Category: National

Open Systems, Muni systems, and Lessons from Singapore

A Problem
Advocates of muni telecomm are often met with the blanket, essentially ideological, claim that municipal plans will fail because “everyone knows” that government-run enterprises will always lack the competitive advantages of private businesses. It’s hard to greet such claims with anything other than exasperation: anyone who thinks that the duopoly represented by corporations like AT&T and Cox has produced efficient pricing or any sign of innovation just hasn’t been paying attention.

Customers of telecommunications companies simply haven’t seen the benefits of “free enterprise” that competition is supposed to bring. The telecomm market looks like market-segmented, minimally competitive duopoly and produces results that look a whole lot more like staid, expensive monopolies than anything that might result from a real competitive marketplace.

Lots of folks have noticed this painfully obvious fact about the current telecomm market and in some places are even trying to do something about it. Lafayette has one solution. Singapore is trying another.

Singapore Tries Honest Problem Solving
Singapore is about to invest in a truly radical plan to build a world-class, high-speed network and to do it by encouraging real competition in the telecommunications market. (See 1, 2) Naturally they start by mandating and subsidizing the construction of a fiber to the home network. Beyond that it gets really interesting. Their plan takes yet another stab at inducing competition in the fundamentally natural monopoly wireline broadband market. Competition—when it works—provides cheaper prices and drives innovation. Lot’s of country’s have tried for that golden ring—and failed. (The American FCC’s attempts have been particularly laughable.) What is interesting about Singapore’s design is that it might work.

It is worth noticing how far they had to go to have a hope of developing real competition. Consider the starting point: Most networks world-wide are fundamentally vertical monopolies. One company owns the physical network, manages it, and sells retail services to end users. Think about your phone or cable company and you’ll get the basic idea. The minimal competition between phone and cable companies over the new internet services should not be allowed to obscure the fact that they are both basically monopolies with only a sideline internet business that has, at best, only one competitor—not nearly enough to develop a competitive marketplace that would yield the benefits of innovation and low prices. As digital services converge over integrated data networks it remains to be seen whether even the current inadequate level of duopoly competition will be maintained…and a lot of history that argues that it will collapse back into a simple monopoly.

But everyone wants competition and its benefits. Singapore wants competition. But Singapore wants it badly enough to try and get it realistically.

Being realistic involves admitting that the basic fiber, the physical network, is a classic natural monopoly. But beyond that evidence of clear-headedness Singapore also seems to recognize that operational layers of the network determine what sorts of application services can be offered at retail and that retail providers need to be able to count on a responsive middle layer provider.

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A typical large-scale network is built up of multiple, but integrated, levels. One way of looking at that is to see at the “bottom” a hardware base built up of the actual fiber and low-level switching. Up from that you have protocols and translation devices/routines that knit together the data from the low-level physical layer. Both of these are pretty much invisible to any end-user. On top of that you have applications that show their face to users of the network. Let’s call that 1) the physical layer, 2) the network operations layer, and 3) the applications layer. (This 3-layer description, as forbidding as it might seem, hides an awful lot of complexity. The canonical way of looking at network design is the 7-layer OSI description. That hides less of the complexity. Sophisticated readers should feel free to substitute OSI layer 1 for “physical;” layers 2-3 for “operational” and 4-7 for “applications.”)
</time out for a bit of background>
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Singapore is separating the physical and operational level into two different, unrelated monopolies committed to selling the same services to all retail providers at the same price. The retailers would then be in a position of making all their profit from the quality and the quantity of services they could convince consumers to buy.

Structural Separation: Keeping the Monopoly Owner Honest
Singapore is structurally separating the physical, lower level from the upper operational and application levels by creating a completely independent network company to build and manage the physical network (cleverly called NetCo). That sets things up so the only way the owners can make more money is by providing more value to the wholesale renters of their physical capacity. If you can offer more value more efficiently you can sell more capacity for a better price. And that, to repeat, is the only way to increase your take. This is a simple, reliable, structural solution to the problem of a monopoly owner using their control of the medium to eliminate or forbid competitors. The physical network owner cannot be motivated to manipulate the network to benefit its particular set of retail services if it doesn’t own any such services….it will not be allowed, for instance, to sell phone or video services to end users and so has no motivation to structure its network to favor, for instance, cable TV at the expense of DV (Downloadable Video). By making the monopoly network owner’s profits depend solely on motives that are aligned with the public’s interest the task of regulation is much easier. All you have to worry about is enforcing rules that require everyone to be charged the same for the same service. (This is much of what lawyers mean when they talk about Common Carriage rules.)

