Comcast Shows Moore's Law Applies in Internet Access Business

Comcast has been doubling the capacity of its access network every 18 months, precisely what one would expect from any product based on Moore’s Law.

The latest move is an upgrade of the entire Comcast residential footprint to 1 Gbps by the end of 2015, with 2 Gbps service available to about 86 percent of locations.

The thing about Moore’s Law, and any product built in part on Moore’s Law, is that the benefits flow broadly across the full range of use cases, and are not restricted to the headline improvements.

In other words, the fact that a given level of memory or processing doubles, but can be purchased at the same price, also means performance and price relationships are enhanced across the full range of processors and memory, below the headline figure.

That is the case for Comcast’s Internet access services, not scheduled to be upgraded to 1 Gbps across the full footprint, while 86 percent of locations are upgraded to a symmetrical 2 Gbps capability, by the end of 2015.

Though the “headline” is the boost in top marketed speeds to 2 Gbps, most consumers will  benefit because the speeds they actually buy are boosted, for no extra price.

That, more than the upgrade to 1 Gbps or 2 Gbps, symmetrical, is where the impact mostly will occur.

Comcast is launching “Extreme 250,” a new 250 Mbps Internet speed tier for California customers, but also boosting the “Performance” tier from 50 Mbps to 75 Mbps and its Blast tier from 105 Mbps to 150 Mbps, both at no additional cost to customers.  These changes will go into effect starting in May 2015.

Oddly enough, most consumers will not be able to detect the changes, the simple reason being that, beyond about 10 Mbps to 15 Mbps per user, the fundamental constraints on experience lie with the far-end servers, not the local access pipe.

Gigabit speeds will not--by itself--improve user experience, in other words.  After about 10 Mbps, no single user is likely to see much improvement, if at all, in page load times, for example.

The U.S. Federal Communications Commission and U.K. Ofcom agree: beyond 10 Mbps per user, experience is not measurably improved--if at all--by faster Internet access speeds.

Instead, latency is becoming the key experience limitation.

Still, the primary “benefits” of gigabit or 2 Gbps speeds will be “seen” (in terms of marketing message) at the lower speed tiers up to 150 Mbps, which users will get at no extra charge, and which are the tiers of service most people now buy.

That is as much a Moore’s Law impact as the headline speed.  

Cut Fees to Spur Investment, India's Telecom Regulatory Authority Says

Lower the price of some desired product and consumer will buy more; raise the prices and consumers will buy less. That is the economic logic behind zero rating of apps and government taxation and fee policies as well.

So barring zero rating and sponsored apps will reduce demand and usage of the Internet. Likewise, limiting licensing fees for fixed network infrastructure will spur investment in facilities.

In fact, lower prices undoubtedly already have boosted high speed access adoption in India. Entry level tariffs for broadband services have dropped “drastically” (an order of magnitude, or 10 times) from Rs. 1500 per month (US$24) in 2004 to around Rs.500 a month (US$8) in 2014.

Most service providers charge a monthly rental between Rs.200 (US$3) to Rs.1600 (US$26) for a broadband connection (depending on speed), TRAI says.

In an effort to spur adoption by customers and investment by suppliers, the Telecom Regulatory Authority of India has asked the government to exempt fixed line broadband service from license fees for at least five years. That would have the effect of stimulating consumption by enabling lower prices.

But there are other obstacles as well. In a discussion of delivering broadband quickly, TRAI noted that “right of way” charges are the “single biggest impediment to the adoption of wire line technology for access networks.”

Also, “civic authorities have imposed stringent punishment on the erection of towers.”

In other cases, the time required to process applications is an issue. “Procurement of satellite capacity on foreign satellites through Department of Space (DoS) often results in long delay and increase in prices due to some process flaws,” said TRAI.

Similar bureaucratic issues surround the Bharat Braodband Network Limited (BBNL), the entity  set up by the Government of India to create a National Optical Fibre Network (NOFN).

TRAI also recommends allowing cable TV operators to provide high speed access. There are some 97 million Indian homes connected to cable TV networks, and a great proportion of those homes are in rural areas most in need of high speed access.

Perhaps 24 million of those homes are served by networks capable of supporting data services, TRAI estimates. It is possible the incremental cost of upgrading for 50 Mbps could be as low as Rs. 12,500 (US$200).

