No question so occupies wired network service provider attention as the recrafting of the business model known as the "dumb pipe." In some ways, it is an unusual question, if only because virtually all retail service providers say that is the one way they will not plan to grow their businesses.
If anything, virtually every executive wants, where feasible, to "move up the value chain," adding more value and functionality, not less.
There are isolated examples of "dumb pipe" models, such as in Singapore, where a new wholesale-only network access company will sell service to all other retail providers. There are more examples of hybrid models, where a functionally separate wholesale entity provides services to all retail providers, but where actual ownership of the assets might remain with a former incumbent or new provider.
Virgin Media, for example, has at least considered offering other retail providers wholesale access to its access network, though company executives publicly deny a recent report that it has concrete plans to do so.
So wholesale is the only area where there might be some modicum of serious debate is over the role of wholesale services. And in most cases, the only reason wholesale is a subject of serious investigation is because regulatory authorities have forced service providers to operate in a robust wholesale environment leading to huge loss of market share.
That said, in most cases it quickly will become obvious that "dumb pipe" operations have to be managed just as any other element of the business, but cannot, in and of themselves, support all the current or future operations of a service provider business at a time when the current revenue base is eroding.
Whatever one might say, it seems generally clear that "dumb pipe" can be a business for a wholesale-only entity, but not so clearly, thus far, a retail operation. Even some firms that have tried the wholesale-only route typically wind up getting into their own retail operations as well.
So far, executive preferences notwithstanding, market experience tends to suggest there are some successful "dumb pipe" business models, primarily found in the wide area network backbone, where "capacity" is the product, and some limited evidence that wholesale-only access opportunities may exist where regulators require it.
So far, though, in the retail, end user business, dumb pipe has not yet proven to be sustainable.
1 comment:
Posing this question makes sense in the U.S. where we have essentially no public policy other than what the telcos permit. Otherwise it assumes we have decided that broadband has no elements of a utility and no elements of a natural monopoly.
Is there a business model for dumb roads? No, we make social commitments to build roads and we have competitive business models around cars, trucks, delivery services, taxis, gas, construction companies that build them, pothole filling, billboards on the side of the roads, etc.
Or is there a business model for electrical distribution systems? My reading of the trend is that we are moving to a "dumb" power pipe with smart elements that will allow generation anywhere including at the edges.
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