Not A New Year's Resolution

I'm not the type of person to make New Year's resolutions because why should a person pick just one time of the year to say that they are going to evaluate how they are going to live their life or run their business. This philosophy comes from my grandmother that use to say, "Why should I wait until your birthday to give you a present to show my love? I love you all of the time so anytime is a good time to give you a gift." So while I tend to evaluate my plans and life on a continual basis, the beginning of a new year is a psychological new beginning for many people. More importantly for most of us in the business world it the beginning of a new fiscal year for many of our customers.

The start of a new fiscal year is my motivator for implementing the plans that I made last year. I previously lamented about the malaise in the telecommunications industry. My assertion was that all of the excitement was in the equipment attached to the network. Looking at the excitement surrounding the CES that just ended, one could agree with my statement. Instead of an either/or option for intelligent network/intelligent CPE, the truth is that they have to operate synergistically to achieve their desired aim. There is a tremendous amount of heavy lifting behind returning your "OK Google" request or bringing you a Uber car. It may be the application developers that appear to create magic on smartphones and tablets, but it is that work of thousands of telecom network professionals like us to make it look like magic.

Although today's mobile device has more computing power than a supercomputer from 1980, that device cannot do everything necessary to deliver information or intelligence from the far-flung reaches of the Earth. There are thousands of protocols and API designed to allow systems to interact with each other to assemble disparate pieces of information into a simple result displayed on a screen. We use catchy marketing terms like Big Data and Internet of Things to make these interactions understandable by the layperson and to sell products and services to our customers. Although I cringe every time I hear buzzwords like these or cloud, I know that they are euphemisms for a complex set of interactions taking place in the network on the user's behalf.

So there are exciting things left to do in telecommunications afterall. They may not be as straightforward as the creation of DSL or SDH/SONET technology, but we have built that layer of the network and it is mature. We are in the phase of more complex interactions between different layers of the network to automate and simplify how services are delivered. For those veterans that built the foundation of today's broadband optical network, it may appear that there is not much left to do, but that is not the case.

The industry will continue to develop the SDN-based network and take advantage of powerful inexpensive computing to virtualize more functionality (NFV) into the cloud (ouch that hurt). As we continue to optimize the transport network to add more connected devices like doorbells (Ring), lights (LIFX), and cars, we will need the added sophistication that the network provides to provide near real time interactions with us.

There are still plenty of problems to solve such as ubiquitous connectivity. With only 40% of U.S. rural population having access to wired broadband and much less connectivity in many other parts of the world, there is still a tremendous effort needed to make broadband universal worldwide.

Security of data and information is another significant concern. Up to now, everything that we have done is just treating the symptom. Personal information is being stolen and sold every day from governments and private enterprises. No organization is immune to a data breach. Privacy goes right along with data security. Privacy is a basic human right that is constantly being violated globally by governments, corporations, and individuals. I question why my identity was compromised by a company that I never did business and used against me by the government. This situation is inexcusable, and it demonstrates the fact that security has not been a priority in our industry. Our liberty depends on these two tenants which is why the industry's brightest minds must develop a holistic solution that includes end-to-end encryption of all information on devices and traversing across the network. There can be no backdoors for any reason.

Millions of new devices being connected to the network monthly requires scalability. With increased scalability comes increased power consumption. We need to put our minds on how to grow these networks without exponentially increasing power consumption. Actually power consumption should be decreasing.

I could go on and on but those are the big three topics that I see the industry addressing in 2016 and beyond. Closer to home, I will continue to be involved in the larger trends in the industry while solving some of the more tactical problems to get us there. ComTech Sales and myself can be relied upon to work with service providers to develop and implement solutions to expanding broadband penetration, security, and power consumption. We will continue to grow our business on the telecom side of the industry that we started in the fall of 2015. Please rely on us for solutions to your equipment needs.

Avoiding the Pitfalls of Municipal Broadband Networks

I just posted an article on municipal broadband from Forbes that is one of many that points out the pitfalls of municipal broadband. Lest we forget all of the muni-WiFi follies of the last decade. It is not the purpose of government to compete with free enterprise in a capitalist economy. Government should only step in when private enterprise will not or cannot financially serve a market.

