Tag Archives: AT&T

Two Fiber Networks?

Image of Austin, Texas

Image of Austin, Texas (Photo credit: Wikipedia)

The conventional wisdom in the industry is that two companies would never invest in side-by-side fiber networks to serve residential customers. I have had this conversation many times with clients who were planning to build a fiber network and who were worried about the response of the incumbent providers. Everyone has always believed that the first fiber builder wins because there is not enough margin in the residential market to support two fiber networks. AT&T has shown that conventional wisdom to be wrong by announcing that they will build a second fiber network in Austin as a counter to Google’s announcement to do the same.

This is not without precedent, although on a much smaller scale. The City of Monticello, Minnesota built a fiber network to pass every home and business in the City. The municipal fiber build was prompted by the fact that the City had some of the highest telecom rates in the country. Soon after the City built their network, TDS Telecom, the incumbent telephone company built a competing fiber network.

And as expected, both fiber providers are not faring well. After building fiber TDS decided to win back customers with an aggressive price war. Charter, the incumbent cable company also got into the price war fray. And so customers in Monticello are benefitting from a price war while all of the companies are underperforming.

It is fairly easy to understand TDS’s motivation for building the fiber network and for the price war. The company serves numerous other towns like Monticello and I see their response there as a clear warning to anybody else who is planning on overbuilding their serving territory. It is also clear that they are hoping that the City will give up and leave the fiber business.

And now we are going to see this scenario play out in the much bigger market of Austin. Google already overbuilt one AT&T market in Kansas City and one can easily envision Google overbuilding many other large cities. AT&T’s response in Austin is the same as TDS’s response in Monticello. AT&T has made it clear to Google and others that they are not going to side idly by and watch their major markets go to somebody else.

So it will be interesting to see the impact of AT&T’s announcement. It’s possible that the announcement will cause Google to pause and not build in Austin. Certainly they will not do as well as expected if there are two fiber networks. It’s also possible that both companies will build fiber and we will see side-by-side competition with two fiber networks and the cable company – the kind of competition we have never seen in a major city in the US.

But the real impact of AT&T’s announcement is going to be felt everywhere else. One has to wonder what kind of impact AT&T’s announcement will have on any company, Google included, who is contemplating building a fiber network in a large city. Google has very deep pockets and might proceed anyway, but almost any other company would not be able to afford the much lower returns that come with hard competition.

While this announcement might result in real competition for the citizens of Austin, it also might have the effect of stifling anybody else from trying to build fiber in a large City. This announcement could result in killing anybody from building fiber in large cities due to the fear of a similar reaction. While hearing about two companies wanting to provide gigabit fiber sounds like a good thing, the long-term consequence of this might mean less overbuilding, less fiber and less competition.

And I don’t know that AT&T had any choice. Their only other option was to watch their large markets go to an aggressive competitor. Nobody knows what Google plans to do, but some have speculated that they might build in most of the major cities. Now we’ll just have to watch this one play out, so pull up a chair. This should be interesting.

HD Voice

A spectrogram (0-5000 Hz) of the sentence &quo...

A spectrogram (0-5000 Hz) of the sentence “it’s all Greek to me” spoken by a female voice (Image:en-us-it’s_all_Greek_to_me.ogg). (Photo credit: Wikipedia)

HD voice (or wideband audio) is a technology that delivers the full frequency range of the human voice.  Traditional telephony has delivered a narrowband voice transmission and only transmitted sounds between 300 Hz and 3.4 kHz. However, the human voice extends between 80 Hz and 14 kHz, so traditional telephone has chopped off parts of every voice transmission.

The range of frequency was curtailed for traditional telephony based upon the limited bandwidth available for transmitting voice calls over a twisted copper pair. But voice that is sent over an IP path does not have those limitations and can send the full range of the human voice.

There has been an industry standard for wideband voice since 1987. However, until recently the only uses of the standard were in high-end video conferencing systems and for transmitting sports announcers back to the home station for rebroadcast.

But the industry is starting to use the HD voice protocol for calls made over VoIP. For example, Skype and some other PC-to-PC voice providers use the full HD voice bandwidth and the higher quality of the call can be experienced by a caller using a high-quality headset or handset. These same calls don’t sound better when listened to on a standard phone due to limitations in the speakers. There are also a number of vendors offering wideband telephones such as Avaya, Cisco, Grandstream, Gigaset, Polycom and others. These sets are capable of both sending and receiving a wideband voice signal, but the phones at both ends must be wideband capable to engage in an HD quality call.

