 PhoenixDown-- Wants FIOSPremium
join:2003-06-08
Fresh Meadows, NY
kudos:1 | reply to NetKrazy
Re: Cancel en masse Why can't ISP's survive as a "dumb pipe"?
Cisco and other CPE retailers are nothing more than a "dumb" equipment provider. Their products have been commoditized yet they still make a healthy profit even without their service contracts. |
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| Well I wouldn't ever think to compare a hardware based company to the service provider realm. CPE retailers get caught up in 'throw away' devices newer bigger better constantly require upgrades and after initial development costs that single investment can drive millions in revenue. And ofcourse for a service provider to meet the demands of it's customers they have to go back to cisco for newer better and bigger.
Now, can a provider survive as a 'dumb pipe' yes, I should have been clearer in my statement. They can but that life would probably not be long lived as someone who is utilizing their resources more. When you begin to compare what it costs to upgrade and maintain the network it becomes a cascade of problems. When a good portion of those problems do come from the customer. I made this comparison in another article about the cost between a T1 and a cablemodem A DS3 and a cablemodem have a huge price difference, while people are quick to point out the differences in service levels customers are quick to shop around and complain when the service isn't on-par.
I think the biggest thing that stands to say why as a 'dumb pipe' a provider won't survive is the direction the industry is heading. The debates over p2p and VOIP for example. Today more and more companies are using the 'backbone' of the service provider to drive their business, This means increased usage that the service provider has to react against while never seeing any increase in revenue. So they have but a few options as consumers passively or knowingly consume more. Increase rates to meet the demand on the consumer (which is never good), start billing the third party for access (OMG Net Neutrality), or monetize the traffic that's already flowing. The big driver, ofcourse offer more for less to the end user in an attempt to keep them as a customer. Ultimately I think this is the biggest driving factor that upgrades and improvements have to happen without per-say an increase in revenue from the customer. But the upgrades that have to happen and in-turn help the CPE guys as you said, the customer and the 'third parties' all carried on the back of the provider.
Not saying I'm right or that I know better purely my opinion. |
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 swhx7Premium
join:2006-07-23
Elbonia | reply to PhoenixDown
said by PhoenixDown:Why can't ISP's survive as a "dumb pipe"?
Because of the nature of capitalism: investors demand ever-rising profits. If profits remain the same or fall, management will be replaced. Investment will move to other companies that exploit customers and employees more intensively.
said by PhoenixDown:Cisco and other CPE retailers are nothing more than a "dumb" equipment provider. Their products have been commoditized yet they still make a healthy profit even without their service contracts.
These companies make products, not services. They can continually make new versions, add features, change pricing, fix bugs, and other things to keep revenue rising. Also the products are not really commoditized yet; Cisco for example benefits from a perception of high quality, some proprietary interfaces, features that competitors don't have, etc., though the others (Juniper, open source) are making some progress. It's not generic like "dumb pipe" internet. |
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 jester121Premium
join:2003-08-09
Lake Zurich, IL
 ·voip.ms
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said by PhoenixDown:Cisco and other CPE retailers are nothing more than a "dumb" equipment provider. Their products have been commoditized yet they still make a healthy profit even without their service contracts. You haven't looked at Cisco's product line much lately have you? It's all about their IDS/IPS offerings, inspecting packets and analyzing content. |
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