Categories
Regulation - What is it Good For? What Customers Want

Telling Customers the Truth

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

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

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

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

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

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

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

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

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.