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4 U.S. Companies: 70% of the Net, 78% of Pay TV

Wall Street Journal Stats

Shalini Ramachandran dramatically shows how concentrated the U.S. is getting. This chart from the Wall Street Journal shows how little competition we have in the United States. When Tom Wheeler lets through the giant Comcast-Time Warner merger, Brian Roberts will control 36% of the U.S. broadband market. Add AT&T, Verizon & Cox and 4 companies control 70% of the U.S. fast Internet. Not long ago, we had 7 Baby Bells, GTE and a dozen fairly large MSO's. The industry has about half as many companies today. 

     Columbia's Eli Noam, the world's leading public intellectual in communications, calculates that concentration in U.S. broadband went up 60% from 2002 to 2013. The prices in the U.S. are "higher than in many other countries." Lack of competition holds back innovation, which Noam believes essential for the U.S. to compete when so many countries have lower wages. The high prices result in high profits that may increase investment, Eli added. Christopher Yoo has done some work that suggests there is an effect, although personally I find competition and improved technology a far more important factor. Eli's book, Media Ownership and Concentration in America, is the standard reference. The follow-up, Who Owns the World's Media?: Media Concentration and Ownership around the World  http://bit.ly/noammedia is a thousand page opus with many international co-authors, soon to be published.

Comcast, Verizon & AT&T proved how effective that market power can be by forcing Netflix to pay them to send video to their customers. Sender pays is a mistake. There's no way to reach 21 million homes without going through Comcast. That's called a "terminating monopoly." Broadband customers typically won't change ISPs for 5 years or more so Comcast's control will continue. A video company can't make it if blocked from a quarter of the customers in the U.S., especially if the other ISPs do the same. 

    At 36% of the U.S., Comcast will be large enough to destroy almost any independent video companies. They haven't used that power maliciously but the profits from aggressive charging will be hard to resist. With no choice, video providers will have to pay even exorbitant rates. Some of that inevitably will be passed on to consumers.  

~50 MHz Enough for a Verizon-sized Network. Really.

How many mobile networks can be supported in a given amount of bandwidth? Verizon is currently the best LTE network in the U.S., a good starting point. LTE is remarkably efficient, even without MIMO and better antennas. Based on Verizon data and eight grade math, I calculated all the traffic on Verizon's network could be easily handled in 50 MHz, about half of what they own. People were startled, but the number makes sense.

    Verizon's CFO, Fran Shammo told Wall Street 64% of all their traffic was being carried in 20 MHz with LTE. http://bit.ly/1pmLdyh If 64% fits in 20 MHz, than 100% of the traffic would require 31 MHz. My figure of about 50 MHz is well above that. 

    If spectrum owners like Dish or Lightsquared were to build a new network, 40-50 MHz would give them a very robust service. In effect, that's what Sprint is doing,  using other spectrum to maintain services to earlier customers not on LTE.

     It wouldn't be trivial to squeeze today's Verizon down to 50 MHz. Voice on Verizon's network currently goes over an inefficient 2G network; it would need to be moved to VoLTE, a process just beginning. VoLTE provides higher quality voice using much less bandwidth. Glen Campbell of Merrill pointed to that bandwidth savings as part of his 2009 analysis that the spectrum crisis was bogus. I asked one of the world's most respected engineers about Verizon's claim ""Verizon needs more spectrum and will need more than that in the future." He replied "c__p," although he was more polite when the recording was turned on. To get down to 50 MHz, Verizon would also need to move the 3G customers quickly to LTE. That might require subsidizing new phones, a large cost but not impossible. 

More traffic doesn't equal higher costs TOLL-1

Router salesRouter/switch $sales actually down. Anyone who says increased traffic is raising carrier costs is misinformed, as I and many other tech reporters have been saying for years. True, wireline traffic and customer counts continue to grow. Wireless traffic is up significantly in the last year. Yet the total dollars spent on service provider routers and switches actually declined in Q2 from last year. This is the largest category of equipment needed for increased broadband bandwidth. Other gear (DWDM, etc.) also came down in price. 

     Equipment costs have been falling as fast as traffic has been going up for at least the last decade. The net result has been the cost per month of a broadband customer has remained steady or slightly declined on any large network. That cost - less than $1/month - is about 2% or 3% of the price of the service.

