Halloween scare stories are back!

It is amazing the length some incumbent broadband providers will go to stop publicly-owned networks from getting off the ground and competing with the “good enough for you” service on offer from the local phone or cable company.

This morning, Stop the Cap! received word from a Minnesota reader who reports their dinner hour was interrupted by an unsolicited phone call from a group called “Americans for Sensible Broadband,” which as far as we can tell does not exist as a formal group. The caller used ridiculous scare tactics worthy of a bad Halloween movie:

• Did you know that fiber broadband networks are expensive to run and will increase your electric bill to pay for the high powered lasers needed to send the signal to your home?

Fiber broadband projects now expanding in Minnesota have no relation to your electric bill because most are run by independent community-owned co-ops, not electric utilities. Even if they were run by an electric provider, the cost to power a fiber network is far smaller than the network of signal amplifiers and other transmission equipment needed by traditional cable and phone companies. The only electrical expense to the homeowner is powering any set top boxes or other related equipment to make use of the service. These costs are comparable to what one would pay with cable or phone services.

• Most fiber networks are not actually fiber at all. The largest companies in America actually let you keep your current wiring, but that is not fiber, so why spend tax money on a risky fiber network?

While AT&T U-verse has chosen the route of “fiber to the neighborhood,” which still relies on existing copper wiring from nearby poles to your home, many fiber to the home projects take fiber… straight to the home. Some community networks do make use of very short lengths of pre-existing copper wiring inside your home, but this has more to do with your convenience. You don’t need a fiber connection to your landline phone, for instance. Compare the broadband speeds and services on offer from the community provider vs. incumbent cable and phone companies. Choose the one that delivers the best services for the price.

• America’s cable and phone companies are working hard for pro-growth, pro-expansion policies in Washington that will allow your community to get the benefit of billions of private investment, at no risk to you.

An in-home threat to your children or incumbent provider profits?

Incumbent phone and cable companies already enjoy a higher level of deregulation than ever before. If they have not spent money to improve broadband in your area before, there is nothing that will open their wallets to provide the service now, unless someone else subsidizes part of the cost. Guess who “someone” is? That’s right. You the taxpayer or ratepayer. Whether in the form of broadband subsidies paid for by taxpayer dollars or ratepayer subsidies from the Universal Service Fund, only subsidies or competition prod incumbents to deliver better broadband to rural Minnesota (or anywhere else). If you fail a “Return On Investment” test, you will not get broadband no matter how much deregulation gets approved in Washington.

The question for rural consumers is whether AT&T, Frontier, CenturyLink, Comcast, or Charter Cable has your best interests at heart or whether a community co-op you partly own will.

• In socialistic countries, the government runs the broadband service and can monitor your web browsing. Do you want your local community checking up on your online activities?

“Socialistic” is in the eye of the beholder. Most broadband networks are run by private telecommunications companies, some with state subsidies, others entirely on their own. The federal government’s security agencies already have access to monitor Internet traffic under warrantless wiretapping laws, and that extends to every provider in the country, private or public. That said, there is no evidence local government officials would monitor your web browsing habits, much less have the budget or technical expertise to do so.

• Fiber cables create more hazards on utility poles designed for phone, cable and electric service. Is it worth risking those services for an unnecessary and expensive fiber network?

Electric and phone companies used the same scare stories to try and keep cable television lines off utility poles more than 30 years ago. Cable operators fought for and won the right to use utility poles to no ill effect, and at fair prices. It is ironic some cable companies want to use the same argument against municipal fiber that phone and electric companies used against them.

• In these difficult economic times, do you realize your local taxes could triple to pay for unnecessary fiber Internet?

Most public broadband projects are financed by municipal bonds obtained in the private free market. Investors can decide for themselves if they represent a safe investment, and many do. If the networks fail, private investors typically take the hit.

But the most ridiculous claim of all was that “recent news reports warn that lasers could blind your children if they happen to play with the fiber cables in your home.”

The only “news report” we could find on this subject was an Engadget news story from 2011 about an S3 Krypton laser that could blind astronauts without proper safety equipment. But those lasers are not powering broadband networks.

