The Genie is out of the bottle – and is driving convergence between computing, communications, media and devices

The subject line of this posting paraphrases the heading of a paper on telecommunications/communications recently published by Oppenheimer, US investment bank (HT: David Isenberg). To those who have not been tracking ICT and telecommunications trends for a while, David Isenberg coined the term “stupid network” in calling the transition from the ’smart networks, dumb terminals’ Telecommunications Age, to ‘dumb networks, smart terminals’ of the Internet Age. Basically the message is that applications running over-the-top of underlying networks do not need “smarts” in the network provided by telcos. Just high bandwidth connectivity will do. This is the “dumb pipes” nightmare outcome that telecommunications vendors and network operators fear the most.

Indeed, a battle has been raging between telecommunications and computing industry interests for some years now. The telecommunications sector has a dream: “next generation networks”. Meanwhile, networked computing interest have lived their dream: the open Internet – or has Oppenheimer calls it, network-centric (NC) computing. NC is described as “….networking and sharing computer processing, storage and data, which can be accessed over the Internet using thin devices at the edge of the network” (page 25). Oppenheimer is calling the victory for NC computing. Oppenheimer summarise their analysis by saying “The migration to NC computing will…eventually lead to the break up of vertically integrated service providers along horizontal lines”. They support their case by pointing to the success of the iPhone, which in terms of its applications is separate to the cellular network.

Under a network-centric (NC) computing age, applications and smart devices have the advantage of global economies of scale. Applications and services innovation and deployment can happen much more quickly than services that are coupled to underlying network configurations. So these two forces at work – global economies of scale and rapid innovation development – are the most important dynamic that telecommunications service providers are likely to face over the next few years.

Oppenheimer point to a few examples of applications innovation in VoIP over mobile, such as Fring and Truphone. Fring makes it easy to connect to your favourite VoIP, social network or messaging application and WiFi hotspots. Truphone is a London-based but global provider of mobile VoIP – you can connect to Truphone’s social networking presence on Twitter, Facebook, YouTube and flickr. Later this year Truphone is expected to launch a ‘Local Anywhere’ service where customers will be able to make and receive calls via a local number and at local rates wherever they are. Great for overseas travel! According to Oppenheimer, developments like that could potentially cannibalise telecommunications industry voice revenues (fixed and wireless) and text messaging revenues. Oppenheimer expect that the explosive growth in data traffic would provide some good news to network operators, but that in the longer-term carriers might be better off being transport wholesalers. Oppenheimer assume that carriers could anticipate a healthy share of applications and advertising revenues.

In other respects the NC value-chain is expected to evolve into a horizontally segmented structure with the three main layers being 1) service providers; 2) software companies; and 3) devices. Interestingly, Oppenheimer anticipate that software companies and telecommunications network providers will strive for an open mobile Internet to avoid being dominated by a monopoly operating platform.

Oppenheimer also expect carriers to continue with a strong presence in the enterprise market, providing integrated security, mission-critical execution, dedicated customer service and integration with other data systems.