From LIGHTReading:

The telecom industry is traditionally one of the largest markets in the world, in terms of a percentage of GDP -- currently about $1.4 trillion annually.

The content business, if you count up movies and music CDs, is about a $70 billion business, reckons [Rod Randall, senior managing partner at Vesbridge Partners LLC]. Advertising is a $600 billion business.

The problem? Recent trends are that communication services -- the bread and butter of telecom -- are being driven down in price, or even tossed in for free, in order to sell content or generate advertising.

"So we are thinking of offering all this connectivity [a $1.4 trillion industry] for free in search of $70 billion," said Randall. "It's a mad world of mutually assured destruction."

Then there's Google, which has managed to capture a $100 billion market capitalization with only about 4 percent of the total worldwide advertising market, said Randall. He pointed out that Google has a market value higher than all of the largest service providers in the world, except Vodafone Group . . .

. . . .

So what kind of future is in store for telecom? Randall hopes it's the best of both worlds -- inexpensive connectivity combined with high-value content, and perhaps advertising as well.

"I happen to believe in an alternative future. You have to figure out how to link the value into connectivity."

(1) Regulatory efforts to impose anybody's idealized template will be a disaster; and

(2) Failure to protect property rights in both the facilities of connectivity AND content will also be a disaster.

A real danger in the field, as one can see in many discussions of Internet business, is that too many business plans are based on the question: "How can we free ride on others?" rather than on "How do we provide value to consumers in exchange for payment?"

posted by James DeLong @ 10:38 AM | Infrastructure

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