Jeff Kagan: Forward Focused Episode 7

Evan Kohn: Welcome back to Forward Focused brought to you by Pypestream Digital Labs, a thought series on customer experience, artificial intelligence, and enterprise automation, I’m Evan Kohn from Pypestream and I’m talking with Jeff Kagan. Jeff is an analyst who covers all things telecommunications, quoted in the media on a daily basis, he also writes several weekly columns. Jeff great to have you with us!

Jeff Kagan: Thanks, Evan.

EK: So Jeff, you are Mr. Telecom, you’ve covered the industry for the past 30 years, what are some of the biggest technology advancements or hurdles in telecom today?

JK: Well, you know, I have been watching this industry for more than 30 years and the industry has gone through several major transformative waves. We are now entering the next big transformative wave and this one should be bigger than all the other ones, this one has to do with transforming transformative technologies, transforming industries, transforming the way we do business, transforming the way we live our lives, just transforming everything. And the technologies like AI, artificial intelligence, IoT, the Internet of Things, and 5G with wireless a faster, wireless service, which is going to usher in an entirely new wave of products and services and technologies. This is going to transform our lives and we’re just in the very early stages of this transformation. So, this is a time like when the internet first came around to public use at some point in the 1990s, in the early or mid 1990s, back in the days when Prodigy and AOL and all the other companies were just starting and we had sort of gotten our feet wet, but at that time I advised every business, every executive, to get their feet wet in the internet because that was the time to experiment, that was the time to play around figure out what worked and what didn’t work, and start implementing the things that worked and growing, because the customers weren’t expecting the companies to really get it right yet because it was all brand-new for everyone and the companies that did that did very well going forward, companies they didn’t and started late, they’re the ones who had trouble and the same thing is going on with AI and with IoT and with 5G, you know? These are technologies that are transformative now is the time, now is the early days, now is the time to get your feet wet. Every business, every user, every investor, everybody who’s looking into the future needs to get their feet wet with these new technologies because today the customers aren’t expecting us to get it right but tomorrow they will. Today is a day to learn what works and what doesn’t work and why.

EK: Well, you mentioned 5G, there’s a lot of hype around the coming of 5G. What kind of effect can consumers expect to feel?

JK: 5G is not an event that happens overnight — 5G like 4G, like 3G, like 2G we’ve experienced this before — these are transformative events they’re periods of time that take several years to unfold. So, for instance, right now we’re talking about 5G but 5G is only really available in the center of a few markets right now, right now the majority of the market is forging but there’s still plenty of 3G that’s being used in smaller markets or less used markets and, in fact, 2G is just being shut down. So, we always have multiple G’s in the market at the same time you don’t flip the switch transform the industry overnight from 4G to 5G, it’s going to take years. So, what’s going to happen for the consumer, the consumer is going to start hearing advertising and marketing and the companies are going to start positioning themselves as leaders in 5G and that’s all important from a marketing point of view, from a leadership point of view, but for a transformative point of view, from the customers perspective, they really can’t expect to get 5G experiences yet unless they happen to be in those few markets where it’s available, but over the course of the next several months and quarters and years you’re going to see more and more markets go 5G. And that means it’s going to be a much faster experience and it’s going to introduce, bring in new products and services and brands that don’t even exist today, because 5G will enable all sorts of new technologies that we don’t use today. So, in the beginning it’s going to mostly talk, which is where we are right now, but as the next few years go by you’re going to start to see more and more products and services and experiences; and then if we move out ahead say five years everybody’s using 5G, we have handsets that connect with the 5G networks and we have all sorts of brand-new products and services that we can’t even imagine today that are going to be made available because of that new faster technology.

EK: Well, beyond 5G, what’s the next big thing for the telecom industry? Maybe something that doesn’t get quite as much coverage.

JK: Telecom used to be boring, you know, you look back several decades it was just telephone you know, and then there was Wireless, then there was internet, and today there’s a voice over IP and you’ve got the major telephone competitors have merged, so instead of there being a lot of them there’s only a few of them, but more competitors are jumping into this space at the same time. You’ve got the cable television companies like Comcast and Charter, Spectrum and Altice and all the rest of them, you know, getting into the telephone business with their voice over IP, and then you’ve got a variety of new competitors that are moving into the same space. At the same time you’ve got all sorts of new technologies that are going to be coming like 5G which are going to allow new competitors to enter that same space. So the telecommunications space which means wireline and wireless and Internet is going to be expanding what we’re going to see more and more competitors with more and more technologies because of Wireless, because of 5G, because of the internet, and because of other technologies like AI and IoT. They’re all going to be working separately and they’re all going to be working together to transform the way we do what we do.

