Monday, August 30, 2004

Going to Supreme Court in Defense of Closed Cable Networks

The Washington Post reports in it's Tuesday edition that the Bush administration will ask the U.S. Supreme Court to overturn a 9th Circuit Court of Appeals ruling that cable companies must provide internet service providers (ISPs) access to their networks.

This battle has been raging for years. It started, as I recall, in Tacoma, Washington, in the late 1990s where the City Council wanted to write a requirement for open network access into its cable franchise agreement. After numerous court hearings and appeals, I think that case was ultimately resolved in favor of the cable companies. But, as the Washington Post reports, a group of independent ISPs brought a separate action challenging a Federal Communications Commission (FCC) ruling which classified cable services as information services rather than telecom services.

The cable companies (and the Bush administration) argue that upholding the 9th Circuit ruling would subject cable services to charges like Universal Service Fund fees. They're right.

However, whether that would mean higher prices to consumers is an open question. Why? Open networks would bring competition to Internet-based services delivered over now-closed cable networks. Competition has been shown to have a very positive impact for consumers on what used to be the straight telephone side of this evolving industry.

That the FCC ruled in a way that protected the proprietary hold of cable companies over their networks should come as no surprise. This is consistent with the 'competition among modalities' approach to competition that FCC Chairman Michael Powell champions. It is consistent with FCC rulings that have exempted incumbent local exchange carriers from having to grant competitors access to new fiber networks.

This particular Powell Doctrine represents a sharp change from the policies that were in place which enabled the Internet to become a hotbed for innovation. It is consistent with a world view which says that inter-modal competition among corporate monopolists is a good thing.

Could be, but good for whom?

Fiber munis share incumbent war stories

Broadband Reports notes our new content, "Talking with Annie Collins of the TriCities in Illinois." That's nice notice in a major national resource on the subject of broadband.

The interview with Annie inaugurates what we intend to be a regular feature—discussions with folks in other communities also interested in moving to a publicly-owned telecommunications infrastructure. Jump over to Annie's interview; she has some very interesting, and familiar, things to say about the tactics that the incumbents in Illinois have used to try and block their municpal coalition to build a fiber network.

Sunday, August 29, 2004

Secret Identity of TJCrawdad Revealed

Mr. Menefee has done his technogeek expose thing again. TJCrawdad, the anonymous "Lafayette Resident" who produces the Let the People vote Blog, is revealed as Tom Cantrell of Tyler, Texas, the Cox executive that distingushed himself by managing to insult the Lafayette Chamber of Commerce, and defending push polls. You should go straight to the horse's mouth and read about Master Menefee's exploit yourself —how he did it is half, well 25%, of the fun—but I can't resist the temptation to give you a little more of the back story here.

You will recall that Doug has exposed these guys once before when he looked up the location and domain name owner of the original "let the people vote" website. First he mentioned, in the course of discussing why going to a vote wasn't fair to Lafayette or LUS that the Let the People Vote website was a Cox initiative. Challenged by an email to prove that it was Cox and not a concerned citizen Doug simply published the whois data showing that Cox in Tyler, Texas owned the domain and that accounts receivable had paid for it. Simple. Devastating.

Cox mostly didn't deal with that and what little reaction they had was to say that it was all an oversight; that they never meant to deceive. But the original version of the site made it very clear that the you were supposed to believe that it was out of Lafayette. That site, its credibility shot, was never well developed and today remains a three page website that exists solely to channel email to the city council. But it still isn't labled a Cox site and still contains phrases like "as we say in Acadiana" that certainly mislead the reader—and certainly is intended to do so. A deceptive site which remains up even after it is exposed reveals the true depth of its owners committment to anything resembling the democratic process....and their unrepentant contempt for those the site hopes to influence.

Then the Let the People Vote blog appeared. It too is set up to make the reader think that TJCrawdad, the site owner, is a Lafayette resident. Just take a glance a the profile where the owner's location is clearly stated. It was this blog, and not the by then discredited Cox site that was advertised for hours at a time on cox cable channel 14 in alternation with an ad for the Cox "Academic" Broadband Forum.

But Tom Cantrell aka TJCrawdad is not a resident of Lafayette. He lives in and presumeably blogs from Tyler, Texas.

It will be interesting to see how Cox responds to this. The last time they got caught out they did a little Texas shuffle and went right back to trying to deceive people—if they had simply forgotten to let the readers know who was sponsoring the message, being notified of their error should have lead to labeling the site a Cox site. But the site is unbranded even today. But in the case of the blog it is not a "mere" sin of ommission. Saying you are from Lafayette is an outright lie. Can they ignore that as well?

These sorts of deceptive practices are ultimately counterproductive, a fact Mike has written on in his recent Fact Check article: Blowing the Whistle Over Bristol (scroll down to the summary).

Cox would be well-advised to reconsider its tactics. People don't like being lied to. And once it is demonstrated that you are perfectly willing to deceive people to gain advantage you lose even people who might otherwise support you. The easiest way for powerhouses like Cox and BellSouth to lose the public relations war in Lafayette is to convince the people of the city that they cannot be trusted. They seem hell-bent on doing so.


Saturday, August 28, 2004

BR Advocate provides English translation for Times column

Saturday's edition of The Advocate carries a straight news story about a tour of other municipal fiber operations by a team of the Lafayette Utilities System (LUS) employees.

That article may come in handy if you read this Eric Benjamin column in Wednesday's The Times of Acadiana.

Menwhile, John is still seeking help interpreting Benjamin's first column on the LUS project.

Friday, August 27, 2004

Progress & Freedom Foundation thinks YOU are the problem!

The hired guns over at the Progress & Freedom Foundation think that the problem with telecom policy in these United States is that there is too much public input.

At least that's the way I read this latest trial balloon from P&FF's Randolph J. May. Mr. May believes that there are too many "cooks stirring the pot" at the FCC. His solution, make the commission directly responsible to the president.

What a neat trick!

As an agency directly responsible to the president, the FCC could invoke executive privilege to prevent the public from finding out whom the commissioners are meeting with in the course of shaping public policy.

Oh, I get it! Make telecommunications policy like energy policy! That is, make policy a captive of the corporations who constitute the industry and reduce public scrutiny of the decisions of the commission along with examination of the decision-making process.

Brilliant!

This is proposal is classic incumbent monopolist logic at work. One passage provides the key to understanding what Mr. May and his paymasters have in mind. He writes:
"In large part because of drawbacks tied to its institutional legacy, the FCC's implementation of the 1996 act has been problematic. In this quickly evolving digital age, the commission regularly issues muddled, fractious decisions that take many months, or years to produce and they are frequently overturned in court."
Before getting on to the argument itself, it must be noted that the companies that fund the Progress & Freedom Foundation (particularly the regional bell operating companies Verizon, Qwest, SBC, BellSouth and their predecessors) bear a hefty portion of responsibility for the FCC's inability to make timely policy. These companies employ armies of attorneys whose functions include filing suits to challenge FCC decisions in the various federal court districts across the country.

That apparently irrepressible impulse to litigate further strung out the FCC's long policy implementation process which is the impetus for Mr. May's suggestion.

Mr. May's complaint here is really that the current structure of the FCC provides companies other than incumbent phone and cable companies the opportunity to influence the regulatory process through which the FCC makes its rules. On top of that, there is no secrecy available in the process. The ex parte rule requires that commissioners and the commission staff publicize any meetings they have with parties having an interest in commision rules. The room can be filled with smoke as the industry lobbyists can blow, but the light of public scrutiny must be allowed to shine in.

What Mr. May and his P&FF masters want is something akin to the Cheney energy task force where the entire process of shaping policy can be conducted behind closed doors, outside the view of and beyond the influence of the public and those with views that run counter to those of industry incumbents.

P&FF is saying that democracy and transparency of process are the problem at the FCC. 'Things would be much better if we could get these rules right quicker,' they are saying. It's a tempting argument, unless one understands the importance of transparency in the regulatory process, as well as the nature of that process compared to that of executive departments.

The FCC is comprised of five commissioners. The prevailing rule is that the sitting president gets to name a majority (at least three) of the members, ensuring that the party not holding the White House gets at least two seats on the commission. In the years since passage of the Telecommunications Act of 1996, this split has had real world impacts.

Reid Hundt was the sitting FCC chairman when The Act became law. Under his leadership (with the support of the two other 'Democratic' members of the commission) rules providing Universal Service funding for schools, libraries and rural healthcare providers were passed. But, more importantly, the commission under Hundt and his successor William Kennard took The Act's commitment to creating a competitive telecommunications environment seriously.

With the change of administrations in 2000, Michael Powell became head of a commission which, for the most part, has been dominated by a 3-2 majority that has usually favored the interests of incumbents over a true competitive environment. In Mr. Powell's view, competition would exist among modalities (cable versus phone versus satellite) rather than within the modalities. Thus, under the Powell FCC, there has been a rollback in the commission's commitment to things like open access to incumbent networks.

