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
The Comcast/NBCU merger poses a real threat to the future of innovation, competition, and the open Internet. Put simply: size matters. The larger Comcast gets, the more market power it has and the more all other markets that depend on broadband and media will be distorted.
Susan Crawford knows this better than most and explains why everyone should be concerned about it.
As we've harped on time and time again:
The crucial thing to understand is that high-speed Internet access to the home really is a crushingly-expensive natural monopoly service to install. The telephone companies haven’t found a way to make this work, because it’s so much more expensive to dig up the streets to install fiber than it is to upgrade cable electronics to DOCSIS 3.0. So they have backed off. The cable industry has made its investment, and is ready to reap its rewards of scale and high fixed costs - secure in the knowledge that no competition is coming after it, and having divided up the country neatly among its members. Meanwhile, the telcos are steadly losing fistfuls of money.
As Morgan once said of railroads, “The American public seems to be unwilling to admit . . . that it has a choice between regulated legal agreements and unregulated extralegal agreements. We should have cast away more than 50 years ago the impossible doctrine of protection of the public by railway competition.” In the cable world, we are deep into unregulated extralegal agreements, and competition is not going to rescue us.
The longer communities wait to build this important infrastructure, the harder it will be. It is hard to imagine national candidate speaking more stridently about the important of the open Internet than did Obama and even he bowed to the pressure of the private Internet access providers. While we should pressure the federal government to regulate in the public interest, we must take responsibility for our future at the local level with smart investments.
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.
On November 29, 2010, MPR published our commentary about community broadband. The Twin Cities has slower and more expensive broadband Internet than the nearby town of Monticello. The Twin Cities metro area has a population of 2.8 million and the highest density of people and businesses in the state. So why is our broadband Internet slower and more expensive than that enjoyed by Monticello, population 12,000? Several years ago, the city of Monticello (45 miles northwest of Minneapolis) recognized the increasing importance of reliable, high speed, low cost broadband. After the incumbent telephone and cable companies declined to build the network city leaders had in mind, the community decided to build one itself. Now, FiberNet Monticello offers some of the best broadband packages available in the country, while the Twin Cities is lagging. A new analysis by the Institute for Local Self-Reliance compares the available broadband speeds in Monticello to those available in the Twin Cities metro. In the metro, as in most of the United States, broadband subscribers choose between DSL from the incumbent telephone company (Qwest) and cable broadband from the incumbent cable company (Comcast). Monticello's offerings are faster at every price point, but Comcast appears to offer comparable downstream speeds in the highest tier of service. This apparent equivalence, however, is like comparing dirt roads with interstates. Both are roads that allow you to travel from point A to B, but they have fundamentally different characteristics in carrying capacity and reliability. For a variety of reasons, DSL and cable almost always fall short (and often, well short) of the advertised "up to" speeds, whereas full fiber networks regularly achieve the speeds they promise. In the metro, cable offers most residents the fastest option for broadband, but only one choice of provider. The Monticello network not only created a new choice for its residents, it induced the incumbent telephone company to greatly upgrade its network to remain competitive. Now, Monticello residents can choose between two extremely fast broadband providers, as well as a cable internet connection. The community-owned network may have only been the third broadband option, but it fundamentally changed the market. Prior to Monticello's investment, residents and small businesses had access only to asymmetrical broadband...Read more
Remember our post that privately owned broadband networks tend toward consolidation? A Wall Street Journal article notes that Verizon CEO Seidenbuerg agrees:
Mr. Seidenberg also had some words for his smaller competitors like Sprint Nextel Corp. and T-Mobile USA, which claim to have their own 4G networks up and running already. He thinks the companies, along with other smaller wireless operators, should join forces. "There are too many players in the industry," he said. "I think it would be healthy if there's more consolidation."
So while most of want more competition (which is to say, actual competition rather than essentially the same limited choices from a few providers), they are working to eliminate the few choices we have.
The same story also peeks into the super fast world of the 4G networks that some would have us believe will obviate the need for a faster, more reliable FTTH connection:
Mr. Shammo said Verizon's 4G network, which is based on technology called Long-Term Evolution, can deliver between 1 and 12 megabits per second of data, allowing for tiered pricing structure similar to home wired Internet service.
Call me crazy, but 4G seems like a step backward for most of us who care about fast broadband.
