Self perpetuating broadband black holes a product of telcos' cynical digital redlining strategy

Since late 2006 and again this week, there have been reports of slowing growth in U.S. wireline broadband subscribers and particularly those using telco-provided Digital Subscriber Line (DSL) service. Analysts and other observers have blamed the demand side of the market, attributing the decline to a slowing economy and market saturation.

There's likely a better explanation -- and it's on the supply side of the equation. Since 2006, DSL deployments by the tier 1 telcos such as AT&T and Verizon have been slowing and are now all but halted as the companies concentrate on building out their triple play (U-Verse and FiOS, respectively) infrastructures in a relative few selected markets.

For those unfortunate enough to reside or do business in these companies' service territories where they don't offer wireline broadband connections, there's another factor at work: the self perpetuating broadband black hole. They're the natural product of the telcos' digital redlining strategy.

Since the big telcos don't do market research, they rely on what they term as "pent up demand" for services. As the broadband boom unfolded at the start of the decade, pent up demand grew. Right around the time of the first reports of a broadband "slowdown" began appearing, that pent up demand had likely recently peaked. Folks who have been asking for wireline broadband connections over a period of 5-7 years and have yet to obtain them by mid-2008 have likely concluded they never will. So they stop asking for service, ignore misguided ads for telco broadband, and pent up demand for broadband falls away. The telcos can then cynically point to the falling demand to justify their continued failure to deploy broadband infrastructure to these redlined neighborhoods.

Louisiana city to mount legal challenge of state video franchise law

The Alexandria, Louisiana city council has authorized its city attorney to bring an action challenging the constitutionality of state legislation putting the state in charge of most video franchises. Alexandria says the law is bad for consumers and has placed it at a disadvantage in its negotiations with its video franchisee.

At least a dozen states have preempted local governments by enacting video franchise legislation. The legislation was sought by telcos wanting to compete with traditional cable companies but fearful local officials would require them to provide access to all residents and not engage in digital redlining.

Read the story here.

AT&T engaged in digital infrastructure redlining, telecom prof says

Barry Orton, a University of Wisconsin at Madison telecommunications professor, says AT&T's actions show the big telco is engaged in digital redlining in Wisconsin.

The Wisconsin State Journal reports AT&T has deployed its fiber-copper hybrid U-verse infrastructure in parts of Racine and Milwaukee. But if the company decides to offer service in Madison or elsewhere, it won't announce the rollout, AT&T spokesman Jeff Bentoff told the newspaper. Rather, Bentoff said, AT&T will contact consumers individually through direct mail and door-to-door visits.
"When it 's available, we 'll let them know, " Bentoff said.

AT&T's rollout strategy shows the big telco wants to select the neighborhoods in which to offer advanced telecommunications services, Orton says, unlike cable agreements with local governments that typically require providers to serve the entire jurisdiction. "That 's what this is fundamentally about -- the ability to cherry-pick neighborhoods, " Orton said.

Author of California legislation benefitting telcos solicited charitable contributions from Verizon

The Sacramento Bee is reporting California Assembly Speaker Fabian Núñez solicited $120,000 in contributions to his designated charities from Verizon three months after Gov. Arnold Schwarzenegger signed Núñez's Digital Infrastructure and Video Competition Act of 2006 into law.

In addition, the newspaper reports AT&T made three grants of $5,000 apiece last year at Núñez's behest.

The law permits telcos like Verizon and AT&T to offer advanced broadband-based telecommunications services including Internet Protocol TV (IPTV) with a statewide franchise granted by the California Public Utilities Commission. The legislation authored by Núñez, AB 2987, shafted areas outside of urban centers such as Núñez's Los Angeles district because it does not require providers to build out their infrastructures, sanctioning digital redlining and leaving gaping broadband black holes in these areas intact.

A spokesman for Núñez issued the perfunctory denial of any link between the solicitation of Verizon and the legislation.

Emerging fault line of the digital divide: new vs. older neighborhoods

The outlines of a new fault line along America's digital divide separating broadband haves from broadband have nots is becoming more and more apparent.

The split is between older, established neighborhoods and newer subdivisions, the latter often governed by a homeowner association. Telcos and cable companies like these developments because they believe new homebuyers will purchase more profitable bundled services such as the so-called "triple play" package of voice, high speed Internet access, and video programming. They can also negotiate exclusive deals with the association that lock out other providers and assure a higher take rate.

This is leaving older neighborhoods currently without broadband with greatly dimished prospects for ever getting broadband as providers effectively redline these areas, concentrating instead on new developments. This is bound to produce a political backlash from homeowners in older neighborhoods who will increasingly turn to their local governments for a solution. That in turn will drive incentives for public-private parterships in which local governments provide public rights of way for the construction of open access broadband telecommunications networks.

Welcome to my neighborhood, a broadband black hole

The typical explanations for broadband black holes tend to fall along geographic or demographic lines. Homeowners are either located too far from existing telecommunications infrastructure or telcos and cable companies don't like their income levels, figuring they won't spring for more profitable premium and bundled broadband services.

Apparently my neighborhood is an exception to both rules and I wonder if perhaps there are others like it. It's just two miles from a major U.S. highway where both DSL and cable services are available.

The demographics are don't fit the usual rationale for digital redlining either. One nearby property owner is building two residences and a home office (and large pool complex) on his land. Just up the road, another property has just been listed for more than $1 million. Seems like the kind of demographics the nearby telco (AT&T) and cable company (Comcast) would like. Can't blame low density either. Several of my neighbors are within 100 feet of my home.

Apparently broadband black holes are like the physical black holes in space to the incumbent telco and cable providers. It's as if they don't exist and no information about them can escape.