Operational Separation: A Balance of Powers
The most unusual (and least clearly specified) part of the plan is separating out the operational division of the network into its own independent company. Most structural separation schemes make this the property of the network owner or allow retailers to install their own equipment at the operational level. The problem with the first solution is that investing all the control in the conservative utility would make it less likely that unproven but potentially innovative middle level equipment would be installed, lessening the hoped-for benefit from innovation. On the other hand letting the retailer install whatever equipment they want on fiber strands they have rented virtually ensures that incompatibility will emerge on the network and pretty much ensures that some classes of equipment will be wastefully duplicated—lessening the hoped-for benefit of lower prices.

Singapore’s solution is to provide for a monopoly operational company (cleverly called OpCo) that must maintain a separate existence, board, and identity but which retail owners can own pieces of. Presumeably the Singaporeans, being committed structuralists, think that such an ogranizational schema will eliminate wasteful duplication and will tie OpCo to the more innovative retailers. Now this isn’t nearly perfect: it would let powerful incumbents on the network control the provision of new middleware and help them keep out smaller new competitors that would threaten their developed markets….but while imperfect, this is a solution that at least makes a stab at controlling the worst defects of previous attempts to foster competition and encourage both lower prices and innovation at the middle level.

Retail: The Evolutionary Melee
The hope, of course, is that by minimizing costs at the physical layer by putting a free-to-be-careful and conservative utility at the physical level, and by structurally maximizing low pricing and innovation at the middle level the crucial retail applications level will attract many competitors who will have no choice but engage in a ruthless evolutionary melee in order to survive. Consumers would reap the benefits of low prices and innovative, powerful services.

It Might Even Work—At a Price
It is clever. It might even work.

In Singapore. As a National policy. And anywhere that the national government is willing to subsidize a full new fiber network to the tune of 25% of its total costs. Anywhere where it can dictate the terms of the new networks operation in order to ensure the incumbents don’t kill competition in its cradle. (The incumbent phone and cable companies are among the bidders for the new network.)

Notice that this plan involves the people paying a substantial subsidy for the development of a system that private corporations will end up owning. And those corporations will reap all the eventual profit.

That’s a deal only a authoritarian, corporate state like Singapore could love. It’s a high price to pay.

What people are seeking when they try something so draconian is to realize the promise of competition in a framework that has been fundamentally hostile toward competition. (And well, maybe, to provide a little grease for their friends…but let’s try to be generous). The hoped-for benefits are lower prices and a high level of innovation. Both are presumed to emerge “naturally” when you structure a natural monopoly so that the owners’ self interest is deployed in the service of the eventual consumers.

But there is another, simpler, surer, way to align the owners’ self-interest with that of consumers.

Lafayette’s way

You could make the consumers the owners, by the simple and time-honored device of making the natural monopoly a public utility. Then the owner-citizens would have no motivation at all to exploit the consumer-citizens…since they’d be one and the same. They could ask themselves for, and expect to get, lower prices and the sorts of services that appeal to them.

I can’t fathom why that can’t be a national policy as easily as giving away the farm.

Net Citizenship and You

Food For Thought: Wouldn’t you rather your master be you?

I’m going to have to lay out an unfamiliar thesis: You, fair reader, are almost certainly not on the internet. Not really. You are a second class citizen who is not allowed to make many of the most basic decisions that full members are free to make; you are a dependent of your modem and the wireline owner it is connected to. Generously: you are a client of AT&T or Cox or ____ (your local duopolist here). Less generously: you are a second class citizen of the internet allowed only the access that Big Daddy allows you. And Big Daddy, as in Tennessee Williams’ play, is more interested in wealth and power than he is the welfare of his dependents.

Full citizenship on the web can be defined simply enough: full citizens can use their connection in any way that they want. They are independent actors who are free to make available or view anything.

That’s not you.

