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Let Them Eat Satellite
Sunday, 30 January 2011 14:56
The February 8 USF/ICC proposals set a policy that perhaps 1% of the U.S. should get satellite, I've inferred. I have not seen the latest drafts of the program, however. Fortunately, new satellites offer 5 megabit service and somewhat improved latency.

   Landline broadband to 100% of the U.S. would cost $20-35B, the planners calculated. Use satellite for 4/10ths of 1% and the cost drops in half. In that last half of 1% are many homes that would cost $10,000 and even $100,000 to connect. Unofficially, the planners decided that was just too much to spend, especially when the the new satellites can offer 5 meg service. They decided government money should go first to areas that could be served for a few hundred or a few thousand dollars. What everyone understood was that the more expensive areas would probably not be reached, but no one said that aloud. I expect the same will be true in the new USF/ICC proposals. The details in practice will offer only satellite to the most remote, but that won't be stated.  One policy expert thinks they will ultimately use satellite for 2% or 3%. If so, the cost of efficiently reaching everyone else by land will be under $5B
   
   Rural France, Ireland, Australia, U.S.: You Get Satellite I wrote a year ago  Australia's NBN decided to invest in their own satellite for that purpose, as has Canada. The Rural utilities service set aside $100M of stimulus money for satellite to 400,000 homes. If that's effectively delivered, it would be almost 10% of those who can't currently get broadband at $250/each and a very smart program.   
Last Updated on Monday, 31 January 2011 20:54
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Timotheus Höttges: Deutsche Telekom in Serious Straits
Tuesday, 25 January 2011 19:07
CandideDT CFO Timothy Höttges paints a dismal picture of company prospects in a January 14th presentation. He leads with a slide showing the company finances are "highly exposed" with a debt to equity ratio worse than France Telecom, Vodafone, Verizon, AT&T and even Telecom Italia. The stock price has gone down 30% compared to the index in the last two years. Earnings the last five years haven't always covered the dividend. But Slide 10 is really scary for investors.  "In order to develop our business, we need long-term oriented equity markets." Sure, the market overplays quarterly and annual earnings like a mad crowd, but Höttges has no reason to think he can change that. Any prudent CFO would develop a future plan that isn't dependent on revolutionary changes in market psychology. He wouldn't be dependent on living "the best of all possible worlds." 
Last Updated on Friday, 28 January 2011 13:03
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Debunking the Broadband Hype - Dave on video
Friday, 14 January 2011 14:54

Dave_on_TelecomTVGuy Daniels of TelecomTV interviewed me about the U.S. broadband plan and I spoke about how little is actually being accomplished. He did a good job with the video, capturing my New York accent, furrowed brow and unkempt hair. He writes "So broadband creates new jobs, stimulates economic growth, and will lead us out of recession? And to achieve this, we need more spectrum for wireless broadband to play its part? Sometimes it pays to question these assumptions, which is why we went to see the editor of DSL Prime in part 28 of the ‘Connected States of America’ series Watch the video »

     I need to correct two errors I made. I said more "broadband" when I meant "more spectrum" early on. I also said that less than 5% will actually go to building broadband for the unserved but it may be as much as 15%. They intend, last I heard, to take money from existing phone subsidies for the poor and apply it to broadband. Robbing the poor to help the poor is not providing new money. Meanwhile paying the companies 50-100% more than it would cost in a competitive market is not "helping the poor" - that's corporate welfare. db

Last Updated on Wednesday, 19 January 2011 00:56
 
"AT&T effectively overstated earnings by $17B over the past decade or so."
Thursday, 13 January 2011 15:40
AT&T_losses"AT&T effectively overstated earnings by $17B over the past decade or so," Craig Moffet writes, although AT&T announced the writeoff as $2.9B.  Like other companies, they've been using unrealistic assumptions for their pension plan and resisted write-offs for losses. I haven't double checked Craig's $17B estimate, but the amazing $30B lost in 2008 alone makes a high estimate sensible. As far as I know, AT&T financials follow the law and GAAP and are no more abusive than many, many other major companies.

    Randall Stephenson is a very good finance man, but I never imagined he could lose $30B and hide it so effectively most of Wall Street paid no attention. (I missed it too.) AT&T's pension funds lost money massively along with the market, and have only partly recovered. The result of the changes, Moffett believes, is "future long-term earnings will be inflated by writing off in past periods the substantial accumulated actuarial losses that would have otherwise been booked over the next decade."
 
Last Updated on Wednesday, 19 January 2011 00:45
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50-100 Meg DSL to 80% of Taiwan by 2015
Wednesday, 12 January 2011 17:10

ChunghwaNearly half of Japan's vaunted Fiber to the Home is actually VDSL from a fiber-fed DSLAM in the basement (FTTB.)  Chunghwa Telecom, facing 50+ meg cable competition, is building a similar network. They just raised the top speed from 20 to 50 megabits on their FTTB service. FTTB now serves 1.8M customers, half of their total customer base (Taiwan Economic News,) and they committed to bringing 50 & 100 meg to 80% of the island in the next four years.


