Back to the future: U.S. Supreme Court accepts telco antitrust case

Many readers likely remember when AT&T agreed to be broken up into several regional, independent operating companies in 1984 under a consent degree to settle a federal anti-trust case.

When the feds splintered Ma Bell's progeny and cast them to the winds, they created a bunch of smaller monopolies in the process of breaking up a big one, plaintiffs allege in an anti-trust action that contends the regional operating companies are engaging in anti-competitive market conduct by agreeing to stay out of each other's territories.

The New York Times (registration required) reports today the U.S. Supreme Court has accepted the case, setting the stage for one of the new court's most far reaching decisions. The Times reports the case, Bell Atlantic v. Twombly, No. 05-1126, will be heard in the Supreme Court's next term which begins in October.

Regulatory uncertainty creates "double play" opportunity for Comcast expansion

As the big telcos including AT&T and Verizon battle it out in Sacramento with the cable companies over legislation that would preempt local government cable TV franchising authority, the cable companies have an opportunity under the current rules to expand and grab market share from the telcos.

In El Dorado County, Comcast is the franchisee. If Comcast's executives were smart and aggressive, they would put the pedal to the metal and dramatically expand in the county while AT&T is distracted down in River City fighting for the right to go around county authorities with a state authorized franchise. It's a strategy right out of the 1980s business bestseller In Search of Excellence that advised a bias for action to gain competitive market advantage.

Earlier this month, this blog reported Comcast plans to launch digital phone service across central California from Chico to Fresno as early as first-quarter 2007. Digital phone service -- and most certainly high speed Internet -- would likely be wholeheartedly embraced by El Dorado County residents who have for years experienced noisy and unreliable voice service over AT&T's aging copper cable plant and who lack broadband access to boot.

It's a compelling double play opportunity that Comcast could play out under the county franchise agreement provided both the county and Comcast waive a provision in the agreement requiring new subscribers outside Comcast's current service area to subsidize expansion costs. And it would likely produce a high take rate and rapidly expand Comcast's customer base in the county.

Comcast should step up to the plate and take advantage of the political uncertainty distracting its would be competitors now that Comcast going into full telco mode and expanding beyond its core entertainment service business model. A "triple play" bonus would be Comcast's ability to sell these newly acquired "double play" customers television programming services.

No fiber optic in Pleasant Valley: Just a conduit

A reader reports from the field: Fiber optic cable is being placed in the trench for the El Dorado Irrigation District's Pleasant Oak water main replacement project.

EID clarifies: No fiber is being installed -- just a conduit for possible future fiber optic cable deployment.

I guess that's a start. But I'm sure Pleasant Valley and Sly Park area residents and businesses would prefer the whole fiber enchilada now so they can get out of dial up hell and also enjoy reliable and high quality voice telephone service.

May 2006: 72% of U.S. households with Internet used broadband connections

That's according to the results of a Nielsen//NetRatings survey reported today in Adweek. The survey found the 72 percent figure is up 15 percentage points compared to May 2005 (57 percent). New broadband users tend to be former dial-up users, as dial-up penetration dropped by 15 percentage points over the same period of time, going from 43 percent to 28 percent.

Much of El Dorado County continues to bring up the rear, stuck in the 28 percent category not out of a preference for dial up, but for lack of broadband Internet access. For too many in the county, it's still Al Gore's Internet, frozen in time where it stood when Gore assumed the vice presidency in 1993 and dial up was the only way to get Internet access.

Writer suggests threat of eminent domain to spur telcos, cable companies to compete

Maybe the incumbent network providers--the Verizons, Comcasts, AT&Ts--can be made to compete; threatening to seize their stagnating networks via eminent domain is just one creative idea to get them to do this. A truly competitive, non-neutral network could work, but only if we know its real economic value. If telcos or cable charge too much, someone should be in a position to steal the customer. Maybe then we'd see useful services and a better Internet. Sounds like capitalism.

Andy Kessler in The Weekly Standard.

In the public policy realm, this is what would be known as the nuclear option -- a final, overwhelming and extreme solution. Local governments have a number of interim measures they can take to encourage preferred outcomes to serve the best interests of the citizenry or discourage those things deemed harmful to the public interest.

As Mr. Kessler notes, in the wake of the U.S. Supreme Court's recent Kelo ruling upholding local governments' broad authority to exercise eminent domain in the name of economic progress, it wouldn't be a major leap of logic to argue that just as governments exercise emiment domain to acquire rights of way for roads and highways, they might also do the same for telecommunications systems.

Just like roads and highways, these systems are key infrastructure vital to a community's economic health and well being and therefore, it could be reasonably argued, the public interest in them outweighs the financial interests of those who own them.

