When Will the Rest of Us Get Google Fiber?
technologyreview.com
technologyreview.com
Comcast's 2008-2011 mean (standard deviation) operating margin is 20% (0.8 percentage points), pre-tax margin is 14% (1.8 percentage points), and net income margin 9% (1.4 percentage points). This is of note for a purported utility, but not "comically profitable".
Let's observe their most recent quarterly disclosure [1] by business segment. Here we learn that the Cable Communications division, which "consists primarily of video, high-speed Internet and voice services (“cable services”) for residential and business customers in the United States", had an operating margin of 40% and spent 14% of revenues on capital expenditures. We also learn that Cable Networks, which "consists primarily of our national cable television networks, our regional sports and news networks, our international cable networks, our cable television production studio, and our related digital media properties", had an operating margin of 37%.
Where's the money going? Breaking out Cable Communication's costs, 35% went to programming, 35% go to "Other", defined as "business services, advertising, network operations, and franchise and other regulatory fees", 12% to marketing, 10% to technical labour, and 8% to customer service. Also of note, 24% of the division's revenues came from residential high-speed internet (50% came from residential video).
[1] http://www.sec.gov/Archives/edgar/data/1166691/0001193125124...
I'd also like to point out that a VPN is about $40-70 a year. Once you have that up, you're only bound by bandwidth restrictions.
It makes me sick that I have to resort to such things simply to extract fair value from my service and believe me, I'm willing to pay my fair share. I'd spend upwards of $150 a month if I could get a legit Internet/TV bundle. What I'm not willing to do is allow these boring shit companies to get rich off subpar services anymore.
It's interesting that you should mention this. Most cities actually sign contracts with service providers. The contract grants the provider access to easements and, generally, exclusivity for the type of service (i.e. only one cable provider/local telephone carrier) allowed to operate in the city).
Convincing providers to bump up speeds and lower costs is going to require cities to kill the exclusivity clause, and encourage competition. Alternatively, allow the cable provider to retain exclusivity, but require fiber upgrades.
This kind of tactic may work better in smaller towns, like mine (Pop. 6000) as residents have very direct access to their city officials, but it's one approach that may work.
It was Urbana's fight in which I came to understand the power of that one bargaining chip and that cable contract negotiations really are weighted in favor of the municipality.
AT&T was the main lobbyist behind these laws during their U-Verse deployment. The statewide franchising would let them deploy U-Verse broadly without having to negotiate with individual city councils (and deal with "sure you can sell cable here, so long as there's free cable for the firehouse, free internet for every school, etc").
With 91 municipalities in St Louis alone, this'd be an expensive barrier to entry for AT&T when they can just buy a state law to avoid it all. The law also lets existing incumbents get out of their franchise contracts with municipalities and go statewide if a competitor enters.
[1] http://www.senate.mo.gov/07info/BTS_Web/Bill.aspx?SessionTyp...
[2] http://www.ncsl.org/issues-research/telecom/statewide-video-...
Fast forward to 2013, AT&T will still not offer anything faster than 3Mbps DSL to my home, and they charge a princely sum for it.
I can get 30/4 from Charter for the price of that 3Mbps DSL, but Charter's customer service is so awful that it makes AT&T look like Zappos or Nordstrom.
Where I lived, I was so far from the telco that the copper gave out after 1Mbit. And we weren't scheduled for U-Verse. Remember, all U-Verse does is shorten the run of copper wire from your house to the DSL cabinet.
What I didn't know (because they didn't mention it at the time) is that after one year it will automatically go up to $65/mo.
$65/mo. for 20MB service is robbery in the US in 2013.
Don't be surprised if your rate doubles after one year.
The question asked by the article title, "When Will the Rest of Us Get Google Fiber?" is not answered in the article, except by implication. That answer is "not real soon." People are spending their money on other forms of Internet access, and people are writing to their lawmakers about other issues, and it will take time before there is either market incentive or regulatory nudging to roll out anything faster than the services that already let most residents of the United States watch YouTube continually. The higher speeds will come eventually, whenever many more customers think they are worthwhile.
I think it should be considered that their main interest might be one of the strategic downfalls of the service (ex. free raw trafic), akin to how GOOG-411 was used to train a voice recognition engine, before terminating it once the training goals were attained.
If it proves to be the case, the media distribution "giants" have nothing to worry about, and people who expect the service to stay might be in for a surprise.
I think it's sustainable, if the service companies let their margins get too big then it would be a no-brainer profit making move for Google Fibre to expand and undercut them. If not, no skin off Google's back and the increased access to the internet serves their original goals too.
That's just begging to be disrupted. If Google or anyone else is willing to take half or one-third (etc.) that margin, they could offer vastly superior service and still turn a healthy profit.
>For example, in 2011, after the city of Wilson, North Carolina, built its own fast network—competing with existing carriers—the North Carolina legislature, amid industry lobbying, passed a law that made it harder for local governments to build networks and prevented Wilson from expanding its network beyond a county line, she said
That is why Google doesn't really want to become an ISP.
When people finally try to self-organize (e.g. municipal development projects), the oligopoly turns to lawsuits and lobbying to beat them down.
The U.S. is such a hypocritical country. We laud competition, while in actuality we beat it down with ever fewer but larger and more deadly sticks.
Examples?
EDIT: Okay. Wow. Had no idea. Has any municipality tried to create a wireless mesh network that connected through a few high-bandwidth connections?
