We’re pleased to have John Cooper, an entrepreneur and consultant based in Austin, Texas, provide our first guest post. Given the high cost of sale, provisioning and billing for traditional broadband service providers, we were interested to hear about his proposed alternative model, the MetroNanoNet. This fills a space between traditional service providers and municipal networks. The natural unit of commissioning of connectivity may not be the household or individual, and the most promising sources of differentiation may come from how you fund and price infrastructure, not technology, or bundling with services. Although like any new venture, its success is not guaranteed, we feel this is a strong “Telco 2.0” story, as it combines a hard-nosed business approach with a lower cost model and highly differentiated sales approach.
Sometimes a “whack on the head” can cause us to look at things with an entirely new perspective. Take telecommunications, for example.
What would voice and data connectivity and services look like if you landed on this planet today and were given our present day resources to use? Would you put together something that looked just like a traditional telecom or cable company? Would you borrow aspects of the old while adding new features? Or would you develop an entirely different approach? Would you build a ubiquitous network for as cheaply as possible like a utility? Or would you build a commercially-sponsored network like the US TV network from 50 years ago? Would it be a cooperative rather than competitive effort? Would revenue from applications, advertising, content, or subscription fees subsidize the cost? Would a handful of large companies provide services or a multiplicity of small companies?
How could you leverage the huge, newly connected broadband market that the new network created? Would content and infrastructure go together, or be provided separately? The chart below compares how differently we could look at telecommunications and the Internet, when we start with a contrarian view to the traditional telecom model.
|Vision||20th Century||21st Century|
|Rationale, Mission||Leverage Market Power||Low Cost, Keep it Simple, Deploy & Learn|
|Structure||Corporate Hierarchy||Community Network|
|Technology||Leverage Old, Add New||Start with New|
|QoS||Carrier Grade||Best Effort|
|Back Haul||Fiber First, point to point||T-1, DSL, point to point, fiber|
|Marketing||Corporate Subscriptions to Individuals||Enabling Community Cooperatives|
|Sales||Direct, Internet||Indirect, Channels, Internet|
|Staff||Consultants, Hire||Outsource, Lean internal staff, LPs|
|Accounting, Pricing||Closed, exploit||Open, share|
|Operations||Own, build||Lease, buy|
Such a new perspective starts with the hypothesis that a new type of infrastructure makes possible a new service model. Market share, not high margins, drive this strategy, since gaining a high-percentage of homes passed is a key driver to ultimate network profitability and risk mitigation. Incumbent network businesses have traditionally counted on market dominance for their business models to work - a legacy of their regulated utility network history. Traditional utilities enjoyed universal market coverage in exchange for rate-of-return regulation.
The current theme in municipal wireless network deployments does that on a small scale, where providers secure an anchor tenant before installing a network to lower their revenue requirement from retail sources and accelerate their return on investment. But they still rely on a version of monopoly franchise. So what would a voluntary, unregulated monopoly utility look like? A third alternative would be a MetroNanoNet (MNN), with market-based, voluntary community aggregation to share costs and lower risks: multiple 21st Century telecommunications cooperatives served by their own “nanonets,” loosely joined via the Internet. It would be a “horse of a different color.”
Start with a broadband network subsidized by heavy community involvement and supported by community members, minimizing excess capacity to provide communication services at the lowest cost, in much the same way that Southwest Airlines gains a cost advantage from flying full, fuel-efficient airplanes.
MNN seeks to avoid the old ways and costs of incumbent or new entrant telcos, cable providers, wireless, or satellite companies by charting a new course. Providing back office functionality, MNN is a Systems Integrator & Managed Service Provider for communities, negotiating long-term service relationships with the community cooperatives it helps to create.
MNN’s business approach is its unique advantage: aligning a new business model to match new wireless broadband technologies and markets that have lower budgets or lower risk tolerance. Instead of criticizing traditional telecom companies for not extending their markets to rural or low-income areas, why not imagine what a more appropriate business model would look like for such hard-to-serve markets?
Departing from the traditional view of telecommunication networks as large complex network infrastructures, instead seeking the smallest, simplest network possible enables a different perspective, indeed, a paradigm shift. As a systems integrator (see service portfolio below), MMN uses a web-based service delivery tool that provides a competitive advantage, enhances service quality and dramatically lowers service delivery costs.
As MNN partners with local communities to enable effective and efficient communications, it fosters healthy functional communities. It will play different roles at different times, depending on the circumstances, the service lifecycle and the opportunity:
- Community Formation & Education Services Provider re Broadband Options;
- Customized Community Portal Provider & Host;
- Systems Integrator:
- Network Equipment VAR;
- Network Design & Deployment Service Provider;
- Network Operations, Management & Maintenance Service Provider;
- Internet and VOIP Service Provider;
- Asset Security and eNeighborhood Watch Services Provider;
- Peer-to-Peer Services Broker;
- Community-selected Open Source Application Service Provider; and
- Local Content and Local Advertising Service Provider.
