IBC 2019: Are the nuances of the content world being understood by telcos?

The traditional telco business model is being commoditised, this is not new news, but with more telcos seeking to drive value through content, do they understand the nuances of consumer behaviour?

Once again at IBC in Amsterdam, it is an OTT which is grabbing attention. This should come as little surprise considering the disruption which this fraternity is thrusting on the world of telecoms, media and technology, though here it is more than gratuitous. Cécile Frot-Coutaz, the head of YouTube’s EMEA business, outlined why these companies are leading the way; a fundamental and intrinsic understanding of today’s consumer and the consumer-driven market trends.

This is perhaps why the telcos and traditional media companies are struggling to adapt to a world dominated by millennials, generation Z and digital natives. They appreciate society is changing but have perhaps not correctly balanced the formula to fit cohesively and efficiently into the new paradigm.

This conundrum is most relevant in the content world. Telcos need to factor this complex and nuanced segment into the business model, but how, where, why and when is a tricky question. Many telcos want to do something completely new and very drastic, but the simplest ideas are often the best ones; how can connectivity be used to augment and enhance the fast-growing, fascinating, complicated and profitable content space?

From our perspective, telcos need to diversify, but the best way to do that is figure how connectivity can enhance growing businesses and segments. This might sound like an obvious statement, however the evidence is the nuances are being missed.

Take AT&T for example. This is a company which desperately wants to diversify to take advantage of the digital economy. One way in which it feels it can do this is through the acquisition of Time Warner, a $107 billion bet to own content, create a streaming platform and drive another avenue of engagement with the consumer. Sounds sensible enough, but why take such a risk when there are opportunities closer to home.

Another strategy is more evident in Europe where telcos are attempting to create partnerships with the streaming giants to embed the distribution of these services through their own platforms. See Sky’s integration of Netflix or Vodafone’s work with Amazon Prime. Again, it is a perfectly reasonable approach, but does this future-proof the business against the trends of tomorrow?

These are two approaches which will attract plaudits, but we would like to take the strategy closer to home once again.

During her presentation, Frot-Coutaz pointed to several trends which could define the content world of tomorrow, and it is a perfect opportunity for the telcos to add value.

Firstly, let’s have a look at the consumer of today and tomorrow. Millennials and Generation Z have fundamentally changed the way in which the media world operates, and content is consumed. Not only is it increasingly mobile-driven, but there are new channels emerging every single day. Technology is second-nature to these consumers, and this is shaping the world of tomorrow.

Another interesting point from Frot-Coutaz is the fragmentation of content. One of the objectives of YouTube is not only to own content channels, but to empower the increasing number of content creators who are emerging in the digital world. If the content creators make more money, so does YouTube.

Frot-Coutaz claims that the number of YouTube channels which generate more than $100,000 per annum has increased 30% from 2017 to 2018. These trends are highly likely to continue, further fragmenting the content landscape.

This is where owning content or embedding popular streaming services into platforms becomes problematic. Consumer trends suggest the variety of channels through which the user is consuming content is increasing not decreasing. Embedding Netflix into a platform is an attractive move, but it is only attractive to those who have an interest in Netflix. If connectivity solutions can be offered to consumers to simplify and enhance the consumption of content, agnostic of the platform, there is a catch-all opportunity.

Although Netflix and Amazon Prime might be the content platforms on everyone’s lips for the moment, the number of ways in which consumers engage content is gathering significant momentum. There are new challengers in the streaming world (Disney+ or Apple TV), traditional social media (Facebook or Twitter), challenger social media (Tik Tok) AVOD channels (YouTube), traditional conversational websites (Reddit), messaging platforms and who knows what else in the 5G era. What about the VR/AR platforms which could potentially emerge soon enough?

This is a nuance, not a drastic change in thinking, but it is an important one to understand. Do telcos want to be the owner of content, the distributor or the delivery model. Admittedly, the delivery model is not the sexiest in comparison, but it might hold the most value in the long-run.

Another way to think about this taking the example of Killing Eve, the BBC spy thriller. Is there more long-term value in the eyes of the consumer in owning the content, owning the distribution channel or owning the connectivity services which fuel consumption and engagement through all channels?

