Frontier has been bitten by the same disadvantage many communities face when building their own networks -- little market power means having to overpay for everything. When Frontier bought millions of Verizon rural lines, it bought a few FiOS connections as well. But not enough to gain any bargaining power with channel owners. So Frontier had to raise the costs of its video services up for 46%. Lest anyone feel too sorry for Frontier, they are doing just fine. It is their customers who suffer. But it is a reminder that the issue of scale and market power are barriers to all competition, not just community networks. If we want to have real competition in this country, the Congress and the FCC need to stop ignoring the problems caused by massive players distorting the market. This unregulated market is an invitation for big players to join together and screw everyone else.
Susan Crawford has coined the expression "looming cable monopoly" to describe important changes in the Internet access arena. We have long discussed the ways in which FTTH represents a natural monopoly -- the first entity to build a FTTH network is likely to be the only one. What we haven't discussed how cable networks are similarly edging DSL-dependent telcos out of the market.
The short version is this: upgrading cable networks to offer fastest speeds is much less expensive than upgrading DSL networks. Something not often mentioned: aside from AT&T and Verizon (who effectively mint dollars with their mobile revenues), the telephone companies have no money to upgrade their DSL networks anyway.
When the FCC took a look at this situation, they concluded that what little competition we have for broadband in the US is about to decrease (something we have long argued is a result of relying solely on the private sector for essential infrastructure). From the National Broadband Plan [pdf] on page 42:
Prior to cable’s DOCSIS 3.0 upgrade, more than 80% of the population could choose from two reasonably similar products (DSL and cable). Once the current round of upgrades is complete, consumers interested in only today’s typical peak speeds can, in principle, have the same choices available as they do today. Around 15% of the population will be able to choose from two providers for very high peak speeds (providers with FTTP and DOCSIS 3.0 infrastructure). However, providers offering fiber-to-the-node and then DSL from the node to the premises (FTTN), while potentially much faster than traditional DSL, may not be able to match the peak speeds offered by FTTP and DOCSIS 3.0.
Thus, in areas that include 75% of the population, consumers will likely have only one service provider (cable companies with DOCSIS 3.0-enabled infrastructure) that can offer very high peak download speeds.
To be clear - those "very high peak download speeds" they...Read more
We're about to start a new year and thanks to the FCC, we'll see some expanded creativity from the private broadband carriers who want to raise the prices we pay. In fact, you might not be aware of the lengths to which they have already gone. Illustrated nicely by this graphic from the folks at New Networks. But now they have increased power to increase the prices they overcharge us in novel ways. I'm a sucker for Les Misérables, so when a friend reminded me of some of the lyrics, I couldn't help but post them up here as they seem appropriate. Some things never change. From Master of the House:
THENARDIER Enter M'sieur Lay down your load Unlace your boots And rest from the road (Taking his bag) This weighs a ton Travel's a curse But here we strive To lighten your purse Here the goose is cooked Here the fat is fried And nothing's overlooked Till I'm satisfied... Food beyond compare Food beyond belief Mix it in a mincer And pretend it's beef Kidney of a horse Liver of a cat Filling up the sausages With this and that ... Charge 'em for the lice Extra for the mice Two percent for looking in the mirror twice Here a little slice There a little cut Three percent for sleeping with the window shut When it comes to fixing prices There are a lot of tricks he knows How it all increases All those bits and pieces Jesus! It's amazing how it grows!
Les Mis Photo used under Creative Commons License, courtesy of daviddmuir.
The day before the FCC's Chairman decided that AT&T and Comcast should have greater powers as gatekeepers to the Internet, Marketplace Tech Report published an interview with Tim Wu.
Tim Wu discusses the history of net neutrality and its importance. In addition to the usual 5 minute clip, they have released a longer 20 minute clip. Listen to the longer one.
Today, the FCC is poised to pass a half-ass attempt to preserve the open Internet against the interests of massive gatekeepers like AT&T and Comcast. Tim Karr rightly calls it Obama's "Mission Accomplished" moment.
Fortunately, the likely result will be a couple of years in the courts before the rule is thrown out because the FCC has not properly ground its half-ass actions in any authority it has received from Congress. Perhaps when the FCC next has to deal with this, we'll have an FCC Chairperson with a backbone and a stronger interest in what is best for hundreds of millions of Americans than what is best for AT&T and a few other corporations.
The FCC and supporters of this let's-keep-the-Internet-partly-open "compromise" will lump all critics as being extremist looneys. (Okay, the Republicans who oppose this might fit that description as they are literally making things up or totally confused about what is being decided).
But let's look at the crazy looney rhetoric of FCC Chair Genachowski last year:
Genachowski proposed that the FCC formalize its four principles of network openness. To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet, consumers are entitled:
- to access the lawful Internet content of their choice.
- to run applications and use services of their choice, subject to the needs of law enforcement.
- to connect their choice of legal devices that do not harm the network.
- to competition among network providers, application and service providers, and content providers.
To these, Genachowski proposed adding two more: The first would prevent Internet access providers from discriminating against particular Internet content or applications, while allowing for reasonable network management. The second would ensure that Internet access providers are transparent about the network management practices they implement.
Not only has Genachowski sold out on what he once stated was absolutely necessary to maintain the Open Internet, he has rolled back the...Read more
Whenever the discussion of Network Neutrality comes up, we like to remind everyone that when the network is locally owned and accountable to the community, anti-subscriber discrimination is not a problem. That said, we are strong supporters of proper safeguards to ensure massive companies like AT&T cannot abuse their market power and discourage innovation.
