My background is not in telecom or software development, but business. Perhaps that is why I get lost in translation when our industry discusses the future role of Communications Service Providers (CSPs) in terms of dumb pipes or smart pipes. In my view, the discussion should probably go in a different direction.
According to Wikipedia, the term smart pipe refers to “an operator’s network which leverages existing or unique service capabilities as well as the operator’s own customer relationships to provide value above and beyond that of just data connectivity. The use of the term ‘smart’ refers to the operator’s ability to add value for additional (and often unique) types of services and content beyond just simple bandwidth and network speed.”
In other words, by becoming smart pipes, CSPs preserve the value of their pipes while enabling new business models and generating new flows of revenue.
Also taken from Wikipedia, the term dumb pipe refers to a service provider’s network “being used simply to transfer bytes between the customer’s device and the Internet. The use of the term “dumb” refers to the inability of the operator to add value for its customers beyond just simple bandwidth and network speed.”
A typical example of dumb pipe has been the iPhone. The argument here is that AT&T is just the dumb pipe that offers network connectivity and bandwidth because it is Apple, and not AT&T, that actually controls the end-to-end user experience and on top of that, when acting as a dumb pipe, the operator must pay a percentage of the customer’s monthly bill.
CSPs as dumb pipes is probably like comparing them to utility companies. That is, a business that sustains an infrastructure that offers a public service such as electricity, gas, water or sewage.
Perhaps the argument may have been somewhat valid when telephone services were only wireline and state-owned, but not anymore. Communications services are not like water or electricity for two main reasons. First, utility services involve the attribute of essential (and necessary to get “access to the house.”) We can’t live without water, but we can survive without a phone, Internet or TV, and as opposed to water or electricity, we can decide what type of services we want and how we would like to consume them. Second, due to the evolution of technology, an operator’s pipe can transfer more than just water (that is, voice, text messages or ringtones).
I’m not convinced that the dumb/smart pipe analogy is appropriate.