Author: FiberFolk

This Broadband Reports story notices that Lafayette is the only location in the Middle America Cox (MAC) district of Cox to get the upgrade that Cox has supplied to both coasts. The implication: Lafayette gets the upgrade because it is considering a municipal fiber network and Cox is trying to clean up its act.

Middle America Cox subscribers have long complained on discussion boards that they pay the same amount for their broadband connections that the more privleged sections of the country pay for much higher speeds. A major complaint is that most recent three upgrades applied in other Cox districts has not been seen in the less wealthy, less densely populated MAC district.

A CNET story covers some of the same ground. Alert readers of this earlier story will note two things: 1) at press time for this story Lafayette was not among the areas supposed to get the upgrade and in fact it was announced for Lafayette only later. 2) The speed everyone else got was to 4 Megs. Lafayette was told it was getting 3. 3 Megs is what the other districts got upgraded from. If the 3 megs story hasn’t changed then Lafayette really hasn’t caught up, it’s just not as far behind as the rest of MAC. Note: I am not seeing anywhere near 3 megs at my house. (I wonder if we could ask for a 25% discount on their “free” upgrade.)

Thanks LUS! The fruits of competition, even threatened competition, are sweet.

As I discuss fiber politics with folks here in Lafayette I often hear that it doesn’t matter who builds the fiber network as long as it gets built. Most of those people concede that only LUS will do so in the foreseeable future but want to make it clear that there is no in-principle reason to want our inevitable fiber network to be built as a public utility.

I, as readers might guess, think differently: a better price and universal service are excellent reasons to prefer a public utility.

But those aren’t the only reasons, and they flow from what is the central reason: A public utility is, in the end, motivated by service. Not merely as a result of noble ideals, but simply because in the utility game good service at a cheap prices is what defines success. And the successful career of its personnel depends upon succeeding using that definition of success.

A private company is playing in a different game and in their game it is all about profit. Yes, we are used to understanding that a healthy respect for profit usually leads to good service and cheap prices. And when you are looking at your local grocery store that is true. They’ve got competition.

But it is not true when you are looking at monopolies. As we are in Lafayette. It has been argued that BellSouth and Cox are not monopolies. But they are, at least in terms of their own networks. There may be some indirect competition for the services they offer. Cell phones and satellite TV are both eating into the established companies’ base. But that does not change the fact that they hold a monopoly stranglehold over their own networks and that recent FCC rulings have tightened that stranglehold. They can, and do, manage their own networks to maximize their profit. It’s only logical—they serve their owners well.

The problem here is that the private providers of monopoly networks often have good reason to deny the public valuable services that would eat into their private profit.

That brings us (finally) to the story that occasioned this bit of reflection, a short piece in the Cnet broadband blog: SBC: We’re fiberlicious. Really which is a good example of how this works.

All that the story really amounts to is a little bit of cynical musing about whether or not commercially provided fiber really makes the sort of difference in user experience that one would hope for. The heart of the entry:

In San Francisco’s Mission Bay development, SBC also provides fiber directly to apartments. But when Jim Hu and I visited, we were surprised to find that consumers still only had the option to get Internet download speeds equivalent to DSL–for the same price as DSL. To the consumer, the fiber made no difference at all. There might be video-on-demand services, but the technology’s blazing broadband potential was being virtually ignored. (emphasis mine)

The author merely notes the lack of much of a speed improvement. But we need to ask ourselves why this is true. Why should SBC throttle down the capacities of fiber? The sentence contains at least one answer—video-on-demand. Recent blogs and articles on this site have focused on the danger posed by IP networks for conventional telephony and video. (Skype, Open/closed Systems, The Road to Innovation) Both the telephone and the cable companies are banking on cable TV to pay the bills—and they should, profits are huge in that sector, contrasting dramatically with the margin in providing bandwidth for data and telephony. But that means that to protect their profit center they cannot allow download speeds to reach a level that would allow a Starz-RealNetwork or TiVo-Netflix deal to be practical. According to a graphic which accompanied only the printed version of a recent Advocate article downloading a DVD movie would take 13 days by fast dialup modem, 11 hours and 36 minutes by cable modem and 1 minute via fiber optics. 11 hours is way too long a time to tie up your internet connection; it simply won’t happen. But if the download time were 1 minute (or even 10) downloading would rapidly become the preferred way to watch video.

