Broadband cord cutters? If this is a thing, ISPs, regulators and Silicon Valley have utterly failed

22 Comments

I’m supposed to be covering the internet of things, but the story today in the Wall Street Journal on the one percent of people who have reportedly cut their wireline broadband subscriptions to use wireless instead is a hot mess that requires some careful rebuttal. But first, that the Wall Street Journal is even writing about this issue at all, as a possible “thing,” and doing so without directly citing the high cost of wired broadband until the fifth paragraph is rage-inducing.

The WSJ minces around the cost issue by distracting readers with the chimera of more Wi-Fi hotspots and better cellular coverage as the reason people are cutting the wireline cord. But its examples show cost is the issue for most people. Essentially Patrick Downs, quoted in the story, doesn’t want to pay for a wireline connection and a wireless connection, so he picked wireless because mobility is a higher value-add for him. Apparently youth in Japan were doing the same thing, prompting NTT to lower its fiber to the home prices.

Sticker shock is an issue

And if cost is the primary reason people are electing to ditch their wireline service we have two problems. One, wireline broadband costs too much, and the second is wireline can’t convincingly differentiate its value from the current LTE-wireless offerings. The first is a problem that can be laid at the door of ISPs and our regulator’s inability to boost competition or innovation in broadband. It’s taking private companies like Google(s goog) and Gigabit Squared to move the needle on faster speeds and lower costs in wireline after Verizon(s vz)(s vod) all but stopped deploying its FiOS fiber to the home service to its customers.

USbroadbandsubscribersQ12013

As the WSJ story notes:

Leichtman Research surveys show that spending for home Internet service has risen steadily over the years, to an average of $46.78 a month last year from $28.46 in 2005. People trading up to faster services—from dial-up to DSL to cable to fiber-optic—accounts for some of the increase, but so do rising prices.

What it barely mentions is that broadband is just part of a growing telecommunications bill for most Americans, that includes cellphones, pay TV and broadband (and sometimes home voice). And what it skips over, but would be a great business story, is that despite the world moving to all-IP, where it is technically possible to deliver TV, voice and data all via the same packet network and infrastructure, prices have not dropped, and have indeed risen. The issue here is a lack of competition and regulatory will. Consumer habits are also hard to break.

For example, on the regulatory side the FCC defines anything over 4 Mbps down as broadband, which means wireless LTE networks are broadband, just like a gigabit network is. The FCC also doesn’t have a real solution for boosting speeds and pushing innovation other than empty goals that are announced after companies have already put in the real work of building out new infrastructure.

On the consumer side, people are sticking with their existing carriers (they like the subsidies) despite the nation’s top 2 carriers implementing pricing plans that eliminate many of the savings one might earn by using over-the-top IP services like Google Voice, Skype(s msft) or WhatsApp.

The bigger problem is that both services look the same

That’s the pricing side. But the second problem is a bigger one in my mind. That people don’t differentiate between wireless and wireline means that the technology and entertainment industry is failing to deliver apps and experiences that make people want and demand a fast wireline service. The carriers (especially in rural areas) love that people are willing to look at wireless and wireline and see the same service, because delivering wireless has higher margins and it means carriers don’t have to invest in costly underground network upgrades.

Is Netflix a good enough reason to buy wireline broadband?

Is Netflix a good enough reason to buy wireline broadband?

And, despite the real issues I think consumers will have if they embrace LTE in exchange for a wireline connection, the fact that Netflix(s nflx) or Hulu streaming is the main argument people in the story seem to have for keeping wireline broadband, means we need to push the envelope on building better apps.

While we may all have that quirky friend who chooses Clearwire(s clwr) or just uses their cell phone data plan (I have a co-worker who does this), if this becomes a real thing, it’s not just some pithy story about how people are giving up wireline connections because they cost a lot and we have a lot of free Wi-Fi and good cellular networks. It’s an indictment on our telecommunications policies over the years and our failure to offer visionary apps and services that make people look at wireline broadband as indispensable.

Right now, these 1 percent cutting their broadband cords, look at broadband the way early adopters might have looked at electricity. You got electricity so you could get light bulbs. But electricity brought so many other innovations and improvements to our quality of life that even though flashlights are cheap and widespread, no one says they are going off the grid because their Maglite gives them all the lumens they need. Broadband is the web today. But as more devices get connected, broadband will become more than just access to Facebook(s fb). It will be access to healthcare, to education, to entertainment and to our relationships. And it will allow smarter devices in our homes to connect, get and share useful data.

Our regulators, our innovators and our ISPs need to see that. Otherwise, we’ll be sipping our lives through cocktail straws and marveling at those who invested in the firehose of innovation that superfast wireline broadband can provide.

