Posted: 10/1997

Interlopers?

Shifting technological paradigms can be quite hazardous. Steam
engines replacing sails, transistors usurping vacuum tubes and
the development of the integrated circuit and microprocessor are
examples of paradigm shifts that destroyed whole industries and
replaced them. Needless to say, industry-leading companies rarely
survive such shifts.

It isn’t clear yet whether client-server architecture and
fast-packet communications are shifts big enough to transform the
telecommunications business. It is clear that both will
dramatically affect the fortunes of carriers, resellers and
suppliers alike.

By enabling new ways of communicating, the new technologies
potentially create new industries. They also allow interlopers to
assault existing markets. Consider, for example, the computer
industry’s coming assault on core telecommunications and consumer
electronics equipment markets.

What leads Microsoft Corp. to invest in WebTV Networks,
Comcast Corp. TV and Internet networks? Realization that the next
big wave of growth comes not from operating systems and
productivity applications but from transactions and content.

What drives PC manufacturers to invade audio/video appliance
markets? Recognition that the next generation of consumer
electronics will be PC-based.

What drives Cisco Systems Inc. to add ATM core switches,
Digital Subscriber Line, SONET and access equipment to its
existing product line? Awareness that telecom networks delivering
all media types as packets are the wide area extension of the
premises business it long has dominated.

The point is that everybody making a living from the long
distance or local telephone markets soon will contend with new
competitors who come at the market from the perspective of the
computer industry. Voice and video in the form of packets is the
camel’s nose under the tent.

Equipment manufacturers and suppliers of international calling
will feel the pinch first. The real price arbitrage opportunities
lie in calling from North America to other continents.
Store-and-forward fax traffic is an obvious target, and
businesses with extensive international operations are early
prospects.

Domestic long distance is relatively safe, since tariffs
already are competitive and getting more so. Residential
consumers will not have extraordinary incentives to switch
carriers or technology platforms for standard voice applications.

Until Next Time,

Gary Kim
Editor