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McNealy Says Telcos Falling Behind in Net Race
BobB-nw writes "Telecommunication companies need to go beyond just providing bandwidth and look into acquiring Internet destination sites that are heavily trafficked, says Sun Microsystems Chairman Scott McNealy. "I have explained to every telco that either you become a destination site, or the destination site will become a telco," McNealy said at a news conference at Sun Microsystems' Worldwide Education and Research Conference in San Francisco on Wednesday."
First they need to actually provide bandwidth, not just throttle their heaviest users back.
Do you think he'd be willing to let telcos with their huge amounts of cash buy some hardware from him?
How kind for pointing this out.
Wait, wasn't this AOL back in the day?
Companies such as Yahoo, Google and others are already moving into the pipeline, further making telcos more and more irrelevent to the core business of the internet. I easily imagine the telco's, cable co's, even RIAA/MPAA becoming fringe players in the future, as information truely takes on a new dimention. It is evolve or die time.
Karma Whoring for Fun and Profit.
For all of Google's and other "destination sites'" talk about buying all this wireless spectrum, the fact is that wireless will just never be able to match wired for speed or quality (a 20-year-old corded phone still sounds better than even the best cordless or cell phone). You just can't get around the fact that a wire (fiberoptic or copper) still has to be laid out there for the best results. And no "destination site" is going to be laying that line anytime soon.
SJW: Someone who has run out of real oppression, and has to fake it.
What if the destination site doesn't want to be owned by a telco? What if the telco doesn't want to provide the same type of content management access the site maintainers had before? What if the telco wants to charge the owners for what was previously free? What if there's a telco bidding war for who gets to own which site? And on, and on...
Every company has an essence that it must stick to. If it gets too far outside that core product/service, it almost invariably suffers and often dies.
... and at which point they often get overrun. Compuserve, AOL, etc. needed to build infrastructure to serve their content business ... but when the infrastructure was there, customers went elsewhere and both are now largely also-rans.
Retailers do not build major roads to facilitate reaching their stores.
Road-building contractors do not go into the retail business.
For a _few_ businesses, expanding into infrastructure construction may be required - but only to jump-start the market, at which point they need to get out of the infrastructure business
Electricity, natural gas, etc. providers have largely given up their infrastructure business.
Internet backbone service providers simply do not have what it takes to go into the content/destination business. It's simply not what they do, and others do it far better so long as there is sufficient infrastructure to support them. Google may be getting into the infrastructure business, but only to boost infrastructure capacity to match where they want to go in their core business; when Google gets the infrastructure to where they need it, they will have to let go of the infrastructure business because, simply, it's not what they do.
Can we get a "-1 Wrong" moderation option?
Personally, I think that a law explicitly preventing internet access providers from supplying any service except the pipe would be one of the healthiest things that could be done. It would prevent conflict of interest situations and promote real competition. Similar to how the movie studios are no longer allowed to own theater chains.
Having the access and content sides of the internet separated means that things like VOIP providers get an equal playing field. The internet provider no longer has the incentive to sabotage them. In a couple years, it will keep them from messing with video download providers in the same way.
This is rather like the phone company cutting off your calls to inform you of all the great 900 numbers you could be calling instead.
Slashdot Burying Stories About Slashdot Media Owned
Not a good scenario. Imagine Verizon giving more bandwidth to their search engine than to Google's, more to their auction site than eBay's, more to their SuperPages site than to AutoTrader. Sad. And sadder, I can't imagine the telco-lapdog FCC caring about it.
Yahoo, Google, etc. are going into the telco business because the telcos are not doing their job. Instead of facilitating customers' needs and making usage easy, pleasant and efficient, they are trying to squeeze every penny out of customer pockets with screwy billing plans, bandwidth & destination throttling, etc. - practices which hinder the services which customers want and which Google, Yahoo et al want to provide.
... so the businesses that suffer are taking advantage of the Internet's core purpose: distribute data efficiently around problems.
As long touted, the Internet is designed to work around breakdowns and bottlenecks. Current telcos ARE breaking links and implementing bottlenecks
Funny thing is, if the telcos would just focus on getting packets from point X to Y quickly and cheaply, and pass that speed and savings on to the customer, they would make more money and not have to consider going into businesses they're not suited to.
Can we get a "-1 Wrong" moderation option?
"Some" people are way ahead of the curve on being an internet of its own, but not only the telco wired land.
After all, the network is the computer ... BHWAHAHA ! ;)
Quidquid latine dictum sit, altum videtur
eg. mail is still a cost for, and from, most ISPs yet you can get a better a/c than they offer free from GMail.
