Over the last year we’ve covered the promises of telcos and cable guys to deliver improved but second best technology at a premium price to American broadband customers. We’ve also heard from them the likes of AT&T that 6MBPs down and 768KBPS up is “adequate”, and that bandwidth hogs are ruining things for everyone. Recent polling may reveal that the consumer is not being so easily fooled:

The U.K. market research firm said 4.2 million high-speed Internet users received fiber in the first quarter of 2008 versus 2.5 million who received cable. “It’s a significant milestone for fiber-optic broadband,” Point Topic CEO Oliver Johnson said in a statement Wednesday. “Where it is available, consumers will take fiber over other broadband technologies.” 

The report removed all doubts that consumers might decline to install fiber because they think they don’t need or want additional bandwidth. The Point Topic report concluded that price is a significant factor in choosing fiber. The fast speeds of fiber also appear to be a factor in subscribers choosing the technology, according to Point Topic.”If you look at the cost per megabit, then DSL comes in at around $20 per megabit per month taking global averages. Cable does better at roughly $12, but they are both completely eclipsed by fiber where costs can get as low as 50 cents per megabit per month,” Johnson said in a statement. (Information Week)

We’ve been had, and we’re getting had, and we will keep getting had as long as we keep accepting it. No matter where you are in the world, the broadband  the bar is raising. It’s time to make some changes in the American broadband market. The customer’s wishes need to be heard and heeded. 

In the battle for broadband supremacy, at least how the duopoly define it, it very maybe that the majors are missing a large target market In a recent Pew Poll of broadband there were a few key points –

• 62% of dial-up users say they are not interested in giving up their current connectionfor broadband.

When asked specifically what it would take them to get them to switch to broadband:

• 35% of dial-up users say that the price of broadband service would have to fall.
• 19% of dial-up users said nothing would convince them to get broadband.
• 14% of dial-up users – and 24% of dial-up users in rural America – say that
  broadband service would have to become available where they live.

And of noninternet users….

When asked why they don’t use the internet:

• 33% of non-users say they are not interested.
• 12% say they don’t have access.
• 9% say it is too difficult or frustrating.
• 7% say it is too expensive.
• 7% say it is a waste of time.

Another words roughly 20% of the population that they could get to use broadband have not been provided with a compelling reason to swtich, even if it is available to them. When someone says that it is hard to use. Are they referring to the internet or possibly the website to figure out what the options are? When on says that the Internet is a waste of time. They could be right. Many is the day I have seen my daughter burn her life away on FaceBook. 7% say that broadband is too expensive, and they would be right it is.

What is most striking is that 24% of those dialup user polled said broadband would have to be available to them. That folks is the equivalent of the California Gold Rush. The firm that can tap into that market cheaply and at a profit will have a license to print money. The Majors are not going after that market. They are sticking with the urban/suburban markets.

Full report here.

The truce between cable and the telcos is beginning to erode and there are signs of competition in the small business market. The real catalyst in this arena is the continued enforcement of local loop unbundling in the the last mile to business properties. This has allowed upstarts like Speakeasy who has been aggressively competing for the telco’s T-1 class business. The disruption has forced telcos to compete with similar services, and the highly profitable segment also attracted the cable guys.

Today competition between cable and telephone companies for business broadband customers is red-hot. As of 2006, more small businesses had DSL (35 percent) than cable (25 percent), but that balance is shifting as cable companies ramp up the speed of their service and push business-oriented broadband/phone packages at compete very attractive prices.

According to Brian Washburn, network services research director for Current Analysis, business DSL plans used to be more attractive because they “bundled in a voice line, unlimited local/long-distance plans and wireless options, while cable was broadband Internet and not much else.” Now, however, “cable bundles [for small businesses] are starting to look like the long-established T1 integrated voice/data services from the telco side.” (PC World)

We hgold high hopes that new broadband offerings from Clearwire and potential overbuilds by Verizon outside of their traditional territory may loosen the grip the non competitive US broadband market.

We’ve heard a lot of bellyaching about high cost of providing bandwidth from the cable guys and the death star lately. For the small number of you that have bought the line that bandwidth caps and surcharges are necessary to pay for the “rising cost of providing service and insure a good user experience”, here’s a news piece for you to contemplate:

According to Telephony Online, Cogent this morning announced that customers who commit to three-year contracts and higher volume service provider customers will now get access to bandwidth at a flat $7 a megabit. Prices go as low as $4, for three-year contract customers who consume a 10 gigabit port. An interesting comment from the report: We have seen Internet traffic growth slow over the past year as measured by a couple of references,” Schaeffer said. “The rate of growth in percentage terms has slowed and that is because of a number of factors. The casual video and social networking sites that drive a lot of traffic are maturing and we have not seen the huge wave of displacement by professional video services that would cannibalize cable and satellite TV. (Broadband Reports)

I’ll let you do the math any way you want to. This is indelible proof that the cost of those precious gigabits they want to ration is pennies, not dollars. The bandwidth caps are just a sneaky way to raise prices. This is proof that the cost of wholesale bandwidth is declining rapidly and that there is no financial strain in providing more bandwidth at current uncapped price levels.