MNN sets itself apart as a commercially-oriented for-profit community network service provider. The special interests promoting community networks today share a common social perspective, generally aligned against conventional commercial network approaches, with some even believing that Internet access “should be free.”
Consequently, their solutions tend to focus on very low-cost, self-delivered solutions to create homegrown community networks, sometimes using homegrown equipment. An exception is FON, a popular community network concept from Europe that harnesses individually-provided residential access points and includes a profit-motive for its foneros, effectively sharing a commercial ISP’s connection service. But requiring members to violate their service contracts and making the ISP an involuntary participant in the network services supply chain is a fundamental flaw.
In contrast, MNN’s solution would use commercial-grade Wi Fi Mesh & WiMAX equipment and commercial-grade back office support to enable commercial quality services and network management with community cooperatives as customers, rather than disaggregated individual subscribers. MNN will help form the community cooperatives, deploy their networks using wireless technologies, and organize and provide the services they need to meet their own telecommunication needs.
MNN envisions a new type of communications network that sheds many of the costs and restrictions inherent in the old telecommunications paradigm (i.e., dramatically lower sales, marketing, operations, and customer support & service costs).
By providing real-world neighborhoods and communities with their own networks, amid a growing awareness of cyber-world social networks (the “Social Internet”), MNN addresses local community needs head on, generating revenues through community cooperative service fees. Fees are based on the services above, delivered in three basic service areas:
- Access First: data and voice (broadband Internet access, local mobile and residential voice services);
- Crime Stopper: security (neighborhood-watch and home-watch surveillance video); and
- Community Services: peer-to-peer video & storage backup, calendaring, local content, etc.)
In such community formation, MNN creates the relationships needed to up-sell more advanced wireless and mobile services to cooperative members and generate supplemental revenue from new marketing and advertising models.
Use of Web-delivered information and services is a key feature of MNN’s service offer that facilitates community interaction:
- the community websites that communities can customize; and
- the community splash page that all users must click through when logging on to an MNN nanonet.
These community websites will be designed using open source Drupal social networking software and data tables to enable a limited degree of customization of content and features based on community member selections. The splash page provides a common user experience over all the nanonet networks.
In this way, MNN seeks a “sticky” customer experience, where individual cooperative members benefit from the selections and activity of their fellow members in a shared space that features localized content.
MNN challenges any potential competition with its unique pricing strategy, bundling basic broadband service with applications like VOIP telephony service and video surveillance in a basic membership with target pricing at below $20/month/member at full-community participation. Enabled by its unique local area network services and processes, community portal services, and low-cost secure, reliable and scalable support and delivery model, MNN will offer communities compelling telecommunications value.
Furthermore, the MNN nanonets, Control Center and Community Portals will be built with open standards equipment and software tools that deliver a lower TCO. With MNN, communities can focus on their unique needs and gain benefits of economic development through collective action, similar to the gains seen in the past few years by enterprises leveraging new wireless LAN technologies.
Fast-growing communities on the fringes of larger urban areas and in the developing world are most ready to initiate such a new approach. Keenly aware of their needs for broadband infrastructure, they know what they are missing out on and they lack the choices that more mature, dense urban and suburban neighborhoods and those in the developed world enjoy. Rather than feed these communities with fish, MNN will teach them to fish - empowering, not exploiting.
Is this model a threat to traditional telecommunication companies or a road to their rejuvenation? That will depend on a company’s attitude. If the success of Craig’s List teaches nothing else, it shows that every company in today’s business climate must adapt to new rules: innovate or be attacked. What if newspapers had adapted more quickly to the Craig’s List low-cost social network model years ago, to get closer to their communities and customers?
Similarly, telecom and cable companies, some of the last holdouts to enjoy monopoly or duopoly protection, must radically innovate their business models to survive and nothing should be out of bounds.
If one follows the progress of Web 2.0 companies and the freemium business model one understands the competitive playing field is already undergoing dramatic change. Silicon Valley Watcher editor Tom Foremski highlights what he calls The Rise of the Bad Competitor, where a competitor will simply give away what another company sells, making a commodity of just about everything. How to compete against such a threat? Incumbent telecoms must realize that their ISP and voice revenues are threatened by business models that will give away voice and basic ISP access to create a social network that will buy other products and services. Skype, anyone?
The size of the telecom pot of gold, the erosion of telecom market protections and the availability of easy-to-access Internet processes and digital tools make this model inevitable. Large incumbent telcos would do well to start developing such an alternative approach to their businesses now, because MetroNanoNet and others will. If municipalities can take control of their destiny, so can neighborhoods and communities, with their own nanonets. Now is a time for new ideas and new models. As we say in Texas, “No use closing the barn door when the horse is already out.”
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