whither telephone companies?

trees made horizontal

Telephone companies face serious business problems. Broadband Internet connectivity can support telephone service as just one app among many apps. For example, Google voice is just one feature among the many that Gmail offers. Texting is already competing with telephoning, and video communicating is likely also to do so in the future.  Providing network connectivity squeezes the telephone business from below, and a multitude of new communications apps squeezes telephone service from above.  Vertical disintegration of the telephone business seems inevitable. Yet vertically disintegrated communications services may fall far short of generating as much revenue as did the historical telephone business.

Martin Geddes, a thought leader on telephone company business transformation, believes that telephone companies’ future is in serving enterprises’ commerce with customers.  He calls this business framework “connect-interact-transact.”[*] In place of traditional media for companies’ advertising,  companies can reach out to connect directly with customers through their own custom-generated content.  Companies’ relations with their customers can become more ongoing and more interactive, and customer-relation management now includes managing relations among customers, i.e. distribution of information and recommendations across social networks.  Communications services like those built into PayPal and Amazon OneClick can contribute significantly to enabling and facilitating purchases. Offering enterprises advantageous trans-organizational communications networks  is a promising future that Geddes sees for telephone companies.

That future makes telephone companies into new media companies.  Corporate advertising dollars have funded traditional media’s mass-market distribution networks.  Those print and television networks lack the cost advantages and capabilities of Internet-based networks. Telephone companies as new media companies would have a business position similar to that of traditional newspaper companies and television networks, but with a better cost structure, greater technological capabilities, and a wider array of business services.

Peter Csathy, Sorenson Media CEO, offers a similar view on the video business.  He argues that video monetization through ads, download sales, and subscriptions is only a small part of a much bigger business field:

While certainly important for media companies and other content providers, that narrow definition of video monetization has little to no resonance with the other 95 percent of businesses online who can benefit in a big way by harnessing the unique power of video to better monetize their businesses themselves — that is, by using quality video to better market their goods and services, engage with customers and potential customers, train their staffs, share best-practices and maximize overall revenues.

The development of the Internet has unleashed wide-ranging business warfare.  In these circumstances, selling communications weapons to all sides seems like a propitious business strategy.

Media businesses involve considerable political engagement and significant political exposure.  For example, telephone companies that market business communications advantages need to avoid net-neutrality blow-ups.  From the personal vanity of business leaders in boardroom strategizing to the intensely mediated theater of national politics, media businesses involve much more than calculations of business profits.  Media businesses can be highly lucrative, but also politically complicated.

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[*]  See also Martin Geddes, “Connect, Interact, Transact: a paradigm shift in the business model of communications service providers” (Aug. 2010), available from Geddes.

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