In reality, fiber to the home networks are safer than traditional copper phone wiring, which can send a significant electric shock to anyone playing with the wiring when a telephone rings. Many fiber networks rely on Class 1, low power lasers — the lowest risk level. Even if a customer stared at the lit end of an optical fiber connector, the visible light would be diffused into a cone pattern that would be completely harmless by the time it reached the retina. Many networks also include a secondary safety mechanism that quickly shuts down the laser light once the connection has been broken. Certain higher-powered laser communications networks can have some safety risks, but almost entirely for workers working on primary cables that deliver service to dozens of homes. Those workers are well-trained to avoid those risks.

Minnesota seems to be one of the latest hotbeds of incumbent wrath over expanding community-owned broadband networks. Despite efforts to label them insidious creeping socialism, they are actually no more threatening than a traditional co-op, except perhaps to incumbent cable and phone companies that have been running to the bank cashing checks from customers enduring low broadband speeds at high prices.

Verizon Communications is on high alert to monitor the potential impact of Hurricane Sandy on the company’s landline, FiOS, and wireless networks — primarily from line damage and extended power outages that could come as a consequence of the slow-moving Category 1 hurricane. Top wind speeds from Sandy have been upgraded this morning to 90mph, making the storm’s impact even more severe for residents along the Atlantic coastline.

Verizon retail outlets are stocking up on car phone chargers and universal charging devices to help customers who endure extended power outages, but some retail stores may close early or stay closed if local weather conditions warrant.

Non-essential construction projects and internal training programs have been suspended so the company can focus on network repairs, as needed.

Verizon wireline and wireless business units have activated national and regional command and control centers, enabling Verizon operations teams to monitor the storm’s progress and company operations, including network performance. Verizon has established communications with power and other service providers to ensure proper coordination in the event of storm damage. The company also has contacted vendors and other outside partners so that critical communications equipment and supplies can be prioritized, stocked and shipped as needed.

Company equipment — including poles, fiber-optic and copper cable, portable cell sites that can replace a damaged cell tower and mobile emergency generators that can be used when local electrical power fails — is being staged in and around the mid-Atlantic and Northeast regions.

Verizon is the dominant phone company and wireless provider in the northeastern U.S.

In addition, Verizon managers are communicating the company’s storm preparation efforts and coordinating pre-planned response activities with the public-safety community, as well as state, county and municipal agencies along the East Coast and the Midwest.

“Verizon Wireless stands ready to serve our customers, and I urge everyone first and foremost to stay safe,” said Dan Mead, president and CEO of Verizon Wireless. “We live and work in the towns and cities in the storm’s path, and we are dedicated to keeping our friends, families and neighbors connected in times like these. We prepare for situations like this year-round, and pride ourselves in our ability to be there for our customers when they count on us most.”

As Sandy’s track came more into focus, the company began communicating with its customers on Friday, posting consumer tips on various company websites, issuing a news release to media outlets in the threatened region and nationally, engaging customers through social media such as Twitter and Facebook, and sending emails to consumers, with key links for troubleshooting and reporting service problems.

Bob Mudge, president of Verizon’s Consumer and Mass Business division, said: “In addition to communicating with customers and ensuring that we will be working to keep the network operating and responding quickly to issues as they arise, we have reminded our employees of the need to work safely, be alert, and help our customers in any way they can. But our people know this well and are at their best in these critical situations when our customers depend on us the most.”

Mudge noted that even though Verizon technicians may be ready to repair storm-damaged Verizon facilities, they may have to wait for approval from local power companies, first-responders or law enforcement before beginning restoration work.

Customers may contact Verizon online at www.verizon.com/outage to report any wireline service-related issues; or call 1-800-VERIZON (1-800-837-4966). Business customers are advised to contact their regular customer service centers or account teams as needed.

Property values in the historic neighborhood of Hanover Heights (Kansas) are ticking up as tech businesses relocate to follow Google’s roll-out of gigabit fiber service, coming in a matter of weeks.

Only one problem: Google is not officially selling fiber service to businesses just yet. Answer? Buy residential property in the area and move workers who could deliver increased productivity with faster Internet speeds.

That was the answer for Local Ruckus LLC, which is opening its new headquarters in a 2,500-square foot home in the first neighborhood scheduled to receive Google Fiber service.

“It just makes life easier,” CEO Adam Arredondo told the Kansas City Star.

The company says it needs the faster speeds to facilitate transferring files back and forth more quickly.

