Santayana's Telecom Insights

“Those who cannot recall the past are doomed to repeat it…” 

Or else just pay a visit to MATH —The Museum of Ancient Telecom History 

Projections, punditry and industry beliefs are invariably off course, sometimes off-off course.  What Jorge Augustín Nicolás Ruiz De Santayana (full name) pronounced in 1905 still applies—yes to telecom and digital cycles as well as broader historical ones.

How do we know?  We remember a client in the early 1980s, a large telecom player, asking our firm to assess the companies that would be its strongest competitors in the decade ahead.  No, they were not asking us to determine which ones would be their strongest competitors.  This was a given, they were certain.  They wanted our inputs on how these companies would compete and what counter-measures would keep them in check.  Their inner gurus had already figured out who the mega challengers would be—IBM, ITT, and Xerox, to which Exxon, which had been assembling a cluster of office technology startups, was added.  This, our client assumed, signaled Exxon’s bad intentions towards them.

Clearly, there was a technology theme to the scenario—and a size one—as there often is when projecting the Godzillas of tomorrow.  Yet the strongest competitors that emerged in the 1980s were none of these Four Horsemen of the Apocalypse.  Instead they were MCI, NEC and Nortel plus Cable and Wireless with its private trans-Atlantic cable partners.  IBM’s threat as a telecom services entrant expired quickly even as it invested in a satellite communications operator.  Xerox was limited by the short lifespan of its fax-based technology.  ITT divested its telecom assets in 1986.  And Exxon is still an oil giant not an office technology one. 

Meanwhile startup MCI emerged, out of nowhere, creating huge waves in the U.S. long- distance services market.  About the same time NEC, Nortel and recently-privatized C&W, backed by their respective governments, took advantage of the breakup of AT&T and became technology or international service threats.  And guess what?  The same pattern has largely transpired in the decades since.  Pundits or industry insiders project one trend or industry re-shuffle and something else entirely happens.  There are rooms at MATH reserved to show how this happened in each decade. 

The Internet companies, for example, were to invade and take over the telecom sector in the 00’s.  Instead this was the decade of Nokia, a company that literally came out of the woods (having been mainly a forest products producer until the early 1990s), marketing it’s well-designed mobiles. Cisco also experienced a boom while operators like Vodafone, America Movil, Telefonica and Telenor rode the mobile wave across the developing world.  Nokia, in fact, led the telecom sector with its design-based products and global presence for a virtually unparalleled 15 years, something its main successor, Apple, is still working on.  

Yes, at the turn of the century the pundits saw web-based newcomers quickly taking over the telecom sector.  Yet within a year these Internet shooting stars largely crashed.  At the end of the 00s only Google, of the new arrivals, placed in Fortune’s Global 500 ranking—at 423.  Yet in the 20-teens, the advertising-driven web platforms (a.k.a. the OTTs for Over-the-Top) played out the scenario prescribed for them a decade earlier.  Google, Facebook and, yes especially Apple, were the new top dominoes.  Meanwhile, the expansive mobile operators of the preceding decade found themselves globally overstretched, debt-laden and facing declining ARPUs.  

By the end of the decade, Apple, the OTTs, China and Samsung were the latest winners.  These frontrunners included Amazon (especially its Web Services), Huawei, Foxconn, Alibaba, Facebook and Tencent.  Does this mean they will dominate the next ten years?  Almost definitely not, if history has anything to say.  Still there is the 5G theme, which by some accounts could propel Chinese players—not just Huawei but the BATs, its AI data labelers, and possibly China Mobile—into global leadership.  Only do not dismiss other scenarios (see Red Teaming the Decade Ahead) just yet, as Santayana warned us more than 100 years ago.  The MATH is already building an extension for its 2020s exhibit.