The best means of differentiation have always been the ones which are closest to home. If you look at the likes of Google, Microsoft and Amazon, these are future-proofed companies because they are taking their current services and creating contextual relevance. There might be examples which undermine this point, but the general claim holds strong.

At Google, the team diversified their business through the acquisition of Android. This evolution took Google from the PC screen and onto mobile, but it is an extension of the advertising business model in a different context. The same could be said about YouTube. A video platform is drastically different from a search engine, but the underlying business model is the same; identifying the needs of the consumer and serving relevant commercial content.

The telcos are looking to do the same thing, but perhaps there needs to be more of a focus on a proactive evolution of the business rather than reactive. The telcos are playing catch-up on the consumption of video through mobile and a shift to OTT distribution, but the current approach is perhaps too narrowly focused. Focusing on the core business of connectivity delivery is more of a catch-all approach, factoring in future trends and the increasingly fragmented digital society.

This is a very easy statement to make, the complications will be on creating products which encapsulate these trends and offer an opportunity for telcos to grow ARPU. We are sitting very comfortable in the commentary box here as opposed to in the trenches with the product development teams, but the nuances of content are there to be taken advantage of.

Apple and Disney belatedly sever corporate ties

Disney CEO Bob Iger has been on the Apple board for eight years but, with the two companies now competing directly in the SVOD market, he has resigned.

Last week Apple officially launched its Apple TV+ subscription video on demand service last week, thus placing it in direct competition with Disney, which is also set to get into the SVOD game with, you guessed it, Disney+. For some reason the two companies left it until the very last minute for Iger to clear off, despite the two competing service having been in development for months.

“On September 10, 2019, Bob Iger resigned from the Board of Directors of Apple Inc,” said the abrupt, unsentimental Apple SEC filing. The Hollywood Reporter got a bit more comment on the matter, with Iger saying how great Apple is and Apple returning the compliment, which is nice. Whether relations will remain so cordial when they’re trying to steal SVOD market share from each other remains to be seen. For some reason Iger is still isted as a board member on the Apple site.

While Iger has been on the Apple board, links between the two companies go a lot further back than that. Apple founder Steve jobs was also the founder of Pixar Animation and thus become one of the largest Disney shareholder when it bought Pixar in 2006. Jobs also joined the Disney board at that time and stayed until his death in 2011.

As companies Apple and Disney have a lot in common. They both position themselves as premium consumer brands and invest heavily in their brand image. They also have a reputation for wanting to control everything around their product offering and image, so it’s not at all surprising that they would want to have their own SVOD services offering only their own stuff rather than rely on third parties for distribution or content.

One other big thing they have in common is a desire to be viewed as wholesome, family companies, which creates the possibility that they will end up producing fairly similar content. Right now Disney is mainly about feature-length movies while Apple seems to be focusing more in TV-style stuff. But that distinction could easily change over the years and, if it does, these two American icons will be fighting for the same wholesome dollar.

Silicon Valley drops the ball on censorship once more

Yet another set of ill-considered censorship decisions by Silicon Valley has illustrated once more the impossible position they are in.

Google has announced it will now ‘elevate original reporting in search’. On one level this is totally laudable. Modern journalism has been severely corrupted by the wholesale shift in advertising spend from print to journalism and thus put in the hands of the digital advertising platforms, of which the biggest is Google itself.

The move to digital has squeezed media margins, with advertisers looking for demonstrable ROI where once the circulation and brand of a publication was sufficient reassurance of ad money well spent. As a result the total number of journalists employed has dropped dramatically which, in combination with the explosion of digital publications, has meant each remaining hack has to produce much more content than previously.

Digital ad spend also directly rewards direct traffic in a way print never did, which means media are incentivised to publish a high volume of ‘click bait’ journalism, which is typically of a low standard and designed more to provoke than inform. Of all the companies in the world Google is easily the most directly culpable for this trend and now it’s belatedly trying to correct it.

