Toto, I don’t think we are in Kansas anymore …
August 25, 2010
That famous line from the Wizard of Oz. You know, the man behind the curtain…
So here we are in Oz. A gentleman by the name of Tom Tauke from Verizon is all over the news with the proclamation that the Wicked “Network Neutrality” Witch is dead, and that the Verizon and Google proposal on net neutrality “…would allow President Obama to meet a promise he made on the campaign trail.” He adds, “It fulfills the president’s campaign promise of non-discrimination and transparency on the Internet.”
I have so many directions to go with this one, I’m not even sure where to start. (Don’t worry Jules–I’ll get to you my little pretty…just hang on–)
First thing: Since when are publicly traded companies (and their share owners) in the business of making campaign promise dreams come true? Also, are Verizon and Google share owners 100% aligned on supporting a campaign promise of any politician?
On campaign promises: There isn’t a politician that promises the sun, moon and stars when they are running for office. Lots of promises get made. I am not a member of any political party so I won’t pick on all the promises Candidate Obama made during the campaign but I will leave it at this–the blaming-George-W. days are over.
On this new Verizon-Google (VG) network neutrality proposal: I have not read it, but I can tell you we don’t need it. Okay I lied…I peaked at it. It’s a vein attempt at volume level pricing. But the facts are, and Congress–listen carefully here, the issue with “access” is at the peering points, not with the “pipe owners.” Peering point providers are an oligopoly and points-of-traffic flow, balance and control are managed by the oligopoly. This is where Jules should be looking as VG protects their distributed computing architectures and billions in sunken costs with their proposal versus the big pink elephant in the room, Internet peering points. Jules, bring a draft law to President Obama around peering points for submission to Congress. You may want to hurry up–the flying monkeys are leaving the Castle.
But I really wonder if Jules can do something even if he wanted to do anything. Why, you may ask?
As we all know, we have this thing which lately has been ignored. It’s called the Constitution of the United States of America. I think it has been around for a while. It’s that document with the big signature from that guy that is in the insurance business, John Hancock. (You can tell by now the quality of my public education!)
Anyhow, when Johnny H. and his friends signed this Constitution they came up with this stupid idea that only Congress can enact laws of the land and that the Executive branch, once signed into Law at the Kremlin White House, is responsible for various departments (aka bureaucrats) to administer the rule of law. My BFF Jules has gone down several paths recently in making up new laws (such as the now defunct option 3) acting as a one person, one vote, Congress himself. Jules–I am pleased you have backed off this. It would have gotten ugly again for the FCC and, dare I say, eventually another loss against the ILECs in a court of law. Sort of like that Comcast thing a while back. Jules–I hope you consider me a friend in advising you earlier not to pursue option 3.
All this said, how is the VG network neutrality “proposal” going to make it into “law?” After all, I make proposals all the time in this blog and no one makes them into law. I think I have had some pretty good ideas, albeit not politically correct or expedient. But then again, I am not on the campaign trail writing checks with my mouth that my @$$ can’t cash. Some of our politicians should start a business with nothing–like I did. One quickly learns, by way of your investors, about writing checks with your mouth that.
So far, and to President Obama’s credit, he has pretty much neutered Congress like a stray cat caught by the ASPCA. Congress can hiss all they want, but pro-creating…not so fast anymore.
You see, they have these people in the Executive Branch called Czars. In my opinion, these Czars are nothing more than replication in the Executive branch of committees (and the like) that make up Congress. The big thing our man from Chicago has done a thorough job on is shifting the power from Congress to the Czars. And, from a political point of view, it is brilliant.
You see, power inside the beltway is all about who spends the money (or debt). Keep in mind–it is taxpayer money from us worker bees which they seem to forget inside the beltway. Maybe a few bee stings are coming this November.
Anyhow, the Congress has been used to approve all sorts of spending bills “campaign promises,” and get this–the Czars in the Executive Branch choose how, and to whom, to spend it. Something tells me Johnny H. and the Boys back then were sort of trying to get away from things like Kings, Monarchs, Czars and the like. Call me crazy. In my short life span, I always thought all appropriations were clearly made through Congress and that only Congress could pass laws. That public education I received sure didn’t teach me a lot about history.
