[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Broadband Blindness.flv[/flv]

Toast Sacramento produced this 28-minute documentary which succinctly tells the story of North American broadband, and how commercial providers have set us up for long-term failure, especially in rural and suburban areas.  Whether you live in the United States or Canada, phone and cable companies dominate the telecommunications landscape.  Unlike other modern-day necessities, broadband is almost entirely in the hands of an unregulated free market that fails millions.  Where competition exists, customers can get reasonably fast service, but it costs more than it should.  Where competition is hard to find: slow speeds, spotty access, and out-of-sight prices predominate.

The documentary explores:

• the neglect of suburban and rural DSL from large phone companies like AT&T;
• how phony, industry-influenced broadband availability maps convince public officials there isn’t a big broadband problem;
• why the country’s broadband demands may be too great for providers to handle without major new investments, leading to usage limits and slowdowns to delay needed upgrades;
• and how the latest broadband technologies being installed overseas fall victim to Wall Street temper tantrums back home.

Bell Canada is misleading potential customers when mailing them invitations to sign up for Fibe TV, which the company calls “a new TV service delivered through our new state-of-the-art fibre optic network.”

Only it isn’t “state of the art” or fiber to the home.

Bell characterizes its Fibe service as Canada’s “most advanced” telecommunications network, even better than traditional cable television.  But in fact, it’s a marriage between fiber optics and the decades-old copper wire phone network Bell continues to rely on to provide a triple-play package of phone, broadband, and television, all without investing in superior fiber to the home technology.

Only it's not a true fiber network.

That the company claims it is running the most advanced network in the country must come as quite a surprise to Bell Aliant, the dominant provider in Atlantic Canada.  Aliant is busily building a true fiber-to-the-home network for at least 600,000 customers in the most eastern part of the country.

While Fibe is an evolutionary move for Bell Canada, it is hardly revolutionary because of its dependence on traditional copper phone lines.  Canada remains behind the United States in deploying fiber technology of all kinds, including Fibe‘s fiber-to-the-neighborhood system.  Bell’s closest cousin AT&T has been running its own comparable U-verse system for a few years now.

Providers like the benefits of fiber-to-the-neighborhood technology and the fact it costs considerably less than rewiring every home for fiber optic connections.  Fibe can deliver speedier broadband than traditional DSL, but cable operators like Rogers and Videotron are already positioned to beat Fibe speeds, and a true fiber to the home network can beat anything on offer.

Phone and cable companies in the United States who have pitched older technology as a “state of the art fiber network” without actually providing one have been challenged by true fiber to the home competitors like Verizon, and forced to retreat.  But with so few Canadian providers in a position to challenge Bell’s fiber claims, it will be up to regulators to declare the advertising and marketing materials misleading.

AT&T’s fiber to the neighborhood service is not exactly winning consumers over in Chattanooga, Tenn.  As of this past spring, AT&T only managed to convince 821 local customers to sign up for U-verse service, in part because the competition delivers faster service, and one doesn’t slap broadband customers with an Internet Overcharging scheme.

While Comcast remains the dominant cable company in the city with more than 100,000 customers, community-owned EPB Fiber has made major advances, primarily against Comcast, picking up at least 33,000 customers in the city since the summer of 2010.

EPB is turning into a major success story for community-owned broadband, typically maligned as a financial failure by cable and phone company competitors.  EPB offers residential customers usage cap free gigabit broadband, television, and telephone service and is competing effectively against the nation’s largest cable operator.

EPB has been raking in more than $3.8 million a month in telecommunications revenue from residential customers alone.  In less than two years, EPB, which also delivers electricity in Chattanooga, has built a $45 million a year telecommunications business.  As a community-owned utility, most of that revenue stays in Chattanooga, benefiting the local economy and allowing EPB to reinvest in its network and improve service.

Comcast, in contrast, has seen its revenue drop by 8.4 percent during the first six months of 2011, primarily because of departing customers. That has forced the dominant cable company to become more aggressive in its efforts to retain those calling to cancel, primarily by slashing prices if wavering customers agree to stay.

Remarkably, AT&T’s U-verse has merited also-ran third place status — the victim of limited availability, the ongoing trend of customers dropping landline service, and the far-superior broadband speeds available from the competition.  AT&T’s Internet Overcharging scheme is also the stingiest, limiting broadband customers to just 150GB for its DSL service, 250GB for U-verse broadband, charging overlimit fees when the caps are exceeded.  Comcast has a usage cap of 250GB with no overlimit fee.  EPB has no limits.

The Chattanooga Times Free Press compares all three providers’ strengths and weaknesses:

EPB Broadband speeds are the fastest in the nation.

AT&T — Very aggressively priced introductory offers, more HD channels than its competitors, plus a “quad-play” bundle that includes AT&T wireless service.  But AT&T’s landline network is still the least equipped to compete on broadband speed, an increasing number of residents continue to turn their back on AT&T when they cut landline service, and U-verse’s usage caps come with overlimit fees.

