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AT&T Fails Big in Dallas, Makes Big Claims for Austin

Even though I regularly read examples of terrible customer service from the massive corporations like AT&T, Time Warner Cable, CenturyLink, and more, I apparently retain the capacity to be surprised as how bad they are. The Dallas Morning News recently ran this piece: "AT&T Never Misses An Opportunity to Miss An Opportunity."

In a neighborhood with poor access to satellite services and miserable with Time Warner Cable, people were thrilled when AT&T proclaimed it would be investing in U-Verse. Even though U-Verse is an amped-up DSL service that barely competes with cable connections, people who are fed up with Time Warner Cable were excited for a choice.

Lo and behold, right in the thick of the CBS-Time Warner fight, I received notices from AT&T that Uverse was now available in my neighborhood. This is something I’ve waited more than two years for. I was thrilled. Finally, there’s choice! Since receiving my first notice from AT&T in early August, I’ve been inundated with AT&T offers. Dozens of pieces of mail have arrived in my mailbox. Clearly, AT&T wanted my business.

And I wanted badly to give it to them. I phoned one day after receiving my first notice. I signed up immediately for service. The friendly sales person told me because of high demand, she couldn’t set an installation date for sooner than two weeks. Whatever. Fine. We agreed on August 19, somewhere between 9 and 11 a.m. I couldn’t wait.

Only they didn't show. They cancelled. And they cancelled the next appointment and put him off time and time again. But now he has a date of when he will be able to take service ... and I'm not making this up. 12/31/2036.

Those familiar with AT&T's announcement in Austin may think that it will take 23 years to upgrade Dallas because the massive corporation is focusing so much attention on Austin where they are kind of promising a gig.

Karl Bode has long been covering what he calls Fiber to the Press Release from AT&T.

The company has made it repeatedly clear that they aren't interested in investing a huge amount of money in fixed-line networks when the real money is in wireless and $15 per gigabyte LTE overages. While the company has made much of "Project VIP" network investment project, their investment numbers for that project have been a lot of smoke, mirrors and very fuzzy math.

However, local folks tell me that AT&T is indeed pulling permits and doing something differently - so this is not entirely smoke and mirrors. Just mostly.

And over at Stop the Cap, Phil Dampier has a deeper dive into AT&T's pool of obfuscation:

The five-county Austin–Round Rock metropolitan area has a population of 1,834,303 residents. Assuming AT&T managed to offer fiber service to 100,000 residents — and that is a generous figure, that represents only 5.5% of Greater Austin. The old U-verse is still a work in progress in several Texas cities, so it could take years for AT&T to deploy fiber in Austin. Expect AT&T to start with the low-hanging fruit — multi-dwelling units such as apartments, condos, and other similar buildings, some that already have existing fiber connections in place.

We still have no idea what AT&T is going to charge for its "Gig" ... which will start at 300 Mbps. Don't count on AT&T to suddenly invest in FTTH in your town - much better to take action however you can to solve your problems locally.

Bandwidth Caps are Unnecessary and Counterproductive

The Open Technology Institute at the New America Foundation has released a report on data caps in the U.S. The report, Capping the Nation's Broadband Future, was authored by Hibah Hussain, Danielle Kehl, Benjamin Lennett, and Patrick Lucey.

The paper looks at the growing prevalence of monthly data caps by massive ISPs like Time Warner Cable, AT&T, and others. Authors conclude that data caps are effectively discouraging Internet usage with restrictions and limits that can be expensive. From the summary:

As this paper documents, data caps, especially on wireline networks, are hardly a necessity. Rather, they are motivated by a desire to further increase revenues from existing subscribers and protect legacy services such as cable television from competing Internet services. Although traffic on U.S. broadband networks is increasing at a steady rate, the costs to provide broadband service are also declining, including the cost of Internet connectivity or IP transit as well as equipment and other operational costs. The result is that broadband is an incredibly profitable business, particularly for cable ISPs. Tiered pricing and data caps have also become a cash cow for the two largest mobile providers, Verizon and AT&T, who already were making impressive margins on their mobile data service before abandoning unlimited plans.