What is going to be interesting to watch is how VG is going to attempt to get their “proposal” in place without Congress. I think Jules is a pretty smart guy and has the lay of the land. It is clearly not a Czar issue or an Executive Order issue. Watching how VG (especially the V) finesse this going forward is going to be fascinating. It’s also interesting how, a few months back, the G was anti-ILEC on net neutrality, but recently had a change of heart. Sorta like changing Frankenstein’s heart. A used heart, but a replacement never the less. (This epiphany in change of heart came about once G figured out what they thought G wanted in network neutrality would hurt their search business. I wrote a previous blog about this–I think G is in some anti-trust situation over in Europe for monopolizing equal access, open access “search.”)
I can’t see anyway but through Congress on this one. And I am sure after the November mid-term elections that, come January, 2011 Congress will be chomping at the bit to keep another campaign promise by President Obama. I just feel it in my bone marrow.
Speaking of promises: Hey G–how is that big one town or City fiber-to-the-home contest coming along? No winner announced yet? Or, are you playing off of FIOS now as positioning to go to Congress with some data in support of your proposal? Meanwhile, you played a bunch of people for fools using them to say to Congress “look at the outpouring for bandwidth we received?”
Come to think about it, I may have written a blog about this as well. I think I used the term “useful idiots” for the applicants.
If today is the first time you have run across this blog, welcome. No, you are not dreaming–it is, in fact, WYSIWYG. And I do walk on water as well. I’m happy to show you–just come up to Rochester, NY in February to see.
Now it’s time to go home. Everyone, close your eyes, click your heals three times and then say “There is no place like home…there is no place like home…there is no place like home…”
Stop the Dancing, Part 1
August 3, 2010
For those of you that follow this blog regularly, I appreciate your loyalty.
To those that are new, read some of my past postings and you’ll see my Pro-America stance when it comes to making any decisions relative to US Telecommunications networks or Telecommunications Policy.
By my own admission, I am a fiber bigot and favor less–not more–regulation from the government in matters that concern telecommunications. I am not a “do as I say, not as I do” type of person.
Today, just for fun, I want to profile a company after reading a recent letter filed with the FCC by this company.
Can you guess who this company is?
• Owns over 54,000 intercity fiber route miles
• Owns over 27,000 metropolitan fiber route miles
• Has over 8,000 buildings “on-net”
• Has a presence in over 125 metropolitan markets.
• Over 100,000 enterprise “near net” buildings are less than 500 feet from their metropolitan fiber backbone (That’s about, on average a $5,000 lateral build per Enterprise
• Services over 300 Fortune 500 Companies
• Services thousands of mid-market enterprises
• Services 13 of the top 16 US-based cable companies
• Services 19 of the top 20 telecom carriers
• Services 5 of the top 5 wireless carriers – that’s close to 100% of the market in America.
• Services more than 35 Federal Agencies
• 90% of their business generates from the United States, 10% from Europe
Have you guessed?
Is it TW Telecom? Cogent? AboveNet? Global Crossing? Or, Level 3?
Answer: Level 3
Pretty impressive, you have to admit. Especially 100,000 enterprises less than 500 feet from their back bone. Imagine 1000 feet? 1500 feet? At least at AFS, we have found stronger margins and double digit growth in Enterprise, more loyalty and less churn.
Now, the rub with Level 3 has always been their debt load. But give credit where it is due–they manage their debt load well and creatively. Actually, the next big chunk of coming-due debt of significant relevance is $2.9 billion in 2014. If history is any indicator of past performance, this too shall be refinanced by the time it is due. So all you “Level 3 is going to get crushed by their debt” experts, I say more than likely not, just managed out into the future.
