Why I Retired From Telecom

Most of the profitable niches in telecom are now gone. Home phone service, long distance, small business phone service, conference calling, mobile — all have become low-margin commodity markets dominated by established companies. The capital costs of prototyping new phone services have declined, but not nearly as much as retail pricing, and hence, the margins are near zero. The liquidity and exit opportunities for small telecom companies are also not good. You either need massive amounts of capital, or you need to be bought by a phone company (the stereotypes about phone companies exist for a reason). There are exceptions, of course, but they are rare.

Mobile should be a huge opportunity for developers, but unless and until the carriers open their platforms and create something like Ad Sense for developers, it’s a rotten business to be in. The mobile operators micromanage application developers, and they do not share revenue freely. They often charge for network access when they should be rewarding you for stimulating usage.

What’s the message in all of this for entrepreneurs? Telecom seems like a great industry. After all, billions of people use cell phones. The problem is that there is nothing like the web for mobile, and by that I mean the entire set of standards and business practices that have grown around it. It’s hard to see this changing significantly in the near future.