And that scenario—where people gradually abandon the cable model in favor of ordering a la carte from a list of movies or shows would not result in the owners of the networks making a profit off selling content, they would be reduced to simply providing transport—an increasingly low-margin commodity.

For a private, profit-making corporation this will always be true. They will always find it more profitable to use their monopoly control of the network hardware to set themselves up as sole providers of content over the network they own for a simple if brutal reason: In fact it will always be more profitable to take all the profit available for a product rather than share it with anyone. A company answers first to it owners. Making the best (meaning most profitable) use of their resources is a legal obligation for any manager.

A privately-owned monopoly network will always be closed. It’s just that simple.

Here some hard truths that we are having a hard time acknowledging and dealing with:

A fiber optic network, like the twisted pair phone and the coaxial networks that preceded it will always be a monopoly. Monopolies, like any profit-seeking business, will always strive to please their owners and this will always mean that private corporations will be obligated to act in the best interests of owners rather than customers. Their network will always be closed unless government forces competition on them. Throttling bandwidth to preserve the profits of cable TV is only one example.

The good, free-enterprise solution is to be an owner yourself. And that is exactly what a municipally-owned telecom utility will allow the citizens of Lafayette to be. It will be a locally—controlled, locally-owned business who will have to please its owners. The difference will be that pleasing the owners will be identical to pleasing its customers since they will be the same people. Its primary goal will be service, not profit. Such a business could, and such businesses regularly do, choose to forgo extracting the highest possible profit in favor of other values like low cost for customers or investing in ultra-reliable systems or choosing to use local providers rather than slightly lower cost outsider providers.

With a municipal utility the grounds for debating issues like how open a network would be to competing providers would be concrete and based on a simple principle: what is best for the citizen-owners. It makes sense to ask questions like the following: Would it be best to milk the huge margins of cable to secure funding for the build? Is that too risky considering the coming bandwidth/IP storm? Is there a way to build transitions between open and closed models into the network? Should we, in effect, subsidize pure communications between citizens (Data communications, Telephony) by lowering the margin on that portion and keeping it higher on entertainment (cable TV). None of these, and more that are similar, are comfortable questions. But they are real questions that can only be raised with a publicly-owned provider. No private provider will ever take such issues into account.

It matters who builds and owns the fiber network.

It isn’t a simple matter of supporting anyone willing to build the local monopoly fiber network. Only a locally-owned, public utility will ever have any rational motive for caring about universal provision, low prices, expanded bandwidth at the expense of profit, and a dozen other similar issues. It’s simple and painful: only if the public is the owner will we be assured that what is best for the public will be considered. It will then be up to us as citizen-owners to make sure it is. But if the provider is private we will simply never have a real right to an opinion. We will have to leave those decisions to Atlanta and knowingly concede that they will not be made with our best interests at heart.

That’s hard to look at. But shorn of any soft-hearted evasions that is simply the way it is. We should want to own the fiber network monopoly so that it will be operated to our advantage and not someone else’s.

As a survivor of numerous hurricanes, I can attest to the fact that those storms are not fun — particularly the cleanup. However, this story from eWeek shows that hurricanes — even devastating ones — can have an upside.

Homestead, Florida, flattened by the same Hurricane Andrew which struck Louisiana in 1992, used the near total destruction of that community to take a forward-looking approach to rebuilding itself. Using community development block grants (CDBGs), Homestead built a fiber optic system that is delivering 100 megabit Ethernet based voice, data and video services to residents there.

And, they’re looking well beyond the “triple play” concept. It’s a great story!

It also reaffirms the fact that not all companies feel threatened by such fiber projects.

This is a link to a November 11, 2003, speech by former Federal Communications Commission (FCC) Chairman Reed Hundt. Hundt’s tenure at the FCC produced landmark rulings that created the foundation for the explosive growth of Internet usage. Primary among those ruling was that Internet Service Providers (ISPs) could freely use the networks of telephone companies to deliver services to whatever customers they could win in homes and offices across the country. That was not a given, but it sure looks like a “no brainer” in hindsight!

In this speech, Hundt has a lot of interesting things to say about broadband deployment, the importance of it for the economic and community development of the country, and the role of regulation in the effort to bring broadband to every home and business in America. Oh, by the way, he still believes open network access is essential.

