Category Archives: Essays

Advocacy essays in support of UTOPIA, iProvo, and municipal broadband in general.

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

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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?

Can US Ignite Succeed Where Other Efforts Have Failed?

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Last Thursday, The White House announced the launch of US Ignite, a new initiative whose goal is to spur better broadband and applications to take advantage of it. It brings in some heavy players including UTOPIA and UEN from our own state, incumbents like AT&T, Verizon, and Comcast, and tech giants like Mozilla, Cisco, and Juniper. I know I should get excited about something like this, but the best I can muster up is ambivalence.

In many cases, a consortium will often fall victim to the selfish interests of individual members. Many of us will remember how Rambus joined JEDEC, seeded the standards with their patent-encumbered technologies, and then went on a spree of lawsuits demanding royalties and licensing fees for using the standards they helped create. Despite eventually losing most of the suits and having a number of their patents invalidated, they pulled an entire technology industry into courtrooms for well over a decade. Most of the players in US Ignite have significant patent portfolios, and make no mistake that many of them participate in standards bodies not because it’s for our own good, but because there’s a buck to be made.

Another problem is that US Ignite has an all-too-standard “big on vision, light on specifics” mission statement. Granted, there are some good ideas in there. Dynamically switching VLANs can open up a bunch of possibilities for service providers. Gigabit and beyond connections are pretty much required for doing any kind of serious heavy lifting. Locally provisioned virtualized computing resources are pretty slick. All of these are really important and good ideas, but they feel more evolutionary than revolutionary.

And then there’s the elephant in the room that nobody really wants to talk about: why don’t we already have these networks in more places? US Ignite seems to assume that the problem is that we don’t have applications to drive demand from end users, so that’s why the networks don’t get built. That, unfortunately, turns the actual problem on its head. Because of the severe lack of competition in the telecommunications space (which is only getting worse as telcos fail to upgrade), networks have no incentive to build those next-generation networks because what they offer now is cheap to build and just good enough to stay marginally competitive with the only other option in town. With the heavy involvement of incumbent operators and their vendors, you’re unlikely to see the barrier of an anti-competitive market get addressed.

I wish US Ignite all the best and hope that they can come up with something useful. That said, I’m kind of resigned to the idea that after the initial fanfare, they’ll fizzle out a die quietly in the corner.

DISH Network on UTOPIA: What are the implications?

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It’s a huge thing for UTOPIA to score a major national provider like DISH Network.

First, let’s consider that DISH already has a lot of customers in UTOPIA areas. They could immediately start marketing both data and voice service to those subscribers. Given that they can cross-subsidize using revenues from other markets, using the MStar tactic of aggressive marketing would be sustainable. They also have installation and customer service staff in place to handle that influx.

That cross-subsidy can also help them pick up new customers on a triple-play package. One of the main barriers to signing up new customers has been the acquisition cost. DISH could potentially opt to subsidize or entirely eat the install cost as a way of speeding up deployment, something they have the cash to do. They can also double up their marketing to hit up potential new customers while marketing to existing ones.

This may also prompt other operators to take a closer look at UTOPIA as a means of delivering services. While UTOPIA has had no problems picking up a plethora of commercial operators, the residential options have remained somewhat limited. The addition of a large national provider will no doubt attract attention from other providers, especially as the network expands and creates a greater opportunity to grab new customers. It was rumored that Cox Communications, the largest privately-held cable company in the country, was interested in joining UTOPIA if they thought they could get at least 50,000 new customers out of it. (FWIW, Cox operates in Las Vegas where UTOPIA’s fiber backbone terminates.) Such additions would make take rates in excess of 50% not just feasible, but assumed.

In all, I think this deal has major implications for changing the competitive landscape. I’m looking forward to seeing what DISH will do.

From Muni to Co-op? UTOPIA Model Paves a Way

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A lot of people wonder why someone with my libertarian tendencies would support municipal broadband. I’m often trying to explain to them the massive market corruption that has occurred largely at the hands of bungled state and federal regulation, often getting a glazed look in return. By the time I start talking about the barriers that keep private companies from even trying to crack that nut, I might as well have Ben Stein speaking on my behalf.

And yet, these significant barriers to entry are the reason why private companies don’t step up to try and fix the telecommunications landscape despite the poor customer service ratings of the dominant players in the industry. For those that can actually secure financing, they are often bled to death with Standard Oil-style undercutting and mountains of regulatory red tape. Even in an ideal situation, it often takes 7-10 years for telecom projects to produce black ink, well beyond the attention span of most speculators investors.

Because there seems to be little hope of fixing the regulatory landscape, finding investors who don’t expect unrealistic returns on investment, and undoing the entrenchment of incumbents, having municipally-backed networks fill the gap seems to be the option of last resort to try and establish some semblance of competitive choice. While a lot of muni supporters would be loathe to admit it, a large part of this is because munis have a very large well of money to draw from to survive long-term assaults: the almighty tax dollar. They can simply ride out the storm until incumbents wear down, throw their hands up, and turn their attention elsewhere.

UTOPIA’s current model alleviates some of this unpalatable use of tax money by shifting the costs of construction onto users, and only building when those sections are financially sustainable. In a lot of ways, it is similar to the New Deal-era co-ops for rural electrical and telephone service. The municipal backing, however, grants a lot of advantages when it comes to financing the project, gaining right-of-way, and cutting through regulations, things that a stand-alone co-op would have significant difficulty accomplishing.

