Signaling Blog

After reading the pre-conference interview I was very much looking forward to what Norman Lewis director of research for France Telecom had to say live at eTel.

I was not disappointed and as such have gone to the lengthy effort of providing a transcript of most of it. For those who want everything in 30 seconds, then I will summarise it before providing the transcript along with some comments that I made.

My personal summary: voice will become embedded in pretty much the same way that time has become embedded in everything (on wrist watches, cellphones etc). France Telecom will be offering an open platform via APIs for developers to combine the best of both worlds; grassroots innovation and a rock solid, telco scalable network underpinning. France telecom will collect and then presumably offer some kind of dip into customer data and metadata to provide underpinnings of exciting new services. FT will offer authentication, identity management functionality and customer care services to application builders. France Telecom sees the future as opening up innovation all the way to the edges and sharing their network assets with innovators. Applications of particular interest are powered by social networking and social software.

Norman was certainly in the top three of keynote speakers, both in terms of content, style and delivery. I think his speech was the most spot on I have heard come out of any telco, let alone an incumbent operator.

He began:

I would like to share with you today is a few ideas about the space we are in and how I see us going forward in the future…we are looking at three to five years ahead, we are looking at the intersection between the emerging and disruptive technologies and fundamental changes in customer behaviour and how they [customers] might interact with that technology in the future

Afterwhich he went on to highlight the disruption of the telco industry following the freeing of voice due to VoInternet:

I think it is true to say, that what has happened in the last years has been a bombshell [slide showed a nuclear bomb going off behind the city of Paris], and as you can see this is almost aimed at our HQ in Paris, I don’t have to tell you, this audience, why this has been so disruptive but I think the fundamental point is that when you have the commoditisation of Internet transport, where packets no longer care what they are on, what type of transmission, then essentially sound transmission just becomes one other capability of the Internet, and when that starts happening then a number of very important parameters fall away and new ones arise as you all know. The fundamental point is voice and audio now just becomes another application on the Internet. And that is incredibly exciting, as far as I am concerned, because it is like time, it is now liberated, it is not a stand alone application anymore. It is embedded in everything we do…Time has became intrinsic in everything. I think that is where voice is going in the future. I think that is truly revolution

He next turned his attention to the lack of innovation that telcos have exhibited since the birth of telephony:

I think that voice and innovation around voice has been very bloody awful. For the past 100-150 years I think telcos have throttled innovation around voice and voice has essentially been the same experience for the past 150 years…and we have that possibility of taking that application [voice]…and liberating it [voice] from that kind of stranglehold that I think telcos have had in the past… and now we can begin to do things we have never done before. …If you just look at the recent period with Ebay-Skype…voice is becoming something of an adjunct to other services and will open up new possibilities…I see this as a huge golden opportunity for immense innovation…What we [the telcos] are doing is re-arranging the deck chairs on the titanic. That is essentially what a lot of us are doing in our companies. The innovation landscape has changed…

He made some other interesting comments, including:

We [the telcos] are shackled by our business models. We are shackled by our legacy systems…business models are holding back our companies; I think it is pretty obvious that we earn billions on voice revenues. When you are, when the whole company is structured around certain revenues and certain business opportunities and when these come under threat, the immediate response is to try and hold onto what you have got, to try and stop the flow, to try and stop the disruption of values as you seen them in the past…they [telcos] don’t know which way to turn and as a consequence there is a real kind of stasis within the business…

He then took a swipe at 3G:

…even within that we still get it wrong…I can give you a number of examples, but the perfect example for me is 3G. In fact I was just talking to Peter Cochrane about this last night and who made the point that. I may not get these figures exactly right but the calculation is that if everyone of our customers, their families and their dogs had mobile phones and they used them for six hours a day for the next 31.7 years, we would get our money back on what we spent on 3G licenses…even on business models they sometimes screw up…why did they do it? It almost was that the financial markets were pushing things in such a way that if you were not in the process [3G] you were not seen as part of the future. In fact for being part of that process [3G] I think a lot of them in fact jeopardised their future for themselves

Back on the telco innovation front:

…every time the operator has done things [services] the customer has done something else. And as a consequence they have had to kind of follow the customer. This has been the history of telco. Think about WAP. You know that thing called WAP-crap… I remember the BT ads, surfing the web on your mobile phone, do you remember that? And when you got to it and of course when you got to it and it was like text and you pressed the button and you went away and made a cup of tea and came back and there were just a few words on the screen and you had to go down the menu, unbelievable. And what did customers do? They used SMS…they [telcos] did not even anticipate this [SMS] was going to be a service…

Personally I think he could have taken a swipe at a much more recent “BT innovation” that appears a fumbled mess, the BT Fusion which claims to be a Fixed Mobile Convergence (FMC) offering but appears completely ill thought out.