Take a look at your TOS (Terms of Service). Cox and AT&T’s, for instance, do meaningfully differ. But they agree about the essentials that concern us here:

1) You are the client, clients of clients are forbidden; you may not distribute service to others,
2) You can’t talk bad about Big Daddy, (e.g.: Customer is prohibited from engaging in any other activity, whether legal or not, that AT&T determines in its sole discretion, to be harmful to its subscribers, operations, network(s). This includes … or which causes AT&T or the AT&T IP Services to be viewed unfavorably by others.)
3) Free speech? No sucha thing. They get to say what you can say. (e.g.: “Cox reserves the right to refuse to post or to remove any information or materials from the Service, in whole or in part, that it, in Cox’s sole discretion, deems to be illegal, offensive, indecent, or otherwise objectionable.“
4) No Free Enterprise. You can’t sell things, for that you need the master’s special permission and a (higher-priced) service, regardless of how much traffic you use,
5) It’s not your connection. “Unlimited, always-on” connections are both limited and subject to an abrupt end. AT&T is bizarrely vague while Cox gives clear limits–which are seldom enforced. It’s not your connection; you need to remember that.
6) Your client status is a privilege, not a right. They can kick you to the curb at any time using whatever rationale seems most useful at the moment. (e.g.: Customer’s failure to observe the guidelines set forth in this AUP may result in AT&T taking actions anywhere from a warning to a suspension of privileges or termination of your Service(s). …AT&T’s decisions with respect to interpretation of the AUP and appropriate remedial actions are final and determined by AT&T in its sole discretion.)

7) Lucky 7 Laigniappe clause: Masters don’t have to follow the rules, only clients. (e.g.: AT&T reserves the right, but does not assume the obligation, to strictly enforce the AUP.)

You are in a master-client relationship with your network provider. You are NOT a full citizen of the internet. Your “location,” your IP address belongs to someone else. They have an assured, static IP. You do not. As long as they own that property you are dependent upon them and they can dictate the terms of that use.

Be aware that this is not the way it was supposed to be. The internet, right down to its IP core was designed around your freedom to connect.

One way of looking at network citizenship is through the lens of internet protocols and the operation of “the end to end principle.” From wikipedia:

The end-to-end principle is one of the central design principles of the Transmission Control Protocol (TCP) widely used on the Internet as well as in other protocols and distributed systems in general. The principle states that, whenever possible, communications protocol operations should be defined to occur at the end-points of a communications system, or as close as possible to the resource being controlled.

That’s a mouthful. Translated: The internet is designed as a transmission device that is supposed to be controlled by those on ends of a communication. You and the person at the other end. A request from one end is simply passed on to the other end—no single positive, centrally-controlled “circuit” exists. No controller stands in the middle. This is in contrast to the underlying design of the phone network with its centralized circuit switching system that designates a circuit for you and holds it open. (We’re talking about protocols, now….not physical implementation or the practical experience of users.)

Net neutrality battles are raging around the edge of this nascent war. We want to be full citizens of the new order. The incumbents would prefer that we be clients, vassels, and that they be the masters. Right now they are winning. Right now few of us even realize that current order is not necessary or natural—it was arranged for somebody else’s benefit; not for ours.

It really is that simple.

What we need to recognize is the nature of the war. What we need to be fighting for is ownership of our own connection. For full citizenship. To kill the Master-client relationship that constrains our current access to the network.

Ownership of the network is the most complete solution. Any limits we impose on ourselves are limits that we impose; they are not the dictates of the master. We may start out copying what we know in some ways. But that won’t last.

Lafayette, with its community-owned, fiber-based network utility is a good example of how that will work. From the begining things will be different here. We’ll have static IP addresses…and a lot of potential will flow from that. We’ll have full access to the speeds and capacity of our own network–that is what the 100 meg intranet is all about. As it becomes more and more obvious that many of the limits imposed by the current owners are not natural and not in the interests of users we’ll change those aspects as well.

That’s the real value of the battle fought and won here in Lafayette.

Worth thinking about…

Broadband To Overtake TV

Interesting:

WITHIN THE NEXT THREE YEARS, more than 16 million U.S. households with televisions will use their broadband service more than they use their TV sets today, says technology consulting firm In-Stat.

Up to 30% of viewers will drop subscription TV and use the Internet for watching TV, according to a recent survey by the Scottsdale, Ariz.-based In-Stat. More than 40% say they aren’t getting enough international news and information from their current TV service, despite having hundreds of channels to choose from. (Use Of Broadband Service To Overtake TV Viewing)

Now that’s much quicker than I would have thought…at least without real, reliable broadband. On the other hand: where there is real, reliable broadband…….;-)

Cox Degrades and Blocks P2P

Broadband Reports tells us that Cox has joined Comcast in chocking P2P traffic. (Readers and netizens will recall the uproar over Comcast’s public relations nightmare—blocking the Bible by using your control of the network to lie to both sides of the exchange about the state of the other is considered uncool.)

