This article was authored by Tony Poulos, and was originally posted on telecomasia.net.
I've decided there's nothing wrong with being dumb. These days just having a smartphone handy can make the dumbest person absolutely brilliant, as long as he's smart enough to use the smartphone. However, when it comes to being a network operator, the word "dumb", when used with that other hackneyed noun, "pipe", sends shivers down telco CEO spines.
Well, not quite all. There is one wholesale satellite and terrestrial LTE provider in the US that relishes being not just a dumb pipe, but strives to build the dumbest of all wireless pipes possible -- the ultimate dumb pipe! In fact, that's the mantra of LightSquared CEO Sanjiv Ahuja, who said, "We want to be the dumbest wireless broadband pipe. No intelligence in our network. None. Zero."
So, how come LightSquared is flying in the face of the industry's accepted norm that strives for intelligence to provide value-added services deemed critical for survival? Maybe it's because most existing, and dare I say "legacy" networks, have been built that way in order to address the lucrative consumer, corporate and enterprise markets. In fact, most networks strive to be one-stop shops from everything, quite often failing to maximize returns from any one sector.
With diminishing high-yield voice revenues giving way to low-yield data, the cost of being all things to all people is starting to come into question and savvy CEOs are not just looking at cost-reduction as their savior but also at dramatic business model re-engineering. Discovering the true cost of servicing retail customers may be an impossible task, but if you imagine not having to worry about any operational and business systems, service delivery platforms, application servers, etc., then you start to get a gauge on what LightSquared is trying to achieve.
That's not say that operating the ultimate dumb pipe is free of all these overheads. Even as a pure wholesale operation, it still has to provision services and bill its customers, but even those systems are kept to a basic minimum and are outsourced. Having an all-IP LTE network (that's even hosted by someone else), having a large chunk of spectrum to play with and being able to use both terrestrial and satellite networks by utilizing a clever Qualcomm chipset in devices, means that LightSquared can just worry about finding wholesale customers that require a minimum of attention, just access to a, dare I say it, "big fat pipe".
The utility model
The question arises that if existing network operators saw a future in an all-wholesale network, could they achieve it? Yes and no, would be the answer, if you take into account what stages they would have to go through. Firstly, there would need to be some sort of structural separation of the core network from the rest. They would then need to push all retail functions through the new offshoot, split into business and consumer units and operate them as virtual networks or just sell off the retail business to the highest bidder. Yes, that sounds radical but if becoming a pure, dumb, wholesale pipe is the objective then all this has to be looked at.
If you look at the LightSquared model, the models being adopted by those undergoing structural separation exercises already and even national broadband networks like those in Australia and Singapore, the objective is to become a telecom utility of sorts. There is no need to highlight what economies of scale this would bring and it would allow the retailers to concentrate on providing innovative services to markets hungry for them.
Of course, this is all easier said than done. How many C-levels out there will have the gumption to propose such a radical proposal to their boards? It is more likely that the new green-field players like LightSquared, if things go according to plan, will host a swathe of specialist retail operators, many of them big brand names, that will eat away at the existing operators' customer base. In due course, with diminishing retail revenues, those players may have no choice but to sell off the unprofitable parts of the business and go wholesale themselves. That's if it's not too late by then.