Why telecom companies are so far behind the times

To people in the tech industry, telecom operators seem helplessly behind the times. To most people however, telecom companies are their only real connection to tech. So why are they so far behind?

Telecom companies still don’t sell most computers on the market. But they do sell the internet connections, the smartphones that are increasingly like computers, the minutes and text messages we plow through every day to communicate.

I used to work for one of the largest telecom companies in Sweden. I started my carrier there with the hope I would help them transition from the “minutes/texts” model to the content distribution model. Because eventually, all the services a telecom company offers today will be software only. Based on open internet technology. How do I know? Because it already happened. Delivering content could’ve been a profit model that outlasted the current model by decades. Then the iPhone launched.

At the telecom company I worked for there was no uproar. In fact, I remember walking around in stunned surprise because of the lack of reaction. They didn’t get it. Or got it but didn’t let it show. Needless to say, the iPhone took the content market out of our hands. The App Store was now the de facto content distribution system. Then Apple launched iMessages.

I came in at work wild eyed and excited. Apple’s iMessages work by sending text messages through their notification system. Telecom operators usually charge per text message iMessages are not distinguishable from other notifications making them impossible to count and impossible to stop. Even if the telecom operators would like to stop iMessages they can’t. Not without breaking the notifications on the iPhone, making millions of customers complain and even worse; the CEO’s mail would stop working on the golf course. Now I knew there was only one way out, telecom operators would have to step back, and start charging for network bandwidth. A lot like the internet connections pre-broadband. But that isn’t happening.

Telecom operators take in most of their profits from text messages. The rest from voice and contracts etc. They generally take in very little profit from charging for data. On the other hand most of a telecom operators costs, except building the network, come from counting and billing for minutes and texts. It’s a hard and advanced process. Billing for data traffic is very easy. The future is clear, telecom operators will sell data plans and earn their profits form that. So why are telecom operators all over the world still bundling minutes and trying to block Skype?

I looked for answers at my company. I talked to everyone around me, no one cared very much. After weeks of this I started to realize that the middle managers didn’t care but the executives understood. But were stalling. For what? The same reason the music industry doesn’t embrace digital distribution.; the income model will change so drastically that the market will become instantly competitive and changing again. This is frightening.

Every manager and executive in the telecom industry today have basically made it their policy to stall for change. Until the market has evolved so far that they can not hold it back any longer telecom operators will continue to wish for the music industries dream: Not in my lifetime.

This is what they hope for. That the change will come after they quit. That the drop in profits during a turbulent shift will not be on their resume. That the scandal of firing hundreds of employees to pivot a large company does not land their name in the press.

This is why telecom operators are holding back progress, and trying to stifle products that run through their network. This, almost insane, way of doing business is helped by the fact that telecom operators are large enough to nudge law makers in their direction.

The next time you wonder why the network isn’t faster, why video calls are still no where to be seen and why your iPhone doesn’t do something amazing. Know that this is why. There are no technological hurdles to overcome. There is no law making it harder than it needs to be.

There is just a bunch of scared old men who have become scared of the inevitable. Who fear change.

2 thoughts on “Why telecom companies are so far behind the times

  1. While I agree with most of this, I think the analysis is only partly right. This is an excellent example of both path dependence through contracting and regulatory capture through legal standards (and, again, contracting). The reason a telecom corporation doesn’t suddenly switch to the model of the future is because (a) there are inter-provider contracting regarding rates and they’re most likely based on the old model (hence, path dependence) and won’t change easily–company A cannot change without changing their contracts with companies B, C, D, and E; and (b) the telecom industry (including infrastructure and providers/developers of infrastructural technology) is extremely regulated by individual governments, through inter-governmental treatises and through numerous “international” standards enforced through super-governmental agencies to “minimize” transaction costs. Had the telecom market actually been a market, then those “old men” who “fear change” would lose their jobs and the Zennstroms of the world would take over. But not in a world with unlimited government.

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