Yearly Archives: 2016

Section 230 and the Internet

Scale_of_justice_2_newOne of the most important laws affecting the Internet that you’ve probably never heard of is Section 230 of the Communications Decency Act of 1996. The law provides immunity from liability to anybody that publishes information generated by others.

It is this law that holds Facebook harmless for content posted by its users, or protects a newspaper that allows comments on its article. The law shields web companies from liability from things posted by their users. Without this law social media couldn’t exist since somebody would attack a company like Facebook over something they didn’t like posted by one of their billion users.

This law has already been tested a number of times by various lawsuits and the law has always prevailed. For example, AOL was sued a number of times in the early days of the web for carrying defamatory statements or false customer profiles – all posted by its users. There are similar laws in Europe and Australia.

But there is a current lawsuit attacking Section 230 that is getting traction in the courts – and this has web companies worried. The case is Hassel vs. Bird and is being adjudicated in San Francisco. In the case, Ava Bird hired Dawn Hassel as an attorney to support her in a slip-and-fall case. But then Bird basically disappeared and so Hassel dropped the case.

But Bird subsequently sued her lawyer for damages and also posted a defamatory and erroneous review about the lawyer on Yelp. The courts agreed with the lawyer and awarded her damages, and Hassel then asked the court to have the defamatory review removed from Yelp. And that’s where Section 230 came into play.

Yelp was not listed as a party to the case and is refusing to remove the bad review claiming that it would create a bad precedent and is violation of Section 230 rules. They argue that to remove the review would be to admit wrongdoing and would create a liability to Hassel. Yelp appealed the ruling, but the California appeals court sided with the first ruling and ordered Yelp to remove the review.

Yelp’s legal arguments center around the fact that they were not named as a defendant in the original suit. If they had been, they could have been heard in court before being ordered to take down the defamatory posting. They argue that they have been blindsided and never got their day in court.

Yelp is appealing the case to the California Supreme Court and has been supported in amicus briefs by the whole web industry from Google, Facebook, Twitter, Microsoft, and many other smaller web services along with numerous newspapers.

These companies all argue that user-generated content and social media are how Americans communicate today. By definition there are people that don’t like what other people have to say, certainly witnessed during this political season. And without the protection of Section 230, companies that allow user commentary and content would eventually be driven out of business by becoming embroiled in countless lawsuits.

From a practical standpoint you can understand the lawyer’s concern. She successfully won a case against somebody that defamed her, and yet part of that slander is still available to all on the Yelp site. But the flip side of that is that if Yelp agrees to take down the defamatory posting then they are open to suit by Hassel by having admitted some responsibility for the process.

It’s not hard to picture what happens if Yelp loses this case. Web companies will not be able to take a chance on negative information and a site like Yelp would probably delete all negative reviews – which would invalidate what they do for a living. And social media sites like Facebook probably couldn’t function at all, because almost everything posted there – from skinhead websites through pictures of puppies – offends somebody.

I’m sure that the average person doesn’t appreciate the underlying laws and precedents that allow the web to function the way it does today. If even one of these basic linchpins is removed then the whole thing could come tumbling down, or at worst could morph into something we wouldn’t recognize or like. I don’t think any of us want a web where the corporate lawyers at each web company decide what content is or is not safe for them to carry.

AT&T’s CAF II Plans

att-truckWe’ve known all along that AT&T was likely to use its cellular network to satisfy CAF II requirements to bring broadband to rural America. But we are now starting to see it happening. AT&T presented its plan recently in California and is probably in the process of doing so elsewhere.

In California AT&T proposes to provide fixed cellular broadband. Many of the rural areas affected by CAF II have not yet been upgraded to 4G LTE, and so AT&T’s first step will be to upgrade cell sites to the higher bandwidth capability. Once that is done, AT&T will offer fixed data to homes and businesses in the effective area using the LTE bandwidth. They will provide a receiver about the size of a dinner plate that will receive LTE data in the same way that cell phones do today. This wireless router will be connected to the home’s broadband network, probably a WiFi router provided by customers.