Comcast — Has a substantial number of on-demand programs to access, can be cheaper than EPB during the initial year of service, and is testing home security and automation services.  Also offers two-hour service call windows and aggressively priced retention deals.  But Comcast’s regular prices are high, its broadband service usage-limited, and its reputation questionable after more than a decade of rate hikes and service complaints.

EPB — The fastest broadband speeds anywhere, EPB runs an advanced fiber to the home network, and maintains a very aggressive attitude about expanding and improving service.  EPB is a formidable competitor.  Community-0wned, its service benefits local residents with a locally-staffed call center, revenues that stay in Chattanooga, and management that answers to customers, not Wall Street.  No caps either.  But EPB can be a harder initial sell for price-sensitive customers because it doesn’t offer heavily discounted service to attract new customers.  But EPB prices don’t rise dramatically after the first year, either.  EPB’s television lineup is less robust than others, in part because it lacks a nationwide presence that brings the kind of volume discounts AT&T and Comcast receive.

Time Warner Cable customers in southern California face substantial rate increases in 2012, including a budget-busting $49.99 service call fee to install increasingly expensive cable service.

The bad news is arriving in customer bills this month, with substantial price hikes for cable television —  including a 27.4% increase for the package that only includes local broadcast channels.  Time Warner Cable blames increasing programming costs for the rate increases, which are several times higher than the official rate of inflation — 3.5%.  Most customers with bundled television, telephone, and Internet service will see a smaller increase on the magnitude of a few dollars, but for those picking and choosing only a few items from Time Warner’s menu, the price tag for individual services will be higher.

The largest rate increase comes when the cable company sends a truck to a home or business.  Time Warner was charging $32.99, but will now charge $49.99 — a 51.5% increase.  The cable company has also been pushing its home networking Wi-Fi option, and will now charge $69.99 to install it, up from $49.99.

Time Warner Cable spokesman Jim Gordon tells the Los Angeles Times not everyone will pay those prices.  Certain promotions may lower those rates, or waive them altogether.  But the company offered little explanation to justify such a major price hike.

One of the cable company’s competitors, DirecTV, scoffed at Time Warner’s rate increase, noting the satellite company only raised prices an average of 4% earlier this year, and anticipates a similar increase in 2012.

The effect of the latest round of rate hikes is likely to drive even more customers to cancel or cut back on cable services.  An increasing number are dropping cable television service altogether, relying on broadband for video entertainment.  The cable industry’s response to cord-cutting has been a combination of increased online viewing options for cable-TV customers and usage caps and overlimit fees on broadband that either discourage online viewing or attempts to profit from it.  Time Warner Cable executives said as recently as December they plan to eventually introduce “usage based billing” of Internet service “the right way rather than quickly.”

FAIL

AT&T announced Monday it has officially dropped its bid for Deutsche Telekom’s T-Mobile USA.

The company blamed regulator opposition for the failure of the merger, underestimating the Obama Administration’s tolerance for super-sized acquisition deals that could reduce competition and raise prices for consumers.

The real challenge for AT&T initially came not from the Federal Communications Commission, but from the U.S. Department of Justice which filed suit against the merger in August. FCC Chairman Julius Genachowski soon followed with statements that suggested the merger would have a difficult time at the Commission as well, and after a scathing report from FCC staffers was made public, Wall Street began to reduce the chances of the merger getting through to the single digits.

Had AT&T successfully merged with fourth-place T-Mobile, it would have easily become the nation’s largest and most powerful wireless provider, advancing beyond current leader Verizon Wireless.

The failure for AT&T will cost the company at least $4 billion in cash and spectrum it earlier agreed to give T-Mobile if the merger failed to complete.  Industry analysts say the real winner this year will easily be Verizon Wireless, which successfully accomplished its own spectrum acquisition by quietly buying unused spectrum from some of the nation’s largest cable companies.  With that spectrum now under Verizon’s control, AT&T has been reduced to signing new roaming agreements with an independent T-Mobile to share their GSM technology networks.  That will do little to alleviate AT&T’s dropped call problem in large cities, analysts say, because most roaming agreements specify sharing network resources only in areas where one carrier does not provide service.

Where U.S. Cell Phone Companies Stand Today

AT&T: AT&T still retains a considerable amount of unused wireless spectrum, but some of it is located on frequency bands that provide a lower quality of service indoors.  AT&T may have a difficult time finding new spectrum, because other carriers have signed partnership deals with most of the companies still holding unused frequencies. One of the largest holders of unused, warehoused spectrum is DISH Networks, and they’ve indicated no interest in selling.  DISH may partner with T-Mobile now that AT&T has exited.  That leaves AT&T with lobbying the government to speed up new spectrum auctions and working internally to expand their cell tower network to divide the traffic load.  It’s an expensive proposition, and several Wall Street analysts are advising their clients to dump AT&T stock.  Kevin Smithen, a Macquarie Capital USA Inc. analyst who downgraded AT&T to “sell” from “hold” last week advised AT&T was running out of options.