…so we screw up on our business models, continuously…the other thing that occurs, particularly in this world of convergence and integration between mobile and voice in particular is that one division cannibalises another. So we can have voice over IP, but that is going to screw up the revenue that we get over mobile. The mobile guys don’t want people to adopt voice over IP or fixed line telephony. They don’t want fixed lines in people’s homes. And at the same time we want to sell them DSL…So you have this kind of internal squabble going on, which I think creates a certain amount of paralysis as well.

He proceeded to provide a nice analogy of the ball and chain that legacy systems provide around operator’s ankles:

it’s like trying to drive only looking in the rear view mirror…the whole time you have to take into account how does that [non-legacy offerings] impact on our existing network, on our legacy systems, on our business models. And what that means essentially is that, the future is coming at you but what you are doing is looking behind you. You are looking everywhere except facing that future…And so as a consequence you try and you manoeuvre, you spend an enormous amount of energy, internally or whatever and essentially nothing ever changes

He provided another insight into the constraints facing telcos who try to innovate:

As a consequence of another great set of financial decisions that were made in the dot com boom, we had more debt than Russia. France Telecom had more debt than Russia. Now when you’re faced with a situation like that, you have a slight problem. Because you might be generating huge amounts of revenue, but your paying off huge debt… as a consequence the company has became more and more at the beck and call of the financial markets and you know, this is a reality that we all [telcos] face. And the problem with this is that it engendered a kind of short-termism that says it is not about the next three to five years but it’s about the next quarter. What are the figures, what are the returns going to be? And we saw the impact of this just a few weeks ago when we had to announce a slow down in the sales and give a profit warning. Our share price was badly impacted as a consequence…We are no longer willing to take the risks [of innovation] that we have done in the past. We are no longer willing to do the kinds of innovation that lead to the emergence of the Internet itself… I think this is a very significant problem. I want to share this problem with you, as I think it is a problem that is impacting everyone.

After selling the “Telco is Dead” pitch on the grounds of lack of innovation he swung things around. He pitched France Telecom as an emerging platform on which developers could work and in which collaboration with FT could take place in an open way leading to a potentially “beautiful relationship”. His pitch was that he wanted to break down the telco castle barriers, so that new innovation and thinking from outside the telco could begin flowing in. Again IMO he is bang on with the only long term solution to the telco is to decentralise innovation.

I was left wondering though after his acknowledgments that innovation surrounding VoInternet would be much greater than any traditional telco innovation, if he believed that an open France Telecom platform could be as competitive as the Internet to build on? I am hoping that he sees two future scenarios which should run concurrently. The first is VoInternet which can tap into the France Telecom network knowledge assets (CDRs, SCPs Etc.) and leverage such information (whom is on a POTS phone to whom, and derived social network structures Etc.) into extremely powerful Internet based applications. The other scenario is where developers can use the France Telecom NGN network as a platform for applications in which they will receive a cut of any generated revenue.

He laid the groundwork for the pitch he wanted to make by picking up and slightly shredding a previous speaker’s innovation:

I love some of the stuff we saw yesterday. But guys, you know, dialling up somewhere to get a message from Beavis and Butthead is not to be the pinnacle of innovation [the Voxeo speaker had given the associated B&B example that they had worked with MTV, the day before – actually I thought it was quite a smart app that they had worked). I think we have got to have higher standards; we’ve got to set our ambitions higher. There are enormous things we can do and have to do. But the problem is, if everybody is being tied into the short-termism, because if you are going to innovate, and you are going to get a product to market. You’re going to have to do it whether you like it or not, you’re going to have to do it thru an existing operator.

He immediately led this into a discussion of Web 2.0 business models:

What is the business model for Web 2.0 companies today? Correct me if I am wrong, and I am open to discussion on this. It seems to me that what most guys are doing, is they are coming up with a great idea, building an application and then getting bought by someone, getting bought by one of the big guys. Now that is monopoly capitalism guys, whether you like it or not, that is monopoly capitalism…what is the business model of Skype? I’m not sure about it, until now they have been acquired by eBay, now I see some real possibilities there…so whether you like it or not, you are going to be impacted by this mentality [short-termism].