“While we typically show the latest and most comprehensive version of a story in news results, we’ve made changes to our products globally to highlight articles that we identify as significant original reporting,” said Richard Gringras, head of Google News. “Such articles may stay in a highly visible position longer.”

There’s a lot to like about this. Prominence in Google news equals more clicks, which equals more revenue. If follows, therefore, that any tweaks to the algorithm that promote proper reporting (which is much more expensive than opinion or re-reporting) are a step in the right direction. But Gringras himself acknowledged the complexity of the situation this puts Google in, in his next paragraph.

“There is no absolute definition of original reporting, nor is there an absolute standard for establishing how original a given article is,” said Gringras. “It can mean different things to different newsrooms and publishers at different times, so our efforts will constantly evolve as we work to understand the life cycle of a story.”

In other words Google decides what news is worthy of delivering to the public. Even if we assume those decisions will always be made in good faith and that the associated algorithms will somehow be furnished, in real time, with the most exhaustive context, this is still a lot power to be put in the hands of one commercial entity.

On top of that Gringras himself was the head of digital publisher Salon before moving to Google in 2011. Salon is widely recognised to be significantly biased in favour of perspectives and issues considered to be left wing and you have to assume its long time boss is also that way inclined. How can we be sure his own political positions don’t influence the decision-making of his team? US President Donald Trump will doubtless be asking that very question before long.

What media spend hasn’t shifted to Google has been mostly hoovered up by fellow Silicon Valley giant Facebook. As a social media platform it faces an even greater censorship challenge than Google (if you just focus on the search bit, not YouTube) and has been even less consistent and coherent in its approach, leaving it open to extensive accusations of bias.

Facebook’s latest attempt to clarify its censorship policies offers little clarity or reassurance to its users. Here are the new criteria, as copied from the official announcement.

  • Authenticity: We want to make sure the content people are seeing on Facebook is authentic. We believe that authenticity creates a better environment for sharing, and that’s why we don’t want people using Facebook to misrepresent who they are or what they’re doing.
  • Safety: We are committed to making Facebook a safe place. Expression that threatens people has the potential to intimidate, exclude or silence others and isn’t allowed on Facebook.
  • Privacy: We are committed to protecting personal privacy and information. Privacy gives people the freedom to be themselves, and to choose how and when to share on Facebook and to connect more easily.
  • Dignity: We believe that all people are equal in dignity and rights. We expect that people will respect the dignity of others and not harass or degrade others. 

While privacy seems relatively easy to determine and thus police, authenticity, safety and dignity are very subjective, ill-defined concepts. Facebook could arbitrarily determine almost anything to be inauthentic or undignified, so all this announcement really does is assert Facebook’s right to unilaterally censor its platform.

The Facebook announcement comes the day after reports of it censoring a piece of content published on it that challenged the claims made in another piece concerning abortion. This isn’t the place to examine the relative merits of the positions stated, but since abortion is one of the most polarising issues out there, and that balancing the rights of the mother and infant is a uniquely challenging ethical dilemma, for Facebook to apparently pick a side in this case has inevitably led to accusations of bias.

Lastly even crowdfunding service Kickstarter is under pressure to censor projects on its platform. A comic titled ‘Always Punch Nazis’ was taken down after claims that it violated Kickstarter’s community guidelines. Slate reports that many Kickstarter employees objected to this decision, which resulted in it being reversed but also claims of recriminations against some prominent protesters. This in turn has led to moves to unionize among Kickstart staff.

Once more we see that it’s impossible for a digital platform to issue watertight ‘community guidelines’ and that arbitrary censorship decisions will always be vulnerable to accusations of bias. The comic claimed to be satirical, which should offer at least some protection, but it still falls on someone to assess that claim.

Prior to the internet there were very few opportunities for regular punters to be published, let alone to a global audience. Social media especially has revolutionised the public dissemination of information and opinion, while concentrating the policing of it in the hands of a few democratically unaccountable companies. They will continue to try to perfect their censorship policies and they will continue to fail.

France rediscovers the importance of sovereignty in response to Facebook’s cryptocurrency

The French Finance Minister has said he will block Facebook’s plans to launch a global cryptocurrency, citing its threat to monetary sovereignty.

