Is Cord Cutting Accelerating?

The research firm eMarketer is predicting that cord cutting is accelerating this year at a pace faster than predicted by the industry. They’ve done surveys and studies and conclude that 187 million people will watch Pay TV this year (satellite or cable TV), a drop of 3.8% in viewership.

The drop in 2017 was 3.4%, but the big cable companies like Comcast and Charter hoped they could slow cord cutting this year by offering Netflix and other alternative programmers on their platforms. Perhaps that is working to a degree since cable companies are losing customers at a slower pace than satellite cable or the big telcos delivering cable on DSL, like AT&T.

eMarketer looks at the statistics in a different way than most others and predicts the people who will watch the various services – which is different than counting households. I suppose that some members of a household could stop watching traditional Pay TV while the home continues to pay for a subscription. They are predicting that the total number of people who will stop watching Pay TV will rise to 33 million by the end of 2018, up from 25 million just a year ago.

As you would expect, if Pay TV viewers are dropping, then viewers of online services ought to be increasing. They are predicting the number of viewers of the major OTT services as follows for 2018:  YouTube – 192 M; Netflix – 147.5 M; Amazon – 88.7 M; Hulu – 55 M; HBO Now – 17.1 M and Sling TV – 6.8 M. eMarketer says that in 2018 that 52% of homes now watch both Pay TV and an online service.

We know that Netflix’s growth has slowed and they added only 670,000 net customers in the US in the second quarter of this year and only 4.5 million worldwide. It appears, however, that the other online services are all growing at a faster pace as people are diversifying to watch more than just Netflix.

eMarketer credits a lot of the exodus of Pay TV subscribers to the proliferation of original content available. In 2010 there were 216 original TV series produced. That was 113 from the broadcast networks, 74 from cable-only networks, 25 from premium movie channels and 4 from online providers like Netflix. In 2017 that number has grown to an astonishing 487 original series. That’s 153 from the broadcast networks, 175 from cable-only networks, 42 from premium movie channels and 117 from online providers. A large percentage of the 487 series are now available online to somebody willing to track them down. These figures also ignore the proliferation of other content available online such as movies, documentaries, comedy specials, etc.

The proliferation of content from multiple sources is making it harder to rely on just one source of content these days. Somebody with a basic cable subscription is missing out on the 159 series produced by the premium movie channels and the online providers. Somebody cutting the cord and only using Netflix would be missing out on even more content. Some of the content generated by the broadcast and cable networks is available for free online, with commercials from places like Hulu. If a cord cutter wants to have access to a lot of the available content they’ll have to subscribe to multiple services – perhaps Netflix plus something like Hulu or Sling TV.

The eMarketer survey didn’t ask about the affordability of traditional cable – a factor that is at the top of the list in other surveys that have studied cord cutting. This particular survey concentrated on what people are watching without delving into the issues that drive somebody to cut the cord.

I don’t know about my readers, but I’m a cord cutter and I’ve already reached the point of content saturation. I probably have fifty items on my Netflix watchlist, and it would take more than a year to watch it all, even if I never add anything new. I have a similar list on Amazon Prime and a smaller list on Hulu. I never sit down to watch content without more options than I know what to do with. I have the luxury these days of watching content that fits my mood and available time – a real luxury compared to even a decade ago.

Getting Militant for Broadband

My job takes me to many rural counties where huge geographic areas don’t have broadband. I’ve seen a big change over the last two years in the expectations of rural residents who are now demanding that somebody find them a broadband solution. There have been a number of rural residents calling for better broadband for a decade, but recently I’ve seen the cries for broadband grow into strident demands. As the title of this blog suggests, people are getting militant for broadband (but not carrying guns in doing so!)

The perceived need for broadband has changed a lot since the turn of this new century. In 2000 only 43% of homes had a broadband connection – and in those days that meant they had a connection that was faster than dial-up. In 2000 DSL was king and a lot of homes had upgraded to speeds of 1 Mbps. There have always been homes that require broadband, and I’m a good example since I work from home, and when I moved fifteen years ago my offer on a new house was contingent on the home having broadband installed before closing. My real estate agent at the time said that was the first time she’d ever heard about broadband related to home ownership.