As the FCC prepares to discuss a half measure to preserve parts of the open Internet, a number of us have been frustrated that while we cannot read the proposal, AT&T appears to be helping write it. Karl Bode's take:
[T]he question shouldn't be whether or not consumers can now view a neutrality proposal after it was hashed out in private meetings (predominately with only the largest, wealthiest carriers), it should be: why weren't consumers absolutely integral in crafting it? AT&T has met with the FCC half a dozen times in the course of three weeks and likely knows precisely what's in this plan -- do you?
We've written to FCC Commissioners to make it clear that they must not compromise on the future of the open Internet. You should too.
Photo used under Creative Commons license from AdamWillis.
As part of our continuing effort to shed light on the tendency of privately owned telcos and cablecos to consolidate rather than compete, we would like to note comments from Qwest's Chief Financial Officer. Stop the Cap! has the story:
Chief Financial Officer Joe Euteneuer said the time was right for Qwest to sell operations in the north-central and mountain west region because there were too many competitors in the marketplace. Euteneuer said the telecommunications market needs to resemble the cable-TV business, which has been heavily concentrated into two huge powerhouses — Comcast and Time Warner Cable.
So not only do these executives think there is too much competition (find me a subscriber who believes that!), but believes we should have less and less competition moving forward. These folks are incredibly candid about their plans to diminish what little competition exists -- perhaps because the FCC has made it clear that it plans to take no actions to encourage further competition. The National Broadband Plan pretty much ignores this problem, perhaps its biggest failing.
For those of us who care about the future of broadband and the communities that increasingly depend upon it, the spectre of even larger privately-owned incumbent providers (with increasingly distant headquarters) is daunting. Bigger and bigger incumbents mean it is that much harder to build better networks that will compete with them. These massive companies cross-subsidize their operations to dramatically cut rates in newly competitive areas specifically to drive out new competitors (public and private). Larger companies have greater advantages for securing discounts on key inputs, allowing them to offer lower prices than communities are naturally able.
This is yet more evidence that the private-company approach to broadband infrastructure is bankrupt.
If we are destined to have only a few entities owning the networks on which we depend, those entities must be directly accountable to the communities, rather than focused solely on increasing profits every year.
The abstract immediately captured my attention:
Policymakers often tell us that the Internet succeeded because of a lack of government regulation. For instance, FCC Commissioner Robert McDowell recently noted that the “evolution away from government intervention has been the most important ingredient in the Internet’s success.” These views, while widely shared, happen to be inaccurate. In reality, a diverse range of federal regulations, subsidies, and nondiscrimination protections sustained the Internet’s historic growth.
But what if, as many inaccurately assume, these regulations had never existed? What would today’s Internet look like in such a world? In this essay, I provide a fictional alternate history - in form of a satirical book review - to illustrate how differently the Internet might have developed in a truly privatized world. Although the essay below (beginning after this abstract) is fictional, it draws heavily upon both the regulatory history of the Internet and the policy arguments at issue in today’s leading regulatory proceedings.
This article covers decisions like Carterfone, the FCC's Computer Inquires, giving control over TCP/IP to the National Science Foundation rather than AT&T, and the intentions of the 1996 Telecommunications Act. It also includes a reminder of the difference between open systems and closed systems:
One important way that open policies achieve this goal is by reducing various types of transaction costs. In open networks, new market entrants can completely avoid negotiating with companies who have “gateway control” over the network. The aspiring entrants do not have to pay—nor seek permission from—the network owners for access. Accordingly, these policies encourage vastly more experimentation and amateur “tinkering.” Closed networks, by contrast, produce relatively less innovation because they rely on centralized network owners to introduce—or at least approve—innovation before it becomes available.
This is a fantastic read (really riveting telecom reading -- how often do you get that?) and a good history lesson for people who were not there to see it firsthand over the years.
David Isenberg, of isen.blog, has published a short history of Reedsburg's community fiber network that he previously wrote for the FCC when they were gathering evidence of successful networks they would later ignore in formulating a plan to continue the failed status quo of hoping private companies will build and operate the infrastructure we need.
Nonetheless, one cannot say that smart people like David did not try to help the FCC overcome its obsession with national carriers who dominate the conversations, and whose employees often work periodically with the FCC in what we call the revolving door (which itself, is a reason the FCC has been captured).
Back to Reedsburg; it is a small community approximately 55 miles northwest of Madison that just happens to have far better broadband service than just about anywhere else in Wisconsin.
RUC first entered the telecommunications business in 1998, when it constructed a ring to tie its wells, its five electrical substations together and to provide Internet access for its high school, middle school and its school administration building. In planning the ring, the city asked Verizon and Charter if they would build it, but they were not responsive. RUS built a partly aerial, partly buried 7-mile ring of 96-strand fiber at a cost of about $850,000. Internet access was provided by Genuine Telephone, a tiny subsidiary of LaValle Telephone Cooperative which ran a fiber from LaValle, about 8 miles NW of Reedsburg.
As they were building the ring, local businesses asked to be connected as well. Reedsburg took the path that so many communities have followed, start by building for yourself and expand opportunistically. Of course, this requires that you originally engineer the network so it can be later expanded, which is good practice regardless of your future plans.
Reedsburg used bond anticipation notes, a financial mechanism that few others have used in building similar networks.
A local bank loaned the initial $5 million in bond anticipation notes for planning and construction. Then RUC issued an...