Altice, the new owner of Cablevision, is not following the rest of the U.S. cable industry by rolling out the next generation of cable broadband — DOCSIS 3.1 — and will instead scrap coaxial cable entirely in favor of a new, all-fiber network.

The cable industry has depended on some form of coaxial cable to offer its service since about 1950, when the first mom and pop operators set up shop offering community antenna television service in areas that could not easily receive over the air TV stations. Most American cable systems today still use the coaxial cable installed in millions of homes starting in the 1970s, supplemented by outdoor coaxial cable that is often 10-20 years old, supported by a more recent fiber backbone network that improves system reliability and maintenance.

Cable systems were originally designed to deliver analog cable television signals, but over the years bandwidth has been set aside to offer ancillary services like video game products, home security and alarm monitoring, digital radio/music, telephone, and broadband. Because of the billions of dollars invested in existing cable networks, the idea of scrapping existing wiring in favor of fiber optics has been largely rejected by the industry as too costly. As broadband service increasingly becomes cable’s most important service, network engineers have instead worked to realign bandwidth to support faster internet speeds, most commonly by upgrading to more efficient cable broadband transmission standards and by removing space hogs like analog television channels from the lineup.

Regardless of what the cable industry does to increase the efficiency of its hybrid coaxial-fiber networks (known as ‘HFC’), they will never achieve the capacity and robustness of all-fiber networks, which may be why Altice is seeking to stop investing in old technology in favor of something new and better.

Altice’s management is legendary in its zeal to cut costs, so an expensive deployment of fiber to the home service to 8.3 million Cablevision/Optimum and Suddenlink customers would seem contrary to the company’s promise to wring out about $900 million in cost savings for the benefit of shareholders after acquiring Cablevision. DOCSIS 3.1 is clearly a cheaper alternative than rewiring millions of homes for all-fiber service. Last summer, Liberty Global CEO Mike Fries estimated that Liberty Global’s costs to deploy the cheaper DOCSIS 3.1 option in Europe would bring gigabit speeds to customers for about $21 per home — a fraction of the cost of tearing out coaxial cable and replacing it with fiber, estimated to cost about $500 a customer.

But Altice wants to future-proof its network with fiber technology that can support profitable next-generation services that may need speed in excess of a gigabit. Dexter Goei, Altice USA’s chairman and CEO, told Multichannel News Altice was not interested in undertaking incremental upgrades every few years trying to keep up with the internet speed demands of its customers:

Goei

Going with a DOCSIS 3.1 game plan “felt to us as one step forward but not a step forward enough relative to what we see as the future of continued connectivity and higher bandwidth usage,” Dexter Goei, Altice USA’s chairman and CEO, said in an interview, noting that the operator has reached an “inflection point” as it sees a disproportionate number of gross broadband subscriber additions taking higher and higher Internet speed tiers.

“We’re big believers in this trend continuing, and we really are moving toward a 10-gig world,” Goei said. “And to sit around and do this in multiple steps doesn’t make any sense [so we decided] to skip over DOCSIS 3.1 and get straight to the point.”

The cable industry may also be exaggerating the cost of fiber upgrades, especially when they cite the financial challenges experienced by Verizon (FiOS) and AT&T (U-verse) as both built out their respective fiber and fiber-copper networks from the ground up. Cablevision and Suddenlink will not have to build fiber networks from end to end because a significant part of their networks already include a substantial amount of fiber optics. Altice would simply extend the amount of fiber in its network to reach each customer.

Fiber to the home upgrades for Cablevision and Suddenlink customers.

Wall Street remains concerned about where the money to build the project, dubbed “Generation Gigaspeed,” is coming from. The Communications Workers of America is also afraid the money will come, in part, from significant downsizing and salary cuts.

Earlier this week, Altice announced it was spinning off its engineering and technical workers to a new independent entity — Altice Technical Services (ATS). When the spinoff is complete, it will employ as many as 4,500 of Altice’s current workforce of 17,000 employees nationwide, and will eventually manage Cablevision and Suddenlink service calls, outdoor network plant design, construction and maintenance, and house all of Altice’s employees servicing commercial accounts.

Although details remain murky, the union is concerned Altice could be engineering an end run around the New York Public Service Commission’s order approving the buyout of Cablevision if Altice did not lay off any New York workers for the next four years.

“We’re very concerned,” CWA District 1 assistant to the vice president Robert Master said. “But we haven’t fully unpacked it yet. We don’t know what they have in mind.”

CWA District 1 organizer Tim Dubnau was more blunt, telling Multichannel News: “We definitely smell a rat.”

