Why Aren’t There More Cord Cutters?

rabbit earsVarious analysts have been trying to define the number of cord cutters and they differ a bit in their estimates. That’s not surprising since there is no easy way to count cord cutters. One statistic that regularly gets reported is the drop-off in traditional cable TV subscriptions. But even that statistic doesn’t tell the whole story. Usually what is reported is the change in cable subscribers from the largest cable companies. That misses the changes in subscribers from the many smaller cable providers. And the analysts rarely account for the fact that there are approximately 250,000 new housing units in the US each quarter. When you consider that, even should the nationwide cable numbers stay identical from one quarter to the next there are actually 250,000 homes that have dropped or elected not to buy cable.

But even with those caveats, most analysts would agree that there is now probably somewhere in the range of 500,000 households leaving traditional pay-TV per quarter, which works out to about 2% of the industry annually. When looked at from that perspective it’s clear that unless something starts driving people away from pay-TV a lot faster that there are going to be huge numbers of cable subscribers around for many years to come. With the major cable companies starting to offer skinny bundles, it’s certainly possible that the losses will slow or even slightly reverse.

One way to understand why there are not more cord cutters is to look at what people watch. Nielsen, Variety and others publish statistics on the most watched shows and programming on TV. For the most recent full 2014-15 season of TV the list of the 50 most-watched shows on TV is striking in that it is still made up almost entirely of shows that are on the major traditional networks. This starts with The Big Bang Theory that averaged 21.3 million weekly viewers down to The Goldbergs that averaged 9.2 million. Also on the list are Sunday-night, Monday-night, and Thursday-night football.

There are only three series on the list that are not from one of the primary networks: The Walking Dead on AMC at #4 and with 19.9 million average viewers, Downtown Abby on PBS at #20 and with 12.9 million viewers, and Game of Thrones on HBO at #45 and with 9.4 million average viewers. That leaves 44 of the top 50 series that were on ABC, CBS, Fox, or NBC. It is worth a note that Netflix does not release the viewers for their own series and some of them might belong on this list.

In addition to various weekly series there are also numerous one-time events on TV. It turns out last year that 34 out of 35 of the most watched one-time events were all NFL football games, with the one exception being the Macy’s Thanksgiving Day parade. But there are lots of other one-time events like the Emmys, the Oscars, or all of the other kinds of sporting events that people regularly watch.

I’ve always wondered why more people don’t drop expensive cable subscriptions since most of the series and the one-time events they love are on network TV. Most people in a metropolitan area can get great reception with a $100 digital antenna and can watch all of the network series and sports carried on those networks. With Hulu you can see the vast majority of the network shows that you might have missed live. And with Sling TV you can get a few of the most popular cable channels plus ESPN.

The cable companies have done a good job at making it easier for people to keep their expensive subscriptions. For example most of them now offer the TV Anywhere app or some proprietary version of it. This lets people who pay the traditional cable bundle watch many shows from any device over the web. But there generally is a delay of a day or more until most shows make it to the TV Anywhere lineup.

A big part of that answer has to be that there is programming within the big cable bundle that people value enough to keep paying the big monthly bill. For instance, parents with smaller children want access to several cable-only channels that cater to the kid demographic. People really like cooking shows or travel shows or reality TV that are on one of the various cable networks. But again, the vast majority of this programming can be watched on Netflix, Hulu, or Amazon Prime, albeit on a delayed basis. But I guess that many cable network shows are not individually popular enough to be watched by many people, but yet which each has their loyal followers.

Some of the reason for lack of cord cutting is also probably that people are either not quite yet comfortable enough to take the big leap away from cable or are procrastinating on the eventual decision. We saw this as landlines went down and that many people kept a landline in their home for years after they did all of their communications by cellphone. I’ve noticed that most surveys show a lot more people who say they are going to drop cable than who actually do it. Those are the folks that probably have the cable companies worried, because the cord cutting trickle could turn into a flood if the public decides en masse that the alternatives are good enough.

