Naked Broadband

cheetah-993774I suspect the word ‘naked’ got a few of you reading this far. Naked broadband refers to broadband that is sold as a standalone product and that does not require bundling with something else.

There has been some regulatory pressure in the past to require naked broadband. In the early 2000s several states like Florida, Georgia, Kentucky and Louisiana tried to force BellSouth to offer naked DSL. At that time BellSouth required that anybody who bought DSL also had to buy a landline telephone service.

BellSouth challenged the states’ ability to regulate broadband in that manner and in 2005 the FCC agreed with BellSouth and overturned the state rulings that required naked DSL. At that same time the FCC opened a Notice of Inquiry into the issue, but I don’t believe that docket was ever acted upon or closed.

Since then the market has reacted to what customers want and both AT&T and CenturyLink widely offer naked DSL. Verizon offers it in some places but charges a premium to buy naked DSL versus bundled DSL.

One of the main reasons that the FCC sided with BellSouth was that the agency didn’t really have the authority to regulate broadband in that manner. But with the FCC’s new Title II regulation of broadband they probably have this authority today. So I ask the question – should the FCC require cable companies and fiber providers to offer naked broadband?

This is a valid question considering that we are now seeing a lot of households trying to cut the cord. In my own situation, Comcast will sell me a standalone connection to their slowest broadband products, but in order to get a faster broadband connection I have to bundle the Internet with a cable TV product. In order to get 100 Mbps broadband I have elected to buy the smallest basic cable product available and I pay over $100 a month for the bundle. I have a settop box sitting in a closet somewhere since we don’t even have a TV. I thought I might finally have a use for this package during the Olympics, but the NBC Olympic web sites still wouldn’t give me access since I don’t subscribe to the USA Network.

I feel that I am paying an extra $30 a month for something I really don’t want. And Comcast counts me (and probably a whole lot of people like me) as cable customers when we are only reluctantly so. I wonder how bad the cord cutting statistics might be if people like me could drop a cable product we don’t want?

There are some providers that offer naked broadband. Verizon sells standalone Internet connectivity on their FiOS network. Google is glad to sell you a data-only connection. And a number of municipalities and fiber overbuilders also offer data as a standalone product. But there is no rule that makes any of these companies do this and tomorrow they could decide to force people into a bundle.

I know many smaller telcos and cable companies that also force a bundle. I fully understand the desire to do this – these companies are trying to preserve revenues at a time when telephone and cable subscriptions are dropping. But these companies really have to ask themselves if they want to force customers to buy products they don’t want. These kind of practices create resentment, and in the long run this is probably not the signal that should be sent to customers. This is a dilemma, and perhaps the right answer is to price naked broadband at a price that is required to sustain your business.

It is pretty easy to make an argument that it is anticompetitive for large cable companies to not sell naked broadband. In many markets they are the only ISP with fast broadband and failure to sell standalone broadband is a barrier for people to cut the cord for cable programming. After Comcast and the other big cable companies finish their DOCSIS 3.1 upgrades over the next few years they will have the vast majority of fast broadband connections in the country.

This issue is one of many that can now be raised since the FCC brought broadband under Title II regulation. I think that this new authority also lets them look at price caps and perhaps even at broadband pricing (although Chairman Wheeler promised Congress he would not do that). It will be interesting to see how the FCC uses the new authority it has claimed. I know there are a lot of households in the country that would love to just buy a fast standalone broadband connection and be done with the bundle.

The Blockchain in our Future

blockchainYou may have seen articles that predict that the blockchain will be a major software tool in the very near future. Or you may have seen that blockchains are at the heart today of cryptocurrency like Bitcoins. I’ve been following the development of blockchain technology and I think it’s something that will soon quietly sneak into all of our lives.

So what is a blockchain? It’s essentially a software technique for creating a permanent and unchangeable ledger of events – a record of events that are stored in sequential order and that can never be altered. There are many places in the business world where having a permanent record of events or transactions would be of great value.

