Analyst Viewpoint

view that each company is big enough and powerful enough to take on the over-the-top players and “control” the experiences of end users in the digital economy. Even though the U.S. market is more consolidated than Europe, it seems unlikely that either AT&T or Verizon can keep customers using only their services—the lamented walled garden approach.

Implementing a Telco 2.0 strategy is important but challenging Via industry interviews and a quantitative survey, STL Partners explored operator attitudes toward these next-generation operator strategies. Overall, respondents felt that most operators would do

best to pursue a Happy Pipe strategy, with only a few Tier 1 operators likely to be successful pursuing a Full-Service Telco 2.0 strategy. For both strategies, respondents were surprisingly skeptical about the ability of operators to implement the necessary changes. The key reasons for this were: • Competition from Internet and over-the-top players • Difficulty in building a viable ecosystem • Lack of mobile operators’ skills • Culture • Organizational structure. Looking at the specific activities required to build smarter

networks and services, it was clear that those required for a Full-Service Telco 2.0/smart services strategy (exposing assets via APIs, differentiated charging and pricing, personalized and

differentiated services) were considered the most difficult to implement.

Conclusions and recommendations By comparing the relative importance of specific smart network and service activities versus how easy they are to implement, we were able to classify them into four categories, ranging from capabilities that operators “must get right” to succeed to activities they must “forget” about in order to move forward (see chart below). Overall, it appears that mobile network operators need to

continue to invest resources in developing smart networks. But operators also must clearly prioritize those activities, given the multitude of moving parts required to deliver a successful Happy Pipe strategy. Meanwhile, a successful Full-Service Telco 2.0 strategy

is likely to be extremely profitable for a mobile network operator, resulting in a substantial increase in share price. But delivering on this strategy remains a major challenge. Operators must collaborate, experiment and invest to implement a full Telco 2.0 strategy. Given the demands of investors for dividend yields, investment is only likely to be available if an operator becomes more efficient, so implementing a Happy Pipe strategy that reduces capital and operating costs is a critical first step for operators ultimately pursuing a Telco 2.0 path. 

Video: Tellabs’ Pankaj Shroff discusses STL Partners’ study at http://www.tellabs.com/resources/multimedia/

Source: STL Partners/Telco 2.0 & Tellabs ‘Smart pipes’ survey, July 2011, n=100 SUBSCRIBE TO INSIGHT: WWW.TELLABS.COM/INSIGHT TELLABS INSIGHT Q1 | 15