Amazon and the Dumb Pipe

May 25th, 2009 by · 1 Comment

LightReading had a wonderful article late last week discussing what telecom carriers can learn from Amazon.  The topic is very relevant nowadays, as the industry struggles with net neutrality.  The owners of last mile fiber do not want to be dumb pipes, they want to make money off those bits by delivering services and don’t appreciate when others do so in competition to them.  They need all that content and can never produce it themselves, yet trying to control its usage threatens to start a war for public opinion that they likely cannot win whether the economics back them up or not.  So what to do?

Act as an open platform, enabling what might have been competition and turn it into partnership – that’s the Amazon way.  Leverage the penetration and billing relationship with every adult on the planet that carriers and MSO’s have to help the content world do what it does better – not what it already does now.  Sounds great, but the problem is this.  Those relationships between the carriers and their customers are strained.  Amazon won because customers like the way they provide service, they beat the competition fair and square.  People go there because they want to.  Carriers and cable MSO’s dominate the last mile because there is little if any competition, and their customers are much more cynical about it.  People use their service because they have to, and even those companies that do it very well bear the weight of that cynicism.

Having a monopoly (or duopoly) on the last mile can be a curse as well as a blessing, because overcoming that strained relationship is extremely difficult.  If consumers buy MLB.TV directly they will see it as their own choice, but if they buy it from Verizon for the same price then it’s because the evil phone company gave them no alternative.    If you tarnish the impression of the sales you enable, then your value as a platform is diminished.  It is the difference between offering the ‘best’ platform versus the ‘only’ platform that poisons the stew.  At least until there are enough real alternatives out there… 

In the wireless space it is somewhat different, the competition there is healthier and if you screw up your service people can leave relatively easily – just ask Sprint Nextel (NYSE:S, news, filings).  Wireless carriers may still have a chance to find an Amazon-like path.

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Categories: Cable · ILECs, PTTs · Wireless

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1 Comment, Add Yours!

  • carlk says:

    Principally speaking, I think you are on to the core of the conundrum, here, Rob.

    The “solution” is the Holy Grail for those swift, open and submissive enough during the process, i.e., constant flux or change.

    Indeed, from a carrier’s perspective, it requires more of a self-less, giving nature than one of “power, influence and control” whereby getting or receiving at every point in the transaction is the underlying motive.

    He who consistently “empowers” the consumer, even while knowing they might be the only path to Nirvana, will win.

    From that stand-point, including all directions-horizontal and vertical-requires constant innovation, high quality levels of services, and partnering.

    From a (3) shareholder perspective, however, the only thing I ask is that, something smart is required in their “PRICE BOOKS” or don’t play!

    A consumer’s own vanity, comprised of its individual needs for “self-preservation,” can and will turn on a dime when making “purchasing decisions” inside of this brave new world we have been lead into inclusive of various outside forces pulling and tugging at each one of us daily.

    The choice is ours, not theirs!

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