Today's rant stems from an insightful reader's comment on my earlier post Bandwidth Intensive Applications and IP Transit which prompted me to put something into words. Here is the comment by Graeb:
So why won’t CDN, voip, et al go the same way with each line of business being reduced to a commodity? If the biggest, pure IP network does not provide a competitive advantage in IP transport, what is the competitive advantage in any other line of business?
My answer: Nothing! Nothing stops CDN or VoIP from becoming a commodity any more than IP transit or SONET or dialup. Tech products have lifecycles, Wikipedia classifies it like this :
- Bleeding edge (e.g. Cloud Computing)
- Leading Edge (e.g. Carrier Ethernet)
- State of the Art (e.g. IPVPN, IP Transit, VoIP)
- Dated (e.g. SONET, TDM)
- Obsolescence. (e.g. Dialup)
It is critical to recognize the lifecycle and likely lifespan of the products on which a business depends. The point is not to avoid commoditization, it is to have a competitive advantage despite commoditization throughout the last three stages when the actual money is made. You can't avoid commoditization, you must embrace it even as you move on to the next product. It's just that some products are more fruitful than others, and there is far less money in raw IP transit than was expected by most.
Telecom these days is bipolar. Some aspects are short-cycle, and some are very long term. Understanding which is which is a distinction that our nearsighted media has substantial trouble with, the short-cycle stuff is just much more exciting to write about. Companies built solely on tech products with short lifespan survive at the mercy of those lifecycles, hopping across the river one rock at a time hoping the next one isn't too slippery. Just ask Earthlink. Companies built on infrastructure have deeper foundations and are hard to take down - just ask the RBOCs.
In telecom the various tech products come and go, but the fiber they run on changes much less frequently. That is what Dave Rusin of AFS, Dan Caruso of Zayo, and a few others understand and are putting into practice right now. It is why Verizon is pursuing FTTH despite how long it will take to pay for itself. Copper's lifetime has turned out to be on the order of a century. Fiber and conduit are just getting started.
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