Telecom is a dinosaur. Yes or no? Recently we ran an item on how telephone communications over the Internet will cost telecommunication companies globally $US8 billion over the next four years. Keep in mind that this is the international telecommunications industry we are talking about, and a billion dollars is but a drop in the bucket for those operators.
What struck me about the item, though, is that the old world of telecommunications is changing at lightning speed, and nearly everyone is crying foul over the slowness of the traditional operators in meeting the needs of consumers. In New Zealand that cry is particularly loud as we demand faster communication services at higher speeds and greater bandwidth. Faster, faster, we cry as we match our expectations to Moore’s Law — a doubling of power and performance every 18 months. If you look at services such as ISDN, we seem to be so far behind the world leaders we can’t help but ask why we haven’t skipped over the technology altogether in favour of something even better.
Meanwhile, cable services are starting to multiply and, in the United States, DSL (new technology using existing lines) is beginning to look like a favourable option. At the same time we complain that our pricing structures are uncompetitive when compared with prices for similar services offered overseas.
Increasingly, computer companies are entering the telecommunications market. Companies like Intel, Microsoft and Compaq are pushing hard for users to start using video over the telephone. “We want you to be talking to your daughter or mum in the South Island over a video phone,” an Intel spokesperson tells a local gathering.
And it has the products to prove it — slow but perfectly formed, as they say. And then there’s the Internet: it’s a gigantic force now, and it’s only in its infancy. Expect it to merge into your television network over time, with the introduction of cable. As for your cellphone, it will soon get a faster data rate than the usual 9600 band. In time your cellphone company will even become yet another ISP offering high-speed connections.
It’s enough to give anyone, let alone a telecommunications company, a headache.
I asked Vaughan Smith, Telecom’s general manager for strategy, for his views on the topic. Judging by his responses it seems that there may still be some life yet in the old dinosaur. Smith says that Telecom’s preliminary trials of Internet telephony — with a commercial service to be launched early next year — have suggested that there won’t be an instant switch to the new medium. Some people loved the service, says Smith. Others were less enthusiastic. The problem: quality. It’s getting there, but if you want real quality the old low-tech way is still the best. Look ahead a few more years and Internet telephony will become a compelling option. In the meantime it is in Telecom’s interest to handle the transition to the best of its advantage, says Smith.
As Smith describes it, the telecommunication companies believe they have done a wonderful job in gathering so much revenue so far on the basis of using a dumb terminal — the telephone. In five years Telecom still expects to make 50% of its business from its plain old telephone service even as prices continue to fall. So if you are thinking of telephony alone, the future ain’t so bright.
But as Smith talks about other opportunities his voice lifts. Telecom sees the digital future as a huge growth area. E-commerce and multimedia present a glowing opportunity and promise a huge increase in data flow, to be matched by a corresponding decrease in charges. The Internet and Web haven’t yet caught up and matched their vision to the opportunities, says Smith. But you can be sure, he says, that content providers — newspapers, magazines and television — will need to rethink their businesses to meet the opportunities.
Maybe so, but you can’t argue the fact that one of the key drivers behind Telecom won’t be its own initiatives and vision but rather the spectre of competition. In the US, legislators have been crying foul over the way telecommunications companies are seen to drag their feet. Competition in New Zealand from the likes of Clear, Telstra and Bell South has been a major stimulant for the industry. We could go a long way further yet, as Telecom’s latest price hikes show.
Don Hill is managing editor of Computer-world. He can be reached at firstname.lastname@example.org.