Decomposing monoliths: Helium
Helium is a startup that seeks to build a wireless access network for IoT devices. Incumbent competitors include Verizon, Vodafone, AT&T, etc. using licensed spectrum and 3G/4G/5G networks for access. The amount of capital required to license spectrum and erect physical infrastructure globally has given incumbents a significant barrier to competition.
Helium uses unlicensed spectrum to provide network access. This means that there’s no requirement to obtain a spectrum license, so that anyone can mine Helium tokens (the currency used to access the network) by running an access point that provides a few kilometres of network coverage. Already, the economics of modern outsourced electronics manufacturing mean that these access points cost only hundreds of dollars. This means it’s a profitable individual decision to purchase and run a Helium access point.
By comparison, a traditional telco would spend many billions of dollars on spectrum, hardware (with not-insubstantial margins to Nokia, Huawei, Cisco, Dell. Etc), lenders, physical installation and site leases. At scale, Helium has none of these costs.
At scale, Helium Corp isn’t a monopolist determining the rules and price of the network. A healthy Helium network is open-source, and comprised of large and small organizations that all have a vested interest in the success of the network. Telcos are both bloated monopolists and especially known for their poor customer satisfaction. Helium inverts the network completely.
Helium has virtually none of the overhead of the incumbents with whom they compete. If they’re successful, of course they’ll be thousands of times more profitable than the incumbents (like Verizon and Airtel) they replace.
I worked in Hollywood for a time, and one day after Amazon won a Golden Globe, I heard a Hollywood-type say “Amazon’s just writing cheques all over Hollywood. They’ll never make money. They’re just arrogant tech money that doesn’t understand how Hollywood works.” An analyst on an investor call asked Bezos about the award. He replied “When we win a Golden Globe, it helps us sell more shoes.”
The Hollywood-types didn’t realize that Amazon was playing an entirely different game.