Local governments throughout the U.S. have already gone into direct competition with telcos and cable companies with their own municipal broadband systems. Perhaps in the post Kelo environment, they'll also begin to consider forming telecommunications redevelopment agencies to take over aging phone and cable systems. A key advantage to this strategy is that it eliminates an entrenched monopolistic provider that refuses to upgrade its systems to make broadband widely available, but by its very presence casts a chilling effect on the market, discouraging the entry of competitors.

Verizon exec: Broadband is vital infrastructure

"I think broadband infrastructure is as important as highways and airports and any other type of infrastructure the state needs, now and for the future," said Timothy J. McCallion, Verizon regional president.

McCallion, quoted in this Sacramento Bee article today on the multi-million dollar lobbying battle between telcos and cable companies over video franchise rules, is absolutely correct. Wonder if his competition, AT&T, gets this?

So far, there's no indication that it does in El Dorado County, where large areas of the county remain relegated to dial up and unable to get broadband Internet access. If AT&T can't or won't deliver this vital part of the county's infrastructure, perhaps Verizon will.

Beyond DSL: Rural consumers want "triple play" services

This new study by the National Carriers Exchange Association (NECA) finds consumers in rural areas expect telcos to provide more than DSL. They're looking beyond DSL -- an interim technology designed to allow broadband to work over copper-based cables -- to their future needs for higher bandwidth to support multiple Internet protocol-based services known in the industry as a "triple play" of high speed Internet, voice, and video. That finding is relevant to El Dorado County, where much of the copper cable system is deteriorated and unable to support DSL services anyway.

The results are not surprising since telcos have broadly promoted triple play as the emerging product standard and are taking on cable companies for the right to sell video Internet Protocol Television (IPTV). The question is will they invest the estimated $11.9 billion to upgrade their networks to deliver minimum speeds of 8 Mbps in order to offer triple play services?

This study goes beyond NECA’s previous examinations of the challenges of bringing broadband to rural America. In The Packet Train Needs to Stop at Every Door, NECA looks at the transformation occurring in rural networks toward Internet Protocol (IP) technology to meet evolving customer expectations for “triple play” multimedia services—a combination of voice, data and video.

These services are driving the need for much higher delivery speeds in the “last mile.” The study examines issues affecting a rural consumer’s ability to access advanced services comparable to those available to urban consumers. Among
these issues are the continuation of stable funding mechanisms to encourage needed network investment
in rural America and emerging issues associated with the delivery of multimedia services. Availability of these services may be a key to increased “take” rates for broadband. These are among the subjects that must be addressed to ensure the packet train arrives on time in rural America.

Another WISP entering El Dorado County

NuTel Broadband Corporation, a broadband wireless managed services provider based in Cranbury, NJ, announced it plans to deploy wireless "mesh" broadband networks in Sacramento, Chico, San Jose and El Dorado County as part of a 14-state rollout.

The rollout is targeting underserved suburban and rural subscribers and small-to-medium sized businesses in regions where broadband wireless network services have been limited or generally unavailable, according to NuTel.

NuTel CEO Joe Fiero says unlike most wireless broadband systems that utilize a copper cable-based data line to connect them to the Internet, NuTel uses fiber optic cable as the system "backhaul," providing a minimum throughput of 45 Mbps, offering plenty of bandwidth for future growth. It will also offer proprietary network VOIP (Voice Over Internet Protocol) that allows subscribers to make digital voice telephone calls over the system.

Fiero says NuTel expects to offer 192/192 kbps Internet connectivity for $14.99 a month, 1.5/1.5 mbps for $34.99, and a bundled Internet and unlimited digital voice calling product at $59.99 per month.

In hilly terrains like El Dorado County, wireless faces a major technological challenge since it requires a clear, unobstructed line of sight to reach end users. Not NuTel's "mesh" system it's deploying in conjuction with Santa Clara-based SkyPilot Networks, which Fiero says is based on a "close spaced node topology that gives us the ability to saturate the coverage area."

Given the many underserved areas of El Dorado that are clearly within NuTel's stated target market such as parts of Placerville, Garden Valley, Camino, Pollock Pines, Pleasant Valley and Mosquito, I asked Fiero when NuTel would be deploying in these areas. Unfortunately despite their starkly underserved status with no broadband services, Fiero didn't have good news.

Turns out parts of Folsom and El Dorado Hills are running short of DSL connections from AT&T (AT&T isn't confirming this) and NuTel will roll out there first, eventually making its way east up Highway 50. Fiber optic cable is also more readily available in Folsom and EDH at this time, Fiero explains.

Memo to Mr. Fiero: fiber is also available farther up the hill. Those who have been stuck on the wrong side of the digital divide surrounding Placerville will surely be watching with interest to see if NuTel can get its system off the ground on the western edge of the county during this initial deployment and if it lives up to its stated mission of providing service in underserved areas where broadband is not available.