DSL Prime: Forecast: Telcos and Cablecos Collude With Winks and Nods

As the EU acts to open yet another European market to telecoms competition, Canada and the U.S. act to close theirs.

by Dave Burstein of DSL Prime and Future of TV [August 25, 2006]

Deutsche Telekom won't be allowed a monopoly on their VDSL network. Conservative EU Commissioner Viviane Redding and Social Democrat German regulator Matthias Kurth strongly agree. "To open the German broadband market to competition will lead to better services and lower Internet access prices for consumers."

Mike Powell made the opposite decision, and SBC slammed him by killing their fiber home efforts soon after they won that decision. The EU decision is only a symbol until we get the details, but I've included Redding's comments in full at the end.

In the U.S. the Wall Street Journal on Page One reports a leaked Cable Labs report: "Cable-television operators may require another round of multibillion-dollar network upgrades to keep up with … the looming threat of a planned $20 billion rollout of high-capacity fiber lines by U.S. phone giant Verizon," adding "fiber networks 'can deliver orders of magnitude more broadband data capacity than today's typical (cable) networks.'"

Mike LaJoie, Time Warner CTO, "wholly disagrees with the conclusions." LaJoie is right, if his CFO agrees to spend the money to upgrade to DOCSIS 3.0, far batter than today's cable. The 1200 page DOCSIS 3.0 spec is out the door with remarkable (but optional) features, including cable modems with an effective speed of 50 to 100 Mbps (1 Gbps shared). Comcast CEO Brian Roberts told me a while back he intends DOCSIS 3.0 "in selected territories" in 2007, although 2008 now looks more likely. Current cable modems can't match Verizon fiber, but the high end DOCSIS 3.0 comes surprisingly close.

The best scenario for the U.S., would be Verizon fiber scaring the cable companies into upgrades. Step two, if cable moves DOCSIS 3.0 into AT&T, Qwest, and Bell Canada, would be a forced upgrade by the other telcos to prevent massive defections to cable. Top telco execs everywhere except Verizon know they are vulnerable if cable is willing to invest.

I have a second U.S. scenario at least as likely. Telcos and cablecos "wink and nod" to divide the market, keep prices high, and improve profits (at least in the short run). That's happening now in Canada, where George Cope of Bell made a Wall Street speech about "focusing on improving margins" and Bell raised prices with support from Rogers and Shaw. Only Videotron is fighting hard, and the naïve Canadian regulator has given Bell new tools to punish Videotron.

More to come, including the economics of DOCSIS 3.0 vs. fiber, serving small towns in France and Montana, Greece, Bulgaria, how to double customers DSL speeds at minimal cost, and I hope a few other interesting stories. Wish I were in Aspen at the always interesting PFF seminar, and plan to say hello to the round fellow with a beard at VON Boston next month.

Verizon Goes Naked
$5 more if you don't take their phone
If you take a 12 month contract, Verizon will charge you $19.15 for 768 Kbps/128 Kbps and $32.69 for 3.0 Mbps/678 Kbps if you have their phone service, or $5 more if you don't. The extra $5 for unbundled service over a dedicated copper line seems reasonable to me. I had no problem getting a well trained customer service rep to handle an order, although the website didn't work yet.

Add Verizon's own VoiceWing VOIP service and you save between $5 (without some features) and $35 (if you make many international calls.) Verizon gives instructions. The main thing you lose is power for emergency calls from your phone when the electric company fails, which is not insignificant. Hundreds of thousands in Queens were without power for a week recently.

AT&T in California pretends to offer a similar service, which was a requirement of the SBC/AT&T merger. Just like the cablecos, it's a sham with a fee almost as high as the cost of the primary phone service.

Copyright 2006 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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