The increasing prevalence of data caps both on the nation’s wireline and mobile networks underscore a critical need for policymakers to implement reforms to promote competition in the broadband marketplace.  Data caps may offer an effective means for incumbents to generate more revenue from subscribers and satisfy investors, but making bandwidth an unnecessarily scarce commodity is bad for consumers and innovation.  The future is not just about streaming movies or TV shows but also access to online education or telehealth services that are just starting to take off. Capping their future may mean capping the nation’s future as well.

The paper also looks at the technical challenges of capping data usage. Additionally, the authors delve into the many ways data caps are turned into profit for a few big providers while harming users. This resource brings relevent data into focus along side long term policy implications and offers some advice:

Data Cap Myth

For the Internet to continue to serve as a catalyst for economic growth it is imperative that consumers and entrepreneurs not feel constrained online. In a recent speech, former FCC Executive Director and Chief of Staff Blair Levin highlighted the links between broadband abundance, innovation, and economic growth.

"When it comes to the wireline access network, instead of talking about upgrades, we are talking about caps and tiers. Instead of talking about investment for growth, we are talking about harvesting for dividends,” …  “[policymakers] should recognize that our progress demands an investment environment that creates the conditions that allows us to invent the future, not just harvest from the past."

An uncapped Internet environment gave rise to a host of innovative and popular applications. Broadband and bandwidth must continue to be thought of as an abundant resource, not a rationed commodity, to ensure the vibrant online ecosystem can continue to flourish.

Shortly after this report was published, the lead lobbyists for cable interests in Washington, DC, admitted that the bandwidth caps are not designed to solve any congestion problems, which Karl Bode covered with his usual smart analysis.

Except the argument that usaged pricing is about fairness has been just as repeatedly debunked. If usage caps were about "fairness," carriers would offer the nation's grandmothers a $5-$15 a month tier that accurately reflected her twice weekly, several megabyte browsing of the Weather Channel website. Instead, what we most often see are low caps and high overages layered on top of already high existing flat rate pricing, raising rates for all users.

Any argument that caps for wireline service are necessary is refuted by the fact that the fastest networks in the US, whether publicly owned, Google, or even Verizon's FiOS, see no need to cap monthly transfer amounts.

The big cable monopolists don't care about fairness, they care about boosting profits while investing as little as possible. Unfortunately, their overcharging lack of investment is harming every other industry in our country.

AT&T, Others Overcharge Subscribers Based on Secret Bandwidth Meters

Imagine going to a gas station, putting 10 gallons into your car's 12 gallon tank, and driving off only to find your needle only approaches half a tank? This scenario is quite rare because government inspects gas stations to ensure they are not lying about how much gasoline they dispense.

But when it comes to the Internet, we have found measurements of how much data one uses is unregulated, providing no check on massive companies like AT&T and Time Warner Cable. And we are seeing the results -- AT&T is not open about what its limits are or how to tell when one has exceeded them.

Stop The Cap has noted that AT&T has advertised unlimited bandwidth for its DSL/ U-verse product while chiding and charging customers who exceeded certain amounts of monthly usage. Customers were quietly warned and charged $10 for each additional 50 GB over 150 GB for DSL subscribers or 250 GB for U-verse customers.  Clearly, "unlimited" has several definitions, depending on whether one is a customer or an ISP.

Complaints have also come in from SuddenLink customers and others. The ISP charged usage based customers for bandwidth usage when they didn't even have power. Simlarly, AT&T customers began to complain about inaccurate meters from the beginning of the program. This from a 2011 DSL Reports story - one of many comments from AT&T customers:

AT&T's data appears to be wholely corrupted. Some days, AT&T will under-report my data usage by as much as 91%. (They said I used 92 meg, my firewall says I used 1.1 Gigs.) Some days, AT&T will over-report my data usage by as much as 4700%. (They said I used 3.8 Gig, dd-wrt says I used 80 meg. And no, this day wasn't anywhere near the day they under-reported.)

Most of us don't keep track of our bandwidth usage, because there is no easy way to do it. For the most part, we have to take the word of our Internet service providers, but who is ensuring that they are accurate? Mismeasuring could be the result of incompetence or fraud, but the FCC has not stepped up to ensure consumers get what they are promised.

