By: Mark Cummings, Ph.D.

There is a general sense in the telecommunications industry that software will drive us forward. But we face a problem obtaining and on-boarding the innovative software that we need. Last month, we described the situation in part one. Here we discuss how we got here and how we may evolve to the desperately needed software-driven ecosystem.

How we got here

The telecommunications industry started out with fully manual infrastructures. The first step in automation was to replace human operators with mechanical switches.  Digitization started with ESSs (Electrical Switching Systems) and proceeded through packet switching. This whole digitization wave was implemented with hard-wired logic appliances—boxes—that could be and were treated as if they were mechanical systems. 

With the advent of SDR, SDN, and cloud computing we are now on the leading edge of a wave of softwarization. Infrastructure is no longer static and can no longer be treated as if it were composed of mechanical things. Unfortunately, human organizations don’t change as fast nor as easily as today’s technology. The challenge for the telecommunications industry is to change its ecosystem in accordance with this fundamental change in technology. 

Leadership, particularly thought leadership, is needed to do this. The best way is for leading companies to have board members, a CEO, and a few mid-level staff supported by a few consultants and analysts with the necessary technical experience and insights to guide their companies to the kind of sustainable software innovation ecosystem that is so desperately needed.

Early in the evolution of the telecommunications ecosystem, service providers were either private companies, government organizations, or combinations of private and government structures. Whatever their structure, they were vertically integrated with discrete groups, divisions, and subsidiaries focused on service provisioning, equipment manufacturing and support, and R&D. These were all effectively under one operational and financial structure. Those that had a private ownership component were monopolies operating within their defined service area while under public utility regulatory control.

During the period commonly called “deregulation,” the vertical integration structures were broken up (with the exception of China, which will be discussed below). The equipment companies were spun off into separate companies. Over time, all of these equipment companies were merged into a very small number of large infrastructure vendors. 

The R&D groups were split, with some portions going to the equipment companies and some portions to the service providers. In either case, with the move to competition instead of monopoly, R&D was seen as an expensive overhead. It started to shrink. During the 2000 recession triggered by the dot-com bust—and even more so during the recession that began in 2008—this shrinkage accelerated.

With this shrinkage came a focus on productization and low-level mechanistic functions rather than on innovation. Regulators were espousing open competition but continuing to put a “regulatory finger on the scale.”  This, amid geopolitical forces, resulted in many seeing telecommunications as a national security issue.  At the same time, the standards groups continued to operate within the context of the mechanical paradigm. All of this created a circular feedback loop that reinforced the mechanical paradigm (see Figure 1, next page).

Startups tried to step in to fill the software innovation void. But this mechanical paradigm and its accompanying large complex infrequent RFPs either killed the start-ups or drove them into other industries.