Frontier Communications, which mutated from being a decent regional carrier into a debt-laden mess, thanks to Global Crossing, has decided to fall back to the revenue-generating strategy beloved of all duopolies: fucking the customer.
In the town of Mound, MN, they’ve decided that anyone who exceeds 100 GB/month of usage will be charged $100/month. Those exceeding 250 GB will be charged $250/month. By comparison, most broadband providers do not charge by usage, though some (like Comcast) reserve the right to cap users after 250 GB has been reached.
Broadband is a mainly a fixed-cost business, and the variable cost item (Internet access) is getting cheaper, not more expensive. Last year, when Time-Warner tried a similar stunt, analysts had a field day pointing out that Time-Warner’s cost for broadband actually decreased by 12% in the quarter that they were trying to raise prices for “heavy users”.
The problem isn’t the cost of broadband — it’s the telecom and cable companies’ broken business models. As people abandon wired telephones and cable TV, carriers look to broadband to recoup lost revenue by grossly overcharging for their cheapest product. Unfortunately, their broken business model is about to become the nation’s problem, if they can get away with anything like these kinds of prices.
In Hong Kong, where they have real competition, one carrier is offering a gigabit of bandwidth for $26/month. Obviously, the fixed cost in Hong Kong is not the same as Mound, MN. But it can’t be 10X more for 1/100th the bandwidth.
Update: That last point wasn’t clear: I meant to say that the cost of delivering an Internet connection in Minnesota cannot cost ten times more than a connection in Hong Kong, especially when you consider that the Minnesota connection delivers 1/100th of the bandwidth as the one in Hong Kong.
Not just 1gbps, but symmetrical. Fast enough to let other people hit your home web server.
Hope I live long enough to see rural broadband, fuck hughes.net satellite, those fucking fuckers, fuckheads all em fuckers.
Sounds like obama’s fault.
never fear, the free market will work this out. to someone‘s advantage.
somewhat related question. There is at least one 3d party (i.e. not hulu) vendor selling a product that supposedly lets you stream hulu through your Wii. Anyone ever tried this, does it work?
If Obama only rammed through the “public option” this wouldn’t be happening!
Gooooooooo! Free Market!
Ricky-ricky ree! Kick me in the knee!
Ricky-ricky rass! Kick me in the other knee!
Higher costs, worse service, less competition: it’s the American way!
Next thing you know, someone will tell me that we’ve been paying surcharges for many years to pay for increased capacity and reach for broadband internet and other services. But that person will probably be a communist.
Metering BB is another nail in the coffin of free newssites and the like. To lower downlink amounts, people will turn off java and images in their browsers and there goes most of the ads. Be interesting to see who uses the most bandwidth in my house. Probably the teenaged WoW player(s) whose grades have flatlined.
I just sent an email to whitehouse dot gov complaining about private companies using access to broadband to make more money for themselves. I said that the broadband and the net should be public utilities and we all need readily available access.
One small voice. But maybe the small voices will add up.
Frontier is in the process of buying much of Verizon’s Fios network which will burden them with even more debt. And yes there is competition with Comcast and Verizon offering the same services. I don’t see how Frontier can survive in that environment.
@Mike Kay: If it is Obama’s fault, where is Rahm’s stubby missing fingerprint?
This wouldn’t be happening if we only elected john edwards!
Pigs & Spiders
This is actually going to be one of the more interesting battles of 2010 if for no other reason than that most of the people who care about it are of the internet ilk who are less prone to believing the rhetoric and bullshit. The big telecoms are so fucking scared of becoming a utility that they are going to try EVERYTHING to be able to continue to charge us hundreds of dollars a month for three services as opposed to 40 or 50 bucks a month for one. I’m hoping FCC chairman Julius Genachowski is as sly as people say that he is.
@jibeaux: I use PlayOn and enjoy it. They allow third party modules as well, so I can get South Park, CSPAN, and TED TV.
Nonsense. There’s the variable cost of quickly inflating investor expectations. Not to mention bloated C-level salaries. Talent like that doesn’t come cheap.
I think you need to switch the ordering in the second to last sentence.
