Many governments mix IT and Telco together and call it the ICT industry
– a mistake that limits the investments in future technologies
In almost all countries the political system regards the IT and Telco business sectosr as one industry and the politicians responsible for these areas often speak of their National ICT policies. The big problem is that this is two different sectors with a number of technological overlaps that result in politicians forgetting the actual large differences between the two sectors and the significance of those differences in a modern society.
Basically the Telco industry in most countries contributes with around 4 to 8% of the GNP. This is an industry that is making large investments in infrastructure with a payback time of between 5 and 20 years. Simply put one could say that the Telco industry is making large national, regional and international investments in infrastructure in order to yield an interest in the long-term.
If you examine the IT industry, their investments are very limited compared to the Telco industry. The IT sector seldom operates with investments with a payback time of longer than three to five years. Somewhat simplified you could say that the IT industry primarily invests in human resources and the technology they create – and all within a short time frame. The Telco industry invests in technology and operates with a very long time frame.
Many often speak of the “chicken and the egg” and what came first; the chicken or the egg? But regarding IT and Telco there is no doubt what came first – it was the Telco industry – and the infrastructure and technologies they have created are the foundation of the IT industry, enabling them to manufacture and deliver most of the services that create the greatest value in the IT industry. If there wasn’t a Telco infrastructure, most of the IT industry would not exist.
What is happening today is that the Telco sector is investing in intelligent infrastructure that the IT sector is building solutions on top of. Without the investments in copper wire, mobile networks and other types of communication networks, there would not be an infrastructure that the IT companies can deliver solutions on top of. If you take a closer look at these investments you will see that ordinary companies and IT companies handle the local networks in their own companies, but when it comes to connecting multiple local networks together nationally, regionally or globally, it is the Telco sector that comes into the picture. It is the Telco sector that enables global companies to connect their businesses together and it is the Telco sector that makes the necessary investments that enable us to send a file or e-mail from one end of the world to another in just a few seconds.
In the political universe there are many governments that have great difficulty in seeing the differences between the IT and Telco sectors. When a government talks about the IT area or when a government makes investments in new IT systems, they actually believe they have benefited the ICT industry and thereby per definition also done something that has also benefited the Telco sector. The restructuring of the public sector and the investments that many governments are making in new IT systems are helping drive the IT sector forward and this is a natural part of the ordinary development of the IT area. The digitalisation of society has accelerated the past 10 years, while at the same time things that were difficult in the past have become far easier and cheaper in today’s IT world.
When all this has been said, the conclusion is that the government has handsomely rewarded a great number of IT companies and no respectable government could dream of imposing extra taxes and duties on IT solutions for the sole purpose of increasing the States revenues. The IT sector is the good boy in the class that is helping to improve and modernise society – IT is helping give citizens better service.
If you examine the Telco area, the situation is completely different. Governments, ministers and civil servants view the Telco sector as the bad boy in the class – a sector that is taxed through 3G licenses and other taxes and a sector governed by a regulation that simply does not take into account the fact that the Telco sector is probably one of today’s most competitive businesses and that has given customers enormous product improvements in recent years and at significantly lower prices.
It is a fact that without a Telco infrastructure the IT sector would not be able to deliver many of the services that are the foundation of their business and society would not achieve the improvements that modern ICT solutions give. There is a great deal that points towards the political system and the IT sector simply taking the Telco sector for granted and that they are simply uninterested in the fact that the Telco sector is having difficult times. It is being taxed through UMTS licences – with much of that money actually going back to the IT companies, rather than the Telco companies – and a lot points towards the IT sector believing that it is okay that the Telco sector is treated extremely unfairly, as long as the IT sector can sell loads of services and solutions to their customers.
Regarding the Telco area I am sure that nobody disagrees that both the EU regulation and regulation by individual countries is often one huge chaos, that the Telco sector is seldom viewed as an independent sector and that the national regulators often act as a State within the State with the sole purpose of ensuring the survival of their regulative role. It is a mystery why the IT sector in many countries has not realised this, instead of simply viewing the Telco sector as a business sector in the same category as companies that deliver water and electricity.
Who is responsible? I suppose at the end of the day it is the Telcos that are responsible for not shouting “stop” and it is also the Telco sector that time after time have turned the other cheek and accepted the way the political system has treated them. It is the Telco sector that has not protested enough and they seem to have forgotten that they are the foundation of the IT sector. It is amazing that anyone can prioritise in this way, when it is clear that the Telcos require many years to yield an interest on their investments on a market with extremely tough competition and decreasing prices.
People like me that work in the Telco industry know what came first, the chicken or the egg, the problem is that the political system is in the middle of killing the chicken, while at the same time the IT sector is strangling the chicken’s neck! So how does the IT sector expect to be able to create future products if they marginalise the business sector that is making the enormous investments required in the infrastructure that is the backbone of their IT solutions?
At Strand Consult we believe there is a need for a debate about the Telco sector’s role in a modern society and we believe that politicians should start viewing the Telco sector as an independent business sector – on equal terms with other industries that make large investments and that require political stability to justify those investments.
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