We are certainly living in very interesting times. Over the next few years, we will witness a fundamental realignment of the structure for the global communications market. I sense that some large players may begin to make some radical changes leading to some surprising outcomes. Some data points/observations to consider:
1) Ofcom is currently exploring the issue of structural separation of BT, separating the physical network from the services provided over the network, 2) The EU has come down hard on Microsoft with respect to the bundling of features with its operating system, 3) Qwest Communications is leading the charge for wholesaling access to its network by selling naked dsl, 4) There is a movement in Washington towards providing true facilities based competition by providing open access to the local loop, 5) VoIP is capturing the imagination of investors, communications providers and the market, 6) MCI is struggling under the increasing pressure in its enterprise, consumer and wholesale markets and is is likely to be sold in pieces, 7) Virtual IP Network Operators (including AT&T) of all sizes are emerging as platform providers, enabling new entrants to offer a range of voice services without the cost and burden of control of the network.
In the early 1980's, AT&T CEO Charlie Brown made the decision to lead the break-up of AT&T into separate entities. From Mr. Browns obituary:
In 1982, it was Brown who made the decision to divest all of the Bell Telephone Cos. as a means of settling government antitrust litigation. The result was the biggest corporate reorganization in history. The breakup unleashed a wave of deregulation in the telecommunications industry.We could use a moden day Charlie Brown to revitalize the communications business!
The optimist in me holds out hope that Ivan Seidenberg will wake up one day to the reality that it is in Verizon's best interests, and the interests of the communications sector and its employees and investors, to separate the network layer from the applications layer. Let Verizon split its local network from its voice and data services business. Let service providers have equal access to the local loop infrastructure, which provides the true monopoly constraint which impedes true competition.
Mircosoft appears to be setting itself up to do something interesting, as it has recently settled many outstanding legal issues, with Intertrust and others. However, it seems to me that the Company is still tentative with respect to its role in the evolving IP communications market. This is a natural reaction to the overhang the regulatory issues in both the EU and the US provides. Any market entry and product development strategy must include a "regulatroy impact' analysis. This has got to be limiting product innovation in Redmond. Just as Verizon should separate the network from the services, Microsoft should similarly separate the OS from the applications group. Then MSFT could aggressively go after the communications market, leveraging their significant installed base of instant messaging users and applications expertise, without the fear of regulators bringing them under attack.
Charles Ferguson, one of my favorite telecom thinkers and internet entrepreneurs, made a compelling case for exactly this type of structural separation at a recent Senate hearing. Lets hope this message starts to sink in. We need this type of structural change to unleash the significant opportunities provided by IP communications.
You were indeed a good man Charlie Brown!
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