Humor: Cox, Eatel, & LUS

Kevin Blanchard does his usual exemplary job of capturing the little ironies and quirks that make following the news so interesting.

In this morning's story on yesterday's big TechSouth Governor's award luncheon he covers the highlights of the event. If you'd like to find out more about the technology behind LITE and how BP uses in oil exploration the story is a great starting point. Our own Ramesh Kolluru comes in for well-deserved praise as well.

But if, like me, you're starved for a little knowing smile skip down to the end and read the bit about EATEL winning its Governor's award for best "Technology Company of the Year."

And just so you don't have to even click for your smile:

Gonzales-based EATEL was presented the Technology Company of the Year for its phone, cable and high-speed Internet service delivered over an entirely fiber-optic network.

EATEL President Robert Burgess thanked Cox Communications — a major sponsor of TechSouth — for its “formidable” competition.

“Because of (Cox’s) size, capability and market strength they force us to be at the top of our game every day,” Burgess said.

That competition has “helped” EATEL succeed, Burgess said.

Burgess than made a joking reference to Lafayette Utilities System’s fiber-optic based telecommunications service, expected to start up early next year — also in competition with Cox — saying he’s sure LUS would appreciate some help.

“We’ve had more than enough assistance,” Burgess said, drawing laughter from the audience, which included LUS and Cox officials.

“Please, any attention you give to us, please give it to (LUS),” Burgess said.

What Kevin does not have to say out loud is that lead sponsor Cox (with its name on every piece of promotion and occupying the suite of booths spanning the entrance to the affair) has recently been locked in an unusually public and expensive battle with EATEL. Cox is offering a super special that amounts to a 12 month 50% discount on its triple play package (with HBO!) but is only advertising it in the small area south of Baton Rouge where local telco EATEL is eating market share with the same FTTH technology for which they were receiving the technology award.

That's rich.

EATEL, as faithful readers of this blog will know, responded by taking out a series of full-page ads in the Lafayette Daily Advertiser which promoted, in vivid red and black, the deal in Lafayette as well. Louisiana law forces Cox to make the deal available throughout its service area but does not force it to promote it as evenly. So EATEL stepped up to "help" Cox out. So, on EATEL's account the two companies are engaged in an exchange of "favors." (That's rich, too.) After an initial confusion among Cox's operators, who initially denied the price reduction was available in Lafayette, the company trimmed its sails and made the best of a bad matter by allowing Lafayette residents in on the deal. Lafayette is a much larger market than East Ascension parish and extending the deal to Lafayette surely makes the attempt quash little EATEL with long-term price specials MUCH more expensive.

(Wanna know how you can get in on the deal? As a little fillup you'll be using a unified technology whose protocols will be similar to LUS' even if the capacity of LUS underlying infrastructure is vastly larger. After you get used to an all-IP household you can flip over to LUS' faster, locally-owned version. The Cox deal does not require a contract but is guaranteed for 12 months.)

/irk on/
As a little added fillip: Cox is sensitive on this matter—I wandered by the Cox booth at TechSouth (they give great floor prizes) and one of their booth guys struck up a conversation trying to encourage me to try Cox. I told him I already had cable and internet from them. He switched to urging me to try their VOIP. I couldn't resist at that point. I told him I was considering the "half-off" deal advertised in paper. ;-) He paled a little (though that might be my imagination) and said it was a good deal. As it is. But he then overreached by claiming that Cox had always intended to offer it to everyone. That it was only being "test-marketed" over there. Now that is just plain silly—and insulting. It was no accident that it was being offered in the only place in this market that Cox currently faces a local, FTTH-based competition. By all accounts EATEL is gaing substantial market share. I tried to point that out and that offering that large a reduction for 12 months had to be a bit more than a casual promotion. He countered by saying that Cox had done it elsewhere. I scoffed. He said he'd been working for Cox in Northern Virginia where they did the same. I doubt he expected anyone in little ole Lafayette to smile and point out that this proved my point about fiber competition—that is where Verizon's Fios FTTH network is going head to head with cablecos and is producing some of the highest speeds in the country. It's fiber taking market share, I said, that caused the long-term "specials" in both places. He wouldn't back off the company talking point that it was all just normal marketing and that it was just a coincidence that his company offered a 50% reduction in the one small place where they had fiber competition---and, oh yes, where they compete with fiber in Virginia. By the end I actually was insulted...Cox is, as EATEL says, a formidable competitor. They are shaping up to be the Verizon of cablecos—willing to really invest in the future of their network even at the cost of today's profits. That's both impressive and worthy. But their Achilles heal is their contempt for their communities, their customers, and even for individuals who walk up and talk to a representative at a trade fair. They need to learn how to be honest with folks. It'll go much further than hype, FUD and self-serving dishonesty.
/irk off/

Post Scriptum:
Blanchard is setting down his pen soon to go back to school and change professions. I, for one, will miss him and gently intelligent toss-off articles like this one.

"Cox Responds to EATEL Ad"

Sharon Kleinpeter of Cox tells the Independent that folks in Lafayette definitely can get the 75 dollar triple play deal (about half off!) as long as you don't currently have Cox phone service.

It's a good deal and the first sign of real price competition in Louisiana attributable to locally fostered competition.

Cox's Kleinpeter tries to finesse the question of whether they are targeting EATel with this promotion even while admitting that they are only advertising it in Ascension. The implication is that Cox just happens to be "testing" it in Ascension. Sure...it was entirely coincidental that the ONLY place that it was actively promoted was in the ONLY place where a local fiber to the home project was up and running and costing them market share. And it was only a coincidence that it was ONLY offered to folks who were switching phone service to Cox from a local phone company that recently started offering cable tv service over that fiber. Cox really shouldn't try to mislead people so transparently. It will make people outside of Lafayette think that Cox isn't honest about such things. (People inside Lafayette already know this.) Really, it shouldn't be embarrassing to actually admit to competing on price...regular companies have to do it all the time—and do it fairly.

The package a deal...and apparently there is no contract involved. Just a guarantee of the price for 12 months. It'll do till something better comes along.

(Thanks are due to EATEL for uncovering this and to the Independent for following up with such alacrity—the weekly had to ask "embarrassing" questions of a major regional advertiser. They did it, and are running the results, apparently without flinching. It should be noticed. Kudos.)

