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Wall Street Hates CenturyLink’s Dividend Cut; Company Punished for Upgrade Spending

CenturyLink’s stock is being pummeled after the company announced a cut in divided payouts to shareholders earlier this year, preferring to keep the money in-house to reduce debt and increase spending on necessary broadband upgrades.

Last fall, CenturyLink stock was trading for over $23 a share. By January, rumors that CenturyLink was going to cut its dividend put the stock on a downward trajectory, falling to an all-time-low below $11 this month. Company officials argued that with tightening credit opportunities and increasing interest rates, the company needed to devote money normally paid back to shareholders towards paying down its $35.5 billion long-term debt and provide better service to its customers.

A half billion dollars of that money will also be spent on upgrading CenturyLink’s broadband service, particularly in rural areas where the company is receiving Connect America Fund (CAF) dollars from the federal government.

“Our plan for 2019 includes investing to improve the trajectory of the business increasing CapEx by roughly $500 million,” Jeff Storey, president and CEO of CenturyLink said on a January analyst conference call. “As I mentioned earlier those investments include expanding the fiber network, adding new buildings throughout our footprint, enhancing our enterprise product portfolio, continuing our investments in CAF-II, and transforming our customer and employee experience.”

Investors were not impressed with those plans, and CenturyLink’s share price cratered.

Independent phone companies have traditionally attracted investors with handsome dividend payouts, but the realities of their aging infrastructure and the inability to compete effectively with cable companies on lucrative broadband services have left companies like CenturyLink, Windstream, and Frontier Communications in a quandary. Shareholders do not perceive value investing in fiber optic network upgrades and punish companies that announce dramatic increases in network investments. Customers left on slow-speed ADSL networks are increasingly dissatisfied with their internet experience and seek alternative providers — usually the local cable company. As Frontier Communications has discovered, attempting to win back ex-customers has been exceedingly difficult, often only possible with lucrative promotional offers that undercut the cable company. But such offers attract customers with above-average price sensitivity, making it difficult to extract increased revenue from them going forward.

CenturyLink’s stock price has dropped to an all-time low over the last six months.

Investors are also increasingly concerned about the financial viability of investor-owned phone companies that are stuck between leveraging their old networks and facing down shareholders when upgrades become essential. AT&T and Verizon have wireless units responsible for much of the revenue earned by those two Baby Bells. Traditional phone companies have had less luck trying to sell ancillary support services like Frontier’s “Peace of Mind” technical support service, or bundling satellite TV service into packages.

CenturyLink’s Local Service Territory (Source: CenturyLink)

CenturyLink is increasingly depending on its enterprise and wholesale businesses to earn revenue. That fact has prompted some shareholders to ask why the company hasn’t spun off or sold off its traditional landline network and consumer businesses, which currently account for only 25% of its revenue. In May, CenturyLink seemed determined to placate those investors with an announcement it was exploring “strategic options” for its consumer business. Investors theorize that CenturyLink could “unlock value” from its legacy landline networks in such a sale or spinoff that would benefit shareholder value. It would also be much cheaper than investing in that network to upgrade it.

The chorus for a sale increased after Frontier Communications announced it was spinning off its landline territories in the Pacific Northwest to a company specializing in upgrading legacy networks to support better broadband. Frontier, mired in debt and facing a concerning due date for some of its bonds, made the sale to give a boost to its balance sheet. Frontier had also been facing increasing scrutiny about a potential Chapter 11 bankruptcy filing. Windstream declared bankruptcy earlier this year, reminding investors that a trip to bankruptcy court could quickly wipe out all shareholder value.

MoffettNathanson, a Wall Street analyst firm that specializes in telecommunications, finds little to like about CenturyLink shedding its own landline operations. Frontier’s sale benefited from the fact a significant part of its Pacific Northwest territory was built from an acquisition from Verizon, which had already installed its FiOS fiber to the home network in parts of Washington and Oregon. About 30% of the territory Frontier is selling is fiber-enabled. In comparison, CenturyLink has installed fiber to the home service in only about 10% of its territory, dramatically reducing any potential sale price. Much of CenturyLink’s core fiber network powers its enterprise and wholesale operations — businesses CenturyLink would likely keep for itself.

MoffettNathanson also sees little value from the proposition a buyer could leverage CenturyLink’s network to provide backhaul fiber capacity for future 5G services, because CenturyLink provides service mostly in smaller communities likely to be bypassed by 5G, at least for the near term.

Wall Street’s idea of a win-win strategy for CenturyLink is to keep its consumer business and expand its broadband service footprint and capability, if the federal government offers to cover much of the cost through more rounds of CAF subsidies. Taxpayers would subsidize broadband expansion while CenturyLink and shareholders share all the profits.

