Connections

Telecom analysis including broadband

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Government Funded Networks: What (Little) We Learn from Recent Reports

Government funding of broadband networks is once again garnering discussion. FCC Chairman Tom Wheeler’s Feb. 19 announcement on Net Neutrality indicates that the Commission may consider Federal pre-emption of state laws restricting municipal communications networks. On the tail of that announcement comes a report from the Government Accountability Office providing some anecdotal evidence of the way small businesses use ten different federally subsidized or municipally run networks. Unfortunately, it is difficult to draw any general conclusions from the report, as it draws on only a handful of interviews with users of a select few networks – a limitation the report itself acknowledges.

I have no beef with the report itself – this GAO report, like all GAO reports I’ve read, is precise, well-written, and self-aware, though I must say I question the value of a study with such a small sample size and so little information about the networks discussed. My concern is that many are misinterpreting the report as offering broad evidence of the success of government run or funded networks. As the report says, “the results of [the GAO’s] interviews cannot be projected to all service providers and … Read the rest

electrician2

How to Misuse American Customer Satisfaction Index Data to Try to Block a Merger

Opponents of the Comcast/Time Warner Cable merger have scrambled to show that companies with larger market shares will hurt consumers, proposing theories built around flawed assumptions. This includes arguments that the new Comcast will suddenly become the only provider or saying that the deal will make the new Comcast a monopsony purchaser of television content.

One metric that they have stumbled upon is data from the American Consumer Satisfaction Index, which gives Comcast, Time Warner Cable, and other television and Internet service providers low scores as compared to other industries.

Several articles (like this one or this one) have bent this finding to argue that a larger company will result in less competition and lower customer satisfaction. Before using the rankings as mud to sling in their holy war against consolidated markets, they should have bothered to look at the reason for the low scores and what they actually say about market competitiveness.

This is what the ACSI data actually shows.

Providing reliable, high-quality Internet and television services across a national network is much more difficult than taking a hamburger order or shipping products bought online. When things … Read the rest

televisions

Cable, A Monopoly… If You Ignore Competitors

In arguing that “American regulators should block Comcast’s proposed deal with Time Warner Cable,” a recent article in The Economist displays a surprising number of misunderstandings about how our broadband and television markets work. The magazine argues that the combined firm, by having 30% of pay TV subscribers, will be just too big, a “fearsome” “Goliath” that will force only its own content upon its subscribers and only at a trickle. Strange words from a publication with a column named after Schumpeter.

The first stunner comes with the assertion that Comcast has 55% of TV and broadband subscribers, so long as you ignore . . . subscribers of competing TV and broadband providers. Confused? You aren’t alone. Satellite TV programming, telco operations like AT&T’s U-verse, broadcast, and over-the-top are all substitutable to cable TV. Sure, cable is well-positioned today, but explicitly ignoring competitors in the analysis is too far. The ability for different platforms to compete, now and in the future, is a key premise of our current competition policy. As we continue the convergence on the IP platform, different underlying technologies can compete in the provision of broadband and … Read the rest

interconnect

Netflix Grows Up

Last month something evil happened in Las Vegas: Netflix was invited into the inner cloister of the Last Mile Cabal, where a blood sacrifice sealed a dark pact with Comcast. What was in that pact, what were the terms on which the sacrifice was made? I’ll tell you: a commercial transaction that will reduce congestion at points of interconnection, improving Netflix performance across Comcast’s network, bringing joy and good cheer to video streamers across the country. Wait, what – you may ask – what’s evil about that? I’m not quite sure either, although reading the coverage of this deal, you’d think it was.

To be clear, this is an interconnection issue, not a net neutrality issue.  Let me repeat that: this is not a net neutrality issue.  It is unfortunate timing for the parties – with the recent opinion from the D.C. Circuit vacating the Commission’s non-discrimination and no-blocking rules some industry watchers are on hair-trigger to find a would-be violation. Accusations that Comcast was “throttling” Netflix, or that Netflix is “paying off” Comcast for a “premium” connection are simply wrong. Netflix is not getting priority treatment of its traffic, … Read the rest

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Debunking the EU Broadband Utopia

As an American academic in Europe, I find the claims by some American media about an EU broadband utopia curious.  Europeans roundly complain about the quality of their broadband, and, there is no European who would say that the US is falling behind Europe. In fact some of the biggest critics of the EU are the EU leaders themselves.  Consider EU Commissioner for Digital Life Neelie Kroes:

The world envied Europe as we pioneered the global mobile industry in the early 1990s (GSM), but [because] our industry often has no home market to sell to (for example, 4G) consumers miss out on latest improvements or their devices lack the networks needed to be enjoyed fully. These problems hurt all sectors and rob Europe of jobs it badly needs. EU companies are not global internet players. . . . 4G/LTE reaches only 26% of the European population. In the US one company alone (Verizon) reaches 90%!

