One incumbent takes it to the bank, another takes it to court. Who's the big winner?

Craig SettlesVerizon is one of several incumbents exploring partnerships with Ontario County, N.Y.'s open access community broadband network to bring LTE services to market faster. Time Warner recently finished pursuing a frivolous court action against Wilson, N.C.'s community broadband network.

You be the judge. Which action represents sound business decision-making inspired by enlightened self-interest, and which represents spiteful asininity taken to new lows that is counter to self-interest? Here's some background to help you decide.

I recently did a couple of joint-presentations with Ontario County and I have to chuckle. Here's a community that paved a totally logical, valid, financially viable path to an awesome broadband network and the big dogs tried to dump all over it until they saw the green-tinted light. Then it's all smiles as they embrace the values and virtues of at least this community's broadband.

The county's towns and hamlets teamed up, determined that broadband wasn't all it could be in their area and decided to take matters into their own hands. Without using taxpayer dollars, the community acquired a few million bucks in financing to build their own broadband infrastructure.

Incumbents, being incumbents, went ballistic, trotting out the same old tired arguments: unfair competition, government can't do anything right (you realize, of course, these both can't be true), the free market will get the job done, rant, rant, blah, blah. Ontario stayed the course, all the while keeping an offer on the table - we'll be here if you figure out you can benefit from our network.

The network's going live soon and guess what? A couple of incumbents are proving you can teach a stubborn dog new tricks. See, Ontario offers cellular services providers an opportunity to use the fiber network to backhaul data for their cell towers. Otherwise, while waiting for their own fiber plans to hatch, incumbents can spend thousands per month to use a bunch of T1 lines. For example, a dozen T1s could give a tower 18 Mbps of service, but it won't be cheap.

Look at the economics of Ontario County's network. First, the county carries the full freight for CapEx, so incumbents are spared millions. Second, the county gets 25 years to pay back the debt. You (incumbents) likely can't get financing so good, or find stockholders willing to wait so long for payday. Third, an incumbent with 12 towers can save between $5,000 to $6,000 per month month in T1 charges. With Ontario's network you're only going to pay about $2,000 to ride the fiber, and a few hundred bucks every place you have to run a fiber cable off the network to tag a tower or whatever. 

Forth, and oh so important, you also get HUGE speed increases along with these reduced monthly fees. Think about it. Would you rather pay through the nose for a mere 18 Mbps of backhaul, or pay a lot less for hundreds of Mbps? I'm just a humble hard-working consultant who majored in liberal arts. But even with my limited understanding of high finance, I know you can't beat this deal with a stick.  

The opposite of enlightened self-interest is...

Let's look what Time Warner is doing. The cable company recently took Wilson, N.C. to court because the city didn't reveal network information in their bid for stimulus money. Information that Time Warner's people would rather lose a vital body part than reveal of their own network. Really, guys?

The folks in Wilson, Salisbury, Buncombe County, and probably somewhere else I'm forgetting at the moment are beating you with much faster networks, better quality of service and great take rates. You inspire populations from these and other North Carolina communities to travel [regularly] by car, bus, train to the state capitol to fight your lobbyists, fixers and pocket-legislators tooth and nail. A poll would probably reveal your popularity hovers down there around that of people who club baby seals. And what do you do?  Litigate, not innovate.

I may have a slight bias against certain incumbent practices, but I also believe in giving credit where credit's due. Verizon is showing clear, albeit initially reluctant, support for Ontario County broadband and is contemplating a formula for making money while partnering with the community. Verizon is also showing savvy marketing instincts by licensing LTE to local rural providers. When will TWC follow suit? 

By the way, this isn't just about Time Warner. Down in Louisiana, Cox Communications' buddies at the National Cable Television Cooperative had their court action tossed that would have stopped Lafayette from filing a discrimination complaint with the FCC. Lafayette believes Cox goaded NCTC to reject Lafayette's legitimate right to join NCTC, a move that would allow the city's network to enjoy certain benefits other cable and Internet providers enjoy. Another in a long line of legal and PR attacks Lafayette's had to beat down.

Here's the bottom line, folks. Incumbents can continue leaving money on the table by being a major source of the sad state of broadband in the many communities where individuals and local businesses can't get the service they want and need. You can continue to fight community broadband as the scourge of the gods of profit, subsequently leaking away millions for lawyers and lobbyists, plus significant opportunity costs. Or you can emulate incumbent activity in Ontario County, Cape Cod, Mass., and the various other places where communities are building fiber networks and opening the doors to let the big dogs come in and play.

And if I can speak for a minute with the rural telcos and wireless providers who are winners of broadband stimulus moneys, future Verizon LTE partners and just plain highly motivated entrepreneurs: One hallmark of the smart small business is its ability to recognize - and respond to - opportunities that corporate myopia may hide from larger entities. Community broadband, meaning networks in which local stakeholders have a financial and operational role, offer you opportunities to decrease CapEx and increase revenue. Will you be wise enough and nimble enough to capitalize on this opportunity?  (Here are tips from several local providers for maximizing community involvement in broadband.)

Craig Settles is an analyst and business strategist in the broadband industry who conducts on-site workshops and training for companies and communities. Follow him on Twitter @cjsettles

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