Around the world, traditional telcos may not be meek but, against the odds, they appear to have inherited large chunks of the earth. These clumsy slatterns of the technological age are now doing a rather good job of bossing the market, where just a few years ago they were deemed to be doomed by the twin forces of liberalisation and competition.

Yet while this may partly be a result of a miscalculation by those who threatened their embedded dominance, it is hard to argue that it was due to any strategic genius on the part of the PTOs. Indeed, ‘genius’ is a word one struggles to associate with established telcos; ‘strategic’ too is an alien concept, except in the case where one can pursue so many strategies simultaneously that the odds are that one of them will come good.

No fee: win or lose
One recurring theme in the study unfolding this week is that telcos occupy a unique position: they can gamble more than their rivals and regulators can hope to do, but with lower risk. Whereas a technology start-up may have one shot at glory, incumbent telcos, individually or collectively, can have several attempts at unlocking the door to the next generation of products and services. They also have the market power to block successful developments by smaller rivals if and when they see fit, thanks to their sheer dominance of the commercial, regulatory and network spheres.

Other articles in this week’s series will cover the following areas:
• finance: telcos saw few highs during the technology boom but have fared badly in the subsequent bust. Does the underlying financial position of incumbents give them hope?
• technology: after decades of pulling rabbits out of their hats, telcos have been faced by an array of new technologies and killer apps. Each time, they turn these weapons od extinction on their predators.
• expansion: the sap is rising and M&A activity is on a roll. Each is a Redux moment, but are telcos following the same futile path to aggrandisement that led to the eventual overstretch before?
• branding & marketing: nobody likes a company that sends them regular bills and whose shares decline. Can telcos recapture the hearts and minds of investors and customers?

The bottom line is that in each of these key areas can make or break a telco's future.

Never mind the label, it’s the lodestar...
During last week’s State of the Redux series, the current positions of new carriers, vendors, regulators, investors and end-users were gazed at in varying degrees of detail. On reflection, there can be no denying that the lodestar for all of these key components of the modern ICT industry, in almost every country and almost every market segment, is the incumbent telephone company.

Here’s another question. What do we call these century-old telephone companies? ‘PTOs’ is neutral. ‘PTTs’ is disrespectful (but not always undeserved) in that it carries the implication of sloth. ‘Telephone companies’ has a ring of truth about it. ‘Incumbent’ is accurate in a forensic way but is suggestive of an organisation prone to physical abuse. The terms ‘carrier’ and ‘common carrier’ drift into the legalese that governs the telecom sector.

‘Telco’ is new and catchy and clean. Added to which, telcos themselves like it.

But what is a C21 Telco? At heart, it’s a telephone company, a PTT, a PTO, a utility, a carrier, a (common) carrier, etc ad infinitum. Above all it is an incumbent. But is it a telco?

Incumbent operators sit on their fatty network asset deposits. They fight regulators through sheer obstinance, smear alternative carriers with SMP, they pin down vendors with their perceived strength and they still say to users that they can have any flavour/colour of new technology so long as its black.

Check list
Here are five reasons why telcos are poor performers:
1) state ownership;
2) state ownership by proxy;
3) links from government to telco via manufacturers;
4) corruption, which centres on existing telcos and their suppliers with governments involved;
5) ignorance: most telcos have old, over-encumbered staffing structures written into their operations.

In most of these areas it is an analogue response to a digital world. 

Check list (2)
Here are five reasons why the telcos will triumph:
1) state ownership by proxy;
2) market dominance in fixed and mobile termination;
3) consumer resistance to non-telco services such as WiFi;
4) rapacious appetite in new areas such as broadband;
5) intricate customer relations and data compared to rivals.

The C21 Telco is lardy in mind and efficient in body. Watch out for it: it will swat the upstarts away. And it might just change its ways.
Jim Chalmers

Tomorrow: C21 Telco Finance: is money the root of all evolution?