Monthly Archives: May 2013

Open Access: Europe versus the US

Europe - Satellite image - PlanetObserver

When cities build fiber networks in the US, one question they always ask is if they can make their system open access. By this, they mean that they want to build a fiber network, but they prefer not to be in the telecom business and instead would prefer to attract multiple providers to the network to use the fiber and compete for customers. The cities just want big bandwidth for their citizens and most cities would prefer to not compete in the telecom business.

Open Access works well in Europe but has been a failure in the US. Why does it work there and not work here? The main reason it works in Europe is that a number of high-quality service providers are willing to use somebody else’s network, especially a fiber network, to provide service. In Europe ISPs are willing to compete side-by-side with other ISPs even though there is no inherent advantage of one service provider versus another when they are all on the same network.

A perfect example of a European open access network that attracted competition is the one built in Amsterdam. Much of the basic infrastructure has been built by the City, although there have been some private partners recently building some additions to the network. But all parts of the network are fully open access. There are thirteen major service providers offering services on the Amsterdam fiber network – Canal Digitaal, Concepts, KPN, Fype, Online NL, Ligbrandt, Scarlet, Tele2, Telfort, UPC, Vodafone, XS4ALL, and Ziggo. In addition there are around 25 other ISPs who serve smaller niches of customers, often with specialty products such as medical monitoring or small business service.

A few of these service providers are large incumbent providers that had monopolies in their own countries before the formation of the European Union. For example, KPN is the incumbent provider for the Netherlands. Vodafone was an incumbent provider in Germany.

It’s easy to contrast this with the US. There have been a number of cities that have built open access networks in the US and who then tried to lure ISPs to serve in the networks. Some of the open access networks include Tacoma, Provo, Utopia (small towns in Utah), Chelan PUD and a number of other smaller PUDs in Washington state. In none of these cases did a large or incumbent cable provider or telephone company agree to bring service to these fiber networks. In every case the cities that built the networks had to scramble to find local ISPs who were willing to tackle the business. And in almost all cases the Cities had to give a lot of help to these local ISPs in the early days to help them succeed. The ISPs that have operated on US open access networks are generally small, local and under-capitalized. None of the US competitors are of the size or strength of the competitors in Europe.

Why do the big telcos and cable companies in Europe step up and compete against each other while the ones in the US do not? On the European side of the equation, the competitive attitude goes back to the beginning of the European Union. The European Union built slowly since the early 1970’s, but it took on most of its current membership by the early 1990’s. In the mid-90’s there were various treaties signed which opened the borders between European nations, both physically and in terms of commerce. Before that time almost every European country had a monopoly telecom provider. But when the gates were opened to competition, a few of them crossed borders to compete and soon everybody jumped into the competitive fray.

But in the US I can’t find one example of an incumbent cable company competing against another incumbent cable provider. And the large telephone companies barely compete against each other. They fight hard for things like the contract to serve the US government, but overall they barely compete in each other’s territory. And even in most of the US where there are two providers, a telco and cable company, for the most part both parties charge high prices and do not compete heavily with each other. The system in the US is referred to in economic terms as an oligopoly, where a few large providers have divvied up the market to mutual benefit. While there is competition, it is nothing like the real competition seen in Europe.

But I must grant that it probably would be difficult for a large US telephone or cable company to provide service on somebody else’s network. These companies are highly decentralized and it often requires groups from many states to come together to provide service to a new customer. The processes used by the large incumbents are so specific to the way they do things on their network that it might just be too costly for them to modify those processes to serve on a different network.

But whatever the reasons, Europe enjoys tremendous competition for customers, particularly where somebody has built a fiber network. But in the US no such competition exists, other than in metro areas where CLECs still vigorously compete for large business customers in highrises.

Choosing the Lesser of Two Evils?

FTTH fiber-to-the-home

FTTH fiber-to-the-home (Photo credit: dvanzuijlekom)

Today our guest blogger is Ron Isaacson, a former employee and still a good friend of CCG’s.

A number of years ago, the large ILEC in our area installed fiber optic lines in our neighborhood and soon started offering their FTTH product line in the area. The cable provider had already been in the neighborhood for a while and was already fiercely pushing their bundled service packages. We finally were going to have the competitive market version of a boxing match. SWEET!!

Our family had “Dish” TV service, satellite access that worked most of the time – except when bad weather interrupted the signal. We had dial-up Internet through a local ISP, back when the bandwidth offered on dial-up was still relatively decent, and we had our telephone service through a local CLEC. Being a telecom consultant I liked splitting services between the different vendors because no one monopolist had their claws fully in my back pocket. I might have been paying a little more for this split service, but it made sense to me.

However, the FTTH offerings changed the whole equation. Cable offered a full package too, so we had a choice.

Having had previous horrendous customer service experiences with both the ILEC and the cable company we were at a quandary as to which 21st Century telecom service to commit to, so I decided to take a poll: I asked a bunch of my neighbors which service they subscribed to and why, and how were the services provided?

The results were a classic case of monopolistic bad reputations! Either a family absolutely hated the ILEC and had signed up with cable, or they absolutely hated the cable company and had signed up with the ILEC. Apparently, no one truly loved either telecom provider and they just chose the company that they hated the least. (It’s been a few years, hopefully this has changed!) I couldn’t help but thinking that both companies are as bad as the worst of the stories about the airlines!

We chose the ILEC, but the notorious nature of the story was just getting started. Our telephone number, which we had for over 25 years, was an exchange-level “FX” number, meaning that all of the customers with that exchange were billed as if the service was down-county, closer to the metro-area. The rep advised that this was not a problem, that they could still do the switch.

Once the FTTH was installed, the Internet and TV service worked beautifully, but it took another 35 days for the phone service to be re-connected because, and this is a quote, “The fiber can’t handle the FX line.” At this point I laughed and replied, “I beg to differ. The fiber doesn’t know the difference, and doesn’t care….it is your systems that are messed up!”

After 35 days, they decided to run the telephone service over the old copper pair, and bill it as if it was on the fiber. This actually proved to be a good thing when the electric power went out due to an electric utility that also possessed byzantine customer service skills.

Years later the ILEC came back and reconfigured the FTTH to include the telephone service on the fiber. Incredibly, the telecom service that was the most troublesome for the telephone company to install….who knew?

Years later, this experience still shades my view of the ILEC, the gang that proved to me beyond a shadow of a doubt that they can and will shoot themselves in both feet.

Thinking of my installation experience with fiber made me think back to something that had happened to me earlier. Many years ago, in the hay-day of the long distance marketplace during a customer service training seminar, the class discussed the results of a poll showing the reasons that customers cancel their service with carriers. A couple of facts stuck with me: First, 3% of customers die and there’s not much one can do about that. Additionally, about 5 to 10% of customers move, or otherwise change locations. Again, not much (at that time) that could be done about that.

However, over 50% of customers cancel because of rudeness or indifference from customer service personnel in reference to a given incident. There were reasons filling in the rest of the 100%, but those three points stuck out to me – two that you can’t do anything about and one that we definitely can.

The bottom line I took away from that training, and my experience with the telephone company is to be sure that every customer is treated as if their service matters, as if their patronage is appreciated.