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- Jesse on Brigham City on Macquarie: Yes, please
- Dakota on Brigham City on Macquarie: Yes, please
- Joe on The end of the road? It’s Macquarie or bust for UTOPIA
- Greg on Not Just Copper: Is CenturyLink slowly withdrawing from the residential wireline market entirely?
- Jesse on Not Just Copper: Is CenturyLink slowly withdrawing from the residential wireline market entirely?
Tag Cloud#utpol AT&T Brigham City Broadband Bytes broadband stimulus Broadweave Centerville CenturyLink Comcast competition Cox DOCSIS 3.0 DSL FCC FIOS FTTN google Google Fiber Hulu iProvo Layton Macquarie Mstar Netflix Nuvont Orem Podcast Prime Time Communications Provo Qwest RDA SAA service providers Sprint Time Warner U-CAN UIA Utah Taxpayers Association UTOPIA Veracity Veracity Networks Verizon VoIP WiMax XMission
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- Broadband Bytes for 2014-04-04 http://t.co/i5vurLyYhK ->
- Why is there no ISP competition? Because building one is hard and expensive. http://t.co/gnksgQjZKt ->
- I have serious doubts that wireless can offer even adequate service compared to wired options. http://t.co/EtJ8H2zKIH ->
- Legacy TV operators are upset at the shift to OTT video? You don't say! http://t.co/Wt9L5R2EwA ->
- Comcast wins yet another "Worst Company in America" award. I'm sure they're really proud of that. http://t.co/79Ksc0lTbF ->
- My gut tells me that LA will sell itself short in a desperate attempt to get something, ANYTHING in the city. http://t.co/3tVCVTlIL4 ->
- Little Cottonwood Canyon is about to get a broadband upgrade, but it's primarily wireless. http://t.co/prc6PheJEc ->
- Cell service from Comcast? No thanks. http://t.co/PdRAmXXuNB ->
- Even with the city on your side, you're not immune from construction delays. http://t.co/NGnJUSAmL4 ->
- The MPAA is still stuck in "sue everyone" mode. http://t.co/oWGzBdXHd8 ->
- Streaming video is very, very broken. http://t.co/OIJriubplt ->
- Really, Comcast? All of your markets are hyper-competitive? http://t.co/nt4oDZ5NCA ->
- Australia decides that FTTN is "good enough". http://t.co/pZwJUX02h0 ->
- I don't think anyone can predict the depths of Comcast's denial. http://t.co/0mx6n5rTa0 ->
- Comcast is greasing all the wheels ahead of its proposed merger. http://t.co/MQ6Tx9h4wu ->
- Broadband Bytes for 2014-03-28 http://t.co/6IhF2Q5QIE ->
- Is Comcast in bed with the NSA? http://t.co/tMbpYNYiIb ->
- What happens when your mayor rolls over to incumbents? Ask Seattle. http://t.co/5pHZdX0lIY ->
- FCC: we don't want to deal with peering agreements as part of net neutrality, thanks. http://t.co/HOAFVmES6R ->
- Susan Crawford argues for open access fiber networks. Like what UTOPIA does. http://t.co/CUDMxNLOgY ->
- Winning strategy: call the people opposing your merger a bunch of low-information nutjobs. http://t.co/Pi58IINrkA ->
- Google may want a slice of the cellular market too. http://t.co/kQf186yaUJ ->
- The future of online streaming depends on the Aereo decision. http://t.co/gP5M4TgI8o ->
- Don't get too excited: this only includes office buildings with larger companies. http://t.co/NElL7QX6sT ->
- Remember: Google's offer is extremely time-limited and inflexible. http://t.co/iD8gbG6ORD ->
- While Comcast isn't enforcing caps in Utah, that could change at any time. http://t.co/6Ff3PpGLBf ->
- Encryption may have been baked into the Internet if not for the NSA. http://t.co/26ZR0hMHZN ->
- Broadband Bytes for 2014-03-21 http://t.co/2U9OPJvQRL ->
- Comcast now wants to toll troll Apple. Pandora's box is open. http://t.co/sXipLSzoLj ->
- In which AT&T plays Lucy and you're Charlie Brown. http://t.co/D8QSmBxy1D ->
- Gotta hand it to CenturyLink, they certainly are acting like gigabit fiber doesn't matter. http://t.co/4UtSeNK8Mj ->
- Google Fiber to Provoans: sign up now or tough noogies. http://t.co/955ley5diY ->
- Surprise! You hate TV and Internet providers (and pay them WAY too much). http://t.co/0kC3BygXNf ->
