Radical Decentralization: How Utilities and ISPs Could be Disrupted, and Three Defensive Strategies

In my last post I brashly predicted a wave of “radical decentralization” that, over the next 25 years, will likely mean that more and more large organizations, business models, and even governmental functions will be supplanted, evaded, or made irrelevant by self-organizing groups of individuals, connected ever more seamlessly by robust computer and telecommunications technologies.

In this post I plan to show how radical decentralization could disrupt even the most monolithic service organizations – including big, centrally organized enterprises such as utilities or internet service providers.

First, a great illustration of just how decentralization works can be seen in the method used during the Hong Kong demonstrations of 2014 (see the picture above). During protests against the new anti-democratic election rules imposed by the Communist Chinese government, the organizers of the demonstrations successfully foiled the government’s efforts to track and interfere with their communications and online posts. As Kevin Kelly tells the story in his book The Inevitable: Understanding the 12 Technological Forces That Will Shape Our Future:

“The Hong Kong students devised a way to communicate without sending their messages to a central cell phone tower or through the company servers of Weibo (the Chinese Twitter) or WeChat (their Facebook) or email. Instead they loaded a tiny app onto their phones called FireChat. Two FireChat-enabled phones could speak to each other directly, via wifi radio, without jumping up to a cell tower. More important, either of the two phones could forward a message to a third FireChat-enabled phone. Keep adding FireChat’d phones and you soon have a full network of phones without towers.”

This sort of network is called a “mesh network,” and it is highly robust. “The result of the FireChat mesh,” according to Kelly, “was that the students created a radio cloud that no one owned (and was therefore hard to squelch). Relying entirely on a mesh of their own personal devices, they ran a communications system that held back the Chinese government for months. The same architecture could be scaled up to run any kind of cloud.”

While the Hong Kong demonstrators banded together with a decentralized mesh network to circumvent government control, it’s likely in the future that we’ll see consumers banding together to use similar networks for purely economic reasons, and the result will be the most disruptive technological change some industries will ever face.

To see how it could develop, consider these two possibilities:

• Utility companies. Think about the effect that residential solar energy generation will have on utilities’ power grids, for instance. The costs involved in harvesting solar power are falling steadily as technology improves, and in just a few more years solar energy will likely be as inexpensive as fossil fuel energy. Sooner or later many of the homes and businesses with their own solar power capabilities will generate more energy than they need during periods of sunshine, and either store it in batteries for later use, or sell it back to the utility company to be distributed to other users. But there’s no economic reason why one consumer ought not to be able to sell excess solar-generated energy directly to other consumers, cutting the utility company out of the transaction altogether. This would change the electric grid from its current hub-and-spoke network (with utility companies at the hubs) to a mesh network of consumers generating energy for other consumers.
• Internet Service Providers. Wi-Fi coverage often overlaps among neighboring homes, apartments, and businesses. Perhaps in the future, rather than having to pay a monthly subscription fee to Verizon, Comcast, AT&T, or some other ISP, just to make a broadband connection to the net, you’ll be able to connect to a neighbor’s Wi-Fi, then another, and another, and another, and hundreds or thousands of others, until your message gets through or your data is retrieved. For Wi-Fi mesh networks to catch on in a major way there would need to be security applications ensuring these kinds of connections are protected, and we would also see pressure to make Wi-Fi power regulations more accommodating. Even without a regulatory change, however, we should soon expect new technologies to compensate for Wi-Fi networks’ low power, because there’s still room in the logic and structure of data transmissions for significant increases in efficiency.

The point I’m trying to make with these two business examples is that no matter what your line of work is, and no matter how commanding a position your industry has today, every business still needs to be prepared for the consumer-led disruption of radical decentralization. This phenomenon is an inevitable result of improving technology.

In my humble opinion (okay, maybe not that humble), the best way to prepare for this disruption or nearly any other kind of technological asteroid strike, is to follow one or all of these three strategies:

1. Concentrate on earning the trust of your customers now, by constantly acting in their interests. When the asteroid hits, you need your customers to be on your side, wishing you well;
2. Deepen the context of your relationships with customers by tailoring each customer’s service to that customer’s individually different needs and preferences; and
3. Create a more frictionless customer experience by facilitating the disruption, rather than simply trying to resist it. You want to be Uber, the company, coordinating the interactions, and not just the highest-volume Uber driver in the new network.