Underseas Fiber Capacity Expands Without Laying More Submarine Cables

underseas capacityOverall submarine cable capacity, which supports a substantial amount of international Internet traffic, has grown around 36% per year for 2007-2014 and is expected to grow around 29% for 2014-2016. But traffic planners are confident the traffic growth will be easily accommodated over existing submarine cable circuits.

A new U.S. International Circuit Capacity Report from the International Bureau of the Federal Communications Commission details the total amount of capacity available between the U.S. and any foreign point. That data helps traffic planners maintain suitable Internet traffic capacity before international data traffic jams emerge. The report shows plenty of capacity remains available to handle sustained Internet traffic growth between North America and other countries around the world. Only the Pacific region, encompassing Australia and New Zealand, shows the potential for a future capacity crunch if more cable capacity isn’t introduced in the coming years.

Submarine cables laid more than a decade ago are showing vast capacity improvements, not because new fiber is being laid underwater, but because of developments in submarine cable technology.

“The technology standard has evolved from 280Mbps per pair (TAT-8 cable) in the mid-1980s, to 5Gbps (TPC-5) in the mid-1990s, to 10Gbps in 1998,” says the report. “Since 1998, the 10Gbps fiber pair has been the standard for all new cables. There are plans to deploy 40Gbps or even 100Gbps fiber pairs. Moreover, the use of Wavelength Division Multiplexing (WDM) technology can multiply the capacity from one pair to multiple pairs depending on the wavelength (or color) of the cable.”

southern cross

One exceptional example comes from the Pacific region, where Internet traffic has exploded. The Southern Cross cable, which connects Australia, New Zealand, Fiji, Hawaii, and the United States, began service in 2000 offering a total capacity of 20Gbps. Those behind the project envisioned that technological advancements would eventually allow the cable to achieve a total of 120Gbps of “fully protected capacity.” They vastly underestimated what ingenuity in data transmission would bring just 16 years later.

southern cross upgradeSouthern Cross engineers are now deploying circuits capable of 40 and 100Gbps technology, bringing Southern Cross cable’s total available capacity to more than 12Tbps (12,000Gbps). Every upgrade was conducted at the cable station with zero new fiber pairs laid in the water. Other undersea cable operators are initiating similar upgrades, providing exponentially greater capacity at a minimal cost.

The report found the most popular destination for U.S. international undersea cables was Colombia, which hosts eight. Japan and the United Kingdom are each reached by seven U.S. cables. Five cables each reach Panama, Brazil, and Venezuela, and Mexico and Australia have four each.

The most aggressive capacity upgrades are scheduled for the Atlantic region, mostly to support increasing traffic from Europe, the Middle East, and especially Africa. The Pacific region, in contrast, has just 13.3% non-activated capacity, possibly demonstrating a need for new cable capacity.

Cable Operators Told to Get Ready for a Gigabit, But Will Rationed Usage Make It Meaningless?

Phillip Dampier: A cable trade publication is lecturing its readership on better broadband the industry spent years claiming nobody wanted or needed.

Phillip Dampier: A cable trade publication is lecturing its readership on better broadband the industry spent years claiming nobody wanted or needed.

Remember the good old days when cable and phone companies told you there was no demand for faster Internet speeds when 6Mbps from the phone company was all you and your family really needed?

Those days are apparently over.

Multichannel News, the largest trade publication for cable industry executives, warns cable companies gigabit broadband speeds are right around the corner and the technological transformation that will unleash has been constrained for far too long.

Say what?

Proving our theory that those loudest about dismissing the need for faster Internet speeds are the least equipped to deliver them, the forthcoming arrival of DOCSIS 3.1 technology and decreasing costs to deploy fiber optics will allow cable providers to partially meet the gigabit speed challenge, at least on the downstream. Before DOCSIS 3.1, consumers didn’t “need those speeds.” Now companies like Comcast claim it isn’t important what consumers need today — it’s where the world is headed tomorrow.

Comcast 2013:

Comcast executive vice president David L. Cohen writes that the allure of Google Fiber’s gigabit service doesn’t match the needs or capabilities of online Americans.

“For some, the discussion about the broadband Internet seems to begin and end on the issue of ‘gigabit’ access,” Cohen says, in a nod to Google Fiber. “The issue with such speed is really more about demand than supply. Our business customers can already order 10-gig connections. Most websites can’t deliver content as fast as current networks move, and most U.S. homes have routers that can’t support the speed already available to the home.” Essentially, Cohen argues that even if Comcast were to deliver web service as fast as Google Fiber’s 1,000Mbps downloads and uploads, most customers wouldn’t be able to get those speeds because they’ve got the wrong equipment at home.

