Telecoms provide a case study in disruptive technology

Telecoms provide a case study in disruptive technology.
According to an insightful article in Forbes, telecoms have lost a combined $35 billion in revenues over the last four years. The article calls the future for telecoms “both brilliant and bleak: fantastic devices and free services for consumers, disappearing dollars for telecom companies and their long-suffering investors.”

Now … destruction, courtesy of the omnivorous Internet, is engulfing the local phone monopolies and even threatens the cell phone industry. It promises to transform the phone system with new competition, plunging prices and a passel of new features. This next wave begins with “Voice over IP,” which means zapping phone calls over the Internet (or private networks built like the Internet). It continues with “Voice over Wi-Fi,” Wi-Fi being a free wireless on-ramp to the Net. It appears so unstoppable that even the old Baby Bells and cellular carriers have accepted it. Now they are about to accelerate the migration, launching a multi billion-dollar rebuilding binge to overhaul their old networks and offer cut-rate Net phone service. This, of course, will speed the demise of their mainstay business of voice traffic. But they don’t have any choice.
They don’t have any choice, because this is another industry in the throes of a revolution headed by consumers. If they don’t change, they won’t be in business in another year or two.
“Our business models will have to change; we have to rethink our network.” says Vinton G. Cerf, who helped build the original Internet and is now the head of technology strategy at MCI. That means giving up the century-old idea that selling phone service is a sustainable business. “The things the telecom industry sells may become an adjunct to what’s on the Internet,” Cerf says.
Qwest Chief Executive Richard C. Notebaert told Forbes that he wishes he’d started offering IP service sooner; “My only regret is that we should have been listening more carefully (to our customers).”

I use a quote from FCC Chairman Michael Powell in my presentations. “I have no problem if a big and venerable company no longer exists tomorrow, as long as that value is transferred somewhere else in the economy.” This is a warning to every institution out there, including my beloved broadcasting.

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