Comcast has been holding out on us, but it’s out of tricks up its sleeve

Comcast-LogoWhen Google Fiber announced in Provo, it didn’t take long for Comcast to immediately whip out a new 250Mbps/50Mbps tier and match the announced price. The reaction isn’t all that surprising. They needed to look like they’re doing something to try and retain customers, and current modems meeting the DOCSIS 3.0 standard can max out at 343Mbps/122Mbps. Unfortunately, Comcast, in one move, almost entirely exhausted the available juice in its system without a massive overhaul of their operations. Could it be that they’re not going to be able to upgrade any further without a huge cash infusion?

Looking at the DOCSIS 3.0 standard, it allows for bonding up to 24 downstream and 8 upstream channels. This provides a peak theoretical bandwidth of 1029Mbps/245Mbps. Unfortunately, cable providers like Comcast have had trouble enough meeting the demand for 8 downstream and 4 upstream channels. With hundreds of channels (many now in HD), reclaiming spectrum has been very tricky. Despite tricks such as headend upgrades to H.264 (and, soon, H.265), using digital-to-analog adapters for customers who won’t upgrade to a digital package, and exploring IPTV, the system remains tapped out. The systems usually only support 6MHz channels across about 1GHz of total space or about 165 total channels. With nodes containing as many as 200 users, even a high 14:1 oversubscription ratio would mean dedicating at least 60% of the available channels just to broadband users, something that would crowd out their core TV product.

This is why Comcast has had to resort to very expensive FTTP upgrades to push their 505Mbps/65Mbps service in markets where Verizon’s FiOS has been chipping away at their market share. Even then, they want $500 to get service and charge a $1,000 ETF if you don’t stick with them for long enough. The hardware has also lagged behind with a limited number of modems that can push that kind of speed. Comcast also charges over $400/mo for the product, well out of reach of your typical user.

So where would Comcast do these kinds of upgrades? So far, it’s primarily in areas with only one wireline competitor that offers somewhat comparable speeds. To date, that means areas with Verizon FiOS. Tiers beyond 105Mbps haven’t shown up anywhere in Utah outside of Provo. Even there, Comcast won’t go beyond what their current 8-channel DOCSIS 3.0 deployment is capable of. Areas with CenturyLink DSL? No need to surpass 50Mbps at most. ADSL2+? 105Mbps is faster enough to keep their heads above water. Areas with gigabit fiber? Invest the bare minimum needed to get low-end users on the cheap because they know they can’t match the speeds.

What we’re seeing in Provo is all Comcast has got: pushing the system to and sometimes past its reasonable limits, and yet still falling woefully short. With a poor reputation for customer service and CenturyLink ceding markets, it seems obvious that Comcast is about to enter a slow bleed phase with very limited upgrades targeted at areas without gigabit fiber. Funny, that sounds a lot like what CenturyLink is now.

Not Just Copper: Is CenturyLink slowly withdrawing from the residential wireline market entirely?

CenturyLinkAlmost all of our broadband heartburn comes from uncompetitive markets. Even in areas with at least two wireline competitors (which is only about 95% of the urbanized Wasatch Front), you’re usually stuck picking between faster speeds from Comcast and cheaper speeds from CenturyLink. I’ve already written that it’s looking like CenturyLink is going to let copper die without a replacement, but it’s entirely possible they just want to get out of the residential market entirely. This would be a nightmare for competitive choice in our state.

Do you remember the last time CenturyLink upgraded their ADSL2+ product? I do; it was 2009. The year before, they stopped doing FTTN deployments entirely, occasionally lighting a new FTTN node here or there. Most of the Wasatch Front is still limited to 7Mbps ADSL with real-world performance usually coming in much less than that. I know people in Sandy that struggle to squeeze 3Mbps out of that aging copper. It makes CenturyLink’s claims of doing their own gigabit fiber seem pretty hollow and underscores that their main purpose in deploying FTTN may have been to try clubbing competitors in the kneecaps.

