Google formally announced its new fiber to the home service to residents of Kansas City today with game-changing pricing for broadband and television service.

For $70 a month, Google will deliver consumers unlimited 1Gbps broadband service. For an additional $50 a month, customers can also receive a robust television package consisting of hundreds of digital HD channels, and throw in a free tablet (they call it ‘the remote control’), free router, free DVR with  hundreds of hours of storage, and access to Google’s cloud backup servers.

Google has also found a solution to affordable Internet for poorer residents. The company is promising free 5/1Mbps service for up to seven years if customers will pay a $300 installation charge, payable in $25 installments.

Customers who agree to sign up for multiple services and a service contract can waive the $300 installation charge.

Google’s new service will roll out to different areas of Kansas City. Google has split neighborhoods into “fiberhoods” that consist of around 800 homes. In a masterful public relations and public policy demonstration, Google intends to show up the cable and phone companies who have repeatedly declared customers have no interest in fiber-fast broadband speeds by asking would-be customers to pre-register for Google Fiber, which will cost $10. Those “fiberhoods” with the largest number of pre-registrations will be the first to get Google’s new fiber service. At least 80 families (around 10%) of each “fiberhood” will have to be willing to sign up for Google to activate the service in each neighborhood.

Google hopes consumers will evangelize the possibilities of fiber broadband with friends and neighbors nearby and get them on board. If the telecom industry’s predictions of lukewarm interest are true, then Google won’t collect many $10 registrations and will not be able to publicize the number of customers who want nothing more to do with incumbent cable and phone companies. If Google is correct, they will have successfully proven America’s phone and cable companies have been dramatically overcharging Americans for service and large numbers are clamoring for a better choice.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Google Fiber In Kansas City 7-26-12.flv[/flv]

Google’s formal introduction of Google Fiber in Kansas City this morning. Presentation begins at around the five minute mark.  (1 hour, 6 minutes)

Google has the goods to entice technology fanatics. Those signing up for television service will find Google has moved way beyond the traditional cable set top box that still won’t reliably record your favorite shows. Google will supply customers with:

• a free Nexus 7 tablet that will come pre-programmed to function as a remote control (but can be used for other things);
• a Bluetooth-based traditional remote;
• a combination set top box and DVR system that can record up to 500 hours of programming;
• a Wi-Fi enabled Gigabit router;
• an iOS (Android coming, of course) app that will let viewers manage everything over their tablet or mobile phone;
• a 2TB storage locker;
• a free terabyte of Google Cloud storage

But Google’s current television lineup does omit many popular cable networks, either in an effort to control programming costs or because the company has not completed negotiations with every programmer they want on the lineup. Among the missing:

• ESPN and regional sports networks
• Disney networks
• Turner networks like TNT, TBS and Turner Classic Movies
• Rainbow Networks’ AMC
• Time Warner-owned channels like HBO, CNN and TruTV
• Fox-owned networks like Fox News Channel and Fox Business News

Time Warner Cable’s response to Google’s network seems to indicate, publicly at least, they are not that worried.

“Kansas City has been a highly competitive market for a long time and we take all competitors seriously,” said spokesman Justin Venech. “We have a robust and adaptable network, advanced products and services available today, and experienced local employees delivering local service. We are confident in our ability to compete.”

The wireless industry is in transition. Increasing capacity also means decreasing the number of customers trying to share a traditional cell tower. The future will bring a combination of shorter-range cellular and Wi-Fi antennas that can sustain traffic loads much easier than overburdened traditional cell towers.

The President’s Council of Advisors on Policy and Technology’s recommendation that the growing demand for wireless spectrum be met by sharing frequencies with the federal government is getting a cold reception from the wireless industry.

AT&T, other wireless operators, and their lobbying trade association have been embarked on a fierce campaign in Washington to free up additional spectrum they can use to meet growing demands for wireless data. Unfortunately, clearing spectrum that can be re-purposed for wireless phone companies requires complicated, and often expensive frequency reassignments as existing users relocate elsewhere. With the federal government holding a large swath of spectrum for the use of a range of public safety, research, and military applications, the best source for new frequencies comes from Washington.

