Devil's Advocate: The state we're in - simply a break down in communications?

Telcos, with all their problems right now, receive little sympathy from columnist Martin Brampton. Should any of us really be so harsh?

Surprisingly, some people still seem to think mobile operators deserve government support. Several readers wrote to support my hard line on 3G auction payments. A few generous souls were more forgiving. Where else might I find support for my line? (As espoused in this column - http://www.silicon.com/a54287 )

If we widen the net a little, we can include all the telecommunications operators. Not so long ago, they were all stock market darlings. But no more. Do they have adventurous ideas about how to revolutionise the use of communications facilities? Have they demonstrated the ability to diversify their interests into related areas?

Well, they did have a go at diversification when there was a belief that a vast quantity of hosting centres would be needed. Projections for internet services were astronomical and there was excitement over the application service provider (ASP) model. Communications companies decided that building the hosting centres would leverage their ability to sell bandwidth. It was assumed that there was almost unlimited demand.

Talking to the companies at the time, it was clear they were staying out of the major areas of added value. They obviously had very limited skills with software and intended merely to house the computers, provide communications and do very little else. Unfortunately, they all piled in with the same idea at the same time, leading to gross over capacity. Also, the problems turned out to be at the added value level, as the ASP model turned out to be much harder to deploy than people had expected.

Now it seems Colt is quietly closing seven hosting centres and 15 of Cable & Wireless' smaller centres are to go. Other once bold operators are close to bankruptcy. And are the companies that built and equipped the hosting centres giving the telcos their money back? Well, what do you think?

There seem to be two lessons here. One is that we need to remind ourselves constantly that telcos have a limited range of skills and are unlikely to deliver on all the vague ideas about value added services enabled by new communications technologies. The other is that government is quite right to take, on our behalf, whatever it can get for the commercial exploitation of natural resources. And not give it back when the going gets harder for the buyers.

Many years ago, the first commercial television franchises were regarded as licences to print money. Nowadays the government is savvier and recognises it can charge hefty fees for access to limited resources such as bandwidth. The mobile auction was just one example of making a charge for the use of something that should belong to us all. While a free for all is impractical, exclusive rights have a commercial value. How better to establish that value than an auction?

So what about the question of revolutionary communications capabilities? Certainly we have borne the pain while telcos caused traffic jams as they dug holes all over the UK for vast quantities of optical fibre. Not much of that capacity is actually in use. The telcos struggle to summon up the courage to cut prices and stimulate demand. They hold back on the investment in equipment to drive the unlit buried fibres.

If you doubt it, make a simple comparison. All major organisations are steadily increasing the capability of their internal data networks. Yet the external links that create wide area networks are forever falling behind. This should not be so, since both involve essentially the same technologies. The oft-cited problem of burying links in the ground is, as we have seen, not the issue. Cutting the price of bandwidth is the critical issue.

The government has noticed this and decided to espouse broadband as the solution. Unfortunately, it is not the solution. But that will have to wait for another time. Meanwhile, take care how much faith you put in communications companies.

** Martin Brampton is a director and founder of Black Sheep Research (www.black-sheep-research.co.uk ), an independent consultancy providing research, writing and speaking services on a wide range of business and technology subjects. Martin was previously a director at Bloor Research, and has worked with IT as a user and analyst for over 20 years. He is a frequent contributor to silicon.com's Behind the Headlines TV programme and can be contacted at silicon@black-sheep-research.co.uk .