Title II universal service obligation could complicate, delay Comcast-Time Warner merger

New regulations issued this month by the U.S. Federal Communications Commission reclassifying Internet access service as a common carrier telecommunications service subject to universal service requirements under Title II of the Communications Act could complicate and delay Comcast’s planned acquisition of Time Warner Cable.

Comcast is currently the dominant Internet service provider in many markets and its domination would increase if the merger is consummated. In addition, Comcast typically provides Internet bandwidth at or above the FCC’s definition of 25Mbps. While the FCC is opting to forbear several Title II provisions, the universal service requirement is not one of them. 

Utilities regulators in states where the combined companies have major market presence could well require the combined entity to provide service to all customer premises in their service territories under the Title II universal access mandate as a condition of approval of the merger. Under current market practices, cable and telephone companies deploy infrastructure to deliver Internet services in limited footprints that serve only selected neighborhoods and parts of streets and roads. To gain a green light from the California Public Utilities Commission, Comcast is offering to spend $25 million on building out infrastructure to serve unserved communities. That’s mere table crumbs that won’t go far in a state as large as California as Steve Blum of Tellus Venture Associates notes on his blog.

Imposing universal service as a merger condition would likely significantly alter the financials of the deal and potentially doom it since shareholders of both companies are likely to object to any major capital construction expenditures to expand infrastructure.

The new rules take effect June 12, 2015. Meanwhile, legacy telephone and cable companies and their trade groups have gone to court to attempt to block them from becoming law. Presumably they could argue enforcement of the universal service obligation would subject them to immediate financial harm and the rules therefore must be put on ice until the merits of their legal arguments against them can undergo judicial review. By the same token, regulators could in turn opt to put the Comcast-Time Warner consolidation on hold pending the outcome of the litigation challenging the FCC’s Title II rulemaking.

New Homeowner Has To Sell House Because Of Comcast’s Incompetence, Lack Of Competition – Consumerist

New Homeowner Has To Sell House Because Of Comcast’s Incompetence, Lack Of Competition – Consumerist

A sad tale of a consumer jerked around by incumbents and misled by the U.S. government's "broadband map" -- a major and useless component of the Federal Communications Commission's 2010 "National Broadband Plan."

And the consumer might find it hard to sell his home since not having an Internet connection is increasingly becoming like living off the grid.

Let's hope the FCC's recent policy deeming Internet as a common carrier telecommunications service requiring providers to universally serve all premises can help avoid these kinds of unfortunate circumstances that leave consumers high and dry.

Rural America: Welcome to Verizon LTE Broadband - $120/Mo for 5-12Mbps With 30GB Cap • Stop the Cap!

Rural America: Welcome to Verizon LTE Broadband - $120/Mo for 5-12Mbps With 30GB Cap • Stop the Cap!: “Definitely stay away [...] unless you like to see your data charges skyrocket (in my case more than doubling) when your use doesn’t,” reported Richard Thompson. “I’ve pulled the plug on it — literally.”

Time to dump the "bandwidth by the bucket" pricing model that bears no economic relationship to the marginal cost of providing it. It's a gouge, pure and simple, enabled by a natural monopoly market. Verizon has these consumers over a barrel in areas where its landline marketing partner, Comcast, doesn't offer service.

Disruptive forces bringing U.S. telecommunications infrastructure to an inflection point

Several disruptive forces are building toward a tipping point heralding a new era of construction, operation and regulation of telecommunications infrastructure in the United States. 

• The realization amid exponential growth in bandwidth demand that the nation needs to rapidly fiber up its legacy metal wire infrastructure and should have begun the work 20 years ago.
• The growth of local fiber to the premise infrastructure projects inspired by Google Fiber and the associated push back against state laws restricting the ability of local governments to build and operate telecom infrastructure.
• The obsolescence of bandwidth-defined "broadband" delivered over legacy metal wire infrastructure as an extension of plain old telephone service (POTS) and cable TV.
• The Federal Communications Commission's potential classification of Internet infrastructure as a common carrier telecommunications service amid growing popular sentiment that premise Internet service is a utility that should be universally available. 
• Excessive commercial risk that limits fiber infrastructure deployment to discrete neighborhoods.
• The recognition of the large moral hazard risk associated with public policy reliance on incumbent promises to build out the footprints of Internet infrastructure in their service territories.
• Growing unease with Comcast gaining excessive market power and getting a lock on most U.S. Internet premise infrastructure.
• The breakdown of the triple play "smart pipe" vertical business model due to high video programming costs and the rise of a la carte Internet video offerings.