No Broadband Price War....elsewhere

One of the reasons that LUS has relaxed a bit about making its pricing commitments is that it is increasingly obvious that there will be no national price war on broadband. So LUS can confidently see that with its much longer pay-back time and with no need to chase large profits for impatient stockholders and investment firms it can easily undercut the pricing of corporations who have, essentially, decided to milk the customers of their established monopoly cows for the indefinite future. As AT&T and Verizion roll out broadband services that provide no advantage over cable for the same levels of speed it is increasingly obvious that the two industries have decided not to compete on price.

The latest in this "we-are-competeing-vigorously-but-not-on prices" noncompetition competition between the colliding telco and cableco monopolies in the broadband arena was AT&T's decision to raise prices on its broadband DSL customers...except in former BellSouth areas where its prices were previously higher.

That wasn't what "competition" between the cablecos and the telecos was supposed to bring. You may recall that when AT&T was trying to transfer local municipal property rights to the state level so it could get around the locals' insistence that AT&T serve all of a community with their new services in return for using the community's land they claimed that relieving them of that obligation would yield cheaper prices for the favored few that actually got "competition." Even that half-a-loaf is NOT the way it is working out...and both the cablecos and the telecos like it that way. Two competitors are simply not enough to establish a competitive market and reality is taking its toll on that tale. A few are even noticing that we've been taken:

The announced price hike didn't sit well with some observers.

Routers, modems and other equipment used to deliver bandwidth are dropping in cost as rapidly as bandwidth demands are rising, said Dave Burstein, who operates DSLprime.com, an industry newsletter. "Total cost to the company for the bandwidth it delivers is about $1 a month per customer," Burstein said. "AT&T is raising its rates because it can. It has the market power to do so. Increased costs aren't the reason."

AT&T still has to pay off the enormous costs of trying to absorb BellSouth, among others, a consolidation that our regulators allowed because it was also supposed to lower prices.

The only real price competition we here in Lafayette can expect to see will come from LUS. BellSouth and Cox exist to serve the interests of their stockholders and that means that we should pay as high a price as the company can extract from us. The industry is learning right now that they don't have to compete on prices to maintain their margins--and so they won't. Anything less would be irresponsible. LUS also exists to serve its owners...but their (our) intersts are best served by low prices for high levels of service. Both types of owners will, inevitably, get a company pricing policy based on their interests. But only LUS will actually be motivated to compete on price. (Six month specials like those you'll see from Cox in both today's Advocate and Advocate don't count—that's marketing, not pricing.)

2009, after the launch of Phase 1, will be an interesting and, I'll bet, a satisfying year for Lafayette consumers of broadband.

The Year in Review

The Year In Review @ LafayetteProFiber

2007 was the year Lafayette's fiber project emerged from the wilderness and people began to dream in earnest. The final delaying lawsuit was dismissed, the bonds sold, and contracts let for construction. Dreams followed the announcement of intriguing new features like a wireless addition and the 100 megs of intranet bandwidth and people began to dream of what we might do with it it to close the digital divide or provide new ways to strengthen the community.

January........
At the year's beginning we were still awaiting a decision from the State Supreme Court on the last lawsuit holding up the bond sale. The Fiber to the Schools project advanced, ensuring a parish-wide fiber backbone and early hints of a wireless project were realized when LUS put out a bid for a municipal wireless network — one initially designed to provide government services. The competition was clearly still out there as Cox introduced Video On Demand, upping the ante on what Lafayette's network needed to provide in its initial offerings.

February........
In early February Durel's "State of the City" address lauded the fiber build but failed to slake our appetite for new news on the wireless component. The Advertiser's attempt to move into an internet-centric future advanced in fits and starts but it emerged with arguably the best local video site in town, far outclassing the efforts of the local TV stations and proving that with the construction of new net-based infrastructure the race will not necessarily go to the established incumbents. An attempt to resuscitate the breathless prose of the fiber fight fell flat at the Advertiser as a story about the cost of defending ourselves against the incumbents produced no discernible ripple of concern from a populace immunized against such sensationalism by the long fiber battle.

Late in the month, after weeks of waiting, came the Supreme Court decision we'd been waiting—and hoping—for. The Court unanimously overturned the 3rd Circuit's ruling and pretty roundly spanked them for their mistakes in letting the argument go on for so long. The final victory for Lafayette was widely heralded as one that would have consequences in locales beyond Lafayette or Louisiana. Cox, after years of vigorous attempts to delay or destroy the project, testily denied that it made any difference to them. Dreaming about what we could do with the shiny new toy starts almost immediately and LUS announced plans to solicit ideas from the community.

March........
The first, and in retrospect apparently last, of the Fiber Forums is held and the community had plenty of ideas. (Cox and AT&T also attended and took conspicuously copious notes.) If nothing else the forum demonstrated that the LUS understood that a generous attitude will pay unanticipated dividends. And that simple insight is one which will do more to make the system a success than any elaborate business plan. Wireless hopes, big intranet bandwidth, symmetrical speeds and more were all promised and their implications discussed.

An old issue, the digital divide, returned, Lafayette was named a "Smart Community," and the first high paying jobs attracted by the fiber arrived. LUS started to spend visible money on the networks construction, selecting a design firm to lay out plans for the headend building that would house the electronics and for a warehouse to store the masses of equipment that would be needed in the construction phase.

April........
April brought a shower of small advances. The Digital Divide Committee was reconvened, the location of the headend facility at the intersection of I-10 and I-49 was set, and an engineer to oversee the construction and help make crucial decisions was chosen.

May.......
March brought a reblooming of the old FUD tactics from the incumbent corporations. Cox kicked off the festival with an embarrassing attempt to pretend its hybrid fiber-coax network was a fiber network in a venue where everyone knew better. Just a bit later we got a whiff of old push poll tactics when a new, apparently limited version was trialed in Lafayette. Then Naquin's (AT&T's PR team?) attorneys carried water for the incumbents by engaging in a rather transparently false threat to sue LUS just a week before the city went to New York to interview for the crucial bond ratings.

June........
As the seasons turned Huval went to Councilor William's "Real Talk" and talked—about the retail wireless plans, about a faster construction schedule, about a larger basic cable lineup than anticipated, about internet speeds where the slowest package would be faster than the fastest speeds available in most of the country. Oh yeah, and symmetrical bandwidth coupled with a 100 meg intranet. Enough to leave the most ardent proponent breathless. Lafayette Pro Fiber floated a dream about a "Lafayette Commons" that would take our commonly owned network and use it to make a place to share local information build community.