Second, a blockchain relies on peer-to-peer verification of entries onto the chain. That means that the identity of the person making any entry into a blockchain is verified by somebody else. This verification process adds validity to the entries on the chain since every entry on the chain has a verified author.

Third, blockchain information can easily be encrypted, making it hard for anybody other than the people involved in the transactions to be able to read the information on the blockchain. This adds an automatic level of security because, unlike a standard data base, each entry can be separately encrypted making the task to decrypt daunting. In a standard database, once a hacker gains access to the database they can see everything. In a blockchain a hacker would have to individually unscramble each entry – something that will deter all except the most determined hacker.

So, what are some of the ways that a blockchain might be used? The short answer is that it will make sense to use the technology anyplace where there is merit in having a detailed record of events that can’t be amended or altered. I can think of hundreds of likely uses, but here are a few:

Accounting. Since a blockchain is basically a ledger it would make sense to use it during the accounting process. In a larger company where multiple people can make accounting entries, a blockchain could be established that would record the events of each entry made – not only the entry itself, but who made it and when they made it. There also could be a pointer to the underlying document that supported the entry. This would be of use to the head accountant in the company because they can now look back with certainty and know everything about any entry into the accounting system. This would give them a tool to pinpoint who made mistakes. But the real benefit would be for external auditors who could quickly understand every entry in detail. Blockchain also would provide the history of each entry and would show if and when an entry was ever changed or amended. A ledger backed up a blockchain creates an audit trail that will make it easier to do things like pass a tax audit years later after everybody in the company forgets the details.

Credit Card Security. I can picture a credit card company establishing a blockchain to record the events of each credit card transaction with the goal of cutting down on credit card fraud. For a credit card used in a store it would establish an exact time stamp of a transaction. But there also might be a picture snapped of the purchaser or some biometric test like taking a thumbprint. Biometric credit transactions are being tested in China, and using a blockchain adds the ability to make a permanent and indelible record of the events involved in each transaction. Something similar could be done with online purchases where a blockchain could be used to record the IP address of the purchaser of other identifying information that might make it easier to track down fraud.

Personal Blockchains. I think people will be interested in keeping track of events in their life. We do a lot of things electronically today and those records are fleeting. You inevitably get a new smartphone or change cellular providers and your personal history is lost. And even if you somehow keep every text you’ve ever made, for example, there is no current easy way to search through them to find a specific text you might have made years ago. A blockchain creates a ledger that can then be searched. For some reason that is beyond my understanding, my wife likes to read things I wrote to her years ago, so she is going to love this! In essence a personal blockchain could create a searchable log of events in your life, large and small.

I can easily think of hundreds of uses for the idea of keeping track of the things we do at work or in our personal lives. The blockchain provides a tool to create a permanent and searchable ledger of past events. For any business that does a lot of transactions of any kind, this gives them a new tool to create a record of their business – something that businesses are largely not very good at today.

What’s the Right Price for a Gigabit?

Speed_Street_SignI often get asked how to price gigabit service by clients that are rolling it out for the first time. For an ISP already in the broadband business, layering in a super-fast Internet product on top of an existing product line can be a real challenge.

Google certainly lowered the bar for the whole industry when they priced a gigabit at $70. And that is the real price since Google doesn’t charge extra for the modem. I think the Google announcement recalibrated the public’s expectations and anybody else that offers a gigabit product is going to be compared to that price.

There are a few other large companies marketing a gigabit product in multiple markets. CenturyLink has a gigabit connection for $79.95 per month. But it’s hard to know if that is really the price since it is bundled with CenturyLink’s Prism TV. The cheapest Prism TV product offered on the web costs $39.99 per month and includes 150 channels of programming and also comes with an additional settop box fee of $9.99 per month – the highest box fee I’ve seen. I don’t know exactly what kind of bundle discount is available, but on the web I’ve seen customers claiming that the cheapest price for the gigabit bundle is around $125 per month. That’s a far cry from Google’s straight $70. And for customers who want to use a gigabit to cut the cord a forced bundles feel a bit like blackmail.

