Tag Archives: Verizon Wireless

The Future of Rural Broadband

Verizon Wireless "Rule the Air" Ad C...

Verizon Wireless “Rule the Air” Ad Campaign (Photo credit: Wikipedia)

There were several events this week that are telling rural subscribers the future of rural broadband. It is a bleak picture.

First, at a Goldman Sachs conference on Tuesday, the CEO of AT&T said that he hoped that the new FCC chairman Tom Wheeler would be receptive to AT&T’s desire to begin retiring its copper network in favor of its wireless network. At the end of last year AT&T had said in an FCC filing that they were going to be seeking to retire the copper plant from ‘millions of subscribers’.

In that filing AT&T had asked to move from the copper network to an all-wireless all-IP network. Stephenson said that cost savings from getting rid of the copper network would be dramatic.

On that same day, Verizon CEO Lowell McAdam said that the idea of offering unlimited data plans for wireless customers was not sustainable and defied the laws of physics. Earlier this year Verizon had ended all of its unlimited wireless data plans and now has caps on every plan.

Verizon already has a rural wireless-based landline surrogate product that it calls VzW. This uses the 4G network to deliver a landline phone and data anywhere that Verizon doesn’t have landline coverage. The base plan is $60 per month and includes voice and 10 gigabytes of data. Every extra gigabyte costs $10. There is an option to buy a $90 plan that includes 20 gigabytes or $120 for 30 gigabytes.

Finally, at the same Goldman Sachs conference mentioned above, the CFO of Time Warner said that they saw more room for increasing data rates.

So what does all of this mean for rural subscribers? First, it means that if you are served by a large incumbent like AT&T that they are going to be working hard to retire your copper and force you onto wireless. And we all know that the wireless data coverage in rural America is not particular fast when you can even get data. The data speeds delivered from a cell tower drop drastically with distance. In urban areas where towers are only a mile or less apart this doesn’t have much practical effect. But in a rural environment a mile is nothing and homes might be a mile apart. People lucky enough to live near to a cell tower can probably get okay data speeds, but those further away will not.

And even if you can get wireless data your usage is going to be capped. Rural landline data usage today may be slow, but it is unlimited. Customers have learned that if they put in WiFi routers that they can channel all of the data usage on their cell phones and tablets to their unlimited landline data connections. But once those connections are wireless, then every byte of data leaving your home, whether directly from a device or though the WiFi router, is going to count against the data caps. So rural America can expect a future where they will have data caps while people in urban areas will not.

Finally, one can expect the price of data to keep climbing. I have been predicting this for a decade. The large telcos and cable companies are facing a future where the old revenues streams of voice and cable TV are starting to decline. The only sustainable product they have is data. And so as voice and cable continue to tumble, expect incumbents to get into the habit of raising data prices every year to make up for those declines. Competition won’t help because the cell company data is already expensive, and both the incumbent cable and telcos will be raising data rates together.

This is not a pretty picture for a rural subscriber. Customers will be forced from copper to wireless. Speeds are not likely to get much faster. Data is going to be capped and prices will probably be increased year after year.

Is Wireless Really Better than Wires?

An rural area west of Route 41 and Lowell, Ind...

An rural area west of Route 41 and Lowell, Indiana. (Photo credit: Wikipedia)

It is clear that the FCC prefers wireless as the broadband solution for rural areas. It seems like they badly want every rural household in the country to get some kind of broadband just so they can take this issue off their plate. Just about every bit of policy decided in the last few years has a bias towards wireless bias.

For instance, the historic Universal Service Fund which was used to promote rural telephony over copper has been transitioned into a new CAF fund that will instead promote high-speed data in rural areas. There are several aspects of the CAF that clearly will ensure that the funds will go mostly to wireless carriers. The bulk of the funding will eventually be distributed by a reverse auction. This is an auction where the broadband providers in a given area will be able to compete for the funding, and the one who bids for the lowest amount of subsidy per customer will receive the funds.

The first time I read the reverse auction rules my first thought was that this money is all going to wireless companies. The reverse auction rules strongly favor companies who can provide data over large areas. Any smaller company who wants to get CAF funds to help pay for a rural wired network can be undercut by the largest wireless companies. AT&T Wireless and Verizon Wireless are the two richest and most successful companies in the country. They pay many billions of dollars of dividends annually and they can afford to underbid any rural landline company for subsidy, simply because they do not need it. But of course, they will bid in the reverse auctions and take the subsidies because the rules allow them to.

