Could Telecom be a Start-up Friendly Environment?

BY MIKA SKARP

When we think about the telecom space most of us don’t conjure a particularly safe or friendly place for startups to play. Most VCs and entrepreneurs would agree, and yet while traditionally speaking this is true, might we be at the precipice of a sea-change in telecom that may see all boats (even small startup vessels) rise? It’ll a tall order to be sure. While telecom arguably supports the whole shooting match, it’s more like a national highway system than an ecosystem. Though countless start-ups travel its routes and bi-ways, there are precious few in direct business relationships with carriers. But why is this?
 

Operators are from Mars, Startups are from Venus

While this would seem to ring true, a major shift in the dynamic between startups and the telecom enterprise stands to benefit both in dramatic ways. Yet the hurdles are many and high. First, there’s the regulation, LOTS of regulation. Like pharma or its strange bedfellows tobacco and alcohol, telecom is laden with legal restrictions and shifting directives from the regulatory bodies that oversee the industry. This is akin to kryptonite for startups. Just think about the challenges faced by Uber or Airbnb with the taxi and hotel industries respectively. Despite their great success, local resistance to their particular flavors of disruption has been a thorn in their side, and a costly one at that. And yet, these industries insofar as they are regulated, represent little more than mafias.  Telecom takes this many steps further.  More like air travel, the barriers of entry are much, muchhigher, but particularly when you look at the unimaginable costs of spectrum, and that’s before any infrastructure hits the ground. 

The second big hurdle is technological. Gargantuan in size, the telecom footprint represents literally generations of overlapping standards woven from arcane protocols that make even the most connected product evangelists within the mobile operator environment shudder. It should come as no surprise then that telecom operators are so slow to move even on their own initiatives, never mind inviting puny startups to the party. Even with the best and most promising technology, the fear that even if deploying a startup’s technology made for a no-brainer of a business case (as many have) the carrier’s fear, and a very valid one, is that the small upstart may neither be able to support its own technology at scale nor even be in business long enough to see it through. From this perspective it may make more sense for a carrier to outright acquire the promising startup than partner with them.

On the flipside, and despite telecom’s deep pockets, they are an industry that has been steadily losing steam over the past decade and today appear desperate for a second act in the form of a scalable new business model. Meanwhile, the startup industry, and particularly those many promising ventures hatched in a certain valley in a certain way ward state, are seeing quite the opposite future. They are fueled by new and disruptive business models unfettered by the constraints of regulation, technology or naysayers as the telecom industry does.

So how can start ups leverage the scale and reach of the telecom industry, and by corollary, how can telecom take advantage of the limitless disruptive potential of the emerging darlings of the new economy?
 

Bridging the Gap

To put the problem in purely telecom terms, when we compare say, public WiFi networks with macro telecom networks we can see a parallel set of differences in play as it relates to the telco / startup divide. In general, the big contrast lies between that of an open, public service and a closed, member only network. Both have advantages and disadvantages. For example, while in a WiFi network Operator A and Operator B can use the same access point, a macro network can do nothing of the kind outside of some complex federated system of hand offs. This is a big plus on the WiFi side, but on it does require some action from the user (a login) for the magic to happen. The macro network, on the other hand, is there all the time, but only for those in a billing relationship with the carrier. Thus while macro network users are fearful of the cost or of running out of data, WiFi users only fear wandering outside of the service area or maybe getting hacked. There are other differences as well of course, including performance, but let’s focus here for the time being. For the sake of argument, what would it require to come up with a business model that combines the best of both worlds to open up the opportunity to freely innovate new services on a macro network? 

From a business perspective the solution is very simple. Carriers should allow customers to use many macro networks. Rather than confining their population to only subscribers, carriers could do away with subscriptions all together to provide services to as many users as possible. Sound crazy? Perhaps not. Re-imagined, the community of network users would no longer be based on the SIM that’s in their phone but on the applications that they use every day. No doubt this represents one of the corner stones of big tech and the very open networks of the likes of Google and Facebook. In this paradigm most application use would be free of charge with money coming into the carrier via a cut of app sales and advertising revenues. While in some cases you might just want to buy raw capacity, especially in the cases like IoT, and purpose built devices like surveillance cameras or for controlling machine to machine communications.

No doubt this would make life much simpler. Not only would it mean no more bill shock from your carrier, but it would suddenly open up much better coverage than one could possibly expect from a singular network as our favourite apps would be available on any network.

Most exciting is that from a technological perspective this solution is just as simple and without any fundamental change to existing macro networks. The only shift is a philosophical one that would redefine app providers as MVNOs allowing them to deliver in-country roaming. Of course the interface on the network side would need to be rich and include access to QoS features and integrate Mobile Edge Computing (MEC) capabilities.

To take but one use case we can imagine a common scenario where you are on vacation in a strange land and simply want to access Netflix. Not only would you not need to worry about roaming and data use, but the bandwidth would always be adequate. Bye-bye early morning WiFi logins, hello Application-Aware Networks where ever you go!

Certainly this would present a tectonic shift in the business model of telcos who would now essentially be reborn as advertising operations. But with no billing, no marketing and almost no direct customer care to be concerned with their OpEx costs would slow to a trickle. With their cost base down dramatically, this would leave more scope for further investments in infrastructure and with that accelerating development of the unified network paradigm envisioned for 5G and ultimately 6G. Thus, in a single stroke, Telecom would not only reinvent itself along the lines of the very healthiest of new business models, but would make networks more approachable for application developers and finally open the kimono to start-ups itching for access to their customers.