Just look at how CenturyLink has been not responding to competitive threats. In Provo, Comcast very quickly pushed their system to its absolute limits with a 250Mbps/50Mbps tier that price-matches Google. What did CenturyLink do? Nothing. They haven’t uttered a single word about doing any kind of upgrades in Provo at all. Who can blame them? It would cost them tens of millions of dollars to go after a customer base that hates them. The ROI would be so far out as to be disastrous. It’s noteworthy that the only places CenturyLink has announced doing FTTH have been duopoly markets, places with a more-or-less captive customer base. Given their non-response to Veracity rolling their own ADSL2+ using CenturyLink cabinets, this isn’t too surprising.

At the same time, CenturyLink has been chasing down deals to build fiber to cell towers and focusing heavily on their business services through acquisitions like Savvis. These premium services command much greater profit margins and more stable user bases than residential markets, plus they can easily convince businesses to pay the full cost of installing the latest technology. Even when the fiber to cell towers goes into residential areas, CenturyLink has been noncommittal about using it to upgrade DSL users to better speeds or technologies. It seems very strange to not want to use the investment to upgrade other services. I’d usually say they just don’t have the money, but they just approved spending $1B on a stock buyback program, money that would deploy gigabit fiber to as many as 1M homes and businesses.

This all paints a very disturbing picture for the future of telecommunications where open access systems like UTOPIA aren’t or won’t be available: Comcast will be the only real ISP for most users, and cities who go with Google Fiber will be right back into the “fast vs cheap” duopoly they hate so much right now. This is one of the many reasons why I’ve been so sour on both Provo and Salt Lake City for going with Google instead of fixing the underlying anticompetitive problems in the telecommunications space. Why would you expect Google to be any better than Comcast when they no longer really have to work for your business?

Salt Lake City is About to Make a Broadband Blunder

This article is cross-posted at Beehive Startups.

I've made a huge mistakeSalt Lake City just can’t seem to make up its mind on broadband. Given the chance to join UTOPIA in 2004, Mayor Rocky Anderson turned down the offer citing “risk [to] taxpayers’ money”. His successor, Mayor Ralph Becker, similarly waffled, giving a response that neither closed the door nor endorsed the idea. In that time, much of Salt Lake City has been unable to get CenturyLink’s ADSL2+ service (with speeds up to 40Mbps down), often getting a meager 3Mbps on vanilla DSL. As a result, Comcast doesn’t offer the same high-speed packages it does in areas with better speed choices, sometimes maxing out at 25Mbps. The reluctance to make a bold choice to improve the city’s infrastructure has cost residents dearly.

Now it appears that SLC is about to double down on those past mistakes. Google revealed that they’ve been in talks with Salt Lake City to extend Google Fiber from Provo into the city. While Salt Lake City officials are claiming that “no tax dollars” will be involved, it’s well-known that Kansas City provided a lot of concessions to Google worth millions of dollars. Provo effectively gave Google an indefinite lease on the network for $1 plus $18.7M in closing costs. We don’t know what Austin provided yet, but we can probably take a guess. Google loves it some public funding but without all of that pesky partnership business.

And what does SLC get from the deal? Sure, they get gigabit, but not with great terms. If you don’t sign up during the initial push, you’re forever cut off from the network. Kind of sucks for renters and new move-ins. Don’t like how Google does things? They’ll be the only gigabit option in town. If Comcast and CenturyLink hurt enough, they could effectively withdraw from the market and leave Salt Lake City with a real monopoly. Can’t afford $70 per month? Too bad; there’s no alternative pricing plans like UTOPIA’s 100Mbps for around $35. And if history is any indication, Google won’t sign a contract with the city for longer than 7 years. They reserve the right to get bored and just turn off the network when it runs out. Compare that with the 30-year deal that UTOPIA has been working on with investment bank Macquarie Group. The only reason Google Fiber sounds good is because you’ve been in an abusive relationship with Comcast and/or CenturyLink for far too long.

Given the stark differences between how UTOPIA and Google Fiber operate, how badly Provo was jobbed on its deal, and how much better a deal UTOPIA was able to negotiate, you have to wonder how there’s even a debate about the choice between dealing with Google or joining up with UTOPIA. It seems that Salt Lake City’s elected officials, mayor and city council alike, are too cowardly to do what’s best for the city instead of what’s best for their next election.

The Tipping Point: Are restrictions on muni broadband no longer feasible?

Only a few years ago, it seemed like any kind of anti-municipal broadband legislation was a slam dunk in state legislatures around the country. North Carolina’s outright ban and Utah’s continued imposition of restrictions with no purpose promoted a kind of defeatism that once the incumbents found a willing sponsor, the legislation was as good as passed.

