What should telcos do?
Don't panic but learn. Despite the obvious threat that Google poses, the extent of that threat has not yet been fully realized. Moreover, it will take time to unravel. Google, like telcos themselves, is in the early phase of understanding the business opportunities around new content services and other applications. It makes sense to sit back and observe what works and what doesn't and to understand why.
Learn to exploit Google, rather than be exploited. Existing examples, such as that of content providers using YouTube's infrastructure to deploy catch-up TV services or for movie rentals, suggest that there are new ways to work with Google, leveraging its assets to deploy new services of your own. This also applies to rolling out new applications to users though mechanisms such as the Android Market. In essence, learn to think like a developer, not like a platform.
Take the opportunity to invest in core assets. Google's willingness to invest in core software platform assets and a plethora of new applications can remove the burden on telcos of doing so themselves. These savings can then be ploughed back into telco core assets such as networks and customer care. These assets are necessary for Google's long-term wellbeing, as well as your own, opening the way to developing new kinds of relationship with Google that will be more equitable.
Look for ways to complement Google. Much of Google's strategic effort is predicated on a belief that the Internet will ultimately provide a completely flat environment for deploying and consuming digital services and content. In practice, at least in the medium term, this will not happen for reasons of cost. Examples might be applications for low-end or legacy handsets that make use of existing telco infrastructure and interoperability, such as mobile ticketing.
If you must compete with Google, be prepared to spend big. For those telcos that are intent on playing Google at its own game, our only advice is to do it properly, with sufficient investment and commitment in systems, software and community-building to give your offerings a competitive chance.
Tony Cripps is a principal analyst at Ovum