- More evidence of CenturyLink focusing on business services and neglecting residential. http://t.co/wLz1gK6Orz ->
- Sweden gives you almost two dozen wireline providers over at least three networks. http://t.co/Vbqu6HFVSO ->
- Popcorn Time exposed the ugly underbelly of streaming video: you can't watch what you want legally. http://t.co/Rrp5RJvtvd ->
- ICANN and IANA could soon be under international control. http://t.co/fU46vvWtAV ->
- Broadband Bytes for 2014-03-14 http://t.co/mSRi9SelMM ->
- One of the many ways in which broadband is good for rural economic development. http://t.co/1WIOyBbVZO ->
- Give Google a few years and you'll hate them as much as Comcast. http://t.co/Q8b78NKTcK ->
- The first offer is rarely the best. Cities should look before they leap with Google. http://t.co/nir64T887w ->
- Pirating video just got easier than ever. It's an availability problem, not a pricing one. http://t.co/OSlvNQKUee ->
- The Macquarie predevelopment agreement lays out the timelines for moving forward. Read it for yourself: http://t.co/SiKpLDUSWB ->
- Cities who want Google Fiber have to give up sticking up for themselves. http://t.co/KM8RMw22ul ->
- It seems like every plan for national WiFi is fraught with problems and controversy. This is no different. http://t.co/H9IbtBagRO ->
- The good: Google Fiber forces incumbents to react. The bad: It's with fiber-to-the-press release. http://t.co/shahWOykxn ->
- Big incumbents let networks rot so they can shake down peers. http://t.co/T3uRibAotN ->
- More live-streaming from Comcast brings hope for a fully over-the-top product someday. http://t.co/XQ28uQ5Xav ->
- CenturyLink: "Yeah, we're going to be using slow copper for a looong time." http://t.co/jB1P4nTgkr ->
- Is Google ready to repent of its redlining ways? I say the jury is still out. http://t.co/Mu43H4cjwb ->
- Quarterly drops in TV subs are nothing new, but an annual drop? #PANIC #DOOM http://t.co/Pi7chrEsMs ->
- Yes, broadband is a utility. Time to treat it that way. http://t.co/BIvNKZtihL ->
- UTOPIA needs Macquarie to happen. http://t.co/EUMThymKhK ->
- Netflix to Comcast: "Here's your blood money. I hope you choke on it." http://t.co/1xtpMtt3qV ->
- Comcast honestly believes it's a net neutrality champion. Seriously. http://t.co/Ar1S8UV08X ->
- "Worse than the Soviet Union" is a stretch, but I know Comcast customers who wouldn't disagree. http://t.co/j1aUgAnd83 ->
Part of the visit with UTOPIA was figuring out how they’re moving forward and assess the financial health of the operation. Unfortunately, it looks like despite hitting a number of financial targets, they’ve fallen short financially. Right now, they’re still running a deficit on operations (I hear around $150-175K-ish a month) and it’s not closing as quickly as they need to meet the home stretch of the UIA plan. Right now, break even is about three years out as they concentrate on business customers. Given that subsidizing operations isn’t an option, that puts them in an operational pickle.
They were pretty candid with me when I asked questions. The switch from focusing on homes to focusing on businesses came at the explicit request of the cities. Business accounts cost about the same to get hooked up as residential, but they generate about four times the revenue. Even small businesses are worth about two homes a pop. With limited resources, they have to focus on those specific areas to at least try and cover operating expenditures.
The biggest barrier to most businesses is the brand name. Despite offering great speeds at great prices and excellent SLAs, their PR kind of bites. (Shocking, right?) The limited deployment means it’s much harder to serve multi-location businesses, though service providers have been creative in using UTOPIA where it can be had. Small businesses are challenging because many of them want the reliability of UTOPIA over cable and DSL, but there’s not a cheap enough product offering for them.