RareWire, a local developer of apps for mobile devices has decided it can best leverage 1,000Mbps broadband speeds launching a new startup – App Creation Studio, which will assist developers with testing and marketing apps.

Tech start-ups are exactly what Google hoped to see from its experimental fiber network, which is still barely operational. City officials see fiber broadband infrastructure and Business Hosted Voice Solutions as the foundation for energizing the local digital economy.

KCMO mayor Sly James last month unveiled Launch KC — an effort to attract technology companies to Kansas City, particularly start-ups.

James announced five companies and Union Station were prepared to offer free or “very affordable” office space in the city’s Crossroads district, the West Bottoms, and downtown. Office space is even available at the Kansas City International Airport.

Other initiatives would stimulate businesses with attractive sale-and-leaseback offers and exemptions for sales and property taxes. Officials specifically targeted city neighborhoods they felt would be attractive to young entrepreneurs in their 20s and 30s looking for office space. Nearby renovated rental property in neighborhoods officials call “funky without being phony” and “organic” should prove attractive to those relocating to Kansas City, according to project representatives.

City officials are also working on developing free Wi-Fi service in the neighborhood and attracting a data center that would offer attractive cloud storage and other web hosting services.

Most of the incentives represent a fundamental shift away from traditional economic development initiatives, mostly targeted to traditional brick and mortar projects for large manufacturing, retail, or service companies that employ hundreds or thousands of workers. Instead, Kansas City officials are targeting small digital economy businesses that often employ fewer than 20 workers. Launch KC believes the sheer number of potential start-ups, and the modest cost of the program, could pay dividends.

With Google Fiber and the city’s cooperation, the Mayors’ Bistate Innovations Team Task Force believes it has a winning combination.

“We’re in a great position right now,” Burke said, “and we need to take advantage of it.”

A growing scandal over alleged diversion of British taxpayer funds intended for fiber broadband rollouts has now cost one whistleblower his job, terminated after suggesting British Telecom (BT) is artificially inflating infrastructure expenses.

The Conservative government’s Department for Culture, Media, and Sport (DCMS) oversees £1 billion in public subsidies to improve broadband in Britain. Much of that is earmarked to construct fiber to the neighborhood facilities in smaller towns and villages — the rural subsidy providing the only chance most of these residents have for better broadband service. But a whistleblower inside the DCMS has said the primary government-approved contractor, BT, is artificially inflating its prices — pocketing a growing amount of taxpayer funds instead of enhancing its broadband buildout.

Courtesy: Br0kenTeleph0n3 (click to enlarge)

The whistleblower, identified as Michael Kiely, a DCMS broadband project consultant, was fired after he detailed BT’s ever-growing (and highly confidential) cost estimates to several village and town councils fighting for a better deal from the phone company. The issue has been closely watched by the Br0kenTeleph0n3 blog, which reports on how Britain’s broadband stimulus funding is being spent. The blog reported the DCMS sacked Kiely, apparently for exposing BT’s secret pricing schemes.

“I am getting increasingly concerned at the way in which whistleblowers are being bullied,” Margaret Hodge, chair of the Public Accounts Committee, told the Guardian newspaper while demanding an investigation. “All too often people hide behind commercial confidentiality. This culture denies us the right to know how our money is being spent.”

Many local governments are matching broadband subsidies with local funds to increase the number of homes reached by fiber-enhanced Internet access. The demand for fast broadband is so great in the UK, the initial plan to spend £530 million has now been effectively doubled, with even more money coming from the European Commission and other sources. Britain’s broadband expansion plan envisions reaching as many rural homes as feasible with the available funds. The more funds diverted away from broadband expansion into the pockets of others, the fewer number of homes can be reached.

The enormous amount of available government funding  appears to have caught BT by surprise, and Kiely suspects the company is inventing new fees, while inflating others, to ‘soak up’ the additional money without having to deliver any improvements in service.

Kiely noted BT appeared to be setting  new wholesale rates for fiber cabinets, despite the fact costs vary widely in different regions. Kiely notes that even as BT enjoys economies of scale, the price it charges for rural cabinets appears to be rising, even though costs are declining.

In rural areas, BT is seeking up to £30,000 for each fiber cabinet, despite the fact the average price in Northern Ireland’s recent broadband roll-out was just over £13,000 each.

