Is Altice Really Bringing FTTP?

suddenlink-truckLate last week Altice released a press announcement that said they are going to bring fiber-to-the-home to all of their newly acquired US properties within five years. For those not familiar with Altice, the company is now the fourth biggest cable company in the US and was created through the recent acquisitions of Suddenlink Communications for $9.1 billion and of Cablevision for $17.7 billion. These acquisitions bring the company about 4.6 million customers.

But there are parts of the press release that have me scratching my head. The headlines announce ‘A full-scale fiber-to-the-home network investment plan’ which will bring ‘large scale fiber-to-the-home deployment across its footprint.’ That sure sounds like the company will give everybody FTTP.

But deeper in the press release are several statements that have me wondering what the company is really planning to do. For example, they say they will ‘drive fiber deeper into our infrastructure.’ Deeper into the infrastructure is not necessarily the same as providing fiber the whole way to the home. That is the same kind of language that Comcast used when they announced their mostly-imaginary 2 gigabit broadband product.

Even more puzzling is the statement that “the new architecture will result in a more efficient and robust network with a significant reduction in energy consumption. Altice expects to reinvest efficiency savings to support the buildout without a material change in its overall capital budget.’ If Altice has 4.6 million customers then they must have around 6 million passings. They will be able to build a lot of the needed network by overlashing fiber onto existing coaxial cable. But even that will probably cost in the range of $500 per passing, meaning an outlay of $3 billion. And to bring fiber into the home costs in the range of $600 to $800 per customer. Add to that the core FTTP electronics of at least $200 per customer and the cost to converting existing customers to the fiber could cost another $3.7 to $4.6 billion, for a total outlay of at least $6.7 billion to $7.6 billion.

The energy savings they are talking about would be due to shutting down the existing hybrid fiber-coaxial cable network. To achieve that savings they would have to convert every customer to fiber – since it take as much electricity to run a network for a handful of customers as it does to run it for everybody. But I have a hard time believing they can save enough in power costs to pay for an expensive new fiber network without having to increase capital budgets. I have a number of clients operating HFC networks and they do not have gigantic power bills of anywhere the magnitude needed to produce that kind of savings.

This FTTP plan also has to be compared back to Altice’s promises to their shareholders. They promised to bring significant cost savings after the acquisition of Suddenlink and Cablevision and it’s already hard to see how they are going to do that. For example, their largest property is in New York and they promised the PUC there not to eliminate any customer-facing jobs (technicians and customers service reps) for five years.

They also talk about their fiber rollouts in Portugal and France. In Portugal fiber is being deployed mostly due to heavy subsidies from the government which is hoping that fiber will boost a poor economy. And in France their business plan is different than the US and Altice benefits greatly from a quad play that includes cellular service. My quick analysis of their financial performance shows that wireless drives a big piece of their profitability there, and it’s unlikely they are going to figure out a profitable wireless play here in the US.

Finally, the company seems to have spent heavily this past year on upgrading existing HFC cable networks. I’ve read a dozen local press releases in Suddenlink markets that talk about completing digital conversions and upping data speeds to as much as a gigabit using DOCSIS 3.0. It’s curious they would pour that much money into their HFC networks if they are getting ready to abandon them for fiber.

I hope I am wrong about this and I hope they bring fiber everywhere. That would certainly highlight Comcast and Charter’s decision to milk their HFC networks for decades to come. But the press-release as a whole sets off my radar and is reminiscent of similar press releases in recent years from AT&T and Comcast talking about gigabit deployments. There are just too many parts of this press release that don’t add up.

Are Cable Companies Winning the Speed War?

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

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

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

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

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

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

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

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

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

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

Technology Hype

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

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

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

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

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

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

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

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

How Did We Do with the National Broadband Plan?

FCC_New_LogoFive years ago the FCC published the National Broadband Plan. This was a monstrous 400 page document that laid forth a set of broadband goals for the first time. Within that document was a discussion of numerous goals the country should consider and the document remains an interesting list today – sort of a ‘want’ list for broadband policies and achievements.

The country has come a long way since 2010 in terms of broadband. We’ve seen numerous neighborhood fiber networks being built. We’ve seen cable modem technology get better and the speeds of those products are greatly improved, at least in major metropolitan areas. We’ve seen an explosion in smartphone usage and seen our cellular networks be largely upgraded to LTE 4G.

The FCC has led a few attempts to improve broadband. They have redirected the Universal Service Fund to bring broadband to rural areas and to bring broadband to schools and libraries. They have approved the use of more spectrum for cellular data. They have even updated the definition of broadband to a minimum of 25 mbps download as a way to goad providers to increase speeds.

Consider the six major goals adopted by the plan. Let’s see how we are doing on these:

Goal #1: At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second. This goal has mostly been met for download speeds and most urban areas now have cable modem products that can deliver at least 100 Mbps download. But we universally missed the 50 Mbps upload goal and I’m not entirely sure why that was set as a goal. But there are very few places in the country where the 100 Mbps product is affordable and so most households still buy something much slower.

Goal #2: The United States should lead the world in mobile innovation, with the fastest and most extensive wireless networks of any nation. While we have upgraded our mobile networks, a number of other countries have done it sooner and offer faster speeds. But I think this is eventually going to be taken care of as cellular network owners migrate to software defined networks where they can upgrade huge parts of the network at once.

Goal #3: Every American should have affordable access to robust broadband service, and the means and skills to subscribe if they so choose. The key word here is affordable and the US still has nearly the most expensive broadband among first world countries. While we have fast speeds available in many markets, they are often not affordable and the vast majority of people subscribe to something slower due to the economics. As the FCC recently pointed out, we don’t have much competition in the country and far too many people only have one or two options for buying broadband. And we still very much have a digital divide, be it a physical lack of broadband in rural areas are an economic barrier in poorer urban areas.

