It’s Time to Get Smart About Dumb Pipes

The telecommunications industry’s default terror is that it will become little more than the provider of so-called dumb pipes to Silicon Valley and Hollywood: investing heavily in networks, only to have the companies that distribute content and services derive the most benefit from them. The lockdown prompted by the Covid-19 pandemic has demonstrated the extent of our reliance on those networks—billions of people are depending on their internet connection to work, study, and play from home.

In the 13 years since the release of the iPhone, investors have bemoaned network operators’ lack of creativity. Why did it take Apple Inc. to catalyze the smartphone market? How come it was Netflix Inc. that popularized streaming video subscriptions? AT&T Inc. finally responded in 2016 with its $109 billion deal to buy Time Warner Inc., adding a vast entertainment arm whose content it would distribute to its more than 100 million customers. Verizon Communications Inc. has concentrated on improving its networks while hoping investors will forget about its ill-fated acquisitions of AOL and Yahoo Inc. at about the same time.