Facebook Aims Global Reach At Cheap Rate

by CXOtoday News Desk    Apr 27, 2016

Facebook’s co-founder and chief executive, Mark Zuckerberg has a clear vision for his company to triple the size of social network, which now has 1.6 billion members, according to a New York Times report.

Mark Zuckerberg

To reach that level of new audience, Zukerberg has to find a way to change telecommunications networks to make connecting to the Internet more affordable, since many of those would-be Facebook users live in developing countries. 

That could be bad news for the companies that make equipment for those networks, be it giants like Cisco Systems or little widget makers who produce parts to tie different pieces of the network together. 

“There is definitely going to be some pressure, some consolidation for many tech equipment suppliers”, said Akshay Sharma, research director at the technology advisory firm Gartner. “If you’re in hardware, you’re going to reduce head count from thousands to maybe 10 people, a hundred at most.”

Zuckerberg has embraced open-source concepts, which have helped him play catch-up with the giant computer networks of companies like Amazon and Google. 

Open source typically refers to freely shared code or even development plans that companies and people collectively create at a fraction of the price of traditional tech products. 

When Facebook will reveal the financial results for its most recent quarter, investors will no doubt scrutinize how much the company is spending, particularly since Zuckerberg has promised to invest more money in searching for new users. One key that has helped to keep those costs down is open-source technology. 

Facebook does its own work on planning the computer hardware and software that it uses to deliver its services. It even released an open source design of racks where its servers operate. 

Zuckerberg is relying on open source to reduce the price of building and running the world’s telecommunications networks, a business estimated to be worth about $150 billion a year. 

“Our rule is 10 times faster or 10 times cheaper or both,” said Jay Parikh, Facebook’s vice president for engineering. “We want to get a full Facebook experience to every end user, whether that is video, or eventually virtual reality.” 

“There is a new force in the system,” said Dave Ward, Cisco’s chief architect. “We’d rather be on the train than in front of it.” 

In the future, Zuckerberg imagines that “a physical thing, like a TV, will just be a $1 app” inside virtual reality on Facebook, he recently told a conference of software developers building apps for Facebook. But that may be 10 years off, by Zuckerberg’s own admission. People who do not work at Facebook might say it is a fantasy. 

Facebook even appears willing to turn the price-crushing model on itself. To get virtual reality to every place in the world, Facebook’s Oculus VR headsets, currently $600, may have to cost $5, said Mike Schroepfer, the company’s chief technology officer. 

For Facebook, getting the costs down could mean controlling the next big communications platform, as Zuckerberg believes virtual reality may eventually supplant smartphones as a primary connection to the online world. 

“The world is making enough phones. It’s better for the world if there are fewer devices,” Schroepfer said. “It’s not totally obvious how all this shakes out — whether we’ll have lots of consumer products, or it all disappear into a couple of VR headsets.” 

How much profit this new audience will yield Facebook is an open question. But Facebook would rather control a crucial technology than have to build on top of another company’s products, as it has had to do with PCs and smartphones. 

“It’s more opportunity to show ads,” said Danny Sullivan, founder of the technology website Search Engine Land, who is a close watcher of the industry. “It’s more opportunity to gather data on what we do or who we are connected with. It’s more opportunity to build a new platform where Facebook serves as the broker of connectivity.” 

Facebook does not want to own or sell the gear, he added, but plans to work with “hundreds” of local phone companies worldwide on cheaper high-speed connections. 

 ”We are connecting 700 million to 1.5 billion people a year via smartphones and tablets,” said Ulf Ewaldsson, chief technical officer at Ericsson, one of the world’s largest makers of telecommunications hardware. 

“They say they can do a 90 per cent cost reduction, but that is from phone bills for high-cost customers,” he said. “Poor people need to be covered, and the industry is working on that.”