Category: BS/ATT

WBS: Lafayette Becoming Most Wired Community in America

What’s Being Said Dept.

Geoff Daily over at his blog AppRising has posted “Lafayette Becoming Most Wired Community in America.” He touts LUS’ speed, price, and our access to a 100 mpbs intranet (and bemoans the price he has to pay for his 10/2 connection — more than I pay for a 50/50). But that’s pretty much old hat, the heart of his story lies in a remark that was made at his CampFiber event last week. A Cox rep attending* said that AT&T was planning on bringing U-verse to Lafayette. Add that to Cox launching their very first 5o mbps docsis 3 service here (at a unique discount I might add) and you end up with Geoff’s headline. If AT&T does launch U-verse we could at least try to lay claim to the title. Pretty impressive results for our little city which, however much we may love it, has to be seen as a backwater worth ignoring by the big guys…except for the fact that we own our own local fiber utility. Something they do not want to succeed and become examples to other towns that don’t care for backwater status. I’m not sure that giving Lafayette the best of everything is the way to make that point but I’m happy enough with the result.

U-verse, as you may be aware, is AT&T’s attempt at a “next-generation” network. It’s a fiber to the node (FTTN) sort of architecture which involve pushing fiber optics deeper into the network so as to enable a cable-style video experience and higher speeds over the old phone twisted pair copper. The key metric for Lafayette users is that its internet tops out at a laughable 18/1.5 mbps; nowhere near the Lafayette standard of 50 mbps. Of course that’s a real step up for AT&T whose physical plant is aging badly but it doesn’t hold a candle to the old BellSouth’s VDSL-2 plans which had promised 80 mbps down before they sold out to AT&T.

Supposing that AT&T is coming to Lafayette the most interesting question by far is just where. A big chess game with hidden pieces is emerging in Lafayette. LUS is, so far, is only in the city proper. Cox is parish-wide in its available footprint; presumably at least partly to stymie any LUS expansion. AT&T, unlike Cox, is actually available everywhere in the parish. Will it offer the service to the whole parish? Just to Lafayette? Just to Lafayette and the more densely settled towns and newer subdivisions? It makes a lot of difference in the game being played out here for mind share, market share, and profits. If the point is to try and reduce LUS’ marketshare in video by providing a third wireline provider then they’ll go only to the city and accept that the Lafayette unit will never have the marketshare in a three-cornered market to be remotely as profitable as spending the same money elsewhere. If they want to find a local footing in our regional market where their network is literally 3rd-rate they’ll provide their premiere service in the rural areas where Cox and LUS will experience the most difficulty in providing their products. What folks in the region need to realize is that LUS is setting the pace here—and they are benefiting. Normally three providers do not provide real competition on price. Modern corporations will try just about any trick to avoid lowering their profit margins and what is happening across the country where Verizon and AT&T are competing with the cablecos is differentiation of product (speed, bursts, integration, etc.) and an exploitation of the areas in which they do not compete on a block by block basis. (Verizon, in fact, recently raised its FIOS rates.) Cox has lowered its top rate in Lafayette because, and only because, they are faced with a differently motivated competitor who does not want to maximize the profits it extracts from the community. LUS’ 20% cheaper policy forces a price cut by giving one. Other parts of the country, like northern Virgina where Cox launched its second 50 mbps service, are not getting cheaper prices.

Frankly, I don’t see the business case for AT&T in Lafayette or the parish….so I’m still not convinced that U-verse is coming. I have, from multiple people, heard that an upgrade in the local network has been underway but the Cox guy is the first that I’ve hear claim U-verse was in the offing anytime soon. He said that it was in fact overdue and that the original schedule had said that it should have already been launched. I’ve no doubt that network upgrades are underway and have been for some time. But whether they are being done to simply shore up the current network and make Lafayette’s plethora of iPhones work a little better or as prep for an immenient U-verse launch hasn’t been made clear to my jaundiced eye. I’d love to be told differently. What eagle-eyed readers want to do is look for the tell-tale DSLAM installations. They’ve excited a lot of trouble with local communities in some places where they are considered huge eyesores. If you see a batch of these big new boxes somewhere let me know.

So…Lafayette may be in line for the nation’s most wired; at least in the sense of having multiple, cheap, top-of-their class options available for less.

*Yup, the event was well attended by Cox and AT&T reps, who were mostly extremely reluctant to admit the fact. Fiberina pushed ’em on it. Good for her. 🙂

PS…AT&T’s big advantage is wireless. If they show up here with a better wireline side sometime soon then expect them to find ways to bundle wireless to give them some sort of lever with local customers. But the wireless side isn’t a clear long-term win either. Both LUS and Cox are on record as intending to supply a wireless network. Wireless is a big deal in this three-sided chess game. Expect more on that when I get a little time to write it up.

How Things Work: Louisiana Edition

Long-time LPF blog readers will recall Bill Oliver, the president of AT&T Louisiana with something less than fondness. Oliver was (and is) the man at the helm of AT&T Louisiana that directed the campaign that sought to prevent Lafayette from building its own competitive network. Oliver’s signature style in Lafayette was back-room dealing and public bluster. The back-room dealing, at least, he brought to the national level as the Advocate article indicates:

“Another old Jefferson cohort was Bill Oliver, president of AT&T Louisiana in New Orleans. Oliver, who has known Jefferson for 16 years, would go on hunting trips with him, attended the Kentucky Derby with him and once served as king of Washington Mardi Gras, where four of Jefferson’s five daughters served as queens.

When Jefferson asked Oliver to look into iGate and its unique technology of transmitting audio, video and data over copper wire, Oliver agreed out of “a combination of friendship and respect.” The two companies never linked, but Oliver ran the idea by his product representatives for Jefferson, he told the jury.

“It mattered to me that he was a member of Congress and I was reporting back to him,” Oliver said.”

