Tag: Cox

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The Industry

Cable Companies Converting to Fiber

I wrote a recent blog discussing comments from Chris Sambar, AT&T’s EVP of Technology Operations who was quoted as saying that he almost feels sorry for cable companies that compete against AT&T fiber. AT&T is convinced that building fiber is a winning strategy and that the first company that builds fiber in a market will win the majority of broadband customers.

While it’s not yet a giant movement, we do see cable companies that are converting to fiber. One example comes from an announcement by Cox that it will be undertaking a project in the Hampton Roads area to upgrade its networks to 10-gigabit fiber. The build will start this year in Norfolk and will extend over time to the rest of this rapidly-growing area.

Atlantic Broadband recently announced plans to extend fiber to 70,000 passings in New England and West Virginia. This will include the communities of Concord, Dover, Somerset, Durham, and Madbury in New Hampshire and Westover, Morgantown, Granville, and Star City in West Virginia.

Altice recently renewed its pledge to convert all of its 4.4 million customers to fiber. The Chairman of Altice, Patrick Drahi, announced he would convert the company to fiber in 2015 when the company acquired Suddenlink and Cable vision. However, the conversion to fiber slowed and has only covered about one-eighth of the company’s 9.2 million passings. Altice is back in the news with an announcement that it will expand fiber to 1 million new locations in 2022, mostly in the northeast.

We can’t forget Charter, which is planning to build fiber in the suburban and rural areas surrounding its current markets. The company won bids in the RDOF reverse auction for a million rural passings. The company is expected to chase state and federal grants to fill in the pockets won in the RDOF auction.

All of these fiber plans still only represent a relatively small share of the 75.2 million broadband customers served by the eight largest cable companies. But this start of a trend towards fiber raises some interesting questions. It’s hard to tell as someone who works inside the industry, but my sense is that the general public has become convinced that fiber is the superior technology. That perception bodes well for AT&T and anybody that builds fiber to compete against a cable company.

More importantly, a preference for fiber bodes poorly in the long run for any cable company that doesn’t have plans to get faster. Converting to fiber is a tough strategic decision for a cable company to face. Many have been putting their hopes on DOCSIS 4.0 and thought they had plenty of time to make that transition. But the pandemic seems to have moved up the timeline drastically by highlighting the weakness of cable company upload speeds. In the surveys my firm has done in the last two years, we’ve consistently seen 30% of cable customers complaining that they had problems working and schooling from home. That’s a lot of people who are deciding they’d rather have somebody other than the cable companies as an ISP.

Categories
Regulation - What is it Good For?

Where is Net Neutrality When we Need it?

Just in the last two weeks two stories hit the press that highlight behavior from ISPs that would have likely have violated the Net Neutrality rules that were killed by Ajit Pai’s FCC. The big ISPs have been surprisingly quiet and have not loudly violated those rules, even though they are no longer in effect. The industry speculation is that the big ISPs are treading lightly because they don’t want to trigger a regulatory overreaction should there be a chance of party in the administration or Congress.

The first headline says that AT&T is excluding HBO max from the calculation of any data caps. This is a big deal for AT&T cellular customers and not insignificant for AT&T landline broadband customers that face data caps.

AT&T defends this by referring to other ‘sponsored data plans’ in the industry, like the one offered by T-Mobile that lets premium customers exclude usage from YouTube, Netflix, Hulu, HBO, Sling YV, ESPN, Showtime, Starz and other sources of video.

I don’t know enough to know if T-Mobile is violating the old net neutrality rules. Net neutrality rules would allow an ISP to exempt all video from data caps and would not violate any rules because the ISP wouldn’t be discriminating against any particular source of video. However, if T-Mobile is being paid by those companies to exclude their data from data caps, then T-Mobile would also be violating the spirit of net neutrality. AT&T’s exclusion of HBO Max from data caps is more blatant since AT&T owns HBO – the policy is clearly being made to benefit HBO over Disney, Netflix or other competitors of HBO.