DSL Reports has extensively covered this AT&T bandwidth cap story and its refusal to open its meters to verification. One customer recorded a persistent pattern of inaccuracuracies, finding that AT&T was over recording the households daily usage by about 20-30%. The user contacted AT&T support to get a definition of "metered usage" because there was no definition on its website. From the article (and reposted from Slashdot):

Boy, did I get a surprise. After several calls, they finally told me they consider the methodology by which they calculate bandwidth usage to be proprietary. Yes, you read that right; it's a secret. They left me with the option to contact their executive offices via snail mail.

As long as there is no meaningful competition for broadband customers, AT&T will face no market penalty for abusing its customers. And unfortunately, the FCC has been asleep at this wheel as well. Also from Karl at DSLReports:

Worse perhaps, is that regulators in both the United States and Canada haven't shown the slightest interest in the problem despite the fact that ISPs are billing like utilities, with nobody but the consumer confirming whether their meters are accurate.

We have yet to hear of a credible reason to need bandwidth meters on wired networks. The companies that have invested in modern networks -- from community fiber to Verizon's FiOS -- see no need to count bits. It only seems to be those who don't want to invest and cable companies that want to slow the growth of over-the-top video pushing these limits.

Media Coverage Roundup: Georgia AT&T Bill to Kill Community Broadband

In the wake of a bill in Georgia to revoke local authority and substitute it with state say-so over whether a community can build a broadband network, multiple outlets have covered the situation.

As usual, Stop the Cap! was quick on the ball, offering original in-depth commentary. Phil digs into the campaign cash history to find the real motivations behind this bill:

Rogers’ legislation is exceptionally friendly to the state’s incumbent phone and cable companies, and they have returned the favor with a sudden interest in financing Rogers’ 2012 re-election bid. In the last quarter alone, Georgia’s largest cable and phone companies have sent some big thank-you checks to the senator’s campaign:

  • Cable Television Association of Georgia ($500)
  • Verizon ($500)
  • Charter Communications ($500)
  • Comcast ($1,000)
  • AT&T ($1,500)

A review of the senator’s earlier campaign contributions showed no interest among large telecommunications companies operating in Georgia. That all changed, however, when the senator announced he was getting into the community broadband over-regulation business.

Phil also refutes the supposed failures cited by those pushing the bill. Not only do such stories misrepresent what really happened, some actually cite EPB's incredible 1Gbps service as demonstrating that munis are out of touch. What else would you expect from the Heartland Institute, which made its name fighting against the radical claim that cigarettes are linked to cancer?

Government Technology's Brian Heaton also covered the story in "Georgia Community Broaband in Legislative Crosshairs."

In addition, Mitchell [me] said that SB 313’s requirement of the public entity paying the same taxes or the same cost of capital as the private sector is another red herring. He said that while the provision looks reasonable on the surface, it would critically hamstring any effort to establish government-owned high-speed broadband services.

“That’s like telling me I have to pay the same taxes that another American would,” Mitchell said. “Are we talking about my middle-class neighbor, or Mitt Romney? Whose taxes am I going to pay a similar rate to? These are all issues that are left open-ended intentionally so that it’s uncertain for a community and they are more likely to end up in court, which is possibly the most devastating situation.”

Fierce Telecom riffed on the GovTech story here.

Karl Bode at DSL Reports asks if "Georgia wants to be a broadband backwater."

As noted, ISPs particularly love bills that require endless public hearings and votes, where deep-pocketed carriers can can out spend supporters by millions of dollars on (often incredibly sleazy) PR campaigns aimed at shouting these services down. That same money could be used to upgrade last mile connectivity, but isn't thanks to the uncompetitive markets these companies are trying to keep uncompetitive. The result? Continued slow speeds, high prices and poor service, all protected by the very government ISPs claim they don't want involved in the market.

And finally, Slashdot got the point of the bill wrong (ignoring many of the provisions of the bill) but did start a conversation about Georgia "Prohibiting Subsidies for Municipal Broadband. One of the commenters lives just outside one of the towns that Majority Leader Rogers cited as a bad example. This commenter disagrees with that assesment. Strongly.

Until the city implemented a broadband plan with cable TV, we had ONE choice for cable TV and virtually NO high speed internet especially in the county (Bellsouth/AT&T DSL is a massive joke to anyone who lived in the county and so was high speed internet connections). Suddenly, when the city decided "We want to attract more business to the area and also supply all of our schools with high speed internet services..." then WHOA! the local cable company went into overdrive. They started expanding their high speed internet services much faster and pushed them out into the county. They offered better bundle rates AND dropped their cost for cable TV alone. The move by the city _incentivized_ the local cable MONOPOLY to get off their ass and start offering the services to both city and county that they had been promising for a while and to bring their price down to a more competitive level.

