Telecom industry ill-equipped for “biggest change”, says Verwaayen

Ben Verwaayen

The European telecom industry is about to witness the biggest change that it has ever seen and is ill-equipped to meet the challenge, according to Ben Verwaayen, former president and managing director of KPN and former CEO of BT and Alcatel Lucent, interviewed yesterday at the CTAM Europe EuroSummit by Don Tascott, co-author, Wikinomics and Macrowikinomics and author of Grown Up Digital.

“There is a big technology change but more important there is a market change,” said Verwaayen. He said trust in the industry had eroded, leading to a lack of investment capital. He said the changing pattern of consumption was also changing the industry.

Ubiquitous, linked networks would disrupt the existing ecosystem of vertical network infrastructures, said Verwaayen.

He said the speed at which existing telecom service providers operated was not sufficient to adjust to change.

Vertically organised consensual organisations will struggle to cope with the pace of technological change, he said.

Verwaayen said that he had been called upon to help advise on the single market for services after he had left Alcatel Lucent earlier this year. Regulation is a key challenge, he said. “There is no space for 28 different regulators in Europe,” he said. “I would have one European market.”

However, changing the speed at which organisations operate is a bigger challenge still, said Verwaayen.

“I don’t think the consumer of the future will look to the stovepipe world as in the past,” said Verwaayen. Younger consumers’ expectations have changed radically, and business plans have yet to meet this challenge, he said.

“In a totally connected world value is perceived very differently,” said Verwaayen. He said the service part of the business would increasingly become the most important part of the business, rather than technology. “That has for a long time been the last part we would reference,” he said. “Service comes first…but that’s not how the industry is organised. Pure distribution won’t be enough.”

Verwaayen said that there is a challenge to get new money to invest in “the digital world”, especially in Europe, which was falling behind innovation in the US and the Far East. One reason for the lack of investment cash is that the top line is not growing.

“We have something in the hand – let’s call it Apple – and something in the cloud – let’s call it Google,” said Verwaayen. The networks in between that enabled these highly value brands to communicate had lost out in terms of value, he said.

Verwaayen said there is a need for a change in the definition of success. “The current structure is build on people defending their existing footprint because there is not enough room to expand,” he said. “We have to go through the process much faster. The number of players is prohibitive today. You need to have consolidation but also the space to innovate and freedom for different business models.”

Part of the answer is consolidation, said Verwaayen. He said there are 128 mobile players in Europe compared to a handful in the US.

Verwaayen said that there was a question over whether the telecom industry had the managerial culture that allowed innovation to flourish. He said this is very difficult to change as hierarchies are resistant to perceived threats. He said the telecom industry was in many ways more hierarchical than others.

“I thought the most important event for the industry was a couple of  weeks ago when Google bid for the NFL rights,” he said. American football has hitherto purely been a US phenomenon. “I think Google will take it way beyond the borders of the US,” he said, citing the example of the way UK pay TV operator BSkyB had helped make darts a global phenonenon.

Deals such as that between Netflix and Virgin media would have “a prfound impact” on the relative value of parts of the chain, said Verwaayen.