There’s some bright news, though. They’re signing up about 60-70 new accounts per month without doing much marketing or direct sales. There’s been a marked increase in high-dollar products like gigabit and even 10Gbps circuits. Most of the cities (including Layton, West Valley City, Murray, Orem, Brigham City, and Tremonton) are using the network extensively for city operations and reducing their own internal costs. If you’re in a completed footprint, you can pay to get hooked up. If you already have the wire on the side of the house, they don’t even have to roll a truck to do it. And operational costs are much closer to being covered than they ever have been.
And yes, the silver lining is pretty thin right now. Despite all of the good things UTOPIA has done (building to ~95K homes with ~11.5K taking service, offering cheap gigabit, 17 service providers, etc), money matters. I support UTOPIA, but the stark reality is that without any money, it’ll die on the vine. It’s here because the early problems, including an illogical build plan, the Qwest right-of-way lawsuit, and constant legislative meddling, tripped things up right out of the gate
I’ll be blunt: either the Macquarie deal happens or we could be waiting decades for fiber to get to more homes. UTOPIA is pretty fortunate to be negotiating with a company that’s bringing a lot of mutual benefit including the cities retaining ownership of the network. If it doesn’t pan out, though, I think we’re hosed.
There’s a lot of talk about Google Fiber bringing competition to the marketplace, but I think it’s a lot of smoke and mirrors. In reality, Google is very good at leveraging its brand to cover up many plays it’s pulling straight out of the incumbent playbook. In the end, they’re acting a lot more like Comcast than I think many are comfortable with confronting, much less admitting. I’ll make a bold prediction: Google will be the new Comcast within 5 years. I’ll make the case as to why.
The biggest problem I see with Google Fiber is their practice of redlining and cherry-picking. Their pattern so far has been to break up neighborhoods into very small “fiberhoods” and only build if there is sufficient demand. Given that they ask for either a 2-year contract at $70/mo or $300 to install the service, it’s easy to see how low-income neighborhoods are unlikely to reap the benefits of a new vertical monopoly in town. This is the kind of practice that Comcast and CenturyLink has been dying to get into: upgrading only the most lucrative areas and letting the low-margin subsidized lines languish.
Let’s not also forget that you have a very limited time to sign up or be left behind. Google has made it very clear in their FAQs that it has no plans to reopen to new subscribers once the signup period has closed. In a rental-heavy market like Provo, this could exclude a large proportion of the user base from ever getting service. There’s also no mention on if someone can reactivate a terminated line to get service again.
So why is Google doing this? Based on the company’s history, I think it’s all about costs. Google is famous for designing hardware to meet very specific needs, a process that leads them to be extremely efficient. It’s not much of a stretch to think this same efficiency is being applied to building Google Fiber. (Warning: speculation ahead.) My theory is that they’re building the network exactly to capacity in an effort to reduce costs and maximize ROI. If you don’t have to plan for potential future additions or build the network where demand won’t meet certain profit goals, you can slash your cost per subscriber to under $1K. Assuming they make about $35 per subscriber per month in profit (which is consistent with numbers I’ve heard from UTOPIA service providers), that works out to a payback of under 2.5 years. With a 5-7 year contract, it’s not hard to see how Google is going to make money hand over fist.
This makes it all the more curious, then, as to why they need all sorts of concessions from municipal governments to make it happen. While their official checklist for the latest round of cities claims that no subsidies are expected, it’s hard to see how really going to be the case. Kansas City greased the wheels with millions in tax dollars whereas Provo literally gave away the network to get Google’s attention. This is much like CenturyLink’s hypocrisy in decrying municipal systems as unfair competition while available themselves again and again and again of available tax dollars. Google may say that they don’t want subsidies, but the unspoken understanding is that without significant municipal concessions, they’re probably going to pass you over.
With all of these behaviors that remind us of the many ways in which Google is behaving like an incumbent carrier, it doesn’t take much to connect the dots. CenturyLink is probably going to let residential wireline rot on the vine as it pursues high-margin business services. Comcast will quickly hit the end of its upgrade capacity and focus instead on entrenching its vertical monopoly between content production and distribution, replacing CenturyLink as the “cheap” provider. Google is then free to fill the void left by Comcast as the “fast” provider, and we’re right back in the non-competitive state we had before, just with different names on the door.
