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Sun Microsystems

McNealy Says Telcos Falling Behind in Net Race 168

BobB-nw writes "Telecommunication companies need to go beyond just providing bandwidth and look into acquiring Internet destination sites that are heavily trafficked, says Sun Microsystems Chairman Scott McNealy. "I have explained to every telco that either you become a destination site, or the destination site will become a telco," McNealy said at a news conference at Sun Microsystems' Worldwide Education and Research Conference in San Francisco on Wednesday."
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McNealy Says Telcos Falling Behind in Net Race

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  • by securityfolk ( 906041 ) on Thursday February 28, 2008 @10:33AM (#22587758)
    What if the destination site doesn't want to be owned by a telco? What if the telco doesn't want to provide the same type of content management access the site maintainers had before? What if the telco wants to charge the owners for what was previously free? What if there's a telco bidding war for who gets to own which site? And on, and on...
  • Stick to your core (Score:5, Interesting)

    by dazedNconfuzed ( 154242 ) on Thursday February 28, 2008 @10:34AM (#22587768)
    Every company has an essence that it must stick to. If it gets too far outside that core product/service, it almost invariably suffers and often dies.

    Retailers do not build major roads to facilitate reaching their stores.
    Road-building contractors do not go into the retail business.

    For a _few_ businesses, expanding into infrastructure construction may be required - but only to jump-start the market, at which point they need to get out of the infrastructure business ... and at which point they often get overrun. Compuserve, AOL, etc. needed to build infrastructure to serve their content business ... but when the infrastructure was there, customers went elsewhere and both are now largely also-rans.

    Electricity, natural gas, etc. providers have largely given up their infrastructure business.

    Internet backbone service providers simply do not have what it takes to go into the content/destination business. It's simply not what they do, and others do it far better so long as there is sufficient infrastructure to support them. Google may be getting into the infrastructure business, but only to boost infrastructure capacity to match where they want to go in their core business; when Google gets the infrastructure to where they need it, they will have to let go of the infrastructure business because, simply, it's not what they do.
  • Other way around (Score:5, Interesting)

    by Telvin_3d ( 855514 ) on Thursday February 28, 2008 @10:35AM (#22587776)
    Personally, I think that a law explicitly preventing internet access providers from supplying any service except the pipe would be one of the healthiest things that could be done. It would prevent conflict of interest situations and promote real competition. Similar to how the movie studios are no longer allowed to own theater chains.

    Having the access and content sides of the internet separated means that things like VOIP providers get an equal playing field. The internet provider no longer has the incentive to sabotage them. In a couple years, it will keep them from messing with video download providers in the same way.
  • by NineNine ( 235196 ) on Thursday February 28, 2008 @10:46AM (#22587910)
    You're exactly right. Case in point: Sun. Sun floundered every time McNealy got some stupid idea to vastly deviate from the core of what Sun is good at. Some would argue that all of these deviations from their core business is why Sun is in the trouble they're in now. McNealy is a shitty CEO, and should have been canned a long time ago.
  • by Anonymous Coward on Thursday February 28, 2008 @10:51AM (#22587996)
    Actually, I think the analogy would be better served as buying a TV from the Cable company. You know for a long time you had to get your phone, from guess who, the phone company. They were providing the infrastructure and the "destinations". You still find phones that are still sold by the phone companies.

    This argument that you cannot be an ISP and a content provider is bullshit. What hurt AOL was not this dual position, but was their inability to successfully switch to broadband service and their insanely expensive rates that did not come with service to match. Then there was that horrible TW-AOL merger. AOL was terribly mismanaged, but everyone wants to use their position as both an ISP and a content provider as the reason they failed. I guess history is written by the idiots who will believe what they want to believe.
  • by squiggleslash ( 241428 ) on Thursday February 28, 2008 @11:03AM (#22588130) Homepage Journal

    Perhaps he's referring to Google, which is on one level nothing more than a search engine and set of related Internet services, but whose problems with connectivity have lead it to increasingly take control over how its packets are delivered. It's buying dark fiber, it's bidding on spectrum, it's experimenting with Wifi networks.

  • by billcopc ( 196330 ) <> on Thursday February 28, 2008 @11:06AM (#22588168) Homepage
    First of all, they do need to concentrate on providing bandwidth, because right now they really suck at that primary role.

    Second, I don't want any of these skeevy telcos acquiring popular web sites, because it is inevitable that they will ruin them. Here's why:

    A hypothetical company XYZCom, who provides my residential broadband connection, buys out and operates Slashdot. They now control both ends of my internet experience. What's can stop them from automatically charging me a nickel every time I hit "Reply" ? Nothing, it's incredibly easy for them and they can trivially word something in their contract to that effect. Then XYZCom decides it is unprofitable to serve outside users, restricts Slashdot to telco members only. I get burned, everyone leaves Slashdot and go post mindless drivel on Kuro5hin, world collapses under the sheer weight of inflated art-school dropout egos. Then the best part is when the telcos whine to the guv't about being so poor since Slashdot died, and get some new bill passed to defraud the general population even harder. Lather, rinse, repeat.

