Dana Blankenhorn

The Bell Two-Step

W. Scott McCollough, an experienced telecommunications attorney who has represented many companies trying to compete against the Bells, has taken apart the legal argument underlying their latest claims against "network neutrality" and submits the following:

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They are carriers or they are not. There is a market for broadband or there is not. (Image from Goodlogo.Com.)

If we take what Whitacre said last week clarifying his prior remarks:

1. AT&T/Verizon are not trying to charge Google et al for use of the local network. The consumer pays for that so the network provider is made whole.
2. When Google  et al buy big fat pipes to get to the backbone they presumably also pay compensatory prices for those facilities and services. They are acting in a consumer capacity, not a provider capacity. I'll ignore the slap about cheap servers since it is irrelevant unless the telcos want to charge different prices depending on the edge device (and/or the price and functionality of it) that is used.
3. What the network providers want to recover is the alleged extra cost of connecting to the "Internet Cloud" and any peering/transit costs relating to sending consumer requests up and delivering "content" (my gripe about using "content" to describe information is fodder for another post some other day) down. Apparently, they think that a "content provider's" "content" when composed of many bytes that often "require" "preferential" treatment in
   order to actually work for the consumer imposes additional cost that the network providers think is better assigned to the "cost causing" "content provider." (Note: I'm not agreeing with this analysis, just trying to articulate what I interpret their position to be.)

There are ratemaking analogies to what is going on. Care to follow along?

Net Neutrality is a Phony Issue

From the author of $200 Billion Broadband Scandal, Bruce Kushnick:

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This entire series of scare tactics should simply be another indication that the Bells will come up with more ways to screw the public.

Instead of allowing them to 'please sir may I have another', why is anyone taking these new demands as if they have any validity.

What should be on everyone's mind is --- Investigate the Bell companies for their  failure to deploy fiber optic networks over the last decade and for charging customers about $200 billion in excessive phone charges and tax perks for networks they never received!

1. Customers funded OPEN fiber optic networks. The fact  is that it took
   a decade for any Bell fiber service  to show up and still isn't here in any
   meaninful way. However:
2. The Bells companies collected money for these networks over the last
   decade ---It could be argued that they should be required to sell off their
   other assets to pay for these networks that didn't show up
3. $200 billion is the low number. This entire issue is a customer-takings. Customers, not the Bell companies have become defacto investors.For example the audits of the continuing property records showed that 20% of the equipment in the networks was missing. --over $80 billion in equipment that is missing was added to phone rates, starting the 1980's.-- We have an  active IRS investigation going. The fact that every service was based on inflated expenses, including our current fees, is what should have been investigated. We estimate this alone cost customers $600 per household!
4. Why are we not investigating all of the money collected and never put into the ground, as well as the cross-subisization of the DSL, Long disrtance and wireless roll outs, which inadvertently was charged to customers. Customers have been illegally funding the rollouts of these services. In California alone the Bells got over $190 million out of customers. (Based on California audits.)
5. This argument has nothing to do with the actual cost of service. The real issue --- examine the Bell's capital expenditures.

Since Ivan Seidenberg feels so strongly that Verizon needs relief, let's look at the record.  In 2000,  Verizon's domestic telecom expenditures were $12.1 billion NOW, in 2005, Verizon is claiming to be spending all of this money on FIOS, its latest fiber to the home plan.  Yet its total domestic telecom expenditure in 2005 was $8.3 billion.

                                    2000           2005          2004
Revenue                   $64,707        $ 75,112     $71,283
Cap spending  total   (17,633)      15,324 $       $13,259
Telecom                    $12,100        $ 8,267     $ 7,118
Depreciation     `                           $ 8,801

And they wrote off more than they put into the ground. In fact, overall, the Bell companies spent
$18 billion in 1984, and in 2004 spent $17 billion, even though revenues went up 128%.

Google Joins The Political Fray

The failure of the present de-regulatory scheme has finally moved Google to enter the political fray.

The entrance came in the form of "chief evangelist" Vint Cerf (a Medal of Freedom winner lauded as "Father of the Internet"), in testimony before a Senate Commerce subcommittee.

It's a powerful statement.

Allowing broadband carriers to control what people see and do online would fundamentally undermine the principles that have made the Internet such a success.

