DNS - Can Carriers Escape Dumb Pipe Future?

You also would be hard pressed to find any telecom executive who would deny the importance applications and software innovation play in the communications business.

 

But that raises an issue that is so far unresolved. Few carrier executives, except some long-haul capacity providers, think basic transport or access is an adequate business foundation. The dreaded possibility of becoming a “dumb pipe” provider is never far from the surface as device manufacturers and third party application providers continue to pioneer the actual end user applications adding value to communications and entertainment these days.

 

But there is one inescapable issue here. In the communications, entertainment, application or content value chains, the transport and access functions are the particular domain of telco, cable, satellite, fixed wireless, mobile and other providers. That isn’t to say they ONLY have a “dumb pipe” role, but simply to note that the irreplaceable and discrete role access providers supply is, quite simply, “access.”

 

That doesn’t mean such firms are not important suppliers of services delivered over those networks. The public switched telephone network does represent a managed service delivered over the access networks. Virtual private networks, multi-channel video, content acceleration or delivery networks as well as mobile voice and text services are applications delivered over the access networks.

 

What worries executives, and rightly so, is the fear that “dumb pipe” will reduce distribution and access networks to the role of a “commodity” within the value chain. It isn’t so much the role, it is the low margins commodity status represents.

 

But “Internet access” is a classic “dumb pipe” service. Service providers can add features to the access, create default applications (browsers, for example) or otherwise enhance the “dumb pipe” service. But those are enhancements. Broadband access is all about “dumb pipe.”

 

Over time, as the bulk of revenue transitions from “voice” to “broadband,” more of the business will be about “dumb pipe.”

 

Again, that is not to say ALL an access provider can be is a commoditized dumb pipe provider. It simply is to point out that the irreplaceable and specific role access providers have in the full value chain is based on “access.”

 

There is, in other words, no way to escape that role, short of exiting the business. That said, nobody expects access providers to do nothing about becoming providers of applications and features other than access. Verizon FiOS (News - Alert) TV and U-verse are examples. Other initiatives will happen.

 

But the time might be coming when access providers need to think about separating their application and software development efforts from the “network infrastructure” business in more visible ways.

 

The reason is simply that the business requirements for running a high-quality access network are not the requirements for running a success software development business.

 

“The strongest cultural theme is that the organization must openly accept the possibility of failure and allow the team that failed to live on and apply the lessons it learned, said Gilpin. Those of you with experience in the carrier business, ask yourselves: does this sound like the prevailing culture?

 

“Without this, individuals won’t be willing to take the risks necessary to bring innovation,” said Gilpin. People in a “fail fast” culture can even see failure as an opportunity if teams rapidly turn insights around in the next iteration and turn failure into success.

 

Again, there is an important cultural issue. Running a reliable, high-quality communications network is not conducive to such “fail fast” experiments. In fact, such experiments are more likely to break the network than improve it.

 

“We tolerate error because we’re always trying and taking risks,” said Steve Swasey, Netflix VP. But that’s a different environment. “Our product is movie enjoyment,” he said. “If we were running a nuclear power plant, we’d have a very different tolerance for error.”

 

That’s a sentiment more experienced network executives can understand. But it also points out the difficulty of trying to innovate in software while also running a high-quality access network. The culture required to run a world-class network puts breaks on the innovation process.

 

All of that suggests that larger service providers will not be able to innovate very fast in the core network, which essentially revolves around the simple “dumb pipe” function. But that’s okay. Innovation now occurs in software innovations, not the core transport and access networks. The issue is how to foster more software innovation.

 

There are other issues for carriers as well. Small teams are best at creating applications. “Once team size goes beyond 10 it’s hard to do anything truly innovative,” said Todd Olson, Rally Software manager. Networks are run by huge staffs. In some ways, they have to be. The culture of a large organization rarely is optimal for getting small team innovations deployed fast.

 

“Finally, in selecting the right people to drive software innovation, you must recognize that in today’s environment you’re no longer sourcing all the innovation inside your company,” said Gilpin. But that also suggests a key culture clash. They are changing, but the prevailing culture for any large communications company is to resist what “is not invented here.”

 

The point is that dumb pipe is an inevitable and foundational business for any access provider. That role cannot be escaped, short of exiting the business. It is pointless to argue that “we don’t want to be a dumb pipe provider.” That role is foundational.

 

The more appropriate argument is that “we don’t want to be JUST a dumb pipe provider.” That will be hard to pull off, as fast as it must be done, if software developers working on applications for large access providers are not separated in key ways from the rest of the network operations business.

 

Nor is it entirely clear that “applications” are best developed by large entities focused on access and transport. One can point to the Apple (News - Alert) iPhone and the App Store as an example. One approach might be to engage software teams solely to create apps for mobile app stores, without burying them inside the larger carrier organizations.

 

“Failing fast” in an app store does not damage the carrier’s brand or reputation for quality as an access provider. In fact, there is no reason why app store software has to be branded using the carrier’s own name. The point is that app stores are great places to try things. Things might break. Quality might be uneven. People expect that.

 

But few important innovations occur without some hiccups or failures. If a carrier wants to maintain its brand and reputation, it won’t mess around with software development too much. But that means it will be a dumb pipe provider, in large part.

 

App stores might be more important than we now believe, in that regard. It could allow faster and broader experimentation, without any failures spilling over to the access domain.

 

To answer the question, no access provider can completely escape the access function, and therefore cannot completely escape being an access provider, which is to say being a supplier of at least some “dumb pipe” functions. But nobody really believes that is all carriers will be in the future. The issue is how to move faster.