At least at the margin, the costs of deploying fixed network infrastructure are aided if licenses, permits and other processes are streamlined.

The "cost of laying fiber in some cities is as high as Rs 1.92 crore (about US$308,000 million per kilometer or $493,000 per mile) for a kilometer apart from cost of fiber,” said TRAI Chairman Rahul Khullar. “The fiber itself costs Rs 65,000 a kilometer (about US$1039 per kilometer, or $1662 per mile).”

“This issue needs to be resolved otherwise who will lay fiber," Khullar said.

source: TRAI

source: TRAI

Verizon Probably Looked North to Create Custom TV

The new Verizon Custom TV bundle, allowing FiOS customers to buy a simple, affordable 35-channel service, with the option to add on theme packs of channels for about $10 each, is a clear reaction to market demand for less-costly, more customized ways to buy entertainment video.

But the new Custom TV, similar in many ways to Sling TV and other over the top packages yet to come, most resembles a “pick and pay” model instituted in Canada.

Cable TV channel unbundling--though not complete unbundling--is coming to the Canadian market. By the end of 2016, subscription TV customers in Canada will be able to buy many channels they want, one by one or in small packages, the Canadian Radio-Television and Communications Commission has ruled.

By the end of 2016, TV subscribers will have the option to add those networks to a “skinny” basic cable package that will cost no more than $25 a month. But consumers can buy a traditional bundle of channels if they choose.

Distributors must have the “skinny” basic service announced Thursday in place by March, 2016.

That tier must include all local and regional stations, public interest channels such as the Aboriginal Peoples Television Network (APTN), education and community channels, plus provincial legislature networks.

If distributors wish, they can add national over-the-air stations such as CTV, City and Global, or U.S. networks ABC, CBS, NBC, FOX and PBS. But they cannot raise the price beyond $25 a month.

By December of 2016, other channels must be available a la carte. But those channels also can be sold in a small bundle of perhaps five or 10 channels, which might be built by the viewer or the distributor.

After TV White Spaces, Now Citizens Broadband Radio Service

The Federal Communications Commission has voted to approve a historic spectrum sharing plan in the 3.55 to 3.7 GHz band, creating at new 150-MHz block of spectrum available for shared use by licensed government users as well as commercial entities expected to include mobile service providers, Internet app and service providers.

The plan is the second major initiative undertaken by the Commission to support shared access to spectrum by commercial and government users.

The TV White Spaces initiative was the first to use spectrum sensing techniques to avoid interference between licensed users and occupants of TV White Spaces bands.

But the new Citizens Broadband Radio Service is the first ever to use a single block of spectrum to support multiple classes of users.

That is important for a number of reasons, not least of which is that it speeds the process of commercializing more Internet and mobile spectrum, at vastly lower cost than the older method of clearing existing users and relocating them elsewhere.

In creating the new “Citizens Broadband Radio Service,” the FCC will enable a new three-tiered commercial radio service that expands the amount of spectrum available for commercial Internet and mobile purposes, while saving the time and expense of relocating existing licensed users.

Under the plan, expected to provide a model for sharing in other spectrum bands, the licensed users will be protected from interference, and have priority use of the frequencies.

But two new categories of users will be created. The “General Authorized Access” tier will allow any user with a certified device to operate without seeking any further Commission approval, will permit low-cost entry into the band, similar to unlicensed uses such as Wi-Fi.

For service and app providers with greater requirements for quality of service, a “Priority Access” tier will offer geographically targeted, short-term priority rights to a portion of the band, available through future spectrum auctions.

One ormore spectrum access systems, operated by private commercial entities, will facilitate coexistence among the different user tiers. That is expected to be modeled on the use of access databases developed to support TV White Spaces.

Antitrust Lawyers Lean Towards Blocking Comcast Acquisition of Time Warner Cable

Staff attorneys at the Justice Department’s antitrust division are nearing a recommendation to block Comcast Corp.’s bid to buy Time Warner Cable Inc., according to Bloomberg. At least initially, many observers believed the deal would be approved, in large part because the relevant market was deemed to be “linear video.”

