Hi, I'm Raj Shah. I'm the industry lead for telco media and high tech for Publicis Sapient. I'm joined here today by Craig Moffitt, who's the founder of Moffitt Nathanson. It's a research boutique focused on the telecom, media and tech industries here in the United States. We're here to talk about the state of the telecom industry, some areas, some ideas for where growth could occur, some reactions to trends that are happening in the marketplace today, and just to get Craig's general sense of what is the art of the possible here for our clients.
Thank you for having me. It's a pleasure to be here.
What disruptions does the industry need to look out for? Internal forces, external forces, new competitors, regulatory? Where is there a potential? It's just over the horizon, do you think?
I think the next 10 years are going to be about competition from the Apples, Googles, Amazons and Microsofts of the world. And that is a very threatening prospect, if only because they are so large and so well capitalized that it feels like an unfair fight. The telcos and the cable operators have unique physical assets that those other companies don't have. But whether it is, you know, think about in the wireless industry, the threat that I think everybody in the wireless industry lives with every day, and that is, what if Apple decides to disintermediate the carriers? What if Apple takes the customer relationship that they have with the hundreds of millions of iPhone owners and starts that you can already see them taking small incremental steps in that direction with whether it's the Apple credit card to take over the financing and whether it is the discussion of subscription models, doing more and more selling it through their own stores. What if they decide to become an MVNO and own the customer relationship? Or on the enterprise side, how do you compete against an Amazon Web Services that says that the relationship that we have with our cloud clients ultimately starts to include connectivity as well as the cloud services that we provide today? Those don't seem like terribly large incremental steps, frankly, and therefore you almost have to anticipate that particularly in the enterprise market that those will happen over time. And that is a very difficult challenge. One of the solutions will be to use the overused frenemy's framework is just to really think about how do I actually start to partner with those companies? So instead of hiding under the covers and just hoping they don't arrive, recognize that they're coming one way or the other. And so I have to think about how I add value to them and can ensure that I'm actually part of the relationship of serving end users, whether it's consumer or enterprise.
How aggressive do you think telcos should be? You mentioned the Apple model, right? Apple Card coming into the financing. Clearly you can see Apple with a subscriber model taking over, say, insurance or accessories, right, which are great revenue streams and profit streams for some of these providers. How aggressive do you think the players should be, the existing players should be?
Well, so aggressive in the sense of it's a warning shot that says, ask yourself a simple question. For whom is the customer's emotional affinity greater? Is the emotional affinity greater with Apple or is the emotional affinity greater with, say, Verizon or T-Mobile or AT&T? If the answer is Apple, as I suspect it probably is, then that's your challenge, right? How do I deepen the affinity that the end user has for me, my brand and my experience in a way that gives me a better shot so that if Apple says, it doesn't matter who your network provider is, the customer will say, oh, no, wait a second, it actually does. That would strike me as urgently important, urgently important, because the worst possible world is not just to be a utility and operating entirely at the connectivity layer, but operating entirely at the connectivity layer where somebody else owns the customer relationship and can therefore leverage the negotiating power that they have to fully disintermediate the carriers from their customer relationships. The cable operators face a similar challenge, right, which is that as it's a more prosaic one, I don't think in those cases, at least in the consumer market, that they're going to be facing those same sets of competitors as much. But when an AT&T comes into your backyard with fiber, right now it still speeds and feeds. It's AT&T is charging this price for this speed and Comcast is charging this price for that speed. Which do I want to go with? As opposed to saying there is very little in any of the research that I've ever seen, anecdotal or empirical, that suggests that there's a sort of Mercedes versus BMW where both may be viewed as high quality brands, but individual segments have different affinities to one or the other in a way that the carriers have today not really achieved yet. Comcast, I think, has done a lot to differentiate its broadband service in the way that they think about what happens in the home and the whole home solutions around Wi-Fi and that sort of thing. That's, I think, part of a solution, but no one has really skinned that cat yet. There's a lot of ground to be covered in really developing a relationship with a customer that transcends just connectivity.
Are there any regulatory influences or anything that you could see coming from D.C. or from somewhere else that could potentially impact the space?
Well, I think you always have to... Right now the energy around... Remember, it seems almost quaint to think about the days of net neutrality and that sort of thing, because the energy around those issues has been entirely supplanted by the energies around regulating big tech. I do think there is an interesting challenge for big tech. It's one of the things that may, thankfully perhaps, keep big tech out of the telecom space, and that is that the attendant regulations that the telecoms have always ironically fought so hard against may actually work as the best poison pill to keep the tech companies from coming too deeply into the carrier's backyards, because the last thing you want if you're a Google or an Amazon is to say now we are burdened with incremental privacy regulations, for example, and customer proprietary network information suddenly starts to bleed into our, what is for them their core business, and they are unable to compete as effectively in knowing their customer or tracking their customer, knowing where their customer is and that sort of thing, than they would otherwise be by virtue of entering telecom markets. That may actually be a very good reason for them to steer clear of telecom markets.
Great. Thanks for the insights.