From the Wall Street Journal today:
Phone Companies Set Off A Battle Over Internet Fees
Large phone companies, setting the stage for a big battle ahead, hope to start charging Google Inc., Vonage Holdings Corp. and other Internet content providers for high-quality delivery of music, movies and the like over their telecommunications networks.
Ah, the value chain. Expect to see Google buy the rest of it.
Responses
You can just picture the meeting where some brilliant strategist said, “Hey, we can maxmize our revenue by charging the web content players for using our pipes!”
Everybody in the room responded, “That’s brilliant!” Then, they stopped doing any real work and rearchitected their billing systems. Nice use of resources. Talk about chasing your tail.
Like Google hasn’t considered this already.
This kind of noise from ISPs just makes me sick. I am a firm believer in companies and economies being much better off for NOT owning the entire value chain. While it makes for short-term profits for the players involved, it kills competition and innovation, which is bad, bad, bad. The results are companies like Sony, who can’t get out of their own way when it comes to their Content and Device divisions hamstringing one another. Apple will suffer from this too, and sooner than I think we think. If you get one thing out of Larry’s CES speech the other day, it is that through open-ness can we empower consumers (and therefore provide value to them that they are willing to pay for).
“It’s the customer, stupid.” That’s what I have to say. Not vertical integration. Not value chain integration. Ugh!
As for Ma Bell innovating and providing good service for the period of time that it did, sure. But think about how much sooner the telecom revolution might have come if you could have bought your home phone from more than one company – think of portable phones, autodial, speed dial, etc. The monopoly was broken up, so I feel my point is kinda proved. In a monopoly, you rely on the dominant company to keep your mojo. When multiple companies are competing in an open marketplace with interoptability and open standards, there is no need to have faith in a single entity to keep innovation/service/etc. coming.
For argument’s sake, I’ll point out the Bells still provide a higher quality of service than mobile providers. Mobile providers also don’t have to invent everything from scratch, they’re relying on everything from compression algorithms to fiber optics that the Bells invented along the way.
The larger point is that innovation doesn’t only happen at the customer experience level. To scale up, a lot of innovation has to happen in other areas of the company, like infrastructure. It’s the same for airlines: the UX hasn’t changed since the 60’s, yet capacity has increased significantly in order the scale that experience to more people.