Assuming ATS is configured as an independent entity, it will not be required to adhere to the NY PSC order prohibiting reductions of Cablevision’s customer-facing workforce in New York State, which theoretically could allow Altice to dramatically downsize.

Outside of New York, Altice’s cost cutting has followed a long established pattern company executives have followed in Europe for years, where Altice also offers service. In France, battles over toiletries and office supplies resulted in workers bringing their own toilet tissue to work. Downsizing, despite regulatory orders prohibiting layoffs, went ahead in France as company officials thumbed their noses at regulators. In the United States, a familiar pattern is emerging, charges Altice’s critics. Almost 600 call center workers were terminated in November in Connecticut, and other cutbacks have taken place in North Carolina and other states.

Late last week, the NY Post reported Cablevision employees are now complaining about an increasingly miserable office life as they endure penny-penching from their bosses. In New York, top management reportedly ordered the removal of many office printers to reduce the expense of replacement ink cartridges. Office cleaning expenses have also been reportedly slashed by increasing the length of time between cleanings. Even the cost of an ice machine for a break room has come under intense scrutiny, as cost management specialists demand better deals and less costly equipment. Much of the removed equipment provides one last service to Altice – a tax write-off after being removed from service and donated to charities.

Employees report unprecedented intensity of cost cutting and lengthy scrutiny of almost every expense. Some claim to have resorted to buying certain equipment and supplies out of pocket just to avoid drawing management scrutiny. Employee morale is reportedly low — especially at Cablevision, where reduced pay packages predominate under Altice ownership. Management has told employees to hold out for a planned IPO, which could allow them to reap some of the benefits of a Wall Street-fueled cash-raising exercise likely to be put to work buying up other cable operators in 2017.

The pain of cost-cutting isn’t exactly reaching the top level executive suites, however. Despite a very public dispensing of Cablevision’s lush Dolan family corporate jet immediately after Altice took ownership of Cablevision, a replacement nearly identical to the original was quietly been put into service for the benefit of Altice’s management, according to the newspaper.

Assuming Altice can raise the money to pay for its fiber upgrade, it is expected to be completed within five years for all Cablevision and most, but not all Suddenlink customers.

Down the rabbit hole

Google has quietly announced an indefinite suspension of further fiber expansion as it prepares to downsize fiber division employees and re-evaluate its fiber business model.

In a blog post tonight from Craig Barratt, senior vice president of Alphabet and CEO of Google’s Access division, it becomes clear Google is rethinking its entire fiber strategy and is likely moving towards fixed wireless technology going forward:

Now, just as any competitive business must, we have to continue not only to grow, but also stay ahead of the curve — pushing the boundaries of technology, business, and policy — to remain a leader in delivering superfast Internet. We have refined our plan going forward to achieve these objectives. It entails us making changes to focus our business and product strategy. Importantly, the plan enhances our focus on new technology and deployment methods to make superfast Internet more abundant than it is today.

Barratt outlines the immediate implications of Google’s dramatic shift:

• In the cities where we’ve launched or are under construction, our work will continue;
• For most of our “potential Fiber cities” — those where we’ve been in exploratory discussions — we’re going to pause our operations and offices while we refine our approaches. In this handful of cities that are still in an exploratory stage, and in certain related areas of our supporting operations, we’ll be reducing our employee base.

Barratt

Barratt himself is jumping ship (or was pushed). He announced in his blog entry he is “stepping away” from his CEO role, but will remain as an “adviser.”

Observing Google’s recent fiber efforts and acquisitions, it seems clear Google no longer thinks fiber-to-the-home service is an economically viable solution in light of competitors like AT&T rolling out increasing amounts of fiber and the cable industry is on the cusp of launching DOCSIS 3.1, which will dramatically boost internet speeds without a substantial capital investment.

Google’s investors have been lukewarm about the company’s economic commitments relating to its fiber broadband networks. Often built from the ground up, Google’s fiber construction complexities also include trying to navigate costly roadblocks established by their competitors (notably Comcast and AT&T), dealing with bureaucracies and red tape even in states where near-total-deregulation was supposed to make competition easy. Google Fiber has also not proved to be a runaway economic success, and now faces more challenges in light of upgrades from their competitors. Cable companies have slashed prices for customers threatening to cancel and have added free services or upgrades to persuade customers to stay, and Google’s proposition of selling consumers $70 gigabit access has proved tougher than expected.

