Month: March 2005

BellSouth is asking the FCC to kill what is apparently one of the best kept secrets in the industry. That secret is the fact that in four states (and Louisiana is one of them!), BellSouth must offer what is called “naked DSL” — that is, DSL without having to buy local phone service from the company.

CNET‘s News.com has the story.

How well kept is this secret? According to a BellSouth spokesperson quoted in the story, a total of 8,000 customers have signed up for this version of the service since 2002! As a former BellSouth DSL customer, I don’t recall ever hearing about the availability of this service. It was, as far as I can recall, never mentioned as an available option during the time in which I did business with them.

Typically, BellSouth positions this anti-consumer move as being in the best interests of consumers:

Among other things, BellSouth and its supporters have warned of the possibility of slightly different naked DSL rules in all 50 states, which would slow broadband growth in the United States and undermine BellSouth’s incentive to invest in the service and the underlying network. BellSouth also points out in FCC filings that some states have opposed naked DSL rules.

Aside from better rates for consumers, what is really driving BellSouth’s effort to kill naked DSL? Competition and innovation, according to a spokesman for the National Association of Regulatory Utility Commissions.

“Standalone broadband, one could argue, may be a necessary prerequisite for independent, non-facilities-based VoIP providers to provide any competitive pressure on landline local service prices,” argues James Ramsay of the National Association of Regulatory Utility Commissioners.

Stifling competition, working to prevent the deployment of new technologies, and hiding information that could be advantageous to consumers.

BellSouth is anti-consumer, anti-business, anti-anyone-but-themselves. And they work hard to prove it every day!

Here’s a nifty resource that explains the concepts behind broadband and the city-owned telecom utilities in a careful and pretty readable way. The site is devoted to encouraging localism and local self-determination, so the point of view they take pretty much dictates that they are for local communities being able to decide for themselves whether or not to provide telecom services. The immediate question “Dr. Dave” responds to is whether or not states ought take away their cities’ rights to provide these services. Not surprisingly, Dave indicates that the answer is no.

What is considerably more surprising is the careful and conversational way he walks through the topic and the density of documentation he provides. Take a look–I think you’ll enjoy it. And it’s the sort of thing you might want to show neighbors or cousins to help them get up to speed on the issue. It’s a nicely organized essay that tries to anticipate questions a reader new to the topic might ask.

Implicit questions on the concepts behind broadband as a national issue that he tries to answer include:

Do we need it?
What exactly is this thing called broadband? And why is speed an issue?
What’s the delay in getting it?
Are you getting all you need?

On municipal broadband:

Should cities be involved?
What is the benefit of cities building telecom utilities?
So what’s stopping them? (Louisiana’s Act 793 gets a mention about here.)

Good questions all. “Dr. Dave” gives thoughtful answers.

Today’s Advertiser carries a great Associated Press story, “Internet program hooks up needy La. households,” on page 8C under a small grey banner “Digital Divide.” I hope that banner indicates that we’ll start seeing more such stories. Unfortunately, you can’t find the story through the Advertister’s website. But a little googling leads to locating the same story under the name “Grambling’s Internet Program Wins Award for Hooking Up Households”—just scroll down.

It is a basically a success story about a project out of Grambling that aims to crack the toughest nut in the digital divide: the low levels of participation among the rural poor and especially the rural poor who are also black. Sensibly, the program works by tapping into the community structures, in this case local churches, to help develop internet skills.

It’s a good story; I’ll excerpt a big chunk in case the linked-to text goes away:

In the last year, Erica Sawyer, a single mother of two living on a teacher’s salary, has grown closer to her children and seen them blossom in their schoolwork.

What difference does a year make? Sawyer, a Farmerville resident, was one of 50 low-income, Black households selected to participate in a Grambling State University Internet program studying the “digital divide” that residents like Sawyer must fight to bridge in rural areas.