The reporter doesn’t say if the prosecutors asked who paid for those hunting trips and the Mardi Gras Ball expenses (both peculiarities are traditional forms of influence-peddling in the Gret State). Nor does it note how the trip to Derby was financed. The story’s intro does note that Oliver would take trips on the company’s Lear jet with Jefferson’s wife. It would also be interesting to know if AT&T’s “product representatives” actually sold any of the third party iGate tech—and, if so, who got the commissions…

Lagniappe:
Oliver, BellSouth, and the infamous push poll.
Oliver threatens to pull Cingular call center from Lafayettte (twice)
Oliver tries to deny having threatened Lafayette.
Oliver’s offers to partner with LUS prove “insincere” as BellSouth launches lawsuit.
Oliver, New Orleans, and Lafayette

“Cox builds Internet speed”

This morning’s Advocate weighs in with an interesting view of Cox’s new 5o mbps down/5 mbps up service. The report focuses on the reactions from most of the principals including Cox, EATel and AT&T but oddly excluding a direct reaction from LUS.

The article makes it clear that while Cox denies any direct influence, (apparently the local folks are making that mistake after all) knowing that LUS Fiber is offering a 50/50 mbps fiber-based internet service is the key to understanding why Cox would debut its new flagship service in such a small market.

The gist of the story as far as LUS vs. Cox is concerned is contained in the following paragraphs:

The introductory price of Cox’s “Ultimate” Internet service in Lafayette is $89.99 per month, plus $99.95 for the required modem and an installation fee that will vary by customer, according to information from Cox.

The company has set the standard suggested price for the service at $139.99 a month.

That price is comparable to similar offerings by Verizon and Comcast, though those companies generally provide their top-tier Internet services only in large markets.

LUS Fiber is selling its premium service of 50 Mbps download and upload for $57.95, with no additional cost for installation or equipment.

LUS Fiber customers can exchange information with others on the local fiber network at 100 Mbps.

The 50 Mbps residential Internet service options in Lafayette Parish are unique in the state.

The larger story is that competition is good: Lafayette has two 50 mbps providers, one with real symmetrical service and the rest of the state has NO such providers. The rest of the country will get this service, when Cox gets around to it, for 1 1/2 times as much, 50 bucks a month more…and it looks like the installation fee locally will “vary by customer” instead of being the 99 dollar pro install that others will uniformly pay. My guess is that, more precisely, the installation fee will vary by customer location…if you live in Lafayette and want this then tell Cox that you don’t want to pay for installation—after all the competition, LUS, isn’t charging for it. 🙂 Cox will probably be happy to put you on the hook for only the 100 dollar modem that you will have to dump when LUS gets to you. Like I said: Competition is good.

Reports from other providers flesh out the local and regional competitive picture. AT&T gets pitifully aggressively vague:

AT&T is preparing to launch its U-verse package in the Baton Rouge market with download speeds of 18 Mbps and upload speeds of 1.5 Mbps, AT&T spokeswoman Sue Sperry said.

Sperry said she could not give a specific timeline for Baton Rouge or plans for other markets…

AT&T will be a third run competitor in the city of Lafayette’s already competitive market. Since Cox is battling LUS’s full 50 meg offering with the best it can muster for the lowest price it can muster AT&T will surely be shut out of the city broadband market. It is hard to imagine that they see much upside to the costs of upgrading in-city only to remain in third place. What AT&T has on its side is wireless mobility — but both Cox and LUS have plans to minimize that strong point.

EATel in East Ascension and Livingston parish is a privately owned rural telephone company that has rolled out a FTTH project in some of the fastest growing parishes in the country.

A pocket of 30 Mbps service is offered in portions of Ascension and Livingston parishes by EATEL, a privately owned communication company that launched its own fiber-optic system in 2005.

The company charges $99.95 per month for download speeds of 30 Mbps and upload speeds of 15 Mbps, with $20 shaved off if Internet is bundled with phone and video, EATEL Sales and Marketing Director Brad Supple said.

He said EATEL’s fiber-optic system still has much capacity to offer faster service in the future.

EATel is running a very aggressive billboard campaign in its footprint. But has yet to elicit cheaper new services for its customers.

Finally, the Adovcate story makes sure its Baton Rouge readers understand the pickle they’re in:

In Baton Rouge, Cox’s top-tier Internet service provides standard download speeds of up to 15 Mbps — with boosts of up to 20 Mbps — and upload speeds of 1.5 Mbps.

What the reporter neglects to mention is that AT&T back in March of 08, while it was successfully hoodwinking the state legislature in to passing an industry-sponsored bill to set up state-wide video franchising in Louisiana took the capital city off the table as a player by cutting a separate deal to offer the capital city many of the priviledges it was insisting that other city’s not receive. At the time LPF insisted that this was a ploy and that AT&T was likely to treat Lousiana, and Baton Rouge, exactly as it had treated North Carolina where a similar successful move to infringe on the property rights of communities had lead to exactly NO new service launches by the incumbent AT&T. But the law had helped get a long, long list of cable providers off the hook to the communities whose land they use to provide cable services. AT&T has yet to launch any new services in our state and any it eventually launches in Baton Rouge will be, at best, second rate.

Competition, where you get it, is good. And in our state competition that boosts services and reduces prices has ONLY come from a municipality, a local government. State laws that gift the private duopolists with further privileges have had exactly no beneficial effect. It is never smart to feed the bully. And it’s always a good idea to do it for yourself.

More Expensive than Hurricanes

Having lavished some ink on Cox today it only seems fair to give a little attention to AT&T, Lafayette’s other incumbent friend in this digtial age.

An article in Multichannel News reports on AT&T’s slowdown in builidng out its “fiber to the node” network. FTTN is the half-measure that was supposed to be the less costly but adequate reply to Verizon’s more capable fiber to the home rebuilding program.

AT&T’s strategy isn’t working and it is scaling back its investment:

AT&T tacked on 264,000 U-verse TV subscribers in the fourth quarter of 2008, but video and other growth areas were more than offset by dropping wireline voice connections, and the telco also said it would scale back capital spending on building out the U-verse network.

That’s really no surprise and the scuttlebut about U-verse pullbacks has been going on all year. But what really caught my eye was the following:

the telco said costs associated with subsidizing sales of the popular iPhones reduced pretax fourth-quarter earnings by approximately $450 million. Costs related to hurricanes, by comparison, reduced pretax earnings by approximately $120 million.

