Fast Net News, DSL Prime, DOCSIS Report

Brian Roberts will soon transform the U.S. Internet for the second time in two years. Q4 2009, CTO Werner commented, they will begin trials of upstream DOCSIS 3.0, with hopes of production units Q1 2010. DOCSIS 3.0 is designed for 50 meg upstream 95+% of the time, and is already deploying in Japan. No one else in North America has said they'll move forward. Does TWC intend to fight FIOS with a slower network?

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Bob Iger of Disney threatened Glenn Britt of Time Warner with antitrust problems if he made it hard for us to watch TV over the Web, I infer. Britt was coming on stage right after Iger's keynote, and Iger spoke at length about how committed Disney was to offering (some of) their programming over the top. All ordinary stuff, until he said that anyone interfering would face "competitve issues." (more below)

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Personalized advertising is every carrier's great hope and the cablecos intend to test it heavily this year. Brian, Dick Green, and Starz showed off a neat EBIF app to make startover easy for movies, but the talk was all about how EBIF could be used to customize ads. Carriers around the world are sure they will make a fortune; networks around the world are sure they will make a fortune on this; and Google + other Internet companies probably will beat them to most of it. We'll see. Meanwhile, Rep Boucher intends to get a "privacy" bill through this year with no teeth. Opt-out as an advance? Even AT&T is willing to accept opt-in.

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Democrat Boucher knocked himself out to save Kyle McSlarrow's job. Kyle's a highly partisan Republican operative hired from the Bush White House, who was a strong supporter of Obama's opponent in the last election. Everyone therefore assumes his $1.5M job is on the line, and several of his peers will soon be looking for new jobs. Kyle has the advantage of being competent and a good organization manager, so has a decent chance of holding on (and a contract that runs into next year, I believe.)  Boucher, who runs a key House committee told hundreds of cable execs Kyle is a great friend and that "cable was very lucky to have Kyle in D.C." In his after-lunch speech (feed them and they will come,) I counted seven comments on Kyle's great leadership and he specifically talked about how Kyle had persuaded him to take action on an important issue. He had to be sending a message, "don't fire this guy. He's a friend." Outside Washington, that level of praise would mark Boucher as someone who performs certain acts for money but in D.C. nobody raises an eyebrow about a "public servant" being so close to a lobbyist.

Incidentally, I just broke a major unspoken rule in D.C.: Never make it personal. I got cursed for 15 minutes the last time I did something like this. "Fight me as hard as you want on the issues," one of the best paid advocates in D.C. told me, "but you went too far making it personal."  Pity - in many other ways he's one of the very best in D.C., and he provided strong support to a candidate who gives me more hope than anyone in politics since I was 16. It turns out that pros fairly soon realize I'm just doing my job and later on usually become friends again. Companies that pull advertising over a story also usually come back after the boss isn't breathing down their necks. Obama tries to stay above politics hiring Rahm Emmanuel is good evidence he wants to knock out the Republicans. The transition team was swamped with his Obama's early supporters. Genachowski and Strickling had major campaign roles and now are running the FCC & the NTIA. Both are extraordinarily competent, mutual friends tell me, and I'm sure they are excellent choices.

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Britt of Time Warner just reconfirmed his intent to charge customers $2 or more for each HD movie they watch. That's far more than Ed Whitacre was thinking when he said "We're not going to let them use our pipes without paying." ($25 extra for 35 meg or less, about 12 HD movies.) Jules Genachowski is not stupid, and he knows this has nothing to do with the cost of the bandwidth and everything to do with keeping video out. I don't know if he has the courage to do anything about Britt (he should have stopped the tax break and spinoff.) Net Neutrality was strong in Obama's platform, and Jules personally put it there. There's no doubt about what he believes on open access. Bandwidth isn't free, but it's cheap. My NN friends were horrified when I wrote that Comcast's 250 gig cap was reasonable in 2008, especially since they said they would be raising it. That's proportionate to costs. Time Warner's 5 - 40 gig might save them a few dimes a month, but probably it's less. Charging $25 for what averages about 50 cents in bandwidth is obviously market power to anyone who understood a high school economics class. I do not know if the new antitrust chief will accept that, but even without Iger's uber-lobbyist, Preston Padden, the Justice Department willhave to look at this. Break up TIme Warner and AT&T, anyone.

