A vignette that aptly illustrates America's troubled transition from copper to fiber

Jared Mauch, a senior network architect at Akamai in his day job, moved into his house in 2002. At that point, he got a T1 line when 1.5Mbps was "a really great Internet connection," he said. As broadband technology advanced, Mauch expected that an ISP would eventually wire up his house with cable or fiber. It never happened.

He eventually switched to a wireless Internet service provider that delivered about 50Mbps. Mauch at one point contacted Comcast, which told him it would charge $50,000 to extend its cable network to his house. "If they had priced it at $10,000, I would have written them a check," Mauch told Ars. "It was so high at $50,000 that it made me consider if this is worthwhile. Why would I pay them to expand their network if I get nothing back out of it?"

AT&T, the incumbent phone company, finally offered DSL to Mauch about five years ago, he said. However, AT&T's advertised plans for his neighborhood topped out at a measly 1.5Mbps—a good speed in 2002, not in 2020. AT&T stopped offering basic DSL to new customers in October and hasn't upgraded many rural areas to modern replacements, leaving users like Mauch without any great options.

 

This account is not atypical and illustrates how telecom infrastructure bogged down in the transition from analog voice telephone to digital Internet protocol (IP) services, leaving consumers in the lurch. And why cable TV companies can't be expected to fill the gap because they are in the entertainment business and not telecommunications.

Wheeler talking through his hat on "cable competition"

Stop the Cap! FCC Chairman Tells Crowd He's "Not Done Enough" to Bring More Cable Competition: FCC Chairman Thomas Wheeler confessed he “has not done enough” to bring consumers more competition to Comcast, Time Warner Cable, Charter, and other cable operators.

This is complete nonsense from Wheeler. Cable is not a competitive market. It exists in a natural monopoly/duopoly market. The chairman can't make it more competitive any more than he could interstate highways if were were head of the U.S. Department of Transportation.

Wheeler's view of the cable market as a competitive one is also at odds with the FCC's adoption one year ago of its Open Internet rulemaking deeming Internet service provided by cable, telephone and other ISPs a common carrier telecommunications utility under Title II of the Communications Act. That title is predicated on a monopoly -- and not a competitive -- market.

Cable companies facing enormous shifts in market, regulatory environments

Cable companies like Comcast, Time Warner and others are facing enormous shifts in the market and regulatory environment that are likely to prove very challenging to navigate going forward. Earlier this year, the U.S. Federal Communications Commission subjected cable companies to Title II of the Communications Act in its Open Internet rulemaking deeming Internet service providers -- cable companies top the list measured by total customer premises served -- common carrier telecommunications utility providers under Title II. 

That's hugely incompatible with cable's business model based on offering subscriptions to bundles of TV channels to selected -- and not all -- customer premises in their service areas. At the same time as this regulatory sea change is occurring, the marketplace is also being disrupted as consumers increasingly shun these offerings.

Cable's subscription-based model is far better suited to the FCC's previously adopted classification of Internet service as a specialized information service -- and the cablecos' market positioning of themselves as entertainment and not telecommunications providers. Now it's gone except in the unlikely event the courts step in and restore it. Meanwhile, consumers are turning elsewhere for video entertainment.

Accelerating implosion of pay TV will hasten AT&T exit from residential wireline

The accelerating implosion of subscription pay TV offerings will hasten AT&T’s exit from the residential wireline market segment and could also result in the telco’s withdrawal of its planned acquisition of satellite provider DirecTV announced in 2014.

AT&T offers video packages with its U-Verse-branded triple play Internet-video-voice product. With the DirecTV deal pending regulatory approval, AT&T hopes to expand its audience of potential viewers and consequently, boost its purchasing power with TV programming providers as negotiations with the programming providers have hardened in recent years.

Viewers have historically regarded the TV programming packages as a poor value for the money since they typically watch only a handful of a few hundred channels. Now they can stream only the video programming they desire via their Internet connections, disrupting the triple play revenue model.