It was easy to predict that sponsored data is something that carriers would be pushing the envelope on, even if net neutrality was still in effect. It’s something that customers like, and so it’s hard to fire the public up that sponsored data is bad for the industry. But it is. AT&T is clearly disadvantaging other video services in favor of their own. If T-Mobile doesn’t exclude all video from data caps they are doing the same thing – just not to advantage their own video product. The original FCC net neutrality order pointed out that sponsored data can make it hard for a new market entrant, and they could be right – we don’t see a lot of new names of companies that stream video.

The second headline is one that broadband customers everywhere will hate. Jon Brodkin in arstechnica describes a situation where Cox is slowing down the upload path to a customer for using too much broadband – and even worse is openly admitting to capping the upload speeds for an entire neighborhood.

I won’t recount all of the details of the story. In a nutshell, there is a customer that is backing up huge amounts of data each night from midnight until 8:00 am. It takes that long to complete the backup because the upload speed available to the customer is only 35 Mbps. If this customer was on symmetrical fiber this backup could be done quickly. Apparently, this customer has been doing the same thing for years, but they have recently been notified by Cox that they need to stop the practice or be kicked from the network. Cox also threatened by cut the upload bandwidth available to the whole neighborhood.

This particular customer uses over 8 terabytes of data per month, which is an extraordinary amount of usage on a home broadband line. But if the usage is all really late at night, it’s unlikely that this is very disruptive to the neighborhood.

What’s extraordinary about this is that the customer doesn’t seem to be violating the Cox terms or service. The customers is already paying extra to avoid the data cap to get unlimited data. Cox is basically saying to the customer that there is some secret usage threshold that they associate with ‘unlimited’ data – yet they won’t give the customer a targeted usage threshold.

Where Cox really crosses the line is when they threaten to penalize an entire neighborhood for using too much data. According to Brodkin this one customer is not the only example of this same behavior by Cox.

If we had an FCC that regulated broadband they would likely slap Cox for this behavior. What’s odd is that Cox doesn’t have to be so arbitrary. They could easily have established rules in the terms of service and their products that could have legally handled this situation. Instead, the sold unlimited data and decided afterwards that there really is a limit on the amount of data they are willing to provide. The fault for this situation seems to lie mostly in the legal department at Cox rather then with the customer who has had the same usage for years.

ISPs ought to realize that the regulatory pendulum always swings the other way. Ajit Pai has completely deregulated one of the largest industries in the country that touches almost everybody. That pushes the regulatory pendulum as far as it can go towards the ‘unregulated’ side, and it’s inevitable that a future Congress or FCC is going to bring back regulation again at some point. When they do, all of the bad behavior by ISPs during this time of deregulation will be used as examples of why regulation is necessary. If the ISPs push the envelope too far they regulatory pendulum will swing a lot further in the regulated direction than they are going to like.

Categories
The Industry

Big ISPs Raise Broadband Prices

As the new year dawns we are starting to see big ISPs raise broadband prices. One of the more interesting increases is by Comcast. They increased two rates – the rate of standalone broadband and the price of renting a cable modem.

The company now charges $75 per month for a standalone broadband connection that meets the FCC’s definition of broadband of being at least 25/3 Mbps. In many of their markets the minimum speed offered to new customers is faster than this, making the $75 entry price for standalone broadband.

For now it doesn’t look like Comcast increased the cost of bundled broadband, although they just announced that all bundled packages are increasing by $5 per month. But that increase can largely be attributed to increased programming costs. The price for standalone broadband was $65 a year ago, was raised by $5 during 2017 and just went up by $5 again.

The standalone price increase is aimed squarely at cord cutters. This price punishes customers who don’t want to pay for the other services in the various Comcast bundles. This is their way to still extract a lot of margin from somebody who elects to watch video online. I wrote a blog a few months ago that cited a Wall Street analyst that suggested that the company ought to charge $90 for standalone broadband, and it looks like the company is heeding that advice.

To put that price into perspective, Google Fiber and a few others are charging $70 for a standalone symmetrical gigabit connection – 20 times the speed for a lower price. But to really make a fair comparison you also have to consider the Comcast cable modem. They just raised that rate from $10 to $11 per month. The company makes it a challenger for customers who won’t use the Comcast modem, and so the real standalone price for the minimal Comcast broadband product is $86 per month.  It’s not hard to understand why households are beginning to find broadband unaffordable.

