Telcos are missing the AI trick

We’ve spoken about this before, but our bugbear has been renewed at The Great Telco Debate; telcos have too narrow a view on artificial intelligence (AI).

AI is the buzzword of 2018, and perhaps this is one which is justified. In years gone we’ve seen the likes of digital transformation and virtualization become so over used they becomes tedious to discuss, but the scale, breadth and depth of AI mean each time it is mentioned it is almost an entirely new conversation.

That is, until you talk to a telco about it.

For many telcos, AI seems to directly translate into another phrase; network optimisation. Now there is nothing wrong with trying to create a lean, mean, analytical machine, all the best companies do it, but with such a narrow focus on a single area of the AI bonanza, you have to question what the long-term consequence will be.

A couple of weeks back we had the chance to attend the Telco Data Analytics and AI conference in London where Tractia Research Director Aditya Kaul suggested roughly 60% of all AI R&D investments at the telcos was heading towards network optimisation. This is a significant proportion, and you have to wonder whether tricks are being missed.

That is certainly the case for Google’s Mike Blanche. Network optimisation is clearly an obvious contender for AI research funds, as the network swallows up such a considerable amount of CAPEX and OPEX, but there is low hanging fruit which can have a more immediate (and positive) impact on the business. Skipping over this fruit will necessarily not have a detrimental impact on the business, but why miss out on easy wins which can add value?

Charlie Muirhead of CognitionX also echoed this point, stating there is so much more to AI than just network optimization, while Marisa Viveros of IBM reeled off the work which her team is engaged in. The point is, there is more to AI than network optimisation, but not much if you generally speak to telcos.

Going back to the Telco Data Analytics and AI conference, at the time we asked BT’s Pratik Bose, who was appearing on a panel session, whether he thought the intensive focus on network optimisation is a dangerous game to play. His response was simple; sort out the network and that leaves a lot of free time and cash to explore more interesting AI applications. This is a perfectly reasonable idea, but you have to wonder when that time comes will the telcos be playing catch-up to others who have been more adventurous with their AI research.

Chris Lewis of Lewis Insight made a couple of fair points at The Great Telco Debate. Firstly, concentrating all the AI efforts on one aspect of the value chain will mean new opportunities and applications will be missed. The telcos are searching for diversification and additional revenues streams, and considering the role connectivity is going to play in every aspect of our lives from here forward, the telcos could be a useful partner to various members of the ecosystem. But not if research is being laser focused on a single segment.

But why is this? Telcos are of course less adventurous than the webscale players, though this is partly due to the business model and pressure from investors who have bought into a certain type of business model, but another point (made again by Lewis) is from a leadership perspective. A lot of the CEOs throughout the telco world are business managers. Compare this to the Silicon Valley fliers who have technologists in-charge, and you start to see why AI is playing the role it currently is. If you have an accountant in charge of the business, that person is naturally going to be more risk adverse, leaning towards technologies which create operational efficiencies.

Bouke Hoving, EVP of Networks & IT at KPN, pointed towards the digital transformation journey his business went through recently, and part of the reason it was such a success is the digital-first, engaging and adventurous mission was led by the CEO. The culture of a business is led from the boardroom, and the strategy reflects the nature of its CEO. Perhaps this is why BT went down the audaciously flashy and risky route of sport content and Kevin Bacon (Gavin Patterson was a marketer), and why T-Mobile US has such a colourful approach to telecommunications (John Legere is John Legere).

Of course, it is worth restating there is nothing wrong with making a business more efficient. However, in this case it is a dangerous road to take. Such initiatives will only make a business more profitable, improving what is already there. This should be an objective for the telcos, though a bigger concern should be securing new revenues. The telco industry is massive, but it is not growing. For all the money which is being spent on improving and enhancing connectivity, others in the ecosystem are claiming the vast majority of the newly created value. This is not something which the telcos can allow to continue.