Some thoughts and observations on the effect Software People are having on the Telco industry. The associated narrative can be found here: http://www.jamesparton.info/softwareandtelco/

1. v
JAMES PARTON, DIRECTOR OF TWILIO EUROPE
ALL CONTENT COPYRIGHT (c) TWILIO INC. 2013
THE AFFECT OF SOFTWARE
PEOPLE ON TELCO

2. A LITTLE ABOUT ME

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INTERSECTION OF TELCO AND SOFTWARE

4. WHAT IS A SOFTWARE
PERSON?

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WHAT IS A SOFTWARE PERSON?
• You don’t have to write code to be a software
person
• Anyone that sees the world through the lens of
software
• Anyone that asks “How can this problem be solved
by software?”
• Anyone that believes any problem can be solved
by software

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WHAT IS A SOFTWARE PERSON?
Not Software People Software People

7. ALL CONTENT COPYRIGHT (c) TWILIO INC. 2013
WHAT IS A SOFTWARE PERSON?
Not Software People Software People

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WHAT IS A SOFTWARE PERSON?
Software PeopleNot Software People

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WHAT IS A SOFTWARE PERSON?
Not Software People Software People

10. WHY SHOULD YOU CARE?

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COMMUNICATION REMAINS VITAL,
AND COMMUNICATION IS MOBILE
5.9 billion
people use SMS
x6
x3
x2.5
In the UK we placed 240 billion call minutes in 2012
51.6% on mobile (flipped from landline in 2011)
Source: OfCom and Tomi Ahonen, May & September 2012

12. SO WHAT’S THE
PROBLEM?

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THE TELCO BUSINESS MODEL IS BROKEN
Voice is God’s gift to humanity.
It’s what differentiates us from the
animals. And we position voice at
zero — you don’t have to pay for
voice. Voice is dead.
”
“
Hakam Kanafani
Group CEO of Turk Telekom
Mobile World Congress 2013

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TELCO REVENUE DECLINING FOR FIRST TIME
Source: ETNO
UK 4G spectrum auction generated £2.3bn
2000 UK 3G action made £22.5bn

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..BUT TELCO’S REMAIN CASH GENERATION MACHINES
Source: Company websites
$0
$33
$65
$98
$130
AT&T China Mobile Telefonica Deutsche Telekom Vodafone FT
59.360.9
76.4
81.884.1
126.4
2012 Revenue (USD Billions)

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CROSS INDUSTRY COMPARISON
Source: Company websites, Wikipedia, Business Week, BBC
$0
$50
$100
$150
$200
Samsung Apple AT&T IBM Sony Unilever Luxembourg Coca Cola Nike Heinz
11.6
24.1
48
58.3
67.4
79.1
107
126.4
156.6
173.9
2012 Revenue (USD Billions)

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ITS ALL ABOUT THE FUEL: GAS & FOOD
Source: Company websites, Wikipedia, Business Week, BBC
$0
$125
$250
$375
$500
Exxon Mobil Wallmart Toyota AT&T
126.4
226
443.9
482
2012 Revenue (USD Billions)

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Source: Company websites
$0
$33
$65
$98
$130
AT&T China Mobile Telefonica Deutsche Telekom Vodafone FT
59.360.9
76.4
81.884.1
126.4
2012 Revenue (USD Billions)
SO WHAT ABOUT THE DISRUPTORS...?

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SO WHAT ABOUT THE DISRUPTORS....
Source: Company websites, insideris.com
$0
$38
$75
$113
$150
AT&T Telefonica Vodafone Google Skype
0.30.75
50.1
59.360.9
76.4
81.884.1
126.4
2012 Revenue (USD Billions)

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THE DECLINE IS PREDICTED TO CONTINUE
Source: Telco 2.0

21. NEW KIDS ON THE BLOCK

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THE RISE OF MESSAGING APPS
Total of $23 billion in texting revenue lost as
of the end of 2012 to OTT messaging services
Source: WhatsApp and LATimes.com

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THE RISE OF MESSAGING APPS
Source: Acision
96% of users use SMS, but 50% prefer OTT
messaging services
BBM
SMS
Whats App
iMessage
Facebook
0 27.5 55 82.5 110
64
64
74
75
110
UK messages p/ week

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CASE STUDY: TRANSATLANTIC CALLS
Avg. cost of a 3 minute transatlantic call:
1927: $75 (today’s equivalent $1,000)
1964: $12 (today’s equivalent $90)
2010: $0.21
Volume of transatlantic call minutes:
1964: 20 million
2010: 114 billion
Source: TeleGeography

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RISE OF SKYPE
Source: TeleGeography

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AND THE CHALLENGES KEEP COMING
2 billion iMessages per day
Source: Apple, LATimes.com
Facetime video since 2010
Audio only announced at WWDC 2013

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AND THE CHALLENGES KEEP COMING

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THE NEW LANDSCAPE
Landline
Provide landlines
(inc. WiFi)
Mobile
Provide mobile lines
(inc. WiFi)
Over The
Top (OTT)
Use other peoples
networks to deliver
their services
(Digital Cuckoo!)
Network Software
Cloud
Virtualize Telco
capabilities in the
cloud and directly
connect into
networks

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NETWORK PEOPLE AND SOFTWARE PEOPLE SITTING
IN A TREE....

