A Slapshot on the Subject of 'Free'
BroadBananas Michael Harris 10/7/2005
Three items generated a bit of buzz in broadband this week, a hat trick if you will: Google's move to provide free wireless Internet access in San Francisco, Comcast's video streaming of NHL games to its high-speed data customers, and the continued blah-blah about 'free voice.' They're actually related in an off-handed way. First up, Google. The city of San Francisco is entertaining bids from companies to build and operate a network that will provide affordable, ubiquitous wireless Internet access to its citizens. Earthlink won a similar deal in Philadelphia this week. If it wins in San Fran, though, Google says it will provide free 300-Kbps Internet access city wide, enough for most mainstream online applications, including VoIP. Higher-speed services would be available for a fee. Despite its billions in the bank, Google says its San Fran bid is a one-shot deal, that it has no ambitions to pay for wireless networks in other geographies. The Googlers say their motivation is to provide a community service in their home market, and also create a test bed for new Internet applications. The build-out cost is reportedly less than $20 million for a bayside Wi-Fi mesh network, an affordable price for a real-world R&D lab. Of course, San Fran's broadband incumbents Comcast and Verizon are cranky about the city's Wi-Fi plans. The good news, though, is that with cheap ubiquitous Wi-Fi, cable and DSL players will be forced to innovate or watch their customer base evaporate. The wired incumbents will undoubtedly boost access speeds beyond Wi-Fi levels and work to add unique, differentiated services. Comcast unveiled one-such service this week as it started streaming NHL hockey games -- live and on-demand replays -- as an exclusive service to its cable modem subscribers. Comcast's OLN sports television network recently acquired NHL programming rights and the MSO is wasting no time leveraging the deal. It's a nice way to differentiate its broadband Internet service from DSL and wireless. Finally, in the wake of E-Bay's psychotic $2.6 billion buyout of Skype, speculating that 'voice will be free' is now the rage. News Corp.'s Rupert Murdoch led the charge, boasting at a Goldman Sachs investor conference last month that "I believe that free voice is going to be ubiquitous not in 10 years -- within two or three years." The take-away: MSOs and telcos counting on voice revenue are in trouble. Ubiquitous free voice in two years. Uh, Rupert, isn't that what Skype and a gaggle of other players already do today? Yes, some service providers will increasingly try to make a business selling 'free voice.' However, that does not mean free telephony, with features like E-911 and lifeline reliability, which will always command a price premium. And if voice prices do plummet, MSOs and telcos still win in one way: it drives demand for their fat pipes. In most places, multi-megabit broadband access will never be free. Indeed, at a cost of only $20 million to make a major U.S. city wireless, Ebay should dump Skype. Why not use that $2.6 billion to build free Wi-Fi networks in the top 100 U.S. markets in a bid to build a nation of online auction addicts?