The social telco

Jan Dawson/Ovum
27 Apr 2009

Wireline telcos are increasingly losing touch with teenagers and young adults, many of whom are unlikely to buy services from them until well into their twenties, if at all. Those telcos therefore need to reach out and engage with this generation in the places where they spend their time: on social networks and other Web 2.0 sites. This means building technical interfaces between their own networks and those sites, and it also raises important questions about the business models that will guide these interactions.

Six or seven years ago, I had a conversation with the head of the consumer division of a major European telco, who told me that his greatest fear was a generation of young people growing up without any awareness of his company. That fear has been fully realized in the interim, as many 15-25 year olds go through life never having had any kind of contract with a wireline telco.

At the time those comments were made, the executive was primarily concerned about fixed-to-mobile substitution. And mobile plays a role - while living under their parents\' roofs, teenagers use mobiles issued to them by their parents to text (and perhaps in some rare cases actually to talk to) their friends, and probably rarely go near the landline. This substitution has now spread to other media too - instant messaging and email played a part for a time, but social networks now play perhaps the greatest role in the communication patterns of teenagers.

Many of these patterns will continue as those teenagers go to college or enter the world of work. They will live with friends, each with their own mobile for voice calls and perhaps a shared broadband line from the telco if naked DSL is available, or from the cable company or other competitor if it isn\'t. For example, two-thirds of US adults living with other unrelated adults live in households with no landline.

Even if the wireline telcos give up on voice entirely and focus on TV and broadband offerings as anchor products, the prospects aren\'t great. As 4G mobile networks roll out, the speed/ubiquity trade-off that currently has to be made when choosing between fixed and mobile networks will be to some extent eliminated. And as online video becomes ever more prevalent, linear television will also become increasingly irrelevant to the younger generation, further reducing their reasons to take out a contract with the local telco.

To an extent that no-one foresaw even two or three years ago, the 15-25 generation now spends much of its leisure time on social networks, and communicates largely through those networks. As such, telcos wanting to re-engage with this group need to go where they are. Unfortunately, it\'s not as simple as setting up a fan page on Facebook and waiting for the orders to flow in - telcos must offer compelling reasons for these potential customers to engage with them.

Ultimately, this means integrating telco functionality into the social network in such a way that it becomes a natural extension of users\' activity there - and that requires establishing the appropriate technical interfaces. There are several offerings in the market today, from players such as Oracle, IBM and Alcatel-Lucent. These platforms each allow the telco to expose some of its functionality to social networks while maintaining control over privacy and security.

But the bigger question for many telcos will be what the business models for such an integration look like. Telcos I\'ve spoken to are divided on this subject.


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