If the prospect of a web company like Facebook using WebRTC to become a telco has the carriers worried, how do you think they'd feel about Facebook flat out buying a telco to compete? (See WebRTC & the Rise of the WebCo.)
They should feel real worried, because it's something Facebook might be considering -- if it's smart. Recently in his blog, BuySellBandwidth.com (subscription required), the industry analyst Sunil Tagare put forth the not-so-crazy idea that the social network buy Tata Communications Ltd. , the Indian fiber/subsea network operator and international Ethernet services provider that was recently a rumored acquisition target of Vodafone Group plc (NYSE: VOD). (See Beal's New Gig: Integrating Vodafone & Tata?)
It makes sense when you think about Facebook's goals, its recent WhatsApp acquisition, and Tata's assets. Tagare breaks it down well on his blog:
- Tata is on the market, and with a valuation of $1.2 billion, it's chump change compared to the $19 billion Facebook paid for WhatsApp. (See Facebook to Acquire WhatsApp for $16B.)
- Buying WhatsApp made Facebook the largest virtual global carrier, with 10 billion messages sent per day. When it starts offering free voice services this year, it will become the largest voice provider, too.
- Tata also has the largest submarine cable footprint in the world, making it the largest provider of voice services with the lowest cost structure of any carrier in the world. Put the two together, and you have a compelling proposition both online and offline.
- Finally, India is an important growth market for Facebook and just so happens to be where Tata has the largest footprint of datacenters, which would come in handy should the Indian government decide to require local storage of data in light of NSA concerns.
"Facebook has tried to buy submarine cable capacity -- in SJC -- and it knows how hard that has turned out to be," Tagare wrote. "Imagine if they have to build a global network from scratch! It's virtually impossible unless they hire hundreds of people and pretty much copy Google -- which will take ten years at the least." (See Facebook Invests in Subsea Cable.)
Tata is Facebook's readily available, low-cost path to global infrastructure. The idea of an acquisition isn't as crazy as, say, spending $19 billion on a chat app. Heavy Reading analyst Caroline Chappell calls the possibility intriguing. "Tata's global footprint is impressive, and as a new market entrant all-IP player, it is exceptionally lean from an operational cost perspective compared to most of its global competitors," she told us.
Should the operators be worried? I'd say they should be prepared, at the least. Anything can happen in the wireless market, and the barriers to entry are getting lower, especially for a powerful player like Facebook.
I think Chappell put it best when she said, "The day a major OTT player buys a carrier, the fireworks will really fly in the telco market."
— Sarah Reedy, Senior Editor, Light Reading