One reason converting the FCC to an executive agency is so attractive to the P&FF folks is that raw political influence is much pronounced in those departments as compared to a regulatory setting. In today's politics dominated by corporate contributors, under secretaries and other positions in departments (like the Department of Commerce mentioned in his article) have become the positions into which lobbyists for the industry or sector that such agencies allegedly regulate migrate. It is a revolving door environment in which political contributions don't talk, they scream.

Under the transition suggested by Mr. May and P&FF, someone from, say, Verizon or SBC or BellSouth or Comcast or Cox, would — upon the victory of the presidential candidate receiving their largesse — move into a position that is today held by an FCC staff member who might actually have an iota of understanding of the concept of the public interest.

It is this pesky concept of the public interest or, at the very least, interests that do not entirely coincide with those of the incumbent telecom and cable companies which is the target of Mr. May's 'reform.'

What the Progress & Freedom Foundation seeks through this proposal is to enable its prime funders (see the names listed in the previous paragraph) to grab firm control of the regulatory process and turn it into a farce.

This 'efficiency' would come at the expense of an open regulatory process that allows for public input and participation. This approach would give those with the deepest pockets the ability to capture control of the regulatory process and shut the door behind them.

The Progress & Freedom Foundation forgets that the pesky inefficiency which open regulatory processes impose are inseparable from the reason that our republican institutions are so widely admired around the world. There is a price to be paid for 'making the trains run on time.' Sometimes pretty good is a damned sight better than perfect. This is one of them.

Thursday, August 26, 2004

Telcos, as sick as railroads?

Don't have a WSJ subscription and so can't get to the text of this one. But if you do the story is online. But according to the summary on CNET news it suggests that the Bells are in trouble and may end up being a sick industry like the railroads.

I value history and have previously opined that the railroads are a good example of the malign consequences of ignoring the natural monopoly character of an industry. In our history it lead to a lot of unwholesome things like robber barons and widespread governmental corruption. A bit more thought and I realize that both railroads and the new Bells are regional monopolies and some of the problems with both were due to unclear jurisdiction and their regional nature.

All very suggestive and I would welcome hearing from a reader who does have a subscription as to just what analogies they draw.

Bristol Shows the Incumbent Way: Don't Innovate. Litigate!

The story of how lawsuits and regulatory maneuvering by incumbents in Virginia drove up the costs of Bristol's OptiNet project is a pretty clear picture of what awaits LUS once it details its plan and, presumably, wins Consolidated Government approval to proceed with its fiber to the premises project.

The regulatory front was prepared in this state during the recent legislative session where BellSouth used its lobbying clout to compel LUS and other would-be Louisiana municipal fiber network builders to run their business plans by the Louisiana Public Service Commission.

But, what the Battle of Bristol reveals is that incumbent phone and cable companies have remained true to their corporate DNA. That is, they are not innovators they are litigators. The single class that has benefited most from the passage of the Telecommunications Act of 1996 have been lawyers, as incumbent carriers, competitive local exchange carriers, long-distance companies (interexchange carriers), cable, wireless, rural carriers, communities, citizens, customers and regulators clashed in the courts trying to flesh out the meaning of the new law.

Litigating is nothing new to phone companies, though; is the incumbent monopolist's way. It is so deeply ingrained the phone company culture that McGraw Hill's Telecommunications Protocols' (ISBN 0-07-134915-4) author Travis Russell writes in the second edition of that book:

"As you can see, while the computer industry highlights center around technology, the telephone industry has struggled with takeovers, lawsuits and regulation."

With a takeover of LUS off the table, BellSouth (and, likely, Cox — either jointly or separately) will pursue the other two lines which have historically been the path of obstruction: lawsuits and regulatory manipulation.

The intent and the result will be to drive up the cost of LUS deploying a fiber to the premises plant here. In Bristol, incumbent phone company Sprint and incumbent cable provider Charter Communications vigorously pursued this route. There, they succeeded in delaying the rollout of services by OptiNet, thereby depressing revenue in the system's ealry early going.

It may, too, have created ill will in the community for the incumbents as both have lost market share and a cable rate increase earlier this year had virtually no impact on OptiNet subscription levels.

We can expect a similar strategy of obstruction to emerge in Lafayette from the unnatural alliance of BellSouth and Cox Communications. The downside of this strategy is that it makes those that employ it come across as classic sore losers who are intent on inflicting pain on its likely competitors. But, of course, the views of customers would have to first matter to the incumbents in order for customer sentiment to be relevant.

Recently released polling data here shows that this is not the course that wins the hearts and minds of Lafayette residents. It is the course of petulant monopolists who are not accustomed to competition, nor to losing. It also reinforces the notion that the talk by Cox and BellSouth of concern for the well-being of the citizens and community of Lafayette is just so much hot air.

LUS has, hopefully, recognized the pattern of obstructionist tactics used by incumbents in its research on other municipal systems. I don't doubt that LUS will be prepared for what awaits them when the time comes to move on its still-developing plan.

I wonder, though, if the public will be prepared for this fight? Because, cher, we have not seen truly ugly yet, but it's coming — and it's expensive!

Wednesday, August 25, 2004

National Attention for "the Battle of Lafayette!"

Two new national articles examine the fiber fight in Lafayette—and both tear into BellSouth and Cox. It does a fiber partisan's heart good. I've noted before that the Lafayette fight for fiber has become the headline fight in a spreading battle between incumbent telcos like Cox and BellSouth and Municipal providers like LUS. What we are seeing now is that people across the country are recognizing that the sleazy tactics arrayed by the incumbents in any one locale is not an aberration or an indication that something is somehow really wrong with the local project. No, what LUS and the City-Parish are being put through here is repeated across the country and is an indication not of local problems but of the greed, and weakness, of the incumbent providers.

Both Broadband Reports (Playing Louisiana fiber keep-away) and Fiber Optics Forecast (The FTTx Battle In The Bayous) carry stories on the issue. (links via LUSFTTH, good going Doug!)

I'll not try and summarize these two articles, I'll just feed you a few tidbits to and urge you to jump to the sources themselves. Both of them are well worth the time on Wednesday morning, I assure you.

BroadBand Reports:
In 2002, Cox Louisiana was one of the few cable markets in the country that saw three rate hikes in one year; a luxury afforded companies with little competition. Regional Cox customers are part of a forgotten Cox division that has been excluded from a series of speed increases customers in coastal markets have enjoyed. Cox is only now starting to provide these customers with connections faster than 1Mbps, yet they're sure fiber is a bad idea.
On our "Academic" Broadband Forum:
We're guessing the experts didn't mention that in markets with more than one cable operation (muni or otherwise) consumers usually see rates 17% lower on average, according to data from the General Accounting Office. Also likely omitted was how the 16,000 residents of Newnan, Georgia receive broadband for $25 a month, discussion of how one Minnesota suburb now enjoys $16 3Mbps wireless service, or the growing number of other communities enjoying less expensive alternatives.
(Broadband forum is guessing right, they didn't mention that, in fact they were at some pains to assert that municipal competition never caused incumbents to lower their prices. A position contradicted by both common sense and the facts.)

Finally:
These aren't honest debates over the viability of municipal operations occurring in dozens of states across America. These are not corporate executives seriously concerned with the Democratic process and the quality of service communities receive. These are tactical corporate disinformation campaigns, designed to protect bottom lines and keep competition from arising in the service vacuums these companies have helped to create.
(Oh, and if you thought that was vigorous writing--don't miss the comments....)

Fiber Optics Forecast
Telephone and cable companies, fearful of losing as much as 50 percent of their customer bases, have been opposing just about every one of the municipal projects. Until now, most of the battles have been fought behind the scenes, with only the tip of the iceberg showing at the occasional city council or other hearings. In Lafayette, the battle has escalated well-beyond that, into an acrimonious public debate that rivals the 1863 Civil War Battle of Vermillionville (as Lafayette was named back then, after the nearby Vermillion Bayou).
After expressing concern at the cost per customer of the LUS project FOF notes:
...Meanwhile, for BellSouth and Cox, the Battle of Lafayette really is a lose-lose situation, one that is reflected in smaller municipalities around the country. If Lafayette goes ahead with its project, the two incumbents could lose as many as half of their customers. If that happens, the economic underpinnings of the networks the phone and cable companies have built start to look quite shaky.

...Initially Bell South senior PR folks tried to convince us at Fiber Optics Forecast that it already has fiber to a million homes and that it is adding new fiber at the pace of a quarter-million homes per year. After just a couple of questions, that claim collapsed with the admission that the fiber passes all those homes, but doesn't actually go to a single one of them. To be quite frank, our initial reaction was similar to Lafayette Mayor Durel's comment to us that "they want to treat us and south Louisiana like we were a bunch of idiots." At press time, BellSouth still had not produced promised executives to discuss the Lafayette situation. Similarly, Cox failed to respond to requests for interviews. The bottom line is that, in small towns like Lafayette, BellSouth and other CLECs might want to consider biting the bullet and abandoning most of their own lines, instead negotiating for a franchise as the voice carrier in any triple-play system offered via the LUS FTTx system. Half a loaf, after all, is better than none.
They close out with:
In any case, the Battle of Lafayette is sure to be studied by municipalities all over the country, with the eventual outcome helping to set the pattern for rural FTTx deployment all over the United States.