High TV content costs threaten the “triple play” commercial Internet infrastructure business model

Television programming costs associated with the “triple play” (TV, Internet, voice) offering of legacy telcos and cable companies are the primary business risk facing the subscription-based, closed access, “own the customer” infrastructure business model employed by the legacy telephone and cable companies as well as Google Fiber.

Those costs are steep and threaten the viability of commercial fiber to the premise deployments that depend on future cash flows from service offerings – which include TV – to cover CAPex and provide ROI to investors.

So dear are TV programming costs that Google Fiber’s Milo Medin described them “the single biggest piece of our cost structure” and “the single biggest impediment" to further expansion. The Wall Street Journal reports costly TV content has prompted some small cablecos to scrap the triple play offering and reposition themselves purely as Internet and VOIP (Voice Over Internet Protocol) providers. Over the top (OTT) TV offerings by Sony and Dish Network are also similarly struggling with the high costs of TV programming.

Susan P. Crawford’s book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age describes the self-reinforcing TV programming market dynamics that cement the dominance of the big subscription-based incumbent telcos and cablecos – and Comcast in particular for live sporting events. These large players can afford the high TV programming costs. But large scale notwithstanding, it’s not TV for all since the big legacy telcos and cablecos cherry pick their service areas, leaving lots of consumers redlined and without Internet TV since they opt not to build the infrastructure to deliver it.

One possible way around this negative circumstance would be for the OTT Internet TV content players to organize consumers into large regional purchasing pools and cater to smaller providers as well as open access community fiber networks operated by local governments and utility cooperatives. That would shift market power to the purchasing side while at the same time bolstering these home grown Internet infrastructure players.

Broadband and the future of learning | Computerworld

Broadband and the future of learning | Computerworld: Since learning may take place anywhere and anytime, connected learners also need broadband access outside of school. Although 70% of U.S. households now have broadband, millions of households still do not. Private-sector initiatives are helping to expand access. For example, Comcast’s Internet Essentials program offers low-income families broadband service for $9.95 a month, along with the option to purchase an Internet-ready computer for under $150 and free digital literacy training. In its first three years of operation, the program has provided affordable broadband service to more than 350,000 households.

It should be noted that Comcast and other incumbent legacy providers redline many neighborhoods, leaving them without access to modern landline Internet connectivity at any price.

There are also promising public-private partnerships to increase access. In Forsyth County, Georgia, the local school district worked with the Chamber of Commerce to create a directory of free Wi-Fi locations in the community and to provide participating businesses with signs indicating where free Wi-Fi is available. And a middle school in Manchester, Tenn., that has equipped all sixth-graders with iPads had convinced local businesses to open their Wi-Fi hotspots to students to maximize the benefits of their technology tools.

Public-private partnerships need to go far beyond Wi-Fi and help construct fiber to the premise infrastructure to make blended learning possible since it heavily relies on students having adequate access in their homes. A good example is in Utah, where an investment firm, MacQuarie Capital, is partnering with the Utah Telecommunications Open Infrastructure Agency (UTOPIA) to finance and complete the construction of open access fiber to the premise infrastructure.

Verizon threatens to sue Netflix in war of words over video quality | PCWorld

Verizon threatens to sue Netflix in war of words over video quality | PCWorld

Netflix has cut deals with Comcast and Verizon to get priority treatment for its video streams. But Netflix isn't at all happy about having done so, characterizing it as highway robbery and extortion. And Netflix is making it clear it expects these edge providers to ensure a congestion free experience for Netflix customers under the agreements.

Verizon's position outlined in this story is other network factors not within its control can degrade connectivity and it thus can't be held responsible. That's likely tick off Netflix even more and escalate tensions into a scorched earth court battle. And perhaps into a deal with Google Fiber to go around the incumbent telephone and cable providers?

The growing tensions and threat of litigation makes it clear a holistic, universal pricing and settlement scheme is urgently needed to ensure providers at the core, transport and edge of the network are fairly compensated and share responsibility for stewardship of the Internet ecosystem and ensuring all -- and not just some -- premises at the edge can obtain landline connectivity. If the private players cannot accomplish this, it becomes more likely the government will intervene and do it for them.

Resolution Seeks High-Speed Internet For All Putney Residents | Vermont Public Radio

Resolution Seeks High-Speed Internet For All Putney Residents | Vermont Public Radio: “The governor made us a promise at town meeting here last year that he would get everything wired 100 percent, no ifs, ands or buts,” Field says. “I’ve got the quote.”