“The program is a great blessing to my family. I’ve never been able to afford a home computer on my own with kids,” she said. “On Saturday mornings, instead of my kids just watching cartoons, we’re all on the Internet together learning…”

“The prevailing philosophy is there’s no point in putting broadband (Internet) in rural areas because no one will use it. But our preliminary data shows we’re about to blow the doors off that,” he said…

At New Hope Baptist Church in Homer, one 13-year-old student who was on the verge of dropping out of school, started regularly attending the lab. He is now an honors student, said lab moderator Gussie Young, the pastor’s wife…

“The prevailing philosophy is there’s no point in putting broadband (Internet) in rural areas because no one will use it. But our preliminary data shows we’re about to blow the doors off that,” he said…

The Southern Growth Policies Board, a public policy think tank in North Carolina, recently granted the program its 2005 Regional Innovator Award for Louisiana.

A lot of the participants in the Louisiana Rural Internet Connection started out with no computer knowledge at all and were “afraid of the technology,” said Margaret Lowery, GSU CareerNET director, and some could not even use a mouse.

But they have all come a long way. The children’s grades have improved and they are using e-mail and banking online. One woman even put her small flower shop online, she said.

Essentially, the Internet usage data collected has come to mirror the middle class, Bennie Lowery said.

While lack of accesss to a wide range of modern technologies is worst in rural areas (this program had to use satellite technology), it’s an issue everywhere. In urban areas poorer districts are always the “least and last” to be served by commercial providers. The lessons that programs like this teach about lowering barriers to usage, working through the community, and providing good training are well worth learning from. But what is really invaluable is that such studies should dispel that idea that some people don’t want or need and somehow wouldn’t benefit from access to the same advanced technology that the rest of us find increasingly necessary.

Claire Taylor of the Advertiser talks to our friend Annie Collins (see our interview with Annie) about what Lafayette can expect during a fiber referendum based on her experience during a referendum battle in the Tri-Cities area of Illinois.

Annie was outspent at least 56 to 1 (which we analyzed in a recent post); she spent $4,000 and the incumbents spent in the $300,000 dollar range at latest count. Annie tells an ugly story of the incumbents’ FUD-based campaign of misinformation. The Bell/Cable campaign, its volume racheted up by its ability to spend effectively unlimited amounts of money, drowned out the voices of pro-fiber activists.

From the story:

Collins said Lafayette residents should prepare for a barrage of newspaper ads, television ads, billboards, flyers, postcards and messages on answering machines opposing the project.

“They started about 60 days out. They started sending people – retirees – door to door, telling people they were going to lose their pensions. They said they would lose their jobs,” she said.

The incumbent telephone and cable TV providers cited alleged failures of broadband utilities across the country, paying for full-page newspaper ads – 28 in one week – Collins said.

They distributed coffee mugs at train stations and brought in trailers of fiber-to-the-home equipment showing the latest products they could offer, Collins said.

Comcast, the cable provider, even mailed to its customers a special greeting card created for them that read: “We’re proud to be a part of life in this community.” It was signed, “Your Friends at Comcast.”

The companies gave out yard signs, bought TV commercials, mailed flyers to homes, probably as many at 10 mailers to everyone in three towns. SBC, the telephone provider, sent two company presidents to debate Collins, a homemaker

It’s hard to know how to react to that litany. A little wry humor helps. That greeting card? SBC commissioned Hallmark to make it. The sugary contrast to the bitter battle to defeat local interests has to be seen as funny.

The article goes on to say:

Collins said residents who support the Lafayette Utilities System fiber project must form grassroots groups to campaign for the project because government cannot spend money to promote a yes vote.

“The deep pockets are a formidable foe,” she said. “It’s tough to face that kind of money. If we could have afforded some advertising and a way to get into people’s mailboxes, that’s the way we would have gone, too.”

“You need to talk to your neighbors. You need to go door to door. It needs to be a grassroots campaign and it needs to be run efficiently,” Collins said.

She’s right about all that. We need a citizens’ group (or several) and Political Action Committtees (PACs) if we are going to be able to fight on anything like a level playing field.

