The end of telecom

Ever since 1877 when Alexander Graham Bell invented the telephone, businesses and consumers have bought their telephone services and equipment from telephone companies. If service providers don't change their ways, that truth may become history.

The telecom industry has increasingly forced its customers to be technology experts. It doesn't sell its customers solutions to their problems, it sells them technologies that must be integrated with other technologies that hopefully will all come together to solve their customers' problems.

In case you haven't noticed, the telecom industry isn't the only one laying off workers. According to the Information Technology Association of America, there were over half-a-million fewer IT employees in the U.S. at the end of 2001 than there were at the beginning of the year. So telcos' business customers are less able and less willing to in-source the hard and dirty tasks of getting their networks working and keeping them working.

A few weeks ago, EDS completed its acquisition of the data center hosting business from Web hosting provider Loudcloud. How hard would it be for EDS to acquire the business customer base and service portfolio of WorldCom and deliver services to them?

Even without doing the acquisition, EDS or any other major systems integrator could buy the component parts of network services from a wholesaler such as Level 3 or Williams and begin offering real networking solutions to their existing strong base of enterprise customers. What do telecom providers have that can't easily be duplicated by highly consultative, solutions-oriented, customer-focused players like EDS, IBM's consulting groups, and other large consulting and systems integration providers?

The telcos aren't just at risk of losing the high end of the market. Have you noticed that a lot of companies that offer broadband, local and long-distance service, Web hosting, programming services, and other IT services - targeted for small and midsize business - are getting decent funding lately?

And then there are the residential customers. The Bell system did a decent job of owning consumer customers when there was no competition and the only product was a black phone connected to basic services. We've certainly seen competition rise and fall over the past few years, but a real consumer threat comes from players that don't rely on the Bell wires into the home.

The cable providers are the obvious challengers. Already, they are clearly winning the broadband game with cable modem services. Those that also offer telephone service over their coax connections are enjoying strong success, with more than 20% penetration in some areas. The symptoms are all similar to what we see throughout telecom - it's cable's straightforward high-speed service vs. telecom's complicated DSL. Telcos offer DSL (or is that asymmetric DSL or maybe very-high bit rate DSL?), and then tell consumers to figure out the technology and to wire up their own Ethernet network because the telco isn't going to do it for them.

Don't look now, but Sony and Microsoft are anxious to get into this game as well. The battle lines are forming, and the telcos may not even be able to muster an army to march to the frontlines.

So if you're a telecom service provider, it's time to redefine your company and your value proposition. It's time to stop forcing your customers to be technology experts. It's time to decide which customers you can deliver true solutions to and focus on creating your value in those markets.

If it's not already too late.

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