Take Control of Your Biases

brain-only-2011Today I am going to stray a bit from technology in order to write about something that I think is just as important to a lot of my clients. The topic today is about cognitive bias and how it might affect the way you look at your own company or at your customers. In this case I am talking about bias that interferes with the ability to make the right business decisions. People often associate bias with prejudice, but in this case it’s something different. I’m talking about how the normal way that most entrepreneurs think can lead them to see the world differently than it really is. There are two particular kinds of bias that can be a problem for a business owner or manager – confirmation bias and what is called the curse of knowledge.

Confirmation bias is the natural tendency to interpret information in a way that confirms a person’s view of the way things work. This kind of bias is probably most easily demonstrated in politics where people tend to believe news sites and politicians from the party or political leaning that most affirms their world view. But this kind of bias is present everywhere in life and can be a huge problem for a businessperson.

I can list many examples of confirmation bias I have seen with my clients. Some examples that come to mind include:

  • A company owner that believed his company was doing great because revenues were up year over year. But the increases were all due to cable rate increases and the company was losing customers and market share. He did not recognize a number of problems within the company and was not looking for any.
  • A company was moving into a new market and the owner was shocked when nobody was buying his products and services. He had assumed that customers wanted what he was selling.
  • A company that was convinced that Comcast had singled him out, was using unfair competition practices, and that this was why he was doing poorly. In fact Comcast was acting in that community identically as they were in surrounding communities.

In all three cases my client was seeing the world they way they thought it worked instead of seeing it the way it really is. If any business person can’t see the major problems in their own business or if they just blindly assume that assume that they can just ‘build it and they will come”, then they have let their cognitive bias overcome better judgement.

The other kind of bias is called curse of knowledge cognition which causes a better-informed person to find it difficult to see from the perspective of a lesser-informed person. I frequently see this when ISPs assume that their products are superior to their competitors and they just assume people will automatically choose their product over the competition. I often hear engineers and others declare things like, “Our broadband product is faster and has less latency. How can anybody else pick that other company’s product?”

This bias causes you to assume that other people think the way that you do, and that can be a problem in an industry where most of the people working at ISPs are technical and most of their customers are not.

Business owners need to remind themselves about such biases and there are several ways to battle against these natural tendencies. One good way is to periodically get an outside opinion. This can be done by hiring a consultant (like me), having one of your peers in to look things over, periodically having focus groups with customers or using well-designed customer surveys. But with any of these techniques an owner has to be willing to actually listen to what the outside world then tells them because the same cognitive bias that won’t let them see problems often won’t let them believe observations from outsiders.

Another good tool, which many business owners find uncomfortable, is to challenge employees to identify problems and the needed solutions. Many business owners are afraid that this cedes too much power to employees, but business owners who embrace this have found that it can energize everybody to work towards being a better company.

Whatever techniques you use, almost everybody has these biases and it’s important that you recognize your own tendency towards them and that you find a way to work around your own brain’s tendency to see the world as you want it rather than the way it really is.

What I am Thankful for in 2015

ThanksgivingThanksgiving is upon us yet again and I’ve given some thought to those things in the industry and beyond that I am thankful for this year.

Net Neutrality: I am thankful for the net neutrality ruling, more as a consumer than as someone in the industry. From what I can see the largest ISPs and cellular companies had a big bag of nasty tricks waiting for all of us had it not passed. I feel like this ruling took back some of the power in the industry from the ISPs with the FCC as our watchdog. Now we need to wait a while more to see if the courts uphold the FCC. On the other hand, I am not so glad that net neutrality seems to have taken the Federal Trade Commission out of the picture for telecom. They were starting to take a hard look at monopoly abuses and one can hope the FCC will take up where they left off. There is some reassurance that the FTC says they will still play a role, but that role is clearly diminished.

