[strategy] uncharted waters
The “value network” in media, internet infrastructure, and telecom services is undergoing major strategic change.
- industry boundaries: how will these industries collide or cooperate?
- potential outcomes: how broad is the range of possible endgames?
- business development: how do we implement partnerships in unfamiliar territories?
- economic assumptions: how do we challenge competitors with very different business models?
Articles
8 December 05
War of the Worlds: Hollywood Opts Out of the 'Google Economy'
Hollywood believes large-scale broadband video distribution would only destroy proven value, fail to provide alternative value, and alter a business model that is still far from being in decline. With near-total control of the most valuable program libraries and the business models governing their distribution, a shift towards broadband media will come largely on Hollywood’s terms and at an incremental pace.
Download this article:: WotW - Broadband Media.pdf [908.1kb]7 December 05
War of the Worlds - Who Gets Broadband's Profits?
Telecom is colliding with unfamiliar new competitors threatening to disrupt its broadband future — Our War of the Worlds series of publications covers strategic developments in the growing competition for broadband-related profits between telecom, media, consumer electronics, software, and retailing.
As an umbrella, thematic piece it sets forth our point of view on a number of strategic issues. It also serves as background to other, very narrowly-focused reports in this ‘War of the Worlds’ series, ranging from sector-specific investment theses, to product strategy and economics in, for example, enterprise communications markets (PBXs, corporate communication servers, etc.).
Download this article:: WotW - Broadband Competition.pdf [2.2mb]12 October 05
War of the Worlds - Part II: Telecom's Uphill Battle
The near-term worries for telecom strategists include another round of sharp decline in the legacy wireline business, and wireless’ and broadband’s shaky ability to shoulder the load of growth expectations.
Download this article:: WotW - Broadband Competition.pdf [2.2mb]12 October 05
War of the Worlds - Part IV: Broadband's New Playbook
Telecom has the potential to play to its strengths, maintain a balance of market power vis-à-vis non-telecom industry competitors, and establish itself as an essential “marketplace” hub between connectivity and applications.
Download this article:: WotW - Broadband Competition.pdf [2.2mb]12 October 05
Scenario - Utilities Included
Utilities Included: Whatever Happened to Telcos? imagines the strategic effects of consumer brands and retail channels displacing telcos from direct-to-consumer communications and entertainment markets.
Download this article:: WotW - Scenarios Utilities.pdf [1.5mb]11 October 05
Scenario - Phone Depot
Phone Depot:How Telecom Became a DIY Market imagines the strategic effects of a radical shift in communications intelligence moving away from the network to end-point devices, undermining both traditional and IP communications carrier business models and creating major distribution and after-market service opportunities.
Download this article:: WotW - Scenarios PhoneDepot.pdf [1.6mb]11 October 05
The Slow Road to Network Transformation
Telco data networking services, though they carry mainly IP traffic, make little use of Internet technology. There are good economic and competitive reasons for this, not least the extreme difficult of changing the operations processes and attendant systems which make up the majority of Telco costs. So most network change will remain evolutionary. NextGen vendors would sell more equipment to carriers if they paid more attention to transitional value propositions (interworking with both existing network and OSS) and proportionally less on waiting for a network revolution which may never arrive.
Download this article:: NextGenEconomics.pdf [297.0kb]1 September 03
Telco Operations: Facing the Coming Productivity Crisis
In this report we explore keys to successful network operations cost reduction including:
- avoiding external benchmarking and focusing on internal practices
- understanding structural vs. procedural differences in cost drivers
- normalizing cost data to reveal controllable differences in performance
- avoiding unintended consequences of mis-applied cost cutting, such as displacing costs to other processes
- using normalized measures of superior internal performance to set new baseline targets
1 June 03
Public WLANs: The New Consumer Amenity
Telecom carriers aren’t telling retailers with valuable locations what’s really driving their appetite for WiFi service partnerships, and what retailers have to lose by giving up control over their own valuable locations…Retail chains can create more value from WiFi than telecom carriers, provide greater customer satisfaction, and strengthen their brand equity all at once.
Download this article:: ConsumerWiFi.pdf [329.6kb]1 April 03
Web Services and Telco Strategy
Most of the likely applications of web services in telecommunications are 1) not going to happen for a while, and 2) likely to result, at best, in incremental benefits to Telco’s existing networks and operations. But one opportunity – the establishment of Telecom Marketplaces enabled by web services could transform and speed up the way in which new products and services are developed and deployed.
