Despite
what we think, telecom wholesale service is not really a tech industry,
at least not in leadership. Engineers, scientists, technicians,
mathematicians, and computer scientists lead the real tech companies.
Google is an excellent example. Sergey Brin and Steve Paige, two
Stanford educated computer scientists, founded the company. German
companies almost always select mechanical engineers to lead them.
Obviously there will be cases of generalists who do quite well. Bjarni
Thorvardarson was not a STEM graduate, but he has a critical, yet open
mind and led Hibernia out of bankruptcy to a $610 million sale sale to
GTT. He accepted a sales force initially composed of four sales
contractors who had no salaries, but received 10% of net revenue, (gross
revenue minus third party network costs), used a contract manager to
handle standard NSA and MSA negotiations as opposed to a lawyer, and
took the daring step of building the new, ultra-low latency Express
cable in an era of surplus capacity and declining prices. In fact, he
tried to raise funding for it twice and was successful on the second
try.
Nonetheless,
it helps to have people who understand technology at the helm run fibre
optic networks. So that is the first strike against the industry. It
has consequences. Carriers are essentially at the mercy of a small
oligopoly of network vendors who are doing financially much better than
their customers. Not only do Layer 1 providers end up paying too much
for the gear, they get all sorts of recurring costs including port
activation fees and mandatory software license upgrades. Products are
designed so that third party components won't work. In these
circumstances achieving an acceptable return on capital is extremely
challenging. Yet, carriers as stodgy as AT&T have demonstrated that
white boxes work quite well. A good example of a better value than the
usual suspects is the Swedish company, Smart Optics. It uses open
network management software and open network elements. Current wholesale
telecom leadership has failed to tackle the problem of vendor
oligopoly. It has made the vendors rich, but service providers struggle
with high capital expenditures to revenue ratios due to commodity
competition. It reflects leadership's inherent conservatism with an
inordinate concern for keeping their jobs even if it dooms the companies
they lead. Sparkle, Aqua Comms, and other carcasses litter the
industry. Companies like Ciena will pitch carriers on how they are
reducing footprint and power, but beyond a certain point it makes little
difference. What matters is the upfront costs, the recurring costs, and
the lack of interoperability. This contrasts sharply with computers
where mix and match is the de facto standard and should be the telecom
equipment norm as well. Long term memory, active memory, peripherals,
and CPUs all interoperate flawlessly despite different manufacturers.
Comments
Post a Comment