As the 2008 campaigns begin in earnest, there are a bewildering number of so-called “media and internet issues” that have been relegated to the WONK file. That’s what I call the margins of the national consciousness overseen by mainstream media that get little, if any, attention from the general public because the issues are deemed too technical or complicated to capture in short articles or 20 second sound bites. Here’s a partial list, in no particular order of importance, along with a brief synopsis of the issues:
· Internet Tax: Consumers could pay higher taxes for better (faster) services
· Network Neutrality: Should internet providers be able to charge more for heavier use?
· Minority Ownership: Rules that limit media ownership by racial minorities
· WiFi Access: Cities are debating the feasibility of providing free or low cost wireless access
· Domestic Spying: Government pressure on media to reveal user data to fight terrorism
· International Internet Censorship: Should American companies help spy on foreign users?
· Media-Internet Coverage of the War on Terrorism: Do government rules limit coverage?
· Broadband Rollout: Why are almost 50% of Americans still using dial-up?
Why should we care about these issues? That may seem like a redundant question to most people who read this blog, but it is extremely important to consider their relevance to mainstream voters and political candidates as the presidential election looms on the horizon. Like it or not, there is not only a division between blue states and red states. There is also a division in the understanding of consumer technologies among people who are otherwise interested in the future of this country.
Perhaps that division is somehow preordained. In other words, we are not meant to understand how the internet works, or how large corporations are trying to control it, or how government is trying to manipulate it for its own ends. (I’m making an effort here to ensure that doesn’t happen.) Maybe the issues are complicated by the way various sides toss around minute details and technical terms that make most people’s eyes glaze over. It may also be that the proponents or critics have not attempted to relate internet issues to core values that Americans will be debating during the election, values such as freedom from censorship, the rights of a free press, equal taxation, equal access to resources, and the limits of government during peace and war.
All this leads to a modest proposal to those who think they understand what’s going on with the internet and media in general. Essentially, we need to do a better job of relating the debates over “technical” issues to values that make real sense in the context in which the internet and media reside, 21st Century America. For example:
On September 20th 2007 Wired.com ran a story entitled: “U.S. Airport Screeners Are Watching What You Read”. The title suggests Orwellian consequences, while the article questions the reasonableness of association by the selection of reading materials and racial profiling for the sake of terrorist identification. Like many people, I took this story as another example of government gone wild. What next? My choice of clothing, or the way I comb my hair, or whether or not I wear sunglasses in the security line? But as I thought about the article, I began to think about how much we are giving up for the promise of feeling safer, literally our freedom to choose what we read and our right not to be racially profiled. So the question might legitimately be posed: In the Post 9/11 era, do I have the right to decide how to think and who to be? Too extreme a conclusion to reach? Maybe, and maybe not? But the very fact that I now have to question whether I still have these fundamental rights suggests how much our perception of freedom has eroded.
Here’s another example. Why should a traditional “red state” voter care about an internet tax, wi-fi in cities, or how extensive broadband networks are rolled out? Three instances come to mind:
Internet Tax: As internet use becomes more widespread, a goal of all media companies, the costs of building more infrastructure will have to be paid by either commercial providers or government. Taxing internet use moves the burden onto government, i.e. consumers. Conclusion: should we pay twice: once through taxes to bring fiber optic networks to our door, and again for the service through subscriptions? As more small businesses come on-line, a trend that doesn't favor conservative or liberal, access to fast broadband services will become more important. Which groups will pay for it has yet to be decided.
Wi-Fi in Cities: The recent building boom in large American cities, despite the sub-prime meltdown, is driving young, middle age, and senior workers back to urban cores. Many already use computers, wireless phones, and other handheld devices, and expect to be able to use them in their new lofts and condos. The large telephone and cable companies, however, have been unwilling to deploy wireless internet access in some city centers because it cannot be confined to single subscriptions, leaving Wi-Fi by defaut to small business hotspots, airline terminals, and train stations. City governments have taken notice and attempted to fill the void, but have been unable to develop business models that provide free or low cost access. An observation: I would not be surprised to find conservative or liberal business owners showing a little old fashion American ingenuity to set up their own Wi-Fi hotspots if it increases customer foot traffic. There are, in fact, a large number of “community Wi-Fi” groups doing just that, with and without big media’s knowledge.
