A vision for telecommunications in the Web3 era: José Mara Pallete Lopez

Founder and CEO of Telefónica S.A., chairman of the GSMA Board, shares his thoughts on organizational delayering, a powerful new connectivity platform, and sharing the cost of building smarter networks.

In his more than two decades as a telecommunications executive, José María Álvarez-Pallete López has seen the sector evolve along with the growth of the internet, from the earliest days of dial-up and basic web pages to the rise of broadband, smartphones, and social media.

Other topics they discussed in this wide-ranging interview include the purpose of delayering, how the pandemic has impacted the debate over the costs of investing in next-generation networks, and why the current trajectory of the industry makes Álvarez-Pallete invoke the movie, The Curious Case of Benjamin Button.

You need to decide the elements of the network with which you’re going to be able to build your future, which ones are strategic and the ones that are not essential. It’s about delayering, but it’s also about switching off legacy networks, the ones that are not going to be fully embedded in this new Web3 concept.

And I think the board had this discussion about something that in some manner has marked a turning point in the mentality of the sector, considering delayering as a way to execute your strategy. Jose-Maria, Telefónica has always been an innovator in this industry, and in the last couple of years, you have launched and executed on several very ambitious projects to create new growth engines for the company—whether it’s Telefónica Tech or Telefónica Infra.

Thanks to that, we have been able to progressively crystallize the value of the towers going forward, divesting the business at a very high multiple. At the same time, we have been able to create a secondary market for towers, which is a resource that we are going to need in the future, therefore optimizing the way going forward.

The formation of the GSMA is one of the very few points in time in which the industry really came together and was able to define a single voice standard that was applied globally.

Just imagine that we apply the roaming concept into this platform world, and that we can create a layer of technology above the complexity of our businesses in which all the different features of the network in every single operator, in every single country, have already been integrated once.

And whenever somebody’s developing code for some new business model, they can drop lines of code not just from the hyperscaler’s side but also from that global telecommunication standard stacks.

Even if you have these common APIs, my commercial effort needs to be the same or even tougher, because the key differentiator is going to be how good have you been in the transition, how well have you been able to integrate the complexity of your business into this platform?

There is going to be a brand-new conception of our business model. Consider that you’re going to have people blending code with your APIs. And if that’s the case, there is a new revenue source coming from developers that are going to be using your APIs to build their business model.

Since they will already be using APIs within the industry, they will somehow be paying us for a line of code rather than on a traditional revenue model. The huge growth in traffic during the pandemic has highlighted that there is an asymmetric effort here, and I think the time has come for more players to pay their fair share of the cost of investing in the networks.

Something physical happens to your body, but it’s also mental; you need to believe that you are going to be able to overcome that feeling, because then you will be successful.

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