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…”

Don’t get me wrong–once upon a time, I was Mr. “The Glass is 2/3 Full.” But a co-worker of mine, “Randy” was one of the most cynical persons I have ever known. We have known each other close to 30 years now and I have grown to value cynicism from my mentor.

I once heard George Will (he writes newspaper columns on politics and is on a Sunday political talk show) say (and I’m paraphrasing here): It’s good to be cynical. Because 80% of the time you are right and the other 20% of the time you are delighted with the results.

Today, it’s about Google and Europe.

Over the years I have learned to watch the “smart people” trying to outsmart one another. In some instances, the “smart person,” in a matter of time, self-destructs…you know–from being so smart and all. And sometimes the smart people outsmart themselves into failure. I think we call them the elitists.

Rewind to a few blogs back when I exalted the ignorance of Google in the United States pushing for network neutrality. I addressed why their smart idea of supporting net neutrality was not really a smart idea for Google. In and of itself, net neutrality is just the first war in a Federal government administration that wants to regulate (take over) everything in order to control and determine what is good for everyone. I even theorized that net neutrality was less of an issue than “search neutrality.”

Google was so deep into bed with FCC Chairman, Jules, on this issue a year ago, that I was worried about the possibility they might have a baby. (Come to think about it, the third rail – oh, I mean, the “third option”–perhaps is the illegitimately conceived child of the two?) Paternity tests anyone?

I believe I wrote about it a month or two ago–Google did a 180 turn on net neutrality and does not see a need for the levels of regulation it once thought. Having the market work things out relative to net neutrality was in the interests of Motherhood, Apple Pie and Chevrolet (the latter owned by our government). Wow, was I shocked seeing Google wrapping themselves in the American Flag and shouting like Mel Gibson in Braveheart … “Freedom!”

The China flag thing did not work out so well for Google, but if things keep trending the way they are in this country, Google just might have to dust off that Chinese Flag!

As you know, I am a pseudo-intellectual by my own admission (no one else’s admission, of course) and self-proclaimed fiber bigot. I stopped reading the Wall Street Journal and have embraced the more extensive capacity and challenge of the Financial Times (known as the “FT” for us intellectuals.) I’m global, sophisticated and have a penchant and thirst to learn even more about the superior economies and programs of countries outside of the United States that President Obama has embraced so graciously on your behalf. Not on my behalf, because I am an intellectual. You could not possibly understand what I and President Obama can extrapolate on such matters …

In reading the FT recently, you are not going to believe the pickle Google is in over in Europe. It’s like I am psychic or something!

The European commission out of Brussels (love their sprouts) has made allegations and an informal anti-trust inquiry over the bias of “Google Search.” At odds with the Commission, like Google’s argument before the 180 flip on net neutrality, is whether or not Google gives preferential treatment in search results to its own services! Imagine the “Don’t be evil” people doing such a thing!

Meanwhile, in Germany the governments “cartel office” is urging our friends inside the Beltway to investigate complaints made in Germany by various newspaper and magazine publishers to scrutinize Google USA. I figure if somehow there is tax money in it, our Federal government will pursue the allegations.

Has the horse left the barn on Google?

As Frank Pasquale, a professor at Seton Hall law school frames things: “After regulating the ’pipes’ of the internet with net neutrality, we need to look at the next part of the bottleneck, and that means search.”

Big Brother anyone?

I have no conclusion to offer you. This will be something to watch. But I do leave you with one thought: Did the smart people at Google outsmart themselves by getting involved in the net neutrality issue in the first place?

As I recently wrote in my “Third Rail” blog on the Julius’ “Third Option” for net neutrality – Jules will get hammered in the Courts or cut a deal behind closed doors with the big cable and Bell companies to save face on net neutrality with Ma Bell et al coming out on top.

You heard it here first…

PS: Jules, what is with the behind-closed-doors negotiations with the Bells and Cable Companies? Didn’t you say something about leading a transparent FCC?

I haven’t noticed any dark SUV’s parked outside the office or my home, but what I have been reading today is scary. Maybe I am becoming a national treasure and don’t even know it—maybe I am the next Jimmy Hoffa!