So it looks like AT&T will use the CAF II money to upgrade cell sites to LTE (something they were certainly going to do anyway). They also might build a few new rural cell sites and build some fiber to feed them. Finally, they will buy the customers the LTE receivers. My guess is that they are going to have a very hard time showing that they spent all of the CAF II money and so I expect some overinflated reporting of CAF II costs to the FCC. But these upgrades are far less costly than the rural DSL upgrades being contemplated by CenturyLink and Frontier.

AT&T promises that the bandwidth will meet the 10 Mbps down and 1 Mbps up speeds required by the FCC’s CAF II order. They also promise that there will be no monthly data caps smaller than 150 gigabits, also a threshold set by the CAF II rules. They have not yet specified specific prices, but say that prices will be at ‘market rate’ for broadband.

Even though we’ve seen this coming, this is a giant disappointment. Already today a 10/1 Mbps connection is inadequate for a large percentage of households. Cisco recently published statistics showing that the average home in the US today wants 24 Mbps to meet their needs, just a hair under the FCC definition of broadband. Cisco predicts that by 2020 that the average household demand is going to grow to 54 Mbps. That means the 10/1 speeds are going to feel really slow even by the end of the CAF II period ending in 2021.

These upgrades will improve broadband in the affected areas, but only by a small amount. Some residents in these areas today can get very slow DSL, under 1 Mbps. There are also numerous WISPs operating in the area offering speeds under 5 Mbps. And everybody always has the option of satellite broadband, which is universally disliked due to the latency and data caps.

The really bad news for these areas is that this upgrade is going to be in place for a long time. The FCC is probably not going to think about the CAF II areas again until well past the end of the CAF timeline, perhaps not until 2025. By 2025 the average household in the country is going to probably want a 100 Mbps connection if the current broadband growth trends continue. The folks in these areas will be just as far behind the rest of the country by then as they today. This whole CAF II program seems like a political sham that pretends to be bringing broadband to rural America, but it’s really nothing more than a temporary bandaid that only makes a marginal change in bandwidth delivery.

I also have no doubt that AT&T is going to use the CAF II upgrades as the excuse to walk away from the copper lines in the affected area. The FCC recently created rules for disconnecting copper, and once the CAF II wireless network is in place people are going to be forced onto the wireless network if they still want landline service.

This is all such a shame. We’ve seen in states like Minnesota that even modest government investments in broadband can bring amazing results. There are dozens of rural fiber networks being built in the state due to modest amounts of grant money from the state’s DEED grant program. The FCC could have used this CAF money to seed huge amounts of rural fiber construction – a solution that would have provided broadband for the next century. Instead they are helping AT&T pay for cellular upgrades that they would have done anyway and are abetting them in cutting down the rural copper networks. As I’ve said a number of times, I don’t know that I’ve ever seen a more wasteful use of federal money.

The Practical Impediments to Smart Home

Outdoor cameraThere are a lot of small telcos and ISPs these days flirting with a Smart Home product, and I know a few of them who seem to be having some success. But – at least for now – it is unlikely that the product line will get significant customer penetration rates. A Smart Home product, while interesting, it not yet a replacement for triple play revenues. Here are a few of the issues involved with being successful with Smart Home:

Public Perception. Probably the biggest hurdle is still customer perception of the product. So far the idea has made inroads with some early adopters, but surveys show that the majority of people either don’t know what Smart Home is or else don’t find it of interest. Anybody selling the product has an uphill battle of educating their customers of the benefits first before they can sell it.

Most small carriers are starting with a product that includes security and energy management (a smart thermostat). These two products are the most recognizable to customers and so are the easiest to sell.

But Smart Home products beyond those are a different case. Just look at the options that are available in the Comcast Smart Home product. This includes options like smart door locks, a smart irrigation / sprinkler system, smart lights, smart garage door, indoor and outdoor cameras, and even a smart doorbell that will show you who is at the front door. The general public is largely not knowledgeable about these products and it’s an uphill battle to upsell people past the base product.

