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The writing on the wall

17 Nov 2009
00:00
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It's all over for operators. The writing's been on the wall for so long there's no space left on the wall.

Any doubts have been erased by the dramatic developments in the mobile web right now. The mobile data business is going through an exciting growth phase, like the internet a decade ago.

Yet all but one of the growth factors has come from handset and internet players; Apple and Google obviously, but also companies like RIM and Facebook.

The sole contribution from cellcos is flat mobile broadband pricing - great for the market, but long-term a rod for operators' backs.
Cisco has forecast that mobile data traffic will double every year between now and 2013. That means bigger and fatter backhaul networks, which is fine for those that want to run large-scale networks. But I don't know an operator that wants to be a bit carrier, to use the phrase that scares them.

Since WAP and GPRS came on the planning horizon a decade ago, mobile operators have been in pole position for the mobile internet. Yet when 3G finally arrived, they offered the walled garden, content subscriptions and mobile TV.

If mobile is about to climb a hill, the fixed-line guys are in even a worse place. Residential broadband has been a nice earner, but outside the developing markets there's no more fresh demand. The business is a cost management exercise.

The IPTV proposition is an appealing one but not even PCCW, which has become the biggest pay TV provider in its market, has been able to turn a profit from it.

Telcos have been displaced from the internet backbone, according to a recent study. Just five years ago tier-one telcos dominated IP backbone traffic. Now nearly a third of IP traffic now goes through a handful of internet players and CDNs, like Google and Microsoft, according to figures from Arbor Networks.

We shouldn't be surprised. Telecom carriers and vendors, also with few exceptions, are poor engines for innovation.
They've repeatedly missed opportunities, like SMS, or butchered them, as with 3G, or put their efforts into those with limited returns, like Bluetooth and ATM.

Telecom's defence is it's a networked industry. It takes time to plan and build standards-based connectivity and get agreements from bilateral partners. Yet the internet world has the same constraint, and it has come up with IP and Ethernet, far and away the world's dominant networking protocols.

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