Just because Kevin Martin was on his way out the door doesn’t mean he couldn’t make noise on the way. The FCC started checking into Comcast’s network management practices yet again and slammed cable pricing. There’s also more talk about the broadband stimulus that just passed the house and it looks like a 4-month delay of the DTV transition is going to pass. All this and more in this week’s Broadband Bytes.
Just when Comcast thought it was going to catch a break on its network management processes (which, I must say, seem pretty clear and concise to me), FCC Chairman Kevin “Ma Bell fo’ Life” Martin decided to see if they were using the new system to purposefully degrade competing VoIP offerings. The allegations are that phone calls could get choppy during peak times when bandwidth demands are highest. (For what it’s worth, I haven’t noticed any problems with my Vonage phone on Comcast.) The FCC is also looking at regulating Comcast’s VoIP product like a traditional phone line since Comcast Digital Voice is being given preferrential routing treatment. Comcast has previously worked with Vonage to ensure smooth operation of the competitor’s VoIP service, I think this is a lot of smoke and not much fire, even if consumer advocates are happy to use Comcast and thier lousy customer satisfaction as a big punching bag.
Not to be content with just getting in another dig at Comcast, Martin gave all cable companies a special parting gift: an inquiry into video pricing and a big bag of fines. Given that prices have jumped an astronomical 122% since 1995, he might be onto something here, though I hope that satelite and IPTV competitors are included in the inquiry. (I’m looking at you, Dish, DirecTV, AT&T U-Verse and Verizon FIOS.) The complaint also cites moving channels to premium tiers and a lack of data being provided to the FCC. While cable operators are certainly complicit in rising rates because they don’t act as advocates for their subscribers (who have little to no voice in the matter), the real investigation should be into programmers who drop double-digit rate increases for channels that cable operators consider their foundation (ESPN, Disney, MTV, etc). All of this might just be Martin trying to strike back at cable operators who he believes were behind the unflattering report from Congress last month.
Microsoft also got into a tiff with Comcast, this time over a soured deal to use MS cable boxes. Comcast bought 500,000 boxes from MS that largely collected dust and only saw usage in Seattle, Microsoft’s backyard. Once Comcast dumped the boxes, Microsoft picked up its toys and went home. It could have had better timing; cable stocks took a real beating over the last year.
Meanwhile, more voices keep wieghing in on the delay. Verizon changed its tune and now supports the delay, Qualcomm says no way, the TV tower industry isn’t in favor and Ars thinks the government should keep the original date despite botching the transition. One of the biggest concerns is rural access. While analog signals get fuzzy with interference, digital signal experience a cliff effect where the signal is either there or isn’t. Up to 20,000 residents of Hawaii may not be getting signals after that state’s switch and many in rural areas could lose signals while the FCC figures out how to extend their range.
Rural residents are getting shafted from another direction as big cablecos and telcos dump their less-desireable rural networks. Hawaii Telecom was one of those experiments and ended up filing for bankruptcy not that long ago. Fairpoint Communications faces the same challenges with the New England networks they have acquired from Verizon. Many of the rural networks are in desparate need of upgrades and the small companies assuming them don’t have the capital to upgrade broadband speeds or, in the case of cable operators, deploy VoIP. Powell, WY is one of those cities that got fed up with the crappy options and built their own FTTH network; it should be operating Real Soon Now(TM).
There’s still a lot of hold-outs who want to hang on to their dial-up or not have Internet access at all. A third of non-Internet users just aren’t interested and 19% of dial-up users wouldn’t ever switch to broadband. Price and availability, however, remain the main barrier to about half of dial-up users and about 20% of non-users. So what do we do to drop prices? That depends. A recent study suggests that wholesale rates charges by incumbents are way too high and a lack of competition often reduces your bargaining power.
There’s still plenty of throttling and capping news this past week. The CRTC, Canada’s equivalent of the FCC, composed a pretty comprehensive report listing who engages in throttling. Some of the companies never responded, but the largest ones are definitely doing it. Vodafone is trying a different kind of soft cap in Hungary that scales back available bandwidth to heavy users during peak times, a method similar to what Comcast does. Wave Broadband, however, is doing a really good job at illustrating how not to roll out caps. They used to do a 3GB/day limit, and now they publish a different limitation on the top-tier account with an unpublished limit on lower-lever accounts. Moral of the story? Users don’t hate caps or throttling nearly as much as they do a lack of transparency.
