Net Neutrality Friday

Friday of last week was the implementation of Title II per the FCC. And as far as I could tell, my service did not change. So I am not sure of where we end up long term, but in the short term I see no difference. But there was a first this week, AT&T is being fined under the new rules for $100M. This is not a pure Net Neutrality violation but instead one of transparency. The FCC has found that AT&T Wireless did not tell its customers enough information about the limits that AT&T placed on their customer's usage of data. Not exactly what one thinks of as a violation of Net Neutrality. I keep wondering why that kind of issue is handled by the FCC and not the FTC.

Also this week, New York City was angry (still) at Verizon about FiOS availability. I don't know that all of us are aware of all the facts, but Verizon claims to have passed every home in NYC with Fiber and that many Multi-Dwelling Units (MDU) have not allowed Verizon to connect FiOS to people that live in them. I know that this is factual in some instances, but I am not clear on the percentages. NYC claims that 40K people have ordered FiOS and it has not been delivered. That seems possible through denied access but larger than might be possible. I think none of us are clear on the truth of Verizon's claims here.

Well that leads me back to my last discussion about investment. I had a nice discussion on the message boards at Light Reading about this topic. I find it fascinating that journalists that cover the industry can not discern the difference in value that a consumer might place on a purchase and the business might place. In this case we are talking about Wireline Residential Access. That is wired consumer access and in most places comes from either the telephone company (Telco) or the cable company (MSO). Now it turns out that this business requires a lot of capital investment and margins on the business are very low. That does mean that the price is not high, just not very profitable.

So, what do companies invest in when they add broadband service capacity? Well, we need to start with the physical plant. In this case, MSOs generally have an advantage over Telcos. The Hybrid Fiber Coax (HFC) plant that MSOs have has more bandwidth than the twisted pair copper traditionally used by Telcos. Additionally, there were few plant issues in upgrading Cable systems to support cable modems. This meant that MSOs could start deploying cable modems with few if any plant upgrades. The biggest change was a box at the Head End called a CMTS. With that addition alone, MSOs could start selling Broadband Internet. For Telcos, there were often more plant upgrades and equipment upgrades to put in DSL. All of this led to 2/3rds of US Broadband Service coming from Cable Companies.

It also took Telcos more plant construction to offer higher speed DSL. In my area here in Santa Rosa, I can get both AT&T at 25 Mb/s and Comcast at 150Mb/s. For AT&T to offer even higher rates will involve significant deployment of fiber, even if they don't bring Fiber all the way to the home. The technology required is called and requires very short loops (500 feet or so) compared to U-verse (which operates at 2500 feet). That means more fiber has to get put in close to the homes and many small units have to be installed to reach homes.

The other alternative is Fiber to the Home, most notably done in the US by Verizon with FiOS. That technology is relatively expensive because of the amount of fiber that has to be deployed. However, Verizon has done very well in selling FiOS but has stopped expanding it a long time ago.

This stoppage of expansion and why Fiber to the Home is not the normal deployment are my concerns here. And that I think network investment is the number one issue!

Jim Sackman Focal Point Business Coaching Business Coaching, Executive Training, Sales Training, Marketing

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