The Pattern of Telecom Change

What does the future hold for business communications?Telemanagement consulting editors Ian and Lis Angus made their forecasts in a keynote presentation to the Telemanagement Live conference in Toronto October 18. To foresee the future, we must understand the past. The first part of the Anguses’ talk (below) takes up what we can learn from the last tumultuous decade of Canadian telecom. Part 2, which will appear in our February issue, will discuss five trends likely to shape business communications in the next few years. If past experience is any guide, coming transformations will be vast and unpredictable It can sometimes seem that everyone is an expert on telecommunications. It’s hard to pick up a newspaper without finding an editorial or a column written by someone telling the CRTC what to do, or expounding on the sins of the phone company or of Internet providers or something else in telecom. We often hear the same thing from people in the industry—they know the future, and everything would be fine if the CRTC or In-dustry Canada or someone else would just follow their advice. It’s not surprising to hear such things from people who have a vested interest in pushing some particular policy. But really they ought to know better. We have been telecom consultants for over 25 years, and in that time the one thing we’ve learned for certain is that the future never happens the way anyone expects. The changes that everyone predicts either don’t happen at all, or happen differently, or happen much faster or slower than predicted. And no one ever predicts the really big changes that transform everything. No one. The Way We WereTo remind ourselves—and you—of the dangers of overconfident predictions, we want to start by going back 10 years to see what the industry was like then, and what the experts at that time expected to happen. If the changes we’ve seen since 1995 are any indication of what we can expect in the coming decade, then you should be prepared to have your whole world turned upside down. Ten years is not a long time, but it is enough time to transform telecom and your business. From today’s standpoint, the most remarkable thing about 1995 was how little attention was being paid to the business potential of the Internet. It was useful for researchers, and great fun for hobbyists, but not much more. Few companies had websites, and most corporate email systems were not connected to the Internet. That was also the year Angus Tele-Management Group created its own website, and the year we launched Tele-com Update—the first Internet-based telecom publication in Canada. That was only 10 years ago. The big issue facing business telephone users in 1995 has been almost forgotten today. That was the year when Bell Canada sought and received the CRTC’s permission to charge by the minute for all local telephone calls made by business customers. They called the plan Business Exchange Measured Service. But a feature article in Telemanagement called it "tollgates on the information highway" and that label stuck. There was very widespread business opposition to the plan, and eventually Bell was forced to back down. Usage charges for local calls were defeated—but in 1995 everyone accepted that charging by the minute for long distance calls was normal and would always be with us. No one imagined that per-minute rates for long distance would be headed for the dumpster in less than 10 years. In 1995 there were only two cellular companies, their services were all analog, and their prices were high. Fewer than a million Canadians had cellphones, and no one predicted that that figure would reach fifteen million—47% of the population— in less than a decade. No one talked about wireless data, or text messaging, and there was definitely no discussion of ringtones as a major source of cellular revenue! The Convergence MuddleIn 1995 the government considered whether telephone companies should be allowed to provide cable TV. The cable industry asked for a delay, so that they would have time to upgrade their cable networks to support telephone service. Everyone expected that cable companies would soon offer phone service and that phone companies would soon deliver television. No one imagined that 10 years later residential phone competition would still be almost non-existent in most of Canada, or that television over phone lines would be available only in a few places in Manitoba and Saskatchewan. No one even mentioned Voice over IP. Or Television over IP. In fact, the so-called convergence debate in 1995 pretty much ignored IP and the Internet altogether. In 1995 the telephone number shortage was just starting. You could still get 800 numbers, and 10-digit local dialing was still in the future. There was no local telephone competition in Canada, no local number portability anywhere in North America. No one was even considering the possibility of wireless number portability. And no one had the slightest idea that you’d soon be able to telephone some people by using their IP addresses. In the fall of 1994, we listed 158 companies offering competitive long distance service in Canada. In February 1995 we warned that "there are too many companies chasing after too few long distance dollars," and predicted that "the majority of the 158 long distance companies" would fail. We were right in that prediction, but neither we nor anyone else expected that the number would soon fall to less than a dozen, or that long distance carriers as big as AT&T and Teleglobe would go into steep decline. Since 1995, we’ve gone through multiple waves of telecom changes, most of which no one predicted. Among other things: > We’ve seen the Internet evolve from a fringe phenomenon into a network that almost every business depends on for mission-critical applications. > We’ve seen Voice over IP, which wasn’t even technically possible in 1995, become massively popular. Today, VoIP is not just mainstream, it is rapidly supplanting the older telephony technologies used by every carrier—including technologies that were still brand new in 1995. > We’ve seen the explosive emergence of Competitive Local Exchange Carriers targeting the business market. Does anyone remembe C1? Stream Intelli-gent Networks? Axxent? Combined Xchange? They and many others promised effective local competition, superior service to business customers, and much more. They filled the newspapers with advertising and our mailboxes with flyers—and then they collapsed and vanished more quickly than they arrived. > We’ve seen the spectacular dot-com bubble expand and burst. We’ve seen the implosion of Nortel Networks, and the world’s biggest bankruptcy at WorldCom/MCI. We’ve seen top telecom executives sentenced to prison for fraud. > We’ve seen the break up of the Stentor alliance—remember that?—and the arrival of national competition between Telus and Bell. We’ve seen the spectacular growth of wireless telephony and we’ve seen the wireless industry restructure itself several times over. First we went from two companies to four. Then Telus bought Clearnet. Then Telus and Bell did a national resale agreement so they could compete with each other nationally. Then Rogers bought Microcell. Most recently, Rogers and Bell have formed a joint venture to offer wireless broadband. Who knows what’s next? In 2000 12 companies thought they knew what the next big thing would be. They spent $172 million to buy spectrum for fixed broadband wireless. Very little of that spectrum has ever been used. In the mid-nineties a couple of hackers invented Voice over the Internet as a way of bypassing international long distance changes. It was clever, but the quality was poor. Obviously a toy for kids, not to be taken seriously. Since then we’ve seen circuit-switched PBXs give way to IP-based servers in hundreds of thousands of businesses. Major long distance carriers now use IP to reduce their international carrying costs. And of course we’ve seen the emergence of an entirely new industry—IP-based, server-based, telephone-over-broadband phone companies that are so successful that Bell Canada has entered the market, and Telus is about to follow suit. It took longer than expected for any cable company to offer local phone service. For the first few years only one cable company did so, and only in parts of Nova Scotia and PEI. This year, we’ve finally seen cable companies across the country plunge in—and so far they seem to be doing pretty well at it. The long-awaited convergence of the cable TV and telephone industries is now under way. Expect the UnexpectedWe could go on, but we’ve made our point. The changes of the past decade should serve as a warning to anyone who thinks they know where telecommunications is going. > The changes everyone expected didn’t happen, while unexpected changes swept the industry. > The changes that were supposed to come quickly have taken much longer than expected, while some that we thought were far off happened very quickly indeed. The lesson for networking and telecom decision makers is clear: Whatever your predictions about the future of business telecom, don’t be surprised if they turn out to be off the mark. Follow closely the changing pattern of new applications and suppliers. Business planning has to make allowances for the unexpected.

The Pattern of Telecom Change

News | January 1, 2006

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The Pattern of Telecom Change

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