AT&T or someone orders half million fiber homes

Jorge Mas CanosaMasTec gets $250M contract for 2015, 2016. "We were awarded a contract for approximately a quarter of a billion dollars of 1-gigabit fiber deployment work," CEO Jose Mas announced. Fiber opportunities "are much greater than people quite understand. I think we are in for an incredible cycle in that business" http://bit.ly/1p3ic4t He added "Every time you pick a publication in the telecommunications sector, it’s got a carrier talking about building out 1-gigabit capabilities and what you are seeing is, you’re seeing multiple markets today where you have multiple carriers building in the same markets.... We’re going to be working 1-gigabit work for multiple customers over the next couple of years.

     That this probably is AT&T is my conclusion. Mas carefully provided no information on who the customer was, despite being pressed by investment analysts.

Q2 U.S.: Comcast strong. AT&T and other telcos weak

DSL getting killed where not upgraded. AT&T lost 55K broadband customers. They want to abandon about 25% of their landline territory and go wireless only. The areas are profitable but rural wireless customers are extraordinarily profitable once the network is built. So they want to eliminate competition even from their own landlines. They stopped maintaining those lines years ago and many have 1999 technology 6 megabit DSLAMs. AT&T and Verizon are best thought of as companies with two parts. The upgraded areas, FiOS and U-Verse, are doing fine against cable. They are getting clobbered where they haven't upgraded but allow that. They want to shut off most of those lines. Century/Qwest lost 2,000 customers and Windstream 17,000. 

     Comcast added 203K subscribers to 21,271,000. Some received the $10 rate for poor families but I believe most at paying full rate. But Cablevision and Cable One actually lost customers. Telcos can compete just fine against cable; in Canada at Britain, telco DSL is beating cable. http://bit.ly/1t89qXa 

     Revisiting the debate on fiber versus DSL. AT&T lost 55K, Verizon added 46K. There have been several recent quarters where Verizon FiOS fiber home did noticeably better against the competition than AT&T's fiber/DSL. Verizon offered 25 and 50 megabits upstream, while DOCSIS is stuck at 1-5 megabits up. Fiber remains a magic word, with connotations of modernity and reliability. The glamour of Google's well-publicized gigabit fiber may be helping the (not so fast) Verizon variety. Different marketing and pricing strategies could explain the (relatively modest) difference in results. 

Point-Topic: Egypt Growing 17%, China 8% and much more

40 free research summaries worth examining. Point-Topic's broadband data are the best available. They've been at it more than a decade and constantly refining their methods. Their service is professionally but fairly priced. I assume nearly all the companies in the business subscribe. Point-Topic always have been generous releasing free data as well and just made 40 country summaries available. http://bit.ly/PTbroadband A wealth of data.

   I commend the data to all those in the U.S. government who are spending $millions to create an Internet Governance framework that excludes China and Russia. China began this year with  189M broadband subscribers, twice America's 95M. The gap is getting wider. Russia is growing at 13% to 23M. China's growth was 8%, which is far down from previous years. 3G and now 4G will limit landline growth in China. The U.S. is at 4%. The fastest growth is from developing countries. Egypt grew 17% in 2013 despite economic chaos. 

New York, Los Angeles Getting 400 Meg Cable

300-400 Meg (shared) now standard off the shelf. I've heard from an engineer that the gear for New York is being installed and tested. They've been losing customers to both Verizon FiOS and AT&T U-Verse in LA, Time Warner Cable  is upgrading download speeds. My 15 down, 1 up service ($63/month) is set to go to 50/5 for the same price.

Going from 160 shared to 300-400 shared in DOCSIS 3.0 is only a software change on most equipment. Extra backhaul costs are minimal. Now that the analog switch-off has freed spectrum channels, expect that change almost everywhere. Giant Liberty Global is upgrading across Europe and offering 200-250 meg service routinely.

Time Warner has also committed to a gigabit (shared) in 2016, per this strong LAT article by Paresh Dave http://lat.ms/1rEQZrY.  No one except the engineers believed John Chapman of Cisco in 2004 when he promised the gigabit in DOCSIS 3.0 but now equipment is starting to ship. Last year, TWC also offered a gig in 2016 to North Carolina.

