Subscribe[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/KRIV Houston Dont Cut Your Cable TV for Xbox 12-7-11.mp4[/flv]
Microsoft Xbox 360 owners who recently updated their consoles are discovering a range of new programming delivered over broadband. But don’t cancel your cable television subscription just yet. As this KRIV reporter in Houston discovered, an increasing number of online viewing choices require an active subscription with your cable TV provider to watch. (2 minutes)
If they build it, will Verizon, Time Warner Cable, or Comcast come?
The Massachusetts Broadband Institute (MBI) has just received a major shipment of cable it will use to construct part of its 1,300-mile fiber optic network, designed to provide better-than-dialup service to over 120 communities in western and north central Massachusetts. That is, if providers show any interest in selling access to it.
The news that the broadband blockade in the western half of the state may finally come to an end is being trumpeted by local newspapers and TV newscasts from Springfield. WSHM used the occasion to celebrate with current AOL dial-up user Ryan Newhouser, of Worthington:
A high-speed informational highway will be set up with thousands of miles of high-speed fiber optic cables. Those fibers will now be installed on utility polls across Western Mass.
Now residents sitting at their computers in frustration can finally look forward to high-speed internet access.
Perhaps.
As Stop the Cap! first explored earlier this year, the new fiber network is good news for western Massachusetts. But it alone will not deliver service to the masses who desperately want faster Internet access.
The incumbent phone and cable companies have certainly not shown much interest. Verizon treats western Massachusetts much the same way it served its landline customers in the rest of northern New England (Maine, New Hampshire, and Vermont.) The company’s landline network was allowed to deteriorate along with Verizon’s interest in providing service in the largely rural states. Eventually, it sold its operations north of Massachusetts to FairPoint Communications. Comcast and Time Warner Cable are missing in action in many parts of the region as well. As big phone and cable companies concentrate investments in more urban areas like Boston, many residents in places like Worthington can’t buy broadband service at any price.
MBI optimistically hopes the presence of its new fiber backbone and middle-mile network will change all that. But outside of AT&T’s apparent interest it to provide service to its cell towers, there has been no publicly-expressed enthusiasm by Verizon or cable operators to begin serious investment in broadband expansion across the region.
The Last Mile Network Challenge
So what is holding western Massachusetts back? The same thing that keeps broadband out of rural areas everywhere — the “last-mile” problem. Traditionally, operators target urban and suburban areas for their investments because the construction costs — wiring up your street/home/business — can be recouped more easily when divided between a pool of potential customers. Every provider has their own “return on investment” formula — how long it will take for a project to pay for itself and begin to return profit. If your street has 100 homes on it, the chances of recouping costs are much higher than in places where your nearest neighbor needs binoculars to see your house. Pass the ROI challenge and providers will invest capital to wire your street. Fail it and you go without (or pay $10,000 or more to subsidize construction costs yourself.)
That is why eastern Massachusetts has plentiful broadband and the comparatively rural western half often does not.
MassBroadband 123 is the state’s solution to the pervasive lack of access across the western half of The Bay State. It will consist of a fiber backbone and “middle mile” network, solving two parts of a three-part broadband problem. The project’s commitment to deliver open access to institutions and commercial ISPs across the region is partly thanks to the availability of broadband grant money, particularly from the federal government.
Projects similar to MBI’s MassBroadband 123 typically include the hoped-for-outcome that private companies will step up and invest to ultimately make service available to end users. Unfortunately, large incumbent providers often remain uncommitted to wiring the last-mile, and communities promised ubiquitous broadband end up with an expensive institutional network that only serves local government, public safety, schools, libraries, and health care facilities.
Thankfully, it does not appear MBI is depending on Verizon, which has shown no interest in spending significant capital on its legacy landline network or cable operators that are unlikely to break ground in new areas.