Root around– I’m sure you can find access to one of the forming PACs. But if your interest is in doing the work of talking to neighbors and friends, find a citizens’ group. Emails will get you in touch with forming citizens’ groups at two addresses: fiber@lus.org or StandingUp@ Lafayette ProFiber.com (The link to StandingUp in the article is bad. This one works. I’ll post a note here when it is corrected.)

This story sends a valuable warning shot across the bow…it’s time to strap down and get to work if we are to defend ourselves against incumbent misinformation and money.

In an earlier post I said I hoped to get a few thoughts up about wholesale and retail issues in municipal fiber-optic networks, but ‘stuff’ (and the installation of a 240 line for a nifty new oven) has gotten in the way. Sometimes, however, life hands you a little present just when you need it. Jim Baller, a leading national telecom lawyer, has recently addressed this issue on the “Getting Illinois Online” list (see LPF’s interview with Baller). Not coincidently, LUS is a client of Baller’s and his reasoning on this issue may well have influenced Lafayette’s decision-making process. Be that as it may, I doubt that there is anyone with more extensive or intimate understanding of the many municipal fiber builds in this country.

[Timeout for some useful background: the text below is a response in a threaded discussion. Such forums—unlike online chat rooms or casual conversation—are places for fairly slow-paced, considered, and fully explained exchanges. We don’t have much in the offline world anymore that feels like a good threaded discussion list; the nearest thing I know to this is the older idea of relaying round robin “letters of correspondence,” which was the basis for the first systematic exchanges of scientific findings and speculation in the 18th century—a practice the founding fathers appropriated to spread the rationale for the American Revolution. Writers expect that they are speaking to a crowd with a shared history and informed interest in the topic, so the writing tends to be denser than in other contexts.]

The immediate context in which this post appears is an ongoing discussion of whether municipal broadband initiatives (which are assumed to be a good idea) ought to be restricted to wholesale-only models or whether the sale of retail services should also be allowed. One participant on the list, Don, had seen Baller make an argument in favor of “choice” at a conference in Peoria and, knowing Baller was a participant on the list, asked him to repeat the argument for the benefit of the group.

This is the way Baller responded:

OK, Don, here goes.

As I stated at the Peoria conference, my religion is “informed local choice,” and I support any feasible involvement model that a community may wish to implement. That includes the wholesale-only model. In fact, several of our clients are currently engaged in wholesale-only projects, primarily because that’s all they can do under the laws of their states, and I sincerely hope that these projects succeed. My main objection is to the notion of imposing a wholesale-only model on communities as a matter of legislative fiat, particularly in the absence of hard evidence from the field that a wholesale-only model can actually work over the long term under the conditions present in most municipalities in the US.

Let me give you a simple example that illustrates how a municipal retail model may work in a community in which a wholesale-own model may not. For purposes of this example, I’ll focus on video services and ignore most of the other factors that one would typically evaluate in determining the feasibility of a municipal broadband project. I should also note that retail service is not rocket science, at least for municipalities that operate their own utilities. The cable industry’s whining to the contrary is just bull-twaddle. More than 100 municipalities have been doing this successfully for years. In fact, Frankfort, Kentucky, has been doing it since the 1950s. An important reason why municipal retail service is relatively easy in the US is that, to stimulate competition in the cable industry, the Cable Act Amendments of 1992 authorized and encouraged the formation of video programming buying cooperatives. Now, virtually every public and private cable operator, except for the giant cable incumbents, gets the vast majority of its programming through a large buying cooperative known as the National Cable Television Cooperative (NCTC).

Now, let’s suppose that a municipality wants to build a state-of-the-art fiber system, to give its government agencies, businesses, schools, medical institutions, residents, and others affordable access to symmetrical bandwidth capacity of 100 Mb/s or more. To pay for such a system, the municipality must receive substantial revenues on each major service, including voice, data (including broadband), and video. More specifically for our purposes, in a typical fiber project, financial feasibility will depend heavily on the amount of revenue that the municipality can reasonably expect to receive on video services, either from providing retail service to subscribers, from providing wholesale service to one or more third-party retailers, or from providing a combination of retail and wholesale services.

