In the late 1990s, the music industry imploded as consumers ripped songs from CDs and shared them over the Internet. A pair of landmark legal cases followed -- Metallica vs. Napster, Inc. in 2000 and A&M Records vs. Napster Inc. in 2001. The lawsuits alleged copyright infringement and were aimed at shutting down peer-to-peer music-file sharing over the Internet, which was killing album sales and driving record companies out of business.
Metallica and A&M Records prevailed, respectively, but the rulings didn’t save the industry. Album sales continued to plummet and file sharing sites for music, TV shows and movies exploded all over the Internet – intellectual property laws be damned. The music industry finally embraced the concept of digital music amid the changing marketplace in the mid-2000s, but the damage was done and the revolution left a litany of record companies dead in its wake.
The digital evolution is now lining up another industry in its sights – telecommunications. And if the traditional big cable broadband providers aren’t careful, they’ll be the next wave of companies on the chopping block.
For years, telecommunications providers such as Comcast, CenturyLink and Time Warner Cable have challenged local governments that light up their own high-speed networks. The resistance typically takes the form of aggressive lobbying on state legislation that erects barriers to entry for new players in the broadband arena. The barriers aren’t de facto bans, but contain so many onerous regulations that they might as well be.
According to The Institute for Local Self-Reliance (ILSR), 19 states have these anti-community broadband legislative barriers enacted, and more are being considered. Legislation was introduced – and later pulled – earlier this year in Kansas that would have prevented local governments from creating its own broadband networks or partnering with companies to provide them. The bill was backed by the Kansas Cable Telecommunications Association (KCTA) – whose members include providers such as Comcast, Cox Communications and Time Warner Cable. It may be reintroduced in a different form later this year.
Yet by attempting to stop the expansion of broadband connectivity in Kansas and all over the United States, big cable companies are setting themselves up for a collapse much worse than what was experienced by record labels a decade ago. The Internet isn’t an entertainment product and diversion like it was in the late 1990s. Being online is no longer a luxury, it’s a necessity, and dial-up speed simply doesn’t cut it, even for the most remote of rural locations.
If companies suppress how people are now communicating and doing business and cling to old revenue generation models, they’ll soon be extinct. Customers aren’t going to show loyalty to an established name. They are going to flock to the provider that gives them the fastest, most reliable and cheaper service – all things that the telecommunications giants seem to struggle with. People will leave them in droves the moment Google Fiber or a local government-owned network becomes available in their area.
So what’s the solution? Acceptance and true competition. Incumbent providers need to stop whining about “fair competition,” and look forward. Reliable and fast connectivity is essential to all people, not just the areas the bigger companies believe are in their best interests to build-out to.
Stop lining the pockets of state legislators to do your bidding and start truly competing. For example, discuss the viability of being an anchor tenant on network infrastructure owned by a municipality. Examine the possibility of advertising revenue as a condition of helping build-out to underserved areas. Put all ideas on the table and find what works.
Sure, tossing dollars at lawmakers to curb expansion of start-up broadband networks works in the short term. But by ignoring the evolution of broadband, those short term games become long term losses as Gen Xers and Millennials become decision-makers and more influential in government.
Are you really going to tell a Millennial who lives in rural Idaho who owns a tablet, smartphone, smartwatch and eventually Google Glass that she can’t have broadband because it doesn’t make financial sense to build-out there? Good luck. They’ll find a way to make it happen, legally or illegally. And either way, the provider that made that access impossible will lose – just like record companies did when they fought digital music.
To be fair, local government-owned or controlled broadband networks don’t always pan out. Look at what happened with Burlington Telecom in Burlington, Vt. Although some users praised the network’s speed, as of 2010, the network was $50 million in debt. The network recently settled the debt with its creditor, Citibank, but Jonathan Leopold, the city's former chief administrative officer, was sued by taxpayers for taking $17 million in city funds to float the sinking network. The case is currently being litigated.
But community broadband networks have many success stories. The ILSR reports that more than 40 communities in 13 states have a publicly-owned network in operation that offers gigabit services. And that doesn’t include Google Fiber’s expansion in a variety of states throughout the U.S, or other small startups looking for ways to partner with local governments to finance high-speed networks.
One of the locally-owned crown jewels is in Chattanooga, Tenn. The city’s broadband utility was one of the first to offer gigabit-per-second Internet speeds to residents. Santa Monica, Calif., and Wilson, N.C., are also prime examples of successful community broadband networks.
No one is saying long-standing telecommunications giants should concede to startups because the demand for technology is changing the game. At the end of the day, businesses are out to make a profit. But the days of relying on old-time providers as the only game in town for vital communications services is over.
Communities are making it clear – they want faster and more robust connectivity. Unless telecom companies want to repeat the mistakes of the record industry, they’d be wise to stop strong-arming local broadband efforts and embrace new possibilities.