Followers of the Brexit debate in Europe may be surprised to hear France suddenly leaping to the defence of national sovereignty since it’s among the keenest for a federalised European Union, in which nation states are entirely subservient to a trans-continental authority. But it looks like there is at least some residual national pride left among French politicians, it just takes the ambitions of US tech giants to awaken it.

Speaking at an OECD conference on virtual currencies, Bruno Le Maire said “I want to be absolutely clear: in these conditions, we cannot authorise the development of Libra on European soil,” according to AFP. “The monetary sovereignty of countries is at stake from a possible privatisation of money … by a sole actor with more than 2 billion users on the planet.”

Facebook announced its masterplan to revolutionise the global currency system back in June and was immediately met with startled resistance by various governments, including the US, which had assumed currency was their thing. Plenty of other people also expressed alarm at the prospect of a company with many question marks hanging over it suddenly deciding to reinvent money, and it was never likely that a continent that had only recently invented its own currency would tolerate the imposition of another.

It’s hard to see how Facebook will be able to persuade national governments to accept this threat to their currencies, even if they are supranational ones. The fact that France is being especially vocal on the matter is a great illustration of how subjective the matter of sovereignty is. When your opponents want greater independence they’re parochial, isolationist and xenophobic, but when your own interests are threatened, sovereignty becomes a matter of utmost importance.

New California law says Uber drivers are employees, Uber says they’re contractors

A new law looks set to be passed in California that could set a much wider precedent regarding the employment status of participants in the gig economy.

One of the most disruptive trends brought about by the mobile internet is the gig economy, in which people are able to get casual, piecemeal work simply by registering through a mobile app with a company that matches people who need a service with people willing to supply it. In many ways it has revolutionised the labour market, but there is also considerable disquiet about the lack of employment rights afforded to these ad hoc workers.

A new law in California seems designed to address this disquiet. It’s called Assembly Bill 5, or AB5 for short, and it recently overcame its main legislative hurdle to becoming law. AB5 seeks to reclassify a lot of gig economy workers from contractors to employees. Contractors get hardly any employment rights, such as sick pay, while employees are legally entitled to a bunch of them.

As with most labour relations issues there are two sides to this, each with their own merits. On one hand it does seem unfair for gig economy workers, such as Uber drivers, to get no employment rights despite often working full-time at the job in question. On the other hand they are free to do other work at the same time, a key feature of contracting.

Lastly there’s the fact that the primary differentiator for gig economy services over legacy ones is price. It’s precisely because the internet company facilitating this labour exchange doesn’t have the overheads of a traditional company, which includes things like employee benefits, that the service is so much cheaper.

Even with these advantages Uber is losing a billion bucks a quarter, so it’s highly debatable whether or not it would even be a viable business if it was forced to reclassify its drivers as employees. As you would expect it has been lobbying extensively against this law and doesn’t intend to give up just because it’s on the verge of losing that specific fight.

In his recent update on the AB5 situation Uber Chief Legal Office Tony West, challenged the reclassification of Uber drivers, noting they’re free to work for competitors too and asserting that ‘drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.’

This kind of law-making seems like an existential threat to the gig economy which, while arguably exploitative towards its employees (sorry, contractors), also offers flexible work to people who might not otherwise be able to earn at all and presents consumers with great value for money. If the precedent set by California spreads, the digital economy could be set for its biggest shake-up to date.

Silicon Valley-busting Euro Commissioner gets additional digital role

Not content with continually fining US tech companies in her role as European Competition Commissioner, Margrethe Vestager is now in charge of all things digital too.

The extra responsibility was bestowed upon her by new EC President Ursula von der Leyen, who was given the role to allow her predecessor Jean-Claude Juncker to devote himself entirely to Oenology. Von der Leyen had had an early cabinet reshuffle in which she gave her favourite EVPs some extra work on top of their day jobs.

So Frans Timmermans gets a bunch of green stuff on top of his work covering regulation, rule of law, etc, Valdis Dombrovskis, adds some kind of watered-down socialist agenda to his normal work keeping an eye on the financial side of things and Vestager is being asked to keep a special eye on the entire digital sector, which is pretty much what she had already been doing as competition commissioner anyway.