As I have written before, call CEO Jim Crowe whatever you want–mad genius, expert financier or just plain lucky–but Jim was smart enough to load up with debt on Day 1 of Level 3 launch which helped Level 3 avoid what 1200+ telecom companies did not avoid over the past ten years: Bankruptcy.
That aside, personally, in my opinion, I like to refer to Jim as the “Bus Driver.” This is the result of a few years back when Level 3 threw Sunit, their CFO, under the proverbial bus when integration after a wild M&A spree was not coming together quite well. I never liked this move given Sunit had saved Level 3’s butt on more than one occasion working his financial magic. In addition, I think after throwing him under the bus, it soon proved hard and difficult to find, hire and retain a new CFO given what had happened to Sunit even though there were well over 1200 CFO’s probably looking for work!
One would think, with that with the profile above, this company should be a crazy growth engine, even if focused upon the basic data, transport and IP. Their asset position is compelling and for all intent and purpose, the networks are sunken costs and we should be experiencing explosive growth and in my opinion, some fine whining from CLECs being crushed by Level 3.
Check in on Thursday for Part 2 of Dave’s “Stop the Dancing” post…
Touching the Third Rail (Part 2)
July 22, 2010
The following is a continuance of Wednesday’s “Touching the Third Rail (Part 1)” post:
What is really being adopted–and not by Congressional law–is adjusting the process of forbearance to non-regulated broadband services instead of focusing on legacy facilities and competition as subscribed under CA1996. It’s this aspect of the “Third Way” where the FCC is going to (once again) touch the third rail. The CLEC whiners are for the “third Way” because Wall Street has yet to punish them for not being enabled to handle organic bandwidth demands beyond 1.5 megabits, bonded pairs or regulated special access (transport) prices.
So, my prediction is that the ILECs will play paddy-cake with the FCC because every day of paddy-cake that goes by is just another day of more CLEC rental money pouring in on rental infrastructure that was paid for decades ago and continues to get reinvested into ILEC fiber optic platforms. Once, the FCC makes a move and the paddy-cake game stops, expect 18 months of court battles and, based on the law covered under CA 1996, the ILEC to once again prevail.
It’s a nice try to modify forbearance to extend the gravy train to rental type 2 and special access CLECs but it has limited legs and the FCC knows it. And if things this November turn out the way pundits are predicting in the mid-term elections, we are talking endangered species for those whom have done little or nothing after 14-years to become ILEC infrastructure independent.
With all that said, here are my solutions:
1. Recognize we need more infrastructure deployed for transport. Unbundled transport regulation will be a deterrent to private investment into non-ILEC controlled infrastructure.
2. Instead of giving away $7.2 billion in grants, why not take another $7 billion and create a 50% government matching bond pool for 10-year bond issuance in the public markets for infrastructure investment. The 50% match gives the bond a high rating provided that those that qualify are known performing entities, prohibited from over-building an already open access network, and the infrastructure deployed by these bonds are required to be open access infrastructure. Dominant carriers like Cable Companies and ILECs are ineligible.
3. Take my idea in #2 a step further and create a 25% government-matched bond for ten years–but make those bonds tax free. Dominant carriers like Cable Companies and ILECs are ineligible.
4. The FCC needs to start behaving differently and should ask for a new charter from Congress. That charter is to stop the rhetoric about “protecting the consumer” and move on to a charter that is focused upon what is “Good for all of America in a Global Economy.” Fiber optic transport is the new oil.
5. Bill and Keep–get it over with. It’s a digital IP world, the terminating access game is over.
6. Sunset copper loops in 5-years whereby the ILEC can charge whatever they want to whoever wants them. Give the ILECs a tax incentive to sell loops to CLECs that want them with title–sort of like an IRU, but requiring yearly maintenance charges.
7. Sunset regulations on special access in 5 years. Leave it alone for now. After 5 years the ILECs are lightly regulated on special access for two more years. After 7 years–no regulation. That gives the Type 2/Special Access crowd 21 years since CA1996 to figure things out.
I actually believe these seven starter items are will create new investment into infrastructure–along with all sorts of new jobs–and facilitate resurgence in the IPO market for service and technology companies associated with the infrastructure.
