Thursday, March 17, 2005

Suppliers support municpal fiber — and innovation

EWeek carries a story—Municipal Broadband Bills Come Under Fire—that illuminates another of those odd alliances in the battles that are taking place in statehouses across the country over whether or not states should restrict the rights of municipalities to provide their citizens with telecom utility services. It is certainly an index of just how successful the incumbents feel LUS is likely to be that BellSouth and Cox, who certainly recognize that the day that they become mortal enemies is coming very soon, are joining forces to defeat it. Not quite as strange, but still remarkable, is the tale this story tells of a fiber-to-the-home supplier and a supplier of wireless mesh networks, who would normally see their technologies as competing for client dollars, drawing together to oppose strangling municipal broadband.

Now you might think that neither company would much care who its clients are, as long as someone is building. But they do care. And therein lies the tale. They care because they are (relatively) small, innovative companies working at the edge of their respective technologies. Without municipalities, they are looking at a universe with no room for innovation and hence no room for their hopes. If the incumbents across the country get their way, there will be nobody to challenge the local duopolies of Bell and Cable. It's looking more and more like there will be no more than 5 or 6 geographically distinct companies in each grand category. These huge monoliths will play it safe. They buy in huge amounts and they are looking, not for long-range utility or breakout innovation, but for the near-term profit that buoys up stock prices (and executive bonuses). They will buy (and have been buying--look at the glacial upgrade path for DSL if you doubt it) only the tried and true, and certainly nothing new or risky. Bigness, short-sightedness, and safety are the enemies of innovation.

Innovation needs a scrappy group of small competitors to break up the stodginess of the big guys. It's the new little guys who see the value of new approaches and are unburdened by legacy architectures. But the giants are in the process of squashing some of the most significant of those small competitors by law...or rather by lobbyists, campaign contributions, and a system of good ole boy favors. (Which is precisely how BellSouth came within a hair's breadth of getting a law passed outlawing LUS' fiber last summer. Had the governor not been a home-town girl they likely would have succeeded in assuring that neither the people nor the city-parish council had any right to vote at all.)

Here is the way the article describes these suppliers' concerns about dwindling competition:
Obviously, companies like Tropos Networks and DynamicCity have good reason to denounce such legislation. It robs them of the ability to do business with municipalities and, instead, forces them to negotiate with competing providers (with their own aging infrastructures to protect) if they hope to do business there at all.

Understandably, they're not happy. The anti-muni bills present a scenario where their companies aren't submitting bids to win the business. They're forced into negotiations with a competitor, the incumbent carrier, which understandably will want to protect the market and keep its competition out.
We hear a lot of noise that municipal utilities like LUS are somehow disqualified from being competitors because they are publicly owned. If you won't believe the data from the feds that shows that public utilities drive down prices on the customer side wherever they enter the market, then maybe it would be worthwhile to notice that businesses on the supply side of the equation also think that municipals supply much-needed competition, and are crucial to an ecology in which innovation is possible.

We lag far behind behind nations like Korea in broadband deployment as much because we've allowed a few dinosaurs riding antiquated technologies to use their inheriting our telemcommunications infrastructure to wring every cent of residual profit out of their outdated technologies as for any other reason. Stifling competition isn't only bad for consumers, it's also bad for innovation—and that's bad for our country.

Stifling competition by outlawing municipal fiber builds like LUS' is one reason the country that designed and built the guts of the internet is falling behind second-world nations in true broadband deployment and consequently in the hardware and software that true broadband makes possible.

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