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Why Telcos Don't Get Networks

Kevin Werbach

I've posted to SSRN my paper on why most telecom companies, even though they operate networks, don't appreciate the fundamental business dynamics of network structures. This will be a chapter in a book Wharton is publishing on network-based strategies and competencies.

In the paper, I describe two views on telecom and Internet infrastructure: the Monist and Dualist perspectives. The Monists, including most network operators, see the infrastructure as the linchpin of the communications ecosystem, which must be managed and supported above all else. The Dualists, including most Internet-based service providers, see the infrastructure as simply a means to reach the applications, content, and communications on top of the network, which are the source of real value.

The Dualist view is ultimately the superior one. However, it has problems as well, namely that it tends to ignore the real problems of funding the essential network infrastructure. The paper goes into all this in more detail, and offers thoughts on what a reformulated "modular" telecom industry could look like.

By Kevin Werbach, Professor at the Wharton School and Organizer of the Supernova Conference
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Re: Why Telcos Don't Get Networks Dan Campbell  –  Mar 05, 2008 12:31 PM PST

I'd be interested in reading that.  You are correct, it should be about content.  It's like the demand for roads in major cities that result from the "content" inside or surrounding the city, e.g., businesses, jobs, malls, sports arenas, condos, neighborhoods.  If you are the ones building the roads, that tends to be where your pride and joy resides, but the roads always seem underfunded, congested, and behind the "content" being built on the perimeter.  Of course, the content still needs to road to allow people to get them there, so it is a "two way street" so to speak.

Re: Why Telcos Don't Get Networks Alex Tajirian  –  Apr 08, 2008 5:47 PM PST

Kevin,

Instead of making comparisons between, say, AT&T and Google based on their “network strategies,” it would be interesting to consider their viability of adopting of a “platform strategy.” Google seems to be a natural candidate for such a strategy, but it is not clear to me if it makes sense for AT&T.

I am sure you are aware that network externalities are a necessary, but not a sufficient condition for a winner takes all platform competition.

Regards,
Alex

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