It’s a known fact that the major revenue earners i.e. voice and messaging are dropping, cannibalized by over the top (OTT) companies like whatsapp and Viber . What can mobile network operators do?
“The innovators dilemma” is one of the most important books that describe how innovations happen and why it’s common for market leaders to fail to seize the next wave of innovations in their industry.
The hypothesis of the book is that established companies do not fail because they had bad management, but rather that good management was the root cause. Management in big companies is organized around optimizing performance in the existing business and meeting short term revenue targets. It’s not that they do not see new innovations coming to disrupt their business – they do. It’s that established businesses are setup to optimize for now business rather than future business.
It’s a known fact that the major revenue earners i.e. voice and SMS are reducing and credit to mobile network operators like Airtel and MTN, they are not waiting for smaller upstarts to dominate the future business in mobile data and payments and are making considerable investments in their networks and systems to take advantage of this. MTN’s mantra is to move to a brave new digital world and Airtel is to Switch on the internet. They also dominate the digital payments space.
They are however faced with another dilemma. Their investment’s in more efficient data networks leads upstart companies to cannibalize their current revenue streams. Companies like Facebook , Whatsapp, Google, Viber, Skype etc do not make any investment in networks but have the most to gain from increased network quality and coverage. There services reduce on network operator’s voice and SMS revenues
What should network operators do?
There generally two schools of thought to this dilemma
- Network operators should focus only on their core competency – The network.
Network operators should realize that they can’t do messaging like Whatapp, can’t do social and communication like Facebook, Can’t do Voice over IP (VOIP) like Skype, Can’t do payments and commerce like a banks and payment providers.
They should focus on having the cheapest most efficient network and leave services to other companies that are good at that.
- Fight back
Mobile network operators own the network, why just be a “dumb pipe” and let other companies make money from a network they did not invest in? Why should they let companies like Skype , Viber, Whatsapp etc cannibalize their voice and messaging revenue?
What operators do then is discourage usage of these over the top services (OTT) by actively looking out for data packets from this services and reducing their quality of service. This makes those services unattractive to users and so they remain using network operator services. Network operators then actively develop their own services to compete with these services and make them more attractive to users by making them work more efficiently on their network
That’s the mobile networks innovators dilemma dilemma . Not only do they need to refocus their business models and investment’s towards a future where data and services are key but by doing so they are hastening the demise of their traditional voice and messaging revenues.
What should they do? What do you think?
Editor’s note: This is a guest post from Allan Rwakatungu. Allan is the Founder and CEO of intelworld (www.intelworld.co.ug) , a company that develops mobile commerce solutions that enables customers to transact using their mobile phones. If you are an industry player and have an insightful post on topics that could be interesting to the readers of this publication, please don’t hesitate to email editorial(at)dignited.com.
One thought on “How Internet companies put Mobile networks in the “Innovator’s dilemma” pickle”
Plans of deliberate throttling of internet based services by telcos, I believe, are already in the offing. But this arises serious ethical issues besides facing the legal ramifications advanced by the net neutrality movement. The MNOs’ ultimate plan of survival should be in partnering with the so called foes that rule the internet.