Should You Carry OTT Programming?

Every cable provider today needs to consider carrying Over-the-Top (OTT) channels on their cable system. OTT programming is content that is available on the web and includes such things as Hulu and Netflix. There are a number of reasons to consider this:

  • I have discussed the phenomenon of cord-cutters in other blog posts. The large organizations that track cable customers report that a lot of customers are dropping traditional cable. Nielson reported that at least one million people dropped traditional cable last year and that number is expected to increase. The cable industry appears to be at the same place that the telephone industry was ten years ago and everybody expects more and more people to drop cable TV every year much as has happened to land line telephones. To the extent that you can give customers easy access to OTT programming on your cable system you may convince some of them not to leave your system.
  • There are a lot of customers buying OTT boxes, which are devices that let them watch OTT programming on their TVs and also on other devices using WiFi such as pads and smartphones. These are devices like Apple TV, Roku, Boxee and Playstation.  Once a customer has an alternative box in their home sitting next to your settop box they have mentally started the process of dropping you. If you can give customers easy access to the OTT programming they want you will have lowered their incentive to buy an alternate box.
  • You can use OTT programming to develop new products. Nobody makes much money today with cable TV. You can create a new bundle of programming by combining OTT, the basic network channels and local programming that can be more profitable than the large packages you sell of many channels. I will discuss this more below.

There are a number of ways to get OTT programming onto your cable system. You can gather the OTT program sources yourself and put them onto open channels on your system. There are devices available that will let you create a channel out of web content. For instance, you can create a channel that would have buttons for the most popular web content.

But an easier way is to use somebody who has already done that aggregation. There are several vendors who have packaged OTT channels together to make a ‘channel line-up’. Probably the best of these right now is a company called AIOTV (All-in-One TV). This is available on the web to anybody, but they also have a version of their programming that is designed to be used as a web channel.

AIOTV will supply the feed to you for free to get onto your cable system. They sell nationwide advertising and they insert ads at the beginning of each show that a customer watches. If you put them onto your cable system they will send you a small revenue sharing check each month for carrying their ads. It’s not a lot, and the revenue is not the primary reason to do this, but it’s still nice to get a check.

The other nice feature of AIOTV is that their platform gives you an easy way to create additional web channels of your own. There innumerable ways for you to use this capability and you could add additional web content to your line-up that is not already on AIOTV. However, the best use of this capability is to use it to create local programming. You can use AIOTV or other platforms to create a channel for every school, church, non-profit or other entity in your area. The programming would be up to the entities who have channels and they can use it to put items of interest to your community onto your cable system. For example, this is the easiest and lowest cost way to get things like little league games and high-school sports onto your network.

With AIOTV or some similar provider you can create some sense out of local programming. The platform gives you a way to create a traditional looking channel line-up so that people can find the local channels they want. Each local channel supplier also has the ability to operate their channel so that it is continuous feed or on-demand.

Local programming is a way to get and keep customers on your cable network. Other communities that broadcast a lot of local content say that this becomes one of the more popular things on their network. People want to watch local sports and graduation ceremonies and other local events. Most cable systems today carry local city-council meetings, but there is a lot more events of local interest in every community.

Finally, you can use OTT and local programming to create a new product. For example, every cable provider has a basic product that consists of the broadcast networks such as ABC and NBC along with a few other channels. You can create a pretty robust package that includes your basic line-up, OTT programming and local programming. Priced at something like $20 per month this would be the most profitable product on your cable system. Today most companies are lucky if they break even with the larger cable packages after paying for all of the programming.

This kind of line-up offers customers a ton of programming including web access to many of the most popular shows they watched on traditional cable. I have anecdotally spoken to several people who have dropped traditional cable for a Roku or Apple TV box and they say that they don’t feel like they have suffered any big drop-off in options. If you can add live network TV and local programming to this mix you have a robust line-up that many of your customers are going to see as an attractive alternative.

I think that cable systems are on the verge of pricing a lot of customers out of being able to afford their services. Expanded basic packages are now $60 to $70 per month in most markets and continue to increase in price every year. So consider a preemptive strike and give your customers a pre-packaged lower cost alternative rather than waiting on them to go find this on their own.

The Last Telephone Monopoly

English: Concertina razor wire at a prison

English: Concertina razor wire at a prison (Photo credit: Wikipedia)

There is still one last monopoly in the telephone world and that is for rates charged in many of the prisons and jails in the US. Some of the rates charged to prisoners for making a call are extremely high as will be shown below.

The prison calling industry has changed a lot over the last thirty years. Thirty years ago most of the calling from prisons was handled by the telephone companies, and for the most part inmates had to go through live operators and make collect calls. But over the years the prisons and jails have required a number of special features, referred to as penological features, that allow them to monitor and control inmate calling. These various penological features have forced the industry to shift to specialty providers who have developed solutions that deliver the needed penological features. So today there are a handful of prison telephone providers who each serve large numbers of facilities – companies like Securus, Global Tel-Link, ICS and FSH Communications.

