Why The Telcos Hate Innovation
from the it's-a-threat dept
Business Week is running a fascinating essay that highlights all the reasons why the telcos hate innovation. They're not technology companies, which is highlighted by how little they spend on research. They're in the business of extracting as much money as they can from their network right now -- which is a short-sighted and eventually self-destructive plan. They view real innovation as a threat, not an opportunity, because tech innovation is usually about driving down the cost of infrastructure. That doesn't help them squeeze more money out of it. As the writer of the essay points out, this is evident in the telcos continued fight against things like muni-WiFi, even as they quietly get involved in muni-WiFi projects themselves.The article also highlights how this lack of technological innovation from within the telcos means that even in areas where they have every opportunity to innovate, such as IPTV, all they're doing is catching up to what the cable providers already deliver. They're missing the opportunity to do much more. In fact, this is a great way to view the net neutrality issue. If the telcos were really about promoting innovation (and the author makes fun of AT&T for claiming it needs to merge with BellSouth to be able to innovate), then network neutrality wouldn't be an issue at all. The company would focus on making its platform (the network) as accessible and as fast as possible -- to encourage more innovation and development from third parties. Instead, the telcos focus, not on encouraging innovation, but on setting up roadblocks. The roadblocks give them the power to squeeze more money out of the network -- but at the expense of actual innovation that would make their networks that much more valuable.
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Outsiders got it wrong.
Telcos might not innovate any more, or haven't in awhile, but keep in mind the transistor, switched trunks, UNIX, and C programming language came from the big T.
-C
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Booyah!
Lesser of 2 evils? Why does it seem those are the only 2 choices... :)
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One problem with the IMS issue is that content will still be created in silos and then plugged into the network. True convergence is where the network works with any device, anywhere, anytime. IMS is just the half step to true convergence. The cost savings of convergence is having one network that distributes content (voice/video/data) to any device, be that a TV set, a computer, a handheld, a cell phone etc.
Why go with IMS then? Because changing the network into a true convergence model is expensive, and you have to have a pipe that will be able to deliver it, so why deliver the cart before the horse.
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hhhmmm
For those that don't know.
The premise of this post is correct.
In the past the telecoms built innovation. DARPA and Bell Labs created the original 'Internet' (ARPANET). But since the breakup of the original AT&T the telecoms have evolved into cash cows and the mechanism in Washington to protect 'the sacred cash cow'.
I agree that the business model of inhibiting innovation has become the goal to block users at the 'consumer' level from directly utilizing 'new' products such as VoiP.
The irony is breathtaking...
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Unfortunately even if they did merge with Bell South, the old ways won't come back, they'll just continue to figure out how to milk the customer.
AT&T has no clue, SBC helped them lose it...
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Telecom innovation
Funny that a "protected cash cow" would spend this much time and money on innovation, huh? Mock AT&T all you want, but Verizon isn't resting on its laurels.
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Re: Telecom innovation
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Lack of innovation is not the problem....
This is not that different from other large old industries....
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Telecoms are *greedy*, not *stupid*. Just because you don't like them having their way with your little boy-pssy doesn't mean their business plans are self-destructive or unsustainable. Telecoms have proven that they can sustain their business plans indefinitely in a free market. The startup cost of being a top-tier phone provider or ISP are astronomical. This makes telecoms inheretly stable.
Saying stupid and inacurrate things like "telecoms are self-destructing and short-sighted" does not help fight them. They are very smart. Stupid evils don't last. Smart evils do.
If you want to fight the telecoms, you have to convince people to hold politicians accountable for the anti-trust violations of telecoms and to pressure politicians to allow freedom for new technologies like VOIP and satelite TV/ISP.
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Local duopoly and Global Duopoly
Letting the Telcos go into all sort of businesses was an error. Politicians gave up to Telcos poweful lobby. Lobbying is good but it must be regulated too.
Now, that they have a local duopoly (TDM or VOIP) and global duopoly (Verizon, AT&T), there is less incentive to innovate.
By the way, I do not expect Telcos to create the new technology. This what I am doing working in a next generation equipement vendor. Still, I would like them to be more interested.
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Telcos killed DSL
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Same Channel, Same Content
I don't get it. They already offer flat rate internet pricing. Speeds have been going up over the years. They have not and currently don't block any applications. How is their 'platform' not open to all right now?
It shouldn't be a surprise that the only VoIP providers making money are the ones that own the network - the cablecos. And there are no barriers to entry for VoIP companies. Owning and squeezing profit from the infrastructure is good business.
The 'field of dreams' business model where you sink a big investment and wait for the return may work for a $1M Web 2.0 startup, but not for a $10BB venture. Try to find anyone in the world who will sink that kind of investment without knowing where the return will come from.
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Re:
Are pipes the same as tubes? And if trucks can't handle stuff just being dumped, how can we expect it of a horse?
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Whose billions?
