Horse and buggy broadband in the slow lane.

One of Australia’s largest broadband suppliers has declared the country’s satellite solution for rural broadband hopelessly overloaded to the point of being “almost unusable” and has stopped selling access.

iiNet announced this week it would no longer sign up new customers of NBN Co’s rural satellite network because the service is oversold in their view.

“We could not continue to offer a service markedly below both our own and our customers’ expectations,”  iiNet’s chief executive Michael Malone said in a statement. “During occasional peak periods the service was so slow as to be almost unusable. As more people are added to the network, quality will only decline further. In the absence of any action by NBN Co to increase transmission capacity, I call on the rest of the industry to respect their existing customers and also cease sale.”

NBN Co, however, claimed it still had room for an extra 5,000 customers — mostly on its spot beam targeting central and western Australia. A spokesperson for the satellite venture did admit satellite beams covering NSW, Tasmania and Queensland were near capacity. NBN Co is investigating leasing more bandwidth on board the satellite, but cost concerns may make that impossible.

The venture claims 48,000 Australians can satisfactorily share the interim satellite broadband service, which is supposed to offer 6Mbps speed. But as Australians join others around the world favoring online video and video conferencing over services like Skype, those original estimates have to be scrapped. In the evenings, some customers report speeds drop below 56kbps or the service simply freezes up and stops working altogether. In response, NBN has adopted a strict monthly usage limit of 9GB and has told customers they will likely have to wait up to two years for a capacity increase.

The government is planning to launch two new custom-made satellites in 2015 to ease capacity concerns. NBN Co claims the two satellites will deliver 25/5Mbps service for 200,000 rural Australians, assuming usage estimates of today’s average broadband user.

Critics contend satellite broadband is not a good long-term solution except in the most rural of sparsely populated areas. Although providing wired service may be too costly, ground-based wireless services could be the most capable technology to contend with future demand and capacity concerns.

iiNet and other ISPs may already be headed in that direction. Some are advising customers to choose fixed wireless options from Australia’s cell phone providers, although those plans are heavily capped and very expensive.

Broadband availability has a direct impact on property sales in rural Australia. A couple that purchased a home in Mount Bruno, near Wangaratta in north-east Victoria discovered only after closing the deal that NBN Co would not sell them satellite broadband because the spot beam targeting Victoria was full.

The couple needs Internet access for work and their telephone line is unsuitable for ADSL. Mobile broadband in the Mount Bruno area is sub-par and expensive as well. As a result, the couple will have to rent office space in Glenrowan or Wangaratta that qualifies for wired broadband until at least 2015, when the next NBN satellite is launched.

iiNet regrets having to turn customers away.

“At its peak, we had 500 customers signing up every week for our NBN satellite services. There is clearly a significant demand for higher quality broadband in remote Australia, and we’re absolutely gutted that we’ve had to withdraw this crucial service from sale,” said Malone.

The WiredWest Cooperative
Towns shown above are official voting members of the WiredWest Cooperative. The town of Montgomery has also recently become a member. Requirements for new towns including being contiguous and directly accessible by road from another WiredWest member town, and less than 50% served by cable broadband.

Although plans to offer publicly owned fiber to the home service in 42 western Massachusetts communities are moving forward, a proposed $10 million taxpayer-funded incentive to encourage Comcast to expand cable service in western Massachusetts could mean the cable giant might get to some of those communities first.

Reps. Stephen Kulik (D-Worthington), Paul Mark (D-Cuba) and Sens. Stanley Rosenberg (D-Amherst) and Benjamin Downing (D-Pittsfield) have filed an amendment to Gov. Deval Patrick’s $40 million community broadband bond bill requesting a $10 million incentive be included to underwrite Comcast’s expenses to expand cable service into areas the company has long declared unprofitable.

“It’s challenging, because you cannot overbuild a new broadband network where there is existing service,” Kulik told The Recorder. “What we’re proposing is to add language to this bill, to provide incentive money to expand cable service.  The partial cable towns aren’t eligible for federal funds. Carving out a way to reach out to these towns and extend cable seems a better way to do this.”

The dozens of communities participating in the WiredWest community broadband consortium have waited years for better broadband service. Rural western Massachusetts has been largely bypassed by Verizon, which only offers limited DSL service to some customers. Dominant cable provider Comcast primarily serves denser neighborhoods in selected towns.

