AT&T’s Innovation Day Highlights a Challenge for Telcos

• Posted: Wednesday, September 24, 2008
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• Author: pradhana
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• Filed under: Miscellaneous

By Jan Dawson, Practice Leader at Ovum

Solutions in search of a problem
"AT&T had quite a range of solutions on display, but mostly technologies which have not yet been productized. There was a demonstration of video search, a voice-activated pizza ordering application for the iPhone, and a Second Life application for testing network security, among others. AT&T also spent some time demonstrating a few possible future applications for AT&T’s U-Verse television service.

Two things were striking about these technologies; first, that many of them seemed like solutions in search of a problem; and second, that almost all of them felt like things that would ultimately be commercialized by someone other than AT&T. Both of these issues raise a bigger question about whether telcos really still need to be in the business of doing lots of their own research and development.

Telcos need to be less engineering centric and more customer centric
We have been saying for several years now that telcos need to become less engineering centric and more customer centric. In the past, new technologies were developed by engineers in labs like those at AT&T, and the job of the marketing people was then to find ways to commercialize those technologies. New network equipment came with a certain set of features and it was really just a question of which ones to turn on and how to sell them.

This inflexible model is a poor fit for today’s changed circumstances. Today, new features are far more likely to be software-based, allowing them to be upgraded, switched on or off, or replaced much more easily than in the past. New architectures allow new applications to be created on the fly using standard interfaces much more quickly.

At the same time, consumers are taking control of the technology in their lives, mixing and matching services and applications from telcos, web-based providers and consumer electronics manufacturers. They have a much clearer idea of how they want to use technology, and a much wider base of suppliers from which to procure it, with telcos often last on the list.

As a result, telcos need to make major adjustments in the way they create and market new services. They need to take cues from other successful technology businesses, which are essentially outsourcing that R&D work to others by taking the best of what’s been developed elsewhere and integrating it in ways that provide value for customers. This ensures that investments are only made in technologies which are already successful and therefore makes every investment dollar count.

Integration will become an increasingly important telco skill
Many telcos are terrified of a future as mere ‘bit pipes’ – condemned to offer the fixtures and fittings of the Internet while others provide the real value. These concerns have led to diversification, some of which is sensible, but much of which reeks of desperation. Instead, telcos should be seeking to recognize that their most valuable asset is still in the network, but the value has shifted from the access network (which regulation is opening to all their competitors) to the core network, where much of the new application infrastructure will sit.

In order to take advantage of this asset, the key skill telcos need to develop in great depth is integration – both internally and with partners. By creating world-class networks and open interfaces to those networks, telcos can create a culture of innovation on their networks without having to do all the development work themselves. They can take the best of what they develop internally and combine it with the best technology developed elsewhere to create compelling products and services for their customers.

But they can also expose the interfaces to their network assets in such a way that third parties – including the web-based competitors they are so worried about – can develop products and services that depend on the telco network to provide real value." /PR

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