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@TC3: Carriers to Silicon Valley: We need your innovation

SAN JOSE, Calif. – Silicon Valley companies that are debating whether it’s beneficial to work with telecom carriers should recalibrate their expectations in the time it will take to get the service to market, but hold onto the fact that the benefits of scale with operators are huge, said Derek Kerton. Kerton, principal analyst at the Kerton Group, helped organize this week’s TC3, an annual day-long event that connects telecom carriers and applications developers to share best practices in the Silicon Valley.

“Set your watch to telco time,” Kerton told the audience. The development cycle at a carrier can take 18 months, which is long by Silicon Valley standards. But the potential to reach mass scale is immediate: the world’s 20 largest carriers hold 57% of the market, Kerton said, citing Wireless Intelligence data. About 350 telecom companies have a presence in the Silicon Valley, he estimated, employing 200,000 people in the area.

The day-long meeting is designed to connect telecom carriers, both wireless and wireline, with entrepreneurs and well-established I.T. companies in the Silicon Valley, and is sponsored by the Telecom Council. Representatives from the Joint Innovation Lab, Verizon Communications Inc., British Telecom, Clearwire Corp., SureWest Communications and China Mobile told audience members specifics about applications they were looking to deploy on their networks.

The burden of ‘big’

“We have to think globally,” said Verizon’s Aditya Khurjekar, director of new business development at the New Jersey-based telco. “We’re hungry for innovations.” As such, Verizon is slowly morphing its company DNA to treat applications developers as customers instead of vendors, Khurjekar said. However, Verizon is approaching a $100 billion revenue company. Innovations the telco adopts have to be valuable, in that they have to generate revenue and they have to be able to scale, because the company is so big. Khurjekar also noted that innovation is a two-way street. Verizon has invested heavily in the network, the largest investment in the ecosystem. Application developers are making a number of small investments. Mobility is the enabler across all vertical and industry segments. Khurjekar envisions the day when companies have chief mobile operators as well as chief information officers. Again, creating large-scale deployments that can cross several industry segments is key to innovation at Verizon, he noted.

An outdoor lab

Allen Flanagan of Clearwire touted his company’s recently launched 4G WiMAX Innovation Network, which launched in the Silicon Valley area earlier this week. Along with partners Bright House Networks, Cisco Systems Inc., Google Inc., Intel Corp., Sprint Nextel Corp., Time Warner Cable and Comcast Corp., the aim of the venture is to start developing apps on the WiMAX network before it goes live next year in the Silicon Valley. Chosen companies can use the commercial-grade network for free as long as they meet a few requirements, Flanagan noted. They have to be professional developers living in or around the Silicon Valley area, they have to use their own WiMAX devices, and they have to fill out an application. Developers will get access to technical information they need like real-time driving routes to see how their app performs on the network. Clearwire and its partners are especially interested in streaming media, location-based services, online gaming, voice services, social media and optimizing existing applications so they work on the WiMAX network.

Multi-screen strategies

SureWest CTO Bill DeMuth said his company, which offers telecom, fixed broadband and IPTV services in Kansas City, Kan., and Sacramento, Calif., is interested in applications that help subscribers find relevant content, as well as multi-screen strategies and connected-home opportunities. While working with Verizon may give app developers a grand slam, working with smaller companies like SureWest tends to produce results faster, Kerton noted.

BT priorities

While it is contrary to popular thinking, British Telecom has found that the economic downturn is spurring more innovation than ever, said Jean-Marc Frangos, VP of technology and innovation at BT Group.

Collaboration among competitors is OK in this new environment, Frangos noted, because telecom companies that are successful today are so because they execute better, not necessarily because they invented something new. The carrier is interested in enterprise applications that take advantage of “anything as a service,” crowd sourcing, social media, digital customer engagement as a way to take the cost out of customer service, and voice 2.5 apps.

China Mobile USA opens research center

China Mobile Research Institute opened its U.S. office earlier this year in Silicon Valley as a way to tap into the area’s brain trust, said Luke Bao, director of business development and terminal solution for China Mobile USRC. Key projects this year include anything using TD-LTE technology; the company’s own smartphone operating system, called OPhone that sits on top of a Google Android OS; mobile money; and cloud computing applications.

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