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.
The Joke is on You, America!
July 9, 2009
I hope everyone enjoyed the Fourth of July weekend–the celebration of one of the more advanced countries (allegedly) in the world, technologically speaking.
The joke is on you America!
Just before the holiday weekend, the Notice of Funding Availability (NOFA) was issued by the Federal government to begin the process of building broadband infrastructure under the Broadband Technology Opportunity Program (BTOP). The NOFA is over 120 pages long – before you get to the actual application form to be released on July 7th.
So what’s the joke?
We finally have a definition of Broadband in America by our Government. Such high standards, goals and ambition – I am in awe! Let me quote from page 18 of the document:
“Broadband means providing two-way data transmission with advertised speeds of at least 768 kilobits (kbps) downstream and at least 200 kbps upstream to end users, or providing sufficient capacity in the middle mile project to support the provision of broadband services to end users.” (Yes, that is not a typo it is kilobits, akin to a step above dial-up. Not megabytes or gigabytes or petabytes or terabytes or exabytes… just kilobits.)
Those spineless, buggy whip wonders within the Beltway. When you use this as a data point, technically speaking, if you have a telephone on copper or a cable TV service you can be readily served. This places our penetration rates over 95%. A feel good country at a feel good moment in time … politicians can now claim what they have done to you – I mean for you.
Let’s see…Australia – going to 1 gigabit nationally in 4 years. South Korea ibid. Japan ibid. Tasmania ibid …. Need I go on?
America is ranked 17th in the world for Broadband access speeds and I am sure this will move us up the dial … Not.
We need to resurrect JFK from the dead; he understood vision and prosperity for America. We can gigabit America in less time than it took to put a man on the moon and at a fraction of the cost.
My favorite word selection in the above definition is; “advertised speeds.” That’s a beauty!
Happy 233rd Birthday America! At this rate, there is a comeback for the Telegraph and Pony Express — that would create jobs also!
The ponies are green.
Jacko
July 2, 2009
Dateline: June 25, 2009.
Headline: Michael Jackson is Dead
Dateline: June 25, 2009
Headline: The Web Collapses Under The Weight Of Michael Jackson’s Death
Wake up America … if something really big happens (Think Crazy Man with nukes in North Korea), you can’t count on the web.
The government infrastructure programs and future Policy need to require minimum bandwidth delivery of 100 megabits – the proof is in the pudding. I think it should not only be a global economic imperative for the US of A competitiveness for REAL broadband over fiber but also in the interests of Public Safety and National Security.
Fiber access … plain and simple.
Something big happens (Think Crazy man with nukes in Iran), only the rural folks will have connectivity as major centers crash.
Back to the Future
May 15, 2009
It’s Back to the Future for me – just like the movie.
The big media buzz of Verizon selling select rural wire line (copper) facilities to Frontier Communications over 14 states for $5.6 billion in Frontier stock is the latest indicator that a consolidation cycle is starting and credit markets thawing. Though this deal won’t see Free Cash Flow positive for Frontier Communications for two years, it is the right strategic move for both companies. For an RLEC transaction, the EBITDA multiple is very good.
Verizon is focusing on the higher growth population centers and gains from the divestment of rural facilities that no longer accommodate Verizon. This also lessens any argument that Verizon is a menacing monopoly by way of this divestment.
Frontier Communications benefits from scale as they specialize in more rural areas to the extent they gain more proficiencies by integration. Frontier Communications does not serve the most rural of rural locations, so don’t expect any effort to deliver broadband to the barn, Green Acres or Petticoat Junction. It’s a great consolidating play for Frontier Communications, especially using stock as a currency, leaving the ability to lever debt off of EBITDA flows as a viable option/hedge.
Why is it back to the future for me? Well, way back in the early 1990’s, I was the first President of Frontier Communications well before the Communications Act of 1996. Once again, I will find myself holding Frontier stock as a result of this transaction since I hold Verizon stock. I am more confident this time that my stock quality will sustain itself, as the last time I held Frontier stock, the bandits from Global Crossing bought Frontier Communications, and in very short order destroyed shareowner value, the wealth and pensions of thousands of people. And no one went to prison.
I would like to share with you, my gracious readers, a funny story as an aside to this transaction (at least for me). If you go back to the 1990’s, the really big thing back then was long distance carriers. Hundreds, if not thousands of them existed. In the mid-1990’s, a consolidating cycle amongst these carriers had commenced as there was an over supply of carriers (capacity) that drove long distance prices so low, that you either merged for cost synergy or went bankrupt.
During this time of long distance consolidation, I participated in the Frontier Corporation M&A meetings discussing various targets or strategies. My invite was eventually lost in the mail.
