Verizon CEO wrongly compares Internet usage to basic utility consumption

Internet Service Cost: Verizon CEO says heavy broadband users pay more | BGR: Are you constantly streaming high-definition video, downloading tons of Xbox One games and sending massive files to friends and family? You should pay more for Internet access than your neighbor, who only uses a 10-year-old PC in his living room to read email and occasionally browse the Internet for cat GIFs. This is the position of Verizon CEO Lowell McAdam, who said this week that heavy broadband users should have to pay more for home Internet access than those who don’t take full advantage of the service for which they already pay top dollar.

McAdam's logic would make sense if an Internet service was like that of other utilities such as electric power, water or natural gas. These are limited commodities that require some incentive to conserve their use so that they may be available to all who need them. That's why these utility providers use tiered billing schemes that tap into price elasticity -- the tendency to use less of a commodity as its price increases -- and create incentive to conserve via penalties for excessive consumption. There is no similar need to conserve Internet bandwidth. Someone who uses more of it does not impose higher marginal costs on Verizon or any other Internet provider to deliver that higher level of usage.

That said, McAdam is correct to expect that customers of its FiOS fiber to the premise service to help offset the capital and operating costs of the service. But treating bandwidth as a limited commodity when in fact it is not isn't the way to go about it. Instead of creating a false paradigm of bandwidth scarcity, McAdam and other industry leaders should endeavor to foster a mindset of bandwidth plentitude. Big bandwidth promotes more uses and applications of it, making it more valuable to households and businesses. And as those users realize that value, demand for fiber connections will grow, in turn increasing the value of the network under Metcalfe's Law and Verizon's investment in it. When it comes to the Internet, more is better -- not less.  What Verizon and other telecommunications companies should remember is they are not in the business of bundling and selling bandwidth. They are in the communications business.

Rural areas shortchanged in broadband Internet service - Paradise Post

Rural areas shortchanged in broadband Internet service - Paradise Post: Jim Moorehead is working with the Broadband Alliance of Mendocino County to get the service to that county's rural areas. He said there are about 16 other counties in the same boat.

"We're not critical of the big companies for not doing it," he said. "They've got a responsibility to their shareholders." Still, he said he would like to see more money going toward installing those services for rural areas.

When a ratepayer gets a bill, he is paying a lot of nickel and dime charges. One of those charges is the California Advanced Services Fund (CASF), which is money that goes into closing the "digital divide," Moorehead said.

"That fund can help close it," he said. "The problem is, the carriers are fighting it."

A lot of this going on in California. It costs too much for the legacy incumbent telephone and cable companies to provide Internet connectivity to all premises in their service areas, so the kids there end up marooned in broadband backwaters. The incumbents don't want the subsidies Moorehead mentions to offset the high costs -- or anyone else receiving them either.

In addition, the CASF utilizes outdated, speed-based standards to determine areas eligible for subsidies rather than setting a higher, goal-based standard such as universal fiber optic premises Internet connectivity. It's a perfect prescription for a race to the bottom in a state that has historically viewed itself as a leader.

How Google Fiber is revolutionary -- and how it's not

Google Fiber is revolutionary with the medium of its infrastructure: fiber all the way to the customer premise and the enormous headroom it offers to accommodate future bandwidth growth and new, high bandwidth services. This will allow Google Fiber to leap past the big incumbent national telephone and cable companies bogged down by their existing investment in wire cable infrastructure designed for a pre-Internet era. As Marshall McLuhan put it, the medium is the message. And the medium is fiber to the premise.

Google Fiber also has a revolutionary business model that lessens the pressure to get customer premises to subscribe in order to make the network economics pencil out. It allows customers to sign up for a low cost, multi-year, flat rate connection designed to cover the cost of connecting the premise. The big telcos and cablecos, by comparison, typically charge many thousands of dollars to connect a premise lacking access to a connection, with cablecos charging about $65,000 per mile.

Where Google Fiber's business model is not revolutionary is that like the big legacy incumbents, it is a closed "walled garden" that seeks to own the customer rather than an open access network that sells access to customer premises on a wholesale basis to those wanting to market services over it. This imposes major marketing costs to acquire subscribers one at at time, limiting Google Fiber to those areas where it can get a good return for its marketing and infrastructure investment.

Critics of this business model such as Michael Elling (featured in this video) contend it degrades the value of the network by limiting its ability to scale, invoking Metcalfe's Law -- that implies a network is only as valuable as the number of subscribers on it. Since fewer subscribers can connect to a limited, closed network, it becomes less lucrative in the larger scheme for those at the core providing Internet delivered services such as Netflix, Amazon and ironically, Google itself.

The rainbow rabbit leaps over incumbents: Google Fiber in diligence for expansion in 9 metro areas of U.S.

