Tag Archives: telecoms

Broadband customers love the message, hate the messenger

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People in the U.S. love big shopping, food and consumer electronics brands, but are not high on utility, telecommunications and food delivery companies and banks. That’s one take-away from the spring 2017 edition of the list of “America’s most loved brands” by Morning Consult. What was published was only a partial list – intended to draw you in and sign you up for their service – but even so it offers some interesting insights into the way consumers view the companies and industries that compete for their affections.


Data from Morning Consult, Spring 2017 brand study.

Looking at the industry by industry data that Morning Consult published, the average “net favorability” score for telecoms companies was only 21%, ranking 25th out of 28 industry segments assessed. There was an interesting split between telephone and cable companies. Verizon and AT&T came out on top in the category, at 29% and 28% respectively, while Time Warner Cable and Charter Communications (soon to be unified under the single, Spectrum brand) managed only half that, scoring 14% and 12%. Comcast’s Xfinity brand fell in the middle, at 21%. I assume other telecoms companies were included in the survey, but that’s the extent of Morning Consult’s data freeview.

By contrast, online services companies did well. Amazon (76%) and Google (75%) were the highest rated brands of all, and YouTube, also an Alphabet (née Google) brand also made the top ten list at 71%. On the consumer electronics side, Sony also made the top ten, hitting 70% net favorability, with Microsoft coming in second – as a hardware company – at 66%. Apple’s rating wasn’t disclosed, which leads me to suspect that the published list was selected on the basis of teaser value rather than on objective league table standings. Apple is routinely one of the most highly rated brands in the world, and it would be a banner headline for Morning Consult if its data said anything different.

The affection gap between the companies that provide services over and for the Internet and the ones that connect us to it is striking. As many people hate cable and telcos as love online services and consumer electronics companies. It’s another way of saying we do not trust monopoly broadband companies, but we do have faith in the competitive product and service providers we access via those networks. That’s a gap that federal and state policy makers should heed as they weigh subsidy choices, common carrier rules and other major telecoms industry decisions.

California’s telecoms playing field takes a tiny tilt towards level

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It’s all the same.

The California Public Utilities Commission took a small, but significant, step towards treating all telecoms companies the same on Thursday. Cable and telephone companies, mobile carriers and any other communication service provider will now be subject to the same kind of safety enforcement procedures as other public utilities.

The commission [voted to allow enforcement staff to issue citations to any communications company]() that violates the safety rules that govern how utility poles, wires and cables, antennas, cabinets and other infrastructure in the public right of way is installed and maintained.

Previously, if the CPUC wanted to penalise companies that maintain unsafe infrastructure or force them to repair it, it had to go through a long and complicated legal process. Under the new system, staff can basically write it up and leave it to the company to either pay the fine or appeal it. It’s not that much different from the way traffic tickets work, except that the fines can be up to $8 million per citation. It’s the same system that the CPUC uses to enforce infrastructure safety rules for electric, gas and other utility companies.

The new procedures bring welcome simplicity and consistency to at least a small corner of California’s telecommunications ecosystem. For the most part, different types of companies play by separate sets of rules that were established back in the old analog days when telephone companies delivered dial tone, cable companies just offered television service and mobile carriers and independent Internet service providers didn’t even exist.

Now that the digital services offered by all four kinds of companies are converging to the point where there’s no meaningful distinction between them other than price and performance, that complex thicket of legacy privileges and requirements serves no good public purpose. Quite the contrary, the various sets of rules custom tailored over the years by relentless lobbying offer telecoms companies the opportunity to game the system to no one’s benefit but their own.

Thursday’s decision was a good start in the right direction.

CPUC votes to let telcos fine themselves, keep the money

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Miss me yet?

In the most cynical decision I’ve ever seen the California Public Utilities Commission make, telephone companies will be allowed to pay fines to themselves, if they fail to meet service quality standards.

Fines, it seems, are just another cost of doing business for telecoms companies and don’t matter anyway. So why not let them keep the money?

Boiled down, that’s CPUC president Michael Picker’s rationale for establishing new telephone voice service level requirements backed up by a swingeing schedule of penalties and then saying but we’ll let you keep the money if you invest it in infrastructure or pay staff. Or something. Anything.

No kidding. That’s what last week’s decision says

Carriers may propose, in their annual fine filing, to invest no less than twice the amount of their annual fine in a project (s) which improves service quality in a measurable way within 2 years.

Commissioner Mike Florio was quick to – correctly – point out that the policy is unenforceable. Even hefty fines are trivial compared to, say, AT&T’s annual capital and operating budgets in California. Concocting an “incremental expenditure” two years down the road, based on last year’s budget, is a trivial accounting exercise. AT&T will leave it to the summer interns to figure out.

A rational alternative was offered by commissioner Catherine Sandoval. She proposed a system of simple fines and a more granular reporting system, to make sure big outages in small rural communities, like Selma in Fresno County, don’t disappear under an avalanche of average results from Los Angeles or San Francisco.

