Broadband Bytes: December 13-19, 2008
I think 2009 is going to end up being the year of broadband. Advocates are very well-organized and the new administration is putting a lot of post-election emphasis on telecom policy, an issue that’s typicaly given only election-cycle lip service.
- FCC Chairman Kevin Martin decided to up and cancel a vote on what to do about a free nationwide wireless network rather than stare down the angry lobbyists on both sides of the issue. Industry execs want the spectrum free and clear whereas privacy advocates are in a tizzy about the mandatory filtering requirements. Some members of Congress are pretty ticked off and claim that it wasn’t legal to delay or cancel voting on the issue. I’m sure that most of them will be happy to have someone else in charge, whoever he or she may be.
- Spending $44B or more on broadband? That’s what Free Press would like to see over the next three years to bring 5MBps+ connections to every home in America with a goal of hitting 100Mbps in the future. The Fiber to the Home Council thinks that we should drop closer to the tune of $100B to get fiber to 90% of American homes. Naturally there’s some distrust; these are the same guys who botched the USF to the tune of billions.
- It’s a bad time to be Qwest. They recently got slapped around by a federal judge in Nebraska for trying to jack up rates on competitors and fared about as well before Montana’s PSC. Then DSLReports comes out and breaks the somewhat-dated story that Qwest is intentionally using FTTN upgrades to degrade ADSL connections and poach customers from other ISPs, something that Qwest predictably denies. Then Qwest goes and slashes the price on its 20Mbps/896Kbps service by $40/mo, something sure to cut into the bottom line. It’s probably not surprising to hear that the company is considered to be a prime takeover target since it has no video offering, no wireless and sub-par ADSL2+ offerings. You know, if it can find a company willing to invest the billions needed to make America’s least competent ILEC competitive.
- Charter Communications is headlining this week’s bad economic news. The debt-laden cable company hasn’t managed to turn a profit since going public in 1999 and repeatedly gets low customer satisfaction ratings. (On a personal note, I know a lot of disgruntled Charter subscribers who would happily jump ship if something better came along.) Odds are that they’ll sell off chunks of the network to get investors and analysts of their back and stop the talk of bankruptcy. I guess the 8.4% jump in cable ad revenues haven’t helped the company’s bottom line. TV Week has a pretty good round-up of questions about how the industry is going to weather the tough times.
- There’s more retransmission disputes with local broadcasters and cable/satellite providers than I can shake a stick at. Anyone want to take bets on it being related to the precipitous drop in local ad revenue while cable revenues are up? Local stations no doubt want to flex their muscle to get a bigger piece of that pie. There’s more drops predicted and the biggest advertisers are, as a whole, cutting back on spending.
- Customers are still ditching and downgrading services in large numbers. Landlines have lost more market share to wireless (though the profile of your average wireless-only household is less-than-flattering) and customers are giving video service the boot as rates continue to increase and free online alternatives prove just as good if not better. In fact, broadband seems to be the only service people are consistently keeping or upgrading, even if those connections come with a dubious definition of “unlimited”. And no, consumers are not dumb enough to fall for low-priced packages that scrimp on features and aren’t too keen on hidden charges.
- What are you watching on that new HD set? At least a third of you aren’t watching HD content according to a recent survey. Both broadcast and on-demand options are lagging behind as standard-definition sets continue to play a large part in the video market. Providers are doing a good job of adding more HD options in their markets and online providers like YouTube are matching suit, but there’s a long way to go. (And no, DirecTV, 480p is not HD.)
- As the deadline draws nearer, the DTV switch is starting to send some folks into full-on panic mode. Nearly 7% of viewers are entirely unprepared for the digital switch, no doubt confused as to what exactly is going to happen. Cable operators have offered to stop moving all of the channels you actually want to watch from analog to digital tiers to help reduce the confusion that their misleading DTV advertising probably caused in the first place. (I recall a particularly scummy satellite ad on the radio several months ago that claimed you wouldn’t get TV signals without their service come February.) With television sales predicted to fall off by 18% or more and a lack of reliable data, you can bet there’s going to be a lot of angry people on February 17.