If you are not a regular reader to this blog (subscription price is $500/year*), I can’t go back over years of blogs pertaining to the FCC, forbearance, CA1996, ILECs winning in court, FCC ignoring Congress and losing, etc.–you will just have to trust me on this one.

I saw a headline that almost caused me to need a pair of Depends. The headline said: “Congressmen Tell FCC to Stop Doing Its Job.” Holy Cats! I started reading and saw that it is two Congressmen they are talking about–one Democrat and one Republican! Holy crap!

Excerpts from the article in the Ground Report:

On Friday, Congressmen Gene Green [D-TX] and Fred Upton [R-MI] introduced a concurrent resolution that “directs the Federal Communications Commission (FCC) to wait for Congress to enact a law prior to issuing rules, regulations, or orders concerning additional regulation of broadband Internet service.”

“If the FCC continues its pursuit of reclassification, the certain result will be lengthy court battles that will reduce, or even halt, capital investments and effectively cease the improvement and expansion of access to the unserved and underserved areas of the country,” Rep. Green said.

The resolution, which Green says “reinforces the powers that are reserved for Congress under the Constitution,” is unlikely to pass the House. Even if the concurrent resolution did pass, it would not carry the weight of the law or require President Obama to sign it.

Now where have you heard this before? Is Congress reading my blog? Am I becoming a National Treasure? Will I get a late night TV show starring as a call-in psychic?

Or, will all of a sudden some black SUV’s start appearing? “Papers please, Mr. Rusin.”

*If you have not paid your $500.00 annual subscription fee, please send me a check; make it out to “Can America Sustain Herself”; or, “CASH” for short. The bank prefers CASH because of the subscription volume. What the hell, if Senators and members of Congress don’t have to report apartment rental income, offshore income or some kickback loan influence to their spouses company, then what’s wrong with me getting some scratch for this humble blog of mine on the side?

So what do I read? A letter dated July 21st to the FCC; Re: In the Matter of Special Access for Price Cap Local Exchange Carriers WC Docket no. 05-25.

The following is an excerpt by image from the letter:

Any idea what the data rate of a DS1 is? At full duplex it’s 1.54 Mbps.

Any idea what the data rate of a DS 3 is? At full duplex it is 44.736 Mbps.

You don’t have to be a telecom genius to realize we are living in a gigabit world with table stakes starting at 100 Mbps. Within 5-years, perhaps 10 gigabits!  Silicon chip manufacturers have already announced 100 gigabit chips?

Jimmy–as much as I like your assets, what the hell are you doing? As I have pondered in my past blogs, you should want what America needs: the death of copper-based transport such as DS1 and DS3.  Continuing the insanity only puts more cash into the ILECs pockets? Step up, Level 3–take on “legacy special access” with your own superior offerings!  Asking for more FCC legacy porridge is not a good idea in my opinion  You have a great opportunity to squander away–don’t do it!

In the FCC letter second paragraph–I am not a lawyer (nor would I ever become one given my moral bearings), but why are you telling the FCC that the ILECs have some monopolistic hold on you?   First, with your assets, you should be keeping the ILEC CEO’s awake at night. Secondly, my friend,Chairman Julius of the FCC–what’s he going to do?   Nothing.  He has no enforcement capabilities.  Commercial contracts were decided years ago.

(Jim, between me and you, I think Jules has stopped reading my blog – he was coming along well for awhile, but then he fell off the wagon and onto this “third option” jargon that will be ruled dead by a court within a year or two.) Jules, come back to this blog–just follow the light…keep walking towards the light…

If what you say is true in paragraph 2 above, I would get over to the Department of Commerce and/or the Department of Justice. We allegedly have laws against monopolistic or market leverage dominance. What you should be looking for, if what you say is true, is facility separation placing special access and last mile components of the ILEC’s networks into a separate highly regulated entity where traditional regulatory rates-of-return apply. The ILECs could simply spin the separated assets out to shareholders as a separate company. I would think this would be a good thing for anyone that owns serious metropolitan fiber infrastructure. Imagine offering a 100 Mbps megabits to an enterprise at a regulated DS3 rate of 45 Mbps–you would have a competitive advantage and the fiber infrastructure asset-light CLECs living off of legacy special access and copper loops would beat a path to your door.