Cerf noted that most Americans no longer have a choice of broadband carriers. Letting monopolists dictate what they can access, and how, for their own benefit puts them in control of the Internet experience. But this is what really laid the smack-down:

It is also critical to our nation’s competitiveness – in places like Japan, Korea, Singapore, and the United Kingdom, higher-bandwidth and neutral broadband platforms are unleashing waves of innovation that threaten to leave the U.S. further and further behind.

After detailing the history of the Internet, and the threat posed by other countries passing using policies the U.S. itself pioneered a decade ago (requiring wholesaling in England, for example), Cerf got to the main legislative point, namely that the present bill claiming to support network neutrality, known as BITS II, in fact does no such thing.

Can FON Save Us?

Google and Skype have both decided to invest in FON, a system that lets people share their WiFi access.

Is this a substitute for fast access via wires?

TheWirelessReport says $21.7 million was raised. Om Malik is skeptical, although FON says it will sell Linux-based routers pre-configured for its service at just $25, against the $75-100 cost of current 802.11g routers. Argentine entrepreneur Martin Varsevsky is the man behind it. He calls those who are using the system "Foneros," and says 3,000 have downloaded the software so far.

Glenn Fleishman writes this:

Fon as a grassroots effort seemed to me to be headed to the same dustbin that led other companies to abandon trying to get individuals and small businesses to install hardware that would turn them into hotspots. Let’s face it: most locations that are good for a hotspot are either already under contract, don’t want it, or are complicated. Someone’s house in the suburbs or an apartment in Manhattan are probably bad hotspots for different reasons. But if Fon is going to use the money and connections it now appears to have to seed its network, there’s more of a likelihood of it working, especially given what seems to be a very high commitment to signing up ISPs instead of signing up users and having them worry about whether their ISP finds Fon appropriate or not. To date, it’s been quite tricky to set up a hotspot with authentication (user accounts and billing) without either having enough traffic to warrant a for-fee provider setting up your service, or, if you don’t want to charge, without either taking on all the tasks yourself (and not using accounts) or paying a managed provider $50 per month to be part of their system and have them handle tech support. So Fon could fill a gap if they put out thousands of hotspots into cities that have gaps, and work with ISPs as a way to let customers easily build networks. I’m still pretty dubious about the notion of every home being a hotspot because that requires incredible luck and coordination to get continuous zones of coverage, and outdoor coverage really requires antennas — not just an access point in the window.

The idea has started to attract others as well. Wibiki is another such project . Sharemywifi.com is the latest to enter the space as well and seems to be a copycat of FON.

If you have broadband access and a WiFi network, you can share it with others, for free or a small fee. List your network on the site (it’s free). Then when someone comes to the site to search for broadband access and they find you, they’ll send you an email. You and the person can work out the details of sharing however you’d like.

More after the break.

Who Wants An Alternative?

Steve Stroh writes:

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Show of hands... who wants to build alternative delivery networks so
you don't HAVE to use cableco or telco?

Bill St. Arnaud's doing it with fiber. I'm doing it with wireless. Whatever works that's NOT telco/cableco. The telco/cablecos are  STUPIDITY and CAN be routed around.

For those that have access to irresistible bandwidth bargains like FIOS, I foresee a rise of a new class of service providers - VPN end points; all of your Internet traffic from your home to a "neutral point" on the Internet is encrypted inside a VPN, and once your traffic hits that "neutral point" it's taken out of the VPN and routed to its destination. VPN used to be computationally intensive and complex to configure. Not any more - it's being bundled into routers, and Hamachi made VPN into a download no tougher to use than Skype.

If the  "crackdown" happens, use of VPNs will happen as a counter-action. From the service provider's perspective, it's an irresistible business - all that's needed is (now open source) software, bandwidth, and CPU cycles.

Hamachi seems to have it down. When they have the Mac client and offer the endpoint service, I'm signing up. Boingo's already there (when you use their client software at a Wi-Fi Hotspot). HotSpot VPN is another.

The need for VPN isn't yet widely recognized, and the services aren't very high profile - YET. All it's going to take is a mention from a Mossberg or Manes or Levy... and a tipping point will be reached in weeks.

A Close Look at Verizon

From the desk of Bruce Kushnick:

Since Ivan Seidenberg feels so strongly that Verizon needs relief, let's look at the record.