Comcast 2015:

“We’ve consistently offered the most speeds to the most homes, but with the current pace of tech innovation, sometimes you need to go to where the world is headed and not focus on where it is today.”

“The next great Internet innovation is only an idea away, and we want to help customers push the boundaries of what the Internet can do and do our part to inspire developers to think about what’s possible in a multi-gigabit future.  So, next month we will introduce Gigabit Pro, a new residential Internet service that offers symmetrical, 2-Gigabits-per-second (Gbps) speeds over fiber – at least double what anyone else provides.”

Nelson (Image: Multichannel News)

Nelson (Image: Multichannel News)

Rich Nelson’s guest column in Multichannel News makes it clear American broadband is behind the times. The senior vice president of marketing, broadband & connectivity at Broadcom Corporation says the average U.S. Internet connection of 11.5Mbps “is no longer enough” to support multiple family members streaming over-the-top video content, cloud storage, sharing high-resolution images, interactive online gaming and more.

Nelson credits Google Fiber with lighting a fire under providers to reconsider broadband speeds.

“Google’s Fiber program may have been the spark to light the fuse — Gigabit services have fostered healthy competition among Internet and telecommunications providers, who are now in a position to consider not ‘if’ but ‘when and how’ to deploy Gigabit broadband in order to meet consumer’s perceived ‘need for speed’ and maintain their competitive edge,” Nelson wrote.

But the greatest bottleneck to speed advances is spending money to pay for them. Verizon FiOS was one of the most extravagant network upgrades in years among large American telecom companies and the company was savaged by Wall Street for doing it. Although AT&T got less heat because its U-verse development costs were lower, most analysts still instinctively frown when a company proposes spending billions on network upgrades.

Customer demand for faster broadband is apparent as providers boost Internet speeds.

Customer demand for faster broadband is apparent as providers boost Internet speeds.

The advent of DOCSIS 3.1 — the next generation of cable broadband technology — suggests a win-win-win for Wall Street, cable operators, and consumers. No streets will have to be torn up, no new fiber cables will have to be laid. Most providers will be able to exponentially boost Internet speeds by reallocating bandwidth formerly reserved for analog cable television channels to broadband. The more available bandwidth reserved for broadband, the faster the speeds a company can offer.

Many industry observers predict the cable line will eventually be 100% devoted to broadband, over which telephone, television and Internet access can be delivered just as Verizon does today with FiOS and AT&T manages with its U-verse service.

The benefits of gigabit speeds are not limited to faster Internet browsing however.

Nelson notes communities and municipalities are now using gigabit broadband speeds as a competitive tool selling homes and attracting new businesses to an area. According to a study from the Fiber to the Home (FTTH) Council, communities with widely available gigabit access have experienced a positive impact on economic activity — to the tune of more than $1.4 billion in GDP growth. Those bypassed or stuck in a broadband backwater are now at risk of losing digital economy jobs as businesses and entrepreneurs look elsewhere.

The gigabit broadband gap will increasingly impact the local economies of communities left behind with inadequate Internet speeds as app developers, content producers, and other innovative startups leverage gigabit broadband to market new products and services.

The Pew Research Center envisioned what the next generation of gigabit killer apps might look like. Those communities stuck on the slow lane will likely not have access to an entire generation of applications that simply will never work over DSL.

But before celebrating the fact your local cable company promises to deliver the speed the new apps will need, there is a skunk that threatens to ruin your ultra high speed future: usage-based pricing and caps.

At the same time DOCSIS 3.1 will save the cable industry billions on infrastructure upgrade costs, the price for moving data across the next generation of super high-capacity broadband networks will be lower than ever before. But cable operators are not planning to pass their savings on to you. In fact, broadband prices are rising, along with efforts to apply arbitrary usage limits or charge usage-based pricing. Both are counter-intuitive and unjustified. It would be like charging for a bag of sand in the Sahara Desert or handing a ration book to shoreline residents with coupons allowing them one glass of water each from Lake Ontario.

skunkCox plans to limit its gigabit customers to 2TB of usage a month. AT&T U-verse with GigaPower has a (currently unenforced) limit of 1TB a month, while Suddenlink thinks 550GB is more than enough for its gigabit customers. Comcast is market testing 300GB usage caps in several cities but strangely has no usage cap on its usage-gobbling gigabit plan. Why cap the customers least-equipped to run up usage into the ionosphere while giving gigabit customers a free pass? It doesn’t make much sense.

But then usage caps have never made sense or been justified on wired broadband networks and are questionable on some wireless ones as well.

