Some truth about Comcast - WikiLeaks style

Mailman List Mirror (Read Only)
1

George Bonser wrote:

What would any provider think if a city said "sure, you can have access
to our residents' eyeballs. It will cost you $5 per subscriber per month".
Would Comcast or anyone go for that?

Dave Temkin wrote:

These are exactly what Franchise Agreements are for. Yes, cities charge
MSOs and LECs for access all the time.

I've been lurking on this thread for awhile, but I feel a need to weigh
in here. There are some critical distinctions between a city imposing
conditions on access to its property and a telecommunications company
imposing conditions on access to its network. There are also some
important limitations to the cases in which cities can indeed impose any
access restrictions, which prompt the question of why parallel policy
limitations do not necessarily apply to last-mile companies.

First, the justification for cities requiring things of companies in
order to gain access to the local market are grounded in practical and
policy considerations. On a very concrete level, putting wires in the
ground requires permission from the city for rights-of-way (and such
activities have genuine costs for the city). This permission comes in
the form of the "Franchise Agreements" that Dave refers to. From a
policy perspective, the city has an interest in ensuring that it gets
the greatest value for its citizens out of the valuable last-mile
concessions it grants to private parties. Historically, this meant that
last-mile rights-of-way were a hook for enforcing customer service
requirements, disciplining pricing, ensuring universal service, and
supporting diversity of programming and "public access." Negotiating
these terms with each municipality was the price that companies had to
pay for monopoly access to local markets. What I think George's comment
does not completely appreciate is that (ideally) cities are imposing
such requirements at the behest of and for the benefit of the (local)
public, whereas private constraints on local access are (by design)
motivated by profit.

Now, all of these requirements apply to providers of cable video content
under the terms of the Cable Act of 1984 (which created a new Title in
the Communications Act). None of them applied to LECs, which
traditionally had a blanket permission to build out for their
telecommunications services. The exception is for LECs that have started
to offer video services. In that case, the same requirements kick in
(for the video portion of those services). The exception to THAT is for
states in which the LECs have successfully lobbied the state government
to give them a blanket license to deploy video services statewide
without negotiating locally (Michigan, for example, as opposed to
Massachusetts). Whether or not you think such statewide agreements are
a good thing tends to be a funciton of who you represent. In any event,
the FCC has also further weakened localities' ability to impose
requirements on even the video portion of these services (22 FCC Rcd.
5101 and 22 FCC Rcd. 19633).

Importantly, for the NANOG crowd, none of these local controls applies to
the broadband portion of such services. This all goes back to our
artificially siloed Communications Act and some decisions made by the
FCC almost a decade ago. The 2002 Cable Modem Order said that
localities had no power to exercise authority over the broadband portion
of such services. That means that they cannot demand payment for access
to rights-of-way for broadband services, but it also means that they cannot
impose public interest requirements on the provision of that service... for
example that such service be provided universally to all citizens or that
access to different types of content be provided on a non-discriminatory basis.
The reasoning was that these services were not the video services
envisioned in the Cable Act of 1984, but rather broadband services that
the FCC was newly classifying as "deregulated." The 2002 Cable Modem
Order was in fact the event that precipitated the 2005 "Brand X" Supreme
Court decision that cemented the FCC's authority to reclassify last-mile
broadband services not as common carriers but rather in a vaguely
deregulated service. This helped lead to our modern debate about net
neutrality.

These jurisdictional turf wars are also at the heart of fights to allow
cities to create municipally owned broadband networks that may then be
leased on equal terms to all comers. It is also the reason that cities
do not have the legal authority to compel "open access" or
"non-discrimination" requirements on private networks within their
boundaries. Broadband providers have understandably sought to gain
near-exclusive control over their customers, and the legal framework
helps them to avoid municipal networks and other requirements. Whether
or not you believe that the local franchising regime that emerged in the
1980s makes sense for internet access today (not that it applies to broadband
anyway), you must at least admit a fundamentally different incentive
model compared to that of private companies. Whereas localities must
now provide equal access to all companies that wish to do a physical
buildout, those companies do not have any locally imposed requirement to
provide equal access of use of their networks.

Regards,
Steve

2

I've seen it apply to CLEC access into a market as well; running as a true CLEC and not just borrowing LEC lines.

Deals can include anything, including profit sharing, free service to the municipality, etc (and can be very bad if your negotiator is poor).

Jack

3

What I think George's
comment
does not completely appreciate is that (ideally) cities are imposing
such requirements at the behest of and for the benefit of the (local)
public, whereas private constraints on local access are (by design)
motivated by profit.

I wasn't really talking about franchise agreements as those are
different and in many cases stipulate things like there can be no
monopoly, etc.

What I was talking about was what if a city simply decided to charge an
Internet provider an "access fee" to the city's people. An "eyeball
fee". The city says, "hey, you are making millions selling ads that
these people view and the more eyeballs you have the more money you
make, so we are going to charge you for those eyeballs". Which is
basically what Comcast is doing ... charging content networks for access
to eyeballs. What if they themselves got charged for the same thing.
Would they think that is "fair"? And what if the city had its own
community high speed internet that paid no such charge?

Regards,
Steve

Thanks, Steve.

4

George Bonser wrote:

What I think George's
comment
does not completely appreciate is that (ideally) cities are imposing
such requirements at the behest of and for the benefit of the (local)
public, whereas private constraints on local access are (by design)
motivated by profit.
    