Here’s a little known factoid: In the early days of electrical power, you paid a monthly charge based on the carrying capacity of the transmission line entering your premises. Electric service began as a luxury, and prices fell rapidly as companies began to rush to connect new customers. Electric meters arrived after just about everyone was connected. There wasn’t really any lack of capacity, there was a lack of new revenue growth. The occasional massive power failures began long after the electric companies began to manage use. Yes, by then we had many more devices that used electricity, and capacity was necessarily increased. The electric companies had no competition, so while economies of scale were realized in adding capacity, lower prices for consumers never came.

While states like Texas are making efforts to encourage competition in electric service, we seem doomed to repeat the same mistake with broadband access. There is some level of service available to just about every easy to reach customer, and often there are two providers to chose from. New customer growth has peaked, and the tiered service level opportunity has already been employed to boost revenue. What’s left? Usage billing. The cable guys started it, and now AT&T has signaled they are ready to run with the pack rather than compete. Why? Competing usually means you have to lower prices and improve service.

From a Wired interview with AT&T’s new chief technical officer, John Donovan, he stated:

……. AT&T will begin testing usage-based pricing starting this Fall. That’s driven by the economics of building network capacity, he says, not by an attempt to make more money. According to Donovan, one percent of the company’s customers account for 20 percent of the network usage; the top five percent account for 40 percent of the usage. Because the network must be able to accommodate peak traffic loads, AT&T — like other network providers — finds itself building far more capacity than most users need, just support the most prolific users.”It’s almost a taxation issue,” Donovan said, comparing the overhead required to support the top 1 percent with the annual taxes the corporation must pay. “Traffic on our backbone is growing 60 percent per year, but our revenue is not,” he said.

Usage-based pricing trials will be, he says, an attempt to encourage greater efficiency in the way customers use capacity.

It would seem the death star is on board with the plan to charge us more with no improvement in service. The need for new cash to meet demand is a paper tiger. The cost of delivering service is tiny, maybe 10% of the retail price. The balance is more than enough to build a more robust network if only adequate competition existed to foster it. Plus, new network infrastructure requires less power, upkeep and fewer man hours to operate while delivering exponential increases in capacity.

With Time Warner, Comcast, and AT&T on board with this new effort to further bilk the customer, will Verizon join the party? Bet on it. If our esteemed representatives in Washington and the state capitals were not so well bought off by the duopoly, we’d see charges of the duopoly operating as an illegal cartel being made.

When a market lacks adequate competitive forces, providers will invest in rationing before they invest in more product. Here’s more proof that there is not adequate competition in American broadband access: Comcast has cooked up yet another network management AKA rationing scheme. This concept is as old as the service cue at any government office. It’s called take a number and wait. Comcast’s subscribers are going to love it!

Comcast CTO Tony Werner stated at the time that “the outcome will be a traffic management technique that is more appropriate for today’s emerging Internet trends.” According to an internal memo obtained by Broadband Reports, this more “appropriate” system will be tested in the Chambersburg, Pennsylvania and Warrenton, Virginia markets from June until July.

The memo indicates that the company will be testing several management techniques (I’d assume from different vendors) in the two markets over the next month, all of which solely target high-consumption users at peak congestion times. If you recall, Comcast’s existing system throttles the upstream BitTorrent traffic for all users twenty-four hours a day (something Comcast denied).

This new solution will ensure that heavy users are “temporarily placed behind other users until the congestion has passed.” Those users will be forced to “wait in line” while other customers’ data requests go through first. (Broadband Reports)

We’re always the first to report when the cable guy actually keeps a promise, just as we criticize them when he behaves badly. This post is a first, as I am reporting for both reasons. The promised metering in Beaumont begins Thursday.

On Thursday, new Time Warner Cable Internet subscribers in Beaumont, Texas, will have monthly allowances for the amount of data they upload and download. Those who go over will be charged $1 per gigabyte, a Time Warner Cable executive told the Associated Press.

