Supercomm before the storm

It has been quite some time since I’ve been this excited about going to our annual industry conclave, Supercomm, which commences the third week in June. This is not just because the venue has been altered from “Hot‘Lanta” to a personal favorite, Chicago. I’m excited because everything I hear and see tells me we are at a critical tipping point in the history of the telecommunications industry. It is clear that what happens in the next nine to 12 months will have profound repercussions for all industry players, no matter where one sits in the food chain. Long-term winners and losers will emerge. A radical restructuring is at hand. Risk and reward abound. This Supercomm literally will be the calm before the super storm. The industry buzz will be superb.

As I write this on May 28, I am staring at the right-hand side of the front page of today’s Wall Street Journal. The headline reads: “After 20 Years, Baby Bells Face Some Grown-Up Competition; Cable, Internet Player Milk Verizon’s Old Cash Cow; 21,000 More Jobs Vanish.” The article is a nice general press reportorial demonstration of “a keen grasp of the obvious.” As we all know, there is a lot more. And while those of us inside the industry know the list of challenges confronting us, sometimes it helps to see them in print. Hence, as a reader service, below are a few items barely touched or not covered in the Wall Street Journal:

Competition:

• Cable vs. telco in the traditional voice and emerging VoIP arenas.

• Wired vs. wireless including who is will successfully leverage Wi-Fi for competitive advantage and make money on it. Will it be cellular, telco, cable or Sir Richard Branson?

• IXC vs. ILEC. What really will happen with the new MCI? Can Sprint, MCI and AT&T survive?

• Bell vs. Bell: It has been a long time coming, but strap on your seat belts, because this should be a bumpy ride. With VoIP they don’t need to own facilities to compete for each other’s customers. IP Centrex is going to be big. 

• Psychographics, demographics and the Internet. Is it a triple play or do we really have four potential outs? As “E”verything converges who really “owns” the customer? Why and with what?

• Ending the insanity, i.e., finding business models that cut churn, delight customers and turn profits.  Will the Bells survive?

• The “Extranet Phenomena.” The stealthy trend of the world’s biggest customers offering their “E”cosystems web services (and, yes voice) to rationalize business transformation imperatives.  This will make infrastructure a commoditized smart pipe whose intelligence gets no respect.  One to watch.  Ouch!

• What about divestiture of infrastructure to separate content from facilities?

Public Policy:

• UNE-P, CoLo, equal access and interconnection, common carriage or information service…Why can’t the industry “just get along?” Or can it?

• “How about them cable guys?” Equal access and interconnection (sound familiar)? Rate regulation? Common carriers?  

• VoIP regulation. “To be or not to be? That is the question.”

• Universal Service. In a VoIP world, how is this funded? Will the Internet be taxed?

• Municipal and electric utility competition. Gone but not forgotten.

• Rewriting the 1996 Telecommunications Act: Will they or won’t they? 

• Universal Broadband. How, how fast, how and who should pay for it?

• Total number portability.

• Privacy and what to do about identity theft, access to CPNI and to customer location information while users are mobile.

• Legal intercept and other Homeland Security and network reliability issues.

• Interactive gaming, gambling, spam, phishing, illegal downloads of music and video, porn, etc. What are the liabilities of service providers?

Technology:  Lots of choices, but where to place bets?

• MPLS. How fast and how far?

• Passive vs. Active optical networks. The economics will finally be tested. Is the pervasive rollout finally here?

• End-to-end Ethernet. Will it take-off?

• Fixed wireless vs. wire for Internet services--but which fixed wireless?

• Grid computing. Friend or foe?

• Security services.

• Unified domains. Who will control them?

• E-911 and encrypted voice. How to make everyone happy?

• HDTV and home controllers.

• TRUST. Who should get it, administrate it, police it, control it, etc.   

• Next-generation networks. Who will control the agenda?

• What is the role of interactive video? Can it be made a premium service?

• Is presence the next big thing, or just the next big hype?

The list of choices is enormous, and like I said, these are just highlights. With a little prodding, I am sure all of you could think of several dozen things to add. However, the issue is not how long to make the list.  Some would argue the total list is no longer or shorter, or necessarily more compelling, than it has been. “So, what’s the big deal?” The big deal is that the convergence (pardon the expression) of all this stuff has two dimensions that previously have not been factors, speed and flexibility. Unfortunately, neither attribute is synonymous with historic business behavior or practice in our sector (another issue for another day). 

Time is now of the essence. We’ve run out of it as a sector. The old attitudes like “Not on my watch, it will be somebody else’s problem” and “We can just outlast and outspend them” no longer are valid strategies. Anyone who thinks otherwise has been asleep for at least three years. In addition, as remarked upon in this space before (please pardon the repetition), the era of vendor supremacy in the vendor/customer relationship is over. Users call the shots. The deployment, care and feeding of the implementation of user determined and controlled policies and rules--against the context of business and personal imperatives, governance and public policy compliance challenges, and the need to adapt to a much riskier operating environment while maintaining the perception of trusted “constant touch” accessibility--is the path to competitive differentiation and value creation.  Don’t think so?  Ask Sun and Microsoft. 

The users will have their day and their way. They operate on a much faster time schedule than the telecommunications industry is accustomed to operating in. The IT industry kind of gets this, but even they are a bit too slow at least in terms of things like expected realistic ROI cycles, migration paths and legacy investment protection requirements. They are at least begrudgingly making accommodations. This includes getting ready to fully implement and reap the rewards of that “Extranet Phenomena” briefly touched on above. The trends go by a host of monikers--“new data center,” “content delivery and storage area networking,” “utility computing” and “Web services” being just a few code names. What they share is a frontal assault on the relevancy not of technology but of telecommunications industry business models. 

The relatively good news is the telecommunications sector, while slow to awake, is now on high alert. Maybe not at Code Red, where it must be, but certainly at an elevated state. Indeed, the reason Supercomm will be fascinating is precisely because of this. Pay attention, for instance, to what the folks at www.infranet.org have on their minds, and pay particular attention to the members of the FCC addressing the convention. All heck is going to break loose on the policy front once the election is over.

The industry and its regulators are starting to ask lots of the right questions after years of complacency. Whether it can act decisively and in time is a subject of much conjecture. There are no right or wrong answers, just decisions that must be made. Time is fast running out. Beneath the calm surface lies a turbulence that means significant change is in the air. Oh, to be cloned so I could be a fly on multiple walls. Happy convention!

Peter Bernstein is President of Infonautics Consulting Inc. He can be reached at pb111451@optonline.net.