The bond sale was authorized and the bonds were put on the market. The first unit sold solidified the legal standing of the entire business plan since bond holders are constitutionally protected from any change in the plan no future legal challenges to the basic plan can be successful.

July.......
In July LUS' Huval was honored by his national peers—he was both given an achievement award and made the chairman of the board of the American Public Power Association. The success of the fiber fight clearly raised his stock nationally as well as locally. The bond sale closed; meaning the money was in the bank and available to spend. The newly hired engineer's men were in the field surveying poles—making sure there was plenty of room for the fiber to be hung.

August........
Joey Durel took over leadership of the Louisiana Municipal and pledged to work "to give local governments more ability to control their own destinies while not placing roadblocks in the way of our progress." Among other things, that probably referred to the infamous imposition by the legislature of the (un)Fair Competition Act. An LMA with aware leadership will fight such laws. The City-Parish Council approved the fiber funding plan. Dreaming about what might well turn out to be the nation's best telecom system continued apace and a new Digital Divide report was made to the council.

September.......
Another small media tempest erupted as the kids headed back to school. The headend building came in way over budget and LUS had to scale back and issue a new set of specs to keep its price under control. The headend was one in a series of public projects whose price spiraled upwards in the wake of Lafayette's post-Katrina/Rita building boom.

Cox fired its most effective shot yet across the bow of LUS by securing a long-term contract with ULL athletics for exclusive rights to telecast replays of coaches programs, sporting events and university athletic programs on its cable systems—and we can rest assured they'll not be reselling such valuable material to the local opposition. For ULL fans this is a very big deal—such deals have lead to a lot of fan anger on both coasts where such deals are more common.

The Advertiser endorsed the dreams of bridging the digital divide in a supportive editorial and Huval spoke up on Federal broadband policy in his role of APPA chair saying plainly that the incumbent telecom corporations had failed American in spite of massive subsidies and called for letting "the public sector take the reins in communities where citizens want them to do so."

October........
Dreaming of a better wireless network provided a bit of fun in October. The surprise announcement that LUS would imitate Apple and open its own "fiber storefront" to educate and promote the brand was greeted with approval. And the construction news rolled on with Alcatel being picked to provide the electronic guts of Lafayette's new system.


November........
LUS signed a franchise agreement with the city-parish that was virtually a copy of Cox's and immediately tried to reassure folks during its approval that the agreement wasn't nearly all they hoped to provide the community. One of the few areas where LUS laid out a plan in their franchise agreement for going beyond what Cox had already done was in its support of AOC, the local access channel. That touched of some dreaming about what a 21st century AOC might really look like. Mike weighed in with some dreams about an asynchronous Lafayette in which AOC or a surrogate would play a major role.

If history repeated itself with the franchise agreement, an awareness of the recent fiber battle seemed completely missing from the minds of some candidates for the state representative seats up for grabs this year. Let's hope their more aware colleagues educate them as to what a successful telecommunications utility could mean for the hopes and dreams of their community.

December........
As the year wound down toward the holiday season the bid on the revamped fiber headend was accepted and the crews were spotted in a North Lafayette neighborhood moving wires on poles in preparation for hanging fiber.

The future is upon us. Since the plan is to light up a section of the city somewhere near the first of the coming year, with any luck next year's edition of this missive will be able to say that fiber has been lit up in Lafayette and that we no longer need to wait for the future.

It's a new year indeed.

Open Systems, Muni systems, and Lessons from Singapore

A Problem
Advocates of muni telecomm are often met with the blanket, essentially ideological, claim that municipal plans will fail because "everyone knows" that government-run enterprises will always lack the competitive advantages of private businesses. It's hard to greet such claims with anything other than exasperation: anyone who thinks that the duopoly represented by corporations like AT&T and Cox has produced efficient pricing or any sign of innovation just hasn't been paying attention.

Customers of telecommunications companies simply haven't seen the benefits of "free enterprise" that competition is supposed to bring. The telecomm market looks like market-segmented, minimally competitive duopoly and produces results that look a whole lot more like staid, expensive monopolies than anything that might result from a real competitive marketplace.

Lots of folks have noticed this painfully obvious fact about the current telecomm market and in some places are even trying to do something about it. Lafayette has one solution. Singapore is trying another.

Singapore Tries Honest Problem Solving
Singapore is about to invest in a truly radical plan to build a world-class, high-speed network and to do it by encouraging real competition in the telecommunications market. (See 1, 2) Naturally they start by mandating and subsidizing the construction of a fiber to the home network. Beyond that it gets really interesting. Their plan takes yet another stab at inducing competition in the fundamentally natural monopoly wireline broadband market. Competition—when it works—provides cheaper prices and drives innovation. Lot's of country's have tried for that golden ring—and failed. (The American FCC's attempts have been particularly laughable.) What is interesting about Singapore's design is that it might work.

It is worth noticing how far they had to go to have a hope of developing real competition. Consider the starting point: Most networks world-wide are fundamentally vertical monopolies. One company owns the physical network, manages it, and sells retail services to end users. Think about your phone or cable company and you'll get the basic idea. The minimal competition between phone and cable companies over the new internet services should not be allowed to obscure the fact that they are both basically monopolies with only a sideline internet business that has, at best, only one competitor—not nearly enough to develop a competitive marketplace that would yield the benefits of innovation and low prices. As digital services converge over integrated data networks it remains to be seen whether even the current inadequate level of duopoly competition will be maintained...and a lot of history that argues that it will collapse back into a simple monopoly.

But everyone wants competition and its benefits. Singapore wants competition. But Singapore wants it badly enough to try and get it realistically.

Being realistic involves admitting that the basic fiber, the physical network, is a classic natural monopoly. But beyond that evidence of clear-headedness Singapore also seems to recognize that operational layers of the network determine what sorts of application services can be offered at retail and that retail providers need to be able to count on a responsive middle layer provider.