Communities are increasingly learning if they don’t have service today, the only real guarantee they will get it is by providing it themselves. That is where WiredWest comes in. It is a community-powered partnership — a co-op for broadband — pooling resources from 22 independent towns (with 18 more expected to join) to build out that challenging last mile, and deliver future-proof fiber to the home service. No last generation DSL, slow and expensive fixed wireless, or limited capacity coaxial cable networks are involved.
WiredWest Members
Founding member towns span four counties, including Berkshire County towns of Egremont, Great Barrington, Monterey, New Marlborough, Otis, Peru, Sandisfield, Washington and West Stockbridge; Franklin County towns of Ashfield, Charlemont, Conway, Heath, New Salem, Rowe, Shutesbury, Warwick and Wendell; Hampshire County towns of Cummington, Heath, Middlefield and Plainfield; and the Hampden County town of Chester.
Most of the construction costs for the new network will likely come from municipal bonds, because government grants typically exclude last mile network funding. Commercial providers often lobby against municipal-funded networks as “unfair competition,” a laughable concept in long-ignored western Massachusetts, where Verizon pitches slow speed DSL, if anything at all.
WiredWest compares rural broadband with rural electrification. Community-owned co-ops provide service where few private companies bothered to show interest:
Think back to the rural electrification of America. Then, as now, it wasn’t profitable enough for private companies to build out electrical service to rural communities. Imagine where those communities would be today if the government hadn’t stepped in to help fund this essential service – which over time has sustained itself and become a profitable enterprise.
Rural fiber-to-the-home is affordable when you use an appropriate financing and business model that isn’t subject to the same short-term measures of profitability as a private company. A municipal model for example, allows capital investment that can be written off over a longer period of time.
This type of business model isn’t limited to community-owned broadband. Other countries that treat broadband as an essential utility have, in some cases, boosted broadband beyond a simple cost/benefit “ROI” analysis.
Constructing a broadband network for western Massachusetts still presents some formidable challenges, however:
[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WSHM Springfield Broadband internet coming to western Mass 12-8-11.mp4[/flv]
WSHM in Springfield says if you don’t have broadband in western Massachusetts now, it should be coming to your area soon. But will it? (3 minutes)
"Hey, we're #19!"
The United States may be a leader in many things, but broadband isn’t one of them. The country has now fallen two more positions — to 19th place, behind South Korea, Sweden, Denmark, the United Kingdom, and even Iceland, since the Berkman Center for Internet and Society released its last rankings in 2009.
In 2004, President George W. Bush complained about the U.S. falling to 10th place, which he declared was “ten spots too low.”
Now eastern Europe and former Soviet Republics in the Baltics threaten to overtake the United States, and countries in southeast Asia already have. Innovation in the United Kingdom, Australia and New Zealand means deploying fiber to the home service to the vast majority of the population. Innovation in North America means conjuring up new pricing schemes to raise prices on broadband service and engage in competition-busting mergers and acquisitions.
But a USA Today editorial this week also places much of the blame on corporate influence inside Washington, which has promulgated legislative policies that favor telecommunications companies and throw customers under the bus.
“The simple answer is that other countries have policies that promote competition and innovation,” the editors write. “In contrast, policies here have allowed a few dominant players that control the least interesting parts of the broadband landscape (the cables and the wireless spectrum) to dominate.”
Indeed, a series of telecommunications laws enacted by Congress, combined with short-sighted policies at the Federal Communications Commission, have allowed a handful of super-sized players to own and control broadband service in America, resulting in providers establishing non-competing fiefdoms that avoid head-on competition.
The worst policy of all allowed broadband providers to keep competitors from reaching customers over existing broadband networks. During the days of dial-up, you could purchase Internet access from the phone company, a large provider like MSN or AOL, or thousands of smaller regional and local service providers. Simply dial a local access number and you were connected to the provider of your choice. Now, U.S. law gives broadband network operators the right to restrict these independents from selling service over their networks. Comcast need not sell anything other than Comcast Internet. Frontier Communications can make a killing selling its own DSL service, while protecting that revenue from other Internet Service Providers who might sell the service over Frontier’s network for half the price. Time Warner Cable voluntarily allows Earthlink and a handful of other companies to sell cable broadband service over its infrastructure, but at prices equal to or higher than what Time Warner charges itself.