As I’ve cited many times, the need for broadband has continued to grow steadily and has been doubling every three years. By 2010 the number of homes with broadband grew to 71%, and by then the cable companies were beginning to dominate the market. By then DSL speeds had gotten better, with the average speeds at about 6 Mbps, but with some lucky customers seeing speeds of around 15 Mbps. But as DOCSIS 3.0 was implemented in cable networks we started seeing speeds up to 100 Mbps available on cable systems. It was a good time to be a cable company, because their rapid revenue growth was fueled almost entirely by adding broadband customers.

Broadband in urban areas has continued to improve. We’re now seeing Comcast, Charter, Cox and other cable company upgrade to DOCSIS 3.1 and offer speeds of up to 1 Gbps. DSL that can deliver 50 Mbps over two bonded copper lines is becoming old technology. Even urban cellular speeds are becoming decent with average speeds of 12 – 15 Mbps.

But during all of these upgrades to urban broadband, huge swaths of rural America is still stuck at 2000 or earlier. Some rural homes have had access to slow DSL of 1 – 2 Mbps at most. Rural cellular speeds are typically half of urban speeds and are incredibly expensive as a home broadband solution. Satellite broadband has been available the whole time, but the high prices, gigantic latency and stingy data caps have made most homes swear off satellite broadband.

Rural homes look with envy at their urban counterparts. They know urban homes who have seen half a dozen major speed upgrades over twenty years while they still have the same lousy choices of twenty years ago. Some rural homes are seeing an upgrade to DSL due to the CAF II program of speeds of perhaps 10 Mbps. While that will be a relief to a home that has had no broadband – it doesn’t let a home use broadband in the same way as the rest of the country.

To make matters feel worse, rural customers without broadband see some parts of rural America get fiber broadband being built by independent telephone companies, electric cooperatives or municipalities. It’s hard for them to understand why there is funding that can make fiber work in some places, but not where they live. The most strident rural residents these days are those who live in a county where other rural customers have fiber and they are being told they are likely to never see it.

This disparity between rural haves and have nots is all due to FCC policy. The FCC decided to make funds available to rural telcos to upgrade to better broadband, but at the same time copped out and handed billions to the giant telcos to instead upgrade to 10 Mbps DSL or wireless. To make matters worse, it’s becoming clear that AT&T and Verizon are intent in eventually tearing down rural copper, which will leave homes with poor cellular coverage without any connection to the outside world.

The FCC laments that they cannot possibly afford to fund fiber everywhere. But they missed a huge opportunity to bring fiber to millions when they caved to lobbyists and gave the CAF II funding to the big telcos. Recall that these funds were originally going to be awarded by a reverse auction and that numerous companies had plans to ask for the funding to build rural fiber.

It’s no wonder that rural areas are furious and desperate for better broadband. Their kids are at a big disadvantage to those living in towns with broadband. Farmers without broadband are competing with those using agricultural IoT. Realtors report that they are having a hard time selling homes with no broadband access. People without broadband can’t work from home. And rural America is being left behind from taking part in American culture without access to the huge amount of content now available on the web.

Do People Really Want a la Carte TV?

We just got a glimpse of a la carte TV and it makes me wonder if this is what people really want. Poll after poll over the years have shown that people would like to pick their own channels. I’m not sure that many people really want a la carte channels once they see the market reality of the product.

Sling TV just started offering a number of a la carte channels and they are available to anybody. Subscribers don’t need to buy another Sling TV package and can buy just one channel. The company says they are planning on offering more a la carte channels.

For now the a la carte line-up is small. It includes Showtime for $10 per month, which is also available elsewhere on line. The other channels available now include:

  • Dove Channel for $5 per month. This channel is not carried on any cable systems and is marketed direct to consumers. It carries a library of Christian-based programming.
  • CuriosityStream for $6 per month. This is an ad-free network that delivers documentaries and shows about science, technology, technology and nature.
  • Stingray Karaoke for $7 per month. This network carries a big library of karaoke songs that streams both the music and lyrics.
  • Outside TV Features for $5 per month. This network carries a big library of outdoor adventure sports films. This is the network that carries the dramatic footage of surfing, skiing, skydiving and numerous adventure sports.
  • UP Faith & Family for $5 per month. This carries original content and movies that are family-based and faith-friendly.
  • Pantaya for $6 per month. This network carries Spanish movies.
  • NBA League Pass for $28.99 per month. This network carries all NBA games and related content.