Life is particularly complicated for the handful of communities that have some service from Verizon and/or Comcast, because almost all federal broadband grants are available only to communities that don’t have Internet access. These partially served areas, dubbed “cable towns,” are frustrated by government grants that only direct funding to areas where no service is available and are on the receiving end of endless complaints from local residents suffering broadband envy, knowing a neighbor up the street has had cable service for 30 years while many others are left in limbo.

Kulik

In August, Chris Saner of Huntington told the newspaper Comcast’s cable line ends 1.4 miles down the road from his house. The cable company would be happy to extend service to the roadway in front of his home for $24,000. If Saner had to sell his home, that investment might be mandatory to help find a buyer. Saner should know, as he works in real estate. Prospective buyers tell him, “don’t even show me anything where there’s no cable.”

Broadband access has become so critical, some don’t care whether they get it from WiredWest’s future fiber network or Comcast’s coax.

Fiber broadband “is lobster and filet mignon. Cable is hamburger, but give us hamburger —we’re starving out here,” Saner said.

The $10 million proposal from the four Massachusetts Democrats could bring faster cable Internet service for some residents, but could also potentially undercut fiber access down the road.

Comcast isn’t likely to expand service on its own, citing Return On Investment formulas that make expansion unprofitable. A $10 million incentive could resolve some of those cost concerns, but critics call it corporate welfare.

Robbie Leppzer, a Wendell documentary filmmaker who has been involved in the struggle to improve broadband in western Massachusetts for years, suggests that taxpayer funds would be better spent in the public sector, “where towns and their residents have more say in the process.”

“Personally, I would love to see a nonprofit, community-based solution because it would be a more effective use of money, and it would keep it in the fiber-optic realm,” Leppzer told the newspaper. “While [coaxial cable] may be adequate for now, it will not meet the needs of the 21st century.”

Ironically, western Massachusetts may eventually get the fastest Internet speeds in the state from the Massachusetts Broadband Institute’s $71.5 million middle-mile network, now 95 percent complete. MBI’s priority is to build the regional fiber network and provision it for institutional customers including municipal buildings, schools, hospitals, libraries, fire and police departments. Once complete, the network’s second phase involves expanding access to the public.

The WiredWest consortium will be the public-facing part of the project, responsible for marketing high-bandwidth, affordable Internet, phone, high-definition television services and ancillary services to residents and businesses. WiredWest wants to build a 1,952-mile fiber-to-the-home network off MBI’s regional fiber backbone and institutional network.

One of the most common questions from eager would-be customers is exactly when the fiber network will be finished and open for business to the public. Funding remains the biggest impediment. The cost of wiring residents for fiber service across the 42-town consortium ranges from $70 million to $130 million. It’s a substantial sum for small communities to cover, but the project does enjoy economy of scale that could ultimately save taxpayer dollars.

In Leverett, which has been building a fiber-to-the-home network on its own, the price tag for the 1,900 residents is $3.6 million — the amount of the bond secured to launch the project. Leverett residents will cover the costs of the fiber network through a tax increase that will amount to $295 a year over 20 years for a home assessed at $278,700.

The state can continue to budget about $40 million annually to gradually connect residents to the WiredWest fiber network or find Comcast expansion a better choice at a quarter of the price in some communities. It could even fund both. For some elected officials, getting broadband to communities using any means necessary is the primary goal. Downing thinks the western half of the state has waited long enough for broadband, noting the improvement initiative started in 2008. He wants the project finished before Patrick leaves office.

“We should all recognize that 18 months from now is the end of this administration,” Downing said. “And there is no guarantee that the next governor will share the same commitment for this project.”

[flv]http://www.phillipdampier.com/video/Viodi Broadband – Unique to Each Locale 11-13-13.mp4[/flv]

The western Massachusetts middle-mile/fiber to the home project is being developed in cooperation with Axia Technology Partners, a consulting, engineering, and construction firm. Tim Scott talks to Viodi.tv about Axia’s role as the operator for the Massachusetts community network. (7:45)

Cable ONE’s boost in cable infrastructure investment is paying dividends for its broadband customers with new upstream speed upgrades.

“Our customers have expressed a need for faster upload speeds and we’re committed to listening to our customers and delivering the latest products and technical advancements while maintaining the highest level of reliability and customer care,” said Joe Felbab, Cable ONE vice president of marketing.

The details:

• 50/2Mbps Streaming Plan gets a slight bump to 3Mbps upload speed;
• 60/2Mbps Premier Plan gets upload speed doubled to 4Mbps;
• 70/2Mbps Ultra Plan gets a triple boost to 6Mbps.