Municipal Competition: I was glad to see the FCC tackle the prohibitions against municipal telecom. As somebody who works mostly with rural broadband issues, we need to encourage anybody, including cities and counties that are willing to tackle bringing broadband to rural places. I can understand why the large ISPs don’t want competition from municipal entities in big cities, but that still has not happened anywhere larger than Chattanooga and probably won’t. I have a harder time seeing why the large ISPs fight so vigorously against competition in rural areas where they don’t spend any capital to maintain their networks. These smaller communities are waking up to the fact that if they don’t take care of the broadband gap themselves that nobody else is likely to do so.

Inching Towards More Privacy: In this last year it became apparent to everybody that the NSA and a ton of commercial companies are spying on all of us. I love the parts of the industry that are taking the side of privacy. There’s Apple that is encrypting everything in a way that even they can’t decrypt. There’s a number of companies working on block chains and other forms of peer-to-peer communication that ought to be immune from snooping. And there are a number of web sites that now promise they aren’t tracking you. We have a long way to go, but it looks like people are starting to care about their privacy.

DOCSIS 3.1: I am thankful for technologies that are making broadband faster. The DOCSIS 3.1 technology that the cable companies are starting to implement will probably help the largest number of Americans get faster broadband. Several of the big cable companies are promising that they will offer faster speeds across the board. I think cable companies have finally awakened to the fact that it doesn’t cost them that much to give out more speed and it shelters them from the competition. And there s a slow but steady growth of fiber with companies like Google and CenturyLink leading the way. You will hear me whoopin’ and hollerin’ in this blog if somebody brings an affordable gigabit to my neighborhood.

Technology is Getting Better: The speed at which technology in and near the industry is improving is mind boggling. It seems like I hear about something new almost every day. This year saw 10 gigabit fiber terminals that are cheap enough for home and small business use. We’ve seen a plethora of improvements in OTT boxes like Roku and the gaming systems. 4K video has made it into the mainstream conversation in the last year. The speed and processing power of cellphones has literally doubled in the last year.

And My Readers: This marks my third Thanksgiving with this blog and I don’t seem to be running out of topics. I am truly thankful that people read this from time to time. I started writing this blog as a way to force myself to stay up with current events in the industry and it has done that in spades. I seem to learn something new every day, and for that I am most thankful.

The Alternate to Cable Cards

cablecardThe FCC just sent out for public comment a proposal to implement AllVid as an alternative to cable cards. AllVid was first introduced in 2011 by a group called the AllVid Tech Company Alliance that included Best Buy, Google, Sony and TiVo. AllVid was proposed as a universal adapter for all types of pay TV content on differing technology platforms like cable systems, satellite TV, VDSL systems, and fiber networks. This was basically going to be a universal cable card substitute that would work anywhere.

The FCC rejected the idea as costly and impractical. The original cable card order has been a boondoggle for years and only a small percentage of households ever went through the hassle of avoiding settop box fees from the cable companies. Even five years ago the FCC thought it was not realistic to think there could be a universal adapter that would work with all of the devices in the world. But since then the world of boxes that can receive cable signal has proliferated wildly making it hard to imagine a solution that would work with anything. There are now traditional cable companies sending programming to things like the Roku box and game consoles.

But the AllVid group apparently is good at lobbying and brought the idea back to the FCC again through the DSTAC (Downloadable Security Technology Advisory Committee), a formal committee under FCC auspices. This group was recently looking at what a post-cable card world might look like and AllVid got pushed back into the conversation. Because the DSTAC group recommended that the FCC ask for public comments the FCC sent the group’s report out, but nobody knows where the FCC might stand on the issue.

It’s impossible to think that there could even be a universal solution. The world of settop boxes is changing quickly. There is Time Warner Cable that says they want out of the settop business and are trialing both Roku and Xbox consoles as a replacement. There is Charter which builds the settop box into its base fee and doesn’t charge specifically for the settop box. As part of the attempt to buy Time Warner Cable and Bright House Networks they told the FCC that the boxes are free to customers. It’s been reported that Comcast now has a proprietary box with its own flavors of features. Google supposedly has its own box that nobody knows much about.