Like Comcast, Cox is using its control of the network servers to forge the identity of users on both sides of P2P (bittorent, etc.) connections and tell both users that their partner has asked for a reset of the connection. The consequence is a dramatically slower connection or, once one side of the software “gives up,” yielding a blocked connection. By forging false information about both ends of the communication Cox denies users the ability to exchange the data they choose.

Why? After all, people buy bandwidth in order to communicate. And Cox has plenty of tools that already control how much bandwidth you’re allowed to drink. Cox, like the other cablecos, sells you a speed-throttled product (1.5 megs, 7 megs, etc.) and they have an unpublicized monthly usage cap. So you can only use so much at a time and you can only use so much per month. That should be enough. Why do they feel the urge to tell users what kinds of connections you can make within those limits?

Well…because 1) Greed: supplying bandwidth costs money they’d rather keep and 2) Lying (or more generously, its cousin “advertising). Even though they’ve set out limits those limits are pretty much fakes that are used to sell product rather than rationally inform consumers. They are counting on very, very few people ever really using the capacity that they sold them. If any substantial number of users really starts to use anything like their monthly allotment everyone’s shared speed would drop like a rock. Cox just don’t have the capacity to give consumers the speeds they’ve sold them. At the root of this sort of behavior is that Cox (and the other major telecomms) oversubscribe their bandwidth…sort of like “overbooking” the seats on a plane. Only Cox et al do a lot more of it than than any airline ever dared. (See a recent fine discussion post on gigom for a clear elaboration of the business and network dynamics involved.)

When P2P begins to entice users to come somewhat closer to using the speeds and capacities they’ve bought that overbooking is revealed: the network slows down and the advertising is revealed too obviously for what it is: a commitment they can’t keep. It doesn’t help Cox stay calm that P2P also looms as a threat to cable’s core business. (We do know what most torrents are used for don’t we? Video, legal and otherwise.) Instead of announcing rational speeds and caps that would reflect their actual network capacity Cox follows Comcast in surreptitiously blocking the upstart P2P network in ways that are fundamentally deceptive.

Notice please: exchanging data is exactly why customers buy an internet connection, the blocked technology is perfectly legal technology; the content presented for exchange is not Cox’s responsibility; and internet users that never, ever signed a contract with Comcast are having their access blocked.

It’s profoundly wrong on multiple levels and no amount of handwaving about ensuring quality of service can obscure it.

Here in Lafayette LUS users will avoid the worst of this because LUS won’t sell you a product they can’t supply. That’s not the way that utility people think. It’s not about marketing for them. Besides, they won’t have any need for marketing deceptions. The sort of advertising that Cox is engaged in is intended to convince you that you are getting more than you actually are. LUS will have the bandwidth to give you exactly what you pay for. And LUS has been very direct in saying that they intend to do just that. I don’t think many people have heard them; it sounds too obvious…but the engineers at LUS know that your local cable connection is horrifically oversubscribed and it hurts their engineer’s sense of right order. They want you to know they won’t do that. (This is similar to the no connection fees, no penalty-laden contracts promise LUS has made—not doing that marketing stuff is the utility way.)

Does that mean that LUS will never mess with P2P? I hope they won’t. There is a lot of nervousness about uncontrolled usage among engineers and servers and P2P is at the center of that angst. I think such anxiety misplaced. But…My point is that LUS won’t have to deceptively block services you want to use in order to keep up the facade that you’ve got plenty of speed. LUS will actually have plenty of bandwidth. And if you use a lot more bandwidth going out of our network (generating a cost we all share) than your fellows do there is no reason not to simply tell you that you are pushing costs onto your neighbors. And charge you for fairly for it if it gets too disproportionate.

Oddly enough I’m looking forward to having that sort of relationship with my net provider. A more honest approach would be a refreshing change.

Comcast joins AT&T: Net Netrality Alert

Executive Summary: Nation’s biggest cableco caught blocking the Bible. Methodology: using its control of network servers to tell users at both ends of the transaction lies about state of the connection. Point: to degrade the service of P2P technology users enough to keep them from using scarce bandwidth. Consequence: The case for public ownership—or at least structural separation—grows.

