The FCC is going to release a report saying that the current broadband oligopoly is not bringing connections to the American market fast enough. If you’re interested in why, this study of Time-Warner’s spending and profits profits provides some of the answer:
TWC’s revenues from Internet access have soared in the last few years, surging from $2.7 billion in 2006 to $4.5 billion in 2009. Customer numbers have grown, too, from 7.6 million in 2007 to 8.9 million in 2009.
But this growth doesn’t translate into higher bandwidth costs for the company; in fact, bandwidth costs have dropped. TWC spent $164 million on data contracts in 2007, but only $132 million in 2009.
What about investing in its infrastructure? That’s down too as a percentage of revenue. TWC does spend billions each year building and improving its network ($3.2 billion in 2009), but the raw number alone is meaningless; what matters is relative investment, and it has declined even as subscribers increased and revenues surged. “Total CapEx [capital expenses] as a percentage of revenues for the year [2009] was 18.1 percent versus 20.5 percent in 2008,” said the company a few months ago.
In fact, CapEx has declined for the industry as a whole. As the National Broadband Plan noted, the big ISPs invested $48 billion in their networks in 2008 and $40 billion in 2009. (About half of this money can be chalked up to broadband; the rest of the improvements were done to aid cable or phone service.)
To recap: subscribers up, revenues up, bandwidth costs down, infrastructure costs down.
DBrown
Why invest (and waste CEO income) in making better service if they can control the market yet remain free of any real Gov reg’s?
ChrisS
@DBrown:
There is a free market because there are multiple broadband companies, well nationally, not necessarily regionally, but that doesn’t matter. They just, coincidentally mind you, charge about the same amount and provide the same service and features. Besides if you need that much more bandwidth, you’re obviously doing something illegal or immoral, you smut-hunter.
cleek
don’t worry. now that we have the information, we can make smart decisions as consumers.
that’s why i’m switching my broadband from TW to… wait, who is the other cable broadband provider in my area… umm….
nevermind
Earl
Yabut how will this help my satellite ISP DIAF?
It really needs to DIAF…
mai naem
I only have one cable broadband provider in my urban suburb and talking to the tech from the other major player at work, I found out that it’s my city. My assumption is that somebody at the city is somehow getting paid off by my provider to maintain their monopoly in my area. I also happen to live very near a college(within a mile) and still can’t get onto their network . I have a verizon card but truly I don’t think I should need one in my urban city. BTW I also think $45 a month for nothing special broadband is a ripoff.
PurpleGirl
It is the late 1980s, Manhattan below 96th Street has been wired for cable TV for about 20 years but its only for maybe 36 channels. Westchester County is a bit better, maybe another dozen or so channels. The political problems have been sorted out — finally! — and Queens (Brooklyn, the Bronx and Staten Island) is about to get wired for cable. By this time, Time Warner is the company with the franchise and they start the work… with fiber optics. So Queens starts out with more than one hundred channels and friends in Westchester are mad that I have more channels than they do. I don’t remember how long it took TW to rewire Manhattan and wire north of 96th Street. But for a few years the outer boroughs had better cable service.
Shalimar
@mai naem: Better than the $75 a month it cost for a dodgy satellite connection for years and years where I live. It is somewhat better now since the phone company offers a cable modem line for $50 a month. HughesNet is the worst company I have ever had to deal with, terrible service that you have to pay for and a contract you can’t get rid of for 2 years.
Punchy
And to all those states looking to privatize their highways and tollways (stares at Illinois), this is a clairvoyant look at exactly what will be happening to those roads w/r/t maintenance and upgrades….
WereBear
As a Time Warner subscriber, I can testify that they aren’t spending it on customer service. The time before last that I needed tech help, I got some poor woman with a heavy accent who had obviously learned everything by rote; because any questions I had merely started her back at the beginning.
And my other choices are: DSL or dialup. You can’t even load the Internet on dialup any more.
Chrisd
I live in the country, house set back a little from the road. After two years’ worth of monthly mail and phone solicitations from Time Warner for high speed cable (Time Warner now services your area!) I called them to give it a try.
Four bungled site visits and numerous kafkaesque conversations later, I concluded they will not extend coverage to my house. If this is the service they provide to potential new revenue, I can only imagine the crap established customers have to deal with.
