Old new thinking in Telecom

According to BusinessWeek,
Microsoft has a brilliant solution for the telecom industry’s woes:
instead of selling dumb connectivity, sell value-added services. 
I have a little secret for you.  Every carrier has been saying
this for at least twenty years.  No one, with the possible
exception of Level 3, wants to be a “dumb pipe.”  Yet the only
“services” that have taken off so far are ringtones, SMS messaging in
Europe, and wireless data apps in Japan. 

The problem isn’t the lack of standards, which is what the BusinessWeek
article seems to suggest.  It’s a conflict between edge and
center.  My new Treo has
lots of great services like Vindigo that I willingly pay for.  I
spent $400 on the device itself, and more on an expansion memory card
to play MP3s.  The problem is that hardly any of that money goes
to Sprint, the telecom operator.  And with voice over IP, WiFi,
and the inevitable unbundling of phones and wireless networks, Sprint
will get squeezed even more. 

The money today is in the apps on the edge, hardware, and of all
things, dumb connectivity.  The first one explains Microsoft’s
presence at the Telecom Show, the second one explains the large Intel
and HP booths, and the last one is what carriers don’t want to
hear.  If you talk to US mobile phone subscribers, though, I bet
you’ll hear far more complaints about coverage and network speed than
lack of services or high prices.  The first user-facing telecom
company to execute the Dell/Wal-Mart model — being the efficient
commodity provider — will make a killing.  (Partly because they
will kill their competitors.)  Not that this is an easy
task.  Legacy billing systems and legacy culture are huge hurdles
to overcome.  The “services” alternative, though, is a
mirage.  The few exceptions like NTT DoCoMo only prove the rule.