Eurovision: The geeks were right
15 November 2010 | Camille Mendler
The oversupply issues of 10 years ago are still the same, writes Camille Mendler. They are just manifesting themselves in a different way this time.
The names Methuselah, Balthazar and Nebuchadnezzar are all familiar if you’ve ever read the Old Testament. They also recall a crazed time in wholesale telecoms. A Methuselah contains the equivalent of eight bottles of champagne; the Balthazar, 16; but the daddy of them all is the Nebuchadnezzar. Named for a now-forgotten Babylonian king, this bottle includes a staggering 15 litres (or 20 ordinary bottles) of fizz.
I can still see them lined up in my CEO’s office circa 2000, the yellow labels reflecting his appreciation of the vinicultural craft of a certain widow from Reims. They celebrated our every achievement: lighting the first ring of our fibre network, winning a slab of venture capital, raising yet more money.
Someone said that the Californian Gold Rush was a time “where the emphasis was on the ability to take risks, the willingness to gamble on the future”. That spirit also describes the motley crowd attracted to telecoms in the late 1990s: hoteliers, furniture salesmen, policemen and crooks. And, not least, people like me. Offered a job in a brave new start-up after a liquid lunch with its mercurial CEO, I found myself on day one speeding to Paris in a Eurostar. I had little more than a grasp of the French language to guide me. Previously, in a scene worthy of Mission Impossible, a bicycle courier had arrived at my door with sealed instructions. I was to present myself to my Parisian contact and investigate dark fibre.
The French right-of-way owners that I met that day, and all those who I subsequently encountered across Europe, were unfailingly polite to the twit sitting across the table from them. After all, I was fronting yet another young Turk of the telecoms market with bootfuls of cash to spend. To those still in the business, such as Vladimir Hendrych of Cecom (now Interoute) and Dieter Otto of Gasline, I say thank you for your courtesy. It’s a shame that it all went wrong. I, like other creditors, didn’t take away more than 40c on the dollar in the end game, but was enriched in many other ways. I hope you were too.
Do today’s young Turks know what a magnum is, let alone its bigger brothers? Go watch The Social Network, the biopic of Facebook’s founders. Or Google the search engine’s creators Sergey Brin and Larry Page. You’ll find they’re all geeks.
Bubbles and bling are out: the smartest guys in the room today are more like Bill Gates than Kenneth Lay. But it’s these geeks juicing retail demand in the global telecoms market. And it’s these geeks that wholesalers need to know a lot better.
Scandalously, they still don’t tell you this when you get a job in wholesale. At least I haven’t heard that a lesson on today’s wider market dynamics is routinely included in many wholesalers’ induction programmes. I’d certainly be eager to deliver it, warts and all. Because I think it’s high time to step up and away from the traditional bilateral table.
What you’ll find may be strangely familiar. If the previous problem was oversupply in the European market, then that reality hasn’t gone away. It’s just that the same problem manifests itself now in a rather different manner.
A decade ago, there were a dozen outfits building networks and vying for control over Europe’s hot telecoms traffic routes. The Golden Triangle – linking London, Paris, Brussels, Amsterdam, Dusseldorf and Frankfurt – had at least 800 pairs of fibre installed to serve demand.
At the time, Yankee Group estimated that all of Europe’s telecoms traffic could have transitted on a single fibre pair muscled up with dense wave division multiplexing (DWDM) technology. No wonder that the monthly rental of an STM-1 on Golden Triangle routes fell from $230,000 to $2,000 in a perilously short time.
Today, oversupply comes from the cloud of software and services. This world gave birth to Ebay, Facebook, Google and Skype. The big boys in this market are indeed awfully big. But don’t let them overshadow certain realities.
The pace of ideation and launch of these new outfits is breathtaking. And just like 1990s wholesale start-ups, they crash and burn with great frequency. Yet instead of dozens of pretenders to the throne (as there were building pan-European networks) there are thousands vying to be the next Facebook or Salesforce.com.
Combined with the fickleness of consumers – think Napster, Myspace, Friends Reunited – these too are hazardous times. Wholesalers must learn to identify the cloud’s winners. And the good news is that wholesalers can also help them win. Whether the network you market was secured for 10c on the dollar back in 2001 or through sheer graft, that’s what will continue to fuel your success. And if your customers don’t raise a glass to you, then I will. Cheers.
VP, global communications, Yankee Group
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