The LightSquared drama continues with news that the company has failed to make an agreed payment to satellite provider Immarsat, and that some investors in the hedge fund that launched the venture were suing the fund. There are also indications that some vendors may be under pressure from the likely failure of the venture, NSN in particular. Read all the stuff on the topic and you’re left with the conclusion that this was booted from day one. Maybe, but not for the reasons being tossed around.
The coverage on this deal has vacillated between saying there’s a big political gorilla in the room to saying that the GPS interference angle was inevitable from day one and should have been recognized. The big question in my view is more one of margins. Here’s this industry (telecom) that’s been mired in commoditization pressure for a decade. Here’s a proposal to enter the market with technology that has a very long build-out cycle, and thus would hit the market even further along the downward spiral into marginal ROI. So what’s the business model? Wholesale, which divides up the minimal margins available even further. It’s like saying “I can make money selling dirt because I have a new way to produce it!”
There are some successes, at least for the moment, in the networking space. Brightcove’s IPO last week saw the stock rise by nearly a third, and it’s worth wondering whether the gain here is linked in some way to the “LightSquared mindset”. There’s a perception that anything having to do with broadband, especially broadband video, is going to be great simply because everyone “knows” that it’s going to be REALLY big in the next couple of years. The problem isn’t so much big-ness as profit, of course. The streaming model isn’t going to create indiscriminate winners any more than other tech models did, but it will generate hype among the non-discriminating. With Brightcove the value is the linkage to a TV Everywhere-like syndication of video rights. The business model for streaming media that shows the best chance for near-term success is the model that uses it to extend and not to replace standard linear-RF multi-channel TV.
One of the big questions now is whether this revolution in video attitude will create an opportunity for the telcos. TV Everywhere is a syndication approach, something that says that you can see a show because you’ve subscribed (implicitly or explicitly) to it. The delivery of the material is secondary to rights determination, meaning that you can invoke delivery if you can validate rights. Telcos and cable companies could easily expect to play in the syndication space, and cable companies like Comcast have in fact managed to create a framework for rights-mediated streaming and even offer it to partners. The telcos are a bit behind the curve here, it seems, and the next question will be whether they can catch up or whether the networks themselves will take over rights management, on their own or via a third party. In that case, someone wanting to stream something would come to the network for validation, possibly through the streaming provider (Hulu, Amazon, YouTube), and the operators could end up disintermediated again.
Why does this sound like groundhog day? Operators have been waving to the departing trains of opportunity for five years now, and the reason is that they have yet to make a success of their monetization plans. For the most part that’s because they’ve yet to make a success of a service-layer approach. The need for an architecture to create NGN services is nearly universal. The essential requirements for this architecture at the functional level are almost universally accepted. The lack of progress in this area is if not universal, at least widespread. I’m wondering what it’s going to take to fix the problem, and whether there’s any chance of getting it while the operators still have a chance to participate in NGN services.