Sling TV is not the first one to offer a la carte channels and it’s a big part of Amazon Prime. Amazon carries many of these same networks, and over 100 others. However, you must subscribe to the Amazon Prime service for $119 per year in order to buy the a la carte channels. Amazon has taken the approach of being the biggest bundler of content and has become the portal to a huge array of content.

The only other service with any real a la carte characteristics is the new package offered by Charter, only to their own customers. They provide the local networks in a market and then let a subscriber choose 10 out of 65 networks. This is supposedly priced at $21.99, but the fine print shows there will be other fees, typical of a cable company, and I’m guessing this will cost around $30.

What strikes me most about the Sling TV offering is the monthly fee of between $5 and $7 per channel. How many people are willing to spend $60 to $84 per year for one channel? Surveys by Nielsen have shown that the average family regularly watches about a dozen networks. A price of $5 per channel would mean a price of $60 per month to get the networks a household wants. But local network channels, movie networks and sports networks would likely cost more than $5 and it wouldn’t be hard to see a bill of $75 to $100 to buy only the channels a family regularly watches.

I don’t think this is what households want. When people respond to surveys talking about buying channels individually they were not thinking of paying $5 each. I recall a Nielsen survey from a few years ago where people suggested they would be willing to pay less than $2 per channel if they could buy them individually.

I saw a Google article that said that the Dove Channel had over 100,000 customers. Even if they now have twice that, at $5 per month per subscriber the network would have a monthly income of $1 million. That might sound like a lot, but it’s not enough to support a staff, buy the needed content and also try to fund original programming.

Contrast this with a network that sits today on the traditional line-ups on cable systems. At the current nationwide cable TV penetration rate of 69%, a network that charges only a nickel to the cable companies would make $4.4 million per month. A network like the Dove Channel would need to get nearly 900,000 subscribers at $5 per month to perform as well as traditional cable network that charges only a nickel. You can see why most cable networks are scared of the a la carte model because there are very few of them could survive as online providers.

Simultaneous Data Streams

By working all over the country I get to hear a lot of stories about how people use broadband. I’ve noticed that over the last few years that the household expectation for broadband performance has changed.

As recently as three or four years ago most households seemed to judge the adequacy of their broadband connection by how well it would handle a video stream from Netflix or other streaming service. Households that couldn’t stream video well were unhappy, but those that could generally felt that their broadband connection was good enough.

Interestingly, much of the perceived improvement in the ability to steam video was not due to better broadband performance. Streaming services like Netflix took steps to improve the performance of their product. Netflix had always buffered their content, meaning that a customer would load the video stream a few minutes ahead of viewing to eliminate the variation in customer broadband connections. They subsequently built some brains into the service so that the compression used for a given stream would vary according to the broadband connection of the customer. They also began caching their content with ISPs so that their signal would be generated from the ISP’s local network and not from somewhere in the distant cloud.

Streaming quality then became an issue again with the introduction of live streaming sports and other content, and many of the flaws in the video stream became more apparent. I remember trying to watch ESPN online when it was first offered by Sling TV and the experience was miserable – the stream would crash a number of times during a football or basketball game. Live-streaming services have subsequently improved their product to work better with a variety of broadband connections.

Over the last two years I’ve noticed a big change in how households talk about their broadband performance. I haven’t heard anybody mention single video streaming in a few years and the expectation for a broadband connection now is that it can handle multiple data streams at the same time.

This tells me two things. First, as mentioned above, video streaming has improved to the point where you don’t get interruptions on most broadband connections. But more importantly, households have changed how they use broadband. I think my household is a typical example. The only broadband need we have that is different from many families is that my wife and I both work from home. But other than that, we don’t have atypical broadband demands.

If you go back five years we probably had perhaps half a dozen devices in our home capable of connecting to the Internet. We rarely demanded a lot of simultaneous broadband. Today we have over 40 Internet capable devices in our house. While some of them use little or no broadband, we’ve changed how we use broadband. We are cord cutters and routinely are streaming several videos at the same time while also using the Internet for gaming and schoolwork. We’re often stream music. Our computers automatically upload files to the cloud and download software updates. Cellphones are connected to the WiFi and there is regular use of FaceTime and other apps that include video streams.

