Technology
23.4.18

Transition of the Telecoms Industry Is Overdue

Source: pixabay.com

It is interesting to observe the changes in the telecommunications environment over the last few decades.

Before the internet predecessor videotex arrived in the late 1970s early 1980s, 90% of telecommunications revolved around telephone calls. During this era, telephony was still a luxury for many as making calls was expensive. In 1972, a telephone call between London and Amsterdam cost one pound per minute. This has basically set the scene for the industry ever since. Reluctantly and only under the pressure of competition from outside the traditional industry did changes start to occur. In the 1990s, we saw resale providers bypassing the national long-distance and international telephone company (telco) tariffs, offering significantly lower prices. With digital technologies emerging, we saw the arrival of so-called value-added service providers (VAS), often led by publishing companies. This environment improved significantly once the internet became web-based.

The incumbent telcos initially fought tooth and nail against these changes before finally being dragged kicking and screaming into the new world. They used every trick in the book to stop innovation and competition. The current net neutrality failure in the USA is a good example of the strength of the incumbent lobby in that country. It has ignored the wishes of the majority who were in favour of net neutrality, which would have prevented the telecom companies prioritising traffic from content providers who pay them a premium price.

The monopolistic behaviour of the traditional telcos is still happening around the world, hampering innovation and competition and often supported by local governments. The traditional telecoms industry, therefore, has never been a leader in the new developments occurring in their own industry. Interestingly, most of these new externally-driven developments have seen telecoms becoming more of a facilitator than a service in itself.

The outcome is clear if we look at the internet and the smartphones of today. Due to its resistance, the traditional industry has never been able to lead these changes. Looking at the World Conference on International Telecommunications (WCIT-12) held in Dubai, we have seen the international telecom tariffs remain an area of dispute within the industry, with opinions divided about whether the UN organisation for telecoms could also regulate certain data tariffs that are carried via the internet over the telecoms infrastructure. At the conference, the ‘them and us’ situation between traditional telcos and the internet companies took centre stage.

Technology regulations are used on either side to protect or to open up the market. This underlying politicised situation makes it very difficult to put the user in the centre and build services such as e-health, e-education, smart cities, smart grids and so on, from a customer perspective. A great deal of lip service is being paid, but in reality the user is still taking a back seat. This is also reflected in a blatant disrespect for privacy and cyber safety.

While significant changes have happened over the last 20 years, the underlying structure is still largely in place. Because of the heavy lobby in the industry, it is supported by international institutions such as the International Telecommunications Union (ITU). Whilst these institutions support new customer-focused developments, they are still heavily influenced by vested interests. Increasingly, vested interests also include the new internet monopolies (Facebook, Google, Amazon, Apple).

While the UN does have a more social perspective, it lacks a holistic approach towards these developments. This means that each UN silo has its own vertical set of policies, although a more all-encompassing, horizontal approach is needed.

I advocated this approach within the UN Broadband Commission for Digital Development, which I assisted in setting up. On the positive side, it has tried to develop a more complete system, but has been disadvantaged by the lack of power to implement such structures across the UN organisation, industries, countries, etc. Nevertheless, it is an important part of the education process and at least able to introduce new all-inclusive thinking.

An overall social and economic structure that better utilises the new advances in information and communications technology for the social and economic benefits does not, in general, exist. The same level of silo thinking exists everywhere in governments, industries, non-government organisations (NGO’s), international organisations and so on.

Furthermore – especially since the 1980s – the current neo-capitalist structure prefers market forces to government intervention. While I also support market-driven solutions over government intervention, the reality, based on the above analysis, is that we are not seeing a truly customer-driven, national interest leadership coming from the private market.

In the telecoms/digital market, social and economic benefits from e-health, e-education, smart cities and smart energy are based more on national cost savings and other national benefits such as increased productivity and international competitiveness. This does not deliver immediate revenues and profits to new companies. This means that it is difficult to build traditional business models around these services, unless governments are prepared to invest upfront in order to receive cost benefits and other national benefits later. Once that hurdle is overcome, the industry will invest in what lies beyond.

Alternatively, to attract long-term investments from the World Bank, pension funds and other financial institutions, radical new strategic plans will need to be developed. These developments depend heavily on government policies, which in most cases do not exist, partially due to the industry issues mentioned above. Financial institutions and those interested in long term utilities-based investments are looking for investment-ready projects that are in the order of $500 million-plus, with extensive strategic plans and scalability.

Another important trend is that the focus of policy-making is increasingly moving towards cities and we do see local government slowly taking a leadership role in user and citizen-focused developments.

My work is in developing strategies and policies to make that happen with governments, industry and academia. We are seeing progress, but the full effects will take another 20 to 30 years and money is an even bigger hurdle here. I recently wrote a blog on this.

With local government leadership, I assist in building two levels of collaboration: one between the different levels of government (local and province/state and federal land national) and the other between cities, industry and universities.

In the strategies developed within these organisations, technology does, of course, play a key role, but it is not central. To participate in these collaborative processes, a commitment will have to be made to place citizens in the centre. With a holistic approach, there is little room for rigid division between technologies such as mobile, fixed and IT, all with their own policies, regulations, narrow business models, and so on. The city/industry collaboration in this structure tries to overcome that divide by making the customer outcome central, not the industry outcome. This is easier said than done, but it will be the trend moving into the future.

In conclusion, nothing less than a major industry restructuring is needed to obtain the massive economic and social benefits that are on offer in this innovative and dynamic environment. This needs to be led by policies and regulations aimed at creating the right environment to both maximise the technical outcomes and to attract the right investments needed to make it happen.

Global Seven News

Paul Budde