And there has never been a cable card solution found for settop boxes that hand off IPTV networks used on DSL or fiber network and those companies all got waivers from the original cable card order.

What probably keeps the topic alive is that there is a very vocal minority of people in the country who love the cable card order. They will do anything to avoid paying a fee to the hated large cable companies. So one has to imagine that this group is also behind AllVid, which is reported to have some support on Capitol Hill.

But every reason why the FCC rejected this the first time is still true and now there are more reasons why this is a bad idea. If we really want a solution so that people don’t have to pay for a monthly settop box it ought to come from Congress. I think every company that sells video would be glad to sell boxes directly to users at cost who insist on having them. That way each company could sell whatever box they use and there would never be compatibility issues. But the AllVid folks seem to think that by somehow coming up with a solution that will work on all networks that there will be such a volume of sales that the price for the box will come down. That is wishful thinking and so the whole industry has to watch this be argued yet another time after we all thought it was put to bed.

How Long Does Fiber Last?

Copper wireI am asked all of the time how long fiber lasts. People want to know if they make the big investment in a fiber network whether they will get their money’s worth. And there is at least some reasons for the people to be confused. For example, I’ve seen opponents of municipal fiber networks say publicly that a new fiber network won’t last twenty years.

So how long does a fiber network last? The answer is – it depends mostly on how it is installed. While fiber is tough, it can be stressed during construction, which can significantly shorten its life. The number one cause of fiber damage during construction is damage caused when pulling fiber through ducts. There is almost no damage caused by either blowing or pushing fiber, making those the safest installation techniques. But it’s possible to overstress fiber when pulling, which will eventually result in it developing opacity. The opacity in fiber grows over time as very tiny cracks and stress points in the fiber grow larger and start deflecting light..

The second most common flaw in installed fiber is at splice points. Over time, as fiber expands and contracts from temperature changes, the splice points can shift tiny amounts and degrade the connection. Luckily, most damage from shifting splices can be fixed by re-splicing the fibers as they go bad over the years.

This does, though, speak to the issue of water damage to fiber. Water in itself doesn’t harm fiber, but if water gets into the sheath and freezes and melts over time it can either break splices or it can cause tiny flaws in the walls of the fiber to grow into bigger flaws. Over time, with enough little cracks and flaws, a given fiber can become unusable. So, just like with most other kinds of buried wires, care must be taken to keep water out of fiber lines in areas that will experience freezes.

But changing temperatures alone can do the same damage over time, so fiber that experiences wild temperature swings is not going to last as long as fiber that is protected from temperature extremes. Of course, burying fiber deep enough is possibly the best way to insure steady temperatures over time.

Fiber has gotten better over the years as manufacturers have improved manufacturing techniques. Today’s fibers are nearly perfect out of the manufacturing process and ought to last longer than fibers made thirty or forty years ago. The manufacturers have adopted techniques such as pre-stressing fiber during the manufacturing process (pulling it slightly) which pulls out any tiny flaws to keep them from getting bigger.

But none of what I said answers the question asked – how long will fiber last? Material scientists have been studying fiber since the 1980s and they have built models to predict how long fiber will last if properly installed. They look at all of the factors that can cause failure – how it was made, the presence of tiny flaws, factors that can cause cloudiness, the protection provided by the sheath, etc.

And what they found is very reassuring. Studies have shown that properly installed fiber will only have a chance of failure at a rate of 1 in 100,000 per kilometer per year between years 20 and 40 after installation. Statistics are funny things and that kind of rate is not easy to apply for a layman, but it ought to be obvious that this means very few failures for a normal fiber installation during that time frame. This means that fiber ought to easily last forty years and far beyond. Nobody will yet say how much further beyond, but I talked once to a few engineers from Corning and they told me that as long as it’s treated well that their best guess is at least 75 years. We’ll have to wait around to see if that is true.

