Cable’s Place In the Unwired World

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In San Francisco, Internet colossus Google Inc. says its proposal to supply free wireless Internet service represents a “necessary ideal as humanity continues to cross this great digital divide.”

In Philadelphia, EarthLink Inc.’s winning bid to launch wireless Internet service includes an agreement to provide free access in public parks and to halve its monthly rate to $10 for households with limited income.

Forgive cable veterans if they feel the whiplash of a time warp. It’s almost like a return to the franchising days of the early 1980s, except now the currency is measured in Megabits per second, not in public access studios or analog video channels.

Whether cities ought to be demanding from commercial providers free or subsidized wireless Internet access presents a legitimate debate. But attempting to put the brakes on Wi-Fi’s growth by complaining about favoritism or public subsidization misses the point.

Wi-Fi isn’t a threat because a few cities have designs on delivering “open-air” Internet service. It’s a threat because it has the potential to radically alter the economics of Internet access. Because of that, Wi-Fi is coming soon to a neighborhood near you. Actually, lots of them.

Google’s estimated $20 million investment in San Francisco is a fraction of what cable and phone companies have spent to burrow fiber optic lines and twist F-connectors into place, household by household. But the fact that Wi-Fi networks enjoy a certain economic liberation doesn’t mean they’re the enemy of cable high-speed Internet services. In fact, cable providers may be better positioned than others to seize Wi-Fi’s advantages.

Cable networks provide a sunk-capital foundation for the most expensive part of residential Wi-Fi: its backhaul network. For cable providers, the marginal upgrade cost to add Wi-Fi transmitters that integrate gracefully with its existing networks is modest. Wireless transmitters even dramatically extend the range and appeal of wired cable Internet service. Cable providers can leapfrog past wireless “mesh” networks that have difficulty sustaining high data rates when they get lots of customers.

Better still, cable has a superior economic position. At $20 million to cover San Francisco’s 49 square miles, Google will invest about $12,500 per wireless access point. By coupling wireless access controllers with existing networks, cable providers can deliver wireless access at closer to $2,500 per access point. That means cable companies can lead the next wave of the Internet networking revolution.

Armed with a superior backbone network, an army of technicians and strong marketing infrastructures, cable providers are well ahead of any new-to-market rival that hopes to carry the day with Wi-Fi. With wireless in place, cable providers can author creative combinations of Internet access, wireless telephony and other services that deliver incremental revenue, protect its existing Internet-access business, and offer a foundation for innovation — something Wall Street desperately wants to see from cable. Plus, there are public policy and community-relations benefits.

By staking a claim now, not later, cable providers can make an important declaration about their future: They’re not in the business of providing high-speed Internet access services over a wire. They’re in the business of connecting people.