Nation, Industry Lack Vision
By Jessica Davis -- Electronic News, 4/1/2004
In the wake of a devastating recession in the telecom industry and an uncertain future, Robert Lucky, a former executive and engineer with Bell Labs, declared that research and development entity dead.
Lucky made the pronouncement, and shared an epic-like outlook on the telecom industry in these uncertain times, during a keynote address at the Communications Design Conference in conjunction with the ElectronicaUSA/Embedded Systems conference in San Francisco this week.
"Lucent will tell you otherwise, but Bell Labs is dead," he said. "It's a third of its former size."
Bell Labs has gone the way of all research in telecom. With sharp drops in revenues, no one wants to spend on research. Worse still, there is no national vision or purpose and no one is responsible for the end-to-end network anymore, according to Lucky.
The telecom industry has experienced unprecedented pressure over the past few years, from the failure of new entrants, big debts, the research and development slowdown, and the transport of bits becoming a commodity product.
"When that happens prices get driven to the marginal cost which is nearly zero," Lucky said. "These are very bad characteristics.
"Sometimes I talk to economists and they bring up the analogy of their airline industry," Lucky said. "Then it gets quiet for a while and someone changes the subject."
Revenue loss at service providers has translated to even bigger drops in capital spending, decimating equipment makers such as Lucent, Nortel and others, said Lucky.
And while the wireless market has been growing, saturation is looming in that space. "When you get to 80 percent of the market, what do you do next?" Lucky asked.
Disruptive technologies such as wi-fi and voice over IP continue to threaten telecom revenues even further. That's because telcos make all their money from voice services. These days data services are practically free. And these new technologies threaten to move voice onto the data network instead.
That could be what's behind some carriers advertising calls at 1 cent per minute, a big drop from last year's 10 cents a minute promotions.
"I'm unemployed so I can say anything I want now," Lucky said. "But I want it free. Starbucks is charging for wi-fi, but there are plenty of places where it's free. I'm starting to expect it to be free. Instead of paying the $9.95 at my hotel, I stand in the window of my hotel and point my notebook to look for the free connections."
But in this new economic reality of practically free connectivity services, who supports the infrastructure? Perhaps a system like the one that supports interstate highways will develop, Lucky said. And while much of the infrastructure that's out there is obsolete, a huge debt hangs out there for the initial investment to fund that infrastructure.
"The real paradox is that all this depressing stuff has occurred at a time when demand is really strong and growing like hell," Lucky said. "What other business would have trouble if its product was doubling every year?"
On the Internet, annual traffic growth is 100 percent. Annual growth in Internet users is 40 percent. Broadband coverage has been growing all over the world.
Korea leads the world in broadband access with 73 percent household penetration, Lucky said.
"But now they are saturated," he said. "What's the next big thing?
"A lot of people say we should put fiber in every home," Lucky said. "Going back many years, I've often said that that is what God intended. But I don't know how you get from here to there."
Because of the big upfront costs, you need 40 percent of households to subscribe to the service and pay you $80 a month for it to make economic sense, according to Lucky.
"And what if a new technology comes in and people say they don't want to use your fiber anymore?" he asked. "You are sunk. You have a sunk investment."
Other potential ownership models could make such a system possible. For example, a monopoly, or an organization like a condominium association where each resident invests a sum.
Another trend that has contributed to the fall of telecom comes from the packet network services eating the circuit network's lunch. In the past, the telecom network consisted of a very smart network and very dumb clients, black rotary phones. In today's data networks, clients are very smart and the network is dumb, according to Lucky.
To combat the changing economics of the telecom industry, telcos are looking to add value to make more money, according to Lucky.
"They say we've got to put intelligence into the network," Lucky said. "But I think the shift of control from telco to user is the real reason Internet protocol causes a threat. Not because it's cheaper."
So as companies march forward, creating even more bandwidth, the search is on for the killer app to fill the pipes, according to Lucky. He believes the killer app is already out there, but no one wants to talk about it.
"About half the traffic on the Internet is file trading at sites like Kazaa.com," Lucky said. "This is controversial, but I don't like Digital Rights Management or the Digital Millennium Copyright Act. Who is protecting users? The user should have fair use privileges."
Ultimately, Lucky said, there is a lack of vision in the industry and in the nation.
"I've been around for a long time," he said. "There was always a vision. But I have no idea what that is anymore. I've never been deprived of a vision. We were always saying, 'wouldn't it be great if we could do that!'" |
