Home North AmericaNorth America 2009 The end of innovation?

The end of innovation?

by david.nunes
Karl May Issue: North America 2009
Article no.: 5
Topic: The end of innovation?
Author: Karl F. May
Title: President and CEO, OpVista, Inc., Chairman of the Board, Integra5, Inc.
Organisation: OpVista, Inc. and Integra5, Inc.
PDF size: 276KB

About author

Karl May is CEO and President of OpVista, Inc, as well as Chairman of Integra5, Inc. OpVista manufactures 40 Gigabit optical networking solutions. Mr May previously served in leadership and executive roles at Silicon Graphics, Bay Networks (later acquired by Nortel Networks, merged with BarcoNet and acquired by Scientific-Atlanta), and AP Engines. Mr May was an early pioneer in both interactive television – he worked on the Time Warner Full Service Network and NTT’s Zoetrope service – and the cable modem, leading Bay Network’s business delivering broadband solutions to cable operators throughout the world. Mr May writes and speaks frequently on broadband and media applications. Trained as an engineer, Karl May started his career at Hewlett-Packard.

Article abstract

Growing demand for bandwidth – driven by video, mobility and application and device convergence – are fuelling the need for network transformation. The growth of online and mobile access to television and music, of social networking and Internet information searches and services are creating demands for bandwidth that operators are hard pressed to economically meet. This offers great opportunities, but the economic environment and shrinking sources of funding are slowing innovation and the transformation of ideas into product and commercial successes.

Full Article

This decade has been both generous and cruel to all links in the communications value chain. In North America, the Telecom Act of 1996 paved the way for broad innovation among carriers and service providers. Broad adoption of the Internet and subsequent enhancements of the cable modem and DSL stimulated tens of billions of dollars in investment and seeded innovation in communications technology like no other period in history. Venture capital flourished, providing the capital to develop competitive local exchange carriers (CLEC’s) and, as well, the technology companies building routers, switches, and other new communications technology. The crash of the technology boom in 2001/02 and the current broad economic downturn, however, have clouded the horizon for new ventures. Innovation – the germination of new ideas – will undoubtedly continue, but converting innovative ideas into robust companies will become an even greater challenge. The computer and communications technology segments are far from mature; nevertheless, the environment for new ideas and technologies is temporarily unreceptive given today’s dismal economic environment. Consumer behaviour has undergone significant change since 2000. Yahoo! and Google have organized information and made it much more accessible to the masses. Apple Computer’s iPod products and iTunes’ service have revolutionized the way people purchase and consume music. Programmes once delivered exclusively to televisions, are now available online through Hulu and iTunes and are increasingly viewed on computers and hand-held devices. The rise of social networking sites – Facebook and LinkedIn come to mind – may ultimately eliminate the need for humans to talk to each other. If those sites fail, the volume of SMS message traffic between mobile phones, and now televisions, will surely seal the deal. There are three broad areas of technological innovation that will feed the growth in demand for the services outlined above: bandwidth, mobility, and application and device convergence. In 1998, a vision of the Home of the Future was created in a lower Manhattan loft that was transformed into a broadband-enabled residence. The Home of the Future used a cable modem, with fast, always-on Internet access, a synchronized calendar with a display integrated into a mirror in the bathroom, connected computers and small displays connected wirelessly with a technology that was later to become a basis for WiFi. There was even a small camera for video conferencing attached to a personal computer. While none of that seems remarkable today, in 1998, most homes had a single telephone line, dial-up modems with a maximum bandwidth of 56 kilobits per second were the hot Internet access technology and mobile phones were somewhat of a luxury. In just over a decade, many of the futuristic concepts presented in the Home of the Future are commonly found in homes throughout the developed world. By some estimates, there has been a sixty-fold increase in access bandwidth to the home. That growth was driven by broadband data services. Today, many pundits are predicting a further ten- to twenty-fold increase in access bandwidth driven by video and that, in turn, will drive yet another network transformation. Video demands a different set of network behaviours compared to traditional IP networks; video needs long session, has less ‘bursty’ traffic, and will tax existing networks. There are already companies emerging with products that address these requirements. If they execute well, they have the opportunity to challenge the router incumbents significantly. A natural corollary to the type of traffic and service traversing networks is the increase in volume that will result from the growth of video. Carriers and network operators will come under pressure to upgrade the bandwidth in their networks at an increasing pace. I have seen customers quadruple the aggregate bandwidth on their networks in less than two years; video is always the main driver. Migration from 10G to 40G and ultimately 100G networks will continue apace and it will be incumbent on vendors to make the transition between technologies as seamless as possible. Operating expenses, including co-location, power, and cooling, will become an ever greater focus as ‘green’ becomes a more pervasive mandate among carriers. Low cost, high performance, low power, high flexibility – companies delivering network infrastructure solutions with these goals in mind will win out in the marketplace Mobile phones have also become ubiquitous. There are few people over the age of 13 and under 80 who do not have a mobile phone. AT&T, one of the largest North American mobile operators, reports 79 million subscribers to its service in the United States. In the current economic climate, one surprising statistic has confounded pundits: smartphones, the high-function, high-end devices such as the iPhone and Blackberry, have thrived. On airplanes and trains, taxicabs and park benches, more mobile phone owners are consuming rich media – video, music, messaging, and playing games. In the same quarterly release, AT&T reported a decline in residential landline revenue, driven, in part, by consumer turning off their home phones and maintaining only a mobile phone. The contemplated 4G or LTE mobile build-outs in the coming few years will only increase aggregate network bandwidth requirements. As mobile phones, computers and, perhaps, television set-top boxes approach each other in processing power and functionality; consumers will expect applications to converge. For today’s savvy tech consumer, every application on the computer should be available on the phone. My instant messaging service should continue to deliver messages to me if I move from my computer to my phone, and vice versa. My Blackberry or iPhone should be as capable of displaying a presentation to a customer or colleague as my computer is, and airport security would be easier if I only had my phone. While travelling, I would like to receive e-mail confirmations on my phone of all of the transactions I make along the way – hotel bill, Starbucks coffee, taxi fare. Reconciling these with an expense reporting application back at the office would eliminate paper receipts and improve efficiency. Social networking applications, pioneered by MySpace and Facebook, will no doubt lead the way in multi-platform application convergence. By their very nature, users will want to network with friends whether sitting at the computer doing work, with the phone on a train, or in front of the television watching a reality show. Sharing experiences, – with Twitter being, perhaps, the real-time equivalent of this phenomenon – continues to be a major goal of younger, tech savvy consumers. One should expect to see rich opportunities to develop new applications that enable sharing, and continue the virtuous cycle of bandwidth growth. Continued bandwidth growth and network transformation driven by video, mobility, and application convergence give entrepreneurs great opportunities to mine. Although innovation will continue, the next several years will present significant challenges transforming ideas into products, companies, and commercial successes. The traditional funding source for innovative ideas – venture capital – is undergoing its own very significant transformation. The traditional sources of capital for venture firms are pulling back or even eliminating their emphasis on risk capital. Fewer venture capital firms will receive fewer dollars, and fewer ideas will receive financing. Some very compelling ideas will simply die away. The current environment will test entrepreneurs and investors like no other in the past 30 years. Let us all hope that we can continue to fund the best ideas and entrepreneurs, and forestall the end of innovation.

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