To Encourage or Stifle Wireless Economic Innovation?

That is the question.

I recently stumbled on an essay by Thomas Keane in the The Boston Globe Magazine of March 19th: Strings Attached .

Keane does a marvelous job of articulating a particular and very conventional point of view on municipal wireless projects: They are a bad idea as they represent government competing with the private sector. He even makes the tired, old joke about "Hi! I'm from the government, and I am here to help you.

This is, of course, only one possible point of view. There are more innovative points of view that I would have expected a venture capitalist, as a taker of risks in the name of innovation, to articulate and embrace.

My essay on Wireless Civic and Economic Development is an example of such another point of view. It supports the new joke going around: Hi! I'm from the private sector, and I am here to help you.

I have been engaged in an extended email conversation with a consultant who has also been articulating Keane's point of view. He and I have found a number of common areas of agreement. A key one is the need to strongly separate the transport of bits from the provisioning of services and content. Once we accept this premise, we move on to the fact that the supply of bits is infinite and the hauling of them is a very small margin business. Clearly, with a robust municipal wireless infrastructure, a for-profit service and content provider is no longer required to be engaged in bit hauling as a necessary component of its business plan.

Thus Comcast, Verizon et al should be thankful that they can use lower cost municipal bit hauling and off load, "Outsource" if you prefer, a very low margin operation they no longer need to burden themselves with. They do not build roads for their trucks -- they out source that to the public sector. They do not pay tolls to use roads either.

By shedding a very low margin sector of their operations, Comcast & Verizon can improve their profits. So Municpal Wireless Networks are, in fact, fair, reasonable and democratic. They also support a healthy market place, which, I am sure you will agree, is a necessary, but not sufficient, condition for a robust, democratic, civil society in which the market serves humanity.

In this scenario, it would be logical for the for-profit vendors of services and content to work with the public sector to insure the most extra-ordinary municipal wireless outcomes possible.

Consider, also, that most models for municipal wireless plan to offer several tiers of service. The entry level tier may be for free, but the others will charge progressively higher fees. It is assumed that the government, which can support long time horizons that the market can not, will only provide bit transport and e-government. All other services and content will be provided by others as they see fit -- many on a for-profit business basis. VoIP, for example, is not free. I actually pay two VoIP service providers.

While Keane writes that he is quite happy with his badly over priced connection, on a cost per Mbps per month when compared to international prices, I am not. The current providers stifle innovation with their grossly inflated fee structures while at the same time driving the city of Boston deeper into the depths of the Charles River in terms of the International Digital Divide. Why would any modern company move to Boston with its approximately $9 per Mbps fees when they can move to locations which are charging $1, or less, for the same commodity bit transport?

While there are many other arguments on the topic of Municipal Wireless that could be discussed, I will only mention two more.

1] The technology for always on, ubiquitous, wireless connectivity is now able to move into the home in such ways that we must now talk about the First Mile Out from the homes of citizens. These modern 21st century citizens are fully, and all of, producers and distributors of their own content as well as consumers. The old business model of the last mile in to the home, occupied by a one dimensional, Pavlovian consumer, blinds people to the new opportunities and realities. Take a look at Apple's iLife suit. It is moving the printing press, the radio station, the TV station, the movie studio, the photo studio and more out of the old center and into the home on the edge of the network.

2] As you know, the PC revolution was fueled by individual decisions, freely made, to upgrade their personal equipment every three years or so for about another $3,000. This demonstrated the great economic power of leveraging end-user capital. To stimulate economic activity today, we need to find new ways to motivate individuals to voluntarily invest their capital in improving their personal communications infrastructure to better their personal situations. This requires that we give the citizens at the edges of the network the full power of choice to be effective producers, distributors and consumers. I suggest that a first mile out model, based on strong mesh networking at the edges, is the best way to do this.

I note, however, that the incumbents currently insist that consumers sign agreements preventing this powerful engine for economic growth from even starting: No sharing of end point connectivity. Comcast & Verizon make mesh networking at the edges illegal. As such, they stifle communications innovation and new economic activities that would strengthen our economy and spawn new clients for Keane's VC firm.

Now we can understand that only a municipal wireless network can fully support powerful mesh networking at the edges. Why? Simply because they are providing the best possible bit transport as a civic benefit and are not required by "The Street" to deliver Ponzi-like rates of return every 90 days. The upside is that the cost of the tolls on the bit paths to the private sector's for-profit offerings are no longer barriers to getting there. Consequently, the private sector, leveraging free, or very low cost bit paths, will be able to offer innovative new products and services no longer constrained by the Tiny Band offering of the current incumbents.

Tiny Band? Reality is said to be 40 Gbps of symmetrical connectivity. 10% would be 4 Gbps. 1% would be 400 Mbps. Broadband starts at 1% of reality: 400 symmetrical Mbps. Thus Comcast's best offering of up to 8 Mbps of asymmetrical bandwidth is really no more than Tiny Band.

Sandoval County, NM, on the other hand, is starting at a county-wide symmetrical 100 Mbps capable infrastructure. Soon to move to 1 Gbps. I can happily report that their economic development office is thrilled by the private sector's response to their initial 100 Mpbs municipal wireless offering.

Can Boston afford to do less?

Can the government, contrary to Keane's assertions, actually create value for civil society and its attendant market place? History is rich with examples that prove that it can and often does.

I was once from the government. In 1994 I was one of the team leaders of the project that put the White House on the Internet. The Internet was an innovation that only the government was able to sustain the development of over several decades. The private sector, with its time horizons constrained by the demands of the market's 90 day number, could not, would not and did not create the Internet. I suspect Keane's VC firm has made a great deal of money, thanks to the government's investment in, and development of, the Internet as a public good in a civil society.

In the end, Keane's commentary does not stand up to either close inspection or the historical record.

Posted by Jock Gill at March 26, 2006 6:10 PM | TrackBack