I call this a monopoly market because at each jail or prison there is only one service provider. Generally the service providers compete to serve a facility through an RFP process, so one would assume that the calling rates would be competitively set. But just the opposite occurs. In most states the telephone service providers are required to pay a commission back to the prisons for each call billed. Over the years these commissions have increased and there are some commissions as high as 60%, although most are more in the range of 30% to 40% of the billings. The RFP generally seems to get awarded to the carrier that will offer the highest kickback to the prisons.

This Table of Prison Rates is a summary from a magazine called Prison Legal Review from 2011 that summarizes the rates in each state. The rates don’t change much over time so this ought to still be fairly accurate. As you can see, rates vary widely by state and also by jurisdiction. The lowest rates are in New York where rates for all jurisdictions are a flat 4.8¢ per minute and the highest rate is in Washington state where an interstate call has a $4.95 setup fee plus 89¢ per minute.

You can see from this table that the intrastate rates in most states are lower than the interstate rates because the state commissions in most states have set a cap on the prices that can be charged for prison calling. But most of those rates were set in a different time in the past where a lot of the calls from the prisons required a live operator. Today very few calls require an operator and most prisons offer both collect and pre-paid calling to prisons which are both totally automated. Other states have set prison calling rates to be the same as payphone rates since the phones in a prison resemble a payphone in technology (although none of them allow for coins to be used to pay for calling).

The prison service providers are obviously making a lot of money on the calls with high rates. If there are service providers willing to bid on the business in a state like New York or other states where the calling rates are relatively low, then these same providers are obviously making a huge margin per call in states where the rates are high, even after paying commissions.

One might ask why it matters what the rates are in prisons and I think there are several reasons:

  • Studies have shown that allowing prisoners to keep in contact with family is an important aspect to rehabilitation and of them not returning to prison. The high rates make it very difficult for most prisoners to keep in regular contact with the outside world. The real victims of high calling rates are the families of inmates. It only takes a few short calls at the rates shown in the table to hit a $100 monthly bill for calling. Many families are forced to severely limit calling due to the cost.
  • The high rates make it very hard for prisoners to stay in contact with their lawyers, for the same reason of cost.
  • It just feels wrong to have a niche of the market where a carrier can land a deal that allows it to charge a huge set-up fee and 89¢ per minute. And the whole system of commission kickbacks feels wrong. This is not analogous to having high rates for public payphones because the public can choose to avoid payphones. But if an inmate wants to call they have no option but to go through the monopoly provider at their prison.

There does not seem to be much momentum to change things. Prisons are very happy with the commission kickbacks. It’s a source of revenue outside of what they are funded by the states or federal government. Very few state commissions seem to be concerned enough about the issue to accept dockets that examine the issue. There has been an open docket at the FCC for many years that has never been decided.

But I think everybody in the industry understands that cost of long distance calling has fallen through the basement. Wholesale long distance can be purchased for a penny or two at most per minute, and it’s obvious by the prison rates in New York that the penological requirements can be met for a relatively low amount per minute. And so anything over the New York rates are simply the last abuse of a monopoly power that has been broken for every other kind of calling.

What’s the Right Number of Staff?

NYC: American Intl Building and Manhattan Comp...

NYC: American Intl Building and Manhattan Company Building (Photo credit: wallyg)

Over the years a lot of my carrier clients have asked me what the right number of staff should be for their organization. And of course, to some extent the answer is – it depends. There are differences between carriers that make it hard to compare two companies that might have roughly the same number of end-user customers.However, even with that said there are some general industry metrics that I have used during most of my career as a guideline when I want to examine the level of staffing at a given company. These are metrics that I gleaned from my mentors in the industry, and it is a little surprising to me that these metrics still seem to be a good guideline thirty years after I first heard about them. A typical telecom company is far different today than they were thirty years ago, but they still have the same basic functions that need to be done – administration and back office, technical, install and repair, customer service, and sales and marketing.

The general metrics I have always used as a starting point to look at an individual company is as follows:

Small Carrier               – Under 15,000 customers

Medium Carrier           – 15,000 – 50,000 customers

Mid-size Carrier          – 50,000 – 250,000 customers

Large carrier                – Over 250,000 customers

The metrics for the right number of employees is expressed in terms of the number of employees per customers. Basically, the larger a company gets, the more efficient they ought to be in terms of that metric.