To activate the new upload speeds, reset your cable modem by briefly unplugging it.

Cable ONE’s promotions often only last three months before increasing to the regular, undisclosed a-la-carte price. Modem lease or purchase is extra.

In June, Cable ONE scrapped its confusing consumption billing scheme and replaced it with standard usage caps that our readers report are unevenly enforced.

The 1.5Mbps, 5Mbps, 8Mbps, 10Mbps, 12Mbps, & 50Mbps services (some plans grandfathered for existing customers) have a cap of 300GB per billing cycle, while the 60Mbps and 70Mbps services respectively have 400 and 500GB data caps per billing cycle. Surfing Internet has a 50GB cap.

While 6Mbps upload speed is slightly better than what Time Warner Cable and AT&T U-verse customers get, Cable ONE remains well behind companies like Comcast and Verizon FiOS.

Cable ONE in April announced a two-year, $60 million network upgrade across 42 cable systems in its mostly rural footprint to enhance reliability and deliver faster Internet service. Upstream speeds are the most difficult to increase for cable broadband providers because the DOCSIS standard was designed to deliver fast download speeds.

Earlier this month, Cable ONE adopted TiVo for its new Whole Home DVR, which offers 650 hours of recording time with four built-in tuners and an Advanced TiVo on-screen guide.

In large parts of its national service area, Cable ONE competes with telephone companies AT&T, CenturyLink, and Windstream.

Verizon Wireless quietly admitted Tuesday its much-vaunted LTE network is suffering speed slowdowns so serious, some customers in New York, Chicago, and San Francisco are being randomly kicked off Verizon’s 4G network to slower 3G service until congestion eases.

Fran Shammo, Verizon’s chief financial officer, volunteered that online video was the likely culprit and he was surprised by usage growth well in excess of what Verizon predicted.

Current estimates from the company suggest Verizon’s LTE customers are responsible for 64% of all data traffic on Verizon’s wireless network nationwide. But in large cities, Shammo said traffic numbers are much higher.

Shammo

“There are certain pockets where we’re absolutely going to experience that down tick from the LTE network to 3G because of capacity constraints,” Shammo admitted.

The sudden revelation Verizon now has insufficient capacity for its LTE service is a significant reversal for Shammo, who has repeatedly told investors Verizon has enough wireless spectrum for the next 4-5 years.

In May 2013, Shammo told investors attending the JPMorgan Global Technology, Media and Telecom Conference:

As I have said before, our spectrum position right now is very good, with the AWS transaction that we completed with the cable carriers last year, with the sale of the spectrum that we are doing with AT&T later this year, obviously giving that spectrum to someone who can utilize it better than we can at this point in time. So I think our holdings are exactly where we need to be. And I have said before we really don’t need spectrum for the next four to five years, with the way that we deployed CDMA and how we will utilize that spectrum from our CDMA deployment over to the 4G network as we need it.

Later that same month, Shammo confidently repeated his assertion Verizon was all set for spectrum at Barclays Global Technology, Media and Telecommunications Conference:

Well, we have — from where we sit today, we have a very good spectrum portfolio which is why we went after the AWS spectrum, which is really going to be used for our capacity of LTE. The 700 megahertz that we have contiguous across the United States is used for the coverage piece. So we’re in pretty good shape for the next four to five years, even with reallocating our 3G spectrum over to our 4G network. […] And we think, look, we think that there will be enough spectrum there. We think that technology change — I mean, people are already talking about LTE advanced. Well, LTE advanced is nothing more than creating a bit more speed on the network. But really LTE advances around being able to utilize the spectrum much more efficiently within the network.

Carriers can boost coverage with more cell towers, street level picocells, or in-building femtocells.

Some critics suggest Verizon is ginning up a spectrum crisis as new FCC chairman Tom Wheeler begins to look at the current state of wireless spectrum and competition in the wireless industry. They also point to the fact Verizon has so much unused, warehoused spectrum, it has tried to sell the excess off to third parties.

“We have A band [unused spectrum] in our pocket today that we put for auction a year and a half ago and we did not get what we thought it was worth,” Shammo said yesterday. “We brought it back into the portfolio. But we can use that as a trade for some different spectrum. We put it up for auction so obviously it was on the block [and was] never taken off the block. But obviously it is not for fire sale. If a transaction makes sense then we will execute the transaction. If it doesn’t, then we will deploy it.”

In the short-term, Shammo promised customers the congestion issues were already being dealt with by “lighting up” acquired AWS spectrum formerly owned by cable operators, and adding data systems and small cell-type antennas in high congestion areas.