Also, with Hong Kong’s incredible density – which in practice is a lot higher than the gross number listed at Wikipedia – I wouldn’t be surprised if the infrastructure costs are radically lower than in Minnesota. Last mile costs are significant, and laying dozens of strands to a 500 unit apartment block is going to be cheaper than laying 2 strands to 500 single-family homes. And it’s a lot easier to switch out a transmitter card or a whole router for a higher bandwidth model when it’s in the basement of an apartment block instead of at 500 different homes.
ETA: I’m not defending Frontier’s gouging; just pointing out a side-effect of America’s built environment.
If you want to stop abuse like this, donate to jane hamsher’s Accountability Now PAC!
She’ll hold them accountable.
This really hurts our national epeen
@Mike Kay: Let’s talk about helping and not helping. That last comment? Not helping.
Ditto Re: Wildblue…
Global Crossing acquired the original Frontier, but sold the name, not the assets, to Citizen’s Communication Company in 2008 or so..I’m not sure there is any current connection with Global.
@Zifnab25: oh, stop with the hippie punching, will ya. Jane runs an excellent results oriented PAC. You should put your money where you mouth is and donate, now.
OT: It’s going to be funny seeing the Teahadists start defending Goldman Sachs against the Kenyan communist menace.
SEC Slaps Goldman With Civil Fraud Complaint
Just imagine how much broadband would cost if Al Gore had gotten his grubby mitts on it. (Dial Up should be good enough for the plebes.)
Gubmint – hands off our intertubes!!!
There’s a broadband site for the gov’t. You can send them an email. It’s a good site. This is the feds trying to work out bradband for all of the country.
The US is way behind in internet access and cost of it. But, Michael Moore is still fat.
The marginal cost to run the net to a rural residence in Montana may be more than in Hong Kong, but it certainly is not more in downtown Chicago, where my brother in a high rise condo in a city crawling with tunnels between buildings can’t get better broadband than I can in Suburban North Carolina. Its all about the competition, and there is none.
At the risk of being the bad guy, I have to disagree with something here – the price of delivery isn’t 1:1 with the price of bandwidth. It’s true that these companies’ upstream bandwidth is continually getting cheaper, but they still have limited infrastructure to deliver bandwidth to the end customer – Comcast may have 100Gbps upstream bandwidth (..or something..), but a cable plant can only deliver 20Mbps or so to a neighborhood to share amongst subscribers. The real problem is shitty last-mile delivery and infrastructure, which desperately needs an upgrade.
That said, I agree with the sentiment here – broadband providers have been immensely shady of late in how they handle their heavy-usage subscribers (randomly inserting clauses into the TOS, blatantly false ‘unlimited’ plans that aren’t, throttling and choking certain traffic based on protocol, etc.). I work for a small ISP, and we recognize that if a neighborhood is being choked because someone is using the service that we sold them to its full extent, it is OUR problem, not theirs.
As for Hong Kong’s relatively cheap broadband, it’s more due to sheer population density – it’s far easier and cheaper to deliver high speeds in densely-packed urban environments than to sparse rural areas. That’s why the US has such crappy rates of broadband penetration compared to the rest of the developed world.
Edit: PeakVT explained the last bit about density very well above.
OT sorta – but Game. On.
The SEC charges against Goldman are awesome! Time to bring on Financial Regulatory Reform. Go on, Republicans. Show us how bad it is to reform our financial system. Go on! Stand with the bankstas!
Quick question here. How would this affect MMO gamers? I’ve played CoH and just got addicted to WoW, and play both obsessively. What sort of bandwith would that use?
SEC sues Goldman.
BJ commentariat demands streaming video of Cole’s happy dance.
@burnspbesq: This law suit is obviously a trick by Rahm to cover up goldman’s crimes.
Pass the popcorn. This is going to be good. It’s possible that we may witness Mitch McConnell’s missing lips reappear in Jamie Dimon’s rectum. Eww.
How are you doing this comparison? I see a capacity limit in MN versus a throughput cost in Hong Kong… (I’m not objecting–just asking.)
@RSA: It’s a DSL service, so it probably tops out at 6 Mbps or so. If anything, 1/100th the bandwidth is being generous.
If you want to see Goldman’s stock shit the bed in real time, click here.
Down around 12%.
