Is that a light at the end of the tunnel?
June 17, 2008
We all know about that approaching light … it can be daylight or a train. Light is definitely coming at all the CLECs. For some it is daylight and others … not so good news.
When I started AFS, it was based upon lessons I learned when we launched Frontier Communications in 1994, the first “CLEC” in America if you will. This experience gave me a very good look at the future of telecom deregulation and local market competition. Amongst a host of insights, the one I understood best was this: If you are going to be a long term, innovative, reliable competitor you need to be on your own fiber optic platform to succeed.
This epiphany I had I have not kept as a secret. Every chance where I have been invited to speak, I would address this important topic. I have been very clear why being ILEC indepedent is important over the years. I sleep with a clear conscience.
Well, it has been 12-years since the Communications Act of 1996 and with Verizon’s announcement yesterday, the train has arrived. And I have no doubt that AT&T and Qwest will soon follow.
Verizon has announced that they are now targeting, marketing, selling and installing FIOS (all optical connectivity) at the small and medium sized business segment. (Note to critics: Verizon Business covers large Enterprises with FIOS or 3rd parties). The VZ network by year end will cover 200,000 business made up of 80,000 multi-tenant offices buildings. Verizon reports this will be done without “significantly changing the capital requirements.”
Just as a reminder, Verizon and other ILECs are not required to share their new found fiber optic networks with anyone.
The good news in this, is that this focus will finally start initiating globally competitive bandwidth access to businesses such that maybe in a decade the USA may be on bandwidth par with others in the global theater of competition. The bad news, is if you are relying on Ma Bell, they can easily value price you out of existence by simpling offering the same bundled package as the CLEC but with one significant variable … bandwidth.
For example, let’s take the IAD crowd, an ILEC shows up with the same package but offers 20 megs of bandwidth … how will you compete. Special Access … pick you bandwidth level they choose to offer to minimize the ability to compete. Fixed wireless junkies … not a chance.
The non-price behaviors of the ILECs has been superb, often and regularly deceiving regulators. You must admire the ILEC prowess. What I don’t believe, for a period of time is that the ILECs will not be overtly aggressive, after all if they can squash competition optically; why initially cast the light of a regulatory inquiry upon oneself. I see the ILECs with this bandwidth differentiator going slow and methodical … picking the MTU’s first — one by one.
What can a CLEC not on local fiber optic infrastructure do? Well, one can always do what historically has not worked — go to the Congress & FCC, play the lawyer tango, and after the smoke clears only your lawyers are better off. What’s the definition of insanity?
To be fair, if I were Congress or the FCC, I would ask a simple question: You have had a mechanism in place since 1996 to acquire customers, build a business and figure things out. Are you telling us you need 12 more years? If you decided to go wide rather than deep for 12 years in developing a competitive platform, that was a business choice not a government edict.
I just find it hard after 12 years of choice that Congress or the FCC will have a sympathetic ear. The USA has not advanced globally with broadband in 12 years, do we expect to remain this way for another 12 years?
What I do suggest, when an ILEC plays the bandwidth value card and you attempt a win back that you at least ask the soon to be ex-customer to require the ILEC to leave the copper facilities into the building in place. ILECs today in consumer cable competition, sell a package and remove the copper from the premis unless the customer request it be left. If the customer requests that it remains by law the ILEC must abide. It’s all perfectly legal to decommission copper … granted a few years back under historical lobbying of the Congress & FCC. The deal is, the customer must be knowledgable enough to ask!
Why keep the copper? Your guess is as good as mine. Once fiber hits that buiding, it’s game over for copper. But keeping it does force the ILEC to carry it on its books, maintain it and if for some reason the physics of metal changes, it would be readily available.
Protecting the guilty … for years in discussion with various peer companies focused on business, I was often told that “FIOS is for residential Dave.” A fiber cable is agnostic to the building it enters or the applications it carries.
I wish to conclude with a little Johnny Cash: ” I hear that train a coming, coming ’round the bend …”
Remember, the softest pillow is a clear conscience.
PS: Don’t get crazy … the ILECs are more concerned about cable companies entering the business segment … we are just a sideshow.