The ensuing stink is sure to rival AT&T’s original Net Neutrality blunder.

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Comcast, the nation’s largest cable company, has joined AT&T, the largest phone company, in giving Net Neutrality advocates a hammer with which to drive home the point that the corporate duopolists want to be able to “shape” the internet to their financial benefit–and that “innovation,” competition, and your freedom to communicate are not part of their plan.

While AT&T merely stated its intent to categorize traffic and relegate companies whose product didn’t pay a special fee to the slow lane they, and other ISPs, have long claimed that this wouldn’t really involve degrading anyone’s service. But in this latest blowup Comcast has been caught doing what the national network providers have long denied: blocking or degrading services that pass over its network in order to make sure its own services run at full speed. That’s the conclusion that the Associated Press came to after an investigating the communications stream. The fuller description of their investigation reveals that they offered a file of the King James version of the bible for upload over BitTorrent and found that when they connected in order to download it at the other end that Comcast blocked their link.

What Comcast is doing was sending “reset packets” to both ends of BitTorrent file exchanges that are forged to indicate that the message comes not from Comcast but from the user on the other end of the exchange–and that the connection has failed. This drops the connection or at least forces a restart. If the program receives too many of these packets it will refuse to deal with the errant node–a tactic which makes sense when the other end really is broken in some way but which is blatantly disruptive when someone standing in the middle is simply lying about a the state of a perfectly capable participant. There’s a semi-formal term for this sort of deceptive practice: it is called a “man in the middle attack.” For a man in the middle attacks to be successful there has to be a trusted intermediary passing the message who decides to lie–to pass false messages to each participant. The idea is to create a situation in which the traitor in the middle gets what he or she wants.

That’s pretty much the situation here. By forging false information about both ends of a BitTorrent exchange (or Gnutella or Lotus Notes (!)) Comast denies users who, in the AP case were exchanging the Bible, the ability to exchange data. Comcast got what it wanted, though: the links failed and Comcast had more bandwidth to use for its own purposes.

Notice please: exchanging data is exactly why customers buy an internet connection, the blocked technology is perfectly legal technology; the content presented for exchange is in no way copyrighted; and internet users that never, ever signed a contract with Comcast are having their access blocked.

It’s profoundly wrong on multiple levels and no amount of handwaving about ensuring quality of service can obscure that.

Just for the record: This “man in the middle, using reset packets” is conceptually the same as one of the tactics that China used to build the infamous “Great Firewall of China.” In that instance the Chinese government used their ownership of the network to forge reset packets that effectively blocked any link between a computer in China that received or sent suspect words or phrases indicating political or social dissent and the computer that sent or received those words. (If you’re gonna be evil you might as well learn from the best, I suppose.)

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A storm of response is building quickly that is sure to rival the ultimate size of the slow-building response to the AT&T gaff that defined the Net Neutrality battles of ’05-’06 is building.

The reinstitution of regulation and a reinstitution of the principle of common carriage is the most obvious solution. —One that has been argued here recently.

But this is the sort of thing shakes peoples’ trust in their provider and that moves people to recognize that, since even more subtle forms of blocking are possible, a better solution might well be structural: remove the incentive to be evil and only the truly twisted will persist in doing the wrong thing. The first structural suggestion is to enforce “structural separation” meaning that no network provider would be allowed to own any part of the content that flows over the wires. Their only interest then would be in developing a better, faster network. We now have well-respected (i.e. no “mere” blogger) players like Susan Crawford and David Isenberg suggesting that is the only solution. Others, like Bob Frankston, want the current networks given to the municipalities to run open municipal systems that mimic the road system.

These are all necessarily national-level suggestions. They require some measure of divestment being forced on the current providers and only the federal legislature could do that. They are not bad ideas. But they suggest a long battle with a doubtful outcome.

Few, yet, are making the structural case that simple municipal or cooperative ownership would also destroy the motivation for a network provider to shape the usage of local users in ways that are not in their interest. We should all own our own local networks. The principle is simple: owners have no motive to abuse themselves. We can, as we in Lafayette have, make the decision to build a network with a big enough pipe that scarce bandwidth is not an issue inside our system. We can decide to price external bandwidth–and the costs associated with P2P an other bandwidth-heavy applications like streaming video as we see fit. (Local caching of popular content would be an obvious first solution in any bandwidth-rich locale. Big files need only come into our community once.) Owning our own network won’t free us from the Comcasts of this world who might still try and keep us from from freely communicating with their customers. But it would give us the control that ensures a network that serves our interests and not the interests of an corporate network provider who is willing to stand in the middle and lie to us and those we are communicating with in order to avoid dealing with the issue at hand honestly.

