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Railroads versus Highways

May 5, 2011 | Author: Ibex Marketing

I’m not an expert on transportation history, but I think I have enough of the facts straight to make this analogy work. So please bear with me if I stretch the facts in order to make them fit my purpose.

In the early days of this country, transportation was more or less based on the individual; you rode your horse or wagon to get where you needed to go, and to move goods from one place to another. Then came the railroads. These traveled along fixed lines, and were able to carry more people and more cargo at a much greater speed and reliability and at lower cost. And businesses and population centers sprang up along these routes, and many of them prospered as a result of their connection to the railroad lines. In time however, our horses and wagons were replaced by vehicles with internal combustion engines, and we were freed from the limits of the railroad lines. And we built a network of roads and highways to encourage the movement of people and goods at even greater speed and efficiency.

Now, here’s the big difference between these two systems. The railroads were closely controlled by their owners (at least initially), and folks like the Vanderbilts and Goulds made fortunes from them. The roads were publicly owned (though there have been exceptions), typically supported by public funds from tolls or taxes. With railroads, you had to go where they took you, and the content that they delivered was controlled by their owners. The highways existed simply to let people and goods move from here to there in a network of points, and the public entities that owned them didn’t much care what was moved or where it went.

I see parallels in the systems we have now. Cable television and the traditional phone service are like the railroads of old; they are purpose-built for a specific service. The service provider maintains both the physical system and the service, all for the profit of the owners. In contrast, the Internet is like our highway network; built and maintained by a range of entities for the sole purpose of facilitating the movement of data from here to there. The difference from the highway system is that the majority of the entities involved in the Internet are also looking to profit from their activity. But neither network cares much where the content comes from or ends up, or what the content is.

And here lies the problem for the cable companies. They are transitioning into becoming the providers of broadband Internet access. For now, they are in a conflicted position where they are trying to protect the access to their content (the TV programming that they provide) while trying to offer their customers high-speed access to all the content that the Internet has to offer. In short, they are trying to run access to a highway system as if it were a railroad. In my opinion, they won’t succeed.

Before long, the content will become completely separated from the delivery medium, and consumers will be free to choose which physical (or wireless) network they want to connect to in order to gain access to the Internet and its content. They will also have even more choices for free (Hulu, YouTube) and fee-based (Netflix, Hulu Plus, Amazon Video on Demand) video and movie content that they can access over this connection. The cable company will become a conduit for information as a utility, just like water or electricity. (And keep in mind that the electric company could also become a competitor to provide broadband connections; after all, they also have a physical infrastructure already in place that reaches almost every home.)

This is not a change that will take place overnight, but I believe that it will happen and that the signs of this shift are already present.