Broadband cord cutters? If this is a thing, ISPs, regulators and Silicon Valley have utterly failed

I’m supposed to be covering the internet of things, but the story today in the Wall Street Journal on the one percent of people who have reportedly cut their wireline broadband subscriptions to use wireless instead is a hot mess that requires some careful rebuttal. But first, that the Wall Street Journal is even writing about this issue at all, as a possible “thing,” and doing so without directly citing the high cost of wired broadband until the fifth paragraph is rage-inducing.

The WSJ minces around the cost issue by distracting readers with the chimera of more Wi-Fi hotspots and better cellular coverage as the reason people are cutting the wireline cord. But its examples show cost is the issue for most people. Essentially Patrick Downs, quoted in the story, doesn’t want to pay for a wireline connection and a wireless connection, so he picked wireless because mobility is a higher value-add for him. Apparently youth in Japan were doing the same thing, prompting NTT to lower its fiber to the home prices.

Sticker shock is an issue

And if cost is the primary reason people are electing to ditch their wireline service we have two problems. One, wireline broadband costs too much, and the second is wireline can’t convincingly differentiate its value from the current LTE-wireless offerings. The first is a problem that can be laid at the door of ISPs and our regulator’s inability to boost competition or innovation in broadband. It’s taking private companies like Google(s goog) and Gigabit Squared to move the needle on faster speeds and lower costs in wireline after Verizon(s vz)(s vod) all but stopped deploying its FiOS fiber to the home service to its customers.


As the WSJ story notes:

Leichtman Research surveys show that spending for home Internet service has risen steadily over the years, to an average of $46.78 a month last year from $28.46 in 2005. People trading up to faster services—from dial-up to DSL to cable to fiber-optic—accounts for some of the increase, but so do rising prices.

What it barely mentions is that broadband is just part of a growing telecommunications bill for most Americans, that includes cellphones, pay TV and broadband (and sometimes home voice). And what it skips over, but would be a great business story, is that despite the world moving to all-IP, where it is technically possible to deliver TV, voice and data all via the same packet network and infrastructure, prices have not dropped, and have indeed risen. The issue here is a lack of competition and regulatory will. Consumer habits are also hard to break.

For example, on the regulatory side the FCC defines anything over 4 Mbps down as broadband, which means wireless LTE networks are broadband, just like a gigabit network is. The FCC also doesn’t have a real solution for boosting speeds and pushing innovation other than empty goals that are announced after companies have already put in the real work of building out new infrastructure.

On the consumer side, people are sticking with their existing carriers (they like the subsidies) despite the nation’s top 2 carriers implementing pricing plans that eliminate many of the savings one might earn by using over-the-top IP services like Google Voice, Skype(s msft) or WhatsApp.

The bigger problem is that both services look the same

That’s the pricing side. But the second problem is a bigger one in my mind. That people don’t differentiate between wireless and wireline means that the technology and entertainment industry is failing to deliver apps and experiences that make people want and demand a fast wireline service. The carriers (especially in rural areas) love that people are willing to look at wireless and wireline and see the same service, because delivering wireless has higher margins and it means carriers don’t have to invest in costly underground network upgrades.

Is Netflix a good enough reason to buy wireline broadband?

Is Netflix a good enough reason to buy wireline broadband?

And, despite the real issues I think consumers will have if they embrace LTE in exchange for a wireline connection, the fact that Netflix(s nflx) or Hulu streaming is the main argument people in the story seem to have for keeping wireline broadband, means we need to push the envelope on building better apps.

While we may all have that quirky friend who chooses Clearwire(s clwr) or just uses their cell phone data plan (I have a co-worker who does this), if this becomes a real thing, it’s not just some pithy story about how people are giving up wireline connections because they cost a lot and we have a lot of free Wi-Fi and good cellular networks. It’s an indictment on our telecommunications policies over the years and our failure to offer visionary apps and services that make people look at wireline broadband as indispensable.

Right now, these 1 percent cutting their broadband cords, look at broadband the way early adopters might have looked at electricity. You got electricity so you could get light bulbs. But electricity brought so many other innovations and improvements to our quality of life that even though flashlights are cheap and widespread, no one says they are going off the grid because their Maglite gives them all the lumens they need. Broadband is the web today. But as more devices get connected, broadband will become more than just access to Facebook(s fb). It will be access to healthcare, to education, to entertainment and to our relationships. And it will allow smarter devices in our homes to connect, get and share useful data.

Our regulators, our innovators and our ISPs need to see that. Otherwise, we’ll be sipping our lives through cocktail straws and marveling at those who invested in the firehose of innovation that superfast wireline broadband can provide.