To be quite frank, I don’t think Google has the capacity to be a good ISP. Google has a history of very technocratic decisions, depending heavily on the technical specs, prowess of their products, and brand name to compensate for their lack of customer service and direct marketing. This is uncharted territory for them, especially since they haven’t proven to be very adroit at dealing with entrenched companies whose lobbyists have very deep government connections. While I’m willing to be proven wrong, I don’t think they’re really prepared to survive in the regulation- and politics-heavy world of telecom, especially when the margins are relatively low. Once the reality of operating a utility settles in, you have to wonder if Google is going to treat their fiber products like they did their WiFi network in Mountain View.
When cities are considering Google’s proposal, they need to look at it with clear vision. There’s a limited amount of skin they have to put in the game, but they’re also not getting the same level of benefits that they could be. Overall, Google is offering to rearrange the deck chairs, not right the telecom ship. I hope that more cities will be wise to it.
- Broadband Bytes for 2014-03-07 http://t.co/Oy63osQc8E ->
- More "smart meters are mind-controlling cancer boxes" derp in this letter to the editor about UTOPIA. http://t.co/f2c4XWX9r0 ->
- If the legislature wants better broadband, I've got a proposal of how to do that. It requires accountability. #utpol http://t.co/5k5lTCYbth ->
- More proof that wireless depends heavily on fiber. http://t.co/csTA6IBzSd ->
- HB60 joins SB190 in the purgatory of the rules committee, is effectively dead. #utpol http://t.co/acE4RGatjo ->
- This ridiculous article makes it sound like the Macquarie deal isn't the only serious option on the table. http://t.co/r7FT0YHxsi ->
- Should a cable company spend money on A) network upgrades and customer service or B) a theme park? http://t.co/qoQy63f4e0 ->
- CenturyLink 2013: "Nobody wants fiber. That's crazy talk." CenturyLink 2014: "Whoa! People want fiber? Who knew?" http://t.co/fOTcijtGrg ->
- Unshockingly, 43% of pay TV subscribers would like to swtich. If only they had some good options. http://t.co/INM7joqYjS ->
- Cable levels of reliability and customer service, now for your electricity. http://t.co/UGKbb9Vw7T ->
- More WiFi spectrum is coming, but it's still an extension code to fiber's power mains. http://t.co/tHxAsun97J ->
- Macquarie confirms some of the details of its deal with UTOPIA cities. #utpol http://t.co/AcoQ4hYjTo ->
- CBS pitches a fit over Aereo, one that would throw all of its affiliate stations under the bus. http://t.co/tODos8VS46 ->
- Verizon: "We'll give you FiOS when we're good and ready!" http://t.co/8lWv4KBK9Q ->
- Tim Berners-Lee isn't happy with how the web is being used today. http://t.co/ZR1mFUpG77 ->
- Go tell Salt Lake City what you think about Google Fiber. http://t.co/yKdqyniQcp ->
- I know one of the guys on this team (who is awesome), but I have doubts. Macquarie could finish FTTH by then. http://t.co/yrOfpqO2Xu ->
- Users are smart enough to not go for voluntary data caps. http://t.co/ghpzShTgBj ->
- Provo Mayor John Curtis gets some tough questions on turning over iProvo to Google. #utpol http://t.co/d9ij5WNBpt ->
- In which the NSA is considered a plague. http://t.co/nSP2DoVaYD ->
- Still have questions about Macquarie and UTOPIA? This FAQ from Centerville answers almost everything. #utpol http://t.co/rvqqUIrjBQ ->
- Google could be a top 10 ISP within a few years. http://t.co/gNN85LhYgn ->
- Zuck goes for the US government's throat. http://t.co/77OM5KwyOM ->
- Another lovely side effect of the Comcast-TWC merger: higher video rates. http://t.co/svdY2l4Ha5 ->
- Is SOPA about to make a comeback? http://t.co/lMcrPY7XIU ->
After hearing some of the rumors about the Macquarie deal, I’ve been watching skeptically to see how much of it is wishful thinking and rumor-mongering. I’m now seeing that almost all of it is completely true. Macquarie had a representative answering questions at the most recent Brigham City city council meeting (skip to 43:30) and he confirmed a lot of what I had previously reported.
