U.S. broadband: Desperate ideas of an industry that resists change

Posted by Wolfgang Gruener

Opinion – Reading about broadband giants and their ideas how to fairly distribute Internet bandwidth to its customers over the past two weeks got me thinking. Following Time Warner Cable and Comcast, AT&T today joined the choir and indicated that it will charge extra if you take advantage of broadband content through your broadband pipe. For how much longer can broadband providers distort market scenarios to justify price increases for antiquated services, before there will be any consequences?
    

About eight years ago, I joined the broadband age and became the proud subscriber to a $40 per month, 3 Mb/s cable Excite@Home Internet connection. When it was clear clear that Pacific Bell would not provide DSL service in my home town, a suburb north of San Francisco, it took AT&T only two months to send a letter notifying us that the service fee would increase to $45, stating that company felt that their service was “worth” that much.  Oh, and the downlink speed was cut to 1.5 Mb/s.  

In 2002, we moved to the Chicago area and despite the fact that Chicago mayor Richard Daley  had labeled his city as the digital hub of the Midwest in 2000, we found out that very few suburbs actually had broadband available and I got stuck with 56K AOL dial-up once again. Fortunately, the city officials here were very well aware of the lack of broadband and had talked to SBC (the company that recently bought AT&T and renamed itself to AT&T) and AT&T (back then what Comcast is today) about broadband services, both of which declined to bring such service soon, stating that it would not make any financial sense to offer broadband to a base of just 30,000 homes.   

The city disagreed and found that it would be feasible to build a broadband network by itself and citizens put a referendum on the ballot. SBC and AT&T defeated the referendum with hundreds of thousands of dollars worth of ads, commercials and flyers, scaring citizens that a city-owned network would result in thousands of dollars in property tax increases. DSL and cable broadband became available within months when it was clear that the referendum would make it on the ballot again. SBC’s local president spent an awful lot of time with local politicians trying to convince them that no one would need a faster connection speed than 1 Mb/s (video can be downloaded from the front page of the website of Fiber for Our Future.) He then went on to put lobby groups in place to convince lawmakers that there should be rules preventing municipalities from offering communication services. Back then, I noticed that competition is a real unsexy thing in the telecommunications industry.

AT&Ts and SBCs business practices dazzled me, since the intentionally false statements made at the time would give you jail time in many jurisdictions around the globe. I learned that you can get away with it here and these past two weeks we just got another taste of an old industry hanging on to old times, resisting change, ignoring consumer trends, promoting a social digital divide, and creating another annoying roadblock for what remains a key innovation driver in this country – the Internet.

So, what happened?

First it was Time Warner Cable (TWC) that confirmed that it is curbing Internet usage and has begun charging extra if new customers exceed their quota. Then, Comcast said that it will be limiting bandwidth and implementing “delayed response times for Internet traffic only for those customers who are using more than their fair share of available Internet resources at the time.” This limit will remain in place “until their usage falls below established bandwidth usage thresholds or until network congestion ends.”

To put this into perspective, we are not talking about discount Internet service here. We are talking about curbed Internet service for $55 a month with TWC and $50 per month service with Comcast. I don’t think I am the only who thinks that there should be no limitations whatsoever on $50+ Internet service. Not unexpectedly, Comcast stated that “most customers will notice little to no change in their Internet experience when the new network management technique is working” and TWC noted that savings or extra charges would be needed to build out their network.

Today we heard that AT&T is thinking about a similar strategy calling “a form of usage-based pricing for those customers who have abnormally high usage patterns is inevitable.”

I don’t buy this reasoning. I have heard it for too many times in too many variations and there is a time where you just have a hard time believing. Let’s try to be honest here: We are talking about a price hike here and another way to delay the upgrade of a mostly antiquated network – a much needed upgrade for which we already have paid with our subscription fees. But I agree, “price hike” does not sound as great as “Internet experience” and “network management technique”.

The U.S. broadband industry is already behind. The U.S. has never been in the global top 10 countries with the highest Internet penetration. We have never been in the top nations in terms of bandwidth. But we always have been in the top 3 in terms of service prices. Broadband connection speeds are far behind the leading broadband nations in the world, where 6-16 Mb/s speeds have become the standard years ago – for half the price of cable broadband in the U.S.  

Mainstream DSL speeds aren’t enough to support family broadband networks and new services such as multimedia streaming and I don’t even want to talk about the quality and reliability of the DSL service in my hometown. Broadband providers already are the most significant roadblock between consumers and new applications and now we are hearing that connections will see delays and/or extra charges when you take advantage of new high-bandwidth services.

If broadband providers have their way, it will be your budget that decides whether you can watch that Internet video or not. I am stunned by the fact that broadband companies can seed these discussions slowly into the media in a strategy to grow the acceptance of these arguments while there is virtually no resistance.     

Let’s be clear: There is zero entrepreneurial spirit and zero social responsibility left in today’s U.S. telecommunication industry. This industry is not about products and consumer trends anymore. It is about protecting a revenue base without exploring and providing new and existing services to customers at prices that avoid new divides between the rich and the poor.    

Has anyone in this industry ever thought about upgrading their service first and then charging extra?