“Digitalisation has a huge impact on the way we live, work and communicate,” said von der Leyen, showing the kind of vision that propelled her to the top of Europe. “In some fields, Europe has to catch up — like for business to consumers — while in others we are frontrunners — such as in business to business. We have to make our single market fit for the digital age, we need to make the most of artificial intelligence and big data, we have to improve on cybersecurity and we have to work hard for our technological sovereignty.”

This will have been the last thing the likes of Google and Facebook wanted to hear as their own country gears up to punish them for abusing their dominant positions in various digital markets. Vestager couldn’t have hoped for a better start to her new role than to be able to watch 50 AGs go after Google, and will presumably watching closely for top tips when she gets her turn.

50 US Attorney Generals sign-up to Google antitrust investigation

Usually, when you put 50 lawyers in a room together, it’s a bloodbath, but Google has seemingly done the impossible; united them all behind a single cause.

Led by Ken Paxton, the Attorney General representing the State of Texas, the coalition brings all except two State Attorney General’s on board, California and Alabama, as well as the legal minds representing Washington DC and Puerto Rico.

“Now, more than ever, information is power, and the most important source of information in Americans’ day-to-day lives is the internet,” said Paxton. “When most Americans think of the internet, they no doubt think of Google.

“There is nothing wrong with a business becoming the biggest game in town if it does so through free market competition, but we have seen evidence that Google’s business practices may have undermined consumer choice, stifled innovation, violated users’ privacy, and put Google in control of the flow and dissemination of online information. We intend to closely follow the facts we discover in this case and proceed as necessary.”

Paxton has pointed out in the statements that the Government and its agencies does not have an issue with a dominant market player (we don’t believe this however), but it must maintain this dominance by playing within the rules. This is where Paxton believes Google has become non-compliant with US law; it is stifling competition and the choice for consumers.

The difficulty the legal coalition will face in this investigation to start with is the reason behind Google’s market domination; it offers the best search service on the web. Some might disagree, but we believe it is the most effective and accurate internet search engine available. This will be one of the reasons behind the continued dominance, though there are of course others; these other factors will determine whether Google is abusing this position of dominance.

One area which might become of interest to the Attorney Generals is the roll of acquisitions in maintaining this leadership position. Of course, M&A is a perfectly valid means of growing a business, though should such transactions be deemed as a means for Google to kill off any competition which could potentially emerge, this would be a violation of antitrust laws.

This is where the probes will find it very difficult to fight against Google and the other giants of Silicon Valley; can anything be done against potentially anti-competitive acquisitions? In the Google case, some might suggest it shouldn’t have been allowed to acquire both Android and YouTube to supplement its PC search advertising business. This suggestion is of course made with hindsight, though there will be some who will attempt to do something about it.

Elizabeth Warren, the Democrat Senator for Massachusetts and potential opponent for President Trump in the 2020 Elections, has already promised to break-up the tech giants. FTC Chairman Joe Simons is another who has the divestment ambition, though he has stated it would have to be done sooner rather than later, as Big Tech is manoeuvring assets and operations in an attempt to make any divestments almost impossible.

What this investigation does offer is another layer of scrutiny placed on the internet giants. This investigation might well be directed at Google, but any precedent which is set could be applied to the other residents of Silicon Valley.

When you actually stand back and look at the investigations which are on-going, the US Government is creating a swiss cheese model of legal nightmares for the internet giants. The more layers which are applied, the less likely Big Tech can squeeze through the legal loopholes and come out unscathed on the other end. The likes of Google will have the finest legal minds on the payroll, but the legal assaults are coming quickly, and from all angles.

Aside from this investigation, Google has also recently confirmed it is at the centre of a Department of Justice probe and is also facing the House Judiciary Committee’s examination into big tech antitrust. And then it will have to consider the potential implications of other enquiries.

Facebook is being investigated by the FTC for its acquisitions of WhatsApp and Instagram, as is the House Judiciary Committee. New York Attorney General Letitia James is asking whether the social media giant has damaged the consumers lives through its operations. Finally, the House Financial Services Committee as well as the Senate Banking Committee is investigating the Facebook push into cryptocurrency.