Next, let’s assume that the municipality wishes to push cable rates down as low as possible, effectively giving the community a dividend on its investment in the fiber system and keeping the savings in the local economy, where they will circulate many times over. The municipality, unburdened shareholder demands for high short-term profits, can set retail rates just high enough to recover its costs, including capital costs, NCTC’s video programming charges, other operating costs, and amounts sufficient to fund future upgrades. At these rates, the municipal system might well be able to attract enough subscribers to make the project feasible. (One would determine this through surveys, focus groups, interviews, experiences in other projects, etc.) If the municipality set its rates much higher, it may or may not be able to overcome the existing cable operator’s advantages of incumbency — i.e, an existem system built and largely paid for with monopoly profits, earned before there was any competition, a starting position of dominance in the market, ongoing revenues from a substantial subscriber base, subscriber inertia, the ability to use its cable system to flood subscribers with disparaging statements or disinformation about the municipal system, and a host of other advantages.

Finally, let’s assume that the municipality is limited by state law to providing wholesale service and can proceed only by injecting a private-sector retailer into the mix. The retailer will have to set rates high enough to cover the municipality’s wholesale rates (through which the municipality must pay for the fiber system), NCTC’s video programming charges, the retailer’s other capital and operating costs, and a sizable markup to generate the profits that the retailer’s shareholders demand. Especially in small markets, in which there are relatively few potential customers to spread the costs of a fiber system, this may push rates high enough to leave subscribers little incentive to switch away from the incumbent. Furthermore, many subscribers may view the private-sector retailer as just another profit-driven outsider that will siphon revenues out of the local economy. In these circumstances, lower anticipated take rates might well render the project financially infeasible, as well as much less attractive to the community.

With regard to Jeff Sterling’s suggestion that the Nordic countries are proving that “open access” works, that is not inconsistent with my point that we have “no long-term evidence from the field demonstrating that wholesale-only actually does work.” For one thing, “open access” and wholesale-only are not the same thing. A municipality can offer “open access” to its system and at the same time provide one or more retail services. In fact, most municipal fiber systems are doing this, and the FCC has found that concerns about potential bias can easily be addressed by non-discrimination and competitive-neutrality requirements. Furthermore, I wish Europe’s experiences translated well here, but I don’t believe that they do. When I was recently in Amsterdam to speak at the European FTTH Conference, I listened very carefully to the European presenters and talked at length with many of them about their projects. In particular, I had several long talks with the founder and initial head of Skokab. I’m afraid that I just don’t see Skokab or any of the other other European model working in America, at least as long as we require our systems to be fully self-supporting and our incumbents are intransigent about working cooperatively with municipalities.

In the end, even if the evidence showed that the wholesale-only model does indeed work — which simply cannot be true in all situations — I still wouldn’t force it upon communities. Undoubtedly, many communities would choose the wholesale-only model, particularly if they lacked the experience to provide retail services themselves, but others would not. I strongly believe that communities are the best judges of what’s best for them and should be free to decide these matters for themselves.

Jim Baller

Baller is speaking in a discussion among friends of municipal broadband. In another context, the most powerful argument might be very simple: if you want to know what the most powerful and secure business model for this sort of enterprise is, look around and find out which model the most successful participants in the market use. In our context–ask what BellSouth and Cox do. What you will find, of course, is that BellSouth and Cox would laugh you out of the house if you suggested that they’d be better off deciding to go to a wholesale model and let other companies take a share of the profits made possible off their investment in their networks—companies without the gumption to build the necessary infrastructure for themselves. In fact, they don’t allow anyone on their networks unless the FCC demands it. LUS should be allowed to adopt the same powerful business models that its competitors use.

The New York Times reports that (GASP!) all but one of the RBOC phone companies won’t let you access what they call high-speed Internet unless you pay for a basic phone line.

That is, in those places where Regional Bell Operating Company (RBOC) customers can manage to get Digital Subscriber Line (DSL) access, you’re also required to pay for a basic phone line — even if you don’t use that phone!

A spokesman for SBC says no one is forcing people to buy their broadband access from his company; but, in a number of cases it’s the RBOC way or the highway.