      Pricing is keeping most customers at lower speeds, however. Fewer than 1 in 10 homes are willing to pay US$48 for 20 meg when 3 meg is US$31. This corresponds to patterns across the world. Few are willing to pay more than $5 or $10 additional for speed in 2011.

 

     Chunghwa is doubling WiFi hotspots to over 20,000, which will take the burden off the spectrum of their wireless metwork. This will have the effect of raising their "effective spectrum." Spectrum itself may be finite, but upgraded equipment, WiFi and femto off load, and additional cell sites can raise the capability of a given amount of spectrum by 5-10 times. Randall Stephenson of AT&T was in D.C. crying he wants more spectrum. I thought to write that story as "Randall to Washington: We Need More Cell Sites & WiFi, Not Spectrum." That would allow thehundreds of megahertz of new spectrum to go to new competitors rather than reinforcing the dominant position of AT&T + Verizon. 

Last Updated on Wednesday, 12 January 2011 22:32
 
World Broadband Q3 508M, Growth Flat
Saturday, 08 January 2011 16:07

Q3 2010 Asia DominatesQ3 broadband net adds were 14.3M to 508M according to the ever-invaluable Point-Topic. That's about 30% of the homes in the world. Developed countries at typically at  Fiona Vanier of Point-Topic notes "Net additions have remained relatively steady after their peak at almost 20 million in Q1 2009." (14M +- 1M). 


    50% (7M) of the new subscribers are in China and South Asia, with both China Telecom and China Unicom over 2M adds for the quarter. South Asia is the big orange blob dominating the chart at the left. China's lead over the U.S. expanded by 4M to about 40M homes, as many as the total in France + Britain. DSL (the big blue area at right) dominates cable by more than 3:1, with small cable shares almost everywhere except the U.S. and Canada. 

Worldwide_DSL_Cable_Fiber_Q3_2010

      The growth stories outside of China are Brazil and Russia, about 20% per year.  The next chart is the breakdown of the Top 10 broadband countries with three years of data. Here's the press release from Point-Topic and the Broadband Forum, which includes IPTV data. France, followed by rapidly growing China, are the TV leaders. 

 

Last Updated on Monday, 10 January 2011 00:25
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The "Julius Tax" and the Great Fear
Saturday, 29 January 2011 13:48
ray_baum"Le tax Baroin" they called it in France when Minister Baroin added a very unpopular VAT to Internet service. "The Julius Tax" would be the natural name if Genachowski goes ahead with a plan to tax every Internet connection and give most of the money to the phone companies. The FCC is already spinning it as a tax to bring broadband to the poor and unserved, but every indication I can get of the numbers is that's not where most of the money will go. While they are talking <about a buck> most families will have one landline and several mobiles, suggesting $3-5/month or about $50/year per family. That could go up without needing to go through Congress.  Most poorer Americans don't get lifeline. My unconfirmable guess is that the broadband tax will take more from the poor than the total of new money for lifeline broadband.
The Republicans called the original "school & library" support the Al Gore Tax and made it a campaign issue. An FCC staffer tells me Republican leader Boucher has threatened to do the same with the new proposal, one reason it's been in limbo for two years. However, AT&T & Verizon stand to gain $Billions from eliminating ICC and other proposals. They own several of the Congressman who normally would be the most vociferous opposing a tax.
Last Updated on Monday, 31 January 2011 19:50
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France: Operators Contribute to "tarif social"
Sunday, 23 January 2011 14:58
Mattey_Courageous as the French?Frédéric Lefebvre, France's new Secretary of State for Consumer Affairs, has called the operators to a meeting January 27. La Tribune reports he intends to get action on a "social tariff" for broadband, a reduced rate for the poor.  "The minister wants all operators to agree." The target is a 20 euro triple play. The operators fear the government will "de devoir à nouveau mettre la main à la poche" - "again put their hands in our pocket."


    What France has right - and the U.S. wrong - is that the operators are required to take lower profits on the subsidized poor. Forget social justice. In any ordinary market, a buyer of hundreds of thousands of lines gets a substantial discount. Instead, in the U.S., USF pays the full retail rate. In practice, many carriers have been raising rates for basic broadband  in order to increase subsidies. Verizon's base rate has gone for $15-20 to the current $30 for "back of the bus" speed service.

 

Last Updated on Sunday, 23 January 2011 17:37
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Broadcom Buying RALINK/Trendchip?
Friday, 14 January 2011 14:29

Shinjou_rabbitShin-jou Fan built Taiwan's Trendchip into one of the largest DSL chipmakers by pioneering low cost chips and offering low cost designs to modem and router makers. He merged with RALINK, a successful 802.11 designer, and emerged as CEO of the combined companies. Digitimes' Cage Chao and Steve Chen are now reporting rumors Broadcom is about to buy the combined company for $800M. RALINK denied although Chao's analysis showed the stock market thinks a deal will go through. 