Interestingly, when the FCC established 25/4 Mbps as the definition of broadband they justified the speed by looking at simultaneous uses of multiple broadband services. At that time a lot of critics derided the FCC’s justification since it wasn’t realistic for how most households really used broadband. Perhaps the staff at the FCC was prescient, because their illustrative examples are exactly how a lot of homes use broadband today.

If anything, the FCC’s method was conservative because it didn’t account for the interference that arises in a home network that is processing multiple data streams at the same time. The more streams, the more interference, and it wouldn’t be unusual for a home like ours to experience 20% to 30% overhead in our WiFi network while processing the numerous simultaneous streams.

Unfortunately, many policy makers are still stuck on the old paradigm. This is the only way they can justify something like the CAF II program that will provide data steams in the 10 Mbps range. They still talk about how that connection will allow a household to watch video or do homework, but they ignore all of the other ways that homes really use broadband today. I know for my home that a 25 Mbps broadband stream is not sufficient and will bog down at various times of the day – so I buy something faster. It’s hard to imagine stepping back to a 10 Mbps connection, because doing so would force us to make hard choices on curtailing our broadband usage.

“But I Live Close to Fiber”

I often hear from people who are excited that fiber is coming to their neighborhood. They see work crews installing fiber and they hope this means that they are finally getting fiber to their homes. But unless folks are in one of the lucky neighborhoods where some ISP is making the big investment in last mile fiber-to-the-home, the chances are good that the new fiber that is tantalizingly close is not going to reach them.

There are a lot of fiber networks in the country that are being used for purposes other than serving homes. Consider some of the following reasons why fiber might be close to you, but unavailable:

  • Electric companies have private fiber networks to connect substations and other electric company facilities. In the last few years we’ve seen some of the biggest electric companies pull back from sharing fiber with others because of security concerns for the electric grid. It’s not uncommon for the electric company to be the only tenant on such fibers.
  • Telcos have fiber networks that connect their central offices in various towns. They have more extensive local fiber networks that are built to supply neighborhood DSL cabinets. If your neighborhood has DSL speeds greater than 15 Mbps, the chances are good that there is telco fiber close to you.
  • Cable companies have fiber for similar reasons. Cable networks are subdivided into neighborhood nodes. These nodes used to be large and served upwards of a thousand homes, but cable companies have reduced node sized to eliminate the problem of their broadband slowing down in the evenings. Nodes might now be as small as a hundred homes – and since each node is fiber fed there is cable company fiber somewhere near to every cluster of homes.
  • A large number of cities have built fiber networks to connect city hall, libraries, firehouses, water utility facilities and other city locations. This has largely been done to reduce the high payments to ISPs to connect these locations with broadband. While many municipal FTTH projects got started by expanding these networks, the vast majority of the municipal fiber networks serve only the city. There’s a decent chance that there is fiber at the library, firehouse or other city facility near your neighborhood.
  • Similarly there are a number of states that have built state-wide fiber networks to connect their own facilities. These networks are often shared with anchor institutions like city halls and other local and state government buildings. Most of these networks are prohibited by state law from sharing the fiber with last-mile fiber builds, even municipal ones.
  • Many school districts have fiber networks to connect schools to provide gigabit speeds. While some of these networks can be shared with other providers, the majority of these networks are used only for the school district.
  • Various companies including telcos, cable companies, and big ISPs build fiber to reach large businesses or industrial parks. The larger downtown buildings in most cities now also have fiber.
  • There is now a major push for building fiber to large apartment complexes. For example, a lot of the push by AT&T to pass millions of locations with fiber is mostly being done by reaching apartment complexes.
  • Today every cell tower is fed with fiber. There will be a lot of new fiber built to reach the smaller cell sites we’ll see on utility and light poles.
  • There are long-haul fiber networks that only function to connect cities and major markets. These networks rarely allow any connections to the network other than at major network nodes.
  • Many cities now have fiber networks that feed traffic signals and traffic cameras. Because of the way that these networks are funded with highway money, these fiber networks are often inexplicably separate from other municipal fiber networks.
  • State highway departments also now operate a lot of fiber networks for their own use to feed the signs that provide traffic information and to feed cameras that are used to monitor traffic.