Small Carrier               – 175 customers per employee

Medium Carrier           – 350 customers per employee

Mid-size Carrier          – 500 customers per employee

Large carrier                – No idea

These metrics apply roughly at the midpoint of each range. This means that one would expect a carrier with 7,500 customers to have about 175 customers per employee and one with 32,500 to be at 350. It’s straightforward math to see the metric for any company by knowing the number of end-user customers they serve.

There are factors that can change these metrics for a given company. For example:

  • Side businesses. Many carriers run side businesses in addition to their core business. These might be such things as construction or telephone system sales. As long as these side ventures are paying for themselves, then the employees engaged in these business lines would not be considered as part of the metric.
  • Geographic spread. A carrier that has to cover a large geographical area is going to need more technicians in trucks than a company that is geographically concentrated. A company with widely dispersed exchanges is also probably going to need more inside techs.
  • Outsourcing. One has to look at what functions are outsourced. For example, a company that is providing its own help desk or NOC is going to be different from one who does not. In looking at staffing, though, one has to always question whether the company should be doing functions internally that could be better outsourced.

In my career I have rarely seen a carrier that is understaffed, but it is fairly common to find companies that are overstaffed according to these metrics. If a company looks at these metrics and finds itself to be overstaffed, the question is what to do with that knowledge. What I have found is that workforces tend over time to find ways to justify themselves. When there are too many staff internal processes will be less efficient than at other companies and the employees will have found tasks to keep themselves busy. These inefficiencies can be of many types including things like inefficient paperwork for installation and repair, excess record keeping for time and materials, or excess testing and maintenance being performed.

Another common issue in companies with too many staff is that every job is in a silo, meaning that each employee only performs the tasks for their own job description and do not do tasks outside of their silo. Silos are necessary for large companies but they can be poison to smaller ones. It is very rare for the amount of work needed to match up exactly with the number if silos, and so you end up with staff who don’t have enough work within their silo to fill a full day. In smaller companies a better structure is one where employees wear many hats and are able and willing to kick in around the company where needed. I know that I am visiting a very competitive company if I walk in and find an outside installer manning the phones because somebody called in sick. That is the kind of teamwork that is needed in smaller companies to be efficient.

It often requires an analysis by an outsider to spot these kinds of inefficiencies because over time it’s easy for people at a company to think that the way they do things is the only way. I have worked with many companies over the years who have undertaken to reduce staff to be more efficient and I cannot think of one of them that was not a more profitable and efficient company after the transition. It is never easy to make a decision to reduce staff, but it is sometimes exactly what needs to be done to have a better and more profitable company. But before using these metrics to reduce staff get an outside opinion because these are ideal metrics and there are reasons why you might need a different number of staff than suggested by these metrics.

The Right Way to do Customer Surveys

Customers

Customers (Photo credit: Vinqui)

Carriers are always being advised to find out what their customers really want and one of the best tools to do that is a well-designed survey. I use the term well-designed, because you can’t put any credence into the results of a survey that is not done correctly. I see many surveys done incorrectly, with the results being that a company will act on the results of a survey that may not reflect what customers really want. There are a number of steps that must be taken to get an accurate and statistically representative survey.

Adequate sample size. You must complete an adequate number of surveys to get the results you want. Most business surveys are designed to get results that are 95% accurate, plus or minus 5%. What this means that if you were to give that same survey to every customer you would expect the same results within that range of accuracy. Most businesses and political surveys find that to be accurate enough.

There are several online websites available that will calculate the size of the sample needed. Most people find the number of needed samples surprising. To get the 95% accuracy, if you have 1,000 customers you need to complete 278 surveys. If you have 5,000 customers you need to survey 357 of them, and with 20,000 customers it’s 377 surveys needed.

I often see companies conduct surveys that produce far fewer completed surveys than these sample numbers. Such surveys are valid, but the amount of accuracy is not as trustworthy. For example, if you have 5,000 customers and you complete only 100 surveys, the results could still represent a 95% accuracy, but only within a range of plus or minus 10%. That doesn’t sound a lot less accurate, but it means that there is almost a one in five chance that the results do not reflect your whole customer base.

Random. For a survey to be valid the people surveyed must be selected at random. If you are surveying your own customers it’s easy not to be random. For example, if you send out a survey in your bills, the results you get back are not random. They are biased by the fact that people who either like or dislike what you asked about are the most likely to respond while people who feel neutral about the topic are likelier not to. The only really reliable way to get a random sample is to call people. And even then you have to choose the numbers randomly.

Calling has several issues. You must consider the Do Not Call lists that the federal government has established for people to opt out of getting solicitation calls. You are allowed under these rules to call your own existing customers, but you are not allowed to call potential customers who are on the Do Not Call list.