PCAST’s final 200-page report urges the Commerce Department prioritize locating 1000MHz of frequencies that could be re-purposed for private wireless communications. But the council also recommended that frequencies could be more quickly made available by asking wireless telecom companies to share them with existing users.

Today’s “exclusive use” licenses all too often are being underutilized and, in fact, are sometimes used as a valuable investment tool to buy, trade, or sell. Issuing exclusive licenses guarantees that no other players can use those frequencies. That is a valuable tool for wireless companies protecting their market share from potential competitors.

PCAST declared the concept of a “spectrum shortage” to be largely a myth:

Although there is a general perception of spectrum scarcity, most spectrum capacity is not used. An assigned primary user may occupy a band, preventing any other user from gaining access, yet consume only a fraction of the potential spectrum capacity. Unique among natural resources owned by the public, spectrum capacity is infinitely renewable from second to second—that is, any spectrum vacated by one user is immediately available for any other user.

Measurements of actual spectrum use show that less than 20 percent of the capacity of the prime spec­trum bands (below 3.7 GHz) is in use even in the most congested urban areas.

This spectrum inefficiency is not just a problem for the wireless industry, it also afflicts government use as well. But it is a problem that can be solved by modernizing spectrum allocation policy in the United States.

“Exclusive frequency assign­ments should not be interpreted as a reason to preclude other productive uses of spectrum capacity in areas or at times where the primary use is dormant or where underutilized capacity can be shared,” the report concludes.

If implemented, the wireless industry could begin accessing hundreds of megahertz of new spectrum, with the understanding there may be other users sharing certain frequencies in different areas at different times. For example, AT&T could use spectrum assigned to forest rangers in federal parks for wireless data in Manhattan or other urban areas, where neither user will create interference for the other. Verizon could use spectrum allocated for naval communications at seaside ports in land-locked Nebraska, Utah, Kansas, or West Virginia.

The proposal identifies these frequency bands as ideal for shared use between private and government users.

As technology progresses, shared spectrum users will easily afford equipment that dynamically locates open frequencies for communications with little or no interference even if two users are located right next door to each other.

The benefits to taxpayers, governmental users, and private industry are notable:

1. The cost to relocate existing government users to other bands is prohibitively time-consuming, complicated, and expensive. Taxpayers often foot the bill for the frequency changes;
2. Government use of spectrum is not particularly efficient either. Identifying under-utilized spectrum for shared-use can bring pressure to government users to consolidate operations and increase operating efficiency;
3. Private industry gets much faster access to new spectrum, which suddenly becomes plentiful and potentially affordable for new entrants in the wireless marketplace.

Despite the benefits, the wireless industry had a frosty reception to the new report:

Joan Marsh, AT&T Vice President of Federal Regulatory:

“While we are still reviewing the PCAST report, we are encouraged by the sustained interest in exploring ways to free up underutilized government spectrum for mobile Internet use.  However, we are concerned with the report’s primary conclusion that ‘the norm for spectrum use should be sharing, not exclusivity.’  The report fails to recognize the benefits of exclusive use licenses, which are well known.  Those licenses enabled the creation of the mobile Internet and all of the ensuing innovation, investment and job creation that followed.

“While we should be considering all options to meet the country’s spectrum goals, including the sharing of federal spectrum with government users, it is imperative that we clear and reallocate government spectrum where practical.  We fully support the NTIA effort of determining which government bands can be cleared for commercial use, and we look forward to continuing to work with NTIA and other stakeholders to make more spectrum available for American consumers and businesses.”