Get the horse (fiber optics) ahead of the cart (applications).
Before closing out my diatribe: where we need FCC neutrality-issue focus is not on unbundled transport. We need network device neutrality, network protocol access neutrality, peering-point neutrality, application programming interface (API) neutrality and any other neutrality to further the advance of investment into wire line and wireless infrastructure for new market entrants.
Finally, for my friends in the Beltway: America was not built on an equal playing field. When the Beltway or State regulates for an equal playing field in burgeoning areas of technology, they destroy innovation, economic expansion and global competitive advantage. America was built upon innovation, but not always by competing on a level playing field. We need winners and losers when it comes to entrepreneurial risk and undertakings–not a level playing field catering to the lowest common denominator–where we can declare everyone a winner due to a lack of political will and leadership.
America is getting too close to the third rail in more ways than one!
Useful Idiots
July 16, 2010
Have you ever heard of the term “useful idiots?”
Well, just an observation about our friends at Google. You know, the “Don’t be Evil” folks.
Over 1,100 communities have applied to Google for the magical mystery fiber-my-town tour. To date, Google has not chosen a community. Think about this–the Broadband stimulus funds of $7.2 billion are being distributed. This makes the Federal Government faster than Google in rendering a decision. I never thought I would live long enough to be able to say anything from the Federal sector is faster than the private sector. Maybe it’s an omen for me!
So here is the skinny: As I always say, never pay attention to what someone says or what’s in a fancy PowerPoint chart–pay attention to their actions.
In the case of our friends at “Don’t be evil”-Google, they have sucker punched over 1,100 communities seeking 1 Gbps of fiber nirvana connectivity. Instead of rendering a decision, they are using the applicants to do their bidding with Congress. Can anyone say “moral compass?” Google is encouraging applicants to show support for bills Google wants enacted in the House and Senate. This is disingenuous at best. Click here to start your own investigation.
Google believes this effort is in the best interest of all communities–to back Google politically–even before they pick which community will be wired. Since when has Google become an authority on fiber infrastructure, uniformity of standards, telecommunications, data communications and all matters related? Do you believe Google is working for the betterment of America or for Google?
So, of the 1100+ community applicants, how many will serve as useful idiots and end up with exactly what they have today? To current applicants reading this: You have less than a 1% chance of reaching Google fiber nirvana. I would force Google to render a decision before backing them politically. Don’t become Google’s village idiot. Fiber connectivity should be done above board by the transparency and light of the Obama Administration. In this case, maybe not so much light after all, and there is that transparency risk. Well, if there is no light, then we are talking dark fiber, which is better than copper loops or no fiber cable at all.
Tiered Pricing
June 22, 2010
All hell broke loose a few weeks back when AT&T announced tiered pricing on data plans for the iPhone. Not being one with knee-jerk reactions, I waited a while for the dust to settle before giving my opinion. Plus–I don’t have to compete with the hysterical noise in the media and other blogs.
Those of you that read my highly intellectual and insightful writings will know that, on a number of occasions, I have encouraged the Federal government–and particularly the FCC–to let the market figure things out for themselves. Eventually market equilibrium will be achieved. Moreover, I have recommended on several occasions that the FCC focus on Internet peering pretty much as an oligopoly. And even I, your humble blogger of unknown distinction, have encouraged government peering points for public access over private peering points as a check and balance against the market. We need less regulation.
My position has been that net neutrality is a Red Herring. It’s peering that requires a closer look and see.
The AT&T announcement to me was not a surprise. Tiered pricing is nothing more than a tool of capitalism used to manage demand when it exceeds supply. In simple terms, AT&T is saying those that want to eat a lot should pay a lot. However, there are folks out there (the net neutrality crowd) that believe that Customer A, who buys 12 oranges, and Customer B, who buys 2 oranges, should both have equal access to the oranges and pay the same, regardless of the quantity consumed. If this were a real life situation, sub-markets in oranges would evolve for those that can get access or have other, perhaps criminal, ideas relative to using the net.