Second, you need to deal with cell phone numbers since many customers no longer have landlines. To get an adequate sample you need to somehow call people with both types of phones. You are not legally allowed to make solicitation calls to a cell phone number unless the person has given you permission to do so. Hopefully you will have customer records that provide a contact number to call for each customer, and any customer who has given you their number has given you permission to call them even if it is a cell phone number.

Non-biased. The questions you ask must be unbiased, which means that they are not worded in such a way as to elicit a certain response. This is why so many surveys you take seem to be somewhat bland, because the questions are written without flowery adjectives.

Interpreting the Results. Companies often misinterpret the results of a survey. The 95% accuracy that is the goal of the survey only applies to the primary questions you ask. For example, if you gave a valid survey to all of your customers and asked a question such as if they would be interested in buying cellular service from you, then the response to that question would be 95% accurate. However, companies often try to interpret a survey question at a deeper level. For example, they might look at the results of the same question for men versus women respondents and say that one group is more likely to feel a certain way than another.

And you can’t make those kinds of interpretations with any accuracy. In this example the survey is an accurate representation of how all customers feel because you sampled enough customers to get a statistically valid result. However, if half of the people you surveyed were women, then your survey of women is only half as big as the overall survey, and correspondingly less reliable. In this example it wouldn’t be a lot more unreliable, but if you try to really subdivide the sample population the results become nearly worthless. For instance, if you try to analyze the results by various age groups of ten years each you will find that you can’t rely on the results at all.

Survey fatigue. Another common problem is survey fatigue where a survey is so long that a lot of people hang up in the middle of it. It’s important to try to keep a survey under five minutes or this will happen a lot.

Summary. If you are going to spend the time and money to do a survey then you should spend the extra effort to do it right. Make sure your sample size is adequate. Make sure the survey is given randomly. Make sure the questions are unbiased. And keep it short.

And as a reminder, CCG has done hundreds of surveys, so one way to make sure it’s done right is to engage us. We can help at every level from helping write the questions setting sample sizes or even making the calls.

What Happened to the Digital Divide?

Internet Access Here Sign

Internet Access Here Sign (Photo credit: Steve Rhode)

There was hardly a time in the late 90’s and early 00’s when broadband was discussed that the topic of digital divide was not mentioned. Government entities, policy people and even service providers talked about solving the digital divide to make sure that everybody had access to the Internet. There were committees and commissions formed in many communities to help solve the digital divide and to make sure that every child had a computer and an internet connection.

From what I can see the topic has disappeared from discussion and I rarely seeing the topic discussed any more. Does this mean that the digital divide has been solved? Certainly there are a lot more households with Internet access today than a decade ago, but do the poorest households now subscribe to the Internet?

Before one can even answer the question we need to define what broadband is. The FCC defines broadband as the ability to get a landline service with a download speed of at least 4 Mbps and an upload speed of 1 Mbps. In most markets that is one of the lower-speed products available and speeds in metropolitan and suburban areas are now much faster than that. According the numbers released by the FCC in August of 2012 there were 19 million people in the US with no access to broadband and another 100 million with access to broadband but who do not purchase it. But there are many who dispute the way that the FCC counted the 19 million figure and think that the real number is much larger.

Another way to look at the market is by households and the Leichtman Research Group did a study in 2012 that showed that there are almost 81 million homes with broadband, or just at 70% of all households. That same study said that broadband penetration rates in homes with average household incomes under $30,000 had only a 52% broadband penetration rate while homes with incomes over $50,000 had a 97% penetration rate. Obviously there are a lot of households who feel they cannot afford broadband.

Today one has to ask if landline broadband is the only kind of broadband. For example comscore reports that 133 million people owned smartphones as of February 2013, or 57% of everybody over 13 years old. Certainly there are many people whose only Internet access is with a smartphone.

A Pew Research Center study released a study earlier this year of the Internet usage of teenagers between 12 and 17. This group uses the Internet more than any other age group and 95% of teenagers access the Internet at least one per month. But 25% of teenagers only have a smartphone to use for Internet access. One has to question if smartphone usage is really broadband. Certainly you can read news, update Facebook and play games on a smartphone. But it’s sheer torture to use a smartphone to write something even as long as this blog and it’s hard to see smartphones being a broadband substitute for school kids trying to do various types of homework. The smartphone wasn’t really designed to handle files in the same way as a laptop or computer.

One thing that is clear in the figures is that the lower the income the less likelihood that a household will find broadband to be affordable. And to me that says that we still have the digital divide. But for some reason, nobody is talking about it anymore.

One statistic that I found interesting is that the Leichtman report said that 90% of households with computers have broadband. When you compare that to the statistics that say that only 52% of households with household incomes under $30,000 have broadband it is also easy to say that an awful lot of those homes don’t have computers.

