By Thomas Howe, The Thomas Howe Company

As the first ADSL modems were rolled out, engineers clearly imagined a world where large companies published data and subscribers consumed it. Originally viewed as a mechanism to carry video to far flung villages in the United Kingdom, ADSL found success in data applications such as Internet access. In both cases, ADSL carried content from producers to consumers. The internal design reflected this bias, as ADSL can typically provide ten times more download capacity than upload.

Today, large and well travelled web sites such as Flickr, and technologies such peer to peer file sharing show how far off the businessmen in 1993 were in predicting the future. Thus, ADSL increasingly loses market share to technologies such as hybrid fiber coax and fiber solutions because they support the bandwidths, both upstream and downstream, which support the real world usage models. The enduring value of broadband connectivity is not that it is a mechanism by which content is delivered to us, it is instead a two way road by which we connect to the wider world.

As Barnes and Noble viewed the Web as another medium to push sales, only Amazon viewed the web as a place to connect users through reviews and recommendations. This fundamental decision relegated Barnes and Noble, a once dominant player with every advantage in the old bricks marketplace, to comparative irrelevancy in the new clicks one. Even if Barnes and Noble were to replicate the functionality of Amazon, which they have tried, they would be unable to tap into the reviews and recommendations of Amazon's customers. Amazon's sustainable competitive advantage is not primarily that they have a web site, but is instead the comprehensive amount of information it has about what their customers have purchased, and what they've recommended.

As the telecommunications industry moves from the first phase of convergence, which was driven mostly by dreams and whiteboards, into a second phase, now driven by business case and revenue, it is apparent that convergence is not a technical phenomenon, but is instead a primarily social one. A quick innovation check proves this point. Nearly every example of true innovation and clear success in telecommunications in the past three years comes from reinforcing social networks. In contrast, carriers have spent billions of dollars on infrastructure and new service development since the divestiture in the late eighties, with very little success to show for their efforts. Companies like Twitter allow both small and large groups of people to quickly share their activities through text messaging, adding subscribers at a rate of 2,000 new customers each day.

At the same time, Multimedia Messaging Services have languished for years. Skype grew to tens of millions of subscribers by leveraging groups of connected people who happen to live thousands of miles away from each other. As Skype grew by connecting communities together, Vonage paid hundreds of dollars to acquire new customers without any social connection to each other. Asterisk is available because a social network of geeks who dedicated themselves to creating a free PBX, and now boasts a quarter of a million installations and a vibrant and active ecosystem. Avaya was just purchased by a private equity firm. Since true social networks have value over and above the basic functionality of any web site or telecommunications service, they have inherent competitive advantages.

Successful service providers and vendors must honestly face this new truth, for this social aspect of enduring value can be seen at every level of the Web economy, not only in the Facebook and MySpace phenomenon, but in more traditional sectors such as Internet access. In fact, simple carrier PSTN termination services may have new life not because of any new service they provide, but how they might support the new class of web enabled applications.

In particular, carriers have a unique position and relationship with their subscribers allowing them to aggregate important data which is valuable to social networking applications. The wealth of data available from simple call detail records is amazing. From them, an excellent picture of a subscriber's social network - who they interact with on a daily basis - is easily determined. This information is obviously valuable to the carriers, but more so to the subscribers and to the other enterprises that wish to sell to them.

This simply scratches the surface, because other important information can be determined from that data, including physical location and movement, buying habits and other lifestyle information. Carriers can monetize this data in a myriad of ways, and with the rapid acceptance and adoption of web services based architectures, the channel and supporting business models by which they can sell this information is now established. Like targeted Google advertisements, or Amazon recommendations, customers may actually welcome the sharing of this data, as it can directly benefit them in many ways.

Even though most historians doubt that the religious and modest John D. Rockefeller actually said "I have ways of making money that you know nothing of", it was probably true. As service providers move from traditional models based on transactions to more sophisticated models based on the interactions between transactions and data, they may have finally found a credible response to falling revenue and high churn.

For more, visit Thomas Howe's Website.