There are plenty of other cases, but the OP is right. The telco incumbents will use any means necessary - propaganda ("it's anti-capitalist!"), bribes (aka, lobbying) and lawsuits - to keep extracting as much profit as possible from people while delivering the barest minimum service possible.
Monticello, Minnesota (2008): http://www.ilsr.org/monticello-fiber-network-fighting-frivol...
Lafayette, Louisiana (2010): http://arstechnica.com/tech-policy/2010/05/lousiana-fiber-ne...
There's no beef to your argument. The telco oligopolies are the result of two simple factors:
1) Telecom is a field with almost infinite economics of scale, which means that the natural tendency is towards consolidation until there is only one company left. It's the textbook case of natural monopoly.
2) Most of the existing telecoms arose through government-sanctioned monopolies. Those monopolies didn't arise because lobbyists padded the right pockets. Those monopolies arose because rural areas dominate U.S. politics (their votes count about 2x as much when election districts are accounted for). As a result, governments go to huge lengths to make sure that utility providers don't do the most economically sensible thing of concentrating infrastructure in densely-populated areas. One of the measures is giving utilities monopoly rights in return for their servicing rural areas.
The fact that it takes something like Google to take on these interests is completely unsurprising. They are one of the few companies with the dollars to address (1). They are also targeting, so far, only Kansas City (not a megalopolis, but an urban area of 1.5 million people) and thereby dodging (2).
In fact, that probably explains the whole "Hey kids! Get your town to enter the Google Fiber Lucky City Sweepstakes!" that was used to roll Google Fiber out. The winning city bought into the fiber idea so hard that the next step of kicking out the franchise agreements would be a snap.
Lamenting about how political telecom can get is somewhat naive. Of course it's political. It involves digging up public/private property under municipal permission. It invokes the same contentious debates that all infrastructure projects invoke: richer neighborhoods versus poor one, urban ones versus rural ones, "not in my backyard," etc. As long as telecom involves digging up public land or using public spectrum, it will be intensely political.
The political tradeoff comes from the franchise agreement. Your citizens want cable tv, and Comcast only wants to wire up the higher-end neighborhoods because they'll buy more services. Is that how you want to be portrayed? So you tell Comcast to make the deal: wire up the whole town, even that neighborhood 3000 feet up the hill, and we'll guarantee that nobody else can interfere with your physical plant investment. Comcast sleeps soundly at night, and so do the politicians.
Every small town in Iowa, the biggest house in town? The cable franchise operator.
All of those things are done under municipal authority. You can grant Comcast an easement to wire up your house, but what about digging under public streets or across your neighbor's yard?
Also, I don't disagree with the second part, but a fair characterization includes the fact that those people up on that hill have twice the votes per capita as the people living downtown.
Absolute BS. Telecom lobbyists spend millions every year. I imagine they would stop if it were not necessary as you claim.
This is an interesting observation. In South Africa, Telkom, the state monopoly had its monopoly status extended in return for rolling out services to rural areas. What really happened was that cellphones rapidly overtook landlines, and the common perception is that most of the landlines have been stolen and used for copper (although that isn't entirely true, I think, our maid has a cheap line in a rural area). Telkom's monopoly has expired, and it is crumbling, but South African telecoms were set back significantly.
South Africa's telecoms law was written with much input from SBC, an American corporation that bought a stake in Telkom ( http://twentythirdfloor.co.za/2007/08/27/telkom-sbc-and-a-fe... ).
Although most think that there was a purely ulterior motive in granting the monopoly, your comment makes me wonder if they were trying to replicate the de facto American model.
Somehow, AT&T was allowed to repurchase SBC, so now it's just AT&T again.
Note I don't actually know that Usain Bolt feels that way, but many top athletes do (especially in "world record" type sports like racing). And of course this is my personal assessment of the situation, not the position of my employer, etc etc.
I'm thinking of companies that are hampered by (e.g.) heavy regulation, internal politics and competition, in mature and/or commodity industries.
With current technology, I wouldn't complain about 1Gb speeds, but 50, let alone 100, is still pretty damn quick. An HD TV show at just over 4.6GB took just over 13 minutes to download; in the process, practically saturating my wifi connection (which I've found to be the more limiting factor in my Internet speed).
So, fiber: yeah, it's awesome. But I'd wager that stupid-fast speeds aren't necessary for most people for a while, and until 802.11AC or faster has market saturation, it won't be.
As much as I would love to get rid of the shitty overpriced service I have, it isn't going to happen.
Google needs to have something of a service so they can keep their finger on the pulse. When Google knows how much it costs to provide service then they can negotiate better for their position within the oligopoly.
At the beginning, they're only going to have a few ad slots to work with, but the next step will be to negotiate with the ESPNs/Discovery Channels/MTVs to expand the number of ad slots they personalize. (Advertisers are going to demand it, since this blanket show the same ad to everyone watching is incredibly dumb.)
If the cable companies had their act together they'd have done this years ago, but a few minutes with my cable box convinces me they're no where near able to pull this off.
Google is going to make a killing.
I'm all for disrupting the oligopoly that cable companies set up, but this point you're making in particular (ie. ultra-personalized TV ads) is not something I'm looking forward to.
I wanted to get one for April when my current Bell contract runs out and then use it with Wind Mobile but it doesn't seem like I will be able to get one in time.