Barbarians, bureaucrats and how to rewrite the future of communications (the third revolution)

A mantra
The first industrial revolution was driven by the steam engine and the railway. The second industrial revolution took shape when electricity converged with the combustion engine and factories began the era of mass production.

Two barbarians
One day, the painter, Samuel Morse, happened to overhear a conversation about electromagnetism between passengers of the ship on which he was travelling. Ignoring the originality of the conversation for the time (…), it was enough for Mr Morse to become obsessed with the subject. Shortly thereafter, the telegraph became a critical tool in the development of the railways.

Years later, Antonio Meucci, a sail maker, could not stop thinking about how he could check on his wife, who was incapacitated with severe rheumatism, while he was at work. He came up with the “teletrofono”. Although Mr. Meucci’s choice of name shows he had little talent for marketing, he had just changed the spatial and temporal dynamics of society forever.

It would certainly not have been possible to manage the construction and extension of the railway without the telegraph in the first revolution. Neither would it have been possible to do without the telephone in the second revolution, which had a much more global influence than the first (affecting Western Europe, the USA and Japan).

In short, they were two barbarians that, with bravery and excellence, led us on the path to revolution.

Bureaucrats
The twentieth century brought surprises but, basically, served to create a structured and well-balanced communications business. It managed to create more value than any other industry in the world, perfectly combining consistency, security and business expansion. It was complex and differential (and worthy of plaudits), but the reader will not deny that it was hardly sustainable.

New prophets
But then came the first decade of the twenty-first century and visionaries who broke moulds and rewrote the rules of the game. Attempts at transforming the value chain rapidly succeeded and nothing would ever be the same again. After 125 years, fixed telephony lost its hegemony to the mobile world, while new players made established businesses vanish into thin air, just like mobile messaging itself, which accounted for 15% of turnover. Wikipedia appeared on the scene and the Encyclopaedia Britannica went from selling 20,000 volumes a year to doing away with its printed edition. Meanwhile, after more than 300 years, the revenue from press advertisements was irreversibly overtaken by online advertising revenue; smartphones changed the revenue stream that our sail maker had dominated for over 150 years; and, simultaneously, the market value of new players and operators was dramatically reversed.

Rewriting the future
We realise that this is an inherently unstable business but we are probably witnessing the biggest turning point in its history. Do we have the actual margin to rewrite the future? Always. But, first, let us consider some assumptions that will make life easier for the communications market.

Suppose, learned reader, that regulations begin to make the same demands of OverTheTop companies as they already do of operators (the leeway represented by a life in “Beta” is gone). Let us suppose, also, that the regulations ensure and protect network investments, allowing discrimination on the basis of the service (we accept to do away with net neutrality as a given). Suppose that the regulations are standardised worldwide and operators can replicate their models easily and immediately (the operator has the same size market as other players). And suppose that mobile operating systems increase (we reduce the intimidating power of the current leaders).

This is an apparent dream scenario upon which many players continue to build, no doubt.

Awakenings
The past has shown that any situation will always be overtaken by new circumstances. The high returns based on fixed technologies lasted for 30 years, 15 years for the mobile world, and just 6-8 years for the world of data. One of the main drivers of the communications industry has been technological evolution; and so we incorporate a fifth hypothesis into our model. Suppose, finally, a new leap in communications networks, where each device is part of the network itself, working directly to transmit data for its neighbouring readers (with a bit of licence, the reader’s phone is also a mobile antenna to which the others will be connected). Yes, when fully developed, mesh networks will be a part of our near future. And it is foreseeable that a seemingly innocuous change will affect investment cycles, encourage new players, change the balance of power, etc.; a dreamlike scenario thwarted only by the necessary technological evolution. A new challenge.

There is evidence that supports this. The future knows nothing about regulations, it’s impervious to investment capacity, clueless about previous positions or technology. The future is all about the customer, the true source of inspiration for communications companies. The third revolution awaits them.

 

Jesús Martín Tello is partner of Business Telecom at everis. Contact to Jesús by LinkedIn o Twitter

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