Surveys show that there is general dissatisfaction with the state of the IoT industry as a whole. Early adopters that like IoT expect that if they buy some new gizmo they see advertised that it will work with the platform they are using. But there is still no standard industry interface with devices and there are half a dozen or more different ways that devise communicate with users today. The industry is a long way away from plug and play, which is the expected standard today.

And then there is price. Without considering the equipment costs and the connection charges, Comcast charges $49.95 per month for the package. There is a lot of work to do to convince customers that there is enough benefit to them where they need to take on a new monthly bill of that magnitude.

Quickly Obsolete. Probably the next biggest concern for anybody entering this business is if the components used to deliver the product will remain available. There are a huge number of big and small companies that are offering Smart Home hubs and add-ons. Past experience reminds us that there is always an eventual shake-out in a new industry and that most of the companies selling IoT won’t be here a few years from now.

You can’t even trust going with a large vendor for components. Earlier this year Google’s Nest walked away from their smart hub product and turned off the web servers that supported the product.

Controlling Truck Rolls. The next big worry of companies I know who are considering the product is that it’s going to involve a lot of truck rolls. There’s not just the trucks rolls needed to initially install the product, but adding a new device to a customer’s system is probably going to need a truck roll.

And like any new technology there are going to be bugs and user errors and it’s likely that the product is going to require a lot of maintenance calls.

Summary

I think most homeowners are intrigued by the idea of having a Jetson’s home where an automated home makes life easier. But we are still a decade or two away from having a fully integrated and easy-to-use Smart Home product that can deliver some of that promise.

This doesn’t mean that you can’t be successful with a limited Smart Home product now. But you must be aware of the risks and have a plan for somehow controlling excessive truck rolls for the product to be profitable. What nobody wants is a product line that takes a lot of work but that doesn’t move the bottom line.

A Regulatory Level Playing Field?

European_UnionThere is an interesting discussion worth noting occurring in Europe right now – regulators there are asking if regulations that apply to traditional telecom providers ought not to also apply to companies offering similar services on the web. This discussion is the culmination of many years of lobbying by telecom companies asking for a ‘level playing field’. The executive branch of the European Union is expected this week to propose that online services be subject to the same regulation as companies that offers similar telecom services.

What might that mean for web companies? It might mean that if Skype or Google Voice allows people to make ‘telephone calls’ that these providers might have to provide their customers access to dialing 911. It might require that any online service that gives their customers a telephone number might have to allow customers to keep that number for other purposes (number portability). It might even mean that web companies might be subject to some of the provisions of net neutrality.

It’s easy to think that voice-related regulation of telecom companies is largely a thing of the past. Telecoms in the US have asking in a number of states to be deregulated for voice purposes – a trend that has accelerated since the FCC declared that landline voice is no longer a dominant service.

And certainly the days are gone when the FCC and the state Commissions regulated the price of every telecom product and set a lot of the rules about how a telecom company had to interact with customers. The most draconian aspects of telecom regulation have been relaxed, and in many cases are gone completely.

Yet there are still a lot of rules that apply to telecom companies both here and in Europe. There are rules about 911 and safety issues. There are the CALEA rules that require telecoms to comply with law enforcement surveillance of customers. There are privacy rules, and truth-in-billing rules and numerous other rules that telecoms are still expected to comply with, even as they are free to sell or bundle their products in any way they want.

The European Union is asking some good questions – and if this is adopted these same questions are going to get asked here in the US as well. Why, if Skype sells themselves as an alternative for service should they not have to provide the ability for a customer to dial 911? Why shouldn’t any web-based voice provider not have to comply with the same requirements for privacy, law enforcement or number portability as a landline or cellular telco?

Of course, given a choice the telcos would probably rather that these remaining regulations not apply to them. There is certainly a big push from the big US telcos to get out from all voice regulations. But there are at least some aspects of telecom regulation that are not likely to go away. It’s been proven many times how 911 saves lives. And there is a general belief among regulators that privacy and billing rules protect citizens from telco abuses. And law enforcement is unlikely to bend on the requirement that a telco of any sort help them implement a wire-tap order from a judge.

