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Customer-owned Networks: ZapMail and the Telecommunications Industry

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  • 25-09-2003 11:15am
    #1
    dahamsta
    Banned (with Prison Access) Posts: 16,659 ✭✭✭✭


    (Merge the forums.)

    This is primarily about voice, however it has a bearing on data because the ability to cut out the last-mile should be presented to user and non-users as an incentive, uh, to cut out the last mile. A negative Catch 22 if you will: "You should cut out the telco because you can, it's better for competition and better for you."

    adam
    Customer-owned Networks:
    ZapMail and the Telecommunications Industry
    First published January 7, 2003 on the 'Networks, Economics, and Culture' mailing list.
    Subscribe to the mailing list.

    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.

    [...]


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