Goal #4: Every American community should have affordable access to at least 1 gigabit per second broadband service to anchor institutions such as schools, hospitals and government buildings. We have made some progress in this area, and through the Universal Service Fund we ought to be getting gigabit fiber to a lot more schools over the next few years. The big challenge for this goal is getting broadband to rural schools since there are numerous counties in the country that have barely any fiber.

Goal #5: To ensure the safety of the American people, every first responder should have access to a nationwide, wireless, interoperable broadband public safety network. We are slogging forward on this issue through the FirstNet program that intends to integrate all of the first responder networks into a single set of standards to insure interoperability. This is going to remain a challenge in rural areas where the wireless coverage is poor.

Goal #6: To ensure that America leads in the clean energy economy, every American should be able to use broadband to track and manage their real-time energy consumption. This really seems like an energy goal and not a broadband goal. But smart thermostats are now available at every hardware store that operate from home WiFi and that can be accessed using a smartphone. So, except in those areas with no broadband or cellular coverage, we have the technology to meet this goal. The percentage of homes with these devices is still relatively small, asking why this was a major broadband goal.

I can’t put a percentage on how we have done. Certainly people in urban areas have better broadband than they did five years ago, but affordability is still a major issue. The rural copper networks continue to age and deteriorate and while there is some construction of rural fiber, overall the rural areas are further behind the urban areas than they were five years ago. We are now seeing gigabit capable fiber networks starting to be made available to residents, but so far this reaches maybe one percent of homes in the country. There are still a surprisingly large number of people that still suffer with dial-up or satellite data who are being left behind. It will be interesting to see how much closer we are to those goals in five more years.

What Does a Gigabit Get Us?

Alexander_Crystal_SeerPew Research did a survey of 1,464 industry experts and asked then what killer apps we can expect if the US is able to significantly increase customer bandwidth between now and 2025. About 86% of the experts thought that bandwidth would improve enough by then to provide a platform for supporting widespread new applications.

The question does not suppose that everybody will have a gigabit of download speed, although by then there will many homes and businesses with that much speed available. But one can also suppose that by then that there will be many people with download speeds of hundreds of megabits. The cable companies are on a path with DOCSIS 3.1 to be able to increase speeds significantly on their networks if they so choose. So the biggest chance for fast speeds for the masses is not having fiber built everywhere by 2025, but rather of having the cable companies stepping up over the next decade. Most experts are thinking that they will to some extent (and I agree).

There were a few applications that a number of the experts agreed would become prevalent if download speeds increase:

Telepresence. There was a feeling that telepresence will have come a long way over the next decade. We already see the beginning of this today. For example, Julian Assange from WikiLeaks recently appeared at a summit in Nantucket via hologram. That is the precursor for having routine meetings with people by hologram. This would not just be speakers at conferences (but it would make it easier to get more impressive speakers when they don’t have to travel). But it means having salesmen make calls by telepresence. It means having staff meeting and other business meetings by telepresence. This is going to have a huge impact on business and could represent huge cost savings by reducing travel and the wasted costs and hours due to travel.

But there is also going to be a huge market for residential telepresence. One of the most popular features today of an iPhone is Facetime that lets people easily see each other while they talk. And Skyping has become wildly popular. One can imagine that people will grab onto telepresence as soon as the associated hardware is affordable, as a way to spend time with family and friends.

The experts also think that telepresence will have a big impact on medicine and education. Telemedicine will have come a long way when if a patient can spend time in the ‘presence’ of a doctor. Telepresence also will be huge for shopping since you will be able to get 3D demos of products online. In fact, this might become the first most prominent use of the technology.

Virtual Reality. Somewhat related to telepresence will be greatly improved virtual reality. We have the start of this today with Oculus Rift, but over a decade, with more bandwidth and faster processors we can have improved virtual reality experiences that can be used for gaming or for blending the fantasy world with the real one. There was also news last week that Microsoft demonstrated a 3D hologram gaming platform they are calling GameAlive that brings something akin to a holodeck experience into your living room. Over a decade virtual reality is likely to move beyond the need for a special helmet and will instead move into our homes and businesses.

Imagine being in a gym room and playing a game of tennis or some other sport with a friend who is elsewhere or against an imaginary opponent. Imagine taking virtual tours of foreign tourist destinations or even of visiting imaginary places like other planets or fantasy worlds. It is likely that gaming and virtual reality will become so good that they will become nearly irresistible. So I guess if computers take all of our jobs at least we’ll have something fun to do.

Internet of Things. Within a decade the IoT will become a major factor in our daily lives and the interaction between people and machines will become more routine. We are already starting to see the beginning of this in that we spend a lot of our time connected to the web. But as we become more entwined with technology it means a big change in our daily lives. For example, experts all expect personal assistants like Siri to improve to the point where they become a constant part of our lives.

Just last week we saw IBM roll out their Watson supercomputer platform for the use in daily apps. That processing speed along with better conversational skills is quickly going to move the web and computer apps deeper into our lives. Many of the experts refer to this as a future of being ‘always-on”, where computers become such a routine part of life that we always are connected. Certainly wearables and other devices will make it easier to always have the web and your personal assistant with you.

Aside from the many benefits of the IoT which I won’t discuss here, the fact that computers will become omnipresent is perhaps the most important prediction about our future.

Not everything predicted by the experts was positive and tomorrow I am going to look at a few of those issues.