Download this article:: WebServices.pdf [255.3kb]1 March 03
FCC Triennial Review - more of the same, good for ILECs
The FCC’s much vaunted “Triennial Review” of the 1996 Telecommunications Act left all parties publicly dissatisfied. But the combination of continued regulatory uncertainty, state-by-state review of competition, and prospective relief from resale requirements for new broadband networks is mildly positive for incumbent local exchange carriers (ILECs).
Download this article:: FCCTriennialOrder.pdf [284.8kb]15 February 03
How High-Risk Business Models are Jeopardizing 3G Wireless
The cost of 3G cellular data infrastructure is nearly prohibitive to carriers for the foreseeable future because of the massive capex requirements and, in Europe, the additional overhang from expensive spectrum licenses. Yet, ironically, and unlike current 2.5G deployments, once 3G is deployed it promises to be profitable by enabling affordable, rich media consumer services in ways that 2.5G cannot.
Download this article:: WirelessMarketplace.pdf [372.4kb]2 January 03
Restoring Growth: Moving Voice from Commodity to Convenience
Carriers are fighting declining voice revenues in two ways: service bundling by wireline carriers, and a transition by wireless carriers to data services. Bundling is a positive, but defensive, play to delay revenue erosion. More open carrier business models could restore voice revenue growth.
- Bundling alone, while accretive to ARPU, will not restore growth in the core voice franchise
- Avoiding the failures of the past in “enhanced services” is now possible with cheaper, simpler technologies, “convenience” features and a marketplace model which levers existing carrier assets at low cost
- For a typical wireline carrier, convenience services could add as much as $500M annually in high-margin revenue.
1 November 02
Consumer DSL: Are US Carriers Crying Poor All the Way to the Bank?
Equipment providers and carriers are crying out for regulatory intervention to jump-start the depressed telecom industry. Chairman Powell is jawboning carriers to increase their equipment purchases. But for the business that matters most to US incumbent carriers’ long-term future – consumer broadband – business is good, growing, and about to get much better.
- Carriers have talked themselves into believing DSL is a ‘bad’ business—in fact it is the already-profitable way out of an otherwise dead-end future
- DSL profitability is higher than early models suggested—key costs, operational efficiencies, and high prices are leading to unexpectedly good results
- The new “core business” of incumbent carriers is to do for broadband what they did for the PSTN—extract maximum long-term value as a utility
1 October 02
Telecom Distressed Assets: How to Rescue Stranded Networks
Bankrupt carriers need business model transplants, not just balance sheet transfusions. In our report, Bondholder Beware , we identified what we believe to be three fundamental flaws in bankrupt carrier plans of reorganization which increase the ultimate probability of liquidation.
In this follow on piece, we identify why senior creditors are pursuing this path, and provide an alternative framework for investors, turnaround firms, and management to restructure service provider assets
- The Rich Get Richer: Two success models in the carrier marketplace
- Not Bold Enough: Far from being bold, distressed asset investors are being too timid in their reorganization plans. We identify Size, Access, Services, and Utilization as four, inter-related missing ingredients
- What’s the Upside: Quantified example of an operating carrier aggressively applying restructuring principles to create a sustainable niche competitor
1 September 02
Telecom Distressed Assets: Bondholder Beware
A number of backbone carriers and CLECs are now submitting Plans of Reorganization in bankruptcy court. While WorldCom burns, Leucadia and Warren Buffett’s Berkshire Hathaway are among the new telecom distressed asset investors. Are “smart money” plays in distressed broadband carriers leading to successful restructuring? We’ve examined a few plans of re-organization and unfortunately, so far, we believe the answer is “no”.
- By and large, creditors are being asked to approve the same business models as the ones that failed, trimmed by 20-25%
- In the proposed plans, operating expenses exceed core revenues (i.e. transport services) by as much as 30% coming out of Chapter 11
- Carrier success is entirely dependent on additional managed services revenues (which they have never obtained pre-bankruptcy), as much as 10x core transport revenues in 3-5 years
- Submitted plans are falling into one or more of five restructuring pitfalls we outline in our analysis
1 August 02
