Why I am Thankful – 2017

Every year at Thanksgiving I take a pause to look at the positive things happening with the small carrier industry. This is not the easiest year to make a list because we currently have an FCC that clearly is in the pocket of the big ISPs like Verizon, AT&T and Comcast. While some of the new FCC policies supporting those big companies will benefit all ISPs, in many cases the FCC decisions are given the big ISPs a leg up over competition. But there are still things to be thankful about in our industry:

Demand for Broadband Intensifies. In the work I have been doing in rural communities it’s becoming clear that broadband has moved from a nice-to-have feature to a must-have commodity. I see evidence of this in several different ways. First, rural communities and their citizens are making a lot of noise to politicians about not having broadband. The broadband issue has become the top priority in many communities. I also see evidence of rural broadband demand when looking at the high penetration rates that come from projects being built in areas that didn’t have good broadband. Over the last few years I’ve seen such projects getting customer penetration rates between 65% and 85%. I call this a good news topic for rural carriers since it means there are still lots of opportunities for expansion, and enough customer demand to help pay for broadband projects. It’s not a positive that there are still so many communities with no broadband, but the positive here is that communities are making demands, which is the first step towards finding a solution.

Public Private Partnerships are Thriving. Very few government entities want to be an ISP and they are instead hoping to find commercial partners to bring better broadband to their communities. In just this last year I’ve worked with half a dozen local governments that have contributed funding to public private partnerships, where the government acts like the bank and the ISP owns and operates the network. Since rural broadband projects are often a challenge to finance this is a promising new trend.

ACAM Money is Financing Fiber. The ACAM money from the Universal Service Fund is being used to expand fiber and advance broadband in rural areas all over the country. The fact that some rural communities are getting fiber is helping to drive the demand for other who want the same thing. We’ll have to wait until next year to see of the CAF II reverse auctions drive similar results.

Wireless Technology Getting a Lot Better. I have a lot of clients who are now deploying point-to-multipoint radios for broadband deployment. Over the last three years these radios have improved dramatically. They are more reliable, almost approaching plug-and-play. By combining multiple frequency bands they deliver bigger broadband pipes, faster speeds and a much-improved customer experience. Depending on customer density the networks can be designed to deliver 25 Mbps to a lot of customers with some speeds as fast as 100 Mbps. There are still big issues with the technology in heavily wooded or hilly areas, but there are a lot of places where the technology is now delivering a great broadband connection.

New Revenue Opportunities Materializing. While voice revenues continue to decline and many of clients are getting clobbered on cable TV, I see a number of them doing well with new products. I have clients getting decent penetration rates with managed WiFi. I have some clients doing well with security. And I have clients making some good margins on smart home technologies. Selling new products is out of the comfort zone for many small ISPs and it requires some new thinking to successfully sell a new product – but I’ve seen enough success stories to see that it can work.

A Managed WiFi Product

A number of my clients are now selling a managed WiFi product. But the product they are offering customers under that name varies widely, and so today I thought I’d discuss a few of the different products being sold under this name.

The simplest product is one that I would call a WiFi network. Historically, ISPs that provided WiFi placed a single WiFi router near to where the broadband connection terminated into the home. And it was typical to include the WiFi functionality directly embedded into the DSL or cable modem router. This product has been around for a while and I got my first WiFi router when Verizon supplied an all-in-one router on my FiOS connection nearly 15 years ago.

But as homes have added numerous connected WiFi devices, a single WiFi router is often inadequate. With today’s greater demand for bandwidth by devices a single WiFi router often can’t reach to all parts of the home or connect smoothly to numerous devices. Most of my clients tell me that WiFi problems are now the biggest cause of customer dissatisfaction and in in many cases have surpassed cable TV issues. Many customers supply their own WiFi routers and ISPs get frustrated when a customer’s inadequate WiFi device or poor router placement ruins a good broadband delivery to the home.

Today there are numerous brands of WiFi network devices available. These systems deploy multiple WiFi routers around the home that are connected with each other to create one ubiquitous network. The routers can be connected wirelessly in a mesh or hard-wired to a broadband connection. These devices are widely available and many customers are now installing these networks – I’ve connected an eero network in my home that has vastly improved my WiFi quality.

I have a number of clients that sell the WiFi networks. They will place the WiFi units in the home in a manner that maximizes WiFi reception. The revenue play for this product is simple equipment rental and they charge each month for the devices. ISPs generally set up the routers so that they can peer into them for troubleshooting since customers inevitably will unplug a router, move one to a less than ideal place or place some big object near one that blocks the WiFi signal. But that’s about all that comes with the product – expert placement of routers and simple troubleshooting or replacement if there are problems.

At the other end of the spectrum are a few clients who really manage the customer WiFi experience. For example, customers can call when they buy a new WiFi device and the NOC technicians will connect the device to the network and maximize the WiFi connection. They will assign devices to different frequencies and channels to maximize the WiFi experience. These ISPs have invested in software that tracks and keep records of all of the devices connected to the WiFi network, meaning they can see a history of the performance of each customer device over time.

The ISPs monitor the WiFi performance and are usually proactive when they see problems, in the same manner than many ISPs track performance of fiber ONTs. The WiFi network moves the ISP deeper into the customer home and allows the ISP to make certain that customers are getting the bandwidth they are paying for.