Monday, August 23, 2004

Your Cable Dollars at Work!

The following blurb and link were contained in an email eLetter from Southeast Tech Wire today:

o Discovery Acquires Raleigh-based Rainbow Educational Media

Raleigh, N.C. -- Discovery Communications, the Maryland-based media
company behind such cable TV stalwarts as The Discovery Channel and TLC,
said on Monday that it has acquired Raleigh-based Rainbow Educational
Media, a publisher and distributor of core-curriculum educational videos,
CD-ROMs and DVDs. A Discovery spokesman said that the principals of
family-owned Rainbow -- also known as the Charles W. Clark Company -- plan
to retire, with the business being absorbed into Discovery's current
facilities. Financial terms of the deal were not disclosed.
http://biz.yahoo.com/bw/040823/235537_1.html

What's the connection? Well, Cox is an owner of Discovery Communications, owner of The Discovery Channel and The Learning Channel (TLC).

This just in: Cox still has no plans to build a fiber to the premises network in Lafayette!

Another Letter Alert

In my little crusade to make sure that folks don't take the recent flurry of anti fiber letters as all that indicative of the opinion of anyone but BellSouthCox folk I give you the latest letter. Though he doesn't mention it he's a BellSouth retiree; he said as much in his previous letter. I imagine he retired a while ago since he seems unaware of Voice Over Internet Protocol—VOIP. VOIP is surely the method that LUS will use if its plan goes forward and it involves using none of BellSouth's resources unless the person you call is a paying customer of BellSouth or one of its lessees. Anyway, those "discounts" aren't such a good deal anymore. The Ma Bell, AT&T, recently stopped taking new customers in our region due to regulatory changes which will eliminate much of the "discount" the writer complains of. Ma is moving to Cox, among others, to provide its local connection using VOIP as was reported here earlier. (See: Running to Mama for VOIP).

Don't worry, I'll get over this silly little bit soon. It just irritates me.

Saturday, August 21, 2004

Education Expert Eager to See Lafayette

I went to the Zydetec meeting that featured Don Knezek, covered in the Advertiser story Expert: Technology vital in education and was impressed. Thanks to Zydetec for inviting him. Knezek is an interesting guy and I agreed with most of what he had to say about education and technolgy. A happy thing for me since ISTE, the organization he heads, is tremendously influential in setting standards for technology education at every level from kindergarten to grade 16 (that's what educators call seniors in college). Part of my job in a former life was to make sure our college of ed could meet those standards for new teachers.

It turns out he's a fan of broadband and intelligent advocate of settling on what you want to accomplish in education—the vision thing—before buying into particular technologies. That was refreshingly forthright and absolutely crucial to good decision-making. If we decide to persist in the idea that education is about transferring knowledge from one head to another textbooks really are the cost-effective, "proven" solution. It's only if we decide we want to help students learn to engage in more active learning—the sort of learning that is more like our day-to-day, real world learning than textbook learning, do the richer resources of computation, databases, simulations, and the net turn out to be crucial.

Be as interesting as I found that and related parts of his talk, this blog isn't about education and what was interesting from a broadband point of view was that this guy is smart, actually really important and, get this, passed up a slot on Jay Leno to come to Lafayette. What drew him was local projects that bring students into more active learning by bring them into the workplace and --you guessed it--the rumors of a large-scale fiber initiative.

If rumors can move a guy like this to visit, imagine the influx of just education folks eager to try out their grants in a large, diverse community. Folks will line up to beg for a chance to trot out the latest ed tech innovations. And that would be a lot of fun, believe me—and not only for the kids.

Slashdot | Municipal Networks as Alternative to Commercial Broadband?

Maybe I am just in a contemplative mood this lazy Saturday morning, posting pieces that are more philosophical than newsy, but it occurs to me that Slashdot might be a good example of the possibilities of wider net access.

(Ensues longish both technical and philosophical discussion, if your day is not as lazy as mine jump to the bottom for the moral.)

Folks love the net but even its most ardent fans will admit that parts of it are pretty juvenile. Folks that are unpleasantly and often baselessly opinionated, for instance, dominate most discussion features. (I trust we are trying to be pleasantly opinionated here. :-) ) You can get the good stuff but you have to wade through a lot of silliness to get there. In an earlier post today I dismissed slashdot forums, leaving the implication that they were usually a waste of time. That is unfair and untrue. They are just a LOT and reasonable folks don't always have the time or energy unless the topic is important to them.

Slashdot is a little preview of what can happen when a community users gets serious about having serious discussions. Slashdot is mostly about technical, web-oriented stuff. So its users are very net-oriented and have had access for longer than any one else. And they have had longer to get annoyed with folks we call "jerks" and they call "trolls"—folks who spoil the discussion. Being technical themselves they set about a fairly technical solution. They decided not to exclude people but to find other ways of keeping the conversation on track.

Update 3:30: The walk-through below is a nice teaching example of how the Slashdot system works. But as content it is old. A newer version of a very similar question asked the Slashdot community, Cities Building Own Fiber Networks, is recent and if you want to browse for information it is a better choice. The information there is a lot fresher. All the principles developed below apply. It might be fun for those not familiar with Slashdot to walk through the example below and then go explore the newer version.

If you'd like to see what I'm talking about open the slashdot fiber discussion in a new window and follow along.

The intro sets up the discussion and at points toward the real issues. Beneath the intro is a interface bar that allows you to change how things are displayed. If you set it up for -1:291 comments, Nested, and Oldest First and click the Change button you will be taken to a new page that starts with the comments. Look at 'em. The very first one is a silly off-topic thing that the someone a crew of folks who have been deputized to keep things sensible have downgraded to a (Score: -1 Offtopic) indicating that it's offtopic. Looking down a bit you see one labeled (Score: -1 troll) indicating that its a post that is just trying to start trouble. You don't want all that gradu do you? Go back to the top. Try the other extreme. Change -1: 291 comments to 5: 4 comments. Someone on the rating squad thought these the best. The system isn't perfect. The first comment is way off base as responses in that thread demondstrate. But third one rate 5 for insightful actually is. Take a gander at it and you'll see what I mean. (alone in a separate screen if you haven't been following along) But while the rating system is very useful the adults using the forum do most of the work. They ignore dumb stuff. They point out what is misleading. They dont' tolerate baseless, ideologically driven nonsense. When they think they are right they don't back down but argue their point. But calmly, afraid of looking foolish or be downgraded--and hoping to be upgraded and notices as a sensible head. All that stuff is pretty much what we do in everyday life. But the web has been missing those amenities and slashdot goes a good way toward giving them back.

A long way to a short point: Once folks have good, solid net access they figure out ways to make it more useful.

It'll work the same way here if we get cheap universal access. Once we get used to it we'll figure out how to make it more useful...and good discussion groups will be the least of it I am willing to bet.

Another View on Natural Monopolies

I was semi-idly noodling around the web following link trails of fiberish stuff when I tripped onto a Slashdot forum discussing Fiber To The Home projects. I have tried to tell myself not to get drawn into reading slashdot discussions unless the need is dire. Hours can disappear into that hole with nothing productive emerging. But I still graze those forums when it is something that interests me and this time it paid off.

Lawrence Lessing, he of intellectual property and constitutional law fame, was referenced somewhere in the middle of that very long page of comments and that link lead to a Wired article written in December 2003. There he presented a very clear discussion of the economics of Natural Monopolies as they relate to municipal fiber. If you've looked at my bits on that issue and wondered about the concept and application take a look a Lessing's differently slanted take. Here is representative paragraph from the middle of the short article (AFN is All Fiber Network):
Most economists would leap from the premise of a natural monopoly to the conclusion that such a monopoly must be regulated. But regulation is not the end that McAdams seeks. Ownership is. If a traditional network provider owned an AFN in a particular area, that network provider, acting rationally, would charge customers a monopoly price, or restrict service to get its monopoly benefit. But if the customer owned the network, then the customer could get the same access at a much lower price and be free of use restrictions. McAdams is pushing - and Burlington and other cities are actually deploying - customer-owned AFNs.
You might think that a municipal monopoly might have the same abusive tendencies that any monopoly would have. But according to Lessing you'd be wrong: you'd be missing the essential point of ownership. He notes: "You don't monopolize yourself." Straight to the heart of the matter; I admire that. Lessing illustrates the matter by using the example of Boeing's in-house fiber network. Businesses bring services in-house to save money, increase efficiency and to make sure the services offered meets their quality needs. Its a good deal for Boeing. And exactly the same logic applies to communities. Lafayette can't monopolize itself. Monopolies act "rationally" (according to that strange conception of rationality found in economics) when they maximize profits wherever they are able. But there is no such motive for the people to exploit themselves.