BT’s estimate for two fiber cabinets in Great Asby, which will service hundreds of residents, was estimated at £60,000, a price Kiely also suggests is inflated.

The phone company has made cost verification nearly impossible with strict, mandatory confidentiality agreements that prohibit local councils from learning BT’s true costs. BT’s non-disclosure agreement also prohibits local governments from comparing notes about what the company charges in nearby communities. The government has approved only two vendors for the government-funded broadband expansion — BT and Fujitsu, with BT winning the overwhelming majority of contracts.

The giant, former state-owned phone company, comparable to AT&T or Bell Canada, can also hide cost reductions achieved from experience rolling out service, economies of scale like volume discounts, and other labor savings. BT’s attempt to create standardized pricing also leaves plenty of room to inflate prices by rolling in unexplained charges like “planning costs,” “availability charges,” and “take up bonuses.”

Despite this, BT says claims it is misspending public funds are completely baseless, and points to its own independent investment in British broadband.

“It is ludicrous that some people are suggesting that we are trying to pass on the full cost of deployment to our public sector partners,” BT said in a statement. “In fact, we are looking at a low double digit year payback in these areas even when the public funds are taken into account.”

Courtesy: Br0kenTeleph0n3 (Click to enlarge)

Conservative party loyalist Maria Miller, recently appointed as the government’s new culture secretary during a cabinet reshuffle, has not commented on the BT controversy. Instead, she has prioritized reducing government “red tape” for providers like BT while also tamping down expectations for the broadband expansion program.

Among her deregulation priorities: scrap the right for local governments to object to the placement of often unsightly broadband street cabinets, force “reasonable” terms on private landowners where necessary infrastructure must be placed or routed across, and sweeping permission to allow virtually anyone to put overhead lines up anywhere they please. All of these objectives heavily favor BT’s interests, according to industry observers.

Miller also recently took pressure off BT to deliver game-changing speeds by redefining “superfast broadband” as “potential headline download access speeds greater than 24Mbps.” That falls far short of the 100Mbps service most expected in return for more than £1 billion in taxpayer subsidies, often directed to BT.

Even more telling, Miller considers 2Mbps broadband speeds adequate: “Our investment will help provide 90% of homes and businesses with access to superfast broadband and for everyone in the UK to have access to at least 2Mbps,” she said.

The European continent, in comparison, is targeting 30Mbps as the bare minimum speed, with at least 50% of Europeans getting 100Mbps service by 2020.

Great Britain’s broadband expansion plan is highly dependent on fiber to the neighborhood (FTTN) technology, with traditional copper phone lines carrying the service the rest of the way into a home or office. Both AT&T’s U-verse and Bell’s Fibe are examples of FTTN technology.

As elsewhere, BT considers 24Mbps a suitable maximum speed for FTTN technology, but most customers will not even achieve that. Just like traditional DSL, distance matters, as does line quality. BT has quietly told most councils the average speed most local residents will actually receive is 15Mbps on average.

[flv width=”640″ height=”372″]http://www.phillipdampier.com/video/Jeremy Hunt Announces Superfast broadband 2010.flv[/flv]

Former Secretary of State for Olympics, Culture, Media and Sport Jeremy Hunt outlining Britain’s superfast broadband initiative in 2010. (4 minutes)

Phillip “You Guys Need a Timeout” Dampier

AT&T and Time Warner Cable are complaining they have gotten a raw deal from Kansas City, Mo. and Kansas City, Ks., in comparison to the incentives Google was granted to wire both cities with gigabit fiber broadband.

“It’s time to modernize our industry’s rules and regulations…so all consumers benefit from fair and equal competition,” read a statement from AT&T.

“There are certain portions of the agreement between Google and Kansas City, Kan., that put them at a competitive advantage compared with not just us but also the other competitors in the field,” said Alex Dudley, a Time Warner Cable spokesman. “We’re happy to compete with Google, but we’d just like an even playing field.”

The Wall Street Journal seemed to suggest Google was getting the keys to both cities, with grants of free office space and free power for Google’s equipment, according to the agreement on file with the cities. The company also gets the use of all the cities’ “assets and infrastructure”—including fiber, buildings, land and computer tools, for no charge. Both cities are even providing Google a team of government employees “dedicated to the project,” says the Journal.