This article touches on the fact that fiber-based broadband networks are extremely costly to build. That last-mile access is the most expensive because it is the portion of the network least shared. Add to it the fact that we have a much lower housing density in the United States than in most countries, and you have added even more to the cost of providing service to a single home. Now consider the fact that the electronics that power the network will be replaced typically every 5 years to keep up with the demand for more services and bandwidth and you have offset most of the benefits of the 40-50 year life-cycle of the fiber. Do not forget the pressure to lower cost due to competition and the increasing costs for content. Now maybe you can see why there are only two providers at best in each market.

The business case for broadband services (i.e. voice, video, and data) works for at most two providers if they build and operate their own networks. Most areas of the United States are currently in this situation. A duopoly does not promote competition; hence, the desire for a third player. Google has chosen to stir up the pot in several markets by competing with the incumbents but their business objective is to use these captive eye-balls to push more Google advertising. I personally applaud Google for taking a long-term and different approach to provide true competition in some markets. The down side to what they are doing could be the "walled gardens" that so many net-neutrality wonks are afraid with managed services on the Internet. What's to prevent Facebook from doing the same as Google? Why not? The problem is if Facebook and Google start limiting content to competing services. It could happen. Remember AOL and CompuServe?

These fears and the fact that Google has only announced a limited number of markets it is entering. In Google's defense what is limiting the speed of their penetration is the byzantine regulatory environment that they have to navigate. Many cities and towns do not want to wait for Google or someone else to come so they have turned to government to fill in where private enterprise will not. A persuasive argument could be made for wanting municipal broadband which citizens of Chatanooga and around Salt Lake City have bought.

Cities have not considered out-of-the-box solutions such as they lay and manage the fiber infrastructure and allow service providers to lease the fiber access from a centralized location to the subscribers' home. Locales in Europe and Asia have successfully implemented this model. Where they have open-access broadband infrastructure, competition has flourished. I have challenged several municipalities to try open-access but they had employees more interested in building and running their own little networks. Civic leaders need to reach beyond their own bureaucrats or desire for bigger government and look for solutions that will work for the economic growth of their cities.

Common Sense at the F.C.C.

Federal Communications Chairman Thomas Wheeler (Brian Fung/The Washington Post)

After a few months of comments by the Chairman of the F.C.C., Thomas Wheeler, that the Commission would consider allowing companies to pay for special arrangements for access to their customers.  They will propose a new set of rules in their May meeting that will allow content providers to pay broadband carriers for better access to customers.  In this statement they included another proposed rule that would prevent any carrier from inhibiting, limiting, or denying access that would limit the openness of the Internet.  The Commission was not specific on how the details of this so-called fast lane could be implemented, but most likely it will be increased bandwidth at peering points, improved content caching, and traffic prioritization (i.e. Quality of Service).  The F.C.C. was specific in stating that broadband providers “may not act in a commercially unreasonable manner to harm the Internet, including favoring the traffic from an affiliated entity.”

The F.C.C.’s action is based on a January decision by the U.S. Court of Appeals for the District of Columba Circuit that struck down the FCC’s 2010 net neutrality rules.  This still left the commission with the authority under the Telecommunications Act of 1996 to regulate broadband services.  The F.C.C. would still have to look at each agreement on a case-by-case basis as required by the D.C. court.  Also they will act on any broadband company that engages in harmful conduct that threaten the openness of the Internet.

The F.C.C. has properly covered its’ bases here by preserving the value of the Internet that allows any device to freely connect to any other device, but they also wisely recognize that all bits are NOT created equal.  Since the arrival of Thomas Wheeler at the commission, the analysis and reports from the staff engineers have triumphed over the politics of the bureaucrats and outsiders.  They realize that best-effort Internet access is not sufficient to promote true content competition.

Since divestiture we have strived for a competitive telecommunications market in this country, but we have been unable to achieve it because the business case is untenable for each service provider to build high bandwidth fiber networks to homes and small businesses.  It is affordable to run fiber to business customers that spend thousands of dollars a month on services which is why we have approximately 40% of all businesses now served by fiber.  For the residential subscriber that spends less that $50 per month the cost is prohibitive. This fact is why we now have triple-play services offered by a duopoly with an ARPU over $100 per month offered by the incumbent broadband carriers.  Service providers need at least a 40% market share to provide a reasonable ROI to build a network which is why you don’t see small start-ups building alternative networks.  Investors are smart enough to realize that it takes too much capital to build these networks and it is a losing proposition to take on the incumbents.