Broadband Rollout: Who would deny small town Americans the right to watch NASCAR 24/7 or download the latest Rascal Flats album? But that is exactly the result if AT&T, Verizon, Comcast and Time Warner continue cherry picking the country with their deployment of internet networks. Population centers of less than 1million may remain in “dial-up country” for years to come unless these companies change their policies and ramp up their infrastructure investments. The imposition of a tax on internet users will not be well received in the rural south or mid-west, particularly if it is perceived to affect both consumers and local businesses that will come to rely more and more on fast, reliable broadband access.
The internet is, therefore, becoming more relevant and important to all Americans, especially if we take the time to expose the real issues underlying the debates it has generated. The question now is how to get candidates in both parties to recognize the core values that are now under attack. That will be a topic for another discussion.
Copyright © 2007 R.E. Xavier
Friday
How Did It Come to This?: The Origins of the Telephone-Cable War over the Internet
The reality that competition over the internet is evolving into two opposing camps is now well established. On the one side are “former” telephone companies, including AT&T, Verizon, and Qwest, the successors and beneficiaries of the Bell System break-up in 1984. Opposing them are “former” cable television operators, including Time Warner, Comcast, Cox, and Charter Communications, the successors and beneficiaries of mergers, acquisitions, and favorable legislation in the 1990’s. (The quotation marks indicate that these “former” companies are no longer just telephone or cable operators, but a new breed that is increasingly vertically integrated, that is, diversified into several different markets, More on this later.)
These companies are now the gatekeepers to the largest network of communications vehicles ever built, made possible by the convergence of video, voice and data into binary code in the 1990’s. Despite the popular belief that “content” and “programming” drive the media, the reality is that producers like Disney, Fox, HBO, Paramount, and Universal are dependent on telephone and cable operators for access to much of their audiences. Without contractual agreements with these gatekeepers, large production companies would not be able to use high speed transmission lines, regional fiber optic systems, microwave facilities, and satellites to exhibit their shows and movies, or for that matter, sell advertising to support them. In fact, the most important acquisitions in media mergers since the mid-1990’s are no longer movie studios, film libraries, broadcast channels, or radio stations. The most prized possessions are the new technology platforms spawned by the internet, including digital television, fiber optic systems, VoIP telephone, cellular services, and specialized networks set aside for gaming, gambling, pay-per-view movies, and downloadable music.
How did it come to this ? How did telephone and cable companies become so powerful ? More importantly, why haven’t they delivered on their promises for an “information superhighway” and a new era of democratic communications ? We now seem to be confronted by the same problems left by traditional media: eroding freedom of speech, questions about our right to free association, a weak and debilitated press, an inability to freely communicate unpopular ideas, and ironically, an inability to develop commerce due to unequal access to the internet. In place of solutions, we are simply told that more information choices are the answer. What happened ?
To understand how the players on both sides of this war ascended to their current positions, we must look at a few key events that affected both camps.
On the telephone side, the first significant event was the 1984 breakup by Congress of AT&T’s “Bell System”, a century old monopoly of regional Bell companies, transmission facilities, and R&D units. The dismantling of “Ma Bell”, spurred by litigation over long distance telephone by MCI and other small companies, created nine independent “Regional Bell Operating Companies” (RBOCs) covering large portions of the country. Through a series of mergers, acquisitions, and hostile takeovers, a smaller group of RBOCs survived in the 1990’s, including a reconstructed Southwestern Bell, later adopting the old “AT&T” standard, General Telephone under a new brand called “Verizon”, and “Qwest Communications”, the successor to USWest. The principal business of these companies remained local and long distance telephone services, however, even through the boom and bust of the Dot com economy in the early 1990’s through 2000.
On the cable side, a prime event was the first comprehensive legislation for the industry: the Cable Communications Policy Act of 1984. This law freed cable operators from most local and federal rate regulation. However, unlike the telephone industry, cable companies through the next decade remained clustered in small regional pockets without the benefit of cost savings from shared facilities and mass markets. It was not until a second major event, the passage of the Telecommunications Act of 1996, ironically pushed by both cable and telephone companies, that established the foundation for the current situation.
The 1996 law had the effect of reducing, and in some cases eliminating, local government regulation of cable subscriber rates, and limiting the amount of extra money and resources, such as community channels and production equipment, that cities, counties, and states could demand from cable operators during contract negotiations. But the new law had other effects that were not so kind to the cable industry.