The Google Fiber project was so desired that the local governments rolled out the red carpet. In Kansas City, Mo., for instance, the city is allowing Google to construct “fiberhuts,” small buildings that house equipment on city land at no cost, according to a person familiar with the matter.

The cities are discounting other services, as well. For the right to attach its cables to city utility poles, Google is paying Kansas City, Kan., only $10 per pole per year—compared with the $18.95 Time Warner Cable pays. Both cities have also waived permit and inspection fees for Google.

The cities are even helping Google market its fiber build-out. And both are implementing city-managed marketing and education programs about the gigabit network that will, among other things, include direct mailings and community meetings.

Several cable executives complain that the cities also gave Google the unusual right to start its fiber project only in neighborhoods guaranteeing high demand for the service through pre-registrations. Most cable and phone companies were required by franchise agreements with regional governments to build out most of the markets they entered, regardless of demand.

But the Journal missed two key points:

1. Time Warner Cable has been granted the same concessions given to Google on the Missouri side, and AT&T presumably will also get them when it completes negotiations with city officials on the matter.
2. Both cable and phone companies have the benefit of incumbency, and the article ignores concessions each had secured when their operations first got started.

The Bell System enjoyed a monopoly on phone service for decades, with concessions on rights-of-way, telephone poles and placement. AT&T was a major beneficiary, and although the AT&T of today is not the same corporation that older Americans once knew, the company continues a century-long tradition of winning the benefit of the doubt in both the state and federal legislature. AT&T has won statewide video franchise agreements that give the company the power to determine where it will roll out its more advanced U-verse platform, and enjoys carefully crafted federal tax policies that helped them not only avoid paying any federal tax in 2011 — the company actually secured a $420 million “refund” subsidized by taxpayers.

Cable operators also won major concessions from local governments under pressure from citizens eager to buy cable television. At the time, cable companies were granted exclusive franchises — a cable monopoly — to operate, an important distinction for investors concerned about the value of their early investments. Local zoning and pole attachment matters were either negotiated or dealt with legislatively to allow cable companies the right to hang their wires on existing utility poles. Franchise agreements permitted the gradual roll-out of cable service in each franchise area, often allowing two, three, or more years to introduce service. It was not uncommon for neighborhoods on one side of town to have cable two years before the other side could sign up. That sounds awfully familiar to AT&T U-verse today.

Google’s proposal to build a revolutionary broadband network delivering 1Gbps deserved and got the same type of treatment then-revolutionary phone and cable service won back in the day.

Time Warner Cable also won much the same treatment Google is now getting, and the cable operator has gotten $27,000 in fees refunded and will avoid another $100,000 in permit fees going forward. Time Warner Cable and Google will both receive free traffic control services during network construction — not that Time Warner Cable plans much of a change for customers in either Missouri or Kansas.

AT&T will likely also receive the same treatment, although it would be hypocritical of them to complain that Google gets to pick and choose where it provides service. Large swaths of Kansas City and suburbs are still waiting for U-verse to arrive, and many areas will never get the service. Cable operators had to wire a little further, but also benefited from years of monopoly status and network construction expenses paid off years ago when there literally was no competition.

Those paragons of virtue at Goldman Sachs are appalled Google has such a good relationship with Kansas City officials more than happy to have the gigabit speeds neither AT&T or Time Warner Cable would even consider providing.

Google’s rights “appear to be significantly more favorable than those cable, Verizon or any other fiber overbuilders achieved when striking deals with local governments in the past,” Goldman Sachs analyst Jason Armstrong told the Journal. “We’re surprised Time Warner Cable hasn’t been more vocal in its opposition.”

But then the cable company has secured most of the same benefits Google has, so why complain at all?

In fact, city officials had to browbeat Time Warner to modernize its network in ways it would have not done otherwise without the new agreement.

Both AT&T and Time Warner have every right to be concerned. Their substandard networks and high prices (along with a lousy history of customer service, according to national surveys) put them at a competitive disadvantage if Google does not make any major mistakes. Neither cable or phone company has made any noise about upgrading service to compete, and should customers begin to leave in droves, then both companies may actually have something to cry about.

The Wall Street Journal’s report on the concessions granted to Google wanders off into the Net Neutrality debate for some reason, and misses several important facts reviewed above.  (3 minutes)