Monday, October 27, 2003
Telepocalypse: Telecom Strategy in the Age of End-to-End Networks
Martin Geddes' Telepocalypse blog has put a buzz in my brain. (Thanks to Jorge Ortiz and Kevin Werbach for a pair of simultaneous converging pointers.) I've added Geddes to my blogroll.
In one recent article, Geddes observes that Ryan Air is rethinking transport in a way that could be instructive for telecom. He observes that 40-some percent of the revenues of BAA, the company that runs most of the UK's airports, is due to shopping, parking, etc. Further to this, he notes that Ryan Air is "heading towards a model of 'reverse landing fees', where they get paid to deliver wallets within reach of geographically-bound businesses." They're launching new routes from Prestwick, a private airport near Glasgow, and the Scottish government is softening up. This generalizes to telecom in a couple of ways. First, Ryan Air rethought its place in the value chain. Second, Ryan Air was not locked into one infrastructure provider.
In another article, Geddes speculates on why Vonage might fail. (Might fail? I'd say it's all but stone-certain!) He says that Vonage is locked into the old telephony paradigm by the single-function Cisco ATA-186, and that Vonage is trying to arbitrage around all the regulatory baggage of local-loop-classic (i.e., taxes, universal service fund, etc.). In other words, Vonage wants to be a low cost player in the old value space. Geddes observes, correctly, that to succeed Vonage will have to do something that the phone company **can't** do. Correct again.
As Jonathan Rosenberg, co-creator of SIP, says, "The killer communications apps have not been discovered yet." (That's a paraphrase.) As Clayton Christensen says, "Compete against non-consumption." New forms won't start out looking anything like the old forms, but they will expand into the value space of the old forms. The trick is to find the new forms.
The old space is easy enough to move into. Addaline.com is a 7-person mom-and-pop ISP with no special voice expertise, but it saw voice as a new source of ISP revenue, so it is providing credible competition to Vonage in a handful of area codes. Others will follow, decimating the revenue base of the telcos.
Geddes is right that Vonage does not address the long run impact of VOIP -- the important thing won't be voice, it will be what you can do over IP.
In one recent article, Geddes observes that Ryan Air is rethinking transport in a way that could be instructive for telecom. He observes that 40-some percent of the revenues of BAA, the company that runs most of the UK's airports, is due to shopping, parking, etc. Further to this, he notes that Ryan Air is "heading towards a model of 'reverse landing fees', where they get paid to deliver wallets within reach of geographically-bound businesses." They're launching new routes from Prestwick, a private airport near Glasgow, and the Scottish government is softening up. This generalizes to telecom in a couple of ways. First, Ryan Air rethought its place in the value chain. Second, Ryan Air was not locked into one infrastructure provider.
In another article, Geddes speculates on why Vonage might fail. (Might fail? I'd say it's all but stone-certain!) He says that Vonage is locked into the old telephony paradigm by the single-function Cisco ATA-186, and that Vonage is trying to arbitrage around all the regulatory baggage of local-loop-classic (i.e., taxes, universal service fund, etc.). In other words, Vonage wants to be a low cost player in the old value space. Geddes observes, correctly, that to succeed Vonage will have to do something that the phone company **can't** do. Correct again.
As Jonathan Rosenberg, co-creator of SIP, says, "The killer communications apps have not been discovered yet." (That's a paraphrase.) As Clayton Christensen says, "Compete against non-consumption." New forms won't start out looking anything like the old forms, but they will expand into the value space of the old forms. The trick is to find the new forms.
The old space is easy enough to move into. Addaline.com is a 7-person mom-and-pop ISP with no special voice expertise, but it saw voice as a new source of ISP revenue, so it is providing credible competition to Vonage in a handful of area codes. Others will follow, decimating the revenue base of the telcos.
Geddes is right that Vonage does not address the long run impact of VOIP -- the important thing won't be voice, it will be what you can do over IP.
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