Really!? In a year that boasted major storms Fay, Gustav, and Ike making landfall in its territory the iPhone ate into its (still substantial) profits more than hurricanes? I bet the denizens of Houston, Lake Charles and Baton Rouge are going to be surprised. Especially as the people of the gulf coast states shoulder the burden of making up those “losses” for AT&T. There’s a grim oblique humor in this sort of thing that the residents of Louisiana south of the interstate have grown to savor. (The iPhone has earlier been lauded in these pages a great NAD and digital divide device…)

Still, hasn’t the iPhone been a great thing for AT&T? If my life is any indication it has been…I was at one of those geeky/food/socials for an out of town tech maven that seem to be a Lafayette trademark on Sunday and once people started calling around for early-season crawfish the woman at the end of the table looked around and remarked that 7 of the 8 attendees had pulled out iPhones. Even six months ago there’d have been a healthy mix of Blackberries and CE machines in the mix. No longer. And apparently that’s not far out the ordinary:

AT&T hung its subscriber numbers on the board this morning: 2.1 million Net Gain in Wireless Subscribers in the fourth quarter and…1.9 million Apple iPhone 3G activations.

That’s worth pausing a moment to consider one more time: 1.9 million Apple iPhone 3G activations – in the fourth quarter alone…

The iPhone was a rival killer – About 40 percent of the customers carrying the device that Steve Jobs built (so to speak) are new customers to AT&T. How many used to send their monthly bills to Sprint, Verizon or T-Mobile USA?

Even wth the estimated 325-425 dollar subsidy that AT&T apparently lays out that’s surely a good thing for the company.

In the long term.

And therein lies the irony for this resident of Lousiana’s flood plain who has been primed for a little grim humor by the earlier news about the iPhone being more expensive for AT&T than our hurricanes. You see, what AT&T is doing is smart, modestly daring business: it is spending money upfront on the promise of getting all those high-margin, big-spending iphone customers for the long time. But it is, almost certainly, losing serious money on the front side and cross-subsidizing this venture with revenue from other aspects of its far-flung empire.

AT&T in its earlier guise as BellSouth was responsible for writing the law that denies Lafayette’s local utility, LUS, the ability to make a similar smart decision to bear upfront losses for long-term gains. There was a lot of preening and huffing and puffing about “cross-subsidization” by AT&T lobbyists and regional vice presidents as if that were some sort of bad thing. As if the money that AT&T realized from its monopoly on landline telephones hadn’t cross-subsidized its move into the expensive wireless regime that now is its the engine of its growth.

It’s darkly funny. I guess.

Cox Steps Into It: Network Neutrality Returns

Cox has stepped into the glare of the net neutrality limelight with its new policy, announced yesterday afternoon, on bandwidth throttling.

Succinctly: Cox has decided that it knows best which of your network activities is “time sensitive” and which ones are not. And it intends to force its ideas on your use of the bandwidth for which you’ve paid.

Initial Reaction
Unsurprisingly, reaction has been negative. Om Malik of GigaOm sez:

Who is Cox to decide that a certain FTP transfer is not time sensitive, or that some software update is not time sensitive? More importantly, why should consumers trust cable companies, whose record of giving customers the short end of the stick is pretty well known?…

Unfortunately, as long as we have this comfortable duopoly in the broadband market, we the broadband consumers are going to have suffer from these kind of practices as we don’t have much of a choice. Hopefully a post-Kevin Martin FCC will be more citizen-friendly, and will act promptly against Cox and other traffic shapers.

The Free Press, epicenter of the net neutrality battle in Congress, similarly remarks:

“The lesson we learned from the Comcast case is that we must be skeptical of any practice that comes between users and the Internet.

“As a general rule, we’re concerned about any cable or phone company picking winners and losers online. These kinds of practices cut against the fundamental neutrality of the open Internet. We urge the FCC to subject this practice to close scrutiny and call on Cox to provide its customers with more technical details about exactly what it’s doing.”

This will clearly be the first contentious issue to come before the new FCC and it is surely no accident that the strategy is announced at the moment when the agency is being reorganized and will find reacting quickly difficult.

Some Background
Hovering in the background of this story is series of failures on the part of Comcast the nation’s largest, and hence most visible, cable company to extend the industry’s privileged position in regard to regulation. (Cable companies have historically been much more lightly regulated than their competitors the telephone companies.) What Comcast failed to secure was the “right” to inspect your bits and to discriminate against bits it didn’t like—especially P2P protocols. In doing so it ran up against the long-established ideals of common carriage. A common carrier is not allowed to discriminate in what it carries…it is not allowed to charge some loads of coal more than others nor to give some customers privileged service by delivering their coal first. Comcast was asserting the right to treat some bits differently based on the protocols that governed them.

The FCC came down on Comcast and in the ensuing back and forth Comcast, and the cable industry, got a huge black eye in public opinion as is evidenced by the qoutes above.

Cox steps into it
So Cox is deliberately taking up the network neutrality fight by declaring a new policy and is hoping to do a better job of it for the industry than the #1 guy. What’s not so well know, but was cited in the story-breaking AP account, is that Cox has also been doing exactly what Comcast has been castigated for attempting:

Comcast is fighting the FCC’s ruling in court, but has abandoned its congestion management system in favor of one that doesn’t discriminate between different types of traffic. It has also abandoned secrecy and revealed details on how the new system works.

Tests conducted by the Max Planck Institute for Software Systems in Germany indicated last year that Cox was using the same discriminatory network management system that Comcast employed then. Cox never revealed the details of its system but said it used “protocol filtering,” a principle also used by Comcast.

Further testing by the Max Planck Institute indicated that Cox cut back sharply on its use of the old congestion system in August, and that it was shut down by January.

Cox, apparently, is not willing to follow Comcast in a shift away from discrimination based on protocol to one based on the particular customers who actually use the most bandwidth. Instead it is trying to recast the issue in terms of “time sensitive” and “time insensitive” categories of protocols. (Cox, by all accounts, uses the same equipment (from a company called Sandvine that Comcast has; a technology that engages in deep packet inspection to try and discern the protocols used to transfer bits and other traits.) But whereas Comcast has been remarkably open about what it is trying to do since being spanked by the FCC and public opinion Cox appears to firmly set on the path continued obfuscation and misdirection. In its FAQ on the topic it says:

Our past practices were based on traffic prioritization and protocol filtering. This new technique is based on the time-sensitive nature of the Internet traffic itself, and we believe it will lead to a smoother Internet experience with fewer delays.