And finally, the Augusta Chronicle covered the proposed bill and the increased campaign contributions from telco and cable companies to those pushing the bill:

The telecom companies have beefed up their lobbying forces this legislative session. Many lawmakers have received campaign contributions from them, including Rogers, who rejects any suggestion that they might have motivated him.

Unfortunately, the Augusta Chronicle again repeats the false claim that the public will be under the same rules as the private sector. The bill explicitly creates new rules that will only apply to public sector providers. It is right in front of them and they print blatantly false claims.

New Year, Same Lame Cable and DSL Monopolies

It's a new year, but most of us are still stuck with the same old DSL and cable monopolies. Though many communities have built their own networks to create competition and numerous other benefits, nearly half of the 50 states have enacted legislation to make it harder for communities to build their own networks.

Fortunately, this practice has increasingly come under scrutiny. Unfortunately, we expect to see massive cable and telephone corporations use their unrivaled lobbying power to pass more laws in 2012 like the North Carolina law pushed by Time Warner Cable to essentially stop new community broadband networks.

The FCC's National Broadband Plan calls for all local governments to be free of state barriers (created by big cable and phone companies trying to limit competition). Recommendation 8.19: Congress should make clear that Tribal, state, regional and local governments can build broadband networks.

But modern day railroad barons like Time Warner Cable, AT&T, etc., have a stranglehold on a Congress that depends on their campaign contributions and a national capital built on the lobbying largesse of dominant industries that want to throttle any threats to their businesses. (Hat tip to the Rootstrikers that are trying to fix that mess.)

We occasionally put together a list of notable achievements of these few companies that dominate access to the Internet across the United States. The last one is available here.

FCC Logo

As you read this, remember that the FCC's National Broadband Plan largely places the future of Internet access in the hands of these corporations. On the few occasions the FCC tries to defend the public from their schemes to rip-off broadband subscribers, Republicans (joined by a number of Democrats) threaten to overrule what is supposed to be an independent agency to defend the corporations that just happen to be donors to their campaigns.

Back when most assumed AT&T would be able to push its horribly anti-competitive takeover with T-Mobile through an impotent federal government, a few stories exposed the tip of the iceberg of AT&T's astroturf efforts, as with this report from the Center for Public Integrity:

“It is important that we, as Christians, never stop working on behalf of the underserved and forgotten,” the Rev. R. Henry Martin, director of the clinic, wrote to FCC Chairman Julius Genachowski in June. “It might seem like an out-of-place endorsement, but I am writing today in order to convey our support for the AT&T/T-Mobile merger.”

...

Not included in Martin’s letter to the FCC was the fact that his organization had received a $50,000 donation from AT&T just five months earlier. Indeed the Shreveport-Bossier Mission is one of at least two-dozen charities that were recipients of AT&T’s largesse and have written in support of the T-Mobile buyout, which will cut the number of national wireless companies from four to three.

When AT&T's wasn't able to buy enough influence with legitimate groups willing to sell out the interests of their members (who would pay more for their communications in a less competitive environment), it would simply create its own groups to push its interests:

AT&T Logo

Tallahassee Mayor John Marks brought an Atlanta nonprofit to the city as a partner in a $1.6-million federal-grant project, saying it would put high-speed Internet into the hands of poor people.

What he didn't say, and now says he didn't know, was that the Alliance for Digital Equality (ADE), in its first three years of existence, was nearly 100-percent funded by AT&T and spent most of its money — four of every five dollars — to pay board members, consultants, lawyers and media companies to push the global communication giant's positions on Internet and wireless regulation. Nor did Marks disclose, initially, that ADE had paid him $86,000 over several years as a member of its board of advisers.

We continue to see these massive companies abuse their market power to increase their prices, knowing that their lobbying arms will continue pushing legislation to stop communities from building their own networks.
Time Warner Cable hiked its rates in North Carolina immediately after passing its legislation to stop communities from building networks. Mediacom raised its prices while it attempts to sabotage efforts in rural Minnesota to build networks in unserved areas. And invented new fees to rip off its subscribers while trying to disrupt a rural fiber-to-the-farm initiative that slightly overlapped some territory in which they have long refused to invest.