The same scientists have studied real life applications of fiber and have calculated that the chances of buried fiber being cut is 1 in 1,000 per kilometer per year. This means it is 100 times more likely for a fiber to be cut than to have it fail from inherent flaws. Again, statistics like this aren’t straight-line ratios, but it you operate a 500-mile fiber network, this tells you that you can expect a fiber cut every year or so. And of course, some networks do worse than that. Outages from fiber cuts and the consequent weaknesses created by the repair splices are a far larger threat to your fiber network than any degradation of the fiber. So bury it deep!

Some Regulatory Shorts

FCC_New_LogoAs to be expected our regulators stay busy regulating. Not all of their decisions have widespread impact, but it’s always worth keeping an eye on what’s going on.

WiFi Blocking: The FCC continues to come down on hard on those in the hospitality industry that would stop people from using their own hot spots in or near hotels or other gathering places. You might recall, last year the FCC fined Marriott for blocking access to guests using their cellphones for WiFi. Marriott is one of those chains that charges extra for WiFi and so they were operating jammers that interfered with the ability of a smart phone to act as a hotspot.

The FCC continued with that theme and recently fined M.C. Dean $718,000 for blocking WiFi at the Baltimore Convention Center. They also fined Hilton Worldwide $25,000 for “apparent obstruction of an investigation” in the case. In August the FCC fined Smart City Holdings $750,000 for using technology at 28 convention centers that blocked cellphone and wireless routers from acting as hotspots.

As somebody who travels and who generally finds hotel WiFi to be inadequate, this is a welcome move. But it’s even more so for groups that rent space in a convention center. Some of those locations charge 6 digits for use of a convention center’s WiFi system, and the FCC is telling the hospitality industry that it is never okay to block WiFi.

Do Not Track Requests: The FCC voted earlier this month to not require web sites to honor Do Not Track requests. The group Consumer Watchdog had petitioned the FCC asking them to force companies to honor such requests. Today web sites can voluntarily honor privacy requests, but only a handful of large web sites do so. The group had hoped that since the FCC had elected to regulate privacy practices for ISPs as part of the net neutrality rules that they might carry this forward to the web.

But the FCC declined to make such a ruling. They said that they are not in the business of regulating ‘edge providers’, meaning the companies that offer web content. I keep an eye on privacy and use web sites that don’t track people whenever I can like the Duck Duck Go search engine. But I am leery about the FCC getting into the business of regulating the behavior of web service providers. When you look at some of the consequences of such actions it’s not necessarily good for anybody. Even in England, which we always assume is a lot like us, the government has proscribed a large list of web content that is off limits unless people opt into them. I personally am glad the FCC doesn’t want to cross that line. I think back to all of the wasted effort they spent on the ‘seven dirty words’ on TV and radio and don’t think we need a repeat of that.

The FCC and Privacy. In what seems like an extreme order, the FCC just fined Cox Communications $595,000 for a security breach that exposed the records of 61 customers. That’s almost $10,000 per customer.

This is the first such privacy ruling by the FCC since this was always under the purview of the Federal Trade Commission until the FCC asserted primary responsibility for regulating ISPs as common carriers. I find the order to be puzzling. The breach was apparently due to a hacker. Cox self-reported the breach and said that they had processes in place that found the breach quickly and that limited it from happening to a larger number of customers. To me that sounds like what companies are supposed to do and I’m not sure that any company these days can be completed immune from hackers. I know we won’t know the details of exactly what Cox did wrong, but it doesn’t feel like this is a case where the punishment fits the crime.

One only has compare this to the way that the very massive data breaches have been handled for companies like Target, J.P. Morgan Chase and a number of other banks, and even from several branches of the federal government. None of them got significant fines and the general thinking is that the market itself provides a lot of punishment in lost business and in the cost of dealing with the data breach. The size of the FCC fine seems out of line, and because of that every ISP ought to be reviewing the way you store and protect customer data. You can’t afford not to, and perhaps that is the message the FCC was making.

