Thursday, August 26, 2004

Bristol Shows the Incumbent Way: Don't Innovate. Litigate!

The story of how lawsuits and regulatory maneuvering by incumbents in Virginia drove up the costs of Bristol's OptiNet project is a pretty clear picture of what awaits LUS once it details its plan and, presumably, wins Consolidated Government approval to proceed with its fiber to the premises project.

The regulatory front was prepared in this state during the recent legislative session where BellSouth used its lobbying clout to compel LUS and other would-be Louisiana municipal fiber network builders to run their business plans by the Louisiana Public Service Commission.

But, what the Battle of Bristol reveals is that incumbent phone and cable companies have remained true to their corporate DNA. That is, they are not innovators they are litigators. The single class that has benefited most from the passage of the Telecommunications Act of 1996 have been lawyers, as incumbent carriers, competitive local exchange carriers, long-distance companies (interexchange carriers), cable, wireless, rural carriers, communities, citizens, customers and regulators clashed in the courts trying to flesh out the meaning of the new law.

Litigating is nothing new to phone companies, though; is the incumbent monopolist's way. It is so deeply ingrained the phone company culture that McGraw Hill's Telecommunications Protocols' (ISBN 0-07-134915-4) author Travis Russell writes in the second edition of that book:

"As you can see, while the computer industry highlights center around technology, the telephone industry has struggled with takeovers, lawsuits and regulation."

With a takeover of LUS off the table, BellSouth (and, likely, Cox — either jointly or separately) will pursue the other two lines which have historically been the path of obstruction: lawsuits and regulatory manipulation.

The intent and the result will be to drive up the cost of LUS deploying a fiber to the premises plant here. In Bristol, incumbent phone company Sprint and incumbent cable provider Charter Communications vigorously pursued this route. There, they succeeded in delaying the rollout of services by OptiNet, thereby depressing revenue in the system's ealry early going.

It may, too, have created ill will in the community for the incumbents as both have lost market share and a cable rate increase earlier this year had virtually no impact on OptiNet subscription levels.

We can expect a similar strategy of obstruction to emerge in Lafayette from the unnatural alliance of BellSouth and Cox Communications. The downside of this strategy is that it makes those that employ it come across as classic sore losers who are intent on inflicting pain on its likely competitors. But, of course, the views of customers would have to first matter to the incumbents in order for customer sentiment to be relevant.

Recently released polling data here shows that this is not the course that wins the hearts and minds of Lafayette residents. It is the course of petulant monopolists who are not accustomed to competition, nor to losing. It also reinforces the notion that the talk by Cox and BellSouth of concern for the well-being of the citizens and community of Lafayette is just so much hot air.

LUS has, hopefully, recognized the pattern of obstructionist tactics used by incumbents in its research on other municipal systems. I don't doubt that LUS will be prepared for what awaits them when the time comes to move on its still-developing plan.

I wonder, though, if the public will be prepared for this fight? Because, cher, we have not seen truly ugly yet, but it's coming — and it's expensive!


John said...

I have to wonder if the recent conspicuous silence (can silence be conspicuous?) from BellSouth and especially Cox could be an indication that they are recognizing that the sort of unformed and mostly baseless attack they have engaged in to date has actually been counter-productive?

Prreuben said...

Guys, you don't sink $100 million into debt because of legal fees of $1 million or even $10 million. That happens because of a flawed plan that even millions of dollars in tobacco subsidies and millions of dollars in cross-subsidization by other city-provided services can't cover. You really need to take a look at BVU OptiNet's balance sheet. If Bristol's citizens demand -- and get -- a complete look at what has been going on, they will realize the city fathers' folly.

John said...

These bobble-head anti's don't even stay up to date.

Since this post was posted way back in 04 Bristol has gone on to overcome its intial litigation-based delay, is now ahead of its business plan and has vanished from the mention of the cadre of telecom-funded "intellectuals" that used to cite it constantly.

The issue for Bristol was that it was kept for a year from offering lucrative services that it had all the infrastructure paid for to offer -- for a startup that was a huge expense. Once they won in court they quickly recouped the loss and, as I mentioned, are now running ahead of their business plan with a greater penetration than they had anticipated.

Startup debt is not a problem. Not meeting your debt service plan would be...but that is not true for Bristol.