Tuesday, March 8, 2016

Access Providers Cannot Get Away from Dumb Pipe Function

You know a market is changing when you begin to struggle with definitions. In many markets (Europe and North America), for example, it is less accurate than ever to talk about “telcos” when “cable TV companies” have so much “telecom” market share.

Likewise, it is clumsy to refer to cable TV companies that way when they actually are “telcos.”

People come up with “catchy” new phrases that capture some of the dynamics, but little of the revenue dynamics. Digital lifestyle enabler is one such term. The use of the phrase tends to connote that access providers are “evolving” beyond access (bit pipes, dumb pipes or some other similar designation) and becoming digital services providers.

That sounds good, even if it does not generally match revenue sources so well at the moment. Some of us would argue that the “dumb pipes” versus “digital services provider” debate is misplaced.

For starters, it is unlikely ever to be the case that any access provider actually earns more money from “services” or “content” or “apps” than it does from connectivity (access). And that is not necessarily a problem.  

A cable TV executive might describe the long-term strategy as a mix of services, ranging from “dumb pipe” (best effort Internet access) to Ethernet access for businesses, plus video entertainment and voice “managed services.”

In other words, both dumb pipe and services are foundations of the business model. But dumb pipe is not to be casually dismissed. In the full protocol stack, access and transport are at the bottom, apps at the top.

Access and transport are the unique roles provided by former telcos, cable TV companies, satellite broadband, metro fiber and many other types of specialized communications service providers.

An access provider cannot avoid offering access and transport without abandoning its role in the protocol stack. But neither are access providers precluded from assuming other roles.

As a cable TV exec might say, “you have to own some of what you deliver.”

That’s why all debates about “dumb pipe” or “app provider” roles essentially are wrong when they assume either one or the other roles must be dominant. The future is “both.” But access is the unique role. Any access provider that neglects the “access function” eventually will falter.

Access (dumb pipe is another word for access) is the unique role in the protocol stack. But it is unlikely to ever be the "sole" role or function.

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