It’s interesting to me that the regulations here and in Europe are so similar. But I guess that a lot of regulation is the result of trying to address the same issues. For example, if customers have a right to privacy, then there are only so many ways this can be applied to a telephone customer.

The bottom line is that if this is implemented in Europe, and if the web-based companies are able to comply with these regulations, then I think we can expect that same concept to find it’s ways here in a few years. At the end of the day regulators like to regulate and there are a whole lot of voice-like services today on the web that are not subject to some of the basic things that are regulated for every other provider.

Will We See Net Neutrality Enforcement?

Network_neutrality_poster_symbolThe FCC has not yet taken any direct action to enforce its new net neutrality decision. There have already been several ways that the agency has begun to use its new authority to regulate broadband under Title II regulation. But the agency has yet to directly act on the core issue of net neutrality.

It’s likely that the FCC was waiting for the courts to first resolve the challenges to the net neutrality ruling. Otherwise, anything they ordered might have been overturned by a negative court decision. But earlier this year the courts affirmed the FCC’s net neutrality order, and so it now seems to safely be the firm law of the land.

The basic premises of net neutrality are that the Internet is to be open and there is to be no blocking, throttling or paid prioritization by ISPs. There are a number of ISPs that have practices that seem to be a violation of the paid priority prohibition. For instance, the major wireless companies have plans to not count some video transmission as part of monthly data caps. The companies refer to these as ‘sponsored data’ and I they hope that somehow will excuse the practices from the net neutrality rules.

T-Mobile probably has the most egregious plans. The company has made arrangements with various content providers and over 100 video services are now available as part of its Binge On plan. This allows users to watch services like ABC, ESPN, Disney, NBC, Hulu, Netflix and Sling TV on their smartphones without the usage applying to monthly data caps.

Verizon has a more modest plan called Go90 which offers some unique content for Verizon cellphone customers that is not available anywhere else. This content is also exempt from data charges. But this might become a moot point since there have been several recent articles saying that the offering has gotten no traction with customers. But Verizon also just announced this week that they plan to zero-rate football games streamed to cellphones under the NFL Mobile app.

AT&T just announced a plan that looks to fall into the gray area. The company is going to start zero-rating the DirecTV app so that customers who buy both DirecTV and AT&T cellular service can watch the service on their cellphones without data charges. Their reasoning is that these are premium customers that already have a significant monthly bill from AT&T and that those bills cover the service. The company has plans to majorly revamp the DirecTV apps later this year and there is likely to be more of these package arrangements.

Comcast also has a questionable service. They send their TV anywhere content to customers outside of their monthly data caps. They have argued that they are using a technology that uses a separate data path than normal broadband, but it still seems to fail the net neutrality test. Comcast recently significantly increased its data caps which alleviates a lot of the concern, but there still must be customers who are going over the higher caps.

I’m thinking it’s highly unlikely that this FCC is going to tackle these issues. It’s likely the current Chairman will be replaced soon after the new year and the agency already has a number of other important proceedings it wants to wrap up soon, such as the current cellular auctions.

So this is probably going to be deferred for the next FCC chairman. And that means we’ll have to wait to see if that will be a democrat or a republican. It’s unlikely that a republican FCC would enforce net neutrality, and we can’t even be certain that a democratic chairperson would tackle the above issues.

I find it a little ironic that these issues are what supposedly prompted the net neutrality ruling, and yet nothing has been done. But the path chosen by applying Title II regulation to broadband opens up a ton of new topics for the FCC to consider like broadband privacy, data caps, truth in labeling and all sorts of other regulations associated with bandwidth products. And that’s where this FCC puts its attention this year.

New Settop Box Rules

roku-3-2Chairman Tom Wheeler proposed new settop box rules last week for the eight largest cable companies. The proposal reverses much of the Chairman’s last settop box proposal that would have required each cable company to find a way to support a common cable box that customers could buy.

The large cable companies lobbied hard that the first proposal added a lot of costs without much public benefit (and they were right). The new proposal is based partially on recommendations made by the large cable companies.

