DANA POINT, Calif. –- At a lunch talk here at Links 2005 yesterday, Rod Randall, senior managing partner at Vesbridge Partners LLC, said he sees the telecom industry hitting a crucial turning point -- much of it driven by the Google (Nasdaq: GOOG) phenomenon.

Google, in short, has shown that a new Internet application can take advantage of ubiquitous cheap networks and generate enormous value. So what's that all mean for the telecom industry? The way Randall sees it, there's a big math problem.

Here's the deal: The telecom industry is traditionally one of the largest markets in the world, in terms of a percentage of GDP -- currently about $1.4 trillion annually.

The content business, if you count up movies and music CDs, is about a $70 billion business, reckons Randall. Advertising is a $600 billion business.

The problem? Recent trends are that communication services -- the bread and butter of telecom -- are being driven down in price, or even tossed in for free, in order to sell content or generate advertising.

"So we are thinking of offering all this connectivity [a $1.4 trillion industry] for free in search of $70 billion," said Randall. "It's a mad world of mutually assured destruction."

Then there's Google, which has managed to capture a $100 billion market capitalization with only about 4 percent of the total worldwide advertising market, said Randall. He pointed out that Google has a market value higher than all of the largest service providers in the world, except Vodafone Group plc (NYSE: VOD), which has acquired more than 20 companies.

Randall said he thought about many of these issues after viewing the online film Epic 2014, a movie he said was pointed out to him by a teenager. In the film, Google supplants most traditional media companies, and takes over most of the media business.

In Epic2014, everybody loses to Google, points out Randall. That's because the world moves to a highly targeted advertising market, driven by search. The New York Times fails and is repositioned as a "niche publication for the elderly and the elite."

So what kind of future is in store for telecom? Randall hopes it's the best of both worlds -- inexpensive connectivity combined with high-value content, and perhaps advertising as well.

"I happen to believe in an alternative future. You have to figure out how to link the value into connectivity."

What's Randall doing about it? He says he's helped by funding a company called Visage Mobile, which helps content providers work with mobile service providers to quickly set up highly focused MVNOs (Mobile Virtual Network Operators). One example of that is ESPN Mobile working with (NYSE: S) to launch its own MVNO.

— R. Scott Raynovich, US Editor, Light Reading