Broadband

Verizon recently issued details on its massive investment in broadband. As great as it sounds, it’s still a far cry from Japan. The American company expects to invest $18 billion between 2004 and 2010 in a network that will bring fiber to the home or business (FiOS). The investment generates “profitable growth” within 4 years. By the end of 2006, Verizon expects to offer fiber Internet connections to 6 million premises. So far, about 15% subscribe to the service. The company therefore has a target of 725,000 fiber Internet customers by the end of 2006. By year-end 2010, Verizon expects to offer the service to 18 million premises and it predicts that it will have 7 million customers.


Fred Leonberger of EOvation Technologies, among others, have noted that NTT of Japan expects to have more than 6 million fiber subscribers by early next year. By 2010, NTT expects to have 30 million subscribers. Leonberger pointed this out during a panel discussion at Telecosm last week in Lake Tahoe on the subject of optical networks.
This is another bit of evidence that we are doing something wrong in the U.S. Specifically, we are over-regulating and over-taxing communications services while we needlessly alarm investors that more is on the way.

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Critics claimed broadband access is a duopoly (a market in which there are only two providers) but this is technically inaccurate in much of the country so now the complaint is that 98 per cent of broadband customers receive their service from either the telephone company or the cable company. Even this criticism is irrelevant. Consumer harm occurs where prices are excessive or quality is deficient. In the case of broadband, competition is leading to lower prices and higher bandwidth. “Duopoly” Most economists agree it’s misleading to read too much into market shares, although I could point out that regional bell operating companies — the main targets of net neutrality regulation — report only 39.3% of total high-speed connections and Read More ›

A small rural community in Western Oregon has a communications network that is far more advanced than most American cities, with IPTV available to every resident. So reports Bobby White, who profiled Monroe Telephone Company and its president, John Dillard, in today’s Wall Street Journal. Dillard participated in a conference on universal service reform sponsored by the Discovery Institute earlier this year, where he shared ideas for making universal service more efficient and sustainable — ideas that do not exactly place Dillard in the small company maninstream. Dillard’s investment in IPTV is part of a small company trend. White cites an industry analyst who estimates there are 313,000 IPTV subscribers in the U.S., 95% of whom subscribe through a “rural Read More ›

The member of the European Commission in charge of telecom, Viviane Reding, admits that these are “times of convergence where we can access music, emails and media content using different terminals and networks and where also the borders between fixed-line and wireless are disappearing.” She has therefore initiated a review of the EU telecom rules — with a focus on opening up more spectrum, regulating less in markets “where competition is already effective” and achieving “competition and investment.” On the positive side, Reding advocates phasing out ex-ante sector-specific regulation — leaving control with competition law and authorities — and reducing the variety of regulatory approaches in recognition that “neither technology nor economic interest nor consumer behavior know national borders anymore.” Read More ›

The telecom reform proposal under consideration in the Senate Commerce Committee would create a $500 million account as part of the Universal Service Fund to subsidize broadband deployment in rural areas. The anecdotal evidence for some time has been that rural areas actually are not far behind urban areas as it is. Part of the reason that there is not much of a lag is small rural telcos have been able to finance broadband upgrades with USF. In a paper released Friday, the Congressional Budget Office sheds some much-needed light on the rumors. CBO claims that broadband is in fact permeating rural areas at a “rapid pace,” and cites a finding from the Pew Internet and American Life Project that Read More ›

How is it that in a technical discussion former White House press secretary Mike McCurry can get the best of Craigslist founder Craig “Hey, I’m an engineer” Newmark? Silicon Valley’s self-destructive hatred of the telecom companies continues to astound. See the Newmark-McCurry debate over “net neutrality” and also my reply at The Wall Street Journal. From: Guest 5:18 pm To: WSJ.com Editors (27 of 29) 3897.27 in reply to 3897.1 The “net neutrality” debate has become so confused that even the Journal’s brief introduction to the McCurry-Newmark debate got it wrong. Congress is *not* “mull[ing] legislation that would allow Internet service providers to charge Web sites for preferred delivery of digital content.” Network operators have always charged different prices for Read More ›

Sen. Ted Stevens (R-AK) rightly worries that current universal service mechanisms are unsustainable as consumers migrate to Internet phone services that are lightly taxed and regulated (these services clearly should contribute their fair share). Stevens and others also believe that rural America won’t get broadband services without subsidies (we can’t know this for sure, because we have never tried the alternative approach of removing all of the barriers to competition and investment). Anyway, while Internet content and conduit providers obsess over net neutrality, something equally harmful is lurking in the shadows. A little noticed provision in the Senate’s “staff working draft” designed to expand the universal service funding base could have profound consequences. Currently, consumers of “telecommunications” services contribute billions Read More ›

Net neutrality advocates argue that network providers have the ability and the incentive to block access by consumers to the web sites of their choice. At a Mar. 14th Senate Commerce Committee hearing featuring several high-placed Wall Street analysts, this question was addressed: SEN. STEVENS: Let me ask you about this net neutrality problem that two of you have mentioned substantially. Do you think a network operator could block access to a company like Google or Yahoo! and really get away with it? MR. SZYMCZAK (JPMorgan): I think that would be very difficult to sustain on an ongoing basis because if we think about it in a competitive nature, if the phone company were to block it, a lot of Read More ›

A group of Wall Street analysts provided key advice to the Senate Commerce Committee at a hearing Mar. 14th. The following excerpts are drawn from both oral and written testimony (emphasis added throughout). In a nutshell, the consensus is that the investment outlook for broadband is somewhere between uncertain and bleak. Net neutrality or a la carte regulatory mandates would make the outlook worse. “As media consumption over the Internet develops at a rapid pace, I believe that it is too early to introduce regulation on key issues such as a la carte packaging and pricing and on net neutrality as the market is still in its early stages. In fact, the broader media and communications sector is perhaps at Read More ›

An article by Robert Litan highlights some of the efficiencies that broadband could mean for health care, as quantified in a recent study by the same author. The potential applications and anticipated savings are fascinating. Litan cites one study, for example, which found that broadband-based remote monitoring for all chronically ill patients could reduce hospital, outpatient, and drug expenses by 30 percent — reducing overall health care expenses for the United States by roughly one quarter, or about $350 billion annually. (See “Massive Economic Benefits Foreseen: Ultra-fast telemedicine and telecommuting can save money and improve quality of life,” by Robert E. Litan.)