In gadget news, Verizon is rollout out a device they call Verizon Hub. It incorporates a 7-inch LCD touchscreen to sync calendars, contacts, maps and traffic directions with a wireless phone. The Hub also lets you send text messages or pop directions to your cell phone. It does not, however, integrate a femtocell. At $200 for the device and $35 per month for service, it’s hard to see how such a gadgety phone will end up catching on, especially since many consumers already can’t figure out the features on their wireless phones. Verizon is separately launching a $250 femtocell to support up to 3 CDMA calls at a time over a 5,000 square foot area. If the femtocell were integrated into the Verizon Hub, it might be a better deal.
Holy moly has the country gone crazy about the impending DTV transition deadline. There’s also more talk about the broadband spending in the upcoming stimulus package (where the money will come from is still a mystery), Charter’s impending implosion, the new FCC Chair, and continuing tech layoffs. We also know who’s going to replace Kevin “Ma Bell is my Homeboy” Martin on January 20.
The DTV transition is getting much, much uglier as Congress prepares an Obama-backed proposal to delay the switch from analog signals until June 12. Verizon isn’t very happy about it since it would delay their planned deployment of LTE, a move that also hurts Qualcomm, the company who makes the equipment. Ars Technica unveiled that an Obama cabinet member proposing the delay may have a conflict of interest as the delay would benefit Clearwire. It’s also not surprising that AT&T is in favor of the delay since it would hurt one of their largest competitors. Public safety groups also don’t want to delay their use of the freed-up 700MHz spectrum for a new public safety radio network. House Republicans have also voiced opposition to the delay citing the increased confusion of moving the date. Dish Network is already trying to capitalizing on it with misleading sales pitches. Wilmington, NC carried out a DTV test with few problems and Hawaii has already gone all digital.Add this blogger to the list of people who thinks that delaying the inevitable is a really bad idea. It’s been in the works for 10 years, we’re been talking about it publicly for at least three and stations have been bombarding consumers with warnings for at least the last 6 months. If you aren’t ready by now, then you just don’t want to watch TV. And if you do, there’s plenty of options available, including calling up local video providers for service.
Speaking of selling additional services, you might want to reconsider coming up with an in-house solution. Telephony Online proposes you start partnering up with companies that already do a really good job at providing services outside of the triple-play such as telemedicine and home security. There’s a lot of wisdom to this embrace of wholesale models since you can focus on your core business instead of being distracted by expensive (and often faulty) products with a high liklihood of being discontinued in a few years. The report focuses on FTTH operators (and part 2 discusses some of the regulatory hurdles that prevent more FTTH systems), but there’s a lot of wisdom in this for HFC, FTTN and POTS systems as well.There’s also looking at The Dark Side to make more money. The RIAA is offering up a portion of settlements with pirates if ISPs will turn them in (most of them aren’t biting) and most of the proposals to cap users are focused on squeezing out additional revenue.
Get ready for more pricing wars. MVNO Boost Mobile dropped a bombshell with a $50 unlimited wireless plan that includes voice, text and walkie-talkie services. That goes head-to-head with offerings from all of the major cell providers (most priced at $100 per month or greater) and even takes on brands like Cricket. The New York Times reports that Sprint did this with their pre-paid value brand to try and utilize more of their Nextel network. Embarq also dropped prices on it’s top-tier DSL product by $10/mo.One area that isn’t falling, however, is pay video services. While promotional rates are very attractive, rates have been rising quickly (no doubt because of higher retransmission fees). Oddly, churn hasn’t yet been affected, but that might be because a lot of customers are trapped in contracts with early termination fees. Many customers have also wised up; they know that calling to cancel can land them the promo rate for a few more months. Despite service complaints, price is the main factor driving subscribers to seek alternatives. Verizon seems to have taken the lead on this in at least one case, something that no doubt improved customer loyalty.
Despite what AT&T and Verizon are doing, Qwest is still going to stay out of the video market. Their rationale? Consumers will end up watching all of their video on the Internet soon anyway. That’s true in a lot of cases (especially for network television content), but there is still a lot of paid content that consumers want, especially as cable networks continue to make big investments in original programming. In the end, Qwest is going to have to come up with something more compelling than upload-crippled FTTN and reselling DirecTV.
As proof that Qwest might be onto something is CastTV, a relatively new site that aggregates content from various other video portals like Hulu, YouTube and others into a clean interface. If that got paired up with an Internet-connected TV, you might be able to ditch (or complement, your pick) your paid programming package. Demand for such a set is very high, over 71%. Microsoft has spent a long time working on an IPTV product for the XBox360 and its Netflix integration is supposed to be top-notch. Blockbuster also realizes the power of streaming video and is trying to push a new streaming product even though they totally flubbed their first attempt. The moral of the story is that providing gobs of bandwidth and not much else seems to be where telecom is heading.