I don’t care if you sell cars, salty food snacks or telecom services–all are subject to business cycles, changes in technology (disruption) and Real Smart Guys (RSGs) investing in bad management, a bad idea and/or poor execution.
Microsoft is still in therapy over the advent of Google, a market driven event.
It’s not a striking imbalance between supply and demand today, as no one is yelling at us to deliver a gigabit to the towers. The pundits must accept that moving along the demand curve from a supply perspective is capital intensive, takes time to deploy and that the more regulation two-step dancing that a carrier has to perform sucks capital away from deployment. In addition, markets become attractive as they demonstrate profits. If tiered data pricing results in greater profits, that will incent new entrants into the market seeking a share of those profits.
This is called creating competition and jobs.
As competition evolves, the supply imbalance will be addressed through evolution and arbitrage as it has for generations in telecom since Judge Green’s decision to break up the classic AT&T into RBOCs back in 1983. This evolution will ultimately result in flat rate pricing as efficiencies are gained. Voice cell phones are a perfect example…Vonage and Magic Jack as well. Those competitors running with the bulls during this evolution phase will have hopefully learned from the past–you can’t stay in business if you price lower than your costs. For the weak or stupid, they go bankrupt or get consolidated as distressed. The cycle continues…
It will take some years to fully scale 4G, LTE or WiMax for efficiencies and inter-connectivity. More regulations will not help this deployment. Regulations that are certain and predictable will attract new entrants and new private capital, which creates jobs. Today, all we have is uncertainty.
However, the fundamental issue, as I see it, is not around the Wizard-of-Oz-like network neutrality crowd–it’s about
the people behind the curtain. And that is called peering, peering access and costs if you don’t peer directly and buy from a member of the peering oligopoly.
Any of my readers or the FCC can say I am full of bunk, but they need to consider something in the wireless world that is much different than the wire line world (which requires physical facility peering.) And that is–wireless has the ability through technology that exists today, to bypass government intrusion by way of proxy servers/networks or an invisible subnet akin to social networking. It may not be secure, it may be more dangerous–but it can go undetected from the tax man…and in the end, we all know that is all the government is interested in–more money to spend.
As I said earlier, it is a function of time and normal discourse of business, whereby flat rate data plans will become the norm. My opinion: the vast majority of hype around the “imbalance” is purely the result of hundreds–if not thousands–of free downloadable “apps” to cell phones or other portable devices that are not only creating this spike in near term demand, but have also created an entire new world for virus and data security hackers.
Bottom line: leave the capitalist tools to manage demand alone. Government should focus on clarity and certainty of regulation, take a look at the peering oligopoly and let mother market nature take its course.
BT Last Mile
June 8, 2010
Oh, the excitement and promise!
Here’s the latest buzz this week–the headline reads: “BT will have to share last mile fiber with competitors.”
I’ll bet you a few American CLEC CEO’s who rent last mile copper (aka Type 2) from Ma Bell had a Chris Matthews-like leg tingling moment reading this headline …
I have written about this subject before in the UK and, like everything else–the devil is in the details …
What UK regulators are proposing is “virtual unbundling.” Translated, “virtual unbundling” is the equivalent of a UNE-P in American terms … and we all know how well that worked out. There are no plans on the horizon for physical access to BT’s last mile fibre (I wrote fiber like “fibre” – because that’s what they do in Europe and since America is trying to become more like Europe, I thought I would endear myself).
Anywho, it’s not law in the UK yet. But, if you understand the constructs under UK regulator OfTel with FTTH – where H means “Hut” in the UK, BT is pretty much granted a dominant franchise for backbone traffic. Translated for the Chris Matthews-like CLEC CEO’s: BT is in a great position to control price, tiers, terms and volume.
So how will things play out? In my opinion, BT will have a lower cost advantage by owning the fibre, an install advantage and content advantage. You can’t have access to virtual fibre until the fibre is installed … who will be selling their services first to the target customer before the physical fibre is installed?
