The Trials of Telecoms

The communications industry is in the deepest trouble it’s ever seen. Why? According to an article just published for members of the Institute of Electrical and Electronics Engineers, the problem lies squarely with greed, corporate crime, and misguided regulation.In his article, Peter Bernstein points out that the industry has a great deal going for it – users, after all, are paying for wired and wireless services of unsurpassed variety and utility. "We are pretty clearly at the dawn of a networking era in which almost everything we use—and even wear—will be capable of being interrogated and manipulated by means of reliable, always-on, always available, two-way broadband networks".But it has also suffered from the combination of a number of factors, that taken together, created what he calls the "telebomb":- Greed. Too many companies chased too few customers and—to make matters worse—many were using similar technology. - Corporate crime. As the stupidity of some greed-inspired decisions emerged, some players misrepresented the facts by lying about their financial health, destroying investor confidence and casting a cloud of mistrust over the entire communications business. - Misguided regulation. Policies that protected incumbent phone companies but were disguised as competitive reform, like the Telecommunications Act of 1996 in the United States, were the timing mechanism for the Telebomb. - Too much debt. The giants have between them incurred a debt of almost $2 trillion, which effectively closes the financial markets to the industry.- A broken business model. Although the Internet is truly a wondrous phenomenon, its sudden surfacing in an industry accustomed to slow, carefully thought out ways of making progress has so disrupted business models that telecom companies are today giving away services that used to contribute mightily to their revenue streams. But it’s not all bad, says Bernstein. The industry is already addressing the issues of illegality, and industry leadership will restore trust by managing down debt and producing positive service experiences for customers, as well as positive financial ones for investors. Fixing the business model, he says, is more problematic, but fixable.After the telecoms clean up, we can, says Bernstein, expect to see a completely different industry landscape, so those who stick to old models and approaches to business, will suffer. The successful players in the future will be those who figure out exactly what it is about a network that is most valuable, how they could maximise that value in their networks, and—most importantly—how they could best get potential customers to recognise that value and become willing to pay a premium for it. It’s about time we started thinking about paying for quality.