<skipable bit>
<time out for a bit of background>
A typical large-scale network is built up of multiple, but integrated, levels. One way of looking at that is to see at the "bottom" a hardware base built up of the actual fiber and low-level switching. Up from that you have protocols and translation devices/routines that knit together the data from the low-level physical layer. Both of these are pretty much invisible to any end-user. On top of that you have applications that show their face to users of the network. Let's call that 1) the physical layer, 2) the network operations layer, and 3) the applications layer. (This 3-layer description, as forbidding as it might seem, hides an awful lot of complexity. The canonical way of looking at network design is the 7-layer OSI description. That hides less of the complexity. Sophisticated readers should feel free to substitute OSI layer 1 for "physical;" layers 2-3 for "operational" and 4-7 for "applications.")
</time out for a bit of background>
</skipable bit>

Singapore is separating the physical and operational level into two different, unrelated monopolies committed to selling the same services to all retail providers at the same price. The retailers would then be in a position of making all their profit from the quality and the quantity of services they could convince consumers to buy.

Structural Separation: Keeping the Monopoly Owner Honest
Singapore is structurally separating the physical, lower level from the upper operational and application levels by creating a completely independent network company to build and manage the physical network (cleverly called NetCo). That sets things up so the only way the owners can make more money is by providing more value to the wholesale renters of their physical capacity. If you can offer more value more efficiently you can sell more capacity for a better price. And that, to repeat, is the only way to increase your take. This is a simple, reliable, structural solution to the problem of a monopoly owner using their control of the medium to eliminate or forbid competitors. The physical network owner cannot be motivated to manipulate the network to benefit its particular set of retail services if it doesn't own any such services....it will not be allowed, for instance, to sell phone or video services to end users and so has no motivation to structure its network to favor, for instance, cable TV at the expense of DV (Downloadable Video). By making the monopoly network owner's profits depend solely on motives that are aligned with the public's interest the task of regulation is much easier. All you have to worry about is enforcing rules that require everyone to be charged the same for the same service. (This is much of what lawyers mean when they talk about Common Carriage rules.)

Operational Separation: A Balance of Powers
The most unusual (and least clearly specified) part of the plan is separating out the operational division of the network into its own independent company. Most structural separation schemes make this the property of the network owner or allow retailers to install their own equipment at the operational level. The problem with the first solution is that investing all the control in the conservative utility would make it less likely that unproven but potentially innovative middle level equipment would be installed, lessening the hoped-for benefit from innovation. On the other hand letting the retailer install whatever equipment they want on fiber strands they have rented virtually ensures that incompatibility will emerge on the network and pretty much ensures that some classes of equipment will be wastefully duplicated—lessening the hoped-for benefit of lower prices.

Singapore's solution is to provide for a monopoly operational company (cleverly called OpCo) that must maintain a separate existence, board, and identity but which retail owners can own pieces of. Presumeably the Singaporeans, being committed structuralists, think that such an ogranizational schema will eliminate wasteful duplication and will tie OpCo to the more innovative retailers. Now this isn't nearly perfect: it would let powerful incumbents on the network control the provision of new middleware and help them keep out smaller new competitors that would threaten their developed markets....but while imperfect, this is a solution that at least makes a stab at controlling the worst defects of previous attempts to foster competition and encourage both lower prices and innovation at the middle level.

Retail: The Evolutionary Melee
The hope, of course, is that by minimizing costs at the physical layer by putting a free-to-be-careful and conservative utility at the physical level, and by structurally maximizing low pricing and innovation at the middle level the crucial retail applications level will attract many competitors who will have no choice but engage in a ruthless evolutionary melee in order to survive. Consumers would reap the benefits of low prices and innovative, powerful services.

It Might Even Work—At a Price
It is clever. It might even work.

In Singapore. As a National policy. And anywhere that the national government is willing to subsidize a full new fiber network to the tune of 25% of its total costs. Anywhere where it can dictate the terms of the new networks operation in order to ensure the incumbents don't kill competition in its cradle. (The incumbent phone and cable companies are among the bidders for the new network.)

Notice that this plan involves the people paying a substantial subsidy for the development of a system that private corporations will end up owning. And those corporations will reap all the eventual profit.

That's a deal only a authoritarian, corporate state like Singapore could love. It's a high price to pay.

What people are seeking when they try something so draconian is to realize the promise of competition in a framework that has been fundamentally hostile toward competition. (And well, maybe, to provide a little grease for their friends...but let's try to be generous). The hoped-for benefits are lower prices and a high level of innovation. Both are presumed to emerge "naturally" when you structure a natural monopoly so that the owners' self interest is deployed in the service of the eventual consumers.

But there is another, simpler, surer, way to align the owners' self-interest with that of consumers.

Lafayette's way

You could make the consumers the owners, by the simple and time-honored device of making the natural monopoly a public utility. Then the owner-citizens would have no motivation at all to exploit the consumer-citizens...since they'd be one and the same. They could ask themselves for, and expect to get, lower prices and the sorts of services that appeal to them.

I can't fathom why that can't be a national policy as easily as giving away the farm.

LUS FTTH Storefront Planned

LUS has announced a plan for a storefront that will likely prove the face of LUS Fiber. According to this morning's Advertiser:

Lafayette Utilities System is looking for retail space to set up a showroom for its fiber-to-the-home products.

"When customers come in and want to sign up, we're going to have a showcase where they can see some of the products in action," LUS Director Terry Huval said.

That sounds great--and it is the first concrete sign that LUS understands that it is entering a market in telecommunications services that requires a different sort of relationship with the public than that of a traditional utilities supplier. Putting out a technically advanced, low cost, reliable service (a fair characterization of LUS' other utilities) is not sufficient. LUS will need to sell fiber. Aggressively. It will need to tell the consumer why FTTH is better and show them how our local utility can do an excitingly superior job.

A storefront "showoff" location is a great idea and a great way to introduce the advantages of LUS Fiber to the people. The committment to such a store shows that LUS is coming to grips with the idea that being a credible competitor involves the perception as well as the actuality of quality.

Just to be blunt: Cox gets it. (AT&T doesn't, at least not locally) Since losing the fiber fight Cox has been pursuing a high-profile strategy of affiliating itself with local organizations and with ULL in an attempt to cut into LUS' perceived hometown advantage. It has aggressively--using both the public media and its background chatter to "influentials"--tried to sell the idea that it has a "fiber network" when what it really has is a perfectly standard cable-style hybrid fiber-coax network like any that you would see more honestly described elesewhere. That is an attempt to cut into LUS' perceived technology advantage. Cox has an uphill climb on both counts: LUS is owned by the people of Lafayette and Cox is a huge corporation run out of Atlanta and owned by a small family. LUS has an inescapable home field advantage. Cox's hybrid fiber-coax switches from fiber to copper coax at a node shared by somewhere in the neighborhood of 500 homes (or more--Cox is cagey). LUS fiber goes straight to each home. LUS will provide more for less in every category using that more capable and cheaper-to-maintain system. Again, actual advantage to LUS. What Cox "gets" is that it can blunt those actual advantages by pushing a strongly as it can the perception of something near to equality. LUS' task is to not let that go uncontested. The storefront will be a great forum for insistently demonstrating the local utility's advantages.

