2018 has been an incredibly business year for all of us, and it might be easy to forget a couple of the shifts, curves, U-turns and dead-ends.
From crossing the 5G finish line, finger pointing from the intelligence community, the biggest data privacy scandal to date and a former giant finally turning its business around, we’ve summarised some of the biggest stories of 2018.
If you feel we’ve missed anything out, let us know in the comments section below.
Sanction, condemnation and extinction (almost)
ZTE. Three letters which rocked the world. A government-owned Chinese telecommunications vendor which can’t help but antagonise the US government.
It might seem like decades ago now but cast your mind back to April. A single signature from the US Department of Commerce’s Bureau of Industry and Security (BIS) almost sent ZTE, a company of 75,000 employees and revenues of $17 billion, to keep the dodo company.
This might have been another move in the prolonged technology trade war between the US and China, but ZTE was not innocent. The firm was caught red-handed trading with Iran, a country which sits very prominently on the US trade sanction list. Trading with Iran is not necessarily the issue, it’s the incorporation of US components and IP in the goods which were sent to the country. ZTE’s business essentially meant the US was indirectly helping a country which was attempting to punish.
The result was a ban, no US components or IP to feature in any ZTE products. A couple of weeks later manufacturing facilities lay motionless and the company faced the prospect of permanent closure, such was its reliance on the US. With a single move, the US brought one of China’s most prominent businesses to its knees.
Although this episode has been smoothed over, and ZTE is of course back in action, the US demonstrated what its economic dirty bombs were capable of. This was just a single chapter in the wider story; the US/China trade war is in full flow.
Tinker, tailor, Dim-sum, Spy
This conflict has been bubbling away for years, but the last few months is where the argument erupted.
Back in 2012, a report was tabled by Congressman Mike Rogers which initially investigated the threat posed by Chinese technology firms in general, and Huawei specifically. The report did not produce any concrete evidence, though it suggested what many people were thinking; China is a threat to Western governments and its government is using internationally successful companies to extend the eyes of its intelligence community.
This report has been used several times over the last 12 months to justify increasingly aggressive moves against China and its technology vendors. During the same period, President Trump also blocked Broadcom’s attempts to acquire Qualcomm on the grounds of national security, tariffs were imposed, ZTE was banned from using US technologies in its supply chain and Huawei’s CFO was arrested in Canada on the grounds of fraud. With each passing month of 2018, the trade war was being cranked up to a new level.
Part of the strategy now seems to be undermining China’s credibility around the world, promoting a campaign of suggestion. There is yet to be any evidence produced confirming the Chinese espionage accusations but that hasn’t stopped several nations snubbing Chinese vendors. The US was of course the first to block Huawei and ZTE from the 5G bonanza, but Australia and Japan followed. New Zealand seems to be heading the same way, while South Korean telcos decided against including the Chinese vendors on preferred supplier lists.
The bigger picture is the US’ efforts to hold onto its dominance in the technology arena. This has proved to be incredibly fruitful for the US economy, though China is threatening the vice-like grip Silicon Valley has on the world. The US has been trying to convince the world not to use Chinese vendors on the grounds of national security, but don’t be fooled by this rhetoric; this is just one component of a greater battle against China.
Breakaway pack cross the 5G finish line
We made it!
Aside from 5G, we’ve been talking about very little over the last few years. There might have been a few side conversations which dominate the headlines for a couple of weeks, but we’ve never been far away from another 5G ‘breakthrough’ or ‘first’. And the last few weeks of 2018 saw a few of the leading telcos cross the 5G finish line.
Verizon was first with a fixed wireless access proposition, AT&T soon followed in the US with a portable 5G hotspot. Telia has been making some promising moves in both Sweden and Estonia, with limited launches aiming to create innovation and research labs, while San Marino was the first state to have complete coverage, albeit San Marino is a very small nation.
These are of course very minor launches, with geographical coverage incredibly limited, but that should not take the shine off the achievement. This is a moment the telco and technology industry has been building towards for years, and it has now been achieved.
Now we can move onto the why. Everyone knows 5G will be incredibly important for relieving the pressure on the telco pipes and the creation of new services, but no-one knows what these new services will be. We can all make educated guesses, but the innovators and blue-sky thinkers will come up with some new ideas which will revolutionise society and the economy.
Only a few people could have conceived Uber as an idea before the 4G economy was in full flow, and we can’t wait to see what smarter-than-us people come up with once they have the right tools and environment.
Zuckerberg proves he’s not a good friend after all
This is the news story which rocked the world. Data privacy violations, international actors influencing US elections, cover ups, fines, special committees, empty chairs, silly questions, knowledge of wrong-doing and this is only what we know so far… the scandal probably goes deeper.