So what are the business opportunities with HD Voice? Businesses are interested in having high-quality calls, particularly in conference rooms, noisy areas and other places where the quality can make a difference. The business opportunity is to make the phones available to businesses that are served with IP voice paths. HD Voice can then be sold as an add-on feature or as a more expensive voice line. A company that wants the higher quality calling is a great candidate for moving off of traditional TDM services onto VoIP, IP Centrex or other IP voice solution.

Should You Become an MVNO?

This article compares the price of US cell phone plans to those around the world. It shows that the basic packages from the large US providers are in some cases twice as expensive as in other countries.

The small oligopoly of nationwide carriers, being AT&T, Verizon, Sprint and T-Mobile, have no incentive to lower prices. The only thing that will get them to come down in price would be competition or some sort of regulatory action.

The large carriers have created an opportunity for some competition against their products by selling bulk minutes, data and messaging. Companies that buy these bulk minutes are known as MVNOs (Mobile Virtual Network Operators). There are scores of MVNO providers in the country with the largest ones listed here.

The three original MVNOs are TracPhone, Virgin and Boost and who still had over half of the pre-paid cellular phone business in 2012. However, note that Sprint recently bought Virgin and Boost, so perhaps part of their strategy is to create sub-markets and then gobble them up to make more profit.

MVNOs have various marketing strategies:

  • Republic relies on shunting a lot of traffic to WiFi which greatly lowers their costs.
  • Ting lets customers design their own rate plan.
  • Kajeet has plans for kids that are parent-controlled.
  • Solavei uses multi-level marketing similar to Amway.
  • Voyager Mobile competes on price and is selling very low-cost plans.

If your carrier business already has a loyal customer base you should consider becoming an MVNO. Your loyalty will bring you customers, and your existing customers will appreciate being able to save money on cell phones while buying from somebody they trust. As long as you do it smartly there are significant profits to be made in the MVNO business. All that is really needed is having good existing cell phone coverage in your area and the desire to expand your product line.

CCG can help you get into the MVNO business. We can assist you with finding a good deal on bulk minutes, help you design products and prices, help you create a business plan, and help you with technical strategies such as a handphone strategy, and using WiFi to lower costs.

Kansas Deregulation

On March 27 a bill passed (HB 2201) the Kansas Senate that largely deregulated telephone companies in Kansas from being the carrier of last resort. The bill passed the Senate by 36 – 4 and passed in the House by 118 – 1. In the past telephone companies were required to provide telephone service to most customers who wanted service, with some limitations that applied to extremely rural customers. But the new bill provides a host of ways that can excuse a phone company from providing service.

The bill applies to all regulated telephone companies, but also to a lot of other companies that provide telephone service like cable companies and CLECs.

“I think we’re at the point where we can take one of our largest carriers (AT&T) and treat them as if they’re a wireless carrier or cable carrier,” said Sen. Pat Apple, the chairman of the Senate Utilities Committee.

House Bill No. 2201 (click to open .pdf) is the Senate-approved version of the bill. Since the Senate made changes it will have to return to the House for final approval or else go to a House-Senate conference committee if the House doesn’t accept the Senate’s changes.

It’s unclear how the bill might have changed the role of the Kansas Corporation Commission (KCC) who currently regulates telephone companies. Currently the KCC has the authority to ‘prevent fraud’ but the bill changes that authority to ‘investigate fraud’. It’s not clear if the KCC will have any authority to affect the behavior of a badly performing telecom provider, as is already the case with cellular companies today.

The bill also shrinks the Kansas Universal Fund, which is a pool of money collected from telephone customers in the state and that is used to support rural telephony.

The bill was originally authored by AT&T but was presented to the legislation with a united front by most of the carriers in the state. AT&T has lobbied for similar legislation in many other states. While Kansas is now the first state to effectively remove carrier-of-last-resort obligations, one would expect this to happen in other states. Telephone subscribers have been steadily dropping everywhere as consumers have shifted to cell phones and to VoIP carriers for their telephone usage.