It is highly likely the future of Google’s Access business will be deploying wireless broadband solutions powered by Webpass, a company Google acquired earlier this year. Webpass uses a high-speed point to point wireless transmission system the company claims can deliver gigabit broadband access to customers in multi-dwelling buildings and other urban areas. Webpass sells access for $60 a month (discounted to $550/yr if paid in advance) for 100Mbps-1,000Mbps speed depending on network density and capacity in the customer’s building. So far, Webpass has not been able to guarantee speed levels, and some customers report significant variability depending on their location and network demand.

Webpass’ wireless infrastructure costs a fraction of what Google has coped with building fiber to the home networks, and the installation of point-to-point wireless antennas on participating buildings has been less of a regulatory nightmare than digging up streets and yards to lay optical fiber.

But despite Webpass’ claim its performance is comparable to fiber, its inability to guarantee customers a certain speed level and its tremendous performance variability from 100 to 1,000Mbps exposes one of the weaknesses of fixed wireless networks. At a time when capacity is king, only fiber optic networks have shown a consistent ability to deliver synchronous broadband speeds that do not suffer the variability of shared networks, poor antenna placement/signal levels, or harmful interference.

There is room for wireless technology to grow and develop, as evidenced by the wireless industry’s excitement surrounding future 5G networks and their ability to offer a home broadband replacement. The emergence of 5G competition is almost certainly also a factor in Google’s decision. But even AT&T and Verizon acknowledge a robust 5G network will require a robust fiber backhaul network to support both speed and user demand. The more users sharing a network, the slower the speed for all users. No doubt Webpass has made the same assumption that cable operators did in the early days of DOCSIS 1 — current internet applications won’t tax a network enough to create a traffic logjam that would be noticed by most customers. The phone companies also learned a similar lesson trying to serve too many DSL customers from inadequate middle mile networks or traffic concentration points. (Some phone companies are still learning.)

Whether it was yesterday’s peer-to-peer file sharing or today’s online video, capacity matters. That is why fiber broadband remains the gold standard of broadband technology. Fiber is infinitely upgradable, reliable, and robust. Wireless is not, at least not yet. But technology arguments rarely matter at publicly-traded corporations that answer to Wall Street and investors, and it appears Google’s backers have had enough of Google Fiber.

Stop the Cap!’s View

At Stop the Cap!, we believe these developments further the argument broadband is an essential utility best administered for the public good and not solely as a profit-motivated venture. The path to fiber to the home service in rural, suburban, and urban communities has and will continue to come from a mix of private and public utilities, just as local public and private gas and electric companies have served this country for the last century. Where there is a business model for fiber to the home service that investors support, there is a for-profit fiber provider. Where there isn’t, now there is often no service at all. So far, the FCC in conjunction with Congress has seen fit to solve broadband availability problems by bribing private providers into offering service (usually low-speed DSL that does not even meet the FCC’s definition of broadband) with cash subsidies, tax write-offs, or occasional tax abatement schemes. Imagine if we followed that model with the nation’s public roads and highways. We would today be paying tolls or a subscription to travel down roads built and owned by a private company often financed by tax dollars.

Not every product or service needs to earn Wall Street-sized profits. Nobody needs to get rich selling water, gas, and electricity… or broadband. Public broadband networks can and should be established wherever they are needed, and they should be priced to recover their costs as well as expenses that come from support, billing, and ongoing upgrades. Naysayers like to claim municipal broadband is socialism run wild or an instant economic failure, yet the same model has provided Americans with reliable and affordable gas, electricity, and clean water for over 100 years.

Maine was made for municipal broadband.

In New York, publicly owned/municipal utilities often charge a fraction of the price charged by investor-owned utilities. In Rochester, where Stop the Cap! is headquartered, one need only ask a utility customer if they would prefer to pay the prices charged by for-profit Rochester Gas & Electric or live in a suburb where a municipal provider like Fairport Electric or Spencerport Electric offers service. RG&E has charged customers well over 10¢ a kilowatt-hour when demand peaks (along with a minimum connection charge of over $21/mo and a “bill issuance charge” of 72¢/mo). Spencerport Electric charges 2.9¢ a kilowatt-hour and a connection charge of $2.66 a month, and they issue their bills for free. There is a reason real estate listings entice potential buyers by promoting the availability of municipal utility service. The same has proven true with fiber-to-the-home broadband service.

The economic arguments predicting doom and gloom are far more wrong than right. Municipal utilities are often best positioned to offer broadband because they already have experience providing reliable service and billing and answer to the needs of their local communities. Incompetence is not an option when providing reliable clean water or electricity to millions of homes and customers have rated their public utilities far superior to private phone or cable companies.

