Technology Futures

As Design Nine works with more and more communities on broadband development, I have become convinced that the only financial model that is going to work over the long term is the Open Service Provider Network (OSPN). What this means is that the network is designed, constructed, and managed specifically to allow and support a marketplace of service providers that compete for subscribers.

It does not really matter if your broadband system is part of a privately owned duopoly (i.e. the cable or telephone companies), or if your system is municipally owned. If you don't have choice for services, you are going to pay more for those services and get less for your money.

The longer term issue is financial viability. With a private company or government officials choosing which of a handful of services they think you should have, there just is not enough money flowing through the system to support and maintain a broadband network over decades. It is not enough to get the system built; you have to have a business model that will produce enough income to pay for maintenance and system upgrades over the long term. Many of the public systems that seem to be doing well right now are likely, in my opinion, to run into capacity and maintenance problems five to seven years out, as equipment wears out and/or requires upgrades.

The beauty of an OSPN system is that you don't put limits on either services or revenue. As new services become available, new income streams to help pay for maintenance and upgrades also becomes available. This is completely different from the current model of simply selling chunks of bandwidth, which immediately puts a cap on how much revenue is returned to the network operator (i.e. the community).

The good news is that there is off the shelf OSPN systems available. I was in Houston, Texas this week to see a cable TV operator preparing to roll out an OSPN, all fiber network, and the versatility of the system was simply amazing. If you would like to know more about OSPN designs and how to finance a community broadband network, give Design Nine a call. We'll be glad to help.

This article reports on a financial study that suggests community broadband projects could cut telecom and cable TV costs in a community by up to 48% because of increased competition. This is a pretty compelling reason for a community to invest in broadband--everyone saves money. The article also indicates that telcos and cable companies could benefit from community broadband because they could reach more customers more quickly.

And that is exactly the point. I'm not a fan of "pure muni" buildouts, where the local government picks one telephone provider, one TV provider, and one Internet provider and then resells those services. In the fast moving telecom/broadband services market, do you really think government bureaucrats are able to pick the winners in the marketplace for the next ten years?

I couldn't do it, and I don't think too many others could either. A better option is for the community to build and operate a digital roadway and transport system that lets any qualified service provider sell services, and to let the buyers of services figure out who offers the best deals.

And those cost savings? If you extend the cost of telephone, cable TV, and Internet services over twenty years, it turns out your community will save, depending on size, anywhere from tens of millions to hundreds of millions of dollars. All that money can then be used for other purposes in the community, like business expansion and new jobs, rather than stuffing it in envelopes every month and sending not only out of the community but out of the state.

This little device uses the videoconferencing facility of Skype (the VoIP software) to send a television stream to anyone with Skype. It's one of those odd little devices that often end up in ads on late night TV, and will probably amount to nothing, but it could become the monster that ate the Internet. It sounds like you could plug this into your cable or satellite TV jack, then have your computer call you at work to stream your favorite soap opera to your work computer, among other devilish uses.

It is just the kind of thing that frightens the pants off the cable and telephone companies that are selling broadband connections for fixed prices that have zero relationship to the things that people actually want to do. Their response is to stop people from doing anything they don't approve of, rather than redesigning their networks to support what people actually want to do (and will pay for happily in most cases).

This article was sent to me by a county administrator who has long recognized the potential of small towns, good quality of life, and broadband. Forbes has selected 150 small towns and small cities and divided them into six categories, based on amenities and quality of life. It will be no surprise to many of you that the one thing Forbes has identified as a key enabler of economic growth is not water, sewer, or industrial parks.

It is affordable broadband.

If your economic developers have not yet completely overhauled their economic development strategy, print out a copy of this article and send it to them. The author talks about geographic arbitrage, meaning that a lot of white collar professionals are selling their high-priced homes located in major metropolitan areas and using the cash to buy an equivalent home for a lot less money somewhere else. How do they find work? They bring their work with them, using broadband to stay connected to clients and contacts.

A lot of these folks are working out of their homes, making neighborhoods the business districts of the 21st century. As I do periodically, I will list the four elements of my 21st century economic development plan.

• Traditional industrial recruitment -- you certainly want to try to attract the traditional manufacturing or office-based business, but it should be no more than 20% to25% of your total ED time and budget.
• Entrpreneurial recruitment -- This is attracting the professionals with portable businesses, who are making relocation decisions based on quality of life and availability of broadband in neighborhoods. Traditional ED sales pitches turn them off or don't attract their interest. To attract these folks, you have to sell the whole community, not just the 50 acre business park by the railroad tracks--they could care less about that. This should be at least 25% of your total ED time and budget.
• Existing business enhancement -- At least 80% of all new jobs created in your region next year will be created by businesses already in place. So what kinds of programs do your economic developers have to help existing businesses expand and grow? This should be at least 35% to 40% of your total ED time and budget.
• Local entrepreneurial growth -- Help people already in the region with new business concepts and ideas to get their business started. Make this at least 20% of your time and budget.

If your economic developers do not have a plan like this in place, you may want to ask them why. And of course, underlaying all this is the understanding that a community-based digital transport system (shared fiber and wireless digital roads) is the new water and sewer--it's basic and essential infrastructure needed to support economic growth. If your locality does not have a line item in its budget for regular annual expenditures to develop and expand a common digital roadway, it should. How else will you attract businesses and business professionals? Great quality of life without affordable, high performance broadband gets you nothing.