Ricky over at Timshel passed me the AP story “Philly Considers Wireless Internet for All”, it caught my imagination and I guest blogged on it over there. I used to live up in Delaware (don’t ask) and Philly was the “big city.” It had a tradition of masking and a strangely vibrant local politics that made a homesick Louisiana boy think wistfully of New Orleans. Mayor Street, a street fighter who didn’t bother to project a sophisticated air when fighting for his city also has a whiff of those old-time, mildly corrupt southern politicians about him. Long story short: I’ve got a soft spot for Philly.

So I was interested in Philly’s attempt to get cheap wireless broadband access for all. For most of the country the next hot thing is not our local passion, “fiber” but is instead “wireless.” Their hope for cheap, communal connectivity lies in clouds of WiFi hotspots tied through “mesh networks” into the internet. Its a nice vision, if not nearly so grand as our own, (they have to settle for current services while we can dream grandly of possible futures) and I wish them the best with it. Apparently, if backtalk on the net is any indication, they’ll need luck: both Verizion and Comcast, their local duopoly incumbents, are widely predicted to oppose it.

But a tidbit from the story touched off a little fantasy I though I’d share.

The tidbit:

One part of the 15-year deal is cheap Wi-Fi phones for neighborhoods where less than 95 percent of residents have home phones. IDT, which has agreed to market the cheaper phone service in those neighborhoods, would pay lower rates for poles there than other companies would in wealthier areas.

Sounds righteous, right? It is. But aside from simple justice there is a little secret being revealed in that innocent line. The city is going for a double play: wireless internet and wireless phone service. Whoever wins the phone contract to use the new wireless network will have a major leg up in the Philly metro area quite aside from having to give a little discount in the poorer areas that are Street’s stomping grounds. (Alert: this is where my “mildly corrupt Southern politician”-trained instincts are activated. I smell a little something here but will leave worrying about that to friends in Philly.)

Still a double play is even more fun that the nice fantasy of a cheap WiFi cloud over Philly.

‘ Course it doesn’t hold a candle to our own “Triple Play.” The talk in Lafayette has been about the fabled “Triple Play” the grail of recent telecom quests. Providing fixed phone, cable TV, and Internet is supposed to be the key to market dominance. Everyone in the game is struggling to achieve the necessary bandwidth—the quickest way to dismissed by financial analysts as dead in the water is for it to be obvious that you don’t have a viable business plan to get there. (Example)

No, Philly’s plan doesn’t hold a candle to our own triple play. But what makes it interesting is that it leads you to realize how easy it would be to turn a triple play in Lafayette in a quintuple play by adopting Philly’s plan. Imagine: superfast internet in the home, a WiFi blanket that covers the city with more speed than you can currently buy from the incumbents for home use, a phone in the home that has the same number as the one that you carry out to the mall, and gobs of digital HD TV. All for one low, low utility price.

It could happen; neither startup cost nor technology would be much, if any, barrier.

The incremental costs of adding a WiFi net to the fiber net would be small. (Or maybe WiMax if it actually matures.) Five percent of the fiber? I haven’t done the numbers but I’d bet no more and probably less. The costs of adding voice (VOIP) to that would be nil. All that needs is software which is already available—some of it is already there in free form (recall Mike’s recent blog on Skype, the free VOIP program that allows you to call into the local phone systems anywhere in the world for pennies). The monster bandwidth of fiber makes the additional cost of bandwith barely visible. Ok, there’d be some significant maintenance on all those little WiFi transmitters. So?

Possibilities roll pretty fast outta that imagined cloud: why couldn’t “push to talk” WiFi phone a la Nextel be free for “in network” users? Shoot, partner with Nextel or one of the others and make that a part of a contract that would probably net the cell carrier 75% or more of the local mobile market.

It’s not just new toys. Its the possiblity of integrating all these toys through a ubiquitous, cheap, high bandwidth network. Use your cell phone to address your settop box and order it to record that new show your friends are talking about at work. Or do it from your laptop, though the phone is cooler. Video phones? Sure. Video cell phones? Probably, at least on the WiFi to WiFi calls.

I could go on. But the message is simple: if LUS wants to kick the excitement up another notch: BAM!, they could do it. And having pissed off Cox and BellSouth what would it harm things to add Sprint and Cingular?

And wouldn’t that be a grand way to blindside whatever new program of disinformation the incumbents have planned for when you announce the full business plan?

