Author: FiberFolk

CED magazine has an article examing the question of whether DSL (the phone companies’ digital subscriber line technology) can handle the bandwidth requirements of High Definition television (HDTV).

The answer is a definite maybe — depending on the technological paths chosen by the respective providers. Hit the headline of this story to view that article. It’s pretty interesting.

However, the most interesting part of the article was this paragraph which brings us back to the heart of the matter here in Lafayette:

“Though some of the major RBOCs — Verizon, SBC Communications and BellSouth, among them — are pushing ahead with fiber plans that will provide plenty of bandwidth for HD, there are still questions about whether DSL will pack enough punch for telcos that don’t have the bucks to make a big upgrade and, instead, will need to rely on their legacy copper networks.”

Got that?

BellSouth has made a corporate decision that fiber is the future of the company and its services.

The problem for Lafayette is that BellSouth does not now consider us worthy of the fiber to the premises technology.

Every company and every institution has its own hierarchy of priorities which guide its moves. For companies like BellSouth and Cox, these hierarchies help them decide where they will make their infrastructure investments and when they’ll do it.

There is no question that BellSouth and Cox intend to build a fiber to the premises infrastructure in Lafayette. Both companies, left to their own priorities, would one day ensure that their respective fiber systems got to almost every business and home in Lafayette. That’s fine. I have no problem with them moving at a pace which suits their corporate mindset and corporate priorities.

For the foreseeable future, they’ve decided that they are not going to deploy a fiber network through your front yard.

This is the essence of the issue: who has established Lafayette’s interest as its top priority. By their respective decisions not to make the requesite investments in fiber infrastructure in Lafayette, BellSouth and Cox have announced that Lafayette is a nice little market, but they each have higher priorities elsewhere.

This has significant implications for the economic viability of Lafayette. If we accept the judgments of BellSouth and Cox, we are accepting their decisions to relegate Lafayette to a third tier city.

But, there are people in both the public and private sectors here who have higher aspirations for our community. We believe it can thrive. We believe it can grow wisely by harnessing the creative capacities of our people, our businesses, and our institutions through the enlightened use of information technology.

The LUS fiber to the premises proposal taps into and feeds off of that vision of a greater Lafayette.

I believe that this vision flows naturally from the strong entrepreneurial base in Lafayette’s economy. Lafayette is a community dominated by an ownership mindset — at least, our leaders are. Those communities dominated by a managerial mindset fare differently.

Let me explain.

I grew up in Eunice, LA. It’s a small town that has not grown much since about 1970. In the time prior to 1970s, Eunice was dominated by small business owners. While there were undeniable social problems in the town, primarily the relations among the races, the fact is that the business leaders of the community had a sense of a community which was greater than their own personal and business interests, though, no doubt they figured to profit if the local market grew.

In the decades since the 1970s, main street has been decimated and retail activities shifted to malls. Stores in those malls are chains which install managers to run them. Those managers are accountable to the expectations of the home office where ever that may be. That is the case whether the store they manage is in Eunice or in Atlanta.

I think it is difficult to appreciate the impact of this disappearance of the local ownership class on community leadership. But, managers are caretakers; they tend not to be into ‘the vision thing.’

The vision thing, though, is alive and well in Lafayette. It is, in my view, inseperable from entrepreneurship which is by definition forward looking. That is, it is not focused so much on where we are now, but where we might be able to go as a community. Lafayette’s entrepreneurial base fuels the vision of what our community can become.

It is the difference between what LUS sees as the potential of Lafayette and how BellSouth and Cox see that same community.

New technology is making for some strange telecom bed fellows.

Once a pillar of stability, you now need a live RSS feed to keep up with AT&T’s business models these days.

Consider these moves: AT&T was once THE Phone Company; then became a long distance company; tried to become a cable company and a wireless company; then reversed its course, sold off the cable businesses to ComCast and its cellular business to Cingular; then decided to get into the local phone business; then . . . Well, you get the picture, no?

Well, AT&T has made its current bet on Voice over Internet Protocol (VoIP) technology — that is, carrying phone calls over the Internet. The company has a good bit of experience with data networks, which was really at the heart of its lurch into cable.

With the Bell companies apparently succeeding at getting clearance from the FCC and the courts to raise access rates that they can charge companies like AT&T to access their networks, AT&T has begun to withdraw from the local access market — at least via phone lines.

The news out of the former Ma Bell is that it has struck deals with cable companies to bring its VoIP expertise to the table to help those cable companies develop and deploy telephony offerings.

Cox Communications is one of five cable companies with which AT&T has struck deals.

The point, here, is that while LUS has succeeded in creating a temporary alliance between BellSouth and Cox, it is just that — temporary. The cable companies’ move into telephony has the regional bell operating companies (RBOCs) like BellSouth squarely in the cross-hairs. It will be interesting to see how this alliance handles the strains of the fierce competition between its members.

There’s a new Cox poll out there and it appears to be less pushy than previous Cox efforts. This one, put into the field by well-established Louisiana political pollster Kennedy looks like it might actually be a real poll. Or at least the first part of it. —The second part was comprised of Cox floating a series of talking points past the virtually assembled test panel to see what might work to turn the Lafayette public away from LUS. And they aren’t telling you what they found there. As you will see they need the info. Poll results are mixed for the company paying.

The Advocate appears to have scooped local media, currently completely embroiled as they are with the school bus mess. (And a mess it is.) A quick survey of local media outlets reveals not a clue.

Reporter Blanchard shares his trademarked incisive lead:

Most people in Lafayette want to vote on whether to allow Lafayette Utilities System to enter into the competitive telecommunications business — but that doesn’t mean they’d necessarily vote against the proposal, a pollster said Wednesday.

That’s pretty much the whole of the content in a nice, neat packet. But if you want the details here they are:

Kennedy surveyed 600 registered voters in Lafayette Parish on June 24-26. The poll had a 4 percent margin of error.

Hmmn, that should be a clue that not all is well with this poll for Cox. June 24-26. It took going on two months to compile this survey and run the stats? Not. Nah. No Way. They sat on it. Why? It wasn’t exactly everything they wanted to hear. Read on:

About 78 percent of respondents said they have heard of the LUS proposal.

Sixty-four percent said they had a favorable opinion of the LUS plan — while only 21 percent said they are not in favor of the plan, Kennedy said.

….

Fifty-four percent agreed that government “should be in business competing with private business,” while 34 percent disagreed with that statement.

But when asked if the final decision should rest with the “city-parish council” or “the people,” 83 percent chose the people, Kennedy said.

Now those last two findings are pretty amazing. The questions they respond to drift over into being leading ones but retain that patina of legitimacy that Kennedy has no doubt honed while serving candidates for political office. Given the phrasing and the push to delegitimate the very idea of a local telecom utility on this “free enterprise” basis, finding that 54% favor government competition seems like evidence that the people of Lafayette know that they want fiber, recognized how that question was supposed to manipulate them and refused to be so driven. Put the same question before a group that didn’t know what it means in our context and I dare say that about 98 percent of all Americans would give the pure “no competition” answer. When folks begin to take ‘unnatural’ positions like this you gotta think opinion is solidifying. And not in favor of Cox and BellSouth. The council will be less happy with the findings of that last question, though. It puts pressure on them to call an election or it least it gives fiber opponents something to bash them with. How to reconcile the responses to those last two questions? Here is the simple interpretation: The citizenry apparently know what they want and they want to let everyone know they want it. I’m willing to bet that Cox has come to that conclusion too.

The Council is rightly worried about what an election campaign would look like. After all we are going through one of those right now and it isn’t pretty. They have already witnessed exactly how far Cox and BellSouth are willing to go in misrepresenting the case they put before the people. Everyone form the Council to the Mayor to Chamber of Commerce has been given cause to be angry. But this is not just a local fight and the tactics that have angered people locally are not particular to Louisiana. This kind of public relations war has gone on all over the country. And it has been very ugly. (Sneak Preview: LafayetteProFiber is working on a piece based on another community’s experience with teleco tactics even now.) One of the great ironies of our little fight is that Cox has been very vocal about supposed unfair “government” advantages. But what it wants to do is drive the battle to a vote where all the advantages are its. To fight the good fight in an election battle the city would have to buy time on the cable networks. LUS would hate giving money to the enemy. And how much would it cost Cox to saturate the airwaves with Fear, Uncertainty, and Doubt? Nothing. Cox’s positions aren’t about fairness. They are about advantage.

Cox does have alternatives. It could force a vote if it wanted to. It could rouse the (not so) restive citizenry and stage a petition drive. They would only need 15% of the voters to do so. Yet there has been no move in that direction. Why not? Go back and review those polling numbers. No support. They people want fiber; they even want to vote for it. Getting those numbers won’t be at all easy. And failing in a petition drive would be fatal.

So they want to shift the battle to their own turf: an advertising campaign. Where they own significant portions of the media battleground.

But go get the story and decided for yourself.

Ok, let me say from the outset that this is a little petty. Folks have a perfect right to say just exactly what they (or even their employer) want to.

(Grumpyness on)

Still, I am irritated each time I take a look at a letter to the editor or go to a public meeting and find that as far as I can tell the vast—and I do mean vast—majority of those that speak out against Lafayette even thinking about treating fiber optics as a utility are employees or retirees of Cox or BellSouth. You have to wonder what is in the employee’s and retiree’s newsletters. if you assume, to be fair, that these folks will be more interested in the still-abuilding plan than their neighbors because they have a horse in the race you would still think that a few of them would see the advantage for the community that a majority of Lafayette residents apparently do. Is there a reason that fraction doesn’t speak up? …You say you think it matters that their employers might not like it? And you can really understand that? …Yup, I agree, and to keep up the fairness I also think it matters for those that speak against the idea that they think their employers will be pleased.

What motivates this little bit of spleen is that we have in the Advertiser today another bit of meanness from a Cox employee who doesn’t share the fact that he is an employee with the readers. In this one he trash talks the character and intelligence of Broussard’s Mayor Langlinais. (Missed that letter? It was good–but you won’t find it online; the advertiser is missing that day’s letters. But you can get it from us.) Why do I think Steve Puckett is a Cox employee? Because he said he was at a Lafayette City-Parish Council meeting. Nor is this his first such letter: I’ve found two more in the Advertiser archives. And, to give the devil his due, in one of them he does own up to his employment.

In the normal course of events I’d probably sit down, eat breakfast, recognize that people unfairly insult public officials all the time and decide to let this one pass without posting. But this one is going in for a simple reason: I’d like our readers to start noticing the percentage of anti-fiber voices that are paid by the telecoms. Letters to the editors, public meetings, and even the infamous “Academic” forum are all populated by paid voices. If you don’t pay close attention you might be tempted to think that there was substantial dissension among Lafayette citizens. Maybe, though I doubt it. But what you see in these venues is as poisoned by the corporations as the results of those push polls and is not fair evidence of widespread concern with a popular utility.

Make up your own mind—and be aware of the interests of those speaking. Listen, but be aware of who you are listening to.

OK, I feel better now.

(Grumpyness off)

All that said I want to note for the record that not all employees of telecoms strike me as making unfair cases. LafayetteProFiber recently received an email from a wireless employee opposing fiber that was well thought out, respectful of people and the community, and used his specialized knowledge to raise concerns well worth worrying about. I spent half a day going over in my mind how I would talk about fiber with a principled opponent of the idea. That was a refreshing change and I was grateful for the opportunity to think about the issues with that assumption.

According to a telephony online article municipal telecom utilities are moving from being regarded by incumbent teleco and cable companies as mere nuisances to being recognized as competitive threats. This is the best analysis of the complex emerging issue that Lafayette is embroiled in that I have yet seen and explains, at least in part, the passion we have seen on the part of incumbent companies. (Another part of course is simple money. See Mike’s posting on that issue. A 30-40% profit margin? You do the math.)

The Threat

Here is what they have to say about why the attitude toward municipal fiber is changing:

Once considered merely niche players in smaller telecom markets incumbents didn’t care about, municipalities are announcing fiber buildouts with greater regularity in increasingly larger markets already served by telcos and cable operators.

Incumbent providers downplay the big-picture threat but are adamantly lobbying against municipal entry into the telecom market at every level of government, with good reason. In addition to philosophical arguments regarding governments competing against the private sector, the last thing the struggling telecom industry needs is to have to match prices with deep-pocketed competitors that have access to cheap capital and — most importantly — no requirement to turn a profit.

Notice how neatly this tracks our experience in Lafayette. The infamous SB 511was

BellSouth’s instant response to the impudent suggestion that Lafayette might consider building a fiber utility.

The History

As Joey Durel has emphasized from the begining the appropriate comparison here is the role municipal utilities played in electrification of their communities—and the demonstrated benefits of electrification for the communities that had the courage to take the risk. Their recounting of the same historical moment tracks Durel’s closely:

There are “remarkable parallels” between the electrification of America in the 1890s and the transition to “true broadband” in the United States during today’s information era, Baller said. In the 1890s, private electric companies focused their investments on urban areas that offered greater profit opportunities. Many municipalities that didn’t fit this criteria eventually decided to establish their own electric companies.

Baller said the arguments against the creation of municipally owned electric companies were similar to the arguments posed by critics of today’s municipal forays into telecom — most notably, that cities lacked expertise in the field and that the governments should let the free market run its course. History proved those arguments wrong, Baller said. Today, there are more than 2000 municipally owned power companies that have withstood the test of time much better than cities that literally were left in the dark, he said.

“Many cities that waited for the private sector to serve them became dust,”

IProvo

For even more parallels to Lafayette’s situation pay close attention to the discussion of iProvo a municipal project to build a fiber optic network in a college town of 100,000. The telecos and cable companies are especially bitter about municipal networks being built where they are currently making real money. They even called on the same Progress and Freedom Foundation that provided an “expert” for Lafayette’s “Academic” Broadband Forum (see our pregame analysis, with special emphasis on the “experts” or indulge in our postgame report) in to declare iProvo’s plan as impossible as his colleague declared Lafayette’s.

Lafayette. You didn’t think they missed us, did you?

On of the things that the private providers claim—and really seem to resent—is that public entities don’t have to make a profit. But it isn’t really true that private entities don’t have to make a profit and they know it. What they mean to say is that public entities don’t have to do any better than break-even. Their profit can be small, and the owner-customers of a utility will likely prefer it that way. That is what they really resent. (Again, see Mike’s story for the real skivvy on cable profits.) It seems that the “flexibility” (read: willingness to not skin the consumer) that this service orientation leads to really makes teleco’s uncomfortable. The reporter catches Louisiana’s Oliver in an unguarded moment:

…that flexibility also makes it hard for private-sector providers to compete in a territory where there’s an effective FTTP deployment, according to Bill Oliver, president of BellSouth’s Louisiana operations.

“It’s like, which math course did I miss?” Oliver said of the accounting for some municipally owned telecom ventures. “It looks like they’re losing money, and they still haven’t paid for a truck to roll or someone to answer the phone.

“It makes it difficult for a private company like BellSouth to compete with a governmental entity that’s only goal is to break even.”

Oliver’s position here, that it is somehow unfair for other providers not to labor under the same disabilities that he does, is reminiscent of Cox’s desire that Arizona tax satellite TV providers into competitive equity with them. Or BellSouth’s strange demand, now eshrined in Lousiana law, that municipal providers like LUS be forced to prove to the Louisiana Public Service Commission that they calculate what they charge their citizen/consumers as if they were leasing their own right of ways and poles the way BellSouth does. (See an earlier entry of mine that goes on at length on this strangly anticompetitive attitude.)

Open and Closed Systems

One of the issues that divides proponents of municipal broadband networks is that of whether the new network should be open or closed; whether the municipality should open up the network by leasing access to competing retail providers or whether the local municipality should take a more conservative, closed, route (the same conservative route both cable and telecos take with regard to their networks) and provide services to its citizens directly. The virtue of open systems in the eyes of its advocates is that the consumer will presumably benefit by lower prices and a richer array of new services brought on by competition. The virtue of closed systems in its proponents opinion, is in a word, safety. You own the network, you offer a good service and because you know that profit levels in, for instance, cable are high you know you can both please the public and have room in the pricing to build up a cushion for future development and to deal with unanticipated problems. You also don’t have to split your profits with the retailers on your system. Closed systems are arguably the safe, “business plan,” model.

Iprovo and its big brother the Utopia project, which links small cities and towns in Utah, are taking the open route.

Lafayette is not:



Huval, the hard-nosed reaction

Huval said there’s no timetable for LUS to make a decision, but he said the organization wouldonly make the investment if it offers a voice-video-data triple play. In addition, Huval said he does not believe the LUS would make its network open to all service providers.

“The idea of open access is nice, but does it pay the bills?” Huval said. “The problem with open access is that the driver of [broadband] penetration isn’t the entity that has to pay the debt service.”

And whether municipal entities can at least break even on their fiber buildouts remains the biggest question. Incumbent providers are skeptical, but Baller said adoption rates for some community networks offering triple plays have legitimized the UTOPIA projected take rates. But both public and private proponents agree that it’s too early to estimate the impact municipally owned networks will have on the telecom market.

I’m an admirer of hard-nosed, realistic plans. And, readers may have noticed, pretty clearly an admirer of idealistic, hopeful plans. I’m torn. A reasonable point that the proponents of open systems sometimes make is that while fiber, and the true broadband capacity it offers are a good bet, the particular services that are offered are less certain. For instance real broadband might end up destroying the cable model–and a leasing plan would offer a more nimble way to switch to video downloading if that is the path the future takes. Maybe. But I am not sure why LUS couldn’t mix models. Keep the basic three services, phone, TV, and Internet, and use that revenue to make sure the cost of the build is absolutely secure. Pledge to make a fixed percentage of the bandwidth available to lessees. There will be plenty of bandwidth available, especially if Lafayette goes with an active, ethernet-based system (please!) and forcing yourself to always keep plenty of “spare” bandwidth would not be bad discipline anyway—my guess is that the easiest “business” mistake to make would be, contrary to what the incumbents tell us, to underestimate demand. We simply have no models of what might happen if network effects take hold once true bandwidth is universal and cheap. (Network effects you ask? Discussed here.)

Hey, LUS, if you are out there. You need to start talking with folks about things like this. Before your plan is set in stone.

Steve Sabludowsky’s BayouBuzz site carries an interview with John St. Julien and I today about our site. Steve asked several questions that get to the heart of the issue in ways that only an outsider can. The questions pushed our thinking some and brought new insights in the process.

Steve’s promising to bring other perspectives on the Lafayette fiber discussion to his site, so keep an eye out for those. If you don’t subscribe to the BayouBuzz daily emails, you should. Always lots of good news and political links, as well as provocative commentary.

Meanwhile, checkout the interview!

Sunday’s Advocate carries the article “Senate hopefuls vow to help La. get its fair share” in which the four major senatorial candidates participated in the Louisiana Municipal Association’s forum held during the association’s annual meeting. For fiber afficanados the interesting—and surprising—move of the event was Vitter’s coming out in favor of giving local government more freedom to provide telecom services:

Vitter also noted he supports giving local government a freer hand in providing telecommunications services — cable television, Internet and telephone — if they can offer those services more affordably than private companies.

Competition serves consumers better, he said.