The core of the new proposal is that the large cable companies will have to offer free apps that would allow customers to receive their cable signal on a variety of devices such as a Roku box, a smart-TV or a SONY Playstation.  Any customer electing to use the app could return their settop boxes and avoid the expensive fees (which have grown to as high as $10 per box).

I’m guessing that the cable companies will make the app option pretty vanilla and it will provide a channel line-up as well as a way to easily tune between channels. The big question will be if the cable companies will give away their more advanced features for free as part of the apps. For example, today many of these companies have cloud-DVR and other advanced services and we’ll have to see if the companies will make customers lease a settop box to get these additional features.

And as I wrote in an article last week, a few of the biggest cable companies like Comcast have put a lot of development into new features for their latest settop boxes. Having a free app alternative might nudge the cable companies to lower settop box prices compared to today to entice people to instead use the box.

The proposed new rules also have a requirement that the cable companies must include other sources of programming in their search guide. For example, if a customer is looking for a movie not available at the cable company, the search might show that the movie is instead available at Hulu or Netflix. Comcast is already doing this today on a limited basis by bringing Netflix into their line-up as another ‘channel’.

This is a very odd requirement that would seem to favor OTT providers the most. It will be curious to see how customers like idea of constantly being offered programming to which they may not be subscribed. I can foresee one consequence of this move in that it might prompt cable companies and OTT providers to work together to create an ‘on-demand’ product for OTT content. That could benefit both companies.

The FCC will be establishing some kind of clearing house for the apps. They learned a lesson with the cable card order many years ago that if the cable companies are left to their own they will make it hard for customers to find the new alternative. The FCC wants to approve apps and somehow bless them, in a process that would need to be worked out.

These new requirements will not apply to smaller cable providers – which is good since it’s hard to imagine them having to do the work needed to create apps for a wide variety of ever-changing devices. But that doesn’t mean that there won’t be consequences for smaller companies.

If it turns out that customers love the free apps there will be pressure on smaller companies to somehow do the same thing. And perhaps these app, once developed will be made available to the smaller cable providers. But it’s likely that the apps are going to be written for two platforms – standard HFC cable networks and satellite TV. That means that there will probably be nobody writing similar apps for fiber or DSL-based cable systems.

One would also think over time that, if successful, these new rules will lower the demand for settop boxes. Over time that might drive up the cost of settop boxes for everybody else. However, to some extent we are already on that path since the biggest cable companies like Comcast and DirecTV have already migrated to custom settop boxes and don’t buy from the normal industry vendors.

Comcast Labs

comcast-truck-cmcsa-cmcsk_largeIt’s easy to think of all of the big ISPs in the industry as roughly equivalent in terms of services, technology, and customer experience. But Comcast has invested in Comcast Labs, a research and development branch of the company that is starting to distinguish Comcast from the rest of the industry.

Comcast Labs has branches in Silicon Valley, Seattle, Philadelphia, Denver and Washington D.C. The Lab employs 40 PhDs, 10 Distinguished Fellows and hundreds of engineers and active inventors, all very focused on telecommunications and product research.

The lab is different than the more familiar Bell Labs, which has always done a lot of pure research and not just telecom research. Comcast Labs is very focused on developing specific products for the company as well as looking for ways to improve the Comcast networks.

The impact from Comcast labs is pretty easy to see. They developed the X1 settop box platform which is regarded as the most innovative box in the industry. The platform includes an easy to use navigation system and cloud-based DVR and can be used to control up to five TVs in a home. They are constantly developing new features and during the recent Olympics they rolled out a remote with voice control (you talk to the remote).

They have also developed a fully integrated set of home automation features marketed at Xfinity Home. Comcast Labs developed a custom hub, rather than relying on a hub made by somebody else. The company so far has integrated a number of home automation features into the platform which includes security, thermostat, water sensors, cameras, door locks, etc., all controlled from a smartphone or from a TV.

Comcast Labs doesn’t only develop consumer devices and you can read about some of their other research on their blog. The company has adopted the concept of moving network control to open source software and is heavily invested in OpenStack and GitHub development. They are also researching a future migration to IP video, which would free up more of the network for delivery of data.

http://labs.comcast.com/

The company and the Labs are also researching areas that will have a long-term benefit to the company such as finding network solutions that use less energy and moving towards a software defined network to be more flexible and to more quickly implement solutions nationwide.

A high-level Comcast executive recently bragged that the company through Comcast Labs could solve problems and deliver solutions within weeks that would take other companies in the industry many months or years.

I find it interesting that the company doesn’t talk a lot about Comcast Labs. There are very few articles on the organization outside of the Comcast websites and I assume that they dissuade those at the Labs giving interviews to outsiders.

But it’s clear that Comcast Labs provides the company with a lot of solutions that would not come from off-the-shelf electronics and solutions. This puts the company on par with Google, Facebook and AT&T as companies that have largely withdrawn from the normal industry vendors and taken their own path by developing their own equipment and solutions.

Of course, the company doesn’t operate in a vacuum. For instance, the FCC is currently strongly considering a requirement that the industry develop a standard solution to allow customers to buy off-the-shelf settop boxes. The custom X1 box that Comcast Labs has developed goes in the exact opposite direction of what the FCC is looking at and the company would probably have a hard time complying with such an order.

But overall Comcast Labs provides the company with a resource that other telcos can’t match. The company is constantly rolling out new features and products that companies without a research arm will not be able to match. I’m sure the reason for this research is to create more loyal customers by providing features and services that they can’t get elsewhere. I guess time will tell how good this strategy is, but it’s hard to argue with success, and as much as people like to complain about the company they are growing faster than anybody else in the industry in terms of new customers.

Are Cable Companies Winning the Speed War?

Polk County SignThe latest news about Google Fiber slowing on their metropolitan fiber builds got me to wondering if perhaps the cable companies are starting to win the speed wars. Are we getting to a time when a fiber overbuilder is going to have trouble competing with them?

After many years of being stingy with bandwidth the cable companies have now largely adopted the opposite strategy and increase household speeds over time without raising prices. I can remember quotes from several big cable companies a few years ago where the cable companies claimed they were giving households all the speed that they need. And this was back at a time when they were experiencing a significant amount of network congestion during the peak evening hours. But my reading of many different customer reviews tells me that the cable companies have largely solved the congestion issue.

This is not to say that there are not places where the cable networks are still not up to snuff, but compared to ten years ago, a lot more cable networks seem to be delivering the speeds that customers want. Of course, there are still plenty of small town where the rural cable networks are not up to snuff, but metropolitan areas seem to have improved a lot.

The FCC reported in their 2015 Measuring Broadband America Fixed Report that Comcast customers got between 109% and 119% of the speeds that they paid for. I know personally that my speed tests often shows at least 5 Mbps better performance than what I am paying for with Comcast.

But the question that has been nagging me is if a new fiber provider can really thrive in a metropolitan area? Can they get enough customers to be profitable? It’s been widely reported that Google and other fiber overbuilders need at least a 30% market share to succeed, and that’s a tall order in a city where everybody already has broadband.

People need a compelling reason to change providers, because it’s a process that nobody enjoys. It means staying at home to meet an installer, returning settop boxes and modems, and worrying about the billing transition.

I have some anecdotal evidence about the way at least one group of people buy broadband. I’ve been a member of several active Maryland sports message boards for over two decades and broadband is a periodic topic of conversation since sports fans these days care about watching sports on the Internet. The majority of the people on these boards happen to live in neighborhoods that have both Verizon FiOS and a cable company – mostly Comcast, but sometimes somebody else. These are folks who have had the choice between fiber and coaxial cable networks for a long time.

What I’ve seen over the years is that there are a few people that are big fans of either the cable company or Verizon. But the vast majority don’t seem to really care as long as the broadband works well enough to watch their sports and the other things their families do on the Internet. Probably half of the people on these boards have moved back and forth between the providers during the last decade. I’ve seen evidence that content matters more than speeds when over the years there were occasions when one provider or the other did not broadcast a Maryland football or basketball game. At least among this one large group of I don’t see any major affinity for fiber over coaxial cable networks. These folks just want something that will work.

A new fiber provider has to provide a compelling reason for people to change. Certainly having lower prices could be a compelling reason, but most metropolitan fiber providers are not much cheaper than the cable company (and sometimes they are more expensive). And while a fiber provider might offer gigabit speeds, I wonder if that is enough to get people to change if they are happy with the speeds they have had for the last few years?

I’ve always said that there is some percentage of any community that will change to a new provider because they dislike the current provider for some reason. But those are rarely enough customers to justify a business plan, and so being successful with fiber also means persuading customers that are not unhappy to change. And perhaps, as Google has found out, that is not as easy as fiber proponents have assumed. Certainly, the cable company tactic of greatly improving the performance of their data products is making it harder and harder for a new overbuilder to thrive.

Does Cable Still Need to be in the Bundle?

Fatty_watching_himself_on_TVI’ve read several things lately that make me wonder about the need to include cable TV in the bundle. I saw an article that blamed part of Google Fiber’s performance on the fact that Google’s cable TV is more expensive than the competition.

The first place to look for this answer is with nationwide surveys. There have been major surveys for the past five years that report that somewhere between 15% and 20% of homes say they are considering dropping cable in the next year. Yet they don’t do it. That demonstrates a lot of dissatisfaction among customers, but something about the cable product keeps people connected even though they are unhappy. We are probably on track to see about 1.5 million people drop cable this year. That may sound like a lot, but with the total number of cable homes just under 100 million, true cord-cutting is still a relatively minor phenomenon.

We also see clues that tell us that people are downgrading cable packages when they can. It’s been reported that ESPN has lost millions of customers more in the last few years than can be attributed to cord-cutting. The only way for that to happen is for a lot of households to be downgrading to packages that don’t include ESPN. And since ESPN is in the expanded basic package for most cable companies, that means that households must be downgrading to the smallest possible basic packages – that that have 20 channels or less. But cable companies don’t report these numbers, so we can only guess the extent of cord shaving.

There is also the issue of affordability. Certainly there are many homes that can no longer afford expensive cable TV packages. Affordability probably accounts for a significant portion of the 30% of households that don’t have a cable package. But since cable rates continue to increase faster than the rate of inflation there must be more homes each year that find they can no longer afford cable. We now know that affordability is the major factor that is capping broadband subscriptions nationwide in markets where broadband is available.

And my guess is that broadband is growing to become more valuable than cable to many households. There is enough entertainment available online that a household dropping cable is not isolated from video like they were just a few years ago. We certainly see a lot of homes subscribing to on-line video. A Nielsen survey from the first quarter of this year reported that more than half of all households are buying at least one online video service. Nielsen estimated that by June of this year that over 45 million homes will pay for Netflix. Hulu had over 12 million subscribers by the end of May of this year. We don’t know how many people watch Amazon Prime video, but the Prime shipping service has over 54 million customers.

Over the last year I know a half dozen smaller telcos that have dropped the cable product altogether and have directed their customers to one of the satellite services. Small companies all tell me that they are losing money on cable TV, and the numbers behind their decision are compelling. Larger companies can gain some economy of scale with cable TV, but only the largest dozen cable companies are actually making money with the product.

We know that when Google Fiber first launched service without a cable product they stumbled. They seem to have done a lot better after adding cable. But part of their problem also has to be the $70 gigabit product that a lot of homes can’t afford. I’m guessing that they’ll do better in Atlanta where they now offer a 100 Mbps product for a flat $50.

But still, even with those many trends acting against the cable product, somewhere around 70% of all homes in the country still buy cable from one of the cable providers – landline or satellite. It seems really hard to ignore a product that 70% of households are willing to buy. As a consultant I still have a difficult time telling companies to not offer cable TV in new markets.

One thing that is making it a bit easier is that the cable product is starting to finally move to the cloud. For example, Skitter TV now offers a cable product that can save a company from investing in a headend. And perhaps that is the long-term solution – for most cable providers to offer programming from the cloud to avoid the costs and issues of trying to go it alone.

Technology Hype

coax cablesI find it annoying when I read short articles that proclaim that a new technology that can deliver faster data speeds is right around the corner. This has most recently happened with 5G cellular, but in the past there have been spates of such articles talking about cable modem speeds with DOCSIS 3.1, and faster copper speeds with G.Fast.

It’s always easy to understand where such articles come from. Some vendor or large ISP will announce a technical breakthrough in a lab, and then soon thereafter there are numerous articles written by non-technical people proclaiming that we will soon be seeing blazing speeds at our homes or on our cell phones.

But these articles are usually premature, and sadly there are real-life consequences to this kind of lazy press. Politicians and policy makers see these articles and accept them as gospel and make decisions based upon these misleading articles. It then is up to people like me to come behind and explain to them why the public claims are not true.

This is happening right now with talk about blazingly fast millimeter wave radios to replace fiber loops. Even if this technology were ready for market tomorrow (which it won’t be), like any technology it will have limits. There are places where wireless loops might be a great solution but other places where it may never be financially or technically feasible. Yet a whole lot of the country now believes that our future broadband is dependent upon gigabit wireless, and this is quashing plans for building fiber networks.

One recent set of these kinds of articles proclaimed that DOCSIS 3.1 is going to bring everybody gigabit speeds over cable company networks. And there is some truth to that, but the nuances are never explained. There are a lot of changes needed in a cable network to bring gigabit speeds to all of their customers. What is really happening in the first upgrade is that cable networks will have limited gigabit capabilities. The companies will be able to deliver gigabit speeds to perhaps hundreds of people in a market. Their networks would have problems if they tried to deliver it to thousands, and their networks would crash if they tried to give fast speeds to everybody.

Consider the list of issues that must be overcome to use a cable network to bring gigabit speeds to the masses:

  • First a cable company has to free up enough empty channels to make room for the gigabit data channels. For many cable system this will require upgrading the overall bandwidth of the cable network, and this can be very expensive. In the most extreme cases it can mean replacing all of the network amplifiers and power taps and even sometimes replacing some of the coaxial cable.
  • Cable bandwidth is shared by all of the customers in a neighborhood (called a node). If a cable company only sells a few gigabit products in a given node there will be some small degradation of bandwidth performance for everybody else. But if enough customers want to buy a gigabit the cable company will be forced to ‘split’ the nodes so that there are fewer homes sharing the bandwidth. Cable companies today have nodes of 200 – 300 customers, compared to fiber network nodes that generally range between 16 and 32 customers per node. A cable company has to build more fiber and install more electronics to get nodes as small as fiber systems.
  • Every network has chokepoints, or places where only a set amount of bandwidth can be handled at the same time. There are several of these chokepoints in a cable network – at the node, on the data pipe serving the node, at several data concentration points within the headend, and with the pipe to the outside Internet. You can’t upgrade speeds without upgrading these chokepoints, and that can be expensive.
  • At some point if enough customers want fast speeds the network would need to be fundamentally reconfigured to a new technology. This might mean converting the whole headend and electronics to IPTV. It might mean moving the CMTS (the device that talks to the data at each node) into the field, similar to a fiber network. And it would mean building a lot more fiber, to the point where there would almost be as much fiber as in a fiber-to-the-premise network.

There is always some truth in these technological pronouncements. But these articles are way off base when they then imply that a given breakthrough is the end-all solution to broadband. Yes, cable systems can be faster now, which is great. But DOCSIS 3.1 does not make a cable network equivalent to a Google Fiber network that can already deliver a gigabit to everybody. And yes, there is great promise in wireless local loops. But even after all of the issues with deploying wireless in a real-life environment are solved, the technology is only going to work where there is fiber fairly close to customers and when a number of other factors are just right. These kind of nuances matter and I really wish that non-techie writers would stop telling us that the solution to all of our broadband speed problems is right around the corner. Because it’s not.