Global mobile app downloads will reach nearly 18 billion this year with sales of $15.1 billion, nearly triple last year’s revenues, according to Gartner Research. How much of that $15.1B went into the pocket of carriers (vs Apple and Google)? We would expect that number to be close to zero!
Having missed the first wave of mobile ecosystem value creation, global telcos are coming to Silicon Valley and SF in droves, looking to partner with entreprenurial companies that are developing innovative technologies that might complement their networks. 15 of those telcos disclosed what they were looking for at the Sept 15, 2011 Telecom Council Carrier Connections (TC3) meeting in Mt. View, CA. Several of the telcos presenting were paired with partner companies they are doing business with. This provided the audience with selected case studies of how start-ups could work with carriers to pursue meaningful partnership opportunities. The TC3 Agenda can be viewed at:
The TC3 conference was moderated by Derek Kerton, whose Kerton Group specializes in telecom strategy, marketing, business development, and consulting services. Always a very skilled and market savvy moderator, Derek was in top form at this conference. He often asked probing questions that were out of the comfort zone of many of the panelists he was interviewing. Indeed, the mobile Internet is an area outside of the telco’s domain of expertise and comfort zone. Their inability to move quickly in this growing market is a primary reason they are seeking relationships with Silicon Valley entrepreneurial companies ((like web software start-ups) that can accelerate time to market for their solutions.
Mr. Kerton pointed out that while the larger telcos have a “long pipeline,” requiring a lot of testing and high reliability for hardware/software (not something web software companies pay much attention to), they offer unmatched leverage and distribution for the small number of companies they partner with. That represents a huge revenue opportunity! On the other hand, the smaller telcos (e.g. Jersey Telecom), don’t have the massive distribution network, but they may be a whole lot easier to do business with. They also may be more nimble and faster to market with a 3rd party solution.
Telcos in the SF Bay Area (Santa Clara County & San Francisco):
The following telcos have established a presence in Silicon Valley (please see next section for a description of selected telco innovation activities noted here):
-Orange-FT has had a research lab in South San Francisco for over 10 years.
-NTT DoCoMo established its USA Labs in Palo Alto and also has a VC fund- DoCoMo Capital
-KDDI Labs in Palo Alto has expanded their “scouting activities.”
-Swisscom has a small office in Palo Alto and a Venture fund. They have made a “social community” partnership with Lithium Technologies and are looking for innovation in several new areas.
-LightSquared has opened a “Developers Sandbox” for innovators in Mt View, in conjuntion with Nokia Siemens Networks. For more information please refer to this article:
-Verizon recently opened an Innovation Center in San Francisco (home to many web software companies, including Twitter). More information at: www.innovation.verizon.com, www.developer.verizon.com, and www.verizon.com/ventures
-AT&T just opened a Foundry in Palo Alto with Ericsson of Silicon Valley. This incubation center is focused on consumer technology and products. It is the third Incubator that AT&T has opened in 2011 (other two are near Tel Aviv, Israel with Amdocs and Plano, TX with Alcatel-Lucent). The company says, “The AT&T Foundry™ innovation centers represent a $80 million investment from AT&T and technology providers.”
For more information, please see: http://www.att.com/gen/press-room?pid=2949
-Comcast has a R & D lab in Sunnyvale. They presented many interesting areas of innovation they are investigating there.
-Singtel (did not present at TC3) added a venture capital fund
-Deutsche Telekom (did not present at TC3) has opened a Lab and Advanced Technology Department in Palo Alto
-Vodafone (did not present at TC3) just established a R&D center in Redwood Shores, which it will use as an incubation center for helping local startups develop and test products that operate on its world-wide wireless network.
-China Telecom and NTT also have operations in the South Bay SF Bay Area.
-Other telcos are investigating a presence in Silicon Valley
In addition to the above mentioned telcos, several smaller (and perhaps more nimble) carriers presented their innovation agendas at TC3. Three standouts were: Jersey Telecom (a UK owned island off the coast of France), Leighton Telecom/NextGen (Australia), and Metro PCS (U.S. 4th largest wireless carrier and first to commercially deploy LTE in the U.S.).
Observation and Reality Check:
We were somewhat surprised that there was no discussion of technologies for some of the hotter areas of telecom research, e.g. For Wireless: nano cells, multi-mode (frequency & RAN) base stations via software defined radio, cognitive radio, self organizing networks, optimized delivery of mobile video, improved microwave backhaul capacity, etc. For wire-line the list includes: 40G/100G Ethernet switching, Optical Transport Network (OTN) multiplexing, Reconfigurable Optical Add Drop Multiplexor (ROADM), WDM Passive Optical Network (PON), DWDM fiber backhaul from/to cell towers, All Optical long haul transport (without OEO repeaters), Optical Fault Detection and Restoration, Faster and longer reach ADSL/VDSL, coax cable & twisted pair HANs, BoPL/ EoPL, smart grid networks, etc.
Instead, the telcos seem to be looking for ancillary technologies (e.g. Real Time Data Analytics/ Big Data, Networked Attached Flash Memory Arrays, Touch Screen Keyboards, Community Wide Social Networks, Innovative Mobile Devices & Services, etc) that complement their broadband wireless and wire-line networks. In fact there was nothing specific to either type of network that was described at TC3.
Violin Memory’s flash memory array (networked attached storage replacing hard disk drives) is a great example of a non-telecom technology being adopted by telcos. It’s used primarily as a Fiber Channel or SCSI attached “appliance” for virtualized servers (when in an I/O wait state mode) and for real time analytics storage. Both Singtel and Rogers (Canada) have invested in Violin Memory. The carriers that are using or plan to use their technology were not disclosed.
Evidently, the telcos still look to their large vendors (Ericsson, Huawei, Alcatel-Lucent, NSN) for almost all of the network resident technology and equipment they need. Of course, this is one reason for the dearth in funding of telecom and networking start-ups – the VCs don’t see any opportunity there so don’t invest in those types of companies anymore. The few that are left have to partner with the larger network equipment companies to get any visibility with the telcos. But that is always a dangerous game, as start-up intellectual property is often at risk.
For more on this dilemma for new telecom technology & networking companies, please see:
It sure looks better to be a start-up that creates value (via software) on top of the underlying transport network, or compliments it with non telecom equipment (e.g. array storage) or customer owned devices (e.g. touch screen keyboards, mobile consumer gadgets) or sensors for M2M communications & Internet of Things.
A longer, more comprehensive version of this article is at: