Metro Connect (Part III)
February 12, 2010
Let’s go beyond the take-or-pay prerogative. Let’s talk about demand—real demand and the timing that will trigger towers to have a need for 100s of megabits (if not gigabits) of bandwidth. I am a student of demand. I like to understand demand, demand drivers, macroeconomic underpinnings, regulatory constraints and timing of events. One of the reasons AFS has survived the recent Telecom and banking industry meltdowns is that we have never spent a dime speculating against future demand unless a customer was with us. Yes, we are quite conservative and contrarian. We also believe network reliability is important to customers—oh, crazy AFS!
You can’t deliver oodles of bandwidth wirelessly for last mile until the technology is available and deployed to towers. This technology—WiMax, LTE, 4G, etc.—is several years away from reaching a tower deployment point where carriers can switch customers between wireless networks to provide the user with a good, rich bandwidth experience. For example, going from EVDO today on one side of a link to a WiMax solution spilling out 40 megabits on the return side of the link may cause a customers experience to be somewhat limited, to say the least. Technology ubiquity, reliability and interconnectivity are underlying gateways to demand growth, but not the major factors (albeit important ones).
Riddle me this one, Batman. As LTE, WiMax, 4G, femtocells and whatever else gets deployed, what is going to happen to the demand for towers themselves? We have a lot of towers today because of wireless coverage technology distance limitations. When a 4G technology can reliably shoot 100 megabits 40 miles, how many towers do you need in between? Or, orthogonal in an urban area? I would not want a lateral to one of those towers that is no longer needed or have built a lateral based upon a promise of future business.
My last point regarding tower demand is about what makes the world go around for many of us—money. In order to understand demand growth (beyond video or iPhone), there is an upcoming phenomenon that will accelerate wireless bandwidth demand beyond comprehension today. What will really drive demand? Content. That’s right, content. Less than 2% of known content today is in a digital format for distribution across wireless or wire line networks. You must ask the question, “Why and when will the other 98% get turned loose?”
Understanding this scenario means you have to stop thinking about technology and don a business cap. There are standards being negotiated as I write this post and they may take several years to solidify. These standards are centered on a topic called Digital Rights Management (DRM). In short, owners or creators of valuable content do not want to release their content in digital form until the systems are in place to ensure:
1) Copyright protection
2) Preventative piracy of the content
3) Payment for how and when the content gets used
DRM is the event that will cause demand for wire line and wireless capacity to shoot through the roof. In my opinion, it’s several years away. Keep in mind, however, that money rules the day. Once content is turned into ones and zeros, the proverbial pony is out of the barn and the creators or licensees will want to get paid for usage.
If you don’t believe me, take a minute to study how much R&D Microsoft has put into micro-payment systems meta-linked to content or IP addresses for the Internet over the past decade.
The last subject we debated at Metro Connect was cloud computing–the hype, and indirectly, SaaS. Let me position it as I did to the attendees—we are at least a decade away from launching cloud computing platforms that are as reliable as they need to be. Fortunately or unfortunately (depending upon one’s perspective), in the early days of my career, I was neck deep in fault-tolerant computing platforms, communications and related technology. The idea of fault tolerant computing is that the application and associated data never goes down or gets lost—it is a very complicated subject matter and area of expertise. I hate to burst Google’s bubble, but a bunch of blade servers in an N+1 configuration built upon client/server machines at the network edge is not going to give you the reliability needed for a commercial business to place all its eggs in one basket. Gmail crashing for 36 hours is just one example of what I am talking about—take a business down for a day or two and the economic costs, loss of goodwill and diminished brand credibility are incredibly large.
As I have said before, nothing happens as fast in Telecom as one would think after reading our trade press, websites and PowerPoint presentations.
In closing, these are the topics examined and debated when you attend Metro Connect or other Capacity Media events. You don’t get a CEO commercial. You listen to knowledgeable and experienced C-level executives who lack any of the tendencies of a large company’s white tower CEO (who probably had someone write them a speech).
God, do I love America!
Written by Dave Rusin - Telecom Executive
Posted by wbrache | Filed Under American telecom, Telecommunications industry
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