Telecom Companies Are Becoming Utilities. Is That Really a Bad Thing?

• Many telecom companies are afraid of becoming public utilities
• But Oracle executives say it will still mean a solid future for some
• Regardless of whether operators go the telecom or technology route, automation will play a key role

You’ve heard the grand declarations from telecoms over the past few years. “We’re not telecoms anymore,” they said, “we’re techcos.” But what’s so bad about being a telecom?

Techco, of course, stands for “technology company.” The idea is that telecoms are evolving beyond their roots as simple connectivity providers and are becoming service companies. Lumen Technologies has taken this approach, as has e& (formerly Etisalat). AT&T’s CTO got into the game at DTW in Copenhagen last month, arguing that all telecoms companies will have to mature into professional software development workshops. And the hype around artificial intelligence (AI) is only fueling the narrative that this transformation from telecom to technology company is a necessity.

The basic implication is that connectivity is becoming a service, like water or electricity. And telecommunications companies really don’t want to be classified as a service (see also: their frantic fight not to be classified as Title II public carriers to avoid net neutrality regulations).

But there’s nothing wrong with just being a telecommunications company, argued Andrew De La Torre, vice president of technology at Oracle, in an interview with Fierce at DTW last month,

“I think there’s a place for telecoms companies to be telecoms companies, and I think for some companies that’s going to give them a really fair future,” he said. “This industry has been so afraid of the word ‘commodity’ for decades. But the interesting thing about tradables is that they’re absolutely fundamental to life and they always have a future.”

He continued: “They may not be the ones who become the next trillion-dollar company. They may not be the ones who see 300% stock price growth. But they make good money.”

De La Torre argued that while it seems like a catch-all declaration that all telcos want to become techcos, that’s not necessarily the case. The industry should make room for those who want to forge their own path as telcos, he said.

But even those that decide to remain telecom operators still have some reinvention to do, said Shirin Esfandiari, senior director of product marketing at Oracle. Even for companies that decide to become utilities, automation and cloud are “still key,” she said.

De La Torre agreed. “Ironically, I think if you’re in the services sector and you’re a technology company and you’re successful, you can afford to be more lazy than if you’re a utility company,” he said. “If you’re in the services sector, you have to be ruthlessly efficient in how you run your business. So cloud and automation are probably more important in that regard than if you were going the other way,” although service companies still need to be agile and fast in delivering services.

According to research by STL Partners, telecoms companies can reap significant financial benefits from automation, primarily from network research management, but also from service management (OSS) and ecosystem management (BSS). Meanwhile, Omdia estimated the market for network and telecom automation at $1.5 billion in 2022 and predicts that this amount will grow to $2.7 billion by 2028.

Our own research shows that more than a third of the 133 CSP leaders who responded to Fierce Network’s AI and automation survey see these technologies as “critical to surviving and staying competitive,” and nearly three-quarters of respondents said they are prioritizing AI and automation in their spending plans.