The solution of course is, not to have an auction for the latest, soon to be extinct, DotBomb 2.0 bauble (Facebook I'm looking at you), but rather to develop a useful portal for your users,
Integrate Webmail and WAPmail, offer file hosting/backup facilities, offer file sharing facilities, offer community building facilities and generally cater your service to your user base so that they see you as providing their favourite car rather than just a road, (c'mon it's /. I had to stick in a car analogy)
In short it isn't enough just to offer connectivity any more, though if you're selling 16.4Tbps you may have an advantage for a while.
"Linux is for noobs"-The new MS fud strategy
In 1999, when I started working for a big telecom equipment company, in Finland mobile phones had a market penetration of about 45-50% (most adults) but pretty much every household had a fixed line as well. In only 3 years almost everybody discontinued their phone subscription - everybody has at least one mobile phone, including kids aged 7 or older. Let me repeat: 3 years.
Things change very fast in the world of telecommunications.
So could it happen that companies like google, yahoo etc. become partly telecoms? Will, what google is trying to do, become a megatrend? I don't have a magic sphere, but from what I can see, I'd say it's more likely than not. And if/once this ball starts rolling, the telcos better have a good strategy or they'll be wiped out or "considerably diminished".
"The agriculture ministry is not in charge of Gundam" - Japanese ministry official.
First of all, they do need to concentrate on providing bandwidth, because right now they really suck at that primary role.
Second, I don't want any of these skeevy telcos acquiring popular web sites, because it is inevitable that they will ruin them. Here's why:
A hypothetical company XYZCom, who provides my residential broadband connection, buys out and operates Slashdot. They now control both ends of my internet experience. What's can stop them from automatically charging me a nickel every time I hit "Reply" ? Nothing, it's incredibly easy for them and they can trivially word something in their contract to that effect. Then XYZCom decides it is unprofitable to serve outside users, restricts Slashdot to telco members only. I get burned, everyone leaves Slashdot and go post mindless drivel on Kuro5hin, world collapses under the sheer weight of inflated art-school dropout egos. Then the best part is when the telcos whine to the guv't about being so poor since Slashdot died, and get some new bill passed to defraud the general population even harder. Lather, rinse, repeat.
Besides, it just feels wrong to give the telcos even more power. That's like getting mugged by some wigger, and handing the little suburban faux-thug a bigger knife with which to threaten you. We already have few defenses against these corporate sellout behemoths, we don't need to be giving away our beloved internet.
-Billco, Fnarg.com
Yeah roadrunner, Verizon Wireless and others already do this. I use Mobile Web on my phone and I can't change the homepage on the phone to something else. It sucks.
Gorkman
Way to go McNealy, if we mix content and transport there won't be any network neutrality.
If anything, there ought to be anti-trust legislation preventing the same company to own transport and content, and preferable not "enabling technology" (browsers, operating systems) either.
the cellphone companies are the same telco's that provide the backbone of the internet. for years now they tried this by selling cell phones and providing all kinds of media services for them and AT&T is now making more money being a dumb bandwidth provider to the IPhone users. there was a /. story on this last month. and the rest of the telco's seem to be following AT&T's lead.
I think scott is just talking out of his anus and is afraid he is going to sell less servers to the telco's to provide all these media services.
in business it's usually not a good idea to get into too many things that aren't related because you lose focus and start being bad at everything. very few companies are like GE that can compete in many fields successfuly
Goddamn, someone needs to kill this guy before any execs fresh to the job pick up on this idea. I say fresh to the job because any old hand will have seen this before. Portals. The days when the idea was that the web started at your ISP's home page. When every ISP had a newsfeed, poorly implemented, with no depth, but a ISP portal had to have the news, and so they bought the cheapest feed they could, implemented it badly and put it on the front page.
Filled offcourse with all sorts of content you could buy from the ISP, but not the actuall content that actually is bought on the net, PORN. Hell, I worked for one ISP were they had special code for the frontpage that would only display the porn links during the late hours. Not that it really worked, because invariable the ISP content sucked compared to what was available on the real net. McNealy? The 1980's called, they want their AOL back.
The problem is that it sounds so logical. If you do not provide food services on your train stations dear transport company, then someone else will. It forms quit a bit of income, all those stands, often at least partially owned by the train company itself. It used to be they even provided pretty decent service.
Ever seen a gas station that just sold gas?
So why doesn't the same go for ISP's selling content? Because the train station example has one simple advantage. LOCATION. When I travel by train it is easier to use the supplied services at the station then go outside and get food there.
