Market Shifts: LightSquared, Cloud, and Comm Standards

The FCC has reportedly (finally) said it won’t approve the LightSquared broadband-in-the-sky plan because of interference with GPS services.  I’ve never been a fan of the whole notion (two years ago I shocked one of the equipment vendors by telling them I didn’t think it would ever happen) because I don’t think the service would be commercially competitive, but certainly the FCC ruling would create angst among vendors (not to mention at LightSquared and Sprint, who is on the hook for a $65 million payment to LightSquared).

The GPS interference problem stems from the fact that GPS devices are small, low-powered, and easily overwhelmed by strong signals nearby.  That means that they could be impacted not so much by the satellite downlink but from broadband uplink traffic from devices near the GPS units.  The FCC has been wary of this issue for some time, and has finally decided it’s critical.  That leaves LightSquared with the ugly choices of a) hoping they’ll change their minds, b) trying to swap the spectrum, or c) shutting down.

IMHO, even if the spectrum issues swere solved the competitive problem is harder to pin down.  The founding notion of LightSquared was that of a wholesale LTE framework that could enable smaller operators to obtain a national footprint without deploying national infrastructure.  Obviously this would mean wholesale use of device-to-satellite connectivity, and with data usage growing you have to wonder how many data connections a bird could handle.  Some of more recent LightSquared options have been described as “hybrid” LTE and satellite and said to include fiber deployment, wholesaling stuff from Sprint, etc.  It’s never been clear to me exactly what LightSquared thought it would deploy and how it thought the thinning margins of mobile broadband could possibly support a wholesale middleman player.  Could this be a hype, dare we say, in our hype-ridden market?  Try to dig out the details on the network for yourself; you’ll likely come away with more questions than answers.  That’s troubling considering how far this process has gotten.

There are other hype spaces, of course, and none are more hype-ridden than the cloud.  Yet according to the cloud pundits, quoted in the cloud media, there’s plenty of opportunity for network operators in the cloud space.  At one level, that’s a kind of useless assertion; if there’s any opportunity at all, there clearly has to be some for the guys who own the networks.  At another level, it’s false because the theme of the stories is the disruption of the IaaS model and incumbent Amazon.  That’s not an opportunity, it’s a trap.

Some operators, at least, believe this.  One told me that they don’t want to move from depending on one service with low-and-shrinking margins (broadband) to depending on a new one—the cloud.  Yes, the operators have a natural advantage in any market that’s a race to the bottom; they do have scale and they also have a lower internal rate of return expectation.  But that doesn’t mean they have to eat sawdust if there’s caviar to be had.

Speaking of communications services, Cisco has decided to appeal the EU approval of the Microsoft acquisition of Skype, saying that there should have been more conditions set to guarantee interoperability.  The decision is unsurprising at one level; these days, everyone always says everyone else is either anti-competitive or infringing on some patent or another.  At another level it’s a thorny issue because the deal would likely accelerate a shift away from TDM overall (videoconferencing and voice), something that would clearly benefit Cisco.

The train has left the station on IP communications interoperability, in my view.  Regulators a century ago recognized that you can’t have a universal and efficient phone network if every town builds their own system using their own technology, and we got out in front with the notion of the Bell System.  Internet communications grew up in the age of deregulation, and so we’ve deliberately sacrificed standardization for innovation potential.  To impose a change in anyone’s protocol for anything at this point is more hurtful to the consumer than risking a kind of monopoly-by-acclimation where everyone flocks to one banner.  It’s a price we’ve paid willingly up to now.  What, after all, is Google or Facebook if not that?  Standardization efforts on something as simple as IM have had little impact, I’d assert.  How much would video or telepresence standards really do?

The real issue here isn’t “standards” per se, it’s the approach to community-building in complex services.  That, as I’ve said before, is a problem of a federation strategy and not an interworking strategy.  You can’t interwork things that aren’t based on the same essential feature and client framework, and in future services the personalization options offered to users alone will eradicate any chance of consistency.  You have to compose interworking of elements into service definitions, not interconnect the services that result from those definitions.

Apple is bringing communications features from its iOS appliances to the Mac, something that will certainly be managed more and more through the iCloud.  Whatever Cisco’s chances of success with the EU are (slim, IMHO), there’s little or no chance that Apple won’t field its own vision of teleconferencing, communication, and collaboration.  The only high ground Cisco could seize here is in the federation space, and that’s more a marketing/positioning stance than one before the bar.

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