Right now only a minority wants to force divestiture or expropriation on the network providers. A few more, possibly a majority, already think that municipalities ought to be allowed to build their own networks. Comcast is changing those numbers — and not in a way that it will like.

“U-Verse in BellSouth Territory?”

DSL reports asks whether U-Verse, AT&T’s cable-like video service, is every going to be seen in former BellSouth territory.

AT&T says: Yes…soon…in Atlanta.

The question arises because U-Verse has so far only been seen in former SBC territories–where it has been taken up by 100,000 users–not in any of the areas that were BellSouth territory before the merger. Denizens of the deep south have felt somewhat neglected.

AT&T’s offering is interesting chiefly because it is a pure IPTV play; it uses the language of the internet. Verizon, which is driving Fiber To The Home, is using what is really cable technology on its video side. AT&T had considerable trouble getting the technology off the ground but now appears to have a usable product.

The telephone company insists that its product will be competitive but considerable doubt (aired in the article linked to above) exists that this is true. The concern is bandwidth contrainst will keep it from competing adequately on the broadband side (where its speeds do not match even current cable offerings) or on the video end (where many doubt that it has the bandwidth to offer dual HDTV streams). The basic problem is its last mile twisted copper infrastructure. There’s only so far you can push old copper–and the phone companies are much closer to the practical limit than are the cablecos.

What most folks seem to expect is that bably Bells will follow the same pattern in video that they have with broadband DSL: offer a slightly inferior product for less–and offer it in some places where cable does not go. Unless they launch a really aggressive attempt to win market share by offering a superior product (as Verizon appears poised to do) the cable companies immediate fiscal interests are served by keeping their higher prices while loosing a few marginal potential customers to a low end phone offering. –Such is the nature of duopoly markets; competing on price is avoided where ever possible. Market segmentation is more profitable for both.

That (basically humiliating) strategy might work in most places to keep AT&T and the other phone companies afloat but it won’t work in Lafayette where AT&T will be a third-best, not second-best network. They’ll be trying to stand against a competitor in LUS who is clearly determined to undercut the market price of the incumbents using more capable technology. LUS clearly wants to be a broad-based utility and not a player in a segemented semi-monopoly market. Its market plan to lower prices across the board by 20% leaves no room on the bottom for an also-ran. And, incidentally, that same plan leaves no rich pickings on the premium tiers for Cox to use as a consolation for letting the bottom go.

AT&T makes no bones about the fact that it is NOT planning to deploy even the modest U-Verse to all its customers. Its plans work out to serving only about 50% of its customer base even if it mets its buildout goals. And the customers it will not be serving are its “low-value” ones….you and I can both guess how Louisiana shows up on such a ranking.

So the real question is whether AT&T will ever show up to play in the Lafayette market. Louisiana markets, like Southern ones more generally, are markets with lower per capita incomes and hence are marginal anyway under the AT&T game plan. The added challenge of coming up against a local, fiber-optic utility which starts out with prices low enough to destroy your margin may convince them to simply stay away when contemplating the extra costs of upgrading their local net to support U-Verse.

Cox has made its determination to compete plain. But in Lafayette Cox will play the unfamiliar role of the second-best network against LUS’ fiber. And LUS won’t be interested in taking up Cox’s place in a duopoly market…it will compete for the lower-end customer as determinedly as it is allowed to by Louisiana’s regulatory agency. (Only in Louisiana would a law be enacted that mandates only regulations that limit the cheapest price a utility can charge the consumer—erecting rules that prevent it from ever charging less—without hinting at limits on the most a utility could charge…unhappily that is precisely what the Cox/BellSouth-sponsored (un)Fair Competition Act does. Go figure. (Go figure that the incumbents understand their difficulty well))

LUS, in this one smallish city, is about to break open a cozy market duopoly that elsewhere in this country will surely solidify further as cable and phone networks seek to secure the best return possible out of their differing network capacities and costs.

I do hope the rest of the country posts a quiet watch on Lafayette. What emerges here will be a lesson in what, in a better world, competition in the telecommunications market could look like.