The $11 fee for a cable modem is outrageous. Comcast gets these directly manufactured and I am doubtful that they are spending more than $100 per device, and probably less. The $1 price increase adds roughly $300 million to Comcast’s bottom line. In total, the company is billing roughly $3.3 billion per year for all customers for an inventory of modems that probably costed them less than $2.5 billion. And since people tend to keep the modems for a number of years, this rate is mostly margin. Even for a new customer Comcast recovers the cost of the modem within 9 months.

Frontier also has introduced a troubling new price increase for broadband. Rather than increase the advertised price of the product they are adding a $1.99 per month ‘Internet Infrastructure Surcharge.’ This is strictly an increase in broadband rates, and the company is clearly hoping that most people don’t notice or don’t understand this new charge on their bill. For the last few years we have seen cable companies sneak in rates that look like taxes or external fees but which are just a piece of the cable TV bill. It’s disturbing to see this happening with broadband and I suspect other ISPs will begin copying this concept over the next few years.

Cox has also increased data prices, and unlike the above two companies which are trying to mask the broadband price increases, Cox raised all packages that include broadband from $2 to $4 per month.

Broadband prices have never been regulated. There was a minimal threat of price regulation under Title II authority at the FCC, but that’s now gone. I’ve seen a few articles blaming these latest price increases on the end of Title II regulation, but there has never been anything stopping an ISP from raising rates other than market forces. In fact, the FCC has never threatened to regulate broadband rates.

There are two real drivers of these and future broadband price increases. First, broadband is no longer growing explosively since most homes now have a broadband connection. And the publicly traded ISPs are feeling earnings pressure while the loss of cable TV and telephone customers leaves broadband as the only place to increase bottom line margins.

The second major factor is the absence of real broadband competition. In markets where a real competitor like Google shows up the big ISPs come close to matching the lower prices of the competitor. But as houses need faster broadband, the residual competitive pressure from DSL is waning, meaning that in most cities the cable companies are becoming a virtual monopoly. Big ISPs like Comcast will lower rates where they have a good competitor, but they are more than making up for it in markets where they have the only fast broadband.

One consequence of the kind of prices that Comcast is now charging is that, over time, they will induce more competitors to enter the market. But the only real threat on the horizon for the big cable companies is point-to-multipoint 5G. It will be interesting to see if that technology can really work as touted. If 5G is successful it will be interesting to see the pricing philosophy of the ISPs offering the service. They could price low like Google Fiber or else ride the coat strings of the cable companies with higher prices.

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Uncategorized

Big ISPs and Elections

Before you stop reading, this blog isn’t about party politics – the elections I am talking about are those where citizens vote on building a fiber optic network in their community. The incumbents don’t seem able to pass up the chance to turn an election their way when competition is put onto the ballot.

The latest example of this is the upcoming election on November 7 in Ft. Collins, Colorado. Voters in that community will be voting on whether to amend the city charter to allow the city to build and operate a fiber optic network in the city. Colorado law makes this elections mandatory, but I’ve seen other cities hold voluntary elections on the issue so that they are certain that the citizens are behind their efforts to build fiber. A positive vote in Ft. Collins would allow the city to take the next step to investigate if they want to build a fiber network in the city.

Ft. Collins is a community of 59,000 homes and Comcast and the other incumbent ISPs have spent over $200,000 so far in advertising against the ballot measure – a phenomenal amount of money spent on a local election and the most ever seen in Ft. Collins.

As is usual for fiber ballot initiatives, the incumbents are fighting against the passage of the measure by spreading lies and misinformation. For example, in Ft. Collins they are saying that voting for the measure would preclude the city from making other infrastructure upgrades for things like roads. In fact, this ballot measure just gives the city the legal authority to explore fiber and it’s likely that they would have another election to approve a bond measure if they decide to float a bond for fiber – a decision that would be some time in the future.

