Business Week nails the analysis of why the Internet is stalled. The roll-out of broadband to the home is slowing due to a pricing problem and not a services problem. If prices were $19.95 a month for T-1 speeds we could easily get 60% plus penetration. Even using the wrong technology (anything but fiber), cable companies are claiming 35-45% margins on broadband access (even with padded calculations). There is lots of room to lower prices, deploy new technology that would make adding bandwidth less expensive, and grow demand. Instead, the cable companies are now claiming that the lack of media services is what is slowing the roll-out of broadband, as if that has motivated anybody to buy broadband to-date.
What's missing from this theory is a little analysis. Historically, communication has been far more prized than content. Annual movie-ticket sales in the U.S. are well under $10 billion, notes Andrew Odlyzko, director of the Digital Technology Center at the University of Minnesota and author of a 2001 paper “Content Is Not King.” Phone companies collect that amount every two weeks.
The only way out of this is to let communities build their own broadband systems. However, cable companies and telcos are fighting this in state courts.
Don't expect the interlopers to make much headway soon, however. So far, incumbents such as Verizon have succeeded in persuading 10 state governments to limit the freedom of municipalities to provide telecom services, including broadband — or prohibit them from doing so altogether. In fact, Bristol was able to proceed only because it won a court victory overturning the state law that banned local telecom services. And the Virgina state government is appealing the decision.
In our community, the cable contract we were forced to sign specifically forbade the town from allowing competitive systems. Rather than fight it, the town relented.
If the US government wants to really do something to unwind this mess, it should make it possible for any town in the US to build a local broadband network that competes with the telcos and cable companies. I bet I could attract 1,000 + people in my town to pay $200 up-front and $25 a month for true fiber-based broadband access if a smart entrepreneur decided to offer this as an alternative. [John Robb's Radio Weblog]