Stop the Cap! began fighting against usage caps and usage pricing in the summer of 2008 when Frontier Communications proposed to limit its DSL customers to an ‘ample’ 5GB of usage per month. That’s right — 5GB. We predicted then that usage caps would become a growing problem in the United States. With a comfortable duopoly, providers could easily ration Internet access with the flimsiest of excuses to boost profits. Here is what we told the Associated Press seven years ago:

“This isn’t really an issue that’s just going to be about Frontier,” said Phillip Dampier, a Rochester-based technology writer who is campaigning to get Frontier to back off its plans. “Virtually every broadband provider has been suddenly discovering that there’s this so-called ‘bandwidth crisis’ going on in the United States.”

That year, Frontier claimed most of its 559,300 broadband subscribers consumed less than 1.5 gigabytes per month, so 5GB was generous. Frontier CEO Maggie Wilderotter trotted out the same excuses companies like Cox and Suddenlink are still using today to justify these pricing schemes: “The growth of traffic means the company has to invest millions in its network and infrastructure, threatening its profitability.”

Just one year later, Frontier spent $5.3 billion to acquire Verizon landline customers in around two dozen states, so apparently Internet usage growth did not hurt them financially after all. Frankly, usage growth never does. As we told the AP in 2008, the costs of network equipment and connecting to the wider Internet are falling. It still is.

“If they continue to make the necessary investments … there’s no reason they can’t keep up” with increasing customer traffic, we said at the time.

We are happy to report we won our battle with Frontier Communications and today the company even markets the fact their broadband service comes without usage caps. In many of Frontier’s rural service areas, they are the only Internet Service Provider available. Imagine the impact a 5GB usage cap would have had on customers trying to run a home-based business, have kids using the Internet to complete homework assignments, or rely on the Internet for video entertainment.

So why do some providers still try to ration Internet usage? To make more money of course. When the public believes the phony tales of network costs and traffic growth, the duped masses open their wallets and pay even more for what is already overpriced broadband service. Just check this chart produced by the BBC, based on data from the Organization for Economic Co‑operation and Development. Value for money is an alien concept to U.S. providers:


The usual method of combating pricing excess is robust competition. With a chasm-sized gap between fat profits and the real cost of the service, competitors usually lower the price to attract more customers. But the fewer competitors, the bigger the chance the marketplace will gravitate towards comfort-level pricing and avoid rocking the boat with a ruinous price war. It is one of the first principles of capitalism — charging what the market will bear. We’ve seen how well that works in the past 100+ years. Back in 2010, we found an uncomfortable similarity between broadband prices of today with the railroad pricing schemes of the 1800s. A handful of executives and shareholders reap the rewards of monopolistic pricing and pillage not only consumers but threaten local economies as well.

special reportThe abuses were so bad, Congress finally stepped in and authorized regulators to break up the railroad monopolies and regulate abusive pricing. We may be headed in the same direction with broadband. We do not advocate regulation for the sake of regulation. Competition is a much more efficient way to check abusive business practices. But where an effective monopoly or duopoly exists, competition alone will not help. Without consumer-conscious oversight, the forthcoming gigabit broadband revolution will be stalled by speed bumps and toll booths for the benefit of a few giant telecommunications corporations. That will allow other countries to once again leap ahead of the United States and Canada, just as they have done with Internet speeds, delivering superior service at a lower price.

China now ranks first in the world in terms of the total number of fiber to the home broadband subscribers. So far, it isn’t even close to the fastest broadband country because much of China still gets access to the Internet over DSL. The Chinese government considers that unacceptable. It sees the economic opportunities of widespread fiber broadband and has targeted the scrapping of every DSL Internet connection in favor of fiber optics by the end of 2017. As a result, with more than 200 million likely fiber customers, China will become the global leader in fiber infrastructure, fiber technology, and fiber development. What country will lose the most from that transition? The United States. Today, Corning produces 40% of the world’s optical fiber.

Global optical fiber capacity amounted to 13,000 tons in 2014, mainly concentrated in the United States, Japan and China (totaling as much as 85.2% of the world’s total), of which China already ranked first with a share of 39.8%. Besides a big producer of optical fiber, China is also a large consumer, demanding 6,639 tons in 2014, 60.9% of global demand. The figure is expected to increase to 7,144 tons in 2015. Before 2010, over 70% of China’s optical fiber was imported, primarily from the United States. This year, 72.6% of China’s optical fiber will be produced by Chinese companies, which are also exporting a growing amount of fiber around the world.

John Lively, principal analyst at LightCounting Market Research, predicts China could conquer the fiber market in just a few short years and become a global broadband leader, “exporting their broadband networking expertise and technology, just like it does with its energy and transportation programs.”

Meanwhile in the United States, customers will be arguing with Comcast about the accuracy of their usage meter in light of a 300GB usage cap and Frontier’s DSL customers will still be fighting to get speeds better than the 3-6Mbps they get today.

