Waiting for FiOS

For those who admire the apparent pervasiveness of competition between Time Warner Cable and Cablevision Industries vs. Verizon Communications’ FiOS, the idea the Big Apple has a broadband problem seems a bit ridiculous, particularly if you can’t get your local cable company to pick up their phone and AT&T will only hand you a 1.5Mbps DSL line, if you can get it.

But according to the Village Voice, New York City broadband “sucks,” and it will continue to suck for at least the next eight years.

“Though entrepreneurs in most parts of the city can access a fast broadband connection today, many of those we interviewed said that New York’s telecom infrastructure is well behind where it should be for a city vying to be one of the nation’s two leading technology hubs,” the study notes.

What it comes down to is that New York — despite being the world’s media capital — does not have adequate access or bandwidth to support tech companies’ needs.

For example, some companies might be able to get either FiOS or Time Warner Cable, but not both, which means they can’t have broadband backup.

“It’s like the elephant in the room is that bandwidth here sucks,” one entrepreneur told the researchers. “You should be able to walk into any building and have at least 150 megabit connection available to you. There has to be ways for the city to construct much better bandwidth availability for start-ups.”

Many cited told the researchers that their internet routinely goes down. And startups who want to set up shop in cheaper, industrial districts often can’t, because the cable companies would rather provide service to more lucrative residential areas. Sometimes, telecom concerns are willing to dig up streets and lay cable, but at a hefty price — around $80,000.

That $80,000 bill is handed to a prospective customer and does not come from cable operators’ capital expense fund.

Researchers gave New York a broadband grade of B to B-, which isn’t too bad considering what broadband is like in the mid-south, the midwest, and the rural west. But it doesn’t cut it for helping New York become a bigger tech city.

Waiting for "Business Class"

While Time Warner Cable and Cablevision have wired multi-dwelling units and homes across New York City, cable operators have only recently started to turn their serious attention to corporate business customers.  Time Warner Cable agreed, as part of its franchise renewal deal with the city, to invest $1.2 million per year for fiber connections to commercial buildings yet to be wired for cable. Cablevision, which can be found in boroughs like Brooklyn and out on Long Island, agreed to spend a more modest $600,000 a year for the same purpose.

Time Warner Cable has already warned investors its capital spending on wiring commercial office buildings across the country is increasing as the company sees lucrative new revenue opportunities competing with their usual nemesis — the phone company.

Verizon treats FiOS deployment in New York City as a long, long-term project. There are neighborhoods in Manhattan that can’t wait much longer for the fiber optic network as Verizon increasingly lets its old copper wiring go to pot, leaving some New Yorkers without phone service for weeks.  The city of New York has given Verizon until 2014 to wire the city, and the company appears likely to need those two additional years at their current pace, and that agreement only covers residential properties, not commercial ones.

Robust broadband is essential for many high technology startups and the multi-million dollar data centers that support them. New York mayor Michael Bloomberg considers it a top priority to reduce the city’s economic dependence on Wall Street, which generates considerable tax revenue for both the city and state. High tech enterprises fit that bill. But the city’s broadband grades do not.

“For a city that’s trying to be a tech powerhouse, we need to have an A,” said Jonathan Bowles, the author of the study, “New Tech City.”

Rogers Communications has following up its “Next is Now” corporate video from 2010 with a sequel: “Next is Now… More Than Ever,” which highlights how Canadians are increasingly relying on mobile communications for news, entertainment, social life, work, and education.

While Rogers wanted the video to promote how the company would be a part of that telecommunications transformation, many of their customers can’t help but reflect on the fact the revolution is well-tempered with Internet Overcharging schemes like usage caps.

Stop the Cap! reader Alex is among them, noting the video says nothing about the company’s restrictive usage limits on home broadband and the even harsher caps on its mobile services.

Rogers, like most telecommunications companies, repeatedly tells investors there is real money to be made attaching meters to monetize megabytes.  Charging for broadband usage is a growth industry, and with the company’s own projections for data growth, they are well-positioned to be in the money for years.

With broadband dependency being as pervasive, if not more so, in Canada as in the United States, the barely regulated services on offer in both countries often come at a steep (and increasing) price — all for something even Rogers hints is becoming a utility — one as important as electricity, gas, and clean water.