Is Verizon planning to kill off POTS lines in favor of VoIP? It depends on which day you ask. Initial reports said they were going to within 7 years, then they came back and said they had no timeline. On the plus side, VoIP is inexpensive and has made a lot of quality and reliability improvements. On the downside, it’s still not as reliable as a POTS line and, as we learned from the Qwest-SkyWi dust-up, it may fall outside of the purview of your state PUC.
In gadget news, the Supreme Court has asked the DoJ to give them some input on the Cablevision DVR case. Pretty much every content producer in the country has come out against the proposal which would offer up 160GB worth of DVR for an inexpensive $10 per month.
Clearwire is showing off a portable WiMax “hotspot” that acts as a WiFi-WiMax bridge. Any WiFi device could be surfing over the speedy new network (if/when it becomes available in your area) with minimum fuss. Somewhat related to this is the emergence of subsidized netbooks from Dell and Acer for a cool $99 if you pair it up with a $60/mo or greater data plan from AT&T. It’s not a bad deal, but it does inspire memories of the ISP-subsidized PCs of a decade ago that ended up flopping. AT&T is also getting ready to push an in-car satellite TV and radio service – at $1300 for equipment and $22/mo for service. I somehow don’t see that catching on anytime soon.
Happy New Year! This Broadband Bytes covers from December 20 through the end of the year. The end of 2008 saw even more retransmission battles (in particular the 11th-hour showdown between Time Warner and Viacom), Qwest trying to unplug a rival that’s suing it for racketeering, and the pending launch of FTTH services in Lafayette, LA. I predict that 2009 will offer up explosive growth in broadband speeds and availability fueled by federal dollars, an increased flight of users from cable to online video streaming and continued greater-than-inflation rises in programming costs.
Qwest’s official company policy appears to compete on everything but having a superior product at a superior price. After small New Mexico ISP SkyWi sued them for anti-competitive practices, Qwest decides to shut down the ISP claiming that they are in arrears by $1.7M. Regulators in New Mexico responded by demanding that Qwest restore service pronto to “critical” customers. Given Qwest’s attitude with Centerville over RDA funds for UTOPIA and their continued efforts to block pole attachments, I think we can see a pattern from America’s least competent ILEC. At least they’re smart enough to slash prices on DSL service across the board.
After years of litigation and construction, Lafayette is finally to launch fiber services in the city next month. Packages are priced very competitively with AT&T and Cox with an $85/mo triple-play package that includes 10Mbps symmetrical Internet service. Lafayette is both wholesaler and service provider, so it makes their financial goals a good deal lower than open networks like UTOPIA that have to share revenue with third-party providers. The Lafayette Pro Fiber blog has a breakdown of pricing options.
It wouldn’t be 2008 without some more bad economic news. The Washington Post reports that the housing slump is hitting homebuilders pretty hard which means you can’t depend on greenfield development to power your growth. New providers will have to look at expensive brownfield development in order to gain new customers. One bright spot is that a think tank has recently called for lowering pole attachment rates as a way to spur broadband deployment. That could spell good news for overbuilds.
As if it wasn’t bad enough that video rates keep on climbing (thank the Governor of New York for some of those increases), text messaging rates are seeing a precipitous climb in overage charges even though it costs fractions of a cent to send each of them. Providers have uniformly increased the cost per message from 10 to 20 cents. Given that a text message is no more than 140 characters, you’re essentially paying over $1400 per MB for texting.
Could big broadband kill Blu-Ray? ZDNet seems to think so citing the growth on online HD video options and the high cost of both players and movies. (h/t: Woods Cross Citizen) A few high-profile flops aside, online HD video has been exploding with manufacturers like Roku and LG integrating Netflix, YouTube and a bevy of other video providers into set-top boxes and DVD players. Even the Wii is getting in on the streaming action. To really compete with Blu-Ray, however, requires a solid 16-24Mbps of bandwidth, something most households only dream of having access to. Will the explosion of on-line video kill cable and broadcast TV? Probably not. Despite some strong warnings to get ahead of the online viewing trend, a recent study showed that online viewers are just as likely to watch live TV as everyone else.
Remember how much TV sucked after the writer’s strike and how some shows (I’m looking at you, Heroes) managed to never quite recover? The Screen Actor’s Guild is getting dangerously close to authorizing a strike after it’s January 12 meeting. If, like me, you’ve been eagerly anticipating new seasons of hit shows like Lost, we might end up waiting a lot longer. Maybe it’s time to get around to watching Jack of All Trades on Hulu.
