Gary Cohen’s Keynote Address
National Communications Forum 2000
October 18, 2000
Good afternoon. It is my pleasure to be with you today at the 2000 National Communications Forum.
Yesterday, on the plane it dawned on me that Halloween is coming up. It’s a holiday based on a peculiar side of human nature - one that enjoys a little scare now and then – especially in a ‘trick or treat’ type of world.
Kids love it, and, as I’m reminded on occasion when I read an analyst’s report or a trade press article, even adults occasionally like to tell a spooky ghost story.
One such yarn we have all been hearing about is what I call “the tale of the Bandwidth Boogeyman.”
You see, there are many industry pundits out there who are talking about a bandwidth glut. As all of us in this room know, a glut is truly a scary thing for any industry. But, just like the boogeyman, the bandwidth glut is no more than an elaborate ghost story, a near-sighted-analysis, created simply to scare people.
These naysayers just don’t get it. They are predicting a glut because they only see bandwidth and, more generally, technology, for what it is used for today – and not as an evolving business tool.
However, some people do get it. They understand that the communications needs of businesses are changing. They understand the requirement upon carriers and service providers to mold integrated telecommunication services to fit with and augment businesses’ varied needs to communicate locally and around the globe. They understand that carriers who perceive and embrace this change will not have a bandwidth glut because they will be the chosen providers. Sure, there may be small pockets of the planet that will have more bandwidth than they need, but for the providers that plan to the demands of their customers, no amount of bandwidth is excessive.
At Global Crossing, for example, we do not provide a telecommunication service that is rigid – one that calls upon businesses to conform to us – that was the way the telecommunications companies operated in the past. We take this revolution in fiber and the Internet seriously, and we take its impact on multinational businesses equally seriously.
Our network and value-added services are fluid and visionary, our technologies are rooted in integration. This allows businesses’ core operations and newer, more inventive business transactions, which use the Internet for execution, to use bandwidth as it is intended to be employed. Bandwidth is an ingredient in the networking solution… and networking isn’t just about speed. Bandwidth is being employed in a strategic manner as part of an overall network value proposition at the board-level of many organizations. As with all of the ingredients involved in creating the network solution – bandwidth is about building business advantages.
The fundamental importance networking now plays in expanding markets – creating new revenue channels and generating profit – has transformed the management of the network from a back-room business function to a boardroom function. E-business requirements and global competition are forcing companies to be net-savvy.
Our strategy at Global Crossing is to be right ‘in-step’ with this shift. We partner with the board-level leadership of our clients. We listen to their discussions concerning evolving their products or services and business execution to a new level. We, in turn, mold our telecommunications capabilities around their companies to capture the best and most lucrative forms of business interactions in their markets around the world.
Take Deutsche Bank, as an example. They are one of our IXnet financial services customers – IXnet is a wholly owned subsidiary of Global Crossing that provides tailored telecom services to financial services providers. This is a worldwide market and a market area that requires in-depth industry understanding.
Deutsche has 7 million customers worldwide. They have 4000 traders located in 20 countries. This is a perfect case study of the kind of company that cannot afford having interoperability issues and hand-offs infecting their communication. They do business in 20 countries, yes, but they don’t want to have to manage relationships and integrate services with 20 different carriers.
Deutsche Bank and over 1,000 other commercial enterprises, in the largely deregulated financial services industry, use our IXnet extranet to gain communicative reach to over 34 countries – all on the same network. There are no middlemen, only direct connections on a network that connects continents, countries, and the e-business companies of tomorrow.
Those who predict a bandwidth glut in the future have not grasped the revolutionary effect of networking on the business community. They predict demand based on the current applications of the traditional telecommunications industry. Anticipating demand for capacity in that manner has not worked in the past and will not work in the future.
Take, for example, the PC revolution. Early predictions for worldwide demand for computers were, in hindsight, ludicrous. Tom Watson, Chairman of IBM, said in 1943, “I think there is a world market for maybe five computers…” However, Mr. Watson made that claim by looking at computers for what they were at the time. Seems pretty ridiculous today.
Just as the computing revolution unleashed a wave of products and services that have changed the way companies operate, the new optical networking technology is having a wide-ranging impact upon how businesses function and business people think and plan in this digital age.