Rogers Communications’ “Next is Now… More Than Ever” has broader implications than the company realizes. (3 minutes)

Hesse

Sprint CEO Dan Hesse believes the march to a consolidated wireless world in the United States will carry on, despite last year’s failed attempt by AT&T to buyout Deutsche Telekom’s T-Mobile USA.

Hesse told an investor conference Sprint may be among the buyers, but would prefer to wait until the company’s network upgrades are finished in 2013. Other players in the market may not wait that long, and Hesse said the company would pull the trigger sooner if a consolidation frenzy appears imminent.

“It’s not an ideal time for our equity because of the big investments we’re making now,” Hesse said.

Sprint already attempted a buyout of regional carrier MetroPCS in February, but the company’s board of directors nixed the deal at the last minute.

Wall Street has been calling for additional industry consolidation to reduce duplication of networks, and the amount of money spent to construct them.  Investors also believe a more consolidated marketplace can lead to higher prices, which will drive revenues… and profits higher.

Hesse believes both the Federal Communications Commission and the Department of Justice are amenable to consolidation deals, as long as the buyers are not AT&T or Verizon Wireless, which together dominate the market.

Hesse rejects contentions the federal government wants at least four national carriers competing for America’s wireless business.

“I honestly don’t believe there’s a magic number of four at all,” Hesse said.

Among the most likely targets for consolidation: Leap Wireless’ Cricket, MetroPCS, U.S. Cellular, C-Spire (formerly Cellular South), Alaska Communications, General Communication (GCI), and regional units of Cellular One.

Verizon Wireless will force customers off of their grandfathered unlimited data plans when they reach the end of their current two-year service contracts, according to the company’s chief financial officer.

It is all part of the cell phone company’s strategy to boost the average bills of customers with new, more expensive tiered family-shared data plans. With a significant number of current customers grandfathered on unlimited data plans that users likely will not forfeit voluntarily, Verizon will force the issue as customers come up for contract renewal.

The plan received considerable approval at today’s JPMorgan Chase TMT conference, a gathering for Wall Street investors and tech companies like Verizon.  Executive vice-president and chief financial officer Fran Shammo laid out the plan to switch customers to forthcoming family “data share” plans that are priced based on anticipated usage:

As you come through an upgrade cycle and you upgrade in the future, you will have to go onto the data share plan. And moving away from, if you will, the unlimited world and moving everybody into a tiered structure data share-type plan.

So when you think about our 3G base, a lot of our 3G base is unlimited. As they start to migrate into 4G, they will have to come off of unlimited and go into the data share plan. And that is beneficial for us for many reasons, obviously. So as you pick what tier you want to be and we think that there will be some price up in those tiers.

“Price up” is code language for bill hiking. Customers adopting family share plans may be able to share data across a larger number of devices, but at consumption pricing, many customers will find their Verizon bills substantially higher than before.

Shammo

“And the important part of that is we want the connections to come in and the way we have designed our plan, this plan is built on tiers and as we look at the future growth of LTE consumption because of the speeds and video consumption and consumption of other M2M-type devices, it is going to be more important that people will start to upgrade in their tiers as they start to really realize the benefits of the LTE network,” Shammo said. “As [customers] add more devices, they are going to have to buy up into tiers. So again, you will see the revenue increase there.”

Those revenue predictions were not sufficient to satiate Phil Cusick, an analyst at JPMorgan Chase. He questioned Shammo about the prospects for Verizon further increasing revenue with across-the-board rate increases on service plans.

Shammo would not commit to that, but was pleased with the lack of customer protests over their recent introduction of a $30 equipment upgrade fee. He called the new fee “the right thing to do.” More fees and surcharges are likely, according to Shammo.

“I think implementing these additional fees is probably where we are at,” he said. “With the construct that we have dealt with around data share and where we see consumption of LTE going, when you put the combination of them together, we are fairly confident that we will see people start to uptake in the tiers, which is really where we will get the revenue accretion in the future.”

Shammo also said Verizon’s fiber to the home network FiOS has gotten such rave reviews, it almost sells itself. That means the company will pull back on promotional offers and plans a general rate increase for all customers in the coming months, if only to bolster company profits.