The chances are that if you live in any kind of populated area, even in rural counties, that there are several of these fiber networks close to you. If you live in a city it’s likely that you can easily walk to half a dozen different fiber networks – none which are being used to bring fiber to your home.  The chances are high that the new fiber you see being built is not being built for you.

Finally a la carte TV?

Charter just sent me an advertisement that got my attention. They are offering a TV package for $21.99 per month that includes my local network affiliates plus ten other channels that I get to select. This is the first TV service I’ve seen that provides a la carte choice. The statistics from Nielsen show that the average family watches around a dozen channels and this service could give people exactly that.

The local networks included are ABC, CBS. FOX, NBC and PBS. The offer I got then allows me to pick 10 out of 65 of the most popular cable networks. This includes a wide range of options like AMC, Bravo, CNN, the Disney Channel, the Food Network, HGTV, MTV, MSNBC, TBS, and USA. I was surprised to see the offer includes the option to pick the pricier sports networks like ESPN, ESPN2 and FS1. This price includes access to the apps of your selected channels. Charter also offers around 6,000 on-demand titles, although it’s hard to know how worthwhile this might be without signing up for the package.

The offer made it sound like this was an online OTT offering, but when I went to the web site I found that I can choose between delivery through a Charter settop box or delivery through a Charter broadband connection.

My first reaction to the offer is ask how Charter is able to offer this. There are specific FCC rules that define cable tiers and I’m not sure how Charter gets away with this as a traditional cable product. This doesn’t fit the FCC definition of a basic tier and certainly is not even close to an expanded basic tier. We’ve been told for years that cable companies cannot offer a la carte pricing for channels, and yet Charter is doing just that. I’m guessing that Charter does not consider this to be a true OTT offering since it’s only available to Charter broadband customers and never touches the open web.

I also wonder about the $21.99 price. I have a hard time thinking that Charter talked the local network affiliates across their huge footprint to agree to put their content onto the web, and so Charter is going to charge local franchise fees on the product with or without having the settop box. I also wonder if Charter will charge ancillary fees like a local broadcast fee or other bogus fees they charge to their normal cable customers. Anybody getting this through a settop box is clearly going to pay for the box. A customer buying this through a settop box might end up paying $35 to $40.

I also wonder if I can watch this programming when I’m traveling, which is a major consideration for me. If they can make that work then I again wonder how Charter can ship local affiliate programming over the web.

Regardless of how they are getting past all of the regulatory rules this has the potential to be a great product. Assuming it doesn’t really cost too much more than $21.99 it blows away the base prices for other OTT options like Sling TV, Playstation Vue and DirecTV Now. Those packages have an affordable basic option, but it always costs more when you add enough tiers to get the dozen channels you really want. As a traditional cable service it’s massively better than Charter’s basic offering for around the same price that doesn’t include any popular network. Any Charter basic customer ought to upgrade to this package. Interestingly Charter is charging a $20 install fee whether this is done using a cable box or over broadband, which further confirms that this is probably not considered as an OTT product.

Surveys have always shown a huge public desire for a la carte programming. People don’t like paying for the hundred channels they don’t watch. I have to think that this is going to put the pressure on the other cable companies to offer something similar.

This product seems to be aimed at cannibalizing Charter’s other TV offerings. This offer, perhaps more than anything else I’ve seen from a cable company shows that they recognize that a huge number of their customers are thinking of bailing on traditional cable TV. This offer offers a lower price option for customers to not completely cut the cord. Unless they pad this with ancillary fees it’s hard to see much margin in this package.

This package makes a lot of sense in places like the research triangle of North Carolina where Charter is competing against Google Fiber and AT&T fiber. It’s harder to understand why they are offering a low-margin cable option where they are competing only against DSL. Perhaps the reasoning is as simple as wanting to keep a few dollars margin rather than losing customers as cord cutters.

I thought about buying this, but I don’t really trust Charter and wonder what the real price tag is – it’s almost certainly not $21.99. I would also be unhappy if this only worked when I was at home on my Charter broadband connection. I am an unabashed Maryland Terrapins fan and I also wouldn’t buy this package since it doesn’t include the Big10 Network. Perhaps my own pickiness about channels shows the real challenge of offering a la carte programming. We each have our list of favorite channels and are likely to reject any OTT offer that excludes a network we insist on buying.