Big Telecom’s Astroturf Snowjob: Blizzard of Bull from CenturyLink and Comcast to Kill Competition

You can look all over this astroturf group's website and never find the fact it's bought and paid for on behalf of Colorado's largest cable company -- Comcast.

The next time Comcast or CenturyLink wants to increase your rates because of the “increased costs of doing business,” you might want to ask them why they have collectively spent more than $300,000 on an astroturf campaign to stop the city of Longmont, Col. (pop. 86,000) from using excess fiber capacity to provide competition to the phone and cable company without raising taxes a penny.

Longmont voters are headed to the polls today with a simple question to answer: should the city be allowed to open their fiber network to all-comers to provide competitive video, data, and telephone services to city residents.  Longmont’s fiber network was constructed in the 1990s as part of its electrical infrastructure.  Some utility companies buried enormous amounts of fiber intending to use it to electronically collect usage data from ratepayers so meter readers could become a thing of the past.  Like in other cities, Longmont now has a fiber network that is woefully underused, and the city wants to open up the tremendous excess capacity for telecommunications uses.  They are even open to allowing Comcast and CenturyLink to use the network to help service their own respective customers, but the thought a new competitor (including a community-owned provider) might deliver service over that network has created an absurd $300,000 Hissyfit.

Comcast has been caught funding the majority of the opposition, the so-called “No on 2A” and “Look Before We Leap” projects, sponsored primarily by the Colorado Cable Telecommunications Association, which counts Comcast as a member.

But visitors to the campaign’s cheesy website never realize who is running the show because the effort hides its association with Big Telecom.

It’s a classic example of Astroturf Fear, Uncertainty, and Doubt.  Scare residents into believing the city will raise taxes or go into financial distress.  Raise uncertainty by claiming important details are being left out.  Encourage doubt by comparing the advanced fiber network with anemic public Wi-Fi failures of the past involving Earthlink (remember them?).

But the No on 2A campaign is also willing to check themselves into a deluxe suite at the Hypocrisy Hotel, accusing city officials of hiding the names of their pro-fiber supporters and backers, including (gasp!) a company based in France!

The No on 2A website breathlessly relates the incriminating documents were unearthed from “previously secret emails just made public thanks to a Colorado Open Records Act.” They suggest a nefarious connection with Alcatel-Lucent because that company, which sells products and services related to fiber networks, communicated with the city in a handful of e-mail messages last summer.  You know those French, always up to something.

When it doubt, blame the French for being in on it.

The rich, buttery irony of a “group” secretly funded by the state’s largest cable company accusing others of keeping secrets is ignored at Kabletown.

But then I’ve received e-mail from Alcatel-Lucent (and Comcast) myself.  And I have a French last name.  Sacrebleu!

The website’s “opponents,” evidently gleaned from the few hundred residents that signed their visitor’s book, includes names like Joanna Crawford, “Garrett County,” and El Cordova, which we think could be the name of a Mexican pro-wrestler, we’re not sure.

City officials are stunned by the sheer amount of money being spent by cable and phone companies to keep competition far, far away.  So apparently is the local media, which has taken to identifying the “grass roots” opposition right down to their job title and name of the lobbying firm they work for.

Take Times-Call, which helpfully discloses “Look Before We Leap” spokesman George Merritt is actually a senior strategist for Onsight Public Affairs of Denver.  That’s a real nice way to say “lobbying firm hired to develop social media strategies to snooker influence public opinion on behalf of corporate clients.”

You know you’re not dealing with a neighborhood group lobbying to reduce road speeds in the neighborhood or sign a petition for improved trash collection when you read Leap’s financial disclosure reports:

  • $120,913.64 to mass communications firm SE2 of Denver for a variety of services, including mail pieces, consulting, two television buys and ad production and design.
  • $70,500 to Rocky Mountain Voter Outreach of Denver for “canvass, management rent and miscellaneous associates.”
  • $37,500 to OnSight Public Affairs for consulting.
  • $22,000 to Drake Research and Strategy of Boulder for polling.
  • $15,776.84 to Zata3 for phone work.
  • $12,260 to Holland and Hart of Denver for legal expenses.
  • $8,000 to EIS of Grand Junction for consulting.
  • $4,334.65 to Campaign Products of the Rockies, of Denver, for a voter file, mailing lists, stickers and yard signs.
  • $2,500 to Mark Stevens of Denver for research.
  • $743.75 to Tim Thomas of Boulder for general campaign work.

The whole dog and pony show of Big Telecom money has bemused Longmont mayor Bryan Baum, who supports the 2A measure and believes the distortion campaign has gone way over the top.