Even as profits on cable broadband services approach Exxon proportions, Time Warner Cable has pushed for usage-based pricing to further overcharge subscribers, but mostly to strangle enormously popular competitors like Netflix. CenturyLink is not far behind, with usage caps prioritizing its own video content over competitors.

Verizon Wireless tried to sneak a new fee past subscribers by announcing it just before Christmas but backed down after outraged consumers reacted. One has to wonder whether it would have backed down in a world where AT&T took over T-Mobile, resulting in 3 out of 4 wireless customers being with Verizon Wireless and AT&T. Four competitors isn't the robust competition envisioned by Adam Smith, but it still beats the duopoly dynamic that results from even less competition.

Verizon Logo

Speaking of less competition, the recent deal between Verizon and cable companies is troubling. We already knew that FiOS was all but dead, but this deal truly puts a fork in it:

I'll assume that neither cable operators or Verizon are going to let us see the deal fine print to confirm the Times guess, but the logic fits Verizon's strategy. Verizon already cherry picked the most valuable FTTH upgrade markets, and has shown total disinterest in further upgrades. This deal allows them to save money on FTTH upgrade costs, instead soaking up remaining customers with LTE -- which we noted was the plan some time ago. This deal is very bad news to the rural telcos without the cash for large-scale upgrades (CenturyLink, Frontier, Fairpoint, two of which Verizon sold aging DSL networks to), and for satellite broadband providers.

The future of next-generation networks is now only community networks, cooperatives, and some small private networks.

We've long argued that phone and cable companies have systematically overstated their coverage in mapping efforts as part of their effort to blunt any sensible public policy that would result in all Americans having a choice between fast, affordable, and reliable connections to the Internet. The New England disaster called FairPoint is back in the news for overstating the number of subscribers that have access to DSL. The company has not met the requirements it agreed to when purchasing Verizon's lines a few years ago.

Comcast Logo

And in the continuing saga of Comcast's growing domination over the information people can access, Bloomberg TV is fighting Comcast's practice of discriminating against channels in which it has no ownership stake. Comcast has long strongly encouraged those who want to put television channels on its lineup to give Comcast a piece of the action, not unlike a mobster encouraging a small business to pay protection money. It wants to continue expanding its role as a gatekeeper to the Internet, particularly in the many areas where people have no real choice from other high speed providers.

And perhaps the best example of why we should not trust these massive corporations to run essential infrastructure is the revelation that AT&T defunded 9-11 call centers in Tennessee to gain a market advantage over competitors, a practice they were previously caught doing, leading to settlements out of court.

These corporations are not evil, they are following a sensible mandate to maximize their shareholder value. It is our government that is not sensible -- entrusting them with the future of Internet access without even bothering to enact the most basic regulations. Communities must continue to wise up and ensure they have the access they need to modern communications -- access that reponds to their needs, not those of distant shareholders.

FCC on Net Neutrality: More Bush than Obama

Whenever the discussion of Network Neutrality comes up, we like to remind everyone that when the network is locally owned and accountable to the community, anti-subscriber discrimination is not a problem. That said, we are strong supporters of proper safeguards to ensure massive companies like AT&T cannot abuse their market power and discourage innovation.

As the FCC prepares to discuss a half measure to preserve parts of the open Internet, a number of us have been frustrated that while we cannot read the proposal, AT&T appears to be helping write it. Karl Bode's take:

[T]he question shouldn't be whether or not consumers can now view a neutrality proposal after it was hashed out in private meetings (predominately with only the largest, wealthiest carriers), it should be: why weren't consumers absolutely integral in crafting it? AT&T has met with the FCC half a dozen times in the course of three weeks and likely knows precisely what's in this plan -- do you?

We've written to FCC Commissioners to make it clear that they must not compromise on the future of the open Internet. You should too.

Photo used under Creative Commons license from AdamWillis.

Wisconsin Republicans Want More Local Tax Dollars Flowing to AT&T

The University of Wisconsin System is involved in a broadband stimulus project to expand fast and affordable broadband access to key community institutions. Just as they have in similar projects around the country, massive companies like AT&T are trying to derail any potential competition to their services.