- The need for speed continues. Virgin Media rolled out DOCSIS 3.0 service in the UK this week without any of throttling that affects their other tiers. Cable speeds are also increasing as prices stay stable, no doubt thanks to FIOS ripping them to shreds where available. Other providers, though, are scaling back speeds. SureWest decided it was much cheaper to buy up new systems than keep expanding its FTTH in existing footprints. AT&T also let its VDSL2 bonding trials slip yet another year as hardware problems keep on causing issues for them. (An Australian company recently used VDSL2 to get 85Mbps/47Mbps speeds in MDUs.) The really good news in speeds is in wireless. Sprint snagged top honors in 3G network speeds and is offering a dual-mode 3G/WiMax modem to let you get the best available speed as they slowly get Clearwire rolled out into new markets. AT&T won’t be outdone as they test 7.2Mbps connections in Chicago on existing 3G equipment. All this speed matters. A lot of small businesses have been avoiding a switch to VoIP because of bandwidth concerns.
Tags: 3G, ADSL, ADSL2+, AT&T, Charter Communications, Clearwire, DirecTV, DOCSIS 3.0, DSLReports, DTV switch, FCC, FIOS, Free Press, FTTN, HD, HDTV, Kevin Martin, Qwest, Sprint, USF, VDSL2, Verizon, VoIP, WiMax
Corrections from UTOPIA on the Tremonton Numbers
Hugh Matheson e-mailed to clarify some of the stats from Tremonton. The close rate is close to 50% – that is that half of homes visited end up taking service. The total take rate is hovering around 20% of all residents right now, still not bad for 10 weeks work. The door-to-door effort is being held up a bit by the inclement weather we’ve had lately. Also: in a lot of cases, folks are either unreceptive to any door-to-door sales or just aren’t home when someone comes by.
Even with numbers revised lower, it shows that an agressive marketing campaign with boots on the ground can do a lot to boost take rates. Maybe we need to get together and do guerilla marketing in a UTOPIA-ready neighborhood?
UTOPIA Article in the DesNews Shows Growth and Goals
The Deseret News ran a brief article on UTOPIA that, while light on a lot of specifics, includes their current subscriber growth rate and goals for subscriber growth. According to the article, they’re adding 300-400 new subscribers per month and plan to double or triple that number in 2009. I’ve also heard that in Tremonton, their door-to-door campaign resulted in an impressive 50% take rate.
It’s good that UTOPIA has some public goals and accomplishments, but there still needs to be more public disclosure so that we can all evaluate how things are going. Hopefully they’ll be able to show big gains in other areas Real Soon Now(TM).
Broadband Bytes: December 6-12, 2008
This week was kind of a slow news week. Most of the telecom world has been focused on President-Elect Obama’s plans for broadband stimulus and the continuing bad economic news from providers, programmers and manufacturers.
- Yes, there’ still even more layoffs and bad economic news. Level 3 is planning to cut about 8% of its workforce and Brightcove is looking at a 15% reduction in headcount. DirecTV has also implemented a hiring freeze, usually a first step before issuing pink slips. Multichannel has a good roundup of layoffs throughout the industry totalling over 15,000 employees. With the tough times, providers are looking at cutting perks for subscribers, raising rates or agressively pushing bundles. While ad spending is going to worsen overall, cable may already be over the hump. There’s still good opportunities for small and growing companies to pick up top talent on the cheap and move quickly to outmaneuver larger rivals by taking advantage of their sagging bottom lines.
- Qwest is planning to keep spending flat in 2009 which could mean a halt to construction of its FTTN network. There’s a lot of concern that Qwest won’t be able to meet its 2010 debt obligations which has investors seriously spooked. If Qwest does halt or slow FTTN deployments, it could mean that Comcast will make similar cuts to DOCSIS 3.0 rollouts in shared markets as they get bloodied in FIOS territories. Fiber projects like UTOPIA can capitalize on these stalled rollouts to snap up more customers. Part of Qwest’s problems could be related to its tendency to litigate and legislate its way to success rather than offering compelling products. Its shenanigans have recently gotten it sued by a CLEC in New Mexico.
- There’s still ways to survive the tough times by focusing on business services and localizing your product offerings. Also be aware that customers are looking for a good deal and have no problem asking you to cut their bill. It’s often worth it to take a hit on your profit margin in order to keep the customer. Comcast regularly offers a 6-month promo rate to retain customers.
