What We Do:
Information Velocity Partners, LLC (IVP) provides strategic advisory, business development, and financial modeling and capital raising for companies in the rapidly changing Infomedia and Technology markets. IVP develops investment themes to enhance clients' long-term enterprise value. We provide clients with 3-dimensional macro/micro frameworks to illustrate internal and external areas of opportunity to improve growth and profitability. We work on a project or retainer basis. If capital is raised, we also work on a performance or success fee as part of our retainer.
Key Investment Theme:
The market is at the beginning of a very large cycle; much, much bigger than the Wintel/Internet and digital wireless cycles begun in the late 1980s. The "fourth and final wave of digitization" is our broad investment theme. The 4th Wave is an outgrowth of three prior waves of digitization that took place during the 1980s-90s. Each of these waves was marked by shifts from analog to digital pricing. The typical 90%+ price declines were offset by a) pricing elasticity, b) application elasticity, and c) shift from private to public networks. The result was revenue growth and new economies that few could perceive or predict. We see the 4th wave resembling the 3 prior waves.
History as Blueprint for the Future:
The 1st wave was the digitization of the WAN between 1984-1990, which led directly to the digitization of data during the late 1980s and 1990s; aka the Internet. Layers 1-2 of Web 1.0 (low-cost, flat-rate dial-up) was a direct outgrowth of telephone monopoly pricing response to competitive WAN encroachment. Digitization of wireless in the mid-1990s was the 3rd Wave; itself a direct outgrowth of the data wave as a result of scale in digital processing leading to low cost wireless terminals/handsets.
The 4th wave should have occurred in the late 1990s but was held up by regulatory and anti-competitive market forces over the past 15 years. Even though broadband adoption has been high over that period, access networks controlled by oligopolies brought about by the Telecom Act of 1996 have stymied recent growth. Today the spread or arbitrage between the "retail" and "economic" cost per bit is the widest it has been since before divestiture in 1984. In plainspeak, bandwidth that costs $100 per month per meg probably can be priced at $5-10 and still generate positive ROI.
A Shift From Vertical to Horizontal:
A restructuring in the industry must occur. Smartphones are paving the way for real-time merging of the communications event with the commercial transaction. Putting together the traffic demands resulting from 300,000+ commercial and consumer applications in the iOS and Android ecosystems, social media networks, and high-definition video (Netflix and Skype) will necessitate enormous amounts of ubiquitous bandwidth. Vertically integrated service providers cannot provide this bandwidth. So a separation or divestiture into separate horizontal layers or groupings (lower, middle, upper) mirroring the 7 layer OSI stack is inevitable.
We're not entirely sure when this will happen, but we know that it will because the vertically integrated carriers cannot scale all elements of their in-house operating and capital expenditures at every layer. And they cannot sustain a two-front war against applications at the top (think Netflix, Skype, Google and Facebook) and technology at the bottom (think new hybrid access network topologies, or HANTs) that will result from greater spectrum availability and high-capacity 8x8 wireless protocols amongst many exciting technologies on the horizon. In the short-term, the sheer size and scale of today's converged service providers hides the long-term forces and reality from most market participants. But recent evidence of the coming restructuring can seen in the shared buildouts of next generation wireless networks in Russia and elsewhere.
The Opportunity:
Over the next 5-10 years a series of horizontal clearing houses will develop that will facilitate the linking of the communication and economic events (think of 800 services) for a high-definition, mobile, broadband world. We already see how advertising, a form of "called party pays" that is anathema to the vertically integrated oligopolies who support "bill and keep", is becoming a far more cost-effective revenue model than carrier subscription services. In the mean-time, the very largest providers like AT&T and Verizon will have to restructure much like IBM did post 1987.
Where IVP Comes In and How We Can Help:
IVP's approach takes this long-term trend and helps map a client's competitive position. External and internal information is distilled down to operational, strategic and financial elements for a concise 2-5 year strategic plan and call to action to change and grow profitably in this rapidly evolving market.
