Profitably running networks despite huge costs, fierce competition is an achievement in and of itself, claims Bengt Nordström.
Operators in the main lack the scale and culture to drive innovation that would meaningfully move their topline upwards, claimed telco consultant Bengt Nordström.
Total Telecom asked him last week whether he had seen anything at Mobile World Congress that might change his mind, and he gave a typically frank response:
"No. N-O. Full stop," he said.
However, he quickly added that operators should not feel embarrassed for struggling to come up with anything much more innovative beyond price plans and bundling services together.
"If you look at the whole nature of an operator business, you have in the back end, massive deployments of infrastructure – most of it passive – such as towers, power, cooling, and so on, which requires a lot of focus and attention, and is costly to run," he explained. "They might not have the R&D budget, but they spend about 15%-20% of their sales in capex every year. So, they are infrastructure builders, which sets a certain focus and priority for their day-to-day operation."
Then, on the front end, there is retail and customer service, which are two more large, complex and costly operations, Nordström said.
All this cost and complexity has to be dealt with while trying to out-compete rival operators that are all out to win market share off one another, he added.
"That sets the agenda for what it is to be an operator," Nordström said.
Therefore operators for the most part are buyers of innovations brought to market by vendors, he said, which out of necessity spend a much greater proportion of their revenues on R&D compared to operators.
Vendors like Motorola and Nokia, "plus a handful of others" blazed the trail for telco innovation, he explained. They were followed by the likes of Apple, Google, Facebook and Amazon. This latter group are experts when it comes to software, user interfaces, and scaling their operations globally.
By comparison operators "don’t have the scale for it, they don’t have the culture of innovation," Nordström said.
In spite of it all though, he argued that operators still occupy the prime position in the ecosystem in terms of stability, profitability, and predictability.
The same cannot be said of vendors, he said. "The risk of being out-competed and disappearing from the market if you fail in your product development is almost 100%. That’s never the situation for an operator. You can be pretty mediocre.
"I honestly think operators don’t need to be embarrassed for not coming up with anything innovative," he said.