This is not the first time it’s happening to me. The office at the university is closed today, this time due to the eastern holidays. Since I drove all the way up here, I decided to get a coffee at this cozy spot, that shares my name near the campus with free wireless, excellent view to the crowded main street (by the way, the female population seems to have dressed up to the occasion, i.e. in spring mood) and the led on my laptop indicating 45 more minutes of life in the battery. This is going to be a blitz post.
This is how the story goes: when I try to use the more or less traditional way of network market segmentation all more often I realize that it does not completely capture the dynamics stemming from the current structure of the telecommunications industry. On a quick note, the telecommunications market has been historical segmented into four distinct layers:
Physical Layer: Here lie all the passive elements that the Internet infrastructure and the access networks are made of (i.e. ducts, poles, tubes, cables, POPs etc).
Access Layer: In this layer we generally consider active equipment, services and business models that enable access provision to the end users. In this layer are included standard services such as email, web, DNS etc.
Content/Services Layer: This layer refers to the fast developing services and content offerings we are used to call advanced services such as IP Telephony, Video-on-Demand, IPTV.
Terminals: This layer has been liberalized since the mid 80s and vendor’s business models thrived by offering advanced customer premises equipment that enable the service provisioning and enhanced quality of service.
In trying to apply contemporary business models, regulation rules and competition strategies given this particular market segmentation I run into troubles when attempting positioning in each layer distinctively. In today’s market that specialized, horizontal business models have started to make more sense there is a great need to accurately distinguish between physical, access and service layers. What follows is “my” perception of the Broadband Market that helps me distinguish the added-value that each layer brings to the broadband product:
Physical Infrastructure: This includes the passive elements of the network infrastructure (i.e. poles, trenches, ducts, tubes/mini-tubes, optical and copper cables, distribution frames, etc.) and other auxiliary active equipment or passive element (i.e. rack space, cooling devices, electric power supply, UPS, power generators, etc) required for operating in the upper layers. I would consider even air being part of the physical infrastructure. Contrary, at large to fixed-line infrastructures, the weather conditions (e.g. fog, humidity etc) can directly influence the quality of services in the upper layers in wireless networks. Unbundling regulation (LLU being the most notorious regime of this kind, physical collocation being another) focuses precisely on this layer
Spectrum/Bandwidth Services: Right atop the physical infrastructure are the spectrum or bandwidth services that enable broadband/Internet services provision. Service providers use active equipment to leverage on the properties of the physical infrastructure and offer data services. Regulation in this layer deals with the competitive use of capacity featured in physical infrastructures. Bit-stream is the most noted regulatory regime in this layer. PON networks also operate distinctively on this layer. DWDM technology provides a clear operation on this layer too. The discussions on white spaces (in US) and digital dividend (in EU) are relevant to that particular layer.
Internet Access: This is the traditional ISP’s offerings. Here, I consider IP connectivity (e.g. IP addressing), IP interconnection (which allows Internet connectivity) and protocol transparency (i.e. enabling the use of services offered in competitive networks and international content/service providers). Protocol transparency has also to do with how the Internet access providers treat the traffic that passes through their networks. The debates on net neutrality, traffic throttling, deep packet inspection are centered on this layer. This is the layer that ISPs have full control at, and thus are experimenting in ways to discriminate or favor specific value-adding services against others.
Standard Services: Internet access is often bundled with a set of standard services that can make an Internet connection more meaningful, such as web hosting, DNS, email etc. At the “dawn of time” these services used to be provided only by the Internet access provider, but as things developed we have seen more competition in these services. That is why I take out these services from simple Internet access. Providers of standard service cannot be granted as direct competitors with Internet access providers. Their main focus is to attract users from this low to none marginal service layer and monetize on other advanced service offerings.
Advanced (Broadband) Services: This is the layer that, by many, adds the true value to the broadband market. These are the services that take full advantage of the broadband properties (e.g. always-on, high-speed, low latency, reliability etc.) to offer advanced services to the end-users, such as telephony, video-based services, health and education services, e-government, public services etc.
That’s the broadband market from my standpoint. Whenever I tried to analyze a telecoms (public or private) business expansion strategy this model simply fitted perfectly.
p.s. 2 minutes left in the battery. I made it ok! Now, allow me to just finish off my coffee!