Frankly, I was surprised. But maybe I shouldn’t be; after all it really is conservative to be for competition and to favor local government with its closer-to-the-people connection in cases where the state seeks to restrict what local governments are allowed to do on behalf of its citizens. I can only think that he wants to bolster his support in Lafayette–and it’s interesting that a conservative thinks that endorsing telecom utilities will help him in Lafayette Parish. He must think the people are pretty much overwhelmingly in favor. And in that he shows (IMHO) good political judgment. Of course, the endorsement is a cheap gimme since our federal representatives have nothing to do with the law recently put in place to limit local government’s ability to provide telecom cheaply. At any rate, GOOD. The more the merrier. Maybe we can get this on the radar screens of other candidates.

In June, the University of Southern California Law School (Yep! THAT USC!) and the Annenberg School for Commmunication co-hosted an event called “A Symposium on the Los Angeles Cable System at USC.” The headline on this entry will take you to the summary of the comments made at that event. They covered a lot of ground that day; much of it relevant to our discussions here.

For purposes of this entry, I’d like to focus on the comments attributed to Greg Kohl, director of research of the Communications Workers of America (the CWA represents thousands of workers at BellSouth and other Regional Bell Operating Companies). The title of his presentation was “A Look at the Economics of the Cable Industry.”

Well, it’s an eye-opener!

Among the many relevant points Mr. Kohl makes (according to Digital Democracy’s Digital Destiny Campaign report on the event) are these: the average cable customer is valued at $3,820 per subscriber; that operating cash flow margins (that’s what you and I would call profits based on system operation) run between 29 and 40 percent; and that cable prices have been increasing at five times the inflation rate over the last several years.

All this says is that the cable system business is very lucrative, based solely on the subscriber base revenues. But, there’s more.

Mr. Kohl also declared that cable advertising revenue out-grew the cost of buying programming by $2.6 billion between 1996 and 2000. So, wonder what that cat fight about ESPN programming costs a few months ago was all about? Multi-billion dollar conglomerates fighting over your wallets?

But, the slide that drives home just how lucrative the cable business is came in slide 16 of Kohl’s PowerPoint presentation (I’ll paste in a link below).

The slide is headlined: “Nine of the World’s Richest People Got Their Fortunes from Cable.” Let’s work down the list for the benefit of those who will not be making the trip to the page:

• Ted Turner — TimeWarner, TBS, others — $2.3 Billion.
• Barbara Cox Anthony — Cox — $11 Billion.
• Anne Cox Chambers — Cox — $11 Billion.
• Harold FitzGerald Lenfest — Lenfest Cable — $825 Million.
• John Malone — TCI, other cable TV — $1.9 Billion.
• Alan Gerry — Cable TV — $1.1 Billlion.
• Amon Barr Hostetter, Jr. — MediaOne, others — $2.1 Billion.
• Charles Francis Dolan — Cablevision — $1.4 Billion.
• Brian Roberts — Comcast — $625 million.

Viewed in this context, the fear, uncertainty and doubt that is the core of the Cox/BellSouth campaign against the LUS fiber to the premises project is almost comical. What they don’t want — particularly Cox — is for anyone to get their hands on the gold that’s in them bills!

No wonder Cox Enterprises, Inc., is willing to cough up $7.9 Billion to by the 38 percent of Cox Communications the company does not own!

Here’s the URL for the Kohl slide presentation:

http://www.democraticmedia.org/ddc/USC/KohlUSC.html

The Adverstiser published an article in today’s paper which covered this site. So we anticipate a few new visitors. We’re a pretty open crew and are interested in feedback. This little post is an experiment intended to provide a way for folks to respond to both the blog and the website as a whole. (If you prefer you can use email.) What works and what doesn’t? Advice?

Just click the comments button below. Thanks!

Claire Taylor of the Advertiser picks up the story of pro and anti fiber websites, in it she features our site (yeah!) and also covers the official LUS fiber for the future website, and the Cox produced “Let the People Vote.” I’d want to point our readers to the oldest blog on the subject in addition: LUS FTTH which recently got back from a little break.

Gotta get around to putting up a links page.