Good Sense Spreads…Muni Broadband comes of age

Two stories came across my virtual desk yesterday that tell me that the municipal telecom movement is maturing. The time is ripe for Lafayette’s resolution to the disagreements within the camp of those who favor municipal and regional public networks.

Background
The quiet, background, argument within that community has been between those that saw WiFi as the obvious way to provide ubiquitous, cheap internet connectivity and those who saw fiber as the only sensible long-term foundation for a municipal telecomm utility that would provide public capacity for internet, phone, cable, wireless and other services as they emerged.

I’ve argued that muni networks would need both fiber’s capacity and the mobility of wireless if they hoped to provide a valuable and competitive alternative to the increasingly interlocked camps of private incumbents. The opposition between Fiber and WiFi has always been false one but, for a host of reasons, the only practical way forward is to make the committment to building a FTTH network and only then build out a wireless network that would piggy-back on the crucial fiber infrastructure. That’s Lafayette’s plan.

With the recent shakeout of muni wifi market the hope that cities could get a private provider to build a network without any local risk or investment has been revealed as an impractical one. We’re now getting down to a more realistic appraisal of what cities will have to provide—and when it’s their own money on the line cities appear to be taking a more sophisticated view of what their citizens really need and the crucial role of fiber in providing it. When the “free,” “good enough” alternative evaporates people buckle down and actually think about their needs and how to make sure their investment pays for itself.

In Minnesota and Vermont
In the first of the two stories that indicate that muni telecomm is maturing, one a city has made the decision to push for a fiber network even though its neighbor is famous for one of the more successful WiFi builds. In the second, a successful fiber build has announced its intention to add wireless.

In Minnessota’s twin cities of Minneapolis and St. Paul Minneapolis has gotten a lot of publicity for moving forward, apparently on pretty favorable terms, with a WiFi network. It’s next door neighbor, however, isn’t buying in. St. Paul opted for a fiber network:

Minneapolis can keep its Wi-Fi network. St. Paul says Wi-Fi is too slow, and it wants something faster. Much, much, much faster.

On Wednesday, the City Council unanimously approved an advisory committee’s proposal to seek partners for a publicly owned fiber-optic cable network for high-speed Internet access…

St. Paul’s broadband system would be fixed in place, but the 20-member advisory committee said the city could add a Wi-Fi service later though a private provider. That would let the wireless system piggyback on the fiber-optic network, which it would need anyway to connect back to the Internet.

A sidebar succinctly makes the case:

WHY NOT WI-FI?

St. Paul quickly rejected the idea of Wi-Fi, City Council Member Lee Helgen says. Some reasons:

Too slow. Typical Wi-Fi speeds are 1-3 megabits per second, but research indicates average users may need speeds of up to 25 megabits per second by 2012.

It’s flaky. Wi-Fi doesn’t penetrate far into buildings; leaves, rain or snow can interfere with its signal.

In Vermont Burlington’s FTTH system has taken the go-slow approach to success and is now planning its move into wireless.

“We are going to build a wireless network,” said Tim Nulty, BT director, in an interview. “But the best way to build wireless is to build fiber first. That way we already have backhaul [capability] and every telephone pole is a potential antenna site.”

Like many municipalities seeking to deploy their own networks, the challenges in Burlington, the largest city in Vermont with 39,000 residents, were daunting. It had to convince state and city politicians and the town’s voters that the network was a good idea, as well as fend off criticism from established telecom providers. And early financing problems nearly sunk the project.

After picking its way through complicated political and financial minefields, BT developed a city-owned network that will supply Burlington citizens with low-cost triple-play broadband and, when its debt is retired in 15 years, should provide the city with 20% of its general fund.

“BT will be able to pay down its debt very quickly,” said Christopher Mitchell, of the Minneapolis-based Institute for Local Self Reliance. “On the cost side of the equation, Burlington once faced massively growing telecommunications expenditures. It now views the telecommunications sector as an important source of new revenues.”

“…We resisted pressure to do wireless at first,” he [Nulty] said, adding that he expects that BT will one day provide Burlington with a “wireless cloud.” Nulty is beginning to look at various wireless approaches including Wi-Fi, WiMax, mesh, EV-DO, cellular resale, and 700 MHz among others.

BT is reported to have started negotiations with other Vermont cities including Montpelier and Rutland as well as smaller neighboring communities interested in gaining access to the Burlington network.

Dealing realistically with the difficult facts of an endeavor is always a sign of emerging maturity. Muni broadband is coming of age.