Picker didn’t even bother to bring Sandoval’s alternative up for a vote. He knew he had yeses from commissioners Carla Peterman and Liane Randolph in his pocket, so he put his version on the table and called the roll: Picker, Randolph and Peterman, yes; Sandoval and Florio, no.

With that three to two vote, the matter was closed and AT&T, Frontier and the scattering of rural telephone companies in California will be left to slap their own wrists when service doesn’t measure up to the standards that remain.

I was never a summer intern for AT&T. I was a summer intern for Bell Labs, which was only half owned by AT&T. The other half was owned by Western Electric. Which was owned by AT&T. Which also owned Southwestern Bell. Which AT&T had to divest so Southwestern Bell could buy AT&T. Which proves I was never a summer intern for AT&T.

Broadband competition beats stagnation and regulation

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Don’t fence me in.

There’s nothing new about local governments getting into the utilities business. Nearly all waste water utilities and many (most?) water utilities are publicly owned and managed, either by a primary agency (i.e. city or county) or a special district or equivalent. Plenty of publicly owned electric and solid waste utilities are around too.

So long as the go/no-go decision is made by the taxpayers involved – indirectly by representative government or directly by vote, as they prefer – it’s little different from a corporation and its shareholders deciding to commit capital. Keeping the decision local is the key that allows for a variety of choices within a general area.

Broadband is in a grey area. Sewer and water infrastructure is a true natural monopoly and broadband shares many of those characteristics. Local circumstances tip it one way or the other. Where sufficient competition exists, taxpayers (and usually their representatives) do not support publicly owned competitors. There are a few exceptions, all of which (that I’m aware of) have turned out badly. In most of those cases, it’s the taxpayers and not the private sector that have blinked first and cut their losses.

Where insufficient competition exists, taxpayers are more willing to back a public option. It’s generally in circumstances where the barriers to entry – particularly the economic characteristics of the market – tip broadband toward the natural monopoly column. In those circumstances, creating a competitive market where a publicly owned system succeeds or fails on its own merit is less intrusive than perpetual regulation.

Telecoms companies direct capital toward competitive markets and sectors within markets, which is their right. However, people living in a non-competitive area are not obligated to accept the status quo. Challenging it through market-based competition is economically healthy and politically legitimate.

Get out of town to see new broadband horizons

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One trend to watch for in 2013 is consolidation and growth in rural broadband in the U.S. AT&T and Verizon are backing – sometimes running full speed – away from the wireline business in less densely populated markets. That's an opportunity for entrepreneurs with rural telecoms experience to create their own kind of economies of scale.

Frontier Communications is well down that road, with five million phone lines under its management nationwide. Like Google, Surewest is looking to Kansas as a growth opportunity. Here in California, Sebastian is expanding from its home base in Kerman, acquiring another small telco in the Sierra foothills and positioning itself as the go to company for rural telecommunications construction. Suddenlink has discovered how to run geographically scattered cable systems with a lean and mobile staff.

But that's just the first wave crashing on shore. The one built on legacy systems. It's the next wave that will run up and over the beach.

Fiber backbones are easier to build outside of metropolitan areas, when people are of a mind to cooperate. The options for last mile service – wireless, legacy copper and maybe even fiber – are gaining in effectiveness while holding steady on costs.

Dispersed and fully digitally native, small management and operations teams have no trouble keeping in touch with networks, customers and each other. Networks can scale up while head counts and costs stay relatively flat.

This coming year, watch for one or two embrace these advantages introduce new service delivery and business models that overcome the high fixed costs of broadband infrastructure and the low marginal revenue of rural markets.

User-financed FTTP fails in a competitive market

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Palo Alto user financed FTTP study

A user-financed, municipal fiber-to-the-premises broadband system would be a financial nightmare if launched into a market with mainstream competition, even if it’s subsidized and supported by a profitable city-owned utility.

That’s the finding of a study presented to the City of Palo Alto’s Utility Advisory Commission last night by Tellus Venture Associates. The report assessed the financial potential of user-financed municipal FTTP options, including upfront payments ranging from $1,000 to $5,000, substantial capital contributions by the City and ongoing subsidies of up to $2,000,000 per year.

In a user-financed model, property owners may opt to pay a share of the cost of hooking up to a municipal fiber network, or refuse and remain unconnected.

Very little construction cost savings can be realized by avoiding building lines to uninterested households. A telecommunications network has to be contiguous and a municipal-scale network costs about the same to build whether it serves many homes or just a few.

Upfront fees in the thousands of dollars range proved to be an insurmountable obstacle in a market like Palo Alto that already has two major service providers – AT&T and Comcast – that do an adequate job of meeting the needs and expectations of the majority of residents.

The City’s market research (conducted by RKS Research and Consulting) indicated that less than 10% of residents would be interested in paying $3,000 to connect to a fiber optic broadband network, even if ongoing Internet service was free. When a monthly service fee was included, interest dropped to less than 5%.