Macquarie wants a 30-year contract with the cities to expand and operate the network. There would be no transfer of ownership of the network and the cities would retain the title to all of the assets. Their purpose in doing this is to secure low-risk (in their words, “boring, stable”) investments with a moderate rate of return for pension funds and life insurance pools. Their view is that because they don’t have the typically myopic view of most of the telecom market that requires a very fast, very high return on investment, they can approach differently and see the long-term effects. Macquarie is committed to building out every home (165K of them by their count) to a “service ready” state. I assume that means including all portals and needed cabling so that getting service is as easy as a phone call.
In exchange for the contract, Macquarie would assess a per-address fee to the cities. While they recommend a utility fee with waivers for the financially indigent, the cities are given full latitude to determine how this fee would be collected. They can’t quote specific numbers yet since they’ve just started to receive proposals in response to their RFQ, but I’ve heard numbers between $15 and $25 per month. Macquarie would commit to providing the connection to every address and service providers would offer a free “basic” level of service comparable to high-end DSL or low-end cable. The service providers would not be charged a fee for access to these customers and would only incur the customer service costs. Word is that they view this arrangement favorably since this gives them a way to market 100Mbps and 1Gbps services to those customers.
Cities are actually going to get a pretty sweet deal on those upgraded customers too. Macquarie wants to make sure the cities keep almost all of the funds paid by the upgrading customers. These funds will help pay off the debt service and could be used to reduce the utility fees. I personally also like that the cost of UTOPIA will become a transparent thing. Brigham City is planning to leverage this universal buildout to switch to smart meters that will pay for themselves within 2 years and greatly reduce the operating costs of the city electrical utility.
Macquarie is doing a good job at keeping their ear to the ground locally. They were on top of Sen. Valentine’s attempts to amend SB190 from the floor and worked vigorously behind the scenes on both that and the original ill-conceived bill. They’re keenly aware of the perception of UTOPIA being forced on city residents and want to focus on showcasing the benefits of the network. They also took a moment to slam some of the woefully uninformed comments from the previous meeting by pointing out that they’ve been doing business in the US for two decades and have over 5,000 employees here.
The devil is always in the details, but so far this looks like a very solid proposal that’s win-win. The cities get world-class infrastructure and money to pay the bonds, the citizens get at least a free baseline of Internet service (with cheap upgrade options), and the rest of the state gets the potential to get gigabit everywhere else too. Macquarie also gets their toehold on what they believe to be a great long-term investment for low-risk portfolios, potentially spurring other companies into an overbuilding gold rush. I have yet to see anything giving me pause.
PS As a bonus, note that Ruth Jensen spends most of the council meeting continuing to concern troll on both smart meters and the free tier of service. She also comically states that DSL and cable are “good enough”, parrotting the standby line of the “you’ll take it and like it” incumbents. Jensen also goes so far as to insinuate that people actually LOVE their existing options, apparently unaware of how poorly they have been performing in customer satisfaction rankings for well over a decade. Her near-automatic gainsay reminds me way too much of the Monty Python argument clinic sketch.
Without any official action, HB60 died in the same fashion as SB190 and was sent back to rules to rot out the rest of the session without so much as a committee hearing. Between these two bills, municipal broadband advocates in Utah have racked up some big wins when we’re used to nonsense punitive laws sailing through without any opposition. What changed this year was being on top of these bills and swiftly letting legislators know how we feel about them. It might not be a bad idea to write Rep. Curt Webb to express appreciation that he backed down on HB60 once we spoke up. I have a gut feeling that he was had.
And no, I’m not going to take credit for anything. Each of you who took the time to write legislators and share this information as widely as possible across social networks (Facebook, Twitter, Google+, Reddit, etc.) had at least as much of a hand in this success. I think we’ve proved that we’re a force to be reckoned with. We just have to show up.
While I think we’ve reached a point where the war is now going in our favor, it’s not over. I’m sure Comcast and CenturyLink will be more than happy to use their hatchetmen at the Utah Taxpayers Association yet again to try and throw up roadblocks next year. Sen. Valentine is not the type to go quietly into the night, and SB190 (or something like it) is probably going to be discussed in interim committees. I have little doubt that other restrictive measures will come up too. Once I find out about them, you’ll know too.