If you have read the blog for sometime now, you know I don’t buy into the lemming model of business (move as a group to mitigate risk in the eyes of Wall Street…after all, if everyone is doing the same thing, it must be the right/safe thing to be doing. And, Wall Street, of course, being the fee-based vultures they are, happily endorses such paradigms.) Myself, I prefer contrarian moves and innovation.
Back to the M&A meetings: My first meeting, I went and listened. After all I was the new guy from “outside” the phone company and I wanted to take in the ambience. The second meeting, I raised my hand and made a suggestion. That suggestion was not to focus on buying into the over-supply of long haul carriers which drove prices into the ground, but instead to focus on acquiring local operating companies that already own infrastructure who are a gateway to the multitudes of long distance operators. My simple mind theory on this approach was that once prices go down, they usually don’t go up – integration synergies will keep the price wars going as things consolidate. I was told: “Dave that’s an interesting idea.” And the discussion continued on acquiring long haul carrier interests.
The third meeting I attended, I listened attentively again. Once again, I suggested a contrarian focus on acquiring local operators, this time my logic was that it had been my experience that those whom are closest to the customer have a better relationship and competitive advantage over those that are more distant – like in long distance. I was told: “Dave–that’s an interesting idea.” And the discussion continued on acquiring long haul carrier interests.
The fourth meeting…well there was no fourth meeting for me. Somehow my name fell off the e-mail invitation list. Several months later, Frontier merged (acquired) a major long distance carrier.
Today, as we know, long distance is near free with services such a Vonage, VOIP, Skype and MagicJack rapidly driving all-you-can-eat long distance services at flat rates across the globe. Flat rate all-distance is not far behind.
Since waking up with Back to the Future, my biggest worry now is waking up in Ground Hog Day – just like the movie. There is nothing brewing, but the Ground Hog irony of this adventure would be if Frontier Communications were ever to acquire American Fiber Systems because of our local presence, unique fiber assets, lucrative ARPU’s and our focus on being closest to the customer!
Talk about crazy!
Big news from down under, Mate.
April 13, 2009
Are you paying attention inside the Beltway?
The Australian government has stepped in and is funding public-private partnerships to increase broadband in Australia.
A few snippets:
- No single private company can build a nationwide Broadband network–this has been found a fundamental conclusion.
- The new network will reach 90% of Australia by Fiber to the Premise (FTTP). Those that can not be economically reached by FTTP will be served wirelessly. (How is that for clarity and objectives America? Do you think private financial money will be interested with such clarity?)
- This won’t happen over night–it will take 8 years! What famous blogger have you heard this from before? *
- FTTP is SUPERIOR over investing in FTTN, where N = Node. Translated: Copper does not cut it, it’s not reliable and it’s not a global conduit–at least in Australia.
- The new network will minimally deliver 100x faster data rates than the present data rates. That’s 100 megabits folks!
- Australia Broadband “…lags well behind those in many other advanced nations…”
America, what don’t you understand? I ask again, with all this Federal money being bantered about for Telecom, health care, infrastructure and education: What is good for America? Let’s not put the cart before the horse! We need optical connectivity for America–nothing more, nothing less should be our standard.
- Telecom Funds–broadband needs to be defined as nothing less than 100 megabits, not a bit less.
- Health Care Funds–spend your funds getting optically connected first before buying all those EHR and imaging applications. What good is an application that goes over an inferior, slow, unreliable connection?
- Infrastructure Funds–as dumb as this may sound, if you open a road or work on a bridge, you should install multiple ducts for the future installation for fiber optics. The incremental cost is miniscule. Sorry ILECs and a few CLECs – these would be Open Access ducts! If you don’t run an open access network (fiber leases and capacity leases to other carriers) you don’t get access to the duct system!
- Education Funds–education is dripping with Federal cash–it’s for the children! The children want and need lessons delivered over High Definition video links into the classroom with content and or real time events from the best of teachers across the nation. Get optically connected first…just ask the children!
Before blowing Federal money on something that has a 2-3 year life, install the optical facilities. Optical fiber cable will last 50 years and provides unlimited bandwidth growth. Once installed, you are future-proofed!
When I die, I will have a smile on my face because I already know the fiber optic networks we have installed will out live me by decades. I will leave our wonderful planet, Earth, with my work intact and for the overall betterment of humanity.
Thoughts? Or am I a lone wolf howling into the wind?
*Me.
Head in the Clouds
April 8, 2009
The trade press of the Telecom industry never ceases to amaze me. When it comes to Telecom reality–most of the time–the trade press is way ahead of the curve.
I keep stumbling across articles on new technologies that will transport data at 400 gigabit speeds. Just last night, I read how IBM has some new chip that can process data at a rate of 10 peta-flops. At least no one is making a claim that such speeds will carry over copper or wireless…yet!
