About 25 years ago there was significant discussion in industry circles about the implications of essentially free bandwidth, computing and storage. Bandwidth providers were outraged by the suggestion, as you might guess.
Around the turn of the century, Bill Gates irritated executives in the communications ecosystem by arguing that “bandwidth wants to be free? ” Others at the time quipped about whether “computing wants to be free?” Others might argue that data wants to be free. And some have been arguing that content wants to be free.
Twenty years later, we are tempted to argue that Gates was more right than wrong, both about computing and bandwidth.
To be sure, Gates did not mean computing or bandwidth would literally “cost nothing.” He only meant that neither computation nor bandwidth would not be a constraint to creating new services and apps.
In 2004, Gates argued that “10 years out, in terms of actual hardware costs you can almost think of hardware as being free — I’m not saying it will be absolutely free — but in terms of the power of the servers, the power of the network will not be a limiting factor,” Gates said.
You might argue that is a position Gates adopted recently. Others would argue that has been foundational in his thinking since Micro-soft was a tiny company based in Albuquerque, New Mexico in 1975.
Young Bill Gates reportedly asked himself what his business would look like if hardware were free, an astounding assumption at the time. Keep in mind the audacious assumption Gates made. In 1970 a computer cost about $4.6 million each.
The original insight for Microsoft was the answer to the question "What if computing were free?". Recall that Micro-Soft (later changed to Microsoft) was founded in 1975, not long after Gates apparently began to ponder the question.
In 1982 Gates did not seem to go out of his way to argue that hardware would be free, but he did argue it would be cheaper and far less interesting than software.
Gates made the argument in 1994. Gates was still saying it in 2004.
The point is that the assumption by Gates that computing operations would be so cheap was an astounding leap. But my guess is that Gates understood Moore’s Law in a way that the rest of us did not.
Reed Hastings, Netflix founder, apparently made a similar decision. For Bill 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
How many business models, products and services now are routine and feasible because Moore’s Law keeps driving higher performance and lower cost? How many applications are possible because bandwidth keeps growing in a similar manner?
Video streaming, early virtual reality and augmented reality, ridesharing, advanced smartphone features, use of millimeter wave spectrum for 5G and all forms of applied artificial intelligence for search, e-commerce and customer service are feasible because computing and bandwidth performance increase while costs are contained.
Think about the application of computing over time, in situations where business models formerly unthinkable can become quite practical because the cost of computation and storage have become so cheap.
The key insight is to ask “what would my business look like?” if communications, bandwidth, computing, storage or information or any other scarce or costly input were so available and low cost that those ceased to be constraints to a revenue model.
The question might also be asked the other way: what does your business look like if a key input becomes too expensive? The key inputs could be labor, knowledge, a raw material, a logistics or supply chain change.
A related question is “what does my business look like if demand changes in a major way?”
Google, Netflix, Amazon, Apple, Facebook, Square and many other examples illustrate what is possible when computing, communications, devices, transactions and information suddenly cease to be barriers.
But Gates was substantially correct. How many these days would argue against the notion that most public Wi-Fi access is substantially free?
“You can’t use today’s technology constraints to predict tomorrow’s developments,” says Amadeus Consulting CTO John Basso. That fundamental insight, based in large part on Moore’s Law, might once again be more important than often is believed.
You could argue whole businesses now are built on the assumption that technology (especially hardware) constraints disappear over time. All cloud-based apps are built on such assumptions.
Anything we see in consumer internet applications--where capabilities are supplied at no cost to users--provides an excellent illustration. The classic question is what does your business look like if a key cost constraint is removed.
Though we might have mischaracterized key elements of the argument, ride sharing did raise questions about what it would mean if “cars were free.” They obviously are not “free,” but personal transportation based in part on ride sharing does in some cases affect the case for car ownership.
The important part of the question is imagining whether a business or product can exist, and what it looks like, if a key cost constraint is removed.
There is almost never a physical world ability to create Moore’s Law rates of change that are possible in the computing world. But there are going to be many other opportunities in the spaces where computing can alter cost profiles. Think e-commerce in general, ridesharing, lodging apps, video and audio content streaming, videoconferencing, use of millimeter wave spectrum that in an analog technology world is not commercially usable for home broadband.
But it is hard and unusual to ask the right question: what does my business look like if a key cost input is removed?
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