Broadband providers argue that allowing competitors to sell service on their network would discourage future investment and rob shareholders a return on investments already made. Today, major cable operators and phone companies are falling all over themselves denying they are in anything but the broadband business. It has become an enormously lucrative enterprise, more profitable than television or telephone service.
USA Today compares the broadband landscape back home with that in South Korea — perennially the world’s fastest, and considerably less expensive than what North Americans pay for service:
South Korea has made broadband a national priority, mandating deployment and in some cases giving private companies incentives to build out. It has also prevented major players from monopolizing their businesses, encouraging competition and innovation. In South Korea, consumers can get broadband service from a cable or telecom company. But they may also choose among myriad independent providers that are given access to the physical infrastructure. This competition keeps prices down and the quality of service high.
[…] But over time, cable and telecom companies worked the courts and Congress to make sure that this competitive world would never come to be [in the United States]. […] Wireless is a bit better. But the market has remained a near duopoly, with none of the smaller players emerging as a strong competitor to AT&T and Verizon.
The same open network concept has fought its way forward in Canada (where Bell has worked furiously to sabotage the business plans of independent providers) and in the United Kingdom, Australia and New Zealand where all three governments have decided the best solution would be to scrap the ancient landline network and start fresh with an open-to-all-comers fiber to the home service.
Back home in the States it is business as usual with increasing broadband prices and the looming prospect of usage-limiting schemes designed to cut capital costs, monetize broadband usage, and stop cord-cutting.
The opposing point of view comes courtesy of dollar-a-holler, corporate-backed think tank The Heartland Institute, who is stuck quoting notorious industry-funded studies and think tanks like the Discovery Institute and the Technology Policy Institute:
The idea that European and Asian countries are lapping America in the race for broadband speed and penetration is a fallacy created with statistics comparing “persons” instead of “households.” Once you make that correction, the USA is firmly planted among the top of industrialized nations, as economist Scott Wallsten pointed out when he was a staffer at the Federal Communications Commission in 2009.
And as tech researcher Bret Swanson of Entropy Economics points out, if you measure Internet usage by gigabytes used per month — a better measure of the speed and utility of networks — the USA has nearly lapped Western Europe once and Asia twice.
Heartland Institute: "By not disclosing our donors, we keep the focus on the issue."
If you measure how many mouse clicks customers in New York make on a Thursday afternoon, we could be number one as well! Gigabytes used per month does not measure the speed or price of service on broadband networks, considerations that actually do impact broadband rankings.
Mr. Wallsten is a familiar favorite go-to-guy for The Heartland Institute. He’s also the choice of Time Warner Cable, who paid him $20,000 for a 2010 essay: “The Future of Digital Communications Research and Policy.”
There is big money to be made writing corporate-funded research reports. Bret Swanson knows that very well, having been involved with the Discovery Institute, a “research group” that delivers paid, “credentialed” reports to telecommunications company clients who waive them before Congress to support their positions. Swanson is also a “Visiting Fellow” at Arts+Labs/Digital Society, which counted as its “partners” AT&T and Verizon.
The gentleman from Heartland also quotes from the misnamed “Progressive Policy Institute,” which counts among its funding partners, AT&T.
It would have been probably easier (but ineffectively transparent) to simply quote from AT&T and Comcast directly.
The Heartland Institute, unsurprisingly, believes letting existing broadband providers deliver service exactly the way they want is the best option:
The digital economy — one of the only vibrant economic sectors left — doesn’t need more government “investment” or regulation. It needs only for government to butt out and let the market work the magic that continues to bring us the marvels of the modern age.
