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Monday, June 06, 2011

Can telcos compete in an era of fashion-driven services?

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We're all used to the descriptions of the mobile phone business being (to some extent) fashion-driven. Just like clothes, some things go in and out of style - touchscreens, clamshells, big, small, black, coloured and so on. We've also heard plenty of handset brands described as cool / uncool - obviously with variations around the world.

I remember a few years ago, for example, SonyEricsson was very much an edgier and slightly counter-cultural brand in the UK, back in the pre-iPhone / Android era. I remember being at a gig and noticing which phones were being lofted overhead to take photos or videos of the band - S-E's were dominant among the younger fans.

So we see device brands - SonyEricsson, Apple, Nokia, HTC, Motorola and so forth - compared with cars (Audi, BMW, Ford, Nissan or whatever) or clothes (Ted Baker, Calvin Klein, Marks & Spencer, Armani and so on).

Up to a point, that's been mostly irrelevant to the mobile operators - barring the need to subsidise the more expensive ones, but that's usually (pre-iPhone) meant particular models rather than the whole brand. Sure, they've been able to exploit exclusive deals or other arrangements - but I don't think they've particularly cared if LG is seen as the equivalent of Mercedes or Citroen or Hyundai.

But now there is another issue - one already seen in the fixed-Internet world.

*Services* are now being driven by fashion, as well hardware. With the coming of smartphones and apps - and fast access to the public Internet, with new ways of creating "viral" adoption among communities - we have seen the rapid rise (and often fall) of novel ways to communicate. Facebook, Twitter, WhatsApp, BBM, Skype, Viber, LinkedIn and so on have grown in part because of adoption within groups. They can be tribal, cliquey, ephemeral - used for a season and then discarded (remember MySpace, Bebo, MSN?). Or they can be regional (Hyves, Friendster, Cyworld, vKontakt, Orkut, QQ etc).

This is much more problematic for telcos, as operators are used to egalitarian, very long-lived service offerings that don't vary much in popularity, awareness or coolness. This has been because in the past, there were very few communications services - phone calls, SMS, email, fax. All were essentially "designed by committee" and so none could possibly be thought of as cool or fashionable - they just "were there".

Sure, there are parts of the communications-using population which aren't particularly fashion-driven, but fewer than you might think. Plenty of CEOs want to connect their latest, shiniest i-Toy to the corporate network. Plenty of businesspeople were using BBM long before the teenagers go hold of their 'Berries. Even 10 years ago, people in finance were sending messages (and jokes) via the proprietary Bloomberg messaging system rather than corporate email.

But in any case, two important groups - people with money, and younger people - often *are* fashion-driven, or at least status-driven.

Now there's an important distinction here between equating phones, services and other non-tech brands such as cars and clothes. Phones are similar to cars in that most people only have one, or maybe two, keeping them for a considerable time. But people have wardrobes full of clothes, some new, some old, some cool, some utilitarian - and buy new ones regularly. They might buy the trendiest new shirt or coat for socialising, or something cheap and comfortable to chill out with on the sofa.

I think the PSTN and SMS and basic mobile telephony are going sofa-wards. They're not going to be made obsolete, but relegated to the status of lowest common denominator clothes essentials that everyone has. Underwear that gets worn when nobody else is likely to see it. Sweat-pants for doing the gardening. Comfy shoes for a long-haul flight. Stuff that gets worn when you don't care about being fashionable.

It's quite common even for the coolest of hipsters to buy their socks from Marks & Spencer. Plenty of people pair one item unique and expensive, with another which is totally generic. Prada + Primark. Zegna + Zara. Missoni + M&S. Tiffany + TopShop. (Not sure of the US or China or India equivalents here...)

The question is whether - and how - telcos could either turn into Primark equivalents, or develop platforms that could form the basis of continually-churning fashion-driven services. Primark, for those unaware, is hugely popular and quite profitable, even for low-end clothes. Its shop on London's Oxford Street is always swarming with people buying basic, cheap, almost-disposable clothes which nevertheless have an essence of coolness. Like Zara, it's been radically engineered to be responsive, with great back-office supply chain management. Conversely, other higher-end clothes brands have developed the annual cycles of fashion shows and manage to reinvent themselves regularly - and you also have fashion house with multiple brands.

Some operators - notably DoCoMo in Japan - have long been pitching "this season's new services", but that's still not common given the lengthy cycle times for development and standardisation.

It's really not obvious to me how standards-based telecoms offerings can ever again play at the top end of communications services. Even if industry initiatives like RCS succeed, I suspect that the best they can aim for is the being the next universal telecoms equivalent of a pack of £6-for-three Primark Y-fronts, worn underneath a pair of £300 designer/developer jeans. And to get to where Primark is today, they will still need prime retail space, a very hard-working team and flawless back-office functions.

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