In 2000,  Verizon's domestic telecom expenditures were $12.1 billion

NOW, in 2005, Verizon is claiming to be spending all of this money on FIOS, its latest fiber to the home plan.

Yet its total domestic telecom expenditure in 2005 was $8.3 billion.

                   				      2000           2005        	2004

Revenue          			   $64,707        $ 75,112     $71,283

Cap spending  total  		     (17,633)      15,324 $      $13,259

Telecom          			    $12,100        $ 8,267        $ 7,118

Depreciation     `              				$ 8,801

Click below for the meaning:

Today's Reading

Bruce Kushnick offers some articles you should read today.

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Let There Be WiFi

By Robert McChesney and John Podesta, The Washington Monthly

Broadband is the electricity of the 21st century -- and much of America is
being left in the dark.

Interview with Verizon CEO Ivan Seidenberg

The Washington Post

"If the company does not get some relief, Seidenberg said, it will have to reconsider whether to serve small franchises and might instead focus on big ones. 'This is the only threatening comment I’ll make. . . . Remember, there are some franchises that are big. So let’s take the city of Philadelphia — it’s big,' he said. 'Then you’ve got all these oodles of them in the state of New Jersey, or Virginia."

 

Boycott This

The Columbia Institute for Tele-Information,and the School of Public Policy and Public Administration at George Washington University and the Federal Communications Bar Association present "The Telecommunications Act of 1996: Ten Years Later"

Bruce Kushnick:

Turns out that the two representatives for the CONSUMERS are Sam Simon, of TRAC,  (who runs the largest Bell Skunkworks' and astroturf group,) and APT''s Daniel Pythyon, who is also the lawyer for the Bells' lobbying arm, USTA. APT is funded by the Bell companies.

More information at our Skunkworks. Still more below the fold:

The Big Lie In The Broadband Debate

The biggest lie in the debate about broadband is that it's expensive, and that its price is rising.

NO, writes Bob Frankston:

THIS STUFF IS CHEAP CHEAP CHEAP. IT's FREE! Better, it reduces the costs so don’t pander to those who assume that pain is virtue.

1. We’ve already paid for so much and its running.
2. Savings over the current very complex billing system (such as building redundant infrastructures) would save a lot.
3. Using a common infrastructure would save a lot
4. Simply sending X-Rays as bits would save an incredible amount of time and money.
5. People should be able to buy their own local connectivity to their neighbors.
6. Wireless is becoming an amenity.

Forget the bonds, just pay for it at of pocket change. Google alone would gain a lot by having connectivity available. Just about any single application such as reducing health costs would pay for much of it.

This is not like the multizillion dollar projects. This is cheap – it saves money.

So we shouldn’t be held hostage to cheapskates. Instead focus on where there is awareness and build from there. Forget the third world burgs that would rather punish P2Pers. If they want to opt out, then go to

Bangalore

Evolution works. Those who don’t get it are simply sloughed off. You may have to move to a more connected and aware community but that’s the same as choosing a place to live by the schools that are available.

We don’t have to win every battle, just make some opportunity available and work from there.

Frankston drew this response from Michael Bookey of Pachena Light Consulting:

The Battle of Wyoming

Recently, Level 3 Regulatory Counsel Erik Cecil brought former FCC official Dale Hatfield to Wyoming in order to fight a Qwest effort to gain a virtual monopoly on Internet backhaul in that state. (Wyoming map from Wikipedia.)

Qwest went to state regulators to demand that Level 3, which offers competitive pricing on fiber-based backhaul, would have to connect everywhere in the state before it could be allowed to do business. Cecil was fighting this effort to secure an  effective monopoly, and at the last moment Hatfield agreed to testify against the Qwest effort.

Writes Gordon Cook: Spread the word.  Tell it to the farthest corners  of this land that the power of money to choke the lifeblood out of  rural communities and fuel the bank accounts of corporate magnates,  is NOT what the United States of America stands for.  Rather that it  stands for those like Eric Cecil and Dale Hatfield who will fight for  what they believe is right.  And that it stands for those who are  willing to risk their well being in order to preserve freedom of 
opportunity for their fellow citizens.

And now, Mr. Cecil: