What is the point of a Telco 2.0?

I started making this story for the upcoming Telco 2.0 conference but since they already have too many speakers and could not get me a slot, I expanded on the story and post it here.

Today there is much talk about next generation telco’s. Incumbent telcos are trying to become next generation networks by offering triple-play services. New players often try and do the same with similar technologies. But the big question is why would one want or need a telco when you can do everything peer to peer on the Internet (think Skype, Bittorrent)?

This question is side-stepped by those incumbents rolling our their IP-based Multimedia Systems, to their costs. They are moving their old business model to new technology, failing to see that new technology brings with it its own viable business models that are rarely the same as the old ones. In earlier blog entries I already mentioned that it is suicide to cross-subsidize bandwidth expecting your customers to make you rich by using the bandwidth to download your content or use your VoIP service. Recently Forrester computed just how much it will cost a telco doing this, $2000-$4000, per customer. Ouch!

So subsidizing Internet bandwidth is a bad idea, you have to make sure that the bandwidth is only used for your services, hello walled-garden IMS, or that the bandwidth pays for itself. The telco’s seem to be going for the walled garden variant, that I predict to become a huge failure because people do not like to be locked-in.

So if one can get around the telco and probably will, what is the point of there being a telco? And who will roll out the bandwidth if it is not the telco?

A new telco thatis to rise in the presence of the Internet (called a telco 2.0 for short) will have to live and thrive in the presence of competition. A telco 2.0 will have a reason for existence only if it can convince people that it can make life easier, more reliable, more fun, cheaper etc. if they just gave some money to it. There are many things a telco 2.0 can do, but I see three main points that are the basis of it all and differentiate a telco-based solution from a peer to peer one, these are convenience, trust and quality.

The Internet provides choice but, not convenience. There is so much to do on the Internet, information, services, games. Services like Google make some of that easier to find but in practice one often hears of sites from friends. Each service has a different user interface etc. Each site will wants to bind you by having submit email address (and other personal info) and setting up an account for you. Also payment is always a hassle. This leads to many people using only a few sites much. A Telco 2.0 can provide an easier way to access the information, games and services.

The Internet provides connectivity, but not trust. On the Internet no-one knows you are a dog. Well, yes and no. In an email conversation or a VoIP call from a stranger one has to take the other person’s word for their identity. Also in a peer to peer session one can find out the other person’s IP address, and from that their location, telling the person you are communicating with that you are not at home (burglary) and offers opportunities for hacking your terminal. There are only so many people you know, trust does not scale beyond a circle of friends. A Telco 2.0 provides that trust and privacy towards people you do not know (well).

The Internet provides connectivity, but no quality in the connection. Today there is no economical way for the incumbent broadband carriers to increase xDSL bandwidth to 100Mb/s symmetrical. A Telco 2.0 could buy bandwidth wholesale and deliver the bandwidth to the user’s when needed, in the quality as needed paid for by the service that needs it.

The business model of a Telco 2.0 will be centered around the tree issues described above, convenience, trust and quality from there the rest follows. Customers can not be forced to use a particular telco, they will pick the one that seems to score best to them on these issues when the price is right.

Bootnote: Reliability is one of those things that follow. Deploying your VoIP network unreliably, like KPN is doing, and making remarks like ‘it is new technology so outages can be expected’ when you just convinced people to dump their old phone line and take your VoIP service which then is unavailable for 10 hours three times in one month, like KPN is doing is not one to inspire trust in your ability to deliver.