At Amazon, the FTC is investigating how the eCommerce giant competes against and aids third-party sellers on its platform, while at Apple, the House Judiciary Committee probe is attempting to understand whether the commission it takes from developers through the App Store is anti-competitive.

Each of these investigations will create precedent which can be applied to others in the Silicon Valley fraternity. It also gives any failed attempts to limit the potential of Big Tech another opportunity. There are plenty of irons in the fire and Silicon Valley will do well to avoid a branding altogether.

With the sheer volume, breadth and depth of investigations scrutinising the business models of the internet giants, it is starting to become impossible to believe the regulatory status quo will be maintained. The sun might be setting on the Wild West Web.

To date, Silicon Valley has enjoyed what should be considered a very light-touch regulatory environment. For us, there are two reasons for this.

Firstly, regulators and legislators simply could not keep up with the progress being made by the technology industry, or perhaps did not foresee the influence these giants might be able to wield. Whether it is a shortage of bodies, skilled workers being snapped up by private industry or simply too many different segments to regulate, the progress of technology leapt ahead of the rules which were supposed to govern it. The internet giants have been profiting greatly off this regulatory and legislative void.

Secondly, you have to wonder whether regulators and legislators actually wanted to put the reigns on the digital economy and the power houses normalising it in the eyes of the consumer. These companies are driving economic growth and creating jobs. The US is at the forefront of an industry which will dominate the world for decades to come; why would the Government want to stifle the industry which is keeping the US economy at the head of the international community.

With both of these explanations, perhaps it has gotten to a point where excess is being realised. The technology industry has become too powerful and it needs to be reigned in. Some might argue that Silicon Valley has more influence than Washington, which will make some in Government feel very uneasy.

Google confirms it is in the DoJ crosshairs

The technology industry is facing regulatory and legislative assaults from all angles, and Google has confirmed it is attempting to help the Department of Justice with its own investigation.

It should perhaps be considered second-nature for Google to be dealing with some sort of investigation. It has been the subject of dozens of probes over the last few years, though there are some weighty ones on the horizon.

“We have answered many questions on these issues over many years, in the United States as well as overseas, across many aspects of our business, so this is not new for us,” said Kent Walker, SVP of Global Affairs at Google.

“The DOJ has asked us to provide information about these past investigations, and we expect state attorneys general will ask similar questions. We have always worked constructively with regulators and we will continue to do so.”

In July, the Department of Justice announced an antitrust investigation, though the subjects were not explicitly named. The probe will focus on how online platforms achieve market dominance and whether they are stifling competition and therefore innovation.

Aside from this probe, momentum is gathering to attack Silicon Valley. New York Attorney General Letitia James is looking into antitrust violations at Facebook, which could set some pretty damaging precedent. The House Judiciary Committee’s antitrust subcommittee is also conducting its own investigation, and soon enough Texas might be entering the fray.

Texas Attorney General Ken Paxton has asked the press to gather on the steps of the United States Supreme Court Building in Washington DC later on today to be briefed on yet another antitrust investigation. Details are thin here for the moment, however it is another headache for Silicon Valley to consider.

The next couple of weeks will offer much more colour to the investigations, however it is becoming increasingly obvious the technology industry is going to be very different in a few years’ time. It does appear the days of the Wild West Web are coming to a close.

The winners and losers of telecoms will be decided by convergence

There are still naysayers about the benefits of convergence, but those who ignore this trend will fast find themselves sleep-walking the path to utilitisation and irrelevance.

First and foremost, let’s have a look at what convergence actually is. This strategy is not the silver bullet which some telcos are seeking. A convergence strategy which not recapture the lost fortunes of yesteryear overnight, and it will not turn the traditional telco into the sleek shape of an internet giant. However, it does future-proof the business against the rising tides of utilitisation.

For those companies who are happy to be utilities, fair enough. There are profits to be made through the commoditisation of data services, though it is a very different type of business. But those who think they can be a value-add business, simply focusing on a single revenue stream are fooling themselves. Those companies shall remain nameless here, but it is pretty obvious who they are.

