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Friday, May 14, 2010

From "dumb pipe" to "happy pipe"

Recently, I've been wondering exactly who coined the term "Dumb Pipe".

David Isenberg wrote a piece called "The Rise of the Stupid Network", in 1997, when he worked at AT&T. A copy is still available here, but although it uses the phrases "dumb bits" and "dumb transport", it doesn't mention the word "pipe".

The negative associations with this snappy, convenient epithet have probably cost the telecoms industry a trillion dollars. It is so unappealing, it seems to induce an almost visceral and irrational fear. You only have to look at the way that some vendors sneer "You don't want to end up a dumb pipe, do you?" to recognise that we're beyond cool-headed analysis and getting close to some legal form of discriminatory "-ism" here.

For the last couple of years, the term "smart pipe" has bubbled around, making a few people think a bit more closely about areas like policy, QoS and so forth. Yet it still does not appear to have dented the shield of fear or bias around the "dumb pipe" dystopia that many perceive to be encroaching. The frenzied and ridiculous appeals to the European Commission for a "Google Tax" are prime examples of this. In essence, the lawsuits appear to say:

"We are dumb.... so can you please tax the clever people for us?"

Recently, I've been using the term "Happy Pipe" instead, to point out some possible different futures - and also to confront the almost bigoted preconceptions that surround networks' supposed "dumbness". This applies to both fixed and mobile broadband - although the challenges, technologies and capacity are different, as are the business models emerging to monetise the happiness.

There are a few separate strands here:

  • Today's networks are pretty far from dumb, and there is huge value in deploying and running them well
  • The smartest networks are the ones which work collaboratively *with* Internet and content companies, not antagonistically against them. This specifically related to areas like policy management.
  • There is much under-exploited potential for revenue around wholesale models. There are many potential business opportunities, both for "bulk" wholesale and "slice and dice" methods of deriving extra fees for capacity and value-added services.
It is conspicuous that it has required a range of new players in mobile data, such as Jasper Wireless, to develop extra functionality that translates between a carrier's wholesale offerings, and those consumer electronics and M2M firms that which to exploit connectivity in their new products. While some operators have innovated in their platforms (eg Telenor, speaking last week at Telco 2.0 about M2M), others have become introspective.

It is difficult for a camera manufacturer to think "I'd love to sell a new SLR with 1000 photo uploads included" and then find someone who could structure that deal, because it's not a "subscription". It's difficult for a hotel chain to shop around for a way to part-subsidise roaming charges for its international guests. It is difficult for an Internet video provider to get a "network congestion API" so it can cleverly rate-adapt its codecs during peak hours, or even just push a message to its users warning them of likely buffering delays.

There are so many ways that the capabilities of a broadband network - fixed or mobile - could be used to improve customer experience, work more effectively with upstream partners, improve traffic management without interfering with users' expectations and unlock new revenue streams.

I covered a large amount of analysis on these and other sub-themes in my recent report on Fixed and Mobile Broadband Business Models, published by Telco 2.0 (details are here or email information AT disruptive-analysis DOT com).

In it, the report concludes that operators have 4 main strategic choices:

- Becoming a full, Telco 2.0-style service provider with a broad set of retail, wholesale and "two-sided" propositions, engaging with users, developers, content providers and so forth
- Becoming a "happy pipe" provider, focusing more on wholesale propositions in addition to class-leading access and related infrastructure based value-added services
- Becoming a "government department" - ie running national broadband networks or critical infrastructure like electricity smart grids.
- Becoming a "device specialist" focused on creating user experiences and product/service end-to-end propositions in either fixed or mobile domains - exploiting Moore's Law, rather than betting against it.

These are not mutually exclusive, and certainly I would expect the very largest operators to have a foot in all camps, especially where they have multiple national properties, or dedicated wholesale divisions. Fixed operators with "structural separation" provide an interesting model for their peers in mobile.

One other missing piece of the puzzle is exactly what type of services can/should be offered on top of access - and how they should be charged. The simplistic attitude that YouTube / Skype / Facebook / Salesforce.com somehow act as predatory "over the top" providers, somehow disenfranchising operators from their rightful revenue streams is weak thinking.

There is no reason why Verizon or Orange or China Mobile could not have acquired YouTube instead of Google - except the telcos' historical inertia behind maintaining the link between access and service businesses. Despite the past 10 years, there is *still* a reluctance by network owners to offer services beyond the confines of their own access customer base - thus denying themselves the global scale required to compete with Internet-based providers. Yes, those services may well be *enhanced* over their own infrastructure, but that is not a reason to eschew pushing the widest possible distribution as well.

The bottom line is that we need to move away from this "dumb pipe" slogan. Separating connectivity and service is inevitable in a lot of ways - but that can actually add value to providers of both.

(In addition to the research report on business models , Disruptive Analysis also undertakes strategic consultancy for vendors and service providers in this area. This encompasses diverse aspects including management workshops, business plan review, competitive analysis, organisational development and executive coaching, and studies of market dynamics and forecasting).

NEW Mobile Broadband Traffic Management Paper

NEW Broadband Business Models Strategy Report

1 comment:

Kevin Mitchell said...

I would love to see more of this federated Telco 2.0 symbiosis in the mobile world. Unification of the multiple walled gardens -- device or operator or Web 2.0 -- would serve the subscriber community. Working out the business model where all parties can be fairly compensated is the challenge. There are some technologies, including those in the IMS domain, that can help enable the authentication, session establishment, QoS and charging/accounting.