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The next D.C. scandal about to hit is that the FCC on April 8 intends to move $hundreds of millions - or more - to the bells in return for what may be absolutely nothing for consumers. Nobody is likely to notice except lobbyists and a few wonks, because this is a response to a circuit court remand of the Universal Service "non-rural exemption" and who the heck knows what that means. It's simple if you just follow the money. In the belief the bells didn't need a subsidy, they cut the bells out of part of the universal service funding, calling them "non-rural." One key part of the expected April 8 NOI will be to give two of the most profitable companies in the world USF money. The Bells actually have more rural lines than the "rural" carriers, but they seem quite profitable without any subsidy and I can't imagine a good reason to give them the money. Mike Copps, did you ask "cui bono?" More to come.

Folks who bought lines from the Bells will probably also collect. That includes wildly profitable Iowa Telecom, which spends millions on lobbying for price increases and possibly Telmex Puerto Rico. It also includes near insolvent Fairpoint and Qwest, which borrowed so much money they need a bailout or a carefully planned bankruptcy reorganization. Proponents will claim this will result in more broadband (wildly exaggerated if not totally bogus) and that the FCC has no choice because of a court ruling. The latter is nonsense; there are almost certainly constitutional ways to block the bell giveaway. Simply averaging each company across a state probably is enough in most cases. Accurately auditing costs would make this subsidy to the bells clearly unnecessary, but the FCC is reluctant to audit carefully or change formulas. Two top FCC officials have told me the USF subsidies are mostly ridiculously above what is necessary but the companies have too much lobbying power to fight. Glen Post, CEO of Centurytel, said "Congressman xxx will protect us." A dozen academics have run the numbers and they are ridiculous for most. I'm actually a strong supporter of universal service subsidies where needed, but hate poverty pimps. Especially those who ride private jets to beg D.C. for money..

(Source: A well-informed state commissioner. More details to come.)

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The large cable companies (and telcos) appear likely to boycott the stimulus, which means easily half the unserved will get nothing from the stim as currently planned. It's a power play to get what they want, knowing that Obama has promised to reach all the unserved. Britain had a sensible response BT for anywhere BT wouldn't serve. Stephen TImms simply announced there was subsidy money available for others who might want to serve those areas. BT suddenly discovered they could cover the territories they had claim were impossible, and soon reached 99.6% availability of DSL (some slow.) Waiting for proposals to cover an area is likely to fail (except for some slow wireless likely to go broke in a few years.) If there are 400,000 homes in California who can't get anything beyond, ask for proposals to serve those homes and maybe a few nearby already served. The guideline is grants for one served home for every three unserved reached.

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But reaching the underserved is proving much more expensive than even I believed in January, with figures between $3.000 and $10,000 per home common, and few under $5,000 in most proposals for the rural telcos. This startled me because Verizon FiOS is costing < $700 per home passed for 200 meg fiber and AT&T U-Verse < $300 for DSL from cabinets. Of course smaller companies with lower densities would have to spend more, but I figured 2x or 2.5x would cover most. What I didn't understand was that the "unserved" are generally a dozen here, four there, and few clusters of even 300. Somewhere between 15 and 50 homes in an area cost becomes brutal for 10 meg or better. $200 DSL repeaters double and triple range, and are the cost-effective choice if 5 meg is considered enough. But if you want more than that, and there is no cable nearby, the costs I'm hearing from telcos are amazing.

93-96% of the U.S can now get "broadband" the vast majority on equipment designed for ten meg or more. Unserved except for satellite are therefore 4-7%, far fewer than most believe. Of those 4-7%, about a third can get 10 (or 50) meg for under $400. Perhaps 1% would cost $10,000 or far more, which I personally think is too much public money to upgrade a home from satellite.

That leaves 2-4% where a new build - cable or fiber - is typically many thousands. Perhaps as many could get cable, but the cablecos haven't been talking about serving them. The telcos want far more. So something RUS and NTIA are thinking is whether to spend $5-10,000 per home that takes service - or doing things in a very different way.

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Enough for now.