“It doesn’t really matter at this stage of the game,” Baum told the newspaper. “It’s going to the electorate. The electorate will vote. And we will know on Tuesday how they voted – if they believe a $300,000 ad campaign, or if they believe the people they’ve entrusted their votes to.”

Some of that $300,000 has also gone into vilifying a real grass-roots effort in support of the Longmont fiber initiative — Longmont’s Future.  Comcast’s front group tried to raise questions about where that pro-fiber group got their backing and money.  The newspaper discovered Longmont’s Future isn’t backed by any French conglomerate or nefarious outside interest.  It’s the work of Jonathan Rice, who operates the website all by himself, spending a grand total of $353 to fight Comcast’s $300,000.

“Every single candidate for office and every incumbent, in every race, supports this measure,” says Rice. “But Comcast and its friends are more interested in profit than progress, and continue to run a smear campaign to spread misinformation and outright lies – they recently posted Mayor Baum’s name as an opponent of 2A when he is actually a vociferous supporter.”

Community Broadband Networks has compiled a series of articles detailing the project and helping to expose the so-called “grassroots” opponents.  We encourage readers to become better acquainted with the underhanded tactics community broadband opponents will use to stop anything that resembles competition.

Sarasota Florida Quietly Builds Fiber Network for “Traffic Control” That Could Do Much More

Phillip Dampier September 13, 2010 Broadband Speed, Community Networks, Competition, Editorial & Site News, Public Policy & Gov't Comments Off on Sarasota Florida Quietly Builds Fiber Network for “Traffic Control” That Could Do Much More

Sarasota County's current fiber networks are depicted on this map produced by the Sarasota Herald-Tribune

In many communities across America, there is more fiber optic cable on telephone poles and buried in underground conduit than you may realize.  But as a consumer, you’ll never get to benefit from it because of a broadband duopoly that works hard to keep municipal fiber networks away from your home and out of your reach.

Take Sarasota County, Florida.  The county is making preparations to build a 96-strand fiber network across the county, capable of delivering 100Gbps service over each strand, and early plans suggest they’ll use it for… controlling traffic signals and viewing traffic cameras.  Taxpayers are ultimately paying the costs to construct the $1,000-per-mile fiber network, but current plans won’t allow any of them to access it.

Why?  Because companies like Comcast and Verizon want it that way.

It’s nothing new and it’s not limited to Sarasota.  In cities across the country, enormous capacity networks are devised and constructed to deliver high speed data connections to local hospitals, schools, and public safety institutions.  Many states’ transportation departments have enormous excess fiber capacity, installed from federal and state grant money to develop intelligent traffic systems.  But almost all of these networks are strictly off-limits to the general public and small business entrepreneurs who are stuck with the far slower broadband service the phone and cable companies deliver at ridiculously high prices.

Sarasota has had ultra-fast connections for years, delivering a dedicated 10Gbps connection to one area hospital and insanely fast connections to police departments and other government buildings.  It’s managed by Comcast and was built for $3 million, paid for directly by Comcast subscribers.  Comcast built the county I-Net network with the understanding that commercial use of the network was strictly prohibited.

The result is blazing fast speeds for institutions that can’t possibly utilize all of the capacity they have, and a broadband cartel delivering less service than local residents and businesses need.

The Sarasota Herald-Tribune considered the county’s fiber future so important, it dedicated a week of coverage to municipal fiber, and the providers and politics that get in the way.

The newspaper reports that the existing broadband duopoly under-delivers access to digital entrepreneurs that need those speeds the most.

The co-called creative class — bandwidth entrepreneurs on a budget — struggle to get by on mediocre connections that are largely repackaged retail offerings.

Over and over, businesses surveyed by the Herald-Tribune pointed to the tell-tale distinction between business-class service and retail.

“Businesses upload stuff, while consumers download,” said Rich Swier Jr., who works from a Central Avenue office where the only service comes from Comcast. Swier, the only entrepreneur on the Sarasota Broadband Task Force, is not happy with what he gets from Comcast. “They are repackaging a consumer grade service as a business service and charging three times more.”

Swier is paying about $200 per month for what is supposed to be 50 megabits per second download and 5 megabits up. But in reality, it operates at half those speeds, he said.


The newspaper’s conclusion: Fiber access is to modern business what train stations and interstate connections used to be.

Sarasota’s fiber project has grown considerably since its original proposition — 24 strands of fiber installed for $11 a foot. Then the county received an estimate that said they could have triple the amount of fiber for just 20 cents more per mile.  Broadband enthusiasts urged the county to upgrade the network to 96 strands and they agreed.

Commissioner Jon Thaxton told the newspaper he views the planned fiber network as an insurance policy as Internet speed becomes more and more important.