Lessing caught my eye in the scanning because we have recently received a request to reuse material on this site. We're for it, of course, and flattered, but realize that the material here is pretty tightly linked to Lafayette. (As are we.) People reusing the material and customizing it for their site run the risk of violating unreasonably restrictive, in our opinion, new interpretations of what is "fair use" of our material. As we realize how widespread the municipal telecom fight is we'd like for people to be able to freely reuse our material. One of the things Lessing is famous for is championing a less restrictive form of copyright called Creative Commons. It's a great idea that allows people who want their stuff reused to make that clear. So, as soon as we can figure out how to do it, we are putting our material on this site under a Creative Commons license. More when it happens—but suffice it to say that Lessing is a hero of mine and I think well worth reading. He thinks clearly about hard to grasp issues like copyright...and natural monopolies.

Friday, August 20, 2004

Not in Your Front Yard!

CED magazine has an article examing the question of whether DSL (the phone companies' digital subscriber line technology) can handle the bandwidth requirements of High Definition television (HDTV).

The answer is a definite maybe — depending on the technological paths chosen by the respective providers. Hit the headline of this story to view that article. It's pretty interesting.

However, the most interesting part of the article was this paragraph which brings us back to the heart of the matter here in Lafayette:

"Though some of the major RBOCs — Verizon, SBC Communications and BellSouth, among them — are pushing ahead with fiber plans that will provide plenty of bandwidth for HD, there are still questions about whether DSL will pack enough punch for telcos that don't have the bucks to make a big upgrade and, instead, will need to rely on their legacy copper networks."

Got that?

BellSouth has made a corporate decision that fiber is the future of the company and its services.

The problem for Lafayette is that BellSouth does not now consider us worthy of the fiber to the premises technology.

Every company and every institution has its own hierarchy of priorities which guide its moves. For companies like BellSouth and Cox, these hierarchies help them decide where they will make their infrastructure investments and when they'll do it.

There is no question that BellSouth and Cox intend to build a fiber to the premises infrastructure in Lafayette. Both companies, left to their own priorities, would one day ensure that their respective fiber systems got to almost every business and home in Lafayette. That's fine. I have no problem with them moving at a pace which suits their corporate mindset and corporate priorities.

For the foreseeable future, they've decided that they are not going to deploy a fiber network through your front yard.

This is the essence of the issue: who has established Lafayette's interest as its top priority. By their respective decisions not to make the requesite investments in fiber infrastructure in Lafayette, BellSouth and Cox have announced that Lafayette is a nice little market, but they each have higher priorities elsewhere.

This has significant implications for the economic viability of Lafayette. If we accept the judgments of BellSouth and Cox, we are accepting their decisions to relegate Lafayette to a third tier city.

But, there are people in both the public and private sectors here who have higher aspirations for our community. We believe it can thrive. We believe it can grow wisely by harnessing the creative capacities of our people, our businesses, and our institutions through the enlightened use of information technology.

The LUS fiber to the premises proposal taps into and feeds off of that vision of a greater Lafayette.

I believe that this vision flows naturally from the strong entrepreneurial base in Lafayette's economy. Lafayette is a community dominated by an ownership mindset — at least, our leaders are. Those communities dominated by a managerial mindset fare differently.

Let me explain.

I grew up in Eunice, LA. It's a small town that has not grown much since about 1970. In the time prior to 1970s, Eunice was dominated by small business owners. While there were undeniable social problems in the town, primarily the relations among the races, the fact is that the business leaders of the community had a sense of a community which was greater than their own personal and business interests, though, no doubt they figured to profit if the local market grew.

In the decades since the 1970s, main street has been decimated and retail activities shifted to malls. Stores in those malls are chains which install managers to run them. Those managers are accountable to the expectations of the home office where ever that may be. That is the case whether the store they manage is in Eunice or in Atlanta.

I think it is difficult to appreciate the impact of this disappearance of the local ownership class on community leadership. But, managers are caretakers; they tend not to be into 'the vision thing.'

The vision thing, though, is alive and well in Lafayette. It is, in my view, inseperable from entrepreneurship which is by definition forward looking. That is, it is not focused so much on where we are now, but where we might be able to go as a community. Lafayette's entrepreneurial base fuels the vision of what our community can become.

It is the difference between what LUS sees as the potential of Lafayette and how BellSouth and Cox see that same community.

Running home to Mama for VoIP

New technology is making for some strange telecom bed fellows.

Once a pillar of stability, you now need a live RSS feed to keep up with AT&T's business models these days.

Consider these moves: AT&T was once THE Phone Company; then became a long distance company; tried to become a cable company and a wireless company; then reversed its course, sold off the cable businesses to ComCast and its cellular business to Cingular; then decided to get into the local phone business; then . . . Well, you get the picture, no?

Well, AT&T has made its current bet on Voice over Internet Protocol (VoIP) technology -- that is, carrying phone calls over the Internet. The company has a good bit of experience with data networks, which was really at the heart of its lurch into cable.

With the Bell companies apparently succeeding at getting clearance from the FCC and the courts to raise access rates that they can charge companies like AT&T to access their networks, AT&T has begun to withdraw from the local access market -- at least via phone lines.

The news out of the former Ma Bell is that it has struck deals with cable companies to bring its VoIP expertise to the table to help those cable companies develop and deploy telephony offerings.

Cox Communications is one of five cable companies with which AT&T has struck deals.

The point, here, is that while LUS has succeeded in creating a temporary alliance between BellSouth and Cox, it is just that -- temporary. The cable companies' move into telephony has the regional bell operating companies (RBOCs) like BellSouth squarely in the cross-hairs. It will be interesting to see how this alliance handles the strains of the fierce competition between its members.

Thursday, August 19, 2004

New Poll Less Pushy

There's a new Cox poll out there and it appears to be less pushy than previous Cox efforts. This one, put into the field by well-established Louisiana political pollster Kennedy looks like it might actually be a real poll. Or at least the first part of it. —The second part was comprised of Cox floating a series of talking points past the virtually assembled test panel to see what might work to turn the Lafayette public away from LUS. And they aren’t telling you what they found there. As you will see they need the info. Poll results are mixed for the company paying.

The Advocate appears to have scooped local media, currently completely embroiled as they are with the school bus mess. (And a mess it is.) A quick survey of local media outlets reveals not a clue.

Reporter Blanchard shares his trademarked incisive lead:
Most people in Lafayette want to vote on whether to allow Lafayette Utilities System to enter into the competitive telecommunications business -- but that doesn't mean they'd necessarily vote against the proposal, a pollster said Wednesday.
That’s pretty much the whole of the content in a nice, neat packet. But if you want the details here they are:
Kennedy surveyed 600 registered voters in Lafayette Parish on June 24-26. The poll had a 4 percent margin of error.
Hmmn, that should be a clue that not all is well with this poll for Cox. June 24-26. It took going on two months to compile this survey and run the stats? Not. Nah. No Way. They sat on it. Why? It wasn't exactly everything they wanted to hear. Read on:
About 78 percent of respondents said they have heard of the LUS proposal.

Sixty-four percent said they had a favorable opinion of the LUS plan -- while only 21 percent said they are not in favor of the plan, Kennedy said.

....

Fifty-four percent agreed that government "should be in business competing with private business," while 34 percent disagreed with that statement.

But when asked if the final decision should rest with the "city-parish council" or "the people," 83 percent chose the people, Kennedy said.

Now those last two findings are pretty amazing. The questions they respond to drift over into being leading ones but retain that patina of legitimacy that Kennedy has no doubt honed while serving candidates for political office. Given the phrasing and the push to delegitimate the very idea of a local telecom utility on this "free enterprise" basis, finding that 54% favor government competition seems like evidence that the people of Lafayette know that they want fiber, recognized how that question was supposed to manipulate them and refused to be so driven. Put the same question before a group that didn't know what it means in our context and I dare say that about 98 percent of all Americans would give the pure "no competition" answer. When folks begin to take 'unnatural' positions like this you gotta think opinion is solidifying. And not in favor of Cox and BellSouth. The council will be less happy with the findings of that last question, though. It puts pressure on them to call an election or it least it gives fiber opponents something to bash them with. How to reconcile the responses to those last two questions? Here is the simple interpretation: The citizenry apparently know what they want and they want to let everyone know they want it. I'm willing to bet that Cox has come to that conclusion too.

The Council is rightly worried about what an election campaign would look like. After all we are going through one of those right now and it isn't pretty. They have already witnessed exactly how far Cox and BellSouth are willing to go in misrepresenting the case they put before the people. Everyone form the Council to the Mayor to Chamber of Commerce has been given cause to be angry. But this is not just a local fight and the tactics that have angered people locally are not particular to Louisiana. This kind of public relations war has gone on all over the country. And it has been very ugly. (Sneak Preview: LafayetteProFiber is working on a piece based on another community's experience with teleco tactics even now.) One of the great ironies of our little fight is that Cox has been very vocal about supposed unfair "government" advantages. But what it wants to do is drive the battle to a vote where all the advantages are its. To fight the good fight in an election battle the city would have to buy time on the cable networks. LUS would hate giving money to the enemy. And how much would it cost Cox to saturate the airwaves with Fear, Uncertainty, and Doubt? Nothing. Cox's positions aren't about fairness. They are about advantage.