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.
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.
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.
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.
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.
Comcast is looking at sneaking in data rate increases after all. Their plan is to upgrade various tiers of service to higher speeds with accompanying higher rates. If you want to downgrade to a lower-priced package, tough noogies: speeds under 12Mbps will be gone except for a 768Kbps “value” tier. Competing providers should be able to snap up a lot of customers by offering a slower and cheaper tier between the two. T-Mobile is also raising rates on data packages, but with a 10GB monthly cap and terrible ping times, few are likely to use it for primary access.
Telcos are hurting but cable could stick around for a while as coax offers a good chunk of bandwidth. They do, however, feel the pinch from the massive amount of bandwidth eaten up by video services. Even as SDV and DTA boxes ease some of that up, the demand for higher-quality signals to all of these shiny new HDTV sets will eat up a lot of the gains as cable operators are forced to move from 480p to 720p and 1080p signals. Competing providers will need to move quickly to offer true HD signals with low compression and superior data rates while the cable companies perform system-wide upgrades over the next 18-24 months. There’s something said for being first to market.
It also appears that DTA boxes could be a sticky subject. CableONE asked the FCC for a waiver for a HD-capable DTA box with integrated security. This could shut out CableCARD (and possibly Tru2way) as well as a number of third-party devices like TiVo DVRs. Manufacturers are already pushing these boxes which could very well kill the Carterphone of video before it gets off the ground. Competitive operators will see the opportunity to be fully interoperable with CableCARD and Tru2way and ensure that customer DVRs will work on their systems.
Local programming is in high demand, but there are some chinks in the incumbents’ armor. Since local programming options like high school sports, General Conference and rebroadcasts of local news are so popular, competing operators should mimic what Comcast is doing and look into an old-school public access channel.
On the DVR front, AT&T has finished deploying whole-home DVR in 69 markets. This will allow customers to watch recorded programs on any TV in the house and is a smart move on AT&T’s part to drive DVR adoption. While there’s no fee for this service, AT&T does charge for the STBs for each set. Dish Network, meanwhile, will be deploying a new kind of DVR next week that can record from satellite broadcasts, analog over-the-air and HD over-the-air and function as a digital-to-analog converter box. Not all is good in DVR news, however. The Supreme Court is going to hear appeals in the Cablevision networked DVR case and the content cartel is aggressively lobbying to make sure it gets outlawed. This will be an important case to watch as it will have a lasting effect on video innovation.
Forget triple-play: welcome to the quad. Cox Communications plans to use recently-purchased spectrum to deploy cell-phone serivce in its markets. Since Cox can leverage its existing infrastructure to keep transport costs low, the profit margins should be substantial. They will also deliver video services to handsets for existing video customers as they had tried to do with Pivot. AT&T and Verizon have been using wireless revenues to help subsidize the construction of their next-generation networks for quite some time with a lot of success. Qwest, meanwhile, has had poor financial performance as it does not offer its own video or wireless products.
Have you noticed that video rates have been going up at a painful rate? FCC Chair Kevin “I love Ma Bell” Martin did and he wants answers. Despite also naming Verizon in the inquiry, it’s pretty obvious that cable is the real target. The focus is on the move of more and more channels out of analog tiers and onto more expensive digital tiers, a practice he believes is compelling consumers to pay bigger prices for the same set of channels. We’ve already seen a bunch of cable providers up their rates with Cablevision and Time Warner both getting in on the hikes.
Unfortunately, Martin is not investigating how wholesale rates from programmers have gone through the roof and has more-or-less abandoned “a la carte” programming options. He’s also ignoring caps from both Frontier (5-20GB) and AT&T (20GB) that are designed to boost revenues. Telcom in general is hurting right now and companies may see rate increases as a way to soften the dropping subscriber numbers. Both Qwest and Cox are planning lay off workers and Comcast had disappointing earnings results.
We may, however, see some big changes in store once the new president takes office. Word on the street is that Martin will voluntarily resign to pursue political ambitions in North Carolina. It’s anyone’s guess as to who would take over his spot and what they would do about these out-of-control telcom prices.
For several months now, rumors have been swirling about that Verizon may attempt to purchase Qwest, a move that would put us one step closer to a reversal of the 1984 breakup of Ma Bell. Most cite Qwest’s switch to selling re-branded Verizon Wireless service as testing the waters. Qwest is also in a weak financial position with dropping profits and subscriber losses. It’s no secret that the company has spent years trying to find a buyer after the company suffered precipitous drops in customer satisfaction and service quality from 2001 onward. Could cash-rich Verizon be the white knight they’ve been waiting for?