The misinformation being floated in Ft. Collins is tame compared to some of the other ways that incumbents have tried to stop fiber initiatives. In Lafayette Louisiana the combination of Cox and BellSouth (now AT&T) were extremely aggressive in trying to stop the fiber initiative (including filing several lawsuits to stop the effort). But prior to the election when fiber was going to be on the ballot they called every home in the community with a push poll that asked ludicrous questions about the fiber project. An alert citizen recorded the push poll and it can be found here. This takes 30 minutes to hear the whole thing, but if you are interested in the tactics the big ISPs use to fight it, this is well worth a listen. There are some amazing questions in this poll, and the gall of this push poll might have been what pushed the election to pre-fiber. In Louisiana the city needed to get more than a 65% yes on the fiber initiative, and due to a strong community effort the ballot measure passed easily.

I also remember a similar election in North St. Paul, Minnesota, a small community surrounded by the city of St. Paul. When the city put a fiber initiative on the ballot Comcast sent busloads of people to the city who went door-to-door to talk people out of voting for fiber. They deployed the usual misinformation campaign and scared a community that had a lot of elderly citizens into voting against the fiber initiative, which narrowly lost at the polls.

There was a similar lection recently in Longmont, Colorado. When the city first held a vote on the same ballot measure as Ft. Collins, the money from the big ISPs defeated the ballot measure. The ISPs won using a misinformation campaign that talked about how the fiber effort would raise taxes. But the citizens there really wanted fiber, and so they asked for a second vote and in the second election there was a massive grass-roots effort to inform the community about the facts. The fiber initiative on the second ballot won resoundingly and the city now has its fiber network.

There are several lessons to be learned from these ballot battles. First, the incumbents are willing to make a sizable investment to stop competition. But what they are spending, like the $200,000 in Ft. Collins, is a drop in the bucket compared to what they stand to lose. Second, they always attack fiber initiatives with misinformation, such as scaring people about higher taxes. They don’t fight by telling what a good job they are doing with broadband And finally, we’ve seen the ISP efforts be successful unless there is a strong grass-roots effort to battle against their lies. Cities are not allowed by law to take sides in ballot initiatives during an election cycle and must sit quietly on the sidelines. And so it’s up to citizens to take on the incumbents if they want fiber. The big ISPs will always outspend the pro-fiber side, but we’ve seen organized grass-roots efforts beat the big money almost every time.

Categories
Regulation - What is it Good For?

Big ISPs Want to be Regulated

I’ve always contended that the big ISPs, regardless of their public howling, want to be regulated. It is the nature of any company that is regulated to complain about regulation. For the last decade as AT&T and Verizon made the biggest telecom profits ever they have released press release after press release decrying how regulation was breaking their backs. The big telcos and cable companies spent the last few years declaring loudly that Title II regulation was killing incentives to make investments, while spending record money on capital.

A few months ago Comcast, Charter, and Cox filed an amicus brief in a lawsuit making its way through the US. Court of Appeals for the Ninth Circuit. In that brief they asked the federal appeals court to restore the Federal Trade Commission’s jurisdiction over AT&T. The specific case being reviewed had to do with deceptive AT&T marketing practices when they originally offered unlimited cellular data plans. It turns out that AT&T throttled customer speeds once customers reached the meager threshold of 3 – 5 GB per month.

In 2014 the FTC sued AT&T for the practice and that’s the case now under appeal. It’s a bit extraordinary to see big ISPs siding with the government over another ISP, and the only reason that can be attributed to the suit is that these companies want there to be a stable regulatory environment. In the brief the cable companies expressed the desire to “reinstate a predictable, uniform, and technology-neutral regulatory framework that will best serve consumers and businesses alike.”

That one sentence sums up very well the real benefit of regulation to big companies. As much as they might hate to be regulated, they absolutely hate making huge investments in new product lines in an uncertain regulatory environment. When a big ISP knows the rules, they can plan accordingly.

One scenario that scares the big ISPs is living in an environment where regulations can easily change. That’s where we find ourselves today. It’s clear that the current FCC and Congress are planning on drastically reducing the ‘regulatory burden’ for the big ISPs. That sounds like an ideal situation for the ISPs, but it’s not. It’s clear that a lot of the regulations are being changed for political purposes and big companies well understand that the political pendulum swings back and forth. They dread having regulations that change with each new administration.

We only have to go back a few decades to see this in action. The FCC got into and then back out of the business of regulating cable TV rates several times in the late 1970s and the 1980s. This created massive havoc for the cable industry. It created uncertainty, which hurt their stock prices and made it harder for them to raise money to expand. The cable industry didn’t become stable and successful until Congress finally passed several pieces of cable legislation to stop these regulatory swings.