Cox does have alternatives. It could force a vote if it wanted to. It could rouse the (not so) restive citizenry and stage a petition drive. They would only need 15% of the voters to do so. Yet there has been no move in that direction. Why not? Go back and review those polling numbers. No support. They people want fiber; they even want to vote for it. Getting those numbers won't be at all easy. And failing in a petition drive would be fatal.

So they want to shift the battle to their own turf: an advertising campaign. Where they own significant portions of the media battleground.

But go get the story and decided for yourself.

Wednesday, August 18, 2004

Another Cox employee makes mean

Ok, let me say from the outset that this is a little petty. Folks have a perfect right to say just exactly what they (or even their employer) want to.

(Grumpyness on)

Still, I am irritated each time I take a look at a letter to the editor or go to a public meeting and find that as far as I can tell the vast—and I do mean vast—majority of those that speak out against Lafayette even thinking about treating fiber optics as a utility are employees or retirees of Cox or BellSouth. You have to wonder what is in the employee's and retiree's newsletters. if you assume, to be fair, that these folks will be more interested in the still-abuilding plan than their neighbors because they have a horse in the race you would still think that a few of them would see the advantage for the community that a majority of Lafayette residents apparently do. Is there a reason that fraction doesn't speak up? ...You say you think it matters that their employers might not like it? And you can really understand that? ...Yup, I agree, and to keep up the fairness I also think it matters for those that speak against the idea that they think their employers will be pleased.

What motivates this little bit of spleen is that we have in the Advertiser today another bit of meanness from a Cox employee who doesn't share the fact that he is an employee with the readers. In this one he trash talks the character and intelligence of Broussard's Mayor Langlinais. (Missed that letter? It was good--but you won't find it online; the advertiser is missing that day's letters. But you can get it from us.) Why do I think Steve Puckett is a Cox employee? Because he said he was at a Lafayette City-Parish Council meeting. Nor is this his first such letter: I've found two more in the Advertiser archives. And, to give the devil his due, in one of them he does own up to his employment.

In the normal course of events I'd probably sit down, eat breakfast, recognize that people unfairly insult public officials all the time and decide to let this one pass without posting. But this one is going in for a simple reason: I'd like our readers to start noticing the percentage of anti-fiber voices that are paid by the telecoms. Letters to the editors, public meetings, and even the infamous "Academic" forum are all populated by paid voices. If you don't pay close attention you might be tempted to think that there was substantial dissension among Lafayette citizens. Maybe, though I doubt it. But what you see in these venues is as poisoned by the corporations as the results of those push polls and is not fair evidence of widespread concern with a popular utility.

Make up your own mind—and be aware of the interests of those speaking. Listen, but be aware of who you are listening to.

OK, I feel better now.

(Grumpyness off)

All that said I want to note for the record that not all employees of telecoms strike me as making unfair cases. LafayetteProFiber recently received an email from a wireless employee opposing fiber that was well thought out, respectful of people and the community, and used his specialized knowledge to raise concerns well worth worrying about. I spent half a day going over in my mind how I would talk about fiber with a principled opponent of the idea. That was a refreshing change and I was grateful for the opportunity to think about the issues with that assumption.



Tuesday, August 17, 2004

Are We a Nuisance or a Competitive Threat?

According to a telephony online article municipal telecom utilities are moving from being regarded by incumbent teleco and cable companies as mere nuisances to being recognized as competitive threats. This is the best analysis of the complex emerging issue that Lafayette is embroiled in that I have yet seen and explains, at least in part, the passion we have seen on the part of incumbent companies. (Another part of course is simple money. See Mike's posting on that issue. A 30-40% profit margin? You do the math.)

The Threat
Here is what they have to say about why the attitude toward municipal fiber is changing:
Once considered merely niche players in smaller telecom markets incumbents didn't care about, municipalities are announcing fiber buildouts with greater regularity in increasingly larger markets already served by telcos and cable operators.

Incumbent providers downplay the big-picture threat but are adamantly lobbying against municipal entry into the telecom market at every level of government, with good reason. In addition to philosophical arguments regarding governments competing against the private sector, the last thing the struggling telecom industry needs is to have to match prices with deep-pocketed competitors that have access to cheap capital and — most importantly — no requirement to turn a profit.

Notice how neatly this tracks our experience in Lafayette. The infamous SB 511was
BellSouth's instant response to the impudent suggestion that Lafayette might consider building a fiber utility.

The History
As Joey Durel has emphasized from the begining the appropriate comparison here is the role municipal utilities played in electrification of their communities—and the demonstrated benefits of electrification for the communities that had the courage to take the risk. Their recounting of the same historical moment tracks Durel's closely:
There are “remarkable parallels” between the electrification of America in the 1890s and the transition to “true broadband” in the United States during today's information era, Baller said. In the 1890s, private electric companies focused their investments on urban areas that offered greater profit opportunities. Many municipalities that didn't fit this criteria eventually decided to establish their own electric companies.

Baller said the arguments against the creation of municipally owned electric companies were similar to the arguments posed by critics of today's municipal forays into telecom — most notably, that cities lacked expertise in the field and that the governments should let the free market run its course. History proved those arguments wrong, Baller said. Today, there are more than 2000 municipally owned power companies that have withstood the test of time much better than cities that literally were left in the dark, he said.

“Many cities that waited for the private sector to serve them became dust,”
IProvo
For even more parallels to Lafayette's situation pay close attention to the discussion of iProvo a municipal project to build a fiber optic network in a college town of 100,000. The telecos and cable companies are especially bitter about municipal networks being built where they are currently making real money. They even called on the same Progress and Freedom Foundation that provided an "expert" for Lafayette's "Academic" Broadband Forum (see our pregame analysis, with special emphasis on the "experts" or indulge in our postgame report) in to declare iProvo's plan as impossible as his colleague declared Lafayette's.

Lafayette. You didn't think they missed us, did you?
On of the things that the private providers claim—and really seem to resent—is that public entities don't have to make a profit. But it isn't really true that private entities don't have to make a profit and they know it. What they mean to say is that public entities don't have to do any better than break-even. Their profit can be small, and the owner-customers of a utility will likely prefer it that way. That is what they really resent. (Again, see Mike's story for the real skivvy on cable profits.) It seems that the "flexibility" (read: willingness to not skin the consumer) that this service orientation leads to really makes teleco's uncomfortable. The reporter catches Louisiana's Oliver in an unguarded moment:
...that flexibility also makes it hard for private-sector providers to compete in a territory where there's an effective FTTP deployment, according to Bill Oliver, president of BellSouth's Louisiana operations.

“It's like, which math course did I miss?” Oliver said of the accounting for some municipally owned telecom ventures. “It looks like they're losing money, and they still haven't paid for a truck to roll or someone to answer the phone.

“It makes it difficult for a private company like BellSouth to compete with a governmental entity that's only goal is to break even.”
Oliver's position here, that it is somehow unfair for other providers not to labor under the same disabilities that he does, is reminiscent of Cox's desire that Arizona tax satellite TV providers into competitive equity with them. Or BellSouth's strange demand, now eshrined in Lousiana law, that municipal providers like LUS be forced to prove to the Louisiana Public Service Commission that they calculate what they charge their citizen/consumers as if they were leasing their own right of ways and poles the way BellSouth does. (See an earlier entry of mine that goes on at length on this strangly anticompetitive attitude.)

Open and Closed Systems

One of the issues that divides proponents of municipal broadband networks is that of whether the new network should be open or closed; whether the municipality should open up the network by leasing access to competing retail providers or whether the local municipality should take a more conservative, closed, route (the same conservative route both cable and telecos take with regard to their networks) and provide services to its citizens directly. The virtue of open systems in the eyes of its advocates is that the consumer will presumably benefit by lower prices and a richer array of new services brought on by competition. The virtue of closed systems in its proponents opinion, is in a word, safety. You own the network, you offer a good service and because you know that profit levels in, for instance, cable are high you know you can both please the public and have room in the pricing to build up a cushion for future development and to deal with unanticipated problems. You also don't have to split your profits with the retailers on your system. Closed systems are arguably the safe, "business plan," model.

Iprovo and its big brother the Utopia project, which links small cities and towns in Utah, are taking the open route.

Lafayette is not:

Huval, the hard-nosed reaction

Huval said there's no timetable for LUS to make a decision, but he said the organization wouldonly make the investment if it offers a voice-video-data triple play. In addition, Huval said he does not believe the LUS would make its network open to all service providers.
“The idea of open access is nice, but does it pay the bills?” Huval said. “The problem with open access is that the driver of [broadband] penetration isn't the entity that has to pay the debt service.”