This is nonsense. Honestly. Past practices are present practices. The FAQ directs your attention to the categories of protocols that Cox has created (time sensitive and insenstive) and away from the raw fact that all that is being done is that Cox has grouped some protocols into one pile and some into another and is discriminating against more than one protocol at a time. Protocols in the disfavored pile include: P2P (the one that got Comcast in trouble), usenet, and FTP. All of this requires deep packet inspection—Cox examining your data to determine what’s in it—then deciding what is and isn’t important and slowing down those that it thinks aren’t important enough to get speedy service.

The confusing discussion that will ensue…….
I expect that all this will be recast by commentators, as soon as they get it together today, as a fork in the road betwen “caps” a la Comcast and “management” a la Cox. No. The real issue is congestion—the slowdown that comes when too many users are clogging the internet; usually in the local “last mile.” Comcast is essentially telling some of its biggest users that they are using an unfair amount and “capping” their use at 250 gigs a month in the hopes that will serve to make congestion bearable. Cox, in contrast, is saying that some protocols deserve better service and is slowing others in its attempt to make its congestion less visible by passing the slowdown off to less important (in its view) uses.

What the first wave of comment0rs will be ignoring is that Cox also caps usage. It is much less transparent about how much incurs its wrath—it apparently differs by location and even then is not applied consistently. (In Las Vegas, for instance, the cap is 60 gigs on its 12 Mbps tier…much more restrictive than Comcast’s more highly publicized and decried version.) So while Cox can be the newest villan in the the protocol arena of the network neutrality fight it cannot be cast as a hero to those who are disturbed about the implications of bandwidth caps. You can rest assured that if Cox succeeds in its current strategy Comcast will follow it into using both caps and “management” to restrict its users. The industry is not offering an either/or…this is an “in addition to” effort.

But the confusing discussion around caps and management will serve the incumbents as a whole by presenting the policy community with a Hobson’s choice between two objectionable “solutions” to the problem of congestion. There is a third choice, a better choice, that doesn’t involve picking either of the industry’s favorite children.

A Third Way
Commentators (and policy-makers) would be better served by focusing on the actual problem: The real issue is congestion. The real solution is to directly address the undersupply of bandwidth that is the root cause of congestion. A congested network is, almost by definition, one which is under-engineered and so cannot handle the traffic demands that its users put on it. The real solution to the real problem is to fix that…to put in place a network which can handle the traffic and one which can easily, quickly, and cheaply be upgraded to handle downstream increases in demand.

It is no accident that I find it easy to reject the choice offered by Cox and Comcast. It is largely a product of where I happen to live. Lafayette’s citizens are in a good position to see that there is a solution which doesn’t involve making selections between false choices presented by the incumbents that seek to get concessions from the public in order advance their interests instead of actually taking the costly and admittedly risky business of fixing what is broken. Lafayette’s new network, built explicitly to provide with the capacity the community believed was necessary for its future, is about to take on its first customers.

There are ways for the country as a whole to address the bandwidth/congestion issue directly without simply building an new network as Lafyette and other impatient communities have done. Regulators can do something as simple as setting standards on the advertising that currently allows companies to grossly overstate the amount of bandwidth they can reliably provide—buying a 12 meg tier seldom means that you can reliably get 12 megs. Simply require a truth in advertising standard of some sort: say that you have to actually be able to provide the advertised speed 98% of the time and that you must monitor and report your performance on a node by node basis to the FCC. If you fail to provide such speeds then you must rebate to your customers a per cent of their bill for the months in which the undersupply occurred. Performance standards like this used to be de rigeur for telephones back in the days before deregulation. They motivated the phone company to build the world’s best phone system.

The almost inevitable consequence of this and other regulatory methods of demanding better service (why not make symmetrical up and down speeds a service standard?) would clearly and cleanly set a framework for rational behavior on the part of the incumbents. [An aside: for a good, current, take on why competition is never enough in some situations see Harold Feld’s latest.]

What you could expect would be rational economic behavior that would drive

  1. telephone companies to follow Verizon’s lead in building out a new FTTH network capable of dealing with today’s demands. Verizion is unquestionably the smartest actor in the field. It is now well understood that Verizon has succeeded in what was initially judged a risky venture by the capital markets.
  2. the cable companies to push fiber much closer to the home and to restructure their use of bandwidth to supply fewer channels and more switched digital and raw bandwidth to customers.
  3. areas which have poor competitors in these categories—or who don’t want rely on national policy to secure their futures—to build their own FTTH networks. As Lafayette has done.

Cox is, frankly, a bad actor on the national stage as it has been here in Lafayette. The country would be wise to reject the false choices currently being offered and to find a concrete, direct way to insist on more, and more reliable, bandwidth.

Its-a-Thought: It’s not about the bundles

Its-a-Thought: “your choice packages,” not “bundles.”

It was probably inevitable in our commercial culture that the news about product, pricing, and availability would be almost the sole focus of reporting and comment about yesterday’s fiber announcement. At one level that really isn’t the most important point: ownership of our own resources and the bare fact that the system is real will have much greater impact down the road than today’s list of commercial details.

But even on the level of commerce…you know, “bundles” in the usual commercial sense are not really the best focus of conversation. That’s because LUS is not offering bundles, not in the usual commercial sense.

Bundles in the usual sense are special “deals” for a range of services put together by the operator that includes a long-term contract and lower prices for an introductory period. The idea is common across business sectors but has become an article of faith in the telecommunications industry with triple-play and even quad-play industry focal points.

