Why does everyone know an operator’s business better than the operator?

At the Great Telco Debate this week there was no shortage of advice for operators. Some counselled them to move up the value chain or branch out into related areas. Others to build “it” so that they would come. Still more suggested making money from the products they were aiming to sell in areas like security. But there were no operators actually talking about doing these things.

In most industries the working assumption is that a company knows its customers better than outsiders. Companies determine what they believe their customers want and then work with their suppliers to deliver it. For example, Apple concluded that a small music player would sell well, and then talked with suppliers about sourcing the micro hard-disk needed to make it work.

But this assumption of knowing your customers seems not to hold in the mobile telecoms industry. It appears that the industry assumes that the mobile operators do not know their customers, but that they - the suppliers generally - understand them better.

The most blatant example of this is the network manufacturers. They frequently publish papers demonstrating how particular market segments would benefit from new technology, such as 5G. (Of course, the manufacturers would benefit even more.) At the Great Telco Debate, Nokia spoke about how the telcos needed to be bold, to build networks for which there was no current business plan on the basis that revenue streams would materialise. Telling your customer to do something which cannot be justified economically seems a risky way to ensure a good long-term relationship.

The operators have been advised for decades that they are in a business that is increasingly becoming a utility and that they need to “move up the value chain” or find some other growth opportunity. This advice seems to be predicated on the view that nobody wants to be a utility, that it is essential for organisations to grow, and that moving around the value chain is easy to do. All merit further investigation. Utility businesses are stable, low-risk and normally profitable. Many companies do not grow but thrive nevertheless. But most problematic, mobile operators have been trying to “move up the value chain” for many years, with conspicuous lack of success. Think of video calling, picture messaging, location-based services, walled-garden internet, widgets, e-health, e-wallets (with the notable exception of m-pesa in Africa), home femtocells, content provision, etc.

Interestingly, those who might have some claim to understand mobile customers, of who Apple are preeminent, have been very quiet, at least publicly on what mobile operators should do. Google did speak at the Great Telco Debate but were rightly hesitant to be overly prescriptive.

Most operators, sensibly, appear to be ignoring all this unsolicited advice and getting on with running their networks reliably while delivering ever-more data capacity for ever-lower tariffs. Of course, they listen to ideas emanating from around the industry, but they know their business, their financial constraints, and their competitive and regulatory environment.

Perhaps the mobile industry should assume that the operators have a good understanding of their customers and are the ones to drive the direction of the industry. Or if the suppliers are so sure that “they will come” once it is built, perhaps they should offer to provide their equipment and services for no cost in return for a downstream revenue share from the operators? For those convinced that a move up the value chain will solve all ills perhaps they could point to case studies where this has worked, or show why this time really could be different.

Do the suppliers to the mobile operators actually understand their customer’s business?