How Google And Apple Will Extract The Value From Telco

The Risks Phone Companies Face From Google And Apple

A number of industries have now been digitized. Studying the common elements to the evolution of those businesses may be instructive in understanding what could happen to other sectors which are about to experience the same effects.

In simple terms, the business model of TV, Radio / Music and News have changed. Google and Apple (and a number of other members of the major internet companies, mostly based in California) ended up owning a large part of the value of those industries when they were digitized.

We take it for granted that we must manually compare phone plans now. How might that affect telco (phone companies)– as the final elements of their industry are digitized?

First, let’s consider what motivates Google and Apple:

FAMGA (Facebook, Amazon, Google and Apple) share a common goal : Each wants to own the internet and our interfaces to it. It’s one of the key reasons Apple makes iPhones, why Amazon are investing so much in Alexa and why Google built their own social network (Google Plus), following the success of Facebook.

I’ve been asked why Google would invest so heavily in driverless cars, an effort which is at such odds with their core business. I don’t know the answer, I can only suppose but companies usually invest to make money. When I think of my working day, literally the only time I am not on the internet, searching, is while I am either asleep or driving. The average commute time in Sydney, Australia, where I live, is about an hour each way. Making it possible for me to stay online when I was driving can increase the time I’m on the internet 2 hours a day. Short of waking me up in the night to use a browser, it’s the cleverest way Google could make me use the internet more – and make them more money.

Tech is a complex market. Each company, even the major internet companies,have to carefully manage their growth plans. The reach of these tech companies is now so broad that if they expand in to some adjacent markets, they run the risk of affecting their own existing revenue streams. Google and Apple, have strong ties to the telecommunications sector for example. Google makes $billions annually from advertising revenue as telcos sell to customers online. Apple who use telcos as a key channel to distribute their iPhones, may not want to ‘tread on their toes.’

The commercial aspects of this then are abalancing act. FAMGA want to own the internet and our interfaces to it. They just don’t want to affect their existing revenue streams in doing that.

What happens when you digitize an industry ?

Digitizing an industry leads to an ecosystem of digital assets, from which, a tool personalizes recommendations you’ll like.


Take TV, for example. The new model of TV is one in which not only TV companies make TV shows. Historically, CBS, ABC, NBC and so on made their TV shows and put them out in half hourly slots, on the hour and 30 minutes past. Now, Hulu, YouTube, Netflix, private individuals and a host of others, create their own TV shows. Those are hosted on any number of digital platforms like YouTube, Netflix or Vimeo. Then a service pulls together what users want so they can watch that content their way. Netflix recommends the shows you’ll like and doesn’t make you watch adverts. Tivo records the shows you like or might want to watch. Foxtwl IQ does the same. We then binge watch at times that are convenient to us, whatever we want to.

Similarly, radio and music have been digitized. Digital assets (songs, podcasts, radio shows) are held in a digital ecosystem. A service like Spotify colleates those Digital assets for you, recommending the elements of the now diverse array of options which you will like. Users consume the things they like, without adverts or time wasted searching for or downloading songs.

News papers have followed a similar trajectory. In the old days, the Wall Street Journal, The New York Times and so on, used to create content (newspapers) and sell them at Newsstands. Now, each creates the same content, it is put in to a Digital Ecosystem of articles, alongside personal blogs and research from individuals. Services like Facebook or Flipboard then collate that content for users, proioviding them stories they are likely to read.

What does all this mean to phone companies?

The telco process, everything from evaluating a product, to buying it and self servicing it can now all be done online. Lower computing costs have encouraged dozens of smaller phone companies (called MVNOs – Mobile Virtual Network Operators in the industry) to enter, targeting niches of users. However, the industry is not yet entirely digital. The final step in the digitization of telco has started and will take off in 2018. The eSIM or embedded SIM replaces existing physical SIMs. With eSIM enabled products, people will be able to choose and change their phone company from settings on their phone. The new Apple Watch 3, released in 2017 had this facility.

With the eSIM rolling out towards the end of this decade, we can expect similar effects to what we have seen in other digitized industries. A digital ecosystem will be created with assets distributed across it. For example, 10GB of data on the AT&T 4G network might be one asset. Unlimited voice calls on Sprint might be another.

Tools will be created which personalize the phone plan elements that appeal to users and provide those to their phone. People won’t have to pick their phone plan any more.

So how do Google and Apple fit in?

Google and Apple tend to create the platforms on which the ecosystem content sit and take a cut of the revenues gained by providing the asset to the user. For TV, the platform is Google Play / YouTube or iTunes. For News, Google now select articles which might appeal to you and show them under your search box on the Google homepage. Facebook insert the news articles m in to your Facebook feed. Both use the information they get from the decisions you make on what to read, to target products and ads towards you.


With an increasing number of telco services appearing in most families ( mobile broadband plans, connected health trackers and so on) individuals may well be glad for the extra support these personalizing services will offer.

Telcos, on the other hand, can expect their markets to become more commoditized, easier to compare and for internet players to take a chunk of the revenues they have taken for granted for a generation now.