And whether municipal entities can at least break even on their fiber buildouts remains the biggest question. Incumbent providers are skeptical, but Baller said adoption rates for some community networks offering triple plays have legitimized the UTOPIA projected take rates. But both public and private proponents agree that it's too early to estimate the impact municipally owned networks will have on the telecom market.
I'm an admirer of hard-nosed, realistic plans. And, readers may have noticed, pretty clearly an admirer of idealistic, hopeful plans. I'm torn. A reasonable point that the proponents of open systems sometimes make is that while fiber, and the true broadband capacity it offers are a good bet, the particular services that are offered are less certain. For instance real broadband might end up destroying the cable model--and a leasing plan would offer a more nimble way to switch to video downloading if that is the path the future takes. Maybe. But I am not sure why LUS couldn't mix models. Keep the basic three services, phone, TV, and Internet, and use that revenue to make sure the cost of the build is absolutely secure. Pledge to make a fixed percentage of the bandwidth available to lessees. There will be plenty of bandwidth available, especially if Lafayette goes with an active, ethernet-based system (please!) and forcing yourself to always keep plenty of "spare" bandwidth would not be bad discipline anyway—my guess is that the easiest "business" mistake to make would be, contrary to what the incumbents tell us, to underestimate demand. We simply have no models of what might happen if network effects take hold once true bandwidth is universal and cheap. (Network effects you ask? Discussed here.)

Hey, LUS, if you are out there. You need to start talking with folks about things like this. Before your plan is set in stone.

BayouBuzz-ing the Lafayette Pro Fiber site

Steve Sabludowsky's BayouBuzz site carries an interview with John St. Julien and I today about our site. Steve asked several questions that get to the heart of the issue in ways that only an outsider can. The questions pushed our thinking some and brought new insights in the process.

Steve's promising to bring other perspectives on the Lafayette fiber discussion to his site, so keep an eye out for those. If you don't subscribe to the BayouBuzz daily emails, you should. Always lots of good news and political links, as well as provocative commentary.

Meanwhile, checkout the interview!

Monday, August 16, 2004

Vitter comes out in support of municipal fiber

Sunday's Advocate carries the article "Senate hopefuls vow to help La. get its fair share" in which the four major senatorial candidates participated in the Louisiana Municipal Association's forum held during the association's annual meeting. For fiber afficanados the interesting—and surprising—move of the event was Vitter's coming out in favor of giving local government more freedom to provide telecom services:
Vitter also noted he supports giving local government a freer hand in providing telecommunications services -- cable television, Internet and telephone -- if they can offer those services more affordably than private companies.

Competition serves consumers better, he said.
Frankly, I was surprised. But maybe I shouldn't be; after all it really is conservative to be for competition and to favor local government with its closer-to-the-people connection in cases where the state seeks to restrict what local governments are allowed to do on behalf of its citizens. I can only think that he wants to bolster his support in Lafayette--and it's interesting that a conservative thinks that endorsing telecom utilities will help him in Lafayette Parish. He must think the people are pretty much overwhelmingly in favor. And in that he shows (IMHO) good political judgment. Of course, the endorsement is a cheap gimme since our federal representatives have nothing to do with the law recently put in place to limit local government's ability to provide telecom cheaply. At any rate, GOOD. The more the merrier. Maybe we can get this on the radar screens of other candidates.

There's Gold in Them Bills!

In June, the University of Southern California Law School (Yep! THAT USC!) and the Annenberg School for Commmunication co-hosted an event called "A Symposium on the Los Angeles Cable System at USC." The headline on this entry will take you to the summary of the comments made at that event. They covered a lot of ground that day; much of it relevant to our discussions here.

For purposes of this entry, I'd like to focus on the comments attributed to Greg Kohl, director of research of the Communications Workers of America (the CWA represents thousands of workers at BellSouth and other Regional Bell Operating Companies). The title of his presentation was "A Look at the Economics of the Cable Industry."

Well, it's an eye-opener!

Among the many relevant points Mr. Kohl makes (according to Digital Democracy's Digital Destiny Campaign report on the event) are these: the average cable customer is valued at $3,820 per subscriber; that operating cash flow margins (that's what you and I would call profits based on system operation) run between 29 and 40 percent; and that cable prices have been increasing at five times the inflation rate over the last several years.

All this says is that the cable system business is very lucrative, based solely on the subscriber base revenues. But, there's more.

Mr. Kohl also declared that cable advertising revenue out-grew the cost of buying programming by $2.6 billion between 1996 and 2000. So, wonder what that cat fight about ESPN programming costs a few months ago was all about? Multi-billion dollar conglomerates fighting over your wallets?

But, the slide that drives home just how lucrative the cable business is came in slide 16 of Kohl's PowerPoint presentation (I'll paste in a link below).

The slide is headlined: "Nine of the World's Richest People Got Their Fortunes from Cable." Let's work down the list for the benefit of those who will not be making the trip to the page:

  • Ted Turner -- TimeWarner, TBS, others -- $2.3 Billion.
  • Barbara Cox Anthony -- Cox -- $11 Billion.
  • Anne Cox Chambers -- Cox -- $11 Billion.
  • Harold FitzGerald Lenfest -- Lenfest Cable -- $825 Million.
  • John Malone -- TCI, other cable TV -- $1.9 Billion.
  • Alan Gerry -- Cable TV -- $1.1 Billlion.
  • Amon Barr Hostetter, Jr. -- MediaOne, others -- $2.1 Billion.
  • Charles Francis Dolan -- Cablevision -- $1.4 Billion.
  • Brian Roberts -- Comcast -- $625 million.

Viewed in this context, the fear, uncertainty and doubt that is the core of the Cox/BellSouth campaign against the LUS fiber to the premises project is almost comical. What they don't want -- particularly Cox -- is for anyone to get their hands on the gold that's in them bills!

No wonder Cox Enterprises, Inc., is willing to cough up $7.9 Billion to by the 38 percent of Cox Communications the company does not own!

Here's the URL for the Kohl slide presentation:
http://www.democraticmedia.org/ddc/USC/KohlUSC.html

Sunday, August 15, 2004

Welcome Visitors, Open Thread

The Adverstiser published an article in today's paper which covered this site. So we anticipate a few new visitors. We're a pretty open crew and are interested in feedback. This little post is an experiment intended to provide a way for folks to respond to both the blog and the website as a whole. (If you prefer you can use email.) What works and what doesn't? Advice?

Just click the comments button below. Thanks!

Fiber optics debate goes online

Claire Taylor of the Advertiser picks up the story of pro and anti fiber websites, in it she features our site (yeah!) and also covers the official LUS fiber for the future website, and the Cox produced "Let the People Vote." I'd want to point our readers to the oldest blog on the subject in addition: LUS FTTH which recently got back from a little break.

Gotta get around to putting up a links page.

Friday, August 13, 2004

Broussard Mayor Supports Lafayette

I'd like to be able to link to Broussard mayor Charles Langlinais' letter of support for LUS but unfortunately it just isn't showing up on the Advertiser website—nor are any other letters from Tuesday's Advertiser. I attribute this to the generally flaky nature of their website.

But the letter really should become part of the record and since you can't get it at the Advertiser you ought to be able to get it here. Langlinais nails the proper role and motives of local government and clearly points to the motives of Cox and BellSouth (profit maximization).

It looks like fiesty public officials are getting to be a tradition in this parish with Langlinais joining Durel in a healthy willingness to say what needs to be said.

Kudos!

Image of Broussard's Mayor's Letter

Thursday, August 12, 2004

Follow the Money?

Well, I tried to follow the money. I went to the LUS budget review presentation for 2004-5 at the city-parish council meeting yesterday evening. As I had suspected, there was no budget item for the fiber initiative since there is no proposal to budget. Still, it was worthwhile—and interesting—to see the principals in action and to watch the dynamics of their interaction.

The Advocate and the Advertiser both have stories worth reviewing online. The Advocate's Blanchard emphasizes the fiber angle and is thus probably more interesting to readers of this blog. Taylor's in the Advertiser is worth reading on this score as well but she gives more prominence to other issues—and, indeed, the meeting spent more time focused on issues other than fiber.

I should really say that I came out of it impressed with the competence of all involved. Now a number of the councilmen weren't there and maybe they are the ones that fit the all-too-popular stereotype of local politicians but I have to say these guys seemed smart, competent and earnest. Possibly I'm naive. But, hey...

I'll not try and do a play by play or even be exhaustive in dealing with the high points of the event. Our interests here are the "Fiber for the Future" issue and for that there were three "C's" worth highlighting: Context, Competence, and Class (or lack thereof).

Context:
The context of any fiber proposal, for both LUS, and the council, has to be as important in its approval or defeat as any actual business plan for a fiber optic network itself. Not to put to fine a point on it but the council and LPUA have to be concerned with the overall health of LUS and the services it already provides as well as any proposed new telecom utility.

In that context even fiber partisans should recognize how dominant electrical generation is and will likely always be in LUS’ budget. The current bond issue for purchasing two new gas-fired plants is substantially larger than the 100 million discussed to start up a fiber network and ongoing fuel costs are fully half of LUS’ total budget. Power is and will remain the most important utility LUS provides in terms of both human needs and simple cash.

I was interested to find that sewerage supported by other LUS services to the tune of about 20% of its total cost. While no proposal for change was in this year’s budget the brief back and forth on this point made it clear that all recognize that eventually this will likely change. Apparently new wastewater regulations and an aging infrastructure have lead to escalating real costs of providing treatment. Local government has effectively chosen to consider these extraordinary costs one-time expenses and has not passed all of that cost on to its citizens. So part of your electric bill supports sewerage.