Walker
@Chrisd:
Very often they will extend coverage, but you have to pay for that extension.
I have a colleague that lives on the northeast side of Lake Seneca in the Finger Lakes. His house is about a half a mile from the nearest junction. Time Warner has told him that it will cost $20k to get broadband to his house.
To be fair, this is not unlike the cost of other utilities when building a house. But at least those other utilities are regulated, ensuring that they are a better long term investment.
Fleem
We pay $60/month for 3G cellular service with a 5 GB bandwidth cap. This is the best we can do here in the last mile. DSL stops about 1/2 mile away on either side of us. The only hope we have of ever getting real broadband is that the wireless transmission rates will get better. Cable? Nah gah happen. Streaming Netflix? Dream on.
ETA: I have asked Comcast to give us an estimate for extending service to our house — the four other neighbors on our road were all interested in kicking in, we knew it would be in the 10’s of thousands of $. Comcast didn’t even respond.
Chrisd
I can’t even have a discussion with the local Time Warner about paying for the extension. It’s like talking to a brick wall. At this point, I just want the solicitations to stop.
WereBear
The sick part of this “extension of service” problem is that:
It. is. a. wire.
We’re not talking about digging a septic line. It is stringing a wire along existing poles (because you must have electricity already.) What is the big freakin’ deal? No one has ever explained.
D. Mason
As a former Comcrap employee I can possibly provide a little assistance to those of you trying to pay for services to be brought out to rural locations. The trick is to go to your local office, get the the name of anyone you speak to and the tech supervisor then ask to speak with him/her. The tech supervisor should be able to answer all of your questions. If they refuse to let you speak to the sup or said sup can’t answer your questions and work towards an appointment the next question should be for the number of their corporate office. Call corporate and politely explain your experience with names of all you spoke to, be sure to mention that they refused to let you speak to the supervisor if this is the case. If possible have your neighbors do the same. Corporate calls get responses even if it’s like pulling teeth.
cleek
@WereBear:
there are all kinds of reasons, from signal degradation to signal propagation issues.
for example, basic copper-wire ethernet is limited to ~100m spans because the signals can’t propagate down the wire fast enough to keep up with the timing requirements. the way around this is to put repeaters along the wire, but they need power, and a box to live in, etc.. costs money.
fiber can go for tens of km between ports. not sure why they wouldn’t do fiber. cost, probably.
Chrisd
Oh, believe me, I’ve been there. Corporate didn’t follow through on getting back to me about the extension or anything else, for that matter.
However, they were able to cancel my bill for my never-existent service, so there’s that.
I guess I could show up in person with gun or something, but I don’t need streaming Netflix that badly.
Gunner Billy K
Invisible hand…. free market…. braaaiinnnssssss…….
WereBear
@cleek: Thanks for providing an actual answer.
I always suspected it was that most beloved of all corporate issues: that they would not make “enough” money. It might even be true in this case; and then, why not say so?
D. Mason
Assuming this discussion is about standard co-ax instead of fiber here is the deal. Signal is brought out from the cable plant (head-end) on a trunk line which is heavily amplified and at the neighborhood (usually a neighborhood anyway) level it gets split to feeder lines which are amplified throughout the neighborhood. These are the lines you see running along the telephone pole and they feed the taps. The tap is basically a splitter and from the tap comes the drop and – is what runs to your home. All of that was to impress the importance of the following rule. There is a limit to the distance which a cable signal will travel along a co-ax wire (from tap to house its usually about 300 ft). If the wire gets too long or split too many times the signal gets degraded to the point of non-reception and this applies at every level with co-ax instead of fiber(nobody uses fiber drops that I’m aware of). This problem is exacerbated for broadband which requires a much more narrow range of signal strength. Now all of this can be fixed with amplifiers but they’re expensive, time consuming to install above the drop level and the services usually remain spotty on lengthy wiring rigs.
tl;dr: stringing co-ax cable beyond a certain distance is a major PITA for local techs and they don’t see a dime of the profits – call corporate.
D. Mason
If corporate didn’t get the extension done then it’s not “cost effective” and won’t be done until that somehow changes. Sorry bro.