 

       Trendchip claims they are #2 or #3 in DSL chips, a remarkable achievement when giants like TI and Analog Devices couldn't survive the earlier highly competitive market. RALINK was one of the first to announce 3x3 MIMO 802.11n chipsets, a breakout technology for 2011. The chipmakers claim 3x3 or 4x4 MIMO is fast enough to carry HD TV around the house and some carriers are enthusiastic after early testing. 

 

       RALINK also offers a low-power, low-cost WiFi chip that sells for under $5. Power was the biggest obstacle to incorporating WiFi into mobile phone; earlier chips would kill battery life. That's been mostly solved, and essentially all but the cheapest mobiles will soon have WiFi.

Last Updated on Wednesday, 19 January 2011 22:29
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High Speeds: Majority Will Not Pay More Than $10/Month Extra
Wednesday, 12 January 2011 22:08

Scrooge_John_Leech_1843The worldwide experience is that many people will pay $5-10 for higher speeds but very few will pay much more. An analyst asked “Is there data you can share behind your comment few people are willing to pay more than a small premium for higher speeds?” There have been many natural experiments where consumers had a clear choice and the results I know pretty consistent. I'd guess that customers are more concerned about differences in speeds at lower levels and less at 20 megabits or beyond, but I haven't seen anything systematic.

 

Little interest in paying a lot for high speeds: Almost half the U.S. cable customers can get 50 megabits instead of 10 megabits. Only about 2% have switched because there's a $50 premium. There are similarly very few takers for the 50 meg speeds on Verizon FiOS. In Japan, J:COM offers (up to) 160 megabits down for $5 more than 30 megabits down but only 26% will pay even that premium to go beyond 20-30 meg service. http://bit.ly/gcsHCE In Taiwan, fewer than 10% are willing to pay $48 for 20 meg when the price of 3 meg is $31. Conclusion in 2011: There is some interest but not a big revenue opportunity

 

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Courageous Regulator, Real Results in New England
Tuesday, 11 January 2011 02:14
 Liz_miller_VermontRegulators need courage to demand telcos meet important public goals. Fairpoint has met its commitment to reach 80% of Vermont by yearend 2010, 83% of Maine and 85% of New Hampshire despite having fallen behind earlier in the year. Fairpoint is now controlled by their former creditors and needed state approvals to come out of bankruptcy. The state commissions insisted they meet the (already postponed) deadlines despite enormous political pressure. The result is clear below: 15 new service announcements in 7 weeks.
    Nearly a fifth of U.S. phonelines are pending the merger of Qwest and Century Tel. If Genachowski and Copps have courage, they will demand Century match Comcast's merger concessions: half the unserved connected and a $9.95/month offering for poor school kids. Century wants the approval and will say yes if Julius has any backbone. If he doesn't deliver on this, he should stop talking about what he's doing for broadband.

       Best of luck to the new Fairpoint, which has an experienced new operations team. They've stanched the bleeding due to the service failure when they took over from Verizon, with Ashley Smith reporting line loss in the last year is down to 12%. The new broadband facilities will help. They fell from 415,671 lines in January 2009 to 252,309 in 2010. http://bit.ly/dGIA3P
Last Updated on Wednesday, 19 January 2011 00:39
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Plan B From Shannon's Law: Doubling Speeds with Vectoring, Bonding
Friday, 07 January 2011 13:04
Plan_nine_from_outer_space50M lines in the U.S. will soon be connected with 25 megabit FTTN/DSL. So will millions more in Britain, Germany, Canada and Switzerland. Because some of that bandwidth will usually be used for IPTV, customer speeds are typically 6-16 megabits. Many fear, and I long expected, that simply wasn't enough to compete with 50 and 100 megabit DOCSIS. The numbers aren't proving out that way so far. http://bit.ly/i57E8j
      For $200-400/home in 2013, those speeds can be increased to 20-40 megabits and perhaps higher. DSM, vectoring, and bonding are now coming out of the labs and in field trials. Vectoring requires new boards in the remote terminals and sometimes complete new DSLAMs, >$100 port, installed. Bonding requires two ports. Often, the wiring needs to be redone in the field, expensive labor.
    As soon as the gear becomes practical (?2012), carriers will start installing vectored gear in all new builds. It will cost little more than the old gear. No carrier I know plans to upgrade the existing lines, however -- unless cable's higher speed becomes a big factor in the market.
       
     That's AT&T's Plan B iff they need it against cable. They've been leaders in the related research and at the Paris Broadband World Forum announced the world's first field trial of vectoring. Done thoughtfully, two lines bonded in a vectored system will deliver 100 megabits to many homes.
Last Updated on Friday, 07 January 2011 13:57
 
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