Significant WFH After Pandemic Shapes Security Mechanisms Such as SASE

If work-from-home continues at a significant level after Covid-19 pandemic restrictions have abated, it is easy to suggest that investments in security at remote locations will be an important necessity. According to a study by Sapio Research, commissioned by Versa Networks, an average of 44 percent of office workers  in the United States, United Kingdom, France and Germany will continue to work at least part of the time from home. 

source: Versa Networks 

That, in turn, suggests new investments in remote-location security. The study found 34 percent of businesses invested in Secure Access Service Edge (SASE) in the past year, and an additional 30 percent plan to do so in the next six to 12 months. 

The research, conducted by Sapio Research across 500 security and IT decision makers also found that 84 percent of businesses have accelerated their digital transformation and move to the cloud during the pandemic. 

“Digital transformation” can mean almost anything these days, from investments in processes to conduct transactions or operations “in the cloud” to use of such technology to recreate business models.

3 Pandemic-Related Threats Dominate Risk, Risk Managers Say

Business risk directly related to the Covid-19 pandemic dominates concerns, a survey of 3,000 risk management experts finds. 

Surveyed for the Allianz Risk Barometer, the top three dangers were lead by business Interruption, followed by the pandemic itself, while cybercrime--caused by exposure to digital intrusions and the shift to digital commerce because of the pandemic--ranked third out of 10 issues. 

Some 94 percent of surveyed companies reported a COVID-19 related supply chain disruption in 2020.

source: Visual Capitalist 

What might be striking is the much-lower scores for threats such as “market developments” (debt, gross domestic product health) or regulatory and legal changes, which might, under other circumstances, be perceived as bigger risks.

GCI Gigabit Take Rates are 4 Times the U.S. Average

GCI customers are buying gigabit home broadband service at about four times the national U.S. rate, GCI says. Take rates for gigabit service are in the 40 percent of passings range, compared to national U.S. rates less than 10 percent. 

Alaska’s remoteness, low population and distance from the equator (for geostationary satellite access) are historical reasons for limited bandwidth within the state. New long-haul optical fiber connections, as always, make the difference. 

source: www.submarinecablemap.com  

ESG Weighing Down AT&T?

With the caveat that some may not care about costs or other implications, AT&T CEO John Stankey, speaking at AT&T’s annual meeting, uttered something telling. The third question asked at the meeting (share price first, then ownership of CNN) was about “AT&T engagement on public policy and political issues.”

The question in this instance appears not to have been asked about the routine operations of its regulatory staffs, but about environmental, social, and governance issues that have seemingly become pronounced. 

Noting the “tough” environment for ESG that is “as polarized and as caustic an environment as any of us have ever seen,” Stankey might have suggested that the burdens now are such that management time is diverted from AT&T’s other pressing issues.  

“I know I personally and the rest of the management team are spending a lot of time” on these issues,” said Stankey. He did not quantify how much “a lot” entails, but a reasonable person might infer that it is a non-trivial volume. 

That leaves less leadership bandwidth for other pressing issues, which for AT&T includes its equity valuation; its debt load; its position in mobile and fixed network markets and its growth initiatives. 

Few would question a proportionate attention to stakeholder issues more broadly defined than “shareholder value.” But shareholder value is a weighing mechanism that suggests how well AT&T is managing the effort--as must any on-going business or non-profit entity--to sustain itself for success in the future. 

And that was the first question asked at the annual meeting of shareholders, the “owners” of AT&T. We might all agree matters are “better” when shareholder value; employee interests; environmental impact and societal good all can be fostered. 

The rub is the balance of effort and impact on outcomes when an entity is under stress, as AT&T is, in a market that is changing substantially. This year AT&T broke a decades-long tradition of raising its dividend.

AT&T had raised its dividend for more than 30 straight years, as best I can recall. That ended in 2021, when the company broke tradition and declined to increase the dividend.

To be sure, AT&T has not yet taken the truly-disruptive move of cutting its dividend, a drastic move that would portend serious trouble with its core business model. But investors clearly are worried about that prospect. 

One might well suggest that time-consuming ESG matters should not be prioritized as they have been when sustainability of the enterprise is arguably the biggest issue.

"The End" of Connectivity Services Revenue Model is Coming

“The end of communications services as we know them” is coming, argues the IBM Institute for Business Value. That puts the institute on one pole of an argument that never seems settled: should service providers build strategies around connectivity revenue sources, or look elsewhere for growth?”

In other words, should service providers focus horizontally on connectivity services or vertically integrate?  

In part, the study team--consultants Chad Andrews, Steve Canepa, Bob Fox and Marisa Viveros--base those recommendations on shrinking profit margins and lessened value of core connectivity services. That is what I have called near zero pricing.  

“There is evidence that connectivity may commoditize more suddenly and dramatically than expected,” the team argues. In other words, both lower prices per bit and lower demand for other legacy services will continue as a fundamental trend. 

“Margins for connectivity are likely to fall,” they note, as data consumption keeps increasing. “On the surface, exponential increases in scale would seem like a good thing for CSPs, but only if pricing keeps pace with the rate of expansion,” they say. “History and data suggest it will not.”

Near zero pricing is the term I use to describe the larger framework of connectivity provider pressures towards ever-lower prices. Others might prefer to emphasize marginal cost pricing. The point is that there is a reason the phrase dumb pipe exists. What we need to remember is that dumb pipe now is the foundation of the whole connectivity business. 

A caveat is that what people usually mean by “dumb pipe” is that a product has low value, is sold at low prices and generates low profit margins. That always is positioned as a bad thing. 

