Can Telcos Break Out Of Their Death Spiral?

I have read that one definition of mental illness is to repeat the same steps over and over and expect a different outcome. At my panel last week at Total Telecom's World Telecommunications Congress in Geneva, one of the issues we were asked to address was how carriers can break out of their presumed death-spiral, and I raised the issue of cultural and organizational structure as impediments.

Part of this was illustrated when I did my usual schtick of asking the telco-centric audience for a show of hands about their online behavior, something I have tried to do at every event I have participated in over the past two years. "How many have used BitTorrent or eDonkey?" Two hands. (I find this particularly alarming given the amazing amount of newsflow and innovation around P2P.)

Later, in passing I mentioned Flickr! and asked for a show of hands of people who had heard of it - four. Still later, in talking about out-of-the-box thinking in telco history, I mentioned the development process of i-mode as well as SK Telecom's Cyworld acquisition, but no one had ever heard of Cyworld. To be honest, I didn't even see any delegates using laptops in the venue (hardly surprising given that there was only extortionately-priced hotel WiFi available). My summary point to the audience was that I suspected there was a major disconnect between the behavior of their customers and themselves, and that this is how telcos can get bitten on the backside.

Maybe I'm being too harsh, but given all the chaos of the past two years, it's strange to be getting the same responses in mid-2006 as in early 2004, when the industry was still wasting its time laughing at Skype. Maybe my audience was not representative of the industry as a whole (yet again)?

A reader within a European telco recently wrote in to say that he believes the issue is not awareness, but rather implementation, due to organizational complexity. He's probably right, and I suspect it's also related to communications flows and learning curves within different levels of management and strategy/planning functions. I also know from firsthand experience that top-notch strategy people can simply be completely ignored by management who think they know better, to their eventual detriment.

Whatever the mix of ingredients, the clock is ticking, and 7% EuroTelco underperformance relative to STOXX 600 this year puts the sector in last place by a significant margin. I interpret this as a continuing vote of no confidence from investors that EuroTelco has what it takes to change its DNA and learn to deal with/benefit from innovation at the edge.