Telephony market predictions from Clay Shirky
Fri, 17 Jan 2003 22:57:59 -0800
I've recently become oddly interested in the telecom industry and what
personal digital empowerment will do to it. I still don't understand much
but I like reading about it.
To understand what's going to happen to the telephone companies this year
thanks to WiFi (otherwise known as 802.11b) and Voice over IP (VoIP) you
only need to know one story: ZapMail.
The story goes like this. In 1984, flush from the success of their overnight
delivery business, Federal Express announced a new service called ZapMail,
which guaranteed document delivery in 2 hours. They built this service not
by replacing their planes with rockets, but with fax machines.
This was CEO Fred Smith's next big idea after the original delivery
business. Putting a fax machine in every FedEx office would radically
reconfigure the center of their network, thus slashing costs: toner would
replace jet fuel, bike messenger's hourly rates would replace pilot's
salaries, and so on. With a much less expensive network, FedEx could attract
customers with a discount on regular delivery rates, but with the
dramatically lower costs, profit margins would be huge compared to actually
moving packages point to point. Lower prices, higher margins, and to top it
all off, the customer would get their documents in 2 hours instead of 24.
What's not to love?
Abject failure was not to love, as it turned out. Two years and hundreds of
millions of dollars later, FedEx pulled the plug on ZapMail, allowing it to
vanish without a trace. And the story of ZapMail's collapse holds a crucial
lesson for the telephone companies today.