Qualcomm, best known for owning a lot of patents on cellular radio tech, has an interesting new product out — and it involves a large yellow backhoe loader. Not quite what you’d expect! But a regular theme in Telco 2.0 is that the real value for the telecoms industry isn’t in the consumer entertainment applications everyone loves, but in the enterprise. That means working with people and things, driving out labour, energy and working capital costs.

First we’ll go through what the product does, before diving into what it means for the business models of both Qualcomm and telcos wishing to apply the same lessons.

Diggers are a product, digging holes is a service

The world’s leading manufacturer of backhoes and the like is JCB (for whom we have a nostalgic fondness). They have started to add Qualcomm GPS/GSM modules to some of their vehicles. These communicate with a Web application back at headquarters, also Qualcomm’s work. If you buy one, and pay the extra service charge, you get to log in to the Web page and see the data the device is collecting. Obviously, it regularly reports the digger’s location, which is handy in the event it gets stolen, or if its operator decides to nip off for a crafty pint of beer.

But it’s not just location information — a common flaw in a lot of LBS projects — but rather location added to data of some other kind. This could be a map or network diagram visualisation of the data, or data retrieved or filtered by geographical criteria. So it should be easy to get reports from a remote station that could include any kind of data you want, which could include location, and to send things back. JCB and Qualcomm’s service does just this. It provides among other things details of whether or not the engine is running, and if not, when it last ran, how long it has been running, and how long the vehicle has until it needs servicing. The significance of whether or not the engine is running is of course that if the engine is running, the machine is probably working. As well as that, it also monitors engine instruments — oil pressure, temperature, RPM, exhaust lambda sensors — so that the service schedule itself can be adapted depending on how well the digger is getting on.

But the real user value comes from the system’s user-configurability. As well as defining areas on a map and requesting an alert every time a digger enters or leaves one, you can arrange for an alert to fire when a vehicle whose time-before-overhaul has reached less than a working day enters a geofence around the maintenance workshop, and therefore get the vehicle into the shop when it passes by. You could direct the alert to the driver’s mobile phone, instead, and do yourself out of a job.

So for JCB, they are taking waste out of an everyday business process of driving diggers around: downtime for maintenance, under-utilisation, and cost of repairs. They do this by reducing lag in business processes (e.g. getting the digger into service at the right time) using data by-products of the business they’re already engaged in. Rather than selling diggers — a business input — in a price-based competition with other manufacturers, they instead sell outcomes — more holes dug and filled per unit of labour and capital.

Qualcomm, no longer the default radio technology, switches business model

It’s also an example of something else. Beyond the world of standardisation, there is a further layer of standards which are in a sense much more important, namely the assumptions in everyone’s head. You can see one in JCB’s promotional material for Livelink — the geographical interface for the system is Google Maps. (Or something with a near-identical user interface — Yahoo! and Microsoft Virtual Earth also look a lot like Google Maps.) That is how we expect a map on computer screen to look and behave, and the format used to display geographical data on the map is the same (Google’s Keyhole Markup Language and GeoRSS). Similarly, the default operating system for a new IT project is some form of Linux, the default network protocol is Ethernet, and the default GUI is a Web page.

And, of course, the default mobile telecoms system is GSM/UMTS. We can’t be the only ones to have noticed that UMTS and GSM networks are still being built, sometimes replacing IS95 or CDMA2000 ones, existing UMTS systems are being rapidly retrofitted to HSPA standards, and where another network technology is used, it’s invariably WiMAX. Whatever LTE turns out to be — and it may well just be HSPA+ with a flatter network architecture — it’s going to be the default standard, and WiMAX will be the only real alternative. Nobody is deploying Qualcomm’s 4G design, UMB (1xEV-DO Rev.C as was). Even their traditional best customers, Sprint-Nextel and Verizon Wireless, are going their own ways, to WiMAX and LTE respectively.

Now there’s a problem; what do you do when you stop being the assumed standard? Qualcomm settled its row with Nokia. It tried and failed to derail IEEE802.16e standardisation in favour of 802.20. It will of course continue to collect its rent on UMTS silicon. But it seems clear that their real strategy for a future is to specialise in services, applications, and platforms — to become the most developer-focused vendor in the telecoms industry. JCB Livelink is just one of the products of this drive to exploit the power of combinations.

Telco products are missing the magic service ingredients

JCB, meanwhile, remains the digger everyone thinks of when they think “digger”, but they have only managed to stay there by continuous innovation. Having invented the first backhoe-loader was never going to be enough. Livelink represents their move towards integrating their machines into a product-service system. And it’s about time too; the property bust has cut JCB’s order book by 20 per cent.

We’re not sure if making them dance is part of their strategy, though, or whether it was just too much fun.

So what innovation is missing in the telco space? Well, today’s basic telco voice and messaging products are peaking in usage and revenue in mature markets. The answer is to turn them into conduits to facilitate interactions between users and merchants. Telcos have a number of advantage here. What they supply is communication — not just location. Furthermore, the telco already has a relationship with pretty much everybody who is economically active, via their landline or cell phone. Rather than aiming for the ‘digger’ business process or vertical, there are a set of generic business processes (see slide 16) that they should tackle.

Note that BT just bought Ribbit, the new voice & messaging firm whose developer friendliness we praised so much. BT is doing very well at coping with the end of its role as default telco; Qualcomm is on the same road.

This is an example of something we keep banging on about: the reason for exposing the network APIs required to handle the seven questions isn’t to make each one a discrete product like a telephone call. Instead, it’s to make it possible to recombine them into new applications. Rather than try to guess what the users want, it’s all about making it possible to build bits of the telco into new things and processes that telco management couldn’t even imagine.(“I know - an application for managing large yellow backhoes!” Try that at Vodafone HQ.)

So in this case, if the normal driver of the backhoe is in Spain on holiday (well, they’re not doing much construction there any more…) then the message can instead be relayed to his boss, or someone else. The API tells us if that person is roaming, for example. Rather than the employer having to issue everyone with a phone, the existing personal infrastructure of the users is adopted. Suitable privacy controls and opt-ins are put in place. The telco is in a position to arbitrage away the difference in cost between “one phone per application” and not spending anything on hardware.

And mobile has a special role here, because of its unique ability to extend the reach of IT systems into the physical world. So we certainly ought to be thinking about yellow diggers, offshore wind turbines, shipping containers, and perhaps even cows. (No, we don’t mean Cells on Wheels.)

---

This Blog is republished from www.Telco2.net/blog. The Telco 2.0 Initiative is a new industry program focused on helping with this thorny question: "How do we (telcos, handset manufacturers, Media companies, IT players, NEPs, etc) make money in an IP-based world?"