    Besides, it just feels wrong to give the telcos even more power. That's like getting mugged by some wigger, and handing the little suburban faux-thug a bigger knife with which to threaten you. We already have few defenses against these corporate sellout behemoths, we don't need to be giving away our beloved internet.
  • Re:he is quite right (Score:3, Interesting)

    by u-235-sentinel ( 594077 ) on Thursday February 28, 2008 @11:21AM (#22588368) Homepage Journal
    Companies such as Yahoo, Google and others are already moving into the pipeline, further making telcos more and more irrelevent to the core business of the internet. I easily imagine the telco's, cable co's, even RIAA/MPAA becoming fringe players in the future, as information truely takes on a new dimention. It is evolve or die time.

    Part of the problem is also we don't have a great infrastructure in place to handle all the new services coming online. The bandwidth crunch is what companies are fighting against. Some companies (Concast) are either break applications or terminating their customers internet usage to solve the bandwidth problem. And saying .01% are being affected is silly. If that number is really low then why are there three of us in my neighborhood who were terminated? The odds of that are just not in line with their statement.

    Anyway, I'm hoping we can get the same infrastructure that other countries are running to the home and business. They are building their future on fiber lines and we're still rolling out copper (Unless you are with or Verizon).
  • Exceptions are rare (Score:5, Interesting)

    by dazedNconfuzed ( 154242 ) on Thursday February 28, 2008 @11:46AM (#22588670)
    Yes, I was thinking of GE as being an exception when I wrote that. (Viable posting sizes do not lend themselves to detailed analysis of every conceptual variation.)

    GE came into being, and largely succeeded, by having the core competency "general electric": they did pretty much anything that had to do with electricity, and that at a time when a company _could_ (broadly speaking) do anything and everything having to do with electricity (kinda like IBM and computers for a long time). They stuck to their core competency, and it worked. As the company flourished, they were able to branch somewhat into other stuff - but kept that core alive, without which all would fail.

    Eventually, the "electrical stuff" business got so vast and detailed and nuanced and competetive that General Electric had to largely get out of both the "general" and "electric" parts of the business. In came Jack Welch, who managed to do something _rarely_ done: change the core competency of a business, and survive. Since GE's massive growth had branched into so many subjects (not all electrical), and had gotten so successful at some of them (again, not all electrical), Mr. Welch re-wrote the core competency to "#1, #2, or not in the business". Everything GE (no longer an acronym, just a meaningless couple of letters) was not best, or second best, at was mercilessly pruned. "Neutron Jack" got his nick for vacating life from vast swaths of the company, but leaving the buildings standing. Plastics? Jet engines? Financing? not electrical, but darn good at it - so it stayed, adhering to the new core competency. Most consumer products (tape players, radios, TVs, etc.)? electrical, but losing out to Sony and other competetors, so cut the losses, don't fight where you won't win, dump the business. Train engines? actually giant electrical generators on wheels, and the department was really good at it, so that business stayed. Hydroponic farming? not electrical, they weren't good at it, and it was dropped - you probably didn't even know they tried it. #1, #2, or get out - that became the new core competency, and on a dime GE turned mercilessly to implementing it.

    Yes, companies can survive changing their core competencies. To do so, they must make the change wholesale - and _stick_to_it_. Most try but fail because they didn't really change, they just branched, got lopsided, and fell over. "Do or do not, there is no try."

    To the thread's point:
    Telling a telco to get into the destination website business is lunacy. They're not in that business, they didn't develop competency in that business as facilitating their core, and the suggestion they try it comes directly from failing to succeed in their core competency - switching won't help because frankly they suck at both. GE succeeded in switching from making electrics to, well, making money because they were GOOD at the original core competency, and when they had to switch they had a good tangent to switch _to_, and they _made_ the switch _totally_. If telcos want to "win", they need to get GOOD at their core competency of bandwidth delivery; if they want to switch, it must be _to_ something they're already good at, developed as a tangent to the prior competency - and they have to switch completely, without mercy.
  • by Skrynesaver ( 994435 ) on Thursday February 28, 2008 @11:59AM (#22588816) Homepage
    I mostly agree with you, however I don't agree that they won't need a portal, whether it's a web portal, or a set-top box portal as the choices of where to get your connectivity increases the option of switching does also and some service level differentiation is going to be needed to avoid being drop-in replaceable.

