Fast Net News, DSL Prime, DOCSIS Report

Jules Genachowski has the opportunity to go down in history as the man who shut down a million families' telephones and ended universal service. On a fast track to be rammed through in 90 days, the Big Telco Plan proclaims "Let them eat satellite!" If the telco determines reaching you is too expensive, they can say "fuggedaboutit" on both voice and broadband.
That's invisible in the press releases and six page letter to the FCC from 6 big telcos so not in the first news reports. It is clear if you read the 159 page proposal. I can't believe the D.C. reporters will ignore this one; if so, expect a firestorm.
Especially since it doesn't actually propose adding more broadband across most of the territory, raises phone bills by $Billions, and produces a windfall to the Bells of additional $Billions from eliminating intercarrier compensation. (Traditional Century/Frontier areas may be different, a small part.)
Carol Mattey, the $150B woman in charge at the FCC, has said she will not accept the proposal unless it helps consumers. Shutting down a million phone lines and raising prices by $billions does not help consumers.
It is based on almost surely spurious data, including “consumer benefits” that assume MCI, Sprint, and AT&T are actively competing for U.S. long distance. (Shame on MIT Professor Hausman)
It will not go through untouched, so this is important to follow. If Julus has any guts, he'll throw most of it away. I hope my friends at the telcos don't shoot the messenger. It's your Washington people who are the problem, not the reporter who breaks the story.

1,000,000 Homes: Let Them Eat Satellite http://bit.ly/ntLtCM
End of universal service
For nearly a century, U.S. telcos served every home in the country. They now demand that end and that the FCC, pre-empting the states, end "carrier of last resort" requirements. They project this would apply to 728,000 homes in the big carrier territory. Adding the small carriers takes the figure to about a million. Since the Bells get relatively little USF money for these homes, the subsidy required today is not excessive: about 1/50th of their annual profit/cash flow. There's no reason they couldn't continue to serve these homes and still remain among the most profitable companies in the world. This is not mentioned in the press release of the summary; you have to look to page 95 of a very dense document to find it. But this is one of the biggest telecom stories of the decade, and reporters won't be deterred.
With time, I planned a companion article "Why 400 Congressman Will Refuse to Support the Big Telco Plan." When I get back from Montana, I intend to hire an assistant/paid intern whose first responsibility will be to ask "Do you support the Plan?" When they realize it means a million homes will lose phone service, I don't think even Bell lobbying power will get them to endorse it. I'll also ask as many of the state commissioners as possible. http://bit.ly/ntLtCM

Approximately 0% Bell Homes Will Get Broadband http://bit.ly/oDwfF9
Already planned LTE only
No matter how cynical I am, I wouldn't have guessed that the Bells want $2.2B in direct subsidy and $2B-10B more in increased prices in the name of broadband, but do not propose offering any additional service. They define broadband as 4 down, 768K up and make a point of including wireless. LTE easily reaches those speeds, and Verizon and AT&T have promised to deploy to 97-99% of the country. That will include most and possibly all the 2M homes they say their plan will reach.
Repeat, this plan has no provision to extend broadband to anyone who wasn't already going to get it. It's just counting already planned LTE builds. LTE Advanced may well be the right technology for these homes. If so, we don't need any subsidies. That's why the plan proposes to lock in subsidies based on the 2011 map of what's served. Otherwise, there would be nearly no subsidy needed. $10B, the proposed subsidy, is not far different from the total cost of the national LTE build, including the first 95%.
How stupid or gutless do they think Genachowski actually is.  More http://bit.ly/oDwfF9

Impact of Big Telco Plan on Consumers: At Least $2B, More Likely $5-10B http://bit.ly/omtohK
The Big Telco Plan proposes an increase in the "Subscriber Line Charge" which would all go to the carrier. It may be up to $3.75/month, although in somes cases the telco won't be able to get the increase in practice. The increased charge on wireless customers is unclear. The first column is $3.75/line/month and the second at $2/line/month. Under different assumptions, that yields an increased consumer cost of between $2.8B and $18B. My opinion is that the most likely figure is $5-10B I've done an estimate for both 300M lines and 400M lines, wired and wireless. To reach the 400M figure, a fair number of people would need to pay for two phone plans.
In addition, the decrease proposed for intercarrier compensation lowers the cost of providing long distance service. Some of that may be passed on to customers in lower prices. A few years ago, customers had many choices in LD service, including MCI, Sprint, and AT&T actively marketed. It was reasonable to assume that much of that would be passed on to consumers. Today, nearly all of us buy LD from our wired or wireless voice provider as part of a bundle. Competition is less. Columns 3-6 have assumptions of 40% offset and 70% offset.
Some folks, including Congressman Boucher, have wanted to add USF to broadband. At the current 15% rate and a $35 average monthly price, that would add about $60/year. As we move towards 100M broadband homes, that's a whopping $6B/year. Last year, it looked like the fix is in on this; now, it's unclear. I don't think the FCC would tax broadband with an election on the way.
There are sophisticated techniques economists use to estimate things like this, but there are so many complicated pricing plans I don't think there's any way to come to an exact answer. In addition, much of the data that would be required to measure demand curves and pricing competition is proprietary.
All things considered, it's almost certain consumers will pay $billions more per year. Most of that would accrue to those carriers who now pay the most for intercarrier compensation and are unlikely to pass on the full savings to consumers by lowering prices. Those are AT&T and Verizon.
Improvements to this analysis welcome, but let's avoid sophistry. More http://bit.ly/omtohK