I remember a decade ago there were major programs developed to get computers into households, particularly households with children. I just did a Google search and found a few such programs are still active, like one in Chicago, but getting computers into homes was a major focus for my clients and the country as a whole a decade ago. And that seems to have basically dwindled away as a priority.

I don’t know the reasons for this, but I can postulate. Broadband access seems to be ubiquitous in middle class neighborhoods and it is now the rare house that doesn’t have a computer and Internet access. Perhaps everybody just assumes that this is now true everywhere, while it is not. If the FCC numbers are to be believed there are still 119 million people without Internet access. Back the babies out of that number and there are still a whole lot of people without broadband.

It seems to me that the digital divide hasn’t gone away at all. We have just stopped talking or caring about it. Maybe it’s time to put this back on the agenda.

Should You Build a Cable TV Headend?

I still meet new businesses all of the time who are just entering the cable TV business for the first time or who are opening up remote markets from their service core. In the past it was a no brainer to build a new headend for a new market as long as that market had enough potential customers to justify the capital outlay. But I find myself hesitating today when I am asked the question of whether one should build a new headend. I don’t think the answer is an automatic yes any longer and there are a number of reasons for this.

Transport. One huge consideration is bandwidth transport. It always makes more sense to use the signal from an existing headend somewhere as long as you can get the signal there for less ongoing cost than building a new headend. The amount of bandwidth needed to transmit a full channel line-up is huge and can easily require at least 100 Mbps. The bandwidth varies a lot depending upon the specific method that is being used to send the TV signal to customers. For example, the bandwidth needed to send a lineup that has both analog and digital tiers will be larger than a lineup that is all IPTV. And the amount of bandwidth is even greater if you want to transmit video on demand.

The price of transport varies widely by location due to the availability of fiber, but overall there has been a big reduction in transport prices. The long-haul transport business has gotten very competitive and there are a host of companies that sell not only bandwidth, but also dark fiber or fiber lamdas. Also, a number of new middle-mile networks were built with federal stimulus grants and those networks, by definition, have to offer reasonably priced bandwidth. In many cases I am seeing transport as a good alternative to building a new headend, whereas a few years ago building a headend almost always looked like a lower-cost alternative.

Aggregators. You also should consider using a network aggregator. One that many of my clients use is Avail Media. Avail has aggregated a channel line-up that comes from the satellite directly in MPEG4 format, meaning that it can be taken directly from the satellite and used in an IPTV distribution network. The advantage of doing this is in the cost savings for the headend. A lot of the capital cost in a traditional headend is spent for equipment that translates TV signals from one format to another. The cost, size and power requirements for a headend drop significantly if the TV signals don’t have to be translated.

Of course, Avail and others aggregators charge a premium for getting the signal to you in the right format and you need to do the math to make sure that there is a net savings in equipment compared to their ongoing transport charges. But many of my clients have found aggregator arrangements that have saved them money.

Headend Sharing. Before I would build a new headend today I would always look around to see if there is an existing headend in the area that I could share. Generally, almost anybody except for the major cable companies would be interested in sharing a headend. Sharing a headend can help a headend owner offset the cost of running their headend while requiring very little ongoing effort after the initial connection.

There are a number of issues to consider when thinking about sharing a headend, but I have dozens of clients who have figured out ways to share. The biggest issue is the signal format. For example, it would make no sense to share an analog headend with somebody who is operating an IPTV system. The cost of translating channels from analog to digital would be almost as costly as building a new headend. There are also contractual issues with some of the programmers who make you jump through extra legal hoops before they will agree to let you transport signal from an existing headend to a different operator in a different market. But headend sharing makes a lot of sense and today, and sharing would almost always be my preference over building a new headend.

Other Issues.  There are always other considerations to consider. For example, if you share a headend or buy content from an aggregator you are still going to have to somehow insert the local must-carry networks onto your system. So you will need to a ‘mini-headend’ of some sort that lets you add your own content to the content that comes from somebody else.

Even if you share somebody else’s headend you might want to consider operating and inserting your own video-on-demand. This will cut down on the transport needed between the locations. If the market is large enough you also might want to consider inserting your own local advertising rather than inflict ads from some distant market upon your customers.

It’s Still a Regulated World

It seems like every few weeks I have a conversation with a carrier and in the course of conversation I find out that they are not in compliance with some regulation or another. It seems like a lot of companies that sell VoIP services, in particular, think that somehow that makes them immune from regulation.

But regulation has not gone away. If you bill an end-user customer for a voice, data or video product then there are regulations that you have to comply with. If you are an ISP for other entities, even if those entities are large, you are subject to some regulation. The only category of carrier that might not be subject to regulation is what I call a carrier’s carrier, and who only serves other carriers as customers. And in some states even they are subject to regulation.

