Wednesday, May 24, 2006

Consumer broadband last-mile competition in the Phoenix metropolitan area

Net neutrality advocates claim that telcos (meaning the local telco providers) have a "virtual monopoly" on consumer broadband, or that they have a duopoly with the cable companies. In many regions, this is true, or nearly so (thus the "virtual" qualifier). (Note, however, that the statement becomes transparently false if it's not restricted to consumer broadband. There are far more options for Internet service for businesses, especially businesses that can put equipment into colo facilities.)

But if you look at the metropolitan Phoenix area, there are quite a few competing consumer broadband providers, e.g.:

* Qwest, the Regional Bell Operating Company formerly known as U.S. West, provides DSL services (as well as higher bandwidth wired connections from fractional T1 and up, and I think they still offer ISDN). This is one of the evil telcos that is enemy number one for many net neutrality advocates.
* Covad, a DSL provider that uses Qwest's last-mile network in Phoenix. In 2003 Covad acquired all of Qwest's business DSL customers, and it appears that they will or have exited the consumer broadband market--however, they can provide business-class DSL service to my residence (which is interesting because Qwest says they can't). Covad is also actively pursuing WiBro (wireless broadband, a Korean standard) and WiMax (wireless broadband, an Intel standard that will now be compatible with WiBro).
* Cox Communications, a cable company, provides cable modem services. (They also have higher speed connections for businesses.) Cox has done very well in recent years in taking away customers from Qwest for voice telephone services, as well as out-competing Qwest's DSL offering for consumer Internet access. I currently use Cox Business Services to my home.
* Cable America, a competing cable company, provides cable modem services in parts of the east Valley. (UPDATE May 27, 2006: As Douglas Ross (directorblue) has pointed out, Cox entered into an agreement to acquire Cable America in January 2006, so this doesn't really count as an independent broadband provider.)
* Sprint Broadband, a long distance and wireless provider, offers a point-to-point wireless broadband service (previously People's Choice, which Sprint acquired). Sprint also offers EV-DO mobile wireless service.
* Alltel, a wireless provider, offers EV-DO mobile wireless service (which is actually using Sprint's EV-DO network).
* Verizon Wireless, a wireless provider, offers EV-DO (3G) mobile wireless service.
* HughesNet, a satellite-based wireless provider (previously DirecWay, and DirecPC before that), offers satellite connectivity (with high latency as a drawback imposed by the laws of physics).
* City of Tempe municipal wireless service, provided and managed by NeoReach. Similar service is being deployed to the City of Chandler, also by NeoReach.

There are no doubt others I've missed--if you're willing to pay for business service, many providers can get that service to your home, which includes services like a T1 connection (where your provider, if not Qwest, will have to pay monthly local loop charges to Qwest and pass that along in your bill) and may include other sources of wireless service. When I had a Global Crossing T1 to my home, the local loop costs were slightly over $200/mo--consumer broadband, by contrast, costs substantially less for more bandwidth, at least in the downstream direction, when delivered to a residence. On the other hand, bandwidth costs in a colo facility can be as low as $10/Mbit/mo, in quantity, i.e., $1000/mo for a 100Mbps Ethernet port. You pay more per Mbit to get data to your residence because of the costs of getting the data out to all those residences and the overhead of dealing with a lot more customers whose individual bills are much smaller than those of a business, and who, on the average, need a lot more hand-holding and support.

Salt River Project, a power generation and transmission company (and a water delivery/irrigation company) that operates in Phoenix, also has about 1,000 route-miles of fiber throughout the city. It resells its excess capacity to businesses (including Qwest) from the entity SRP Telecom. I don't know if they would ever consider using their network to provide consumer services themselves, but there's clearly the potential for a consumer broadband provider to purchase capacity on their network in order to move data around the city.

In Phoenix, if one provider decided to start blocking access to or degrading certain kinds of services that their customers want, there are multiple alternative options. Any provider that engaged in such behavior would see an increase in churn, to the benefit of its competition.