I want to second the comments made by PeakVT. Not too long ago I was heavily involved in analyzing different broadband models across the globe. Verizon’s FIOS cost between $1000-2500 per home, and the payback period was long (8-12 years). In a dense metro like Hong Kong, cost per subscriber was only $300 or so (payback period was still kinda long tho, because of their revenue multiplier). For Frontier, who’s probably using an FTTN architecture, the cost was half that of FIOS, but trickier to get working with the creaky old copper plant (and had a shorter lifecycle too). Plus, moore’s law doesn’t help much, because electronics are only a small portion of the entire cost equation.
Bottom line: Deploying broadband is a capital and labor intensive investment with long payback periods. The business case, especially in rural areas, isn’t a cakewalk. Yes, their are oligarchic pricing practices, and yes, the telcos business models are being threatened. But all that means is that the investment question becomes even more uncertain, because the opportunity for cross-subsidization is getting dimmer.
The reality is that a heavy user consumes a vastly larger proportion of an infrastructure which is truly very expensive. The routers in the network are huge and costly, and every one of those 250 GB goes through a large number of them. The demand that a 250 GB pig should pay the same as someone using a millionth of the bandwidth is idiocy. Cisco loves to try to convince all of you that this idiocy is “fair”, because if enough of you believe it, then it forces Cisco’s customers (the broadband suppliers) to give Cisco billions of dollars to buy more routers.
I wrote a bunch of rant-y garbage below, but you should check out this site to see how crappy internet access is. I just hit it and stared at it for a little while, finding myself a bit angered and annoyed at how bad service is in much of Chicago, even wealthy areas, and how horrible service is in a lot of the low income areas of Chicago and, especially in low income areas downstate illinois.
Like so many things in our country right now, our telecom policy in general is completely broken. Rather than making things better, deregulation has made things worse. New competition didn’t really materialize, except as scams, and then consolidation waves started hitting.
We need more competitors in the industries that make up telecom, and we need a better regulatory framework.
With the internet, the network neutrality principle has to be protected, and we need to push the telecoms to make faster network speeds available. There needs to be a push for faster speeds and for expanded access. According to one link that I found, the US is 28th in average internet speed (ironically, I couldn’t pull the site up because it was downloading too slowly). This site shows that most of the country averages less than 6 MBPS, while a few places (Cali, much of the northeast (NY, PA, VA, MD, MA, CN, RI, NH, NJ) and, oddly, Georgia are in the 6 – 10 range. The only state that averages over 10 is the small, bank heavy Delaware. And, I’d be willing to bet that huge swaths of the country don’t even hit 1 mbps, be it in inner cities or in rural areas. I’ll bet that wealthier areas of cities and suburbs keep a lot of states from dipping into the sub 768mbps (would that be kbps, actually? i’m not a big enough tech geek to know, but I know slow) range. Sure enough, if you zoom in on your state, or zip code, you’ll see that access speeds are much more limited in many places. Even in my wealthy Chicago zip code, our average is still only 6-10 mbps.
Most of Europe and East Asia kick our butts in speeds.
We also need a huge bump up in wireless internet speeds and access. Communities were going to try to start building their own city-wide wifi networks back a while ago, but it seems that never really went anywhere. I’d bet that the telecoms lobbied to kill the effort. Which is a shame, especially for people in poor, underserved areas that need access most. In this day and age of netbooks, cheap, community wide wifi would do a ton to bridge the digital divide.
Cable television service needs a swift kick in the behind. The current package system is probably what most people would want if given a choice to pick that vs ‘a la carte’ (bear with me on this) because the rates charged for each given station is much lower when all cable customers have to buy it, sharing the cost across all cable buying households, than it would be if one bought a la carte – you’d probably be in a situation where you were buying the full package pretty quickly due to the lower overall cost. But, for those of us who only want a few channels, that may not be a bad thing. Plus, we could quit subsidizing crappy religious channels and various other dreck. Maybe some of those channels would go out of business if forced to actually compete. (Cable television is a huge quasi so shallist enterprise in many ways. Not for the consumer, but for the content providers). I’d love to kick Fox off my tv and stop supporting them. But more cable providers and the opportunity to at least select a la carte channel selection would be a big improvement.