That’s correct – BT!
So from my perch here in upstate New York (but with extensive International business experience in my past) I see the “virtual opportunity” as one of a competitor of BT being limited to price competition only. And, just like in America, if your largest competitor controls your operating costs and as market prices compress due to “virtual” competition – what is it that you end up with?
You end up with thin and declining margins which, over time, results in consolidation of the weak rental carriers and in some instances bankruptcy. BT has its cake and gets to eat it as well … I love the fibre business.
I look at the regulatory model in the UK with this “virtual last mile” apparatus and can only think, as BT prices virtual access by the amount of bandwidth required–perhaps by tiers–the cries for network neutrality will be heard throughout the United Kingdom. BT should not be required to price virtual bandwidth on a cost-plus basis but on the value it delivers. And, in my opinion, any hogs using gobs of it should pay for its consumption.
I don’t believe a little old British lady who takes her daily tea at 3pm and uses minimal bandwidth for e-mail should have to subsidize some “gamer” with a Freon-cooled computing gaming computer that sucks gobs of real time bandwidth to play games. (I purposely used “Freon” to drive the environmentalists crazy)
Thoughts?
The BTOP Blues
December 8, 2009
The BTOP blues…my song goes out to those really singing the blues–AT&T and Comcast.
It seems that AT&T and Comcast are filing protests on just about anyone seeking broadband funds under the Federal Broadband Technology Opportunity Program (BTOP). It seems they believe, wherever they are, consumers and businesses are already served well by them and that any BTOP money should go to proposals that bring wireless and fiber optics to the most remote areas in America. Affectionately, they are telling our government they are serving everyone (lie), that they have competition (lie) and that they are concerned about those receiving funds building in their markets. They use the term “building over us.”
I do hope–and this is a big hope–that the NTIA and RUS see right through this garbage and such a blatant act of protecting their monopoly presence. If what AT&T and Comcast say is true, then they are telling the President and Congress, “you are a bunch of idiots for even entertaining urban/suburban proposals unless they are targeted towards fiber to the barn (FTTB) or WiMax to the chicken house (WiTTCH).”
I am a fair person. I can agree with AT&T and Comcast–if they open up their networks for access to others to further enable broadband penetration and competition.
And what I mean by “opening up their networks” is that they lease dark fiber and wholesale capacity to any and all comers at the same rate it is costing them. This creates a level playing field, maximizes capital infrastructure efficiency and allows competition to occur based upon applications and bundles by eliminating the high fixed cost barrier to entry they each have and each enjoy today.
BTOP Blues … it’s been 13 years since the Communications Act of 1996 … the ILEC and able companies after 13 years still dominate their markets ranging anywhere from 85% market share to 100%. If you measure it on physical network competition, they are well above 95% market share and going as slow as possible and filing against carrier BTOP submissions that can and bring open access networks to anyone, including AT&T and Comcast.
AT&T, Comcast and a few others have those BTOP blues a-playing…should be interesting to see how the NTIA and RUS react to their lyrics…
Next Generation Connectivity
October 22, 2009
This link will take you to a 232 page report on Broadband titled, Next Generation Connectivity:
A review of broadband Internet transitions and policy from around the world. It is published by The Berkman Center for Internet & Society at Haarvarrd University. (Yes, Buffy dear, I purposely spelled Harvard as “Haarvarrd” for contextual affect.)
Click here to go to the report.
My conclusion: In America, it’s all about having policy, objectives and economic incentives to deliver fiber optic connectivity to 90% of homes and businesses with remote areas being served by subsidized satellite capabilities that already exist within 10 years. This approach will stop spending good money after bad, keeping copper loops alive. And, of course, broadband mobility should be left to the free markets to sort out with the least amount of government “help.”
If you have the fiber optic infrastructure, mobility backhaul for 4G services is a slam dunk. You need the fiber infrastructure first; otherwise you end up putting the cart before the horse.
