Time to Redefine Telecom
April 21, 2007

Telecommunication, according to Wikipedia, is the extension of communication over a distance. In practice, it also recognizes that something may be lost in the process; hence the term 'telecommunication' covers all forms of distance and/or conversion of the original communications, including radio, telegraphy, television, telephony, data communication and computer networking.

While defining telecom gets more and more difficult, the profit and ethics behind the business keep on diminishing. SBC spent $16B to a company whose revenue stream is declining more than 10% year over year. Verizon bought MCI, and in order to make deal lucrative, they say they will layoff over 7,000 people.

The reason for scaling-down in telecom is that the technological advancement has terribly been focused on communications. We all owe a thank to nineties for that... Lots of technical people has seen the future in Telecom and made huge amounts of mind investment to the business. Today, we are forced to live in an overly competitive industry where telecom is forced to be cheaper everyday. To make matters worse, a company called Skype appeared. This global P2P Telephony Company decided to make old fashioned definition of telecom a commodity through its software, which allows you to make free calls over the Internet. Other emerging companies like Net2Phone and 8x8 also flocked customers to make cheaper (sometimes free) calls.

Some traditional telecom companies have kept an awry eye on those start-ups while adopting technologies like VoIP. They mostly thought those new technologies are something to monitor and investigate. In other words, they are disruptive. Some assumed the danger and started firing QoS bullet, as those startups do not provide top-notch service like incumbents do.

The fact of the matter is, none of those business plans will hold true should they are based on making money on calls. Like Michael Powell said, “I knew it was over when I downloaded Skype...”

So, can we say that telecom is a commodity?

My answer would be no, if network providers accept to change their musty mindset. Three things are important if the full background of this new notion is to be understood. First is, telecoms exist to provide infrastructure. The rest needs to be handled by networking and computing companies.

The need for voice, video and data are going hand in hand. There is no value in them when there is no Internet. That’s why, the second is, the new business plan should be based on the Internet access. If telecoms want to survive, charging customers packet-based with the guarantee of excellent QoS is the only way to go. MPLS is their material to make this happen.

This way, optimization, the biggest concern of telecom industry, can be solved as the packet usage can be approximated. Demoting VoIP into an application to where it originally is can be doable in packet-based model. This new model will also disallow fighting against free-of-charge models and bring a fresh breath to network providers to generate more revenue.

Third is, not only the ability of optimization but also the prioritization and security of the traffic, if needed, will let network providers to put extra cash to their pockets. The money behind the content will not be their ball game.

Some may argue that there is no incremental cost of extra usage of packets to a network so the value behind tracking the traffic is nonsense. However, what is unseen is that it forces network providers to upgrade their systems quicker. They can also build their cost /profit structure easier.

Perils to the model would be the evolution span of MPLS and anti-spam systems. MPLS, as an immature technology, is welcomed with high expectations. Addressing all needs in such a short period of time needs a lot of investment. The story is almost the same for anti-spam solutions too. No customer would like to pay extra for spam as this is adding to the traffic that a user is using. That would force network providers to unify on an MPLS/ anti-spam model where they and their customers can rely on.

Once this new role of incumbents is well assumed with solid technology, then converting the so-called threat of telecom commoditization into an opportunity is feasible.

Burak Fenercioglu is a freelance writer and working for a computer network security company for over 4 years. burakf@nc.rr.com

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