That said, the idea of buying a piece of the network and becoming a stakeholder sets the foundation for a future model of assigning ownership back to users. It would be entirely possible for UTOPIA, once financially sustainable, to turn itself into a co-operative with the users in control of the network. This would absolve the city from being required to manage telecom, but it would still put users squarely in charge. For cities considering building a network but worried about the long-term effects, this paves a way for them to seed a network and let it grow itself, expanding to universal service as any profits are reinvested into the network.

Is this something UTOPIA could do? Maybe. There’s a lot of old model baggage that weighs things down, and cities went in with the initial promise of padding city budgets. Still, it’s an interesting possibility for networks new and old.

UTOPIA and iProvo as Campaign Issues

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The Deseret News brought up that UTOPIA and iProvo are proving to be campaign issues in the upcoming municipal elections. (h/t: Brian Merrell) The article itself provides a good background on the financial details of the networks (and an added bonus that the Utah Taxpayers Association is little more than a lackey for Comcast and CenturyLink), but not much in the way of where candidates stand. Personally, I’ve found them to fall into one of three categories.

The first is the obvious municipal network supporter. They’re in favor of the network and are willing to do what it takes to make it successful. Long-time boosters like Dan Snarr and JoAnn Seghini fall into this category. You’ll find them to be few and far between because of the amount of flack so many of them catch.

The second is the opponent who wants to acknowledge reality. They don’t think joining the network was a good idea, but they know the reality is that the decision has been made and they have to make the best of it. In some ways, they are the best option since they won’t pull punches when something isn’t working the way they think it should. John Curtis is a good example.

The last is the opponent who has plenty of complaints, but nothing in the way of solutions. They’ll rant all day long about how the network was a terrible decision, it should have never been done, and no good can come of it. They completely fail to propose any real solutions, and the “just sell it” attitude pays no heed to making the city take a financial bath in order to prove their ideological point. These people are a reckless danger to any city they govern since they are willing to make you, the taxpayer, pay dearly in order to kill off their non-favored programs. George McEwan is a prime example of this kind of low-information irresponsibility (and he was thankfully eliminated from the election for failure to file financial disclosures).

So as you head to the polls in your city, ask yourself which of these candidates is going to make good decisions for the city. Ask yourself who each one of the candidates fits from your list. You’ll know what to do.

Comcast’s $10 Service is Smoke and Mirrors

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One of the conditions placed upon Comcast’s purchase of NBC Universal was to start offering a cost-conscious Internet plan for low-income households. This also includes a plan to offer cheap PCs to those families so that they can actually use the service. As with any deal, though, the devil is in the details. Upon closer examination, it would appear that Comcast has simply found a way to create a new revenue stream with some great PR. Combined with the stringent terms of use, it’s obvious that the entire thing is puffed up well beyond what it actually is.

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Does Windstream’s Acquisition of PAETEC Spell ILEC Wars?

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A week and a half ago, ILEC Windstream Communications announced that it would be acquiring business telecommunications company PAETEC, a current UTOPIA provider. As of yet, nothing has been said as to if that arrangement on the network will continue. As you may recall, AT&T had planned to join UTOPIA as the flagship provider until SBC purchased the company in 2005. That got called off because incumbent providers, both in the telco and cableco space, have a long-standing gentleman’s agreement to stay out of each other’s territories. While Verizon and AT&T fired a few shots in some Texas suburbs a few years ago, this arrangement has continued to stand for decades. The question now is if Windstream is willing to risk competition in its own backyard to keep access to UTOPIA.

I think the answer might be yes. Business telephone companies regularly both compete with and buy wholesale services from incumbent providers. Veracity, for instance, does this all the time. This would be a rare occurrence that a company is both, and I find it highly unlikely that CenturyLink would set up shop in Windstream’s backyard (mostly because they don’t have the money, but I digress). Even with what I assume are relatively few accounts on UTOPIA, Windstream may be ready to make the calculated decision to open up an ILEC-on-ILEC war right here in Utah. It may even expand to the residential market now that the merged company is no longer focused on business accounts.

The implications are huge. If Windstream pulls it off, Verizon and AT&T, both of whom are cash-rich, may decide to start picking off bits of CenturyLink’s business. Before long, incumbent territory won’t matter anymore. UTOPIA’s open access model would be ideally positioned to capitalize on the willingness to cross the anti-competitive artificial boundaries and provide quick market access.

Re-writing Reality: Utah Taxpayers Association Spins on iProvo

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It’s almost become too easy to pick on the Utah Taxpayers Association when they get a story so very, very wrong. The latest work of fiction is thacceir tortured stance on iProvo, one in which they perform twists of logic to support how things have unfolded with iProvo and yet continue to vilify what UTOPIA does. As usual, this requires a point-by-point breakdown of where they lack any kind of consistency and twist or invent facts to support their weak sauce arguments.

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Misplaced Rage with Netflix

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It seems like the entire Internet is raging and fuming about Netflix raising prices on some of their services. Most of it is coming under super-dramatic headlines such as “NETFLIX JACKED UP PRICES 60% OMGWTFBBQ!!!” Naturally, this rage is not only misplaced, it’s totally blown out of proportion.

The skinny is that Netflix has decided to break up the entry-level tiers into “streaming only” and “one DVD at a time”, each priced at $8/mo. The tier that includes both of these will cost $16/mo instead of the previous $10/mo. Some of the other tiers will see pricing changes as well. I’m not saying that I’d be happy with the increase either, but nobody is taking the time out to actually understand why it’s happening.

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