From the Cap Times, "Surf and turf: Telecom industry protests UW-Extension broadband plan:"

The angst is over nearly $30 million that was awarded to build more than 600 miles of fiber optic cable that will bring high-capacity broadband connections to a range of key public entities and health care providers in the four communities, each of which has indicated a desire for more reliable broadband service and, not coincidentally, has a UW campus. This project’s budget is nearly $43 million when one adds in funds contributed from groups that will benefit from the infrastructure upgrade in each community.

[T]hose backing the undertaking argue it will bring faster and more reliable Internet service to public safety agencies, health care providers, schools and community organizations in Platteville, Superior, Wausau and the Chippewa Valley (Eau Claire) area.

Private telecom companies (led by AT&T) are protesting the project with a rejoinder we commonly hear in these issues:

Bill Esbeck, the executive director of the Wisconsin State Telecommunications Association, argues the project will duplicate an existing network and take revenues out of the pockets of local Internet providers. The group is asking for a state review of the plan and is considering legal action, says Esbeck.

Interestingly, both sides are mostly right. The public safety, health care, and educational institutions will see faster, more reliable, and less expensive broadband. Private existing providers (mostly AT&T), will lose some revenues.

Of course, those lost revenues would have come from the tax base in the form of local governments having to greatly overpay for telecom services.

The fiscally responsible path for local governments is to build and own (perhaps operate if they wish) their own broadband networks rather than leasing overpriced services from carriers like AT&T. Not only does this cut public expenditures for telecom immediately, it reverses the growth of future telecom costs. Companies like AT&T raise prices over time whereas technological progress allows those who own the network to cut costs over time. When the public owns the network, it has more flexibility and power and deal with future costs of broadband.

As for the network being duplicative… well, as we have said time and time again, this is the equivalent of dirt road owners arguing against interstate highways. Both Interstates and dirt roads allow you to go from point A to point B, but they have key differences. The U of W is building a far superior network to the current alternatives (using metrics like available capacity, cost, reliability, control, and future capability).

In a move unsurprising to anyone watching this occur in state after state, a number of elected officials immediately rushed to defend the prospect of AT&T losing revenue.

Last month four Republican lawmakers who sit on the Joint Committee on Finance sent a letter to the Democratic co-chairs of that committee asking for a review of the project because they believe the UW System may be violating the law if it moves forward with the broadband expansion.

So to be clear, these lawmakers are fighting to require local governments to pay higher prices to companies like AT&T for worse services. This is what passes for fiscal responsibility to state legislators around the country who seem more swayed by telecom lobbyists than any concern for the governed.

Karl Bode had a similar response to mine:

In other words it would be good for the local economy and residents -- it just wouldn't be good for AT&T, given they couldn't overcharge those institutions via the local AT&T-fueled BadgerNet service. Given BadgerNet charges local institutions $814 a month for 1 Mbps Internet connections, you can fairly quickly figure out exactly what AT&T's looking to protect -- and it isn't "community investment."

What galls me is the way big companies like AT&T cast themselves as trying to help the local provider, when they have driven thousands of local providers out of business either by abusing their market power or lobbying for laws that privilege the super large companies. This network in Wisconsin actually may help true local providers by bringing another big broadband pipe to town and lowering prices for backhaul.

Full disclosure: I should note here that I am a Gopher partisan and find the prospect of defending the U of W rather difficult in any circumstances.

Canada Joins Rest of World With Open Access Requirement

Last year, when the Berkman Study (pdf) by Harvard (commissioned by the FCC) revealed the secret behind impressive broadband gains in nearly every country over the past decade, we hoped the FCC would learn something from it. Maybe it did, and maybe it didn't -- what is clear is that it did not have the courage to embrace pro-competition policies.

Canada's telecom regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) has shown more courage in confronting powerful interests that want to monopolize the future of communications.

They have decided to require the big telecom carriers share their network with independent ISPs in an open access type arrangement.

Until this decision, the established telecom companies could "throttle" third-party services, by slowing them down or limiting downloads.

In Canada, these huge companies also claim that such regulations will decrease their investment in next-generation networks, likely a hollow threat. Regardless, it is a strong argument for public ownership of essential infrastructure. How many communities should be denied next-generation communications because some massively profitable global company is having a snit with the regulator?