Bells promise nothing on 3.5 GHz

IEEE 5G posterWasting enough spectrum to increase most homes' Internet speed 100-500 megabits. 150 MHz at 3.5 GHz is the largest spectrum band likely to become available for many years. AT&T and Verizon of course want to control as much as possible, even though they likely will not build the small cells they want it reserved for. I wrote ten days ago 3.5 GHz Spectrum: Bells want it but WiFi clearly a better choice. http://bit.ly/1vV1cH Further research and a chance to discuss the issues at TPI Aspen bring me back to the subject.

   In a few years. AT&T will almost certainly be focusing their "small cells" either on conventional WiFi (the best choice) or using 5G small cells at millimeter wavelengths, probably 28 GHz. Japan is confident they will deploy 28 GHz by 2018, because the hundreds of MHz available at high frequencies can easily carry gigabits. Capacity will be 10's or 100's of times more than at 3.5 GHz. Anyone at AT&T who doubts 28 GHz/5G should ask AT&T Group President and Chief Strategy Officer, John Stankey. He keynoted the 5G Summit at NYU Wireless and you could tell where their roadmap was headed. It's absurd to hold things back based on technology the D.C. lobbyists haven't yet realized is out of date.

    China Mobile has just ended their small cell build after spending $3B and deploying 4.3 million cells. LTE is working so well they'd rather invest in more LTE bandwidth than in small cells. A friend at the FCC asked me for my source because he couldn't find anything to confirm it. The details come from a story from China http://it.sohu.com/20140703/n401704351.shtml, which I read in Google translation. Robert Clark's blog http://bit.ly/XUPNZj, picked up by Light Reading, pointed me to the Chinese source. If I have time, I'll write up the details. CM used carrier WiFi, not LTE, but the economic problems are similar. I learned working at the Vermont Tel project that backhaul costs usually kill the economics of carrier small cells.

   This chart from Nokia suggests an 80% drop in cost of delivering a gigabyte over LTE. Verizon and AT&T have done a great job proving how well LTE can work. LTE-Advanced carrier aggregation, MIMO and MU MIMO are just starting to be deployed and will increase capacity on basically the same infrastructure at least 5X and maybe 25X. Stanford's Andrea Goldsmith predicted in a Marconi webinar “Wireless capacity can grow 50-100x in the next 5-10 years. The technology is becoming clear." Her Stanford colleague Arogyaswami Paulraj and legendary engineer Henry Samueli concurred. A few days ago, Vint Cerf agreed.

Comcast-Time Warner:$10 for poor families, 50 megabits for most

David Cohen

David Cohen announced at TPI Aspen most of the subscribers in both Comcast and Time Warner will soon have 50 megabit service. Poor families will be able to get broadband for $10/month in New York, Los Angeles and other Time Warner territories. Other groups in need may be covered. (I suggest Medicaid recipients and less affluent senior citizens.)

I applauded when Cohen said, "Comcast strongly supports net neutrality" some issues remain with their practice. I was sitting at a table with senior AT&T & Verizon execs who looked glum. Net Neutrality will sidetrack the Bells' effort to get their "New Telecom Act" through Congress, Congressman Rick Boucher predicted. "Unless Net Neutrality is compromised, the bill won't go through in the next two years." Any support for neutrality makes it harder for the Bells to get their bill.

Comcast's $10 offer for the poor has connected more people to the net than $billion of mostly wasted government money. The program's not perfect, but Comcast has consistently simplified procedures and eliminated red tape. It's tragic that JG allowed the other cable companies to renege on their commitment to do similar made to the broadband planners. The Bells have done nothing for the poor. They've now have some of the highest prices in the developed world. The cheapest offering on Verizon's FiOS website is about $75 including fees; it was about half that a few years ago.

CEO Brian Roberts and EVP David Cohen strike me as decent men who want to do the right thing, especially for the poor. Ivan Seidenberg of Verizon likewise demonstrated good faith in his dealings and was very proud he delivered two of the best networks in the world, FiOS fiber and the first really big LTE network. They are hard driving and very effective businessman who undoubtedly have charged over many on the way to great riches. Almost no one gets to their level without making choices that put their company's interests before consumers. Of course they know they get pr value from moves like these, but they at least get done. As we say in Yiddish, most top executives I've met would rather be mensches than gonifs.

Not all succeed.