That magic will cost you $50 a month and rising. If some providers have their way, while the rest of the world abandons usage caps, American providers can’t wait to slap them on, reducing the value of your service even further.
Comcast, Time Warner Cable, and Bright House Networks sold AWS spectrum in areas shown here to Verizon Wireless, virtually guaranteeing the cable industry will not compete in the wireless phone business.
Two years ago, Cox Communications was hungry to get into the wireless phone business. It announced it was launching “unbelievably fair” wireless — an oasis in a wireless desert of tricks and traps on offer from competing wireless companies. No more expiring minutes, the option of affordable flat rate service, and no hidden fees or surcharges were all supposed to be part of the deal.
“Our research found that value and transparency are very important to consumers when choosing a wireless service plan, but they are not finding these qualities in the wireless plans offered today,” Stephen Bye, vice president of wireless said back in 2010, introducing the service. “Total loss of unused minutes as well as unforeseen overage charges on bills are just two examples of what our customers have told us is just unfair.”
Those same issues still exist for wireless customers today, but Cox won’t be a part of the solution. The company announced this past May it was exiting the competitive arena of wireless and would simply resell Sprint service instead. Last month, it announced it wouldn’t even bother with that, and will transition its remaining wireless customers directly to Sprint.
What changed Cox’s mind? The cost of building and operating a wireless network to compete with much larger national companies. It simply no longer made sense to build a small regional wireless carrier and rent the rest of your national coverage area from other providers, who set wholesale prices at a level high enough to protect them from would-be competitors.
The lesson Cox learned first has now been taught to America’s largest cable operators Comcast and Time Warner Cable (and its sidekick Bright House Networks).
All three cable operators have effectively signed a non-aggression treaty with Verizon Wireless, agreeing to sell their unused wireless spectrum acquired by auction in 2006 at a 50% markup to Big Red. In return, Verizon will market cable service to wireless customers. It’s the ultimate non-compete clause so wide-reaching, Verizon stores will soon be selling Time Warner Cable right next to Verizon FiOS, something unheard of in the telecommunications marketplace.
It’s a win for Verizon Wireless, which accumulates additional wireless spectrum and peace of mind knowing the cable industry will not enter the wireless communications business. Cable companies get to profit from their purchase of the public airwaves and see the potential of a dramatic reduction in customer poaching, as cable and phone companies stop fighting each other for customers. Ultimately, it means customers could eventually pay the cable or phone company for all of their telecommunications services from television and broadband to wired and wireless phone service. What consumers enjoy in one-bill-convenience may eventually come with higher rates made possible from reduced competition.
Verizon Wireless' currently unused AWS spectrum favor the east coast, but not for long.
Verizon will pay $3.6 billion to Comcast, Time Warner and Bright House Networks for the spectrum. The deal has stockholders cheering because that payment represents a tidy profit for cable operators who did absolutely nothing with the spectrum they purchased five years ago. It also makes AT&T even more intent on completing its own spectrum merger with T-Mobile USA.
The agreement has concerned consumer advocates because it seems to signal Verizon is content making money primarily from its wireless business, and will repay the favor from the cable industry by pitching phone customers on cable service. That could ultimately spell big trouble for Verizon’s stalled FiOS fiber-to-the-home network. Verizon may find it easier and cheaper to end its aggressive entry into Big Cable’s territory by simply reselling traditional cable television products. It can still market wireless products and services to cable subscribers and not endanger the new atmosphere of goodwill. Rural broadband, where cable never competes, could be served through wireless spectrum, for example.
For now, Verizon says it intends to continue competing with its FiOS network, but the company stopped deploying the service in new areas nearly two years ago.
The deal will go before regulators at the Justice Department and the Federal Communications Commission for review. What will likely concern them the most is the appearance of collusion between the cable companies and Verizon.
“A flag is raised when two rival networks move to start selling each other’s services,” a person familiar with the concerns of federal antitrust officials told the Washington Post. “They lose their desire, impetus, to compete. That is a big antitrust flag.”
