Telcos underestimate the power of Web 2.0

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Telcos are missing a trick when it comes to fully embracing the opportunities available to them thanks to the growing popularity of the net.

The boom in the use of online information-sharing services in the Web 2.0 world is something that traditional telcos should be celebrating, according to Arthur D. Little.

Users' appetite for Web 2.0 services need to be fully supported in the mobile environment to avoid revenue decline, but first operators must overcome barriers such as sharing across companies and territories and high mobile data prices, walled gardens around content and exclusive proprietary formats, warns the global consultancy.

"The key drivers of today's internet growth are the users, who through web 2.0 can now create and distribute content instantaneously and globally in a manner not previously envisaged," said Richard Swinford, a senior manager in the Arthur D. Little Telecoms team

"In order to harness and monetise Web 2.0 the Telcos will have to rapidly address the needs of this community. Younger Europeans are already showing their readiness to interact on the move, with 38 per cent of them accessing e-mail from mobile devices. Telecommunications businesses now need to offer access to the established web 2.0 services, for both communication and for the fulfilment of their wider social needs whilst on the move."

It is clear that telcos need to act and fast. But players are now in a quandary as to whether they should compete with current Web 2.0 leaders or instead join forces and settle for the reduced margins partnerships produce.

Arthur D. Little's research reveals that most operators have opted to do the latter, a theory that is backed up by recent high-profile deals such as Vodafone and MySpace 3's X-Series partnerships with Google, Skype and YouTube.

The only alternative to this dilemma would be for telcos to completely opt out of the aggressive service-centric world and turn their attention to 'bit pipe' bandwidth delivery.

However, if companies choose to go down this road, they need to be guarded in their choice of partner and ensure they work with someone who will successfully grow profitably as the models evolve from pure advertising to more mature and sustainable revenue streams.

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