Recall, now, how hard the RBOCs have worked and how much money they’ve spent in the mostly successful attempt to deny competitors access to the networks that they built during the decades when they (or their predecessor AT&T) were regulated monopolies. To use the lack of competition as leverage to force consumers to pay for a service that they don’t want in order to get one they do was called “tying” in the Microsoft anti-trust case (which the Feds actually won).

It’s such tone deafness to the needs and interests of consumers that have made RBOCs so unpopular. I for one am counting on BellSouth not being able to learn a new trick in the coming months as Lafayette moves to vote in support of the LUS fiber initiative.

This Associated Press background article datelined Kutztown provides a readable overview of current efforts by telecom companies to squash municipal competition. Louisiana gets a brief mention as one of the states where the push to use state laws to outlaw local competition was less than completely successful for the telecoms.

Kutztown is pretty little town in Pennsylvania’s Amish region—I’ve got a soft spot for this region of rolling hills and narrow roads clogged with Amish horse-drawn buggies, since Sunday drives in that area were one of the pleasures of my position at the University of Delaware. Kutztown was one of the first towns to build its own fiber-optic system and has been regularly and unfairly presented in telecom company-sponsored propaganda as an example of how such builds have failed. (For Kutztown’s reaction to this treatment, see the section on Kutztown in the TriCities “Broadband Failures” page.) Presumably the local reporter who wrote the story has the background to help cut through the incumbents’ fog machine.

Well, the cost of taking a company private is, apparently, nothing to be sneezed at! Cox Communications lost a whopping $2.5 Billion during its last quarter of existence (before being consumed by privately held Cox Enterprises). This story says a fair bit of that loss was connected to the cost of taking the company private. This one says it, too.

The second story says that, if you take away the accounting charges, Cox’s cable operations (the third largest in the country) generated over $600 million in profits. Cox says that it has 6.6 million customers nationwide.

The more interesting part of the Cox story (at least for me) is found in the numbers relating to its phone customers.

For starters, 44 percent of Cox customers are bundle customers; that is, they subscribe to more than one Cox service — cable, internet and/or phone service. That seems like an awfully strong number. Using their national customer base figure of 6.6 million, that means that something on the order of 2.6 million or so of those customers are paying Cox in the vicinity of $100 per month. I base that guestimate on the local cost of a digital cable package plus high-speed Internet.

But, the really interesting part of the Cox story is the growth of its digital telephone service — Voice over Internet Protocol (VoIP). Cox reported signing up just under 90,000 new digital phone customers (“the biggest quarterly gain ever,” according to Cable Digital News), due in large measure to the fact that this new service was rolled out in five new markets in the last quarter of 2004 — including Lafayette. Cox has a total of 1.3 million telephone customers, most of whom are not on the new digital network.

What does this have to do with BellSouth?

Well, Cox is not creating new telephone customers; they are, in fact, taking them from someone. In Louisiana, Cox is taking phone customers away from BellSouth.

Cox recently announced its intention to try to sell some of its assets in Louisiana and other places which are not poised for the kind of growth that Cox prefers. Cox wants to hold on to its New Orleans, Baton Rouge and Lafayette area markets.

Cox is signaling that it views those markets as having better than average overall growth rates and that it believes it can grown its market share in those growing markets. Just about all the market share that’s there to be grabbed in those markets will come at the expense of BellSouth.

The ‘Odd Couple’ nature of the Cox/BellSouth alliance against LUS is even odder when viewed in this light. Cox is aggressively moving to take market share away from BellSouth at a time when BellSouth Louisiana execs can’t convince their bosses in Atlanta to upgrade infrastructure investments in those markets to anything above regular maintenance levels. That is, BellSouth Louisiana can’t convince BellSouth HQ to respond to the market challenge presented by Cox. The logic at BellSouth HQ being something like, ‘how can we justify a big infrastructure investment there when we’re going to be losing market share there for the foreseeable future?’