- Speed matters. Comcast has rolled out DOCSIS 3.0 in a handful of markets, CableVision is getting ready to do the same and across the pond, Virgin is getting 50Mbps into the hot little hands of subscribers tomorrow. Good thing, too: subscribers have a need for speed. It’s not just the last mile either. Satellite is getting a big bump with a 100Gbps satellite to be launched in 2-3 years and Ciena has shown off a 100Gbps fiber connection on a single wavelength.
- Wireless also matters… kinda. Verizon is going to make a push to have the first LTE markets ready for service by next year, no doubt spurred on by the Clearwire WiMax juggernaut. It’s mostly a marketing ploy, though it could end up being a very effective one. Clearwire is already facing substantial hurdles and it’s probably safe to assume that even cash-rich Verizon won’t have a solid product for several more years. There’s also the problem of transport from the towers, an area where UTOPIA can shine. In other wireless news, AT&T is planning to stream satellite TV to cars and trucks, yet another move beyond the triple play. Augmenting a wired infrastructure with wireless offerings such as this is going to be critical in the future to increase revenue streams and keep bundled customers, especially if they don’t blend in.
- Obama’s plans to allocate a substantive chunk of any stimulus package for broadband is being called a “Broadband New Deal”. The real question is how much of any package will be allocated to broadband and how it will be administered. Obama’s plan is to give states “use it or lose it” grants and let them best figure out how to spend the money. If additional conditions aren’t attached to the grants and vigorously enforced, we could just get a repeat of the Telecommunications Act of 1996. It will be very important that providers start now to get their political ducks in a row and line up for some of the cash.
- Add Congress to the list of people who are miffed at the FCC under Kevin Martin. The House released a 110-page report slamming his management of the agency and calling for substantive change. With the White House changing hands in 6 weeks, I don’t think that’s going to be much of a problem. Given Obama’s legit technology chops, I’m optimistic that the new FCC head will do a better job.
- Even though households with HD sets have doubled since 2007, only a quarter of homes are using the latest technology. With converter boxes and subscription services that don’t require a new set, plenty of consumers are content to keep using what they have, especially during a pinch. Your standard-definition packages will still be relevant for some time to come.
- Speaking of content, you’d better learn how to play nice with local broadcasters. There’s a lot of instances of over-the-air stations flexing their muscle against cable over retransmission issues. CableOne and Dish have both ended up dropping local channels when they couldn’t reach agreements on fees and Lafayette’s fiber networkfound itself in the same kind of squabbles.
- Online video is still booming. Netflix is now streaming to TiVo, AppleTV and Linux PCs while YouTube has added a Watch in HD option to all of its videos. Hulu also managed to explode to 24 million viewers in October though Google properties still own the online video market. Even the NFL is starting to get a clue with a $20 season pass to watch games in HD after they air. Smart providers will want to focus on delivering products to their customers that bridge the gap between PC and TV since there’s no content provider to pay and the possibility of a strike from the actors guild could put new shows on ice. ZvBox already does it, though you’ll need to find something that lacks its hefty $500 price tag.
Tags: AppleTV, AT&T, Brightcove, Broadband New Deal, cable, CableONE, CableVision, Ciena, Clearwire, Comcast, DirecTV, Dish, DOCSIS 3.0, FCC, FIOS, FTTN, HD, Hulu, Kevin Martin, Lafayette, layoffs, Level 3, LTE, Multichannel, Netflix, NFL, Obama, Qwest, Telecommunications Act of 1996, TiVo, UTOPIA, Verizon, Virgin, WiMax, YouTube
Rumor: Broadweave Defaulting on iProvo?
Sounds like the iProvo troubles are about to get bigger. According to a Nuvont installer who would like to remain nameless, Broadweave has defaulted and could likely be returning the network to the city in very short order. Nuvont is also trying to switch video customers from iProvo to Dish Network, presumably in preparation for serious network troubles. This could very well mean the end of both Broadweave and Mayor Billings’ political future.
Anyone else out there heard about this?
Qwest Threatens New UTOPIA Lawsuit, Wants to Block Centerville RDA Funds
Qwest’s business model should be “If you can’t beat ‘em, sue ‘em.” The Davis County Clipper reports that America’s least competent incumbent is threatening Centerville with a lawsuit if they decide to move forward with their plan to use RDA funds to build out UTOPIA. Qwest’s accusations are, natually, light on specifics and big on puffery. Maybe Qwest should take some cues from Comcast and try competing instead of litigating its way to success.