It’s all just a fantasy….Yeah, I know it’s unlikely. But a man can dream. The Quintuple Play. And the CityCell phone (registered trademark) 🙂

PS: Dreams of converged networks don’t exist in just this fevered blogger’s imagination. The Koreans (who are waayyyy ahead of the US in broadband penetration) are dreaming of converged wired and wireless networks. But they need a final, essential piece according to a Korea Herald article. Can you guess? Sure you can: Fiber optics to the home. Read the story and have your illusions of American broadband dominance smashed.

Sadly, my earlier enthusiastic endorsement of a Netflix/Tivo deal appears to have been premature. The CNET article, Picture Imperfect for Netflix, TiVo, makes a convincing case that such a deal is not immenient. But at the same time the article makes it clear that it is neither the technology nor the buisness plan suggested that is the problem. Instead the issue appears to be problems with exclusive contracts for prime release dates and that the content providers are still nervous about TiVo’s Digital Rights Managment software—software recently approved by the FCC over the major studios’ objections.

It’s still coming. Just not in 6 months.

Recall that the record companies didn’t care for Apple’s DRM either. iTunes was just a little test on a minor platform. But nobody dropped out over Digital Rights when iTunes made it clear that it had found the sweet spot at the intersection of price and user rights that could rein in runaway piracy. The same dynamics are set to play out for video—the difference is that audio can be easily downloaded over current bandwidth. Movies need real bandwidth (read fiber). When movie piracy becomes as scarey to the studios as the music piracy was to the majors TiVo will seem like a savior.

But not just yet…

And a TiVo settop box for LUS is still a good idea….

The Financial Times has a story today about BellSouth’s move to sell $3 Billion in bonds to help cover its 40 percent share of Cingular’s purchase of AT&T Wireless. The article came to my attention by way of Southeast Tech Wire, which is a daily eletter covering technology news in the Southeast US.

The total cost of the Cingular buyout of AT&T Wireless is $41 Billion. BellSouth’s share of that is, the Financial Times reports, $16.3 Billion. That’s more than double what Cox Enterprises is paying to take Cox Communications private. We are now speaking about large numbers! It’s pretty amazing that reps of these companies are quibbling over an LUS plan that is expected to total somewhere in the vicinity of $100 million.

This is not just another transaction for BellSouth. The Financial Times article notes that both BellSouth and its senior partner in Cingular, SBC, “have been selling non-core businesses to fund the deal.” So, the companies are having to exert themselves in order to raise the cash to make this Cingular/AT&T deal happen.

It’s no wonder, then, that BellSouth isn’t interested in building a fiber to the premises network in Lafayette. They’ve got higher priorities that are demanding their attention — like financing all this corporate debt!

Talk about life catching up to speculation! A theme of late on this site has been the disintegration of the Telephony business model under the onslaught of bits—especially as shaped by disruptive nature of IP protocols. (See blog on Skype, and the On Background article: The Road to Innovation is Open) One bit of speculation was the possibility (probability?) that video would go the same way. Here is the latest gust in that gathering storm: Tivo, Netflix Close to Internet Movie Deal. It’s a short little article but be not deceived. The story is huge.

As both a TiVo owner and a Netflix subscriber let me say that I, for one, would welcome this with open arms. Between these two services I watch a lot less boring TV than I ever have. I never watch ads. (Just fast forward through the ads using your handy TiVo clicker.) I never watch anything just because its what’s on when I run out of steam. (I’ve got a Netflix movie or a backlog of interesting shows recorded on the TiVo) I watch the movies I want and feel no need to upgrade my cable to all those extra channels (My wife and I have been on a Netflix fueled classic documentaries kick this summer inspired by seeing the still quite good “Louisiana Story.” Our own, custom-built channel.)

By all that I only mean to say: this can be successful, very successful. TiVo is the leading maker of DVR’s and no one has been able to match its user interface. Netflix has rocked the Blockbuster world and inspired copycats everywhere. These are both top-of-their-category enterprises with hundreds of thousands of customers that are fanatically loyal. Merging the two is sure to power a surge for both.

But business aside (and the stocks of both companies have jumped) consider the implications for cable companies. All that they have going for them that sustains their 30-40 per cent profit margin (See “There’s Gold in Them Bills!” ) is their monopoly control of their regional coaxial networks. The content they sell belongs to others. If you can go straight to the source and get it for cheaper—or even if you pay the same amount but get it when you want it and only the exact movies you want, wouldn’t you go for it? (I know that even on premium channels that I think are decent I would never watch any real percentage of the total that I “pay for.”) Other deals have had a hint of this–particularly a recently announced Starz-RealNetworks deal. But that would be way too technical for most (hey, for me anyway!) and would require a recent computer (not cheap) and a huge hard drive. The interface would have to be maddening. But TiVo is as smooth as silk. Folks whose VCR has blinked 12:00 since they bought it in 1992 use TiVo and easily record the latest season of “Charmed.” It has the huge hard drive. It has the nice broadband connection. It is really pretty cheap; certainly a lot cheaper than a tricked out media computer. It will be no sweat for TiVo to add this service and make it easy to use. It’s just a new top-level menu and the user’s well-established selection and search habits will do the rest.