UPDATE (May 27, 2006): Douglas Ross (directorblue) has called this list "bogus" and claimed that only two of the options (Qwest and Cox) actually count. He dismisses Covad because it uses Qwest last-mile wires, but goes on to say, inconsistently, that he would count other cable resellers if the Brand X decision had gone the other way and providers like Cox were forced to enter into relationships like Covad has with Qwest. My observation is that if those reseller relationships exist and the reseller provides access to its own Internet network, then that is enough to foster a competitive environment. It doesn't matter whether it's government-mandated, it matters whether it exists. Doug rejects all the wireless options out of hand on the grounds of Verizon's EVDO terms-of-service. (His section about why WiMax isn't viable doesn't actually discuss WiMax at all, only EVDO terms-of-service.) He misses the point that Sprint Broadband and Sprint EVDO are *two different services*--he doesn't actually give a reason to reject Sprint Broadband. He says he doesn't understand why I put the City of Tempe's municipal WiFi network in the list--I did so because Tempe is right in the middle of the Phoenix metropolitan area (and noted Chandler's metro WiFi in-development, which is just south of Tempe, for the same reason). These are real options for people moving to the Phoenix area and for anyone who is willing to move to get different broadband service. (And certainly broadband options in an area are an important factor in choosing a place to live.) Finally, he rejects HughesNet because it is unsuitable for VOIP or P2P. At least he doesn't say that HughesNet should be mandated to change the laws of physics in order to provide those services under net neutrality.

Doug's position on net neutrality appears to be that nothing counts as broadband unless it supports every application he wants to use (even though the proposed net neutrality bills count anything as broadband that is greater than 200kbps in one direction--they don't restrict it to wireline services), and that whoever builds an infrastructure capable of supporting what he wants has to provide it to him, without recovering the costs of that infrastructure by charging any third parties. But I bet he also is unwilling to pay an unsubsidized rate to use such a service.

21 comments:

Mike Linksvayer said...

Thanks for gathering this info, and your previous net policy posts, which seem the best informed I've read.

I've found that http://www.buytelco.net/ provides an incomplete list of dsl/cable/satellite options for many locales, but it is the best I've found.

If you ever feel so inclined I'm curious of your opinion about the potenital of broadband over power lines. It sounds great, at least for its potential to introduce an n'th competitor in all markets, but it has sounded great for years and I cannot tell from mainstream media whether it is any closer to widespread deployment.

Jim Lippard said...

Thank you, Mike. I appreciate the compliment and the link.

Unfortunately, buytelco.net doesn't like my phone number or service address--it tells me I need to supply *more* info (after I already did), filling in my phone number with all 9's.

Ah--found the problem--buytelco.net is using an out-of-date zip code directory. My home changed zip codes to a new zipcode back in 2001, but I frequently find systems that barf on the new zipcode, and only work with the old one.

Buytelco only identifies NetZero (dialup) and HughesNet for my home for residential providers, but seems to indicate that a number of business broadband solutions are available (letting me choose Home Office DSL, Small Business SDSL, T1, and T3).

Qwest has actually told me I now qualify for their home VDSL service with digital TV, but I want the ability to have static IPs and run services (so I can do things like connect to the IPv6 Internet).

RedBankTV said...

That looks like a very helpful list to residents of Pheonix Jim, nice job.

Verizon offers their fiber to the home service, FiOS, in my small town in New Jersey. I’ve subscribed to all kinds of internet service; and FiOS blows away all of the other options available to consumers in my area.

The only possible competition that Verizon could face in my town would come in the form of a municipal WiMax offering. And Verizon has a history of blocking towns from offering WiFi.

I’m getting 20mbps downstream and 2mbps upstream. How could evdo, dsl, satellite or even cable compete with that? And I’m not even on their fastest plan.

With Verizon being the only fiber provider allowed in my area they are sure to control the internet around here for a long time to come.

Tom
tom @ redbanktv.org
http://www.redbanktv.org

Jim Lippard said...

If the telco slow tier is faster than anybody else's fast tier, then what exactly is the complaint about "degrading" service by putting it in the slow tier?

Surely the complaint of net neutrality advocates is not that telcos are going to provide better best-effort Internet service than the competition, and therefore must be stopped.

Jim Lippard said...

BTW, I'm paying $89/mo for 1.5Mbps down/384 Mbps up... I'd love to have subsidized fiber to the home.

RedBankTV said...

Hey Jim, here’s my answer to your question.

If Verizon's slow tier is faster then the competition’s fast tier then there is little incentive to switch from Verizon.

So (and this is a simple, flawed example but it may help make my point) if Verizon puts iTunes on their slow tier and partner with napster and put them on their fast tier your access to iTunes will be as good as ever. No problem right? Should I be upset that although I pay Verizon $50 a month for internet access that they give me fast, but not as fast as napster, access to iTunes. I think so. Would I choose to switch to cable and pay the same price for monthly access, knowing that Verizon offers much faster access to a lot of the web but not iTunes? Probably not; in fact I’d probably consider switching to napster, implicitly limiting my choice of music stores.

