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).
That’s $180 billion, which happens to be just about the total U.S. provider capex for all services, from all provider sources, including ISPs. What would this generate in revenue? If we assume it generates $100 per month, it would produce $120 billion in revenue. How does that square with the traditional number of 18 cents of every sales dollar for capex? It doesn’t, and yet at the same time as we’re touting fiber to the home we’re touting “net neutrality,” which would make it nearly impossible for providers to earn even that $100 per month.
The consumer can’t double spending on vacations, double spending on the home they buy, and double their consumption of computers and personal electronics without doubling their incomes, but we’ve had forecasts of all of these spending explosions from some source or other, without any promise that the nation and the world are somehow striking it rich. The sum of the parts is a lot more than the whole can ever be, and that’s the difference between today and the 1990s.
Wall Street and media pundits tell us that the bubble can’t happen again, because “we’re too smart.” Wrong. It can’t happen again, because we’re too dumb. We can’t put together a single story, a single plot line, where all the good guys win. It’s like the “Magnificent Seven” where the gunmen turn on each other instead of saving the town. A brief moment of drama, then it’s over and with no happy ending for anyone.
We can do astonishing things these days with technology. Copper loops can carry tens of megabits of traffic to customers who twenty years ago were pushing the limit with 1,200-bit-per-second modems. A single fiber cable has a traffic capacity equal to or greater than the total load of all network services worldwide. We can make technology sing.
It’s a shame we can’t get technology, and its proponents, to sing the same song.
