Love Hurts: A telecom melodrama

Everyone loves a good story, an exciting tale of dramatic surprise, strategic reversals and the underdog rising up to claim the throne. It sells newspapers (which the publishers would certainly be thankful for these days), because it touches on a need that most of us have, an need for excitement . . . and for entertainment.

But at what price? The industry’s love of a good story may be creating bad outcomes.

Why did we have a networking bubble in the 1990s, with little or nothing substantive behind it, and can’t seem to get one going these days when there is real substance in at least some of the key trends? Could the answer be that we’re trying to create too many bubbles at once? Could our love of drama and excitement be creating so many revolutionary trends that they collide with each other? And could these trends be colliding uncomfortably with reality?

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Everyone loves a good story, an exciting tale of dramatic surprise, strategic reversals and the underdog rising up to claim the throne. It sells newspapers (which the publishers would certainly be thankful for these days), because it touches on a need that most of us have, an need for excitement . . . and for entertainment.

But at what price? The industry’s love of a good story may be creating bad outcomes.

Why did we have a networking bubble in the 1990s, with little or nothing substantive behind it, and can’t seem to get one going these days when there is real substance in at least some of the key trends? Could the answer be that we’re trying to create too many bubbles at once? Could our love of drama and excitement be creating so many revolutionary trends that they collide with each other? And could these trends be colliding uncomfortably with reality?

The networking bubble of the '90s was created less by the Internet than by the notion that the Telecom Act was going to allow the old established RBOCs to be overturned by a bunch of upstart players. There were hundreds of billions at stake in the United States alone, a trillion dollars a year in revenue worldwide. The upstart wins; simple theme. The technology mantra of the day was “convergence,” or that IP wins. Simple theme. Best of all, the two themes were symbiotic. The future was in the hands of the ISP upstarts using the Internet’s technology to converge everything.

In contrast, look at the NXTcomm show results in objective terms. What was hot there? IPTV, some FMC and IMS, alternative broadband technologies like WiMAX and even Wi-Fi for municipal networks. How well do these go together?

Well, everyone’s out there texting and pixing and flixing on their mobiles, but somehow they’re also home watching their new IPTV services. Content is king, with people downloading videos in the billions from such places as YouTube, but again they somehow have time to do all their mobile stuff and watch IPTV, too. We’re either talking about a whole new level of consumer ambidexterity, or we’re missing some critical points.

That’s only what we could call “demand conflict.” How about the other side, the supply end of the business? Well, we know that video is going to demand tons of bandwidth. Every consumer will need not two or four or 10 or even 20, but a 100 megabits of broadband to get the content they need. Those same users, though, are going to flock to Wi-Fi and WiMAX access, where users have to share capacity.

If 1,000 people in Philadelphia’s noble wireless effort went to continuous video-consumption mode, how much of the rest of the city is in the broadband dark? Remember, every hub is shared by all in its range, and in many cases the traffic has to hop from base station to base station just to get to the content, consuming capacity in a whole string of Wi-Fi “cells.” So is content bad or is municipal Wi-Fi bad?

Not to mention the business side. Worldwide, service providers tend to spend about 18 cents of every sales dollar on capital equipment. Verizon’s numbers say that the cost of fiber to the home, including running the fiber, connection, etc., is about $1,800 per customer. So let’s suppose that we want our wireline broadband providers to reach 100 million households (in round numbers, the U.S. population).