The same does NOT go for ISP's. I can switch between content sides at the press of a button, there is absolutly no reason for me to visit my ISP's newsfeed when I can go straight to the source. Why should I buy music from my ISP when iTunes is just a click away? Why should I use their branded search engine when google is just a click away?
IF ISP's had a form of lockin it makes sense, say that visiting the BBC news site cost me money and my ISP's Reuters newsfeed was free then I could easily see that some people would choose the inferior but cheap option.
Just a couple of minutes from Arnhem train station was a fast food shop with really good self-made snacks, cheaper as well, compared to the concesion stand at the station itself, but still, because it is hassle to walk the detour the crappy snacks at the station fetched a higher price.
The idea itself works, it just doesn't work for the Internet.
The older people among us know this, because it has been tried. In fact many a customer got so fed up with it, that entirely new companies jumped in the market ADVERTISING with the fact that they offered JUST internet access and nothing more.
And lets face it, it is a lot easier for the ISP's. If they sell music then they got to haggle with record companies, invest in servers, deal with complaints. If they don't sell music, they collect for the transmission of the music their customers get from whatever company is wiling to risk it. You know, my ISP EVEN gets its money when I pirate music. Let iTunes worry about what the record labels will do next, my ISP just transmits the data and gets paid for it.
No McNealy, you sometimes seem almost clever, but this article marks you as just another tie without a clue.
You are trying to sell portals. No thanks.
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You may solo them, I prefer them in a group.
Yes, I was thinking of GE as being an exception when I wrote that. (Viable posting sizes do not lend themselves to detailed analysis of every conceptual variation.)
GE came into being, and largely succeeded, by having the core competency "general electric": they did pretty much anything that had to do with electricity, and that at a time when a company _could_ (broadly speaking) do anything and everything having to do with electricity (kinda like IBM and computers for a long time). They stuck to their core competency, and it worked. As the company flourished, they were able to branch somewhat into other stuff - but kept that core alive, without which all would fail.
Eventually, the "electrical stuff" business got so vast and detailed and nuanced and competetive that General Electric had to largely get out of both the "general" and "electric" parts of the business. In came Jack Welch, who managed to do something _rarely_ done: change the core competency of a business, and survive. Since GE's massive growth had branched into so many subjects (not all electrical), and had gotten so successful at some of them (again, not all electrical), Mr. Welch re-wrote the core competency to "#1, #2, or not in the business". Everything GE (no longer an acronym, just a meaningless couple of letters) was not best, or second best, at was mercilessly pruned. "Neutron Jack" got his nick for vacating life from vast swaths of the company, but leaving the buildings standing. Plastics? Jet engines? Financing? not electrical, but darn good at it - so it stayed, adhering to the new core competency. Most consumer products (tape players, radios, TVs, etc.)? electrical, but losing out to Sony and other competetors, so cut the losses, don't fight where you won't win, dump the business. Train engines? actually giant electrical generators on wheels, and the department was really good at it, so that business stayed. Hydroponic farming? not electrical, they weren't good at it, and it was dropped - you probably didn't even know they tried it. #1, #2, or get out - that became the new core competency, and on a dime GE turned mercilessly to implementing it.
Yes, companies can survive changing their core competencies. To do so, they must make the change wholesale - and _stick_to_it_. Most try but fail because they didn't really change, they just branched, got lopsided, and fell over. "Do or do not, there is no try."
To the thread's point:
Telling a telco to get into the destination website business is lunacy. They're not in that business, they didn't develop competency in that business as facilitating their core, and the suggestion they try it comes directly from failing to succeed in their core competency - switching won't help because frankly they suck at both. GE succeeded in switching from making electrics to, well, making money because they were GOOD at the original core competency, and when they had to switch they had a good tangent to switch _to_, and they _made_ the switch _totally_. If telcos want to "win", they need to get GOOD at their core competency of bandwidth delivery; if they want to switch, it must be _to_ something they're already good at, developed as a tangent to the prior competency - and they have to switch completely, without mercy.
Can we get a "-1 Wrong" moderation option?
The difference is, I think, that security through diversification and outsourcing requires a fairly mature business environment with many players to choose from. If you're the bakery who's considering eliminating your delivery department and going with an outside vendor for that purpose, you'd want to make sure there were many choices of delivery services, so that you're not tied too closely to one. If lots of choices and diversity don't exist, it might make sense to keep it in-house. Since Internet services are a relatively immature business environment, and a large content-provider like Google has few backbone providers to choose from, it makes sense that they're looking to secure their position by bringing things in-house.
