Tag Archives: NCTA

Forcing Competition

charter-spectrum-logoThere was an FCC requirement in the Charter acquisition of Time Warner Cable and Bright House Networks that wasn’t much mentioned in the press. As a requirement to gain approval for the merger the FCC is requiring that Charter must build new networks to pass one million potential customer passings outside of its existing footprint. Charter must do this where there is already another ISP offering at least 25 Mbps, and Charter is required to offer at least 60 Mbps speeds.

The two main lobbying groups which together represent small cable companies and telcos for smaller ISPs  (the American Cable Association and the Rural Broadband Association) are suing the FCC to stop this.

This seems like a very odd requirement. Charter is being directed to build in markets that already qualify as having broadband under the FCC’s definition, so this won’t bring broadband to anybody new. But I guess the FCC hopes it will create networks that will compete against each other with price and service.

But if Charter expands using coaxial networks, then this ruling will force Charter to build a second coax network in markets, often in places where poles are already getting very full of wires. Charter could instead build with all-fiber, but then they would be creating a pocket of customers using a different technology, and big companies have shown they are not very good at handling one-off situations. For example, Verizon had such a hard time integrating fiber processes into their existing company that they literally created FiOS as a whole new internal organization separate from copper. What I find even more troubling is that any market where Charter builds is not likely to then ever attract another fiber overbuilder.

I know that the FCC is very bothered by the fact that cable companies don’t compete against each other. The FCC reports every year that the majority of residents in the country only have one choice for decent broadband speeds, and I am sure that is what prompted this requirement. But I think there is a reason for that – cable companies are largely a natural monopoly. A cable company has no technological advantage by building alongside of another existing coaxial network. I am sure that cable companies have done the math over the years and if, for example, Charter was to build to compete against Comcast, then in the end both companies will under-earn in the market with dual competition.

I love real competition and it’s always interesting to watch how a cable company reacts when somebody builds a new fiber network to compete with them. But I don’t think that a regulator can force competition. They can require Charter to build new network, but they can’t really make them act competitively in the same manner that some smaller fiber provider would act. A competitor has to be hungry to be competitive and it’s hard thinking that this requirement is going to make Charter show up in new markets and act like a competitive overbuilder.

The smaller ISPs are worried because they suspect that Charter will pick their markets to meet their requirement rather than going up against Comcast or Mediacom. And there is certainly a good chance they are right. I am sure that Charter really does not want to create bad blood between them and the other large cable companies. Together these companies own Cable Labs. Comcast and Charter both own a piece of Hulu. They do not want to be out marketing against each other if that can be avoided. And so Charter is likely to select smaller markets where either small cable companies or telcos are the primary ISP.

I really have to ask what good this requirement does in the long run. If Charter’s heart is not in this they will muddle through competing in the new markets and they won’t do well. Some customers in those markets may benefit by the newly created competition, but then again Charter may decide to not compete on price. One might suspect that in the sixth year of the new venture that Charter might be selling off these new networks to somebody else.

My gut tells me that you can’t force a company to be competitive when it’s against their nature. I am sure there is a lot of groaning in the departments of Charter that are being tasked with completing this requirement. But the company will choose some markets, probably close to where they already have headends, and they will build new networks until they pass a million and one potential customers. They may or may not make enough money to pay for these new networks, and at some point they will walk away from the venture if it’s a financial failure. I may be wrong, but this doesn’t feel like an idea aimed towards success.

Comments to the FCC on Data Speeds

FCC_New_LogoI’ve been reading through the comments in FCC Docket 14-126 that asks the question if the FCC should increase the definition of broadband. The comments are  sticking mostly to the expected script. It seems that all of the large incumbents think the current definition of 4 Mbps download and 1 Mbps upload are just fine. And just about everybody else thinks broadband should be something faster. In the Docket the FCC suggested that a low-use home today needs 4 Mbps download, a moderate-use home needs 7.9 Mbps and a high-use home needs 10 Mbps.

AT&T says that the current definition of 4 Mbps is adequate to define ‘advanced telecommunications capability’ per Section 706 of the FCC rules. They argue that customers don’t use as much bandwidth as the FCC is suggesting. For example, they argue that most of their customers who pay for 12 Mbps service rarely hit a maximum of 10 Mbps during a typical month. They argue that the FCC is trying to change the definition of broadband by only looking at what the heaviest users of broadband are using.

AT&T goes on to say that they and other companies like Google and the large cable companies are now deploying gigabit-capable technology and so the FCC has no reason to worry about data speeds since the industry will take care of the problem by increasing speeds. I obviously disagree with AT&T on this argument. They are using the red herring of what is happening in places like Austin Texas and extrapolating that to mean that the whole country is seeing huge broadband upgrades. As I have written many times, small town America is not getting any of the new broadband investment that AT&T touts in their comments. And rural America is still often stuck with dial-up, satellite or cellphone data. Further, AT&T has been actively saying elsewhere that they want to kick millions of customers off copper and get rid of their DSL option.

Verizon took a different tactic in their filing. They also don’t want the definition increased from 4 Mbps. They first argue that they have made a lot of investments in broadband, and they certainly have done so with their FiOS fiber network in cities and suburbs. But they then go on to argue that cellular data ought to be counted as broadband and that they are offering a great cellular alternative to people. They cite that 97.5% of people in the country have access to LTE with broadband speeds greater than 10 Mbps download and that this should be counted as broadband.

There are a few problems with their claim. First, Akamai collects the speeds from millions of cellular data downloads and they report that the average cellular data speed actually achieved in the country is 4.4 Mbps and not Verizon’s theoretical 10 Mbps. And cellular data is bursty, meaning that it’s designed to be fastest for the first few seconds of download and then normally slows down. More interestingly, a few months back Comcast citied Verizon and AT&T cellular data as evidence that Comcast has robust broadband competition. Verizon Wireless’s CEO countered the Comcast’s claim and said, “LTE certainly can compete with broadband, but if you look at the physics and the engineering of it, we don’t see LTE being as efficient as fiber coming into the home.” Finally, everybody is aware that cellular data plans include tiny data caps of only a few cumulative gigabits of download per month and cellphone users know that they must park on WiFi from landlines data sources as much as possible to make their cellphones usable for video and other heavy data usage.

Verizon goes on to cite the National Broadband Map several times as justification that there is already great broadband coverage in the US today. They say that 99% of households already have access to broadband according to the map. I have written several times about the massive inaccuracies in that map due to the fact that all of the data in it is self-reported by the carriers.

The big cable companies did not make comments in the docket, but there is a filing from the National Cable Telecommunications Association on behalf of all of them. NCTA says that the definition of broadband should not be increased. Their major argument is that the FCC is not measuring broadband deployment correctly and should measure it every year and report within six months of such measurements. They also say that the FCC should take more consideration of the availability of cellular and satellite data which they say are broadband. I haven’t commented on satellite data for a while. Some parts of the country can now get a satellite connection advertised with a maximum download speed of 15 Mbps. It’s been reported to be a little slower than that, but like cellular data a satellite connection has tiny data caps that make it nearly impossible for a family with a satellite connection to watch video.

In a speech last week FCC Chairman Tom Wheeler said that 10 Mbps is too low to be considered broadband and that federal funds like the Connect America Fund should not be funding the construction of any broadband with speeds lower than that. It’s going to be interesting to see where the FCC comes out on this. Because if they raise the threshold too much then a whole lot of households are going to be declared to no longer have true broadband, which is pretty much the truth.