In 1965 an observation was made by David House that over the history of computing hardware, the processing power of a minimal cost computer chip would double approximately every two years – Moore’s Law. While the impact of that forecast has been widely accepted and credited with significant advances in technology and associated economic benefits, there is an important forecast that applies to the power and value of networks, known as Metcalfe’s Law. The simplest way to apply this law is to look at the value of one fax machine which is useless on its own and as soon as you start to increase the number of fax machines, you increase the number of people who can send and receive faxes. While there is no specific timeline attached to Metcalfe’s law, advances in network size and capacity along with the mobile computing and communications revolution, have made the impact of Metcalfe’s law perhaps even more significant that its processing power counterpart.
We definitely “get more” out of the devices and networks that we use by virtue of their size and reach. Metcalfe’s law was defined by device only – today it also applies to the network effect most commonly discussed in reference to social networks. For example, if Facebook were a nation it would be larger than the United States and would rank itself just behind China and India in population.
I believe the most transformative aspect of the network effect or Metcalfe’s law is in an economic context. We are witnessing firsthand how the whole paradigm of enterprise computing is shifting to a cloud based model. This is allowing for even greater levels of distribution and provisioning of services and applications across both urban, rural and remote locations.
You can draw a direct line from the now dominant importance of SLAs in our business to the network effect described in Metcalfe’s Law. When the power and capacity of the connections becomes standard, only the reliability and performance of the network can impact its value to customers. In our opinion, the impact of the network effect and Metcalfe’s Law is significantly larger in rural and remote communities because of the fact that the multiplier effect is allowing business to take a substantial leap forward from the negative effects of decades of living off restricted and narrow network capacity.