There are also parts of the CAF that can be used to build new broadband infrastructure and these funds also favor wireless companies. The funds get distributed by complicated rules that have a bias to get broadband to customers at the lowest cost per subscriber. And of course, there is no cheaper way to cover a large rural footprint than with wireless. Wireless companies are also going to get a lot of this infrastructure funding.

Meanwhile, AT&T recently told the FCC that they were going to introduce a plan to drop the copper for ‘millions’ of rural subscribers. And if they are successful then their rural subscribers can expect to be told to get cell phones rather than landlines. And for voice telephony this might not be such a bad thing. But do we really want to relegate a large bunch of the US geography to only having cellular data?

Today there is clearly a broadband gap with some rural areas still stuck with dial-up Internet access. And so getting them some kind of faster data seems like a reasonable plan. The FCC has set the definition of broadband to be the capability of receiving 4 Mbps download. And it’s obvious that they set that limit with rural areas in mind.

And so over the next decade more and more of rural America will be getting cellular data that will meet, or come close to meeting the FCC’s definition of broadband. But meanwhile, the cities have already far surpassed those speeds. There are very few cities left where the average home can’t get speeds of between 10 Mbps and 20 Mbps. There are usually cheaper alternatives in the range of 5 Mbps to 7 Mbps, but the faster speeds are widely available. And many places have much faster speeds available.

The FCC itself has promoted the availability of gigabit bandwidth and companies are responding. Google is bringing this speed to Kansas City, Austin and Provo and AT&T has promised to match them in Austin. CenturyLink is bringing a gigabit to Omaha. And a number of smaller municipal and commercial providers have brought gigabit speeds to other towns and cities scattered across the country. And one can expect the gigabit movement to grow rapidly.

It’s universal knowledge that the household use of bandwidth has continued to grow and there is no end in sight for that growth. As networks can provide more data households find ways to use it. Video has been the recent reason for the explosion in data usage, and now we can see that the Internet of Things will probably be the next big bandwidth driver.

Have we really solved the rural bandwidth gap if people in those areas are going to have 4 Mbps data speeds while urban areas have a gigabit? Obviously the rural areas will continue to be left behind and they will fall further behind than today. Just a few years ago the rural areas had dial-up and the cities had maybe 5 Mbps. But a gap between a rural world at single digit megabit speeds with the cities at gigabit speeds is a much larger gap and the rural areas will not be able to share in the benefits that bandwidth will bring.

The only long-term solution is to build fiber to rural America. Obviously nobody is going to build fiber to single homes at the top of mountains or at the end of ten-mile dirt roads, but I have been working on business plans that show that fiber can make sense in the average rural county. But it is really hard to get rural fiber funding since such projects tend to jut pay for themselves and are not wildly profitable.

It’s possible that the FCC’s universal service plans will work and that a lot of the 19 million rural people without broadband will get some sort of rudimentary broadband. But meanwhile, the rest of the country will be getting faster and faster bandwidth. And so, before the FCC declares ‘mission accomplished’ I think we need to have more of a debate about the definition of broadband and what is acceptable. I hate to tell the FCC, but the rural broadband issue is not going to go away even after rural areas all have cellular data.

What’s Up With Verizon?

1980s Dodge Ram Van Verizon

1980s Dodge Ram Van Verizon (Photo credit: Wikipedia)

I have another story to tell about my friend Danny. He runs an accounting firm in northern Virginia and he looks a lot like a ton of other small businesses. He has half a dozen phone lines and he wants a fast Internet connection. He called me the other day and told me that he had been approached in just the course of one week by three different salespeople who represented Verizon.

His first contact still has me shaking my head. A salesman stopped by and offered to sell him an all-in-one T1. Danny already has FiOS and a symmetrical 35 Mbps Internet connection. This salesperson wanted to sell Danny a T1 from Verizon or from half a dozen other CLECs and resellers. And he could do this for only $1,400 per month, which is 3.5 times what Danny is paying for vastly better service.