Fledgeling startups like Vonage or Netflix could never afford to build their own network, but they can leverage the Internet to provide competing services to the incumbent carriers.  The incumbent carriers control the quality of their services by utilizing bandwidth outside of their Internet service to deliver their voice and video services.  Over-the-top (OTT) service providers do not have any ability to control the quality of their services since currently the Internet is a best-effort where all bits are created equal.  Before delay and jitter critical services like voice and video traversed the Internet, best-effort was good enough because no one really tell if their web page or e-mail was arriving a few milliseconds later than it did last time. Slow performance was usually related to the last-mile access bandwidth.  Throw a few more Mbit/s at a customer and the problem was gone. 

Now that video dominates the Internet, the backbone frequently becomes saturated at peering points and access;  thereby, affecting all traffic.  Customers of OTT companies are complaining that the quality of the service is poor, and they eventually go back to the incumbent service provider.  The OTT loses while the incumbent wins.  The customer loses too because there is less competition in the market.

The conclusion is that best-effort packet delivery is not good enough for services like voice and video.  Businesses have known that for over a decade which is why they purchased managed Ethernet services where they can prioritize their voice traffic over video over web surfing and e-mail.  There are two standards by which traffic can be prioritized end-to-end and several implementation agreements that the industry uses for interoperability.  These same mechanisms can be applied to the Internet to level the playing field for OTT service providers.

The F.C.C. is smart to recognize that true service provider competition will take a few more decades to come to the residential market.  Of course open-access municipal broadband could deliver true competition as I have written about many times, but allowing content providers to negotiate special peering arrangements and traffic prioritization will offer consumers a real choice in services other than that forced upon them by the duopolies.  OTT service providers like Netflix, Hulu+, Amazon, Google, Vonage, etc. will soon be able to deliver the same quality of service as the incumbent carriers at competitive prices.

Unfortunately this common sense technical solution to enable capitalism has been extremely politicized.  Many of the articles written over the past few months are vehemently against this proposed change in policy, but their fears are fueled by their ignorance and vested interests.  Surprisingly The New York Times and PC World each wrote very good and non-biased articles on today’s announcement that accurately presented the F.C.C.’s proposed new rules.  The usual tripe was spewed by outlets such as The Verge, NPR, The L.A. Times, and CBS’ own CNET decrying the end of the Internet and quoting any number of Soros funded front groups.

Their arguments are based on the egalitarian philosophy that all bits should be treated equal.  They trot out anti-capitalist rhetoric and class-warfare arguments.  What they do not realize that while they think they are sticking up for the little-guy (the consumer and OTT providers) they are actually supporting the big guy (the incumbent).  Maybe I am not giving them enough credit and their support is intentional. 

A prime example of the the misinformation that is propagated was on today’s The 404 Show hosted by CNET.  Bridget Carey (@BridgetCarey) incorrectly states that the little guy cannot afford to pay the toll to Comcast that the large companies could easily pay.  Well Netflix was and still is a little guy compared to companies like Comcast, but they charge an order of magnitude less than the big guy so adding a couple of bucks a month for superior quality of service insignificantly impacts their value.  She leaps to the conclusion with the support of her cohort Jeff Bakalar (@JeffBakalar) that there will be an Internet ghetto for those companies and people that cannot afford to pay. What they are missing is that only companies with time-sensitive content will want to pay for prioritization, and that companies just serving up web pages like Amazon, Facebook, LinkedIn, etc. can still survive on a best-effort service.  Jeff believes that the Internet should be free and that all service and content providers are inherently evil.  Their arguments were thinly veiled slams at Comcast which is no surprise since they are paid by Viacom/CBS.  This is the problem when you have journalism majors applying their political philosophies to the technical domain.  They certainly should not be issued a journalism license.

The problem is that arguments like these will be presented as opposition to the common sense rules proposed by the F.C.C.  They will be guided by emotions and fear and not facts which seems to dominate today’s political domain.  Thomas Wheeler is the first Commissioner in more than a decade that actually understands the industry that he is attempting to regulate.  Let’s hope that the rest of the Commission understands reason so we can have a truly competitive content market.

