Telcos can’t avoid ‘pipe’ black hole

I’ve been involved in the telco industry for longer than I sometimes care to admit. (Reagan was president when I started!) Over the years we’ve seen so many promises from the telcos as they’ve tried to bring innovation to the market. It’s just painful to look back at the graveyard of botched launches. Since Carterfone, the telcos have been gradually losing control over what’s connected to their networks, and now with the move to IP networking they’ve pretty much lost most of it.

Sure, as long as the telcos launch new capabilities, the early devices will be under tight control, but as we go forward third-party operating systems really control the user experience — the lesson learned from the PC space. Faster, better, cheaper will continue to be a long-term trend from telcos, and that’s just more dumb pipe stuff. When it comes down to the applications of that technology — and the inevitable move to smart phones — the telcos just don’t have as much influence on the process as they (or anyone) would have predicted — and certainly not as much as they’d like.

As a thought exercise, I came up with 10 examples of tech applications that telcos have promised us over the past few years. In each case it took me but a moment to come up with an alternative technology that either provides what the telco did not or offers a better/cheaper alternative to what is on offer today. Take a look at this list and let me know what else should be in here. I suspect all of you can come up with your own list:

• Second line on cell phone? Check out Toktumi’s $1 Line2 application (http://www.line2.com/).
• Find me/follow me? Get if for free from Google Voice (voice.google.com) and integrate all your phone lines with a unified, speech-to-text-enabled voicemail box to boot.
• Migrating fax to IP? Why bother when you can sign and send documents with Zosh ($2.99, www.zosh.com) — and you must see their DEMO video.
• Video on cell phone? Who isn’t doing this, most for free? Is there a market for exceedingly high-quality action-oriented (read: sports) video for telco video? Not enough.
• Voice command of your phone dialing. Remember Sprint’s VoiceCard? Telco attempts at voice dialing? Heck, that’s not even an application any more, but rather a “me too” feature built into many phones’ operating systems. And don’t forget you can do free voice dictation on your phone with Dragon Dictate (www.nuance.com).
• Location-based services? Sure, telcos offer a few, but they’re pricey. Look at what foursquare, Yelp, Google Latitude, Mapquest and others are doing with GPS — without charging a penny.
• Place-shifting my TV on the fly? (Remember this was the hottest IMS trade show demo a few years back?) Well, I can do it now on my phone or PC with Slingbox, but the carriers’ services are still not there.
• Telemedicine? Not anywhere near the mainstream as a telco service, but look at applications like Bant (http://bantapp.com), which leverages Google Health and provides remote diabetes monitoring. (Yep, it’s another free application.)
• Home control and monitoring? Not much here from the telcos (AT&T did launch a video monitoring service now renamed and sold under a different brand), but you can remotely monitor and control your house with systems such as Control4 (www.control4.com) or Schlage LiNK (link.schlage.com) without the telco providing anything but an Internet connection.
• Cheap, feature-rich, consumer-grade voice over IP? Came and went from the telcos, but Skype keeps plugging away and adding features for next to nothing. Heck, magicJack is waving a $20-a-year femtocell in front of us (yet to be proven, but don’t get me started on the telco fees for femtocells that fix their own network deficiencies).
• Network-based conference calling? Who doesn’t use Freeconference.com or similar free or bundled bridging services these days?

OK, so that’s 11. I could keep going, but my point here is that despite decades of doing everything (walled gardens, etc.) they could to avoid being dumb pipe providers, telcos haven’t lead the way in terms of delivering useful services that really help users live their lives and do their work. Instead, that innovation has been built by others on top of the infrastructures the telcos have constructed. Telcos have merely fought over which could offer it first (e.g., iPhone).

Sarah Reedy gets this. First, read her interview with Alcatel-Lucent on the telco’s role as the future “keeper” of the digital wallet for m-commerce transactions. Then second, read about Starbuck’s success today with a simple iPhone app that lets users pay for their coffee, without a telco involved.

We’re at the point where Apple, Google and (increasingly less often) Microsoft count for enabling innovation. Verizon app store? DOA. Palm, BlackBerry Apps? Read the surveys, as soon as their contracts run out, people are shifting to iPhones and Droids. While the telcos and their vendors work on creating ecosystems that will tightly control (and put the telcos in the middle of) m-commerce some time in the future, application vendors are already doing it — and doing it well without them. Actually, not just well, but quite well, thank you.

I’m not saying the telcos are going away or that they’ll be poor. They control scarce resources. I’m just saying let’s call a spade a spade. The telcos are no longer the innovators or even the controllers of innovation anymore. They merely facilitate others doing it. It’s too late to avoid the black hole of the dumb pipe. It’s got ya.