Verizon FiOS has not yet given in to the pressure to offer a gigabit product. In looking at their web site their fastest product is still a symmetrical 500 Mbps connection at $270 per month plus an added fee for a modem, and with a required 2-year commitment. A 1-year commitment is $280 per month.

Comcast will soon offer a gigabit in more markets than anybody else. In Atlanta where Comcast is competing against Google Fiber a gigabit is $70 per month with a 3-year contract, including an early termination fee (meaning that if you leave you pay for the remaining months). This package also requires an additional modem charge. Without a contract the price for the gigabit is $140. It’s unclear if Comcast is offering the same lower-price deal in other markets with newly upgraded DOCSIS 3.1 like Chicago. The word on the Internet is that customers are unable to sign-up for the lower-price option in these markets, but the company says it’s available. I’m sure the availability  will soon become clear.

One thing that happens to any company that offers a gigabit is that the prices for slower speeds are slashed. If a gigabit is $70 – $80 then slower products must become correspondingly less expensive. Google offers a 100 Mbps product for $50 and each of the other companies listed above has a range of slower bandwidth products.

The first question I always ask an ISP is if they are offering gigabit speed for the public relations value or they really want to sell a lot of it. There are plenty of ISPs that have gone for the first option and have priced a gigabit north of $100 per month.  But for somebody that hopes to sell the product, the dilemma is that they know that the majority of their customers will buy the least expensive product that provides a comfortable speed. The rule of thumb in the industry is that, in most markets, at least 80% of customers will buy the low or moderate priced options. But if the choice is between a gigabit product and a 100 Mbps product, the percentage buying the slower product is likely to be a lot higher.

The issue that small ISPs face when recalibrating their speeds is that they end up increasing speeds for most existing customers. If they migrate from a scale today where 50 Mbps or 100 Mbps is the fastest product up to a new scale topped by a gigabit, then they have to increase speeds across the board to accommodate the new gigabit product.

This is a hard mental block to get over for many small ISPs. If a company offers a range today of products from 6 Mbps to 75 Mbps it’s mentally a challenge to reset their slowest speed to 50 Mbps or faster. They often tell me that in doing so they feels like they are giving away something for free. If a company has been an ISP since the dial-up days they often have a number of customers that have been grandfathered with slow, but inexpensive broadband. It’s a real dilemma when rebalancing speeds and rates to know what to do with households that are happy with a very cheap connection at 1 Mbps or 2 Mbps product.

For the last ten years I have advised clients to raise speeds. ISPs that have raised speeds tell me that they generally only see a tiny bump in extra traffic volume after doing so. And I’ve always seen that customers appreciate getting faster speeds for the same price. Since it doesn’t cost much to raise speeds it’s one of the cheapest forms of marketing you can do, and it’s something positive that customers will remember.

I think most ISPs realize that the kick-up to gigabit speeds is going to be a change that lasts for a long time. There are not many customers in a residential market that need or can use gigabit speeds. What Google did was to leap many times over the natural evolution of speeds in the market, and I think this is what makes my clients uneasy. They were on a path to have a structure more like Verizon with a dozen products between slow and fast. But the market push for gigabit speeds has reduced the number of options they are able to offer.

New Technologies and the Business Office

old robotI often write about new technologies that are just over the horizon.  Today I thought it would be interesting to peek ten years into the future and see how the many new technologies we are seeing today will appear in the average business office of a small ISP. Consider the following:

Intelligent Digital Assistants. Within ten years we have highly functional digital assistants to help us. These will be successors to Apple’s Siri or Amazon’s Alexa. These assistants will become part of the normal work day. When an employee is trying to find a fact these assistants will be able to quickly retrieve the needed answer. This will be done using a plain English voice interface and employees will no longer need to through a CRM system or do a Google search to find what they need. When an employee wants a reminder of where the company last bought a certain supply or wants to know the payment history of a given customer – they will just ask, and the answer will pop up on their screen or be fed into an earbud or other listening device as appropriate.

Telepresence. It will start becoming common to have meetings by telepresence, meaning there will be fewer face-to-face meetings with vendors, suppliers or customers. Telepresence using augmented reality will allow for a near-real life conversation with a person still sitting at their own home or office.

