Providers: Your Pipe is Dumb, and So Are You

For several years now, service providers have been terrified of the so-called “dumb pipe” and its potential to remove them as the gatekeepers to various services. Many of them use protectionism as a way to lock customers in. CenturyLink denies CLECs access to any node upgraded to FTTN, Comcast requires bundling to get their fastest service, and Verizon even goes so far as to snip out the old copper lines when you jump to FIOS. The reality, though, is that the dumb pipe is already here and they are ill-prepared for it.

The numbers seem to bear this out. Every quarter, the cable companies report a loss of video customers, the telcos report a loss of voice customers, and both report adding broadband customers. An increasing number of people are turning to Netflix, Amazon, iTunes, and Hulu for their video needs while relying on cheap VoIP or cell service for making calls. The incumbents got lazy figuring that they were the only way to get those services, and now they’re ill-prepared to reverse the flow of customers.

It’s been kind of sad to watch them flail about as they try to figure out ways to keep customers without really rocking the boat. Comcast has tried to expand its VOD offerings, but for $10 a month and the cost of a Blu-ray player, you can use Netflix and even rent the occasional movie from Amazon. CenturyLink can’t even get a video product going, hopelessly mired in its bubble of debt from going on an acquisition spree, and care barely get any meaningful deployment of ADSL2+. Neither of them to have the will (or in many cases, the capability) to really roll up their sleeve and create new products to stop the slide.

So what does this mean for service providers? It means looking way beyond the traditional triple-play, a package that started dying three years ago. A breakdown of UTOPIA’s customer base shows that almost every customer is taking broadband, and less than half are adding another service on top of that. Ask yourself what kinds of new services you can offer or resell to saturate that pipe. Maybe it means hatching a deal with OnLive or XBox Live to go for the gaming market. It could be offering remote storage and file hosting for backups and remote access. Offering special QoS packages or VPN access to home might entice some customers.

The point is that if you aren’t finding new services to offer, the only thing you’ll be selling a few years down the road is a low-margin bit bucket from which you can barely eke out a living. That doesn’t sound like a good future, does it?

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