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Myth vs. Reality - Opportunities for PCOs

A Historical Look at Risk-Taking Being Essential to Success - Opportunities for PCOs

by Bill Burhop

Legal Counsel, IMCC

March 22, 2010

The cheerleaders for 64 schools said their team could win the NCAA basketball playoffs.  For all but one squad, it was definitely a myth searching for reality.  Do you remember Valparaiso a few years ago?  This was a team nobody expected to go anywhere, yet they almost won the entire thing.  Every year – in sports, in business and in life – there are huge upsets and surprises, proving that some shots are worth taking.

The same holds true in our business, and in virtually any business anywhere.  Some myths actually do turn into realities. Just look at mythology and history.  Icarus glued on his feathers to take flight, and instead crashed into smoldering ashes.   Orville and Wilbur got off the ground and flew for a few feet, keeping the dream alive.  Just today there were over 30,000 commercial flights in the U.S.A. alone (it still irritates me you have to pay for the crummy bag check).  It is an incredible reality most of us now take for granted.

In our industry we can remember that classy press conference when AOL and Time Warner announced a new merged world between the two companies. Talk about a smoldering heap of … feathers.  That is only one of many comparable examples of abysmal failure.

Here is another category of greedy myth with no chance for reality. We are still experiencing TARP – the government financial institution that bails out the banks, the prototype being the largest banking institution in the world, Lehman Bros.  Lehman botched their jobs and exhibited corporate irresponsibility to the tune of … well, nobody really knows how much.  But yet the parachutes carried them to a golden hereafter in the billions.  Millions of investors lost large portions of their savings, retirement nest eggs and diverted venture capital from potential realities into pathetic myths.

Some might say the above are examples of hubris, business misjudgment or just plain boardroom idiocy.  Perhaps all of those.

But then remember the garages belonging to the likes of Bill Gates, the incubators in which a few phenoms with exceptional brains and courage produced market, life and world altering products and services.  That is a part of the process.  Some myths do become reality.  And, in spite of many historic failures, some of you do develop winners. It’s worth the effort and risk, just like it was worth 64 teams putting on the uniforms to have a chance at a dream.

If lessons are learned from the failures and the successes, they can also be the crucibles in which our industry and its companies have transformed dreams into reality, guiding our industry leaders away from failure and toward success.  Orville and Wilbur taught us that one day we could jump off a windy hill in North Carolina and eventually end up in Dallas.  If we do not take the chances then we are destined to repeat stupid mistakes, waste investor resources and force those future business leaders and investment capital into other industries.

As an aside, maybe that is what happened with Lehman Bros. Their hubris and unfettered business greed helped to cause a financial bubble which still wreaks havoc on the world economic climate.  Given all of the factors, that failure was inevitable.  In the long-run, it was beneficial for the free enterprise system because it forced reality into a business model that was built on a myth.

It is not feasible that very many garages will produce life changing products and services.  It is far more likely – proven reality, in fact – that many garages and small offices can and do serve as places where you (at least you smaller entrepreneurs) can develop ideas into product plans and companies that do turn myths into realities.  Many of you reading this article have taken the chance and succeeded.  There are also many who have tried and failed.  This is the process that builds corporate success and is the foundation for an entire industry.

For instance, it takes courage for Verizon and Comcast to dump dozens of billions of dollars into the ground to make the triple play work. That’s an example of courage that could become a reality and could transform communications in the United States.  Or it could become another heap of burning feathers that people discuss for years into the future.

There are small companies out there who are doing virtually the same thing, but on a much lesser scale.  For instance, private cable companies (PCOs) and their small vendors pursue the same opportunity:  To turn a dream into a reality.  These are not myths.

The PCO business model mimics the business model of huge corporations.  Three or four components are always present in that model.  One such factor is the question, “In this model is there a large enough potential customer base for PCOs to succeed financially?”  That answer is yes, because there are so many MDUs and potential residents seeking the triple play.

If people are skeptical of that market, saying FiOS and Comcast and the huge players have already or will soon control that market, just overlay the service area maps of those two companies.  You will see very large areas of urban and suburban areas that those companies do not serve for one reason or another, and will not serve (or spend more corporate resources).   Those are the opportunities for PCOs and those smaller industry vendors to reach for reality.

It’s like a large loaf of bread.  The big guys will control the majority with large slices of bread.  While PCOs will not control large slices themselves, there are and will be substantial crumbs that are available for the smaller entrepreneurs like PCOs.

Of course there are other factors influencing this process. One of them is government regulation, as the sidebar demonstrates.  PCO garages and small offices have been around for 30 years, with some of them ultimately reaching success and getting out of those garages with their great ideas.  Many others have tried as Icarus did, to the same end.  Several have never gotten beyond the myth stage, but will continue making the effort and will take the risks required to succeed.  As can be demonstrated today, many are following the right business model and their company’s myths are well on the way to becoming realities.