AT&T: Landlines may be a thing of the past in rural areas served by AT&T.

AT&T customers in the company’s rural service areas are likely to see wireless broadband as AT&T’s answer to rural America’s demand for Internet access.

Speaking on AT&T’s quarterly results conference call, Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets yesterday previewed the forthcoming investor and analyst conference scheduled for Nov. 7 to discuss AT&T’s future in the rural landline business.

“I think there is a place in some rural areas where I see the outline, that [wireless] could serve as an alternative to wired broadband,” de la Vega told a Wall Street analyst from Goldman Sachs. “We are going to be talking to you about that on November 7, giving you more details about our thinking of how we can use this technology. And, quite frankly, the customer reception to the technology [is good] in terms of their willingness to pay for great quality data in large, large amounts.”

Some analysts anticipate AT&T is also likely to announce some additional expansion of the company’s U-verse platform to an additional 3-5 million customers that were not previously scheduled to see the service in their area. The build-out would take 12-18 months to complete. But that still leaves up to 15 million rural AT&T customers with either no broadband or the company’s slower DSL service. For many of them, AT&T sees wireless Internet in their future.

At the core of AT&T’s wireless broadband solution is the company’s LTE 4G network. AT&T is stressing it intends to roll out LTE upgrades in both rural and urban areas, unlike its nearest rival Verizon Wireless, which has prioritized upgrades on urban areas. AT&T claims its current network performs at speeds of 5-12Mbps — faster in low demand areas. In areas where AT&T has not bothered to provide DSL service, the company has repeatedly stressed it believes wireless delivers the best bang for the buck.

Unfortunately for rural consumers, access is not likely to come cheap, congestion will reduce overall speeds, and plans will include usage caps that are draconian in comparison to the company’s wired broadband services.

AT&T is a strong believer is monetizing data usage by gradually eliminating the unlimited data plan the company started at the dawn of the smartphone era. The future at AT&T is usage-based pricing.

“I think that more customers we have on usage-based plans the better we are,” de la Vega told investors.

In the last quarter alone, AT&T earned $6.6 billion from its wireless data service — up more than $1 billion (18%) compared to the same quarter last year.  AT&T now takes $26 billion annually to the bank just from its wireless data earnings.

Looking for new revenue opportunities

More than half (52 percent) of all U.S. consumers say Internet service is their home’s most important utility, according to a survey conducted by Verizon Communications as part of their Verizon FiOS Innovation Index project.

But Verizon’s research surveys go well beyond simply identifying who loves Internet access. Verizon’s real interest is identifying so-called “borderless consumers,” — customers who are seeking a seamless online experience and connectivity both inside and out of the home.

The convergence of wired and wireless broadband networks is a potentially enormous money-maker for Verizon, especially if you happen to be a Verizon Wireless customer.

“As the borderless consumer segment continues to grow, so will the need to identify, understand and anticipate what consumers truly want in their increasingly connected lives – today and in the future,” said Eric Bruno, vice president of FiOS strategy and development for Verizon.

Fran Shammo, Verizon’s chief financial officer, has previously told investors that monetizing data usage goes beyond text messaging and web browsing. The next frontier for enhanced revenue will come from the machine-to-machine segment. As consumers strive for a more connected future, enabling wireless connectivity for home appliances, automobiles, medical equipment, and other devices will create new revenue streams for the company.

Verizon’s new research surveys help the company target its future marketing to consumers most likely to be living the “borderless lifestyle.” Are you? Here are some key attributes:

• Above average income: Most are college educated, own their home, and nearly half earn $75,000 or more annually, so they can afford higher broadband bills;
• They are 18-34: Generation X and Millenials grew up in an increasingly connected world. Baby boomers are not far behind, but seniors are;
• Women somewhat outnumber men in their need to remain connected;
• You already have a computer, smartphone, or tablet and are connected to high speed Internet. Most of you want faster speed, if you can get it.

Verizon’s study becomes murkier over the issue of cord cutting. Verizon found that video streaming continues to drive Internet traffic growth, but at least 89% still prefer watching shows on their televisions. Verizon defines that as live TV, DVR, or on-demand from “TV/Cable service.”

But they did not ask whether consumers are watching more or less television provided by their cable, satellite, or phone company or if a larger proportion of viewing now comes from Netflix or other streamed content. That is a key indicator of whether a customer is gradually shifting viewing habits, which could ultimately make it easier to dump cable television.

With 90 percent of those surveyed looking forward to the day when every connectable device in their house can seamlessly interconnect and work together, Verizon’s potential revenue opportunities are enormous, if customers use Verizon Wireless for connectivity and not free Wi-Fi. Machine-to-machine wireless traffic can boost profits without costing the company much, especially under Verizon Wireless’ new Share Everything pricing. The impact of short data exchanges likely from home appliances and other similar devices is expected to be negligible. The profits from charging at least $10 a month to add each of those devices to a Verizon Wireless account are not.

