Telcos and Traditional Media Companies vs Web 2.0 Media Companies

Came across this good article (on Paul Budde‘s newsletter) about the challenges and opportunities facing the traditional Telcos and media companies who are behaving like dinosaurs against the likes of the Web 2.0 media companies like YouTube.

Telcos and media vs Googles -Paul Budde

Increasingly we see tensions between new media companies such as Google and the long-established telco and media companies. The traditional industries have been very slow to develop new applications, while the new media companies are adding new services at a rapid rate, and customers are lapping them up.

This should prove to the traditional industry that customers do like to use telecoms and media beyond making phone calls and watching TV. Yet, rather than leading this consumer trend, the traditionalists are being dragged kicking and screaming in the new direction.

Interestingly, the telcos and media companies had a head-start in the market. They were the first to be confronted by the Internet, and yet they failed to seize that advantage and become the leaders in this field.

This created room for the new media companies, and they have taken the utmost advantage of the opportunity. But the response from the traditional companies is still very much a defensive one. The net neutrality issue in the USA is a case in point, as are the court cases involving Viacom and Belgian publishers.

Why haven’t the incumbents learned from the music industry? You can’t stop this tsunami, so the old-style companies need to find ways of becoming involved themselves in these profitable developments.

I would argue that those new developments have a lot to offer to the incumbents as well. We still talk about entertainment and information services. Most media companies are good at delivering entertainment and for the telcos – it is still all about global connectivity, and who are better at this than they?

Yet they are allowing the new media to undermine their business cases, by making enemies out of them rather than partnering with them.

As an example; each of the new media companies now has its own proprietary service (MySpace, Google, Flickr, YouTube, MSN, etc).

What the telcos can offer is one global interconnected network.

They could develop and run the structure for the networks and allow the content and service providers to build and package their own services within a standardised environment. I bet users would love that! But, while an open system like this would obviously be to the advantage of the telcos, they still can’t bring themselves to take the leap. As one expert remarked to me ‘to them, accepting open systems is like swearing in the church’. Telcos have an ingrained dislike for open systems, and for that reason alone systems that would allow them to move into such environments – like for example IMS, are difficult for them to accept.

So, rather than moving ahead with NGNs and IMS, telcos are stalling these processes because they believe that such new structures would undermine their existing voice businesses. That is certainly an important consideration, but to allow this new revenue stream to be channeled off to the new media companies is surely not in the interests of their shareholders either.

The telcos need to understand and assume their ‘plumbing’ role on the Internet, and not let others appropriate it. That would not be in their own best interests, or in that of their users.

Related link:

http://www.budde.com.au/ – is an excellent site based in Australia but global focused. It is one of my fav site to keep up to date with the latest news and gain insights around the telecommunication industry.

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