Should interconnect be viewed as an opportunity or threat?

I am sure you can guess my answer to this one, given that I have put the question as a section heading! Having worked in this area for a number of years though, I feel that there is often too much emphasis on viewing it more as a threat than an opportunity. Incumbents see it as a direct threat to their dominant market share and generally claim that they will suffer real financial penalties as a result, and of course will be forced to make thousands of people redundant. New entrants on the other hand, being fully aware of the proportion of their revenues that will get handed over as interconnect fees, are very worried about the threat of them getting locked into high interconnect fees coupled with an incumbent (or other dominant provider) that decides to compete vigorously with them on prices at the retail level.

Now don’t get me wrong, I am not attempting to deny the importance of these considerations. However, businesses that always look for the negatives in a situation will never prosper to the extent that they could if they concentrated more on the positive aspects. Here, I mean really concentrated more. I am fully aware that many companies do pay lip service to the positive side of the challenge, but in reality remain negative thinkers at heart.

For businesses to prosper they must trade successfully. They must have a number of suppliers and also a number of customers. They must be able to choose which suppliers offer the best deal, and which customers they can best serve. They must realise that they cannot be all things to all people, that some other companies will prove better able to fulfil certain market needs at a more competitive price. In some areas, they will be both able and suited to re-engineer themselves to be more competitive. In other areas they will (or at least should!) recognise that this is not (or is no longer) their core competence and is best left to others.

The more vertically and horizontally integrated a company becomes, the more prone it also becomes to what I would refer to as inefficiency creep. Today’s small, lean and mean businesses can so easily become tomorrow’s lumbering, inefficient dinosaurs. And no, I am not necessarily talking about incumbents here since I have seen “new” operators exhibiting these characteristics, just as I have also seen parts of incumbents that are definitely “lean and mean”.

Interconnect can open up a whole new world of business opportunities. It can stimulate the overall size of the market, spur on the introduction of new innovative products and services, expose both new and established operators to inefficient business practices, and make all of the operators much more responsive to the real needs of their customers.

Threat or opportunity? If your company is either complacent or arrogant, then it most definitely represents a very serious threat to your business. By the time you realise what has happened, it may well be too late. This is particularly the case with the rolling out of Next Generation Networks which really do have the potential to create entirely new playing fields. If, however, you are bold, adventurous and innovative (but not foolhardy!), then the possibilities opened up by interconnect might allow you to re-invent your established business completely. You could then be in a position to ride the wave of change that has always been inherent in the telecommunications industry, but now, courtesy of NGN, is even more so.