The Great Telco OTT Symbiosis
Do you remember learning about symbiosis in an early biology lesson?
Although readers of this blog come from diverse backgrounds I would not be surprised if our textbooks used the same examples. Such as the hermit crab scuttling about with a sea anemone on its back, or plover birds picking clean the teeth of crocodiles.
I recall the feeling of empowerment on learning this new technical term, which describes entities (can go beyond animals) that normally are antithetical to each other but find a way to co-exist to mutual benefit. It created a ready-made tag for describing similar phenomenon thus adding a bit more order to my universe.
So many years later, I believe that symbiosis describes the current state of affairs between communications service providers and cloud service providers, which I will refer to as Telcos and OTTs (over-the-top providers) since we can’t use the common acronym CSP.
Recognizing their symbiotic relationship helps answer questions, like, “Why aren’t OTTs offering telecom services more aggressively?” – given their meteoric rise and displacing impact on so many other aspects of commerce and society, and “Why is telco digital transformation taking so long?” – a question raised by numerous speakers a few weeks ago at SDN-NFV World Congress in The Hague.
Let’s look a little deeper. It is crystal clear that OTTs benefit from Telcos – one side of the symbiotic equation. Without the relatively inexpensive access and connection bandwidth that Telcos provide, the OTT business model of moving compute and storage based services value into the cloud could not exist. But the OTTs go further. They keep pushing the envelope and upping the ante on the services they provide, creating a desire and expectation among end-users for faster, better, more variety, etc. And this is now starting to be amplified by AR/VR-based human interactions, and machine-to-machine applications.
So how are Telcos reacting? Well initially they thought about participating in the OTT services game? But let’s be honest, that was always a dream, and they lost that opportunity a long time ago. Based on the culture and infrastructure differences, Telcos never had a chance. Alternatively, do Telcos try and take advantage of their access control and throttle bandwidth, or perhaps charge exorbitant rates for high bandwidths. That might make sense but they don’t. In fact, Telcos keep investing in their infrastructure to provide end-users with better fixed and mobile access, with even higher bandwidth, at more or less the same rates.
You might think this is paradoxical behavior until you realize that Telcos also benefit from OTTs –the other side of the symbiotic equation – although in a more perverse sort of way. What the OTTs are doing are enabling the Telcos to sustain their existing business model, and make money from what they are good at, even though they push Telcos to an exasperating limit.
The Telcos know intuitively that if they cannot keep up that other entrants will start trying to find ways to creep in and deliver access and bandwidth to end-users. Their nightmare may indeed be a repeat of the 1990s with so many new entrants trying to take advantage of deregulation and fiber technologies to get into the telecom game (think Worldcom and Enron), although who knows what shape and form new competition would come from.
Indeed, if the OTTs cannot get what they need from the Telcos, they might even start getting into the telecom game more seriously (beyond their current dabbling). But this is not their core business, and it takes a heck of a lot of dollars, and they intuitively stay away for now.
So the Telcos are on an accelerating treadmill that forces them to run faster and faster, to deliver better access and higher bandwidths, just to stay alive. But because they are good at what they do they succeed! On the other hand, Telcos are forced to spend most of their capital on hardware communications infrastructure to accomplish this, which slows down their ability to invest in software-based digital transformation.
So there we have it, a modern day example of symbiosis we learnt about so long ago in school. But applied to business and not the animal kingdom. The Telcos provide the OTTs with the end-user access and the bandwidth they need to keep growing their businesses, and the OTTs provide the raison d’etre for Telcos to keep pushing their business model to the limit, and enabling them to survive by doing so.
And the world keeps turning.