I recently borrowed Strategy Pure and Simple II by Michel Robert from a work colleague. Although the book crams 50 pages of content into 300 pages of paper, it does have some useful insights.
In particular, it lists archetypes for corporate strategies. The hypothesis is that you can only be following one of the following ten core paths (with examples):
For example, a product-driven company will try to find people -- of any class or type -- whose needs are filled by the product. On the other hand, a user-class driven company will source whatever products are needed to keep their clearly defined customer base happy. If the customer needs change, so will the product portfolio.
You will note that traditional telephony falls into the unique distribution method category. The only way of obtaining the "speak to someone not here" application was to partake in the bundled distribution network. Clearly, that is becoming no longer the case. This creates a potentially irresistible force tearing apart the vertically integrated telcos.
At the bottom of the stack is access or connectivity. This is driven by a capacity-led strategy. Every bit-moment of fiber and spectrum needs to be used, else it is wasted forever. In fact, it is subtly more complex than this. When the network is bought as a unified whole on a subscription basis with a captive audience, the driver is to minimize usage (since usage drives cost, and revenues are fixed). On the other hand, access can be metered, or provided through some aggregated provisioning system (like Wayport or Boingo, of even traditional cellular with affiliates and roaming). In this case usage drives revenue, and hence maximum capacity utilization is the key.
Above this in the stack is the application platform. In traditional telephony this is all the SS7 switching, voicemail storage, etc. This is probably a technology-led business, although you could argue that proprietary platforms like Windows are growth-led business. (The only secret in the secret sauce is that you've got more of it.)
Finally, there is the application and service layer. This could be driven by a number of different strategies, although product is by far the most likely.
Hence there are really at least three businesses struggling to escape from the traditional telco. Few if any telcos are organized as business units around these areas. The result is likely to be under-utilization of network resources and excessive build-out and capacity. Failure to re-structure will perpetuate the over-capacity of the industry because the network owners are not strongly incentivized to find new network uses, since the new applications may compete with existing revenue streams. The differing strategic needs of the components of the business are likely to compromise any of them from being effective.
The problem is also likely to get worse as technology improves. For analog cellular, the whole system was totally tailored to the needs of voice telephony, and packet data was out of the question. It wasn't really possible to sell access unbundled from the telephony platform and service.
With 2.5G and 3G networks, some limited real-time packet applications are possible, but the network is still strongly vertically integrated with the voice application.
4G-type technologies (the OFDM family) will enable a totally IP-based architecture. This may well be the straw that breaks the camel's back.
In conclusion, instead of seeing industry consolidation, expect to see delamination. There isn't a good reason to build half a dozen nationwide IP network which are then also in competition with metropolital and local wireless networks. A few wholesale networks are likely to underpin many Mobile Virtual Network Operators (MVNOs). Other parts of the value chain may also be re-organized. A product-led MVNO might outsource customer care, while a user-category driven company will have a nugatory product development department.
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