• United States

Dawn of the consumer communications era

Nov 21, 20054 mins
Enterprise Applications

The communications industry has a new focal point. Forty years ago, it was military defense (secure messaging). Thirty years ago, the focal point shifted to the corporate marketplace (IBM’s SNA). Twenty years ago, it shifted to the academic world (the Internet). Ten years ago, it shifted to service providers and carriers (cable, cellular wireless, frame relay, ATM, optics and IP). Five years ago, the implosion of the communications industry created a state of turmoil, with no single industry segment the driving force for new communications technology and investment.

Now, that has changed. Over the past five years, the consumer slowly has emerged as the focus of venture capital and technology investment.

Today the corporate marketplace is not following a philosophy of replacement but rather a philosophy of adding on as necessary and accommodating legacy technology. Maturity has arrived, and decisions to upgrade or replace are now business- rather than technology-driven. Security and compliance are the most important issues, rather than upgrades for faster access or greater QoS.

Change is occurring dynamically among service providers and carriers. Ten years after most corporations adopted IP as their unifying communications strategy, carriers have decided to join the fold. The driving force behind this change of heart is the consumer. We now hear service providers and carriers directing such terms at consumers as VoIP, Internet-protocol TV, video on demand, home security, content and triple play.

Venture capitalists are aggressively seeking entertainment or media investments – but they’re searching not only for an Apple iTunes killer or the next Google, but also for the next intellectual-property or software-application product or services start-up to sell to Apple or Google. In the consumer-focused reality of 2005, the investment required to achieve a six or seven times rate-of-return exit in a reasonable time frame is extremely difficult for a communications infrastructure or software start-up.

Consumers’ buying power and fickleness create constant change in the marketplace. Add to the mix the marketplace’s orientation to youth with ready disposable income, and we have all the ingredients for selling and delivering hot products and services dynamically via almost any IP network. These market dynamics -high risk, low or medium investment, numerous exit paths, high ROI and short-term focus – are attractive to venture capitalists.

To survive, service providers and carriers have to focus on consumers. Although corporate customers provide the majority of revenue, profits are another matter. Corporate services cost more than consumer services to deliver, manage and maintain. The classic consumer service – voice – is under significant market pressure from competition and disruptive technologies such as the Internet. Shifting your strategy from transport to services, marginally successful with corporate customers, shows signs of being wildly successful in the high-margin consumer segment. Just look at the cost of a ring tone and you can envision the unbelievable profit margin for services.

The consumer market is also enticing to technologists; its opportunities seem to be unbounded. Peer-to-peer management, instant-messaging and identity-theft security, next-generation personal firewalls, image recognition and retrieval, and digital music and video transmission, storage and retrieval – these are some of the potential areas of the consumer marketplace where technologists could add value dramatically. Skills learned in the corporate and service provider and carrier market segments are not worthless, but in fact are required to upgrade and enhance the consumer communications experience.

Remember, communications technology is not market- or industry-bound;it seeps daily from one market segment into another. After next-generation technology succeeds in the consumer market, it will be only a short time before it morphs and migrates into the corporate and service provider and carrier segments. Get ready for 21st-century communications – the age of the consumer.

Dzubeck is president of Communications Network Architects, an industry analysis firm in Washington, D.C. He can be reached at