DSL Prime: Broadband Everywhere, Deployed Faster

Ambitious companies across the globe recognize that broadband is deployable everywhere, now.

by Dave Burstein of DSL Prime and Future of TV [June 29, 2005]

Broadband: Affordable, Everywhere, Faster
New York could lead the way
New York is currently behind Tokyo, Paris, Provo (Utah) and East Egg Long Island in the fast Internet, I testified to the city council. Some general ideas on how cities can achieve those goals:

Wireless, of modest but useful quality, is now faster and cheaper than dialup, so most cities should move to a quick deployment. 10 private companies bid to "unwire" Philadelphia at minimal expense to the city. The cost is low enough, it's time to stop talking and start doing.

"DSL Everywhere"—at least 95-98 percent coverage, is set within a year at British Telecom, France Telecom, and literally dozens of smaller telcos. So Verizon's suggestion below they can deliver is practical, especially with a political push. Identify the problem—remotes, distance, bad wires—and a telco working in good faith should be able to make it happen. If they don't, ...

Fiber-fast is the challenge, because the cost is high. Jeff Halpern sees a five and a half year payback (19 percent ROI) for Verizon, which they are willing to accept but other telcos doubt. A city can borrow money at 3-5 percent, so can accept even a 15 year payback. If the local telco won't match Verizon, other cities may need to follow UTOPIA to a direct solution, or fall behind.

[Ed. note: for more on UTOPIA, see Consulting on the Triple Play.]

Some ideas for New York, perhaps useful elsewhere.

Affordable: EarthLink is bullish on $19.95 Wi-Fi
Brinton Young considering a potential $75 million investment
"If the technology proves workable, we're prepared to invest upwards of $75 million." Young has climbed the North Face of Mount Everest, probably an easier task than persuading New York City to move quickly to create an essential service. Earthlink's Executive VP surprised the City Council hearing on June 10, talking about plans he'd clearly love to make possible. "Wi-Fi is just incredibly cheap, and that makes business plans possible we couldn't do before. A small town test has done remarkably well, and if New York City works with us we can deliver a great service at a great price." Young needs the city to allow installations on light poles at marginal cost (a few dollars of electricity) with appropriate regulations and access. He hopes city facilities around the boroughs would become "anchor tenants," and jumpstart the program. "We haven't solved the engineering problems for every location, and we'd have to build in stages. But the numbers look very good—I think this can be done."

Riva Richmond of Dow Jones confirmed EarthLink is making a bid for the similar network in Philadelphia. "We need an educated population and need to have a work force that's connected," Richmond quotes Dianah Neff, Philadelphia's inspiring CIO. Since 90 percent of affluent Philadelphians are already online, that means reaching out to low-income families, only 10 percent to 25 percent of whom are connected, she said. According to a survey, price is the No. 1 reason they don't have Internet access. The tentative plans in Philadelphia call for a $10 price for low income subscribers and $20 for others.

Young nurtured EarthLink from 75,000 subscribers to over 5 million. If he thinks it can be done, I say give him a chance. Time to put out an RFP to cover my city, New York, and yours too, with ubiquitous, affordable service. Pretending $30 or more is "affordable" to all Americans flies in the face of common sense, while Philadelphia's $15 goal is practical.

Everywhere: Verizon wants to serve the other million
Eric Rabe of Verizon writes "We continue to deploy DSL as quickly as we can even while we are also deploying FTTP ... Obviously, it's in our interests to make the needed changes as quickly as we can, and we continue to work at that." That suggests a good faith effort working with the company could be the best way to get to near-ubiquitous DSL. I've visited Vermont Tel (98.5 percent covered), and hear from NTCA and OPASTCO that dozens of their members are also close to 100 percent, proving it's possible. I've often reported that today's equipment costs make 90-98 percent coverage profitable.

I included Rabe's comments in my testimony, and suggested New York City "think like a phone company" to solve the problem. Where is the problem, and what's preventing these people from getting service. Rabe tells me all the COs in the city have DSLAMs, a good first step?

How many are behind remote terminals, and what's the telco's schedule to upgrade them for DSL? That's typically the majority of the problem, easily solved with a public will and a co-operative telco. Pizza box sized baby remotes cost about $100 per customer, a modest investment quickly repaid on a service sold for $300 per year. I reported last issue SBC was upgrading existing remotes either internally or with exterior boxes, and believe Verizon has resumed doing the upgrades as well.

Many of the rest are too far from existing facilities, more than 15,000 to 18,000 feet. Verizon in the GTE territory is using smaller field units (I believe Critical Telecom) to reach people like that, but so far has not deployed repeaters in volume on the East Coast. SBC's CEO Ed Whitacre told me he reaches 100 percent of his customers that way, just adding repeaters as necessary. Yes, Big Ed did say precisely that, and in context. Actually, as many made clear to me, his company isn't actually providing what the Chairman claims, but his comment sure suggests it's possible. In population dense New York, that's relative few.

The balance generally have bad lines or unusual equipment. While it's not true that some of Brooklyn's phone lines haven't been upgraded since Alexander Graham Bell, many are old and defective. Verizon's nominal policy, which should be required by regulation, is to fix bad lines if needed. In practice, that's rare. The solution is obvious.

Some problems—getting broadband to $15, for example—may require government playing hardball. This one should be solved co-operatively.

Faster: Catch up to Great Neck
Mayor Bloomberg, meet Larry Babbio
If New York City wants a fiber speed internet, the best move now is for Mike Bloomberg to look in the face Larry Babbio, Verizon President, and ask "When? How?" Babbio told me last August "We'll bring Fios to New York City, eventually." Bloomberg made a billion dollars connecting a Wall Street information network, and should understand why to make "eventually" instead "as soon as possible." New York is lucky: Verizon, unlike any other big telco in the West, is rapidly building a great network, designed for speeds of 100 Mbps or more. But they are deploying first in Long Island—Hicksville will probably get fiber before Manhattan and Brooklyn. Verizon needs six months of technical trials, adjusting their installation technique for high rises and perhaps incorporating 100 Mbps VDSL where fiber is impractical to retrofit. After that, there's no technical reason not to deploy heavily in the city starting in 2006.

Jeff Halpern of Bernstein Research has a suggestive note "We continue to believe Verizon is fully committed to FTTP as a technology and is continuing to push forward with its FTTP build as aggressively as practical given overall budgetary constraints."

Verizon continues with a 30 to 40 percent capex cut, less than some but still a crucial limit. So a non-confrontational way forward is for New York City to solve the capex problems, perhaps with industrial development bonds, a Verizon build and leaseback deal with government financing, or another way for New York to get a network built without Verizon's income statement being clobbered. Only if friendly persuasion doesn't work need the city consider stronger steps, like an RFP for a public-private full build.

Friends are amazed I speak highly of Verizon lately, but when they are right, they are right.

Copyright 2005 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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