Let’s review. Verizon’ says FiOS is on track to pass 18 million homes by the end of 2010. The cost for that effort is $750 per customer to wire a neighborhood and another $600 to extend the fiber to an individual home. So with a per customer investment of $1,150 up front, Verizon FiOS has a 28% overall uptake rate. And its FTTH service can’t command higher prices because of DSL and cable competition.
How does FTTH work if you’re not Verizon? This week Hashman analyzes FTTH business models that might actually help the U.S. reach the FCC’s broadband goal of having 100 million homes with affordable access to to 100 Mbps of download speed. Hashman looks at the FTTH scenario for greenfield builds, government funding and municipal/private partnerships. Check out the numbers and the potential.]]>
The 3-0 ruling from the three-judge panel may have only concerned an FCC Comcast ruling (click here to read the court’s full opinion), but the bigger issue is whether the FCC has the power to regulate how ISPs manage their network traffic. And it seems that’s a negative. The ripple effect leads to the question of whether the FCC has the authority to declare that all broadband traffic is created equal – which would effectively nix tiered services that offer higher profit margins.
The decision overturns a 2008 FCC order that Comcast should cease and desist blocking subscribers’ peer-to-peer (P2P) file sharing applications (remember that this was under the Bush Administration’s FCC, but the ruling will affect the Obama FCC’s National Broadband Plan.
The court decision is also a set-back for members of Congress who want to usher in net neutrality. FCC Chairman Juilus Genachowski said he wants to try to reclassify the broadband plan as a Title II service in communications law, which means the FCC would have authority to create regulations. Broadband is currently classified as Title 1 (in plain English that means the FCC doesn’t have the authority to regulate it).
Can we hear corks popping in the Washington office of major carriers? For once, AT&T and Verizon were siding with the likes of Comcast. But savor the moment; it won’t last long.]]>
After giving up a little hip-hip-hooray for Verizon’s long-awaited 4G network (ready for 60 devices thus far and expected to be in 25-30 markets next year) at the opening keynote of SuperCOMM 2009 on Wednesday in Chicago, CEO Ivan Seidenberg shelved his warm and fuzzy feelings there.
The Federal Communications Commission was on the cusp of releasing its proposed net neutrality regulations — a hard sell for the SuperCOMM crowd, to say the least. Seidenberg pretty much stopped short of calling the net neutrality proponents (and their sympathizers on the FCC) lefty wingbat commies.
“If this burdensome regime of net regulation is imposed on all parts of the Internet industry, it will inject an extraordinary amount of bureaucratic oversight into the economy’s main growth engine for the future,” he said.
Seidenberg said his main beef with net neutrality proponents was their suggestion “that network providers like Verizon and applications providers like Google, Amazon and others occupy fundamentally different parts of the Internet ecosystem — a binary world of ‘dumb pipes’ on the one hand and ‘smart applications’ on the other.”
Verizon Wireless and Google — who has been at the front of Team Net Neutrality — are partnering to release a smartphone that runs on Google’s Android system.
“This is a mistake, pure and simple: an analog idea in a digital universe,” he said. “We can’t create smart economy by dumbing down our critical infrastructure.”]]>
In the last few weeks, BT faced accusations that it was limiting download speeds for the BBC’s video content player, the iPlayer. After some stalling, a BT spokesman came clean to silicon.com: Yes, BT was limiting video-steaming content on its basic service package. In truth, the truth makes a better point on BT’s behalf than keeping it quiet.
The BT spokesperson told silicon.com:
“We throttle video traffic to 896 Kbps for our Option 1 customers, between 5pm and midnight. Next week Lord Carter will present the Digital Britain report,” said the spokesperson. “What everyone wants is high speeds, low prices, 2MB connections. We don’t think it’s realistic for content owners like the BBC and others to continue to get a free ride.”
It’s hard to think of a service provider that wouldn’t want to charge content providers something for all the content they send over IP networks. Thus BT’s issue with content providers is every ISP’s issue with content providers – it’s an untenable business model. Network owners often operate on razor-thin margins and face such strong competition that thoughts of passing costs on the customer would be deemed suicidal, as well as go against the concept of affordable broadband for all.
As for arguments that broadband caps will stifle innovation and encourage service providers to embrace congested networks, they sound as bogus and disingenuous as any big-money lobbying effort put forth by the “bad guys.”
And so we come full circle – if someone is going to share the cost of transporting all of that content, why should content providers get a free ride. This rightsizing of the business model in the Age of Content has several more rounds to go. I just hope content providers don’t start asking my mother for her opinion.]]>
First let’s look at Qwest, which is offering its high-speed Internet customers a good deal — free Qwest Wi-Fi access at 17,000 hot spots nationwide. Qwest Wi-Fi is actually rebranded AT&T Wi-Fi, so there’s no doubt a wholesale deal in place. Some years ago, this deal would have been unthinkably anti-competitive, but both of the former Baby Bells operate in completely separate wireline territories, and Qwest doesn’t own any wireless assets. So why not?
