Speed kills

OK, junkies of this column. Either you equate the word speed with the slang term for methamphetamine or you assume this is a column about auto safety--a strange topic for a columnist who usually writes about the communications industry’s competitive and marketing challenges. Read on, please, because this column is neither about illicit drugs nor drag racing. It is about drags on our marketplace.

It is almost four weeks since SuperCalm in Atlanta ended. Aside from finally cleaning all the handkerchiefs needed to blow the noses and wipe the eyes of the many sniveling and whining vendors, I’ve had time to reflect on two things I heard and saw at the show.

1. At the Investor Forum held during the show, the moderator from Merrill Lynch said, by their reckoning, that in the past 30 months almost 400 start-ups in the optical space (from components to systems) had been given funding by the venture capitalists in various rounds. His conclusion was the world probably needed a dozen of them. My conclusion was there is also an amazing amount of denial and irrationality left to be driven out of the market.

2. I participated on an industry panel sponsored by reinvigorated equipment vendor NET (yes, that NET). It was a webcast that has been saved for your listening pleasure at www.net.com--follow the instructions. The panel had a group of industry analyst superstars and assorted others, and was probably the best (all prejudice aside) public session I have heard on how we got to where we are, and what it might take to return the industry to profitability. It also highlighted why we might not.

...there are clearly too many optical companies being chased by too many VCs with too much money and too little ability to discern winning companies with winning technologies from winning technologies offered by losing companies.

On the first point, there are clearly too many optical companies being chased by too many VCs with too much money and too little ability to discern winning companies with winning technologies from winning technologies offered by losing companies. The statement almost stands by itself as to how we got here.

There is no monopoly on creativity. There certainly is no monopoly on stupidity. Service providers are not only cutting back on their expenditures, but are also narrowing their trusted vendor lists. Show me a company without a plan for post-sales service and support of its product by a sound strategic partner, or a strong distribution channel, and I’ll show you a great way to throw away money. 

One would have thought that the VCs would have learned something from the dot.com fiasco. So much for teaching an old dog new tricks when they have not mastered the old tricks. Metro optical vendors are “the weakest link, good bye!”

On the second point, highlighting the reason that getting out of the current difficulties may be hard, was noted industry guru Howard Anderson’s remarks. He said that we’d better find a threat for the Bell companies soon or we will all be looking for work. 

Howard is absolutely correct. The cultural legacy of the Bell system that still is alive and well at the incumbent service providers leads these providers to operate under this mantra: Only spend when someone is aggressively trying to take your business away from you and you’ve already run out of regulatory and delay tactics to ruin their business.

Notice I did not say spend to grow your own business, but rather spend to ruin their business. Under this strategy, the spending stops when the mission is accomplished. It has been accomplished. Covad, Northpoint and others lie in shambles, and the cable industry has other issues of its own.

Most horrifying about this mantra is the failure of the computer industry to understand it. No less a light than the CEO of Intel has suggested that Congress should pass the Tauzin-Dingell Bill and let the Bell companies into the long-distance business since they were the only ones with money and thus the resources to complete the job of deploying broadband to everyone. 

Talk about putting the lunatics in charge of the asylum. I guess he forgot that ISDN was developed in 1976, and thanks to the same people he wants to allow to deploy broadband, we have virtually zero ISDN penetration in more than 20 years of trying.

Possibly more disturbing was the answer from one colleague (listen to find out who), to a question as to what the killer application to get us out of the current morass is. The response was faster deployment of higher speed connections.

Speed as a service/application. Interesting. When the world, for very good reasons, has a 55 mph–75 mph speed limit, cars that go 200 mph have a small market and remain costly. 

Most people need affordable transportation that can reliably go the limit. Paying a premium for a vehicle that breaks the law when you use all of its potential is not a rational purchase. Even worse, buying such a vehicle when there are no roads that can handle that speed is an act of irrationality. 

We have fast roads between cities (actually too many), but you can’t get there from here quickly once you hit town. Nobody is willing to invest in faster roads in town, because people are willing to pay for the bad experience, but are not willing to pay more until most in-town roads have been upgraded. 

The people who own the roads have no incentive to upgrade quickly since they see no additional revenue flowing to them if all that happens is people go faster and actually expect to pay less and the road owners are not being compensated by those reaping the benefits of building newer, faster cars to run on their roads.

That is where we are today--with roads and communications connections. It is a classic chicken and egg problem that only underscores that Howard is right: We had better hope somebody arrives soon that wants to either built new in-town roads, or has invented inexpensive anti-gravitational vehicles that don’t need roads, or we are all in trouble. Speed does kill, and will.
Peter Bernstein is President, Infonautics Consulting, Inc. He can be reached at pabernstein@worldnet.att.net.