A Dickens of a Relationship Problem

Some of the greatest duos in history – Laurel &Hardy, Ruth &Gehrig and Lucy & Ricky – were reportedly anything but close outside of work. If network operators are smart, they will evolve in a similar fashion their relationships with over-the-top (OTT) Internet-based service providers.  From a future income standpoint there can be no argument that operators must learn to work with the Googles and Facebooks of the world. That doesn’t mean they have to like them or be cordial, though. Telecom carriers should exercise a healthy contempt for these future partners, which have been foisted upon them out of necessity and would, in a second, abandon them for a solo career.

From every angle you approach the situation, network operators need to rip down their walled gardens and open up their network assets for use by third-party service providers and developers. Operators are historically ill-equipped to provide all the services and personalization that 21st century subscribers consider a birthright and they cannot survive by simply providing a pipe between expensive end devices and Web servers owned by third parties. Though some operators may make a go of a transport-only business model, the sad reality is that carriers will need to forge extensive partnerships or perish. Survival itself, then, demands that operators insert themselves into the revenue streams of foreign entities by essentially leasing out the unique assets of their networks, such as customer information, billing and charging systems and QoS and policy controls.

So it is with thoughts toward blatantly caustic pairings, such as Cain & Abel, Homes & Moriarty, that operators should enter partnerships with OTTs. Telecom carriers must examine the fine print of revenue-sharing agreements and the adoption of standardized methods for opening up their networks as if they were penned by Beelzebub and their souls were on the line. Operators have been scorched in the past by the all-you-can-eat transport business model and the last thing they can afford to do is give away their remaining crown jewels by opening up their networks and OSS/BSS processes to third parties for little more than a song and a promise.

Putting additional pressure on operators to be ruthless in arranging future asset-sharing agreements is the fact that the burden of hauling ever-increasing loads of content without a proportional raise in revenue is increasing exponentially. Every time you open a newspaper, there in black in white are the details of the latest industry to move its products and distribution to the Internet – putting additional pressure on operators’ pipes. First it was the music industry and then motion pictures. Now the boob tube content providers are getting into the act, as both American (Hulu) and British (BBC iPlayer) television networks have dumped their terabytes of programming onto the Internet, without kicking a buck (or a pound) to the operators that have to blow out their infrastructures to support the crush of new content. Even that newspaper you’re holding is yesterday’s news. Large dailies in Seattle, Boston and across the states are decommissioning printing presses and pink slipping truck drivers in favor of electronic distribution. With the sudden rise of the Amazon Kindle, how long before hardcover books and paperbacks are relics of the past? All of these industries are essentially high-tech squatters, setting up camp on the infrastructures of operators without their permission or remuneration.

Not only has the genie seen the light of day in terms of subscribers becoming accustomed to all-you-can-eat pricing, its bottle has been dropped kicked to the moon and smashed into a thousand pieces. Try as they might, operators are never going to get that fixed-pricing genie anywhere near the bottle again.  Since subscribers will not be the source of addition revenue to finance network expansion or even pay the cooling bills for infrastructure gear, operators must rely on the other side of the so-called two-sided business model: the third-party players that tap into the operator’s assets to deliver services that match the subscriber’s narcissistic expectations. That’s why operators must proceed cautiously and ruthlessly in developing a revenue-sharing relationship with third-party partners that will be tilted toward operators to the same degree that the current transport-oriented business model is tilted against them.

So bully for operators for not rallying around standard approaches to opening up their networks or signing off on long-term relationships with OTT players. If network operators lose the ability to control who leverages their network assets and how much they are paying for those assets, they will have lost all of their remaining bargaining chips. The key to survival for operators is a hardy mistrust of their partners. Scrooge and Marley teamed up to create one of the most prosperous businesses in long-ago London.  But there’s not a ghost of a chance that ether would have turned his back on the other for more than a second. Operators should start all of their negotiations with potential third-party partners with the same word: Humbug. And from there they should get nasty.