Regarding Peak Telecoms

January 30th, 2012 by · 5 Comments

Martin Geddes put out a screed on Friday that is well worth a read, detailing his view of the impending doom of the telecommunications business as it is today. It makes for depressing reading, but its principle point is that the dollars generated by voice and messaging are going away and the industry simply has no viable answer.

My own viewpoint though is that all this is way too focused on the incumbents and the revenue sources they depend on to pay dividends and to which they seem to feel entitled.  An impending global industry shakeup doesn’t mean telecommunications is terminally ill, rather it means that there are finally some opportunities on the horizon for new leaders in infrastructure to emerge.  Because while we have seen consolidation, the same basic groups are on top now as were twenty years ago in this sector.

Essentially what Martin is saying is that we are now finally approaching that singularity everyone talked about back in the dot com bubble. There is no question in my mind that telecommunications a decade from now will be an entirely different world, but I think it’s a mistake to pick a whole industry as a loser. Rather, we’re about to enter a phase which is both dangerous and full of opportunity and corporate social mobility.

Apple’s gadgets, Google’s search empire, and Amazon’s web-focused infrastructure will have to evolve just as rapidly, and I think that we all tend to overestimate their ability to do so. They are younger, but not so young as they once were. And in the end, they don’t own the infrastructure and can’t simply hand-wave their way through the last mile on open community fiber and unlicensed wireless.

Today’s large telecoms are having trouble matching the costs of building infrastructure to the revenue they can derive from the traffic it carries.  Tomorrow’s large telecoms will be the companies who figure it out.  Maybe that will be via the cloud revolution, maybe via the new generation of fiber builders out there now, and maybe it will be via some new wireless approach we haven’t seen thus far.  The nature of a singularity is that you simply can’t tell what’s on the other side.

And lets be honest, there really hasn’t been a lot of creativity when it comes to telecommunications business models over the last ten years – mainly it’s just been about bundling old overpriced stuff (voice, SMS) with new underpriced stuff (raw bandwidth) while trying to find regulatory pathways to stop anyone from using so much of the latter unless they pay more. Surely someone will blow that up before long.

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Categories: ILECs, PTTs · Internet Backbones · VoIP

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5 Comments So Far

  • Anon says:

    Also odd to pick Telefonica as a winner. There’s only one company with meaningful voice volume and market share growth and that is Tata – Q3 results say over 13Bn minutes, so on track for over 52 billion minutes or ~20% of the international minutes market (still number one and up from 40Bn minutes and 18% market share last year). It does have a finite lifetime but the biggest will continue to be profitable as the smaller guys (eg BT) give up and outsource.

  • mark says:

    AGREED on:

    “there really hasn’t been a lot of creativity when it comes to telecommunications business models over the last ten years”

    its exciting to see some actual innovation and change come to the telecom industry. I only wish our US gov’t could do better at removing outdated regulations so that true innovation could happen from startups

  • Dan Caruso says:

    Wow. Perspectives are interesting but not fully thought through. Conclusion might be directionally true for voice and messaging, but for infrastructure it seems to defy common sense. Bandwidth is becoming more fundamentally important to all businesses and to all individuals. It will continue to grow at 40%’ish rates for a far as the eye can see. Consolidation is resulting in fewer and fewer bandwidth providers. Is it a sensible conclusion that those who supply bandwidth will be marginalized? I doubt it.

  • Anon says:

    And the whole Netflix/Level3 vs Comcast thing rather disproves the lack of value in capacity (and indeed IP peering). Transatlantic pricing has been pretty steady for a while now. The idea that everything physical has no value and should be free is very naive.

  • Anon says:

    I said “should” but I meant “will be” free.

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