That’s why I don’t think there will be viable competition in your area once you have fiber to the home. The fiber provider will become the default internet provider. And that’s why I see net neutrality as being important for fair competition.

-- Tom

Jim Lippard said...

Mike: I'm looking into BPL for you. I know that there was a field trial in 2004 in Cottonwood, Arizona (near Prescott) by Electric Broadband LLC with Arizona Public Service and Mountain Telecommunications (a CLEC), which led to a lot of complaints from ham radio operators about interference problems. I'll let you know what I find out.

Jim Lippard said...

Redbank:

How is that scenario any different from the "unfairness" of having different access speeds to competing content providers, one of whom is paying extra to put their content closer to their customers through Akamai, and one of whom has everything in a single colo space with a cheap GigE link from a tier 2 provider?

If Verizon is providing iTunes speeds higher than anybody else, but Napster speeds even faster, I don't see that Apple or the Verizon customer has anything at all to complain about. BTW, I think you can improve your case slightly by changing the example to something involving traffic highly sensitive to latency and jitter that requires large amounts of bandwidth--HDTV is the realistic paradigm case.

But then the question becomes if Fox and CBS are willing to pay for access to provide HDTV over telco facilities and YouTube is not, how is that unfair? The cable companies have pretty much this model today--you don't get YouTube videos as a cable TV channel, it only comes over the Internet portion of the service. Should that be *illegal*? Net neutrality advocates seem to say yes, it should, and everybody should have access to run their own cable TV channel, over that reserved cable bandwidth, without having to pay the cable companies for it.

RedBankTV said...

The Akamai question is always a good one. I think comes down to this; an Akamai customer is choosing to pay for a better engineering solution to a problem, distributing their content to intermediary servers to provide better response across the net. Akamai is not in the content delivery business, they are in the packet delivery business. They don’t have a dog in the fight. You pay them and you get a better engineering solution.

Verizon is in the content delivery business and they are not fixing a problem with their Tiered Access plans; they are acting as a gatekeeper. Verizon has a lot to be gained by restricting competition. Restricting should be an important differentiator between the Akamai and Verizon approach. Akamai enables, Verizon wants to restrict.


To respond to your point about the difference between what cables cos. do with YouTube vs. network TV. ABC is currently streaming TV shows over the net, as long as my cable internet service provides the same packet delivery for that ABC show and for YouTube then we have a level playing field. (there are fundamental differences between the fiber IPTV services and the cable internet offering. The IPTV services is basically video streaming over the internet, traditional cable TV is a whole different thing)

To my main point, and the subject of your original post, do you see how there really isn’t competition for broadband when there is only one fiber player in town?


BTW – I’m not in entirely in favor of federal regulations to protect Net Neutrality, I think the market can do a good job of protecting it; legislation should be a last resort. I am pushing to have Verizon talk about their future plans for the internet and then to have communities (towns or states) use that as one of the deciding factors when it comes time to grant IPTV cable franchises.

Jim Lippard said...

Don't tell Akamai they're not in the content delivery business, their marketing team won't be happy to hear that. (Likewise for Phoenix-based Limelight Networks.) Point taken, though--they aren't providing the pipes to the consumer. But they *are* paying many consumer providers for bandwidth! You won't find Ed Whitacre using Akamai as an example of somebody not paying AT&T for the use of their network; unlike Google, Akamai connects directly to AT&T. (I must add that I think Whitacre's comment was ridiculous--Google is not free-riding on AT&T's network. If he wants Google's content to stop traversing his network it's easy enough for him to have it blocked by nullrouting Google's IPs on his network. But of course his customers would rightly be infuriated.)

How is Verizon acting as a "gatekeeper" if they're not blocking anything? They're offering differentiation, not discrimination (see Mark Goldberg on that distinction).

Why shouldn't they be allowed to build new infrastructure and reserve part of it for those who are willing to pay to provide services on it? Suppose a cell phone company creates a new service that allows you to download TV shows. All of those that exist today are partnerships between the cell provider and specific owners of content, not open-ended Internet access. Should that be illegal?

