Vertical integration and adding new roles in any value chain are traditional ways firms seek to increase value or control costs and value. As much as connectivity providers talk about “moving up the stack,” app providers also can move “down the stack.”
And we might as well just acknowledge that it is easier for an app provider to move down the stack than for a connectivity provider to move up the stack.
The reasons are somewhat obvious if you think about the issue long enough. Any app, service or product provider already knows lots about their customers. In other words, a business operating above the app level knows what its customers want, why they buy and how much they prefer to pay.
A connectivity provider has to learn what its connectivity customers want, but typically has no direct knowledge of the intimate details of how those connectivity customers actually create value in their businesses.
In other words, firms operating at higher levels of the stack are intimately involved with the actual business functions connectivity supports. Transport and computing functions at the lower levels are less involved--if involved at all--in the higher level business processes.
Bluntly, a connectivity supplier only knows what a class or type of customer typically wants to buy, in terms of computing and connectivity services, but has no direct and detailed knowledge of the connectivity customer’s actual business.
That is why connectivity provider enterprise sales forces have to build domain knowledge. Those in the domain already know all that, in detail.
It no longer is unusual for an app provider to become an access provider, for example. Google Fiber provides only one example, operating as a retail internet service provider and as an owner and builder of substantial wide area networks across the globe. Meta, Microsoft and other app providers also are anchor tenants if not full owners of WAN assets.
Tucows, originally a domain name registrar, has become both a mobile services provider and now a gigabit Internet service provider.
There also is movement by new providers into existing connectivity roles. Cable companies, satellite companies and other original equipment manufacturers likewise have moved into additional parts of the retail connectivity services business, ranging from internet access to mobile services.
Facebook now leases transponder time to support internet access operations in sub-Saharan Africa and sponsors the Telecom Infra Project that develops new open source tools across the connectivity ecosystem.
In other words, it is far easier to move down the stack than to move up the stack.
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