Congress & FCC — 12 Years Late
June 16, 2008
A new FCC Order — News Flash — the United States government will now start measuring “broadband” for feel good purposes inside the Beltway at 768 k/bps. I have more news, in 1996 it should have been measured starting at a T1 rate … so after 12 years of deregulation, we are almost half-way to where we should have been in 1996!! It’s so nice to see our tax dollars at work.
Since it is 2008 after all, I suggest multiplying the new feel good number by at least 15 as a basis of measure globally. Just a suggestion …
From Telecom Web:
“The order, to be implemented by new rules to be issued within 120 days, sets 768 Kb/s as the minimum speed for what the FCC is now calling “basic” broadband, which extends up to 1.5 Mb/s. Slower speeds, from the old 200 Kb/s definition of broadband up to 768 Kb/s are redefined as “first generation data.” In addition, the FCC said it will now require broadband providers to report subscriber totals for individual higher speed tiers, which it didn’t give names to, of; 1.5 Mb/s - 3 Mb/s; 3 Mb/s - 6 Mb/s; and above 6 Mb/s.”
Time for a ticker tape parade …
Pole Attachments
June 11, 2008
I spent a bit of time during my inaugural blog giving an overview and opinion on the Beltway, Congress, FCC and lawyers.  I will not let that pass. Let me share with you how nuts things are on the topic of pole attachments to prove my point that logic and common sense do not exist inside the Beltway.
The FCC is taking “position papers” at this time on the competitive and cost aspects of hanging a cable on wood or metal poles. But before I go down a path, I need to make sure that you have your mind right. Think about this: If you download a video on to your laptop, does the laptop get heavier? If you upload a document from a laptop, does the laptop get lighter? Do you pay special charges to Dell or HP for a laptop depending upon how or what you are going with the laptop?
So much for the warm-up.
Poles are those tall structures that carry the cables for copper facilities, fiber facilities and power distribution. They are regulated by our government, as they should be. No one wants six poles installed within a four-foot circle to carry six different carriers or utilities facilities. Now, from this point on I suspend any form of common sense until my proposed solution, as I describe in layman’s terms the genius of the Beltway and some carriers…
I don’t want to impress you with my brilliance. I have an MBA, but perhaps more importantly, I have read all sorts of legal filings and industry related articles on pole attachments. (I will spare you the detailed insanity.) At the center of the pole attachment debate in DC is who pays what to place a cable on a pole. Isn’t it funny? It’s always about money.
Anyhow, the genius of the debate is that an entity offering voice services should pay a different rate to attach to a pole than an entity providing cable services to attach and a different rate yet for an entity providing IP services over a cable to attach.
How nuts is that?
The last time I checked, a pole has no idea what is traveling over a cable. What the pole cares about is safety and a solid physical attachment. Better yet, if you are running an OC-12 over a cable across a string of poles and decide to upgrade to an OC-192, in fact, the cable does not get any heavier.
Every time I discuss this topic with a man or woman not familiar with telecom, they rightly so and quickly determine that charging by “what” runs over a cable is asinine as the pole is indifferent. Now, mind you, these are just normal, every day citizens not nearly as smart as the Beltway buddies.
There is also hypocrisy to the situation. Let me share an observation - I will change the names in the story to protect the guilty.
Carrier Vextron delivering voice and data for years never participated in the pole attachment debate. Vextron pretty much left the debate and cost arguments be handled by the “little people” carriers, if you will. The reason for this is that Vextron for years cut some sweet deals with a few cable companies which allowed them to lease fiber from a cable company within a cable companies closed fiber sheath on pole routes. Cable company rates to attach a cable are the lowest of attachment rates on a given pole. With Vextron inside the cable sheath, delivering non-cable services, they were clearly cheating the regulators. Also, Vextron was not competing at the same costs to be on a pole as its competitors — probably an oversight.
Low and behold, our industry changes. Cable companies are now becoming phone companies, and phone companies are becoming cable companies. Cable companies are now chasing business as well as consumers for telecom services. As such, the cable companies turned on Vextron, reporting them to the FCC, and no longer allows the free loader any fiber as they are now direct competitors.
Where is the hypocrisy?