Verizon Wireless: Big Red remains in excellent shape to maintain its current market leadership position, particularly as it uses recently-acquired spectrum to bolster its 4G LTE network.  A UBS analyst was more direct: It will have 56 percent more 4G spectrum than AT&T in the top 10 markets and 46 percent more in the top 100, giving it a “meaningful competitive advantage.” Verizon has also cut a deal with cable operators that could reduce competitive pressure on Verizon’s landline/FiOS network from cable companies.  That fringe benefit comes courtesy of an agreement to market each others’ products to consumers.

Sprint: In addition to building its own 4G network, the company still has an agreement with Clearwire that allows Sprint to purchase the former company’s spectrum if it ever becomes available for sale.  With T-Mobile still obviously up for sale, Sprint could attempt its own merger, although it may be wary of stirring the same regulatory pot that got AT&T into trouble.  That leaves T-Mobile’s next buyer likely to be a regional cell phone company, a foreign firm entering the U.S. market, or an existing telecommunications company that decides a wireless division would be of benefit.

Extended Video Coverage

News of AT&T/T-Mobile Merger Failure Breaks

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/AP T-Mobile Merger Dead 12-19-11.mp4[/flv]

This report from the Associated Press informs consumers of the basics — the merger is no-go, leaving AT&T and T-Mobile as competitors, at least for now.  (1 minute)

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg ATT Pulls T-Mobile Bid After Regulator Opposition 12-19-11.mp4[/flv]

AT&T Inc. abandoned a $39 billion takeover bid for T-Mobile USA after underestimating opposition from regulators, thwarting its ambitions to become the biggest U.S. wireless carrier. AT&T will take a pretax charge of $4 billion to reflect cash payments and other considerations due to T-Mobile-owner Deutsche Telekom AG, the Dallas-based company said in a statement today. Peter Cook, Lisa Murphy, Adam Johnson and Sheila Dharmarajan report on Bloomberg Television’s “Street Smart.” (7 minutes)

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Blair Says ATT’s T-Mobile Bid Was All About Spectrum 12-19-11.mp4[/flv]

Brian Blair, an analyst at Wedge Partners Corp., talks about AT&T Inc.’s decision to abandon a $39 billion takeover bid for T-Mobile USA and Apple Inc.’s victory in a final patent-infringement ruling that bans some HTC Corp. smartphones from the U.S. Blair speaks with Emily Chang on Bloomberg Television’s “Bloomberg West.”  (11 minutes)

[flv]http://www.phillipdampier.com/video/CNBC Baird on ATT T-Mobile Failure 12-20-11.mp4[/flv]

Apologists for AT&T on CNBC wring their hands over how wireless networks will get built out into rural areas now that the T-Mobile deal is dead. Will Power, R.W. Baird & Co, weighs in with a host who clearly cheerleads AT&T’s world-view.  (5 minutes)

[flv]http://www.phillipdampier.com/video/CNBC ATT Drops Bid for T-Mobile 12-20-11.mp4[/flv]

AT&T drops its $39 billion bid for T-Mobile USA, with Todd Rethemeier, Hudson Square Research.  AT&T’s talking points don’t fly with Rethemeier.  (4 minutes)

T-Mobile’s CEO Speaks About the Merger Failure

[flv]http://www.phillipdampier.com/video/CNBC Deutsche Telekom CEO on Failed T-Mobile Merger 12-20-11.mp4[/flv]

Rene Obermann, Deutsche Telekom CEO, explains why the merger between AT&T and T-Mobile USA should have gone through. “This transaction would have solved a number of industry issues,” he says.  Obermann is in friendly territory on CNBC.  (8 minutes)

The Impact on Sprint

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Horan Sees T-Mobile Eventually Merging With Sprint 12-19-11.mp4[/flv]

Tim Horan, an analyst with Oppenheimer & Co., talks about AT&T Inc.’s decision to abandon a $39 billion takeover bid for T-Mobile USA, thwarting its ambitions to become the biggest U.S. wireless carrier. Horan speaks with Adam Johnson and Lisa Murphy on Bloomberg Television’s “Street Smart.” (3 minutes)

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Gamcos Haverty Says Sprint an Endangered Species 12-19-11.flv[/flv]

Larry Haverty, portfolio manager at Gamco Investors Inc., talks about AT&T Inc.’s decision to abandon a $39 billion takeover bid for T-Mobile USA, and the outlook for Sprint Nextel Corp. and the wireless industry. Haverty speaks with Cory Johnson on Bloomberg Television’s “Bloomberg West.” (6 minutes)

 Will DISH Network Be AT&T’s Next Acquisition Target?

[flv]http://www.phillipdampier.com/video/CNBC Trading on ATT’s Failed T-Mobile Bid 12-20-11.mp4[/flv]

Shares of Dish Network up 9% in the aftermath of AT&T’s failed bid to acquire T-Mobile. Michael McCormack, Nomura telecom analyst, weighs in on whether Dish is the next target for AT&T.  (2 minutes)