The Telecoms may be Many Things, but They are not Suicidal
By Joel Maloff
December 2006

“When I was fourteen years old, I was amazed at how unintelligent my father was. By the time I turned twenty-one, I was astounded how much he had learned in the last seven years.” -- Mark Twain

The same might be true today for the telcos and PT&Ts. They are easy targets in the fast-paced age of the Internet. Too slow. Too set in their ways. Protecting their ASSets.

Having spent ten years in the ‘70s and ‘80s with Mother Bell, I too shared many of these sentiments. And just as with Mark Twain, I am astounded when I look back and see how much I learned while I was there, and how those skills have served me well through the ensuing two decades. Maybe they weren’t as dumb as I thought.

As a “Macro Analyst” – some might call it spy – for AT&T Information Systems studying IBM, I observed everything IBM did as a corporation across all divisions, and extrapolated what they would likely do in telecommunications and networking. I learned to look for the big picture and not become distracted by minutiae. If they did something a certain way in one division – even if it was unrelated to telecom – they may very well employ that pattern in their telecom strategies. I carried those lessons with me into the early days of the Internet.

Ten years ago, there were thousands of small Internet Service Providers (ISPs). Looking at this embryonic industry at that time, it appeared logical that the marketplace could not support thousands of providers, that rapid consolidation into a few major ISPs would be likely, and most of those would be consolidated by large telcos. While working with several major early ISPs, I advised the CEO of one to sell out to an RBOC. He didn’t listen. His company went under. He never saw the big picture.

“Those that do not learn from history are doomed to repeat it (Santayana).”
The telcos may be many things but they are not suicidal. Looking into the crystal ball once more, there are a few areas where telcos and PT&Ts in various countries may inevitably dominate. These include VoIP telephony services (like those provided by Vonage, Skype, Google, and others) and broadband wireless services, likely based on the forthcoming WiMAX standards. The reason is just as clear as it was ten years ago regarding IP access: They have no choice and the rumors of their demise are greatly overstated!

I remember Microsoft showing disdain for the Internet. How in the world could such a decentralized, disorganized assemblage as the Internet ever challenge mighty Microsoft? Of course, eventually Microsoft had no choice but to change their minds and embrace the newness. They have accomplished that admirably. They listened, learned, adapted, and prospered.

As Executive Director of the Big Ten universities research network – CICNet, telecom carriers and hardware/software companies paid a membership fee simply to participate in our meetings and develop new applications and approaches for networking technologies. Some of them may have been “Bell Heads” and they had their own biases and perceptions (Like those of us in the Internet didn’t?), but they were still smart people. They recognized that “something” was changing, and they came to learn.

So, despite their undeniable skill at lobbying, public spin, and tilting the table in their favor, what makes me believe that the telcos really do get it – albeit slower than many of us might like? They have no choice! The alternative is that they wake up and find themselves bypassed by an increasingly wireless world with customers no longer having any loyalties or even necessity for them. They cannot – and will not - let this occur.

Telcos recognize that the Four Horsemen of Information Technologies are voice, video, data, and mobile communications. They also recognize that the days of individual silos, separate organizations, and separate infrastructures just don’t cut it anymore. Software giants like Oracle, IBM, BEA Systems and Microsoft all are betting big-time that the telcos DO get it and are creating systems that will help bridge the divide between old-fashioned Bell Heads and Generation Whatever. Service-oriented architectures (SOA) allow platform-independent interfaces between various applications, and will facilitate the convergence of services, including IP Multimedia Subsystems (IMS). The days of separate and distinct (and non-interoperable) architectures providing voice, data, video, and mobile are almost gone. Oracle, IBM, BEA, and Microsoft know it. So do the telcos.

So what lessons SHOULD we have learned over the past few decades?

• Lesson #1 – Big companies like Microsoft or the telcos are generally not out on the bleeding edge. They wait until the market proves a concept and then move to capture their share. This was true with Internet access and it is likely to be true again with broadband wireless deployment, VoIP telephony, and other similar services.
• Lesson #2 – Just because they are big and slow does not mean they are the Evil Empire. There is plenty of room for innovation by smaller, more agile rivals. Some of those may survive to become big and challenge the leaders. Others will be absorbed and make the big guys better for having done so. After all, most decent start-up business plans DO discuss their “exit strategies.” One of those is often to become appetizing to the bigger fish.
• Lesson #3 – Try to see the Big Picture and have some patience. I remember when 9.6 kbps dial-up seemed just great. Now, I cannot do without multimegabits speeds. The telcos do need our input. They do need to know where we need them to go. Mistaking them for misguided dolts limits our ability to provide such influence.

The question that remains open for me is whether the telecoms will choose to remain with their strength - infrastructure - or be seduced by the dark side - content. Clearly, Google has become a leader in seeking new avenues of opportunity, not the least demonstrated by their October acquisition of YouTube for $1.65 billion. Barely a year and a half old, YouTube is a consumer media company for people to watch and share original videos worldwide through the Web. Google certainly did not wait long before proof of concept was achieved, and then they pounced. It's hard to imagine a telecom moving that fast , and that is what is needed to capitalize on content!

Will the YouTube aquisition turn out to be a winner for Google? What about eBay's pick up of Skype? These are interesting moves with a high degree of risk/reward. They could be overwhelming successes or incredible debacles.

Will the traditional glacial pace at which the telecoms normally move be influenced by "Internet Time?" The answer is most certainly yes, bu it may not be perceptible right away. Let's look back in five to 10 years and see how far the telecoms have evolved.

Joel Maloff (www.maloff.com), a former COO, CTO, and GM with 30+ years of experience, focuses on emerging technologies and security. He can be reached at jmaloff@gmail.com .