In addition, AT&T’s U-Verse product is delivered to residences over its aging legacy last mile copper cable plant that offers far less bandwidth headroom -- much of it consumed by video -- than hybrid fiber-coax (HFC) cable plants. To keep technologically abreast of cable, AT&T would have to replace its copper plant with fiber. But it is unable to easily do so, constrained by shareholder expectations for earnings and high dividends that militate against substantial capital expenditures.

That leaves AT&T with only one viable option – to continue to sell off chucks of its residential market as it did in December 2014, spinning off its Connecticut residential landline unit, including Internet and TV services to Frontier Communications for $2 billion.

Former FCC Chairman and GTCR Fund See Strong Rural Cable Future

Former FCC Chairman and GTCR Fund See Strong Rural Cable Future: Former FCC Chairman Reed Hundt hopes this week’s acquisition of tier 2 cable company NewWave Communications by investment firm GTCR will be “the first of many.” Telecompetitor spoke this week with Hundt, who headed up the FCC during the Clinton administration and is now an advisor to GTCR.“We believe cable is the universal American communications medium,” said Hundt. “Cable is the essential connection for everyone, especially in rural America.”

 The Telecompetitor article continues:

GTCR’s strategy is interesting, considering that service providers have had difficulty finding a business case for deploying broadband in some rural areas – particularly as distances from population centers increase.

When I asked Hundt about that he said, “Technology keeps producing breakthroughs.”

Indeed it does.  But has it reduced the labor costs associated with deployment and maintenance of wireline Internet infrastructure, which rule of thumb estimates place at about 70 percent of the total?  I haven't heard of of any such technology breakthroughs unless Hundt is talking about using drones to spool and drop cable from the sky and robots to bury and install it on poles.

Emergence of Internet TV reinforces end of “broadband” era

The emergence of the Internet ready or “smart” TV marks the graduation of the Internet to a full featured, multiple service telecommunications service. It also marks the beginning of the end of siloed, single purpose video programming providers such as cable TV and satellite. Now that HD video content of all varieties is available via the Internet, the medium is the message in the words of mass communications theorist Marshall McLuhan and the medium is the Internet.

The Internet or “smart” TV also marks the end of the “broadband” Internet era, where the Internet was mostly used for viewing web pages and email — and later Voice Over Internet Protocol (VOIP). It’s notable that TV manufacturers aren’t marketing the latest sets as “broadband” TVs. That reinforces a point I made in December 2010 when I declared distinguishing “broadband” from dialup “narrowband” was growing increasingly irrelevant since dialup was becoming technologically obsolete. Consumers either have functional Internet infrastructure connected to their premises, or they don’t. And if that infrastructure can’t deliver HD video while simultaneously allowing them to browse the web, download email and make a voice call, they’re effectively disconnected from the Internet.

HDTV growth emerges as driver for fiber to the home

While cable companies and telcos are making a play for so-called "triple play" services combining telephone, high speed Internet and video, the rapid growth of high definition TV is likely to require them to upgrade their systems to fiber optic cable, an industry consultant suggests. That's because metal wire-based coaxial and copper cable lack the capacity to carry the estimated 20 Mbps that end users will require in order to get all three services including HDTV. Michael Kennedy explains in Telecommunications Online:

Video services consume most of the bandwidth within the voice, video, and Internet Triple Play portfolio. About 2 Mbps is required to deliver Standard Definition TV and 9 Mbps is required for High Definition TV. Whereas network designers can safely over subscribe bandwidth higher up in the network this cannot be done when allocating bandwidth to a single enterprise establishment, household or local serving area— especially for video service. HDTV sets are already out selling SDTV so HDTV must be taken as the standard offering when planning an Optical Distribution Network. This means that each household must be allocated a minimum of 20 Mbps because several HDTVs are likely to be in use at the same time.

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