Month: May 2013

Duopoly Carriers Aren’t Evil. They’re Public Policy.

Susan Crawford at Code for America

Susan Crawford at Code for America


Last week I attended a presentation by Susan Crawford, the author of Captive Audience, The Telecom Industry and Monopoly Power in the New Gilded Age. It was held, fittingly, at Code for America in San Francisco.

Ms. Crawford has a pragmatic outlook on the state of telecommunications in America, and I think she’s right on. In highlighting the outcomes of our largely duopoly telecom marketplace in America, in a recent NY Times article, she says “It isn’t evil, it’s just the way things work.”

The fact is, it’s not just the way things work, it is the way the appointed regulators at the FCC from 2001 to 2008 intended it to work. The goal during the chairmanships of Michael Powell and Kevin Martin was “robust, intermodal competition”, where Big Cable and Big Telco would complete, without the distraction of additional competition. In other words, duopoly. And, it’s what we got, by and large. (More on this later; Sonic is the exception.)

So, it’s not evil on the part of the two firms who dominate each regional market, it’s simply the outcome of our regulatory policy.

FCC Chairmain Powell’s BrandX and TRRO, and Chairman Martin’s Broadband Forbearance order together largely eliminated the potential for uniform nationwide competitive pressure on the two operators in each region. The goal was to limit competition in hopes of spurring investment by these two incumbents, with Martin saying about the Forbearance order:

“Promoting broadband deployment is one of the highest priorities of the FCC. To accomplish this goal, the Commission seeks to establish a policy environment that facilitates and encourages broadband investment, allowing market forces to deliver the benefits of broadband to consumers.” -FCC Chairman Kevin Martin

In other words, handing over a doupoly is supposed to encourage the two appointed competitors to duke it out.

I will concede that the policy has worked to some degree. Cable firms have rolled out DOCSIS 3.0 upgrades, and both AT&T and Verizon have made investments to catch up in video and increase broadband speeds. Even Centurylink has made some upgrades to their network.

In a recent article, Susan Crawford points out an op-ed by a Cable executive, titled “U.S. the leader on broadband“. Maybe by making it the headline, it becomes truth.

But, the fact is that we remain well below even the OECD median speed, and we are certainly no leader like Japan, Sweden or Norway. I suppose we can at least take solace that the offered broadband speeds in the US are not as bad as Mexico or Greece.

OECD Broadband Speeds Chart

OECD Broadband Speeds Chart

The policies which arguably helped drive these investments have come at a significant cost to consumers — Americans pay far more for their broadband and get less than citizens of most other developed nations. We pay more than three times as much per megabit as citizens of Sweden or Japan, and a whopping sixteen times as much as those in Korea. In fact, Americans pay more for broadband than residents of virtually all of the OECD countries. Only five countries do worse than US residents: Turkey, Chile, Poland, Greece and Mexico. We are in sad company when it comes to what we pay for broadband.

But, that’s not evil, that’s the outcome of our policy. Cost is the casualty when an intermodal duopoly is favored over full competition as a public policy goal.

OECD Broadband Prices Chart

OECD Broadband Prices Chart

The US median price per megabit is $5.42. Did we get enough performance in exchange for the creation of a virtual duopoly? Probably not, but that’s not evil on the part of our dominant broadband providers, that’s policy, and the way the marketplace was intended to work.

Fusion logo

Postscript:

But what about Sonic.net’s Fusion service?

Fusion is the sort of competition that the 1996 Telecom Act envisioned. And, we are still here despite the de-regulatory hit job by Powell and Martin. We are still here because the basic bones of the 1996 Telecom Act remain strong. While competitive access was curtailed by the intermodal duopoly agenda of the Bush-era FCC, competition is still possible under the Act, at least in metropolitan regions.

Sonic.net’s Fusion service offers competitive European style pricing and features, an “all-in-one” service delivering uncapped and unlimited broadband at up to 20Mbps, plus unlimited nationwide phone service together for one low price. When both the voice and data products are considered, it offers an advertised price about $1 per megabit, better than all but a few of the OECD nations, and less than one fifth of the US median price.

