I think there's an expectation, in the service provider business, that all problems have answers. At my keynote at the IP Possibilities conference in Kansas City, Mo., across the river from where Google (News - Alert) will be building a symmetrical, one-gigabit-per-second fiber to the home network, I suggested that some questions do not have obvious answers, and that perhaps not all problems can be solved.

Consider the situation now facing many small, rural telcos and cooperatives. Many are losing population, meaning that places with few people per square mile 30 years ago have even fewer people today. The impact of demography might not be so obvious, so consider this. Most of us, when looking at business opportunities, will instinctively look for big or important problems that people or organizations have, then try and create solutions for those problems, creating products that can be sold for money.

So what do you do when there are too few people to buy, even if you have correctly identified a significant problem? Even in the best of times, and these arguably are not the best of times, a rural telco might only have 300 to 1200 actual potential customers. 

While it is fine to call for innovation, it is much harder to figure out what the actual revenue potential might be, for just about any new investment in a new application or service, even assuming that one has guessed correctly about a problem that can be fixed, a need people have, and then can develop a solution. 

Put another way, the reason a universal service program exists; the reason that high-cost funds exist, is that there are not enough customers to make telephone service and broadband access an actual business, without subsidies. By extension, that makes innovation a dicey proposition as well. For some of us who spend quite a lot of time thinking about new problems that can be solved by software, applications and services, the small rural carrier set of problems is tougher by far. 

Where one normally thinks about new services and products that can be sold to people, rural and smaller carriers suffer from the problem of "not enough people," even when everything else can be worked out.  

Consider the twin questions "what would you do if you had unlimited resources," and "what would your business look like if voice pricing dropped nearly to zero"? The problem in rural areas is that even "unlimited resources" would not help create much additional demand, because there are too few potential buyers to create a significant market. The business problem is that even the ability to spend more to create new services would likely not produce a profit on the investment. 

As for the second problem, declining voice revenues, the obvious answer to the question, which simply wasn't clear in 1994, when I actually asked myself the question for the first time, is that telcos and cable companies would simply have to get into new businesses. Nobody has yet proven that additional heavy investments in "voice" infrastructure will produce enough incremental revenue to offset declining end user demand, in a rural market with few businesses or consumers. 

The answer to the question "what would your business look like" is simply that telcos and cable companies have gotten into new lines of business. The point is that significant additional investment in "voice" likely would not compensate for falling demand for the legacy product. The problem of "near zero pricing" for voice is, for that reason, not "much-more investment in voice capabilities."

The answer is "get into new businesses." 

The new wrinkle is that it remains unclear how much more revenue a rural carrier can generate, beyond getting into entertainment video and broadband access, after they have entered those businesses. That is not to say such incremental growth is impossible, simply that it is not easy. 

One might argue that the next round of growth will require efforts that go beyond adding new services "in territory." Rural customers will need remote backup just as much as urban customers, for example. The business issue is that even when those sorts of services are added, the relative paucity of potential customers in territory remains an issue. That virtually necessitates some look at services that can be sold over a much-broader set of potential customers, and that means going "out of region." 

Larger tier-one carriers globally have encountered the same sort of problem, which is why so much "growth by acquisition" and "growth out of region" activity has been happening for the past decade. At some point, "selling products people want to buy" is crucial. But so is sales volume. 

The unknowable issue at this point is how innovation can occur on a scale that provides a financial return. One can argue that part of the solution is to solve more problems people and organizations have, beyond those immediately involving "communication." Rural service providers have to go one step beyond that, though. Even products that solve more problems likely have to be sold to greater numbers of people than live within a current geographic area where a given rural telco or cable company operates. 

Some questions really have no easy answers. There are answers, but those answers could well include a level, and scale of innovation, far beyond what is possible with line extension products, additional computing and communications services, sold exclusively within a limited geographical area. 

In other words, it is not enough to be "right" about innovation. Rural service providers have to be right, but also right, with scale. Cloud services seem to be an almost-ideal answer, in that regard. By definition, cloud services can be provisioned remotely, with sunken investment shared across a high number of buyers, on a wide geographic scale. 

Some problems have no easy answers. In fact, some problems, such as a gradual diminution of voice revenues, are largely insoluble. Chris Carabello, Metaswitch Networks director, likened the "keep doing what you do now" strategy to a melting ice cube. Eventually, there is nothing left. 

But that doesn't mean there is no answer. By their past actions, rural service providers already have learned to answer the question. They have gotten into new lines of business, beyond voice. Carabello also suggests service providers can leverage voice to climb on a ladder to some new businesses.