What's ironic is that the one thing that the telcos absolutely oppose -- network neutrality enforced by legislation -- would probably remove much of Google's incentive to build out backbone capacity. If the telcos were forced to provide nondiscriminatory service, suddenly there's no risk for Google of being extorted. With the disappearance of that risk also goes the impetus to be their own backbone provider. (I think there are historical parallels in the early 20th century with the passage of the Interstate Commerce Act and its accompanying regulation of goods transport, although the waters are muddied by the power that the transportation and industry cartels held in the ICC and in government.)
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I think that he is referring to long term and big sites. Honestly it's not too unreasonable. If Comcast is fucking me up the ass and I can get my internet from Google why wouldn't I?
The problem with that thinking is that his proposed *solution* is what's causing the problem in the first place, pretty much exactly as you lay it out. If the carriers stop screwing people, Google wouldn't have anything better to offer as a carrier. The message should be "if you don't stop being a bunch of dicks, someone will step in and kill you." McNealy's message, on the other hand, is basically "Since people want to get away from you because you're a bunch of dicks, you could become even bigger dicks, get a monopoly on all the media, and give people no recource but to do business with you."
Which seems like better business - make people want to use your service, or try to get a monopoly so people have to use your service? Problem with the second choice is that 1) only one company can "win", and 2) people don't want canned content anymore, so you can't win at that anyway.
Yahoo is an ISP and a high traffic portal, it does not seem to do them that much good.
This is incorrect. Horizontal monopolies -- dominating most of the business in a particular sector (e.g. Standard Oil, Microsoft) can run you afoul of the law if the monopoly position is used to restrain trade.[^1] Vertical monopolies -- owning a small piece of many different sectors in order to control the entire supply chain for a particular end product -- has never really been frowned upon except in very specific instances.[^2]
It was considered a reasonably good business practice until fairly recently (I'd say prior to the 1970s but you could debate this) to own as much of your critical supply chain as you practically could, and to this end you saw companies like Goodyear running rubber plantations, Alcoa (an aluminum producer) operating power plants, IBM operating chip fabs, etc.
The decline of vertically-integrated enterprises is more about flexibility and maturity of markets than regulation. You don't see Dell running its own fabs or turning out its own microprocessors, and you don't see Intel manufacturing finished computers and sending out salespeople and maintenance techs to end users, the way IBM used to. Both companies are intensely focused on what they perceive to be their 'core competency' (that the phrase itself has become a managementspeak cliche is a testament to how pervasive the idea has become) while leaving the rest to outside suppliers and vendors. This allows them to be more flexible than traditional vertically-integrated companies,[^3] but it requires the market to be relatively mature: if there wasn't a plethora of hardware manufacturers in Asia willing and capable of turning out Dell products, Dell wouldn't be able to operate the way they do.
Nobody -- besides perhaps the shareholders -- is keeping Dell from owning and operating its own chip fabs, assembly factories, or trucking networks, from owning the entire supply chain from sand and oil wells to tech support. They don't play in any of those sectors because there's no need to: I suspect there's a pretty long line of companies who want to be Dell's chip supplier, assembler, or shipper of choice. (And those suppliers have their own suppliers, eventually going all the way back to the silica or oil or whatever.) As evidenced by Dell's market share compared to IBM's (and IBM's subsequent reorganizations away from a traditionally vertically-integrated company), there seems to be merit to the whole scheme, at least from a business perspective.
[1] Having a monopoly by itself isn't sufficient, you have to have the position and abuse it; this is per some early 20th century U.S. Steel case that I can't find at the moment.
[2] You get to a vertical monopoly (as opposed to just integration) when by controlling the full supply chain you can eliminate other players in the market for the end good by driving costs down to the point where they can't compete; however since you don't fully control any single aspect of the supply chain, you have to maintain this level of performance in order to maintain the monopoly position -- you can't just rest on your laurels once it's accomplished, as you can with a horizontal monopoly. If you slack off and try to increase costs, your un-integrated competitors can reappear (subject to re-entry costs). For this reason, vertical monopolies aren't regulated to the same extent horizontal monopolies are, and some people would argue they're actually good for consumers in some situations.
[3] I think that you could argue that at the same time companies have become less focused on vertical integration as a path to success, many companies have started creeping out horizontally and looking for the other kind of monopoly. The intense specialization that modern business practice extols seems like it inevitably encourages monopolization of niche markets; vertical integration seems to encourage more competition. (Since companies with massive investments in a huge in-house supply chain want to wring profit out of it in any way possible, even if it means manufacturing some
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