Catch 22 - Why Large Service Providers Fail to Compete

We all have thought about it when watching one of those weird nature documentaries where one strange plant is completely dependent on some bizarre activity of a specific animal species and the animal needs the plant in order to survive. And you think “How could that happen? How did it get started?” Kind of like the Chicken or the Egg. Which came first?

Or a Catch-22. You should read the book Catch 22, by Joseph Heller. A character in the book, Milo Minderbinder, continuously creates Catch 22s for the other characters in the book.

You know how it goes. Your car is out of gas. You need to go buy gas. But, your car is out of gas. Or how you could prove that you are the best programmer in the world, if only someone would give you a job. But, you don’t have any experience, so no one will give you a job.

This type of Catch 22 is just as bad for large corporations as it is for you and me. The executives have to continuously make the company look better and better. Otherwise, they’ll get fired. But, the industry is changing, so they need to take risks in order to protect the company for the long term. But, taking risks costs money and they could fail. So, then they would lose their jobs. This keeps them from taking risks. Thus, the company that is the leader in the industry soon starts to fall behind the smaller, newer more nimble competitors. And then the company crashes and the executive gets fired. The perfect Catch 22.

The wireline telecom industry is a perfect example. Margins are shrinking. People are turning off their wireline services and switching to wireless. Union contracts keep expenses high. Investing in new infrastructure is risky and expensive. Delivering new services is difficult. And no one at the telcos seem to know what the ‘new’ services are anyway.

Service providers (including telcos and cable companies) find it almost impossible to innovate new services because they need the existing services to keep making money and keep them alive. Their infrastructures require that each new service be built from scratch. They focus again and again on how to keep what they have and expand slightly what they sell. That is why we have seen the triple play slowly become the quad play and then slowly become the quintuple play.

What is needed is a new player to come in and shake up the game. One that builds out a network infrastructure to meet the needs of an expanding market and allows easy convergence of new services no matter what those services are.

It will be a company that isn’t saddled with legacy expenses. Isn’t held back by old infrastructures. A company that understands the potentials of a multi-layer delivery of new, converged services based on high-speed transport that meshes with the lives of consumers not just their devices.

The legacy service providers won’t see it coming. They can’t afford to take the risk in order to compete. They can’t see how it could possibly work.

They don’t want to get fired.

David Croslin
InnovateTheFuture.com