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Can Mobile Operators Move at Internet Speed?

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Can mobile operators move fast enough to compete on the Internet? That was one of the most hotly contested points in a debate on the future of mobile operators that I moderated in Stockholm last month.

Some of the start-ups on the panel contended that mobile operators can be tough to partner with because they take too long to make decisions. “Anybody in this room who has been trying to deal with an operator’s innovation department, will know it is where innovation goes to die,” said Niklas Agevik, CEO of Instabridge, a start-up focused on simplifying access to Wi-Fi. An inability to innovate quickly could relegate mobile operators to utility status, as they face intense competition in the service layer from scores of Internet companies offering over-the-top (OTT) voice and messaging services.

However, other panellists noted that Asian mobile operators, in particular, can move very quickly. “If you take APAC, the operators are much more willing to partner and faster than they do in the Nordics and Western Europe,” Martin Ingemansson, country manager Nordics at Facebook, told delegates at the Hot Topics event in Stockholm.

That sentiment was echoed by Tom Christian Gotschalksen, SVP product marketing, mobile operators, Opera.  “I see operators do crazy things in Asia,” he said. “The industry there is not as doped as it is in the Nordics and in the U.S. with contracts, with bundles.” Gotschalksen noted the preponderance of prepaid subscribers with multiple SIM cards in developing markets means that operators there have to actively sell customers their services every day, rather than every 18 months – the typical postpaid contract cycle in developed markets. He noted how an operator in Thailand, for example, has to continuously persuade schoolchildren to top up its SIM card, rather than a SIM card of one of its rivals. 

More to lose

Of course, mobile operators have far more to lose than the typical start-up. Joachim Horn, CITO of mobile operator Tele2, highlighted the fundamental differences between telecoms companies and many of their OTT competitors. “Operators are slow and there is a reason for that, our hands are tied by regulation and the billions we have invested, in whatever currency, to build our networks. So, obviously the sensitivity to potential risk is really high,” he said. “If something happens with the data of our customers, we are immediately on the spot with the regulator, with officials, with the public. Whereas a fast-moving, small company can do things we are not able to do and our biggest challenge is how can we follow the pace of these start-ups, these small companies, who are totally focused on doing one thing only.”

In an attempt to move at Internet speed in the service layer, Telefónica, Telenor, SK Telecom and some other telcos have formed separate digital units run at arm’s length from the main business. The panel debated how effective this model is. Bengt Nordström, CEO of analyst firm Northstream, argued that these units aren’t as motivated as start-ups because they are cushioned financially by the telco’s mainstream operations. But Gotschalksen, who used to work at Telenor, disagreed. He said that these digital units still have to fight for the support of the telco’s operating companies (opcos). “The CMOs in the opcos don’t want to take the corporate equivalent of Facebook, they want to bundle with the right product for their customers,” Gotschalksen said.

In an interview posted on Telenor’s web site one month after he was appointed, Rolv-Erik Spilling, EVP and Head of Telenor Digital Services, stressed the need to take risks: “We have a vision and we have to dare to be bold,” he said. “Telenor from little old Norway has succeeded in doing this before and today we have millions of customers around the world. Now we have to do it again on the service layer. So it’s time for a little bit of craziness and a little bit of risk-taking. Let’s make it happen!”

David Pringle is a telecoms writer, editor, analyst and commentator. His weblog is here.

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