Whose money are they spending? Weren't they paid taxpayer dollars to do this back in the 90s?
http://www.newnetworks.com/broadbandscandals.htm
You call it "Resting on its laurels". I call it "Taking the money and running"
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Re: Telcos killed DSL
When I moved two years ago they wanted me to pay them $40 for the privilege of remaining a customer. I said "no thanks", and went to the competition (cable co), who did free installation and have provided faultless phone service.
Recently I asked the Telco for the price of a basic phone line - about $15. When you add Call Waiting (alone) the price goes to $30. $15 for Call waiting?
What a bunch of jokers.
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Re: Same Channel, Same Content
Um. Okay. How about Intel? They invest billions on each new chip without any guarantee of return. They do it, though, because they believe that's where the market is heading and they want to lead the market with innovation.
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Re: Re: Same Channel, Same Content
Would you, if you were a Verizon executive, take heat from Wall Street for laying fiber, lay fiber if you knew competitors could offer the services you want to offer, undercut your rates and use your fiber optic lines?
Who would invest $10 Billion dollars to lay fiber, only to see those same customers buy Vonage for Voice, Google for Video and who knows for whatever else?
Where is the return on that? Seriously, if that were your money, would you do that? I think not.
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Re: hhhmmm
Why shouldn't someone else be allowed to use their own infrastructure to do what telcos specifically and deliberately chose not to do. What the telcos are doing with roadblocks and lobbying now is nothing short of protectionism and sour grapes over their own failure to use their own invention. They chose to reach for my wallet instead of reaching for the future, why shouldn't they pay for it, I already did.
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Re: Re: Same Channel, Same Content
New silicon entrants who target smaller markets or markets with a great deal of uncertainty use the fabless model. TSMC, UMC, others spend $2BB and spread the risk over tens of different semiconductor applications.
Your analogy fits better with a TSMC than an Intel. TSMC provides a platform and lots of semiconductor companies profit from it.
I still don't understand how Verizon or AT&T in the retail broadband area have set up 'roadblocks' to other people using this platform.
Verizon or AT&T are DEFINITELY doing this on the Enterprise side. It takes weeks to get a T-1 and it still costs a fortune.
I think they would be shocked if they offered DS-3 Broadband for $1k/month, with very high reliability and 1 week turn on, how many DS-3's they could sell. Obviously, there would have to be some stat muxing at those rates but think about the business applications that would emerge with that kind of bandwidth.
Your arrows are well meant, but shooting them in the retail consumer broadband is misguided.
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Re: Re: Re: Same Channel, Same Content
Who would invest $10 Billion dollars to lay fiber, only to see those same customers buy Vonage for Voice, Google for Video and who knows for whatever else?
You seem to totally miss the point. Vonage and Google and all those other things are WHAT MAKES THE DAMN NETWORK VALUABLE IN THE FIRST PLACE.
The telcos didn't invent those services. It's only because those services exist on the network that the telcos have this access to sell.
So the point of keeping the network open and free is to encourage MORE of these types of innovations to make their network MORE valuable. When they try to put up roadblocks so that only their approved services work they make their own network LESS valuable and will be able to make LESS.
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Could I sell advertising on Techdirt? That would bring value to me, but not much to Techdirt. Could I set up a grill in a movie theater and sell hotdogs and profit from that? Sure, I could undercut the moviehouse price, consumers would benefit, but the theater owner would get pretty pissed.
Hell, I will make it easy, would a bar owner let me walk into his place and sell beer out of a cooler for a buck a bottle? I would make a profit and the consumer would benefit, how do you think that would go over?
Sure, those services make the network valuable, but without the network, those services are also worthless. You seem to think that its ok for services to be worth something, yet you deny the right of the network to be valuable also.
Answer my question, if you had to make the decision, would you lay fiber to equip consumers with high speed access if you knew that all they would buy from you would be that access? Would you take your $50 a month for data? Would you invest a thousand bucks to wire that house for that return?
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Re:
That's a total contradiction. The network is only valuable if the network owner can sell the services? You really believe that.
Could I sell advertising on Techdirt? That would bring value to me, but not much to Techdirt. Could I set up a grill in a movie theater and sell hotdogs and profit from that? Sure, I could undercut the moviehouse price, consumers would benefit, but the theater owner would get pretty pissed.
This is the best example you have? I don't even know how to respond other than to stand amazed that you think this is a valid analogy. First, the Techdirt is example is totally meaningless. That's not about making the site more valuable at all. In the movie example, many would argue that it's not so silly. If there was real competition for food prices more people might be willing to go to the movies and buy food there. It could work out to the theaters advantage and the consumers advantage.
I'm amazed that you actually consider the monopoly position of the theater owner as a good example. In what sort of world do you live in that you consider the monopoly and artificially high prices a good economic and societal outcome?
Hell, I will make it easy, would a bar owner let me walk into his place and sell beer out of a cooler for a buck a bottle? I would make a profit and the consumer would benefit, how do you think that would go over?