22 Comments

Dan Kennedy

As a former operator in rural areas, wireless build out is coupled by a fiber infrastructure which means we are using it to take fiber to the home. While LTE offers a good option, the limitations of oversubscription, sustained throughputs and lack of complete coverage means that it is a bandaid to the next technology breakthrough. Your story misses some elements of the manufacturing limitations as reasons for the true gap and the overall cost it takes to retool, add and implement a new system into a companies work flow processes. Its not that companies don’t want to offer these speeds, its just not cost effective to do so. The good news is that the technology is catching up and the cost to delivery 100Mbps to the home is viable(even in rural areas). With the changes in USF for rural areas, this means that competition will be spurred on by the lack of future funding unless those company’s adopt an aggressive broadband strategy now. Look for consolidation in the coming months and years and then you will see innovation for the consumer in telecom that will exceed the needs of the consumer. Culture of the companies has to change as well. That is going to take longer than it takes to construct the new network, but its happening and the consumer will benefit. Compression technology is the primary gap for wireless TV service and the programmer allowing the operator to provide it. Adaptive bit rate technology coupled with better middleware will address this. The underlining agreements that programmers have to protect content and monetize advertising revenues is also a stumbling block. Many of the programmers are still using generic spreadsheet reports for reporting of subscribers. Once you see a true streamlined approach to delivery content, managing the subscriber counts, the programmer adopting an pay per view approach to programming, then you will see a huge shift in new innovation in broadband for wireless and wireline which will dramatically reduce the consumers bill. The margins for video are extremely small and sometimes are a loss leader. Video is also a bandwidth hog on a network and thus it means we have to dedicate massive resources to it. Once the shift to OTT and pay as you go TV service is allowed by the programmers, I see where the consumer will benefit short term and long term.

Richard Bennett

That should be “NTT is finding it hard to sell FTTH at any price to YOUNG people”, sorry.

Richard Bennett

Stacey, your story is a bit self-contradictory as you blame US regulators for a trend that you yourself see taking place around the world. As more people get access to LTE in more places, the value of wired broadband as a separate service declines. NTT is finding it hard to sell FTTH at any price to you people, as so many are so attached to their smart phones they simply don’t want to be bothered with a second device – desktop computer – with its own network connection.

While it’s certainly the case that LTE will never be as fast as FTTH, it’s clearly good enough for many people.

Chris Grosskopf

Bottom line is this, wireless connections are not as stable nor do they perform as well as wireline connections. The technology currently in production makes it this way.
One of the biggest tragedies in our way advanced technological Country is the fact that most ISP’s will not upgrade their current infrastructure for whatever reason. It’s really odd that telco’s in Europe offer way more bandwidth than our telco’s here in the USA. And please explain to me why the residential/consumer market has more options than the Commercial market. Homes need more bandwidth than Business’? I don’t think so. In fact, both markets require major upgrades to support bandwidth. It’s pretty sad, but today’s Major Corporations are more concerned with the short term profitablity rather than longterm.

Lance Rogers

The reason why wired is more expensive is because it is faster, it will always be faster, wireless cannot match the speed of wired directly and with fiber optics taking over, the wireless connections will be left in the dust.

Mike

I run into this argument daily. Three trends. Dumping landline for cell, dumping cable for web tv and dumping hardware for wifi. In a perfect world ok but it’s not. So here are the main set backs for each. Cell only? When the lights go out because of a storm, earthquake or some other disaster cell is gone. Web tv after paying for your Hulu plus, netflixs and amazon you still don’t get anything real time nor local. And now this wireless trend. So in my house were is my free wireless? Am I supposed to connect my cell phone to my tv, ps3 and such? Nuts or are we all getting together for coffee and a movie every night after work just for cutting the cord?

Guest

If you don’t work at home and you don’t care about video, wired broadband is an unnecessary luxury.

Jim Gribbin

As far as wired internet goes, I disagree with your statement that the consumer doesn’t want faster. We do want faster. The providers are the ones claiming the consumer doesn’t need or want it.

The other issue is the price the providers are hitting us for it. We sit here in America and see in the news what subscribers are getting in other countries. I haven’t actually run the numbers, but from what we see in the news, customers in other countries appear to be getting twice the pipe for half the price that we pay in this country. We have even seen a case in the news recently where a community got fed up with the small pipe the local cable provider made available and the town got together and attempted to put together their own. The cable Company successfully sued them and made them stop construction before they could finish it.

I, personally, was ready to cut the pipe at the house and just up my package at AT&T Wireless a little. I have access to a fat pipe at work and just don’t need that much at home. I’m on the road a bunch anyway.

