Tuesday, August 14, 2012

Testing the Negraponte Flip

           Several years ago MIT Professor Nicholas Negraponte suggested that many current wireless services could be more efficiently provided via wires and vice versa.  Certainly he was onto something when we have duplication via both media, e.g., television broadcasting and cable television.  But does it make sense to suggest that most wireless services can efficiently and more cheaply substitute for wireline services?

            It looks like we may see that experiment as U.S. wireline carriers appear ready to rely solely on wireless options.  Whether by design or their refusal to invest in wireline improvement, incumbent telephone companies in the U.S. have experienced a significant decline in plain old telephone service revenues.  This quarter these carriers have faced a net decline in DSL subscribership.  The top two carriers, AT&T and Verizon, appear willing to divest themselves of rural service territories and to reduce or stop capital expenditures in fiber and fiber/copper broadband.

            Many of us have accepted the rationale that local loop-based broadband constitutes a transitional technology.  But I thought the transition led to fiber primarily.  Now it appears that  both AT&T and Verizon have confidence in a wireless only future. 

            Surely 4th generation, LTE wireless can provide attractive transmission speeds compared to wireline, but can these technologies handle the volume of demand we can expect if the marketplace has only a cable modem and wireless options?  Have the incumbents done the math and figured that they are better off with offering only broadband services in the $50-100 a month range instead of having available something slower and far cheaper, e.g., DSL available for less than $20 a month?

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