Bot-to-Bot Communications. The way you interface with many of your customers will become fully automated. For instance, if a customer wants to know the outstanding balance on their account they will ask their own digital assistant to go find the answer. Their bot will interface with the carrier’s customer service bot and the two will work to provide the answer your customer is seeking. Since there is artificial intelligence on both sides of the transaction the customer will no longer be limited to only asking about the few facts you make available today through a customer service GUI interface.

Self-Driving Cars. At least some of your maintenance fleets will become self-driving. This will probably become mandatory as a way to control vehicle insurance costs. Self-driving vehicles will be safer and they will always take the most direct path between locations. By freeing up driving time you will also free up technicians to do other tasks like communicating with customers or preparing for the next customer site.

Drones. While you won’t use drones a lot, they are far cheaper than a truck roll when you need to deliver something locally. It will be faster and cheaper to use drones to send a piece of electronics to a field technician or to send a new modem to a customer.

3D Printing. Offices will begin to routinely print parts needed for the business. If you need a new bracket to mount a piece of electronics you will print one that will be an exact fit rather than have to order one. Eventually you will 3D print larger items like field pedestals and other gear – meaning you don’t have to keep an inventory of parts or wait for shipments.

Artificial Intelligence. Every office will begin to cede some tasks to artificial intelligence. This may start with small things like using an AI to cover late night customer service and trouble calls. But eventually offices will trust AIs to perform paperwork and other repetitive tasks. AIs will take care of things like scheduling the next day’s technician visits, preparing bank deposit slips, or notifying customers about things like outages or scheduled repairs. AIs will eventually cut down on the need for staff. You are always going to want to have a human touch, but you won’t need to use humans for paperwork and related tasks that can be done more cheaply and precisely by an AI.

Robots. It’s a stretch to foresee physical robots in a business office environment in any near-future setting. It’s more likely that you will use small robots to do things like inspect fiber optic cables in the field or to make large fiber splices. When the time comes when a robot can do everything a field technician can do, we will all be out of jobs!

The Future of Privacy

Magnifying glassThe FCC is considering new privacy rules for ISPs. The FCC is considering treating ISPs in the same way they have historically treated telcos. Telco customers have had the ability for years to opt out of having the telephone company use their data for other purposes. Most people don’t even remember this, but when you bought your last landline the telco was supposed to ask you if they can use your contact info for marketing their own products or if they can sell your information to outside companies.

But a telco doesn’t know much about you other than your phone number and who you call. Telcos have never really ‘mined’ telephone calling data and that was what made Edward Snowden’s revelations about the NSA so startling. The NSA demonstrated the ability to draw conclusions about people according to who they call.

But the data that an ISP collects from you as a customer can tell them almost everything about you. They know everything you do on the web – your social network connections, what you search for and buy online, and what you write in every email or messaging system. And – if they wanted to – your ISP could know truly private things about you, such as what illnesses you might have, if you are happy or unhappy in your relationships, or if you do anything that would embarrass you (like looking at pornography).

So the FCC wants to give customers the right to tell their ISP to not examine or use their personal data. Under the FCC’s proposed rules customers can opt out of ISP surveillance completely, or can allow their ISP to use their data in some less intrusive manner, yet to be defined.

It’s an interesting concept, because your ISP is the only entity online that knows everything about you. One would certainly hope that any such rules would apply equally to cellphone ISPs in the same manner as wireline ISPs.

These kind of privacy rules would certainly put the brakes on the money that ISPs can make from mining data about their customers. We recently saw AT&T introduce the idea of charging more to customers to avoid deep data mining – making the default condition one of being monitored.

But the FCC is not going to put these same restrictions on what they call edge providers – meaning every service on the web. Facebook or Google would be free to use whatever they know about you, with the reasoning being that people use these services voluntarily.