The effect of this is probably to give a small break to the poorer residents of the city since the poor and the wealthy are almost certainly closer in their water usage than in their electrical usage. That is an intensely political if very quiet decision but one that seems absolutely right to me. What interested me is that it is clearly a longstanding practice to support the universal, inexpensive provision of one service out of the profits of another.

For fiber partisans what is interesting about this is that, by new BellSouth-sponsored state law, any LUS telecom venture will not be allowed to benefit the less well-off in the same way. And that is too bad. It is the kind of decision that we ought to be able to make about our own community without outside interference.

Annexation questions occupied quite a bit of time with discussion of an upcoming contract with SLEMCO that would allow LUS to “buy out” its customers when an area is annexed. Council members appeared to carry a good bit of frustration around that Lafayette had lost ground during the last “eight years” to more “aggressive” surrounding municipalities. In part this was due to lacking an agreement that would allow LUS to offer full city services to the areas annexed and the councilmen clearly wanted that situation to end.

Their frustrated passion led me to wonder if there might not be a fiber angle to annexation issues. Surely the provision of “full city services” that accompany annexation would be much more attractive, especially to outlying, upscale subdivisions, if being annexed provided access to cheap, truly fast internet, cable, and phone services as well as the traditional utilities. Realizing that potential advantage would involve an intricate dance with the adjacent parish municipalities who, by all the evidence I can see, have been promised a place in line for the fiber offered by LUS. Broussard’s mayor recently defended LUS (oddly, no online link for letters for that day only exist at the Advertiser) and additionally the city-parish's LINC study has suggested tighter integration between adjacent water and natural gas utilities would lead to greater efficiency for all. There are potentially some very touchy, very local political issues just under the surface.

Competence:

One of the more unfair issues that anti-fiber folks have raised is competence. There has been an awful lot of insinuation that somehow LUS is incompetent. Way too much of this has been based on nothing more than the generalized feeling that government just can’t be competent. That is silly. The actual facts are pretty clear. LUS, bond issuing agencies highest rating and has traditionally had the lowest rates around for its services. It replaces its plant as is needed. (Broussard’s water quality problem, for instance, is a result of not undertaking the infrastructure upgrade that has been necessary for at least a generation.) According to data from the Public Service Commission LUS provided at the meeting it has the most reliable electrical service in the state. By all the evidence it makes responsible, locally driven decisions with a noticeable eye for the long term.

There were some new numbers revealed on LUS’ already established wholesale broadband business, a recent target of insinuations that LUS has been hiding loses and has not been making its business plan’s goals. But according to LUS last night, its wholesale business is healthy and ahead of its projections. It projects an income of one million in 2004-5 based on revenues of 820,000 this year and 600,000 last. At that rate they expect to breakeven in year 4, ahead of schedule.

Class (or lack thereof):

There was evidence that the city council is tiring of Cox and BellSouth’s tactics. Some discussion early in the session about restrictions on LUS advertising and what sort of educational advertising was deemed legal were puzzling references initially. As the session went on it became apparent that council folk were angry about the recent Cox full-page ad that ran in the local print media recently. Council members are taking umbrage at the sorts of deceptive tactics BellSouth and Cox are using and are urging LUS to reply. But there are restrictions on LUS advertising that seemingly makes that difficult. Both stories cited at the top of this entry carry amusingly exasperated quotes from councilman Mouton on Cox’s tactics. But the papers did not report that chairman Stevenson injected his opinion that he was actually seeing very few emails or other complaints generated by automated mailers sponsored by Cox—and that he was seeing several times that number of “unsolicited” endorsements. If these guys ultimate goal is to sway the council I would have say that as far as I can tell their current tactics are working against that goal. A little class would be my first recommendation.

Wednesday, August 11, 2004

Wired News: Big Business Becoming Big Brother

One of the threads of those who oppose the LUS fiber to the premises proposal is an attempt to cast the plan as some kind of nefarious guv'mnt plot to encroach on the rights and privacy of Lafayette citizens.

Well, friends, the sad truth of the matter is that if and when the black helicopters do start landing in your back yards, they'll have corporate logos on them!

WIRED has an excellent story on how the federal government has circumvented laws and rules designed to stop them from invading the privacy of citizens simply by accessing the databases of corporations! The WIRED article is based on a study by the American Civil Liberties Union that details what it calls the "The Surveillance Industrial Complex"—the web of cooperation and information sharing that has developed between federal agencies, law enforcement and corporations.

Call it the 'adaptive enterprise' approach to information gathering. That is, confronted with which blocked various data sweeping operations carried out directly by the government, the feds turned to private sector companies which, by the way, have much more information stored on much more robust systems.

The 'LUS as Big Brother' makes no sense from a scale of enterprise concept—I mean LUS's annual budget would be barely an accounting blip at Cox, BellSouth or even Gannett.

The reality of the situation is that it is all that information you freely give companies when you use their credit cards, register for their give aways, use their 'preferred customer' cards, your credit reports, your travel records—all the stuff you thought was somehow private—these are the records that companies are freely sharing with law enforcement, a.k.a. 'Big Brother.'

That opponents of the LUS plan will continue to shamelessly raise this canard as evidence of their desperation—and lack of respect for the intelligence of the citizens they claim to hold in such high regard.

If you'd like to get a copy of the ACLU's report on the Big Government/Big Business attack on privacy, go to the ACLU website (http://www.aclu.org). You'll find a link to the report there.

Monday, August 09, 2004

Free Enterprise? How Cox deals with Competition: Let the State Tax ‘em

Cox, most noticeably of the two main fiber antagonists in the Lafayette battle, has chosen to try to cast fiber issue of one of ‘free enterprise’ versus ‘government.’ That’s pretty misleading, IMHO the real issue is rather a matter of choosing between private and public provision of a natural monopoly. Do we want a large private corporation or a local public utility controlling the natural monopoly that any fiber network will inevitably be?

But with the ideology of a radical, simplistic “free enterprise” position (all private good, all public bad) so prevalent, Cox seems credible when they claim to merely be for preventing “Government” from competing with “Private Enterprise.” And since the charge would be more or less true if it were really the case that “free enterprise” rather than monopoly power were at stake all they have to do to win this point is to keep up the illusion that their monopoly power is not at the heart of our local issue.

So Cox’s public presentation of itself in Lafayette is one of a pious champion of business against the overbearing, grasping state. It’s a nice role to play. But it just isn’t true.

A good example of this is that Cox has fought a losing battle for years in Arizona to force the state to impose taxes on competitors in order to force them to raise their rates. Government interference with free enterprise is just fine if it works to Cox’s advantage. In fact Cox is willing to demand it.

Asking for Taxes

What taxes? Cox has been losing cable customers in recent years (while taking in more revenue) and mainly losing them to satellite providers whose newer satellite technology evades Cox’s monopoly on local coax networks. One advantage of this newer technology is that it doesn’t lead to local franchise arrangements with local governments in which cable companies like Cox contract with the local government to pay the government for the use of its right-of-ways and for use and maintenance of the poles on which the cable runs. Satellite TV is more efficient than cable, at least in that way, and that, part of the more general fact that cable has to maintain a much larger on the ground infrastructure gives satellite a competitive opening.

So Cox is faced with a classic free enterprise choice: either continue to bleed customers to price-efficient Satellite or lower its’ rates and compete on price.

What does Cox do? Cox chooses to…try and raise their competitors’ rates.

Cox wants the legislature in Arizona to step in at the state level and tax the Satellite companies for costs they do not legitimately incur at the local level.
That’s right, Cox has lobbied the legislature to impose state taxes on its competition, but not on Cox, so that their competition will have to charge more to their customers. That takes real gall. I almost admire it. There is a Louisiana flavor to the exuberant, unashamed attempt to make government serve private corporate interests at the expense of its citizens.

But it doesn’t end there.

Demanding Taxes on your Competition

In a move that seems to have shocked even its allies with its heavy-handedness Cox has demanded that candidates sign a pledge to support “tax equity” before Cox will give them money to run for election. That’s sort of like a promissory note. The politician signs a pledge to provide a vote when the debt is called and Cox pays the politician. Pretty direct. Not pretty.

And it does throw doubt on the idea that Cox is simply promoting anything most of us would recognize as “free enterprise.” This is monopoly behavior.

Take home

Taking the message home to Lafayette, situations like this should help us see that what is happening here in Lafayette is simply the way that monopolies react when faced with competitive disadvantage. When their natural monopoly—born of their ownership of the only wired network that can carry the service—is no longer enough to eliminate real competitors monopolies turn to government to keep from losing in free competition. Certainly Cox does.

The Arizona situation is analogous to our own: LUS is suggesting that fiber technology is superior to coaxial cable in that its use would let LUS provide services similar to Cox’s for less money. Cox and BellSouth don’t want to lose customers. And they don’t want to lower their rates to compete. So Cox endorsed a BellSouth promoted State law that imposed a special “tax” on local government that Cox and BellSouth don’t have to pay.

