Will incumbents' denial be Verizon's LTE plan's damnation?

Friends, incumbents, pundits, lend me your ears. I come neither to praise Verizon's LTE plan nor to bury it with invective. The shortcomings live long after such plans are announced, and do not need me to illuminate them. The true good, though often buried in PR hype, eventually rises into view.

I will say that the incredible capacity for denial among many incumbents makes me doubt the ability of LTE to carry America to the broadband Promise Land, but the technology definitely will be better than what cellular providers offer now. And yeah, maybe damnation is kind of a strong word, but it's a much snappier punchline than "...obstacle to fulfilling the promised benefits of a ‘data revolution.'"

A major problem with the large telcos and cable companies that hampers their ability to solve many of America's broadband challenges is that they deny some of the key realities facing We the People who actually use the technology. Smaller regional and local telcos/ISPs may pick up some extra revenue and market share if you recognize these states of denial among your large competitors and plan accordingly.

Denial #1 - We're meeting our customers' needs

Um, not really. Not in many parts of the country. I was at a dinner table with some incumbent execs and lobbyist types several months ago describing community after community that had approached the incumbent in their area with a list of specific broadband needs, only to be told to go away, "we can't help you," "you don't need that much speed." 

The people around the table were genuinely shocked, totally rejecting the fact that such atrocities happened. "I can't believe we would turn down customers." Given I spend 60% of many a workday speaking with, for or about communities across the U.S., some struggling just to get dialup, I thought, wow, these folks don't get out much.

They must not eat their own dog food either because if they spent any decent amount of time on the Net, say, surveying their markets, these stories wouldn't surprise them. After conducting such a survey, I have to wonder how affective new service rollouts will be if incumbent hierarchies are in such denial about how well they're meeting customers' needs.

Denial # 2 - Who needs a gigabit?!

The other dinnertime shocker was the comment, "Who needs a gigabit?" Spoken with religious fervor. When Chattanooga, TN launched their gigabit service, the Denial Machine went into hyperdrive spinning this sentiment.

Maybe too many incumbents view the world through the Consumer Market lens. They see subscribers as wanting to play games, download some music videos or iPhone apps, watch a little TV. Walk amongst the people enough and you realize that what people want and need is broadband that enables businesses to grow, doctors to view MRIs from home, enables teachers, students and parents to collaborate using data-intensive applications.

When an industry executive states their planned broadband service will deliver 5 - 12 Mbps down and 2 - 5 Mbps and this is what makes LTE so transformative, here's an industry in denial. You're offering people a faster jetliner and calling it transformative when the market needs the broadband equivalent of the Starship Enterprise.

Here's how hundreds of economic development professionals I surveyed last month define "transformative" speeds.

Only around 20% believe 10 - 12 Mbps by 2013 is adequate for ANY of the five top economic development goals frequently cited by broadband champions (see Figure 1). Approximately 55% feel 100 Mbps or more is needed by 2013. And if a community's goal is to use broadband to attract new businesses, 34% of respondents believe they need a minimum of 1-gigabit speed.

 Figure 1

Rather than futzing with entertainment and cool smartphone apps, respondents feel individuals need broadband to improve job skills and professional development, become entrepreneurs online and create home-based businesses that drive local economies.

They feel even stronger about the need for 100 Mbps as a minimum, with 62% saying that individuals need anywhere between 100 Mbps and 1 gigabit to achieve these personal economic development goals. Only 18% find 12 Mbps transformative (see Figure 2).

Figure 2

Denial # 3 - Governments should not be directly involved in broadband.

Chattanooga, TN, Santa Monica, CA, Wilson, NC are selling 1-gigabit broadband services today on publicly built and operated networks. Lafayette, LA and Cedar Falls, IA are selling 100 Mbps services. Ontario County, NY will have a fiber network delivering 1-gigabit service by the end of the year (private companies will deliver end user services).

Don't quibble, trying to deny the validity of fiber by saying "we're wireless providers and wireless is special since mobility is the one true broadband religion." Cambria County, PA has been selling a 15 Mbps wireless service since 2008, and Allegany County, MD delivers three or four times that speed on their wireless network. Incidentally, Ontario County is going to forget all the wireless incumbents who trash talked their network and provide fiber services that'll give cell towers much faster data throughput for a lot less money than if providers built their own backhaul. Fiber indeed matters in the wireless world.

So, there are lessons here for smaller ISPs and local telcos if the bigger ones don't realize that denial should only be a river in Africa.

Realize, if you haven't already, there are major needs out there that can't be met by the LTE bandwagon, at least not in the near term for folks in small towns and rural areas. Those needs, however, are not consumer-services driven. It's all about business development and growth, personal economic development and proliferating home-based businesses. 

Second, aggressively court local and county entities as full-on partners in the community broadband business. Intelligent local governments often can build network infrastructure more cheaply than you can, provide resources you need and give broadband adoption efforts some serious oomph.

Third, Verizon is "deputizing" rural operators to offer shared services. Pursue the opportunity, but first strengthen your hand with a few partnerships and pre-sold customers. Be sure you have a plan for how you're going to eventually offer the kinds of services that communities really want. LTE may be better than nothing, but the need for more, better broadband isn't going away.

Finally, keep your hand in the USF reform game. Pressure DC for reform that protects local interests. 58% of survey respondents believe that to get the greatest economic development impact from USF reform, local communities should play a key role in approving how and where monies get allocated. A substantial 34% prefer that USF money go to local companies rather than large incumbents.

Craig Settles is an industry analyst and community broadband strategy consultant. Read his new report "Broadband's Impact on Economic Development: The Real Deal"