Big companies also are not fond of being totally deregulated. That is the basis for the amicus brief in the AT&T case. The big ISPs would rather be regulated by the FTC instead of being unregulated. The FTC might occasionally slap them with big fines, but the big companies are smart enough to know that they have more exposure without regulations. If the FTC punishes AT&T for its marketing practices that’s the end of the story. But the alternative is for AT&T to have to fend off huge class action lawsuits that will seek damages far larger than what the FTC will impose. There is an underlying safety net by being regulated and the big ISPs understand and can quantify the risk of engaging in bad business practices.

In effect, as much as they say that hate being regulated, big companies like the safety of hiding behind regulators who protect them as much as they protect the public. It’s that safety net that can allow a big ISP to invest billions of capital dollars.

I really don’t think the FCC is doing the big ISPs any favors if they eliminate Title II regulations. Almost every big ISP has said publicly that they are not particularly bothered by the general principles of net neutrality – and I largely believe them. Once those rules were put into place the big companies made plans based upon those rules. The big ISPs did fear that some future FCC might use Title II rules to impose rate regulation – much as the disaster with the cable companies in the past. But overall the regulation gives them a framework to safely invest in the future.

I have no doubt that the political pendulum will eventually swing the other way – because it always does. And when we next get a democratic administration and Congress, we are likely to see much of the regulations being killed by the current FCC put back into place by a future one. That’s the nightmare scenario for a big ISP – to find that they have invested in a business line that might be frowned upon by future regulators.

Categories
The Industry

Finally, Speed Competition

We are at the beginning of a big change in urban Internet speeds. Recently, there have been all sorts of announcements about companies upgrading speeds or wanting to build fiber in major markets.

For instance, Comcast says that they are going to upgrade all of their systems to DOCSIS 3.1 within about two years. This new CableLabs standard is going to allow them to offer far faster speeds to their customers. DOCSIS 3.1 allows a cable system to bond together empty channels to make one large data pipe and theoretically, if the networks were empty of television channels, they could offer download speeds up to 10 Gbps. But since there are still lots of cable channels on these network the more realistic maximum speeds for now will be a gigabit or maybe less depending upon the spare channels available in any given system.

Comcast has already started the process of upgrading customer speeds. For example, in much of the northeast they have upgraded customers from 25 Mbps to 75 Mbps and from 105 Mbps to 150 Mbps. They’ve announced that these same upgrades will be done in all of their systems. They’ve said in future years there will be more upgrades to go even faster.

Other cable companies are likely to follow suit. MediaCom has already made gigabit announcements. Time Warner in Austin also greatly increased speeds. Cox has announced aggressive plans for speeds. It’s likely almost all urban cable systems will be upgraded to DOCSIS 3.1 within a few years.

Meanwhile, CenturyLink has been starting the process of building fiber in most of their larger markets. It looks like they are building fiber in cities like Seattle, Portland, Minneapolis, Phoenix, Denver, Salt Lake City, and a number of other markets. They will offer speeds that vary from 40 Mbps for $30 to gigabit speeds for $80 as part of bundled packages. CenturyLink is also experimenting right now in Salt Lake City with G.Fast, testing a 100 Mbps product over copper. Between the two products the company thinks they will be able to offer faster speeds to a lot of urban and suburban customers.

And of course, Google has been rolling out fiber and can be credited with popularizing the concept of gigabit fiber. They have built or are launching in Kansas City, Austin, Atlanta, Provo, Salt Lake City, Nashville, Raleigh-Durham and now San Antonio. They have released a long list of other cities where they may go next.

Finally, there are numerous smaller companies and municipalities that are already building fiber or who have plans to build fiber.

Comcast’s new philosophy is a 180 degree turnabout from a few years ago when they said that customers didn’t need bandwidth and that they would give customers only what Comcast thought they needed. It seems now that Comcast is adopting the philosophy of unilaterally increasing speeds, even in markets where they might not have an immediate competitor on the horizon. They already have the customers and they already have the networks and they can take the wind out of the sales of a potential fiber competitor if customers in any given markets already have fast speeds at an affordable price.

