Tuesday, February 23, 2010

The FCC Broadband Plan

The FCC issued a presentation last week on its proposed broadband plan. It reminds me of when I took over as COO of NYNEX Mobile, now Verizon, in 1990. You see I had spent the mid 1980s helping Motorola get into the wireless data business. They had a product, the Motorola KDT terminal, bigger and heavier than a brick, which they had built for IBM field service techs. IBM had the software and the well defined need but they needed a wireless data terminal to effect their plan, a more productive field service system.

Bob Galvin, the then CEO and son of the founder. asked me to come in and try to make a business of this product. Bob talked to me over peanut butter sandwiches in the Motorola cafeteria that when they, Motorola, made pagers, the paging service providers, Motorola's customers, made ten dollars for every dollar of equipment sold and when they made cell phones, it was the beginning of cellular, the cell service providers made tens and tens of dollars for every dollar of revenue of cell phones sold by Motorola. He saw the service business as the future of Motorola in the wireless data world.

I came from the service side, namely satellite and cable, and had done this before. But I remembered the main dicta, if all else fails listen to the customer. Thus, I went out with the team and listened to customers. None had either the software of an IBM nor the vision of an IBM. Kraft, for example, saw a potential for food distribution but it would require a massive change in what they did and how they did it. Costly as well. Thus in 1985 there was no market for data terminals sans the rest of the foods chain.

Thus, in 1990, when asked to sell data on the NYNEX network I fell back onto the adage, listen to the customer and in 1990 the customer was still not yet there. It would take another 20 years, namely now!

Thus the FCC's plans makes many assumptions that we rejected 20-25 years ago. They somehow believe that just having more broadband, albeit cheaper somehow, that they can effect a revolutionary change. Well I hate to rain on their parade but it is an institutional issue, it requires changes all along the food chain, and they FCC is the last place that any rational business person would turn to.

So why are they wasting time doing this? Good question. It just wastes money, which is what Washington seems good at these days! Unfortunately I have that distinct disadvantage of experience, and the folks on K Street and other such places are just reinventing the failures of the past but now with much higher price tags.

So how does this reflect on the FCC plan. Well in several ways:

1. The FCC is Doing Soviet Style Central Planning: Strange as it may seem, that is just what they are doing. Not that they are Communists, exactly, but they are central planners. They believe that they have the light and they are the sole holders of the light and that all should follow. Lawyers, follow lawyers! I think that this is a bit too much even for Washington.

2. The lack of broadband deployment is somewhat of a fiction. We do not all demand 1 Gbps speeds. That is true for two reasons. First most of us, even old folks like me who have been on line since the early 1970s with Unix email do not spend our days with HD video. Perhaps my video conferencing could be a bit better but it works. Second the main problem will be backbone gridlock and costs. The Tier 1 Internet providers still have to be there and get paid.

3. Applications drive the demand. As I discussed with Kraft versus IBM, you need to do something and the field of dreams approach while laudable is without merit. Demand drives deployment, and by that I mean an economic demand, namely someone willing to pay for value delivered.

4. Does the FCC even have the authority to do this? I think not. But that has never stopped politicians before.

So where is all of this going. The FCC Chairman can get before the television audiences and brag about how much they are doing but ultimately it is American industry who has to do the heavy lifting. Even the rather convoluted Broadband gift program may not get one anywhere. In many ways this is still a solution in search of a problem. Take their health care solutions. In 1987 I developed and delivered the first truly network broadband for Medical Imaging. Too early! It still may be too early.