You modified my cable example--there's an equivalence between downloading ABC content over the Internet and downloading YouTube content over the Internet via a cable modem in *exactly* the same way there would be an equivalence between downloading ABC content and downloading YouTube content over the "public Internet" component of fiber to the home. But the HD cable channels are coming over reserved bandwidth alongside your Internet. Can you characterize a distinction between the mechanisms involved in my cell example, my cable example, and the Verizon fiber example that explains why they should be treated differently from a regulatory standpoint? (I don't think there's a *functional* reason, but there may be a historical one--namely, that the telcos got free access to public right of ways, get a share of universal service fees, and had the benefit of decades of regional monopoly status. But I think the right change to make there is to fix those aspects of the telco model so they aren't getting subsidies and free rides, which seems to be the way things are going.)

Would it be satisfactory to you if Verizon was required to *unbundle* any digital television or other service offering so that you had a choice of using the entire available bandwidth on the fiber for Internet access only?

BTW, I really appreciate your thoughtful discussion here--getting into these details is *essential* for any valid discussion of net neutrality issues, where most of what's occurring in the blogosphere is the emotional exchange of catch-phrases.

directorblue said...

>> How is Verizon acting as a "gatekeeper" if they're not blocking anything?

I'll pick apart your list later, but try running VoIP or any streaming service over EVDO -- or any wi-max offering for that matter.

Can't do it. Violates the TOS. It's blocked.

Jim Lippard said...

directorblue:

These guys seem to disagree with you about whether it's doable.

Are you saying that *every* EV-DO provider and WiMax provider's terms of service prohibits streaming audio and video? If so, please provide supporting evidence. BTW, I agree that EV-DO is on the low end for bandwidth among those I listed (but it is fast enough to qualify as broadband under the proposed "net neutrality" bills), and I pointed out the latency issues with satellite. As RedbankTV pointed out, fiber to the home is faster than all of the others today.

When you "pick apart" my list, please be specific about your facts, the conclusions you infer from them regarding what regulations you think need to be in place and how they will actually do what you want. Thanks.

directorblue said...

Verizon's terms of service for EVDO:

"Unlimited NationalAccess/BroadbandAccess:
Subject to VZAccess Acceptable Use Policy, available on www.verizonwireless.com. NationalAccess and BroadbandAccess data sessions may be used with wireless devices for the following purposes: (i) Internet browsing; (ii) email; and (iii) intranet access (including access to corporate intranets, email and individual productivity applications like customer relationship management, sales force and field service automation). Unlimited NationalAccess/BroadbandAccess services cannot be used (1) for uploading, downloading or streaming of movies, music or games, (2) with server devices or with host computer applications, including, but not limited to, Web camera posts or broadcasts, automatic data feeds, Voice over IP (VoIP), automated machine-to-machine connections, or peer-to-peer (P2P) file sharing, or (3) as a substitute or backup for private lines or dedicated data connections.

NationalAccess/BroadbandAccess is for individual use only and is not for resale. We reserve right to limit throughput or amount of data transferred, deny or terminate service, without notice, to anyone we believe is using NationalAccess or BroadbandAccess in any manner prohibited above or whose usage adversely impacts our network or service levels. Verizon Wireless reserves the right to protect its network from harm, which may impact legitimate data flows. We also reserve the right to terminate service upon expiration of Customer Agreement term."

This type of TOS agreement is typical. And it will only get worse when there just two remaining telcos.

directorblue said...

And no one's saying it's not possible. I'm saying VZ is blocking plenty of services today.

RedBankTV said...

Jim, I’m enjoying this discussion and there is a lot to cover, I’ll try to touch on all of your points without making this a marathon post (edit: too late for that), if I don’t get to it all here I’ll try to circle around to it in a later post. -- Tom

Good catch on the Akamai content delivery business link, pretty funny that they a page dedicated to just that. What I meant was that they are not in the content creator or re-seller business; thus they have little to gain by favoring one content provider over a competing content provider, unlike the telcos.

The comments by Ed Whitacre and others really are talking about the last mile, not the connection to the backbone, which is what the genesis of your original post is talking about.

I think Mr. Goldberg’s comments are wide of the mark when it comes to this discussion. He looks at the telcom acts and legal terminology, his posts speaks to what is legal vs. illegal. I think we should be looking beyond legalities and legislation and trying to agree on what is best for the future of growth and competition on the internet.