But something has changed. In Kansas, a bill designed to sharply curtail Google Fiber got absolutely destroyed by citizen protest. Here in Utah, HB60 is being pummeled in the local and national press. Any time one of these bills comes up, the anger quickly follows, the incumbents are unmasked as the culprits, and now the bill sponsors are forced to water down the bill significantly or outright withdraw it. What happened?

Cable and phone companies have been at the rear of the pack for customer satisfaction for well over a decade. Any time we try to improve things, they shoot us down to maintain their bottom line. I think we’ve finally reached the point where so many of us are enraged at both the crappy state of Internet service and blatant protectionism in government that we’re willing to try anything to improve it. If it looks like you’re getting in our way to make a buck, you’ll kindle our wrath.

Look at what’s happened with HB60. Over a dozen national news outlets have picked up the story. Hundreds of Utahns have been contacting legislators to voice opposition. There’s no evidence of any public support for the bill at all. The bill was pulled from a committee hearing and it’s possible it may not come back this year. Swift, fierce anger ruled the day on what appears to be blatant protectionism for a power incumbent phone company.

Has the tide finally turned? I think so. And we’ll all be better for it.

Hans V. Anderson Jr.’s Curious Definition of Failing

I suppose it could be possible for UTOPIA opponents and critics to make their case without lies or misrepresentation, but much like discovering how many licks it takes to get to the center of a Tootsie Pop, the world may never know. The latest example is an op-ed published in the Daily Herald from Orem City Council Member Hans V. Anderson Jr. In addition to many of the usual talking points, he makes multiple assertions that contradict what we already know about the deal with Macquarie.

For starters, he’s stating that Macquaries investment would be a loan. No published source has stated this at all. In fact, the published information is that the money would be a required network investment similar to what Google did in Provo. If it’s actually a loan, how is it that Anderson is the only one reporting such, especially when numerous city council members and mayors were at the same meetings?

Anderson then asserts that a proposed utility fee is actually intended to repay Macquarie for their investment. His own source, however, show that it is to retire the existing bond service. Instead of covering bond service from the general fund, it would be a clear line item spread across all Oremites, similar to how Provo assigned the debt service from iProvo to everyone in the city, subscriber or not. It seems very curious that he would contradict himself to make the utility fee into something it is not.

So what, exactly, is failing? UTOPIA has met or exceeded every financial goal under it’s current five-year plan. It’s now bringing in a partner to finish the network, relieve the cities of shouldering any operating expense shortfall, and likely provide some revenues to reduce or retire the proposed utility fee. I don’t see anything for someone who wants to lessen Orem’s financial load to be upset about at all. Why is Hans furious to the point of lying?

This is what happens when UTOPIA opponents want failure at any cost. Any success, no matter the size, must be turned into failure in order to prove their larger ideological point. Instead of retreating to the absolutely defensible and logical “I don’t like this approach” position, they have to cling to the “it just doesn’t work” one, evidence be damned. I hope the citizens of Orem will ask themselves which kind of elected official they want running their city.

Why a gigabit?

More and more often, I keep hearing this question. “Why would I need a gigabit? There’s nothing I could possibly do to need that kind of bandwidth.” On the surface, I can see the point. There are precious few home applications that, on their own, would consume this kind of bandwidth. Let’s take at how you could use that kind of bandwidth.

I’d like to offer a real-world scenario of my own usage. We have two streaming TVs, two laptops, a desktop, two smartphones, and a Kindle tablet. Our phone service is Google Voice with a ObiHai box with a microcell from Sprint to boost our cell coverage. We use a fair amount of Netflix and Amazon Prime streaming. I have all of the systems backing up to CrashPlan (currently 100GB or so worth) and sync files with ownCloud. I also work from home full-time, so I spend a good chunk of my week (45+ hours) connected to the VPN doing large file transfers, Webex sessions, and VoIP.

I also have a 5.3TB NAS sitting in my closet. It holds backups of all of our software installers, our entire ripped CD/DVD/Blu-ray collection, and a huge library of TV shows (currently 2.2TB and counting). It currently runs Plex for media streaming, and I’m planning on adding both ownCloud and CrashPlan to it for file sync and backups, respectively. Ideally, I’ve love for friends and family to be able to use it too.