Today, we at MuniNetworks.org have released the first of a series of regional broadband comparisons examining the benefits of community networks. We decided to start with the Minneapolis / St Paul area, where we live and work. Read the Analysis [pdf]
Read the Press Release Our analysis, "Twin Cities Broadband No Match For Community Network," compares the available broadband plans in Minneapolis and St. Paul to small town Monticello, located 45 miles NW of Minneapolis. Monticello, as we have frequently discussed, has built a publicly owned FTTH network (which then pushed its telco incumbent to invest in much faster connections as well). Despite Comcast's much touted DOCSIS 3 upgrades and Qwest's "Heavy Duty" DSL, neither comes close to the value of Monticello's services. These companies have continued to use last-generation DSL and cable technologies with significant downfalls, including much slower upstream speeds than downstream -- a limitation particularly damaging to small businesses and people attempting to work from home. Qwest advertises "fiber-optic fast" but its speeds come nowhere near Monticello's actual fiber-optic network. Further, Qwest's actual speeds are often far below their claims due to limitations with DSL technologies. Comcast offers faster speeds than Qwest, even advertising a 50 Mbps downstream speed that appears to rival Monticello's until you consider the Comcast cable architecture rarely delivers promised speeds because entire neighborhoods have to share bandwidth. Both providers struggle to deliver fast upstream speeds, whereas Monticello's network services all include upstream speeds just as fast as the downstream speeds. When it comes to prices, Monticello's are lower, despite the faster speeds they offer. Minneapolis residents have access to a low-cost Wi-Fi network, but in that case, the low cost reflects the slower available speeds and significantly lower reliability. Our analysis also includes Clear, a new Wi-Max provider, to discredit any claims that 4G wireless will somehow change the fundamental dynamic at work in the Twin Cities: Comcast and Qwest are content to deliver 2nd rate speeds at inflated prices. Wireless provider have...
In North Carolina, Salisbury has launched the state's second FTTH network, as communities continue to build the next-generation broadband infrastructure in which their massive incumbent providers decline to invest. We have offered in-depth coverage of Fibrant as they prepared to launch the new services. As of Tuesday, Nov 2, the network softly launched, which is to say they will slowly ramp up the number of paying customers as they gain experience and confidence. Stop the Cap! also covered the launch with extensive coverage as well as both praise and criticism for Fibrant's approach.
Some of the 115 early, free testers of Fibrant became the first paying customers Monday, with the utility scheduling installations for 200 other residents on a waiting list.
A local group has posted a number of videos about Fibrant, including a recent one that compares Fibrant's speeds to the pathetic offering of Time Warner Cable (see bottom of this post). In a totally unrelated development (or so Time Warner Cable would have us believe), TWC has rapidly increased its broadband tiers in the region. In this, TWC has joined Comcast in downplaying the role competition has in forcing incumbent investment. If you believe TWC, competition plays no role in their investment decisions, a fascinating approach to succeeding in an area they constantly claim is a very competitive market.
The cable giant’s new download speed can reach 50 megabits per second, twice as fast as Fibrant’s 25 Mbps. However Time Warner’s fastest upload speed — 5 Mbps — is still slower than Fibrant’s best upload speed of 25 Mbps and standard upload speed of 15 Mbps. Time Warner is more expensive.
Of course, as the video shows, TWC's actual broadband differs significantly from its advertised speeds. I would like to see a speedtest comparing the new TWC offerings -- though I wonder if they have instituted the...Read more
Two cities, located on opposite coasts, have recently cried out for cable competition in their communities.
A few weeks ago, SunBreak ran a story under "Why Comcast Needs Competition...Badly." The post describes a significant outage in Seattle and Comcast's slow response to fix the problem.
You may think to yourself, Hey, come on, it's 90 minutes out of your day. But what I think about is how much time cumulatively was wasted in Seattle this morning, much of it simply because people would not have been sure where the problem was. An early, all-hands-on-deck announcement from Comcast would have been a big help. It seems slightly insane that a company that provides internet service isn't very good at using the internet.
The folks at Sunbreak apparently were not aware that the City is still slowly considering building a network to ensure everyone in the community has affordable high speed broadband access (which would likely be far more reliable than Comcast's network). After I noted this in the comments, they reprinted one of my posts about Seattle's deliberations.
Meanwhile, the folks in Scranton, Pennsylvania, (immortalized in the television show The Office) have been asking when they get the faster broadband now available in Philly, Pittsburgh, and parts of the Lehigh Valley. The answer came bluntly from Stop the Cap: Sorry Scranton, You’re Stuck With Comcast Cable… Indefinitely
"Offering out television service is expensive, too expensive for most smaller telephone companies," said telecom industry analyst Jeff Kagan. "So many are reselling satellite service to keep customers who want one bundle and one bill."
Because of that, satellite television providers, who were never a formidable challenge to conventional cable...