In a recent article, by Chris Gavomali entitled, “President Obama: the FCC should classify the Internet as a Utility. In an television interview the President stated, "Broadband service... Must carry the same obligations as so many of the other vital services do." (President Obama, 2014)
[“Net neutrality” has been built into the fabric of the Internet since its creation — but it is also a principle that we cannot take for granted. We cannot allow Internet service providers (ISPs) to restrict the best access or to pick winners and losers in the online marketplace for services and ideas. That is why today, I am asking the Federal Communications Commission (FCC) to answer the call of almost 4 million public comments, and implement the strongest possible rules to protect net neutrality.]
This is what happens when Attorneys want to design a broadband network. Before this can of worms gets opened allow me to explain something. The “Internet” is made of many layers. The first and second layers are basically the right-of-ways, the spectrum, the conduits and the networking equipment to power the “transport” network of broadband communications. Essentially these two layers make up the physical infrastructure of assets. In the past, for the carriers to make money, they were forced to put money into these two layers so that they can provide “services” at layer 3 and above. We can’t afford to get the “physical infrastructure” mixed up with the definition of “broadband content services and access”.
What really needs to happen here is the physical infrastructure (layers 1 and 2) needs to be classified as a Title II Utility, but the broadband services (layers 3 and above), which ride on top of the physical infrastructure, should stay in the open market.
If an “Internet Service Provider”, or video-streaming provider (Netflix, Blockbuster), wants to sell access to their content then why would we try to classify them as a Utility? These streaming companies aren’t in the business of access; they’re in the business of content. This is why you see AT&T delivering Uverse. UVerse allows AT&T to move into the content space, which is in direct competition with those streaming companies. The issue AT&T has is its own internal organization framework. AT&Ts organization is big, cumbersome and made up of many silos, some of those silos are still investing in upgrades to an infrastructure in support of the “old” commodities approach. Internally there are competing product silos that are trying to move away from physical access needs, while at the same time the corporate office are trying to commit to pure content delivery – which by the way is much more profitable than the traditional commoditized “Internet Access” model. To add, these new product offerings puts AT&T into a content market that is being dominated by much smaller niche players who are much more nimble, can react, and foster more focused creativity than the giant telecoms.
If AT&T can’t afford, or don’t want to play, in the access model delivered through the commoditized assets of layer 1 and 2, then are we basically saying that AT&T and Verizon are going to be a Utility? Although this could be very lucrative, and there may be some entrepreneurs in the carrier space that wouldn’t mind the longevity and stability of this model, the case analysis demonstrates that it won’t be the best fit for these telecom giants. It’s too hard to change a horseshoe on a galloping horse in mid-stride during a terrestrial downpour in a field full of deep mud. These organizations would have to expend large amounts of capital to make the change, to which has no guarantee it will even work when completed – if its ever completed. Afraid to say but the future of the carriers will be limited to cost cutting measures and the stripping of silos that don’t match where the leadership wants to go. That means a LOT of layoffs are inevitable. Why is that?
As you can imagine the cost to build and maintain layers 1 and 2 are increasing the pressure on the traditional broadband services model where as the commercial carriers see the need to move away from owning the physical assets in layer 1 and 2 and moving to a pure layer 3 content and above play. This means a dramatic decrease in the overheads from their bottom lines and a dramatic increase in profit margins. But trying to get a large ship to change the course in a shallow pond will be suicide? If you sell broadband service to a consumer with a smart phone, then the overhead the carriers traditional must carry is roughly 70% of its profit margin. In short, I sell you a $40 dollar a month “all-you-can-eat” plan and I have to give $28 away just to pay for my physical assets – and those costs continue to rise -- especially when the carriers are being monopolized into building out to the rural areas where the cost justification of putting more money into the infrastructure doesn’t make sense.
Another hot topic is that the access model of old has been commoditized into stagnation and the cost of providing the infrastructure to support that commoditization doesn’t help. The commoditization of the access opened the door to smaller, more nimble, broadband companies who only sell the broadband content that adapted to the broadband infrastructure that exists today. This is why the commercial carriers (AT&T, Verizon, etc..) are putting pressure on the streaming content providers to pay more for access.
It’s just bad timing. The timing associated with expanding broadband to all Americans is forcing the issue of change onto the carriers, faster than they anticipated. A majority of the carriers are eliminating old architecture daily and are opting to sell assets to whoever wants it – as long as they get exclusive rights to that infrastructure. This means the carriers want to monopolize the access model for their own content – at least initially. Title II puts kinks in that plan though -- or does it? Look at the glass half-full in this case. By moving away from the notion of trying to monopolize their content delivery why not just let the assets go? Eliminate a lot of infrastructure, quickly, and move into more profitable content while at the same time eliminating deadweight draining blood from the bottom-line-- just a thought.
The main course has already been established though. You are either at the table or you’re on the menu. There is one thing that is not being mentioned – FirstNet and the Public Safety Broadband Network.
Signed into law on February 22, 2012, the Middle Class Tax Relief and Job Creation Act created the First Responder Network Authority (FirstNet). The law gives FirstNet the mission to build, operate and maintain the first high-speed, nationwide wireless broadband network dedicated to public safety. FirstNet will provide a single interoperable platform for emergency and daily public safety data communications.
Why is FirstNet, or the Public Safety Broadband Network, so important? Well, because it’s the perfect catalyst to build one homogenous infrastructure of broadband fiber and wireless assets. By partnering within a prioritized scheme of users, where as Public Safety is priority 1, they will be a great opportunity to put money into the infrastructure of assets that the President is calling a “Utility”. The premise of FirstNet is to build a nationwide broadband network of fiber and radio access networks, the same architecture the carriers are trying to shed.
No, we can’t just buy the carriers assets to make it our own. What we can do is establish a framework for collecting land, right-of-ways and the spectrum to build a truly hardened, protected and cyber-secured infrastructure that enables all layers of prioritized access and usage schemes – to include commercial broadband access to all Americans and the ointment to the "Net Neutrality" rash. This new National Asset will form the baseline for the communications framework of the nation. Work has already commenced on this front. Why not consider the infrastructure needs of FirstNet as the basis for creating a Public Private Partnership between government requirements and private industry needs for a holistic access model? Sounds like a great solution that knocks out multiple birds with one stone. There is one model that was designed for just this purpose….The Myers Model®.
But then who am I other than….
Just some guy and a blog….