Last month's Pacific Telecommunications Council event in Honolulu was the first one I'd been to since 2003. At that time, the carrier sector was reeling from the aftermath of the bandwidth bubble meltdown. The chips were more or less done falling, and the survivors were looking for things to be optimistic about besides a more rational bandwidth business and generally having survived the worst.
Back then, despite the disruptions in the market, the topics at PTC were fairly predictable - wholesale subsea capacity, new builds, satellite capacity, etc.
What were they talking about last month?
The cloud.
Okay, yes, they also talked about wholesale subsea capacity, new builds, satellite capacity, etc. But the conference agenda was dominated by the theme of "disruption", and Pacnet chief Bill Barney kicked off the opening keynotes by pointing out just how much the telecom game has already changed. Evidence: the stocks of telecom companies, CDN providers and data center operators have been declining the past few years, while companies like Google and Facebook have quadrupled their market cap in the same time period. (Indeed, a few weeks after he said that, Facebook announced its IPO, which reportedly could fetch a market valuation as high as $100 billion.)
Barney predicted that the biggest industry sectors in the next decade will be social networks, mobile, search and telecom carriers - provided the latter can transform themselves to be integrated into that value chain.
"The data center guys, the CDN guys and the telecom guys will all be in the same business in ten years," he predicted. "We have to change the way we operate if we want to be key players in all this, and we can work together to make sure that happens."
In other words: it's not business-as-usual anymore.
Meanwhile, other CEOs onstage with Barney - including Equinix CEO Steve Smith, KVH chief Richard Warley and Alex Kazerani of EdgeCast (Pacnet's CDN partner) - backed up his statement, maintaining that carriers are in a better position now than they've ever been to work with the Facebooks and Amazons and Googles of the world because they not only have the bandwidth but the business relationships to add value to OTT services that no one else can deliver.
Whether that's true, of course, remains to be seen, and will depend on two things: carriers being able to reinvent themselves sufficiently to be optimum partners and convincing OTT players of the same thing. Either way, a key challenge for carriers is understanding not just that they have to change, but just how much change may be required of them.
Mindset shift
KVH's Warley summed up the required mindset nicely: "You can't predict the future when you have an entire generation of people growing up thinking of the internet in an entirely different way... We need to create an environment where they can flourish. We have to think about how to enable and empower the really smart people with the next big idea."
Luckily, there are signs that carriers understand this much - witness this issue's roundtable discussion concerning carrier perspectives on cloud-based services for examples. However, the same discussion also reveals the external challenges they face, including regulatory compliance in Asia's heterogeneous marketplace and, crucially, convincing their own enterprise customers to trust the cloud.
Interestingly, some operators are taking a lead in that area as well. In February, five service providers - Hutchison Global Communications, VADS (owned by Telekom Malaysia), LG CNS, AAPT and Telstra - teamed with Oracle and PricewaterhouseCoopers to form a regional "cloud alliance" that aims to eradicate the uncertainty of the cloud's value proposition (and mitigate regulatory compliance issues) by implementing a best practices business framework for cloud service providers.
Will it work? Who knows? The Asia Pacific Cloud Alliance has its work cut out for it, as does any carrier gearing up for the cloud-based future. But the telecom industry has to start somewhere, and it has to start now.
MORE COVERAGE OF CLOUD COMPUTING, OTT