Tellus Venture Associates’ modeling showed that even under theoretically perfect conditions, a 24% take rate would be needed to fully pay the cost of construction, and two to three times that many subscribers would be required in any plausible real-world scenario. Even when operating surpluses and tens of millions of dollars in City subsidies were added in, full payback was not possible except in a handful of scenarios where optimistic assumptions were made about initial subscription rates, continuos growth over twenty years and virtually no competitive response from incumbents.

The study concluded that “a fully user-financed citywide fiber-to-the-premise system is not possible to achieve” in a competitive market such as Palo Alto. It could “be built using a combination of upfront user fees and City financing, but there is very little probability of the debt incurred being repaid through operations. Ongoing subsidies would be required”.

The full report is available here, and the accompanying presentation is available here.

Palo Alto user-financed FTTP study

Palo Alto user-financed FTTP study, 6 June 2012

Palo Alto user-financed FTTP presentation, 6 June 2012

User-financed FTTP presentation to City of Palo Alto UAC, 6 June 2012


 

3G networks reach deep into Australia and New Zealand

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Travelling through New Zealand and Australia with a smart phone or iPad is painless and relatively inexpensive for a traveller. Three national mobile networks – Telstra, Optus and Vodafone – cover Australia. Optus also markets service under the Virgin Mobile brand. In New Zealand, it’s Telecom NZ and Vodafone, with newcomer 2degrees building out its network.

My assessment of actual coverage is subjective. I used Vodafone in both countries, and Telstra in Australia. Vodafone NZ and Telstra do a very good job of covering the areas I visited: long swathes of both North and South Islands in New Zealand, and Melbourne, Adelaide and the countryside in between in Australia. Vodafone Australia’s coverage is less comprehensive. I occasionally checked on Optus’ and Telecom NZ’s availability, and could not see any significant difference between their coverage and that of Telstra and Vodafone NZ, respectively.

All four companies market their services through their own stores and resellers, and do a good job of reaching out to travellers with iPads and unlocked GSM/3G phones. I have a long standing pre-paid account with Vodafone NZ that lets me use its Australian sister network on the same terms. Just topping up once a year keeps my phone number active.

Getting a microsim for my iPad from Telstra took longer than it should have – I spent about 45 minutes in a Melbourne store going through the bureaucratic steps necessary for setting up an account, and the other three carriers appear to have similar procedures. It’s a far cry from Vodafone’s UK operation. Travellers there can pop a credit card into an airport vending machine and, for £10, get a microsim and 250 MB of data.

Costs are very reasonable. In Australia, Telstra, Vodafone and Optus all offered a microsim with 3 GB of data for A$30. Published prices are different but, judging from discussions with store staff, all three aggressively meet or beat each other’s special deals on the street. There are a few Virgin Mobile brand stores as well, and they’re aiming at more even more cost conscious buyers: a A$5 microsim comes with 300 MB of data. Avoid a couple of hotel or WiFi hotspot day use charges and it’s paid for itself. In New Zealand, microsim costs range between NZ$20 to NZ$50 for up to 3 GB of data.

New Zealand and Australia have always bee very pleasant places to do business. Ubiquitous, fast and cheap mobile broadband coverage makes it very easy, too.

Mobile telecoms companies lead consumer electronics innovation

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Consumers expect the devices they buy to be connected to their content collections, personal data, interpersonal communications and the Internet and other external data sources. That’s why innovation at CES is coming from companies that wouldn’t even have been considered part of the industry a few years ago.

Since Apple launched the iPhone and followed it up with the iPad, mobile telecommunications manufacturers and core technology providers have been driving profound changes in the consumer electronics business.

It’s the consequence of what Ericsson CEO Hans Vestberg called “the networked society” during his keynote address at CES today. Citing commonly accepted industry statistics, Vestberg point out that the mobile telecoms industry boasts 6 billion subscriptions (not subscribers – many people have more than one subscription). About a billion of those accounts include broadband, a figure expected to grow to 5 billion by 2015.

“Anything that benefits from being connected will be connected in the future,” said Vestberg, predicting 50 billion devices will be on mobile networks by 2020, the vast majority using machine to machine (M2M) connections.

Many of those machines will be automobiles, which explains the growing presence of car makers at CES. Mobile phones may be distracting drivers today, but tomorrow M2M links between cars will dramatically improve safety.

4G networks will make automated control possible, according to Vestberg. Latency will drop from half a second on 3G networks to a tenth of a second on 4G technology, making mobile network responses comparable to the reaction time of an alert and skilled human driver.

Legacy consumer electronics manufacturers will make bigger and sharper video displays and richer, cleaner speakers and earphones. At least to the point human eyes, ears and brains can’t tell the difference.

Anything truly new will begin with telecommunications capability, and for most it will be based on wireless technology.