Metered billing is an attempt to deal fairly with Internet usage, which is very uneven among Time Warner Cable’s subscribers, said Kevin Leddy, Time Warner Cable’s executive vice president of advanced technology.

Just 5 percent of the company’s subscribers take up half of the capacity on local cable lines, Leddy said. Other cable Internet service providers report a similar distribution.

“We think it’s the fairest way to finance the needed investment in the infrastructure,” Leddy said. (Google)

The press release goes on to say that metering is common in other countries. This in true in places like Canada, where there is virtually no competition. It is not true in MOST western countries. Time Warner already offers several service levels that in effect establish some limit on downloads. This is supposedly aimed at the top 5%, but the Time Warner sited “average” usage of thousands of pages and emails per month are for static content, not the rich media content of today’s net. It’s a safe bet that many “average” users will be seeing a few surprises in their future bills.

Since no one is providing a better / faster / cheaper service in Beaumont, this was inevitable. The fact is that if Time Warner had any real competition in, they would be investing in a more robust pipe instead of investing in a system to count and ration each customers downloaded bits.

Computerwold has a very intriguing article. The jest of it is businesses are encourging ‘casual telecommuting’ in an effort to support a reduction in commuting and drive down fuel prices. It is in companies interests to do so as they too consume fuel. –

A Reuters report today highlights organizations that are cutting back the number of days employees are required to physically show up at work because of soaring gas prices. Even employees who are required to be on-site in order to work, such as janitors, are being cut down to four-day workweeks to save gas. White collar workers, of course, are being allowed, encouraged or forced to stay home once a week or more often and telecommute.

One thing leads to another. High gas prices prompt employers (including the federal government) to allow employees to work from home once a week. Once that’s accepted culturally, an elephant appears in the boardroom: If it’s OK once a week, why isn’t it OK five times a week? (This is what happened with “casual Friday” — its once-a-week acceptance lead to the current trend of casual wear every day.) Once telecommuting is accepted, “extreme telecommuting” — working from the Bahamas or Paris or an internet-connected shack on the Australian Outback — becomes acceptable, too. After all, once you’re out of the office and connecting to the company over the Internet, it doesn’t really matter where you are, does it?

“… it doesn’t really matter where you are, does it?”, well yes it does unfortunately. That is if you are going to telecommute then you need a broadband connection on a fairly regular basis. Which is the rub. Say my company said I only had to show up for a video conference once a week the rest done via telecommute. To pull that off I have to be located in cities providing the service. For example here is a map of FIOS deployment.. Were I to want to be in Denver I would be out of luck.

The point? If We the American People want to put a stake thru the hearts of the middle east then we need to complete a transcontinental broadband system. We did it with the railroads in the 1800’s, the phone system in the 1900’s. It is time to do the same in the 2100’s. Till we have the top 500 metro markets covered in broadband and wireless access nearly everywhere we will not achieve the dream of ‘extreme telecommuting’ and deliver a death blow to both high gas prices and middle east geopolitics.

The article does have a kernel of opportunity though. The gas situation may just be the point at which corporations do finally figure out that management by proximity is not the most efficient method of management. If that occurs there will be an explosion in cottage industry employment. With location decoupled from employment results becomes more important than schmoozing as companies will have to develop result oriented metric management styles. We can only hope.

Drive bits not cars.

Compterworld article.

Those 2 wild and crazy guys in the US broadband duopoly keep telling us they can’t make a living selling us big dumb pipe at a fair price. As a result we endure paying for a phone line we may not need to get DSL, and have valuable bandwidth filled with TV channels few watch, but all subscribers pay for to allow them a chance to recover their “losses”. Those fortunate few Americans that have access to a big dumb pipe like Verizon’s FIOS pay a big multiple of what someone in France, Japan or Korea pays for similar service. The problem is this: Anyone with a duopoly position in a $190 billion market that can’t make money from something as simple as a big dumb pipe needs career counseling. For now their shareholders are still buying the lie, and losing money.

More than 415 million broadband accounts will be active by the end of the year, according to estimates published by Strategy Analytics today. The market research expects this number to grow to 612 million by 2012.

Worldwide, broadband service revenues will increase from $130 billion in 2008 to $190 billion in 2012, with Europe, Asia Pacific and North America leading the way, Strategy Analytics said. (Toms Hardware)

Rarely do I agree with the editorial positions taken by the NYT. But this article is so ’spot on’ that I feel like I ought to hire the writer. Yes its about cable rates and iterates what we here at ThirdPipe have been railing against since the beginning — rottern service, incompetent personnel, clueless management and ever rising prices.

Read it again.