This is a total strawman argument, and has no bearing on the discussion. Let me give you a better example that actually fits the discussion at hand. Let's say the owner of a tremendously large building can charge admission to that building -- but to do so, he needs valuable services inside. He can try to set them all up on his own, or he can let anyone set up shop there -- and as the marketplace competes the better services survive and gaining entrance to the building becomes that much more valuable, so more and more people are willing to pay to enter.
Sure, those services make the network valuable, but without the network, those services are also worthless. You seem to think that its ok for services to be worth something, yet you deny the right of the network to be valuable also.
Hmm. I don't deny that at all. You seem to misread what I'm saying. If the telcos want to offer their own services, more power to them. But, they shouldn't block out other services. They should let them compete.
Answer my question, if you had to make the decision, would you lay fiber to equip consumers with high speed access if you knew that all they would buy from you would be that access? Would you take your $50 a month for data? Would you invest a thousand bucks to wire that house for that return?
Ah, the strawman again. If this is the way the telcos view it then they're shortsighted and stupid -- and, frankly, deserve to go out of business.
1. They can still offer more services and they can still charge for them. If they really are better/more convenient then people will buy them and they'll make more money.
2. The $1000 to wire each home number is bogus and you know that.
But, yeah, if I had the money to invest, and I could get REAL broadband speeds and an open network to as many customers as possible, I'd absolutely do that. And, I'd encourage all sorts of service providers to offer services to make my network that much more valuable. The more, the merrier. And, I'd try to offer additional services myself, knowing that I was competing with these other ones to provide the absolutely best service available.
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Interestingly enough, a water company, a phone company, a gas company, an electric company, and a cable company have installed lines going to my apartment with no gaurantee that I'll pay them anything...
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Yes, but they won't enable those lines unless you pay them for what you use. Just like Verizon won't enable their fibre unless you pay them fior what you use.
The question is: Can Verizon charge you for what you use?
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Re:
What kind of question is that? No one has ever said they couldn't.
What people object to is their attempt to get Google and others to pay for the bandwidth you already pay for as well.
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If not, could Verizon cut a deal with Yahoo to speed up Verizon customers when they are on Yahoos site?
Seems to me that one way or another, the consumer will pay, its just a matter of who they pay directly.
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Re: Telecom innovation
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Who will inherit the telecommunications world?
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Re:
No, not against bandwidth tiers.
If not, could Verizon cut a deal with Yahoo to speed up Verizon customers when they are on Yahoos site?
That's extremely different. That's a tier for just one site. The tiers should be for bandwidth across the board, not discriminating against or for one particular site.
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The Telco's have no vision. They just try to squeeze the most money out of what they have. That's why if the Telco's get there way with tiered internet, they can get away using the same system without a need to upgrade.
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Re: Re: Same Channel, Same Content
Comparing the R&D costs at a hardware vendor and a services provider is like comparing apples and oranges. Intel's product came from R&D, and their next product will come from R&D. If they don't do R&D, then they have no next generation product.
Contrast this with the telco. The telco is, in many senses, nothing more than a systems integrator. They take the products of hardware vendors (products that were the result of that vendors R&D), string them together, turn them on, and begin selling services off of them. Once they have acheived this, they face Clayton M. Christensen's Innovator's Dilemna just as any business does. They have to weigh the risk of cannabalizing their existing revenue, revenue which may be offsetting equipment that was capitalized and is still being depreciated (i.e. they are still paying for it on their books). This is basic business.
The other question telco's ask themselves is what the output of the R&D will be. Since telco's don't build hardware themselves, the output is often given freely to vendors to use as input for their next R&D cycles, and revenue from patents rarely result in enough money to justify the expense of the R&D.
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Re: Re: Re: Same Channel, Same Content
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Good Job, Mike...
To refute them, I was thinking more in terms of a Flea Market renting out booths (All booths being equal), then upping the rent of successfull vendors, thus putting the brakes on them and reducing the overall value proposition of the entry fee (Typical Telco behavior as of late).
Not that my analogy is great or anything, but A. Coward's were terrible, to the point of not actually being an analogy at all (I wonder what AC scored on his/her ACT/SAT?)... Not to mention the straw-man arguments... As I was reading them, I was laughing at how illogical the comments and arguments were. It reminded me of a heated religious debate in some ways...
:)
I like hearing people arguing all sides of a debate, as long as its rational. It seems that some people watch too much FOX news and delve into the realm of pseudo-debate/framing/flamebait comments. That doesn't help anyone...
Keep up the good work, Mike!
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You Are So Correct!
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Faster Bandwidth
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Re: Re:
> you know that.
Yeah, you're right, it is bogus -- it's a lot more than that if you count the cost per home served that than home passed.
There's a reason why Verizon waited until the FCC gave the approval that that they didn't have to share their fiber with others. Verizon wasn't about to spend umpteen billion dollars only to be told by the regulators how little they aught to be leasing it for. The risk is too great, otherwise.
Frank
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