Cellular phone service is the worst though. Our rates are insanely high, service is extremely bad, and the cellular phone cartel keeps sticking it to us. The Cell phone companies need to be broken up and the regulations need to be totally rewritten. There’s no reason for phone and data plans to cost as much as they do. There’s no reason to have these obscene 2 year contracts with huge penalties. You don’t see that elsewhere. You can always change companies elsewhere in the world.
But Net Neutrality will make the telecoms suffer and stifle innovation, so yeah!
I agree that fiber infra is expensive, but it’s a sunk cost for cable operators, and pretty close to a sunk cost for DSL operators like Frontier. Yes, Frontier’s copper plant has a shorter lifecycle, but in many neighborhoods here in Rochester, especially the ‘burbs, they need to do nothing to the last mile to add a DSL connection ($20-40/mo) to an account. (I realize they need equipment in the home and at the CO, but still it isn’t that expensive, and payback is quick.)
@Steve Finlay: I’m sure there are some upgrades to the providers in-house routing equipment, but the big expense is the last mile, and technology there hasn’t changed for years for Frontier.
DB Main @ 36 and Steve Finley @ 37 get it right.
I can’t tell if Kryptik @ 39 is being ironic; but anyway, this issue (tiered cost of service) has nothing to do with net neutrality. Completely unrelated.
I’d also like to gently point out to our host that cable infrastructure in Mound, Minnesota is vulnerable to this thing called “winter” that has no equivalent in Hong Kong. John, have you ever seen an ice storm in the upper MidWest?
Thanks for the clarification.
Hughes Communication, one of the major satellite providers, caps the amount you can use per day at a different amount depending on which plan you buy. Even the best plan they have only gives you something like 4 hours of high-speed downloads in a day, and if you exceed your limit they shut you out of the internet completely for 24 hours. Which really sucks for those of us who play 24/7 internet games.
I don’t download a tremendous amount so I only hit the limit a few times, but it really sucks when you find alot of music you want and you have to ration the dowlonads over a 7-day period to get it all because there is a daily limit. It also makes it impossible to buy and download games over the internet since the files are too big. Which is why I no longer have HughesNet.
It will have almost no effect. MMOs are designed to transmit very little data and tolerate extremely bad latencies. WoW can handle 1 second latencies. This means you can yank out your network cord, plug it back in, and barely notice it.
They can do this because a lot of data is cached in the client program. The problem is for streaming video and other media that is not already on your computer.
I’m not going to defend the telcos toooo much, as one reason why I was analyzing broadband (and other technologies) was to convince them that they had better do some investing in new and different stuff to protect themselves once their business model was broken. Most didn’t listen, and got even more fat and stupid selling second dial-up lines. (Actually, Rochester Tel – what Frontier used to be called – was always one of the early adopters).
What you say is true — if they’re not getting into triple play. If all they are doing is adding DSL to their voice copper plant, the incremental electronics cost is maybe $100. Most incremental expense is probably the truck roll to connect up the house. Depending on the work force, a truck roll could cost as much as $300 (don’t ask).
But this doesn’t apply if they’re getting into a triple play, or trying to offer sustainable 3MB+ service in the suburbs. If that’s the case, they’re out laying cable/fiber, and more labor costs come into play.
PlayOn is the one that I found. It’s legal and all that, right?
FYI, Mound isn’t particularly a ‘sparse rural area’, more a place for executives to build their two-million-dollar lakeshore estates. It’s about 25 minutes west of downtown Minneapolis and located between a few bays of Lake Minnetonka. Very ritzy area, maybe with some less-ritzy homes, but the cable provider is the only “frontier” around there. I don’t know if Qwest’s fiber network has reached the area yet, but if not, they soon will be, so Frontier is really grabbing at straws with this move. Obviously they think they can soak the Richie Riches because of the location, and equally obviously they are vastly unfamiliar with the mentality of the citizens of the Lake Minnetonka area, who did not amass their wealth by spending $100 on bandwidth overage fees.
The Invisible Hand goes fap fap fap!
Comcast tried doing this where I live. They increased the broadband fee by about 25% per month and claimed that they had accelerated their network. What I saw was a network slower than ever. So I switched to Verizon (DSL, not even FIOS).