In the world of telecommunications retailing bundles do two things, one good and the second bad: 1) they provide a convenient one-stop alternative for consumers weary of tracking 3 or 4 different communications bills, and 2) they serve to lock-in consumers into one provider by making the best prices only available if you take multiple services from that provider. Lock-in works in pretty directly: You can be locked into a contract—like the one-year deals Cox is pushing right now—with a penalty for leaving early to go to a more attractive competitor—like LUS. Lock-in contracts also usually include a promise of a cost increase during or at the end of the contract period. Much of the good deal is a temporary come-on designed to entice you to buy beyond your comfort zone and become dependent upon the service by the time the real price reappears. That’s all standard economics. (And one reason why thoughtful people still call economics “the dismal science.”) More subtly: the near-monopoly that some users find themselves facing can result in lock-in as well; if a bundle is the best way to eke out a decent price and, for instance, only one company offer decent internet or cell service in your neighborhood you can feel forced to buy their bundle–for the price–even though you’d be better served by choosing a phone from AT&T, cable from Cox, and cell service from Verizon….

Bundles are all about reducing customer freedom in exchange for a (usually temporary) price break.

But that’s not the way LUS’ bundles work — and why bundles are a misleading way to think about the LUS Fiber offerings. The focus should really be on how much it costs to put together a package that serves you best.

What’s missing from LUS’ systems is lock-in. 1) There is NO contract involved. The deal you get on day one is the only deal. Leave the moment you want with NO penality. NO programmed-in cost jump because there is no contract to hide one in. 2) There is NO linkage involved. Buy one service. Buy two. Buy three. Buy all the extras, Buy none. NONE of that has any effect on your base price for another service. One price, all the time. The price for 250 cable channels or 50 megs of symmetrical service remains the same. No linkage also means NO penalty for using one service from LUS and one from Cox or AT&T.

That’s NOT a bundle in the usual commercial sense. Which is why “bundles” is not the best way to think about the question of getting the best deal on your telecomm services. First ask which services from which providers are best for you? Make up your own “freedom package” —”your choice package.” Then add up the real costs for that “package.” My guess is that mostly that will be three services from LUS. But you can mix LUS tiers freely and tack on services from a competitor without penalty…or at least no penalty from LUS. Do the math. The real math not the fake “bundle math” the incumbents will try to stick you with.

I can pretty easily imagine customers who will decide to pony up for 50 megs of symmetrical internet, drop all phone and cable services and limp by with cell service and downloadable video. I think that’d be rare. But the point is: LUS won’t punish you by jacking up the price on your internet if you drop their phone line. Try dropping Cox’s cable and keeping the phone service. Don’t think you’ll keep the same price on phone…

The reason for the difference, and it can’t be stressed too much or too often, is that LUS’ consumer is also LUS’ owner. LUS is treating you, the customer, with some fundamental respect because, in the end, it is motivated to do best by you, the owner. The privately owned competitors have the same motivation—to do the best by its owners. But, for the private sector, acting in the best interests of its owners is NOT the same as acting in the best interests of its customers. With LUS it is. And, in the end, it is just that simple. We made the right decision on that July 16th, 2005.

So comparing Cox’s or AT&T’s offerings to LUS’ offerings is a little hard. But it’s not really apples and oranges. Maybe more like comparing oranges and grapefruit. You’ll get your vitamin C from either. But you’ll probably find one version goes down a lot more easily.

Promo Pricing Unwise

Well, the “experts” have weighed in, and according to an article in Telephony Online the sort of promotional pricing that we’ve seen from the local incumbents and especially Cox are said to be unwise:

“I personally think the U.S. broadband industry and U.S. mobile industry need some sort of mindset change – which is the hardest to achieve – to get away from thinking that new customer acquisition will solve all your problems,” Weber said. “At the end of the day, it is the existing customers that provide 80% of the profit but they only get 20% of attention.”

And, of course, it is the good, solid customers who pay for promo pricing. If a company has to have its 30% margin it simply figures out how much it has to charge the 80% of its loyal customers to offer a raft of deals to the 20% that aren’t going to stick with them anyway.

One of LUS’ long-time commitments is that it isn’t going to float a raft confusing, 6 month package super specials that entice people to buy more than they really want and lock them into much higher costs down the road. That’s a strategy that carries risks when you’re trying to break into a nearly saturated market but the promotional strategy creates real problems of its own as this article notes. To wit:

The typical approach is to offer new customers a special price on a triple play bundle or a new phone for free or at low cost in exchange for a service contract. When the promotional price expires, and regular prices kick in, customers have incentive to look elsewhere for the next new deal. Service providers may not like this price-shopping behavior – which was the death knell of the long-distance voice business in the 1990s – but “they have educated their customers to behave like that, so they can’t complain now,” Weber said.

Of course what will happen in Lafayette, or so I anticipate, is that as people hit the end of their promotional period they’ll be hit that sudden big bill and suddenly LUS’ 20% cheaper price will look good. Moving over will make sense and the trick then will be to keep ’em with real local support and great services. I don’t think that will be all that hard. But the “expert” in the article makes one more suggestive remark re keeping those loyal, revenue producing customers:

One more intelligent possibility is to offer existing profitable customers special promotions or price breaks on new services . . .

Hey now, that would be cool. Offer your loyal customers the extras other companies charge for (ridiculously, I might add). The way that LUS has talked about its services is to offer a simple solid set of base tiers in the phone, cable, and internet sides and then let folks choose to add on from a menu the set of, say, three “extras” they want (e.g. call waiting, caller ID, etc.) These are dirt cheap in truth. At the end of the first six months the loyal customer could be offered an extra service. And after a year, another. For being a good customer. For helping the community succeed.

I think it’d go over big. And would draw a bright line in the sand.

BellSouth Lobbyist Resigns

BellSouth-AT&T Lobbyist/Jindal Legislative Ramrod Tommy Williams is going back to being a lobbyist again the T-P reports. No big surprise, that.

We’ve been watching Tommy’s career ever since he was a BellSouth Louisiana Vice President during the fiber fight here in Lafayette. Tommy’s son, John, was the BellSouth rep in Lafayette at that time. John was the one, you may recall, who first denied that BellSouth had anything to do with the infamous Lafayette push poll but later had to admit that BS had, in fact, come up with the idea, while complaining that, his father’s standing not withstanding, he didn’t know anything about a poll run in his area. Not an illustrious clan. Tommy left his job lobbying for BS and became an indpendent contractor for them back when AT&T bought up BellSouth and continued lobbying for the company right on through the transition—he still officially represents the phone company on the Broadband Advisory Council.

