[1867] in Commercialization & Privatization of the Internet
interesting historical document
daemon@ATHENA.MIT.EDU (the terminal of Geoff Goodfellow)
Sat Jan 4 00:07:25 1992
To: com-priv@uu.psi.com
Date: Fri, 03 Jan 92 21:08:16 PST
From: the terminal of Geoff Goodfellow <geoff@fernwood.mpk.ca.us>
Internet Host: nic.cerf.net Directory: farnet Subdirectory: farnet_docs
Filename: maloff-paper Last Updated: Nov 8, 1991
The Future of Midlevel Networks: Are We Repeating History?
Joel Maloff maloff@nis.ans.net August 1991
As the members of FAFNET gather to discuss and debate the future of the
Internet, the NREN, and midlevel research and education networks, it might
be useful to reflect on relatively recent historical parallels. It may
surprise some of us who have grown up with the Internet and education
community to know that there are historical precedents to the environment
in which we now find ourselves immersed. These thoughts are intended for
all organizations, including midlevels, national providers, and NREN
planners.
Once, there was an environment where organizations and individuals --
end-users -- had limited alternatives for communication with one another.
Cost was a driving factor, but the lack of creative and innovative new
options was also of concern. This led to the establishment by forward
thinking pioneers of cluster networks.
These cluster networks were composed of network circuits acquired from the
major long distance companies -- initially AT&T only, but later MCI and
Sprint. Coupled with switching equipment and and network management
services that these cluster organizations purchased, they were able to
offer lower cost and more creative services to customers in geographic
market niches.
Many of these cluster organizations had investors, or "seed money," to
help them get started. Some of the money came from large national
entities, but much of the direct support came from local groups that
needed access alternatives.
They prospered and grew, marketing the packaged services of multiple
vendors -- long distance carriers, end terminal equipment, and network
management services. In some cases, they took on the expensive task of
building their own network control centers.
I have not been describing the research and education midlevel networks.
This community started in the late 1970s and is almost concluded now. At
the height of the business, when entrepreneurs were springing up
everywhere, there were more than 1000 long distance resellers in the U.S.
After the initial shakeout of a new industry, there were 400. They had
names like TeleSaver, Long Distance for Less, TDX, SouthernNet, Microtel,
LiTel, and others. Now, there remain a handful.
There still is an association of the surviving organizations, called
CompTel (Competitive Telecommunications Association). Its membership has
dwindled and influence on national affairs has waned.
There are clear lessons to be studied from the long distance resale
environment.
1. Having a good idea, proper motivation, and entrepreneurial
spirit does not guarantee success.
2. Eventually, if an idea is good enough, and offers sufficient
revenue potential, large well funded organizations will enter the market
and push aside all but the best of the entrepreneurs.
3. Early investment moneys do not continue when investors see
limited return and increasing competition.
4. Multi-party alliance, where each organization retains its own
fully separate structure, rarely work for the long term, although they may
be effective for a few years. (The National Telecommunication Network is
an example of five organizations working loosely together. The CIX is an
even looser example of such an arrangement.) Cost and revenue settlements
issues, technical disparity, marketing turf, and personality issues tend
to drive these organizations apart.
5. Failure of the entrepreneurs to move on to the next area of
market void, and rather, continuing concentration on turf invaded by the
giants is a prescription for disaster. Those organizations that branched
out into new related areas were the successes. Telemarketing, fiber optic
facilities deployment, artificial intelligence in network management --
these are but a few areas where organizations that began as resellers were
able to migrate - - and succeed.
The lessons that I see for all of the members of FARNET are as follows:
Determine what you do well, and what you can do better than most
others, and stress the building of those activities.
Do not try to hold the status quo against bigger, better funded,
more able organizations. Consider outsourcing and alliances. Bend with
the wind and move to serve your constituencies rather than remaining
intransigent.
Diversify your markets and sources of supply so that you are not
captive to any one source and therefore vulnerable to whims and sudden
changes.
Today the U.S. long distance industry s dominated by AT&T, MCI and Sprint.
Can anyone name the fourth largest carrier in the U.S.?
It happens to be Cable and Wireless, a British-owned company.
Over the past five years, one company -- Telecom*USA -- had nearly forty
acquisitions or mergers before finally being acquired itself by MCI last
year.
How is the midlevel network environment different? Certainly in the focus
on research and education and the support from governmental agencies, the
Internet is different. Yet, we still find ourselves in an emerging
marketplace attracting the increased attention of very big players. We
should not underestimate the similarities.
Midlevel, regional networks must take the time NOW to reassess their
missions and focus clearly on meeting them. This means new approaches and
new efforts. Much remains to be done -- better user interfaces, clear
identification of application and use, less talk and more action in the
development of state networks or K-12 programs, etc.
The members of FARNET should concentrate on providing needed vision and
valuable services, rather than on trying to ensure the survival of
obsolete models. Let's learn from the long distance resale example and
not be condemned to relive it. Once has been enough for me.
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