It all started with the Cambridge Analytica scandal, and a Russian American researcher called Aleksandr Kogan from the University of Cambridge. Kogan created a quiz on the Facebook platform which exposed a loop-hole in the platform’s policies allowing Kogan to scrape data not only from those who took the quiz, but also connections of that user. The result was a database containing information on 87 million people. This data was used by political consulting firm Cambridge Analytica during elections around the world, creating hyper-targeted adverts.
What followed was a circus. Facebook executives were hauled in-front of political special committees to answer questions. As weeks turned into months, more suspect practices emerged as politicians, journalists and busy-bodies probed deeper into the Facebook business model. Memos and internal emails have emerged suggesting executives knew they were potentially acting irresponsibly and unethically, but it didn’t seem to matter.
As it stands, Facebook is looking like a company which violated the trust of the consumer, has a much wider reaching influence than it would like to admit, and this is only the beginning. The only people who genuinely understand the expanding reach of Facebook are those who work for the company, but the curtain is slowly being pulled back on the data machine. And it is scaring people.
Big Blue back in the black
This might not have been a massive story for everyone in the industry, but with the severe fall from grace and rise back into the realms of relevance, we feel IBM deserves a mention.
Those who feature in the older generations will remember the dominance of IBM. It might seem unusual to say nowadays, but Big Blue was as dominant in the 70s as Microsoft was in the 90s and Google is today. This was a company which led the technology revolution and defined innovation. But it was not to be forever.
IBM missed a trick; personal computing. The idea that every home would have a PC was inconceivable to IBM, who had carved its dominant position through enterprise IT, but it made a bad choice. This tidal wave of cash which democratised computing for the masses went elsewhere, and IBM was left with its legacy business unit.
This was not a bad thing for years, as the cash cow continued to grow, but a lack of ambition in seeking new revenues soon took its toll. Eight years ago, IBM posted a decline in quarterly revenues and the trend continued for 23 consecutive periods. During this period cash was directed into a new division, the ‘strategic imperatives’ unit, which was intended to capitalise on a newly founded segment; intelligent computing.
In January this year, IBM proudly posted its first quarterly growth figures for seven years. Big Blue might not be the towering force it was decades ago, but it is heading in the right direction, with cloud computing and artificial intelligence as the key cogs.
Convergence, convergence, convergence
Convergence is one of those buzzwords which has been on the lips of every telco for a long time, but few have been able to realise the benefits.
There are a few glimmers of promise, Vodafone seem to be making promising moves in the UK broadband market, while Now TV offers an excellent converged proposition. On the other side of the Atlantic, AT&T efforts to move into the content world with the Time Warner acquisition is a puzzling one, while Verizon’s purchase of Yahoo’s content assets have proved to be nothing but a disaster.
Orange is a company which is taking convergence to the next level. We’re not just talking about connectivity either, how about IOT, cyber-security, banking or energy services. This is a company which is living the convergence dream. Tie as many services into the same organisation, making the bill payer so dependent on one company it becomes a nightmare to leave.
It’s the convergence dream as a reality.
Europe’s Great Tax Raid
This is one of the more recent events on the list, and while it might not be massive news now, we feel it justifies inclusion. This developing conversation could prove to be one of the biggest stories of 2019 not only because governments are tackling the nefarious accounting activities of Silicon Valley, but there could also be political consequences if the White House feels it is being victimised.
Tax havens are nothing new, but the extent which Silicon Valley is making use of them is unprecedented. Europe has had enough of the internet giants making a mockery of the bloc, not paying its fair share back to the state, and moves are being made by the individual states to make sure these monstrously profitable companies are held accountable.
The initial idea was a European-wide tax agenda which would be led by the European Commission. It would impose a sales tax on all revenues realised in the individual states. As ideas go, this is a good one. The internet giants will find it much more difficult to hide user’s IP addresses than shifting profits around. Unfortunately, the power of the European Union is also its downfall; for any meaningful changes to be implemented all 28 (soon to be 27) states would have to agree. And they don’t.
Certain states, Ireland, Sweden and Luxembourg, have a lot more to lose than other nations have to gain. These are economies which are built on the idea of buddying up to the internet economy. They might not pay much tax in these countries, but the presence of massive offices ensure society benefits through other means. Taxing Silicon Valley puts these beneficial relationships with the internet players in jeopardy.
But that isn’t good enough for the likes of the UK and France. In the absence of any pan-European regulations, these states are planning to move ahead with their own national tax regimes; France’s 3% sales tax on any revenues achieved in the country will kick into action on January 1, with the UK not far behind.
