The Raging Strategic & Technological battle in Telecom...

I cant think of an industry today where the individual elements of the supply chain are being forced to defend their own interests, often in direct conflict with those of other elements more than in the telecom industry. Battles are being fought on every front: strategic, tactical, technological...you name it.

Of the several battles that are currently being fought, the most interesting one is that between the promulgators of Fixed-Mobile convergence and the drivers of Mobile substitution of Fixed services. To make this all a little less esoteric, lets think of this as a 6-year old would.

When you were growing up, you had a fixed phone line in your house. Somewhere along the way, cellphones invaded our lives to the stage where they are omnipresent today. When we leave INSEAD, many of us may choose not to install a fixed line in our homes at all. Why do we need it? Cellphones do the job well enough now...even indoors. But hang on...what job? Voice telephony is well supported by cellphones, but what about data? I.e., your internet connection. A-HA! Whether you use DSL or WiFi, you need a fixed wireline connection. For the ordinary consumer like you and me, this means 2 different connections, 2 different bill statements, 2 different serive contracts. What a pain! Enter the chaotic, confusing world of Fixed-Mobile convergence.

Fixed services operators such as British Telecom are keen not to lose their revenues to mobile players, in the fear that eventually wireless internet access will be as fast and convenient as wireline. Hence, they are strongly pushing for Fixed-Mobile convergence (FMC) solutions such as the BT-Fusion product. But what is FMC and how does it work? By allowing a single device to access both a wireless and wireline network, they hope consumer demands for a single device and connection will be met, thereby mitigating complete takeover of fixed services by the wireless world! And Fixed service players aren't the only ones. Internet companies such as Google and Skype are pushing for this too, keen to see their services permeate the wireless world. Think about it. It is COOL to have a Skype chat application on your cellphone.

Fighting all of this of course, is the mobile wireless industry. From a business point of view, the Wireless space in the developed world is completely saturated now. Growth is only coming in from emerging markets. To squeeze margins out in the developed world, mobile players must try to leverage the general trend towards a world with no wires. Consumer behavior patterns and preferences are on their side. But to go back to the initial need for wireline, i.e. internet access at home, they must tackle this head-on.

The answer was provided several years ago with the advent of 3rd Generation (3G) mobile telephony, which promised high data rates. As is always the case though, the technology itself is never the problem. The problem is the business case. Trouble here: demand has been low, making the deployment of a full-fledged 3G network financially non-viable. This issue MUST be resolved if the mobile world is to win this battle of Mobile substitution of Fixed services over FMC. So if a full 3G network is not viable, why not build a different network, one that is less capital intensive. Enter: small Base Stations that can be installed within a single house and cost a fraction of a conventional mobile network: pico/femto-cells. Brilliant!

A simple idea that may yet provide us with a final, telling twist in the tale. The play is underway...all the actors are in place and we the consumers are watching. May the best man win!