Google’s wireless future may prove a success, but probably only in densely populated urban areas where a point-to-point wireless network can run efficiently and profitably. It offers no solution to suburban, exurban, or rural Americans still waiting for passable internet access. Clearly, Google is not the “free market” solution to America’s pervasive rural broadband problem. It’s time to redouble our efforts for public broadband solutions that don’t need a seal of approval from J.P. Morgan or Goldman Sachs.

Thirty cities in Bosnia, Herzegovina, and the Serb-majority entity known as Republika Srpska will now have access to fiber to the home service with broadband, television, and telephone service — all equipment included — for $27.50US a month.

Elta-Kabel’s under-$30 package includes more than 130 channels, unlimited phone, and unlimited 15/1Mbps broadband for less than what Time Warner Cable charges for its standalone Standard Internet service on a temporary promotion.

The cable operator is one of the biggest telecom companies in Bosnia and Herzegovina (part of former Yugoslavia) and is the first to offer up to 200/100Mbps broadband service over an all-fiber optic network.

Elta-Kabel fiber customers can choose from three types of connections: Super Net 60 (60/30Mbps), Super Net 100 (100/50Mbps) and Super Net 200 (200/100Mbps).

The company says fiber optic technology is “the reliable choice for the 21st Century.”

Further expansion of Google Fiber appears to be on hold as the company contemplates moving away from fiber to the home service towards a wireless platform that could provide internet access in urban areas for less money.

The Wall Street Journal today reports Google parent Alphabet, Inc., is looking to cities to share more of the costs of building faster broadband networks or using cheaper wireless technology to reach customers instead.

Six years after Google first announced it would finance the construction of fiber to the home networks, the company has made progress in wiring just six communities, many incompletely. Progress has been hampered by infrastructure complications including pole access, permitting and zoning issues, unanticipated construction costs, and according to one Wall Street analyst, the possibility of lack of enthusiasm from potential subscribers.

Google’s recent acquisition of Webpass, a company specializing in beaming internet access over fiber-connected wireless antennas between large multi-dwelling units like apartments and condos appears to be a game-changer for Google. Webpass was designed mostly to service urban and population dense areas, not suburbs or neighborhoods of single-family dwellings. Webpass’ reliance on wireless signals that travel between buildings removes the cost and complexity of installing fiber optics, something that appears to be of great interest to Google.

Google Fiber is planning a system that would use fiber for its core network but rely on wireless antennas to connect each home to the network, according to a person familiar with the plans. Alphabet chairman Eric Schmidt said at the company’s shareholder meeting in June that wireless connections can be “cheaper than digging up your garden” to lay fiber. The only question is what kind of performance can users expect on a shared wireless network. Google’s plans reportedly do not involve 5G but something closer to fixed wireless or souped-up high-speed Wi-Fi. A web video on Webpass’ website seems to concede “you get best speeds with a wired connection.”

Even Google’s wireless technology solutions provider Webpass concedes that wired broadband is faster.

Former Webpass CEO Charles Barr, now an Alphabet employee, argues wireless solves a lot of problems that fiber can bring to the table.

“Everyone who has done fiber to the home has given up because it costs way too much money and takes way too much time,” Barr said.

Barr’s statements are factually inaccurate, however. Fiber to the home projects continue in many cities, but if they are run by private companies, chances are those rollouts are limited to areas where a proven rate of return is likely. Large incumbent phone and cable companies are also contemplating some fiber rollouts, at least to those who can afford it. Many of the best prospects for fiber to the home service are customers in under-competitive markets where the phone company offers slow speed DSL and cable broadband speeds are inadequate. Rural communities served by co-ops are also prospects for fiber upgrades because those operations answer to their members, not investors. Community broadband projects run by local government or public utilities have also proven successful in many areas.

But like all publicly traded companies, Google must answer to Wall Street and their investors and some are not happy with what they see from Google Fiber. Craig Moffett from Wall Street research firm MoffettNathanson has rarely been a fan of any broadband provider other than cable operators and Google Fiber is no different.

“One can’t help but feel that all of this has the flavor of a junior science fair,” Moffett said of Google Fiber, pointing out the service has managed to attract only 53,000 cable TV customers nationwide as of December. Moffett concedes there are significantly more broadband-only customers signed up for Google, but that didn’t stop him from suggesting Google Fiber has had very little impact on increasing broadband competition across the country.

Analysts suggest Google Fiber is spending about $500 per home passed by its new fiber network. But that is a fraction of the $3,000+ per customer often spent by cable operators buying one another.

Google’s wireless deployment will likely take place in Los Angeles, Dallas, and Chicago according to people familiar with the company’s plans. Less dense cities slated for Google Fiber including San Jose and Portland, Ore., may never get any service from Google at all, but they are likely to hear something after a six month wait.