I have to hope LUS will model itself on Apple's storefronts. Slick, hightech, "cool" presentations of the best technology, coupled with a special cadre of "genuises" to answer technical questions and give reliable technology advice have made the Apple Store chain into an enormous win for Apple. Designed as much provide a reliable showcase for the company's advanced technology as to directly sell products the Apple Stores are now regularly cited as an important factor in Apple's increasing market share. It is easy to imagine an "LUS Fiber Store" (somebody needs to start the branding machine up!) that is filled with big HD flatscreens, computers, and phones all interlinked...the flatscreen serves as big display monitor, phone messages can be retrieved on the computers, caller ID that flashes on TV when the phone rings, linking in to address books on the 'puter or online to place VOIP phone calls. A few VOIP video phones for fun. Some WiFi phones for the adventurous mobile user. Demos that show how to integrate iPhones, Blackberrys, fancy PDAs into the system's hooks. Demos of cheap security cam integration. In-home wifi advice. Digital Video Recorders that you can program from work. ...I could go on here for a long time but you get the idea. These are all things that really have to be shown to be compelling. But once shown they are compelling. (I'll give up my TiVo DVR and home WiFi when you pry them from my cold dead fingers. :-) )

The storefront is a bit of a surprise to me. But I'm thrilled with the idea. I don't know that of any other muni fiber provider that is doing this (I'd be happy to be corrected) and it represents yet another way that LUS can push home its advantages.

Fun! I'd line up for the opening. ;-)

"U-Verse in BellSouth Territory?"

DSL reports asks whether U-Verse, AT&T's cable-like video service, is every going to be seen in former BellSouth territory.

AT&T says: Yes...soon...in Atlanta.

The question arises because U-Verse has so far only been seen in former SBC territories--where it has been taken up by 100,000 users--not in any of the areas that were BellSouth territory before the merger. Denizens of the deep south have felt somewhat neglected.

AT&T's offering is interesting chiefly because it is a pure IPTV play; it uses the language of the internet. Verizon, which is driving Fiber To The Home, is using what is really cable technology on its video side. AT&T had considerable trouble getting the technology off the ground but now appears to have a usable product.

The telephone company insists that its product will be competitive but considerable doubt (aired in the article linked to above) exists that this is true. The concern is bandwidth contrainst will keep it from competing adequately on the broadband side (where its speeds do not match even current cable offerings) or on the video end (where many doubt that it has the bandwidth to offer dual HDTV streams). The basic problem is its last mile twisted copper infrastructure. There's only so far you can push old copper--and the phone companies are much closer to the practical limit than are the cablecos.

What most folks seem to expect is that bably Bells will follow the same pattern in video that they have with broadband DSL: offer a slightly inferior product for less--and offer it in some places where cable does not go. Unless they launch a really aggressive attempt to win market share by offering a superior product (as Verizon appears poised to do) the cable companies immediate fiscal interests are served by keeping their higher prices while loosing a few marginal potential customers to a low end phone offering. --Such is the nature of duopoly markets; competing on price is avoided where ever possible. Market segmentation is more profitable for both.

That (basically humiliating) strategy might work in most places to keep AT&T and the other phone companies afloat but it won't work in Lafayette where AT&T will be a third-best, not second-best network. They'll be trying to stand against a competitor in LUS who is clearly determined to undercut the market price of the incumbents using more capable technology. LUS clearly wants to be a broad-based utility and not a player in a segemented semi-monopoly market. Its market plan to lower prices across the board by 20% leaves no room on the bottom for an also-ran. And, incidentally, that same plan leaves no rich pickings on the premium tiers for Cox to use as a consolation for letting the bottom go.

AT&T makes no bones about the fact that it is NOT planning to deploy even the modest U-Verse to all its customers. Its plans work out to serving only about 50% of its customer base even if it mets its buildout goals. And the customers it will not be serving are its "low-value" ones....you and I can both guess how Louisiana shows up on such a ranking.

So the real question is whether AT&T will ever show up to play in the Lafayette market. Louisiana markets, like Southern ones more generally, are markets with lower per capita incomes and hence are marginal anyway under the AT&T game plan. The added challenge of coming up against a local, fiber-optic utility which starts out with prices low enough to destroy your margin may convince them to simply stay away when contemplating the extra costs of upgrading their local net to support U-Verse.

Cox has made its determination to compete plain. But in Lafayette Cox will play the unfamiliar role of the second-best network against LUS' fiber. And LUS won't be interested in taking up Cox's place in a duopoly market...it will compete for the lower-end customer as determinedly as it is allowed to by Louisiana's regulatory agency. (Only in Louisiana would a law be enacted that mandates only regulations that limit the cheapest price a utility can charge the consumer—erecting rules that prevent it from ever charging less—without hinting at limits on the most a utility could charge...unhappily that is precisely what the Cox/BellSouth-sponsored (un)Fair Competition Act does. Go figure. (Go figure that the incumbents understand their difficulty well))

LUS, in this one smallish city, is about to break open a cozy market duopoly that elsewhere in this country will surely solidify further as cable and phone networks seek to secure the best return possible out of their differing network capacities and costs.

I do hope the rest of the country posts a quiet watch on Lafayette. What emerges here will be a lesson in what, in a better world, competition in the telecommunications market could look like.

Cox & UL Athletics

Cox has rolled out the first really big shot in the upcoming war with LUS; KATC and a post to the Independent blog reveal that it has spent two million dollars to purchase:

...exclusive rights to telecast replays of coaches programs, sporting events and university athletic programs on any of its cable systems, affiliated regional sports channel or programming network.

In the land of marketing this is a big deal...a very big deal.

The contract also includes, less importantly in my judgment, some pointedly described fiber connectivity and renaming/branding rights. Look to see "Cox" perpended to "Ragin' Cajuns" on buildings, shows, the scoreboard and wherever fine UL products are sold.

