Google is perhaps the company that inspires the greatest amount of paranoia and fear among telecom industry players. This fear is well-placed.
Google's ability and willingness to invest in whatever is necessary to achieve its aims - to place advertising in front of as many people as possible, wherever and whenever it can - is placing a growing strain on traditional telcos' ability to roll out novel and profitable services. Constant innovation, free at the point of consumption, is Google's mantra. By targeting users of connected devices other than PCs, Google is also competing with telecom players for the attention and loyalty of subscribers.
To date, this has been a particular problem for mobile operators. Google has taken the mobile screen opportunity very seriously, with the release of products such as the Android OS, and its efforts to own the location and navigation services spaces through constant updates. It is also the dominant search provider in the mobile arena.
But the Google phenomenon also looks set to impact those whose primary point of customer contact is their living room - namely IPTV, cable, satellite and other broadcasters.
Google's ability to leverage its cloud services core to infiltrate new screens marks it out as a competitive threat to even the most converged of today's service providers. One of Google's main weapons of attack on converged service providers - YouTube - is also demonstrating the potential for telecom and media value system players to seek new forms of partnership with the Internet giant, by leveraging YouTube's infrastructure to deliver their own content to consumers.
What should telcos do?
Don't panic but learn. Despite the obvious threat that Google poses, the extent of that threat has not yet been fully realized. Moreover, it will take time to unravel. Google, like telcos themselves, is in the early phase of understanding the business opportunities around new content services and other applications. It makes sense to sit back and observe what works and what doesn't and to understand why.
Learn to exploit Google, rather than be exploited. Existing examples, such as that of content providers using YouTube's infrastructure to deploy catch-up TV services or for movie rentals, suggest that there are new ways to work with Google, leveraging its assets to deploy new services of your own. This also applies to rolling out new applications to users though mechanisms such as the Android Market. In essence, learn to think like a developer, not like a platform.
Take the opportunity to invest in core assets. Google's willingness to invest in core software platform assets and a plethora of new applications can remove the burden on telcos of doing so themselves. These savings can then be ploughed back into telco core assets such as networks and customer care. These assets are necessary for Google's long-term wellbeing, as well as your own, opening the way to developing new kinds of relationship with Google that will be more equitable.
Look for ways to complement Google. Much of Google's strategic effort is predicated on a belief that the Internet will ultimately provide a completely flat environment for deploying and consuming digital services and content. In practice, at least in the medium term, this will not happen for reasons of cost. Examples might be applications for low-end or legacy handsets that make use of existing telco infrastructure and interoperability, such as mobile ticketing.
If you must compete with Google, be prepared to spend big. For those telcos that are intent on playing Google at its own game, our only advice is to do it properly, with sufficient investment and commitment in systems, software and community-building to give your offerings a competitive chance.
Tony Cripps is a principal analyst at Ovum