What taxes? What was outrageous in Arizona is both outrageous and in that fine, special, Louisiana way, absurdist. Its outrageous to ask the state to pass a special tax on your competition because you have to pay for services they don’t need; it is outrageous to get the state to do so with the open intent of raising costs for your opponents so that they have to charge the public more; it is outrageous to admit you do so so you can compete more profitably. But it is absurd to ask the local municipalities who own the right of way, who built the poles and maintain them to pay as if it were having to buy access from itself. Who gets paid? Local government. Who loses? Only the customer. You pay more for what you buy. We get to watch the spectacle of the Louisiana “Public Service” Commission being told by our state legislature to make sure that Lafayette charges its citizens enough more than it would otherwise in order to cover the cost of something that it already paid for. It is absurdist. It is surreal. It is wrong.

Here is what is wrong with the PR image of Cox as a partisan of “free enterprise:” They act like monopolists.

It's not what you've got; it's what you do with it!

The Washington Post has a great article on the Digital Divide initiative that the nonprofit organization One Economy is driving in a number of larger metropolitan communities across the country.

The program is bringing affordable, shared, broadband wireless connectivity to residents in Philadelphia and other cities.

Reading the article, it is clear that the folks running One Economy grasp the idea that bandwidth has the power to transform the lives of those with access to it. The higher the speed, the greater the potential to drive change.

Rey Ramsey is the CEO of One Economy. This is what he says about what he believes the impact of this affordable bandwidth will be on those getting access to it:

"Broadband brings advantages in addition to all the new entertainment applications, Ramsey argues. His long-term vision is to use the Internet to revolutionize a social and educational services, such as homework assistance and helping find jobs, insurance and health care, much of which would require faster connections for video and interactivity."

Note, too, that Ramsey and One Economy recognize that they are creating a demand for still-higher speed connectivity with every connection they make today.

Sunday, August 08, 2004

Behind Closed Doors

Friday's edition of the Kansas City Star's Midday Business Update included some interesting comments from the chairman and CEO of Cox Enterprises, Inc. This is the company owned by the Cox family and its heirs that is buying out the 38 percent of the stock of Cox Communications (the cable and telecom company) now held by the public.

Cox Enterprises, Inc., is going to pay $7.9 billion to buy back that stock. To give some sense of both the size of the deal and the size of Cox Communications, $7.9 billion would pay for 79 fiber to the premises projects the size of that proposed by LUS (that is, 79 projects costing $100 million each). It also means that Cox Communications is valued by Cox Enterprises, Inc., as being worth almost $21 billion (using $7.9 billion for 38 percent as the basis for the calculations).

So, for Cox Communications, it is not a question of being able to afford to build out a fiber to the premises network in Lafayette, it is a matter of not wanting to do so.

Cox Enterprises, Inc., must be a huge firm. And it is. But, because it's privately owned by the Cox family and heirs, it would be difficult to determine what that company is worth — or even how it conducts its business.

On the day that Cox Enterprises, Inc., announced it was taking Cox Communications private, the hired guns brought into Lafayette to accentuate the negative about the LUS plan prattled on about the superiority of accountability within corporations versus that inside government. Guess they don't read newspapers or watch any TV, otherwise they may have noted that corporate accountability ain't what it used to be — or, at least, what we think it used to be.

Not one of the panelists appeared even willing to conceed that the notion of corporate responsibility to communities had any merit.

But, what is clear is that Cox's cable and telecom division will be less accountable to communities and the publics they ostensibly serve as a result of their stock being taken out of publicly traded markets.

Cox Enterprises, Inc., CEO & Chairman Jim Kennedy, was quoted in the Kansas City Star as saying that swallowing Cox Communications would likely slow the parent company's buying habits. Could it constrain its capital spending as well?

As a quasi-independent company, Cox Communications has had to live according to the plans and projections it laid out in its various public filings. It also had to retain and control some of its profits, which enabled it to do things like upgrade networks and deploy new services. Now, as a privately held vassel of its parent company, the cash cow that is cable services could represent a very tempting pool of revenue that could be used to maintain other, less profitable segments of the company. Which ones? We don't know because the parent company, Cox Enterprises, Inc., is privately held and is not required to divulge its financial data to the outside world.

No doubt, milking the cable systems dry is not the intent of the family in taking Cox Communications private. But, $7.9 billion is a lot of money and it is a significant amount of debt. If the national economy falters and things like the company's newspaper division goes soft, or maybe the television stations, or the auto auction business — that money being generated by the Cox cable systems could look like a great life boat for those other segments of the company.

And, why not? After all, the Cox family will only have to answer to itself now.

Saturday, August 07, 2004

A little distance and a little preview

Kevin Blanchard writes an opinion piece for the Advocate that allows us to back off the strum und drag of the recent fiber news.

His piece is a structured series of questions that focus not on the ideological clash that has dominated the news but on the gritty political, regulatory, and economic intersections that shape and constrain the way the issue will develop. It reminds its reader of the fundamental issues and at the same time gives us a nice little preview of what the reporter is working on.

(To see why I might think commending a style of “opinion reporting” is worthwhile please take a look at the painful contrast presented by what the Advertiser’s Decker did with the Chamber’s mealy-mouthed, take no discernable position on anything that could actually lead to realizing a vision “position paper” concerning broadband. Decker says “The page-and-a-half policy is running over with vision." He isn't being ironic. He is missing the point.)

Here’s the parts of the Advocat story I found most interesting,:

At the intersection of Regulation and Economics:
"How will LUS be affected by regulations being hammered out by the Public Service Commission? …Will the PSC set those minimum rates so high as to make LUS' business plan less workable… How much can Cox and BellSouth lower prices to compete with eventual LUS service, without triggering anti-trust laws or the ire of the PSC or the Federal Communications Commission?"
Damn good questions, each and every one. Maybe we ought to start tracking contributions to the PSC members’ reelection funds?

At the intersection of Politics & Economics:
"How does New Orleans fit into the equation?"
Blanchard suggests that Nagin’s visit to Lafayette earlier this summer might not have been just about some sort of general “cooperation” between cities but might have also been an opening for asking for Lafayette’s help in driving telecommunication services down I-10’s dark fiber to New Orleans. Apparently a plan stalled by arcane New Orleans politics to put fiber in the downtown sewers is involved. (No, I am not making that up. How could I?) A far-fetched connection? I think so, but then it is Louisiana

And I've always wondered what BellSouth and Cox were afraid of that warrants the thermonuclear level of response we've seen. A regional Lousiana fiber network linking cities a la Utah's Utopia project might be part of it. And wouldn't New Orleans be the biggest possible plum...

At the intersection of (city) Politics & (city-parish) Politics
What would happen if the Lafayette Public Utilities Authority -- made of up five city-parish councilmen who mainly represent the city -- approves the LUS plan, but the council rejects it?
Apparently the charter gives control of LUS to the LPUA but any bonds would rely on the authority of the City-Parish. Who controls? Who knows. And I called New Orleans’ political problems arcane.

Well worth the read, go get it. I’m gonna look forward to the stories coming down the line.

Friday, August 06, 2004

Nobody wants FTTH?

Nobody wants fiber? Hey, download the Fios brochure (pdf) that FTTH subscribers are getting in Dallas as Verizion rolls out real broadband in Dallas this August. CNet describes the initiative. Somebody in Dallas must be more credible than the citizens of Lafayette. They want it and they are getting it.

One of the more irritating things that BellSouth and Cox are doing is telling the folks of Lafayette, poor ignorant children that we are, that we really don't want fiber. We want some sorta "services" that they already offer and children they will take care of our real needs, needs which they understand. Trust 'em. That was mostly implicit until the "Academic" Broadband (not fiber, didn't wanna talk about that) Forum when Menefee, local tech guru, staightforwardly asked if BellSouth and Cox would committ to building a fiber to the home network if the people of Lafayette voted "51%" to do so. There was a lot of hemming and hawing but the facts were clear: that's not the way they make decisions. (It is the way local governments make decisions.) It's about their judgement as to how much profit can be made here versus other, "better," ways to spend their money. (Which, I hasten to point out, includes profits made off Lafayette business.) (See Mike's coverage of that Dog and Pony show)

Anyway, BellSouth and Cox might not find Lafayette's fiber business worth spending the money to secure but that's not because fiber just isn't economic or, as they imply, that wise business heads aren't doing it. Real players in the game, like Verizon, are embracing FTTH. Now you might think that Dallas is a big city. And it is. (And I for one don't want to live in Dallas or Houston.) But it isn't only the big guys: Louisiana's own EATel (East Ascension TELephone) is rolling out FTTH in Ascension and Livingston as we speak. Its not about size. It's about vision.

It's not about scary new "maybe" technologies (that are mostly directly dependent on fiber). It's not about "uneconomic business plans" —unless you think that Verizon and EATel are fools. Really folks, it's about money. And Cox and BellSouth think they can make more money with the profits they take here by spending it elsewhere. That's sensible, good business practice. It can even be reasonably argued that the law requires they be "good stewards" and maximize their shareholders' profits.

But that doesn't make LUS wrong in its judgment that a healthy dose of Fiber is good for Lafayette.

And to imply otherwise is just condescending.