 

Senior Customers

elderly-people-crossingI have worked with a number of carriers who largely avoid building fiber or any new facilities to neighborhoods that have a larger than average share of senior households. And I think perhaps we are getting to a point in time where that is no longer the best strategy.

Pew Research Center just released a poll showing the change over time of the use of social media by various age groups. They have been asking this question for a number of years. Their polls show that back in 2006 around 40% of people under 29 used social media but barely anybody else. But over the years the usage has grown for each age group. As one would still expect, around 90% of those under 29 now use social media, but the percentage for those over 65 has grown to 35% and is growing quickly.

You don’t have to go back very many years to see a different story. As recently as 2012 only 20% of those over 65 used social media and in 2010 it was only 10%. But the older demographic is quickly catching up to those between 50 and 64, where, even now, only 50% use social media.

This survey didn’t give any reasons why the use of social media is growing so fast. But one easy explanation is that as the population ages, the younger groups of people become the next older group. I just read recently that there are now more millennials in the country than baby boomers. The baby boomers, along with everyone else, are aging and the first boomers are now 69.

Not all of my clients shy away from seniors. I have a few clients that for years have held training sessions to help seniors get over their fear of computers, and this has paid off. They tell me that once a senior gets on the Internet that they are some of their best customers. They pay on time and they are loyal.

I happen to live in a community in Florida with a lot of seniors who love the Florida sun in the winter. I can tell you that, at least around here, the community itself is drawing seniors onto the Internet. It’s not unusual for community centers and other centers of senior of activity to prefer to communicate via the web. It’s also not unusual around here for doctors to want to do everything on the web. So people who might have had no other reason to get onto the Internet are getting drawn in by daily life.

I don’t think anybody should expect that seniors are going to pony up a high price for the fastest Internet connections, and so I would imagine that Google doesn’t do as well in this segment of the population as they probably do with families with kids at home. But that doesn’t mean that seniors want the slowest product either. My mother-in-law, who lives in Texas, had a 40 Mbps cable modem and was pleased last year when Time Warner increased her speed to 75 Mbps due to competition with Google.

We are also on the verge of a time when seniors will become very demanding broadband customers. There are over 100 tech companies reported to be looking at products that can help seniors stay in their homes longer. All of these products rely on video cameras and other monitors that are going to make seniors care about bandwidth. If buying bigger bandwidth can keep somebody in their home for an extra decade you are going to see the elderly shelling out for broadband and demanding that it is fast enough to satisfy their needs.

I still think the idea of carriers finding ways to reach out to senior can pay dividends. I have a very large extended family and every year I see a few more of my older cousins and relatives pop up on Facebook. And I am sad to report that it’s not just kids who take selfies! I think the older generation in my family has a lot more fun with the Internet these days than the kids.

Cable Companies Try Skinny Bundles

Comcast truckWhile all of the cable companies and their trade organizations publicly deny that cord cutting is a real phenomenon, in this most recent quarter most of the large cable companies have announced a skinny bundle package delivered over the web. It’s hard to think that these packages are aimed at anybody but cord cutters and in fact, one has to wonder if they might lure more people away from the big packages.

CEO Rob Marcus of Time Warner Cable says that their skinny bundle is an attempt to get rid of settop boxes. TWC just announced in New York and New Jersey that all cable customers can now use Roku instead of settop boxes. He said that TWC has a long-term strategy to get out of the settop box business, which is a big expense for the company and something that customers really don’t like paying for. I know that for most of my clients the monthly settop box rentals are one of the most profitable parts about selling cable TV and so his statement puzzles me a bit. But my clients are not working in major metropolitan markets and perhaps the total cost of tracking and swapping boxes is different for a large company.