EK: Well, you mentioned AI, what role do you see AI playing in the telecom space and where do you see that having the biggest impact?

JK: Well, AI is a technology which, if it’s done right, will transform everything and the way we do everything and the way we experience everything. AI or artificial intelligence is using a computer to think through and execute problems that we think of today and that we that we have today, but it also allows networks to find the bad guys and delete them and eliminate them from the networks, that allows you know continual updating and upgrading and protection of the networks, it allows us to have, you know — there’s AI, there’s conversational AI where you can talk to the technology itself rather than just use it on the keyboard — you know, AI is going to be a technology which is going to be seen and used and touched by users, but there’s so much of it that’s going to happen behind the scenes, that’s going to happen at the network level, it’s going to happen at the corporate level, it’s going to be happening in the household level — managing the household from simple things like opening and closing the shades, turning up and turning down the air-conditioning, monitoring the security system and the fire alarm system, to just doing everything that we currently do, that we all have grown up with, it’s going to be all handled by machinery and by technology. Now, that’s not something that everybody is going to do right away, this is something that the early adopters are going to jump into because that’s what they love, but slowly and eventually over time this is a technology that’s going to be driving our lives. So, if we look ahead we can see our lives look very different than they do today but today if we think about it our lives already look completely different from the way they were just 10 short years ago. Think about the smartphone, think about the iPhone, think about the Android, that’s just 10, 11, 12 years old, that’s it. Before that what did we use? We used handheld devices, we used a Blackberry, we used, you know, Nokia, we used the palm devices — this is yesterday’s technology but that was only a decade ago. So, our world is completely transformed itself with the devices that we now carry, in the next 10 years it’s going to even accelerate faster, so we’re gonna have even more change. What the world will look like 10 years from now I can’t tell you because I don’t know all the new technologies that are gonna popping on the scene, but we can expect there to be plenty.

EK: And Jeff you’ve talked about more competition in the years ahead, do you think the giants of the telecom industry today are open to making technological changes or is there resistance, you know, how much is shareholder driven for the short term verse more opportunistic innovation for the long term?

JK: Well, that’s the million dollar question and there’s not a single answer. It depends on the company, it depends on the CEO, depends on the shareholders, depends on the technology that the company is using. Well, some companies are very forward driven so for instance you know in the wireless space AT&T is very forward driven, they are rapidly transforming they acquired DirecTV a few years ago, they acquired Time Warner last year — they changed the name to Warner Media — and you know that’s going to transform their company from a telephone company, the telephone giant of what 10 years ago, 20 years ago? To a complete communications and entertainment empire and these are technologies that will work well separately, as they always have, but they’re also going to work well together and that’s going to increase the value and increase the potential growth for AT&T. They had the Game of Thrones, which just had its finale, but they also — if you walked into an AT&T store over the last month or two you would see that they were cross promoting the Game of Thrones in their wireless stores, it allows for a cross-promotion and that builds the brand. Then you’ve got another competitor that they have like Verizon. Verizon is a very strong and well known company and they’re as strong as AT&T but they don’t change as fast, they change much slower. They’re going to continue on that path and they’re gonna continue to transform more slowly than AT&T but they’re going to continue to lead as well, as well as AT&T, they’re just taking a different, slower path. So, some companies go faster and some companies go slower, then you’ve got other companies that just don’t want to make the change at all, they want to keep things the way they were, and those are the backwards thinking companies, those are the companies that could be in trouble going forward. I don’t want to mention the names of the companies that I think they are but there are companies who just don’t want to make that leap forward and those are the companies that should be worried. Things will stay fine for now but when things really start to rapidly change over the next year or two or three, I think they may be left behind in the dust.

