Coming across the Forth bridge on the train today, I remembered why I came back to Scotland. The week’s clouds and drizzle had blown by, the sky was clear, the water calm. Winding up through the hills north of Perth the evening sun glowed on the auburn autumn hills. It’s one of the most beautiful countries in the world.
Taking a break from gazing at the scenery, I noticed a couple of great features in the Financial Times newspaper.
The first was about bus deregulation. (You’ll have to find the link yourself, they don’t make it easy!) Back in 1986 the UK bus system was deregulated, except in London and Northern Ireland. Bus usage has recently started to climb again after decades of decline in the face of competition from the motor car. London has lead the way, but only at the cost of huge subsidy. In the rest of mainland Britain bus services are run for profit by private companies. The towns and cities where usage has increased are the ones where there has been a closer partnership between public and private bodies. For example, bus lanes have proven critical to providing buses with a competitive edge over congested car transport. Places where buses were put on a level with cars as road users saw further decline in bus usage.
Sound familiar? Rights of way for buses aren’t so different from those for fibre or spectrum. Subsidy and public ownership of essential infrastructure assets? An inevitible consequence of the paradox of the best network, which erodes producer surplus and turns it into consumer surplus.
The second article of note was on BT’s landline business deploying WiFi phones. This is a missed opportunity. Yes, it extends the reach of their network. That accords with the “distribution” business model archetype. First rule in telecom: reach the parts that other beers cannot reach. But the real opportunity to to add a second strategic winner, “increasing returns to scale”. By making all BT broadband WiFi access points by default open to BT users, they could have created an invincible advantage. They’re fluffing it.
Many super-successful businesses execute on two simultaneous business model archetypes. Dell manage a unique distribution method (direct to customer) and production method (agile supply chain with low inventory, build to order). Microsoft have “technology” + “increasing returns to scale”. IBM have a unique sales method and technology integration.
The elements of telecom are subject to different natural business models. Access networks (like the retail side of broadband) are best with a unique sales or funding method. Long-haul is a capacity driven business model. Enabling platforms are technology and increasing returns to scale. For example, we all use SIP because we don’t want to live in a technology desert island. Then the applications and product and distribution driven. Having more stores, real or virtual, counts for something. And these different strategic drivers explain the other FT article, on why BT is disintegrating. The wholesale and retail arms cannot coexist within one corporation, because they are trying to satisfy completely different strategic imperatives. BT can’t fight on all four of the components listed above and stay in business.
Anyway, the purpose of my trip into the Scottish Highlands is to attend the Access to Broadband Campaign’s conference. Watch this space!
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