Broadweave Fails to Make November Payment
The Salt Lake Tribune reports that Broadweave has failed to make its November payment to Provo City, instead having to rely on the security deposit. CEO Steve “we’re meeting our financial goals” Christensen and Mayor Billings both tried to gloss over the missed payment while Steve Turley, predictably, has called it bad news. Of course, if Broadweave is unable to bill their customers, that might account for coming up short. This will most certainly be a major issue during Provo’s upcoming municipal elections.
Rumor Confirmed? Subscriber Says That Broadweave Isn't Billing
One of the allegations from the Broadweave insider is that they don’t know who their customers are until they call in for support. A commenter recent confirmed this saying that they had been installed in August but have yet to receive a bill for any service and says that a neighbor is in the same boat. The question, of course, is if Broadweave can back-bill these customers successfully or not. It’s the customer’s responsibility to notify a company if they aren’t billed for services rendered, but good luck trying to keep the customers happy when you do it.
Anyone else getting service from Broadweave without being billed? Sound off in the comments.
Broadband Bytes Doubleheader Edition: November 22-December 5, 2008
Between visiting family in Sacramento for Thanksgiving and a business trip to Montreal (where the hotel apparently didn’t believe in reliable Internet service), I got a bit behind on the Broadband Bytes feature. Never fear: I’ll make it up to you with a special double feature to get caught up on the previous two weeks.
- A recent study shows that 18% of HDTV owners can’t tell the difference between standard and HD programming. This may be why DirecTV can get away with claiming over 150 HD channels when they include 480p digital broadcasts. Also of interest is that 38% of all HDTV buyers are motivated by a broken/old TV set or are buying an additional set. A scant 22% bought their set for the better picture quality. There’s also a significant number of people who won’t upgrade to an HD set until well after the digital cut-off in February. Standard-definition video will be a significant player for some time to come.
- So just what are folks watching on those HDTV sets? Fewer of them will be buying premium packages from satellite and cable providers, so bet big on basic video packages and over-the-air signals. With online video sites such as Hulu and YouTube expanding their selection of HD content and Blockbuster making an entry into set-top boxes (albeit very lackluster), few may see the value in the ever-increasing cost of paid video packages. You can even find NFL games (though sometimes of questionable legality) using your PC. Internet hasn’t killed the video star as TV viewership continues to rise, but it is creating a challenging advertising market for video providers. Comcast is already seeing predictions of increased video churn.
- It’s no wonder subscribers are shedding video packages. Price increases have been as regular as Yellowstone’s Old Faithful with Comcast, Time Warner and Bell Canada continuing to jack up the rate you pay. Qwest has decided to go in the other direction and extend their $15/mo offering (1.5Mbps/YourGuessIsAsGoodAsMineKbps). Comcast also upped the speeds on their value tier (from 768K/128K to 1M/384K), but it’s not as competitive as Qwest’s offering and was a direct response to Verizon making the same speed changes. Consumers are taking it into their own hands and finding ways to negotiate lower rates with thier providers. The French, however, are laughing all the way to the bank. Fierce competition has resulted in a triple-play package with 100Mbps data, VoIP and 120 channels of video for $38/mo.
- All of these problems are driving customers to defect to other ISPs. Or at least they would if they thought a better option was available and it wasn’t such a torturous process. A recent survey shows that as many as 75% of current broadband subscribers would jump ship if the process were quick and easy. That makes for easy pickings for competitors and new entrants.
- All of these industry woes are capped off in some massive industry-wide layoffs and financial problems. AT&T decided to issue 12,000 pink slips, Windstream is lopping off 170 and looking at ways to trim pensions, Hawaii Telecom declared bankruptcy (I can’t imagine that Fairpoint will be too far behind), Comcast is closing call centers in Indiana and media companies Viacom and NBC Universal and also lowering thier headcounts. It’s not just telecom in the US either: Telecom Italia is looking to layoff 4,000 while it looks to sell off various divisions. Qwest is also feeling the heat as it settles with disgruntled investors for $445M and the CFO tries to assure everyone that they can manage their debt load. Verizon doesn’t escape the bad news either: regulators in Florida are considering heavy fines for neglecting the old copper infrastructure as they roll out more FIOS. These layoffs and financial troubles present opportunities for small and growing providers to pick up experienced employees on the cheap and capitalize on the uncertainty with entrenched incumbents.
