The telecoms industry has an innovation problem - Rakuten

A ‘legacy way of thinking’ is stifling innovation in the telcoms industry, and operators will need to adopt new business models in order to not be relegated to utility providers, claims Rakuten.

Rakuten’s OpenRAN-focused venture Symphony gained some attention at Mobile World Congress this week, with a barrage of partnerships and the acquisition of US cloud-native networking specialist Robin.io. We caught up with Geoff Hollingworth, CMO at Rakuten Symphony in Barcelona, and he had some stark warnings to telco firms operating what you might call ‘traditional’ business models.

Discussing the advantages of Rakuten Symphony, a virtualised, OpenRAN-based mobile networking solution, Hollingworth said “We think this is the operating platform for the industry. We think the whole industry has to move to this form of model to be competitive with all other industries. If it maintains its legacy way of thinking and operating than the reality of today will continue, and the truth is the telecom is not competitive with other technology leaders from other industries in the market. And the reason is that they can’t engage with the same speed and automation and speak software to these other people. They still speak hardware. If you want to do something with a telecom today, you still have to meet somebody and then you have to physically do things. We’ve moved everything into software.”

Speaking about the relationship between wider tech industry and telcos, Hollingworth added: “I think doing business with telecoms is very, very challenging for other companies outside of telecoms. I think we see it reflected in the speed in which they adopt new technologies. I mean, we see a big problem. The real innovation these days is happening in very small companies. And very small companies can’t afford to work with telecom as a customer, because the lead times are too long and the chances of being successful are too small, which means VCs won’t back innovators to target telecoms.”

When pressed on this apparent lack of innovation in the telecoms market, Hollingworth said: “It’s an absolute problem, because there’s no way for that technology innovation to actually enter the telecoms operating model today, so there’s no software interfaces, and there’s no accessibility. Telecoms networks are exactly like what it was like before the iPhone and the App Store. If you wanted to try and get software on a phone to scale, it was completely fragmented. You had to integrate your software with the manufacturer. Each integration was unique, it was unique with each operator. We remember that experience and it didn’t deliver a business result, it was it was like it was like a walled garden. The iPhone came along, and really what it did was remove the friction of software supply chain onto handsets, and we see the results of that. So we’re trying to build the exact same software supply model on the telecom networks.

“It’s absolutely obvious that this is what the industry needs to do. Either the industry does this or the industry will be regulated [sic] to have a lower level role in the value creation that is going to take place. They’ll still be absolutely critical, it won’t necessarily be a bad business if you size your business appropriately, but it’s not going to be the business that’s taking part in the exponential value of creation above. It’s going to be a bit like a utility. There’s nothing wrong with that, but you have to own that cost structure and that operating model and decide that that’s okay.”

The hoards of telco execs who have paid vast sums in order to be out at MWC and show off their new toys would surely take issue with the idea that they are basically not in a position to innovate. However the question of what traditional telco firms will look like in the next ten years as the industry becomes increasingly intertwined with big tech and cloud platforms is a live one, and bound to be front of mind for many walking the halls of the show this week.