The real Gigabit Challenge is getting ISPs to think like tech firms

On Friday six cities in North Carolina issued a request for proposal for gigabit connections at a reasonable cost for businesses and residents. The cities have been talking up their efforts which would include new investment from a company, as well as the opportunity to lease the cities’ dark fiber. Just like Seattle, Chicago, Chattanooga and Bristol Tenn., and Kansas City, these North Carolina municipalities are taking their broadband future into their own hands.
As cities around the U.S. look at gigabit connections and see the future infrastructure that they ought to provide to ensure their citizens have access to 21st century jobs and remain (or maybe even become) hotbeds of innovation, FCC Chairman Julius Genachowski has also hopped on board the train. The Chairman, playing the role of chief cheerleader called for a Gigabit Challenge three weeks ago: asking that every state in the U.S. get at least one gigabit city by 2015.

The real gigabit challenge is to change the ISP mindset

But he had it wrong. No matter what the FCC does, there will be gigabit cities in most states by 2015, or those networks will be under construction. The real gigabit challenge is to get the telcos to think like tech companies or to get them out of the way. If we accept that broadband is the silicon of the next fifty years — providing the platform for technological innovation and advancement that chips had done from 1960 on — then we need the providers of broadband to think like tech firms. Intel (s intc) makes for a great example.

One of Intel's fabrication plants.

One of Intel’s fabrication plants.

The chip giant has consistently pushed for faster and more chips off its manufacturing lines — even when its manufacturing operations cost billions to build. It has never told consumers that its 486 chips would be sufficient, and then tried to control the programs that would run on them. Instead it has pushed its partners for faster software that would require faster and better chips. And it then pushed those chips into new areas such as servers. Intel delivers a commodity of sorts — the x86 platform — but it still raked in profits of $2.5 billion last year, and is even now investing up to $2 billion to change its fabrication methods to produce even more chips on larger wafers.
On the flip side, we have the telcos and the cable guys who generally provide most of the broadband in this country. In different eras and in different ways each has made vast technological investments in networks that can deliver broadband around the U.S. But after their initial investments they stopped looking ahead in many cases, or pushing their envelope. When the telcos saw the success of ISPs they bought them up. As cable providers saw the success of ISPs, they came out with their own broadband services that were faster than the DSL technology the cables had.

The broadband race ended in the mid-2000s

The 90’s and early 2000’s were a great time for broadband. There was competition from various providers, and differing technologies and people responded. Consumers signed up for these new services, and entrepreneurs built products that ranged from eBay and Napster all the way up to the genesis of Facebook(s fb). But then two things happened.
First, broadband adoption slowed. Unlike telephone lines, if you had one broadband account in the home you didn’t really need another. During this time the cable companies and telcos focused on their other lines of business, adding HD channels on the cable side and putting money in wireless and additional phone features on the telco side.
The other thing that occurred was a more hands-off regulatory view of the interent; regulators came to regard competition between cable and telcos as sufficient to ensure that people would get the connections they needed. But unlike a tech firm, which seizes on the absence of regulation to push ahead with a grand vision (such as gather all of the earth’s information), the telcos and cable guys just sat on their networks making money off their investments from the previous five or ten years.
They didn’t pay attention to where the world was going other than to grouse about the profits folks like Google or Amazon were making off of “their pipes.” They wanted to stand still and reap profits because that’s what utilities do. They invest in infrastructure and they maintain it. Along they way they lobby the government to ensure or keep their profits. And that’s why there are grim charts about how the cost per megabit are going up, despite the falling costs of providing a megabit.
Unlike Intel, which puts a lot of R&D in its business and hopes to sell more of its chips in more places, and so invests in technologies that drive the adoption of silicon, ISPs are implementing caps and incentives that are aimed to preventing people from using broadband — or at least second guessing themselves when they do. Should I buy a Dropcam? It uses 60 GB a month of data? Should I download the entire Lord of The Rings trilogy in HD or will that push me over my quota for the month?

A modest proposal for ISPs

If ISPs had been thinking like tech firms they would have realized that their goal was to connect everyone to the internet, deliver the internet everywhere and invest in applications that would drive demand for faster speeds. ISPs should have beat Boingo (s wifi) and Wayport to the Wi-Fi hot spot business. They should look at the internet of things and see opportunities for delivering quality of service and prioritization and create services for that. And fundamentally, they should be playing a game where they want to get to a gigabit, because if everyone wants a gigabit connection, they will have to get wireline connections for home and still have their Wi-Fi and cellular for everywhere else.
So now that the RFP for North Carolina is out, maybe we’ll see an ISP step up to the plate and think like a tech firm. There are plenty of innovations they could help drive to lower the cost of deploying such networks. Or maybe they could take a page from Google and try some social engineering. After all, that document allows the incumbent broadband providers the same ability to participate as it does for a Gigabit Squared or a Google. And if that could help get ISPs to think like tech firms, then it could benefit us all.