This could rapidly become a self-feeding downward spiral for BellSouth Louisiana. The markets Cox wants to contest BellSouth in are the fastest growing markets in the state. Cox has invested and will likely continue to invest significant dollars in their network infrastructure which will enhance their ability to win still more market share from BellSouth. That will leave BellSouth with slow growth markets here. It would be bad news for those communities, because they would continue to serve primarily as cash cows to fund BellSouth’s more technologically advanced projects in other parts of the company’s nine-state operating footprint.

The question for BellSouth will soon become at what point do we want to stop the bleeding — if at all? There have been rumors circulating within the telecom industry that BellSouth will move to close its BellSouth Louisiana office in New Orleans within the next 18 months. This makes sense from a corporate organizational model because it would help eliminate layers of bureaucracy in the company. But, could it signal a more significant retreat from Louisiana?

With its only rapid growth markets in the state under competitive siege and with no significant infrastructure dollars coming down the pike to facilitate a response to the challenge, BellSouth Louisiana does not currently look like a company with a long-term strategy here.

Yet, they continue to partner with their fiercest adversary in a ham-handed effort to prevent Lafayette from gaining access to the kind of infrastructure that it will not provide here.

The word ‘spiteful’ comes to mind.

Danny Izzo makes the straightforward points that demonstrate that he at some time had a good civics teacher (in school or out):

Nearly everyone agrees we are better served having LUS in our community and there is a long history of local governments doing certain types of infrastructure business in the interest of the people. That is exactly what LUS is doing now.

We voted in precisely the way our founding fathers meant our representative democratic republic to work. We are not a “democracy.” We elect representatives to handle our governmental business. Let them do their jobs! If we don’t like the job they do, we can “UN-elect” them next time around or, if we believe they really screwed up, we can always start a recall.

Providing utilities is basic good government and our representatives are supposed to represent us…not kick it back to us every time the going gets rough. It’s good to see that people still recall these basic principles.

Update: Trolling back through my archives I see that the Independent published substantially the same letter on 3/2. Get yours from your local newspaper of choice.

Today’s Advocate has an article which at first blush seems similar to yesterday’s Advertiser story in that it lays out the sequence of events that have to happen on the way to a referendum. It’s spiced up with a constructed debate between Tim Supple of fiber411 and Terry Huval of LUS on wholesale vs. retail models.

But what’s really interesting in this Blanchard article is the concession that Tim Supple makes for fiber411 on the question of whether or not a fiber network is desirable at all. He says it is. He’s right, of course. But the admission is still surprising—and noteworthy.

The arguments against fiber as a technology (by fiber411 and their allies) have to date been based on nothing more than suppositions, fear, uncertainty, and doubt about the technology of fiber-optic transport. Suppositions about “possible” new technologies, inducing unsubstantiated fears of “maybe” changes in basic transport technology, intoning that all technolgical change is uncertain, and suggesting doubt about the value of fiber have been the basic, even if clearly basically mistaken, tactic of the opposition.

The truth is that everyone with a dollar to bet is banking it on fiber-optic technologies–both the incumbents who are so against Lafayette building its own fiber-optic system are in the midst of slowly replacing their ageing infrastructures with fiber. The Federal Communications Commission has been so desperate to find ways to convince the carriers to build fiber to the home that they’ve been willing to trade what managed competition there was for a few years in the hopes of finally inducing the Bells to build their long-promised fiber to the home. (Let us all take a moment to mourn the loss of ATT and EATEL’s money-saving service in Lafayette.) Tim is right to concede the basic point: Lafayette needs a fiber to the home system.

Getting rid of the the whole Fear, Uncertainty, and Doubt (FUD) tactic in relationship to the technology of fiber would be an enormous step forward in the public debate. It hints that someone in the debate might actually be willing to lay down weapons they know to be dishonest.

And that is the best sign about the battle to come that I’ve seen in a long time.

The story goes on to oppose too briefly the judgments of Supple and Huval as stand-ins for the pros and cons of wholesale and retail business models. It’s a start, but the basic issue is critical enough to deserve a much fuller treatment. I’ll try to toss in my two cents worth later today if I can manage the time.