Instead, area lawmakers got an earful from residents who say they’re tired of hearing that Putney already has Internet service.

"Close to 300 of us in Putney only have dial-up," says Field. "In my case I pay $80 a month to Hughes.net. Can’t Skype, can’t stream anything. My wife’s a pediatrician in town. She can’t do her electronic medical records."

Nancy Braus says people on her road are getting Internet from Comcast or Fairpoint. But not her house. Braus has a daughter who’s deaf.

A couple of observations on this story:

• It's an example of the blow back politicians face after years of promises to address deficiencies in premises wireline Internet service with little or no tangible results.
• Ms. Braus's comment illustrates the highly granular nature of broadband redlining that renders government subsidy programs based on mapping and funding only "unserved" and "underserved" areas impractical. One address is offered service by incumbent wireline providers while another nearby premise is not.

Netflix performance on Verizon and Comcast has been dropping for months | Ars Technica

It wouldn't be at all surprising if Netflix and Amazon stood in the way of government approval of today's announced deal for Comcast to acquire Time Warner Cable without a pledge from Comcast to treat all network traffic equally along with meaningful regulatory enforcement. This story graphically shows why:
Netflix performance on Verizon and Comcast has been dropping for months | Ars Technica

IP-based service convergence rendering broadband debate irrelevant

Comcast's move into digital voice in 2006, AT&T's disclosure to Investor's Business Daily two years ago that it ultimately plans to shut down its existing voice network and replace it with a VOIP (Voice Over Internet Protocol) system in the limited areas where its U-Verse offering is being deployed and Verizon CEO Ivan Seidenberg's assertion at a Goldman Sachs investor conference last week that his company is migrating from the publicly switched telephone network (PSTN) and central offices designed to handle plain old telephone service (POTS) delivered over twisted pair copper wire to fiber to the premises (FTTP) all signal that wireline telecommunications is undergoing a paradigm shift.

The transition is away from the single purpose voice telephone and cable TV systems of the past to Internet-protocol based telecommunications infrastructure capable of delivering various media including high speed Internet connectivity, voice and video.

This paradigm shift is rendering the debate at the U.S. Federal Communications Commission and elsewhere over what constitutes broadband Internet increasingly irrelevant. What's gaining importance isn't the download and upload speeds that have dominated the debate over defining broadband but rather how to ensure these various IP-based services can be reliably and economically delivered to end users.

That takes a new and improved telecommunications infrastructure. This emerging IP-based infrastructure and the business models that can most rapidly deploy and support it is what truly deserve attention going forward. The pointless back and forth over how to define broadband keeps the conversation oriented retrospectively to the 1990s instead of where it needs to be: forward into the 21st century.

Why the incumbents prefer a sub 1 MBs broadband standard

Some are scratching their heads at recent comments submitted by large telcos and cable companies to the Federal Communications Commission recommending that broadband be defined at speeds of under 1 Mbs in the national broadband plan the FCC is due to present to Congress by February.

Why would they set the bar so low, observers rightfully wonder, particularly since such a low standard is already becoming obsolete given the explosive growth in bandwidth demand and video content.

It's clearly incongruous that Comcast, for example, would urge the FCC define broadband at circa 1998 levels of 256 Kbs at the same time it rolls out its DOCSIS 3.0 software upgrade providing downloads of 50 Mbs and potentially higher. Or for Verizon to suggest broadband be deemed 768 Kbs down and 200 Kbs up (the current FCC definition of "basic" broadband service) when its own fiber to the premises offering, FiOS, offers throughput on a par with that of Comcast.

Here's the explanation: These sub 1 Mbs standards are based not on what the providers are technologically capable of delivering today but instead on their business models. They have built out their proprietary infrastructures to the extent these models allow while providing a reasonable return and dividends for their shareholders.

By advising the FCC to define broadband on such obsolete and arguably bogus terms, the providers are essentially telling the feds they aren't serious about the issue. It's a frivolous, throwaway position that summed up says "forget about any national broadband plan and leave us the hell alone." It's reminiscent of the scene in the 1980s film Tin Men where a car salesman asks a tin man played by Danny DeVito what he's willing to pay for a Cadillac and DeVito answers "Five dollars."

That stance is likely to lead to more complaints from top FCC brass that the FCC's call for input on a national broadband plan is producing self serving and unconstructive comment that doesn't provide any illumination or guidance.