Upon this industry change adversely affecting Vextron, Vextron immediately put on a red superman cape and entered the circle of competitive providers vis-a-vis the Comptel organization. Comptel is the last standing organization inside the Beltway that allegedly acts on behalf of all members interests in regulatory and competitive matters before Congress and the FCC. It’s sort of an anti-Ma Bell group.
Anyhow, Vextron swoops in and tells all the “little people” at Comptel now is the time for us to unite and petition the FCC for lower cost pole attachment fees. What did the “little people” do? They signed on with this group that never gave a rat’s ass about them until their sugar deals with the cable companies went bad. Did anyone at Comptel call them on the table? … Did anyone ask: where have you been for the last 12 years on this issue? No. Why? Because it’s always about money.
Don’t ever let it be said that I don’t offer up solutions to problems. My solution to the pole attachment issue is so simple, it won’t get implemented!
My solution starts out with the idea that no one should care about what content or transport a cable is carrying. What we should care about is that we don’t end up having 15 cables hanging on one pole. And here is where my fairness and equality of access comes in to play.
If a company, say Vextron, has a cable on a pole, and it is a closed cable that only Vextron has access to the copper, fiber/coax or fiber strands, it is my belief for such privilege that Vextron et al should be paying 80% of pole attachment fees for the pole. Any closed cable should pay much higher fees relative to open cables. I would even consider a federal or state fee per mile for a closed cable. I would even consider federal and state fees for copper cables which are much heavier than fiber optic cable … a great incentive to deploy open access fiber cables!  More fees … sounds like I am running for President.
Open cable providers, those carriers that lease fiber to others so that we don’t have overbuilding or 15 cables on one pole, should pay a minimal amount to pole attach as an incentive to share copper, fiber/coax or fiber facilities. In my open cable solution, for example, a fiber cable must at a minimum contain 96 strands of fiber, and 50% of those strands readily available to lease to others on equal terms. No single other carrier can buy all the inventory.
This solution solves a lot of problems. The first problem solved is larger carriers like Vextron or Ma Bell monopolizing a pole and thwarting competition get competition and subsidize competitors for the privilege of having a closed cable. By driving an open access component (a business choice driven by economic costs) to the actual physical cable it provides proper incentive for competition in all forms and the idea of “what” a cable carries is no longer important. The idea of overbuilding a pole line (and fighting Ma Bell or the utility to do so) because of closed cable systems, is that rational new fiber deployments can occur. Lastly, and logically, fiber will get deployed more efficiently as open cable competitors will efficiently deploy more cable where by other competitors will already know they have an open access option once it is built. Last I checked, America is in need of deeper fiber penetration and fast.
Too simple to get implemented; my solution is good for competition, good for consumers, good for business and good for America.
Remember: the softest pillow is a clear conscience.
Dave Rusin
Welcome to my Dark Side (Fiber that is) - Pt 3
June 2, 2008
Another benefit of running on fiber as it relates to the Comm Act of 1996 is that you have no need to go into the Vortex. What is the Vortex? The Vortex is when two or more lawyers getting anywhere between $300 to $500 an hour argue amongst themselves about the most mundane things over and over into a loop whereby the billing hours get spun out of control. The Vortex I am speaking of is well fed when it comes to matters with the FCC or PSC regulatory issues. The big dollars win regulatory, not the small entrepreneurs.
I find it interesting that our FCC does little or no thinking for themselves. That’s right, if you want to ask something, or god forbid ask for something that resembles commonsense; you have to hire a lawyer to write it in whatever that language they speak at the FCC. In turn, the FCC asks for opinions which attracts even more lawyers and lobbyists to write position papers for the FCC. Don’t you think based on our effective tax rates that the FCC should conduct its own research and write its own opinions? Doing so would not be a good thing for all those billable hours and hob-nob lunches whispering in each others ears inside the beltway, would it. By the way, the Bell companies are the Kings of lawyering, I take my hat off to them … they get what they want not what they need. Actually, the head lawyer at Verzion, Bill Barr (ex-GTE) has my utmost respect bordering on fanhood. Barr is worth his weight in platinum.