Google Fiber's announcement today that it is in diligence with local governments in nine metro areas of the United States for possible expansion of its proprietary fiber to the premise (FTTP) telecommunications infrastructure illustrates how a company that has been in the Internet business from the beginning can nimbly hop over legacy incumbent telephone and cable companies. The incumbents are weighed down by large investments in metal wire-based infrastructure and outmoded pricing structures that rely on creating artificial bandwidth scarcity and unit-based consumption. They must also satisfy shareholders who favor big dividends over capital investment in FTTP networks -- which explains why Verizon halted its FiOS FTTP product expansion in 2012. Finally, incumbents have sowed sour relationships with local governments that have asked for better service for their residents for years, making them likely to heartily welcome the Googlers.

What's also evident from today's announcement is Google Fiber's colorful hare won't likely be running to areas of the U.S. where it's needed most -- locales where homes and businesses lack wireline premises Internet service due to redlining by the incumbent providers.

Those areas will likely have to rely on municipal and cooperative fiber builds, although some investor-owned players could potentially offer them FTTP as in this rather counterintuitive circumstance in Mississippi. They can, however, benefit from Google Fiber's experience, adopting principles and techniques that lower costs and improve the economics of FTTP. These include prioritizing construction based on interest from potential subscribers and differential pricing models that include an option for basic, flat rate service at low cost for a limited period of time.

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

The major causes of U.S. premise Internet service policy quagmire

U.S. telecommunications policy for premises Internet connectivity is in need of reassessment and revamping. It severely limits the nation’s ability to ensure all homes and businesses have fiber to the premise Internet connectivity capable of serving both current and future needs as bandwidth demand continues to grow exponentially.
 

Call it the Levin quagmire, named after former U.S. Federal Communications Commission official Blair Levin. In 2012, Levin predicted little change in the status quo, noting for most Americans over the near term, the best wireline network available to them will be the same one they have now. According to the FCC, for about 19 million Americans that’s dialup, state of the art technology in the early 1990s when Bill Clinton was starting his first term as president.

Summed up, these are the circumstances and policies that have produced the current quagmire:

• There is an insufficient business case for legacy incumbent telephone and cable companies to invest in building out their networks to serve all premises in their service areas or to upgrade existing infrastructure to fiber to the premise service. Nevertheless, these providers generally don’t avail themselves of federal and state subsidy programs aimed at capitalizing the cost of Internet infrastructure.
  

• Federal subsidy programs such as the Connect America Fund are only available to telephone companies and not cable companies that are becoming the dominant premises Internet service providers over telephone companies that are instead concentrating their capital investments on mobile wireless markets.

• Legacy incumbent telephone and cable providers view their service territories as proprietary franchises. Consequently, they oppose the award of subsidies to alternative providers and lobby for subsidy program eligibility rules inappropriately based on mobile wireless service and outmoded and changing standards of Internet service. They also lobby for state laws that bar local governments from building and operating fiber to the premise networks or make it impractical to do so.

California should invest in modern telecommunications infrastructure, not high speed rail

Stanford University public policy professor Joe Nation makes an excellent point in this article on transportation infrastructure. Nation, a former California state legislator, notes high-speed trains work in densely populated areas (like the Boston-New York-Washington corridor, for example) and not states like California with large rural, quasi-rural and exurban areas.

In the evolving digital, information-based socio-economy (much of it innovated in Silicon Valley), the Golden State would likely be better off  investing in fiber to the premise telecommunications infrastructure. Particularly since market forces don't tend to produce meaningful private investment in premise telecommunications infrastructure in less densely populated areas that are in danger of becoming neglected backwaters left off the Internet. Putting this infrastructure in place would also enable these areas to more fully participate in the digital economy, reduce the need for commutes to metro areas and benefit from services such as telehealth and distance learning.

High speed rail might have been a suitable project had it been proposed three or four decades ago. What's needed today is ubiquitous, high speed Internet.

IP Transition Must Advance, CES Panel Says | USTelecom

IP Transition Must Advance, CES Panel Says | USTelecom: Meanwhile, AT&T has been eager to begin moving forward with the IP transition and last year proposed that the Federal Communications Commission begin trials to test the effects of a full network transition, said Bob Quinn, AT&T senior vice president-federal regulatory. The role for FCC is to oversee the "turning off" of the old network, Quinn said. "There will be an enormous amount of policy concerns involved in doing this, and we need to figure out what this new world will look like."

"We've reached the point where the IP network is superior to the old switched network," said Internet analyst and author Larry Downes. "The policy issue is what do we do about people who have not yet made the switch?"

There's also the issue of telephone companies that have not yet changed out their old POTS copper cable plants to fiber optic capable of supporting data and video as well as voice services using voice over Internet protocol (VOIP). This isn't only about consumers who haven't made the transition off wireline POTS for premises service. For many, they don't really have a choice for wireline-delivered voice service.

AT&T and other telcos are hoping consumers will be satisfied with using mobile wireless service for both voice and Internet access since they don't plan to invest in fiber to the premise (FTTP) infrastructure to replace their obsolete copper networks that cannot serve many homes and businesses due to technological limitations. Communities can offer their residents a far better option by building municipal or consumer telecommunications cooperative owned and operated FTTP networks instead of leaving their residents relegated to supbar mobile wireless services that can't provide adequate bandwidth and value.