I was really surprised by this sales call. This is a flashback to the late 90’s when there were salespeople everywhere selling the all-inclusive T1 that had some channels for voice and the rest of the T1 for data. And in those days since we had all just migrated from the dial-up world, this seemed like fast Internet access. But then DSL and cable modems, and now fiber and 4G have all left T1s far behind and I was surprised that there was a company who would spend the money on a salesperson to go door-to-door with last century’s product. That seems like the telecom’s version of a buggy-whip salesman.

But Danny says that in his CPA practice that he has at least 50 clients who still use T1s. He advises them every year to move to something better, but I guess there are a lot of people in the world who stick with what is comfortable and working. Such customers could save a lot of money moving to something else and would get far faster Internet access to boot. But I guess the fact that these kinds of customers are still out in the market explains the T1 salesman. There is so much profit in a T1 at his prices that one sale per month probably keeps him happy and very profitable.

Next Danny got a visit from Verizon Wireless. They wanted him to ditch his FiOS and go completely wireless with 4G. Danny has had his FiOS for four years and has never had a single problem. During that time Verizon has increased his bandwidth without changing the price. He is completely happy with fiber and he knows that fiber is the ultimate pipe if he wants bigger bandwidth in the future.

4G is an interesting product, but nobody thinks that a wireless network is as reliable as the FiOS fiber. Cell towers sometimes go down or get overwhelmed with service requests. And the 4G speeds vary by how many customers are using it at any given time. 4G is nice, but it is not fiber.

Danny says that the 4G salesperson could not answer some basic questions. For instance, they could not tell him the speeds he could expect at his location but only could talk about a possible range of speeds. And they never asked him any questions about his business. There certainly are going to be businesses where 4G might be the right solution, but Danny is not one of them. His accountants work in the office and clients come to see him. His major concern is reliability and he loves that FiOS stays up and running. Before FiOS he had a Comcast cable modem and had to send employees home several days when the Internet was not working. Danny is a happy Verizon customer and is sold on their fiber. Danny was somewhat amazed that the 4G salesperson did not know that he already had FiOS and it seems like the different parts of Verizon don’t talk to each other.

Finally last week Danny got a call from a FiOS rep. He had not gotten a call about his FiOS since he first bought it, but I guess that the Verizon FiOS group knew that Verizon Wireless was out trying to poach their customers and they called to check on him. So within the span of one week Danny was contacted by three different salespeople, two from Verizon and one who was a Verizon reseller.

This surprised me for a number of reasons. First, I honestly would have thought the day of selling T1s was dead and that visit just has me shaking my head. But the idea that two different parts of Verizon would spend for sales resources to compete for the same customer has me flummoxed. I understand that the Verizon fiber and wireless businesses are separate business units. But at the end of the day their profits all roll up to the same bottom line.

It appears to me that Verizon has missed one of the basic principles of selling – putting the customer first. A lot of my clients are CLECs and they learned a long time ago that the way to get loyal customers is to get to know them and find them a solution that fits what they need. This approach is called consultative sales and involves taking the time to get to know the customers’ needs. In the early days of CLECs they all sold on price and they quickly learned that a customer who changed to them for a lower price would also drop them for the next lowest offer. The CLECs who are still around today are for the most part doing it right and selling in a way to earn trust and loyalty from customers.

It honestly surprises me that Verizon has not learned this simple lesson. Danny says that the wireless salesperson never asked him about his business and only spouted that 4G was the latest and greatest product. It further surprises me that Verizon would put a live sales staff on the street to compete against themselves. Sales teams are expensive and it’s hard to fathom why Verizon would send a wireless salesperson to a place that already has Verizon FiOS. You would think at a minimum they would send salespeople only to those places that don’t already use Verizon. But once they heard he had FiOS they still tried to convert him to wireless.

Why would Verizon compete against itself like this? I know that there are different business units at Verizon and that each group will earn bonuses based upon their own performance, but at the end of the day it is more profitable as a corporation to do this the right way. Verizon ought to be sending out one sales team that can sell their whole product line and who will help the customer find the best solution for their business. In the long run it can’t do Verizon any good having salespeople bashing their own product lines. As a corporation do they really want wireless salespeople telling the public not to use their fiber? That is going to lead customers to pick somebody other than Verizon.

I think Danny has it right. When his receptionist hears the word Verizon now she just tells them, “He doesn’t want to talk to you.” And she is right.