Bandwidth and Revenue: What Does History Suggest?

Service provider executives often worry about a restricted future role in the Internet ecosystem, largely captured by the phrase "dumb pipe." Somewhat oddly, you sometimes hear people complain that the phrase exists at all, as though anything at all would be different did the phrase not exist.

Left unsaid is the truth behind the existence of the phrase. Bandwidth is not the only product that has experienced dramatic effective cost reductions, with large societal and economic benefits, as troublesome as those price changes might have been for producers in the businesses that experienced the changes.

The so-called "robber barons" of the late 19th century generally made their fortunes by drastically changing the price curve for new technologies, grabbing market share by undercutting rivals.

Cornelius Vanderbilt cut the price of rail freight 90 percent, Andrew Carnegie slashed steel prices 75 percent and John D. Rockefeller cut oil prices 80 percent between 1870 and 1900.

Malcom McLean, Sam Walton and Michael Dell did roughly the same for container shipping, discount retailing and home computing a century later. Such radical changes often are unwelcome by the producing community, though the consuming public benefits.

Something of that same process is likely to play out in the bandwidth business as well, no matter what one thinks about the term "dumb pipe."

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