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)

Despite industry propaganda touting an “unlimited broadband future” (possibilities, that is, not an end to usage caps) and good sounding headlines about robust competition in the broadband market, the reality on the ground isn’t as rosy.

Americans looking for a better deal for broadband are largely stuck negotiating with the local cable company or putting up with less speed from the phone company to get a cheaper rate.

That is hardly the “success story” being pushed by the Mother of All Broadband Astroturf Front Groups, Broadband for America. BfA, backed by money from some of America’s largest telecom companies calls today’s marketplace “dynamic” and “rapidly changing.” For them, competition is not the problem, the way we define competition is.

Tell that to San Jose Mercury News columnist Troy Wolverton, whose dynamic and rapidly changing Comcast cable bill has now reached $144 a month, and threatens to go higher still when his two-year contract expires.

Wolverton is a case study of what an average American consumer goes through shopping around for broadband service. Despite assertions of a vibrant, competitive Internet access paradise from groups like Broadband for America, Wolverton found very little real competition on the menu, despite being in the high tech heart of Silicon Valley.

Valley residents can typically choose between AT&T and Comcast, if they have any choice at all. Neither company offers a great deal for consumers.

Comcast offers faster speeds at considerably higher prices that can be reduced somewhat by signing up for a costly triple-play service. AT&T’s prices are lower, but its service is slower and is based on a technology that in my experience is less reliable.

So it goes for millions of Americans who face the same dilemma: take a higher-priced package from the cable company or settle for less from the phone company. With the exception of Verizon FiOS, most large telephone companies still rely on basic DSL service to deliver broadband. AT&T’s U-verse and CenturyLink’s Prism are both fiber to the neighborhood services that deliver somewhat faster speeds than traditional DSL, but also have to share bandwidth with television and traditional phone service, leaving them topped out at around 25Mbps.

Wolverton could not believe his only choices were Comcast and AT&T, so he visited the California Broadband Availability Map, one of the state projects earnestly trying to identify the available choices consumers have for broadband access. Despite California’s vast size, it quickly became apparent that even companies like AT&T and Comcast largely don’t deliver broadband outside of cities and suburbs. Several smaller, lesser-known providers emerged from the map that were open to Wolverton, which he explored with less-than-satisfying results:

In addition to Comcast and AT&T, it listed Etheric Networks, which offers a wireless Internet service directed at home users that’s based on Wi-Fi technology, and MegaPath, which offers Internet access through a variety of wired technologies, including DSL.

After further research I found that neither of those companies was a legitimate option. MegaPath can’t deliver residential service to my house that’s faster than 1.5 megabits per second. Etheric, which focuses on business customers, offers a service level with speeds of up to 22 megabits per second, but it costs a cool $400 a month.

Other non-options for Wolverton included the highly-rated Sonic.net, which in his neighborhood is entirely dependent on AT&T’s landlines for its DSL service. That was a no-go, after Wolverton discovered he would be stuck with 3-6Mbps service. Clearwire also offers service in greater San Jose, but not at his home in Willow Glen.

That left him back with AT&T and Comcast.

But that is not really a problem in the eyes of industry defenders like Jeffrey Eisenach, managing director and principal at Navigant Economics and an adjunct professor at George Mason University Law School. Navigant is a “research group” that counts AT&T as one of its most important clients. The firm provides economic and financial analysis of legal and business issues cover for clients trying to sell their agenda. Navigant’s “experts have provided testimony in proceedings before District Courts, the Department of Justice, the Federal Trade Commission, the Federal Communications Commission, the Federal Energy Regulatory Commission, and numerous state Public Utilities Commissions.”

Eisenach goes all out for the broadband industry in his paper, “Theories of Broadband Competition,” which throws in everything but the kitchen sink to defend the status quo:

• The cost of broadband service is declining;
• The duopoly of cable and phone companies are still competing for customers and introducing new services;
• Competition can take the form of provider innovation (ie. providers compete by offering a better services, not lower prices);
• Wireless competition is accelerating, citing LightSquared and Clearwire as two conclusive examples of competition at work;
• The cost of service on a per-megabit basis has declined.
• Competition in today’s broadband market delivers ancillary benefits not immediately evident when only considering the customer’s point of view;

Eisenach’s pricing proof stopped in 2009, just as cable providers like Time Warner Cable began raising broadband prices. TWC’s Landel Hobbs to investors: “We have the ability to increase pricing around high-speed data.” (February, 2010)

Eisenach has appeared at various industry-sponsored evidence touting his views of broadband economics and competition that later turns up as headline news on Broadband for America’s website. But just as Wolverton’s initial optimism finding other choices for broadband faded with reality, so do Eisenach’s conclusions:

