Telco Choice of TCP/IP for Next Generation Networks was Fateful

Technology decisions, it goes without saying, can dramatically change access provider, data center and application business models. Cloud computing creates the business opportunity for data centers and “software as a service.”

Fatefully, connectivity provider adoption of TCP/IP upended the “closed” business model and substituted an “open” model that also relegates access providers to “connectivity” roles. If telcos did not want to become “dumb pipes,” they should not have adopted TCP/IP as their “next generation network” platform. 

TCP/IP was the computing network model, where value was created on top of layered and disaggregated transport and access. Modern computing necessarily operates on an “over the top” basis, with hardware and operating systems disaggregated from apps that use that hardware and operating systems. 

To be sure, there were strong arguments in favor of TCP/IP and Ethernet: connectors were low cost, compared to proprietary telco connectors. Data networks using TCP/IP and Ethernet were relatively simple. The ecosystem was well developed and disaggregated, presumably leading to faster and easier innovation. 

As all communications networks began to operate as “data” networks, that made sense. 

None of that necessarily requires retail pricing of data connections on a flat fee, unlimited usage model. 

As access service providers complain about capacity costs and seek new revenues from hyperscale app providers, other common solutions exist, even if hard to implement under highly-competitive conditions. 

Obviously, selling more customers unlimited usage plans, even at higher recurring prices, does not encourage customers to be careful about their consumption. 

By choosing TCP/IP as its next-generation network, the global “telecom” industry chose to operate data networks based on the use of loosely-coupled layers. But it is not a given that flat fees and virtually unlimited usage is a mandatory pricing model. 

Arguably much of the ISP concern about business models grows directly from decisions made to operate retail access networks with a flat fee/virtually unlimited usage model.