Leading Multinational Corporations (MNCs) realize this. They understand that the great bandwidth reservoir that we are building can be harnessed to produce powerful realities, realities that will dramatically alter the landscape of business, as we know it.
These realities include business incentives such as:
Reduced time and increased effectiveness to market. The faster you can communicate, the faster your company can move.
Reduced costs. Video conferencing, integrated networks and IP-based voice reduce the need for travel, dual networks and long distance charges. IP VPN’s offer a 35-65% savings over private line networks.
New revenues. Networking allows companies to improve existing relationships with customers and partners as well as foster new relationships in new markets.
Integrated business-technology solutions with a single point of accountability. Dealing with a single, global vendor simplifies troubleshooting network modification and most importantly, linkage between the network attributes and the customer business model.
It sounds dramatic, I know. But, in essence, what we are seeing is nothing short of a complete transformation of networking from a useful tool for business into an essential, integrated component of every aspect of a company’s business model.
The convergence of computing, rich and varied content and telecommunications with business practices is generating a demand for new services. Telecommunications is not – and should not be – just about transmitting voice anymore. The circuit switched world is evolving into an IP-centric world in which telecommunications, or better put, the power and possibilities native to IP communications, will become a great enabler of the success of MNCs. The technology is simply too awesome, too business-useful, to ignore and too valuable not to integrate into the MNCs' operations. Providing intelligent IP services to our customers enables us to offer VoIP, video, extra/internet connectivity.
What I am talking about here is complete business integration. The entire communications infrastructure – the physical, logical and customer elements – all must be fully integrated to be able to mold to the customer’s needs.
In the future, MNCs will demand, and should expect several things from a communications provider: functionality, bandwidth, global reach, end to end management and, of course, customer service. However, despite the fact that they all have the same general demands, it does not mean that they will be satisfied by the same network solution. Understanding our customers’ industry and company business models is critical to our ability to design an appropriate network and the systems that support it.
Notice the change here. Historically, companies have had to mold their business processes around the available communications infrastructure. Now, Global Crossing is targeted to provide a telecommunications infrastructure that is molded around the business processes of each multinational customer. This is a complete reversal of the longstanding relationship between the customer and the service provider.
As network traffic becomes data-intense and business-purposeful, relying on various network providers with various bandwidth availabilities and network capabilities is not optimal. As e-business adaptation proceeds, the packets in the corporate networks become increasingly important. The more that businesses embrace networking technology, the more they will demand from their networks. Instead of simply requiring packets to be moved quickly across the network, customers will demand flexibility, scalability, seamless application management, reliability, security and of course global reach. Customers will also expect their networks to possess advanced capabilities, which requires continual upgrading of the network. This means new fiber . . . and a lot more of it. Yes, I said a lot more of it contrary to the “glut” pundits. The reasons are many and include the fact that, a portion of the fiber that is out there today may not even be able to handle some of the more advanced traffic and customer base we are talking about. In some cases, fiber that has been in the ground for five years or more may not have been sized for today and tomorrow’s loads or may not have been placed on routes that require it now. Older optical networks were designed with fiber and electronics that were spaced differently with greater opportunity for signal degradation. Telecommunications companies must change what they actually deliver, how they deliver it and where they deliver it.
In short, telecommunications companies must become more sensitive to targeted customer markets. While the federal government, the entertainment industry, the financial industry, and the manufacturing industry all have telecommunications needs, their needs are different.
One of the needs that many communications companies have been unable to address is the demand for global network management. Since most carriers’ networks are neither physically nor operationally positioned to offer worldwide service, businesses must stitch together enough separate, independent networks to cover the geographies that are important to them. This is a management nightmare. MNCs will not accept this nightmare for much longer…not as their core business applications become network enabled.
If FedEx handed your package off to 12 other delivery companies to get it to its destination, and offered you no way to track your package, and gave you no guarantees that the package would arrive intact, well, chances are you’d use another service provider. Our industry is not very different.
Our customers want control, reliability, performance and support. They do not necessarily need or want to perform all those functions themselves. Global Crossing’s end-to-end, owned, operated and managed network permits us to offer our customers the ability to customize their network to meet their requirements and eliminate the network management nightmare by delivering services with QOS availabilities embedded in the fabric of our network.
