The earthquake in Japan and the related threat of nuclear reactor problems are surely the headline items for today. The human scale of the disaster isn’t even known at this point, but many of even those who have survived uninjured face a difficult future. Homes, businesses, and infrastructure have been severely damaged, and the consequences of the quake will linger for years to come.
Economically the markets are having a hard time predicting what will happen. The quake will impact Japan’s economy and production in the near term. It may cause a shift to production for internal reconstruction in the near term. In the longer term, reconstruction will likely boost the Japanese economy, which had been threatened with deflation. Short-term negative impact in Japan seems inevitable, though Tokyo seems determined to release a flood of money to counter any immediate liquidity risks. The nuclear issues will almost surely curtail the country’s aggressive plans to increase the percentage of total electricity that nuclear plants generate from the current 33% to a goal of over 50%. While near-term energy consumption will be down because of the reduction in driving, a switch from nuclear to fossil fuels may have some impact on energy costs. It’s also been suggested that the reconstruction in Japan may increase sales of technology and other products, and that insurance companies might dump Treasuries to pay claims. However, the turmoil seems to have boosted Treasury demand so any sales by insurance companies may well be quickly taken up with little net movement in price/yield.
The problems in Japan will certainly have an impact on how companies view disaster recovery. The scale of the problem in Japan makes it clear that where there is a realistic risk of natural disasters (as there is on the US west coast, for example) it’s critical to plan for disruptions that could have a considerable geographic scope, and for substantial loss of power and communication in the impacted area. That, in my view, will push companies more and more toward the concept of cloud backup, not only for data but for data centers or at least mission-critical apps. I think the big beneficiaries in this could well be the service providers, who are in a better position to distribute compute assets than most pure-play backup types and have the financial credibility to make enterprises comfortable.
Broadband policy issues are moving into a new period; AT&T has announced it will be imposing usage caps on both DSL and U-verse customers. Initially they’ll not be charging if people go over their cap only a few times, but it’s obvious that the carrier is joining many of its fellow ISPs worldwide and getting ready for usage pricing above a certain cap point. The caps are set generally where cable competitors set theirs, so it’s likely there will be little impact on the carrier’s churn. The question of whether access is profitable or not has been debated for years now, but if you look at operator financials and financial practices the answer is clear. We’re now going to get a broader practical demonstration of the consequences of poor Internet settlement policy. Yes, I know I’ve been complaining about that for a decade or more, but that’s the whole problem. It’s not like this issue has snuck up on us; we’ve just been determined to stick our heads in the sand.
Alcatel-Lucent has been pushing its Application Enablement and Open API Program as solutions to the revenue problem; most recently they’ve touted the integration of a Scandinavian carrier’s billing with Angry Birds in-app purchasing. It’s progress to be sure, but as I’ve noted before, operators can’t monetize the network by selling billing and customer care. They have to be direct players in higher-layer services, and that requires more than developer exposure of carrier IT assets, it requires the creation of service features in an exposable, manageable, context. That’s the goal of a new-age service layer, something that’s just as overdue as settlement.