Google is also reportedly asking cities if the company can lease access on existing fiber networks. Another tactic is requesting power companies or communities build fiber networks first and then turn them over to Google to administer. The latter seems less likely, considering there are successful public broadband networks operating on their own without Google’s help.

A federal appeals court has reversed an effort by the Federal Communications Commission to pre-empt state laws restricting municipal broadband expansion in Tennessee and North Carolina, ruling the FCC exceeded its authority by interfering with both states’ rights to define the boundaries where the community broadband networks can and cannot operate.

In a near-unanimous decision (with some minor dissent from one judge), judges from the Sixth Circuit Court of Appeals found the FCC exceeded their authority.

“The FCC order essentially serves to re-allocate decision-making power between the states and their municipalities,” the court ruled. “This is shown by the fact that no federal statute or FCC regulation requires the municipalities to expand or otherwise to act in contravention of the preempted state statutory provisions. This preemption by the FCC of the allocation of power between a state and its subdivisions requires at least a clear statement in the authorizing federal legislation. The FCC relies upon § 706 of the Telecommunications Act of 1996 for the authority to preempt in this case, but that statute falls far short of such a clear statement. The preemption order must accordingly be reversed.”

In other words, the court ruled that the FCC’s belief that Section 706 of the Telecommunications Act of 1996 allowed it to pre-empt state broadband laws goes too far. The judges opined Congress would have to rewrite the law to clearly state it was acceptable for the federal branch of government to overrule how a community or state decides to draw boundaries for public utilities.

EPB is the municipal utility in Chattanooga, Tenn.

The ruling will have an immediate impact on plans by municipal utility EPB in Chattanooga and city-owned provider Greenlight in Wilson, N.C., to expand service outside of their respective service areas. EPB has been working inside the Tennessee legislature to overturn or change the current broadband law but has been unsuccessful so far. Comcast and AT&T have lobbied the Tennessee legislature to keep municipal competitors from expanding, even where neither company offers service.

“Ultimately, Tennessee’s broadband gap is a problem for Tennesseans, and we need a Tennessee solution,” said David Wade, president of EPB. “We will continue to work with the growing number of state legislators and grassroots citizens interested in removing the barriers that prevent EPB and other municipal providers from serving our neighbors in surrounding areas who have little or no access to broadband. We are further encouraged by Commissioner Randy Boyd’s interest in addressing the lack of broadband in rural areas. As the head of the Tennessee Department of Economic and Community Development, he is especially well positioned to join with state lawmakers in addressing this challenge on behalf of Tennesseans.”

Greenlight announces gigabit service for Wilson, N.C.

North Carolina’s law was effectively drafted by Time Warner Cable, who shepherded the bill through the Republican-controlled state legislature, making huge political campaign contributions along the way, eventually winning enough votes to see the bill become law.

The ruling is a serious blow to FCC chairman Thomas Wheeler, who made municipal broadband expansion one of his active agenda items at the FCC. Wheeler believed the two state laws were not supposed to inhibit rural broadband expansion. Critics of the laws contend they were written and lobbied for by the same incumbent cable and phone companies that could eventually face competition from public broadband networks.

“Let’s be clear: industry-backed state laws to block municipal broadband only exist because pliant legislators are listening to their Big Cable and Big Telecom paymasters,” said Michael Copps, a former FCC commissioner. “This decision does not benefit our broadband nation.”

Wheeler

Wheeler tacitly agreed, saying today’s decision “appears to halt the promise of jobs, investment and opportunity that community broadband has provided in Tennessee and North Carolina.”

“[Since 2015], over 50 communities have taken steps to build their own bridges across the digital divide,” Wheeler said in written comments. “The efforts of communities wanting better broadband should not be thwarted by the political power of those who, by protecting their monopoly, have failed to deliver acceptable service at an acceptable price.”

The ruling can be appealed to the U.S. Supreme Court, and the FCC has an excellent chance of getting the high court to overturn today’s decision. Rulings issued by the Sixth Circuit were reversed by the Supreme Court 24 out of the 25 times they were reviewed in the five annual terms starting in October 2008 and ending in June 2013 — the highest number of any federal appellate court during that time period.

Broadband activists can also return to the two state legislatures and urge that the broadband laws be modified or repealed. Wheeler seems ready to join the fight.

“Should states seek to repeal their anti-competitive broadband statutes, I will be happy to testify on behalf of better broadband and consumer choice,” Wheeler said. “Should states seek to limit the right of people to act for better broadband, I will be happy to testify on behalf of consumer choice.”