This means untethered Qwest broadband business or residential customers can now leave their Ethernet cords behind and can get online for free at places like Starbucks, Barnes & Noble and McDonald’s without buying an additional wireless broadband plan or paying for access by the day. Has anyone done a study yet on how many Big Macs the average Wi-Fi user might eat while taking advantage of those free connections and compared that to the resulting health care costs? Someone get Michael Moore on the phone…
But I digress. Qwest says it’s acting on the results of a study it commissioned by Impulse Research Corporation, in which half of the respondents said they liked Wi-Fi because it gives them the freedom and flexibility to be connected when not at home or the office. Brian Osborne at geek.com gave me a good laugh when he wrote:
I must admit that I was a little surprised that the study commissioned by Qwest only found that half of the respondents valued Wi-Fi. I mean, what’s wrong with the other half in the study? Do they prefer to walk around connected via a cord all the time?
Maybe the other half never travel. Maybe they have desktops. Maybe 50% of Qwest’s broadband customers are shut-ins. Maybe it’s just hard to cut the cord. Still, free is always a good deal for customers. For service providers – not so much.
I called my wireless guru analyst friend Mike Jude, program director of Consumer Communications Services at Stratecast, to ask him why Qwest should offer hotspots for free. Haven’t we talked until we’re blue in the face about how service providers need to increase average revenue per user (ARPU)? Well, yes, Mike said. “Maybe Qwest’s deal will be free for now, but not in the long term.” Maybe offering free hotspots can stem the tide of customers churning to cable? “The people who are typically broadband consumers are likely to want to access broadband services on the move, and this gives them the capability of doing that,” Jude said.
Now let’s move on to Verizon’s MiFi, the battery powered EVDO modem the size of a credit card that turns incoming 3G radio waves into a moveable feast of a Wi-Fi network. What a great device for a Jetson’s type of user. I’d love to travel in my own little cloud (and often do), and Verizon’s MiFi can even include up to five people in the personal-cloud club.
To get any serious bandwidth, users would probably opt for the $60 a month plan for 5 GB, which means they’d likely decide to cut out another type of access they’re already paying for. Let’s ARPU that! The private hot spot, kind of like a battery-operated femtocell, is the Novatel MiFi 2200, which will be available from Verizon in mid-May for $100 with two-year contract, after rebate).
The New York Times’ David Pogue raves about MiFi, but our more jaded Mike Jude called it a “cool technology looking for a purpose.” Maybe if MiFi were bundled with WiMax, it could create a mobile-mobile-convergence play rather than a fixed-mobile convergence play. The possibilities are endless, as well as unclear. It’s one mixed up, but cool market.]]>
But wait, there’s a downside. Mobile broadband growth refers to increases in the number of users and the amount of data traffic. But the joy doesn’t spread to average revenue per user (ARPU), Ovum says. Instead wireless ARPU is expected to drop significantly during mobile broadband’s meteoric rise, with projected growth of only 44% of the rate of total users — a dilemma also faced by wireline network carriers.
Ovum expects 258 million users to access mobile broadband services through laptops by 2014, which translates into 1022% growth from 2008. Wireless operators expect similar growth for mobile broadband via handsets, but the existing user base is already much bigger: 158 million in 2008 growing to an estimated 1.8 billion in 2014.
The ARPU dilemma is enormous for carriers. ARPU will drop due to less revenue generated from emerging markets, increased competition for mobile broadband access and possible prepaid tariffs designed to drive up broadband adoption, Ovum says.
Whether in the air, on the ground, or along the ocean floor, providers have to come up with new ways to increase revenue in addition to transmitting bits. Even transferring 1000% more bits could still leave them as commodity players.
Ovum’s numbers again put the spotlight on value-added services as operators continue to look for a business model that will keep them in business in the digital age. Check out Mobile app stores deliver little direct revenue but are critical for ARPU for another view on the choices mobile operators face. Clearly, the answers aren’t obvious, but operators have some inherent advantages to over-the-top (OTT) content players. They just have to recognize them and take action in time.]]>
Drawing the most fire, former FCC economist Michael Katz bashed rural life to the extent that it got the attention of NPR’s well-modulated Morning Edition. And New York Times blogger Saul Hansel weighed in with his opinions on various economists’ views.
With its Broadband Connection Highs and Lows Across Rural America, The Daily Yonder website is keeping it rural, and offered what appears to be the most knowledgeable analysis of broadband in exurban areas, complete with a map of which counties have the highest broadband concentration. We’ll have plenty of time to point fingers on this one, but even I couldn’t help but comment given my rural background. Any type of country-wide infrastructure buildout has had some kind of government help, and in my view, this is the next universal service.]]>
Alcatel-Lucent stock went up after the Q4 ’08 earnings report (released Feb. 4) -– which isn’t easy to do this year. The new chief sees positive signs in things like cash flow being at its highest level in two years, as he explained his view of the company in a BusinessWeek interview. The company plans to make good on promises made last December to reorganize and refocus its strategy, and that means less emphasis on traditional products (read telephone switching equipment).
Verwaayen is shifting the company’s focus to services and Internet-related technologies, while placing less emphasis on traditional products like telephone-switching equipment. The analyst community sees Alcatel-Lucent as doing what it promised.
