Why competition suffers in the broadband market

One of the biggest debates is over how much broadband telecommunications should be regulated. That debate is in turn fueled by another over the fundamental nature of the market. Is it a competitive market and will competitive pressures force the market to provide broadband to those who want it at reasonable prices? Or is it an uncompetitive market as Robert Atkinson, president of the Information Technology and Innovation Foundation, described it at a conference today in San Francisco.

Atkinson like your blogger and many other observers tend to see it as a monopoly or duopoly with broadband provided by just a telco, a cable company or in all too many cases, neither, leading to the formation of broadband black holes stretching across the landscape. The reason, Atkinson explains, is the high cost of becoming broadband provider and deploying the necessary infrastructure.

Atkinson's right. By way of illustration, if another high cost infrastructure such as roads and highways was left to private market providers who would charge tolls for access, there would only be a small number of road builders and plenty of places where roads -- like broadband -- don't go. That's why roads in the vast majority of places are provided by the public sector.

Despite the substantial financial heft of the big telcos and cable companies and their ability to raise money on Wall Street, they simply can't put up the money themselves to build out their infrastructures to provide broadband to nearly every one who wants it. They'd have to take on billions more of bond debt and sacrifice near term earnings --something their investors wouldn't tolerate.

Increasingly, it appears only a partnership of both the private and public sectors can eliminate America's numerous broadband black holes and close the digital divide.

Connecticut should tell AT&T to hit the road

AT&T is at loggerheads with Connecticut regulators that want it build out its infrastructure to serve more residents and businesses as a condition of getting approval to deploy its triple play (voice telephone, Internet access, Internet protocol TV) "U-Verse" offering in the state.

AT&T contends it can't do so profitably and is threatening to pull the plug on U-Verse in Connecticut. Good riddance; this technologically challenged turkey probably won't fly anyway. Connecticut should stick to its guns and tell AT&T in clear terms that building a swiss cheese telecommunications infrastructure filled with broadband black holes is not acceptable.

This is a prime illustration of the need for the locals to take charge and create public-private partnerships with locally owned and operated telecommunications providers and tell the big, out of state corporations who would create broadband winners and losers to hit the road.

Connecticut AG, AT&T clash in court over broadband build out

As this blog reported in early August, Connecticut Attorney General Richard Blumenthal wants to ensure the "connect" in Connecticut means the entire state and not just selected local jurisdictions when it comes to broadband access.

Blumenthal therefore is moving to force AT&T to deploy its triple play U-Verse service under state rather than local regulatory jurisdiction. AT&T is fighting back, taking Blumenthal to court to challenge his order.

This is a high profile legal showdown worth watching as a state AG with a strong consumerist reputation is basically telling the telco/cable duopoly that with market domination comes the responsibility to serve everyone as is current regulatory policy for basic telephone service.

WISP pulls out of Northern California, El Dorado County

In June 2006, NuTel Broadband Corporation, a Cranbury, NJ-based broadband wireless managed services provider announced plans to deploy wireless "mesh" broadband networks in Sacramento, Chico, San Jose and El Dorado County as part of a 14-state rollout. The company is now pulling out of Northern California.

The WISP had plans to begin rolling out service in Folsom and El Dorado Hills and then head east up US 50 into the foothills. NuTel CEO Joe Fiero confirmed the withdrawal in an email today. Fiero said the decision to pull the plug on the region was prompted by concerns from would be business partners that Fiero says feared potential competition from municipal Wi-Fi networks that would provide free or very low cost access to users. NuTel's business model involves partnering with existing ISPs and WISPs as well as residential telecommunications wiring contractors, with NuTel providing back office management as well as a VOIP (Voice Over Internet Protocol) offering via NuTel's proprietary backbone and switch.

"From a demographics point of view, we would love to be in the region," Fiero wrote. "It’s finding willing partners to build and operate the system that has been the issue. We have done exhaustive research and spent hundreds of hours to locate economic sources for bandwidth and proper antenna locations. Someday we hope to put all that to good use."

El Dorado County's locally owned and operated WISPs including Remotely Located and Sierra Advantage likely welcome Nutel's retreat, although from this blogger's perspective it appeared doubtful NuTel like Clearwire and other big multi-state WISPs would have ever served areas east of El Dorado Hills. Nor would they likely face competition there from free or cheap public Wi-Fi.

El Dorado County economic development chief calls Internet access key

Sam Driggers, installed earlier this year as El Dorado County's economic development director, told county supervisors this week that having good Internet access is key to the county's economic health. Moreover, Driggers suggested, a higher quality of life that can be had outside urban areas should not mean going without broadband:

Driggers said El Dorado County appeals to people who want to get away from the hustle and bustle of more urban regions.

"People want to live in quality-of-life areas, but they also want to work. It's in tandem," he said, and Internet access is key. "If you don't have broadband, you don't have access to the world."

Your blogger and El Dorado County home-based business operator is heartened by Driggers' remarks to the board and hopes the supes give them the serious consideration they deserve.

To underscore Driggers' efforts to get his bosses to view the county's telecommunications infrastructure as being as vital as highways, water and power when it comes to the county's economic health, I urge county residents to sign this petition. It calls on the supervisors to direct county staff and retain necessary outside consultants to establish a public private partnership with fiber optic telecommunications vendors to utilize county rights to way to construct open access fiber to the node/neighborhood (FTTN) infrastructure to serve the current and future telecommunications needs of residents and businesses situated within unincorporated El Dorado County.

AT&T offers fixed terrestrial wireless broadband

AT&T is now offering fixed terrestrial wireless "broadband" connections where it doesn't provide wireline-based Digital Subscriber Line (DSL) service in addition to reselling WildBlue's satellite Internet service.

According to a customer service representative I spoke with today, the service offers speeds of 400-700 Kbs down and 250-300 Kbs up for $59.95 per month plus a $99 installation charge which includes a computer adapter card interface. Not quite broadband in this blogger's definition of 1.5 Mbs and higher, but certainly better than dial up. Ma Bell is offering a 30 day trial period for new customers, who can cancel if the service doesn't live up to their expectations.

This development comes as AT&T increases its fixed terrestrial broadband presence, deploying WiMAX-based offerings in Alaska and in the former BellSouth territory it acquired earlier this year, as well as spending $2.5 billion to acquire additional wireless radio spectrum, according to this AP dispatch today.

AT&T's foray into fixed terrestrial wireless isn't likely to offer Ma Bell a competitive edge over Wireless Internet Service Providers (WISPs) who are moving to fill the many broadband black holes in locales like El Dorado County, California. Wireless broadband offerings by El Dorado County WISPs Remotely Located and Sierra Advantage offer a greater range of choices -- including significantly higher connection speeds -- that equal and exceed AT&T's fixed terrestrial wireless offering based on speed and price. The only way AT&T can hope to compete with these emerging WISPs is to battle them on the ground by upgrading its wireline infrastructure to allow it to reliably offer higher speed connections for comparatively lower prices. So far, there's no indication it's willing to make the necessary investment, leaving the market wide open for the WISPs.