Williams senior is giving up his job as Bobby Jindal’s Legislative Director. In that position he was responsible for making sure the administration’s legislative agenda made it through the House and Senate.

The Times-Picayune article’s take on the resignation emphasizes the tattered relationship between the legislature and Jindal in the wake of the last session–and it hit the net before Jindal flopped back to flip and vetoed the legislative pay raise after all this morining. Tattered is probably now a mild description of the legislature’s pique at loosing that particular perk.

My perhaps cynical guess is, however, that the AT&T lobbyist had already managed to pass what his longer-term employers thought was most important, even if it wasn’t particularly part of the Governor’s agenda: passing the state-wide video franchise law.

Truth be told, putting a lobbyist in charge of the lobbying for an ethics package never made all that much sense. The judgment that the administration’s legislative ethics package actually damages the cause of ethic’s reform in the “gret state of Louisiana” has been coalescing since the resignation of 9 of the 11 members of the ethics board.

Williams didn’t actually get much done for Jindal that Jindal he could be proud of. On the other hand, AT&T will surely be happy to have him back home. Practically speaking, spending much more time representing a governor’s ethics program whose main thrust has turned out to be making sure that legislators bear the brunt of the public disclosure laws that Jindal thinks will heal our state’s image (while opposing transparency for his own administration) will not endear him to the legislators that are his audience in his real job. As a lobbyist he needs to get back on the job of glad-handing and getting on the good side of his real constituency.

His resignation, breathless reporting aside, is no big surprise.

All in all though, his abscence has to be good for Lafayette’s fiber project. As we’ve noted before, his presence in the governor’s inner councils can’t be a good thing for a project that he has vehemetly opposed.

(Tip o’ the hat to Mike who sent in the pointer to this one.)

Making the Most of LUSFiber’s Advantages

(Warning: Long…but thoughtful, I hope.)

LUS Fiber is going to have a lot of advantages going into the fray with Cox and AT&T. Capacity, technical sophistication, home-town appeal, and the fact that we fought a winning battle against the incumbents to get our network up all work to the advantage of the local utility.

But, unfortunately, a “build it and they will come” strategy is mighty risky. A more solid strategy can be built by taking your advantages and making them essential to your customers. LUS will have to encourage its Lafayette citizens to value what it alone can offer. The utility will also need to acknowledge its weaknesses and take steps to minimize those weaknesses that are inescapable.

Technical and organizational advantages:
LUS’ indisputable technical advantage will be bandwidth, bandwidth, and consistency built on having bandwidth to spare. (No one will have to wonder if the network is too “slow” to handle a given use “right now.” — As I regularly do on Cox when the kids get in from school.) So how does LUS find a useful advantage in all that bandwidth; or rather: how does LUS make sure its users find that bandwidth too wonderful to pass up? And how does LUS do that in ways that its competitors simply cannot—or will not—match? That involves making good use of its massive bandwidth and symmetrical connections.

But the massive bandwidth of fiber on a modern system unburdened by legacy copper and commitments is not LUS’ only advantage. Arguably, that’s not the major advantage. LUS also has the advantage of being owned by its customers. Other businesses have to compromise between what is best for its customers and what is best for its owners. LUS doesn’t have that conflict and can rationally choose to benefit its citizen/customers in ways that are simply not open to other companies. This makes it easy to take smaller profits and offer more services—the stockholders of LUS will, I assure you, not object.

But the advantage of community ownership goes beyond doing a better job of the standard business plan; LUS can do do more than offer better service at cheaper prices. A community utility does not need to pretend to be a slightly more efficient company slaved to a standard business model based on profit maximization. The utility model is based on service maximization…and that is not the same thing. Cox has to be able to show the profit potential in everything it offers its customers or be legally liable for mishandling its owners’ resources. LUS, by contrast, can do things that creates value for its citizen/owners without creating direct value for itself along the way. A utility can pass value through. A utility can take a remarkably generous attitude towards its citizen/owners.

That, potentially, is a vast competitive advantage. It means that LUS can pursue business models that its competition simply cannot emulate. And “value pass through” is not theoretical or forbiddingly abstract in practice: Passing the value through is exactly what LUS is doing when it lets its citizen-owners use the full 100 megs of intranet bandwidth and offers symmetrical bandwidth. Private corporations are loath to follow suit because doing so would mean letting customers use resources they might eventually find some way from which to profit.

Value pass through need not be limited to bandwidth infrastructure issues like symmetry or full intranet usage. It can apply to infrastructure at higher levels. LUS can provide—or support—all manner of infrastructure. On the purely video side it could offer “channels” to anyone local at ridiculously low prices (as Burlington, Vt. is doing) it has bandwidth to spare. Why not? On the richer internet side it can host neutral servers that any citizen/customer can use. The utility can host cheap applications that are open to anyone who has an IP address on the network. It can host free or cheap online storage. LUS would be wise to host (or sponsor) servers providing all manner of higher-level infrastructure capacities. It would be a trivial expense to host a server that provided users with the ability to multicast streams of video (broadcast) or to reflect a video to a specified set of users (“unicast”). Application serving, online storage, and facilitating advanced technologies would all increase the value of the network for the community of users and that, not simple profit-taking, is the goal of a utility company. Happily, it would also raise the percentage of people who’d take the service and thereby add to the bottom line.

(An aside: Google acts like a utility; and is hugely successful as a consequence….the business model of offering your customers “free” value to make richer use of your network is the basis for the most successful new business model of our era.)

If value pass through, massive bandwidth, symmetry, and high-level infrastructure represent key advantages for LUS and Lafayette then those advantages should be used to offset any inescapable disadvantages the local network will face when dealing with Cox (and AT&T, should it get its act together).


LUS’ disadvantage: Size
And LUS does have a key disadvantage: size. We are tiny compared to Cox. And even smaller compared to AT&T. Nor do we have, yet, a clearly visible wireless strategy and a wireless strategy will be considerably enhanced by the size of LUS’s competitors.

