A new, insurgent cable company has emerged in New York City. It could be a model for how internet and cable are delivered in the future. In the process, it’s becoming a shining example of how stakeholder capitalism works. And, as an answer to conservative critics of stakeholder capitalism, it’s also a case study in how free-market competition can produce lower prices for services as an upstart tries to actually give its customers a better life.
Anyone who buys cable service in New York State knows that, unless you live in one of the lucky neighborhoods served by Greenlight—an alternative cable service—you have no choice—in many neighborhoods—but to get your broadband from Spectrum. It’s typical to pay from $50 to $135 per month for Spectrum internet service alone, with a higher price tag for full cable TV. Spectrum is a legacy provider, and it’s pricing has remained unchallenged for years.
In other words, many places, like the boroughs of New York City, have been desperate for a more affordable alternative. The market has been ripe for a competitor to actually challenge Spectrum and compete with the big ISPs.
Well, as it turned out, Spectrum challenged itself. Or rather, a group of dissatisfied, striking Spectrum employees broke away and created a business model to provide Internet for less than a third of Spectrum’s $50-$100 monthly fee. People’s Choice Communications, the new cable service launched half a year ago, was organized by striking Charter-Spectrum workers and their supporters. Even though Brooklyn, for example, was being served by three giants: Spectrum, Altice/Optimum, and Verizon/Fios, none of the providers were competing significantly on price.
The workers/owners who founded and now run the much more affordable service were among the people who built New York City’s broadband infrastructure, so they know the business literally from the ground up. They understood how to access broadband at a cost so low it enables them to offer service to customers for dramatic savings.
As Forbes reports: “So far, People’s Choice has installed mass WiFi hubs at multiple schools and supportive housing buildings in the Bronx and Manhattan, allowing the group and its customer-owners to make use of “thousands of miles of free conduit” there, among other available infrastructure. Their next intended hub is in Queens.”
None of this would have happened if Charter-Spectrum had treated its employees with respect. The seeds of this new venture were sewn after Charter bought Spectrum in 2016 and reduced or eliminated healthcare, retirement and other benefits. The workers went on strike and refused to go back to work. For years. Workers wanted the company to continue pensions and health insurance, but it wouldn’t budge. “Their goal was to eliminate the union,” according to IBEW Local 3 steward Troy Walcott. The People’s Choice website claims it has become the longest strike in U.S. history. In April, the strike had lasted four years. It emerged as part of a more widespread and general antagonism toward Spectrum from many quarters.
As Gizmodo reported in April: “The city itself is almost constantly fighting Spectrum. With its rise to dominance in New York, Gov. Andrew Cuomo has tried to evict it; attorneys general had to chase it . . . for allegedly defrauding 2.2 million New York customers; and the company was accused of putting employees in harm’s way just one month into the pandemic.”
Yet it took the pandemic to prompt some of these striking workers to form their own company. They recognized a need for it and acted on it.
According to the New York State Comptroller, more than a million New York State residents have no broadband. It’s simply unaffordable. That’s 13 percent of the state’s households. Having to make ends meet while on strike opened the hearts of these Spectrum workers to the plight of that 13 percent of New Yorkers who couldn’t afford internet. Their empathy arose from the hardships they faced while on strike. Many of these Spectrum workers were unable to keep their homes, let alone pay for the service their employer was selling.
These striking workers invented an intricate and fascinating way to provide internet, one building, one neighborhood at a time for a price much lower than the prevailing one. The structure of the company itself is a remarkable innovation, creating an interdependency between employees and customers, a fusion of interests and ownership. It’s exactly what stakeholder capitalism is trying to achieve: companies that treat customers and communities as their primary responsibility.
Workers co-own the company. Customers own the network that provides service to their building or home. In each structure where People’s Choice provides service, the people who live or work in that building own the actual local area network. Residents pay an installation fee in small, amortized increments: $10-$20 per month—the way cell phone users pay off the price of a new phone in their monthly charge—and this low monthly fee includes the internet service provided. In each neighborhood, People’s Choice installs antennas on each building it serves and these act as receivers for wireless signals from the co-op’s central hub. This spiderweb of connections remains in the background: each resident just plugs into it in the usual way, via routers using ethernet cables inside their building.
“In the event of a link break, building antennas can connect and reroute through each other, reducing the likelihood of large-scale outages,” Gizmodo reports.
Customers and service providers both have equal power in this business model. Customers own their building’s network so they can just switch to another provider while keeping the technology. Meanwhile, People’s Choice can pull its services if customers become too difficult. Each has bargaining power—something these workers most definitely did not have with Charter-Spectrum.
“It means people will have to collaborate, and I think that’s really interesting,” according to Sascha Meinrath, the network developer who helped create People’s Choice. “It means that you’re going to pay fair wages. It means that customer service is going to be really important. This is a sustainable social enterprise.”
Because of the spider web structure of this network, it’s incredibly scalable. The more buildings and neighborhoods that sign on, the faster and more reliable its service gets. Here’s the magic: the bigger People’s Choice gets, the cheaper its service becomes because when it buys bandwidth in bulk, like most things, the price goes down. “Once you get a critical mass of people,” Meinrath said, “. . . it’s remarkable how cheap bandwidth gets when you buy it in bulk.”
This little company might have found the key to making internet service one of the cheapest utilities in the economy five or ten years from now. Contrast what they are doing compared with the 97 percent profit margins Comcast and Time Warner were enjoying according to a 2015 investigation, as Gizmodo reports.
In the near future, People’s Choice sees a path toward bringing service to hundreds of thousands of residents in the Bronx. One can imagine it won’t be long before it expands into other cities. All of this is the perfect case study in why stakeholder capitalism matters. Acting like a poster child for shareholder primacy, Charter Communications was ignoring employees, communities and customers in its pricing and in its revocation of essential benefits for its workers. So those employees left and are showing Charter how to embrace the values of stakeholder capitalism—caring about the community and the customer, sharing ownership of the process and the system, passing along the rewards of growth with lower prices.
They might become the David that brings down the Goliaths. Unless the Goliaths just follow People’s Choice’s example, adopting its innovations and its pricing to thrive by doing what’s good for both its employees, shareholders and its customers.
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April 01, 2022 at 03:34AM
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