“We have to do a better job in discipline of price increases and I think that you’ll see us do some price increases here over the next two quarters to offset the content increase and that will also contribute more profitability to the bottom line,” Shammo said. “You are going to have to concentrate more on reducing the amount of promotions, reducing the amount of retention that you put on the table to retain a customer and then also you are seeing that the industry is pricing up.”

Verizon FiOS customers will find rate increases applying both to equipment rental and service pricing nationwide, according to Shammo.

“We were actually below-market compared to our competitors on the amount of fee that we charge on the rental of a set-top box or a digital converter box,” Shammo explained. “We are switching around our bundles and the customers that are coming out of the current bundles will be priced up to the newer bundles. So you are going to see really a shift over the next two to three quarters in price-ups coming out of FiOS.”

As far as FiOS expansion goes, the company does not expect any major expansion in the service for the next several years.

“If we can penetrate the market and really turn the wireline profitability, could we potentially build out to other areas? Yes, but that is a decision that will be made in years out, not right now,” Shammo said. “So from a capital perspective, we are being very disciplined with where we are going to put that capital.”

Time Warner Cable and Viacom have ended their dispute over whether the cable company had the right to stream Viacom-owned cable networks over its lineup of streaming apps for portable devices and home computers.

This means the cable company will be restoring streams of Comedy Central, MTV, VH1 and other Viacom networks over the coming weeks.  In return, Time Warner Cable has agreed to carry/continue Viacom’s Country Music Television on its cable systems.

From the official statement:

Viacom and Time Warner Cable have agreed to resolve their pending litigations. All of Viacom’s programming will now be available to Time Warner Cable subscribers for in-home viewing via internet protocol-enabled devices such as iPads and Time Warner Cable will continue to carry Viacom’s Country Music Television (CMT) programming. In reaching the settlement agreement, Time Warner Cable and Viacom were also able to resolve other unrelated business matters to their mutual satisfaction. Neither side is conceding its original legal position or will have further comment.

The dispute had no effect on traditional cable carriage of these networks. Only online streaming was impacted.

Growing questions are being raised about whether Comcast is violating FCC and Department of Justice policies that prohibit the cable company from prioritizing its own content traffic over that of its competitors.

Comcast’s Xfinity Xbox app offers Comcast customers access to Xfinity online video content without eating into their monthly 250GB Internet usage allowance. Netflix has called that exemption unfair, because its content does count against Comcast’s usage cap. New evidence now suggests Comcast may also be prioritizing the delivery of its Xfinity content over other broadband traffic, a true Net Neutrality violation if proven true.

Bryan Berg, founder and chief technology officer at MixMedia, believes he has found proof the cable company is giving its own video content preferential treatment, in this somewhat-technical finding published on his blog:

What I’ve concluded is that Comcast is using separate DOCSIS service flows to prioritize the traffic to the Xfinity Xbox app. This separation allows them to exempt that traffic from both bandwidth cap accounting and download speed limits. It’s still plain-old HTTP delivering MP4-encoded video files, just like the other streaming services use, but additional priority is granted to the Xfinity traffic at the DOCSIS level. I still believe that DSCP values I observed in the packet headers of Xfinity traffic is the method by which Comcast signals that traffic is to be prioritized, both in their backbone and regional networks and their DOCSIS network.

Berg also contends Comcast’s earlier explanation that its Xfinity content should be exempt from its usage cap because it travels over the company’s private Internet network is also flawed:

In addition, contrary to what has been widely speculated, the Xfinity traffic is not delivered via separate, dedicated downstream channel(s)—it uses the same downstream channels as regular Internet traffic.

Berg

Broadband traffic management is of growing interest to Internet Service Providers, who contend it can be used to manage Internet traffic more efficiently and improve speed and time-sensitive online applications like streamed video, online phone calls, and similar services. But manufacturers of traffic management equipment also market the technology to ISPs who want to favor certain kinds of content while de-prioritizing or even throttling the speed of non-preferred content. The technology can also differentiate traffic that counts against a monthly usage cap, and traffic that does not.

Quality of Service (QoS) technology can be used to improve the customer’s online experience or help a provider launch Internet Overcharging and speed throttling schemes that can heavily discriminate against “undesirable” online traffic.