There is another big privacy issue looming in the near future – and that’s the surveillance that is coming from the Internet of Things. There is an amazing amount of data that can be gleaned from monitors in our home. Health monitors are going to record details about you that you don’t even know about yourself. Various monitors around the home in the form of smart locks, smart cars, motion detectors, sleep monitors, etc. are going to monitor details about you (and the other people in your home) and how you live. Those details can then be sold to data companies that will combine data from multiple sources to paint a detailed picture of what you do and when you do it. Supposedly this will be done in order to personalize advertising for you, but it’s hard to believe that companies won’t take this a lot further and use this data in unsavory ways.

Already today there are data depositories buying raw data from a number of web sources that can paint a pretty good picture of who you are. Even without the ISPs being part of the data-gathering chain it’s likely that privacy is going to become largely a thing of the past.

There are a lot of people that don’t want to be watched so closely and I think we are going to see a new industry that strives to protect you from detailed monitoring. But when I see how extensive the data collection already is today, I fear that really removing yourself from data surveillance is going to be expensive and not available to most people.

I suspect my feelings towards privacy are typical. It makes me uneasy to have companies monitoring me and I find personalized advertising to be creepy. But as our world comes to rely more and more on devices that make our lives easier, it’s not hard to see that our current feelings about privacy are probably going to become quaint anachronisms of the past.

Looking Into the Future

Alexander_Crystal_SeerYesterday I presented at the South Dakota Telephone Association annual conference, with the topic being ‘A Glimpse into the Future’. In this presentation I talked about the trends that are going to affect the telecom industry over the next 5 – 10 years as well as the broader technology changes we can expect to see over the next few decades.

These are topics that I research and think about often. A lot of this blog looks at telecom trends and technologies we can expect to see over the next five years. And once in a while I indulge myself in the blog and look at the future of other technologies. Researching this presentation was fun since it made me take a fresh look at what others are predicting about our future.

I am an optimist and my research tells me that we are living at the most amazing time in mankind’s history. There is so much groundbreaking research being done in so many different fields that the announcement of new technology breakthroughs will become commonplace during the next decade. Barely a day goes by already that I don’t see the announcement of a new technology or scientific breakthrough.

I don’t think the average person is prepared for how fast the world is going to soon be changing. The last time that the world underwent such a dramatic shift was at the beginning of the 20th century when we were introduced to electricity, cars, telephones, radios and airplanes. We are about to be hit with a tsunami of innovations far more numerous than that last big wave of change.

It’s hard for the mind to grasp the idea of exponential growth. Over the last forty years our technology has been dominated by a single exponential growth curve – the continuous growth of the speed and density of the computer chip. This one change has brought most of what we think of as modern technology – computers, the smartphone, the Internet, the cloud and our broadband and telecom networks. Anybody working in any field of electronics has been blessed for a long time by knowing that they would be able to produce a new version of their technology every few years that was faster, cheaper and smaller.

What is amazing about today is that there are numerous new technologies that are at the early stages of the exponential growth curve – and all happening at the same time. Just looking at the list of these technologies is exciting – robotics, advanced machine language (artificial intelligence), nanotechnology, alternate energy, super materials, genetics and medical research. As these technologies progress we will soon be inundated with breakthroughs in all of these areas. It’s mind-boggling to envision which of these technologies will dominate our lives in a decade or two, and it’s even harder to think of how these various technical trends will intersect to produce things we can’t imagine.

What is even more exciting is that this is not even the whole list, because there are a lot of other technology trends that might become equally important in our lives. Such trends as the Internet of Things, the blockchain, natural language computing, or virtual reality might have a big impact on many of us in the very near future. I will be discussing some of these future trends over the next few months and I hope some of my readers share my enthusiasm about what is coming over the next decade or two.

I don’t usually use this blog to promote myself, but I am interested in talking to other associations and trade groups about the many topics I cover in this blog. You can contact me at blackbean2@ccgcomm.com if you are interested.

ISP Liability for Customer Behavior

Scales-Of-Justice-12987500-300x300A few weeks ago a judge ordered Cox Communications to pay a $25 million settlement to BMG, the music rights company. This come from a trial last year where a jury decided that Cox was guilty of allowing their customers to pirate BMG music over the web. This ruling is a dangerous precedent in that it holds an ISP liable for behavior of its subscribers – something that should scare all ISPs.

