The traditional telco is dead

Ever since Alexander Graham Bell made that first call from his now famous invention, the telephone and its iterated version – the mobile phone have forever changed the world. I can attribute the term “global village” to the fact that the mobile phone has made it possible to reach and interact with anyone with a signal across the globe. The pivotal place that the traditional telco had, has seen many of them grow and rank as some of the largest companies in the regions they operate, based on revenues and market capitalization, making them an investor magnet. Telcos have been able to set their price and have the market make do with it due to lack of options.

Enter the internet and it became evident that a tectonic shift was in play. This is happening in two phases, with the first having been the uptake of voice over IP. A little over a decade ago making international calls was about the most expensive thing one could do using their mobile phone, with mobile airtime often cited as ranking high in an adapted version of Maslow’s Hierarchy. The disruptive nature of the internet even before the transcontinental submarine cables were laid opened up a very lucrative opportunity in call termination that skirted around the traditional telco, making international calls more affordable, primarily on the incoming route. The Communications Authority deemed this as illegal and on several occasions raided premises and confiscated equipment worth millions in every run. Eventually the operators themselves latched on and the third party opportunity diminished substantially.

The second phase is what see now, with the explosive growth of OTT platforms such as Facebooks most prolific purchase, WhatsApp, Viber, WeChat and a host of others globally that have put a dent in mobile operator earnings the world over. The cost of mobile data is dropping while capacity increases. Initiatives such as Internet.org are also introducing millions of previously unconnected populations to the internet often through “smart enough” phones. The traditional telco had the advantage of “owning” the subscriber by controlling access to the mobile SIM card. That age old advantage has since been rendered null, as OTT platforms leverage the same to authenticate users but them migrate the user interaction and experience onto their platforms, which can work over any data connection. This means that without topping up your mobile SIM or having mobile data turned on, you can still communicate with others. Some telcos have moved quickly to stem the revenue bleed by diversifying, mostly to mobile money but the OTT platforms have already seen this opportunity with some like Facebook Messenger already into payments and those from Asia having powered mobile commerce for years.

The telco troubles continue as Google goes strong on Project Loon that will use stratospheric balloons to deliver internet connectivity and Facebook works to deploy massive unmanned drones for the same task. Despite the rural focus by both internet behemoths, African cities are not large by any measure and covering the entire Nairobi and its environs with high speed wireless internet starts to make for many aha! moments.

It will be interesting to see how the telcos adapt to these advances. In my opinion, the traditional telco is dead