CTIA – The Wireless Association:

The CTIA is the wireless industry’s lobbying group

“We thank the Administration and PCAST for focusing on the need to make more efficient use of spectrum currently assigned to federal government users. As the PCAST report notes, it is sensible to investigate creative approaches for making federal government spectrum commercially available, including the development of certain sharing capabilities. At the same time, and as Congress recognized in the recently-passed spectrum legislation, the gold standard for deployment of ubiquitous mobile broadband networks remains cleared spectrum.

“Cleared spectrum and an exclusive-use approach has enabled the U.S. wireless industry to invest hundreds of billions of dollars, deploying world-leading mobile broadband networks and resulting in tremendous economic benefits for U.S. consumers and businesses. Not surprisingly, that is the very same approach that has been used by the countries that we compete with in the global marketplace, who have brought hundreds of megahertz of cleared spectrum to market in recent years.

“Policymakers on a bipartisan basis have grasped the importance of making more spectrum available to meet the growing demand for mobile Internet services, and this report highlights a range of forward-looking options, some of which are not yet commercially available, that may be considered to meet this important national goal. We look forward to continuing to work with the Administration, the FCC, NTIA, Congress and other interested parties to increase access to federal government spectrum and to continue to assist our nation in its economic recovery.”

Wireless carriers will continue to lobby Washington lawmakers to leave the current “exclusive use” spectrum policies in place, even if it delays opening up “badly-needed” spectrum for years.

In short, the major players in the wireless industry are hostile to the idea of losing exclusive-use spectrum. That comes as little surprise because shared spectrum cannot be controlled by the wireless industry. Spectrum squatting, where large phone companies or investment groups hang on to unused spectrum either to keep competitors out or as an investment tool until it eventually can be resold at a major profit, is a significant problem in the industry. Wall Street analysts routinely assign value to the spectrum holdings of wireless carriers, whether they are used or not. Since most spectrum is now sold to the industry at “highest bidder wins” auctions, only the largest players are frequently serious contenders. Auctioning off shared spectrum, if practical, will bring lower bids — but could potentially bring new bidders like start-up ventures that have some new ideas on how to use wireless frequencies to compete.

Therefore, it has been in the wireless industry’s best interests to keep the idea of sharing frequencies with other players out of the minds of Washington regulators and legislators. Their technical objections and claims that shared spectrum would somehow destroy innovation and investment ring hollow, and are weak deflections from the more obvious agenda: to maintain their status quo control of wireless frequencies, well-utilized or not.

AT&T and other wireless players will no doubt lobby their case to Washington politicians, many who will rush to the industry’s defense. The shadow argument most likely to be used to defend the current “exclusive use” auction system is the auction proceeds collected by the federal government. Billions have been raised from past auctions, and shared use frequencies would never net that level of return. But PCAST’s report exposes the rest of the story. The cost to reallocate existing users to other frequencies, hand out new radios, raise new antennas and purchase new transmitters is often so costly, the government’s net gain, post-auction, is likely to be minimal.

Abroad, many governments have already adopted shared use, discarding the focus on spectrum earnings and refocusing spectrum allocation on delivering the best bang for the buck — whether that dollar belongs to the consumer, the wireless industry, or the government.

Attempts by AT&T and others to kill PCAST’s recommendations should also be considered proof the industry’s dire claim of a spectrum shortage emergency is vastly overblown. In a true crisis, everyone makes compromises.  That does not appear to be the case here. Congress and regulators should receive that message loud and clear.

Susan Crawford points us to this fun fact: While the cable industry wants to raise your prices to cover increased costs, one of the things they forgot to mention is more than $8,900,000 (so far this year) of your money was shipped straight to Washington to hand out to lawmakers. In the last quarter alone, the National Cable & Telecommunications Association has spent more than $4.5 million lobbying Washington on everything from repealing the Dodd-Frank Wall Street Reform and Consumer Protection Act to the Internet Freedom Act. If consumers are for it, the NCTA is against it. The ironic part of it is they put your money to work against your interests.

Imagine what you could do with $8.9 million — bringing broadband to the unserved, making service better for those who already have it, and keeping your broadband bill in check. Just sayin’.