Tele-Orgasm
September 24, 2009
I have a new word and sensation for Telecom – it’s the Tele-orgasm.
A Tele-orgasm is the tingling sensation that Chris Matthews gets when he encounters a fiber bigot, such as myself, discussing copper loop removal from a building or residence. Yes, the Tele-orgasm is the equivalent of Chris Matthews in awe of anything President Obama utters – that same identical tingling.
At the Goldman Sachs investor conference this week, Ivan “The Terrible FIOS” Seidenberg, CEO of Verizon pretty much stated that copper is just about dead as far as Verizon is concerned. These comments were aimed at the shrinking loss of lines that analysts like to measure. Joined by Randall “FTTP” Stephenson, CEO of AT&T and Ed “Wireless-less” Mueller, CEO of Qwest, all concurred that someday the landline loss would stop shrinking.
As aptly reported by conference attendee Saul Hansell of the New York Times, “In other words, that snipping sound you hear around copper phone lines is just going to get louder.”
Oh, that tingling sensation I get just thinking about it!
In the same article, Seidenberg declared, “Video is going to be the core product in the fixed-line business and the focus will move from selling bundles of video and landline to video and cell phones.” He added: “Once I shed myself of the burden of chasing the inflection point in access lines and say ‘I don’t care about that anymore,’ I am actually liberated.” Let’s here it for liberty and freedom – I am having a vision, perhaps Ivan can be caste in a remake of “Braveheart” as William Wallace – the Telecom version!
Since I have written about this before, let me translate this for Wall Street: Measuring legacy copper lines is of declining value, possibly of no value at all. It is not an indicator of anything anymore. Ivan, Randy and Ed won’t say it, but I have before and will again — you need to measure ports installed and bandwidth deployed. Mr. Wall Street – any idea how many simultaneous VOIP calls you can run over one port of Gigabit Ethernet? You count that “port” today as a line… Think about it. You really don’t know how much net line loss is going on with VOIP as a substitute for copper TDM lines, do you?
And I do know for a fact that many of you on Wall Street do read this blog but never comment. That’s called voyeurism.
The other secret I’ll let out of the bag, though my buddy Ivan insinuated it, is this: They are not the telephone company anymore. Wall Street-–you need to accept this and figure out what to measure accordingly. The big “service push” that is evolving is data. And I don’t mean data in the sense of point A to point B.
What I am talking about is the effort by my three new friends trying to figure out how to sell one data plan to customers that covers all their needs — fixed and mobile. People don’t want to pay for separate, multiple data plans – a single “portable” data plan is of significant value to the customer. Data – anytime, anyplace, on-demand regardless of access device is powerful. The single point IP addressable data plan is the new Holy Grail in telecom. A personal data plan or a shared corporate data plan —- but one data plan period – wire line (fiber) or wireless (LTE/4G/Wimax) is coming our way. So stop it with the copper line loss shenanigans.
However, before we get to data utopia, that copper needs to get snipped … and there goes that tingling sensation – another Tele-orgasm.
Digital Britain
September 2, 2009
In my former life, I used to travel the globe mercilessly on business. You name the place–I pretty much have been there. One might say I am a mystery man of international intrigue.
One of my haunting places on many, many occasions was the United Kingdom. So, I keep a watchful eye on the comings and goings within UK telecoms and Europe in general, plus South America, plus Asia, plus Australia/New Zealand . I affectionately refer to the UK, when it comes to things like healthcare, horticulture, cuisine and telecoms, as the land of “That’s Good Enough.”
I just came across a report called Digital Britain published under Lord Stephen Carter, the first Minister for Communications, Technology and Broadcasting. Just Google or BING “Digital Britain” and “Lord Carter” and you to can download this 245 page report as well. (I put BING in here just in case Google reads this…).
There were two things that caught my eye, though I have not read the report cover to cover, that I would like to share with my loyal fiber bigot readers…and of course the few copper loop loving Oafs. Don’t worry–I love my loyalists and copper Oafs equally. It’s all about the love at American Fiber Systems.