The case has some unusual facts. BMG hired Rightscorp to monitor the Internet for illegal file downloads of BMG music. Rightscorps sent numeous infringement notices to Cox that it wanted forwarded on to customers. These notices told customers that they had done an illegal download of BMG copyrighted material and gave customers the ability to immediately resolve the issue by sending $30 to Rightscorp.

Cox thought these notices smacked of extortion and refused to forward the notices directly to customers. Instead Cox decided to use the same policy as most large ISPs called a three strikes test, meaning that they will disconnect a customer that has been given several notices about illegal downloads. But the suspicion has always been that the big ISPs are somewhat spotty about enforcing copyright violations and don’t want to turn off paying customers.

Cox ended up blocking 1.8 million notices that Rightscorp was trying to directly send to Cox customers, and Cox largely did nothing with those notices. Cox was found guilty by a jury, and the judge set the high penalty because Cox had not done enough to enforce the copyrights of BMG.

Cox was relying on a legal strategy called ‘safe harbor’ where they would have no liability as long as they were using a reasonable set of procedures to stop music piracy. But the judge quickly pierced the safe harbor protection by saying that Cox did not do as much as they should have done to protect BMG.

This case was certainly complicated by the unsavory tactics of Rightcorps. What’s to say that all of those customers actually had violated copyright? But the bottom line is that Cox was held responsible for the supposed music piracy of their customers. That ruling that has to concern every ISP, because this is bound to open up the floodgates of similar suits and similar tactics. And who knows where this stops? Customers can engage in all sorts of illegal activities other than copyright violations.

It’s really hard for an ISP to know what to do following this decision. One strategy would be to just pass on every notice of copyright infringement. The problem with that idea is there is likely to a bunch of scammers that will copy the tactics of Rightscorps but with no real claims against customers. ISPs don’t want to get into the middle of potential scams.

ISPs could also develop and enforce tighter policies against customers that repeatedly download pirated material. The danger of that approach is that the ISP could end up ‘convicting’ a customer with no real proof that they violated copyright. This has been one of the factors that have made ISPs uneasy about getting tough on this.

Finally, I guess ISPs could do deep packet inspection to see what their customers are doing. But most ISPs don’t want to do that. And even if ISPs try this, the FCC is contemplating customer privacy rules where customers can opt out of being tracked or followed by the ISP.

So Cox and other ISPs face a dilemma. We know that the biggest ISPs have all been involved in this issue. I would love to hear from any smaller ISPs who have been involved in copyright issues and that might want to share their experience.

Why Cord Cutting Will Grow

television-sony-en-casa-de-mis-padresI have been thinking a lot about cord cutting and about my own TV habits. I know my habits have changed a lot over time, and everything I read and hear tells me this is happening everywhere. I’m starting to conclude that if the cable companies can’t find a way to provide content in the way people want to watch it that cord cutting is going to accelerate a lot faster than they are expecting.

I just saw a projection from SNL Kagan and that predicts that cable company video will remain a profitable business for a long time. They predict that by 2026 residential cable revenues will rise 8.6% to $117.7 billion. That assumption obviously assumes a continued loss of customers to cord cutting, with those losses offset by rate increases. But that kind of assumption assumes there is not going to be a fundamental change in the way that people watch video.

I’m a baby boomer, and so I grew up with the traditional TV experience. There was usually more than one person watching TV in our home, so once you started to watch a show you watched it to the end. You rarely channel surfed because we only had four channels growing up and somebody had to sit by the TV to manually turn the tuner. You sat through all of the commercials and the TV held your attention.

The first big change in my viewing habits came years later when I got a TV with a remote control. That’s the day I stopped watching anything other than sporting events end to end. I don’t know if this is more of a male habit, but I would surf every time I watched TV. I can remember many times when somebody asked me if I had seen a certain show or movie and my answer was always, “part of it”.

I eventually realized that surfing took most of the pleasure out of watching TV. There is nothing worthwhile about watching portions of sitcoms, old cop shows and infomercials. And so I eventually ditched my TV subscription. I had lost my desire to watch linear TV.