Unlikely and Perhaps Utterly Unbelievable: $80 Cost Per DSL Line Already in Place http://bit.ly/nzZ84U
All data hidden.
The Big Telco Plan asserts about 5M homes cost $80 or more per month to serve and therefore need a subsidy. It's almost impossible for this to be true under any appropriate measure. The standard cost for a large carrier with equipment in place is about $8/month. That figure is confirmed by the most respected on Wall Street, John Hodulik and Craig Moffett. It's more costly to serve less dense regions, but for locations with equipment in place I can't see any legitimate way to justify a number above $15-20/month. That's about half the homes claimed as costing over $80/month.
Where new equipment needs to be deployed, the broadband plan data implies dramatically less capital to reach the unserved homes if the last 1% is excluded. Over 72 months, that's $15-35/month. The total for those needing new facilities is therefore between $30 & $55 per month, way under the $80-250 in the plan figures. Subsidies are appropriate, but only at a fraction of the level proposed.
Unfortunately, the Big Telco Plan does not include the model used to calculate their figures.
Takeaway: The figures here contradict the Broadband Plan, the best on Wall Street, and typical costs of bandwidth, routers, support calls, DSLAMs, and the other components of broadband cost.. They might be fine, but I believe it should be tossed aside until the data is verified. More http://bit.ly/nzZ84U

AT&T, Verizon Find Broadband Map Data Unusable http://bit.ly/qr8kcr
If reporters advance this story, NTIA boss is in trouble
Creating the model for the Big Telco Plan for USF/ICC, Jim Stegman found the data in the National Broadband map so unreliable he couldn't use it. Instead, he filled in many of the gaps by "augmenting the NTIA data on cable provided broadband coverage with Warren Media data." The number of homes unserved by cable according to NTIA is nearly twice reliable numbers from other sources. I estimate that if the six companies had used the NTIA map data, subsidies demanded would have been $billions higher.
Everyone in the business - including FCC staffers - know the data is garbage and needs to be extensively revised. Reliable sources tell me the next version will be better, although according to what NTIA is telling me it will still be far off.
Kathleen Grillo, Bob Quinn of AT&T, Kathleen Abernathy of Frontier, Steve Davis of Century, and Michael D. Rhoda of Windstream all signed the proposal,
Many industry and regional newspapers have been covering this. I wrote Many "Unserved" Apparently Missed on Map , U.S. State Broadband Data Implies 4-5% Can't Get 3 Meg, 2% Not Even 1.5 , Broadband Map: 1.5M Californians Lost Broadband , NTIA Map: 10M Homes Lost Cable Modem Availability?

How Many Corporate Jets Are Buried in the Model http://bit.ly/oNnr1O
Begging for public money with private jets to DC.
AT&T/SBC is believed to maintain two jets just to take executives to sporting events around the world because ex-CEO Ed Whitacre didn't want to share his jet. BellSouth, now part of AT&T, kept a jet in D.C. just to ferry Congressman home and win their favor. I'd bet that these expenses are buried in the Big Telco Plan model, probably under SG&A. For $50B companies, it's an insignificant number. But other possibly buried items, like the $10's of billions of underfunded pensions and retiree health benefits, amount to a significant fraction. Without access to the data that went into the model, I can't estimate how big a factor this is.
I don't believe public money should pay for private jets to the Superbowl.

From ABC News, outrage when the automakers did similar.
Big Three CEOs Flew Private Jets to Plead for Public Funds
By BRIAN ROSS (@brianross) and JOSEPH RHEE
November 19, 2008
The CEOs of the big three automakers flew to the nation's capital yesterday in private luxurious jets to make their case to Washington that the auto industry is running out of cash and needs $25 billion in taxpayer money to avoid bankruptcy.