Business Tools Blog

Microsoft’s Steve Ballmer was quoted in the Washington Post,

What is your outlook for the future of media?

In the next 10 years, the whole world of media, communications and advertising are going to be turned upside down — my opinion.

Here are the premises I have. Number one, there will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form.

10 years?

Yeah. If it’s 14 or if it’s 8, it’s immaterial to my fundamental point. . . . If we want TV to be more interactive, you’ll deliver it over an IP network. I mean, it’s sort of funny today. My son will stay up all night basically playing Xbox Live with friends that are in various parts of the world, and yet I can’t sit there in front of the TV and have the same kind of a social interaction around my favorite basketball game or golf match. It’s just because one of these things is delivered over an IP network and the other is not. . . .
 

In late March, BearonBusiness wrote that bandwidth is growing and that’s an understatement.  I think we picked the right industry at the right time.  Content might be king … but if you read Ballmer’s comments closely, the content isn’t what’s changing, it’s our ability to interact with the content that will change.   The interaction described above requires lots of bandwidth. 

Does the Bear have a crystal ball? Read his The Supply Side of the Equation post:

Zayo’s Investment Thesis:

• Bandwidth is rapidly growing and this will persist
• Fiber will be the workhorse for bandwidth transport for as far as the eye can see
• New generations of fiber are unlikely to make current generations of fiber obsolete

A fair response at this point is a heavily sarcastic ”haven’t we heard this story before?” That is, the three points above led to lots of dollars being spent on the construction of fiber networks. My time horizon begins in the late 1980s, when competition with the baby Bells began. (MCI, Sprint and the break-up of AT&T had already taken place—I’ll leave it to another blogger to cover the roots of LD competition.) Between the late 1980s and early 2000s, many billions of dollars were spent by competitors to the former AT&T monopoly. By my estimate, these companies invested $85B. That is a big number. (Later, I will show my derivation.) $85 bill is a lot of dough.

Granted this money was spent on more than just fiber construction and associated electronics. Switches, colo facilities and opex burn chewed up a big portion. Regardless, $85B or thereabouts was invested with lots of it pumped into ground. In the meltdown, it was not demand that was the problem—it was supply. There were simply too many companies with too much bandwidth (and other stuff) to sell. It didn’t matter that demand was growing—it was not growing fast enough to justify the ample supply.

So why does Zayo believe 2008 is any different than 2002? After all, the fiber is still in the ground. This is a fair question—to address it properly requires a bit of a history of competitive telecom. I will skip past the MCI and Sprint era. My story will begin in the late 1980’s, when competition with the baby bells began. It will take many posts to tell this story. I will begin this in about 2 or 3 weeks. In the meantime, I will cover some other topics. Stay tuned.

If you haven’t tuned in to Bearonbusiness and Dan’s Telecom Texas Holdem Tournament, start at the beginning and read through.