I think Comcast and the other companies are smart to do this. The higher-priced data products are probably the highest margin products we have ever had in this industry. It doesn’t cost a whole lot more than a few dollars to buy the raw bandwidth needed to serve a data customer and it’s widely believed that for large companies the margins are in the 80% to 90% range. It’s a wise decision to protect these customers, and by being proactive with speeds the cable companies will make it a lot harder for other companies to take their customers. And I think they have finally begun to learn the little secret that many have already figured out – faster speeds don’t really hurt profitability and a customers with a 100 Mbps connection doesn’t use much more data than one with a 20 Mbps connection, they just download things faster.

So what we are seeing now is competition through speed rather than competition through pricing. All of the comparisons I have ever seen show that US broadband prices are significantly higher than in any other developed countries. When Google or CenturyLink enters a market with $70 to $80 gigabit they are not lowering prices, and are actually luring customers to pay more than today. It’s an interesting market when even in the most competitive markets the prices don’t really come down.

Categories
The Industry

Why Not Faster Data Speeds?

I was recently at my mother-in-law’s house and saw an example of what competition can do for the country. She lives in Kyle, Texas, which is an outer suburb of Austin. When I say outer, it’s an hour’s drive to downtown Austin.

As I was working on my laptop using her WiFi, it felt like it was faster than in previous times that I had visited here, so I ran a speed test. And sure enough, her bandwidth measured in at a little over 70 Mbps download and 10 Mbps upload.

She buys only the basic Internet product from Time Warner. I am pretty sure that in the past this was a much slower product, closer to 15 Mbps, and possibly less. But for certain her speed has been increased significantly due to competition. By now everybody knows that Austin is in the midst of significant competition with Google, Grande and AT&T each selling a gigabit data product, while Time Warner which now has speeds up to 300 Mpbs. What this competition has done is to up the game for everybody in the market.

The sad thing is that it takes competition to get the cable companies to up their game. I doubt that many other Time Warner markets around the country have base speeds of 70 Mbps, and probably none of their other markets has speeds of 300 Mbps.

I really don’t understand why the cable companies don’t just increase speeds everywhere as a way to fend off competition. One would think Google might be a lot less likely to build fiber into a market if every customer there already had 300 Mbps data speeds. The cable companies in most markets clearly have the majority of customers, and certainly have all of the customers who are interested in fast speeds. They have it within their power to be market leaders and to bring fast speeds today, so that any future competitor will have a hard time denting their lucrative markets.

Instead many of them sit and wait until the inevitable announcement of competition before they do the upgrades needed to get faster speeds. For example, Cox has announced that in Omaha and Las Vegas they will have speeds as high as a gigabit in response to fiber deployment by CenturyLink in those markets. But not all of them are waiting. For example, Charter recently doubled the speeds on most of their products. That is not the same as offering blazingly fast speeds, but it really makes a difference to boost their base residential product to 60 mbps.

I know that there is a cost to upgrading data speeds. But recently Time Warner Cable said in their annual report that they have a 97% margin on their data products, a number that opened a lot of eyes nationally. One would think that the cable companies would do anything to protect a product with margins that high and that they might spend some of that margin to fend off competition.

I have no idea how well Google does when they come into a new market. I know that when a municipal provider comes to a market they generally get 40% to 60% market penetration with their data products. But the Google product, at a premium price of $70 per month is probably not going to attract quite as many customers. Still, one has to think that they probably get at least 30% of households.

Cable companies have a lot to lose if they lose 30% or more of their customers in the large urban markets. It’s clear that the cable TV product today has very poor margins (if not negative margins) and so the future of the cable companies comes from data sales. They are in the enviable position of already having gotten most of the customers in most market and one would think they would want to jump in front of potential competition and head it off before it even starts.

But they are not acting like companies with a lot to lose. To me it feels like they are making a strategic error by not being more proactive with data speed upgrades. The cable companies are largely disliked by their customers, and they could go a long way to change that perception by unilaterally raising data speeds to be as fast as they can make them.