Large size makes a few things potentially easier, among them: regional content, regional network effects, and technical prowess. People want to communicate with and about local things. (Most phone calls are local, for example. Regional content like high school football has a larger area to draw from than the city of Lafayette.) So Cox will be able to establish valuable products like local calling circles and regional sports networks that LUS simply will not be in a position to match.

Large size also means that Cox and AT&T can afford to spend big bucks putting together sophisticated interfaces to their content and building devices that allow them to integrate wireless and wired, phone and internet, and generally to try and lock people into unified world where they can offer easy integration. —For instance they could work on making it easy to program your DVR from a phone or see a telephone caller’s name and number on the TV when the phone rings.

Advantages and Disadvantages. Lemons into Lemonade.
So regional network effects and the ability to spend on integration and interface issues favor large corporations. But home town loyalty, massive bandwidth, symmetrical bandwidth and, most crucially, a willingness to pass value through to citizen-owners favor local, municipally-owned competitors. LUS can build higher-level infrastructure that drives participation and adoption.

Capitalizing on Advantages: Broadband and Symmetry

LUS can do what no private provider will: encourage bandwidth usage. And kill the old broadcast model while doing so. It will be to LUS’ advantage to do so since it will lead to a place where the competition will simply be unable to follow.

The most obvious driver of bandwidth usage is video and LUS needs to be thinking about how to drive levels of use so high that Cox and AT&T cannot match local demand. The way to accomplish that is make it possible and easy to use video phones, simple to use security cameras casually, to send video’s of T-boy’s birthday to grandmama, to watch a live stream of the Tuerlings game broadcast by a fan, to talk to salesfolk at a local store, to sign into a video “channel” organized by the Chamber of Commerce…or the Wetlands Coalition, to attend class, to, even, view locally produced full-length documentaries. Local video needs to become a casual, normal, accepted, unremarkable way to communicate, share, and promote products and ideas. If that level of usage can be reached LUS’ network will be wildly popular…and the intimate local content will make other networks look weak in comparison.

Making video communication unremarkable is quite possible. But it will require active promotion on the part of LUS and the Lafayette community. We will have to break our own path—fortunately that’s something we’ve done before.

LUS has already made an amazing start. We’ll have true bandwidth, true symmetrical bandwidth. It will be cheap. It will be ubiquitous. Those are the necessary if not sufficient conditions to move to a visually rich communications system. With the lowest tier, even in the first year, being 10 megs there will be no one on our network that will have too slow a connection to regularly use a video phone or watch full screen HD streaming video. Even when we are communicating with the outside world. When we are connecting to our fellow citizens we’ll have the full capacity of local network available to us, limited only by the electronics on the wall of our house…currently 100 megs. And everyone here will have the same 100 megs of intranet capacity. Regardless of what they pay for their connection to the outside world. That sort of uniformity and capacity will make it possible to build networks–human networks of people talking, playing and working–based on the expectation that you can communicate with huge resources.

We’ll have a dense population of uniformly high-bandwidth subscribers in a small city. Once a tipping point is reached everyone will want to be on such a network. First in Lafayette and then, when others see what is possible, elsewhere.

Reaching that tipping point though will have to be a goal that we work toward. Having the necessary conditions is not sufficient.

Getting There: Supporting Higher Level Usage

Bandwidth and Symmetry give this community a huge leg up on the future. The future will be possible in Lafayette come January. But they aren’t enough alone to ensure that we make the shift ahead of other communities. The community will need more to make the jump. Luckily LUS is a public utility and it has already show that it thinks in terms of giving the community the most it can. That is why we have big bandwidth and a 100 meg intranet.

Public utilities can and often do pursue such a “generous” policy—and LUS has shown every sign that it understands the value of this. (For details see “On Really Getting It“) A generous attitude turns the ROI attitude on its head: anything that benefits the user is good unless it does serious damage to the bottom line. The owners must be pleased first, just as in any business. But since the consumers actually are the owners in a public utility scenario pleasing them includes giving them what they want, mostly–which is lots of reliable services for as little as is possible. That is what public utilities do. They “pass value through” to their community.

We’ll still have two sets of needs that someone will need to generously provide; they will be both social and technical. Social needs are essentially educational. Technical needs are essentially infrastructure.

Social Support
On the social side we’ll have to teach people how to use new tools. Dialing the telephone was once a daunting technical challenge involving unfamiliar concepts like codes that stood for locations and an elaborate set of rules about when to release the rotary dial. (Really) Use needs to be taught. In our era we’ll need to teach folks the rudiments of lighting, (backlighting is rude) how to upload video, a bit about politely providing a compressed stream to the poor people who view our stuff outside the city, and something about how to usefully tag our products. If that seems crazy and forbidding go back and look at the phone video I linked to above. In 5 years it will all be second nature–but until that time we’ll need to provide basic education.

Beyond basic communication we’ll also be undertaking to create media…to broadcast our kid’s soccer games, to hold business meetings virtually, and to create advocacy films and websites. We’ll need to learn how to do this well. The schools should be involved and we’ll need a community center, or several, to foster a new layer of people who are the equivalent of today’s photographers and newsletter writers…again, we’ll know this has been a success when nobody really needs to be taught this any more; when it is absorbed from the culture and every small group has its “Uncle Bob” who knows how to get it done.

AOC –Acadiana Open Channel, the PEG channel— who already does a similar task for TV production and film needs to be retasked to include these functions or some new organization created to serve these educational functions.

An AOC-like organization will also be needed to host Uncle Bob’s videos, to run the server, to vet the new “channels” and playlists made available by groups and individuals, and to keep the technical backdrop going. Community access channels will remain, if renamed in any new big broadband future that takes local communities seriously. Someone has to do the work.

Technical Support
There’s a level of infrastructure above the physical connection that really should be attended to. If we can set up some reasonable standards and provide some resources that are easy and cheap for us to do collectively the whole process of “getting there” will take place much more rapidly and the Lafayette network that LUS runs will be much more useful.

LUS and LCG could provide most of this—and perhaps should—but they could also simply support it by sponsoring organizations that provide the functionality.

