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Are Google, Microsoft and Apple the Next Utilities in Telecoms?

Over the last few years the increasing amount of discussion about telecoms reveals that the real competition for telecoms companies is not from other telcos, but companies such as Google and others.

While I agree with this, obviously it is important to analyse it further. For example, it is not just a matter of Google competing with something like the White and Yellow Pages directories. What is happening is that another utility function, other than plain telecoms infrastructure, is required for the emerging digital economy to get off the ground. Of course the telecoms infrastructure (broadband) plays an important role in this. But this somewhat raw material in itself doesn’t really provide the foundations for the digital economy just as, for example, iron ore is not the foundation for the car industry.

What has triggered the changes in telecommunications over the last 15 years has not been the basic infrastructure, which was secondary, but the Internet. Suddenly this new ‘half-product’ appeared that also sat on top of the infrastructure, and it was the combination of these two that got the digital economy underway. Only afterwards was there a need for an upgrade of the underlying telecoms infrastructure.

It is this Internet layer that provides the opportunity for people and businesses to develop their own products and services for their own participation in the digital economy. This ICT combination is now delivering applications that are progressively forming the basis of the digital economy.

This now begs the question what, in our industry, are utility investments and what are value-added investments? It appears that many of the Google, Apple and Microsoft investments will end up in the utilities corner. There is nothing wrong with that as long as the business models around that move reflect this. At the same time, are these companies able to use that utility themselves to also generate extra value-added revenue? I am of the opinion that Google and Apple are well and truly on their way, while Microsoft seems to be struggling.

It is very important for all involved in developing the digital economy to understand the different business structures and investment models that need to be made available to them. Serious problems may occur further along the line if companies are not aware of this at the start, and do not address the specific structural components of their new company or investment in their business model.

The risk with utilities-based investments is that you can end up in dominant and monopolistic situations similar to, for example, Microsoft, which then results in regulatory intervention. In addition, as is currently happening with energy companies and telcos, such a situation could possibly lead to a forced split between the assets.

Furthermore, the new idea of what is utility and what is not in relation to the infrastructure needed for the digital economy has consequences for its design and architecture. It is not just a matter of providing the raw materials for the infrastructure, but also all the basic ICT elements which are an essential utility in creating the new economy.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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What? No mention of Amazon? Brett Glass  –  Jan 26, 2010 8:23 PM

Amazon’s Kindle is a communications platform, and some say that it poses a threat to Wal-Mart as a retailer.

Amazon certainly is leading new retail developments Paul Budde  –  Jan 26, 2010 9:54 PM

Amazon certainly is leading new retail developments based on the new communications platforms that are being available. They also tought us a lesson by doggedly sticking to their vision despite massive initial losses. They truly believed in what they were doing and that certainly paid off. They put financial rewards second and increasingly it are those companies that are winning new markets, not those who talk about protecting shareholders value and who take years to develop new business models to than conclude that there are no financial models to support that (e.g. most of the telcos). Paul

Or ISPs (like mine) who introduce and Brett Glass  –  Jan 27, 2010 1:51 AM

Or ISPs (like mine) who introduce and hone new, cost-effective business models and likewise defer profit, only to find that huge corporations like Google are spending millions lobbying to have our innovations made illegal. See http://www.brettglass.com/nprmcomment.pdf

There is no doubt that it is Paul Budde  –  Jan 27, 2010 11:15 AM

There is no doubt that it is a tough world out there Brett. As I mention in my analysis there is a real threat in any company becoming too big. However, at this point in time I do prefer competition from the Google’s over that from Verizon’s and AT&Ts;of this world. The first one in any case does innovate, the other two stiffle it.

Google rarely innovates. It buys and copies. Brett Glass  –  Jan 27, 2010 9:28 PM

Google, like all large companies, is well past the stage of innovation. Even its search engine technology is licensed from Overture/Yahoo!, and was copied from it right down to the Spartan search page of Overture's AltaVista search engine (see http://www.altavista.com). It bought YouTube after its own Google Video failed to compete. And so on. What's really scary is Google's corrupting influence in DC. It's not just lobbying directly; it's literally buying control of so-called "public interest" groups and think tanks inside he Beltway. For example, The New America Foundation is a wholly owned lobbying arm of Google (it's even installed its CEO as the group's chairman) and never deviates a micron from Google's corporate agenda. Any corporation with as much money as Google has to throw around is a clear and present danger to democracy, especially after the recent SCOTUS decision. And the "network neutrality" regulations which Google is attempting to buy in DC (and which, conveniently, exclude Google) are a clear and present danger to the Internet and to innovation.

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