The outgoing HD streams would be about 20Mbps a pop. Backups and sync would probably be around 10Mbps per user, if they have a good connection. I also occasionally host a Minecraft server and download multi-gigabit games over Steam. When I add it all up, it’s not hard to see peak usage of over 200Mbps both ways.

Granted, you’re probably not looking at usage as intense as what I’m doing. But what happens in a few years when a few data-hungry teenagers are uploading their 50M-pixel photographs when you try to watch a 4K video? How about when you need to backup 100GB worth of movies and pictures from your latest family vacation? What happens when your hard drive fails and you need to restore over 500GB worth of backups to be back on track? Those aren’t far-fetched ideas, and they certainly aren’t going to be outside of the norm for long. Can you do it with a slower connection? Maybe, but the experience won’t be any good.

And really, this is what gigabit is about: removing the barrier between what you’d do on your local network versus what you’d do over the Internet with remote networks. There’s not much in the way of a single application that would use a gigabit connection. There’s lots of individual applications that, when added up, can saturate even 100Mbps. Would you prefer to carefully plan and ration your usage so that too many episodes of Dora the Explorer doesn’t bog down your marathon Left4Dead 2 session? Or should the bandwidth flow so freely that, like electricity, you don’t worry about which straw will break the camel’s back?

Is CenturyLink About to Ditch Copper?

CenturyLinkIt’s no small secret that Verizon has been working really, really hard to ditch copper access lines. In areas where they haven’t rolled out FIOS, they’re letting older copper plants rot on the vine, ceding the wired space in those communities to the local cable companies. In areas of New York where Hurricane Sandy wiped out the copper plant, they’re flat-out refusing to rebuild any landlines, instead offering a high-margin fixed wireless service.

AT&T hasn’t been too much better. Their anemic speeds on FTTN constantly lag behind their cable counterparts. Like Verizon, most of their money comes from wireless operations, so that’s where their efforts have been focused. In fact, when was the last time you heard anything about U-Verse in the news?

It seems to me that CenturyLink is ready to follow suit. They recently announced that they would be building fiber to 19-20K cell towers in their service areas. I can’t say I blame them. This is a highly profitable business, one that I wish UTOPIA or its providers could crack. Given the slow and steady loss of both landlines and broadband customers (the latter due to a lack of network upgrades), I’m sure they’re looking at whatever boosts the bottom line.

You’ll note, however, that upgrading DSL users to ADSL2+, their FTTN solution, is a footnote. Their CFO and SVP more-or-less states it outright:

“We try to design the routes to bring fiber to the towers to where they can serve other needs that we have to in terms of providing fiber closer to business customers and closer to residential customers to provide some of the higher bandwidth services,” Ewing said.

That’s right: CenturyLink is stating rather plainly that their main concern is to get fiber to those cell towers, then, if it’s “feasible” (read: dirt cheap), you can have the leftover table scraps. Cable companies (and most other phone companies) have posted subscriber gains in broadband, yet CenturyLink, who hasn’t upgraded speeds past 40Mbps since 2009, is losing thousands of customers per quarter. Odds are good that any areas getting this fiber will just now be moving off of vanilla DSL to the same 40Mbps speed (or lower) that they’ve been pushing for the last four years. When Comcast is pushing 105Mbps and UTOPIA and Google Fiber are doing gigabit, how is it anything but a giant middle finger to current and potential customers?

CenturyLink is choosing to let copper customers loose for the same reasons that Verizon and AT&T are: it’s expensive to provide service, and they can make the same or more money from wireless (albeit on different ends) with lower costs and a lot less competition. The copper network has paid for itself many times over, so writing it off as it continues to degrade is no big deal. The money they invest in cell towers has a much better ROI than investing in wireline services, so what limited funds they have will be going there.

This isn’t just a problem for CenturyLink customers. As they slowly back away from consumers and shift their core business to wholesale transport for other businesses, most users in Utah will be left with just the cable company, Comcast, to fill the void. With only a single wireline provider in most of the state, speeds will stagnate, prices will rise, and service will worsen. When there’s no incentive to compete, why would you?

Is CenturyLink doing fiber-to-the-home or fiber-to-the-press release?

