[opendtv] Re: Broadband backwater
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Wed, 29 Jun 2005 09:22:14 -0400
At 12:57 PM -0400 6/28/05, Manfredi, Albert E wrote:
>The Supreme Court seems to be even-handed about having
>third parties use the last mile connection. In the 1996
>Telecom act, the idea was to open the telco local loop
>to service provider competition. But that took away any
>incentive the telcos had to upgrade their expensive last
>mile(s) of cable plant to homes. As was easy to predict
>at the time, IMO. So subsequent to 1996, this opening
>of the local loop was not enforced.
It was not a question of enforcement. The Telcos simply made it
economically impossible for competitors to use their facilities and
make a profit.
The Brand-X ruling involves the thorny issue of property rights - the
government dictating how a private enterprise must run its business.
This issue is ALSO at play with must carry.
The irony is that many cable systems have opened up their facilities
to third party ISPs. Why?
It turns out that consumers do not perceive much added value for the
ISP - what everyone wants is access to the Internet, not access to
the portals operated by ISPs. When cable launched broadband services
they expected that they would be able to build portals that would add
value to their systems; it didn't work out that way. look at what has
happened to AOL...
The real money is in provisioning Internet access. Even if the cable
company does open up its system to third party ISPs, they still win,
because they get most of the monthly fees for provisioning access.
>The recent ruling on cable systems is consistent with
>that. As if to say, "we saw that opening the local loop
>doesn't work, so we won't push it on cable either."
It can work, but the margins are thin for the ISPs as they must pay
the telco or cable company for use of their facilities. Obviously it
does work, since many cable systems offer multiple ISPs.
The big win in the latest ruling - one that is being closely watched
as it relates to must carry - is that the court found that there is
no justification for the government to impose regulations that seek
to force private enterprises to open up their facilities to
competitors.
>One might deduce that one reason cable systems upgraded
>their plants sooner than telcos was that cable systems
>had not previously been threatened with having to open
>their local loops to competing service providers.
This had NOTHING to do with the latest round of cable upgrades. Cable
was forced to upgrade their facilities because of competition, AND
because the investment makes good economic sense. When the Death
Stars started to suck away a significant percentage of cable's best
(most profitable) subscribers, they had no choice but to upgrade
their plants to deliver digital TV. The opportunity to offer new
services including broadband and VoIP, made these investment even
more viable.
It is worth noting that these upgrades were much less aggressive than
what the industry had been promoting for years. In the early '90s the
cable MSOs were all talking about Full Service Networks, which they
would use to deliver a variety of e-commerce services alongside
traditional TV services. But it turned out that the Internet burst
this bubble. The cable MSOs wanted everyone to create custome
content for their proprietary systems, but the Internet provides a
better set of tools where a company could create once an publish
everywhere. Thus the cable companies pulled back on their bold plans
and decided to do the less expensive upgrades to 700-900 MHz systems
that still allocate most of their spectrum to one-way services.
The cable industry vision of proprietary walled gardens where they
controlled EVERYTHING was flawed, but they backed into a windfall by
providing broadband Internet access.
Another win for the marketplace!
>
>Let's see if WiMax providers get into this competition.
We can only hope. Competition is a good thing.
It is important to note that it has been the government that has
prevented this. In order for WiMax to have a chance they needed
spectrum, which the government finally provided in the past few years.
>This is the same thing. The rules that apply to the
>incumbent, cable, are being applied to the new guy,
>telco IPTV. Perhaps franchise negotiations should be
>dropped all around, then. Just as voice telephony
>rules and mandates are dropped, when VoIP is deployed.
You can call them rules if you like. I call them protection payments.
In essence local governments are deriving large amounts of revenue
for the privilege of operating in their communities. The cable
companies are paying for the right to have monopoly control via these
franchises. DBS upset this apple cart, as local communities get
nothing from the DBS companies.
The telcos do not pay franchise fees and do not want to pay them for
the new services that will be delivered via their digital networks.
So the correct question - which Bert got right - is to ask is whether
any information service should be subjected to local franchise fees.
By the way, there is a bill in Congress to make permanent an excise
tax on telephone service that was passed to help fund the Spanish
American war. The tax was to be imposed for only three years, but we
have been paying it for a century. There have been several attempts
to repeal it over the years - now some of the Congress Critters want
to make it "permanent."
>
>> The government does not need to subsidize broadband
>> to bring prices down and availability up. They just
>> need to get out of the way, and stop protecting the
>> incumbents.
>
>I think they are getting out of the way. In the case
>of opening local loops and of deregulating VoIP
>telephony, the govt is clearly stepping aside. That
>fact is, deploying broadband isn't cheap, especially
>if you have to provide service to individual homes
>rather than dense housing complexes, and rural
>communities in addition to urban settings.
Agreed. This is why WiMax has so much appeal.
Regards
Craig
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