First, by deregulating subscriber rates the 1996 law allowed many cable operators to raise rates without local controls, creating a subscriber revolt that eventually attracted satellite television providers, such as Direct TV and Dish Network, to large urban markets. Second, the 1996 law encouraged telephone companies, such as AT&T, Verizon and Qwest, to look for merger opportunities among cable operators. AT&T’s first venture in 1998 with TCI, the largest cable operator in the 1990’s, died a lingering death because of high interest payments on billions in debt bonds. But the experience proved invaluable a decade later when AT&T decided to re-enter the television market. Finally, the high volume of revenue generated by cable television services, now deregulated, and the perception that municipalities were obstacles to internet growth pushed state governments to step in. In California the regulation of cable television was placed in the hands of the Public Utilities Commission (CPUC) in January, 2007. By then, more than 30 other states were making similar moves.
The transfer of cable regulation to state governments has been a boon to the telephone industry. In California, while eliminating most regulation of rates and services for both cable and telcos, AT&T, Verizon, Qwest and others were granted access to media markets without going through long negotiations and hearings with city councils. Waiting periods were virtually reduced to days, instead of months or years. Each telephone company was also granted specific regions in which they can operate, eliminating direct competition with companies in their own industry, but placing them at odds with incumbent cable operators. Using the capital they were able to accumulate through years of monopolies in local and long distance telephone, AT&T, Verizon, and Qwest have invested hundreds of millions of dollars to upgrade and expand their digital networks.
Former cable television operators have had a more difficult time. In Los Angeles there were fifteen different franchise areas in 2002 operated by six different companies. Since then many of the companies have been merged, acquired, or in the case of Adelphia Communications, gone into bankruptcy. Among the survivors are Comcast Communications and Time Warner Cable, the number 1 and 2 cable television operators respectively in the country. In 2005 both companies purchased Adelphia’s cable TV properties, as well as its broadband internet and telephone rights at a 40% discount. By that time Comcast and Time Warner, like their telephone competitors, were no longer just cable TV operators, but vertically integrated media conglomerates with extensive holdings in film and television production, sports franchises, high speed internet distribution, publishing, and marketing.
Time Warner subsequently traded most of its east coast and southeastern cable systems to Comcast for the latter’s systems in Los Angeles, adding to Time Warner’s already central position as the principal multiple system operator in Ventura and San Bernardino counties. The completion of the deal in 2006 resulted in Time Warner’s access to 98% of all TV households in Los Angeles, and more than 70% in Southern California. Time Warner’s dominance of the nation’s # 2 TV market allows it to compete only with AT&T and Verizon for bundled television, internet, and telephone services.
Implications of Cable’s Competition with Telephone Companies
The differences in services between Time Warner and its telephone competitors are almost negligible to the average consumer. As each company rolls out bundled services on their high speed platforms, consumers will be offered similar television, internet, and telephone options. But it is important to understand the implications of Time Warner’s acquisitions in Los Angeles, as well as the entrance of telephone companies into this important market.
Since Time Warner and other cable companies had existing cable television franchise agreements in Los Angeles, the city received approximately $20 million annually in franchise fees in the previous ten years, an expense not imposed on AT&T or Verizon. This revenue will likely grow as the city earns fees from new services that require access to streets, including broadband internet access, shopping channels, and VoIP telephone, from any future service provider. This means that telephone companies have, in effect, received a $200 million bonus from the California state legislature to provide internet based services, presumably to catch up on the lead built by cable operators, and perhaps as a penalty on cable for several years of customer neglect. Similar advantages are enjoyed by the telephone industry all over the country.
There is another side to this competition, however, that is less visible. When it comes down to it, Time Warner will not be significantly affected by a $200 million loss over ten years. The company will probably make the money back through rate increases and new services. Those most adversely affected will be consumers, both in the wallet and in terms of personal freedom. Consumers will pay higher fees because cable’s loss will be passed through on customer bills. They will also lose because in the process of competing to deliver internet services cable and telephone companies have succumbed to pressure from a lame duck presidential administration to trade vital customer data for favorable standing as participants in the so-called “War on Terrorism”.
