Exploring the impact of broadband and technology on our lives, our businesses, and our communities.
The FCC and net neutrality
There is plenty of sturm und drang elsewhere about yesterday's net neutrality decision by the FCC, so I am not even going to link to anything. I think that it is extremely likely that Congress or the courts, or both, will force the FCC to withdraw this new ruling, just as the FCC's ruling earlier this year was turned back. While opinions differ, it is not at all clear that the FCC has the statutory authority to do what it wants to do with net neutrality, and so nothing much is going to change until there is a ruling.
As usual, I think there is a better approach than trying to get the incumbents to change their business models by statute. Open access networks, owned by the community and managed as a digital road system, can have "net neutrality" baked into the business model so that no legislation is needed. The technology of the Internet now allows us to move beyond the outdated multiple networks (one for voice, one for TV, etc.) that were a requirement in the analog world. We can now treat networks just like we manage roads: one shared road system used by all public and private users. It lowers costs, and creates huge business opportunities for the private sector if done right. And no, I am not advocating that we should be buying our Internet access and phone service from the government. We don't have to go to the local town hall to buy groceries--but the grocery store and its customers both use the same shared road system to get food to the store and then to travel to the store to buy food. Some communities (more than 100 in the U.S.) are already building and managing their own digital road systems. And it is an approach that creates a way for incumbents to move beyond their "little broadband" networks, retain their existing customers, and reach new customers. Everyone wins.
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Enzyte, Smilin' Bob, and warrantless searches
The Sixth Circuit Court decision on email being protected by the Fourth Amendment contains the fascinating story behind the, uh, "male enhancement" product called "Enzyte" and the infamous Smilin' Bob character who appeared in the annoying late night TV commercials. The entire document runs 98 pages, but pages 4 through 12 describe in detail how a $250 million a year complete scam is set up and run. And yes, if you don't bother to read the decision, the short story is that Enzyte was a scam from beginning to end. But the Enzyte folks had 27,000 emails seized without a warrant, which led to this decision, and so in an odd way, Enzyte turned out to be a good thing for all of us.
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Email is protected by the Fourth Amendment
Freedom to Tinker reports that the U.S. Court of Appeals for the Sixth Circuit has ruled that email is protected by the Fourth Amendment. The Fourth Amendment requires a search warrant issued by a judge before law enforcement officials can search premises, and has long been applied to opening sealed paper mail. But some law enforcement officials have wanted to simply get service providers to supply them with the contents of a customer's email without a warrant, on the rather thin basis that the emails are stored in a readable format. The ruling is significant and ensures that citizens are protected against frivolous or unjustified searches of electronic mail.
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Burlington Telecom the new "proof" that community broadband does not work
More information about the financial problems of the city-owned Burlington Telecom (Burlington, Vermont) venture are emerging. Opponents of community broadband will be eager to hold this up as the latest "proof" that community-owned telecom does not work.
What is odd about arguing that communities should stay out of telecom is that the alternative being proposed is basically, "Stick with the 20th century business models that have failed utterly to meet broadband needs in the U.S." So some pioneer community broadband projects have had problems. Anyone remember Adelphia? Anyone remember the hundreds of other cable companies that have failed or been bought up because they were struggling financially?
The opponents of community broadband have nothing, nothing to offer except "stick with what we know has failed." As opposed to, "Let's try some new models and learn what works." It is a very feeble argument.
Projects like Burlington Telecom and Utopia (which is now back on track and so not mentioned so much anymore) are providing valuable best practice information for other community projects. What can be learned from the BT effort?
- The financial records need to be open and transparent. The community should be receiving regular financial reports on revenue, expenses, income, and debt.
- One reason to create authorities, coops, and other arms-length ownership and governance entities is to keep elected officials out of day to day decision-making. Some cities, like Danville, Virginia; Jackson, Mississippi; Powell, Wyoming, and others are very successfully managing the networks as a city department, but there is always the possibility that political opportunism gets in the way of good fiscal management.
- We are seeing that community networks need well-run marketing and public awareness campaigns that are ongoing. Projects that are having trouble meeting financial targets are almost all lacking good marketing--for open access business models, it means that you can't rely solely on your service providers to meet your take rate projections.
- It is risky to build too much infrastructure in advance of having customers. This keeps popping up as an issue in early projects that borrowed heavily and burned through the loan funds too quickly without having the customer base to justify the capital expenditures.
- Similarly, it is clear that some of these early projects hired too many staff too quickly--again in advance of having the revenue to justify a big staff. Especially in the first year or two, projects have to run very lean in staffing and operational expenditures.
- It is critical to hire highly qualified staff with a strong background in business and a proven track record managing large enterprises.
The BT auditors have said they don't see how BT can repay its debts, but they probably only did an analysis using the existing customer base. We run the numbers on community broadband ventures all the time, and modest increases in the customer base can make a big difference in paying off debt over ten or fifteen years. Auditors are not usually going to engage in speculative analysis, but it is incorrect to read too much into the audit conclusions. BT can overcome their problems with good, open management and a sharp focus on increasing their customer base.
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iPad killing and saving the newspaper
Two stories in one: The iPad is cutting into traditional newspaper and magazine subscriptions while simultaneously increasing readership for the online versions of newspapers and magazines. The challenge for publishers of newspapers and magazines is to set the online subscription prices at the right price point. If they are greedy and try to keep the online price high, they will never achieve the economies of scale possible when distribution costs are nearly equal to zero. But don't count on this; many editors and their bean counter bosses are going to keep online subscription prices high "so we don't cannibalize our print version." Uh huh. Whether we like it or not, a lot of stuff is never going to be printed on dead trees again. Go with it, you guys, and get over the hand wringing.
