February 19, 2019

T-Mobile, 5G Video, and the Evolution of Telecom

After originally promising to launch a “disruptive” OTT TV service in 2018, T-Mobile’s meteoric rhetoric turned out to be hollow. The path to launching such a service, as it discovered, was far more cumbersome than expected. Consequently, T-Mobile announced in December 2018 that it would delay the service launch, but appeared to stick with its original plan to launch a nationwide OTT TV service in 2019.

Early this month, however, the company changed course, abandoning its pay-TV plans and choosing instead to join the growing field of DTC aggregators a la Amazon Prime Channels. Reality topped rhetoric, leaving T-Mobile with copious amounts of mud on its face.

While T-Mobile is rightly deflated by having to throw in the towel on nationwide OTT TV, this strategy may very well offer a better opportunity to evolve the mobile telecom industry in ways that (yet another) virtual pay-TV service couldn’t.

Telcos as Lifestyle Brands
During T-Mobile’s fourth-quarter earnings call, President and COO Mike Sievert discussed the opportunities in creating a go-to-market platform for DTC video services. In this model, it will compete directly with other DTC gateways such as  Amazon Prime Channels and Roku, less so with pay-TV operators such as Comcast. T-Mobile has an opportunity to curate a la carte apps that relate directly to its target audiences — young wanna-be hipsters, for example, whose social capital is defined by the smartphone they use and the media services to which they subscribe. For these consumers, a lifestyle-oriented video marketplace where they can choose the channels that speak uniquely to them, to their sentiments and way of life, may fare much better than a traditional pay-TV service.

You get the idea. And this is not uniquely about video, mind you: Video is but one of many modes[1] through which T-Mobile (or for that matter, any carrier) can advance the evolution of mobile wireless access into its “third age” — something telcos had the chance to do before they missed the boat.

Though video offers the most immediate platform for evolution, fully evolved carriers can be the central point of any commerce that touches the digital realm.

The ‘Three Stages’ of Telco Evolution
In this view, the First Age of telcos was about connectivity, starting with “Sarah the operator” in the local central office (remember The Andy Griffith Show?) and evolving to touch-tone, which was the user-front-end of the first software-based digital signaling switches in the phone system.

The Second Age was/is about mobility and personal augmentation, with the phone evolving from a connectivity portal into the user’s personal online assistant. The customer stopped “going to the phone” to make a call, and the phone started going with the customer to become an enabler of our daily activities. It’s long ceased to be just a telephone, and has become an extension of our public selves — and just another app on the omnipresent device. Issues with mobile telephony, such as speed, are actually sub-issues to be addressed in order to fulfill the phone’s role in the Second Age.

The Third Age has yet to arrive, and may never. It pertains to the “phone company” as a consumer/provider ecosystem. Originally, the “phone company” created sophisticated billing systems for its own business and, in doing so, fashioned a core competence of “customer-facing” support and organizational systems. But these same systems could have built a business ecosystem in which a variety of niche service providers could provide specialized ad-hoc services via the phone infrastructure. That infrastructure could have been used for for both service delivery and billing.

In the Third Age, the scope of services would be limited only by the imaginations of the entrepreneurial public — for example, online real-time movie translation on a per-connection basis, or noticing that a critical number of customers appeared to want to buy pizza in a given area at a given time, and presenting this in real time to a local pizza shop to create an ad-hoc, pop-up Groupon-like deal.

A predictive example of this was the (inadvertent) rise of NTT i-Mode ecosystem in Japan during the late 1990s and early 2000s. With i-Mode (which was on 2G networks), third parties could create phone games and submit them to NTT, who would make them available to users by connecting them to the game providers seamlessly. Billing was handled via user phone bills and providers were paid by the phone company. This is somewhat like iTunes, but with the central company also controlling the delivery and billing infrastructure.

A History of Missed Opportunities
Yes, this sounds like old hat now, but that is because others jumped in and did this (or, rather, undertook the lucrative parts of it) when no telecom realized and acted on the opportunities in front of them. At the time, telecoms enjoyed an unparalleled consumer reach and a pervasive infrastructure with which to deliver services. They could have been the ecommerce nexus, marketing arbiter, services gatekeeper, security nerve center, and billing provider with little additional effort. Unfortunately, telcos (and in many cases, cable operators) failed to leverage this opportunity — although this role may have been more challenging for cable operators because they have not historically supported mobile.

In this yet-to-be-if-ever scenario, the customer creates a profile securely stored with their carrier for making decisions whether and how to include the customer in deals. Eventually that profile becomes the customer’s avatar in the carrier’s ecosystem, programmed with not only product/service preferences but with advertising/contact/privacy preferences that actually have meaning and accountability. This avatar also serves as a privacy firewall for the customer. In this way, the provider evolves from merely augmenting the customer’s sanctioned activities to representing the customer in the digital domain.

And since the customer controls their profile, the outline of the buyer changes in line with their tastes and purchasing habits. T-Mobile could make great use of this as it maintains relationships with movie and video customers over time.

Quantum Control
T-Mobile may be able to accomplish this with video, but it could be anything from education, travel, automobiles, sandwiches, shoes, voting, or a myriad of other services. In the end, carriers are better off enabling third parties to provide innovative content, thus freeing carriers from having to think up imaginative services for markets in which it has little presence or visibility.

Most of the technological underpinnings to support this world of dynamic distributed services and ecommerce through the network was baked into 4G, but the industry by and large saw 4G in the simplest of terms; as providing greater speeds but little more. Any talk to telcos about dynamically using niche service providers for ad-hoc service delivery made their eyes roll back in their heads and, after a brief pause, they’d return to discussing how much faster the connection would be. The mobile carriers could have been Amazon, or Grubhub, or Stubhub — and the technical underpinnings to support a cross-billing scheme to accomplish the job was/is pretty much already in place. But this did not happen, and therefore Amazon, Grubhub, and Stubhub formed to capitalize on those opportunities.

The power provided by 5G gives carriers another chance to evolve to their Third Age. Will they seize the opportunity?

Stick with TDG and stay ahead of the curve.

[1] Such modes could include travel, education, commerce of any kind, medical care, voting, etc., limited only by the third parties’ imagination.

About the Author – Lee Allen
Lee Allen is currently an Advisor with Engel and Vollkers, a specialty boutique firm providing real estate and investment services to the luxury market. Prior, Mr. Allen was an Investigative Analyst for WW Steele; Senior Analyst, Technology Strategy for NTT DoCoMo; Director of Competitive Analysis for a mobile software firm; and a Senior Consultant for MindForce Consulting, a technology commercialization consultancy. Lee’s operational experience includes IT management for BellSouth Corporation (now AT&T), product management for Lotus Development Corporation (now part of IBM), senior-management for an Internet startup, and team management for Procter & Gamble.

 

Look for Lee’s new report on 5G coming soon!

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