There is nothing we industry pundits love more than a good food fight. Cisco vs. Lucent. Google vs. Microsoft! Intel vs. AMD! Cable vs. Satellite! SAP vs. Oracle! But the Fight of The Future is what is going to happen on your mobile phone and in your home.
A few years ago I was invited to Bill Gates' home for dinner ("Howard, you shameless name-dropper! I bet you were there because Bill needed another waiter or two") and since Bill is not real good at small talk ("How 'bout them SuperSonics!"), I adroitly moved the conversation to how he had wired his US$70-plus million home. The issue was just how much bandwidth did The Home of The Future Need? Two Megabits? Six? Bill was quite comfortable talking about.... 100 megabits to the home. 100 Megabits!
After all these years, we know four universal truths about networks. One, they always grow. Two, they always get more complex. Three, the amount and form of content expands to fill the amount of ever increasing bandwidth. And lastly, the cost of bandwidth drops even quicker than Moore's Law.
On one hand, pulling fiber to homes is the brute-force method. Dollars in, megabits out. It is relatively easy to build new big pipes -- throw money at the problem. This is the Verizon strategy. Kind of like replicating the nation's highway system so that you have a superhighway to everyone's front door.
There is another way: mathematics. New compression algorithms actually reduce the amount of data needed by eliminating redundancy. So both trends work in concert to continue to cut the cost per bit of bandwidth.
Until about three years ago, it was assumed that the home or consumer might, just might, need high speed in, but never did people think that we would need high speed out. I mean, what were we, broadcasters? Yes, we are. We started by broadcasting e-mail, then we did pictures, then we did video. We were both a source and a sync of signal. And then we wanted to do it.... Wirelessly. Of course we did. CNN has a new service where TV subscribers upload their video to CNN headquarters -- which rebroadcasts to the world. There is even a site (youporn.com) where amateurs upload their "home movies"; this site is actually wrecking the business of the adult DVD business -- it is "YouTube" for the horny masses. Don't laugh (but its all right to snicker).
My wife wants to send videos of her plantings to her garden club, my daughter wants to discuss new acupuncture techniques with her classmates. Yes, with unlimited free bandwidth we will morph from bloggers to home broadcasting. The amount of content will grow to fill the available cheap bandwidth
Here is why our friends, the big dumb phone companies have some advantages. For one, they still run monopolies -- virtual monopolies if not legal ones. They own the wire.... And they are one of the two major wireless players.
Now, imagine that bandwidth was free... how would you run the world? Would you broadcast all the TV down one channel ... or would you deliver individualized TV streams to each user...on demand? Before you answer, remember that bandwidth is free.
Clearly you would do the latter. And you would know who was watching what, when, and where they were. And then you would sell, one way or other, that information to others -- completely customized information. Let's say that you have a customer at 123 Main Street who is watching "ER." Further, you know this customer has a four-year-old car, data you get from publicly available data. So you can insert an ad for General Motors because the viewer is a prime prospect to either buy or lease a new car. We have a company already that does that -- it's called Google. Maybe you heard of them.
Maybe I am out this Thursday night with my wife at the symphony....and I dearly want to watch "ER" on my cell phone. Maybe I want to load it ahead of time. Fine, be my guest. The telcos are great at doing advanced billing, great at delivering service levels and god-awful in developing content. Of course they are. But someone like Verizon can roll out V Cast Mobile TV and contract with Fox or CBS or a company that already has the content... and have increasingly fewer viewers over their old broadcast network. In fact, the cost for delivering this to you is zero. Zero marginal cost is a very impressive number. It means that any revenue falls immediately to the bottom line.