On the ground in Lafayette it means that Cox can control the video marketplace for UL sports. If you want to watch endless reruns and postgame analyzes of UL sports you'll have to subscribe to Cox. In a city where the successful pro fiber grassroots organization emblazoned all its advertising with the red and black it's one more element in Cox's campaign to overcome the anti-Lafayette label it was tagged with during the fiber referendum. (Cox has shown an acute awareness of LUS' local advantage in ways large and small; from hiring the locally connected daughter of the sitting governor to make its announcements, to sponsoring dinners for the local black chamber, to, now, grabbing the Ragin' Cajuns aftermarket. Cox understands that their prior behavior has created their largest marketing problem—and they're doing what they can to counter that history.)

What's LUS to do? There's very little that they can do. This is one of the places that Cox's size and financial reach make a direct answer impossible. Cox supplies cable to all of Acadiana and can distribute the cost of this purchase over every cable system they own in the region. [The red blobs at the map on the right; click map for a larger version] No single-city provider, no matter how loyal a booster of the university, can afford to match what Cox can afford to pay if the university makes it into a bidding war for an exclusive contract. And, anywhere Cox is not competing with an alternative wired provider, they can take a little cost off the top by leasing it to that non-competitor.

The Backstory: The feds
They will not have to provide this programming to anyone that they don't want to—and in Acadiana that means Cox will not sell it to LUS or the satellite companies. This sort of tactic has a pretty long history especially up east there have been bitter complaints against cable companies that secure exclusive rights to regional sports programming and refuse to resell it to competing wireline overbuilders (like LUS) or to satellite providers as a way of controlling the fan base.

It may (or may not) surprise you to know that this sort of thing was almost outlawed a year ago. The omnibus telecomm bill, that was only derailed when the net neutrality issue blew up unexpectedly, called the tactic anti-competitive and would have ended it. Cox is taking a bit of risk—a two million dollar risk—that the current congress won't casually outlaw the practice. The short version of the story is that locking new competitors out by using regional sports loyalties is pretty clearly anti-competitive. [How long is this contract? No one seems to say. KATC tells me that the period is a lengthy 10 years of exclusivity...$200,000 dollars a year.] And sports fans are the sort who, rightly, get upset and complain when they understand that their local loyalties are being exploited for the business benefit of media machines. They'd like to get it declared anti-competitive and illegal.

In fact it has been outlawed for any satellite-provided material. The satellite companies successfully lobbied to force vertically integrated media conglomerates that owned both television or movie programming and cable companies to sell critical programming at a reasonable price. That is why DirecTV can buy HBO programming (which is owned by Time-Warner cable) for a reasonable price. But the tool that the feds used to regulate it was satellite feeds—the big cable companies only had to sell it to satellite companies if they used satellites to distribute the feed. The idea back then was that the only reasonable way to distribute serious programming was via satellite uplink and downlink so distributing the feed to satellite companies would be trivially easy. However, in order that the cable companies wouldn't have to mess with demands to redistribute the many little shows that were locally produced shows (like those shown on AOC) that were transfered to regional affiliates over wire were excluded from the rule.

That made sense then. But things change and the rise of the gigabit internet has now made it feasible—and in some instances cheaper—to send massive amounts of video over the backbone, especially if you own regional fiber. (You can bet that AT&T won't bother to invest in lots of little satellite download dish farms as it rolls out its video services.) The UL deal exploits is what is known in the trade as "the terrestrial loophole." As long as cablecast regional sports "networks" (the tiger network, the ragin cajun network) use landlines to transfer the programming to local cable providers they can cut anyone out of the deal that they want.

But all that it would take to close that loophole would be the stroke of a legislative pen.

This is (another) one of those moments when Lafayette cannot simply go its own way and pursue its own interests. The federal legislature should act on issues like this and push the FCC, which under this administration, and frankly the last several administrations, has shown no inclination to police the media megacorporations that are the field on which modern politicking is played out. In a brief moment of irony Lafayette's best hope for gaining access to UL programming is the hope that AT&T and Verizon will be successful in their ongoing lobbying to close the terrestrial loophole.

UL?
The real question for me is: What is going on with UL? Cox is easy to understand. But UL has to understand that it is taking advantage of an opportunity that the people of the Lafayette community have created. Without the looming threat of competition from LUS Cox wouldn't bother to pay much for a product that no one else was in a position to sell. Cox could have given UL a couple of million anytime it wanted to in the last decade or so—and didn't. It is not generosity that motivates them. Cox chooses to do so today because it is looking for a way to staunch the inevitable bleeding that will begin the moment a popular locally-owned competitor rolls out a competing video product. But from UL's point of view they had to choose between 1) an exclusive, very lucrative contract with Cox this year that will, in all likelihood, result in limiting viewership by the 50% in their hometown that choose to buy from LUS and 2) Two non-exclusive contracts two years down the road--both likely well above what they're getting now but likely not equal to the pot that Cox is offering now--that would serve the entire loyal fan base they've developed in their hometown. The choice was between cash and developing their local fan community.

The University opted to trade cash for loyalty. It's probably a good business deal. But is doesn't serve the fan community—or other local university loyalists—well.

If you thought the horse farm deal and a determination to sell off that property before a new president arrives showed a lack of community of awareness bordering on hostilty toward Lafayette on the part of the outgoing Authement administration, the Cox deal will only confirm your suspicions. A new university administration can't come soon enough for Lafayette.

Update 8:10: I ran down an announcement of the deal on the ULL website. It's remarkable for two things—one which does and one which does not appear:

• 1) What is absent is any mention of what this 2 million really bought—which I've argued was the exclusive replay rights for all ULL's athletic programs and after-show commentary. (Is someone embarassed? And if so, is it Cox or ULL?) and
• 2) Cox repeats the silliness of describing its hybrid fiber-coax network as its "fiber network." Tain't so; and a lesson in what a fiber network really is is coming soon.
  

"Sorrento might OK Eatel fiber"

Sorrento is about to get a locally-owned fiber-optic network. Rural telephone provider Eatel, who Lafayette readers may remember fondly as one of the businesses that used to offer cheap phone service here, is now bidding to extend its fiber-optic network to the town.

EATel, no longer known as East Ascension TELephone, is based in the parish of the same name and is bidding to extend cable and high-speed internet service to this town in its already-existing footprint.

