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June 24, 2014

How to Assess AT&T and Verizon's 'Broken Promises' on High Speed Access



By Gary Kim
Contributing Editor



There is a recurrent line of thinking that AT&T and Verizon consumer benefit promises are rather routinely missed. Some might point to Verizon’s (News - Alert) fiber to the home plans.

Sometimes the criticism is warranted. Others might insist making fiber available sometimes requires more than service provider will. Getting right of way agreements with property owners in New York provides an example.

If you ever have had to build a communications network in New York City, you know that getting rights of way, or rooftop space, is a slow, difficult, sometimes expensive proposition.

Also, there is a difference between making a service available, and consumer willingness to buy offered products. Service providers cannot make people buy their products, so sometimes observers will quote “take rates” when otherwise talking about “availability.”

One can disagree about the level of consumer demand for 50 Mbps, 100 Mbps or gigabit Internet access service when pricing is in triple digits a month. But that is a different issue than the separate issue of whether such service is available for purchase.

Perhaps the industry’s gadfly with regard to “broken promises” is Bruce Kushnick, New Networks Institute executive director.

As nearly as I can recall, Kushnick has been making this very argument for decades. Kushnick does not simply express an opinion, but always tries to support his contentions with facts.

Others might disagree with some of the facts, but Kushnick typically provides a reasoned and “from the record” comparison of promises and results.

A fair observer might note that results can be questioned. But a fair observer might also note that the U.S. communications market has developed in a more-complex way than originally expected by policy makers or practitioners.

Without implying any intent to deceive, and granting the benefit of rapidly-changing market conditions, most fixed network telcos have in the past overestimated what they actually could accomplish, underestimated the impact of serious competition from cable companies and others, and proven at least partly incorrect about the development of technology and the costs of technology.

Those are mistakes, to be sure. Telcos might rightly argue that the business case for some investments has become more challenging in the extreme. And what is true for some providers might not be true for all providers.

Google (News - Alert) Fiber is showing that, with some regulatory and flexibility, a firm with a better cost structure can innovate in seriously important ways, such as delivering a symmetrical gigabit service for just $70 a month.

Nearly everyone might agree that universal fiber deployment, or the equivalent, has been slower than expected or promised. Many would argue there are good reasons.

Chief among those reasons is the risky and precarious financial return from widespread fiber to home networks, on the part of the dominant suppliers.

Other providers, with different cost structures and business models, might do better. But it is hard to argue that fiber to home projects are “obvious” winners, in a business model sense.

Additionally, the best use of scarce capital is an issue.

There are competing priorities for limited capital, often also directly related to the quality and speed of consumer connections.

Untethered and mobile alternatives are important. Investment has to be made in those areas as well. And the business case is much clearer in such cases.

Yes, progress is slower than most of us would prefer. But there are reasons why progress is so tough. 




Edited by Maurice Nagle
 
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