There are probably few topics as important as where telcos are on their path to…well, maybe that’s the problem. What are they on the path to? Digital transformation? Virtualization? Telco cloud? Cloud native? We’re entering a new year shortly, a year that’s clearly going to be critical for the telcos worldwide. They are finally facing the end game in their profit-per-bit battle, something they hoped would never come and yet never really addressed. Wouldn’t it be nice if those telcos knew what end game they were playing?
You’ve all probably realized that I’ve been digging through all my interactions with the telcos and cable companies through the last couple of months, and writing about some of the things I’ve found. This blog addresses that question of the telcos’ path to the future, both in terms of what they think and what they should be thinking.
It’s hard to characterize the responses I’ve gotten from telcos to question about where they’re heading. With short of a hundred responses, there’s still a lot of fuzz and uncertainty. In fact, just last week I finally think I got a hint of the thing that links everything I heard. You can summarize it as follows: “Technology X, when I complete deployment, will address and eventually solve my problem.” Whatever “Technology X” is, and there are over a dozen suggestions, it’s the deus ex machina. Maybe they all have a different notion of what the “deus” piece is, but the “machina” part is clear; it’s business salvation.
You can see this is a retreat (yet again) into supply-side thinking. Those telcos have only a very vague notion of what specific thing their Technology X is going to do. Roughly half think it will somehow revolutionize costs, and the other half that it will be a source of new service revenues. The former group could probably be characterized as being the “digital transformation” group; I blogged about my concerns about both the term and the concept just last week. The latter group thinks that Technology X is 5G in general, or maybe 5G Core, or maybe network slicing, or maybe even 6G, and that’s the group we probably need to talk about.
If we go back maybe 40 years, we’d find that FCC data showed that consumers had spent roughly the same percentage of their disposable income on telecommunications for as far back as they had data. They used their phones more in proportion to the extent that using them cost less, which equalized their total cost. Today, they spend well more than triple that percentage. Why? Because the Internet came along and changed the value of telecommunications by taking “communications” out of it.
When the Internet started to gain traction, everyone dialed in. It was almost a decade before any form of consumer broadband was available, but it was the availability of consumer broadband that jumped telecommunications spending up. The key point here is that the value of the Internet pulled through the changes in networking. Would we have deployed consumer broadband had the worldwide web and dial-up modems not made it clear that there was money to be made in that deployment? I doubt it.
This excursion down memory lane (at least for those old enough to remember!) is a historical validation of the critical point that demand drives investment, not the other way around. Nobody in the 1980s was asserting that telecom should be funded because something might come along to justify that. The Internet grew by leveraging what was available, and at some point that proved that making more available would be profitable. By that standard, the applications that would drive mobile evolution and infrastructure investment, along with a good ROI on that investment, should already be in place and limping along without the support they really need. Where are they?
What actually drove the Internet revolution and the huge leap in spending on communications services was the worldwide web. You could use any PC, run the good old Netscape browser, and you had a global information resource. As a company or organization, there was a modest cost associated with hosting content for people to discover you and your information. We had analog lines, we had analog modems, we had something to use them for, and we had companies interested in exploiting all that. But most importantly, communications capabilities limited the utility of the web. It’s no wonder the web worked as a driver of new network service revenue.
Try this same approach today. Pick a technology; let’s use IoT as an example. We do, after all, have smart homes and buildings and we may be moving to smart cities. Wouldn’t something like 5G be the same kind of driver for new revenue? No, because of that last important point above; the IoT we have, and reasonable extensions to it, aren’t enhanced by new communications features. What we have is fine. The great majority of IoT is intra-facility. What goes outside isn’t the IoT itself, but notifications, and those have very modest communications demands.
Or how about edge computing? The problem there is that the value of edge computing is its ability to unlock cloud-like hosting for a class of applications that the cloud can’t run. But what are those applications? Industrial IoT might be called out, but those applications are already run on local servers and it’s difficult to see what enterprises would gain from moving them to a provider edge pool. If low latency is the goal, what could offer lower latency than a server pool local to the industrial process?
So there’s no hope? Not true, perhaps. I remain convinced that an expanded notion of the metaverse, one that focuses more on digital twinning and real-world modeling, could be a driver for edge computing and also a driver for enhanced network services. The problem is that we don’t have any coherent pathway to that approach, we don’t have any interest in it among the operators, and absent resources to host and connect it, there’s not much chance that third parties will rush out to invest in creating this essential precursor element set.
Before the Internet, there was no consumer data networking at all. What created the Internet wasn’t the standards, the fact that military/scientific applications had driven the development of the technical capability. It was that people found things they wanted to do. If we want data networking to progress, people will have to find new things.