AT&T kills BellSouth Plans?

Who knew? David Burnstein, the highly respected telcom pundit with the unbearbly clunky html, says that AT&T’s acquistion of BellSouth frustrated BS’s plans to move to an all IP network and rip out the old phone systems antiquated operational guts.

The best minds in this business think it is now cheaper to replace the old PSTN network with a new all-IP network. British Telecom is essentially throwing out all the existing gear and running broadband to every home by 2011. Phone calls will be all VOIP, and there is no technical reason they can’t turn on data to 95% of the British Isles. New Zealand is thinking similarly, parts of Trinidad and Tobago are moving ahead, and BellSouth planned the same thing until the empire took over and cut everything back. (Has anyone else noticed they’ve decimated BellSouth’s network plans this year? Capital spending plunged.) (My emphasis in bold)

While that’s the first I’ve heard of it, the claim that BS planned an upgrade and that AT&T is keeping that money for its own purposes instead is fairly believable. —One of the most reliable patterns of the reconsolidation of the regional phone monopolies into a few national powers has been that those that phone companies that chose to spend their cash on acquisition swallowed their brethren that were investing instead in network capacity. The acquiring companies invested their current profits not in additional profit-generating capacity but in “buying” debt. That is a substantial part of the reason that the newly merged companies killed earlier promises to build national fiber networks. (Take a look at an overview (and then the massive documentation) of these broken promises—it’ll shake your confidence in our regulatory system.) They used the money to buy out each other and enriched the banking industry instead of their shareholders—and the communities they served.

Our regulatory regime allowed two behaviors that destroyed the US’ chance to stay ahead in the network race by allowing the phone companies to seek profit outside their core wireline networks: it allowed the phone companies to spend their monopoly income on buying up pretty much the entire potentially competitive wireless cellular market. We lost both competition and investment in fiber optics at one blow. 2) it allowed AT&T and the other Bells to further waste their substance by transferring huge amounts of money to the financial sector solely to make their companies prettier on the stock market selling block. Capacity was again sacrificed.

I’ve said it before and I’ll repeat it again: Deregulating monopolies is a recipe for disaster.

This time BellSouth customers (who would have benefited from an upgraded core even if BellSouth did not to have the courage for fiber they of all the baby Bells could have afforded) will be paying the price for our regulators’ fantasy that they could magically create a competitive market by allowing monopolists free rein to purchase their competition and reconsolidate.

What were they thinking?

Huval on Federal Broadband Policy

Huval, speaking as the chairman of the board of the American Public Power Association, on the problem with American broadband:

Broadband access is a top priority for American Public Power Association board Chairman Terry Huval. “Despite all the promises of the Telecommunications Act of 1996 to create a competitive telecommunications market, the mega-incumbents sufficiently intimidated smaller players and succeeded in stifling desperately needed infrastructure upgrades,” he said. “As a result, the definition of American broadband is based on the smallest investment necessary to produce the greatest profit for the incumbents, leaving the United States’ ability to respond to worldwide global competition alarmingly hampered. It’s a dangerous situation that needs to be corrected soon.” Huval is the 2007-08 chairman of APPA and director of utilities in Lafayette, La. After a protracted battle with incumbent telecommunications providers, Lafayette Utilities System is constructing a citywide fiber-to-the-premises project to fill the city’s unmet broadband needs…

Huval believes local governments are potentially the best providers of advanced telecommunications infrastructure. They are accountable only to citizens and will price services reasonably, he said. “Local governments should not be hamstrung in any way that keeps them from meeting the vision and needs of their communities,” he said. “The incumbents have had their share of tax breaks and incentives. . . In a large way, those companies have failed to keep their promises. It’s time to let the public sector take the reins in communities where citizens want them to do so.”

That focuses directly on the real problem—incumbent greed—and the real solution—taking matters into our own hands. (It should go without saying that “the mega-incumbents” haven’t intimidated everyone. Good.)

National Broadband Policy Gem

A real gem:

“We are probably the only industrialized country without a national strategy,” said Copps. “We have let the world go by while we deregulate and reclassify things and move them from one part of the Telecom Act to another, as if we are accomplishing something. We proceed with the naive assumption that an invisible hand will somehow get this done.”

That’s just about as right as one can get in two sentences. And refreshingly tart to boot.

(From U.S. Lags in Broadband Deployment by Cathy Swirbul)