Back to the fiber ownership — if you own fiber and work in the on-net last mile space, you have a good immune system in place over regulatory changes/decisions or a rewrite of the Communications Act of 1996, thus your Vortex exposure is minimal. Or think about it this way, for every 90 minutes a lawyer bills you, you can line drop a fiber connection into a home. For every 6 hours a lawyer bills you, you can line drop a fiber pair into a business building. I suggest to you, the line drops offer a better return.
Since starting AFS in 2000, I have personally been involved at the FCC once … once is all it took. I quickly ramped up on the Vortex inside the beltway game and would no longer attempt to apply commonsense or our cash to the regulatory matters. My only involvement at the FCC has been a petition to allow fiber builders with direct access into Ma Bell’s fiber vaults for direct backbone connectivity instead of the collocation/interconnection games of the Communications Act of 1996. That petition is some 5, 6 maybe seven years old by now … the FCC has yet to rule. Imagine sitting around waiting all these years waiting to decide!!!
Bottom line: Outside of Ma Bell, don’t bet your business on regulatory help. Get some immunity. Have you ever noticed how high Ma Bell’s EBITDA is because they are 100% facilities based? 50% plus … what do they know, I must wonder. By the way, I am not anti-ILEC, I am pro reality.
Rusin random thoughts … I don’t believe in Global warming, I believe in science … I believe anywhere between a dollar and $1.30 a gallon of gas is pure speculation by Hedge Funds … the same Hedge Funds that have speculated on rice driving it’s price up by 30% recently … an increase in rice prices literally kills people in third world countries … I guess when the Hedgies arrive at the Pearly Gates someday the IRR on rice will go over real big … I think it was in Network World a few weeks back — headline: “Google warns FCC: Do not trust Verizon” … everyone be quiet Google has unearthed a big Ma Bell secret … we will never achieve ubiquitous globally competitive broadband with net neutrality regulations … how do you pay for physical infrastructure if those not taking the risk get a free ride … the Bell’s will slowly and methodically take Google out to the wood shed, hey Google “It’s the network” … our political system needs an overhaul .. I have some secret plans on that as well … have you ever spoken with someone that believes wireless anything never touches a fiber network … imagine gas at $5 per gallon, now we know how smokers feel … have you reached that point in life yet were life is no longer as giving and is starting to take more from us as we age … next “blog” the illogic of pole attachments …
Welcome to my Dark Side (Fiber that is) - Pt 2
June 1, 2008
Our country needs real Broadband, not the junk we call broadband today where the feel good Congress and FCC measure broadband starting at 200 kilobits. How convenient of a measure until you stack it up with the reality of the global market place. Advanced countries start measuring broadband deployment starting at 20 megabits, others at 100 megabits. Meanwhile, we are all happy and bubbly inside the beltway on our position of 15th or 27th globally depending upon whose numbers you are reading.
My views are not hindsight talking but the Comm Act of 1996 should have been entirely focused on incentives to build out new metropolitan networks of high count fiber and last mile fiber access from that backbone. This could have been managed to deploy fiber on a non-overlapping manner on routes to maximize fiber distribution, instead we had the great land garb which collapsed the industry. (I have a secret model on how to allocate routes, if you are nice I might share it with you someday). Ironically, an approach of route allocation has been done before in other industries successfully but for some reason in telecom it wouldn’t work.
Sometimes my head wants to explode when I hear the whining about getting access to Ma Bell’s legacy copper or services. The bottom line is this: over the long run it’s all going to be about fiber connecting directly into buildings and homes. Why? It’s called routers, you know that little company that sells routers … starts with a C, oh yes, Cisco and others similarly situated of course. Now, for a few of you whiners, I will save for another day why wireless and FTTP is not your savior either … it all boils down to physics and demand. (I can almost hear the technocratic zealots coming unglued already).
Routers are a distributed resource - one router per home or business is all you need … no need for Ma Bell once you have a pipe and router in place but that reliability thing remains important, just ask Vonage. Routers do not use legacy Ma Bell circuits, they use packet based protocols like Internet Protocols or IP. The packets are agnostic and do not need to be concentrated first to be distributed across our planet. The only packet magic to be performed is making sure the packet application types are provided proper bandwidth and priority for latency reasons.
Rusinism: Not all packets are created equal.
Feeds