Recent news reports illustrate this disturbing trend. Item: AT&T and Verizon approved electronic spying by the National Security Agency on its users under the Patriot Act. Item: The Los Angeles Times reports that consumers who purchase bundled television, internet, and telephone services from Time Warner and other large cable operators will likely sign contracts allowing government agencies to mine personal data with little or no recourse in the courts. Item: Reports in the New York Times and other papers indicate that Google, despite resisting Bush Administration pressure to conduct domestic spying, continues to assist the Chinese government to observe and censor its internet users, and in some cases provide information for their incarceration. Ironically, even the claim that broadband services in the United States are second to none fails to acknowledge a little known fact: Item: As reported by the Electronic Freedom Foundation, the United States is now 14th in the world in the deployment of broadband internet access behind Luxembourg and Sweden.
All this leaves the impression that the battle over the internet is not so much a competition between companies, or even a rivalry between industries, as if it were such an abstract and distant conflict. The real war is more likely an assault on individual rights and personal freedoms that we are suppose to enjoy living in a democracy. Ironically, the vehicle for this assault has been the very technology we were told would set us free: the internet. (This is not the time to blame the technology: It is those who apply it that are at fault.) Still, this is something to think about the next time we’re sent glossy brochures or approached by one of these companies to sign up for new services.
Copyright © 2007 R.E. Xavier
These companies are now the gatekeepers to the largest network of communications vehicles ever built, made possible by the convergence of video, voice and data into binary code in the 1990’s. Despite the popular belief that “content” and “programming” drive the media, the reality is that producers like Disney, Fox, HBO, Paramount, and Universal are dependent on telephone and cable operators for access to much of their audiences. Without contractual agreements with these gatekeepers, large production companies would not be able to use high speed transmission lines, regional fiber optic systems, microwave facilities, and satellites to exhibit their shows and movies, or for that matter, sell advertising to support them. In fact, the most important acquisitions in media mergers since the mid-1990’s are no longer movie studios, film libraries, broadcast channels, or radio stations. The most prized possessions are the new technology platforms spawned by the internet, including digital television, fiber optic systems, VoIP telephone, cellular services, and specialized networks set aside for gaming, gambling, pay-per-view movies, and downloadable music.
How did it come to this ? How did telephone and cable companies become so powerful ? More importantly, why haven’t they delivered on their promises for an “information superhighway” and a new era of democratic communications ? We now seem to be confronted by the same problems left by traditional media: eroding freedom of speech, questions about our right to free association, a weak and debilitated press, an inability to freely communicate unpopular ideas, and ironically, an inability to develop commerce due to unequal access to the internet. In place of solutions, we are simply told that more information choices are the answer. What happened ?
To understand how the players on both sides of this war ascended to their current positions, we must look at a few key events that affected both camps.
On the telephone side, the first significant event was the 1984 breakup by Congress of AT&T’s “Bell System”, a century old monopoly of regional Bell companies, transmission facilities, and R&D units. The dismantling of “Ma Bell”, spurred by litigation over long distance telephone by MCI and other small companies, created nine independent “Regional Bell Operating Companies” (RBOCs) covering large portions of the country. Through a series of mergers, acquisitions, and hostile takeovers, a smaller group of RBOCs survived in the 1990’s, including a reconstructed Southwestern Bell, later adopting the old “AT&T” standard, General Telephone under a new brand called “Verizon”, and “Qwest Communications”, the successor to USWest. The principal business of these companies remained local and long distance telephone services, however, even through the boom and bust of the Dot com economy in the early 1990’s through 2000.
On the cable side, a prime event was the first comprehensive legislation for the industry: the Cable Communications Policy Act of 1984. This law freed cable operators from most local and federal rate regulation. However, unlike the telephone industry, cable companies through the next decade remained clustered in small regional pockets without the benefit of cost savings from shared facilities and mass markets. It was not until a second major event, the passage of the Telecommunications Act of 1996, ironically pushed by both cable and telephone companies, that established the foundation for the current situation.
The 1996 law had the effect of reducing, and in some cases eliminating, local government regulation of cable subscriber rates, and limiting the amount of extra money and resources, such as community channels and production equipment, that cities, counties, and states could demand from cable operators during contract negotiations. But the new law had other effects that were not so kind to the cable industry.
