3 trends for network operators to keep an eye on in 2016 (and start planning for in the budgeting season already now?)

The annual budgeting and planning process is right now kicking in to high gear in most large companies. Questions of how to staff projects and what products will sell will be discussed at length and become truisms. In some strange way most leaders will, close to Christmas, when everything is set for 2016, feel as if they have won a battle and all they have to do now is to just show up. The plan is PERFECT!!! We simply can't fail...

Yes you can! And in many cases you will...

Everybody else also has basically the same information you have. You are not unique. And, all your competitors are looking at the same reports as you and making the same plans for "attacking" the same customers as you...

What if you take some time to think just a little bit outside your cubilce? Sometimes it's worth is and this is also my job. I will not in any way claim to have the answer to wll-things-future but at least I surround myself with companies and people that give me inspiration to be able to push our imaginationa just a little bit.

Below, I have complied a few of my thoughts for what we, as network carriers should keep an eye on in 2016... Which means that they somehow need to be in the budget process 2015 which is why I publish it now and not in january as every other futurist will..

Feedback is very appreciated!

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Trends and input to future strategy

The telecommunications market is not seen as a growth market by anyone. At least, not in the regions where TeliaSonera are active.

From an investor perspective, network carriers are in what BCG would call the “Cash Cow” quadrant. A place where high direct yields are expected but with limited growth…

This is also very easy to observe if you compare my employer TeliaSonera to Facebook from a EV and revenue perspective. Facebook has exactly the same revenue but a totally different valuation. In the case of Facebook, investors expect that the best is still to come (in terms of growth in returns)… The picture would look the same for most network operators on a relative basis.

The network operators are of course not doomed in any way or form. We just have to speed up our innovation efforts and truly deliver on the promise of becoming the new generation Telco unless we want to become a significantly smaller operating company and revert back to strategies of “coverage and only delivering bits”. Changing your way of operating, effectively shifting up gears is not a small task and nobody can guarantee share price increase (or increased revenues for that matter). THE most important task now is to stay relevant to our customers. If we do this, profits will come.

Relevance is a tough nut to crack though. Markets are becoming more and more fragmented and consumer demand is shifting rapidly.

-Yes, but.

We are alos set in a beautiful market position. In the case of TeliaSonera we are #1 or #2 in all our core markets. We have a high focus on quality and enjoy a relative pricing power. Consumers look towards us for new services, devices and innovations. Or, at least they should. This is our biggest opportunity. We can set the agenda for the future. If we dare…

Below are some important areas where I think market is nascent enough to enter as an early mover and where network carriers can become thought (and possibly even market-) leaders.

Mesh networks

How can 500,000 teens (and growing with 1-2,000 users a week) in the US send messages through an app without having a data plan? Magic?

No, of course not. Instead, the app (called Jott) does this by creating ad-hoc Mesh networks between all phones. Mesh networks are supported in iOS since 2014 and a few Apps already seem to have reached escape velocity in terms of user growth. Jott and Firechat are examples of this. Android will very soon also start supporting Mesh networks.

Mesh networks are exciting and possibly very disruptive to the carriers business model since these networks don’t care about topology. In basic terms, Mesh networks are a form of P2P networking where the crowd’s own devices contribute to building the network organically. Most non-mesh networks use a star topology of some sort, with a central node (a switch/router) connected to a bunch of distributed switches who in turn connect to the end user’s device. The star topology dictates that if one client wants to talk to another the data must go through the central point (the router).

The internet is built around the concept of many topological networks that are interconnected by different layers of routing protocols. Telecom networks are also topological and all rely on a few single peering points to access the internet.

A mesh “topology” (or non-topology as it were) on the other hand is where each node in the network is connected to every other node around it without central relay and switching involved.

The implications for network operators is that people will be able to start communicating with others (which arguably is the main function of the internet) without us ever getting involved. This is especially impactful in densely populated areas such as cities and at e.g. large events.

There are of course opportunities to be captured… The Mesh network will still somehow be connected to the internet. It has to be. A few nodes in the mesh will, so to speak, act as internet peering points for the mesh. We could e.g. start to participate and build capabilities to act as internet peering points in mesh networks. We could even build Mesh networking and communication apps in order to further deepen our bet…

If we, as service providers, don’t start moving on this topic very soon the likes of Facebook, Google, Apple etc. will all incorporate Mesh functionality in their apps and operating systems which will effectively reduce the value of our networks.

