Wireless broadband disrupts the grid oligopolies
Oligopolies, we have often noted, try to control the environment in their business segment, seeking to avoid disruption. And the biggest threat to comfortable oligopolies is rapid technological change. Technology now has the quickly converging phone and cable industries very worried.
We've documented the way in which once disparate areas of the phone industry (local service, long-distance, wireless) have been consolidated by a handful of Baby Bell successors. Then how the cable industry and phone industry have been competing on three fronts TV service, phone service, and high-speed Internet, three area that are becoming more and more the same, as the competition matrix collapses.
Now there's a new threat. Broadband wireless allows companies that do not have a grid of cable or telephone lines serving each address to offer first Internet hookups and eventually other services including video and phone.
This phenomenon is about to break into the mainstream, according to a Wall Street Journal article ("Internet and Phone Companies Plot Wireless Broadband Push", 1/20/05). Te improvement of Wi-FI and the next generation WiMAX technology is making it less and less expensive to set up these services, both in urban and rural locations. In fact, the city of Philadelphia and a number of others are rolling out low-cost municipal services, frustrated at the expense and slowness of the cable and phone companies to offer Internet services to any but affluent neighborhoods.
The big phone and cable companies (Verizon, Comcast, SBC, and others) are anxious, because this move opens up even further their industries to outsiders. As fewer and fewer companies own the land lines, the business was starting to settling into a competition between two local monopolies, a cable company and a local phone company. In my own case, for example, I can choose between high-speed links between Verizon and Comcast. They are in competition, but it is a relatively contained competition.
Now upstarts like Internet service provider EarthLink and non-local phone companies like MCI, Sprint, and AT&T are rolling out wireless Internet services. This is being fueled by inexpensive new equipment from major computer and telecom equipment manufacturers, including Motorola and Intel.
Needless to say, the whole thing is being resisted especially by the Bells, who are trying to make it impossible for wireless services to, for example, plug into their land line phone system. At the same time, according to the article, such companies as BellSouth, Verizon, and Qwest are starting to test new offerings in this area. "But the Bells are hedging their bets, in case wireless broadband takes off this time. They are investing in the technology, even as they spend billions to lay fiber lines that will be capable of delivering ultra-high-speed Internet access and TV."
Phone and cable companies must feel that they are constantly fighting new battles, but their size and funding are likely to keep them dominant. However, they have to have mixed motives. Their biggest asset is the grid, and it's hard to imagine them supporting a standard that negates that advantage. Expect a lot of lawmakers and regulators to be leaned on, as the incumbents scramble to protect their market domination. You can also expect to see any company that breaks out in offering WiMAX services to become an instant acquisition target.