Now OTT has brought me a whole new world of video options. Our household has subscriptions to Netflix, Amazon Prime, Hulu, Starz, and HBO Go. During the winter last year I subscribed to Sling TV to catch football on ESPN. And, since I am interested in the OTT market I spend some time looking at as many OTT packages as I can. I’m still not a huge TV watcher and spend somewhere between 10 and 15 hours per week watching video.

I have developed new TV habits that I think are going to be problematic to the TV industry as a whole. Amazon Prime and Netflix bring me curated television. On the first day I used those services I went searching for things I wanted to watch. And both of those services then suggested other similar shows and movies based upon my tastes. I now have a backlog of things I want to watch that will probably last for the next year.

I have also grown totally resistant to commercials and am willing to pay to not have them. I know a lot of people binge watch – but I’ve never been in a hurry to get to the end of a series and so I skip between episodes of a dozen different series as my mood dictates. I love that Netflix keeps track of where I’ve been and I’m growing intolerant of any platform that doesn’t do the same thing.

For example, I don’t really care that much for HBO Go just because it’s not as easy to use as Netflix. HBO doesn’t keep track of what I’ve been watching and it’s up to me to try to remember the last episode of something I watched. HBO has some great content, but the lack of this one feature makes it much harder to navigate, particularly if I haven’t watched a particular show in a while.

I think there are a lot of people picking up these same new habits. Cable TV can’t satisfy me in the same way as Netflix and other OTT. I know that you can use a DVR and record cable shows to get a similar experience. I used TIVO for many years, which is even easier than most Cable company DVRs and it was still not as easy to use as Netflix. The DVR experience still makes a viewer spend far too much time leafing through the channel guides.

I just can’t imagine ever taking the time to scroll through a channel guide again. I wouldn’t watch cable TV if I had it for free. And I never want to channel surf again – that was always a colossal waste of time. I instead use my limited TV time to watch want I want in the order I want to watch it. I don’t think it can get any better than that. My gut says that if the cable companies can’t somehow duplicate this same experience they are going to lose a lot more customers than analysts are predicting. Younger viewers are already largely abandoning the traditional cable model, and now a lot of us older folks are doing the same. Analysts often speculate about why people drop cable. For people like me it’s not the price – it’s the cable experience that no longer interests me.

Big ISPs and Everyone Else

Comcast truckMost of the news about our industry is about the largest ISPs – Comcast, Charter, AT&T, and Verizon. It’s easy to think that the things that happen to these big companies are going to happen to the rest of the industry, but on a smaller scale. Certainly in the past, small ISPs had a lot in common with the big companies. But I think we are now at a time when these big companies are pulling away from the rest of the industry to the point where they have become something very different. Let me look at Comcast as an example of this, but I could make a similar case for the other large ISPs. Consider this list of ways of how Comcast is already different than the smaller ISPs in the industry:

Content. Comcast is as much of a media company as they are a cable company. In fact, their stock prices now change more from the performance of their content than it does from the cable business. Comcast owns a lot of programming content. They own NBC Universal that operates the various NBC stations including MSNBC, CNBC. USA Network, E!, Bravo, Syfy, Sprout and others. They own Telemundo and a suite of Spanish language networks. They own 25% of the Weather Channel. They also own overseas content such as Movies 24 and the Style Network. The company is also in the movie business. They own Universal Studios which has already released fifteen new films in 2016. They recently brought Dreamworks. And Comcast owns 27 local NBC stations and affiliates in major markets like New York, Los Angeles, Chicago, Philadelphia, Washington CD, Dallas and Miami.

Sports. Comcast owns the Philadelphia Flyers including the Wells Fargo Center in Philadelphia. They own the rights to broadcast the Olympics in the US. They own Comcast SportsNet which has rights to professional and college sports in a number of large cities. They own the Golf channel and are part owners of the NHL Network and the MLB Network. NBC Sports also has broadcast rights for football and other major sports.