Mixed messages inside a broadband black hole

Life can be odd inside a broadband black hole where the normal laws of logic and common sense get twisted and break down.

Consider, for example, today's mail delivery. It contained the contradictory mix of 1) A letter soliciting Comcast Business Class service, a $79/month bundle of "business class Internet up to 4 times faster than DSL." (Query: how can it be compared to a nonexistent service -- no DSL here) and 2) A big postcard from HughesNet addressed to "DIAL UP INTERNET HOUSEHOLD" inviting me to suck a satellite to get speeds "50X FASTER than dialup." (Thanks but I'll pass).

Two direct mail solicitations: One from a provider that can't deliver what it pitches (Comcast) and another selling a costly, latency larded service (HughesNet) that could be more aptly dubbed MolassesNet.

Somehow these companies don't have their marketing campaigns straight. It's no wonder the government wants to map broadband availability because apparently the providers themselves are confused.

Cableco's wireless rollout targets urban mobile market -- not wireline coverage gaps

Here's a CNET article on Comcast's addition of wireless "High-Speed 2go” Internet service. The rollout shows that the nation's biggest cable company sees this offering as a mobile adjunct to its existing premises oriented wireline services -- and not a means to fill in gaps where its cable network isn't fully deployed.

Irony abounds in comments by U.S. representative, telco and cable reps on broadband stimulus funding

A highly interesting item appears in today's PC World. It reports on a telephone town hall conversation yesterday between a Tennessee resident and her Congressional representative, Representative Marsha Blackburn (R). It's an encounter to which many U.S. residents will readily relate.

The hapless constituent is stuck on dialup just one mile inside a broadband black hole event horizon. Repeated pleas to an unidentified broadband provider to roll out broadband service produced nothing and the constituent's patience has worn thin.

Blackburn responded by asserting the market would deliver if only more folks in the displeased constituent's neighborhood demanded broadband. Thus, Blackburn reportedly said, the $7.2 billion in subsidies and loan guarantees in the recently enacted federal economic stimulus legislation for broadband deployment to rural and other underserved areas are unnecessary since the market will solve the problem. That's patently incorrect as petitions by residents and small businesses to providers -- so called demand aggregation -- don't convince providers to deploy broadband infrastructure that their proprietary algorithms reject as economically unfeasible.

Ironically enough, Blackburn was disabused of her misapprehension that a competitive market exists in the natural monopoly -- and a duopoly at best -- that is wireline telecommunications service by representatives of two prominent members of the telco/cable duopoly at a panel discussion hosted by the Free State Foundation.

Thomas Tauke, executive vice president for policy at Verizon, pointed to market failure where the costs of providing service go beyond what providers like Verizon are willing to pay. Many of the areas without broadband are "very expensive to reach," PC World quoted Tauke as saying. Accordingly, Tauke added, broadband infrastructure subsidies such as provided in the stimulus legislation are entirely appropriate. The broadband funding in the stimulus measure also drew positive comment from Joseph Waz, senior vice president for external affairs at Comcast, who told the panel its inclusion is "very heartening."

That adds another layer of irony insofar as the big telcos and cablcos have gone on record elsewhere complaining the broadband funding provides little incentive for them to build out their infrastructures, arguing tax breaks would get infrastructure build out faster than grants or loan guarantees. They also object to the open access provisions attached to the stimulus funding.

Tensions erupt between telcos, cablecos over over California broadband build out subsidy levels

As recently reported on this blog, California's incumbent telcos are bitching to the California Public Utilities Commission, complaining a 40 percent subsidy to underwrite the cost of building out broadband infrastructure to areas of the state lacking adequate access under the CPUC's California Advanced Services Fund (CASF) isn't likely to be enough for many potential projects.

Now the griping has turned into a contretemps between some of the biggest players and Comcast has jumped into the fray. In comments filed Nov. 19 on the eve of a CPUC hearing today to consider restructuring the CASF, Verizon criticizes AT&T's suggestion the 60 percent provider match be abandoned, warning it could lead to too much state funding of some projects.

In its Nov. 19 comments filed with the CPUC, cable provider Comcast takes issue with AT&T's "incredible" suggestion that the CASF fully subsidize some projects and Verizon's proposal that the CASF share be increased up to 80 percent for selected projects. The cable company warns the higher CASF funding threshold would be contrary to the CASF's goal of funding only projects that are economically viable.

AT&T's suggestion that CASF provide 100 percent funding for selected high cost projects in unserved areas "is truly outrageous, particularly coming from AT&T," Comcast said in its filed comments. "The CASF was not set up to be a slush fund to cover 100 percent of the costs of the largest ILEC in the state."

