How the Internet and Telecommunications Industry are Changing Each Other
The telecommunications industry is changing rapidly - as is the internet - and they’re creating a mutual feedback loop. This feedback loop is virtuous if you’re a consumer of such services – but it’s terrifying if you’re a supplier in these industries.
Telecom is changing the internet. The internet is changing telecom. Let’s start with the latter assertion.
Skype – freeware comes to the telephone
The freeware model for software delivery is a proven method for quickly creating a large user base for your product. In the software space, WinZip is an example of a software product that quickly garnered huge market share due to zero dollar entry prices. LinkedIn, Yahoo mail and Gmail have had huge success in the software-as-a-service (SaaS) space.
Similarly, Skype – an internet-based PC-to-PC voice communications application – has irrevocably altered the market by proving that many users will accept inferior levels of call quality in return for free or extremely low pricing. This is causing other voice communications firms, including some long established providers, to drop their prices.
But far more important than the commoditization price ‘race to the bottom’ that Skype started is the fact that Skype convinces people to accept that the PC is a voice terminal. Skype has demonstrated that voice over the internet, especially when combined with instant messaging and chat technologies, provides some advantages that are easiest to provide when using your PC as a voice terminal.
There is nothing particularly unique about Skype; any competitor could offer the same service. However, its first mover advantage which resulted in a large established Skype community limits the likelihood of users switching to another service. This means that the race to the bottom will just quicken as new entrants (like Google – who now offers voice enabled chat on their Gmail service) enter the market with similar free offerings.
Dick Tracy has finally arrived
Forty years ago people dreamed of video-phones. Now that they’re here and available in online web-meetings via services like Webex, it’s surprising they’re not used more than they are. As availability and usage of these internet-native applications grows steadily, it must ultimately affect how people view their telephone. Traditional telecommunications companies have no choice but to innovate quickly or end up a relic.
The result will be that they will ultimately end up only providing the network access. The pace of innovation in the software world is so much faster than it is in the network provider world that incumbent telcos who are used to longer product life cycles will find it impossible to match a company like Skype, which releases new software every quarter.Continued on the next page