Net Neutrality Friday

As we head into the long Memorial Day weekend, this gives me a chance for some reflection on where we are and how we got here. For me, it starts in 1968 with the Carterphone decision. This allowed people to hook up non-AT&T devices to the phone network. In those days, most of us had to buy or lease equipment from Western Electric (which became Lucent). This decision opened up what became the Telecom Equipment market to more competition and helped spur development of networks.

Then in 1984, we had the breakup of AT&T into Local (what we call the RBOCs), Long Distance (what we called AT&T) and Equipment (Lucent) arms. This had the consequence that the architects of the phone network (inside of Bell Labs - part of Lucent) were no longer in the same company as the operating divisions of the network. The same was true with Telcordia which turned the Bell Labs architectures into specifications.

In 1996, we had the update to the Telecom Act. This created an entire new class of Telephone company - CLECs. These competitive carriers looked to be one possible driving force for that new fangled thing called the World Wide Web, which entered the consumer lexicon in 1994. It seemed that the CLECs and other new Fiber Carriers were going to revolutionize the way that networks would be built.

Now if I take a look back at what actually happened, the Carterphone decision created an entire industry in the US. There were many new businesses spawned because the phone network was opened up. Jobs were created and in general things moved forward at a more rapid pace.

The breakup of AT&T ended very oddly. The winner was supposed to be the Long Distance arm. This faded over the years and at this point nobody remembers having to pick a long distance company or that international calls were dollars per minute. The equipment arm got in extreme trouble (wait until the telecom act) and is now part of Alcatel-Lucent (which has a pending merger with Nokia). Telcordia became part of Ericsson. The big winners were the Local Arms, which began to consolidate and are really now in 3 pieces: Bell Atlantic and NYNEX are Verizon. SWBT, Ameritech, Pacific Bell and BellSouth are all part of AT&T. US West is part of Centurylink. Nobody expected that outcome at all.

There are still CLECs and new Fiber Carriers. The Internet is going strong. But this combination created an equipment bubble that we are now just about done sorting through. Many of the traditional equipment companies used their cash to try to help fund these new Carriers through Vendor Financing. These equipment vendors lost their shirts and the outcomes can be seen in what happened to Nortel, Lucent, and Marconi among many. Lots of startups came and went and essentially ended the hey day of telecom equipment startups. Investors lost huge sums in fraud and stupidity in many of these deals.

And so here we are today with the fight over Net Neutrality front and center. As many of my readers know, this is not something that I fought about strongly. I want a neutral network, mostly because a non-neutral network is bad for business. But worse than this, I think it takes our eye off the real ball. How do we grow investment in the network so that everyone has lots of low cost bandwidth available to them. I think we played our government card this year and will be some time until we can play it again.

But no matter what happens, there will be unintended consequences. Keep your eyes open for them. They are often great business opportunities.

Happy Memorial Day! Jim Sackman Focal Point Business Coaching Business Coaching, Executive Training, Sales Training, Marketing

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