Shammo added that since Verizon was finished expanding its wireless network out to new, unserved areas, future investments would be directed at improving service within current coverage areas.

“I think by year-end you’re going to see us [concentrate] all of our CapEx around densification and then you will start to see us talk about things like VoLTE (Voice over LTE) and multicast (video) and some of these LTE advanced technologies that will come in the next year,” said Shammo.

The next name of Time Warner Cable?

Charter Communications is laying the foundation for a leveraged buyout of Time Warner Cable before the end of the year in a deal that could leave Time Warner Cable’s broadband customers with Charter’s usage caps.

Reuters reported discussions between the two companies grew more serious after last week’s revelation a poor third quarter left TWC with 308,000 fewer subscribers.

Charter is relying on guidance from Goldman Sachs to structure a financing deal likely to leave Charter in considerable debt. Charter Communications emerged from bankruptcy in 2009 and is the country’s tenth largest cable operator, estimated to be worth about $13 billion. Time Warner Cable is the second largest cable operator and is worth more than $34 billion.

The disparity between the two companies has kept Time Warner Cable resistant to a deal with Charter, stating it would not be beneficial to shareholders. Charter executives hope to eventually win shareholder support for a buyout stressing the significant cost savings possible from a combined operation, particularly for cable programming.

The deal would likely end Time Warner Cable as a brand and leave Charter Communications CEO Thomas Rutledge in charge of a much larger cable company. Pricing and packaging decisions are usually made by the buyer, which could bring faster broadband speeds to Time Warner customers, but also usage caps already in place at Charter.

John Malone’s War on Customers

Malone

Cable billionaire John Malone, former CEO of Tele-Communications, Inc. (TCI) — America’s largest cable operator in the 1980s — believes consolidation is critical to the future of a cable business facing competition from phone companies and cord cutting. Malone’s Liberty Media, which now holds a 25% stake in Charter, is currently buying and consolidating cable operators in Europe. Malone’s post-consolidation vision calls for only two or three cable operators in the United States.

Malone’s quest for consolidation is nothing new.

Under his leadership, TCI eventually became the country’s biggest cable operator, but one often accused of poor service and high prices. More than a decade of complaints from customers eventually attracted the attention of the U.S. Congress, which sought to rein in the industry with the 1992 Cable Act — legislation that lightly regulated rental fees for equipment and the price of the company’s most-basic television tier.

Despite the fact consumer advocates didn’t win stronger consumer protection regulations, TCI was still incensed it faced a new regulatory environment that left its hands tied. One executive at a TCI subsidiary advocated retaliation with broad rate increases for unregulated services to make up any losses from mandated rate cuts.

A 1993 internal TCI memo obtained by the Washington Post instructed TCI system managers and division vice presidents to increase prices charged for customer service calls and add new fees for common installation services the company used to offer for free. TCI’s Barry Marshall recommended charging for as many “transaction” services as possible — like hooking up VCR’s, running cable wire, and programming remote controls for confused customers.

“We have to have discipline,” Marshall wrote. “We cannot be dissuaded from the [new] charges simply because customers object. It will take awhile, but they’ll get used to it. The best news of all is we can blame it on re-regulation and the government now. Let’s take advantage of it!”

Tele-Communications, Inc. (TCI) was the nation’s largest cable operator. Later known as AT&T Cable, the company was eventually sold to Comcast.

The FCC’s interim chairman at the time — James Quello, charged with monitoring the cable industry, was not amused.

“It typifies the attitude of cable companies engaging in creative pricing and rate increases to evade the intent of Congress and the FCC,” Quello said. “There is little doubt that the cable industry has an economic stake in discrediting the congressional act they vehemently and unsuccessfully opposed.”

Marshall defended his internal memo, although admitted it was inartfully written and was not intended for the public. Revelation of a damaging memo like this would normally lead to a quiet resignation by the offending author, but not at John Malone’s TCI, a company with a reputation for being difficult.

Mark Robichaux’s 2005 book, Cable Cowboy: John Malone and the Rise of the Modern Cable Business, was even less charitable.

Robichaux describes Malone as a “complicated hero,” at least for investors for whom he was willing to ignore banking rules and creatively interpret tax law. Robichaux wrote Malone’s idea of customer service was to ‘charge as much as you can, but spend as little as you can get away with.’