Stacey Higginbotham

Jim, I think some consumers want faster, but ISPs are still able to argue that upgrades aren’t needed without a huge national outcry outside of the tech blogs. I hope we’re getting beyond that point, but if you are thinking you can get away with wireless at home, then that’s a sad state indeed. It means we have failed to show people the value and necessity of wireline broadband, which is why i wrote this post.

guest

Near the White House in DC. Dumped broadband for wireless (no caps) 2 or 3 years ago. Best move ever. Cost not the major factor crappy service offerings more important. Really don’t notice much difference if any from the broadband connection at work so assume I just have a good tower close. Would bite in a second on gig offering like Google fiber. Never going to happen in the nations capital. Disagree that broadband is the web – it really sounded like you are describing wireless potential not something that will never exist.

Stacey Higginbotham

Today, for most people broadband is the web. More and more people view it as a source of TV as well. As I put more connected devices in my house I see it as the glue that keeps my home secured and my music streaming, but I’m a bit of an outlier there. Of course, it’s also my highway to work every morning, but most of my work right now is on the web.

And I have a huge faith in the potential and need for cheap wireless. But I know that will rest on fat and cheap wireline access.

Mark

I am about to dump wireless because it is pretty much useless. I could switch to a vendor with better wireless but then I would be capped which is just switching the problem.

mclars

Not everyone is getting free Google Fiber like you, Stacey. Some of us actually resent paying double for essentially the same service. Also, the electricity analogy is pretty weak. Moving to wireless won’t hurt innovation. Quite the contrary, in fact, as it will spur efficiency and competition. To assume wireless will never surpass wired in overall utility (not just speed) is a bit nearsighted.

Nathan Betzen

mclars, people resenting “paying double for essentially the same service” is literally the point of the column. The fact that wireless and wired are essentially the same service right now is a national embarrassment. Beyond basic monopoly/duopoly collusion, there’s literally no reason why wired services shouldn’t be hundreds of times faster than their wireless brethren.

Stacey Higginbotham

Nathan, you got it. Mclars, I’ve nothing against more and faster wireless, but cellular will never be as cheap or as efficient as wireline for a variety of technical (Shannon’s law) and business reasons. Wi-Fi, might be, but it will still need a wireline connection as backhaul.

John Nemesh

Wireless COULD replace wired connections, especially with high speed LTE being deployed. BUT, you are severely capped on the 2 largest wireless providers…usually to the tune of 2-5 GB per MONTH! So, if you want to watch 3 or 4 movies on Netflix (in HD), you will go over that limit and get charged extra for every bit of data! HORRIBLE.

If you could get an UNLIMITED internet access (with no limits on how many devices connect, either), then, yes, LTE wireless could compete with wired internet service, ESPECIALLY against the aging DSL technology! Until then, it’s a no brainer, wireless is no substitute for a wired connection.

Stacey Higginbotham

John, LTE is not a cheap or efficient way to get wireless access, although it does have it’s place. Plus, if we get gigabit service or even 100 Mbps LTE in urban areas will not be able to compete with those speeds because of it’s technical limits, plus having to share limited spectrum.

realjjj

Your view of wireless is distorted by the current insane pricing. There is no real reason for that kind of pricing and the future is wireless. It doesn’t have to be 4G (most of it anyway) and doesn’t fully exclude wires. What we do need is 1 subscription for unlimited fast data. for all our devices.
As for regulators ,they are equally useless for wired and wireless.
Wired is like TV was some years ago.It is very early given the wireless pricing but those prices should come down and in a sane world ( yeah right) soon and fast .

Stacey Higginbotham

There are real technical constraints around cellular that make it expensive to send data via that channel. So while the pricing is high, I’m not sure it’s all that insane given the way telcos have set up their networks and businesses.

That being said, the idea of ubiquitous Wi-Fi anchored by gigabit networks in the community should change the pricing dynamic for wireless and mean that wireless could become a real default for people. BUT that still requires a wireline connection that’s fast and fat.

Infostack

Stacey, it’s called the law of wireless gravity: http://bit.ly/ZRqwrG. And comparing mobile wireless to high-capacity last mile wired access is like comparing a motorcycle to a mack truck. http://bit.ly/11F7Ais The WSJ article was a plant to move the government towards auctioning more spectrum, even though the carriers can achieve better results with different business models.

Nicholas Paredes

I have been heavily interested in mobile since the 90s and ditched my landlines as CDMA cards became available. Only in the last year did I return to a wired connection, and that was primarily my girlfriend’s doing.

Why I can’t download a movie to a Netflix app is some bizarre construct of two industries that have lacked a clue for quite a long time — the entertainment industry and telecoms. It isn’t lost on people who have been in mobile prior to 2007 that without Apple we would neither have music downloads or smartphones able to access a network outside of a walled garden.

The nightmare will become real.

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