See, I pay ~$90 a month for unlimited broadband on my phone, plus ~$50 for unlimited broadband for my home internet, but probably only download 100-500 mb per month.
Although that will change once I get the new blue ray player with netflix and pandora hooked up. Which is what the telecoms are looking to cash in on.
I’ll have to pay them for my unlimited broadband until I actually start using lots of bandwidth – at which point the the rug is pulled out from under you and they cash in. Nice game.
WoW seems to be pretty efficient in terms of bandwidth usage. 3+ hours of raiding and ventrilo generally use up 100MB or so. And I wouldn’t be surprised if about 1/2 of that is vent. I guess this isn’t really a surprise because it’s playable (sort of) over dialup.
I know this because I’m out in the sticks, and have to use Verizon 3G for my broadband. It’s not horrible performance-wise (600Kb/sec to 2Mb/sec, 150-200 ms ping), but it _is_ capped at 5GB/month, with a $50/GB charge after that. So I monitor it and fall back on my cell phone’s data plan if I use up too much.
edit: and I see that [email protected] beat me to it. Refresh fail.
I work with the kind of FTTX (Fiber to the X, where X can be the Home, Curb, Node, Desktop, Cell Site, or a variety of other places) technology being discussed here, though more in a technical capacity than a sales/purchasing capacity, so I don’t have super-accurate numbers to talk financials. However, I can add a few comments in this regard.
First, I remember hearing that it costs something in the range of $2000 per every foot of fiber optic cable run in terms of cable, equipment usage, and personnel costs. When you’re running a bundle of fibers, it’s not so bad, but when you’re running individual fibers for homes you can see how things might get expensive. This is why population density makes it much easier to deploy high-speed networks… the bundle of fibers to a high-rise costs a similar amount to deploy as a single fiber to an individual home, but serves a lot more customers.
The most common technology used for FTTX in the market today is GPON, which delivers 2.5 Gbps of overall traffic downstream. This bandwidth must be shared between up to (typically) 32 users, and the end nodes (the users, if you will) have to share the upstream bandwidth and thus have time windows which dictate when they can send traffic upstream (so while theoretically it’s symmetrical, the process of splitting the upstream traffic ends up being asymmetrical). When you add in the data requirements of IPTV solutions (between 1 and 4 Mbps for standard def, and figure 8-10 Mbps for HDTV per active channel depending on the TV equipment being used by the provider), and you have to be able to provide enough bandwidth to users so they can watch a couple of TV channels without killing their internet connection or downloading torrents without screwing with their TV (easy enough to keep one from interfering with the other, but you have to think of them as separate logical connections). VoIP is relatively negligible in terms of bandwidth use, so I’m not including it here.
Keeping in mind that it’s cheaper to stick as many users onto the splitting node as possible, you can figure that there is a maximum theoretical bandwidth of just under 80 Mbps per user. You have to sell service in packages (configuration is easy enough to do, but it would be a nightmare if everyone could select the individual technical aspects of their connections), so you have to assume on any given fiber you’re going to have multiple HDTVs (assume 2 or 3), a broadband internet connection (my provider offers up to 18Mbps), and the overhead traffic to keep everything flowing smoothly. This means that you’re looking at a requirement of up to 40-50 Mbps if you’re doling out your downstream bandwidth evenly, which doesn’t leave a whole lot of growth capacity. Throw in some businesses who would like to have higher-speed data connections, and it lowers the overall bandwidth that can be shared amongst everyone else.
These are just some of the aspects of planning that go into handling a large fiber network. Equipment costs for the actual equipment that connects to the fiber is generally broken down into a Cost Per Port basis, which I want to say is about $250/user (might be as high as $500), though like I said I’m a tech so I don’t get to crunch those numbers) in terms of the the stuff at the provider’s office, plus whatever end-user devices they have for you to plug into at your home. Add in subscription fees for IPTV setups and high-speed upstream networks, and it can get expensive very quickly.
For rural telecoms (and there are a LOT of rural telecoms), they can get assistance with the costs through the Rural Utility Service commission. There are a lot of small towns and cities around the country rolling out FTTH projects with the assistance of the RUS and their grants. There are a lot of hurdles to jump through for that, but it’s still there to help alleviate a lot of the costs.
