The transportation industry is facing an unprecedent revolution in the coming years as a result of the combined release of 5G, AI, Blockchain, V2X, Autonomous Vehicles (AVs) and other disruptive technologies, which may change the way we get around forever. But let´s forget about all of this for a moment.
I am sure you all remember the movie Back to the Future, one of the most iconic films of the 80s. Imagine that we have our DeLorean set for the year 2001 as destination time and hit the road at exactly 88 miles per hour. What would we see? Interestingly, we would find the telecommunication sector at a very similar stage as today’s transportation industry.
Telecommunications in the early 2000’s
Right at the beginning of the new millennium, expectations sky-rocketed with the release of 3G, the third generation of mobile networks, which promised a significant increase in network performance that would enable a new breed of services for mobile phones around the world.
The future was looking bright for telecommunications companies (telcos), which clearly drove the market and anticipated an additional increase in revenue due to data consumption.
Yet, there was still one final challenge that needed to be addressed: the new “killer application” that will drive telco’s revenues in the new era.
However, if we were to extend our stay a little longer, we would see that, after general availability of 3G and despite the industry’s efforts, the increase in data usage wasn’t anywhere close the anticipated levels and the new technology mostly remained as a “solution in search of a problem” for a few more years.
That is until Apple Computer, a newcomer in the industry, released its first generation of iPhone in June 2007, which was an instant success. But Apple not only released a mobile phone; it launched a full new platform integrated within their Ecosystem, featuring an extensive application marketplace open to third parties. In other words, instead of releasing a single application, it offered a whole new world of possibilities for 3G where Customer Experience was king.
And this caught Original Equipment Manufacturers (OEM’s) and telco’s totally off guard.
Long story short, this new way of doing business triggered the long-awaited revolution, led by tech companies (later known as Over-The-Tops and OTTs) like Google and Apple, which became the new market leaders and kept most of the revenue available for mobile services. Meanwhile, telcos were downgraded to supporting actors.
Comparison to today’s transportation industry
Now, let´s set the time of our DeLorean to the present day and see what we’ve learned.
To begin with, the shape of the transportation market bears a shocking resemblance with the telecommunications market of the early 2000’s:
- During that time, we had mobile phone and network equipment OEM’s. Now we have Vehicle OEM’s which, quite similarly, are mostly based on proprietary software and hardware.
- In the same way, virtual networks of the telecommunications sector can be paired with the physical networks of the infrastructure providers.
- Transportation operators, such as toll road concessionaires and mobility platforms, run their services over the available networks just as telco’s did in the past.
The lessons learned from this journey
If we compare the telecommunication revolution of the 2000’s to today’s transportation revolution, there are 6 key lessons which can help us navigate the future of transportation:
Digital transformation of infrastructures will remove entry barriers and will increase the level of competition lead by new digital-native companies with no previous experience in the industry but with a very strong customer base. This is what happened with OTTs in the telecommunications industry of the 2000’s and it’s already happening in the transportation industry as well.
User-centric business models are key. Companies with the strongest relationship with their customers will benefit from higher revenues and market dominance. Again, the success of OTTs is a good example of this. Conversely, those organizations pushed farther down the value chain will need to adjust. Telcos transition from their very lucrative pay-per-use pricing schemes to all-inclusive flat rates confirms this.
The forward and backward movements along the value chain are inevitably going to happen due to the corporate efforts of establishing a strong customer base. Some of these changes are already taking place, such as the case of OEMs and infrastructure operators that are building mobility platforms (e.g. Wondo and Zity) or OTTs, which are designing AVs (e.g. Waymo) or turning infrastructure developers (Sidewalk Infrastructure Partners).
Integration and Completeness
Integrated solutions are more powerful and scalable than proprietary or ad-hoc solutions. The key to Apple’s success was that it offered a broad solution based on a new platform open to third-parties. This was a major shift from the traditional “walled-garden” approaches promoted by Telco’s. Similarly, the leading mobility solutions of the future are likely to be extensible since they follow a holistic approach instead of being designed to address specific needs or use cases.
Revolution vs. Evolution
Game-changing solutions will most likely not come as a simple upgrade of existing services. Instead, the mobility market will need to be completely reimagined to avoid repeating telco’s unsuccessful efforts to boost data consumption by just enhancing previously existing services.
A legal framework that clearly defines the rights and obligations of each player in the market can remove friction and promote collaboration across the value chain. In this regard, acknowledging the asymmetry on the levels of investment of mobility operators versus infrastructure providers is paramount. Hence, new pricing schemes for tolling from third-party operators will need to respect existing concessionaire contracts to assure viability. Likewise, an opposition to “net neutrality”, which occurred in the telecommunications market in the early 2000’s to protect infrastructure investments, may also happen in transportation industry of today.
If we were to take one final trip on our DeLorean to the future, we will see that there are very exciting years ahead of us in both the mobility and transportation industries, with lots of new technologies coming up and use cases being released every day. However, as important as it is to keep pace with what is new, it’s always insightful to look back and learn from past events before we go back to the future, similarly to what Marty McFly did in the films.