I am glad to see competition forcing data speed increases, but the majority of markets are not competitive. But in my mind, if the cable companies wait to increase speeds only after there has been an announcement of a coming competitor in each market, they will have lost the game. People are going to perceive that as too little, too late. And it’s a shame, because we know in Austin what a cable company can do if they are motivated by competition. I just scratch my head and wonder why maintaining markets with a 97% margin data product is not enough motivation to fight to keep the customers they already have.

 

Categories
The Industry

Cable Banking on WiFI

I’ve been reading a lot lately about the massive effort that cable companies are putting into expanding their WiFi networks. It’s estimated that Comcast and Cablevision together now have almost 9 million public hotspots, most of which come from dual routers in subscribers homes that provide a hotspot link along with the subscriber’s link. There are about another 1.5 million hotspots deployed by Cox, Time Warner and Bright House.

At this point nobody is quite sure how the cable companies are going to monetize this business. Several years ago some standards were developed by the Wi-Fi Alliance to create interoperability between WiFi networks and cellular networks. The idea was to allow cellular companies to offload overflow cellular traffic onto commercial WiFi networks when their cell sites get too busy.

But there are still changes needed in the industry for this to take place. First, a lot more phones need to be enabled to make calls on WiFi, a feature that is now included on the IPhone, but which few people have enabled. Probably the most important thing still lacking is the brains in the networks that will allow easy WiFi roaming so that a call or data transmission can be handed from one WiFi hotspot to another without needing a new verification and login and without restarting a given transmission. Until WiFi roams smoothly you won’t be able to continue a WiFi voice call without being cut off every time you change to a new hotspot. This might not be solved until the whole cellular network moves into the cloud using software defined networking so that the brains that are behind the handoffs of cellular calls can be applied to other types of connections.

But in high traffic areas where there is a lot of foot traffic, WiFi certainly can relieve the data traffic on cellular networks. But are the cellular companies really willing to pay for this? Already today WiFi is carrying a lot of data for cellular-enabled devices for free (to the cellular companies). Adobe published statistics recently that show that 93% of data on tablets and 43% of data on smartphones is carried by WiFi. But one would have to think that the vast majority of this is done in people’s homes and offices where they spend most of their time.

There is no doubt that having somebody else carry their data traffic is a benefit to cellular companies, but that doesn’t mean that they are going to be willing to write checks to WiFi hotspot owners for carrying cellular data. There has been no news of Comcast or the other cable companies making such deals with cellular companies, and so one would think this application is mostly speculation.

One also has to wonder about the efficacy of the current cable hotspots. The majority of Comcast hotspots are going to come from home routers that have been equipped to provide a public WiFi connection as well as the in-home connection for customers. But how useful are these connections? If you’ve ever walked around outside your house looking to connect to your own WiFi network I think you understand that reception outside of your home is sketchy. There are places where the signal is clear, areas where it is poor and areas where it doesn’t exist.

I look at my own house and wonder how valuable it is for Comcast to enable my hotspot. I get joggers and dog walkers by here on the front sidewalk, but otherwise this is not a neighborhood with much foot traffic. The only circumstances where my WiFi might have value is if workmen at my house use it, or if one of my immediate neighbors obtains a Comcast password from somebody and uses my WiFi for free. Otherwise, somebody would need to sit on my front porch or park in my driveway to get WiFi, something I would frown greatly upon.

There are a few ways that Comcast can monetize WiFi. One is to sell roaming WiFi as a service, much like you get in an airport. But to sell that service requires large areas of good coverage. And there are places like that. For example, it’s been reported that Comcast has blanketed the Jersey shore with coverage, and so selling a data connection to non-Comcast customers in these kinds of areas is a possibility.

I think the best business opportunity is for Comcast to get into the cellular business using WiFi enabled phones. They could sell cellular plans that either use only WiFi, or that use WiFi first and use cellular as the back-up. A lot of people mostly use their cellphones in homes and offices and such callers could save a lot of money if Comcast prices it right. Assuming that they could strike a deal with one of the four major spectrum holders they ought to be able to undercut the major carrier’s prices and still be profitable with such products.

But nobody knows for sure why Comcast and the other cable companies are doing this because they haven’t said. They must have something in mind, because they are spending a lot of money on public hotspots. One would certainly hope that Comcast has something in mind since they are antagonizing their cable modem customers yet again by turning them into public hotspots without their permission.

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