“Pipe” Services Will “Always” Drive Most Service Provider Revenue

Communications service providers dislike the phrase “dumb pipe” for obvious reasons, since it implies–often falsely–that a telecom supplier is “just” a provider of low-value, commodity access services. The notion is partly accurate, but has nothing to do with profit margin on “dumb pipe” services. 

What, after all, is “best effort” Internet access but a “dumb pipe” service? The access is one thing, while nearly all the content and services are provided by third party suppliers. But profit margins on U.S. high-speed access are in the 40-percent range, hardly a low-margin, commodity service.

There are potential issues in the future, if prices and consumption are not better aligned, but service providers already are moving on that front.

Nor are service providers "just" providers of "dumb pipe" access; they also make most of their money on "services" or "applications" delivered over those pipes. In the best example, they use the network and the access to create "voice" service or video entertainment services or messaging. 

And that always will remain the key way to create yet other applications and services that use the network, and access to the network.