But since TWC offers Roku for everybody I’m not sure that settop boxes are a very good explanation for their skinny bundle. TWC is now trialing a skinny bundle in New York City, available only to its data customers. It starts at $10 per month for 20 channels with options to add movie channels and other networks running up to $50 per month. That sure looks to be aimed at cord cutters.

And most of the other cable companies are also limiting their offerings to their own data customers. For instance, Comcast has launched a trial in the Boston area of a skinny bundle they are branding as Stream for their own data customers at $15 per month, including all taxes and fees. The package includes local networks, HBO, and some streaming movies. They plan to take this nationwide in 2016. The unique feature of the Comcast product is that it is not truly an OTT product since it doesn’t use the shared data stream but is delivered with separate bandwidth on the cable network.

Charter has launched what they are calling Spectrum TV. It starts at $12.99 per month and comes with a free Roku 3 player. This bundle contains 19 channels including the four major off-air networks. For an additional $7 per month customers can add more channels including ESPN, and for even more money customers can add HBO or Showtime. .

CableVision launched packages back in April of this year that includes a digital antenna for receiving local channels. They are offering a 50 Mbps data product plus the antenna plus HBO for $44.90 per month.

This isn’t limited to just the cable companies. CenturyLink is supposedly getting ready to trial a skinny bundle for its data customers. There are no details yet of pricing or line-up.

This all got started with Dish networks and their Sling TV product. Unlike these other products that, for now, are only available to the data customers of each ISP, Sling is available to anybody with a fast enough connection. I previously reviewed Sling TV and it had a lot of problems. I tried it during the first football game of the season and it was so bad that I abandoned it. I just watched Maryland beat Georgetown in basketball last night and the video was still out of sync with the audio. It’s getting better, but is still not as good as cable TV.

It’s interesting that most of the companies like CenturyLink say their skinny bundles are aimed at cord cutters, but even more specifically are aimed at millennials. I look at the channels offered and my bet is that baby boomers like me are going to more interested in this than millennials. I guess we’ll have to wait and see who subscribes to the skinny bundles.

State Commissions and Broadband

California PUCFrontier and the California commission have been negotiating a deal that lays out the terms that will allow Frontier to buy a pile of California customers from Verizon. Basically, as will be detailed below, the CPUC will require Frontier to upgrade broadband for over a third of the customers it has in the state as part of the deal.

Occasionally, state commissions get the chance to come down on the side of broadband, mostly during these times of mergers, sales, and acquisitions. There are a handful of state commissions, such as California, New York, Illinois and a few others, that have always been aggressive in these circumstances. There are a whole lot of other commissions who seem to be friendlier to the big carriers and let these kinds of deals slide through without much comment.

It’s good to see commissions take an aggressive stand to improve broadband. But looking back on some similar past deals one has to wonder how effective such arrangements really are. For example, I recall an arrangement between the Pennsylvania commission and Verizon in 1993 that freed Verizon from rate-of-return regulation as long as Verizon would bring DSL to hundreds of rural communities. But Verizon never built that DSL and rural Pennsylvania today still has some of the worst broadband in the country.

There also have been deals made by other government entities and carriers that have not brought any results. For instance, dozens of eastern cities gave Verizon franchise agreements to sell cable TV for an agreement that the company would bring FiOS fiber to their whole city. Verizon never built that extra fiber in any of these communities and earlier this year finally admitted that it was never going to expand FiOS fiber any further.

The FCC just made a deal with AT&T to greatly expand their fiber product as part of the agreement to buy DirecTV. We’ll have to wait and see if the company meets this obligation, and most of the industry is still trying to figure out if AT&T is serious about fiber.

So these deals sound great, but one has to wonder how much teeth they have. In this case, if Frontier doesn’t come through over time it’s not like the California commission can undo the purchase of the Verizon properties. There really is not a lot that any regulatory commission can do these days with a carrier that chooses not to comply with such an agreement. There was a time when commissions held a lot of power over carriers. They controlled rate increases and had many other levers to influence carrier behavior. But in a world where all three of the triple play products are largely deregulated there is only so much that any government agency can do to a rogue carrier.

