Something Ventured:
July 6th, 2001
By Brent
Holliday
Greenstone
Venture Partners
"I
recommend biting off more than you can chew to anyone
I certainly do
I recommend sticking your foot in your mouth at anytime
Feel free"–
Alanis Morissette,
You Learn
Last
time, a random thought that I threw out about the
federal government (Brian Tobin's Industry Canada, in
particular) trial ballooning an idea to fund broadband
to every home in Canada stirred a lot of feedback from
you readers. I stated that the government should just
stay out of this and that any effort to roll this out
would be tantamount to a bail out of Nortel, whom would
almost certainly receive the lion's share of the
equipment contracts. This had me thinking and debating
the topic with a few people over the past couple of
weeks. In particular, there are two issues: 1) Should
the government (taxpayers) pick up the tab, turning this
into a gigantic public works project? 2) Going to a
higher level, what do people get when they have
broadband… what, exactly, is the benefit?
Here
are a couple of the more passionate responses to what I
wrote:
Response #1
You wrote: "Private market forces will dictate how
best to efficiently deliver broadband to the rural areas
of Canada (satellite? Telesat has a 2MB up and down
technology in trial today)"
Nonsense.
The cost of the satellite feed far exceeds what the
average homeowner can afford. There is no shareholder
value in servicing rural regions which is exactly the
reason that Telus, Shaw et al are ignoring them today.
What is needed is government funded, community owned,
open access carrier neutral network infrastructures.
That is the community owns the infrastructure private
companies offer the services over that infrastructure.
It is the cost of the infrastructure that has prevented
the incumbents from offering services in remote rural
regions to date. Broadband is the best hope that rural
Canada has for a future and it is in the best interests
of urban Canada to ensure those remote and rural regions
have the ability to partake in the "New
Economy" or else those same urban regions will be
left to support their rural cousins on welfare etc. It
is time for telecommunications infrastructure to be
treated the same as roads. Publicly owned and equal
access to all. Both are equally important to economic
survival and prosperity.
DA
Response
#2
In your recent column, you said:
"Why not just give Nortel the money directly like
they are doing for Bombardier and then scrap the idea of
broadband to Alert, NWT?" A couple of comments seem
in order. First of all, Alert is no longer in the NWT
but rather in the new territory of Nunavut. On the issue
of extending "broadband" telecommunications to
remote communities, there are in fact a number of
compelling reasons for building out a network to serve
these communities. During the time that I worked for the
government of the Northwest Territories (which then
included Nunavut), I initiated and implemented an
initiative to build a (relatively) high speed network to
every community in the NWT (58 in all). The model for
the network was a form of public private partnership
with the GNWT as the anchor tenant and additional
capacity being sold to other clients including the
private sector. The successful bidder was a consortium (Ardicom)
of the telephone company, NorthwesTel Tel, Arctic
Cooperatives Ltd, an umbrella company for 4 retail
cooperatives in the North which also ran a number of
cable TV operations, and Northern Aboriginal Services
Co., a joint venture of 4 major aboriginal development
companies. The network is installed and operational.
Many of locations are served by satellite connection. It
provides T1 connections at the local level and variable
band width over the intercommunity links as required by
the needs at any point in time.
The
network was justified and paid for on the basis of the
support it could provide to education and health care in
the communities as well as other government services.
For example, the network was "specced" to
support video conferencing at bandwidths necessary for
typical telemedicine and distance education
applications. While it is expensive in general to reach
these small and remote communities electronically, they
are also the ones which are the most difficult to
service with traditional methods of service such as
flying people out for medical diagnosis.
You
are right to raise the issue of the potential for the
initiative to be an expensive white elephant but in my
view it is also possible to provide these services to
such communities in way that is cost effective and
ultimately in the best interests of the country as
whole. You are also correct in noting the need for valid
applications and content.
Oh,
by the way, NorthwesTel did in fact select Nortel
Magellan Passport switches to support this frame relay
network, but that was their own business decision.
Although Alert is in the service territory it is in fact
essentially only a military base and was not part of the
project. Presumably they already have plenty of telecom
capacity.
Gordon Robinson
Former Deputy Secretary, Audit, Budgeting and Evaluation
for the Financial Management Board Secretariat
(Effectively, CIO) NWT
{My
apologies to all of my readers in Nunavut for mistakenly
representing that Alert was still in the NWT. Zero on
the geography test.}
These
comments summarize nicely the emotional and practical
responses to the issue of the "digital divide"
as it has become known. DA has succinctly put to me that
the rural technology have-nots will rise up and storm
the cities with pitch forks in hand to eviscerate the
un-caring urban digital elite who have turned their
backs on their less fortunate brethren. Further, the
nasty corporate profit seekers, like Telus and Shaw,
should be equally gored to a miserable death because
they see no profit motive to wire the small communities
in Canada. Oh, the humanity.
