Want to stump a panel of mobile carrier executives? Ask them about 4G service innovation.
There I was, listening to representatives from Sprint, Verizon and AT&T discuss the remarkable speed and capacity of their new 4G networks. They all stuck close to their corporate talking points, and they all took polite jabs at their competition. Sprint talked about how they’ve been at it the longest, with their WiMax network. Verizon and AT&T championed the global scale and ultimately low chipset costs of LTE (Long Term Evolution). There were a lot of acronyms aired, and a lot of talk about downlink and uplink speeds.
Then, someone in the audience asked a simple question: “We’re hearing a lot about network speeds, but can you talk for a few minutes about the new services that we can expect as a result?” The initial response was dead silence. Given the nature of the event and audience, I wasn’t expecting a major product announcement, but silence? Very scary. These panelists, who were ‘business’ not ‘network,’ could not articulate a single compelling 4G service that I’d care about as a consumer.
When they finally did provide an answer, they all pointed to an ‘over-the-top’ vendor ecosystem as the likely source of compelling 4G services, ceding this huge opportunity to others. This approach flies in the face of their aspiration to be a “smart-pipe” and leaves them in the business of delivering bits. To quantify what this approach might mean to their future, let’s look at another company that reliably delivers information for a living – FedEx. FedEx’s gross margin is 25%, and its profit margin is 5%. Plug this kind of performance into AT&T’s (for example) results, and say goodbye to $6 billion of annual profit.
At Pega, we’re passionate about providing technology that helps the world’s biggest companies re-capture business agility. We’ve seen the drag on innovation created within large companies by disjointed operational silos and disparate technology platforms. But we’ve also seen that by implementing our technology even the largest companies can turn change into in a competitive advantage. From our perspective, mobile service providers must address this challenge now to prevent a huge ultimate decline in margin and profit. It should be service providers, NOT an ecosystem of 3rd parties, creating the services I will use on 4G.
If they continue to only talk in terms of how fast they can deliver bits, they’ll miss out. Oh, by the way, FedEx’s growth rate over the last 3 years? Down 10%. Welcome to the delivery business.