Nobody know what to charge for this yet and I see monthly rates for the managed WiFi that range from $10 to almost $25 per month. I don’t have enough experience with this to yet suggest the right price. Like any new product the success is going to be due mostly to the marketing effort expended. I have a few clients who have already gotten penetration rates of 25% or more with prices in the $15 – $20 range.

But this product isn’t for everybody. For example, I have clients that don’t want to take on the product due to the extra truck rolls. But almost all of my clients have worries about eventually becoming dumb pipe providers and the managed WiFi product provides a tangible way to maintain contact with a customer to demonstrate the ISPs value proposition. And like with any equipment rental play the revenue stream is good. Once the cost of the hardware and initial installation have been recovered the product is almost all margin.



The Customer WiFi Experience

Every broadband provider is familiar with customer complaints about the quality of broadband connections. A lot of these complaints are due to poorly performing WiFi, but I think that a lot of ISPs are providing broadband connections that are inadequate for customer needs. Making customers happy means solving both of these issues.

It’s the rare customer these days that still only has a wired connection to a computer and almost the whole residential market has shifted to WiFi. As I have covered in a number of blogs, there are numerous reasons why WiFi is not the greatest distribution mechanism in many homes. I could probably write three of four pages of ways that WiFi can be a problem, but here are a few examples of WiFi issues:

  • Customers (and even some ISPs) don’t appreciate how quickly a WiFi signal loses strength with distance. And the losses are dramatically increased when the signal has to pass through walls or other impediments.
  • Many homes have barriers that can completely block WiFi. For instance, older homes with plaster walls that contain metal lathe can destroy a WiFi signal. Large heating ducts can kill the signal.
  • Most ISPs place the WiFi router at the most convenient place that is nearest to where their wire enters the home. Most homes would benefit greatly by instead placing the router somewhere near the center of the house (or whatever place makes the most sense with more complicated floor plans). Customers can make things worse by placing the WiFi router in a closet or cupboard (happens far too often).
  • There are a lot of devices today, like your cellphones, that are preset to specific WiFi channels. Too many devices trying to use the same channels can cause havoc even if there is enough overall WiFi bandwidth.
  • A WiFi network can experience the equivalent of a death spiral when multiple devices keep asking to connect at the same time. The WiFi standard causes the transmission to pause when receiving new requests for connection, and with enough devices this can cause frequent stops and starts of the signal which significantly reduces effective bandwidth. Homes are starting to have a lot of WiFi capable devices (and your neighbor’s devices just add to the problem).

A number of ISPs have begun to sell a managed WiFi product that can solve a lot of these WiFi woes. The product often begins by a wireless survey of the home to understand the delivery barriers and to understand the best placement of a router. Sometimes just putting a WiFi router in a better place can fix problems. But there are also new tools available to ISPs to allow the placement of multiple networked WiFi routers around the home, each acting as a fresh and separate hotspot. I live in an old home built in 1923 and I bought networked hotspots from Eero which solved all of my WiFi issues. And there is more help coming in the future, with the next generation of home WiFi routers offering dynamic routing between the 2.4 and 5 GHz WiFi spectrum to better make sure that devices are spread around the usable spectrum.

But managed WiFi alone will not fix all of the customer bandwidth issues. A surprising number of ISPs are not properly sizing bandwidth to meet customer’s needs. Just recently I met with a client who still has over half of their customers on connection speeds of 10 Mbps or slower, even though their network is capable of gigabit speeds. It is a rare home these days that will find 10 Mbps to always be adequate. One of my other clients uses a simple formula to determine the right amount of customer bandwidth. They allow for 4 Mbps download for every major connected device (smart TV, laptop, heavily used cellphone, gaming device, etc). And then they add another 25% to the needed speed to account for interference among devices and for the many smaller use WiFi devices we now have like smart thermostats or smart appliances. Even their formula sometimes underestimates the needed bandwidth. But one thing is obvious, which is that there are very few homes today that don’t need more than 10 Mbps under that kind of bandwidth allowance.

It’s easy to fault the big cable companies for having lousy customer service – because they largely do. But one thing they seem to have figured out is that giving customers faster speeds eliminates a lot of customer complaints. The big cable companies like Comcast, Charter and Cox have unilaterally increased customer data speeds over the past few years. These companies now have base products in most markets of at least 50 Mbps, and that has greatly improved customer performance. Even customers with a lousy WiFi configuration might be happy if a 50 Mbps connection provides enough bandwidth to push some bandwidth into the remote corners of a home.

So my advice to ISPs is to stop being stingy with speeds. An ISP that still keeps the majority of customers on slow data products is their own worst enemy. Slow speeds make it almost impossible to design an adequate WiFi network. And customers will resent the ISP who delivers poor performance. I know that many ISPs are worried that increasing speeds will mean a decrease in revenue – but I find many of those that think this way might be selling six or more speeds. I’ve been recommending to ISPs for years to follow the big cable companies and to set your base speed high enough to satisfy the average home. A few years ago I thought that base speed was at least 25 Mbps, but I’m growing convinced that it’s now more like 50 Mbps. It seems like the big cable companies got this one thing right – while many other ISPs have not.