I have a Verizon Wireless EVDO phone and I subscribe to their VCAST service (it’s a very good service btw). Verizon Wireless owns their network. In theory there would be few barriers to entry if I wanted to build my own cell network and sell tv shows over it. So I don’t have a big problem with Verizon Wireless. Now, can I run my own fiber-to-the-home lines? No, towns and cities wouldn’t let me do that because they don’t want additional lines strung and because the telcos have exclusive agreements to be telecom providers. So there is a big difference between the two models. I think that public funding and exclusivity agreements make the public part “owners” of Verizon’s fiber lines.

To get to your point about the cable TV example we have been using let me start by saying: I don’t know. I don’t know what differentiates the Verizon HDTV packets and the regular internet packets. To me it looks the same; I think that Verizon has already managed to put a tiering plan in place by delivering iptv over their fiber. There may be a technical difference that I am not up to speed on but it looks to me like Verizon is already using a good chunk of the bandwidth that should be available to the public to deliver their TV service. The telcos really love legislation (which makes their fight against Net Neutrality regulation kind of funny) and I would guess there is some legislative loophole that allows them to do this.

I think your comments about unbundling strike pretty close to what Net Neutrality is all about and maybe we should discuss that more.

One new point I’d like to add. We’ve talked a lot here about video being the driver but I don’t like using that as the example. My concern about Net Neutrality is that it could discourage the next great internet company; which for all I know can be forming right now in my small Jersey town. Let’s say someone comes up with the idea for a product, one with potential to be as cool and as trendy and grow as fast as the iPod. Maybe it’s a body suit that picks up thousands of data points all over your body and this new company finds a way to build an online community where people wearing this new suit could interact in real time in a virtual world. The only problem is, bandwidth, sending all of that data across the net requires high speed connections, maybe equivalent to what HDTV requires. I’d like to evaluate how that company could grow on a Neutral internet vs. a Tiered internet.

I really don’t care about today’s googles or content providers my concern for Net Neutrality is based on the future of the internet and can it continue to be the economic engine that it has been for the last 15 years.

Jim Lippard said...

Doug (directorblue): You've proved your point on the Verizon EVDO TOS. Do you think they might have a reason for those terms on the basis of (for example) capacity? Is it your position that Verizon should be prohibited from having that clause in its TOS, even if the result would be P2P users causing network disruption for other customers? (BTW, I find the idea of using a cell phone to provide a data link to a computer for use as a soft phone to be a little convoluted--I think fixed-mobile convergence and WiFi phones makes more sense.)

Tom (RedbankTV):
It sounds like your underlying position is similar to mine in terms of what we want, and a willingness to examine the empirical evidence to determine what's most likely to get us there. I don't have much to disagree with, except that I question your statement that "In theory there would be few barriers to entry if I wanted to build my own cell network and sell tv shows over it." The biggest barrier is obtaining spectrum licenses. I favor more of a market approach (which, if you read the book "Wireless Nation," is what actually happened independently of the FCC to get cellular networks off the ground, in something the players called "the Big Monopoly game").

Mike Linksvayer said...

Great discussion.

Re: BPO trials, I've heard of a bunch, next to no followup, which of course makes me wonder whether any have panned out.

The relevant wikipedia article has more information than I remember last time I looked about interference and deployments (still looks very inconclusive). Via wikipedia I found a list and map (pdf) of deployments.

directorblue said...

I've critiqued your list here using everything but brass knuckles and a two-by-four. Your list is, in fact, stark evidence that no last-mile competition exists and net neutrality provisions must be in place until real competition is in place.

Richard Bennett said...

Directorblue, your "critique" is an embarrassment to your mother because your criteria are so inconsistent and dubious.

Susan Crawford, the law professor who originally hi-jacked the term "net neutrality" from Tim Wu advocates an "unbundling" regime where multiple ISPs are available over a common pair of DSL wires. In her view of "net neutrality" this is the goal, not multiple sets of wires to each home.

Crawford is much more loony on neutrality that Wu, because she doesn't understand networks as well as he does. Wu admits that the Internet as it was originally designed has a built-in non-neutral bias against real-time applications. Crawford is the patron saint of the Save the Internet Coalition, and if you insist on having an even more extreme view of consumer choice than she, you'll have to accept the fact that virtually nobody on this planet agrees with you.

Kathy Basham said...

Very informative article, i never ever found this type of article, i have found an article on broadband at

http://www.broadbandprovider4u.co.uk/broadband_articles.html

there are many articles but as you gave information its really nice...

thanx for such a great information...

Jim Lippard said...

It's been noted that I omitted Cingular's EVDO service (256kbps).