Internet Host: nic.cerf.net Directory: farnet Subdirectory: farnet_docs Filename: maloff-paper Last Updated: Nov 8, 1991 The Future of Midlevel Networks: Are We Repeating History? Joel Maloff maloff@nis.ans.net August 1991 As the members of FAFNET gather to discuss and debate the future of the Internet, the NREN, and midlevel research and education networks, it might be useful to reflect on relatively recent historical parallels. It may surprise some of us who have grown up with the Internet and education community to know that there are historical precedents to the environment in which we now find ourselves immersed. These thoughts are intended for all organizations, including midlevels, national providers, and NREN planners. Once, there was an environment where organizations and individuals -- end-users -- had limited alternatives for communication with one another. Cost was a driving factor, but the lack of creative and innovative new options was also of concern. This led to the establishment by forward thinking pioneers of cluster networks. These cluster networks were composed of network circuits acquired from the major long distance companies -- initially AT&T only, but later MCI and Sprint. Coupled with switching equipment and and network management services that these cluster organizations purchased, they were able to offer lower cost and more creative services to customers in geographic market niches. Many of these cluster organizations had investors, or "seed money," to help them get started. Some of the money came from large national entities, but much of the direct support came from local groups that needed access alternatives. They prospered and grew, marketing the packaged services of multiple vendors -- long distance carriers, end terminal equipment, and network management services. In some cases, they took on the expensive task of building their own network control centers. I have not been describing the research and education midlevel networks. This community started in the late 1970s and is almost concluded now. At the height of the business, when entrepreneurs were springing up everywhere, there were more than 1000 long distance resellers in the U.S. After the initial shakeout of a new industry, there were 400. They had names like TeleSaver, Long Distance for Less, TDX, SouthernNet, Microtel, LiTel, and others. Now, there remain a handful. There still is an association of the surviving organizations, called CompTel (Competitive Telecommunications Association). Its membership has dwindled and influence on national affairs has waned. There are clear lessons to be studied from the long distance resale environment. 1. Having a good idea, proper motivation, and entrepreneurial spirit does not guarantee success. 2. Eventually, if an idea is good enough, and offers sufficient revenue potential, large well funded organizations will enter the market and push aside all but the best of the entrepreneurs. 3. Early investment moneys do not continue when investors see limited return and increasing competition. 4. Multi-party alliance, where each organization retains its own fully separate structure, rarely work for the long term, although they may be effective for a few years. (The National Telecommunication Network is an example of five organizations working loosely together. The CIX is an even looser example of such an arrangement.) Cost and revenue settlements issues, technical disparity, marketing turf, and personality issues tend to drive these organizations apart. 5. Failure of the entrepreneurs to move on to the next area of market void, and rather, continuing concentration on turf invaded by the giants is a prescription for disaster. Those organizations that branched out into new related areas were the successes. Telemarketing, fiber optic facilities deployment, artificial intelligence in network management -- these are but a few areas where organizations that began as resellers were able to migrate - - and succeed. The lessons that I see for all of the members of FARNET are as follows: Determine what you do well, and what you can do better than most others, and stress the building of those activities. Do not try to hold the status quo against bigger, better funded, more able organizations. Consider outsourcing and alliances. Bend with the wind and move to serve your constituencies rather than remaining intransigent. Diversify your markets and sources of supply so that you are not captive to any one source and therefore vulnerable to whims and sudden changes. Today the U.S. long distance industry s dominated by AT&T, MCI and Sprint. Can anyone name the fourth largest carrier in the U.S.? It happens to be Cable and Wireless, a British-owned company. Over the past five years, one company -- Telecom*USA -- had nearly forty acquisitions or mergers before finally being acquired itself by MCI last year. How is the midlevel network environment different? Certainly in the focus on research and education and the support from governmental agencies, the Internet is different. Yet, we still find ourselves in an emerging marketplace attracting the increased attention of very big players. We should not underestimate the similarities. Midlevel, regional networks must take the time NOW to reassess their missions and focus clearly on meeting them. This means new approaches and new efforts. Much remains to be done -- better user interfaces, clear identification of application and use, less talk and more action in the development of state networks or K-12 programs, etc. The members of FARNET should concentrate on providing needed vision and valuable services, rather than on trying to ensure the survival of obsolete models. Let's learn from the long distance resale example and not be condemned to relive it. Once has been enough for me.