Last week, Jason Calacanis wrote an article on how Google Fiber is not an experiment but a plan to take over this market and kill Cable and carriers altogether. Sure, there is an intriguing story to tell when you compare prices: $70 for Google Fiber for 1 Gbps, $80 for 30 Mbps cable, or $70 for 20 Mbps (V)DSL?
We will have to see:
a) Any telco needs a payback for infrastructure investment and operations.
b) Getting into all corners is usually very expensive compared to cherry picking.
The argument for a) could be that a major investment is in cables and that Google is with fiber just a generation ahead, like the cable companies were with coax over twisted-pair.
The question is how much bandwidth do we really need? Coincidentally, I am the Architect in a similar experiment. I am currently building a datacenter with 10 Gbps from anywhere-to-anywhere with maximum 10 µsec delay. Fabric technology has only been used for a handful of mostly government-owned super-computing centers, but never in a more general commercial space.
However, fabric technology became so price effective that it is applicable in classic datacenter environments, which had been built-in the past with Access, Distribution, and Core layers. From a mind perspective, a flat non-blocking fabric approach is a stark movement away from how we built datacenter the last 20 years.
Why do we need it? Because we can, because technology became cost-effective. For what are we planning on using it? Mainly to separate storage from hypervisor computing, abstracting servers into modules of storage, generic computing hardware, and VMs to make a cloud – similar to Amazon AWS or Microsoft Azure – just in a much smaller scale for the private computing need of an average business. This allows us to provision, scale, and move computing environments on a press of a button.
And this is the point, Gigabit connections to end users have existed just like 10 Gbps connection to servers, for some time. But for the first time, in either case, it is brought to a mass application. There might be no killer app, yet, but if you build it, they will come.
It might be premature to talk cable companies dead. By no means, they are not dead, yet. Their cable plant can also deliver a few Gbps. In orders to avoid the oversubscription problem, which any telco infrastructure has, they need to move closer into the neighborhood with distribution points – details.
It will be more a war in the minds of people: aging dinosaurs and good-old-boy business relationships against agile young technologists who can think outside the box.
Some food for thought: what if Apple, Samsung and the like take content distribution away from cable companies and cable companies are reduced to an infrastructure play? I am pretty sure that this scenario plays out in the mind of a few executives right now and scares a lot of folks.
I believe since some time that the media model is rapidly and irrevocably changing – a topic by itself. But it will affect the classic cable business. Today, you have 300+ channels with 60% commercials. Commercials are not just irritating but also waste of precious time. Besides, commercials are highly ineffective. When did you watch a commercial with attention the last time? Can you remember what the commercial is all about? Me, if I can remember, I swear never to buy the advertised product. Commercials irritate me more than anything else. We have them because advertisers do not know any better.
We are not just forced to watch commercials, we are also sentenced to watch live, or record in advance. We cannot just pick what and when we want. I developed a concept paper back in business school, which I shared with some investment bankers in the late 90th about VoD and they thought I was crazy. It is happening now. It has been months for me, probably closer to two years, that I watched live, or recorded, TV.
I have consulted to most large telcos in the US and have experienced them all as surprisingly flexible to adapt to changing business needs. I believe that Google is currently leading the pack because they can effort such an experiment whereas the traditional service providers have to work with the infrastructure (and business model) they already have.
This fight will be very different in the US where innovation is culturally promoted when compared to Europe, which culturally is based on carefully grown establishments and social hierarchies.
I am thinking that we will see this fight play out more on the level of content providers, which still have to determine new revenue models, then on the level of service providers. The big question for the telcos will be how to participate and consequently how their revenue model will look tomorrow. And that is everybody’s guess right now. (SB)
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