Last week I posted a link to the comment I wrote for Ovum on the topic of the Social Telco. While I spent some time in that piece talking about what that actually means, most of it was context, so I wanted to expand a little on what I mean by the Social Telco, starting with the drivers behind this shift.

Two major reasons why telcos need to become social

There are two major reasons why telcos need to become social:

• their users are migrating to other platforms and leaving the telco behind
• telcos are bad at creating services and need to tap into the innovation happening elsewhere.

I dealt with the first of these in the comment I linked to above and in a previous post and so I won’t return to it in depth here. Briefly, customers – especially those we might describe as belonging to Generation Y, and also referred to sometimes as Millennials – are increasingly bypassing the wireline telco (and to a lesser extent the mobile operator) when communicating with friends and family. As such, if telcos want to have commercial relationships with these customers, they need to find ways to re-engage them and that means going where they can be found. 

Secondly, telcos are abysmal at creating new services that customers actually want. I’ll deal with this in more detail in a later post, but the major barrier to telco innovation has been the industry structure. Equipment vendors sold to engineers, who decided together with marketing which features to switch on. Of all the major new forms of communication that have emerged over the last 20 years, telcos have been responsible for none. Telcos are in a poor position to experiment with new services, too – everything they launch has to be scalable, robust and integrated with billing systems and so on, which makes timescales long and requires a high degree of certainty that a new product or service will succeed, which drastically limits their opportunities for experimentation. Internet players are in a much better position and have a far better recent track record, and telcos can benefit from this work. 

Aims of the Social Telco

If those are the two major drivers, then the aims are closely tied. Essentially they are to:

• create alternative channels for customers to access telco functionality
• enable the creation of new services combining that functionality with functionality provided by other players.

Part of the wireline telco challenge is that people don’t see the relevance or benefit of using wireline telco services to communicate, but part of the challenge is also the business models associated with those services. Customers no longer want to sign contracts requiring a large monthly outlay for a service which is only available at a fixed location and provides little flexibility. In part the challenge is therefore to create new channels for customers to access their core functionality in such a way that it becomes useful and attractive again. But in addition, the aim should be to enable the creation of new services which tap into that telco functionality and integrate it with functionality found elsewhere.

It’s not about creating Twitter, Facebook and YouTube accounts

At a very basic level, the Social Telco could include the sorts of things we’re seeing from many telcos today as they seek to take a few tentative steps into the world of Web 2.0. Setting up Twitter accounts to broadcast press releases, creating promotional videos for YouTube, blogging, setting up Facebook pages and so on and so forth. These activities attempt to place the telco on the same plane as the users of those services, as if it were an individual participating in a natural fashion in social media. Of course, this is an illusion, but it may be effective anyway. That Sprint Twitter account has just over 2000 followers, some of AT&T’s videos on YouTube have been watched 250,000 times and so on.

But in these activities, telcos are no different from any other large company seeking to embrace the new media – there’s no real leverage of telco functionality or core competencies. And these activities don’t really overcome the basic problems that telcos need to solve. So although this is related to the Social Telco area and may be part of a larger social media strategy, it’s not the main thing I’ll be talking about.

The focus should be on APIs with effective controls

Telcos need to go significantly deeper than this in becoming social, and this effort effectively comes down to APIs and other technical linkages between telcos and third parties two facilitate a two-way exchange of functionality. Many web players already expose some of their core functionality to third parties in an open or semi-open fashion, and others are moving in this direction. Facebook, MySpace, Yahoo!, Google and many others have openly available APIs which developers can use to create new applications and services.

Telcos on the whole do not have APIs to expose their functionality to third parties. This is again a natural result of their heritage – Internet players are software-based whereas telcos have historically been hardware-based. But that is changing – most new telco services will reside on application servers and be software-based too. As a result, telcos will increasingly need to embrace the software model and so hopefully the opening of APIs will be a natural outgrowth to some extent. 

One of the challenges associated with APIs – as Facebook and others have discovered recently – is that users want the benefits of openness but without sacrifices in privacy and control over how their information is used. Telcos will face the same challenge but on a greater scale – any time the data telcos hold on their customers is released, whether intentionally or unintentionally, it creates a firestorm in the media and among consumer rights groups. They therefore have to be particularly sensitive to questions of privacy, security and user control.

A new model for service creation

All of this will lead to a new model for service creation for telcos. Not all services will be developed in this way, but an increasing number will. The two major models will be operators creating new services themselves either incorporating social web features or made available through social websites, and third parties creating applications that incorporate telco functionality. The former will expose telco functionality to new audiences and create new channels and business models for using it. The latter will enable the creation of many more services which tap into that functionality by an army of third party developers, which will combine telco and social web functionality in innovative ways. Together, these will open up many more commercial opportunities for telcos, allowing them to re-engage with customers they may have lost, and extending the ways in which they interact with their existing customers.

A couple of important points – mobile and enterprise

I have focused in this post on wireline operators, in part because they are in the most dire need of assistance in this area, and in part because mobile operators have some more obvious short-term opportunities around social networking. But these same principles apply equally to mobile operators, and I firmly believe they should be thinking about them too.

Secondly, I’ve focused a lot on consumer trends, but these trends apply to enterprise too. In fact, the first Social Telco activities I’ve talked about were those of AT&T in the enterprise space. The applications are different, and the focus will be more on opening interfaces to third parties, including enterprise customers, than on exposing telco functionality directly within social networks, but the principles are the same, and activities can be shared between consumer and enterprise functions at telcos.

Further reading

I’ll be covering some of this stuff in more detail in future posts, and specifically plan to post on each of the following (I’ll try to come back here and add links as I post them):

• Why telcos need help with innovation
• Do mobile operators have the best opportunities as Social Telcos?
• What functionality should telcos expose?
• How telcos can move beyond one-to-one communication
• Creating new business models and channels

I’d be very interested in any input on any of these topics as I address them in the coming weeks.

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