It matters that you follow the rules. It seems like regulators at both the state and the federal level are getting surly about offenders and there some big fines being handed down to carriers who ignore regulation. I think the cost of compliance is cheaper than the cost of getting caught.

Here is a sample of the kinds of federal regulations that we see carriers ignoring. There are other state requirements that are also being ignored:

  • CALEA. There are significant obligations to be read to immediately give access of your customer’s voice and data records to law enforcement. You must have a manual filed that describes the processes.
  • CPNI / Privacy. You must have a manual and processes describing how you will protect your customers’ privacy.
  • Red Flag. You must have a manual and processes in place to demonstrate how you will protect your customers from identity theft.
  • Net Neutrality. There is very specific information about your company, your products, your network and your technology that you must inform customers about.
  • 21st Century Communications Video Accessibility Act. You must file a plan on how you will help disabled customers get access to voice, video and data products.
  • Universal Service Contributions. We find carriers that should be contributing to the USF fund who are not. The fines for getting caught for this can be huge.

I told my readers that I wasn’t going to write too many blog entries that are direct sales pitches for CCG services. I will admit that many of my blogs hint at the services we offer, but the main intentions of these blogs is to discuss issues for carriers that I think they will find to be useful. But in many cases CCG is able to help clients with a lot of the topics discussed in my blog.

CCG has three regulatory products that make it easy for anybody to stay in compliance with the rules. We have many clients who use CCG as their regulatory arm and many have said that it’s far cheaper to use us than to do it themselves. Here are the three products you ought to consider if you want to hand make sure that you are in compliance with the regulatory side of the business.

Regulatory Assessment. We will do a one-time assessment of your business and tell you every regulation that we think applies to you. Why guess if you are in compliance. For a modest fee we will make a list.

Regulatory Compliance Monitoring Service. In this service we develop a calendar for your company and we remind you of every regulatory deadline you must meet during the year.

Regulatory Compliance Filing Service. If you want it, we can create all of the needed paperwork and manuals, fill out the quarterly and annual forms and file everything for you. We think we have some of the best prices in the market for this kind of work.

If you want help to get into regulatory compliance or stay incompliance, give Terri Firestein of CCG a call at (301) 788-6889. We can help you take regulatory worries off your plate.

What is Google’s Fiber Plan?

Google

Google (Photo credit: Wikipedia)

Trying to figure out what Google is going to do with fiber is now the best guessing game in the industry. I will be the first to tell you that I have no idea what they are up to, and so this will not be another pundit announcement proclaiming that I have any insight about Google’s intentions. I just find it interesting that every pundit has a different view of what Google is up to. Here are some of the theories that I have seen:

Broadband Experiment. A number of industry experts have postulated that Google is undertaking a grand experiment that lets them create a giant broadband lab where they can play around with ideas and applications that need gigabit bandwidth speeds. Google’s future in the US is going to rely a lot on there being good bandwidth everywhere. Today they need bandwidth for YouTube, but that is not a good enough reason to build gigabit networks. Most metropolitan areas have plenty of bandwidth already to support video streaming and I even have enough bandwidth for streaming video sitting on an island in the Caribbean.

So if this is a bandwidth experiment, what applications does Google have in mind? Certainly they have their eye set on the Internet of Things. One can expect a huge increase in the need for bandwidth to process the monstrous amount of data that is going to come from billions of sensors in the world around us. I am sure that Google wants to be the one who monetizes the processes that will make sense of big data.

I saw some merit in this argument until Google purchased the Provo network. Certainly, if their intentions are for this to be just an experiment, then Kansas City and Austin are big enough places to test almost anything that needs to be tested.

To Lure More Investors to Build Fiber. This country has fallen woefully behind the rest of the world in terms of making basic infrastructure investments in fiber (and everything else like bridges). For the past fifteen years there have been numerous companies making backbone fiber investments, but very few investing in the last mile. Verizon built FiOS into the best parts of their markets. Some hundred towns and cities have built fiber to everybody. And a number of rural telephone companies have built last-mile fiber – there is better bandwidth availability in much of North Dakota than there is in Manhattan.

But the vast majority of the country does not have fiber. If Google really believes that it needs fiber everywhere in a decade to sell the services it wants to sell, then perhaps a major motive is to show others that investing in fiber can be profitable. Certainly Google could build fiber everywhere themselves, but that would be a massive investment. And one really wonders if Google wants to become that much of a brick and mortar company since most of their revenues now come from advertising.

This is an intriguing concept and it seems to already be working. When Google announced they are building Austin, AT&T came out almost immediately with the same announcement. CenturyLink just announced they are building gigabit fiber in Omaha, Nebraska. A start-up called Gigabit Squared has announced fiber projects in Chicago and Seattle. So, maybe this is what Google is really after.