TiVo has been desperately trying to court the cable companies for years. They would like to be in your settop box today. TiVo has been peddleing those nifty boxes for years and suffering the slings and arrows of assorted analysts for their failure to close a deal with the cables. The cable companies could have had this innovative add-on service years ago. But the cablecos have been unwilling to share the revenue stream and prefered to put off utilizing DVRs until they could slap together their own version. Cox started offering their only late this summer.

But now may prove to be too late.

You thought Florida had experienced some storms. You just wait.

Cox might soon have better things to worry about than the local issue of Lafayette’s fiber. Maybe LUS could make a deal with TiVo to install their linux-based settop boxes and thereby set up a smooth transition from the cable model to a content-provider based model which will eventually require a computer-based video machine. And there is no cheaper media computer than the TiVo.

Wanna really sweeten the deal for Lafayette? Notice that TiVo is based on Linux. ‘Spose you could install a nice X-11-like interface in a walled off partion and use the TV screen for a display? What Digital Divide? Just as fast as that every house that had inexpensive “cable” would have an “ok” computer with full internet connectivity. Slap on a little “open office” applications and a browser and off you go. At a price that would be unheard of.

(Thanks to Doug, who noticed this story and shot us a heads up.)

Update: 9:20 pm– The original Newsweek story has more details.

A ProFiber first: Blogging our own story. Mike’s recent open systems story has inspired a lot of interesting conversation between us that always seems to be interrupted by real life. It looks like it might be easier to talk here—and maybe we can involve others in a conversation that we’d like to see more folks having. ….Join in!

Mike pushes hard for considering a open systems model for any Lafayette fiber optic project. His point is built on history: open systems have historically been the engines of new development. Closed systems have a strong tendency to become dependent on their cash cow. The Bells, for instance on telephony, and the cables on video bundles. They not only aren’t very good at anything else but are tempted to suppress new developments which, no matter how lucrative in the future, might supress short-term earnings.

Taking a look at the story it’s hard to argue with the basic principle. Open systems are, all things being equal, more likely to foster innovation. But that might not be the only thing we value; other things might not be equal.

It’s worth recognizing that were it anyone other than LUS we wouldn’t bother with this conversation: BellSouth and Cox are firmly committed to continuing as closed monopolies; there is no chance they will ever open their networks voluntarily. LUS might, if convinced it would be of service to the community, so the conversation is worth having.

And the difference between LUS’s and Cox/BellSouth’s motivation in this points to a real issue: is LUS considering fiber to set the stage for dynamic development and economic growth or is it in it to provide cheap, reliable, locally controlled utility services to our community? Mike’s work suggests that they might not be fully compatible motives.

My guess is that, whether compatible or not in some theoretical sense, both the community and LUS want both. The question is whether innovation and service can be reconciled and if so how?

I’d be tempted by this path: Decide that present, well-established telecom services are like water or the roads. For those follow the utility model: universal access and cheap, community-driven pricing. But build big overhead into the system and make sure the connection at the house can handle really huge bandwidth. Wholesale that enormous extra bandwidth to innovators (giving preference, perhaps, to local folks) to develop other services or to find unique ways of integrating the basic services. (Remember video phones?)

Use the old services to build and pay for the network for as long as they last. And pledge the excess bandwidth to open system principles. Such a system would be neither open nor closed: a mixed system.

Thoughts?

James Fallows had an article in Sunday’s New York Times about his experience using Skype, the wildly innovative Voice over Internet Protocol (VoIP) tool that is going to wreak havoc in the telecommunications business.

Based on the article, Skype appears to be something akin to instant messaging and peer-to-peer technology wrapped into a single program. This much is clear: this technology is truly disruptive in the best sense of the term. It will be extremely attractive to consumers and will force telephone and cable companies to innovate, obstruct, or die.

This will be interesting to watch. Anyone out there have any experience with Skype?