Not so fast on G.fast

Not a gigabit; a demo, not a field trial; 2016 or later. The reality of G.fast is impressive, 200-600 megabits over short loops of perhaps 100 meters.  G.fast is the telcos' answer to 400 meg and faster DOCSIS. New York, Los Angeles and much of Europe are getting 300-400 megabit (shared) cable this year. Kabel Deutschland is optimistic on a gigabit (shared.) But the hype goes further.

At two extraordinary recent conferences I met nearly all the top engineers working on G.fast. Les Brown, Tom Starr and others from standards; Hubert Mariotte, Trevor Linney and more from the carriers; Chip guys (they are all guys) Dudi Baum, Rami Verbin, Debajyoti Pal, from Lantiq & Broadcom. Analysts Teresa Mastrangelo, Erik Keith, Richard Jones, Rupert Wood, Stephen Wilson. No one has anything ready to sell, which improved the conversation. 

Here's some basics they told me:


That's the only thing most people know about G.fast and most have it wrong. There are certain circumstances in which speed goes to a gigabit, so the ITU Standards Committee press release has some truth. Bands have to be notched out to avoid interference. Vectoring to cancel noise is required and difficult to implement at the speeds involved. It's not clear when, if ever, the full bandwidth will be put to use. 

    Swisscom has set expectations of 580 megabits at 100 meters and 280 megabits at 200 meters. Speed falls off very rapidly after that. G.fast is only 40 megabits at 400 meters, much slower than vectored VDSL at that distance. G.fast speeds are measured as combined upstream and downstream. Time domain multiplexing allows varying the ratio.

Current Edge Tolls Actually Small

They could gouge if the precedent is set. I've called the current prices that the carriers are demanding from the video people "a hill of beans," that wouldn't be worth fighting over if they weren't likely to go up. Respected streaming media analyst Dan Rayburn pointed me to this comment from Chris Libertelli of Netflix confirming what I knew from off the record sources.  

“It’s fair to say that the interconnection fees that are being charged here are — and I think our CFO said this at the same conference that Jim alluded too — not as big for example as our content costs, so the price differentiation you’re referring too is likely to be so small that the costs of it would outweigh the benefits because the differences in price wouldn’t be so huge and customer affecting.”  http://bit.ly/1zdFUBg

    Rayburn I think goes too far suggesting that means edge tolls/sender pays are OK. We all know Ed Whitacre said "They are not going to use my pipes without paying."

3.5 GHz Spectrum: Bells want it but WiFi clearly a better choice

China Mobile giving up after $3B, 4.3M small cells. 100 MHz of spectrum - enough to build 3 networks the size of Verizon - will become available in much of the U.S. The military has agreed to share the 3550-3650 MHz spectrum in much of the U.S. They primarily use the frequencies on the coasts so they don't need the MHz. The high frequencies have a short range so can't be used from towers but are great for WiFi and other small cells.

     Bill Smith, now of AT&T, taught me "The sooner the bit gets to a landline, the less it costs us." Every plan for the urban wireless future is based on WiFi, small cells or short range high frequency transmitters. You can usually have 10-30 small cells in the space covered by a tower, each reusing the same spectrum. The most efficient method turns out to be public WiFi rather than monopoly use, which is becoming obsolete.

"For Want of Gloves, Ebola Doctors Die"

As I typed in the above into my latest newsletter, I couldn’t stop crying. The most horrifying headline I can remember. If I were a physician, I don’t think I’d have the courage to go in without basic protection. Gloves are cheap. Those with the resources to help are committing a crime, starting with my own government. My college roommate, Jerry Nadler, is now a Congressman, although we've drifted apart. I've never asked him to do something as a favor, until now.

   From Drew Hinshaw, Wall Street Journal

For Want of Gloves, Ebola Doctors Die

On the front lines of the Ebola outbreak in Liberia, health-care workers believe its toll on their own staffs could be mitigated if only they had enough basic hospital supplies such as gloves

SERGEANT KOLLIE TOWN, Liberia—Rubber gloves were nearly as scarce as doctors in this part of rural Liberia, so Melvin Korkor would swaddle his hands in plastic grocery bags to deliver babies.

His staff didn't bother even with those when a woman in her 30s stopped by complaining of a headache. Five nurses, a lab technician—then a local woman who was helping out—cared for her with their bare hands.

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