To Make Money. And at an industry event last week a Google spokesperson said that Google is just in this to make money. Maybe that is it in a nutshell. I know as a consultant who has been working with building fiber networks for the last decade that there can be very decent profit margins from building last mile networks. Verizon has proven that fiber can work, and they did it the hard way by building to compete against their own copper network and their own existing revenue stream. In a competitive environment where a new fiber network attracts all new revenue is a very solid investment as an infrastructure play.

But if this is Google’s only reason for building fiber I am a bit flummoxed. They are doing what I call a dumb pipe deployment. They are selling very fast bandwidth, but at rates higher than market. Their only other product is a somewhat standard cable TV offering. And that’s it. If they were in this to maximize profits there are a ton of other things they could sell. For example, voice is still a quite viable product that is mostly margin. And there are a ton of other products hitting the market around the country from advanced security, home automation, medical monitoring that all could drive a lot more money to the Google business plan. Maybe they are going to do all of these things over time. But for now, to me, this does not look like a business plan whose sole goal is to maximize profits. It looks more like a cherry-picking business plan that is going after those customers who will pay a premium for very fast fiber.

To Rule the World. This is my favorite theory. I read a guy who said that Google wanted to rule the world by owning all of the data in the world. By building fiber, Google gains the ultimate connection to people. When the Internet of Things starts monitoring everything around us Google would know more about you than you know about yourself.

Like all of the other ideas this one has at least a little bit of merit. Google is putting a lot of effort into analyzing and dissecting everything about you so that it can maximize its advertising efforts. And as we move into the Internet of Things, your ISP will have the ability to know literally everything about you including things like your blood sugar levels. I don’t put a lot of credence in this idea, mostly because it scares me to death to think that somebody wants to be Big Brother.

My guess is that all of these factors are part of the motivation for Google to do this. They know that getting very fast fiber to people is a good thing and even they probably don’t have a master plan about where this will ultimately go. Obviously they will expect to make money at it, and if they don’t they would ditch the businesses at some point. And with the giant bandwidth laboratory Google is going to learn a lot of things the rest of us won’t know. That alone probably makes it worth the effort.

Customer Portal

I have talked in other blog posts how I believe that the successful residential service provider in the future is going to have a choice to make between being what I call a dumb pipe provider or a full service provider. And there are merits to both approaches.

But should you elect to take the service provider approach you will be selling many smaller and niche products to your customers instead of the handful of major products you sell today. It may be a decade until voice and cable TV become 100% commoditized, but every year there will be fewer and fewer customers buying those traditional products.

One of the tools that service providers are going to need for selling multiple services to customers is a customer portal. This is a website that allows customers to see a menu of what is available to them. Last week I wrote a blog entry about upselling your current products to your customers as a way to immediately affect bottom line and a well-designed portal is a great tool for enabling that process.

Here is what I envision as the perfect customer portal:

  • The ability for a customer to see what services they are already buying today.
  • An easy-to-use menu that shows what else is available, categorized to make it easy for a customer to browse your products.
  • Product descriptions that explain the benefits of each available product.
  • Ideally, a video or demo for more complex products showing how they works.
  • The ability to offer sales specials as a customer browses to entice them to try the product.
  • A tie-in to your provisioning system so that the customer can buy, or even just try the product as they shop.

There are a number of customer portals in the telecom world today and I have yet to see one that works in this ideal way. Just last week I went in and changed several things on my AT&T Wireless bill. I found a lower cost voice package and the portal let me easily change plans. But in doing to it deleted my text messaging plan and decided I desired to pay 25 cents per text message. That took a call to fix. And I wanted to delete a feature that gave me lower cost international calling and that also took a phone call to fix. There is nobody bigger than AT&T and they don’t have their portal figured out correctly. But what they did have was a lot better than nothing because it enabled me to familiarize myself with their various plans so I could decide what I wanted, without having to involve a person in that process. I was glad to have the portal, and I just wished I didn’t have to make two phone calls to finally complete what I wanted to change.

Some of the better portals I have seen are from the major cable companies. They often offer so many different programming packages that having them all explained on a portal is a great way for a customer to shop without tying up a customer service representative. But from what I can see, none of them yet give customers the ability to change products without talking to a live person before it is finished.

I think a lot of companies hesitate to build a portal because they don’t want to commit the resources needed to build the ideal one. But there is no reason to wait since even the largest carriers haven’t perfected the customer portal yet. There is nothing stopping you from starting your portal now to let your customers see the wide range of your existing products. Every one of my clients has a number of products that they barely sell. I believe that there are a lot more customers who would buy products like unified messaging if they understood what it could do for them and if they knew that you offered it. Think of building a portal as a way of communicating with your customers.