Berg further found that when he saturated his 25Mbps Comcast broadband connection, traffic from providers like Netflix suffered due to the bandwidth constraints.  Because he flooded his connection, Netflix buffered additional content (slowing his stream start time) and reduced the bitrate of the video (which can dramatically reduce the picture quality at slower speeds). But when he launched Xfinity video streaming, that traffic was unaffected by his saturated connection. In fact, he discovered Xfinity traffic was exempted from his normal download speed limit, allowing his connection to exceed 25Mbps.

While that works great for Xfinity fans who do not want their videos degraded when other household members are online, it is inherently unfair to competitors like Netflix who are forced to reduce the quality of your video stream to compensate for lower available bandwidth.

According to the consent decree which governs the merger of the cable operator with NBC-Universal, prioritizing traffic in this way is a no-no when the company also engages in Internet Overcharging schemes, namely its arbitrary usage cap:

“If Comcast offers consumers Internet Access Service under a package that includes caps, tiers, metering, or other usage-based pricing, it shall not measure, count, or otherwise treat Defendants’ affiliated network traffic differently from unaffiliated network traffic. Comcast shall not prioritize Defendants’ Video Programming or other content over other Persons’ Video Programming or other content.”

This graph shows Berg's artificially saturated 25Mbps Comcast broadband connection. The traffic in red represents Xfinity Xbox traffic, which is given such high priority, it allows Berg to exceed his usual download speed limit.

Comcast sent GigaOm a statement that denies the company is doing any such thing:

“It’s really important that we make crystal clear that we are not prioritizing our transmission of Xfinity TV content to the Xbox (as some have speculated). While DSCP markings can be used to assign traffic different priority levels, that is not their only application – and that is not what they are being used for here. It’s also important to point out that our Xfinity TV content being delivered to the Xbox is the same video subscription that customers already paid for and is delivered to their home over our traditional cable network – the difference is that we are now delivering it using IP technology to the Xbox 360, in a similar manner as other IP-based cable service providers. But this is still our traditional cable television service, which is governed by something known as Title VI of the Communications Act, and we provide the service in compliance with applicable FCC rules.”

Our View

Comcast, as usual, is talking out of every side of its mouth. In an effort to justify their unjustified usage cap, they have pretzel-twisted a novel way out of this Net Neutrality debate by paving their own digital highway on a Comcast private drive.

Comcast argues their 250GB usage cap controls last-mile congestion to provide an excellent user experience. That excuse completely evaporates in the context of its new toll-free video traffic. In fact, their earlier argument that its regionally-distributed streaming traffic should not count because it does not travel over the “public Internet” at Comcast’s expense does not even make sense.

Berg provides an example:

A FaceTime call from my house to my neighbor’s—which never leaves even the San Francisco metro area Comcast network, given that both of us are Comcast customers—goes over the “public Internet.”

Yet Comcast’s Xbox streams, which pass from Seattle to Sacramento to San Francisco through all of the same network elements that handle my video call (and then some!) are exempt from the bandwidth cap?

You can’t have it both ways, guys.

DOCSIS 3 technology has vastly expanded the last mile pipe into subscriber homes. If Comcast can launch their own private pipe for unlimited IPTV traffic that travels down the same wires their Internet service does, they can comfortably handle any additional capacity needs to support their “constrained” broadband service without the need to limit their customers’ use.

Usage caps remain an end run around Net Neutrality. Consumers given the opportunity to view content under a usage cap on the “public Internet” or using the “toll-free” traffic lane Comcast created for content from their “preferred partners” will make the obvious choice to protect their usage allowance. Comcast is certainly aware of this, and it is a clever way to discriminate through social engineering. It’s also less obvious. You don’t have to de-prioritize or block traffic from your competition to have an impact, you just have to limit it. Customers who repeatedly exceed their usage allowance face suspension of Comcast broadband service for up to one year. That’s a strong incentive to follow their rules.

Netflix is fighting to force Xfinity traffic to fall under the same arbitrary usage cap regime Netflix endures — a truly shortsighted goal. The real issue here is whether Comcast should be capping any of its Internet service.

