Broadband

Mayors and city councils are the chief threat to affordable broadband, as my colleagues and I often remark. Many places, like my hometown of Portland, Oregon, for example, tax telecom because they don’t have to get taxpayer approval (they know they couldn’t get that). But unfortunately for the Portland City Council, Oregon has the initiative and the referendum. The City Council wanted to raise taxes on cellphones, but the industry signalled its intent to call for a referendum (a poll showed that 58% opposed the cellphone tax). Telecom taxes and cable franchise fees are generally viewed only in terms of local government’s insatiable need for cash. As a result, these services are taxed nearly the same as alcohol and tobacco. Read More ›

AT&T, BellSouth and Verizon are pursuing radically different approaches in the quest to deliver real broadband to the American home. With capital expenditure concerns in mind, AT&T and BellSouth are extending fiber to the the neighborhood. There will be a large market for this type of broadband until sometime in the next decade. Verizon has made the decision to bring fiber directly to its customers’ premises. Many naysayers are highlighting the challenges confronting Verizon (see, e.g., “Verizon Hits Hurdles in Big Bet on New High-Speed Network” in today’s Wall Street Journal). But they ignore that the costs of laying fiber are decreasing rapidly and will be approaching that of DSL later this decade. Verizon’s optical network will be mostly installed Read More ›

One of history’s great propaganda experts believed that if you repeat a lie often enough it becomes the truth. A lot of politicians follow this advice. The Consumers Union and the Consumer Federation of America endlessly wave the same bloody shirt of higher phone rates. The latest incantation is: “If approved, [the] merger [between AT&T and BellSouth] will lead to higher local, long distance and cell phone prices for consumers across the country.” This is absurd because AT&T and BellSouth do not compete against each other for local or mobile phone services. And any competition between them in long distance is de minimis. The consumer groups see these companies as potential competitors. They have argued unsuccessfully for years that antitrust Read More ›

Well, that didn’t take long. On Tuesday night the Indiana General Assembly passed the nation’s most far-reaching telecom deregulation, which Gov. Daniels has said he will sign. Today, Friday, I see telecom crews surveying rights of way around my neighborhood to lay new optical fiber. Let’s start the clock and see how long until the optical multimegabits reach my house. Ready, go…. -Bret Swanson

A survey conducted by the American Consumer Institute documents significant consumer savings as a result of the statewide franchise legislation enacted in Texas. For example: “The benefits claimed by those who switched were very substantial. According to the survey, customers that claimed benefits from switching to a competitor saved, on average, $22.50 per month on their cable bill, and those switching to any provider saved, on average, $22.27 per month. This suggests that price competition is occurring among the providers. For these customers, the savings represented approximately a 30% decrease in price, which is nearly identical to the FCC’s estimate of 27% lower price per channel in competitive markets (footnote omitted). From this, we can safely assume that the new Read More ›

The Indiana General Assembly tonight approved the nation’s most far-reaching, far-sighted telecom legislation, substantially deregulating the industry and radically simplifying the local video franchising process. Growing up here and living here now, I have a special interest in this effort and hope to see crews stringing optical fiber near my house soon. Gov. Mitch Daniels soon will sign THE BEST telecom law in America. Will other states follow? -Bret Swanson

House Energy & Commerce Chairman Joe Barton (R-TX), along with Reps. Chip Pickering (R-MS) and Fred Upton (R-MI) have an alternative plan in mind for cable franchise reform, according to this afternoon’s National Journal’s Technology Daily ($). Like the Dingell plan, the Republican vision includes a national franchise according to which new entrants would pay the customary 5% franchise fee to localities. But the Republican is superior in two critical respects: No build-out requirement. No requirement to negotiate with local franchise authorities as a pre-condition to obtain a national franchise. It may sound counterintuitive, but the absence of a build-out requirement is actually better for consumers because it reduces investment risk. Tens of billions of dollars are necessary to extend Read More ›

A draft franchise reform proposal authored by Ranking Member John Dingell (D-MI) of the House Energy & Commerce Committee, details of which were reported in today’s Communications Daily ($), increases the likelihood that final legislation would: Allow new video entrants to avoid in-kind contributions to cities (currently averaging approx. 3% of gross revenues) on top of the customary 5% (of gross revenues) fee, Would give the new entrants 10 years to provide their service to every household, and Allow the incumbent cable operator to opt in to the streamlined process as soon as the new entrant has a 15% market share. Dingell, who has traditionally defended the cities on franchise issues — and intends to do so again — reportedly Read More ›

This week’s hearing on local franchising in the Senate Commerce Committee was breathtaking. Senator after senator expressed doubts about the wisdom of subjecting new entrants to the cable franchise process. Consumer advocates generally supported the phone companies. The same day, a group of 6 Republicans and Democrats on the committee signed a letter stating that Congress should reform the franchise process. “I think the stars are aligned,” noted Senator Jay Rockefeller (D-WV). One gets the impression that the cable industry hasn’t been paying attention for the past 25 years, as they take positions and employ arguments that monopolists have used in the past with little-to-no success (see, e.g., Deal of the Century: The Breakup of AT&T [1987], by Steve Coll). Read More ›

Yesterday the head of the trade association representing most of the nation’s telephone companies testified that telephone companies will not block, impair or degrade what consumers and vendors can do on the Internet. “Today, I make the same commitment to you that our member companies make to their Internet customers: We will not block, impair, or degrade content, applications, or services. That is the plainest and most direct way I know to address concerns that have been raised about net neutrality.” –Walter B. McCormick, Jr. President and Chief Executive Officer United States Telecom Association February 7, 2006 As a practical matter, a voluntary commitment is significant because it is a de facto standard by which the actions of individual companies Read More ›