Editor’s note: Telecommunications is one of the areas of expertise of our faculty here at the iSchool. Yesterday, “Why WhatsApp is Worth $19 Billion and Why Telecomm Should be Afraid” appeared on Re/code. Turns out, the article may not represent the full breadth of the situation. I asked some of our faculty experts to respond:
From Milton Mueller:
Of course SMS is dead; those of us who spend time in Europe watched WhatsApp destroy the SMS market there three years ago. It was Dutch network operator KPN’s use of deep packet inspection to recognize the volume of WhatsApp on their networks and its discussion of how to charge for it that provoked a political outcry that led to Net neutrality legislation in the Netherlands in 2011.
The vertical integration between network providers and information services has been coming apart for some time. Cable operators are also threatened by cord-cutting, as people learn they can get access to movies and TV programs on their own schedule and preference through Netflix, YouTube and other information services.
But that doesn’t mean the big networks are dead; in fact it means they – and their expanded bandwidth to carry all these new services – are more important than ever. And you may not have noticed that a few days after the WhatsApp deal was announced, Netflix announced that it would be paying more to Comcast for faster speeds. So it is mainly a matter of these networks adjusting their pricing policies to supporttheir infrastructure properly.
In the last few years applications such as Skype and WhatsApp, have been slowly eroding the revenues of telecommunications operators because traditional per minute and instant messenger charges have declined to zero. This has been possible thanks to the ingenuity of entrepreneurs that are able to take advantage of increasingly powerful mobile phones and computers to make communication easier, cheaper and more sophisticated. It is surprising that traditional telecommunication operators have not more aggressively pursued applications of their own that can generate more revenues given the imminent death of the traditional offerings.
Monuil Zaber and I argue in a paper that it may be time for regulators to release the market and eliminate traditional interconnection and termination fees in favor of a system that is more closely aligned to the type of agreements that take place among Internet service providers. An all Internet Protocol network will make it possible everyone to have their own IP address and to make calls on the basis of these new identifiers instead of telephone numbers, which may still exist but will be fully integrated with an IP address that will allow people to be reached by any communication device including computers. The integration of telephony with computing will lead to what is known as next-generation networks (NGNs) that have the bandwidth necessary for the full convergence of video, voice, and data at lightening speeds with interactivity.
Why then are telecom operators facing declining revenues (and regulators) not jumping on the Internet bandwagon? In order to achieve their dream of next generation networks telecom operators require significant investments and, to this point, the revenue generated from alternative services is uncertain when facing the real costs of upgrades. They are extending as much as possible the life of their old business models while also working hard to determine the best way of generating unit revenues.
Have thoughts on the future of Telecomm? Share with us in the comments.