Competition, Competition, Competition

by Russ Steele

One thing that activates the telco and cable providers is competition. How are they going to deal with the competition from SpaceX, OneWeb, Amazon, and other LEO high-speed internet providers? These innovators are circling the legacy communications provider like a hunger coyote looking for a rabbit lunch.

In the past, the telcos use their political muscle to keep the competition under control at every opportunity. They spend millions on lawyers and lobbyist to shape legislation to stifle competition rather than spend their profits on providing superiors service.

For example, in the early days of WiFi, a Texas University was wiring up the campus. Next door to the University was some low-income housing, and the University wanted to share their WiFi with the low-income neighbors. According to the story I heard, AT&T sent 25 lawyers down to the State Legislature to stop this sharing of free WiFi. AT&T abhors competition!

We are going to see a significant upheaval in the internet market when the LEO satellites networks are established and fully functional. Today the phone and cable companies are providing marginal broadband services at a high cost to the consumer. Why, because they can, they are the only provider, with no competition.

There are millions of DSL customers poised to jump once a competitive broadband service is offered. Some communities have pinned their hope on 5G for more reliable service at higher speeds, but that technology rollout is controlled by the telco providers who are not going to provide competing service. On the other hand, they will have little control over the satellite internet service providers, unless they cut backhaul deals that incorporate some competition restrictions.

I can hear the conversation now, “If you sign this 5G backhaul contract, you cannot sell your broadband to our 4G/5G customers.”

The cable companies are losing customers to the cord cutters and streamers. While cutting the video cord, streams still need a broadband connection. In many cases, the cable internet service is the only connection, and it comes at a high price. Why, because the cable companies have no competitive incentive to reduce rates.

In many communities with only telco DSL or an aging cable plant available providing broadband access, LEO broadband will be the first time there will be some competitive service. The question is, how will the telco and cable companies deal with that competition?

They can lower the price for their marginal services, but the customer still has unreliable slow speed internet access, whereas the LEO satellites are offering much higher speeds, and hopefully more reliable service. All the LEO satellite service challenge are still unknowns.

In the end, the superior service will win if the cost is reasonable. Amazon is a significant disruptor in the retail sector, and space-based internet is going to be a substantial disruptor in the telecommunications sector.

How will the telcos respond?  Your thoughts?

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