Thursday, May 14, 2009

Is Metered the Way It Will Be?

"Michael Morisy of TechTarget posted a great, thoughtful article Thursday on revenue generation in the telecom world. He posed a core question in the story's title: "Without revenue-per-bit stabilization, is telecom a time bomb?" ... Mr. Morisy discusses two distinct challenges. The first is: how do carriers grow ARPU? The second is: how do carriers cope with the accounting challenge of recouping technology investments? He suggests that it "could be years" before carriers have a solution to these challenges." This was a response blog post from Ifbyphone, a Cloud Telephony Provider, that says, wait for it, "The solution lies in carriers selling our valuable, SMB-tested telephone applications, delivered over inexpensive Internet connections. We call this Cloud Telephony for Carriers, and this concept is already a reality." Ta-da!

My beef is that carriers don't need to sell by the bit -- they are making plenty of profit Now. Look at their numbers! The real problem for the Big 12 ISPs' is that the "just good enough" mentality.

Taking NJ or Penn. as an example. Verizon made promises as long ago as 1999 that with a rate increase it would deliver FTTH at DS3 speeds. Now ten years later, it has seen numerous rate increases with the same promise and yet only about 10% of its territory has FTTH. Ten years! That's the trouble. Think about where we would be if they had started FTTH in 1999..... We would be in the Top 3 providers and living the high-fiber broadband diet. The government wouldn't be shelling out $7B of taxpayer money to do what was promised and paid for already.

"Mergers Harmed Broadband -- AT&T's latest merger required the company to have 100% broadband capable of at least 200K in all states by 2007 and offer $10 DSL to new users. Didn't happen. In 1999, AT&T had claimed they would spend $6 billion on 'Project Pronto'. Stopped spending post merger. Almost every AT&T state had plans for broadband that were cancelled after each merger, including SNET, Pacific Bell and Ameritech." []

VZC spent $13.7M and VZW spent $4.3M - a combined $18M in 2008. They could have solved some internal issues with that money. From 2006 through 2008, Verizon’s top 5 executives received $194 million dollars. And let's add to the shocker: Tax Payments in 2008 -- Verizon only paid 3% of the total revenue on income taxes, while AT&T only 5%.

Their profit is from bilking us. Politicians have been paid to UN-regulate (not deregulate but seriously shut off any regulation for telcos). Let's look at Voice service:

  • Local Service - By 2008, VZ had increased NY’s local phone service by 524% since 1980.
  • Long Distance - In 2009, AT&T’s basic LD rate one minute call cost $0.42; higher than 1980.
  • Long Distance -- A recent California phone bill study found that because of plan fees and other charges, the average subscriber paid $0.55 a minute.
  • Wireless -- Verizon & AT&T were able to bid with a ‘designated entity’ on spectrum as “very small businesses”, saving $8 billion.

Note: This data is part of presentation by New Networks Institute: “Has Divestiture Worked? A 25th Anniversary Assessment of the Breakup of AT&T”, sponsored by Open Infrastructure Alliance and the Internet Society, New York Chapter.

It's this monopoly Bell-head attitude that drives me nuts. Multi-National Corporations - companies too large to fail - are Unregulated and their very corporate actions threaten the American economy. And you can't count on the FCC, state PUC or politicians to care. Consumers need to make noise.

We will have metered broadband. Why? Because the telco/cellcos make more money that way without having to increase CAPEX or OPEX. Good enough seldom is.

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