"What if Computing and Communications were Free?" Still Are Key Questions to Ask
Though it is not something anybody really thinks about on a daily and routine basis, virtually every business, in every industry now operates in a context where “computing and communications are nearly free.”
Even if it is not yet true everywhere on the planet, for everyone, computing and communications are shaped by Moore’s Law, which means those products and capabilities ultimately will be so affordable people do not have to worry about using the tools.
That is a good thing, in a broad sense, if often challenging for suppliers of computers and other computing devices; as well as suppliers of communications services. Bill Gates and Reed Hastings, though, are among the executives who correctly figured out how to leverage those trends.
For Gates, the insight that free computing would be a reality meant he should build his business on software used by computers.
Reed Hastings came to the same conclusion as he looked at bandwidth trends in terms both of capacity and prices. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”
“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO. “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.
Not that often are huge businesses built on such bets.
The "original insight" for Microsoft was the question: "What if computing were free?" It was an apparently crazy question at the time.
“We saw that the power of these machines would go up very, very dramatically, and we felt we could write software that would exploit that power," Gates has said.
Hastings essentially asked a similar question: what would our business look like if bandwidth were nearly free?
Some might even argue that an understanding of Moore’s Law, in the 1980s, also “saved the cable TV business” from a disaster that would have been caused by high-definition TV with bandwidth requirements of up to 40 MHz per channel, in a business set up to support 6-MHz channels.
For telecom executives, as for computing hardware suppliers, the key insight is the absolute imperative of value-added services, content, transactions or retailing and advertising as drivers of revenue beyond access.