Alvarez-Pallete: Transformation is the Only Way Forward

Telefónica COO calls for a “Digital Constitution”

24/10/2014 Barcelona

José M. Álvarez-Pallete
Telefónica S.A. CCO, José Maria Álvarez-Pallete: “We need a Digital Constitution to level the playing field.”

"You are a privileged generation," José María Álvarez-Pallete, COO of Telefónica, told a packed audience at the IESE Barcelona campus auditorium yesterday.

Privileged, because we are living in times of unprecedented change and near limitless possibilities, driven by the Digital Revolution.

This is an era where social media can dislodge governments, cars can drive themselves, 3-D printing is revolutionizing manufacturing – "and the personal smart phone has more processing capacity than NASA when it landed the first man on the moon," he said. The Internet of Things currently has 10 billion connections. By 2020, it will have 50 billion.

A time of great change and opportunity is also a time of uncertainty and risk, calling for leadership and vision, said Álvarez-Pallete.

Companies will have to adapt, improve and deliver to thrive in the new digital world. And to do so, we will need new rules – and new values.

Accelerating Change, Uncertain Outcomes

The demand for technology has never been greater. Álvarez-Pallete cited the example of the iPhone. In its first weekend, the original model sold 800,000 units. A staggering 10 million iPhone 6s were sold over the same period in 2014.

Smartphones and all the technological trappings of the modern world are becoming a vital part of life, he said.

"Technology is changing everything: social relationships, politics, economy – and it is not going to stop. People are beginning to see technology as something as necessary to them as eating and drinking."

If companies are to survive and thrive in the new digital landscape, they need to tackle these headwinds of change – and be open to a complete transformation of their business.

A Digital Constitution

As change accelerates, and citizens become "netizens," there is need to build new models of thinking, new rules and new values.

Calling for a "digital constitution," Álvarez-Pallete highlighted the risks posed by global cybercrime, with an annual cost to government, business and individuals in excess of 320 million euros. He also pointed to social media networks, which encourage people to "willingly give up vast amounts of their private data every minute of every day."

The commercialization of our private lives is currently the price we pay for "free" services, he said. But the data we surrender – and how it is used – needs to be protected.

Level the Playing Fields

Telefónica, with a mobile market share in Spain of around 33%, has to follow strict guidelines about the content carried on its networks and the privileged client information it guards. Competitor telcos are subject to the same regulations.

Álvarez-Pallete compared this with Google, Android, Apple and Facebook. These companies enjoy near global monopolies or duopolies, he said, without the restrictions faced by telcos.

"This, despite the fact that increasingly they are providing data and voice services, exactly like a telecommunications company."

He welcomes the competition, but calls for "a more level playing field. Either regulate them, or deregulate us."

Eppur si Muove

In closing, Álvarez-Pallete quoted Galieo Galilei’s retort to the Inquisition when forced to deny that the earth moves around the sun. "Eppur si muove" is a phrase used today to mean: "these are the facts, whether you like them or not."

"Ready or not, the Digital Revolution is happening," he said. "And it is happening with or without you."

There is no roadmap and the rules will need to be re-written to help us negotiate an unknowable future. However, he says, one thing is clear. "Our future success depends on finding and nurturing talent, and on defining and defending solid values."