A Historic Shift from Scarcity to Abundance has Been Underway for At Least 2 Decades
Though it perhaps is surprising, very little direct discussion of the role of scarcity in the telecommunications business happens these days. That is manifestly not because people are unaware of its importance.
Contestants are very much aware of the role “scarcity” plays in the access business. In fact, attempts to maintain scarcity are a foundational part of strategy for some contestants, while efforts to end scarcity and create abundance likewise underpin the strategies undertaken by attackers.
The reasons are drop-dead simple: scarcity creates higher profit margins and higher revenue, as is true in any market. Abundance lowers profit margins and gross revenue, in any market.
Some rightly would argue that a ubiquitous access network (mobile, cable TV, fiber to home or copper to the home) is expensive, limited the number of providers that can exist in any market.
The point is that, with the advent of an era of abundance, the barriers are going to fall, and fall substantially.
So the possible “bad news” for some access providers is that the historic scarcity of resources in the access network is going to be replaced by abundance. The “good news” for app providers is that access capacity is going to be less and less a barrier to their business models.
To be clear, the end of the age of scarcity, and the start of the era of abundance, is coming, for the bandwidth portions of telecommunications business, and will force dramatic rethinking of business models.
As access services drive less revenue volume and produce lower profits, access providers will move into other parts of the Internet ecosystem, just as app providers are moving into the access and device portions of the ecosystem.
The trend is not actually so new. In fact, abundance has been approaching for decades, in part because of advances in use of spectrum, the impact of Moore’s Law and competition itself.
The implications could not be more profound. For more than a century, “scarcity” has been the fundamental reality of the industry and the business.
Networks were expensive, time-consuming and bandwidth limited.
In some ways, scarcity still drives the equity value of fixed and mobile networks. Fixed access networks are terribly expensive to build and operate, which is why there are so few of them in any market.
Advances are happening, but the “rule of a few” still holds, as what is scarce are enough customers to support the building and operation of a ubiquitous fixed access network in the face of two or more other providers.
But scarcity and abundance are starting to coexist. Moore’s Law helps. Better signal processing and antenna arrays help. Unlicensed spectrum and Wi-Fi also help. Optical fiber helps, even if some in the recent past have argued that scarcity and pricing power would return to the access business when optical fiber becomes ubiquitous.
Fixed wireless helps. Spectrum sharing helps as well.
But much more is coming. The U.S. Federal Communications Commission is moving to make available an extraordinary amount of new spectrum--including seven gigaHertz (7 GHz) worth of unlicensed spectrum, in the millimeter wave bands, and a total of 11 GHz, including 3.85 GHz of licensed spectrum, in a first wave.
Nor is that all. The Commission also adopted a Further Notice of Proposed Rulemaking, which seeks comment on rules adding another 18 GHz of spectrum encompassing eight additional high-frequency bands, as well as spectrum sharing for the 37 GHz to 37.6 GHz band.
Keep in mind that the new allocations represent many times more spectrum than all other existing spectrum now available for mobile and wireless communications in the U.S. market. Just how much more depends on one’s assumptions about coding techniques and modulation.
But it is possible the new spectrum will represent an order of magnitude or two orders of magnitude more communications spectrum than presently is available for mobile and wireless communications purposes.
Abundance will transform business models. Incumbents who built their businesses on scarcity will have to rework those models. App providers whose businesses are built on the assumption of abundance will flourish, at least potentially.