“It does, at a minimum, put us in a position of not being wholly dependent on some other service provider,” Thaxton said.

The newspaper notes the economic implications of superior broadband are enormous.

Google sparked the issue when it announced plans earlier this year to hot-wire a city or cities somewhere in the United States, creating what could be a prototype for a community with the broadband speeds to more than command its economic future.

Our political leaders clearly saw the import of this. Heck, City Commissioner Dick Clapp even jumped into a shark tank to show Google the community’s spirit (yeah, they were pretty small sharks, but I wouldn’t do it, fiber or no fiber).

Businesses of the 21st century are hungry for fast speeds, and this region has been fortunate to land some with voracious appetites.

[…]Who would have pegged Lafayette, La., as a place where Hollywood would set up a first-rate special-effects studio? (Can you say the Walt Disney Co. as a customer?) But the fiber was there, and the big dogs came.

South of us, in Naples, it is private enterprise driving high-octane broadband, the work of a technology-savvy entrepreneur and a like-minded group of millionaires who want what many of us raising families in Southwest Florida are after: an economy that would allow our kids to remain here with good jobs.

In the Information Age, connectivity is going to be critical in attracting the kind of companies we want, and the well-heeled folks in Collier County know that. (They also clearly know how to make a lot of money, so don’t read their efforts too much as altruism).

Then you have one of the new 800-pound gorillas of the fiber effort, Allied Fiber, a New York-based company in the midst of creating a trans-continental broadband push akin to what the railroad barons of the 1800s accomplished.

Southwest Florida has a good chance of tapping into their $500 million (or more) play.

Competition from Municipal Providers Drives Prices Down and Speeds Up (New Rules Project)

The county established a Broadband Task Force, but made the same mistake so many other municipalities make when they create these panels: consumers are not represented at all and small business representation is limited to a single participant. Consumers will ultimately be a major source of revenue from municipal broadband projects and their needs and interests must be represented.  Since incumbent commercial providers will seek to impede municipal competition by organizing consumer opposition to such projects, getting trusted consumer advocates and broadband evangelists on your side at the outset can make the difference between enthusiastic support for additional broadband choice or a mind-numbing, incumbent provider-driven sideshow about a “socialist government takeover of the Internet.”

The rest of the panel is made up of public officials from the school district, county and city government and the local hospital.

The newspaper hints these are exactly the wrong people to invite onto a Broadband Task Force.  Virtually all already enjoy the generous bandwidth already provided by Comcast’s I-Net, few are likely to be well informed on broadband technology issues, and apart from the lone businessman on the panel, the group is unlikely to grasp the commercial implications of better broadband for the local digital economy.

Since these individuals all earn a paycheck protecting their own institutional interests, the larger vision of community broadband can easily get lost in turf wars and political disputes, or interference from incumbent providers.

Providers can cut the bottom out of such task forces with rewarding side deals for friends — enhanced services at fire sale prices. For institutional opponents — intransigence and crippling rate increases.

On Florida’s East Coast, Martin County’s public service institutions learned first hand what kind of pricing Comcast is capable of bringing to the table when an existing contract expired.  Comcast demanded a whopper of a rate hike.

“We decided for the kind of money these people are asking us, we would be better off doing this on our own,” Kevin Kryzda, the county’s chief information officer, told the Sarasota paper. “That is different from anybody else. And then we said we would like to do a loose association to provide broadband to the community while we are spending the money to build this network anyway. That was unique, too.”

The last straw for county officials was the loss of a lucrative deal with California-based Digital Domain to build a Florida branch campus.  The company chose St. Lucie County instead.  John Textor, Digital Domain’s co-chairman, told the Herald-Tribune that having a local all-fiber network connection and being able to set up an all-fiber direct connection to remote servers in Miami was a key advantage of the site in Port St. Lucie.

After that, Martin County commissioners voted unanimously to obtain bids for their own network.

Martin County’s fiber network will combine a publicly-constructed institutional network and a tiny rural phone company paying part of the costs to resell excess capacity to commercial users. The downside is that consumers will not be offered service.

In Florida’s Lee and Collier Counties, U.S. Metro network has proved fiber’s ability to transform entire regions economically.

“If you build it, they will come” is a common rallying cry for fiber proponents.  In both counties, they came.  The latest arrival?  Jackson Laboratory of Bar Harbor, Maine, now being showered with more than $200 million in government grants to build a genetic research campus in Collier County.  A large portion of that money will end up staying in Collier County, stimulating the local economy and creating jobs.

Why all the clamor?  Because U.S. Metro runs a network that puts incumbent phone and cable companies to shame.  When a business requests service, owner Frank Mambuca doesn’t tell them what speeds they’ll have to live with.  Instead, he asks, “how many gigabits do you want?”