Back to the details of the Frontier deal. The agreement, which is still to be signed by the California commission, would have Frontier do the following:

  • Provide 25 Mbps downstream and 2-3 Mbps upstream to an additional 400,000 households in California by December 31, 2022.
  • Provide 10 Mbps downstream and 1 Mbps upstream to an additional 100,000 unserved households beyond its CAF II commitments by December 31, 2020
  • Deploy 10 Mbps downstream and 1 Mbps upstream to 77,402 households in accordance with the CAF II requirements in the census blocks identified by the FCC
  • Deploy 6 Mbps downstream and 1 to 1.5 Mbps upstream to an additional 250,000 households in California

Altogether this would bring better broadband to over 800,000 California homes. But I feel sorry for the homes that are being upgraded to 6 Mbps. This will likely be their last upgrade before their copper gets torn down in the not-too-distant future.

Telling Customers the Truth

FCC_New_LogoThe FCC got a recommendation from its Staff to finally implement one of the aspects of net neutrality that large ISPs are bound to hate. They are recommending that ISPs publish consumer disclosure forms that declare all of the relevant facts about their broadband products.

This is not a new requirement and was originally ordered in the first FCC net neutrality decision several years ago. Since it was never challenged in court, this portion of the original order always remained in effect. But the FCC never got around to telling carriers specifically what they must disclose to customers.

The list of what Staff is recommending to be disclosed is really thorough and includes all of the information that customers ought to know about their broadband product. This includes:

  • What the product would cost if bought as a standalone product, not part of a bundle.
  • Details of how those prices change if the product is in a bundle.
  • Details of the charges. For instance, if there is a data cap, then what is the base fee and how much is additional data?
  • Any associated charges for a modem, WiFi router, or other equipment.
  • Details of other monthly fees. This is a great requirement because large carriers have been inventing various fees to make their base prices look lower, and a customer has no way of knowing in most cases if these fees represent taxes the carriers must pay or are just pocketed by the carrier.
  • A list of the taxes that apply to the service.
  • Average data speeds. The FCC wants carriers to report the average peak download and upload speeds that come from FCC testing or carrier tests. This will be a real challenge for some carriers since broadband speeds can vary widely within their network. For instance, DSL speeds vary by the distance from the central office. Cable modem speeds can vary a lot between different network nodes. And some technologies varies by the number of users on the system.
  • Average latency. This is the network delay in getting data from the web.
  • Average packet loss. How much of the data you are downloading comes through accurately. This and latency are two things that carriers rarely disclose.
  • A list of network management practices that might affect service. The FCC wants details about how such practices are triggered and applied to the network.
  • The company’s privacy policy.
  • How to make complaints.

For now these rules are only going to apply to carriers with more than 100,000 customers. The FCC is going to consider, however, how this might apply to smaller carriers at some later date. One has to imagine that at least some of this is going to be required for everybody.

That is an incredibly detailed list of requirements and covers every aspect of selling a data product. Carriers that deliver honest speeds are going to have no problems with these requirements. In fact, if you deliver a fast data product that actually delivers what you advertise, then these disclosure forms could become a competitive edge since you will be able to point to the competitor’s forms that tell a different story.

One thing that this ought to stop is carriers selling ‘up-to’ speeds since they are now going to have to disclose the actual speeds they deliver. It’s very common to see the large companies selling the same speeds in every market although the speeds they advertise are only available in urban parts of the states. This results in people thinking they are buying one speed but getting something far slower.

I’ve always wondered why the FCC took so long to do this. This requirement has been on the books now for many years and basically all that was needed was for the FCC to tell the carriers to implement what had been ordered. But it’s finally here and I am looking forward to seeing how the big companies comply with this. This level of required detail doesn’t give carriers a lot of wiggle room and perhaps customers are finally going to have a way to compare competing data products.