Do we learn enough from past mistakes? Technology bubbles, real estate bubbles, oil price bubbles. A story on the wires refers to spiking farm prices as a “dot corn” bubble.
Let’s stick with telecom and take a moment to think back to the CLEC bubble of a decade ago.
I seem to recall that virtually every new entrant business plan said that their competitive edge was a lower cost structure based upon “next generation network architectures.” CLECs promised to compete with lower prices than incumbents could handle with those “legacy networks” and “inflexible business support systems”.
When one of the Canadian competitors introduced flat rate national long distance, they didn’t expect a nimble response from the big guys.
Surprise! The incumbents were able to lower their prices overnight because their billing systems weren’t quite as antiquated as the CLECs thought.
I suspect there was a fundamental confusion between the cost of delivering a service and the prices charged. Just because legacy network service providers charged more didn’t mean that their costs were higher.
Are there lessons for new entrant wireless providers?
The problem with gazing out from the ivory towers of academia is that the real world is often out of focus, far beneath the gaze of the theoreticians.
Such is the case with some analyses of net neutrality. Andrew Odlyzko, of the School of Mathematics at University of Minnesota recently wrote a paper [pdf] that started with a faulty premise:
What if you build it and they don’t come? That is what happened with the landline and underwater cables of the telecom bubble of a decade ago, and many other seemingly promising technologies. And that is almost bound to happen if net neutrality is blocked, and service providers do what they have been promising, namely build special facilities into their networks for streaming movies.
Internet video is nothing like the technology bubble of a decade ago. Building it and hoping they will come isn’t the problem here. Video traffic on the ‘net has already arrived.
Oh yeah.
Remember, the fact that traffic is already overwhelming some of the networks is the whole issue. The traffic on internet access and backbone networks has been growing, thanks to streaming media and file sharing and gaming, etc. This isn’t building a stadium in Iowa and hoping they will come. The league is a success; the stadium can’t handle all the fans and more games and concerts are getting booked and tickets keep getting getting printed. And there is a genuine shortage of real-time needs like food, beer and washrooms [your contributions to the metaphor are welcome].
Service providers are looking for ways to manage the quality of the user experience for all the wonderful applications and more that we haven’t even heard about yet.
Even the abstract for the paper seems fundamentally flawed.
What service providers publicly promise to do, if they are given complete control of their networks, is to build special facilities for streaming movies. But there are two fatal defects to that promise. One is that movies are unlikely to offer all that much revenue. The other is that delivering movies in real-time streaming mode is the wrong solution, expensive and unnecessary.
I could start with his suggestion that service providers don’t already have complete control of their networks, but I’ll let that comment go for today.
Real-time streaming may or may not may not be the right way to deliver movies, but it is hard to imagine another way to effectively deliver live action events like sports. Imagine, if you will, the appeal of each of us being able to choose which of the hundreds of cameras we want to follow at any given time from the Olympics. Sounds to me like a call for real time streaming.
The paper advocates use of “faster than real-time” techniques for video, suggesting that YouTube is a counter example for a statement attributed to John Chambers that transmitting video over the internet is “really, really, really difficult.” YouTube quality isn’t going to cut it for most of the content I want to see.
The key problem I have with his premise (“that delivering movies in real-time streaming mode is the wrong solution“) is that neither service providers nor academics will get to choose what the right solution is for delivering movies over the internet.
Users and entrepreneurs, small time innovators and the market-place will decide based on all sorts of factors. For someone advocating net neutrality, it is surprising to see Odlyzko suggesting that there should be a “right solution” for video delivery. Every solution that customers choose will be a right solution.
That perspective shows an affinity for centralized control of internet applications – which is antithetical to the concept of the internet’s open innovation.
AT&T; is offering rewards of $10,000 to target thieves of its cable. We aren’t talking about stealing TV programming services.
We’re talking about copper.
Perhaps a sign of the state of the economy; perhaps more a reflection of higher commodity prices, theft of copper and other metals has skyrocketed in recent years. The theft of utility copper is a significant issue for carriers, beyond the loss of material and cost of repairs.
Theft of utility copper often results in service disruption to customers including access to emergency services. In some cases, even manhole covers have been targeted.
Toronto City Council recently looked at theft of materials from blue boxes. Tyler Hamilton wrote about the impact on Canadian carriers and utilities in The Star last April.
It seems to me that going after copper on live electric lines is high risk – mistakes are punishable by death.
Before the dust settled on the results of the $4.25B AWS auction, Industry Minister Prentice said that we’ll be gearing up for the next auction – the release of the 700 MHz band for mobile services.
How will the spectrum be divided?
Despite the designation of this summer’s auction feature as “AWS” (for ‘advanced wireless services’), it was interesting that the spectrum was auctioned in 10 Mhz and 20 MHz blocks, block sizes that might be better suited for voice.
Do we need more spectrum for voice in the future 700 MHz auction? Will Industry Canada structure the auction design to better target mobile broadband with wider channels?
Other issues will also arise, such as:
what is the size and shape of the geographic tiers. that is, will Industry Canada separate the urban core from the suburban donut to promote niche rural competitors?
is a new entrant set-aside appropriate?
if there is a set-aside, can the auction be run in a manner that avoids gaming by parking points?
We’ll be watching for Industry Canada’s call for comments.
Some people express concern that market forces aren’t working for residential broadband because there isn’t sufficient competition for DSL and cable modem service.
Following up on yesterday’s posting, I’ll suggest that a ‘third’ choice for residential broadband will arrive with the launch of new entrants in Canada’s wireless marketplace.
Years ago, we looked at a cross-over point defined as having more mobile voice subscriptions than wireline voice. Mobile has not only caught up, but blown past wireline. Globally, there are more than 3 times the number of mobile lines compared to fixed.
We are now approaching a new cross-over point. This will be achieved when mobile broadband exceeds fixed broadband.
What role will new entrant wireless operators, fixed and mobile, play as enablers of increased consumer choice for broadband?
I suspect that as new entrants deploy mobile broadband networks, competition from mobile operators, especially those that are not aligned with local telcos or cablecos, may help drive faster bit rates from fixed line operators. The new wireless carriers will be looking to quickly attract revenues to pay for that expensive spectrum purchased earlier this summer.
To compete and differentiate, cable and telephone companies will need to roll-out even faster speeds and expanded services, such as higher bandwidth caps.
It is worthwhile pondering the implications of wireless alternatives for residential broadband.
Regulators and policy makers need to be cautious in managing broadband subsidies in order to be consistent with principles of technical neutrality. Wireless, both fixed and mobile, offers credible options for residential broadband delivery.