Other Assets. They own Universals Studios theme parks in Hollywood and Orlando as well as the real estate venture at Universal Orlando Resort. They own the ticket service Fandango. They operate Comcast Spotlight which produces and sells advertising for their cable company and many others.

OTT. Comcast is hedging their bets on cord cutting by being the largest owner of Hulu – which also broadcasts a lot of Comcast content. They also produce and distribute content through Comcast Interactive Media.

Cellular. The company has announced recently that they have major plans to become a big player in the cellular market. This business will also benefit from Comcast’s 9 million+ public WiFi hotspots.

Research and Development. One of the hidden gems for the company is Comcast Labs. The company recently bragged that the company could develop solutions in days that would take months by any other company. They also benefit from their role in the non-profit CableLabs. The company has used this research to develop proprietary software and hardware not available to the rest of the industry.

Security and Smart Home. In 2015 the company reported having over 500,000 customers to its Xfinity Home security and smart home platform. They will have the scale to make this a profitable business line where smaller companies will struggle.

Comcast and these other large ISPs are no longer like the rest of the industry. For example, while other companies suffer from shrinking profits on cable TV, Comcast buys a lot of content from their own subsidiaries and is more profitable than anybody else. And they have the luxury of being able to bundle cable customers with their many other product lines like Xfinity Home and the upcoming cellular product.

It was not too many years ago when the bigger cable companies were just bigger versions of smaller cable companies and mostly differed by scale. But for these large IPSs the landline business has just become one of their many other product lines – a luxury that smaller companies don’t have.

Cisco’s Latest Web Predictions

cheetah-993774Cisco recently published their annual Visual Networking Index and as usual it’s full of interesting facts and predictions. Here are a few of the key highlights that I think small carriers will find interesting:

Busy-hour (or the busiest 60–minute period in a day) Internet traffic increased 51 percent in 2015, compared with 29–percent growth in average traffic. And it’s expected to continue to grow faster with Cisco predicting that by 2020 busy hour traffic will have increased 4.6 times while overall web usage will only double. This is a big change for network providers. Since the advent of web video we’ve seen the evenings become the busiest times on the web, but this trends shows that the evening usage is going to be far greater than the rest of the day. If a network wants to offer a satisfactory service they must design to satisfy the busy evening hours, which in four short years will be over four times busier than today.

Telco companies remember that this was the same historical pattern for voice traffic and now we see the same thing with residential broadband. It means networks must be engineered for the busy hour and are underutilized the rest of the time. Failure to design for this growth means customer dissatisfaction during the busiest hours. It also implies growing demand for faster speeds.

IP video traffic will be 82 percent of all consumer Internet traffic by 2020, up from 70 percent in 2015. As you might expect, much of the increased data traffic on the web will be driven by video and more people use the web for entertainment.

Globally, Internet traffic will reach 21 GB per capita by 2020, up from 7 GB per capital in 2015. This demonstrates that the total amount of data on the web is going to continue to grow at a torrid pace. Part of this growth will come by adding new users to the web, but web traffic everywhere is still growing rapidly.

Broadband speeds will nearly double by 2020 . . . global fixed broadband speeds will reach 47.4 Mbps, up from 24.7 Mbps in 2015. So, not only Internet volumes grow, but customers are going to demand faster speeds. These numbers are a little deceptive in that they combine business and residential fixed broadband speeds together. But still, service providers need to be prepared to increase customer speeds to keep them happy. Expect networks that can’t increase speeds to grow increasingly unpopular.

Business IP traffic will grow at a CAGR of 18% from 2015 to 2020. It’s easy to assume that video is causing consumer data usage to grow much faster than business usage, but business broadband demand is growing almost as quickly as consumer broadband demand.

Smartphone traffic will exceed PC traffic by 2020. This is pretty amazing considering that in 2015 PCs drove 53% of all web traffic while smartphones generated only 8%. But by 2020 Cisco is predicting that traffic from PCs will fall to 29% and traffic from smartphones will grow to 30%. Of course, in North America with our extensive WiFi, a lot of this smartphone traffic will end up on landline connections. To reach these numbers, mobile broadband usage will grow 53% per year through 2020.