There is one word that comes to mind when I think of mobile communications startup Twilio: powerful. Twilio has one of the most robust APIs in the technology industry. The API helps connect users via voice or messages from any client they are using. That includes adding voice and messaging functionality to the browser or within a mobile app. Twilio is taking the notion of communication, bringing it to Web technology and unleashing it to a new class of developers.
The startup and hacker community has known for some time that Twilio has a great product with simple, robust APIs. Yet, I have felt for quite some time that there was something I was missing from the company’s model. Sure, Twilio is unique and dynamic, but the true potential of the platform eluded me. Yesterday, it all clicked: Twilio has the potential to put a huge dent in the mobile carriers’ basis of power.
My thoughts on Twilio were solidified when I came across a great post by entrepreneur Nick Hughes at his blog, So Entrepreneurial. All of a sudden, everything made sense. I had never thought of Twilio as a direct competitor to the carriers except in a corollary fashion that all Web-based messaging and voice platforms were a threat.
Hughes frames his argument, “Why Twilio Will Kill AT&T,” in the guise of the “innovators dilemma” from Clayton Christensen’s famous book about how companies tend to fail because they innovate to protect their business model as opposed to innovate to disrupt it.
Hughes calls AT&T a firm that has always focused on “sustaining” innovation as opposed to disruptive innovation.
“It’s the difference between the electronic typewriter, which improved the typewriter, or the word processor, which supplanted it,” Hughes wrote. “AT&T is the Typewriter. Twilio looks to be the Word Processor.”
Hughes is right about AT&T and, in a larger sense, the other three major carriers in the United States. Verizon, Sprint and T-Mobile have a lot of properties to protect along with AT&T. These are large, sprawling empires based on the fundamental principal of “pipes.” The carriers create pipes for data to flow through including voice, text and TV. Historically, the carriers were the de facto gatekeepers of communication. Anything the companies can do to protect that role of gatekeeper, they will do.
Enter the Web… and Twilio.
There has been no greater disruptive force to established companies than the advent and growth of the Web. Ask the music or movie industries. To a certain extent, the carriers have avoided Web disruption because the infrastructure they provide makes the Web possible. To be clear, the carriers play a very important role in the U.S. information ecosystem. The smartphone revolution would not exist if the carriers did not spend billions of dollars creating high-speed data networks that are the base of what the entire app ecosystem is built upon. The carriers’ biggest fear though is to become “dumb pipes” that do nothing but shuttle data from one point to another.
Hence, the operators need to squeeze the ecosystem to make a profit in other realms outside of their pipes. The starting point is communications but also extends into content and media, apps, software and enterprise solutions. All of these solutions are invariably fed through the carriers’ pipes. Think of it like a major oil line. The primary flow is the moneymaker but forks from the main line are used to bring functions and funds to other areas. Some users complain that this goal is more or less leading to “being charged twice” for the same product.
Where Twilio stands apart is the basis of making communications IP-based. Twilio is based of the Web. The carriers stand outside of the Web. This is a primary distinction. Whereas the carriers are concerned about building within their basis of power, a company like Twilio’s purpose is to be built upon. We have seen it several times in the history and evolution of Web technologies: the companies that create a platform that third-parties can use to create dynamic new systems are the ones that thrive. Facebook, Apple, Google, Amazon are all great examples, to varying degrees, of this principle.
This is the crux of Hughes’s argument:
“They understand the new rules of business – better in the long run to open up, provide basic communication technology to the masses and empower innovative ideas as a platform rather than remain closed and stifle anything that might attack their business model. They understand technology moves faster than they do so the best position to be in is as a platform. They understand they will touch more end users by encouraging innovation using their service. An even better way to think about Twilio’s business model is it’s all about disruptive innovation.”
In the end, will Twilio and its kindred really kill the carriers? In a general sense, no. The carriers are more than communications platforms and the clout they carry in terms of media, government lobbying and infrastructure are too much for a platform like Twilio to cause the empire to topple. Yet, what Twilio does and what it represents – IP-based communications and open standards – is a direct threat to the carriers’ base communications base of power.