From the Advocate story:

The Town Council has agreed to consider a proposed ordinance that, if adopted, would provide residents with a choice of cable television providers.

“Basically, it will allow Eatel to run fiber-optic lines to provide cable services. Eatel will provide a competing service to Cox (Communications),” town attorney Greg Lambert said.

That's good news for local consumers. Sorrento is lucky that its phone provider is Eatel and not AT&T.

Eatel is doing what AT&T refuses to do—actually competing against the cable company in small rural towns. And Eatel is doing so on a level playing field, paying the town of Sorrento franchise fees to use its property equal to those Cox pays. One assumes that there is no question but that Eatel will serve the whole town; the phone company network is everywhere and city council in a small town like that would get hung if it signed anything that allowed partial service. BellSouth/AT&T realizes that local representatives feel that way—and since they would rather serve the rich guys they went to the Louisiana legislature to get a law passed that would have forbidden a town like Sorrento from demanding that a franchisee that wanted to use the public rights-of-way would have to serve both sides of the track. (Blanco vetoed the bill.)

Good for Eatel. Good for Sorrento.

Follow Up: St. Charles Parish & Cox

The Times-Picayune reports on the latest St. Charles parish expression of discontent with Cox Communications. The parish council is asking citizens to show up at their meeting and let them know what they think of Cox. (Cox's contract ends on December 31st.)

From the story:

The council, spurred by citizens' complaints about the company, passed a resolution in February saying they want another cable company to apply for a cable TV franchise.

If Lafayette's experience is any guide the council should expect the room to be packed with uniformed Cox employees who arrive in company trucks.

What the NOLA story does not mention is that back when this all blew up two of the council members were advocating municipal competition a la Lafayette and had met with represetatives from the city across the basin.

It should be interesting to see what comes of all this.

$10 DSL Revisted

New AT&T CEO Randall talks to the Atlanta Journal Constituion about, among other things, the "hidden" $10 DSL program that I've noted recently. The FCC required that AT&T offer this discount program—and an accompanying "naked DSL" program for a bit more—as a condition of it allowing BellSouth and AT&T to merge. As it turns out, in my experience and the experience of others, it is inordinately hard to find and order. Not a few people think AT&T is avoiding keeping its word.

Randall says that you don't really want it. Is that true? If you've tried to get it I'd like to hear your experiences. (John2 "at" LafayetteProFiber "dot" com)

In his own words:

Q: Of all the things the AJC has written about AT&T lately, none has caused more reader irritation than AT&T's $10 a month DSL offer, which was required by the Federal Communications Commission when you bought BellSouth. A lot of folks said they couldn't find it. It was hard to find on your site. Why?

A: We haven't made it difficult to find. To be honest with you, that's not a product that our customers have clamored for. We still have $15 offers out there in the marketplace, even $20 offers, for 1.5 megabit speeds. Those are really kind of the minimum speeds that give a good user experience. So I don't want to necessarily offer up a product where the user experience is not what I would consider really state of the art. That $10 product is kind of in that mode."

Local Government Fair Competition Act Dead...in North Carolina

Following a state-wide outcry North Carolina's version of the lobbyist-written "Local Government Fair Competition Act" died today according to a local report. (Previous LPF coverage: 1, 2, 3)

Opposition from the likes of North Carolina's Leauge of Municipalities, Google, Educause, Intel, Tropos, and user groups finally killed the embarrassing telecom-sponsored bill in the state that prides itself on having successfully courted high-tech in its widely admired "research triangle." The victory didin't come easy and the incumbent corporations enjoyed several successes before being derailed in the House finance committee. Louisiana's legislature, regular readers will recall, passed such a law and it has proved the bane of Lafayette's effort to build the network the citizens voted for every since by spawning seemingly endless lawsuits. In North Carolina legislators were helped to see the light by the disaster produced by the previous year's telecom -sponsored–a state-wide video franchise law. That made it a little harder to treat the earnest entreties of the incumbents as credible. (In Louisiana the ongoing mess produced by the Lousisiana Local Government Fair Competition Act was no doubt instrumental in inducing our governor to veto our state-wide video law when that giveaway was proposed here. You can fool some of the people...)

Congratulations are due to an aroused North Carolina citizenry. Only one thing trumps the money the incumbent corporations have to spread around at election time: the votes they had hoped to buy with it.

Louisiana needs to repeal it's own version of this odious (un)Fair Competition law. It puts stunningly unfair restraints on competition, restricts the people's rights to act in their own behalf, and has the now demonstrable effect of leaving local governments mired in legal battles that serve only to delay the expressed will of the people. It robbed the citizens of New Orleans of their municipal wifi system after the storm and came close to derailing Lafayette's project. It is not likely that any other municipality in the state will have the resources or the will to pursue serving their citizenry in this way until this law is repealed.

North Carolina shows the way.

AT&T's $10.00 DSL Not "Offered"

David Isenberg at his exemplary Isenblog points out that AT&T is not really living up to the agreements it made to get the BellSouth merger approved. He uses a LPF post as a point of departure, noting that while it is possible to find the $10.00 DSL offer I referred readers to it is not easy to locate and, even more significantly, you cannot get to the offer from even the difficult-to-locate page I found. I had not realized that but, upon digging further, found it to be absolutely true. Mea Culpa! Following the link on the BellSouth page leads you to the general AT&T DSL page and after giving them your local phone number as part of the "order" process for the cheapest visible alternative they still don't give the customer (you and me) any sense that there might be a legally mandated, still cheaper offer available. To go any further you have to complete the order and await contact by email....since I've no intention to order DSL service I stopped there. But the fact is clear: You cannot get to the $10.00 offer unless you already know it is there and are willing to interrupt the normal ordering process to demand it.

Isenberg correctly notes that this is not "offering" the service in the sense that the FCC required. Posting the offer on your website in such a way that only Google can find it and then adding insult to injury by funneling a person who has laboriously located the "good deal" for "Fast DSL Lite" to a page where a $10.00 offer isn't visible but a "New Lower Price Fast DSL Lite" at $19.95 is, cannot be called anything but deceptive.

Isenberg goes on to note that this isn't the only evasion of its merger "deal" with the feds that AT&T seems to be ignoring:

It agreed to offer "naked DSL" within six months of the merger agreement -- that would be June 30, 2007, and there's no naked DSL offer from AT&T I can find today, July 6, 2007, either. The FAQ still says, "To enjoy FastAccess DSL [FastAccess is what AT&T calls all its DSL services], you'll need to have local phone service with BellSouth."