What makes this story much more interesting will be the influence of the White House. The US government might feel this is an attack on the prosperous US economy. There might be counter measures taken against the European Union. And when we say might, we suspect this is almost a certainty, such is the ego of President Donald Trump.
This is a story which will only grow over the next couple of months, and it could certainly cause friction on both sides of the Atlantic.
Que the moans… GDPR
GDPR. The General Data Protection Regulation. It was a pain for almost everyone involved and simply has to be discussed because of this distress.
Introduced in May, it seemingly came as a surprise. This is of course after companies were given 18 months to prepare for its implementation, but few seemed to appreciate the complexity of becoming, and remaining compliant. As a piece of regulation, it was much needed for the digital era. It heightened protections for the consumer and ensured companies operating in the digital economy acted more responsibly.
Perhaps one of the most important components of the regulation was the stick handed to regulators. With technology companies growing so rapidly over the last couple of years, the fines being handed out by watchdogs were no longer suitable. Instead of defining specific amounts, the new rules allow punishments to be dished out as a percentage of revenues. This allows regulators to hold the internet giants accountable, hitting them with a suitably large stick.
Change is always difficult, but it is necessary to ensure regulations are built for the era. Evolving the current rulebook simply wouldn’t work, such is the staggering advancement of technology in recent years. Despite the headaches which were experienced throughout the process, it was necessary, and we’ll be better off in the long-run.
Next on the regulatory agenda, the ePrivacy Regulation.
Jio piles the misery on competitors
Jio is not a new business anymore, neither did it really come to being in 2018, but this was the period where the telco really justified the hype and competitors felt the pinch.
After hitting the market properly in early 2016, the firm made an impression. But like every challenger brand, the wins were small in context. Collecting 100,000s of customers every month is very impressive, but don’t forget India has a population of 1.3 billion and some very firmly position incumbents.
2017 was another year where the firm rose to prominence, forcing several other telcos out of the market and two of the largest players into a merger to combat the threat. Jio changed the market in 2017; it democratised connectivity in a country which had promised a lot but delivered little.
This year was the sweeping dominance however. It might not be the number one telco in the market share rankings, but it will be before too long. Looking at the most recent subscription figures released by the Telecom Regulatory Authority of India (TRAI), Jio grew its subscription base by 13.02 million, but more importantly, it was the only telco which was in the positive. This has started to make an impact on the financial reports across the industry, Bharti Airtel is particularly under threat, and there might be worse to come.
For a long-time Jio has been hinting it wants to tackle the under-performing fixed broadband market. There have been a couple of acquisitions in recent months, Den Networks and Hathway Cable, which give it an entry point, and numerous other digital services initiatives to diversify the revenue streams.
The new business units are not making much money at the moment, though Jio is in the strongest position to test out the convergence waters in India. Offering a single revenue stream will ensure the financials hit a glass ceiling in the near future, but new products and aggressive infrastructure investment plans promise much more here.
We’re not too sure whether the Indian market is ready for mass market fixed broadband penetration, there are numerous other market factors involved, but many said the initial Jio battle plan would fail as well.
Convergent business models are certainly an interesting trend in the industry, and Jio is looking like it could force the Indian market into line.
Redundancies, redundancies, redundancies
Redundancy is a difficult topic to address, but it is one we cannot ignore. Despite what everyone promises, there will be more redundancies.
Looking at the typical telco business model, this is the were the majority have been seen and will continue to be seen. To survive in the digitally orientated world, telcos need to adapt. Sometimes this means re-training staff to capitalise on the new bounties, but unfortunately this doesn’t always work. Some can’t be retrained, some won’t want to; the only result here will be redundancies.
BT has been cutting jobs, including a 13,000-strong cull announced earlier this year, Deutsche Telekom is trimming its IT services business by 25%, the merger between T-Mobile and Sprint will certainly create overlaps and resulting redundancies, while Optus has been blaming automation for its own cuts.
Alongside the evolving landscape, automation is another area which will result in a headcount reduction. The telcos will tell you AI is only there to supplement human capabilities and allow staff to focus on higher value tasks, but don’t be fooled. There will be value-add gains, but there will also be accountants looking to save money on the spreadsheets. If you can buy software to do a simple job, why would you hire a couple of people to do it? We are the most expensive output for any business.
Unfortunately, we have to be honest with ourselves. For the telco to compete in the digital era, new skills and new business models are needed. This means new people, new approaches to software and new internal processes. Adaptation and evolution is never easy and often cruel to those who are not qualified. This trend has been witnessed in previous industrial revolutions, but the pace of change today means it will be felt more acutely.
Redundancy is not a nice topic, but it is not always avoidable.