Just some things to think about in this discussion.
Dude… in DOWNTOWN SAN FRANCISCO, I am unable to get a home internet connection that is CAPABLE of exceeding 250 gb in a month. That’s around 360 megabytes per hour, or around 1 megabit per second, sustained, 24/7, every day for the entire month.
My choices are 1.5 megabit DSL, which actually caps out at about 1.2 megabits and certainly can’t sustain that 24/7, or cable modem, which does not work in my apartment building due to old wiring on my street. The next street over gets it, and my friend up there says that they are wildly oversubscribed, such that during the day they get 6 or 7 megabits and at night they are lucky if they get one tenth that.
If our biggest problem in this country was that people were being charged $250/month if they exceeded a sustained speed of 1 megabit per second for an entire month, that would be no bad thing: it would imply that they were actually getting high-speed internet service at all, and then we could argue about prices.
BTW, I assume you know why this is: businesses in San Francisco are willing to pay $400/month for 1.5 megabit T1s, in droves. Some even spend $5000/month on a 45 megabit T3. And the customer pays all the setup costs, too, and it costs AT&T a few bucks a month to actually provide the service. I know small office buildings that make AT&T over a million dollars annually.
Basically, these lines are pure profit. Why would it want to instead provide $50/month service to a few hundred thousand people, when each of those lines costs AT&T about the same as a T1 to run? (Or, in the case of the faster DSL, MORE than a T1?) Since, of course, they couldn’t stop businesses from getting these new lines. (At least not in California, with the utility board.)
1Gbps ( in the linked article) is 1 gigabit per second. That is the rate at which data can flow through the pipe to the computer. Which is about 125 megabytes per second (1 byte = 8 bits). The 100GB (gigabytes) per month refers to an amount.
I don’t really think you can compare a rate to an amount. It’s like saying my car can travel 200 miles per hour in Hong Kong, but they only let me drive 100 miles each month in Minnesota. This tells me nothing about how far they will let me drive each month in Hong Kong.
@PeakVT: This is absolutely the case, so let’s look at something that is at least in the same realm of comparison.
Hong Kong: Population 1.3m. Population Density: 16390/km2
Median household income: $31,000
San Francisco: Population 800k. Population Density: 6688/km2
Median household income: $75000
San Francisco is a third as dense as Hong Kong, but more than twice as wealthy, and has a nearly equivalent number of people. The average home broadband speed in San Francisco is almost certainly in the 1.5 megabit area: the speed test referenced above claims much higher speeds, but there are lots of high-tech companies in San Francisco and I am certain that the averages were skewed by people connecting via their employer’s T3 and/or the relatively cheap 100 megabit connections that are available in lots of the large office buildings, but which are not available to normal human beings (or businesses in smaller buildings for that matter). Comcast is available in some areas, but is totally hit-or-miss: some places the average speed of Comcast in the evenings is well below 1 mbps. Plus Comcast is pure evil.
There are huge swathes of San Francisco that don’t qualify for DSL faster than 1.5 or even 0.7 megabits, because they are upwards of a mile from the CO and most of the telephone wiring hasn’t been replaced since it was originally put in. The place I live now is less than 4000 feet from the financial district, but is more than 5000 feet from a CO. The place I’m moving to is in a very busy, very built-up neighborhood, and is over 8000 feet from its CO. My current place, because of lousy, ancient underground wiring, only qualifies for 1.5 mbps service, and that drops out on average about once every half an hour (for around a minute). I shudder to think what the options and service will be like at my new place.
To put that in perspective, 8000 feet is about one quarter of the entire width (and also length) of San Francisco.
Being a business hub, Hong Kong may be able to subsidize private users somehow, and you don’t remark on what the law is there as opposed to here or in Mound, or the differences in access and existing ‘pipe’ that is used or unused by it’s customers.
It could very well cost 10x more in outlay to have set up access in Mound than to EXTEND access in Hong Kong.
Thanks. My wife would kill me if I spend more on my little hobby than she thinks is appropriate.
I just need to convince her now to let me spend 25 bucks on a pixelated horse.