Saturday, July 24, 2010

Local governments, coops better positioned than legacy providers to meet burgeoning bandwidth demand

Check out Lance Whitney's July 21 cnet News article that illustrates the growing conflict between burgeoning bandwidth demands of Internet video content and the incremental billing business models of the legacy telco and cable providers that ration bandwidth.

Faced with the explosive demand for bandwidth, the legacy providers are responding the only way they know how given their business models: charging more money for more bandwidth via tiered service offerings and rationing bandwidth with the use of caps.

This puts the legacy providers in a bad spot since incremental bandwidth pricing and punitive caps will only tick off their customers. What's worse is the legacy providers can't upgrade their infrastructures to accommodate the jump in bandwidth demand and leave room for future growth over the foreseeable. That's because they are owned by shareholders who have been with them for decades and expect a nice safe, utility company style dividend -- money that can't be allocated to capital expenditures.

The take away here is alternative providers such as local governments and consumer telecom cooperatives who don't have to pay those fat shareholder dividends are better positioned to deploy fiber to the premises infrastructure that can easily deliver the bandwidth needed today and leave headroom for tomorrow.

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