First, by deregulating subscriber rates the 1996 law allowed many cable operators to raise rates without local controls, creating a subscriber revolt that eventually attracted satellite television providers, such as Direct TV and Dish Network, to large urban markets. Second, the 1996 law encouraged telephone companies, such as AT&T, Verizon and Qwest, to look for merger opportunities among cable operators. AT&T’s first venture in 1998 with TCI, the largest cable operator in the 1990’s, died a lingering death because of high interest payments on billions in debt bonds. But the experience proved invaluable a decade later when AT&T decided to re-enter the television market. Finally, the high volume of revenue generated by cable television services, now deregulated, and the perception that municipalities were obstacles to internet growth pushed state governments to step in. In California the regulation of cable television was placed in the hands of the Public Utilities Commission (CPUC) in January, 2007. By then, more than 30 other states were making similar moves.
The transfer of cable regulation to state governments has been a boon to the telephone industry. In California, while eliminating most regulation of rates and services for both cable and telcos, AT&T, Verizon, Qwest and others were granted access to media markets without going through long negotiations and hearings with city councils. Waiting periods were virtually reduced to days, instead of months or years. Each telephone company was also granted specific regions in which they can operate, eliminating direct competition with companies in their own industry, but placing them at odds with incumbent cable operators. Using the capital they were able to accumulate through years of monopolies in local and long distance telephone, AT&T, Verizon, and Qwest have invested hundreds of millions of dollars to upgrade and expand their digital networks.
Former cable television operators have had a more difficult time. In Los Angeles there were fifteen different franchise areas in 2002 operated by six different companies. Since then many of the companies have been merged, acquired, or in the case of Adelphia Communications, gone into bankruptcy. Among the survivors are Comcast Communications and Time Warner Cable, the number 1 and 2 cable television operators respectively in the country. In 2005 both companies purchased Adelphia’s cable TV properties, as well as its broadband internet and telephone rights at a 40% discount. By that time Comcast and Time Warner, like their telephone competitors, were no longer just cable TV operators, but vertically integrated media conglomerates with extensive holdings in film and television production, sports franchises, high speed internet distribution, publishing, and marketing.
Time Warner subsequently traded most of its east coast and southeastern cable systems to Comcast for the latter’s systems in Los Angeles, adding to Time Warner’s already central position as the principal multiple system operator in Ventura and San Bernardino counties. The completion of the deal in 2006 resulted in Time Warner’s access to 98% of all TV households in Los Angeles, and more than 70% in Southern California. Time Warner’s dominance of the nation’s # 2 TV market allows it to compete only with AT&T and Verizon for bundled television, internet, and telephone services.
Implications of Cable’s Competition with Telephone Companies
The differences in services between Time Warner and its telephone competitors are almost negligible to the average consumer. As each company rolls out bundled services on their high speed platforms, consumers will be offered similar television, internet, and telephone options. But it is important to understand the implications of Time Warner’s acquisitions in Los Angeles, as well as the entrance of telephone companies into this important market.
Since Time Warner and other cable companies had existing cable television franchise agreements in Los Angeles, the city received approximately $20 million annually in franchise fees in the previous ten years, an expense not imposed on AT&T or Verizon. This revenue will likely grow as the city earns fees from new services that require access to streets, including broadband internet access, shopping channels, and VoIP telephone, from any future service provider. This means that telephone companies have, in effect, received a $200 million bonus from the California state legislature to provide internet based services, presumably to catch up on the lead built by cable operators, and perhaps as a penalty on cable for several years of customer neglect. Similar advantages are enjoyed by the telephone industry all over the country.
There is another side to this competition, however, that is less visible. When it comes down to it, Time Warner will not be significantly affected by a $200 million loss over ten years. The company will probably make the money back through rate increases and new services. Those most adversely affected will be consumers, both in the wallet and in terms of personal freedom. Consumers will pay higher fees because cable’s loss will be passed through on customer bills. They will also lose because in the process of competing to deliver internet services cable and telephone companies have succumbed to pressure from a lame duck presidential administration to trade vital customer data for favorable standing as participants in the so-called “War on Terrorism”.
Recent news reports illustrate this disturbing trend. Item: AT&T and Verizon approved electronic spying by the National Security Agency on its users under the Patriot Act. Item: The Los Angeles Times reports that consumers who purchase bundled television, internet, and telephone services from Time Warner and other large cable operators will likely sign contracts allowing government agencies to mine personal data with little or no recourse in the courts. Item: Reports in the New York Times and other papers indicate that Google, despite resisting Bush Administration pressure to conduct domestic spying, continues to assist the Chinese government to observe and censor its internet users, and in some cases provide information for their incarceration. Ironically, even the claim that broadband services in the United States are second to none fails to acknowledge a little known fact: Item: As reported by the Electronic Freedom Foundation, the United States is now 14th in the world in the deployment of broadband internet access behind Luxembourg and Sweden.