We provide one network, with enormous reach, and with the bandwidth to handle the core traffic and to literally see through the entire system, its performance and operation from end to end. We can see our customer’s traffic at any point.
Companies operating globally cannot, and should not, tolerate the finger-pointing that goes on between multiple carriers when problems arise. They should not have to worry about delivery, integrity, QOS, or security for that matter, as their critical traffic is sent over multiple networks with mixed standards. They should have the ability to manage their traffic- after all, what’s inside those packets is precious cargo, indeed.
Let’s talk for a minute about what is inside of those packets. Not only are new technologies coming that will revolutionize business and consume large amounts of bandwidth, but exciting new business models are being developed every day that rely on networking technology.
A recent New York Times E-Commerce Report, for instance, discussed online content syndicators. These are a relatively new category of Internet businesses that act as intermediaries between sites that need content and sites that want to sell it.
Jupiter Communications, a research firm, forecasts that online content syndication and licensing will amount to a $1.5 billion market in 2004, up from $343 million this year.
This new category of Internet business is spreading to Europe, too. Companies like Bertelsmann are reportedly investing in US syndicators – there is also N-Factory in France, Germany’s Tanto and Your News in the Netherlands.
According to a recent article in the Wall Street Journal, “the global market for such syndication services and related technical support is now some $4 billion a year and could fetch 10 times as much within five years.”
This is just one example of an upstart industry that will be competing with everyone in the world for bandwidth. It follows in the tradition of radical innovations such as e-commerce and on-line auctions and it is a bridge to a future of new business ideas that aren’t even imagined yet.
Those who write at the dawn of the 21st century of a bandwidth glut are as shortsighted as a former commissioner of the United States Office of Patents, who, in lobbying to have his position abolished, wrote at the end of the 19th century, “Everything that can be invented has been invented.”
Just as Henry Ford’s assembly line sparked a wave of innovation then, the network Global Crossing has developed is now a catalyst for the creation of new technologies and applications that will consume the existing bandwidth we have in place and what we are putting in place. Obviously there will be localized areas of the world where there is more network capacity than is necessary at any given point in time. However, to believe that a huge portion of the lit fiber being installed will lie dormant completely overlooks the march of technological improvement, which is forever enhancing the performance and lowering the cost of fiber electronics.
Furthermore, this idea that a large amount if lit fiber will be unused ignores the impact of changes in other communication technologies that are part of the networking mixture. The wireless industry is a good example of this technology interdependency. We have all heard the predictions for the wireless market in the upcoming decades. The predictions are incredibly wide ranging but the one thing we can be sure of is that the industry is huge and it is going to get a lot bigger.
However, as bright as the future is supposed to be for wireless services, many people fail to realize that to enable the industry’s true potential it will require fiber as a critical component in the networking infrastructure. Wireless technology is essential to the telecommunications industry. The ability to send large amounts of content wirelessly to any location in the world is a tremendously powerful asset in the quest to provide the best service.
“But is it necessary or economical to string a network around the world, when wireless technology lets us ‘reach’ everywhere?” some ask. The answer is yes.
Wireless and wire line technologies are now integrated to create the broadband infrastructure. Telecommunications companies that understand this integration and utilize it can respond to the needs of MNCs to send any content to any destination on the planet. The wireless service providers still need the backbone and, in some cases, fiber-based local distribution to connect their global wireless solutions. If you can’t get the wireless data to the customer, it’s of no value. As in any delivery system, it’s usually the last mile that will kill you. The challenge is even greater when, as we have decided at Global Crossing, you have to go to the customer’s premise, because then it might be the last 500 feet that will kill you.
Whether you are interconnecting a wireless switch to either another wireless switch or a wire line switch, fiber will provide a large amount of the transport.
Fiber will also spur on new applications that are developing in the 3G IP wireless space. The integration of the wireless and wire line technologies will support applications that will flood global networks and facilitate the fluid migration of data streams to not only desktops and laptops, but to millions of phones, PDAs, and devices that have yet to be invented.
We at Global Crossing are not the only ones betting on a boom. This past spring’s wireless spectrum auctions in Europe garnered a breathtaking $35 billion. That’s a lot of money for a resource. That kind of investment is a clear signal of what the wireless industry is expecting.