Mark Cooper, the director of research for the Consumer Federation of America, expressed serious concern as well.
“Verizon was supposed to be the great competitor for Comcast in the video space, while Comcast has been looking for a wireless play to match the Verizon bundle,” he said. “The deal signals bad news for consumers, who can expect higher prices for video, fewer choices and higher prices for wireless.”
Who owns what
Four years into the deal, consumers may not know what company they are dealing with, as cable operators will be able to market Verizon Wireless service under their own respective cable brand names.
The deal is also trouble for lagging Clearwire, which had been providing wireless broadband service to both Comcast and Time Warner Cable. Under the agreement, both cable companies will end their relationship with Clearwire, which is particularly bad news for the wireless company because of its ongoing financial distress. Sprint, which has heavily invested in Clearwire, may ultimately find itself with an investment gone sour, troubling news for the third largest wireless company manning the barricades against a nearly-complete duopoly in wireless service between AT&T and Verizon Wireless.
Cable stock cheerleader Craig Moffett from Sanford Bernstein seems thrilled with the prospect. In a research note to his Wall Street clients, Moffett says AT&T could benefit from the Verizon pact with Big Cable by ending up in a “more duopolistic industry structure without paying for it.” If the FCC approves the non-aggression pact, the deal “would amount to an unmistakable step towards the duopolization of the U.S. wireless market, inasmuch it would leave T-Mobile, once again, stranded without a 4G strategy.”
Cable investors, he adds, are likely to be excited the cable industry won’t spend billions of dollars in capital building a wireless venture, and instead has agreed to work with competitors to cross-sell products and services. With little competitive pressure, prices won’t be falling anytime soon.
That’s great news for investors, even if it is “unbelievably unfair” for consumers.
[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Verizon to Buy Wireless Spectrum for 3-6 Billion 12-2-11.flv[/flv]
Bloomberg News explains the deal and its implications in the wireless industry spectrum battle. (2 minutes)
Regular Stop the Cap! reader Alex dropped us a note sharing the bad news: Bell Canada is hiking rates for virtually everything effective Jan. 1. Except Bell doesn’t call them rate increases. To the phone giant, they are “price updates.” They are also considerable, with sweeping rate increases for phone, Internet, and television. They are even hiking rates for individual phone calling features like three-way calling.
Bell reserves rate increases for its long-standing customers. Potential new customers served by Bell in eastern Canada, where the company is rolling out its fiber-to-the-neighborhood service Fibe (similar to AT&T U-verse), report offers as low as $19.95 a month for selected services during the first year. But prices increase dramatically when the promotion expires. By how much is detailed below:
Prices listed are for customers in Ontario.
But Bell saves the worst for a footnote at the bottom of their Internet “price update.” They are tinkering with the company’s notorious Internet Overcharging scheme, raising the bar on their overlimit penalty. Customers who used to exceed their monthly broadband allowance originally faced a maximum penalty of $30. But Bell has been revisiting that “maximum overlimit fee” regularly. In 2010 the company raised the penalty cap to $60. On Jan. 1, Bell is raising the maximum by an additional $20 — to $80 a month. In our view, it is only a matter of time before the ceiling on overlimit fees is eliminated altogether, setting customers up for sky high bills.
Bell Fibe 25 customers with 25Mbps service will now pay $78.95 a month for Internet alone, and that plan comes with only 125GB of usage per month. Want to use more? You will have to buy Bell’s Usage Insurance in advance:
But that may not help you avoid at least one month of overlimit fees. Bell pro-rates customers adding Usage Insurance to their accounts, which means the first month’s extra allowance is limited by the number of days before your next billing cycle.
Bell’s prices for new customers are much lower, with Fibe 25 priced as low as $34.48 a month during the first year. The real bite arrives when the promotion expires, when the price more than doubles.
The "Massive News" theme by: Press75.com