All this leaves the impression that the battle over the internet is not so much a competition between companies, or even a rivalry between industries, as if it were such an abstract and distant conflict. The real war is more likely an assault on individual rights and personal freedoms that we are suppose to enjoy living in a democracy. Ironically, the vehicle for this assault has been the very technology we were told would set us free: the internet. (This is not the time to blame the technology: It is those who apply it that are at fault.) Still, this is something to think about the next time we’re sent glossy brochures or approached by one of these companies to sign up for new services.
Copyright © 2007 R.E. Xavier
Its AT&T's World. We only Live in it.
One of the best ways to gather information about the tendencies of large media companies is through listservs. Basically, a listserv is a running e-mail dialogue among groups of people who have similar interests in obtaining and sharing information, venting about government or corporate policies, and testing strategies they might use in the future. Here’s an illustration of how information on a listserv might be useful.
The following was a recent piece of intell I came across (the name of the city has been changed to protect the innocent):
“AT&T rolled out their U-Verse product in “Chilldale” in March 2007. They deployed close to 18 nodes in the initial go-around, plus an additional 15 or so in the second round. About 60% of “Chilldale” will be covered with service in these 2 rounds of construction.” (Definition of a NODE: a transmission point on a telecommunication grid, the physical plant of fiber optic lines and other electronics, from which a specific number of households are “fed” access to the internet and other services that telephone or cable companies provide.)
What does this information tell us? First, in “Chilldale” AT&T is rolling out “U-Verse”, its bundled media package, consisting of digital television, broadband access, VoIP telephone, and cellular\wireless services. These products are offered over a newly built fiber optic digital backbone, which AT&T calls “Project Lightspeed”. They will install 33 nodes over 60% of Chilldale, which means, presumably, that by the final phase of construction the entire city will be covered by 55 nodes.
Industry policy used to dictate that each node served up to 1000 households (2.4 people per household), or 2400 people a node. However, Chilldale’s population is only 29,000, so each AT&T node will serve about 527 households. (Fewer households per node means faster internet speeds, and more business conducted.) This is an improvement over cable, and suggests that AT&T is building in extra capacity for future services.
Based on these facts, we can extrapolate the following:
1) Given the manner in which AT&T traditionally develops business policy, we can be pretty sure that this technical deployment of infrastructure is company-wide, at least on the West Coast. Moreover, it may be similar (but not exactly) to deployments by Verizon (which is rolling out “FIOS”). Reports on the node capacities of Time Warner (which offers services under the “Roadrunner “ brand), and Comcast (which calls its services: “High Speed Internet”) suggest that both companies are also reducing the numbers of households served per node to stay competitive.
2) Due to a recent change in California Telecomm law (AB 2987), however, the state’s Public Utilities Commission limits competition by AT&T and other “telephone” companies with cable TV operators, such as Time Warner, in specific geographic areas. So for example, AT&T and Verizon do not compete and have been given separate service areas, and would only compete with Time Warner or Comcast (which are also geographically separate) in California. AT&T also competes for digital television subscribers with Direct TV and Dish Network, but not significantly over internet or telephone services, at least not yet.
3) Based on this competitive landscape, which we will return to in a moment, we know that content providers on each system, including commercial television, PBS, educational, web, or PEG access channels), are distributed in different ways. For example, commercial broadcast channels owned or affiliated with CBS, NBC, ABC, and Fox are the most widely distributed across TV, Internet, Telephone, and cell\wireless (via downloads), while on the other end of the scale, non-commercial Public, Educational, and Government access programs are the distributed only on local or regional cable channels. (The exception is those which operate their own web channels, but these are truly few and far between.)The general rule is: the wider the distribution the better the audience, a decision resting solely in this example with AT&T. There are other variations, such as PBS channels and Educational channels which are either affiliated with PBS or are independent. For those channels, the advantage remains being lumped with the mass audience commercial stations, at least for the time being.