Fusion is available today to four million homes in ninety-six California cities around Los Angeles, the Bay Area and Sacramento. Join up. Then tell a friend. It’s a growing revolution.

Sonic.net Traffic Leaps on Netflix “Arrested” Release

Netflix "Arrested Development" release bumps Sunday/Monday Internet traffic by roughly 40% over normal

Netflix “Arrested Development” release helped bump Sunday/Monday Internet traffic 40%

Netflix’s release of Arrested Development appears to be enjoying some strong uptake. Typically we see normal or slightly reduced Internet traffic on a holiday weekend, but the surge in broadband use on Sunday and Monday was substantial, an almost 40% bump in overall usage.

Compare Saturday the 25th with Sunday the 26th, after the Arrested release. And, strong demand continued Monday (binge viewing?), compare Monday the 27th on the right to the left-most sample, Monday the 20th.

While the reviews of Arrested Development have been mixed, its success certainly could be measured here on our network.

2012 Transparency Report

Protection of customer privacy is one of our core values at Sonic.net. We seek to provide as much transparency as possible regarding legal processes and customer privacy, so in furtherance of those efforts, we are releasing our second annual Transparency Report.

This year we saw an equal number of civil subpoenas as 2011, with a total of nine in both 2011 and 2012. However, user data was surrendered in only one civil case in 2012. All of the civil cases in 2011 and 2012 were related to allegations of copyright infringement.

Sonic.net Transparency Report 2012

We have also released an updated Sonic.net Legal Process Policy document. This document details our log retention intervals and customer notice policies.

In specific, the updated document makes clear that for user content that, “Sonic.net, Inc. / Sonic Telecom will not provide user content without a U.S. search warrant.” This is an important standard of protection which a number of online service providers have adopted.

Internet and telephone service providers have a great responsibility both to protect their customers and the public. We continually work to achieve both of these goals.

Internet Video Needs a “Carterfone” Decision: Any Lawful Device

Carterfone on display in the Sonic.net lobby

Carterfone on display in the Sonic.net lobby


From 1877 until 1968, consumers in the US were only allowed to use telephone equipment that was provided by the telephone company. It was a closed system, where your only choice of handset was the one that the local phone company would rent to you. This was codified by the FCC:

FCC Tariff Number 132: “No equipment, apparatus, circuit or device not furnished by the telephone company shall be attached to or connected with the facilities furnished by the telephone company, whether physically, by induction or otherwise.”

The Carterfone was a special purpose device which allowed mobile radio users to be “patched through” to telephone lines via an acoustic coupling. In other words, the telephone receiver just sat on top of the Carterfone. This was a violation of the rules, and it was challenged as an illegal device by AT&T.

In the Carterphone decision of 1968, the Federal Communications Commission reversed this, allowing customer owned devices to be connected to telephone lines. This eliminated the phone company’s monopoly on equipment, and opened the door to a wave of innovation. This spawned consumer FAX machines, modems, cordless phones and cheap home answering machines. Consumers had choice, and the network was open (at least from the perspective of equipment.)

Today we have a similar problem with video content providers. Fox, ABC, CBS, NBC and Hulu all provide access to television shows which you can watch in your web browser. You can view the content on your desktop PC, on your laptop, and you can even plug your laptop into your television to watch in the living room.

But, along comes the modern Carterphone: devices like Google TV, Boxee and Roku. All of these are basically web browsers in a small box which make it more convenient to connect to your TV than a laptop would be. And, like AT&T in the 1960’s, the video content sites have responded by blocking these innovative devices.

The Internet now needs a Carterphone decision. With the blocking of Google TV and other devices, there is a clear violation of the principal of network neutrality. Consumers should be able to view content with “any lawful device”, as the Carterphone decision said.

Clearly, where devices have limitations, it should not be a content providers responsibility to address them. For example, if a site uses Flash to play video, it won’t work on the iPhone. That is Apple’s choice, and an intentional limitation of the device. Content providers certainly should not be required to make their content work with every possible device.

But, when a device has the technical capabilities to access content, it should not be blocked by the content provider. Doing so is discriminatory protectionism and a violation of the tenets of network neutrality.