Technorati Tags: FCC,FTTH,Internet,broadband,net neutrality,differentiated services,Silicon Flatirons,No Agenda,Comcast (CMCSA)

What the 1,099 Communities Not Selected by Google by Google Should Do

The past month has been crazy ever since Google announced that they are going to build an open access fiber-based network in one or a couple communities from 50,000 to 500,000 in population.  Over 1,100 communities submitted responses to the Google Fiber for Communities Request for Information including my own Boulder and Longmont, Colorado.  Those communities took the time to thoroughly understand how broadband infrastructure could benefit their community.  So what should the 1,099 or so communities that are not selected do?  They should build the open-access broadband network anyway.

Why?  Communities that responded to the RFI realize that a broadband infrastructure will not only offer their citizens greater choice of service providers, but also provide economic growth to their community.  Studies in Europe, Asia, and North America have confirmed the benefits that will come to these communities (link and link).  Some cities conducted their own surveys asking businesses how a broadband infrastructure could benefit their business.  Boulder’s results can be found here and here.  So now that Google has stimulated this awareness of the benefits, why should a community take it on themselves to build the network?  Obviously one of the incumbent carriers will build it eventually, right?

Communities need to realize that incumbent carriers are not going to make any multi-billion dollar investments in infrastructure in the next couple of years no matter how hard they squeeze them during franchise negotiations.  Verizon has publicly announced that they have completed their FiOS buildout passing approximately 18 million homes and gathering 2.86 million TV and 3.43 million Internet subscribers.  AT&T’s U-verse service only reaches 2.1 million subscribers and it based on a FTTN architecture that only provides limited speeds.  Comcast has been the most aggressive with hitting more than 80% of its service territory with DOCSIS 3.0 by the end of the year and reclaiming spectrum for more data use via Project Calvary.  Comcast is offering speeds up to 50 Mbit/s for Internet.  The bottom line is that if you do not live in a major metropolitan areas that these providers already hit, you can only expect incremental or no improvements in service.  Most of these communities will not see Internet speeds greater than 50 Mbit/s or a choice of more than two video providers. 

The economics of building a single carrier infrastructure are not suitable for these companies to undertake.  Verizon spent $23 billion building out its FiOS network which equates to over $7,600 per subscriber.  Ivan Seidenberg, CEO, stated that they would like to achieve at least 7.2 million subscribers;  thereby, cutting the cost per subscriber in half.¹  Assuming that the company nets $50 each month per subscriber, which is generous, and that Verizon achieves its 7.2 million subscribers, it will take over 5 years to see a positive return on investment.  Investors in public companies do not want to see payback periods beyond 2 years even though the investment’s lifetime is greater than 20 years.

The economics for a open-access infrastructure are much different because there are multiple service providers utilizing the infrastructure that improve the fill rate and cash flow.  Successful open-access networks enjoy a fill rate of greater than 60%.  Some of the installation issues that plague large companies like Verizon are mitigated in municipal networks.  Smaller carriers have reduced installation costs down below $1,500 and even lower.  Just taking these two factors into account and allocating $30 per month to pay for the infrastructure moves the payback time to 5 years, and that figure does not include the revenue from any business customer that definitely improves the economics.  This article, published on the Gerson Lehrman Group site, takes a look at the economics with a smaller adoption rate but does not separate the service from the infrastructure.  They conclude that the payback time is much less.  Our company, Inphotonics Research, has more detailed case studies that indicate a payback period closer to the 5 year period factoring in all of the expenses and incomes which is far too long except for the patient investor.  On the other hand, the municipal bond investor may see a compelling investment opportunity and communities may even be able to enjoy a net positive revenue flow into their general fund.

Now that communities realize the the economics are feasible and that such a network provides numerous benefits to the community, how will they do it?  The purpose of Google’s grand experiment is to show communities how they could build their own infrastructure.  Their objective is not to build these networks in every community, but share the results so other communities could do it themselves.²  Understanding the formula will get a community started.  It does not give them the expertise to build and operate the infrastructure as well as attract service providers.  Companies exist that will assist communities to plan, build, and operate their infrastructure such as Inphotonics Research.  These companies have the relationships with appropriate industry players to make the project successful for a community.  So if you are one of the communities that does not end up selected by Google, go ahead and leverage Google’s work and build the network yourself.  You can do it with a little help.