In the land of “That’s Good Enough” it’s nice to see not much has changed. Though Telecom is a £52 billion a year economic driver, the British government has in its sights a goal. That goal is this: by 2012, for all of Britain have broadband speeds of 2 megabits. This is classical British authority – the government establishing what’s good enough for the British commoners.
In fairness, they do recognize the value of fiber optics to the home and businesses per the Digital Britain report.
So, beyond 2012, they want fiber and they want it everywhere. Per the report, they pretty much figured out that 2/3 of the country can be served by just letting private Enterprise compete in an open market with limited government involvement but regulatory oversight of British Telecom by Ofcom (aka their FCC) to succeed with last mile fiber deployment.
Lord Carter, through Digital Britain, has concluded that there needs to be the ambition “to accelerate the rate of growth, and cement the UK’s position as a world leader in the knowledge and learning economy.” Note to Lord Carter and the Queen of England: You are not going to cement anything at 2 megabits per second – I can swim the English Channel faster – I told you I am a mystery man of International intrigue.
So our friend the Lord, has proposed an idea to address the remaining 1/3 of the country that can’t be addressed by the private sector due to rural economics. He has proposed a tax of 50 pence per month or £6 per year on each and every copper loop as long as they are in existence.
The collected tax will be centrally collected, controlled and disbursed by Ofcom to subsidize the private sector to service and build out rural UK with fiber optics. Lord Carter believes this scheme will in 4-5 years time provide fiber access across 90 percent of the UK. Estimated tax proceeds from the copper facilities of £175 million per year will be the source of public funds to achieve rural fiber access by matching it with private funds. I am sure eventually that reality will settle in and that wireless 4G, LTE or WiMax will also play a subsidized role in the hinterland. I have been to Scotland – I don’t see running fiber cables from glen to glen.
What I like about this approach, is the British government trying to stay out of the mix as much as possible (translated – no government authority or entity trying to be in the communications business.) Maybe by watching America, they wish not to repeat our mistakes of municipal or public utility participation on a tax subsidized basis, not being required to make a profit, let alone have the appropriate core competencies or burning desire of an entrepreneur.
Now, for a few of my readers that may be from the UK, or conduct business there or just follow things like this as I do, you may be thinking: “But Dave, isn’t the push on for Fiber-to-the-Curb (FTTC) in the United Kingdom leaving the access to copper?” And my answer to that is yes!
That’s the beauty of the tax.
Today, British Telecom is the national wholesale backbone provider and for this privilege is regulated by Ofcom. BT is required to place at various intervals along the backbone cross-connect huts with power and get this – non-discriminatory, equal access to the copper from the hut to the residence or building. If a hut runs out of space, BT is required to build another hut adjacent. Most of these “huts” are underground. No volume discounts or any of those last mile “special access” games – competitors pay the same for the last mile copper as BT uses it for itself. (I am trying to keep things simple). BT is the wholesaler – the technology push is last mile for all.
The incentive over time is for competitors and BT to build fiber from the hut to the premise to displace the copper and the tax that goes along with it. Nothing prohibits a competitor to build their own backbone in and around the huts. This makes for an interesting mix of diverse last mile options that could range from a neighborhood to multiple kilometer area coverage. The key is the equal access, non-discriminatory and same cost interconnection in the huts. To a certain extent, it can rationalize the deployment of capital expense whereby a last mile fiber owner has a sharing incentive for access (i.e. waves) or take the risk of getting built over for trying to be a last mile monopolist. If a competitor has an equal access backbone from BT, it becomes a more level playing field for rational access deployments.
There is a very nice Layer 2 access model in all of this as an option for private investment.
BT as a wholesaler will get regulatory relief as networks and options evolve, but as things evolve they have every incentive to deliver reliable, diverse and equitable bandwidth to those huts. If they don’t, besides Ofcom, competition with open access to the huts can usurp their wholesale position.
It will be interesting to see if the tax gets approved. I am not one for taxes; however, copper loops are like kryptonite to me, it makes a nation weak.
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