Unfortunately, U.S. Metro also only sells service to businesses, but they have some wholesale customers that do serve consumers.  Marco Island Cable and a sister company, NuVu are cable overbuilders that offer access to U.S. Metro’s broadband network at speeds and prices Comcast and CenturyLink can’t touch.

Marco Cable, a tiny independent provider, delivers faster speeds at lower prices.

Marco Cable is preparing to deliver fiber-based 75Mbps service for $99 a month, along with several other access plans that save at least $12.95 per month over Comcast’s prices, and undercuts CenturyLink’s DSL plans as well.  The company also does something Comcast won’t — it promises unlimited Internet access and email accounts.

If someone wants even faster speeds, say 100Mbps, they can call Marco Cable and request it.

The highest download speed that Verizon offers [locally] at present is 50 megabits per second for $149.99 a month, according to spokesman Bob Elek.

NuVu is currently installing competing service in condos on the mainland.  For the father and son team that run both Marco Cable and NuVu, their philosophy is radically different from most cable and phone companies — delivering as much broadband speed as customers can use at prices they can afford.

For existing providers, who have “marked up” prices for years, the competition’s lower prices threaten profits from delivering “good enough for you” speeds at the highest possible price.

For some, simply lowering prices and enhancing service to compete isn’t the answer — putting a stop to municipal competition at all costs is.

In 18 states, high priced lobbying campaigns financed by giant phone and cable operators have succeeded in restricting or banning competing providers.  AT&T has been the most aggressive, successfully impeding competition in states like Texas, Wisconsin, Missouri, Arkansas, Michigan, Tennessee, and others.  Comcast helped stop competition in its home state of Pennsylvania.

Click image to view interactive map

Year after year, Time Warner Cable and AT&T continue efforts to try and do the same in North Carolina, a potential hotbed of locally run, community-owned providers.

For some towns and cities who have spent years begging for improved service, the clock has run out.  The Sarasota Herald-Tribune used Wilson, N.C., as an excellent example.  The city of 50,000 east of Raleigh decided it was through asking Time Warner Cable to provide a platform for a digital economic revival.

Brian Bowman, public affairs manager for the city, told the newspaper the city faced economic disaster from twin blows — the loss of the textile industry and America’s waning interest in tobacco products. Giving the keys to the local cable company to drive Wilson’s nascent digital economy into Lake Wilson was simply not an option.  The town would build its own digital highway — a municipal fiber to the home system for consumers and businesses.

For both, Wilson’s Greenlight system provides up to 100 megabits per second in both directions.  Time Warner Cable residential customers, in comparison, max out at 15/2 Mbps service.

“The way we see it, you’re going to have haves and have-nots in the next generation broadband world,” Bowman said. “The fact is we wanted to invest in our own future; that’s why we did this.”

Cable and phone giants always are going to say that current speeds are adequate and that there is no need for cities to build expensive networks themselves, Bowman said.

“I have heard that here from some of the incumbents, that you don’t need to go that fast. I’m sure the folks in Florida were doing OK without I-4,” Bowman said, noting the state never would have gotten Disney World if not for that interstate access.

People in Sarasota County are about to hear all of the usual arguments against municipal service:

  • “Taxpayers will pay for it.” — Not with revenue bonds they won’t.  These bonds deliver returns to investors from revenue earned by the municipal provider, not from taxpayer dollars.
  • “We want a level playing field.” — This cable industry opposed providing one when satellite and phone company IPTV showed up, as they tried to withhold programming and lobbied against both.
  • “The government should stay out of the private sector.” — Christopher Mitchell, writing for the New Rules Project, tore apart that argument:

Governments “compete” with the private sector in many ways on a daily basis. Libraries compete with book stores, schools with private schools, public transit with taxis, police with security firms, even lumber yards, liquor stores, municipal golf courses and swimming pools with privately owned counterparts. Without public competition in the form of the Rural Electrification Authority, much of the country would still not be wired for electricity or phones.

The focus on whether local governments, who have a wholly different motivation than private companies, are “competing” with the private sector is a red herring to distract the public from incumbent providers’ failures to build modern networks. On matters of infrastructure, a community should always have the option to build the network it needs, just as it can build roads, bridges, water systems, and other modern necessities.

Ultimately, Sarasota County residents have two choices:

  1. Obtain the best traffic control and monitoring system America has ever seen, capable of delivering crisp, clear 1080p HD feeds of traffic tieups on Route 301.
  2. Deliver Sarasota County 21st century broadband that will power the digital economy and bring hundreds of millions in investment dollars, create thousands of new, high-paying jobs, and save local consumers and businesses a lot of money from broadband competition.

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Stop the Cap!