EK: Well, the competitive landscape in the telecom industry is really interesting. Given that some parts of the country see, your know, real dominance by certain carriers there’s some pretty active M&A unfolding. You mentioned you know a number of AT&T acquisitions over the previous years, what does all this mean as it pertains to the adoption of emerging technologies? Does it create more of a race or give some large players a room to take a step back?

JK: Oh sure, no, the race is on and this is not a time to rest, this is not a time to step back and reflect, this is the time to jump in with both feet, this is the time to see if the water is cold or warm, this is the time to see if you can swim or if you need some help, this is the time to experiment with new technologies the way we did with the internet 10, 20, 30 years ago — well 20 years ago, and, you know, this is the time that companies need to be, not just dipping their toe in the water, but jumping in and figuring out what new technologies are going to help them grow and hang on to their competitive advantage that they have today as well as maintain a competitive advantage tomorrow, that’s the key. And investment community needs to understand that these companies need to change and there’s going to be a period of some stagnant growth for some companies while they go through that and that’s just part of the process. We’ve went through this a decade ago when the iPhone first came out around that period of time everything just sort of, in there years just prior to that, everything sort of cooled down but then it heated back up again and that’s what’s going to happen now. So, now is the time for every company to be fearless because now is the time when mistakes are forgiven, now is the time when nobody knows what to expect and everybody is tickled to death just playing with all these new thoughts and ideas, but a couple of years from now the companies that are really doing this well will grow and the companies that don’t will just suffer. So now is the time that they need to be jumping in.

EK: How about on the cable TV side, for pay TV, streaming services, new over the top providers, so many to choose from between Netflix, Hulu, Fubo, Disney Plus that’s coming out with offerings, DirecTV Now — what do you think Jeff is it an all Netflix future?

JK: Oh no, it’s — you’re going to see the paid TV industry sliced up like a pie. You know, until recently the pay TV industry was just one big pie without any slices but now we’re starting to see slices, we see AT&T with their DirecTV purchase — AT&T and Comcast are the two largest pay TV providers in the country. Charter, Spectrum is third and Altice fourth, but AT&T wasn’t in the television business a decade ago, today they’re right up there with Comcast and you’ve got a lot of new competitors, you know, the Hulu’s and all the rest but you’ve also, because of 5G, got to be expecting there to be many new competitors that are going to be offering pay TV services in competition with Comcast and Charter and DirecTV and AT&T with their DirecTV. You’re gonna see 5G offering new competitors the opportunity to come in and create more slices of that pie. So, I think we’re going to start to see, for instance AT&T offering a wireless version, a wireless pay TV offering, I don’t think if you talk to Comcast, Charter or Altice they’re thinking about that 5G wireless pay TV yet, you know? When I talk with them they it may come it may not come they don’t really want to upset their apple cart until they know it’s coming for sure, I think it’s coming for sure, I think this technology is going to be rolling out 5G it’s going to be so fast and it’s just going to allow new competitors to move in and continue to transform this space. So, we have to realize the pay TV space is changing, it has changed so much over the past five to ten years. Ten years ago pay TV was just cable TV and that was it sure you had two satellite providers Dish and DirecTV but that was pretty much it, today you’ve got so many new competitors like AT&T with DirecTV and now with Warner Media and you’re competing against all of these new ways of thinking about delivering television — the youth doesn’t watch TV the way the grown-ups do. You know, if you’re a teenager, if you’re 20-something you don’t watch TV. I have children they are on their own now, they’re 30 years old, when we go over to their house for dinner I struggle because I use the traditional cable TV service, I struggle because they have to use their their iPhones. They’ll pull up all the different apps and all the different players and I can learn very quickly but it’s a very different model from what we all grew up with and that model is very different today than it was 10 years ago and that model, because of 5G, is going to continue to expand and continue to change over the next 10 years. So, who’s going to be leading is the question say 10 years from now I don’t have an answer, but it’s going to be fun to watch the industry transform.

EK: Jeff we’ll leave it there, thank you for joining us today and sharing your insights. Where can our listeners find you?

JK: Well, thank you it was a pleasure to be with you today. My website is jeffkagan.com, my email jeff@jeffkagan.com, Twitter @JeffKagan.

EK: Much appreciated again, Jeff. Listeners thank you for tuning in today, you can access more Pypestream Digital Labs content at pypestream.com/insights we hope you join us for the next Forward Focused podcast.