The residential telecom (and cable) industries appear to be careening down a path of evolution from a provider of consumer network services to a revolutionary platform for all businesses
to redesign their products and services. This path is defined, above all else, by the Broadband Incentive Problem. The transition to a platform for the redesign of everything, spurred by this problem, is a story best told in three acts: Telco 1.0, Telco 1.0 SP1, and Telco 2.0.
Telco 1.0: Broadband access is currently provided all-you-can-eat in industrialized countries. The result of this business model has been remarkable broadband penetration, but this penetration leads to a plateau in access revenue while network costs continue to escalate (primarily from video over the Internet). Korea, which has the highest broadband penetration in the world, is the canary in the coalmine, as the chart to the right shows. The resulting Broadband Incentive Problem, as explained by the MIT Communications Futures Program (which included participants from Comcast, BT, DT and FT) is the following: "The broadband value chain is headed for a train wreck....Today's prevailing business models give wired and wireless broadband operators the perverse incentive to throttle innovative, high-bandwidth uses of the Internet." The network cost increases that prompt this throttling are both capital and operational costs, as the MIT report explains in detail.
"The broadband value chain is headed for a train wreck....Today's
prevailing business models give wired and wireless broadband operators
the perverse incentive to throttle innovative, high-bandwidth uses of
the Internet."