    At the moment, as I understand it Comcast has a near monopoly in the US and so doesn't yet face that kind of competition, but it will happen

  • by Anonymous Coward on Thursday February 28, 2008 @12:21PM (#22589102)

    Retailers do not build major roads to facilitate reaching their stores.
    Actually, I can think of numerous examples where retailers have indeed done just that. The best example I can come up with off the top of my head is in the shopping district of Ikebukuro in Tokyo, Japan, where two huge old department stores - Seibu and Tobu - built railways to their stores. And not just a cheap tram along the road, they are serious railways.

    I have to concede that there's more at play than just shopping here - in typical japanese style there was a long-term strategy at work here. Both of them bought up huge amounts of land in Ikebukuro, cheaply because it wasn't a popular business and shopping precinct - then proceeded to make it popular by building shops, buildings, everything, and a train to get you there. They made a *lot* of money in a typical japanese 30-year-plan kind of way.

    So some retailers - or more to the point, real estate developers with nerves of steel and a multi-decade planning horizon - can and do do exactly what you said. However, I agree with you anyway, because real estate and buildings are a long-term play and any single website or group of websites - with the sole exceptions, i would say, of Google and POSSIBLY Yahoo Japan - can't rely on anything like that kind of long asset life in order to recoup the massive NRE.
  • by Mr. Underbridge ( 666784 ) on Thursday February 28, 2008 @12:28PM (#22589184)

    I think that he is referring to long term and big sites. Honestly it's not too unreasonable. If Comcast is fucking me up the ass and I can get my internet from Google why wouldn't I?

    The problem with that thinking is that his proposed *solution* is what's causing the problem in the first place, pretty much exactly as you lay it out. If the carriers stop screwing people, Google wouldn't have anything better to offer as a carrier. The message should be "if you don't stop being a bunch of dicks, someone will step in and kill you." McNealy's message, on the other hand, is basically "Since people want to get away from you because you're a bunch of dicks, you could become even bigger dicks, get a monopoly on all the media, and give people no recource but to do business with you."

    Which seems like better business - make people want to use your service, or try to get a monopoly so people have to use your service? Problem with the second choice is that 1) only one company can "win", and 2) people don't want canned content anymore, so you can't win at that anyway.

  • by Anonymous Coward on Thursday February 28, 2008 @12:31PM (#22589210)
    Most(all?) grocery stores near me have a bank branch inside them now. And a fair amount of them also now have gas stations.
  • by Dr. Spork ( 142693 ) on Thursday February 28, 2008 @12:48PM (#22589462)
    It's not that vertical monopolies "fell out of favor" - they were instead regulated out of existence. Net neutrality would have been a regulation that discourages vertical monopolies in data delivery. However, it seems to have failed.

    The result is that data providers are now at the mercy of pipe providers. Without net neutrality, it will pay to be a pipe provider. You can extort fees from data providers so that they have access to users at the end of the pipes.

    What I foresee is the return of free ISPs, and maybe Google will be one of them. They will pay for all that (probably wireless) infrastructure through deals with data providers who want access to all the people who connect to the internet through Google. The laws allow "pay to play" and that's how Google would be paid for providing their ISP service. I think this could work and I want it to happen, because US ISP's are dicks and they deserve to die.

  • by AmaDaden ( 794446 ) on Thursday February 28, 2008 @01:08PM (#22589748)

    "Since people want to get away from you because you're a bunch of dicks, you could become even bigger dicks, get a monopoly on all the media, and give people no recource but to do business with you."
    I didn't get that from the article at all. I got more a "Since people want to get away from you because you're a bunch of dicks you need to do something valuable to justify you being a bunch of dicks or people will just push you out of the way because what you do is not all that special to someone like Google or MS. It's just a mater of time before your dickiness pisses them off so much they use there massive internal network, budget, and technical expertise to just cut you out of the picture."
  • Yahoo (Score:3, Interesting)

    by sodul ( 833177 ) on Thursday February 28, 2008 @01:25PM (#22589948) Homepage
    Yahoo is an ISP and a high traffic portal, it does not seem to do them that much good.
  • by mabhatter654 ( 561290 ) on Thursday February 28, 2008 @03:13PM (#22591414)
    roads are a good example. Google and such were pushed out of local telco "towns" long ago and forced to stake a claim out along the interstate. Well now they are huge "cities" with lots of traffic because 100% of the people "driving" to Google don't live in Google town. That's huge amounts of congestion getting onto that interstate that isn't big enough to handle the traffic. Google is putting up money to maintain it's end quite well, the "towns" don't want to.. but want to charge people to drive on Google' part of the highway from their town.

    What Sun is saying is that the "towns" where people live need to get Google to put branches in their town. Then they can use local roads to get to Google services. That reduces the need for massive pipes and evens out the traffic to manageable levels. The telcos pushed out compaines like Google to fend for themselves and now those pushed out have all the destinations... the telcos are stuck with cheap "bedroom" towns where nobody wants to pay for roads. They need to get big providers ON their internal networks so that traffic doesn't go outside and traffic comes in smaller amounts from other "towns" directly rather than the one big highway.

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