For many among UK telecoms’ longer-serving pros, ‘the future’s bright’ is a slogan that will recall the mobile industry’s halcyon early ‘90s when an upstart operator called Orange came over the horizon with a whole new look, and a proposition that drove a wedge between BT and Vodafone’s then-comfortable duopoly and went on to swallow France Telecom’s beloved brand.
Orange took the industry by surprise, but it was pushing at an open door. Legacy ways, attitudes, systems and processes, many rooted in the 100-year old history of public fixed networks, were ripe for overturning by a new player with no legacy to shake off (or drag behind it), for whom the field was ripe for exploitation with a new approach to the market.
Couldn’t happen now, of course – mobile is far too well-established and we all know the game very well. If anything, the market is shrinking, back (in many places) to a set of operator groups with whose names we would have been very familiar in the early 90s.
But appearances are deceptive. The market may be consolidating, but regulators are holding the door open for new competitors to enter a business that is more software-oriented, less network-dependent, much more accessible than ever before. Even more importantly, changes in the IT and network technologies that underpin telecoms mean that once-formidable financial and engineering barriers to this market are falling. This is a business ripe for disruption – and that disruption is starting to happen.
Once, to be a telco, you needed massive engineering capability and very deep pockets. Now, you could be a football club. Or a fashion brand. Or a high street retailer. Deep pockets still don’t hurt, but now the money can go into product innovation and marketing. If you have a recognised and well-understood brand and a large and loyal customer base, if you’ve spotted a niche that would respond to a well-focused offer, telecoms is open to you – as a revenue earner, but as important for many players, as a way to leverage and promote an already successful brand, and create a new channel to market for the primary business.
But what’s changed? MVNOs have come and gone before without – other than in a few instances – shaking up the business.
Advances in cloud technology and virtualised functionality are key to the new MVNO. Hardware and software assets that once soaked up substantial capital resources can now be accessed for a fraction of the investment burden that licensed network operators (and even the previous generation of MVNOs) needed to shoulder.
From the systems needed to run the business to the network elements needed to control subscribers and services, there are few functions of the modern telco that can’t be provided as a service and as a largely operational expense – meaning that a large part of the cost is no longer frontloaded and is instead aligned with business success. ‘Telco in a box’ has become ‘telco in the cloud’, from core network to end customer.
The steady move to outsourcing non-core business and technical operations has also changed the business model. Premium skills don’t need to be acquired and expensively retained. Premises can be minimal and located anywhere. The new breed of MVNO can, comparatively speaking, be a pop-up operation, able to set up quickly and exploit a gap in the market, and with relatively little downside should the venture prove short-lived. The risk-reward calculation looks quite different from only a very few years ago.
That agility carries through to the launch and operation of the telco too – third party services and software can be more easily integrated into a virtualised platform than into a legacy hard-wired platform. Analytics and real-time policy management can be designed in from the start. Partner offerings can be more easily adopted than if they had to wait in a conventional IT queue.
As many established operators struggle to transform themselves to a digital model that new entrant MVNOs can adopt from day one, there’s never been a better time to become a telco. The business case virtually writes itself.