Comcast has given us the answer, launching the very bandwidth-intense video streaming it used to decry was contributing to an Internet traffic tsunami.

It’s time for Comcast to drop its usage cap.

Walden

House Republicans attacked the Federal Communications Commission Tuesday for “rushing” special waivers and conditions that allowed LightSquared to begin operations without fully considering its impact on GPS devices and services.

GOP Reps. Cliff Stearns (Fla.), Fred Upton (Mich.), and Greg Walden (Ore.) said the need for intensifying an investigation first launched in February was more pertinent than ever with this week’s bankruptcy declaration by the wireless Internet service.

“Now, more than ever, we need to get to the bottom of how we got this far down a dead-end road,” said the congressmen in a joint statement. “There are many unanswered questions, specifically about whether the FCC’s own objectives led to sloppy process. We are continuing to examine the information we’ve received so far to determine what happened and how it can be avoided in the future.”

Upton

All three said the FCC’s “rushed” review cost investors billions that were “wasted” building a broadband network that was later determined to create serious interference problems for global positioning satellite receivers.

The FCC previously denied they were pressured by Obama Administration officials to approve the project as part of the White House’s strong focus on broadband improvement.

But the House Republicans believe the interference problems should have been identified before the project got too far along.

Initially, the FCC issued a conditional approval to begin testing the service, which quickly led to growing evidence it unintentionally blocked GPS reception.

A preliminary report found GPS receivers were incapable of rejecting the adjacent channel interference from LightSquared’s powerful ground-based transmitters.

While technically not the fault of LightSquared, which argued it should not be held responsible for poor GPS receiver design, the fact millions of GPS receivers are already in use swayed the FCC to reject the use of those frequencies for the wireless Internet service.

Happy Days Are Always Here for Top Telecom Execs

Our friends at Fierce Cable put together a list of the top-paid telecommunications executives, and they’re in the money. Your money. While your rates keep going up, their take-home pay often is, too.

Remarkably, actual performance as executives (or lack, thereof) often had no relationship to their ultimate pay package, with a handful of exceptions:

Cable & Satellite

Brian L. Roberts, Comcast — $26.9 million: The Roberts family has dominated Comcast since the 1980s, so it is no surprise their pay packages are as colossal as the company itself.

Michael J. Lovett, Charter Communications — $20.54 million: He resigned in Feb. 2012 but got a great golden parachute: nearly double the compensation he earned the year before. Charter is one of America’s least-distinguished cable companies, usually scoring just above “pond scum” in popularity with customers. But you can take that trash talk when you walk $20 million to the bank.

Glenn A. Britt, Time Warner Cable — $16.43 million: His pay went down slightly (well, by a million dollars but with that kind of money, does it really matter?) in 2011. Britt has been around at some iteration of Time since 1972… when Nixon was still president, so he worked his way to the top. But some of his best accomplishments are irritating his customers with talk of overcharging them for Internet access.

James L. Dolan, Cablevision — $11.45 million: The Dolan family and Cablevision go together like cookies and milk, but Wall Street can’t help but bet when the family will finally cash out of cable and sell the company to Time Warner or Comcast. With $11 million in salary, stock awards, and bonuses, what’s the hurry?

Joseph Clayton, Dish Network — $9.84 million: Clayton is a Dish freshman, only coming on board 11 months ago. His salary was a paltry $467,000 in 2011. Thank goodness for the $9 mil in stock and bonus pay!

Michael D. White, DirecTV — $5.94 million: Ouch… a pay cut. White made $32.93 million the year before. Now he’ll have to clip coupons from the Sunday newspaper like the rest of us.

Rodger L. Johnson, Knology — $3.13 million: Not bad for running a company almost nobody has heard of and will soon no longer exist.  WideOpenWest bought them out last month.

The Wireline Companies & Their Friends

Stephenson: Blew a $39 billion dollar merger deal with T-Mobile, but walks away with $22 million in pay anyway.

Lowell McAdam, Verizon — $23.1 million: McAdam’s promotion paid handsomely. As former chief operating officer, he only walked home with a little more than $7 million last year. Now he’s earning every penny conjuring up ways he can do away with your cell phone subsidy -and- keep Verizon Wireless’ rates as high as ever.

