Why the U.S. Has Fallen Behind in Internet Speed and Affordability

Not often will I agree with opinion from “The New York Times,” but in this case they are pretty close to getting it right. After you dig through the comparison to other cities and slamming of our communications service providers they get to the heart of the matter by saying that a duopoly is not competition and competition will lower prices and improve the quality of service. Note that I did not mention “speed.” 

here are structural differences that make the U.S. different from Asian and European countries such as our lower population density and more people living in single-family dwellings. These two facts dramatically increase the cost to build a network to where at best two providers can make a decent ROI. Why do you think that AT&T and Verizon keeps shedding their rural territories? Where we see competition, we see lower prices and better services. Another reason many of these countries have lower prices is that governments have subsidized building of these networks with taxpayer dollars easing the challenge of turning a profit to service providers. In many of these countries service providers use to be owned by the government so they still have a cozy relationship. Continue reading

Municipal Broadband: A Bad Deal For Taxpayers

Please read my accompanying blog article.

There has long been a heated debate over the merit of government-run broadband networks, of which there are currently over 100 operating in municipalities around the country. Proponents of government-owned broadband networks, such as Federal Communications Commission (FCC) chairman Tom Wheeler, claim they introduce competition into the market, while critics point  them as an inappropriate use of tax dollars and an example of government improperly competing with the private sector.

The inherent problem with municipal broadband is that government entities are incapable of fairly competing in the free market, as they are taxpayer-backed and therefore able to charge less for a service than it actually costs. Private businesses cannot do this, as doing so would result in bankruptcy. Continue reading

Report Says LUS Fiber Model Flawed; LUS Director Says Report Biased

English: Fibre optic strands

English: Fibre optic strands (Photo credit: Wikipedia)

A November 2013 report by the Reason Foundation, a self-proclaimed libertarian, free-market think tank, claims municipal broadband projects like Lafayette Utilities System’s fiber network are fundamentally flawed and practically destined to fail.

“For all the enthusiasm about municipal broadband, one fact remains: A great majority of systems fail,” author Steven Titch wrote in “Lessons in Municipal Broadband from Lafayette, Louisiana.” “Those that survive end up falling short of their promised goals of lower prices, better service and ubiquity.”

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Syracuse looks to install city-wide high-speed broadband

The mayor realizes how important broadband is to the city’s future, but her approach to enter into becoming a service provider is off mark. The government should enter into a business enterprise ONLY when it is not feasible for a private company. Syracuse already has two retail communications provider and others that serve businesses. It is correct that communications companies are challenged to build last-mile infrastructure so maybe they should consider constructing infrastructure and lease access to different communications providers.

Syracuse (WSYR-TV) – Mayor Stephanie Miner is in the early stages of researching installing broadband internet fiber in the City of Syracuse.

The mayor says high speed internet should be a public service, almost as important as trash pick-up and water.

Miner said high-speed internet is “the modern day equivalent of infrastructure.”

She adds, “It’s clear that broadband is going to be a foundation of our new economy.”

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Consumers Willing to Upgrade, but Slow to Embrace Super-Fast Technology

The reason that consumers are not willing to pay for super high-speed services at the moment is because they do not have a need to utilize all of the bandwidth for the high price.  As more content is delivered over the Internet and prices come down, then demand will grow.  This finding is not really surprising.  It is a typical technology adoption process.  Broadband investment is decreasing because the incumbents have cherry picked the most densely populated areas that will produce an ROI within their corporate requirements.  There are still huge parts of the country that have limited access to broadband.  Allowing governments to enter into public/private partnerships to build last-mile infrastructure will spur investment into broadband networks in the rest of the nation.

The Dish, Stanford University
Image via Wikipedia

Rahul Gaitonde, Deputy Editor, BroadbandBreakfast.com

WASHINGTON, October 5, 2010 – Consumers are willing to pay a large amount to upgrade their internet access speeds from slow to fast, but are more reluctant to upgrade from fast to super-fast, according to a research paper discussed at the Telecommunications Policy Research Conference last week.

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Some residents voice opposition to Opelika smart-grid plan


Optic fiber

Image via Wikipedia

Although I agree with Jack Mazzola in theory, he does not understand the reasoning behind the city’s actions and he is over dramatizing the impact of the utility’s proposed network. Mr. Mazzola has it correct that selling communications services is best left to private enterprise. The government should not be in the business of providing telecommunications services.  It could provide the last-mile infrastructure to service providers that want to offer voice, video, and data services, because building such a network for a single service provider is cost prohibitive.  The city should facilitate competition for private enterprise by providing a utility that a single provider could not afford to build on their own.

I am sure that the city would collect franchise fees from multiple service providers other than Charter, but the economics are not viable for Charter and other providers to build multiple networks.  Once again I return to the fact that building a broadband network costs a bit over $1,200 per home passed in small communities.  Divide the market in two and the cost doubles which extends the time for a positive rate of return to over 3 years.  Too much for public companies.

The city is wise in its intention to amortize the cost of building a fiber network across different uses.  The fiber has the capacity to support multiple services and applications.  By apportioning the cost based on bandwidth used by a service or application, electricity customers will pay much less than if they had to foot the bill for the whole fiber network;  negating the “rate hike” Mr. Mazzola mentions.  Higher value and bandwidth services would pay their fair share which would increase the revenue to pay for this endeavor.

Mr. Mazzola’s arguments of over regulation and loss of freedoms/privacy are a little overstated.  There is the potential for citizens to apply pressure on the utility to restrict certain types of “information” that Mr. Mazzola refers.  Providing an open-access infrastructure is the way around that problem because the city is not involved in the actual content of the services.

I admire Mr. Mazzola’s principles in an age where so many of the principles of which this nation was founded are being discarded, but he needs to be a bit more constructive in his thought.  If he would like to see free enterprise flourish and receive innovative services then he should support the city building an open-access fiber infrastructure to be used for the smart grid and competitive communication services.  These goals can be achieved with the privacy and financial transparency his group is questioning.  Opelika citizens head to the polls in about a week.  If the ballot measure is approved, then citizens like Mr. Mazzola should remain involved and shape the network to achieve their goals of free enterprise and free flowing information.

By Donathan Prater | Staff Writer

While many expect Opelika voters to give the city the nod when they head to the polls on Aug. 10 for a referendum that would create a city-owned telecommunications company, that feeling isn’t unanimous.

Some opponents plan to attend the public hearing in the Opelika City Council chambers Tuesday to voice their concerns.

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Australia Expands Fiber Internet Network Footprint

By RACHEL PANNETT

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Read more about key players in Australia's upcoming elections.

CANBERRA—Australian Prime Minister Julia Gillard on Friday unveiled an expanded footprint for a planned national high-speed fiber Internet network that will now reach 93% of homes and businesses, up from 90% previously.

The network is a defining policy for Gillard’s ruling center-left Labor government ahead of an Aug. 21 general election.

But the program isn’t universally loved, even though it is popular with many voters. Australia’s main conservative Liberal-National opposition coalition has questioned the need for such an expensive service and has threatened to scrap the plan if it returns to power.

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