 

Broadband Advocates

I’m writing this blog while sitting in a meeting of NCHeartsGigabit, a non-profit started in North Carolina to promote the expansion of broadband. The group started five or six years ago as an informal group of folks who were interested in expanding broadband coverage around North Carolina. A few years ago they realized that they needed to move from talking to action and created a non-profit organization that now brings together the various broadband stakeholders to look for broadband solutions.

Today’s meeting is a great example of the progress they’ve made. There is a wide range of attendees representing state and local government, telco cooperatives and ISPs, bankers, foundations, equipment vendors, consultants and engineers. Most impressive is that they attracted both current Governor Roy Cooper and former Governor James B. Hunt to speak to the group. I think their presence highlights the importance that broadband coverage is now getting in this and other states. North Carolina is like the majority of states where there are some pockets of fiber-to-the-home, cities served by the big cable company networks, a smattering of rural areas served well by small telcos and cooperatives, and much of the rural parts of the state with poor or nonexistent broadband.

Sitting in this meeting reminds me how important it is to have what I call broadband advocates – folks like NCHeartsGigabit who have taken it as a mission to promote broadband. I’ve written many blogs about why broadband is vital for rural America and these are folks who get it.

I work around the country in communities of all sizes and I regularly interface with broadband advocates. Sometimes these groups are formal like a broadband committee that is empowered by the local government. I recently worked with such a group in Davis, California and it is one of the most knowledgeable and engaged advocacy groups I have ever worked with. I can tell that this group, which is also backed by widespread citizen support is going to hold the city’s feet to the fire on broadband issues.

Sometimes there is no formal group, but instead the public acts in mass to make their voices heard on the issue. As an example, I was at a public meeting in Pope County, Minnesota last year to give the findings from a broadband feasibility study. This is the most sparsely populated county in the state and there was little broadband outside of the county seat. The public meeting was standing-room only and the county officials heard story after story about how lack of broadband was affecting people’s lives. The County officials heard this message and have since provided funding in a public private partnership with a telco cooperative to bring broadband to the County.

The more common situation is that there only a few broadband advocates in a community who push for broadband. If these few broadband champions are persistence enough they can sometimes finally pull the rest of the community along. The best example of this I can think of is my friend Mark Ericsson who was the one-man force behind bringing broadband to Renville and Sibley Counties in Minnesota. He went to hundreds of local meetings and eventually got a lot of other volunteer help, but without his early persistence this project would have died in the early days.

His success is memorable because it is rare. Bringing fiber to a rural area requires a huge amount of effort. It means convincing politicians to support the idea. It means raising the money needed for doing the feasibility analysis. It means raising even more money for customer education and marketing and in many places a referendum. It takes yet more money to raise the funding. And unless a community wants to be an ISP it means finding an ISP partner to operate the business. More often than not, a community with only a few advocates can’t make it through this daunting gauntlet of tasks.

This is why I always recommend that communities with poor broadband make a push early to involve as much of the community as possible finding a solution. I don’t understand the sociology of why it works, but I know from practical experience that unleashing a group of broadband advocates often creates momentum that is hard to stop. Households in rural counties generally want broadband badly enough that many of them will agree to play some role in getting a broadband network. If a community really wants broadband, my first advice is to create the advocacy group first and then get out of their way.

The Price for Triple Play?

I was recently working on a project for client who is thinking about competing in a new city and wants to understand the real market rates customers are paying. We solicited copies of bills from existing subscribers to the incumbent telco and cable company to find out.

I doubt that anybody would be surprised from what we found, but it was good to be reminded of the billing practices of the big ISPs. Here are a few of the things we found:

  • Both incumbents use promotional rates to provide lower prices to new customers or to existing customers who are willing to negotiate and to sign up for a term contract. Promotional discounts were all over the board and seems to mostly range between a $5 and a $25 discount per month. But there was one customers who was getting a $60 discount on a $180 monthly bill.
  • Both incumbents also offer bundling discounts, but they were applied erratically. Our sample of bills was not a statistically valid sample, but roughly half of the bills we saw had a bundled discount while other customers buying the same products were not getting a discount.
  • The cable incumbent offers the typical three tiers of service offered by most cable companies. While every cable customer had one of these three packages, we surprisingly didn’t see any two customers paying the same price.
  • The cable company had programming fees that were separate from the base programming charges – one fee to cover local programming costs and another labeled as a sport fee. These were not always billed at the same rate and there were not being billed to all customers with the same packages.
  • There was also a varying range of fees for settop boxes and cable modems by the cable company and WiFi modems from the telco.
  • What surprised me most was how widely the taxes varied from bill to bill. Customers with the same products often had tax charges several dollars apart. This makes me wonder why more taxing authorities aren’t auditing bills from time to time to see if all of the tax due to them is even being billed.
  • Nowhere on the bills was any customer told the speed of their broadband products.
  • There were obvious billing errors. For example, I saw a bill charging the subscriber line charge to somebody who doesn’t have a telephone line. They probably had one in the past and are still paying $6.50 per month long after they dropped their landline.

I hadn’t looked at that many customer bills from a single market for a while. I’ve always known that prices vary by customers, but I didn’t expect them to vary this much. My primary take-away from this analysis is that there is no one price for telecom products. I hear clients all of the time saying things like “My primary competition comes from a $49 broadband connection from the cable company”. But that’s not really true if most people are paying something different than $49. Some customers have discounts to lower that price while others may be paying more after considering ancillary fees.

The bills were confusing, even to me who knows what to look for. It would be easy, for example, for a customer to think that a local programming fee or an FCC line charge are taxes rather than revenue that is kept by the service provider. Both ISPs mixed these fees on the bill with actual taxes to make it impossible for the average customer to distinguish between a tax and a fee that is just a piece of a product billed under a different name.

These bills also made me wonder if the corporate staff of these big ISPs realize the wide range that customers are paying. In many cases there were fees that could have been billed that weren’t. And there was a a wide variance tax billing that would make a corporate CFO cringe.

These bills reinforce the advice I always give to clients. I think customers like transparency and I think the best bill is one that informs customers about what they are buying. In this market most customers could not tell you what they are paying for the various products. Bills can be simple, yet informative and some of my clients have wonderful bills. After seeing the billing mess from these two big ISPs, I think honest straightforward billing is another advantage for a competitor.

The Demand for Upload Speeds

I was recently at a public meeting about broadband in Davis, California and got a good reminder of why upload speeds are as important to a community as download speeds. One of the people making public comments talked about how uploading was essential to his household and how the current broadband products on the market were not sufficient for his family.

This man needed good upload speeds for several reasons. First, he works as a photographer and takes pictures and shoots videos. He says that it takes hours to upload and send raw, uncompressed video to one of his customers and says the experience still feels like the dial-up days. His full-time job is working as a network security consultant for a company that specializes in big data. As such he needs to send and receive large files, and his home upload bandwidth is also inadequate for that – forcing him to go to an office for work that could otherwise be done from his home. Finally, his daughter creates YouTube content and has the same problem uploading content – which is particularly a problem when her content deals with time-sensitive current events and waiting four hours to get the content to YouTube kills the timeliness of her content.

This family is not unusual any more. A decade ago, a photographer led the community effort to get faster broadband in a city I was working with. But he was the only one asking for faster upload speeds and most homes didn’t care about it.

Today a lot of homes need faster upload speeds. This particular family had numerous reasons including working from home, sending large data files and posting original content to the web. But these aren’t the only uses for faster upload speeds. Gamers now need faster upload speeds. Anybody who wants to remotely check their home security cameras cares about upload speeds. And more and more people are migrating to 2-way video communications, which requires those at both ends to have decent uploading. We are just now seeing the early trials of virtual presence where communications will be by big-bandwidth virtual holograms at each end of the communications.

Davis is like many urban areas in that the broadband products available have slow upload speeds. Comcast is the cable incumbent, and while they recently introduced a gigabit download product, their upload speeds are still paltry. DSL is offered by AT&T which has even slower upload speeds.

Technologies differ in their ability to offer upload speeds. For instance, DSL is technically capable of sending the data at the same speeds for upload or download. But DSL providers have elected to stress the download speed, which is what most people value. So DSL products are set with small upload and a lot of download. It would be possible to give a customer the choice to vary the mix between upload and download speeds, but I’ve never heard of an ISP who tried to provide this as an option to customers.