Kroes praises the success of the American broadband mode, noting its ability to drive private investment and innovation. She is increasingly joined by other European leaders who recognize that the European approach is not working.  … Read the rest

broadband wire

Comcast, Time Warner Cable Deal Deserves Accurate Analysis

Big news yesterday – Comcast is planning to buy Time Warner Cable in a stock deal worth $45.2 billion. This is no doubt a big transaction: Comcast and Time Warner are the two largest U.S. cable operators, and the deal will give the combined company roughly a third of the pay TV market. Such a largemerger deserves a careful look from the FCC and the DoJ, but knee-jerk reactions against any consolidation, all too common in the media, cloud the discussion. We should consider the benefits to consumers and the overall economy, as well as the potential drawbacks instead of assuming big cable companies are necessarily bad. With a little analysis, the deal appears a win for consumers and the economy overall.

The most important point, frequently overlooked or downplayed by opponents, is that Comcast and Time Warner have no overlapping service areas. The two simply do not compete. There will be no change at all to consumer facing competition in the pay TV or broadband market after the deal goes through. Furthermore, what we should really be concerned with is intermodal competition, not how a merged entity would stack … Read the rest

vintage telephone

18 Years – Time for an Update

Today marks the 18th Anniversary of the signing of the 1996 Telecom Act. In these 18 years the communications market has changed dramatically – change that warrants an update to our laws. We are all familiar with the recent explosion of services riding over our networks, but a simple thought experiment illustrates just how dramatic the changes of the last twenty years have been. Imagine if Congress had enacted the Telecommunications Act of 1999 instead of the Telecommunications Act of 1996. Would encouraging facilities-based competition in an attempt to build a duplicative phone network have seemed wise when by then it was clear broadband networks were key? Would the rise of the Web and early IP voice communications have given us pause? The changes we have witnessed since the ’96 Act represent a break in our ability to easily understand and predict this complex sector. It is time to update the Act, but not in a way that assumes to know what direction or velocity our communications and media markets are heading or what would be best for them.

In 1996 voice, video, and data were totally separate services … Read the rest

tower

Channel Sharing Pilot Holds Promise

Yesterday two Los Angeles broadcast TV stations announced a plan to enter a pilot program to demonstrate the feasibility of channel sharing. They plan to experiment with broadcasting the streams of both stations over the infrastructure and, more importantly, the spectrum of only one. This is exciting news – channel sharing potentially allows for significant amounts of spectrum to be unleashed for mobile broadband. Broadcasters also win though the deal. When two stations are able to squeeze into a single 6 megahertz channel, they maintain virtually all of their previous revenue streams (including retransmission fees) plus gain a cash infusion by putting their extra spectrum up for sale in the incentive auctions. In the end, channel sharing means more efficient use of valuable low-band frequencies, more spectrum available for mobile broadband, a higher chance of a successful incentive auction, all while those few who watch TV over the air remain able to do so. This is one of those rare win-win-win situations.

Channel sharing has been a long time coming. The National Broadband Plan identified the first step in recommending that the FCC “establish a licensing framework to permit two … Read the rest

Riga, Latvia

Not News: Deploying Broadband Costs Less in Dense Cities

An unfortunate idea continues to circulate in the mainstream press, fueled by broadband populists: in this case, a piece recently published by The New York Times proclaims that the “U.S. Struggles to Keep Pace in Delivering Broadband Service.” Such headlines perpetuate an argument that, although appealing in its simplicity, is ill-founded and dangerous in its policy implications. The argument goes something like this: broadband is a utility, a utility that the U.S. is “falling dangerously behind” in providing; therefore governments should step in, either through regulation or public provision of infrastructure to ensure we have top-notch utility service. Forget the politics of such a position – the premise of the argument is simply not borne out by the facts. For starters, our past research has shown that by many measures the U.S. ranks competitively in international broadband speeds, prices, and deployment. But let’s look at the specifics laid out in the Times piece.

The author, Edward Wyatt, attempts to draw policy conclusions by comparing the broadband speeds of San Antonio and Riga, the capital of Latvia. As a threshold matter, it is not clear that we can conclusively … Read the rest

American Broadband

What is a Fair Price for Broadband?

An updated report by the New America Foundation (NAF) examines whether we are getting a good deal on our broadband in the United States. It does so using fairly straightforward methods: cataloguing advertised prices and speeds for major cities around the world. Unfortunately, to paraphrase H. L. Mencken, for every complex problem there is an answer that is clear, simple, and wrong.

We covered the issue exhaustively in our report from earlier this year, The Whole Picture: Where America’s Broadband Networks Really Stand, and a number of blog posts responding to the original Cost of Connectivity report in 2012. However, their report update makes the same claims as the last one using the same logic: we therefore feel compelled to issue a very similar rebuttal. The NAF report fails to engage the issue in a way that helps us understand what is really going on in our broadband markets.

There are two important questions to consider when examining these broadband markets: are companies offering a fair price for high-quality broadband services given their costs, and are they competing in a way that will offer dynamic improvements in the future? … Read the rest