With Google behind the scenes pushing on our Government, I am also seeing more and more ink on Cloud Computing, aka Software as a Service (SaaS). In a nutshell, it’s about moving applications from the desktop and your local server up into Google-land or some functional equivalent. Translated: an attack on Microsoft. (Note: I really enjoy watching rich companies fight).
As I have stated on this blog, and will inevitably state again, nothing happens in Telecom in the United States at a rate most analysts, market research houses, Congress, or trade press predicts. Cloud Computing will be no different. Cloud Computing is still a twinkle in Google’s eye.
But, as I sit here in my metropolitan fiber bigot world, I once again ask a simple question, (whether it’s peta-flops on your server or massive parallel Cloud Computing farm, the data still has to get from Point A to Point B–quickly and reliably): Why are we so relentless in placing the cart before the horse? (The horse in this case is reliable optical connectivity.)
I am not worrying about quick and reliable anymore. After all, input to the Federal NTIA broadband funding initiative has some carriers defining broadband at 1.5 megabits as perfectly acceptable. How long would it take a machine pumping at 10 peta-flops to upload to or interface with a Cloud Computing farm at 1.5 megabits per second? I refuse to do the math.
Here’s my point, America needs optical broadband connectivity. The entire country with a very few exceptions is under-served.
Reliability? That’s a low price, non-dimensional commodity–until something does not work. Sort of like electricity, or natural gas or fuel oil…have you ever wondered when some say bandwidth is as important to America as electricity but it should be plentiful and cheap? Have we ever had electric rates go down? The more electricity you consume, the more you pay? Sorry I digressed.
My point on reliability– and the same goes for Cloud Computing…what does it cost you if the Cloud is down or you can’t connect? Take out a calculator, assume your ”Cloud” goes down for 24 hours…What’s your cost? I would love to hear from you.
I am not picking on Google, but not too long ago, GMail went down for 24 hours. Those of you relying upon GMail–how was the experience? I would love to hear from you as well.
Reliability and optical bandwidth speeds–America’s ignored step-children
Charts is Charts…
April 6, 2009
I ran across some interesting charts that provide some perspective on who throttles real (optical) broadband in the United States and show the concentration of revenue and market power.
I encourage carriers applying for NTIA or RUS funds to submit a definition of “broadband” to the NTIA of service no less than 100 megabits. The vast majority of America is under-served at this definition rate. You have until April 13th to file–the NTIA has a nice on-line form: http://www.ntia.doc.gov/broadbandgrants/form.cfm
Take a look at the charts–if we want “broadband” defined as 1.5 megabits, these charts will not look better, but much, much worse. At 1.5 megabits, you are telling the government that there is no bandwidth demand and you are perfectly complacent the way things are. Do not let the ILECs or short term complacency throttle your existence. Maybe you are relying, or dying, on type 2 circuits. The answer is not to tell the government that 1.5 megabits–or even 50 megabits-will suffice.
Open access and non-discriminatory interconnection are terms (strings attached) that the ILECs do not like in this funding. Same for the term “innovative,” which has yet to be defined. They are worried these terms will require them to open up their capacity and fiber cables, which is something they fought hard to win in the courts. They are not about to risk opening up their optical broadband position for a lousy $7.2 billion, given they spent $30 billion on capex in the last 12 months, on local fiber optic infrastructure and wide band wireless infrastructure.
I am a free market guy. Get a clear definition of broadband to equate to no less than 100 megabits and watch private-public partnerships flourish. The key is setting a broadband standard to advocate and reach for–not what the ILEC allows us to do. My opinion: with anything less than 100 megabits, we will be having this same discussion three years from now.
More of my opinion: advocating anything less than 100 megabits is not sending the right message to the Beltway on broadband and Telecom policy in general.
Plus–ask yourself: what’s good for America? 1.5 megabits or 100 megabits? We all know the technology exists, wire line and wireless, to meet a 100 megabit hurtle.
It is alleged that the Obama Administration is “tech savvy.” I don’t consider 1.5 megabits tech savvy, do you? Will they? You need to tell them!
Why I’m Bullish on Qwest
April 3, 2009
The media is abuzz about Qwest Communications.
The buzz: Qwest would like to sell off its long haul business–analysts say it will fetch $2 billion to $3 billion. They say it’s to retire some forthcoming 2010 and 2011 debt.
Now–I am not surprised, given the vast majority of analysts have never operated a company and enjoy the pleasures of spreadsheet surfing as a form of art–that retiring debt is the conclusion. The short term antics of analysts are still alive and well! And, if I ran Qwest, I would tell the analysts no different. After all, you don’t get rewarded for thinking long term.
May I digress for a moment? A memory just popped into my head… Years ago, an Investment Banker (aka Real Smart Guy on Wall Street) left his lofty perch as a Banker in pursuit of even greater riches and became the CEO of a small CLEC. After all, he reasoned, after years of being a Banker, how hard can it be?