Ump 902a
Check out the percentage increase in customers vs. increase in revenue. Less than 18 percent increase in customers vs. 66 percent increase in revenue. Less expenditure = higher profits and to hell with infrastructure.
Janet Strange
A few years ago, I went to The National Conference for Media Reform(the one in St Louis) and was outside talking to some folks who had been involved with setting up internet service as a city/town publicly owned utility. It had been done in a few places. The monthly cost to users was about $12-15/mo. Which was enough to break even, it didn’t have to be taxpayer subsidized.
This was, of course, in the days of Republican control of Congress, which, of course, passed a law prohibiting such utilities. As I recall. Too lazy to Google around to get a link for that. But I’m pretty sure that’s right.
cmorenc
A similar dynamic played out over the 1920-1940 era with the creation and spread of electric utility services across the country. Private electric companies were interested in profiting from sale of electricity, rather than in extending and improving the electrical grid affordably per se except as it fed their profit potential from revenue. And so broad swaths of more rural and generally poorer sections of the US were still without electricity well into the 30s (in a few places even into the 50s) until federal and quasi-governmental efforts like TVA and area coops got established under Roosevelt’s New Deal. The private utilities (and conservatives and Republicans) of the day fought fiercely against governmental electrification projects in much the same way as private telcos are now, and in general the private telcos are behaving much the same as the electric compaines were back then.
benjoya
not only that, but TW makes these crappy flash ads that crash browsers. they’re all over yahoo and occadsionally BJ. or is it just me?
Perry Como
It was amazing how much better Comcast’s service got when FIOS rolled into my neighborhood.
El Cruzado
@D. Mason: If I’m looking at my installation right, FiOS is precisely that, they drop fiber to your home then convert it to coax in a box. It’s certainly more future proof but I’m sure the fiber splitters and other necessary equipment are not terribly cheap (the cables I know are dirt cheap these days but they are a fraction of the cost).
D. Mason
@El Cruzado: I didn’t work in a market with FiOS but my understanding was that the fiber to co-ax conversion takes place at the tap(leaving the drop and everything inside the home as copper based wiring). If I’m wrong that’s great news for FiOS customers and just more proof to me that Comcast is as dishonest with their employees as they are with their customers.
Tony Alva
Dude,
In the biz for 18 years now and I can say with certainty that nutin’ is going to happen capex wise at any of the big telco’s until stability returns to the economy and capital markets are opened up again. I’ve weathered some large periods of capex freeze in my career at a few different companies, but this one is epic in comparison to all others. The caution these guys are exercising is unprecedented.
Hope you get your FiOS soon!
Tony
burnspbesq
Jeezus H. Krist on a Segway. If that’s what’s going to pass as “analysis” around here, then I’ll stop coming here for anything but pet pictures.
Taking one easily manipulated metric and piling a ton of insupportable inferences on it doesn’t tell any but the ignorant or closed-minded anything worth knowing.
I expect this quality of thought from mclaren. Not from a front-pager.
This is a topic that’s worthy of serious analysis and discussion. Do try to bring some next time.
burnspbesq
@Punchy:
The experience here in SoCal is different. The only roads being maintained are the toll roads.
Comrade Luke
I really wish the gummit would own the lines, leaving the telcos & cable operators to fight over the services they deliver.
And no more cell phone subsidies. The telcos & handset makers are using that to obfuscate their profits. You should be able to buy any phone and use it with any service (once everyone is standardized on LTE).
Catsy
@cleek:
That may have something to do with it, but another possibility is DSL: you can’t do it over fiber. Copper lets them sell all sorts of services. For reason that exceed my understanding, a lot of companies are still mired in the late 90’s and think that DSL is awesome.
arguingwithsignposts
@Catsy:
As someone who had to live with crappy dial-up for four years because the only other option was crappy satellite, I think DSL is the shiznit. (he says as he streams “Capitalism: A love story” on Netflix instant.)
RareSanity
@D. Mason:
If I’m not mistaken FiOS is single-mode fiber from the tap to the house (is it called the NIC in cable parlance?), and coax inside the home. That’s how they deliver the insane bandwidth. It is an almost 100% efficient delivery system.
It’s beautiful really, to a tech geek like me, and thanks to me living in AT&T (formally Bellsouth) country, we will never experience this technology.