We have reached the end of the golden age of the telcos. Despite their massive empires, old-fashioned telecommunications giants like BT, AT&T and Cable & Wireless have entered their twilight years. They are destined to fade away almost to nothing within the next two decades.
Their fate is foreshadowed by that of the railways. In the nineteenth century, great railway corporations like Union Pacific in the US, and GWR, Midland and LNER in Britain, laid the foundation for the prosperity of the industrial age. They were the backbone of the economy, the means of carrying raw materials to factories and returning finished goods to markets.
Similarly today — although everyone thinks of computers when we talk of the digital age — telecommunications form the infrastructure of the global economy. The vast wealth that flows between the world's financial centres is carried on telephone circuits. Corporations link their sites and satellite offices together using traditional telephone lines. Only when we get down to local office level does the computer network take over.
Railway nemesis
So far, the telcos have welcomed the huge explosion in digital traffic spawned by computers, because they have profited from carrying it. The history of the railways stands as a warning to them.
For the railway companies, nemesis came in the form of personal transport rather than personal computing and communications. They, too, initially welcomed the newcomers because they saw them as local, decentralised enhancements to their trunk network. In the beginning, it just meant even more goods and passengers turned up at the railway stations.
They did not suspect how quickly the network itself would fall victim to these more nimble new competitors. The popularity of motor vehicles led to the uprating of the road network, at first within towns and localities, later in the construction of long distance trunk routes that ultimately eclipsed the railways.
The telcos will just as surely be swept aside by alternative networks built on the back of today's decentralised new telecommunications systems, such as the Internet, radio and satellite mobile telecoms, cable and even electricity distribution. Worldcom's bid to steal MCI from under the nose of BT is just the first sign of many that the world order in telecoms has changed forever.
Telephone fixation
Of course, as marketing guru Theodore Levitt first spelt out in 1960, the railways should have realised they were in the transportation business, not the railroad business. If only they'd branched out into other forms of transport instead of sticking with rail, they could have reinvented themselves.
According to this argument, what telcos should do is stop fixating on the telephone. They should wake up to the fact that using telecoms to carry voice alone is old hat. The Internet will be made to work as a communications medium because of its protean capability for transmitting sound, images, video and data all at the same time, and between any number of participants.
Furthermore, however much they try to obstruct its low-cost, distance-neutral cost model, it will always find a way to cut them out of the loop — even through the electricity meter if necessary, as electricity provider Norweb demonstrated last month.
Bizarre convention
The bizarre thing is that the telcos already know all this — BT more than any of them, since it employs some of the world's leading crystal-ball gazers at its research labs near Ipswich. Yet they will not act on it because Levitt's glib analysis of defective marketing vision doesn't take into account the powerful influence of conventional wisdom.
With hindsight, we know that motor transport is cheaper and more convenient, but back in the twenties, it looked disorganised and unreliable. Investors and bankers would never have backed a management prepared to gamble it all away by investing in risky road transportation. The railways had no choice but to stick to what they knew.
Today, misinformed, unimaginative vested interests are holding back the telcos in exactly the same way. BT's inescapable destiny is to become the British Rail of the 21st century.
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