Google’s applications and service dominance is a significant threat to ISPs seeking to push beyond providing mere Internet access, a new report claims. But ISP can find ways to work with the Google.
According to an Ovum report titled Adjacent player profile: Google, the cloud computing and search engine monolith poses the biggest risk to telecommunications players. Google has strong financial backing, a global reach and is eager to invest in research and development; something local ISPs will find difficult to compete with, the analyst group claimed.
The success of Google’s YouTube video streaming portal and the launch of its Web TV service may dampen the IPTV ambitions of ISPs such as iiNet and TPG. ISPs with a mobile telecommunications business unit are also squeezed through Google’s Android phones and its Android applications Marketplace.
“A few years ago, telcos thought they’d be quite successful in the application and services layer, and deliver and capture value in that area, particularly among consumers,” Ovum senior analyst, Nathan Burley, said. “As the Internet evolved, we’ve seen a lot of new innovative players like Google and Apple delivering services and providing more innovation than the telcos have been.”
This has reduced the value ISPs could capture from upper layer services and increased their reliance on the access layer, where margins are tight, Burley said. He highlighted Telstra’s failed attempt at building an Internet search engine business with its subsidiary, Sensis.
“It [Telstra] was unable to compete with the scale and investment Google was putting into its search business and was always going to be sub-par in the Australian market,” Burley said.
Ovum recommended ISPs and broad-based telcos look at ways to complement Google rather than fight the giant head-on. For example, telcos could leverage Google’s existing assets to deploy new services such as rolling out applications to users through the Android Marketplace.
“Google’s willingness to invest in core software platform assets and a plethora of new applications can remove the burden on telcos of doing so themselves,” the report claimed. “These savings can then be ploughed back into telco core assets such as networks and customer care.”
ISPs can also work together to form a more equitable relationship with Google.
“No doubt operators have seen their strongest competitor as other operators,” Burley said. “It does make sense in some situations for operators to collaborate, especially on standardising [a platform for applications delivery] and things that will enable them to grab a larger portion of the value chain.
“An applications developer is not going to want to use different interfaces for Telstra, Optus and Vodafone. They want a standard set platform to push out their solutions.”