As part of its new strategy, Alcatel-lucent isn’t trying to do everything itself. To address certain hardware maintenance and expense, Verwaayen said the company may outsource legacy equipment servicing to established vendors that could “co-partner” with Alcatel-Lucent.
And to gain some nimble startup advantages — which is like turning the Titanic for a company the size of Alcatel-Lucent — Verwaayen said the company has asked its Bell Labs research division and its carrier product group to keep an eye out for innovative startups and work with them.
In December, Verwaayen said Alcatel-Lucent would focus on four broad areas in 2009: IP, optical, fixed-line broadband and mobile broadband (particularly Long-Term Evolution, or LTE).
In terms of strategy and services, Tom Nolle’s commentary, Telecom operators need vendor help to justify new investment benefits, discusses how Alcatel-Lucent is one of the main vendors that could help service providers sort out their next-generation network architectures. But only if it can get out of its own way and move forward with the new strategy.]]>
The rumored new head of the FCC is an FOB. That’s “Friend of Barack,” people, as in a former Harvard Law School classmate of the president-elect, who definitely knows his way around Washington D.C. (Yes, he’s on Facebook, but has he friended you?)
The nomination of technology exec Julius Genachowski is still an official secret, which is obvious because it’s been blasted all over every website and publication that has any interest in communications policy. The Genachowski nomination will be no big surprise, as he is already Obama’s chief technology advisor already.
Genachowski already knows the FCC drill, as he was chief counsel for Reed Hundt, the FCC chairman under former President Bill Clinton, and has worked at IAC/InterActiveCorp and other technology companies. He also co-founded LaunchBox Digital, a venture capital firm in Washington, D.C.
What policies does Genachowski favor? We’re hearingnet neutrality (government mandated?, cheap broadband for everybody, and media ownership rules that favor diversity.
Even before Obama’s inauguration, telecommunications policy and regulation has been in the spotlight, as the new Commissions will need to immediately deal with the conversion to digital television and the Obama universal broadband strategy.
The FCC is supposed to ensure that the digital television conversion on Feb. 17 goes smoothly (only an estimated 20 million people to switch and the government fund that provides conversion box coupons running out of money). The Obama transition team made it clear that the president-elect would like to push the conversion deadline back to the summer, citing readiness and funding concerns.
In the longer term, building out broadband is part of Obama’s economic stimulus package. The new FCC chairman will hear every possible viewpoint on how to accomplish a broadband buildout and arguments who should be allowed to get tax credits or other incentives to do so. Navigating that free-for-all alone will show us what Genachowski is made of. Stay tuned.]]>
I live in the policy belt where there’s no rust in sight and the river of policy statements flows with honey. There’s never a recession in the policy-wonk biz, so with that setting, let’s talk about President-elect Obama’s broadband stimulus package.
As the new administration works with Congress to get a potential $1 trillion economic stimulus package in place, telecom and cable lobbyists will be pressing the flesh over talk of broadband expansion as one-part U.S. economic revival and one-part show the world the U.S. isn’t a has-been in a global economy.
What’s good news for telecom is that unlike the automotive industry, product demand is growing. Obama has been clear that he wants to make sure broadband access is universal so inner cities and rural areas are served as well. Harsh but true, most telecom providers offer broadband in the most lucrative locations. And why wouldn’t they? Again, unlike the automotive industry, they have to pay for their own network infrastructure, so to build every where, even if they lose money doing it, they’re going to need incentives.
A broadband stimulus package that would extend network coverage or increase speeds in existing areas may be in the $20-to-$30 billion range, if reports are true. It sounds like infrastructure-building tax credits are on the table, anywhere from 60% for new builds and 40% for speed increases.
Already, the scramble for who can benefit from potential tax credits has begun. There are always public interest groups that cry foul about giving an advantage to companies that already have and know how to build and run networks. Weighing in already are organizations including Public Knowledge and Free Press. That’s their job.
The behind the scenes rumor-mill says that for the ObamaAdministration, this isn’t about increasing competition. Bravo. I’ll take network expertise any time. Verizon, AT&T, Cox Communications and Comcast — to name only four in what appears to be a working cable/telecom broadband duopoly — know how to build broadband networks. So let them do it, with tax credits if it gets it done faster.
I don’t want to sound like Father Time or anything, but, did we not learn a lesson in the 1990s when anyone with a backhoe decided to build a high-speed, fiber-optic network? Lest history repeat itself so soon, let’s remember who went bankrupt and who ended up picking up those new fiber optic networks for a song. Building, maintaining and running a broadband network isn’t a no-brainer, so I’m all for keeping the hyperbole down and getting the job done.
U.S. telecom and cable companies are already struggling to figure out how to monetize their networks, and they’re still cutting jobs. Maybe this demand-driven industry can even create jobs.
The bottom line is, broadband in the U.S. needs to grow, and if the plan gets bogged down in bickering about who should be allowed to get a tax break in this often razor-thin profit business, I swear I’ll be blogging on the Capitol steps in protest, and I hope I see you there.]]>