Technorati Tags: broadband,broadband penetration,Comcast (CMCSA),AT&T,DOCSIS,FTTH,telecom,Verizon (VZ),#boulderfiber

Is Enough, Enough When It Comes To Bandwidth AT&T?

Time to get back to telecom issues and leave content and services alone for a few articles.

Ah, the glory days when we proclaimed at AT&T that 56 Kbit/s was all the bandwidth a business would ever need.  A few years later we updated that cap to a T1 or 1.544 Mbit/s.  Lately, The New AT&T proclaims that 35 Mbit/s is enough bandwidth for your TV, phone, and Internet access.  Is it?

Comcast does not think so.  Earlier this week, Brian Roberts, CEO of Comcast, demonstrated Internet access speeds of 150 Mbit/s at The Cable Show in Las Vegas.  The demonstration utilized the DOCSIS 3.0 standard to bond together the equivalent of 4 analog TV channels to obtain the desired bandwidth for the demonstration.  They plan on reclaiming bandwidth on the plant to offer 100 Mbit/s Internet access to homes by moving to an all digital plant, utilizing switched digital video, reclaiming bandwidth from legacy applications, and implementing MPEG-4 compression according to Tony Werner, Comcast's CTO.  Comcast is not resting on its laurels in the triple-play arms race.

Additionally, Comcast will have to incorporate node splits to ensure enough bandwidth to each home.  Splitting a node costs between $3.35 to $26 per home passed depending on they way that they actually split a node.  About 65% of those splits are of the "logical" type that cost $3.35.  A small cost compared with some of the telcos upgrade plans.

Let's compare these figures to the cost of AT&T's Project Lightspeed.  Also this week, AT&T announced that the capital expenditure of Project Lightspeed would increase from $4.6B to $6.5B and the number of homes passed to 18 million; down a million homes.  That announcement increased price per home passed to $361 which is now about half the cost per home passed of Verizon's FiOS project that is delivering 50 Mbit/s Internet access alone.  To reduce capital expenditures, AT&T relies on a fiber to the curb approach and existing copper cable for the last thousand feet which limits bandwidth to the home.

In addition to the cost, AT&T depends on a completely switched digital video network to squeeze the most out of the limited bandwidth over their aging copper plant.  The Microsoft software that powers their IP-TV network has proven to be less than reliable to date.  Add this up:  a totally new switched digital video network, the limitations of a copper infrastructure, and a multi-billion dollar build-out for a network that is barely sufficient to meet today's triple-play needs. 

Contrast this risky strategy with Comcast's low cost, high bandwidth network and you would think that the market would be going crazy for Comcast stock.  The opposite is true.  AT&T's stock keeps rising while Comcast's is holding steady after a setback in January.  The market is fixated on short-term numbers instead of the long-term picture.

In the triple-play arms race, Comcast is better suited to capture a greater market share with faster Internet access, a greater selection of HDTV programming, more responsive VOD, cheaper voice services, and an integrated suite of packages ala Zimbra.  Despite of what Om Malik says, Comcast is delivering the innovation to make it a triple-play market leader.

Technorati tags: AT&T (T), Comcast (CMCSA), Verizon (VZ), DOCSIS, FTTH

Broadband Penetration Projected to Reach Half of U.S. Households by 2008

Parks Associates today released their estimate that the U.S. may finally reach that 50% mark for broadband penetration by the end of the year. High Speed Internet connections grew by 20% last year hitting 47% of all U.S. households. While it is good news that broadband penetration is becoming a mainstay in the American home, we still lag behind Denmark, the Netherlands, Iceland, Korea, Switzerland, Finland, Norway, Sweden, Canada, the UK and Belgium in per-capita broadband deployment. The U.S. still lags greatly in the number of fiber connections with just over 500,000 while countries like Japan have 6 million or more. Although Verizon is driving FTTH deployment in big numbers, AT&T and U S West are not contributing much. Surprisingly enough independent telephone companies and municipalities are not waiting for the telcos or cable companies. Many of them are building their own open access broadband networks like Bend, Oregon. We still have a long way to go. Remember that fiber glut we had coming out of the bubble? Funny how we do not hear much about it any more. Could be because we are exhausting it in many places.

Technorati tags: Verizon (VZ), broadband, FTTH