Wednesday, June 29, 2011

Horsepower to improve the business case for aerial fiber deployment

One of the toughest nuts to crack in the business case for deploying fiber optic cable plant is the cost of labor, which by some estimates accounts for 70 percent of the price tag.

Now an old world method -- horsepower -- is helping aerial fiber deployments pencil out, as this Reuters story out of Vermont illustrates.
"It just saves so much work - it would take probably 15 guys to do what Fred (a Belgian draft horse) and Claude (his human owner) can do," said Paul Clancy, foreman of a line crew from FairPoint. "They can pull 5,000 feet of cable with no sweat."

On a recent June day, the tall, burly man and his muscular workhorse toiled 10 yards off of a desolate dirt road in hilly Hardwick, Vermont. They were assisting a work crew manning trucks and together they lashed cable to existing aerial utility line strung along wooden power poles.

Saturday, June 18, 2011

Motorola CEO, FCC agree: Wireline is for premises Internet connectivity, wireless for mobile access

With telco wireless providers rolling out 4G service, some have raised hopes that it has the bandwidth to rival facilities-based customer premises wireline infrastructure to deliver the full spectrum of Internet service.

Motorola CEO Sanjay Jha dismisses that notion as unrealistic. Wireline will continue to be the optimum method of providing Internet connectivity and high bandwidth video content for “a long time to come,” Jha was quoted as saying this week by The Wall Street Journal.

Jha added that wireless spectrum in the U.S. remains “very limited,” and wireless providers will continue to be the primary supplier of Internet access to consumers outside their home.

Jha's perspective on the respective roles of wireline and wireless is shared by the U.S. Federal Communications Commission. In a May 20, 2011 report to Congress on the availability of advanced telecommunications capability as mandated by the Telecommunications Act of 1996, the Commission rejected arguments by some mobile wireless providers claiming they can provide sufficient bandwidth to substitute for wireline service.

Incumbents’ strategy to lock down underserved, unserved territories could backfire

Telecommunications infrastructure costs a lot to build and maintain. In that regard, it’s like roads and highways. Roads and highways are typically publicly owned and operated because the upfront cost to plan and build them added to the significant expense of ongoing maintenance can’t attract capital. The return on that major investment takes too long. Investment capital can earn a quicker and more certain profit invested elsewhere.

Under the same rationale, legacy telephone and cable companies build and upgrade their networks to provide today’s advanced telecommunications services utilizing Internet protocol on a limited basis— only where they can generate fast returns for inpatient investor capital.

The result is an incomplete telecom infrastructure. Or to use the transportation metaphor, it’s like having thoroughfares in the central part of town with outliers forced to rely on dirt and gravel roads. Investing additional funds in cable plant and other facilities to provide these services would take too long to cover the cost and begin generating profits on that investment.

But that doesn’t mean legacy providers see those dirt and gravel roads as outside of their transportation system. Since telecom infrastructure is a natural monopoly, investor-owned legacy telcos and cablecos want to keep it locked down as if it were their exclusive franchise.

That underlies the debate over public versus private ownership of telecom infrastructure. Incumbent providers decry public or community owned and operated infrastructure as duplicating their own proprietary networks, constituting unfair competition. Winning that competition from their perspective isn’t about traditional business competition: gaining and retaining market shares. Rather, it’s all about preserving hegemony over their self-declared service (or more accurately, “unservice” territories.)

That’s a zero sum game that produces many losers, condemning millions to an indeterminate future of dirt and gravel roads. According to a recent Federal Communications Commission report, an estimated 26 million Americans are offline and unable to obtain Internet access at a time when the Internet is rapidly replacing the single purpose legacy telephone and cable networks as an all purpose, global telecommunications system capable of simultaneous delivery of voice, data and video services.

Because of its high construction and operating costs, telecom infrastructure is a natural monopoly. However, a deliberate strategy to oppose community-based efforts to build a more complete and sustainable telecom infrastructure to reach those neighborhoods typically served solely by POTS (Plain Old Telephone Service) copper plant and shunned by cable providers could be construed by regulators and the courts as monopolistic and unfair market conduct.

It would be easy to argue citing the recent FCC data on Internet disconnected America that such conduct produces measurable damage and deprives consumers of telecommunications services and choices. For the incumbents, attempting to keep a lock on an unserved or underserved service territory may be more of a liability rather than an asset in the long run.

Thursday, June 02, 2011

Attention Netflix: Coordinate your business model with office space

Netflix is running into local government opposition in Los Gatos, Calif. over its plans to build 550,000 square feet of office space in the town.

Netflix is transitioning its delivery platform away from DVDs delivered to customer's homes via postal mail to delivering movies over the Internet.

Why doesn't it do the same with its office space and use a distributed workforce working out of their homes and otherwise remotely instead of relying on a 1950s pre-Internet business model that requires its staff to work in central office buildings?

Wednesday, June 01, 2011

“Muni broadband” debate based on false premise of “competition”

Connected planet has posted an account of a debate between advocates and opponents of telecom infrastructure built by local governments.
I submit this is a debate based on a false premise. Telecommunications infrastructure tends to be a natural monopoly due to its high CAPex barriers to entry as well as substantial operating and maintenance costs.

By definition, there is no true competition in a monopoly. Nor is competition robust in a duopoly of just two owner/operators of telecom infrastructure that exists throughout much of the United States: a telco and a cable company. A healthy, competitive market by contrast has many buyers and sellers. That does not and cannot describe telecom infrastructure, so any debate over “competition” is a nonstarter.

If the position of the incumbent legacy telcos and cable companies is they should have exclusive ownership and control of telecom infrastructure, I strongly disagree. The incumbents are NOT entitled to a monopoly or duopoly by virtue of their incumbency. Particularly when so many homes and small businesses remain disconnected from the Internet in much of their service territories as the U.S. Federal Communications Commission recently reported, noting that an estimated 26 million Americans remain offline.

Local government and community-based providers such as telecom cooperatives must step into the gap and address this market failure with alternative, nonprofit business models that can function to provide Internet access where investor-owned ones cannot.
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