Randall Stephenson, AT&T — $22.01 million: If you blew a multi-billion dollar merger deal at your company, do you think the only punishment you’d receive is a $5 million pay cut? Stephenson is the cat that fell out of the wireless merger window, and landed on his feet unharmed. Unfortunately the same isn’t true for his customers.

Dan Hesse, Sprint — $11.88 million: His pay is down about $2 million from 2010, and he recently announced he was going to take another pay cut for the team. If anyone deserves hazard pay, Hesse is the man. Wall Street hates him for not following his competitors gouging customers with higher prices and more restrictive service plans and policies. The big money crowd in New York’s financial district already has his going away party well-planned.

Jeff Gardner, Windstream — $9.78 million: His pay is up around $2 million. Windstream can afford it, acquiring companies later stripped clean of employees. PAETEC workers will learn this lesson soon enough. At Windstream, all the money rises to the top… management that is.

George A. Cope, Bell Canada — $9.6 million: His salary more than doubled over 2010 and why not. Bell is the first telecommunications company in North America to be audacious enough to demand an entire country be stripped of flat rate Internet service. That move managed to organize 500,000 Canadians that normally are resigned to the fact the revolving door at the Canadian Radio-tv and Telecommunications Commission has locked them out for years. Thanks Bell!

Glen F. Post III, CenturyLink — $8.55 million: Post saw his pay slashed from $14.5 million the year before, but merger deals like Qwest (with the corresponding huge bonus for pulling it off) only come once or twice in a career.

Hesse: Wall Street's least-wanted.

Maggie Wilderotter, Frontier — $6.72 million: No, we don’t understand it either. Her pay is down from $8.58 million, but considering Frontier’s current stock price and bottom-rated service, wouldn’t half of this money be better spent on improving broadband in states like West Virginia?

John F. Cassidy, Cincinnati Bell — $6.06 million: Cassidy earned more than two million more the year before. Cincinnati Bell is an aberration in an industry that is convinced the only good thing telecom companies can do is merge with each other to get bigger and bigger.

Paul H. Sunu, FairPoint — $4.25 million: The company that couldn’t find one customer’s business on a service call despite being literally right next door to FairPoint itself, is clawing its way back from bankruptcy and Sunu’s pay package reflects that. He only earned $775,000 the year earlier.

Ian Paul Livingston, BT — $3.8 million: British Telecom’s chief got a modest salary hike in 2011, and the U.K. phone company has done modestly better recognizing better broadband in the key to its future. BT is the AT&T of the United Kingdom, but British salaries are downright frugal compared to the high flyers on this side of the Atlantic.

David A. Wittwer, TDS Telecom — $2.29 million: You can’t complain about a cool $2 million in salary for a company with only around 1.1 million customers.

Ben Verwaayen, Alcatel-Lucent — $2.25 million: His salary dropped slightly from 2010. Alcatel-Lucent could do considerably better if they can win the public policy debate that fiber optic broadband is the wave of the future. Alcatel-Lucent is a major player.

This monopole cell tower antenna just showed up one day in the backyard of this Kirkland, PQ resident.

Rogers Communications installed a 49-foot monopole cellular antenna in the backyard of a Kirkland, Que. resident earlier this year, but the only signals being transmitted are discussions over its fate at town hall.

Residents were furious when a neighbor leased out a portion of a residential backyard to Rogers, who claims the small cube antenna mounted on the pole will improve cell reception in the immediate area. Ever since Stop the Cap! first covered this story earlier this year, local officials have been flummoxed about what they can do about the antenna, which is currently non-operational.

“For now (there is) no resolution, but talks are progressing,” Kirkland’s director general Joe Sanalitro told The West Island Gazette. “We are demanding it come down.”

Rogers and Kirkland officials have been meeting about the antenna, which has generated considerable interest and complaints over whether the company used a zoning loophole to sneak the antenna into the neighborhood.

If allowed to stand, residents fear Rogers and other cell companies could offer cash incentives to other homeowners to erect similar towers, increasing visual pollution.

Industry Canada rules state towers less than 15 meters are excluded from municipal notification rules and do not require permits to install.  Rogers was evidently aware of this rule — its Kirkland antenna tops out at 14.5 meters, just shy of the height limit.