Convergence is about layering the business through multiple service offerings and diversifying the way in which telcos can engage consumers. It could be through multiple connectivity opportunities, and increasingly content has become a common theme, but there are numerous options open to the telco which demonstrates a bit of bravery.

According to recent research from OSS/BBS firm Openet, 73% of consumers are open to purchasing more digital services from telcos. The result of the introduction of these services is not only more revenue, but increased loyalty. 65% said the presence of more digital services would make them feel more engaged with their telco, while 79% said it would increase their loyalty.

Firstly, this is an opportunity to avoid the dreaded race to the bottom. If a telco can offer a positive network experience (not a given in today’s world however) and a reasonable price, as well as digital services, churn will also theoretically decrease. But what do digital services actually mean?

Content is the most obvious one to start with. If a telco is flush enough, this can mean owning a content segment, such as football rights in Spain for example, though partnerships with OTTs is an increasingly popular option. The telcos can be very valuable partners to the OTTs, either through their billing relationship with the customer or a trusted link in regions were direct customer acquisition is more difficult.

Numerous telcos are taking this approach, and it is proving popular with customers. Using the Openet research once again, 38% of respondents would switch their provider for better content options, while another 38% would be interested in changing should there be a zero-rating offer attached also.

But content is only the start, and this is an area which could become increasingly commoditised if/when these partnerships become commonplace. Looking beyond these content bundles, offering a broad range of niche features could be the next battle ground. Think of the Vodafone partnership with Hatch for gaming. This will not appeal to everyone, but it will attract interest from a niche. O2’s Priority loyalty programme offers early access to music venues and festivals. Again, a niche, but it will appeal strongly to some.

Looking further afield once again is where you start to see the real leaders in the digital world. Orange is a perfect example, with its security products. This is where the world of connectivity and digital services can be blended to attract completely new revenues. And of course, as more of the world become digitised, there are more opportunities to add value on top of connectivity offerings.

The smart home presents opportunities, as does the connected car. The telcos have a unique opportunity to capitalise on the digital world as few consumers today would leave their home without their smartphone. This is a direct, and constant, link to the consumer. There are not many other industries which can boast this advantage.

Interestingly enough, the telcos will not even be cannibalising their own revenues with these new products. For most consumers, the money spent on connectivity is different from that which is spent on entertainment or security. If you can help them spend less through bundled services, this is a bonus, but asking the consumer to spend money on entertainment as well as connectivity is not going to decrease ARPU. Quite the opposite.

The consumer wants to spend money on entertainment and digital services, but the question is who they are going to spend it with.

Ideally, we would like to see more telcos take the Google approach to business. In 2015, Google undertook a business restructure, separating the two functions into very distinct business units. On one side, you have the core search business. Google knows it can make money from this without really trying. On the other side, you have ring-fenced funds which are used to fuel the ideas which drive diversification on the spreadsheets.

Through this structure, one side of the business is not influenced by the other until the right time. Ideas are given the opportunity to flourish and be what they are intended to be, without the limitations of the traditional business. Fi is an MVNO which has emerged from the research side, as is Sidewalk Labs and balloon connectivity firm Loon. Without the separation, would these ideas have evolved to their full potential which is currently being realised?

This is the challenge which the telcos are facing. Convergence and the evolution into a digital services provider requires an internal disruption. It demands executives think about priorities different and invest in areas which are alien to the organization. It means being forward thinking and preparing to fuel ideas with long-term ambitions. And it needs to be done quickly.

You don’t necessarily have to be first to market, but you need to be a fast-follower at the very least. A convergence strategy encourages loyalty from subscribers after all, and once the dust has settled, it will become increasingly difficult to lure valuable postpaid customers away from rivals.

Not every telco will get it right. Not every telco will believe in the convergence buzz. And not every telco will evolve fast enough. However, there could be the creation of a tiered industry for too long. The winners at the top who nail convergence and become a valuable part of the digital economy, and the losers who continue to trudge the path to commoditisation.