This the second in a series of posts exploring lessons learned from the Seattle Gigabit Squared project, which now appears unlikely to be built. The first post is available here and focuses on the benefits massive cable companies already have as well as the limits of conduit and fiber in spurring new competition.
This post focuses on business challenges an entity like Gigabit Squared would face in building the network it envisioned. I am not representing that this is what Gigabit Squared faced but these issues arise with any new provider in that circumstance. I aim to explain why the private sector has not and generally will not provide competition to companies Comcast and Time Warner Cable.
Gigabit Squared planned to deliver voice, television, and Internet access to subscribers. Voice can be a bit of hassle due to the many regulatory requirements and Internet access is comparatively simple. But television, that is a headache. I've been told by some munis that 90% of the problems and difficulties they experience is with television services.
Before you can deliver ESPN, the Family Channel, or Comedy Central, you have to come to agreement with big channel owners like Disney, Viacom, and others. Even massive companies like Comcast have to pay the channel owners more each year despite its over 10 million subscribers, so you can imagine how difficult it can be for a small firm to negotiate these contracts. Some channel owners may only negotiate with a provider after it has a few thousand subscribers - but getting a few thousand subscribers without good content is a challenge.
Many small firms (including most munis) join a buyer cooperative called the National Cable Television Cooperative (NCTC) that has many of the contracts available. But even with that substantial help, building a channel lineup is incredibly difficult and the new competitor will almost certainly be paying more for the same channels as a competitor like Comcast or Time Warner Cable. And some munis, like Lafayette, faced steep barriers in just joining the coop.