Before I could publish this, Chris Mitchell at MuniNetworks.org did a much more in-depth version of what I wrote here. I highly recommend reading his article for the nitty gritty details. Unsurprisingly, we both reached the same conclusion.

When Google announced they would be building a gigabit network in Austin, AT&T wasted no time trying to jump on that bandwagon for damage control. Of course, nobody believed it. How could a company who has shown no interest in network investment suddenly decide that they might want to get on that? I find myself in the same position with CenturyLink’s announcement of an FTTH testbed in Omaha. Moreso, they’re not even equipped to do it.

Bear in mind that this is going to be a very small deployment, just 48,000 homes. It’s focused on an area where CenturyLink provides TV service, a product they haven’t even put into trial in most markets after shutting it down and starting it back up again. This makes some sense as most fiber networks need multiple product offerings to make the network achieve the desired revenue goals. That also means that areas without TV trials are probably not likely to see the service anytime soon.

Then there’s the matter of money. CenturyLink is a cash-poor, debt-heavy behemoth that’s been shedding voice customers to cell carriers and broadband customers to anything that isn’t them. When was the last time they did a new ADSL2+ footprint anywhere in Utah? It’s been several years now with not a red cent of network improvement. Omaha is a testbed not because they don’t sorely need to upgrade their entire network, but because that’s likely all the money they can afford to spend. Without a highly profitable wireless business or a lead against their cable competitors, it doesn’t look like the picture is going to improve anytime soon either. Investors don’t seem to think so.

I’m sure CenturyLink will build out their “testbed” in Omaha. Heck, they’ll probably even expand it to the surrounding suburbs. But will they pick up enough steam to push it nationwide? I wouldn’t put money on it.

The Google Fiber Pipe Dream (or, Stop Dreaming and Do the Work Yourself, Lazybutt)

Google Fiber has managed to keep people excited for quite some time now. Dozens of cities did everything from present solid cases for building there to engaging in wacky stunts (like swimming in frozen lakes) to try and get the attention from the Mountain View company. Even after selecting Kansas City, MO (and a number of its surrounding suburbs) as the site for their build, many cities keep on insisting that they can somehow catch the Internet giant’s attention and score their own golden ticket. Make no mistake: I compare it to the prize bestowed by Willy Wonka because it’s just about as likely to happen.

Far too many people lose sight of what Google really is: an advertising company. Everything they do is centered around the idea that they can sell advertising. In the process, they create really awesome tools that get eyeballs. Google’s search product is still the gold standard. Gmail is more popular than any other webmail product. Android displaced everything but the iPhone to fight for the number one smartphone platform. What do these all have in common? They increase your exposure to Google’s ad platform, but they don’t incur a significant cost to do so. Even Google’s self-driving car is an attempt to free up commute time for, you guessed it, looking at their ads. This is why Google makes money hand over fist.

The question that should be asked is how Google Fiber fits into this mission. Yeah, it kind of encourages you to spend more time using their services, and it does create a way for them to directly sell TV advertising, but the capital costs of fiber are huge, especially when using active Ethernet. Google is on-track to make somewhere in the range of $12B+ in profits this year. The cost of deploying fiber optics nationwide is somewhere in the $300-400B range, and it runs an average of around $1500-2000 per served home. That would be a huge investment into a venture not guaranteed to break even. The history of overbuilders is littered with failed companies. Google in unlikely to sink a significant portion of its revenues into additional buildouts, so the odds of your city getting a break are pretty slim.

And that’s the point. Google isn’t going to build in cities that beg louder and more often. Heck, they might not build in any more cities at all. It selected Kansas City because there are major backbone fiber routes there (Sprint has its HQ in neighboring Overland Park, KS) and the city could provide expedited right-of-way. Does your city meet those criteria? Probably not. In fact, your city is probably only saying “but we really REALLY want it” and hoping that’s enough. Well, it’s not. Kansas City did the work to create an environment Google would want to sink their dollars into. What has, say, Lehi done? Arguably nothing but get their begging published in the Daily Herald.

That’s the lesson to be learned: if you actually want a fiber network, you’re going to need to do some work. By the time you’d be an attractive target for Google Fiber, you’re about 90% of the way towards building it yourself, either as a co-op or a municipal network. At that point, do you really want to spend years or decades hoping that Google or another company will do for you what you could do for yourself?