After some preamble about both developers and France Telecom needing pray to a mightier force to overcome the short-termism together, he got to the pitch that he had been building up to, now that the audience was receptive he went on:

Now let me tell you why I think we might win [France Telecom]… It is a sincere attempt to engage you in an interesting dialogue about this, because I think there are synergies between what the aspiration that you have, and what we are trying to do. It can actually create a sweet spot for all of us…for me innovation is rarely about identifying problems our customers have got and trying to solve them. Real innovation is about social change. It is about adopting, it can be incremental, it can also be very disruptive. But if really had to begin with real social motivations, of why people are doing things. What kind of things that they really want to do… it is a social consequence that they [“digital children”] introduce technology into their lives in ways we do not quite fully understand… understanding customers [social] behaviour and motivations…that is the coal face as far as I am concerned…Are we going to develop Internet apps that really embed voice in everything we do, and fundamentally transform that whole experience. I think that is the question.

He went on to detail changes structurally at France Telecom and what they could offer developers:

France Telecom is moving towards an integrated strategy, full integration between the fixed, mobile, enterprise, home etcetra…we are in the process of completely rebranding our entire organisation as Orange and we will be the world’s first fully integrated operator. That really has some significant positives for the future. We have the networks, we have the scale, and we have the data. We will be able to amass data and metadata, about millions of customers around the world in ways I think everybody [people in conference] would dream of in terms of what you might be able to do with that data in the future…

He then spoke at length about customer support as a strong offering of telcos and gave examples of what do you do when your iPod has a problem and the fact there is no one to call and you need to trawl online forums looking for answers. He pitched that developers could utilise that support platform for their potential application customers:

We have quality of service… who do you call when it [your application] screws up… you can call us… We will solve the problems. We have that capability. We’ve been doing this for many many years. We have real people who know what to do. We have real technicians who can solve your problems there and then…I think that is a real value and that will become very much more important when we get into this Web 2.0…where we have web server environment and lots of services being cobbled together, mashed whatever, and something goes wrong somewhere. Someone’s going to have to sort that out. And we are the guys who can actually do that. We’ve got decades of experience of doing that kind of stuff. We can build for anything, we have that capability. We can authenticate and we can manage identity - absolutely critical in all of this [emerging telephony applications]…I think this is a key capability of ours in the future, customer care

He went on:

We [France Telecom] are the leaders in providing voice over IP and both France and in the UK, this is Wanadoo in the UK. We are one of the biggest providers in the UK of voice over IP today. Us, not BT, Us. In France the same thing. We’ve introduced some incredible pricing and packaging etcetera etcetera. Of course the real problem is you can get people to buy into the service but to get them to use it, is another question. And that is where this whole discussion comes a full circle. Because the way we are going to get people to use it, is by building compelling applications that embed voice, in other things that people are doing. And that is where I really want to talk about the future…by having this capability and more importantly understanding where we need to go in the future in terms of the sweet spot between providing that kind of infrastructure, providing that kind of capability with the ability to innovate that exists at the grass roots, that is where I think we need to come together and start working together and start building the next generation of applications that go far beyond the trivia that we see, ringtones…how stupid are people, you get a whole song for 99 cents why would people pay three pounds fifty [6.23USD] for 30 seconds of a song?

He finished off speaking of a project he called Octave that would offer the aforementioned APIs:

I would really like to make an appeal to you, that one of the things I am going to do for the future is a lot of the work that we are working on, and I can share some of this with you, we really want to make available to you guys… See by what we do in practice. This is a project that you will hear about in the very near future. It is called Octave. It is a personalisation platform. And coupled together with this we have another platform that we are developing around social software and [social] networking and we are going to make the APIs of this available and we are going to make available to you guys in particular, because we want you to be able to get access to the rich data sources that we are going to be able to orchestrate, and to be able to start building some of the applications and start experimenting with it. In particular around voice and one of the ideas that we really want to play with is using a social network and social software as a mechanism thru which you mediate and control context and your voice environment. So a caller would be routed according to where they stood in your social network and that would determine how you receive that call. And this would be a really easy system to manage as far you are concerned, in terms of the interfaces. Now I think that is really exciting when you start bringing all of those things together…we are going to make this available to the developer community and say guys, let’s work together. Here are the APIs, do with them what you will… it could be the beginning of a beautiful relationship.