Signs of a paradigm shift

On 5/24, at 5:24 am, Vermont flipped the switch to replace its original next generation all IP 9-1-1 system with a new next generation all IP 9-1-1 system. As is often the case when paradigms shift, the most significant big-picture aspects of the event are not readily perceptible. It should be noted that the system change occurred with zero coordination needed between the old system provider and the new system provider—in other words, 9-1-1 systems are now commoditized. For those who are old enough to remember, this is analogous to the period after deregulation in the telephone industry when you could buy any phone, anywhere and plug it in without needing to coordinate with your service provider. The deregulation legislation passed in 1996, which immediately commoditized basic phone service, has now commoditized complex 9-1-1 system.

This is extremely significant for the 9-1-1 industry. Those familiar with Harvard Business School (HBS) Professor Michael Porter’s five forces framework will recognize that this represents a shift of power from the seller to the buyer. Commoditization lowers switching costs for the buyer and reduces vendor lock-in. Barriers to entry are also lowered. All of this increases the rivalry among existing firms. The resulting competitive environment lowers costs and increases innovation.

Commoditization in an industry sets in motion the de-commoditization elsewhere in the industry, according to Clayton Christensen, also of HBS. As commoditization drives down the cost, and profit margins of complete systems, de-commoditization creates huge opportunities for the firms that create the modular components that make up the commodity systems. An example of this is how IBM mainframes were replaced by commodity PCs, but it was the component makers, e.g. Microsoft, Intel, Seagate, etc., who reaped the huge profits.

What does this meant to the 9-1-1 industry? If the trends from other areas of technology apply, the firms that continue to produce monolithic systems that do not interoperate well are likely to face significant threats from disruptive innovators who provide the de-commoditized subsystems. All of this bodes well for those who operate 9-1-1 systems, as these trends will lead to significantly better systems, more choices, and lower costs. It can’t happen too soon.