Wearables

Wearable connected technologies have now been around for quite a few years. 2015 was also a big year in terms of wrist-based use cases with Apple Watch launching (somewhat-) successfully. In 2016, more and more devices will come and even TeliaSonera’s new head office will have the possibility to incorporate new ways of opening doors with e.g. connected rings etc.

It is obvious that wearables have three dominant use cases right now:

• Tracking movement.

Main use case has so far been to provide data to health and lifestyle apps in the form of e.g. steps-per-hour, running speed etc. Which has a broad applicability albeit limited long term usage statistics (people tend to fade away after a while when they realize that usage patterns generally fluctuate very little hence making them look less often at the app…).

Movement tracking will however start to migrate towards other consumer and enterprise use cases. Examples of this can be fall detection for elderly care takers, body augmentation fabrics etc.

• Displaying Notifications

The Apple Watch and before it the Pebble and Samsung gear etc. were all designed as companion screens for a smartphone primarily. Neither of these devices are especially good (or nice looking) watches and never really tried to be such. Instead they have been positioned as “small smartphones” where you can do lots of stuff that you already are doing with your phone, only you don’t have to take your phone out of your pocket… Consumer’s general adoption of this new way of looking at content has ot been overwhelming.

• Near field communication

Most wearables also have the ability to communicate at close range with e.g. locks and other smart devices. The use cases for this technology are so far not that many outside of opening stuff. But this will be enhanced by the advent of payment terminals and other devices where simple proximity based identification is needed (e.g. Public Transportation etc.)

So what is in the pipeline for wearables?

A couple of trends are very evident here. First, the “movement trackers” will become ubiquitous and become embedded in to both ordinary items as well as fashion. Every person might soon have 20 or more movement trackers to stay on top of such as handbags, rings, cars etc. The clear opportunity here is to assist the consumer with predictions on what is going to happen and tell the why and what to do about it. This is where the second trend comes in to play.

The cloud metaphor for explaining what a service can do for consumer will have to change. Instead we will have to explain it as Virtual Assistants or Services that are all about YOU… What do I mean with this?

Consumers have come to expect that digital services magically knows what you were doing on one device so that you can carry on doing this on another (i.e. Netflix etc.). As technologists we use the Cloud metaphor to explain this. I.e.we stored you session in a cloud hosted user database so that when you logged on again from somewhere else you can continue your session. This is not how a consumer thinks about cloud. For them, storage services such as Dropbox are probably the only ones that are understandable as cloud services.

Coming back to the trend in wearables. If we ditch the Cloud metaphor and replace it with virtual assistants we can start to look at innovations in this realm. Apple’s Siri, Google Now, Microsoft Cortana are examples of these. The virtual assistants will have a more and more important role to play for wearables and consumers. The operating systems are in a unique position to aggregate all data coming from apps to build smart services such as predictive recommendations. Your virtual assistant can tell you that you need to get going if you walk with your normal pace, tell you that since many of your friends have been sick lately maybe you should consider buying some ginger (do you want me to add it to your shopping bag scheduled for delivery later today?).

For network operators the opportunity is to start exploring how we too can offer virtual assistants. Maybe, to begin with, this should mostly be in relation to the home environment where we are strong. We should however not forget that we have huge amounts of data that consumers, through smart services, can use to make their lives easier.    

Cashless societies

What is money? And what is the value of a coin or a piece of paper? …are things I will not discuss here.

But, less and less people in my region of the world rely on cash as a means of transaction. Actually less than 6% of all retail payments in Sweden, Norway and Denmark are made in cash.

Most parts of society, and governments in particular, benefit from becoming cashless. There are countless scenarios that benefit from reducing the transaction costs related to cash. Denmark is, according to CNN contemplating becoming completely cashless already in 2016 (https://money.cnn.com/2015/06/02/technology/cashless-society-denmark/index.html).

Even more interesting, for us as a carrier, is of course the effect and ramifications a cashless society has on e.g. purchase patterns and customer relationships.

Without knowing the exact figures I would expect that very few transactions between consumers and service providers in general are done in cash even today. Yet, when the completely cashless society becomes a reality many more retail avenues and business opportunities will open up.

Today, banks basically enjoy a trust monopoly. People want to have their money stored somewhere safe, in a place where they can easily transact with others (i.e. pay bills etc.) and also have the possibility to get cash in hand when needed. But, what will happen to peoples feeling for money and centralized trust-based institutions when money no longer has a physical manifestation other than through the things that you can buy?