Report: Comcast considers selling off infrastruture in Maine

The Times Record of Maine reports today that Comcast is mulling selling off its holdings in the state as part of a plan to dispose of 46 properties nationwide. (Separately, an industry source discloses one of the Comcast plants to be divested serves Coalinga in California's Central Valley.)

According to the newspaper, municipal officials in several Maine towns said they were contacted by Comcast and informed of the possible sale. A Comcast spokesman declined to comment on the report.

Following this report, the Associated Press May 23 reported Comcast plans to sell off its plant in eight states serving between 400,000 and 500,000 subscribers. The states reportedly include Maine, Kentucky, Louisiana, New Mexico, Virginia, Georgia, West Virginia and California. Comcast is staying mum on the specific locations where it will sell off its assets.

Robert Serrano, an analyst at SNL Kagan in Monterey, Calif., told the AP Comcast is "pruning some of the more outlying areas in order to make a more efficient cluster."

Comcast gets well deserved poor customer satisfaction ranking

Not surprisingly, Comcast's customer satisfaction ranking in the Q1 2008 American Customer Satisfaction Index is in the cellar at 54. Dealing with this company is like talking to a wall. While Comcast's Web site informs me that I qualify for various services when I enter my address in ZIP Code 95709, when an attempt is made to order service, it initiates an endless loop with on line customer service personnel who simply shrug and repeat, "You're not in our system."

Truly surprising given AT&T's dismal track record of over promising -- "Your World Delivered" -- and under delivering is the telco 's score of 75 out of 100. AT&T informs me I'll be able to order its U-Verse bundled service in the next 1-2 months. With the absence of newly installed U-Verse VRADs in my area, I'll withhold judgment as to whether I'd vote to raise the telco's score.

The index is produced by the University of Michigan’s Ross School of Business in partnership with the American Society for Quality (ASQ) and CFI Group, and is supported in part by ForeSee Results, corporate sponsor for the e-commerce and e-business measurements.

Comcast applies for California video franchise

Comcast has joined cable providers Cox, Time Warner, Charter and Wave Broadband in applying for a statewide franchise with the California Public Utilities Commission under the Digital Infrastructure and Video Competition Act that took effect in early 2007.

Comcast's Dec. 12 application can be viewed on the CPUC's Web site.

Telco/cable duopoly an obstacle to information tech progress

The U.S. telco/cable duopoly is getting slammed in articles this week for standing in the way of progress in terms of getting more Americans connected to high speed Internet access.

PC World magazine blasted the big telcos like AT&T and Verizon as among the most anti-tech organizations in America:

The effect of slow broadband speeds and poor availability on tech is obvious. A whole generation of innovative businesses that depend on real broadband is still waiting to come into existence. For now, consumers will have to wait for new, lightning-fast information, media, and telecommunications services that could change the way we work and play.

Tech.Blorge.com, meanwhile, writes that the lack of competition has made big cable player Comcast indifferent to its customers who compete for a static amount of bandwidth over its coaxial cable. Tech.Blorge.com sees Comcast as headed the way of the dinosaurs into tech extinction with the likes of America Online (AOL):

For a short time, Comcast will be able to sit on the customer base it has developed and sap money from customers that could receive better products at a more competitive price. But, just like AOL, once people get a taste of where technology is heading, that pile of money will deplete to nearly nothing…unless Comcast can step up, stop functioning like a monopoly, and start being competive.

Cable company in regulatory no man's land, SoCal city charges in lawsuit

This type of situation may begin to crop up frequently in California, where cable companies can opt to remain under local government franchise agreements or get a statewide franchise from the California Public Utilities Commission under new legislation that took effect this year, the Digital Infrastructure and Video Competition Act.

According to the San Diego Union-Tribune, the city of Carlsbad believes Time Warner is operating outside the law because it doesn't have a franchise from the city nor has it received a statewide franchise. Nor has it even applied for one according to the CPUC's Web site.

Holding up a city franchise with Time Warner is Carlsbad's insistence on higher fees to fund broadcasts of city council and other government events.

It's probable there will be other such lawsuits brought by local governments over this and, more likely, when negotiations stall over buildout requirements in which the locals insist cable companies serve their entire communities instead of leaving parts in the dark on the wrong side of the digital divide. The likely targets include telcos and other cable players -- like Comcast for example -- that have so far not applied for or received statewide franchises.