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Ten Telecom Tsunamis

Tom Evslin

The telecom industry five years from now will be unrecognizable. The creative destruction of the Internet broadly writ will be even greater than it has been in the last decade. The major telcos, the major television networks, and the major cablecos — if they still exist at all — will have very different revenue models than they have today. That's the good scenario. In the bad scenario the old business models are bailed out or saved by regulation to the detriment of consumers and society in general.

Here's a list of ten major drivers of change:

Universality

The driver of all drivers will be universal very broadband Internet access. Five years from now we'll all (except for those who choose to live off the net) have a minimum of 25megabit per second download speed (and that'll be the low end) when we're standing still. We'll be connected — perhaps at a slightly lower rate — when we're moving around, especially in our cars but also in planes and trains and on foot. That means that the next generation of communication services whether they be voice, entertainment, power management, information, health or something else can and will all be built assuming this universal connectivity. See here for why government should help accomplish universality sooner rather than later.

End of the Billable Minute

We won't pay for voice calls by the minutes any more than we pay for email by the word. This trend is already well underway, of course, with flat-fee VoIP based services, "free" VoIP-VoIP calls, and unlimited minute plans; but last mile monopolies have managed to keep minutes billable on many international and most mobile calls. Universal IP connectivity for both residential and mobile users will complete the bypass of these last mile bottlenecks. There'll be no incremental charges for voice, just monthly connectivity plans for bits of any sort. Gory details on why we still have billable minutes are here.

End of Copper POTs

The recession is accelerating the abandonment of landline phone service currently running at better than 10% per year. Without a major breakthrough (which could happen), copper-based DSL won't be good enough for the bandwidths we'll all need in a year or two. Line loss along with displacement of voice calls to VoIP (see above) will shrink revenue earned by the copper network, which has served us long and well, so that the carriers can no longer afford to maintain it even though it will still have many users left. That may be a mess. More here.

End of the Channel

The channel is a left over concept from the days of over-the-air TV. It's convenient for marketing reasons but not technically necessary for cable and satellite companies to deliver a set of channels; they could offer single shows or series ala carte. Today they choose not to except for events they can get a good premium for pay-per-view. But The Internet is essentially ala carte and the Internet will deliver our entertainment, business model tbd. There may be bundles of content available both to facilitate choice and for economic reasons but children will ask "Daddy, what's a channel?" It's likely that the cablecos will convert most of their bandwidth to support generic very high speed Internet access instead of carving it up for channels.

End of Over-The-Air TV

As we know from the recent flap over the now-postponed switch to digital TV, there are people who still watch TV over the air. But the number keeps shrinking and, as more and more of that same content is available on the Internet and more and more people have sufficient connectivity (see above) to receive that content from the Internet, the economics of over-the-air TV will become prohibitive even though the broadcasters don't have to pay for the spectrum they use. It's not that the local stations'll disappear (at least I don't think they will); they just won't have antennas attached to them. The stations may be able to get a boost by subleasing the spectrum they used to use for over-the-air for generic Internet access. We'll probably end up paying people $40 each for boxes to attach their old tv sets to the Internet.

Open Spectrum

After a rocky start, the white space experiment which the FCC decreed this year will be an enormous success. This open spectrum will be extremely valuable both for fixed and mobile Internet connectivity. More open spectrum will be needed and will become available as TV goes off the air (see above). Why open spectrum is so important is here.

Bandwidth Demand

The price of providing bandwidth either over the air or through a fiber goes down roughly with Moore's law. Every year and a half the amount of bandwidth that can be provided at a given cost doubles. This trend'll continue as we all demand more bandwidth partly in order to receive all the entertainment we used to get from dedicated networks and partly for new applications. Today's five meg connections will soon be as useless as yesterday's dialup as new bandwidth-hungry Internet uses are invented and become essential and as websites are built on the assumption of higher and higher bandwidth availability. See here for more on the bandwidth required to receive "television".

Online GPSes

It'll be no more than a couple of years until every car-mounted GPS is online whenever the car is turned on. We'll get and contribute automatically to crowd-based weather and traffic reports. We'll know how long the lines are at a local attraction before we get off the Interstate — and we'll buy our tickets before we get there. The billboards will literally be inside the car. This post is about an early GPS with connectivity.

Latency Intolerance

Latency is the time between when we send something on the Internet and the time when we receive a response. Interactive voice demands low latency; so do modern web pages which build themselves on your screen through a series of interactions. High altitude (geostationary) satellites cannot provide low latency because of speed-of-light limitations so they will not be a significant provider of Internet connectivity. Local Internet providers also have routing problems to and from the Internet backbone which contribute to latency. Some measure of expected latency'll become part of the marketing description of an Internet connectivity service. More on latency and satellite here.

Smart Grid

Electricity will begin to replace imported oil and gas for home heating and transportation and some other applications during the next five years. Our total electric consumption will go up. But the fossil fuel required to create that electricity will go down as the demand for electricity goes up. A smart grid which lets us better use baseline power from hydro, nuclear, wind, and solar will accomplish that near miracle. See The Smart Grid Should be Stupid.

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Great post - could you clarify a point? Bruce Van Nice  –  Feb 12, 2009 11:51 AM PST

You state: "In the bad scenario the old business models are bailed out or saved by regulation to the detriment of consumers and society in general."

Which business models are you referring to? 
Is it the telcos?  Will Google's business model be "old" in 5 years (seems like it should be if everything we say about "internet time" is true!).

So is it the telcos that might be "saved by regulation" or the Googles and their like? 

Consider Google's never ending quest for net neutrality.  Peel away the hyperbople and isn't it Google who is really looking to diminish competition? If the networking business is such a great business then maybe Google should build a network (instead of pretending like they wannt to build a network as with the wireless spectrum acution a couple of years back).  They have incredible talent so it should be easy for them. 

And if as the common wisdom holds the telcos are "backward", "old fashioned", "don't get it" why should brilliant aggressive companies like Google fear competing with them?  Especially if the future is wireless as everyone likes to claim it will be. 

Net Neutrality supporters may want to be careful what they wish for.  If the the governement gets their hands on the Internet it will be dramatically different, but probably not in the ways that you suggest.  The best possible outcome is to let the marketplace work it out - then these dreams have a chance of coming through.  If Google ends up being a victim of their own success and can't cross the chasm so what??? Someone will come along and replace them.  Isn't that what the Internet is really about?

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Promoted Post

Buying or Selling IPv4 Addresses?

Watch this video to discover how ACCELR/8, a transformative trading platform developed by industry veterans Marc Lindsey and Janine Goodman, enables organizations to buy or sell IPv4 blocks as small as /20s.