As you take away more of the special access and last mile highly regulated copper business, the costs get worse for the ILEC spin-off–not better. Of course, this assumes no one goes nuts competing on price but delivering more bang for the bandwidth buck. And think about this, eventually the highly regulated spun-out legacy company will ask the FCC for permission to build last mile fiber or die! And, like in the United Kingdom, it should be granted–but remain highly regulated, equal access, open access to all and with no volume contract designs.

I like the recent Level 3 focus on penetrating local metropolitan markets.  It’s leverage. But I think asking for more legacy ILEC product rights is not the correct strategy.  You should want what America needs: fiber optic access.

Assuming the mid-term elections are going to bring “change” to the Beltway, perhaps a window of opportunity is opening!

Go ahead, make some noise at the DOJ, Commerce and Congress.  Make it an early 2012 election issue. If I know lawyers like I know lawyers (and with which Congress is loaded) and if the 2010 elections becomes upsetting to both parties as I believe, you just might want to consider leading an effort to–once and for all–addressing America’s commercial/consumer dietary need for fiber in a compromise legislation breaking up Ma Bell further while declaring a bipartisan victory for all in America!   If Jim or maybe even Julius, were to lead this, either could end up on a box of Wheaties!  The first non-sports super heroes!

Let’s forget the fat kid fight for a fiber diet against fast food chains which is going on inside the beltway today.  Jim–you and Jules can lead the way!  Think about it!

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…

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!

I read lots of articles, reports, analyst’s reviews, technical briefs and congressional filings.  Yes, I know, I need to get a hobby.

I usually like to digest things before commenting such that there is level of objectivity and credibility in my observations.  Some times, things I read give me indigestion and that’s when the real sarcasm appears.  My itch today has to do with this “Third Way” proposal that my buddy FCC Chairman, Julius Genachowski, is pursuing relative to re-regulating broadband from an information service to a fully regulated service.  As I continue to read, I am becoming more and more suspicious that Chairman Julius has stopped reading my blog.

The FCC is about to become a Yoga pretzel all tied up in knots in this scheme to regulate the transport aspects of broadband.  Transport being limited to wire line, not wireless, though I assert to you that wireless is an oligopoly being dominated by a handful of bi-modal competition rules from previous Chairman Martin.

So who is going to be the Yoga instructor on this one for the FCC?  Well, it’s not going to be Richard Simmons.  In the end, it will be the ILECs at the Federal Court level once again telling the FCC you regulate to the laws created by Congress.  Chairman Jules – just listen to me now and save the tax payers millions in legal fees.

Actually, the “Third Way” for neutrality is a façade.  It’s like a slight of hand trick.  The issue being advertised has to do with remnants of network neutrality (Comcast v. FCC) where Comcast was the Yoga instructor of choice.  Just like Chairman Martin, the FCC was told you are not Congress; you must follow the law as set by Congress.

The ‘Third Way” is an attempt to regulate the Internet and previously lightly-regulated information services such as VOIP and applications.  The guise of the proposal is to regulate transport on an unbundled basis – an area that needs less regulation and more incentive for infrastructure builds.  But the whining copper loop and special access (aka Type 2) CLEC crowd who have played arbitrage since the Communications Act of 1996 (over 14 years ago), are still pursuing that ILEC teat instead of investing into their own facilities or the facilities offered by non-ILECs.

Over the past 14-years, the Communications Act has increased competition and has lowered market prices.  Lower prices are not a good thing for any operator unless their costs drop at a rate faster than price.  Thus, every time the CLEC whiners start whining, it is because their love of arbitrage and margins are getting squeezed by lowering market prices while being dependent upon the ILEC teat for infrastructure at regulated fixed costs.  So the cry for the “Third Option” is to get even lower cost prices from the ILECs who are investing heavily in more cost efficient platforms called fiber optics.

It’s no secret that 1.5 megabits just doesn’t float too many boats anymore–even Harry Homeowners boat.  So with an organic increase in demand for bandwidth far exceeding 1.5 megabits, an emphasis is being placed on regulating unbundled transport prices to further the 14-year arbitrage game.

So, that’s the slight of hand so far.

Tune in on Friday to read the remainder of Dave’s rant–

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.

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.

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?