As Paul Harvey would say: “And now…the rest of the story…”
Over dinner one evening, our ex-Banker friend told me that he should have never left Banking, this (being a CEO) is “too much like work, Banking was easy.”
Back to Qwest… I like to think about things and observe. And one thing my years of Telecom experience have taught me about ILECs, is they usually don’t do something on a proactive basis, like divest network assets unless they are forced to by the Government or are in dire financial straights. Qwest is not under Government orders, nor are they in hard financial straights. You have to give the ILEC credit–they are not dumb people. Case in point, Verizon Communications unloading their Maine, Vermont and New Hampshire wire line network assets to Fairpoint Communications recently. It has not been an easy path for Fairpoint. Some analysts in hindsight are now questioning a number of things…except, of course, their past analysis of the deal.
I give Qwest credit, my logic beyond “debt retirement” is as follows:
1. Qwest International was the first to build out an independent nationwide long haul fiber network back in the mid 1990’s. The infrastructure is long in the tooth, the fiber is not “this generation fiber.”
2. Long distance calling as a usage product is marginal at best and is going to succumb to “free VOIP” if you buy our data plan. Texting has already surpassed TDM voice in usage…and twitter is just starting…in Academia, this shift would be called the end of a life cycle.
3. Qwest International IRU’d fiber over the years to other carriers. Built-in options exist for capacity. Long haul wholesale is a tough pony to ride.
4. Qwest is not in the wireless business. Wireless is driving backhaul. There is no distinct competitive advantage for Qwest to become a virtual wireless operator. As IP evolves and the Federal Government gets open network access and devices–not being in the cellular business won’t matter much–local market network presence will.
5. Every day I read about yet another box provider stating 10 gig, 40 gig and 400 gig capabilities for long haul networks. We always must remember the cheapest and easiest network to light have always been the long haul networks. Local networks are far more costly, complex and knowledge intense than long haul.
6. Service and application value-add originates and terminates locally – that is the future. Long haul networks running at 400 gig are pure commodity–cheaper than salt. The telephone has been around for over 100 years…I have yet to witness a call originate or terminate on a long haul network. This is why Google is working real hard inside the Beltway on policy and as a friend of President Obama.
So, as I look at Qwest and their footprint, I believe they want to stay in the game and will focus on services inside and outside their territory. I imagine they see the same data that I see where margins and profits are better for carriers where rational competition exists and less bravado overbuilding has been done. I believe they see a future where margin growth is valued over revenue growth given our financial markets are not likely to return to their old practices of lending any time soon–I am not talking about a near term credit thaw. I believe our financial institutions will be regulated as such, that margin and profit growth will become the key lending criteria–no longer the big revenue “too big to fail” financings of the past.
I also believe Qwest sees the importance of local fiber access and presence–even if you end up as a nationwide wholesaler of local bandwidth.
I believe with cheaper capital forthcoming, and the retiring some debt, Qwest will become a near term consolidator of Telecommunications infrastructure. I see a focus not so much on the top tier markets, but in viewing an opportunity to become a major national player below the top 12 cities in the United States. Today, on a network basis, below the top 12 cities, it is a highly fragmented market with a donut hole between the ILECs and the smaller players.
All due respect to the larger CLECs with a billion or two in revenue, but–in the scheme of things–we are all tiny. I have had countless inquiries from all sorts of Private Equity firms claiming they see a large opportunity in consolidating below the top twelve markets, yet no PE firm has shown the moxy to lead it…yet.
Qwest and the right PE firm – could be an entirely different story. A newly reconstituted Qwest can provide the right platform, existing scale and PE comfort to become a national “Zone 2” carrier and enabler which is missing in America.
I’m more bullish on Qwest than just retiring some debt…we’ll see …
Fresh Squeezed in Florida
March 30, 2009
The House & Energy & Utility Policy committee in the State of Florida has passed a bill removing most state regulations over telecommunications competition. The bill also limits the Public Service Commission from most Telecom matters for all but basic landline services.
Here’s the logic:
- The rates for telephone service will go up–by an estimated 6% to 20%. This will attract more competition.
- Cable Companies are not regulated for phone service, which creates a disadvantage for the incumbent. (Talk about a good lobbyist). Cable companies can bundle, price, and promote without seeking PSC approvals.
Rusin Translation: The duopoly structure in Florida is not working and one party in the duopoly can’t compete because of regulations, resulting in lost market share. By allowing prices to rise (as I have said over the years, the free market) and as growing profits are realized, then and only then will new competitors enter. That’s when the business model just might make economic sense…
Will other states follow? What a concept–let the market decide prices, the winners, and the losers.
Now, if we could get the FCC to focus only on basic land line services only….
More Video, Voice Peering Forum, Part 2
January 2, 2009
This is the second half of the interview with TMC’s Rich Tehrani.
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