January 7, 2011 By Craig Settles
The broadband discussion suffers from a case of mistaken identity. The mix-up could be costing communities lost opportunities in economic development, improved health-care delivery, better education and other significant benefits. It’s time you turn this situation around.
Many communities — large and small, urban and rural — have watched the industry define “market” almost exclusively as being incumbent telcos, service providers and vendors. “Market,” in the industry world, is code for “companies.”
You often hear them say, “Let the free market take care of broadband. Whatever companies do to make a buck that shortchanges communities is generally a-OK because in the end, ‘free markets’ serve the public’s best interests.” Can’t get any provider to deliver broadband to an area? No problem, because the free market has decided it’s not worth the effort. Only have one choice for service, and that service is overpriced and subpar? Not to worry — that’s the market at work.
The giant telcos’ definition of market is smothering the national broadband goals that official Washington, D.C., says it wants. It’s time for communities to step up and embrace the market in its true form.
A little while ago, I was discussing broadband issues with Don Means, co-founder of consulting firm Digital Village Associates. Means is a fiscally conservative Republican and I’m a moderate Democrat. At one point he asked, “What happens when you view communities not as political subdivisions but as markets? You find better solutions that meet actual market demand.”
Instead of accepting the adage that “what’s good for free markets (a.k.a., big telco), is good for broadband,” communities that are unhappy with their broadband should adopt the following market-based position that Means and I champion.
This philosophy also guides Communities United for Broadband, a group I co-founded to provide valuable resources for communities’ broadband champions.
Let me make this real. Last year, a city commissioner called from a small Florida town. About 10,000 constituents pay about $100 per month for voice and data services to the only provider in town. That’s $1 million a month. The town decided that for much less they could get as good or better service. They’re on a mission to do just that by building the network infrastructure and getting private-sector providers to sell services. I expect they’ll be successful.
Come to grips with how much money your community collectively spends (or could spend) for Internet access and voice services. People know how much they pay individually, which seems like peanuts in the big picture, but often don’t do the math for the community at large.
Once you survey your constituents and realize how much they’re already spending, you and others will start to see the possibilities. Just 10,000 people represent a cool $12 million each year in the case I cited. Consider, too, the amount that could be spent by your currently unserved constituents. With the various broadband technologies available, $12 million starts to get the attention of organizations that can help you. With those kinds of numbers, creative juices start flowing and new avenues to funding broadband become viable.
Treating your community as a market — shifting $12 million a year from your current provider — makes you a market force that possibly can induce the public utility to be a provider. Their business infrastructure is already conducive to running a broadband network, and $12 million is a decent cash infusion to support this new opportunity. A local wireless Internet service provider selling fixed broadband at 20 to 30 Mbps can see good business in a $12 million market.
Possibilities multiply as you calculate potential revenue from local businesses and organizations that aren’t using broadband currently, but would if they could get service capable of supporting their needs. Then there’s additional revenue for premium services these constituents would buy if they could move hundreds of megabits, even gigabits, of data.
Don’t forget the buying power of local government when replacing old communication technology with new broadband, or the new businesses and organizations you can attract to your community. Once your community realizes and quantifies its current and potential spending power, you have negotiating power just as your local government does when it buys other technology and services.
This collective buying power for broadband opens various business and financing models. You can take the path Ontario County, N.Y., did to own its fiber infrastructure, which was to sell services on an open network that fosters competition. The community, via local government or local investors, can even own the network outright and provide services. Santa Monica, Calif., went this route and built a city-owned fiber network that generated more than $2 million in capital that the city used to expand both wired and wireless broadband.
There are more 80 community-run broadband networks across the U.S.: in Utah, Pennsylvania, Tennessee and many other states. Most are doing quite well; only a couple appear to be floundering against incumbent-driven challenges or internal issues. More are on the way thanks to the broadband stimulus and inspiration from Google’s gigabit network project.
The private sector has a role to play, but that role is serving the market’s needs. Right now it’s the reverse. Communities need to take charge. Realize your market power. Harness market forces. Forge market-driven partnerships with providers and vendors that deliver what constituents demand.
As Paul Larsen, community and economic development director at Brigham City Corp. said, “As long as broadband infrastructure is owned by companies that also provide services and have a vested interest in the failure of their competitors, there will be problems. A better way is to let incumbents go their merry way, [while you] support a system of publicly owned, open-access networks that provide platforms for competitive providers to offer their services without resistance from the network owner, and without the need for regulation to provide the desired outcome.”
Many communities’ individuals and business constituents collectively have the money (or conduits to funds), the creativity and the will to facilitate — if not outright own — the best broadband solutions. If you say you want better broadband and want to reach unserved communities, aggressively pursue policies and plans that favor markets over the marketers.
Craig Settles is an industry analyst, broadband strategy consultant and co-founder of Communities United for Broadband, which delivers on-site training to private- and public- sector organizations. Follow him on Twitter (@cjsettles) and his blog, Fighting the Next Good Fight.
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