4) Another feature of AT&T’s media services rollout is the way it is done: most often in phases, and almost always first in the most affluent and “high market” areas of a city or region. Again, under California’s new telecomm law media companies are encouraged, but not required, to provide universal service when certain benchmarks have been reached. (AT&T was given two waiver mechanisms, including one 2 years after it has reached only 30% penetration.) That means that there will be large areas of cities that will not have competing media services: TV, Internet, Telephone, Cell\Wireless (telephone company vs. cable company). Most of these areas will continue to be served by the incumbent cable operator, whose service record was the initial spur that pushed the new telecomm law in the first place. But this also means that in the short term savvy organizations, particularly those with the widest distribution across several media platforms, can reach more people with their channels and do a better job of providing information, at least in theory, than other channels with narrower distribution.
5) Despite AT&T’s reputation for dominance, the company remains in a competitive struggle with Time Warner, Comcast, and other cable operators for subscribers. This competition, which could be short lived if mergers occur, provides opportunities for partnerships, which if based on competitive advantages, can be promoted for the benefit of all parties. As long as competition exists for media services, for example, the opportunity will exist for educational organizations to appeal to the community spirit and good feelings of different companies for sponsorships and other benefits.
6) On the other hand, based on what we know about AT&T’s long history as a telecomm company, it may not be the best choice for a partner, particularly if a partnering organization is hoping to exploit visual media (digital TV or streamed video over the web). Unless there has been a cultural revolution within the company, and there are signs that such a change is occuring, decision making at AT&T has usually been centralized and mostly “top-down” in the old Ma Bell style. These are, after all, telephone people, who are converts to the digital age, and like many converts AT&T seems hell bent on convincing everyone with saintly zeal that this is a new company with different ways of doing things. This, of course, remains to be seen, and should be noted as a positive development, but by no means should justify exclusive agreements without first seeing what the competition has to offer.
7) Finally, the modest bit of intelligence we gleaned about AT&T also suggests that the media landscape in American cities is changing rapidly and should be monitored, and probably mapped, to determine where and how best to strategically position your organization. In other words, if AT&T is rolling out 55 nodes in “Chilldale”, where are Time Warner or Comcast’s nodes, and when will competition for subscribers actually begin ? We could also overlay Direct TV and Dish Network on the landscape in anticipation of their rising market shares. Within this map it is also important to locate the existence of programming channels carried, or absent, on each system, as well as the location of Wi-Fi hotspots provided by AT&T, Verizon, T-Mobile and Sprint, which are now widely available in most areas. Such a map, which should be updated periodically, is the only way to keep track of the players and the services they provide in any particular section of the country.
As you can see, the context in which companies like AT&T, Verizon, Time Warner, Comcast, Direct TV and others operate is wide, and in many ways creates ripples in different arenas. These ripples, however, can be “ridden” or exploited by organizations that have a clear vision of their own agendas. That vision requires information and an interpretation based on particular circumstances. Only then can opportunities be identified and effective strategies developed.
Copyright © 2007 R.E. Xavier
The following was a recent piece of intell I came across (the name of the city has been changed to protect the innocent):
“AT&T rolled out their U-Verse product in “Chilldale” in March 2007. They deployed close to 18 nodes in the initial go-around, plus an additional 15 or so in the second round. About 60% of “Chilldale” will be covered with service in these 2 rounds of construction.” (Definition of a NODE: a transmission point on a telecommunication grid, the physical plant of fiber optic lines and other electronics, from which a specific number of households are “fed” access to the internet and other services that telephone or cable companies provide.)
What does this information tell us? First, in “Chilldale” AT&T is rolling out “U-Verse”, its bundled media package, consisting of digital television, broadband access, VoIP telephone, and cellular\wireless services. These products are offered over a newly built fiber optic digital backbone, which AT&T calls “Project Lightspeed”. They will install 33 nodes over 60% of Chilldale, which means, presumably, that by the final phase of construction the entire city will be covered by 55 nodes.
Industry policy used to dictate that each node served up to 1000 households (2.4 people per household), or 2400 people a node. However, Chilldale’s population is only 29,000, so each AT&T node will serve about 527 households. (Fewer households per node means faster internet speeds, and more business conducted.) This is an improvement over cable, and suggests that AT&T is building in extra capacity for future services.
Based on these facts, we can extrapolate the following:
1) Given the manner in which AT&T traditionally develops business policy, we can be pretty sure that this technical deployment of infrastructure is company-wide, at least on the West Coast. Moreover, it may be similar (but not exactly) to deployments by Verizon (which is rolling out “FIOS”). Reports on the node capacities of Time Warner (which offers services under the “Roadrunner “ brand), and Comcast (which calls its services: “High Speed Internet”) suggest that both companies are also reducing the numbers of households served per node to stay competitive.