TCI’s top priority was to keep up the cable business as an “insular cartel.” The predictable result included accusations of “shoddy service” customers were forced to take or leave. In the handful of markets where TCI faced another cable competitor, TCI ruthlessly slashed prices to levels some would describe as “predatory,” only to rescind them the moment the competitor was gone. TCI’s intolerance for competition usually meant mounting pressure on competitors to sell their system to TCI (sometimes at an astronomical price) or face a certain slow death from unsustainable price cuts.

Among Malone’s most-trusted friends: junk bond financier Michael Milken and Leo Hindery, former CEO of Global Crossing.

Congressman Albert Gore, Jr., later vice-president during the Clinton Administration, was probably Malone’s fiercest critic in Washington. Gore’s office was swamped with complaints from his Tennessee constituents upset over TCI’s constant rate increases and anti-competitive behavior.

The cable industry’s biggest competitor in the 1980s-1990s was a TVRO 6-12 foot diameter home satellite system.

Gore was especially unhappy that TCI’s grip extended even to its biggest competitor — satellite television.

In the 1980s and early 1990s, cable operators made life increasingly difficult for home satellite dish owners, many in rural areas unserved by cable television. But things were worse for home dish owners that walked away from TCI and began watching satellite television instead. To protect against cord-cutting, the cable industry demanded encryption of all basic and premium cable channels delivered via satellite. It was not hard to convince programmers to scramble — most cable networks in the 1980s were part-owned by the cable industry itself.

To make matters worse, unlike cable systems that only leased set-top boxes to customers, home dish owners had to buy combination receiver-descrambler equipment outright, starting at $500. Just a few years later, the industry pressured programmers to switch to a slightly different encryption system — one that required home dish owners replace their expensive set-top box with a different decoder module available only for sale.

Gore was further incensed to learn TCI often insisted home dish owners living within a TCI service area buy their satellite-delivered programming direct from the cable company. Customers hoping to leave cable for good found themselves still being billed by TCI.

Sometimes the rhetoric against TCI and Malone got personal.

”He called me Darth Vader and the leader of the cable Cosa Nostra,” Malone said of Gore. “You can’t win a pissing contest with a skunk, so there’s no point in getting involved in that kind of rhetoric.”

“There’s a joke going around Washington,” John Tinker, a New York-based Morgan Stanley & Company investment banker who specializes in cable television said of Malone back in 1990. “If you have a gun with two bullets, and you have Abu Nidal, Saddam Hussein and John Malone in a room, who would you shoot? The answer is John Malone — twice, to make sure he’s dead.”

TCI itself was a four letter word in the many small communities that endured the cable company’s insufferable service, outdated equipment, and constant rate “adjustments.”

The New York Times reported John Malone’s TCI had a reputation for treating customers with “utter disdain,” and provided examples:

• In 1973, rate negotiations stalled with local regulators in Vail, Colo., the local TCI system shut off all programming for a weekend and ran nothing but the names and home phone numbers of the mayor and city manager. The harried local government gave in.
• In 1981, TCI withheld fees and vowed to go completely dark in Jefferson City, Mo., if the city failed to renew its franchise, while a TCI employee — “who turned out to have a psychological problem,” said Malone — threatened harm to the city’s media consultant. Again, a beleaguered local government renewed the franchise — although in a subsequent lawsuit, TCI was fined $10.8 million in actual damages and $25 million in punitive damages.
• In 1983, the small city of Kearney, Neb., also dissatisfied with poor service and rising rates, tried to give Malone some competition in the form of a rival system built by the regional telephone company. TCI slashed fees and added channels until the enemy was driven from the field.

“That’s the dark side, if you will, of TCI,” said Richard J. MacDonald, a media analyst with New York-based MacDonald Grippo Riely.

By mid-1989, Malone’s frenzied effort to consolidate the cable industry resulted in him presiding over 482 merger/buyout deals, on average one every two weeks. Among the legacy cable companies that no longer existed after TCI’s takeover crew arrived: Heritage Communications, United Artists Communications and Storer Communications.

To cover the debt-laden deals, Malone simply raised cable rates and shopped for easy credit. Bidding with others’ money, the per-subscriber price of cable systems shot up from $998 in 1983 to an astronomical $2,328 in 1989.

The General Accounting Office, the investigative arm of Congress, found deregulating the cable industry cost customers through rate hikes averaging 43 percent. In Denver, TCI raised rates more than 70% between 1986 and 1989.

Malone’s attempt to finance a leveraged, debt-heavy buyout of Time Warner Cable seems to show his business philosophy has not changed much.