Far better for communities to be self-determined, by building their own networks. When networks are run as infrastructure, they are open to independent service providers, just as the roads are open to shipping companies on equal terms.

Canada's regulator has made a difficult decision - but as Karl Bode reminds us, let's wait to see if they actually enforce it.

Gentlemen, Please - Dealing with a Divided Market

Susan Crawford recently posted "The Gentlemen's Agreement," noting that major cable companies have divided the national market and tend not to compete with each other (they actually help each other in some circumstances).

Though bad for everyone not named Comcast or Time Warner, this division is actually a historic accomplishment:

Even J.P. Morgan couldn’t get independently-owned railroads to agree not to compete with one another in the late 19th century. Not that he didn’t try. In 1890 one of Morgan’s associates was excited by the prospect of a Western Traffic Association that would include a director from each railroad and set uniform rates: “Think of it - all the competing traffic of the roads west of Chicago and Saint Louis placed in the control of about 30 men!” But the effort fell apart because some of the independents insisted on cutting rates and invading each other’s territories.

Cable and fiber-optic networks, as with railroads, have natural barriers to entry because the costs of building a network are very high; entrenched incumbents have nearly all the advantages should any competitor have the resources to surmount the barrier of sky-high upfront capital costs. In short, the market cannot self-regulate. We have a number of choices:

  1. Do nothing, let Comcast, et al. do as they please.
  2. Regulate: Hope the FCC or other Federal Agencies can stand up to the corporate lobbyists and regulate in the public interest.
  3. Provide a Public Option

We prefer the public option route - communities can build their own networks and remain independent of corporate control of infrastructure.

However, many communities have chosen to do nothing -- some in hopes the federal government will get its act together and reign in the power of these companies as the U.S. falls behind international peers in broadband metrics.

Verizon's FiOS has brought fiber to the home in some cities (with many cities courting the company), but some quickly found FiOS comes with significant trade-offs. Karl Bode details some of these - like Boston being shunned because it wanted Verizon to pay property taxes.

Seattle and Portland have suburbs with FiOS but are stuck with Qwest and Comcast networks in their cities. Baltimore was not deemed worthy of FiOS - presumably for the same reason as so many others who remain stuck with Verizon DSL: they had the wrong demographics. Verizon's mission is to maximize returns for its shareholders, nothing more. Communities that pin their hopes to a company like Verizon will find that Verizon has all the power in their relationship.

In contrast, communities that build their own networks can offer the same fast speeds (and faster) while knowing that no company controls its digital future. Any by owning the network, the community can open it to competition, creating a true market for broadband that FiOS communities will likely never experience.

Upcoming National Broadband Plan

From what we have seen of the upcoming broadband plan, it looks to solve very little. Karl Bode explains why the National Broadband Plan will deliver everything but what it is supposed to. Basically, it comes down to an Administration that is unwilling to challenge very powerful private sector interests.

The main question we need to ask when the plan comes out is how the plan will increase the power of communities to succeed in the 21st century. For more than a decade, private companies have decided when communities will receive the utility of the 21st century: broadband Internet access. They have decided, without any oversight from the community, what speeds are available and at what prices. Towns regularly lose businesses because incumbent providers offer only overpriced, slow connections.

In several states, communities are greatly limited in what telecom services they can provide -- legislation that protects the incumbents that refuse to invest in next generation networks. The National Broadband Plan should call for ending all state barriers on publicly owned networks.

The FCC has been quick to note that there are few federal funds to put into expanding broadband access. Great - all the more reason to stop subsidizing the private profits of incumbents with Universal Service programs that reward slow, overpriced connections to schools and rural residents. The Universal Service Fund must be reformed from a program that throws away money with inefficient, ongoing subsidies to private companies so they will run networks in rural areas. These areas should be served by cooperatives and other networks that operate in the public interest. If they require ongoing subsidization, the networks should operate in the public interest, not pad private profits.

We have one opportunity to transition from copper to fiber - if we waste this opportunity by cementing the power of the very companies that have refused to build the infrastructure we need, it will be our fault and our fault alone. The pathetic U.S. broadband situation was not inevitable and can be rectified by encouraging communities to be locally self-reliant rather than perpetually subsidizing private companies to offer services in rural areas -- where they will find every loophole to avoid improving services so they can increase their profits. This is a choice, not destiny. At this point, it looks like the FCC will choose poorly.