"Dumb Pipes"? Lessons from the Electric Company

Alan Percy : The SIP Invite
Alan Percy
| Observations by Alan D. Percy on VoIP enabling technology, industry and our personal reach for success.

"Dumb Pipes"? Lessons from the Electric Company

Much has been discussed during my recent travels about whether Internet access is a basic human necessity - reinforced by a recent survey and report from Cisco.   Frankly it doesn't surprise me - access to the Internet has clearly become a core utility enabling business and our economy to move forward.

As the Internet becomes a core utility, a related question is will the Internet Telephony Service Providers (ITSPs), wireless providers and cable operators will have to settle on a role in the market as a "dumb pipe"  (meaning delivering IP connectivity as their primary offer) vs. content and applications.

If history is any lesson, new utilities (like the founding of General Electric by Thomas Edison in 1890), create a product looking for an application and customers.  To get the market started, utilities will often manufacture and sell products that create demand for the utility services.  In GE's case, it was the invention of electric lighting and appliances that needed their electricity. 

However, if you skip ahead to today, you can't imagine buying you new 60" HDTV set from your electric company.  What changed?

Essentially, utilities are not generally good product companies.  Product companies don't make good utilities.   There's a disconnect in priorities and an almost conflict of interest in business practices and priorities.

What would this mean for today's ITSPs, wireless and cable operators?  It's my opinion that they need to stick to what they are good at - delivering IP packets to businesses, residential and wireless customers.  Charge for bandwidth - both quantity and quality, but please let the independent application and content companies (Hulu, Netflix, Vonage, Amazon...) create and distribute the services.

Back to studying history - can you imagine if Ma Bell required that they had to sell you the telephones that were connected to their network? We'd still be stuck with black touch-tone phones and grandma's princess phone.

So how do the ITSPs, cable and wireless providers make the transition? - by investing in the content and application companies, but not "supervising" their development. If Time Warner made an early investment in Facebook (surely one of the biggest network hogs on their IP network), they'd be a lot more wealthy today.

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