Most basically, community support organizations should be provided with bandwidth; they are serving the network and making them pay for bandwidth would be both prohibitive and unfair. The community media support, the local portal, organizations that support nonprofits…all need bandwidth to serve the community. If they don’t make a profit they shouldn’t be expected to pay to use resources that are, after all, not scarce.

Server and storage space are the 21st century equivalent of a the TV studio–the necessary infrastructure to make community media possible.

LUS can also establish basic technical capacities that anyone can use. For instance LUS should turn on multicast features in their routers, They should help make sure that a multicast server and a server that supports multicast are available for broad use. That is much like reserving channel capacity for public channels on today’s cable networks. The new networks will also be served by fostering public media.

There are also a wide range of things that the community, in the guise of LUS and LCG could do to keep the network up to date and able to dynamically adapt to changing conditions. Because Cox and AT&T will have much more money to drop in developing integrated applications (like the phone/TV ones mentioned above) than Lafayette ever will it would behoove the community to adopt the broadest standards available and encourage developers to treat a protected portion of the network like a “sandbox”–a safe place to play that encourages innovation. In one example: it is clear now that in the near future the standard set top box for cable television will be based on a standard called “Tru2Way.” This is a published standard and allows anyone to write applications that can be used on any compliant box. If history is any guide cable companies in general will try and strongly restrict what people can actually do with their signal and what applications are allowed to run on their boxes. The companies will want to control the experience (and dollars) of “their” users. Innovation will generally be restricted and nifty new services will not make it to market. (Want to know why your HDTV can’t surf the net? It’s not because such technology wasn’t developed a decade ago in rudimentary form.) If the Lafayette network adopts only boxes that run this standard and adopts an open attitude about allowing others to add value we’ll likely end up with advanced integration and a better user interface than any of the larger, slower, more constraining network providers.

Conclusion:

This has been a long piece but the take-away is relatively short: The success of the new LUSFiber network is dependent upon maximizing the advantages it gives its citizen/customers and finding ways to compensate for the networks inescapable weaknesses. Bandwidth, symmetry and the ability to pass-through value due to the network being community-owned are fundamental advantages. Size is any local network’s fundamental disadvantage. LUS needs to focus on making its advantages essential to the community; a process which will require both education and building another layer of infrastructure above the fiber itself.

Even if LUS has an advantage in a standard face-to-face commercial matchup (and it clearly does) it would be wise to play a deeper game; one that focuses on making the new network central to how we live and play in Lafayette. That means helping citizens find rich ways to use the network; especially help using the network to communicate locally. In that arena Lafayette’s network is free to adopt policies which will make it overwhelmingly more useful to community members—policies which its competition cannot match.

The Lafayette community has already demonstrated that it is up to the task and LUS has shown that they have right generous spirit to pursue their part of the effort.

What remains is to settle down to the hard work of making it happen.

Louisiana Leg Shoots Itself in the Foot. Again

This morning’s Advocate carried the news that the Legislature has again decided that giving a AT&T whatever it asks for is more important than what local communities want and what would be be good for the people of the state. The House passed Senate Bill 807 94-9. With a bit of reconciliation between the two versions it will soon be put on Jindal’s desk and he will not have the scruples that lead Governor Blanco to veto “franchise reform” when faced with a similarly irresponsible bill a couple of years ago. AT&T will soon be free cherry-pick the few wealthy suburbs it would like to serve on the North Shore of Lake Ponchartrain and in places like River Ranch in Lafayette and continue to ignore serving anyone outside of the big cities (the law doesn’t apply to big cities). It won’t have to even talk to those little local people in towns and rural who actually own the property AT&T must use to run its lines and cart home its profits to San Antonio. Big brother in Baton Rouge has fixed things for them so that AT&T (and now all the cable companies) can just ignore local communities.

It’s pitiful the way that rural legislators ask all the questions that would indicate they understand what a bill of goods Bill Oliver and the lobbyists AT&T pay are peddling and it’s sad that our representatives don’t seem to be inclined to learn from the mistakes of others.

Here, as in North Carolina, the big winner is going to be the cable companies. They’ll get out of real commitments they made to real people in real local governments to serve all the people of a community and to return some services to those people in return for using local property.

It’s not that the phone companies don’t get something, even if the big winner is Cox and Time-Warner. The telephone companies get to ignore local communities about all sorts of things now. Maybe you don’t like the idea of a refrigerator-sized box plopped down in your front yard in the right of way that you must maintain by law. Used to be the city could regulate that. No more. A “video franchise reform” law passed in Connecticut demonstrates how that worked. That state passed a law moving all control from the local governments that own the rights of way to the state, just like ours is preparing to do. Now, several years later AT&T is putting huge boxes in people’s front yards, the communities are outraged, and the state is scrambling to figure out what to do about it. The Department of Public Utility Control (DPUC) is trying to force AT&T to deal with local owners and desperately wants to bring in local communities to help negotiate locally sensitive issues that nobody at the state level could possibly know about. (Be careful what you take on legislators…) DPUC has issued a new ruling that outlines methods for securing the cooperation of local owners and municipalities. AT&T is having none of it. And a law the legislature passed, they pointedly note, means they don’t have to listen to those local guys:

In its motion, AT&T also asked the DPUC to clarify its new requirement that AT&T obtain consent of “all municipalities where equipment is placed.”

AT&T argues that existing law gives the DPUC exclusive rights over the placement of utility equipment in public rights of way, and that municipal approval is not required.

“Municipalities don’t have a place in the approval process,” Carlow said. “That’s not to say we don’t want to work with them, but Connecticut law doesn’t require their approval of our facilities.”

Carlow said gaining approval of municipalities would be difficult and time consuming and disrupt the way many utility providers in the state do business.

[emphasis mine]

What they cleverly don’t mention is that they wrote that law….

So the cable companies get to dump their franchise agreements and AT&T gets to do what it pleases in your front yard.

All courtesy of your representatives down in the legislature…

The Cox, Time-Warner and AT&T have got to be laughing up their sleeves at the rubes.

They’re right to laugh. It’s damn embarrassing to watch.