DSL Prime: Telecommunications Saves Lives

Keeping service affordable as well as available helps save the lives of people going through everyday events as well as those in disaster areas.

by Dave Burstein of DSL Prime and Future of TV [February 7, 2007]

"The price increases we are getting state-by-state will drive our profits."
—Randall Stephenson of AT&T

Eleanor Burstein would have died 15 months ago if her phone didn't work. Feeling woozy, she called my brother Danny as she was nodding off late at night. An EMT, Danny didn't like how she sounded and called 911. In the hospital, they discovered she has lost massive amounts of blood. A transfusion saved her, and her stomach bleeding stopped when they discontinued her arthritis painkillers. If she hadn't been able to call, she probably would not have woken up the next morning. She healed well, and was back at work as an Administrative judge a few weeks later.

Eleanor, my step-mother and friend, recently died at age 70 of unrelated causes. People die when they don't have communications. I am passionately committed to reasonable prices for basic service. I've been returning to this theme since Katrina, but Eleanor's example is a reminder that most "emergencies" are individual, not New Orleans scale. Kevin Martin is right to require E911 for V0IP, but he needs to go further. Reducing unneeded regulation is fine, but the last six years prove that's not enough to keep prices down.

I'll be in Boulder, Colorado this weekend for Phil Weiser's Silicon Flatirons conference. Mike Powell is the first speaker; I hope to ask him how regulators can effectively keep rates low. If you're there, say hello to the round fellow with a beard.

Correction: Korea Telecom is fully privatized. The company, not the government, controls a major shareholding.

Breaking News: AT&T Ready to Unwire All of Saint Louis
Additional network important for Mississippi river town
Mayor Francis Slay has apparently cut a deal with AT&T for "a limited free broadband wireless Internet access citywide. They will recoup their investment by providing fee-based offers for higher speeds. The city will allow AT&T to put their equipment on our light poles and street lights."

The Mayor writes "The free service will help close the digital divide, provide internet access for families on a budget, and be an amenity for tourists, convention goers, and other visitors to our City. ... the new service will be available, starting in our Central Business District, later this year."

In Tate's Law: More Networks Mean More Reliability in an earlier DSL Prime, I strongly supported building a wireless overlay network almost everywhere. If working with the incumbent is the way to get results, I'm satisfied. The city should enforce that the service really is citywide, and that the quality is sufficient for reasonably reliable VoIP calls. San Francisco's deal sets a reasonable minimum at 300 Kbps, which easily carries most 32 to 64 Kbps VoIP calls.

Esme Vos on MuniWireless, who broke the story, asks, "Where's the public tender? ... There is no public tender process, just a request to Alderman Matt Villa to introduce a bill enabling the AT&T-St. Louis deal. Doesn't anyone else think this is strange? I have not seen anything remotely resembling a public consultation process or even a study commissioned by the city on this subject. Why AT&T? Why have they not solicited responses from MetroFi, EarthLink and local ISPs? Why is the city handing over their network to an incumbent?" Those are fair questions.

"Phone bills on the rise again"
Granelli of LA Times breaks the big story
"After enjoying years of falling prices, customers are starting to see monthly bills for phone service and high-speed Internet access rise again. … The typical bundle of local phone, long distance and DSL service, for instance, cost about 3 percent more in the last three months of 2006 than it did in the same period a year earlier, Banc of America Securities reported last week."

The article is based on a Bank Of America survey led by David Barden, probably the best public research on U.S. pricing. Barden has several surprising data points: AT&T has raised effective pricing for U-Verse for the second quarter in a row.

Verizon increased DSL and unlimited voice prices. Verizon increased entry level DSL pricing 34 percent Q/Q, from $14.95 to $19.99. The price hike is 21 percent over the price in 4Q05. Verizon increased is Freedom Essential unlimited voice plan to $44.99 from $39.99 last quarter.

In total, the "unadvertised costs" of one-time charges, regulatory fees, taxes and equipment charges are $12 higher for the Bell companies, on average, up from $11 higher than cable in 3Q06.

The pattern of rate hikes is clear, although the data can be spun from many angles. This is not only a U.S. trend. Canada's new "conservative" government allowed increases in DSL pricing. Japan raised termination charges to force up VoIP prices. Deutsche Telekom has asked for LLU prices changes designed to add EUR 350 million per year to DSL revenues, claiming the money is required to pay for the 30,000 coming layoffs. Telecom costs on average are going down 3 to 8 percent per year, as Moore's Law brings down many (not all) costs. Prices going up is a sign that competition or regulation are weak—or both.

Basic phone rates in the U.S. have been going up since the late 1990s, when SLC charges were added to all bills and USF charges started to increase. That trend began under Democrats, early in the deregulation phase. Don't blame everything on Mike Powell and Kevin Martin. Basic long distance service rates have gone up since about 2004.

Typical consumer long distance rates have gone up since around 2004. The cost of LD was so low, standalone LD plans like those offered by AT&T and MCI didn't bring in enough money to cover their marketing cost. The Bells responded by raising rates for all but high volume customers, typically with a $2 to $4 surcharge.

Wireless rates have been virtually flat since Cingular bought AT&T and Sprint Nextel. Costs of offering the service have continued to plummet, including phone prices falling to $30 to $50 and technologies that double the number of calls using the same spectrum. Merrill Lynch calculates going from six to four main carriers is worth billions in cost savings. The latest is the increase from ten to fifteen cents for SMS. All four carriers went along, a classic case of price signaling. Kevin Martin should have stepped in.

Barden's conclusion: "the emerging cable/telecom competitive price structure is unfolding in a duopolistic manner." Granelli points out, "That's good news for the carriers and their investors, … But it's bad news for customers."

*** Announcing F2C: Freedom to Connect, March 5 & 6, Washington, DC Keynoting Yale Professor Yochai Benkler is changing minds with his new book, The Wealth of Networks. He'll be joined by Dan Gillmor, Mary Hodder, Reed Hundt, Jonathan Krim, Susan Crawford, David Weinberger and a dozen more of the top Internet people. F2C will have the Governor of Vermont as our opening speaker. Governor Douglas has recently announced an initiative to make Vermont the first e-State in the Union, so if you're in Vermont's borders, you open your laptop and connect. Also coming will be Bruce Sterling, the sci-fi author who coined "cyberpunk," a brilliant speaker, as closer. Bruce's keynotes at South-by-Southwest are legendary. http://freedom-to-connect.net (psa)

Copyright 2007 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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