1. Eisenach’s evidence of broadband price declines stops in 2009, coincidentally just prior to the recent phenomena of cable broadband rate increases, which have accelerated in the past three years;
2. Competition still exists in urban and suburban markets, as long as phone companies attempt to stem the tide of landline losses, but it’s largely absent in rural markets and in decline in others where companies “reset” prices to match their cable competition. AT&T’s U-verse and Verizon’s FiOS both effectively ended their expansion, leaving large swaths of the country with “good enough for you” service. Cable operators have even teamed up with Verizon Wireless to cross-market their products — hardly evidence of a robustly competitive marketplace;
3. Innovation can take the form of services customers don’t actually want but are compelled to take because of bundled pricing or, worse, the decline in a-la-carte add-ons in favor of “one price for everything” models. Verizon Wireless set the stage for providers of all kinds to consider mandatory bundling for any product or service that can no longer deliver a suitable return on its own. For customers already taking every possible service or fastest speed, this pricing  may deliver lower prices at the outset, but for budget-focused consumers, compulsory packages or high prices on a-la-carte services assures them of a higher bill;
4. Eisenach’s examples of competition are a real mess. LightSquared is bankrupt and Clearwire has shown it cannot deliver an equivalent broadband experience for customers and throttles the speeds of those perceived to be using the service too much. Other wireless providers typically limit customer usage or cannot deliver speeds comparable to wired broadband;
5. While the cost per megabit may have declined in the past, cable providers are still raising prices, and as Google and community-owned providers have illustrated, delivering fast speeds should not cost customers nearly as much as providers continue to charge, with no incentive to cut prices in the absence of equally fast, competitive networks;
6. While broadband may open the door for additional economic benefits not immediately apparent, competitive broadband would further drive innovation and reduce pricing, delivering an even bigger bang for the buck.

Wolverton recognized taking a promotional offer from AT&T will temporarily deliver savings over what Comcast charges, but he would have to set his expectations lower if he switched:

I’m reluctant to switch to AT&T. [U-verse] Max Plus is the fastest level of service it offers at our house, but with a top speed of 18 megabits a second, it’s significantly slower than Comcast’s Blast. Speed matters to us, because my wife and I often share our Internet connection, and we frequently use it to transfer large files such as apps, videos, photos or songs to or from the Net.

[…] What’s more, as the FCC outlined in another recent report, Comcast does a better job of delivering the speeds it advertises than does AT&T.

What’s worse in my book is that AT&T’s U-verse’s Internet service is a version of DSL. It’s faster than regular DSL, because the copper wires in your house and neighborhood are connected to nearby high-speed fiber-optic cables. Even with that speed boost, though, I’m hesitant to go back to any kind of DSL service, because my wife and I suffered through years of unreliable DSL service from AT&T predecessor PacBell and then EarthLink, which piggybacked on AT&T’s lines.

Wolverton also objected to Comcast’s bundled pricing scheme, which delivers the best value to customers who sign up for broadband, television and phone service. Wolverton does not need a landline from AT&T or Comcast, and would like to drop the service. He’s not especially impressed with Comcast’s TV lineup (or pricing) either. But he noted if he switched to broadband-only service, Comcast would effectively penalize him with a broadband-only rate of $72 a month, exactly half the current cost of Comcast’s triple-play package.

In a later blog post, Wolverton confessed he liked Comcast’s broadband service and speeds, and with the carefully-crafted pricing the cable and phone companies have developed, he expected to remain a Comcast customer given his choices and pricing options, which are simply not enough.

Rogers is serving up its Ultimate Internet service, with speeds up to 150/10Mbps, by challenging some of Canada’s biggest athletes to try and beat the company’s broadband speeds.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Rogers Ultimate Bundle Challenge.flv[/flv]

Tennis Pro Milos Raonic: For Milos’ challenge, we set up a tennis court in a Toronto warehouse, with a “play” button target at one end.  We challenged Milos to serve the ball and hit the target to play a song, faster than we could download it using Rogers Ultimate Internet. Let’s not forget Milos is well known for his powerful serve, reaching 250 km/hr. He has also served more aces than any other player so far in 2012. Does Rogers Ultimate Internet have a chance against a champion like Milos?  (1 minute)

Apparently more often than not, judging from Rogers’ video. But one thing Raonic has going for him, as a human being, is no usage cap. As our loyal reader Alex points out, Rogers’ Ultimate Internet only includes a downright piddly 250GB a month, which is quite a little for customers paying just shy of $123 a month for Internet access. Rogers slaps a $0.50/GB overlimit fee on this tier, with a maximum of $100.

That leaves super-premium customers feeling like they can take Rogers’ screaming fast Internet service on a 15-lane highway with a 250kph speed limit for around five kilometers before hitting the toll booth.