I could stand up here all day and keep throwing out data and examples to debunk the Bandwidth Boogeyman. But the proof is in the packets. We at Global Crossing have built the world’s most extensive IP network for a very good reason. The world’s network traffic is slowly but surely packetizing. It’s becoming an industry cliché to point out that data is now outpacing voice. We here in this room know that. As the very nature of how we communicate changes, so too will the mix of traffic in today’s networks.
One example of this eclectic traffic is Instant Messaging. The Wall Street Journal recently theorized that Instant Messaging could be the “dial-tone” of the future. A market survey conducted by Forrester Research concluded that out of those people who use IM technology daily, a whopping 59% of them reported that IM’ing has reduced their use of the telephone for voice calls. 61 million people are already registered for AOL’s Instant Messenger service. That’s millions of people who are communicating via data, end to end. And it’s just starting to catch on as a way of communicating in businesses.
That, coupled with the proliferation of streaming video and audio, leaves us with a world that is bursting with data. Not to mention that many carriers and ISPs buy capacity at 10 to 12 times more than they actually use off-peak, since they have to prepare for unexpected spikes in demand, and the additional capacity reserved for redundancy, quality of service, and network restoration.
In addition there is voice over IP (VoIP). For multinational businesses, VoIP will represent a significant increase in functionality over traditional voice traffic. The top network equipment vendors are all furiously developing the infrastructure to support VoIP applications, both at the enterprise and carrier levels. Large enterprises will lead the migration, pulling internal voice calls out of incumbent carrier systems, and throwing them into the data mix.
On September 27th, for example, Global Crossing lit up its Voice over Internet Protocol backbone in our domestic production network. We have core VoIP gateway centers in Atlanta, Chicago, Dallas, Denver, Kansas City, Rochester, NY and Seattle supporting traditional long-distance switched services.
We are deploying core VoIP gateway centers internationally as well. We will extend the VoIP backbone to Tokyo, London, Frankfurt, Paris, Amsterdam, Copenhagen and Brussels by year-end.
This effort gets directly to the heart of the new business model I was talking about earlier.
If we can put voice over an IP network, we can cut substantial cost out of your network operations. However, some companies have heavy amounts of voice traveling through their networks, while others have less voice and more streaming video or less of both and more instant messaging traffic. The service provider must take the contents of the network into consideration when developing the network architecture. Intelligent IP networking enables QOS and increases the efficiency through “yield management” capability. Service providers must also act quickly to meet the upcoming demands of their customers.
We are seamlessly transferring our voice traffic from the circuit-switched network to the packet-based network. We are doing this because that is what Global Crossing was created to do. We know that different types of services will be demanded and will need to be bundled and packaged as complete business solutions. That is because large multinational businesses follow that new business model I mentioned earlier. Networking is inherent to their value proposition.
The carriers and businesses that make up our portfolio of valued customers will require more bandwidth, plain and simple. It is just a question of time.
Whether it’s new network applications, next-generation wireless services, 3G applications, instant messaging, voice over IP, or changing business applications, the Global Crossing network has been built to handle it all.
Going forward, Global Crossing is committed to serving those customers who have evolved or are evolving into large, global, sophisticated enterprises whose communications needs are intensive and extensive. Whether they want to send a packetized voice call from Prague to Paris or stream a video from Boston to Bogota, we will accommodate them. We will give them consistency and full network integration because we operate the entire network. We will remove the risk of middleman networks, and ensure that their most valuable assets, their information, will reach its destination at the speed of light.
As I suggested, when I began, the business model today is radically different from the business model yesterday. It is about using the entire mixture we call networking as an inherent component of the MNC’s value proposition. It is about weaving networking, with its bandwidth and reach, into the fabric of the business model.
So, we at Global Crossing aren’t frightened by the ghost stories floating around today about bandwidth glut. We are positioned, now, to deploy more than 101,000 miles of fiber in our network – and we are taking the carrier function to the next step – namely, enhancing customer services to businesses which are our clients and to those that will become our clients. And we will provide them all with the bandwidth and the networking they need to succeed.
Keep in mind that bandwidth and applications are a “chicken and egg” situation. At Global Crossing we firmly believe that if you put bandwidth in, you’ll stimulate the market in new and significant ways.
Thank you very much. |