If you are going to start a portal or improve an existing one you should consider including some of the following functions:

  • Let customers check their bill on-line.
  • Let customers make a credit card or bank debit payment.
  • Let customers change product parameters like their Internet bandwidth.
  • Make it easy for customers to order Pay-per-view events.
  • Let’s customers place a tentative order even if that just prompts you to call them back.

So I recommend that you create a portal today that does some of these functions. There is probably not going to be some magic program available that is going to let you create the perfect customer portal all at once. Rather, this is likely to be an ongoing process. Because of that, do what you can for now, but do so in such a way that you are prepared to evolve your portal into a powerful tool for you and your customers.

Finally, I would note that there is an additional set of functions that are sometimes referred to as a customer portal. On smart switches you can build a web interface so that customers with advanced voice features can maintain the settings for those products. While this is certainly a portal function, this is more of an operational function and not a marketing function.

Should you Build a WiFi Network?

Free Wireless (WiFi) Minneapolis Hotspot in Su...

Free Wireless (WiFi) Minneapolis Hotspot in Sumner Field (Photo credit: Wikipedia)

For years I have had clients who have been building WiFi networks and then trying to figure out ways to make money with them. For the first time I think there is now enough opportunity to sufficiently monetize a WiFi network to make it look like a good investment. The following are some of the ways that other carriers are making money from WiFi. A good business plan will probably need to combine several of these together to make a viable business.

Cellular Data Upload. The biggest use of WiFi is becoming the uploading of cellular data to the network. Most cellular carriers sell data plans with low caps and they want and expect their customers to use WiFi to keep data traffic off the cellular networks. In most places the cellular networks are not nearly robust enough to handle all of the data they would need to carry if it wasn’t for WiFi. There are two different possible ways to monetize this.

If your service area has enough customers of one or more of the major cellular companies, the carriers might be interested in buying wholesale access into your WiFi network. This is something that is happening in big cities, and in many places the cellular carriers are deploying the WiFi directly. But there are now a number of markets where cellular carriers are buying bulk WiFi access from other carriers.

However, deals with cellular carriers are not yet something that has been commoditized, and the alternate plan is to sell data plans directly to cellular customers in your town for their smart phones. Many cellular customers already have WiFi in their homes, but with a city-wide WiFi network they could then get the WiFi benefits anywhere in town. Statistics say that 85% of cellular data is used in the home territory and you can sell data for less than the cellular carriers and make good money at it.

MVNO Wireless. Even better than selling cellular data to others is consider offering your own wireless plans using an MVNO. In this scenario you buy bulk cellular minutes, text messaging and cellular data and then package them your own cellular plans. If you have a city-wide WiFi network you have a big advantage because you can make sure that your cellular customers use your network for both voice and data when that is possible. This means that you can charge them cellular-level pricing for traffic that you are delivering at landline costs. The margins on MVNO wireless are already decent, but combining it with a robust WiFi network really enhances the bottom line.

Broadband Alternative. There are now a significant number of customers who don’t want traditional broadband delivered by wireline. In addition to smartphone users, there are many customers who now use pads and laptops instead of traditional PCs. So you can sell WiFi business plans as an alternative or as an adjunct to your existing data plans. WiFi-only plans can be priced similarly to traditional low-level landline plans and you might sell a ‘portability’ additive plan to your normal landline data customers. Finally, you can sell hourly, daily and weekly WiFi to visitors or occasional users.

VoIP / Local Only Phone. In every market there are customers who almost never leave town and with a WiFi network you can give them a much lower cost portable phone alternative than using a traditional cellphone carrier. This essentially is a cordless phone that will go anywhere in the town. You also can use WiFi to give local phones to kids and others for low prices, saving parents the cost of pricey cellular family plans.

Public Safety. Most towns and cities would be interested in using your network for public safety and public works. With a citywide WiFi network you can give all city employees access to data anywhere in town, making it easier for police and fire to operate using pads but also improving the productivity for inspectors and other city workers who are mobile in the town. You should be able to sell bulk access to the city and local utilities, particularly if you will arrange a QOS arrangement to give public safety a priority for the network when they need it.

Workforce Needs. And of course, a city-wide WiFi network will also increase your own productivity since your own installers and salespeople can always be connected to the network with a pad or smartphone. This is not a revenue opportunity but rather can save you money.

There certainly some issues to consider and it would make sense to pre-sell to the larger WiFi users before you build the network. But if you can sign up a cellular carrier or the City government as anchor tenants then you can build knowing that these other revenues will materialize if the network is built with good coverage.

Like any business there are operational issues to consider. For instance you will want to insure that only people who are paying for your service use the network so you will want a secure system to validate users and be prepared to boot off customers who give away passwords to others.

From a technical and cost perspective it has never been easier to get into the WiFi business. The price of equipment has dropped and it has become more science and less art to keep the network functioning well.