Cable modems are a different story. Historically the small upload speeds were baked directly into the DOCSIS standard. When Cable Labs created DOCSIS they made upload speeds small in response to what cable companies asked from them. Until recently, cable companies have had no option to increase upload speeds beyond the DOCSIS constraints. But Cable Labs recently amended the new DOCSIS 3.1 standard to allow for much upload speeds of nearly a gigabit. The first release of the new DOCSIS 3.1 standard didn’t include this, but it’s now available.

However, a cable company has to make sacrifices in their network if they want to offer faster uploads. It takes about 24 empty channels (meaning no TV signal) on a cable system to provide gigabit download speeds. A cable company would need to vacate many more channels of programming to also offer faster uploads and I don’t think many of them will elect to do so. Programming is still king and cable owners need to balance the demand for more channels compared to demand for faster uploads.

Fiber has no real constraints on upload speeds up to the capability of the lasers. The common technologies being used for residential fiber all allow for gigabit upload speeds. Many fiber providers set speeds to symmetrical, but others have elected to limit upload speeds. The reason I’ve heard for that is to limit the attractiveness of their network for spammers and others who would steal the use of fast uploading. But even these networks offer upload speeds that are far faster than the cable company products.

As more households want to use uploading we are going to hear more demands for a faster upload option. But for now, if you want super-fast upload speeds you have to be lucky enough to live in a neighborhood with fiber-to-the-home.

Technical Support as a Product

Verizon announced a new line of products this week that provide three different tiers of technical support to help customers better handle the wide array of devices and issues they face in the ever-more-confusing digital world.

The first product is the most intriguing. For $10 per month a customer gets technical support for virtually any device connected to their home network such as printers, smart locks, smart lighting, security systems and smart thermostats. Unlike the Comcast smart home product where customers only get Comcast-approved IoT devices, a Verizon customers can buy devices anywhere and still get support from Verizon in connecting or troubleshooting connections to such devices.

The technical support also comes with other useful features. Verizon will help you isolate and remove computer viruses and malware. They’ll help you with complicated tasks such as transferring photos, files or personal settings between computers. They also will provide up to 5 PC tune-ups per year that will run diagnostic tests and maximize computer performance. Maybe most important of all, joining the service puts customers at the top of the queue for call to technical support (which I guess means longer wait times for customers who don’t buy the service).

A second tier at $15 per month adds LifeLock Select, the identity protection service as well as McAfee Security and Safe Family – a suite of virus protection and parental control software. The last tier, priced at $30 per month adds an insurance plan for smart devices in the home other than smartphones or computers. It will cover smart TVs, tablets, smart thermostats and other IoT devices, and Verizon will repair or replace broken devices. This top plan also adds LastPass, a password management tool. The product doesn’t include any in-home assistance, although that is available through Verizon partners.

This is not a new product and there are numerous companies offering online technical support such as 24/7 Techies, AskPCExperts, Bask and Best Buy’s Geek Squad. Several of these services also offer a first-tier plan for $9.99 per month.

I also know a number of smaller US telcos and ISPs that offer something similar. Many of these companies operate in geographically isolated areas where there is no Best Buy or other outlet for technical services and support. Some of my clients sell monthly subscriptions similar to Verizon’s base fee. Others operate a physical store location where customers can get computer repair services.

I think every small company I’ve talked to who offers something like this tells me that they are lucky if the operation breaks even. But they all maintain the service because it distinguishes them from competitors and builds tremendous customer loyalty. Most are happy if their technical support effort breaks even.

I’m sure Verizon has done the math and believes they can make money at this – and they probably can. A company of their size can keep call queues full so that technicians have little or no down time. I’m sure Verizon is also counting on the fact that most customers will buy this service and only use it sporadically. A customer who really uses the service will cost Verizon more than the $10 fee.

The biggest issue that anybody who offers this kind of service faces is keeping a competent technical staff to support customer calls. Many employees who take this kind of job view it as a stepping stone to a better paying technical career, so there is usually high turnover of staff.

It’s an intriguing business line for ISPs to consider, particularly those in more remote markets. Our home networks are getting increasingly confusing. Sometimes just getting a printer to work right can eat up hours of time and figuring out more complicated devices can be maddening. As long as you recognize that you won’t get rich doing this it’s an interesting way to create personal relationships with customers while providing an invaluable service to customers that will differentiate you from the competition – unless your competition is Verizon.