AT&T also pledged to make wireline DSL available to 85% of the households in its territory by the end of 2007. Will it, or is this yet another Kushnick?* (A Kushnick is what a Bell does when it gets a Quid for a future Pro Quo, which it doesn't ever deliver.)

AT&T has already announced that it will be developing technology to violate its pledge of Network Neutrality;

I've long since gotten to the cynical spot where I automatically assume that any obligation that BS/AT&T or Cox make that can be evaded will be evaded. They simply don't act in good faith. I'm so inured to such behavior that I barely notice it and simply assume that if you want a fair shake you'll have to fight for it. But Isenberg is right. You shouldn't have to.

AT&T should simply honor its word. That it casually declines to do so when it is not to its immediate fiscal advantage is the best possible reason for not doing business with them.

The Money's in the Bank

The sale of LUS fiber to the home bonds officially "closed" Thursday both the Advocate and the Advertiser report. LUS sold $110.4 million in revenue bonds to support the construction and intial costs of the network. As in "closing" on your home or car loan what this really means is that the money is in the bank and you can take possession of what you've been sold. In this case LUS (and the rest of us) is "buying" the use of the money. Now they can begin spending money.

Expect the pace of things to pick up.

The papers report that spending will begin on planning and on the early construction of items like the warehouse necessary to store construction equipment and the head-end building that will be the electronic heart of the new system.

Attentive readers may wonder what happened to the $125 million that the voters approved two years ago. Why only $110.4 million? The easy answer is that new cost projections are lower as a consequence of the delay are less so they are borrowing less. But while that is central there is a bit more to consider as the following from the Advocate indicates:

The $110.4 million in bonds are based on projections of what it would take to build a system if half the market signed up for LUS service.

The savings in technology and interest cost mean that should LUS exceed that 50 percent share of the market, it could make it easier to pay for further expansion with cash instead of another bond issue, Huval said.

The hope of LUS has always been to make LUS Fiber a utility, that is for LUS Fiber to be a ubiquitously available service run in the public interest. It is part of the history and community orientation of LUS to hope and believe that it will be the dominant provider of telecom services in Lafayette. While that level of subscription is not essential to the network's success as a business (that figure is in the lower 20% range) a subscription figure above 50% is clearly what LUS desires. Based on subscription rates to other locally-owned, advanced telecom systems that hope is not particularly grandiose. Bristol, Va.'s system has recently had to retool its network at a real additional cost to accommodate higher that expected "take rates." Consequently LUS has always taken seriously the potential for rapid subscriber growth—especially after having been endorsed by 68% of the voters. Heavy, early, buy-in from the community means a much higher initial cost to be paid for from the bonded money at a time before income really starts to roll in. The cost to run fiber from the street to the wall of your house, install the electronics box there, and connect up your home is a large, fixed cost that the business intends to pay off over time. (Huval estimated that cost at $6-700 recently.)

So part of what it means to ask for less money from bond market than you were authorized to take by the voters is that you believe that you can keep up with the hoped-for take rates at more cheaply as a consequence of lower interest rates and lower equipment and installation costs than you originally thought. This is good news.

The most dangerous moment for LUS might well be the moment of its biggest success. If LUS gets a huge initial subscription bulge that prevents it from showing a quick profit (as it pays off all those expensive but income-producing $6-700 dollar investments in new customers) AT&T, Cox and its agents are no doubt waiting to make use of the incumbent-written "Local Government (un)Fair Competition Act" to try and "prove" that LUS not making a profit (precisely because it is dominating the market) and use clauses in their their law ostensibly inserted to "protect the citizens" to shut down their local competition. LUS has apparently decided that this is not worth worrying about at the 125 million dollar level--only the 110.4 million dollar level. Having to worry about such nonsense at all adds cost to the build and is yet another reason why this special interest law should be repealed.


Oh, by the way...am I the only one to notice that LUS had the authority to take home $125 million dollars—authority directly from the people—but chose to only use $110 million of that authority? That its "excuse" was the best of all fiscally responsible reasons: that it wasn't going to cost that much so they didn't want to burden the people with the expense of what would amount to a safety cushion? Where are all the nutcase jobs who were sure that the project was going to be incompetently and corruptly handled? Are any of them rethinking or moderating their stand based on the evidence? (Thanks, I needed to get that off my chest.)

Verizon's fiber-optic payoff | CNET News.com

Food for Thought, Learning from the Big Guys Division:

"Verizon's fiber-optic payoff;" The premise of this story is that Verizon did right by going with a Fiber To The Home plan...and AT&T/BellSouth messed up by trying to get by on the cheap. Verizon will have the bandwidth and the flexibility to compete more than adequately against the cable companies. But AT&T will not, on the basis of this author's analysis.

Lafayette can mine Verizon's experience for insight into how an all-fiber network can compete against the cablecos. Verizon will be several years ahead of LUS in the deployment of a new fiber system and its successes can be followed and its failures avoided. Verizon is, happily for Lafayette, not the incumbent locally. It's enormous numbers will allow suppliers and developers for its products to supply a place like Lafayette almost as an afterthought--and at reasonable prices since the big-ticket purchaser is the giant Verizon. Even better, the also-rans on giant Verizon contracts will be looking for a place to prove their ideas. If Lafayette's buyer's are wise we'll be able to cut some interesting deals on cutting-edge ideas that badly need a place to demonstrate that their ideas are viable before marketing it to the big fellow. A real danger has always been that LUS would be so far ahead of what the market in other places can provide that useful products would have to be untested and hand-crafted for us. That could be exciting...but expensive. Much better to have a big trailblazer proving basic concepts somewhere else. Then we only have to lay in a better implementation.

Apparently Verizon is succeeding. Thought its stock has taken a hit because of its heavy, long term investment in fiber has suppressed earnings its subscriber numbers are very healthy for the same reason. Its bet on a combination of old-style cable technology, fancy new IPTV for the extras, and fiber to the home capacity is allowing the company success in delivering both a high-quality, reliable TV experience, and fancy new IP services. AT&T, on the other hand, has high stock prices but low subscriber numbers for its new hybrid fiber/DSL that uses unstable IP for all its services. If I were looking at a long-term investment I know where my money would go