- A broad group of telcos, cablecos and broadband activists have decided to put aside most of their differences and join together to call for a national broadband strategy. While these kinds of things aren’t new, the biggest players in the industry have decided to join in this time, no doubt inspired by sagging bottom lines and the chance at a bunch of federal dollars. Of course, not everyone is happy at the idea of incumbents getting a slice of the federal pie and I can’t blame them. After all, these jokers are the same guys who managed to get nearly $1B in bogus USF funds over a one-year period. That sure would have paid for a lot of broadband. Saskatchewan isn’t standing still: the Canadian province plans to drop nearly $200M to promote universal access. Vermont also has a plan of its own.
- Next year will be a mixed year for broadband. Reports say that shipments of DOCSIS 3.0 gear have dropped like a rock and cable operators are holding off on selling off some of their markets. Clearwire is also slowing down its deployment schedule in the face of tight credit markets. Despite a fierce race to the 100Mbps threshold (Verizon may be there next year and Europe is totally handing our collective posterior back to us), the higher speeds are more likely to be available to existing footprints as system expansions either slow or halt. Now would be a good time to figure out where the competition has DOCSIS 3.0 and FTTx and market outside of those areas to lock in the customers, especially if they have to spend a lot of time making repairs due to increased copper theft. Of course, you could always take matters into your own hands and build your own personal fiber connection.
- There’s big money to be made in backhaul. Cox Communications is looking to use its network to link cell towers and provide big bandwidth to medium-sized companies. Deals between carriers and cell companies aren’t the only source of wireless traffic. Research shows that explosive growth of femtocells could increase cellular capacity over 10-fold. Cell companies would really like to go this route since the customer bears the cost of this equipment and their ISP bears the backhaul costs. Don’t worry about bandwidth, though. The coming “exaflood” has been debunked as pure myth.
- Verizon continues to draw blood by not-quite-overbuilding AT&T U-Verse service areas. If the incumbents get into a full-scale war for customers down in Texas, you can bet consumers will be the winners. In other overbuilding news, it seems that BPL isn’t quite dead yet. While it’s a poor choice for end-to-end connectivity, it shows promise as the last mile of a FTTN system. With speeds of up to 400Mbps, it could very well spur even fiercer competiion.
- Even as Cox chases wireless backhaul, it’s also working on a wireless network of its own to move its voice, video and data products into the mobile world. Analysts are, er, “pessimistic” about cable companies moving into wireless, but AT&T and Verizon have been using wireless revenues to subsidize building fiber with great success. Given the growth in cross-device viewing and predictions that the wireless data market will be recession-resistant, I think that the analysts have pegged this one incorrectly, especially as speeds ramp up. Wireless has already proven popular in emerging markets where wireline options are scarce and could prove strong in rural areas.
- Keep your eyes on Cablevision. Not only could they end up busting heads at the Supreme Court over their network DVR product, they’re also trying to get programmers to ease up on their byzantine requirements for carriage. Feel lucky that Cablevision is the one brave enought to pick these expensive fights.
- The FCC is still trying to push a nationwide porn-free wireless network. The latest incarnation allows adults to opt out of the filtering, but, as usual, pretty much everybody is going home unhappy and nobody knows how the carrier that will eventually operate the network can end up turning a profit.
- In transfer cap news, Comcast is going to roll out a meter to let you check your bandwidth. (You know, that thing that XMission has been doing for many, many years?) AT&T, meanwhile, has chosen to join Time Warner in punishing the poor folks of Beaumont, TX with more low-ball transfer cap trials. T-Mobile has also resurrected caps, except they won’t really tell you how much is too much.
- And from the “holy crap” file: Embarq has chosen to have real, live people answer the phones when you call, just like the days of yore. It’s so crazy that it just might work, especially since telecom manages to do so poorly in customer satisfaction.
There’s still a lot more going on in the industry, but that covers the big highlights.
Tags: AT&T, Bell Canada, Blockbuster, bpl, cellular, Comcast, Cox, data, DirecTV, DOCSIS 3.0, femtocell, FIOS, FTTN, FTTx, Hawaii Telecom, HDTV, Hulu, NBC Universal, NFL, overbuild, Qwest, Time Warner, USF, Verizon, Viacom, video, Windstream, wireless, YouTube