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Memory Lane: Power play

Mon, 09/16/2013 - 8:29pm
Stewart Schley, Media & technology writer

 Today's broadband network might be analogous to the U.S. electrical grid in the early 1900s     

In Chicago, the great fire of 1871 wiped out much of the business district, and the capitalists came running. The fire’s fury had produced an attractive, greenfield opportunity for building infrastructure in what was the world’s fastest growing city. Nearly two dozen electricity entrepreneurs competed to carve out operations in small delivery sectors.

The legendary Samuel Insull, an assistant to Thomas Edison who had managed New York’s Edison General Electric, was one of them. Starting with a struggling Chicago utility serving around 5,000 customers, Insull began a marketplace infiltration that combined business guile with insight into human behavior and the changing attitudes of turn-of-the-century America.

Insull quickly expanded his territory by buying out nearby rivals, eventually consolidating his operations around the Harrison Street Station, which would become the world’s largest power plant. But more than his facility for dealmaking, it was Insull’s instinct for understanding the changing social and cultural mores of the time that propelled his business.

Convinced that electricity could catch on beyond the affluent base to which it had been targeted, the London-born Insull did something nobody else in the capital-engulfing field of electrical power could fathom: He discounted his product steeply. He subsidized the wiring of middle-class homes, slashed rates and even gave away electrical appliances – all in the name of cultivating demand. Among the innovations Insull brought to the U.S. market was a varying rate system. Inspired by a visit to England in 1894, Insull created a two-tiered system that lowered rates during low-demand periods, resulting in a lift in usage during non-peak hours.

Insull’s willingness to embrace concepts of affordability and lowest-rate delivery was revolutionary, and it helped propel electricity to become a mass-market staple, rather than the elitist luxury some early developers had assumed was its rightful place in the market. From an economic standpoint, the strategy worked beautifully.

By 1920, Insull’s companies were merged to create the Commonwealth Edison Co., which had served more than 500,000 customers. By the late 1920s, Insull supplied electricity to more than 4 million customers across 32 states and presided over an empire valued in billions of dollars.

Today, many scholars and industry analysts see a ready analogy in the building of the U.S. electrical grid during the first half of the 1900s and the rise of broadband Internet systems.

A common argument is that broadband Internet access will be as important to economic growth in the 21st century as electricity was in the 20th century.

If that’s the case, an interesting question is whether a modern-day Samuel Insull figure will arise to challenge prevailing assumptions about how broadband ought to work. By and large, the offering strategies behind today’s broadband networks are extremely like-minded. Most providers deliver just a handful of product variations, arranged almost exclusively around a relatively course attribute: the speed at which bits fly up and down the network.

There are few examples of the conventiondefying approaches Insull brought to his electricity operations, such as giving away appliances and teasing out usage by varying rates depending on the time of day.

Maybe they’re unnecessary. The majority of U.S. adults already pay for broadband service, and unlike electricity in the 1930s, there is usually more than one provider to choose from in most U.S. cities. Even so, it would be interesting to know if there is a greater economic upside out there that aligns with a more inventive product approach for broadband.

Today, the prevailing product offers spring forth from technology: Engineers invent ways to improve network performance, and marketers respond by parsing network speeds into new price points.

Turning that formula around by making interesting observations about the human side of broadband and creating products to suit varying needs and usage patterns could be interesting going forward. That’s how Samuel Insull amassed an empire (at least before being wiped out in a Depressioninspired investment disaster).

As the Loyola University of Chicago Professor of History Harold Platt wrote in his book The Electric City: Energy and the Growth of the Chicago Area, 1880- 1930, it wasn’t “the inexorable logic of the machine” that produced a mass market for electricity at the turn of the 20th century.

It was the other way around. “On the contrary, contemporary social values and cultural orientations determined the pace and direction of technological change,”

Platt observed. To stand out in the emerging broadband marketplace, maybe that realization is exactly what’s needed to spark the next wave.

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