The Connected Society Is Emerging

If there is one sector that will have a tremendous impact on everyday life in the next decade, it's the telecommunications industry.

As demand for services increases, existing telcos will find themselves facing a daunting challenge: change their basic economic model or face disaster.

"At the moment, the big telecommunication firms make most of their money from the old model of toll calls, distance multiplied by time. Now they are racing to move from voice to an online business strategy," says Ernst & Young partner David Cullwick. He's part of a team that interviewed 95 of the world's top chief executive officers, including Telecom New Zealand's Rod Deane, about the future of the communications industry.

"We talked to 50 CEOs from within the telco industry and a further 45 from the top companies worldwide," he said.

"If telcos don't find a new model to work with they will rapidly find themselves without a market as the consumer moves away from the existing issues and toward issues like greater bandwidth and speed," says Cullwick.

The report itself is far more grand in its approach to the new market.

"A new era of human history -- the Connected Society -- is emerging," says the report which calls for a new industry player, the "content packager", to better address the needs of the consumer.

"We've labelled these entities content packagers as opposed to content providers," says the report, which defines a packager as a company that consolidates and passes the "overabundance of available information" with the goal of making useful information more available. Currently the battle takes the form of portals, which try to bring disparate news sources together with a search engine, but these are merely prototypes for what is to come, according to Cullwick. Packagers will "merge content, information services and communication services, but they are not content or telecommunications" says one of the CEOs involved in the report.

The whole shift is driven by one overriding factor: the consumer is king.

"The consumer is the number one industry driver," says Cullwick. The battle will be won by companies that recognize customer service is the only differentiating factor they have to offer, he says.

"CEOs must compete for customer loyalty like never before, developing products, services and brands with powerful allure," says the report.

"There are three areas that must be addressed to ensure New Zealand companies play a part in this new era," says Cullwick. He believes the telcos must increase the rate at which they open up access to their networks; increase the rate at which broadband services are rolled out and increase the rate at which wireless services are provided.

"Voice will move more and more to wireless as an alternative to fixed telephony," he said. With voice moving to wireless, the cables will be taken over by the transmission of data.

"That's one of the driving factors behind Telecom's recent move to its 0867 numbering plan," says Cullwick, although he does acknowledge there could be other "commercial" factors to the move as well.

Business-to-business electronic commerce (B2B), is one of the largest growth areas identified in the report.

"It's pushing the drive to broadband communications as well as requiring telcos to improve their quality of service and the choice that's on offer," says Cullwick, who believes that businesses, as the telco customer, will be in the driving seat when it comes to negotiating a service.

"(Telco) businesses must have good support to keep their customers. They must own their customers and that's one of the keys to the future of the business," he said.

By owning their customers, or getting to know them better, content packagers can target their services more accurately.

"Take Inc. for example -- it knows its customers and what their preferences are," he said. "The site will be able to provide a list of books for a particular reader based on their previous visits to the Amazon site."

Businesses that ignore the valuable data they gather on their customers do so at their own risk, says Cullwick, who expects to see developing synergy between organizations that previously wouldn't have had much to do with each other.

"Banks, bookshops, couriers, entertainers, transport companies all will begin working together more cohesively to better service their customers," he said.

There is one thing that New Zealand must have to take advantage of this scenario, though and that's an open market. "Not just open in that government plays little part, but open in terms of operation. It can't be 'open' in name only," Cullwick added.

Cullwick believes companies need to be deregulated in real terms as well as in legislative terms. Only then can New Zealand companies survive the competition from offshore that he says will be more of an issue in the next century.

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