Despite concerns from consumer groups that a deal to exchange wireless spectrum in return for collaborative marketing between two competitors will lead to higher prices for consumers, the Federal Communications Commission seems prepared to approve it, according to a report from the Reuters news agency.

Two sources familiar with the matter told Reuters the FCC has taken the lead on the “spectrum transfer” issue, which involves turning over prime wireless spectrum currently owned by large cable operators Comcast, Time Warner Cable, Cox, and Bright House Networks to Verizon Wireless. The combined licenses the cable industry holds are in the majority of major American cities, which critics charge Verizon will acquire to eliminate any potential competitive threat from a new nationwide wireless carrier.

Verizon’s recent moves to sell off its own “excess” spectrum to its current competitors has garnered favor inside the FCC, according to sources. Verizon Wireless recently agreed to transfer some of that spectrum to T-Mobile USA, which coincidentally was a fierce opponent of the deal between Verizon and cable operators. T-Mobile’s opposition has since muted.

Licenses owned by the cable industry would have been expansive enough to launch a new national wireless competitor. (Image: Phonescoop)

The deal between Verizon and the nation’s top cable companies is worth about $3.9 billion, but the Justice Department continues to signal concerns it would ultimately cost consumers more than that. According to Reuters, Verizon remains in “tougher talks” with lawyers inside the Justice Department who are concerned cooperative marketing between the phone and cable companies would result in decreased competition and higher prices.

One source told Reuters regulators were hoping Verizon’s now-stalled fiber to the home network FiOS would bring major competition to the cable industry, which until then had only faced moderate competition from satellite dish providers. In return, Comcast and other cable operators were expected to invade the wireless phone marketplace, adding needed competition.

Instead, both sides have retreated to their respective positions — Verizon focusing on its wireless service and Comcast and other cable companies abandoning interest in wireless phones and sticking to cable-based products.

The idea that both would begin to cross-market each other’s products is “a problem” according to the Justice source not authorized to speak publicly.

Additionally, concerns are being raised over a proposed “joint operating entity” between Verizon and cable operators that would focus on developing new technologies that could lock out those not in the consortium.

No decision is expected from the Justice Department until August, but Justice officials have signaled they have several options they can pursue:

1. Sue to stop the spectrum transfer;
2. Force the companies to modify their proposal to reduce potential collusion;
3. Approve the deal but monitor how cross-marketing agreements impact on consumer markets for wireless and cable products.

Thomas

Feisty T-Mobile is back on the attack, this time against Verizon’s new “Share Everything” plans which T-Mobile’s marketing gurus are calling a lousy deal for consumers.

Harry Thomas, director of segment marketing, dismissed Verizon’s new plans as costly, complicated, and punitive in a company blog post:

• They’re COSTLY – Verizon is charging more for what consumers want by raising rates on data, but promoting the “value” by pointing to unlimited talk and text even though today many consumers use less of these services. This is especially true for add-a-lines – now with Verizon’s Share Everything plans, adding a line starts at $30/month for a basic phone (non-smartphone) and, for accounts with at least one smartphone, requires unlimited minutes whether customers want unlimited or not.

• They’re COMPLICATED – Verizon is forcing customers to share data when many customers don’t know how much data they’re using, which makes it hard to stay within their limit when trying to balance multiple users (not to mention the family data hog).

• They’re PUNITIVE – At the same time that Verizon is making it harder for customers to manage overages, they are also increasing overage rates from $10/GB to $15/GB for accounts with at least one smartphone.

Thomas predicted Verizon’s new plans would deliver more benefits to Verizon’s bottom line than to consumers, and as they took effect late last week, he’s now convinced he was correct.

T-Mobile released this graphic showing its plans offer considerable savings over Verizon Wireless’ new “Share Everything” plans. Verizon is probably wishing AT&T managed to get that T-Mobile merger through, if only to stop this kind of competition.