30. SOFTWARE PEOPLE
CREATE BETTER USER
EXPERIENCES

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BETTER COMMUNICATION USER EXPERIENCES
Source: OfCom
...and these experiences are being built by
software people

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CASE STUDY: INSTAGRAM
Source: ReadWriteWeb
mobile picture messaging user experience done right...

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SOFTWARE PEOPLE DRIVING MOBILE DATA DEMAND
Source: OfCom
Avg. UK mobile data use: 71Mb p/month Jan 2010 rising to 154Mb in Jan 2012
3UK contract customers avg. was 800Mb (Feb 2012)

34. SOFTWARE PEOPLE
GO FASTER!

35. Innovation
INTERNET
Copper
Switching
WWW

36. TELECOM
Copper
Switching

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LETS PUT THIS IN HISTORICAL CONTEXT
~3,000 BC to 1838
we communicated via cave painting, smoke
signals, story telling, carving, writing

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1838 - THE TELEGRAPH
~ 4,800 years to point of innovation

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1876 - THE TELEPHONE
+ 38 years to point of innovation

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1984 - THE MOBILE PHONE
+ 108 years to point of innovation

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SOFTWARE PEOPLE TIME
3G data launched in 2003
2003 + 0 years
2006 + 3 years
2007 + 4 years
2008 + 5 years
2009 + 6 years

42. CONTROL = #FAIL

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YE OLDE MOBILE INTERNET

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WHY TELCO’S WANTED TO BE THE GATEKEEPERS
• The gatekeepers “own” the customer experience,
billing relationship and channel
• The stagecoach, the postal service
• The telegraph company
• The phone company
• The mobile company
• The social network?

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OWNERSHIP OF USER IDENTITY
• Carriers always (still?) believed they owned the
primary address for everyone on the planet. The
phone number
• But where has the innovation been with the
customer experience?
• Which is more user friendly?
+44 20 xxxxxxxx or @jamesparton

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THIS IS WHY SOFTWARE IS EATING
TELECOMMUNICATIONS
• Marc Andreessen was right about software
eating the world, especially when it comes to
Telecommunications...
- The innovation void is being filled by
software people, not Telco’s
- Software people think web first. This style
of thinking is inherently open
- Software people think collaboratively -
APIs, collaborative working, open source
- Software people think about building
communities & ecosystems
Why software is eating the world: http://parton.ly/17u5g5z
Andreessen photo: http://www.flickr.com/photos/36521958135@N01/2443764501

47. SO WHATS NEXT?

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HOW TO AVOID THE KODAK MOMENT

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WHAT IS THE STRATEGY?

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CAPEX IS RISING, BUT NPD IS BROKEN....
Source: PwC & ETNO
Between 2001 - 2010 avg. ROI was just 6% = NDP Broken
but note Telco’s are investing less than 20% of revenue

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NEW BUSINESS MODEL
ConsumerRetail StoreProducer
Packaged Goods!
Internet Services!
ConsumerDeveloperProvider App
Source: http://www.slideshare.net/samramji/darwins-finches-20th-century-business-and-apis

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MIXED RESPONSE FROM TELCO
Source: Informa

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THE SAME OLD THINKING IS STILL THERE
Source: Informa

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APIS FOR MUGGLES

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PARTNER TO REACH DEVELOPERS

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CREATING A VIBRANT
DEVELOPER ORIENTATED ECOSYSTEM
Connectivity
Start Ups
Channel
ISV
SI
Customers
Enterprise
Direction of money flow
Hackers
{Single
API
Abstraction

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REMEMBER THIS QUOTE?
Voice is God’s gift to humanity.
It’s what differentiates us from the
animals. And we position voice at
zero — you don’t have to pay for
voice. Voice is dead.
”
“
Hakam Kanafani
Group CEO of Turk Telekom
Mobile World Congress 2013

59. ALL CONTENT COPYRIGHT (c) TWILIO INC. 2013
MAKING HACKNEY SPARKLE
http://vimeo.com/56125403

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SOME CLOSING THOUGHTS
1. Stop building product
2. Partner to provide the right developer tools
3. Partner to reach software people that will drive
traffic on your networks to counter OTT threat
4. Big guns are designed to hit large targets - help
software people sell into Enterprise

61. ALL CONTENT COPYRIGHT (c) TWILIO INC. 2013
FURTHER READING
Alan Quayle
http://www.alanquayle.com/blog
Tomi Ahonen
http://communities-dominate.blogs.com/brands/
Disruptive Wireless
http://disruptivewireless.blogspot.co.uk/
Martin Geddes
http://www.martingeddes.com/
Benedict Evans
http://ben-evans.com
Telco 2.0
http://www.telco2.net/blog/

62. THANK YOU.
@JAMESPARTON
WWW.IBEGYOURPARTON.COM