2) Due to a recent change in California Telecomm law (AB 2987), however, the state’s Public Utilities Commission limits competition by AT&T and other “telephone” companies with cable TV operators, such as Time Warner, in specific geographic areas. So for example, AT&T and Verizon do not compete and have been given separate service areas, and would only compete with Time Warner or Comcast (which are also geographically separate) in California. AT&T also competes for digital television subscribers with Direct TV and Dish Network, but not significantly over internet or telephone services, at least not yet.
3) Based on this competitive landscape, which we will return to in a moment, we know that content providers on each system, including commercial television, PBS, educational, web, or PEG access channels), are distributed in different ways. For example, commercial broadcast channels owned or affiliated with CBS, NBC, ABC, and Fox are the most widely distributed across TV, Internet, Telephone, and cell\wireless (via downloads), while on the other end of the scale, non-commercial Public, Educational, and Government access programs are the distributed only on local or regional cable channels. (The exception is those which operate their own web channels, but these are truly few and far between.)The general rule is: the wider the distribution the better the audience, a decision resting solely in this example with AT&T. There are other variations, such as PBS channels and Educational channels which are either affiliated with PBS or are independent. For those channels, the advantage remains being lumped with the mass audience commercial stations, at least for the time being.
4) Another feature of AT&T’s media services rollout is the way it is done: most often in phases, and almost always first in the most affluent and “high market” areas of a city or region. Again, under California’s new telecomm law media companies are encouraged, but not required, to provide universal service when certain benchmarks have been reached. (AT&T was given two waiver mechanisms, including one 2 years after it has reached only 30% penetration.) That means that there will be large areas of cities that will not have competing media services: TV, Internet, Telephone, Cell\Wireless (telephone company vs. cable company). Most of these areas will continue to be served by the incumbent cable operator, whose service record was the initial spur that pushed the new telecomm law in the first place. But this also means that in the short term savvy organizations, particularly those with the widest distribution across several media platforms, can reach more people with their channels and do a better job of providing information, at least in theory, than other channels with narrower distribution.
5) Despite AT&T’s reputation for dominance, the company remains in a competitive struggle with Time Warner, Comcast, and other cable operators for subscribers. This competition, which could be short lived if mergers occur, provides opportunities for partnerships, which if based on competitive advantages, can be promoted for the benefit of all parties. As long as competition exists for media services, for example, the opportunity will exist for educational organizations to appeal to the community spirit and good feelings of different companies for sponsorships and other benefits.
6) On the other hand, based on what we know about AT&T’s long history as a telecomm company, it may not be the best choice for a partner, particularly if a partnering organization is hoping to exploit visual media (digital TV or streamed video over the web). Unless there has been a cultural revolution within the company, and there are signs that such a change is occuring, decision making at AT&T has usually been centralized and mostly “top-down” in the old Ma Bell style. These are, after all, telephone people, who are converts to the digital age, and like many converts AT&T seems hell bent on convincing everyone with saintly zeal that this is a new company with different ways of doing things. This, of course, remains to be seen, and should be noted as a positive development, but by no means should justify exclusive agreements without first seeing what the competition has to offer.
7) Finally, the modest bit of intelligence we gleaned about AT&T also suggests that the media landscape in American cities is changing rapidly and should be monitored, and probably mapped, to determine where and how best to strategically position your organization. In other words, if AT&T is rolling out 55 nodes in “Chilldale”, where are Time Warner or Comcast’s nodes, and when will competition for subscribers actually begin ? We could also overlay Direct TV and Dish Network on the landscape in anticipation of their rising market shares. Within this map it is also important to locate the existence of programming channels carried, or absent, on each system, as well as the location of Wi-Fi hotspots provided by AT&T, Verizon, T-Mobile and Sprint, which are now widely available in most areas. Such a map, which should be updated periodically, is the only way to keep track of the players and the services they provide in any particular section of the country.
As you can see, the context in which companies like AT&T, Verizon, Time Warner, Comcast, Direct TV and others operate is wide, and in many ways creates ripples in different arenas. These ripples, however, can be “ridden” or exploited by organizations that have a clear vision of their own agendas. That vision requires information and an interpretation based on particular circumstances. Only then can opportunities be identified and effective strategies developed.
Copyright © 2007 R.E. Xavier
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