I'm too lazy to do a search for it, but I've seen a diatribe by some early Greek bemoaning the newfangled business of writing things down on paper. He was citing the imminent ruination of the youth, who were going to lose the really important ability to memorize everything worth knowing. Uh huh. Nothing ever changes. Ever.
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Apple will have a Merry Christmas
Apple shareholders are going to have a Merry Christmas if the holiday gift buying polls are correct. All most kids want under the tree is an iPad (31%) or an iPod Touch (29%). That 31% figure for the iPad beats every other device on in the poll, including Microsoft's Xbox 360, which is a measly 12%. But wait, there's more coal for PC makers, who are being told that the iPad and other tablet devices are depressing computer sales; overall, sales are still increasing, but at a lower rate as tablets cannibalize PC sales. Apple is largely exempt from this, because it's market share for computers (laptops and desktops) continues to expand at the expense of PC makers.
The iPad is probably the most significant innovation since the rise of the Internet in 1994. It's breaking every sales record on the books, and it is likely to single-handedly save the newspaper (now the "newspad") and the magazine. It will change the way kids learn (good-bye to the textbook), and it will continue to throw gasoline on the raging bandwidth fire that is creating grief for the cable and phone companies. And while there are some good Android-based tablets that will give the iPad much-needed competition, right now, Apple is selling 75% of the tablet devices.
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Skype busy destroying the phone company, melting down cable networks
Skype has announced a new record of 25 million concurrent users, meaning 25 million voice and video calls simultaneously. It also means that all those Skype users are NOT using their cellphones or land lines to make voice calls. Skype video works extremely well if you have a good Web camera (good means you ought to spend at least $50-$75) and a decent Internet connection; if you have tried Skype video and found it fuzzy or blurry, it's probably your camera. The tiny cameras that come in laptop lids tend to have very poor quality compared to a good USB camera. But I digress. Those video calls that Skype users are making are stressing out the "entertainment" networks provided by the cable and phone companies. I put "entertainment" in quotes because years ago, when I was working out of the home and suffered a cable modem network outage, I was told that the cable modem service I was subscribed to was an "entertainment" service, not a business service, and it might take up to two weeks to repair the outage.
Today's cable and DSL networks were not designed to support symmetric bandwidth, which is what you need if you are going to do voice and video calls--especially if you are trying to do video calls.
But wait, I've saved the best for last. Think just a few geeks are using the Skype video service? You'd be wrong, because Skype says 40% of their calls in the first half of 2010 were video, not voice. Ruh-roh, as Scooby Doo would say, or perhaps the cable companies and phone companies are saying..."Ruh-roh...our networks are glowing cherry red, we can't supply the bandwidth, we have an antiquated network and a 1950s business model." This is going to become a national disaster before it is over, because the economic development plans of many communities are going to be disrupted over lack of decent bandwidth to run a business.
The communities that are building their own open access networks will have complete control of their economic future. If your community's essential infrastructure for attracting and retaining businesses depends on the cable and phone companies, you might want to practice saying, "Ruh-roh."
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The beginning of the end for cable TV
Comcast and Level 3 are having a public fight. Level 3 is a long haul network provider; the company owns thousands of miles of inter-city fiber and hauls all kinds of data traffic, including Internet traffic, for a wide variety of customers. But Comcast is groaning under the weight of Netflix and other video traffic, and the cable company wants Level 3 to pay more to drop traffic onto the Comcast network for delivery.
Comcast execs must be scared out of their wits. Cable TV subscribers are canceling their subscriptions, and its not just because of the poor economy. Cable TV and its fabled "500 channels" does not deliver much value any more. Worse, video on demand ventures like Netflix are hugely popular and are using enormous amounts of bandwidth--Netflix customers are using 20% of the total U.S. bandwidth in the evening. And Comcast, which has been making a nice profit on their broadband service for years, is all of sudden facing a flood of demand for their data service which is killing their old-fashioned HFC (Hybrid Fiber Coax) networks. The cable companies guessed wrong ten years ago. They guessed that this Internet thing would never really catch on, and that they could do some tinkering with their existing copper-based network to deliver both TV and Internet, and they went off and borrowed billions to be able to deliver digital content over a fifty year old network design.
They have not paid that money back yet, not entirely, but the billions in upgrades have already run out of steam. The only answer is to build fiber all the way to the home, but they don't have the money to do that. And worse, their customers have decided that they don't really need the TV service if the Internet works okay. Except all of a sudden, the Internet is slowing down for cable TV subscribers, just when everyone wants more--a lot more.
If you are even slightly tempted to feel sorry for the cable companies, the big incumbent phone companies are in worse shape, as they thought they could string their customers along with 100 year old copper twisted pair networks, and the DSL services are running out of steam even faster than the cable networks.
Short story: Telecom in the U.S. is a horrible mess and will be getting much much worse very quickly. Unless you live in a community where there is a community-owned fiber network (think Chattanooga; Powell, Wyoming; Jackson, Mississippi; much of Utah; parts of Virginia, and a few other places).
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Investors are willing to bet on fiber
Allied Fiber indicates it has raised the funds needed to build the first leg of a nationwide dark fiber and colocation network that will eventually be almost 12,000 miles in length. Allied called the current financing market "challenging," but was able to raise the money it needed to get started. The companies is planning colocation facilities (POPs) about every sixty miles along the entire length of the network, or in most towns and cities along the fiber routes.
Colocation facilities, along with fiber, are rapidly becoming the drivers of economic development. Communities that don't have fiber routes connecting to major networks like this one won't have be competitive from an economic development perspective because the local prices for broadband services will be higher than in communities that do have access to these networks.
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