But think about it: industry revenue growth now is lead by broadband services (internet access), which is, by definition, a dumb pipe service. It is a way to get access to applications, not an actual application itself. Nor are profit margins always low. Broadband access now routinely has higher profit margins than entertainment subscriptions or most voice services or messaging can generate. 

The other issue is that value and revenue within the information technology and communications spheres keeps shifting away from “data access and transport.”

“In just three to four years,” sustaining growth may require “most CSPs (communication service providers)...to develop new competencies and assert themselves in new roles in value chains,” the IBM Institute for Business Value says. 

To be sure, that is not a novel bit of advice. “Think beyond connectivity” is about as standard a recommendation as one is likely to find any analyst, consultant recommending as a revenue growth strategy.  

“If CSPs are to thrive, most will need to develop new competencies and assert themselves in new roles in value chains,” the institute also says. As always, that advice runs counter to that of virtually all equity analysts, who always seem to want service providers to “stick to their connectivity roots.” 

Where the institute urges pursuit of different and new roles within the internet ecosystem, equity analysts want a focus on connectivity services. “Up the stack” or not remains a key argument. 

“CSPs should seek new ways to make money, beyond metering connectivity and access to data, as these traditional mainstays of CSP business models are likely to commoditize,” the institute says. 

“CSPs should seek new ways to make money, beyond metering connectivity and access to data, as these traditional mainstays of CSP business models are likely to commoditize,” the institute says. 

The institute identifies 5G and edge computing as key platforms, in that regard. Again, rather obvious suggestions. The institute also recommends a hybrid cloud strategy. That is not too surprising, given IBM’s commitment to hybrid cloud as its core strategy.

The institute also argues that telcos must become platforms. Again, not a novel view. The term platform is misunderstood by most, however. It has a different meaning when referring to computing than to business models. It is the former instance, not the latter, that seems generally meant by the phrase “becoming a platform.”

In the sense the institute sees matters, becoming a platform is meant in the sense of computing platforms. 

A platform in that sense is a group of technologies that are used as a base upon which other applications, processes, services, or technologies are developed. Platforms can be hardware (e.g., chips, devices) or software. Types of software platforms include operating systems, development environments (e.g., Java, .NET), and digital platforms. Digital platforms are highly configurable/extensible software tools that sit above traditional development platforms. 

Most observers would agree that core connectivity revenue streams are under pressure and are likely to stay that way. Where opinion really diverges is “what to do” about those circumstances. 

As wise as diversifying into new roles might be, history suggests how difficult that will prove to be for most service providers. That noted, most would also agree that opportunity exists in a number of areas including internet of things, edge computing and advanced networks. How to seize opportunities remains a subject of debate.

Telco Outsourcing Will Increase, Survey Finds

If, 20 or 30 years ago, you had asked any telecom executive what a service provider’s core competence was, you’d invariably get an answer related to “we operate quality networks” or “we understand networking” or something of that sort. 

Today, you might often get an answer that continues to emphasize the ability to build and operate communications networks. The odd thing is that most service providers are “building and operating” less these days. 

Few have gone as far as Sprint, which at one point outsourced the operation of its core network. But it is quite common for service providers to outsource towers, for example. And compared to the sourcing of core technology today, as compared to the monopoly era before 1990, telcos outsource almost all their core technology to third parties. 

To illustrate, where AT&T once developed and built all its core technology using Western Electric and Bell Laboratories, it now buys almost all its core technology from third party suppliers. 

That includes operating systems, edge computing, cloud computing, billing and operations support systems and even core networks, according to a survey of 500 telecom industry executives undertaken by the IBM Institute for Business Value and Oxford Economics.

source: IBM Institute for Business Value 

To be specific, IBM was looking at service provider willingness to use third-party cloud computing suppliers. But the general principle applies to all core network technology. 

AT&T CEO on Competition

Communications policy always is political and always has industrial policy ramifications. That is why one hears so much talk about who is "ahead" and who is "behind" in 5G. Much of that concern is industrial policy, focused on which industries, in which countries and regions, can gain leadership in infrastructure supply; applications; content or platforms. 

Private telcos and internet service providers generally, and incumbents always, loathe government-owned networks that, by definition, erode communications markets. For firms that are publicly traded equities, opposing the expansion of such competition has a genuine fiduciary duty obligation, one might note. 

The public networks business is a scale affair, made more difficult in the competitive era for many logical reasons, ranging from stranded assets to tougher growth prospects to slimmer profit margins. 

The migration of value away from "access and transport" and towards applications, services and content made possible by the internet does not help either. 

National policymakers always seem to want robust investment, quality services and low prices. Up to a point, competition tends to help. Past a certain point, with excessive competition, investment, quality and prices all suffer, as the network business model cannot be sustained. 

The balance policymakers must seek is to balance competition with sustainability. Nowhere in the world has it been possible to sustain many competitors serving the mass market using fixed facilities. 

Mobile markets have been the exception in allowing three facilities-based providers to sustain themselves. In some markets perhaps four can survive. 

The point is that nobody has yet discovered a way to sustain many suppliers, over the long term, and still obtain the benefits of competition (high rates of investment, high innovation and lower prices). 

In most markets there is rarely sustainable competition between two national, facilities-based mass market fixed network telcos. Mobile has done better, in that regard. 

We might not like all their policy positions, but firms such as AT&T understand the economics of their businesses quite well. Competition does reduce gross revenue and profits. Up to a point that is not a problem. At some point, excessive competition destroys the market.