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 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.
Craig, we've heard a lot from wireless companies specifically, but I think it extends to cable companies, their desire to be perceived as a tech brand, not only for the valuation they get, but for the type of talent they'd be able to bring in, for the just brand perception in general. And yet, I don't know if you agree with me on this, they're kind of stuck in this perception of being a utility effectively. Just like an electric company flipped a switch and the lights come on, there's an expectation, my wireless provider is really providing me the signal to my phone. It's not necessarily the brand or the lifestyle that I associate with. How do these companies, how could these companies move from being viewed as a utility to potentially a tech player in this space?
Here's my guess, and I think, again, let's think about it in two different segments, but instead of by industry, let's think of it by customer segment for a moment. In the enterprise segment, the real delineation, I think, between the tech companies, and this is maybe a broader umbrella for the companies as a whole, the real delineation between the tech companies and utilities is pace, right? It is the cadence of innovation has to happen at a very rapid pace. And it is so deeply culturally ingrained in tech companies that innovation has to happen in very rapid cycles. And that is very difficult for the telecommunications companies to emulate because they have such a long history of very deliberate cycles. It used to be the case that you could argue, well, these are very long-scale capital investments, and so a deliberate pace is necessary and appropriate. I don't know that you can make that case anymore because the tech companies are making even larger capital investments, but they've been able to maintain that expectation of very, very rapid cadence of innovation.
In the consumer segment, I think it's about experience. I think the tech companies, that is the consumer-facing tech companies, Apple's an awfully high bar to emulate. So let me be clear that not everybody can be Apple. But I think one of the things that Apple has taught is it's not just about the product and how good the product is, although that's certainly part of it, but it's about wrapping the consumer in an enveloping experience that really differentiates from the beginning of the experience to the end, what it's like to be a partner with that company as a consumer. Again, it's a bar that I don't know any other company can meet that standard that Apple sets, but it's certainly something that I think one needs to pay attention to. And think about how deeply the innovation of something as simple as the way that you engage with an Apple salesperson when you walk into the Apple retail store reflects upon the brand in ways that are just as important as how good the camera is in the phone, and that all of that is part of the experience that the cable operators and the telcos have really struggled with. And they have tended historically to think about the consumer experience in very narrow, almost myopic ways, that there is an experience with the customer on the phone during a customer service call, or there's an experience when the customer is getting the installation, or there's an experience, but rarely about what's the total experience of being partnered with this company as a consumer.
Aside from their history, do you think there's anything intrinsic about this industry or this sector that prevents them from getting there?
History is a big one. I said earlier in a different segment that we've been looking at these companies talking about moving up the stack for 30 years now, and really with limited success. Historically, the challenge to that has been culture and pace of innovation, and an unwillingness to take risks that I think is a very real impediment and one that's a hard one to break. I don't think there is anything intrinsic in the technology that says that these companies can't be innovators. The idea of selling, again, this is more of an enterprise market observation, but the idea of selling solutions rather than just connectivity or selling solutions rather than just hardware is as old as the hills. I mean, Scott McNeely used to talk about it at Sun Microsystems 35 years ago or whatever it was. So those lessons aren't new, but just because the lessons aren't new doesn't make them easy to execute.
And do you think, you talked about experience as a way to differentiate in this space. We talked about the utility and just consumers and customers sort of having an expectation that it just works, but not necessarily an expectation to turn to these organizations for innovation. Do you think that there is a different way for some of these companies to distinguish themselves not just against each other, but potentially against the hyperscalers or the other tech companies here?
There has to be, right? Let's think about the wireless operators for a second. I think it would be crazy to suggest that the map and how much of the map is covered in red or blue or magenta is not relevant. Of course it's relevant. You have to be able to sort of satisfy a customer's expectation with respect to coverage and speed, and you have to be ready to talk about that. But I think there is also an opportunity to say at the dawn of 5G, is there a way that we can reinvent the value proposition in a way that goes beyond just what is now the fifth generation of saying our network is better than your network? Again, I wouldn't pretend that network superiority is a real thing, and it needs to be competed for. But I wonder whether consumers, whether it is now lost on consumers, the nuances of the distinctions, and whether the carriers as a group have sort of failed to capitalize on the opportunity to reinvent the value proposition. Make the value proposition more about what you can actually do with the service and less just about mine's a little bit better than theirs. I wouldn't pretend that's easy to do, right? And I wouldn't pretend that nobody has thought of that and hasn't tried it. But I think it's fair to say that as we enter 5G, we're still in my network is a little better than yours, and the definition of a little better than yours is a little faster with a little better coverage, and that's it. And we haven't found a way to move beyond that.
Cable operators might arguably be the same. I think if you think about the convergence opportunity available to the cable operators as they embark on a wireless future or where wireless becomes a larger and larger part of the value proposition for consumers, the real challenge, I think, and this is true for the entire world, not just for U.S. operators, is trying to find a way that really ties the services together beyond just the apps on your mobile device so that there is a differentiation that says your wireless service is meaningfully better because you get it from the same company that provides your wired service and vice versa. No one's really found a way to crack that code yet. Everybody would like to have service differentiation as the basis of convergence, and so far I think it's been a largely dry well. I mean, it's not for lack of trying. Deutsche Telekom has been struggling with that in Germany for years and really prioritizes it, and carriers all over the world, I think, prioritizes, particularly in Asia, prioritize the experience of how do wireline and wireless fit together in a way that is more than just a bundled discount on a bill. No one's cracked the code yet, but boy, there is a lot of value to be created there if someone can figure it out.
I wonder if I can ask you to open that aperture a little bit, not just from the North America or the U.S.-based companies. You mentioned Deutsche Telekom. You mentioned some of the Asia telecoms. Is there somebody, nobody's cracked it, but is there somebody close to cracking it? Is there somebody that's leading the edge that maybe these U.S. providers should look at and say, how are they approaching the market? Could that work here?
Unfortunately, there's no one carrier that stands out. I think you've seen Rakuten do some interesting things with the network. You've seen, actually, NTT Docomo has always tried to innovate with the wireless service. So the Japanese market is, in some ways, one of the more innovative markets. In India, people like Reliance Joe have done it more with the economics of the offer rather than with the service offering itself. But carriers across Europe, the upstarts, the Iliads of the world have, again, it's been more of an economic value proposition than it has a real service differentiation. And the service differentiation has proven pretty elusive.
Do you think, this is a loaded question, but do you think that there's space for perhaps a Verizon, AT&T, T-Mobile, maybe even a Comcast or a Charter to launch a new brand around innovation and potentially put that history behind them, perhaps?
I think most of them have already done that to a degree. The Xfinity brand at Comcast was very much a brand created out of let's try to position ourselves as an innovation tech company. The Spectrum brand at Charter was the same. The Optimum brand at Altice was the same. One could argue that the Verizon brand born out of 9X, Bell Atlantic, and GTE was the same. So that impulse has always been there. There are obvious impediments to constantly recreating your brand because there's a lot of brand equity built into all of those. But I do remember, I'm sure we've