For sure, banks will have to fight for our business much more than they do today. Cash is, for the banks, what the networks are to us as network operators => a gigantic entry-barrier for new challengers. If you, as a bank, today would skip cash altogether, you would lose all your merchant clients who have to be able to deposit funds. And, even though you as a bank (since 2008 in Sweden) can uphold a retail banking license without managing cash, it is still (politically-) seen a part of your obligation to society… Popular press would put enormous pressure on you to serve the long tail.

Without cash many things we take for granted can change. For instance why would you need a plastic card? They are not needed if you don’t want to go to an ATM. Most merchants accept NFC payments already today. More importantly, people will have to get used to transacting P2P by digital means such as paying for things at a garage sale etc.

Further, people that today are unbanked (such as migrant workers, immigrants before they get a living permit etc.) would need to be served somehow (by new types of banks?). Also, positive externalities might happen such as oppressive cultural norms being broken up, women and girls who today are not allowed to handle their own money will need own accounts, out of reach for the men in the family (yes, this is still quite common in some ethic groups living in Scandinavian countries).

Also, workers from other countries will need to somehow transact outside of the traditional banking system, or risk not getting paid at all. The entire shadow economy will change structure and move towards either transacting directly in goods or move to cryptocurrencies (the latter most likely). There is a big “trickle up effect”. In a 2013 report, VISA (the credit card company) estimated that the Swedish shadow economy was as high as 13,9% of GDP, which would value this “black economy” somewhere close to 500bSEK (or more) which would have to move online in one form or other.

The opportunity for carriers is of course to dive, head first, in to the financial technology field and leverage our distribution power and consumer trust. Running a cashless retail bank is just one obvious opportunity. Others include all aspects of the value chain around cryptocurrencies and block chain based systems of trust. In addition, providing simple means of value transfer between people who don’t necessarily want banks involved is a huge albeit questionable area to venture in to. Financial market derivative products such as insurance and trading services will also be much easier to sell. And to top it off, Identity management is the corner stone of all of this. A cashless society will require many different types of identity based services where carriers can play a central role.

A few bonus observations that might come in handy already 2016 but more likely 2017 and beyond.

VR and AR

The very much hyped Oculus Rift consumer product will most likely launch in 2016 (perhaps it will be the Christmas present of the year?). To drive adoption Facebook will in 2016 start experimenting with 360 degree videos in your feed. Content is however still very expensive to create and not something that the a broad set of consumers will do by themselves and share (which is of course what brings people to Facebook, Twitter etc.). Instead the market will have to find its natural use case and price point. Google is innovating on the low end of the spectrum with Google Cardboard. Game makers are with few exceptions looking in to how they can create more immersive experiences. Still high end gaming is a niche.

Education use cases are very appealing but will take time to adopt. Likewise in the Enterprise market.

Places in the value chain for carriers are of course to sell the equipment itself and provide (ever more) connectivity. In addition we should keep an eye on how to participate if virtual worlds have a renaissance if/when Facebook decides to augment its platform with this. Also, being early with VR/AR based TV services can have a good marketing effect even though not much content will be available.  

Security and Privacy

Five out of six companies employing more than 2,500 people were targets of cyber-attacks last year, according to Symantec’s annual 2014 Internet Security Threat Report.

With huge data breaches coming in to the public spotlight, such as infidelity-site Ashley Maddison and Sony etc., consumer might soon start to really care about what they do online. Consumer behaviour is slow to change and privacy has been on the table a long time. But, the perfect storm of large public attacks and deeper knowledge of state run surveillance (due to the likes of Snowden) might finally tip the sentiment.

Hard to predict if this will happen in 2016… But time seems ripe for service providers of all sorts to start pushing security services, outside of just virus protection. Perhaps the aforementioned opportunities with block chain etc. can be combined? Perhaps local (in country) storage services to compete with the likes of Dropbox et al. can extract enough price premiums to become profitable by pushing “adhering-to-local-jurisdiction” offerings?

5G

5G services are designed with latency and throughput at centre stage. But, also for more efficient battery management and flexibility in deployment (frequencies etc.) Low latency networks can have large impact especially on industrial and enterprise applications such as autonomous cars. Even more interestingly. 5G will most likely be the first radio standard to run commercial operations (and have devices supporting it) before 3GPP standardization is released.

Waiting for standardization to be finalized is not an option if we want to be ready. The first 5G networks in operation need to start preparing for PoC’s already in 2016 despite standardization planned for 2020.