Comcast said it would divest enough video customers to keep the company’s share of the national market at or below the 30-percent threshold historically applied by antitrust authorities.

The problem, others pointed out, is that video increasingly is not the relevant market. That would be market share in the high speed access market, where a combined Comcast and Time Warner Cable would have about 40 percent share of the high speed access market, and an incomparably high share of faster speed connections, even before Comcast upgrades all U.S. locations to a gigabit.

If the Comcast acquisition were allowed, Comcast would have more than 57 percent market share of all U.S. high speed access connections operating at 25 Mbps or faster.

Looking only at homes able to buy gigabit high speed access, Comcast would, at more than 21 million locations, vastly outstrip all other gigabit providers put together. If one assumes that networks capable of a gigabit, supplied by all other competitors, could soon pass half a million U.S. homes, Comcast would represent 98 percent of all connections.

That is likely to be too great a degree of concentration for antitrust lawyers.

50th Anniversary of Moore's Law (Which Shockingly Applies to Internet Access Bandwidth)

April 19, 2015 is the 50th anniversary of the publication of an article by Gordon Moore about chip densities that later became what we call “Moore's Law.”

Roughly, the principle has been that chip densities double about every 18 months to 24 months. That has meant the cost of any fixed amount of computing or storage declines by roughly half over that same period of time.

Little noticed, by most aside from Reed Hastings, Netflix CEO, is that Internet access speeds follow a development curve nearly as robust as Moore’s Law does in the computing appliance and processor space.

In other words, access bandwidth nearly doubles about every 24 months.

Logic seemingly would suggest that is unlikely. Communications networks--especially those of the fixed variety--are expensive construction projects.

Such networks also are subject to local, state and national regulations, interest rates, economic conditions, changes in tax laws and changes in demand curves, all of which should slow rates of change, compared to rates of change for semiconductor products that follow Moore’s Law.

Shockingly, then, some studies have shown that even on twisted-pair copper telephone networks, speed doubled about every 1.9 years.

Other studies show similar results: some say an Edholm's Law shows that Internet access bandwidth does increase as Moore’s Law would predict.

That rate of increase of Internet access bandwidth is why some of us have been sure that consumer access bandwidths in the U.S. market, for example, would reach gigabit speeds, widely, by perhaps 2020.

That is a simple extrapolation of trends that have been in place for decades.

To reemphasize the point, between 1984 and 2013, fixed access network speeds have grown nearly as fast as Moore’s Law would suggest, as crazy as that sounds, knowing the physical nature of access networks, which are construction projects, not software apps.

Some might argue that mobile bandwidth will not scale as fast as fixed network bandwidth. Some of us believe that is wrong, and that mobile bandwidth has, an will, increase at the fixed network rates.

Consider that the coming fifth generation mobile network standard calls for 10 Gbps per end user. At that point, mobile networks will for the first time be functionally the equivalent of fixed networks, in terms of peak speed or average speed.

Still, the data is stubborn and clear: Internet access bandwidth has grown about 50 percent annually since 1984.

"No Business Model" Problem Migrates from Rural to Urban Areas

Among the fundamental problem for communications service providers and policymakers looking at services in rural areas is that there essentially “is no market.” That is to say, the number and density of potential customers is insufficient to drive revenue, while the higher cost of building plant means the hurdle rates for standard investment are lacking.

There is, simply, “no business model.” So, historically, communications services in rural areas are subsidized, both in terms of capital and operating costs.

We are seeing new versions of that issue, but relating to gigabit Internet access, even in downtown cores of smaller communities without a huge enterprise or mid-market firm presence.  

In many cases, even potential small fiber networks involving only 20 miles of plant are deemed uneconomic. In a growing number of cases, municipalities are looking for ways to subsidize such municipal networks on their own.

When no commercial suppliers (independent Internet service providers, competitive local exchange carriers and others) either cannot construct a viable business model, or can do so, but cannot secure capital to do so, municipal networks might be the best choice for fast action.

The emerging model seems to involve municipalities contributing assets (conduit, access, permitting) but not running the networks or providing taxpayer funding.

Cost control also appears to be among the potential success factors. If conventional business models do not work, and capital costs can only be reduced so much (by governments contributing conduit, for example), then operating costs must be tightly controlled.