What do the problems in Greece (and in Europe) have to do with telecoms?

You might know the feeling – you open up the newspaper in the morning you get to read about the crisis in Greece and how it is spreading like a wildfire to the rest of the Europe (and even around the world).

Recently, I came across an article written on this topic (Taloussanomat 25.10.2011). The journalist had come up with a list of “nine deadly sins” – why the crisis in Greece has had a major impact on rest of the Europe?

Her list of nine deadly sins covered the following areas:

  • For too long governments were allowed to run deficit budgets
  • Greece was allowed to join Economic and Monetary Union of the European Union
  • Europe Monetary Union problems were not addressed early enough
  • International Monetary Fund was not called for help early enough
  • Incapability to make tough decisions
  • Delayed and watered down actions
  • Long term growth plans were missing
  • European Central Bank should have bought Greece government bonds
  • Why did we not learn from Lehman Brothers´ mistakes?

This made me think of analogy between European financial crisis and what are the fundamental changes taking place in the telecoms industry. Could we learn something from this?

1. A new player joins the game but he does not play it with a same set of rules

(Greece was allowed to join Economic and Monetary Union of the European Union)

Competition to telecom operators has emerged from a completely new direction – over the top service providers are banking on making operators a dumb bit pipe (and device manufacturers commodity hardware providers). What is the role a telecom operator should take – to make a move into content creation, aggregation and distribution business, to focus on being a very efficient bit pipe or to differentiate through guaranteeing quality of service for large bandwidth data services?

The fact is that the telecommunication sector is regulated in most (if not all) countries and operators have had their competitive sandbox well defined. These over the top service providers are transforming the traditional business model – they are not breaking the rules but changing the status quo situation.

2. Root cause diagnosis does not exist and sometimes it is difficult to face the facts

(For too long governments were allowed to run deficit budgets)

Increased bandwidth and capacity requirements drive up requirements for network infrastructure investments. Insufficient and incorrect measures for building up the capacity might even jeopardise basic voice services.

How could operators build data capacity in a more efficient (intelligent and cost effective) manner? Is the traditional method still valid – put hardware and software to places where congestion exists?

Is an operator’s network topology up to date – how can an operator maximise utilisation of existing network elements?

If an operator uses outsourcing as one mechanism to focus on their core do the operator’s strategic objectives convert into the outsourcing partners´ activities and deliverables? Do the outsourcing partners deliver against this?

As new competitors emerge, operators have to look into their fundamental building blocks of service delivery capability – do I need to make some structural changes, can I approach the challenge from a new angle?

3. How prompt are the actions for bringing the boat back on track

(Europe Monetary Union problems were not addressed early enough; Incapability to make tough decisions; Delayed and watered down actions; European Central Bank should have bought Greece government bonds)

This is just like a doctor prescribing antibiotics to a patient for too short a period – it does not kill the bug but makes the bug resistant to further doses of antibiotics.

When and where will network modernisation be timely for competitive or long term financial reasons? This is truly a tough call especially when legacy systems have been depreciated and they generate still in short term reasonable returns.

Would site and telecom infra sharing deliver efficiency gains without jeopardising the service layer level competitive advantages?

The quicker operators understand the changes in the underlying competitive context and business model, and the faster they act on it, the better they will be positioned as a leading player in their field for the years to come.

4. Hesitancy in bringing in expert advisors

(International Monetary Fund was not called for help early enough; Why did we not learn from Lehman Brothers´ mistakes?)

The problems operators face are unique in nature but sometimes it helps to bank on the learning from those who have experienced similar issues earlier on – networks around the world mature at a different pace. In addition, in some parts of the world availability of talent might be limiting the growth.

Operators need to consider if they want to solve the problem themselves or to seek for advice from those who have gone through similar problems in the past.

5. To break through the vicious cycle one must generate growth in the long term

(Long term growth plans were missing)

How unique is the operators´ business model? How efficient is the operators´ business model – does the value, which customers place on the delivered benefits, exceed the cost of producing these benefits?

The situation in Europe continues to be challenging but I truly hope that in the field of telecoms we learn something from this – avoid the pitfalls, understand a root cause for the problem, be prepared to make tough decisions and learn from each other – this in order to generate long term returns for all stake holders.

Warm greetings from a not so warm Finland!