I
do agree, as DA has pointed out, that pure private
sector build-out and maintenance of a huge network like
this is probably not in the cards. Point taken. I should
have been much more practical in how this really might
work, as Gordon pointed out, "a public-private
partnership". But, more on that later.
I
really take issue with the hand-wringing "chicken
littles" who warn of an impending social
catastrophe because a large population does not have
broadband access. Coming from a guy who tends to make
broad sweeping generalizations, this broad sweeping
generalization needs to be examined a bit more. What
benefit does a person living in a small rural community
in Canada get from having 1MB access to their home?
Let's assume that they have no access today. They likely
have a telephone (as 99% of Canadian homes do), they
certainly have a television (as 98% of Canadian homes
do), they likely have satellite or cable TV to get at
least 60 channels (as roughly 70% of Canadian homes do)
and they probably have a PC (as 60% of Canadian homes
do). Pity the poor farmer in rural Saskatchewan with
only 60 channels to watch and a few CD-ROMs to spin in
his connectionless computer. He gets dial tone on his
phone 99,999 times out of 100,000. Poor bastard. He's so
cut off from the world. Here's what this person would
get with broadband access: Porn, MP3s, books and frying
pans from Amazon.com and all of the funniest ads on TV
streamed from Adcritic.com. Of course, I'm being flip.
But measure the downloaded bits from this fellow and
those would be the most accessed types of enlightening,
soul enriching benefits that make this fellow's life
more complete because he could only get them with
broadband access.
What
he also gets with broadband access is access to
government web sites, educational materials (ranging
from straight information to curriculum tied resources
and corporate training), and health care (again, from
information to remote telemedicine). This stuff he can't
access through any other medium in as quick and timely a
manner as he can with broadband access. But his life is
not in danger of being any less connected than the DSL
enriched fellow in the West End of Vancouver. Not yet.
The
main problem is that the content is not as good as the
pipe. THIS is my biggest beef with rolling out access
across Canada right now. The government services on-line
suck. You can't apply for your driver's license, fill
out your tax forms, receive and transfer payments to the
government, effectively communicate complaints or
concerns in real time. In education, there are many
(mostly private, profit driven) sites with great content
and curriculum. There are fantastic corporate training
and course materials. But the masses do not yet use
them. The urban elite are not yet getting their kids to
do their homework or interact with distance educators
effectively. There is a long way to go with educational
content and the re-orientation of the teacher-student
relationship using broadband connectivity (say hello to
the teacher's unions, who are slowing this process down
the most). And telemedicine is not in great use yet,
other than on Discovery Channel. Once again, health care
needs major procedural and structural changes to be
effectively delivered or even slightly augmented using
broadband connectivity.
Before
we can effectively change the world of the rural or
small community Canadian (heck, even the urban connected
Canadian) with broadband access, we need to see major
advances in what we are accessing that can directly
benefit our lives: government services, education and
health care. Gordon showed that the NWT government
actually did the cost/benefit "spec" on these
three main axes and decided that it should go ahead
because the cost savings over time would dramatically
outweigh the start-up cost today. So, Brian, stuff the
trial balloon in your access port and do a proper
analysis of what we need to have in the form of
government services, education and health care on the
Internet that would compel a user of broadband to feel
that their life has been enriched. Make the argument
that the cost savings of delivering these three key
services over the Net will outweigh the costs of the
buildout of high speed access.
Finally,
when it comes to doing this, listen to the lessons of
the public-private model that were learned in the NWT.
The enormous costs of laying fiber, installing receivers
and transmitters, installing access devices and
providing end user hardware to actually use the
broadband (remember, 40% of Canadian don't own a PC and
I bet that hasn't been factored in yet) should be
largely shouldered by the taxpayers when, and only when,
we are convinced that the cost/benefit is there. Not
just because we should, as the digital divide doomsayers
are saying today. But the ongoing costs of training,
support, marketing, upgrades and content improvement
should be largely in the private sector in return for
the revenue streams that would come from monthly access
fees.
In
fifteen years, we will live with broadband access like
it is the reliable telephone service that we have today.
I am a believer. But it will take time. Mr. Tobin and
the folks like DA are mixing the doomsaying superlatives
with the "Canada can lead the world in access"
superlatives and rhetoric. Canada should lead the world
in smart, efficient access to content and services that
make their lives better. This starts with spending money
and effort on the web sites themselves and not the pipe.
Build the demand before you build the supply. Make it so
the farmer in Saskatchewan is clamoring for access.
Right now, he's watching Jerry Springer and he couldn't
give a rat's ass.
What Do You Think? Talk
Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
positive or constructive. I'll keep the flames to
myself, thanks).
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