I wasn't really talking about franchise agreements as those are
different and in many cases stipulate things like there can be no
monopoly, etc.

What I was talking about was what if a city simply decided to charge an
Internet provider an "access fee" to the city's people. An "eyeball
fee". The city says, "hey, you are making millions selling ads that
these people view and the more eyeballs you have the more money you
make, so we are going to charge you for those eyeballs". Which is
basically what Comcast is doing ... charging content networks for access
to eyeballs. What if they themselves got charged for the same thing.
Would they think that is "fair"? And what if the city had its own
community high speed internet that paid no such charge?

They do already. It's called HBO, Showtime, HDNet Sports, etc. - they get charged per eyeball for those networks, and so they pass the charge on per eyeball to the customer.

Nothing is new here.

5

They do already. It's called HBO, Showtime, HDNet Sports, etc. -

they

get charged per eyeball for those networks, and so they pass the

charge

on per eyeball to the customer.

Nothing is new here.

The municipality charges the cable company per HBO subscriber?

6

Sure, the content providers charge Comcast per eyeball, but localities do not.

Part of nearly every franchise agreement is a percentage of gross revenue from video services that is paid to the city. In recent years the FCC has capped this at 5% and subsequently introduced further constraints on what counts and how it is collected. Cities typically use these funds to support public resources related to video (public, educational, and governmental video channels, equipment, and networks). However, I think they have the freedom to use it to fill potholes if they so choose.

None of this implicates the revenues from broadband service, because the 2002 Cable Modem Order removed those from the purview of localities. What about bundled "triple-play" style services? This is a mess, and I believe someone has to arbitrate what the percentages are. What about people playing video over their internet connection? Not included. As you can see, if the regulatory dichotomy between video and broadband services ever made sense, it clearly doesn't today.

George's concern about a last-mile provider competing with municipal broadband parallels the most common argument made against such efforts: Although private companies do not have to pay any local fees that municipal broadband does not have to pay, the companies argue that municipal efforts have the unfair advantage of being built on taxpayer support and existing outside of the competitive marketplace. Of course if the "competitive marketplace" is a natural near-monopoly, these arguments are less compelling.

7

George Bonser wrote:

They do already. It's called HBO, Showtime, HDNet Sports, etc. -
    

they
  

get charged per eyeball for those networks, and so they pass the
    

charge
  

on per eyeball to the customer.

Nothing is new here.
    
The municipality charges the cable company per HBO subscriber?

The municipality gets a cut of that in a profit sharing agreement. The point was, everyone gets their tax or toll along the way.

-Dave

8

Dave, perhaps you would be kind enough to tell us where you operate a
network and what municipality is able to charge "the cable company"
based on a "profit sharing agreement".

That would be against the law in Michigan. And I've never heard of any
cable company revealing its profits on a per municipality basis....

9

The franchise fees in many markets are based on gross revenue. 5% is a
fairly standard percentage charged by municipalities to cable companies
for right of way access, etc. Not sure if I would call this a profit
sharing plan, but it's not too much of a stretch. Today with local
agreements somewhat going by the wayside for statewide franchising, I'm
not sure how the fees are charged.

Phil

10

In a message written on Sun, Dec 19, 2010 at 05:16:27PM -0500, William Allen Simpson wrote:

That would be against the law in Michigan. And I've never heard of any
cable company revealing its profits on a per municipality basis....

Google finds some:

"The Franchise Agreement requires AT&T to pay the City $0.88 per
residential subscriber per month to maintain and enhance PEG access
services provided by MPAC. AT&T has chosen to pass this $0.88 fee on to
subscribers, which it is not prohibited to do under Federal law."

http://www.montgomerycountymd.gov/mcgtmpl.asp?url=/content/cableoffice/june98franchise.asp#8.%20FRANCHISE%20FEE

"Payment to County. Each year during the Franchise term, as
compensation for use of Public Rights-of-Way, the Franchisee shall pay
to the County, on a quarterly basis, a Franchise fee of five percent
(5%) of Gross Revenues, including any Franchise fee owed to the
Participating Municipalities."

http://www.cityofsouthfield.com/Government/CityDepartments/AC/Cable15/FranchiseFees/tabid/499/Default.aspx

"Franchise fees are calculated as a percentage of your bill.
Southfield's fee is eight percent of gross revenues."

Googling "Franchise Fee" turns up thousands of other documents.

This is also why, when speaking to folks at the cable and iLEC
companies I remind them that when it comes to network neutrality I
do regard them as different from CLEC's and independant companies.
They have been granted a monopoly by the local government for
wireline services, and in exchange for that monopoly need to act
in the public's interest. In the TV world this is things like
running the local community interest channel, and paying a franchise
fee. In the IP world we're still developing the criteria, but it's
not unreasonable to think they might have some government imposed
requirements there as well.

11

The government granting a monopoly is the problem, and more lame government
regulation is not the solution. Let everyone compete on a level playing
field, not by allowing one company to buy a monopoly enforced by men with guns.

12

Google finds some:

"The Franchise Agreement requires AT&T to pay the City $0.88 per
residential subscriber per month to maintain and enhance PEG access
services provided by MPAC. AT&T has chosen to pass this $0.88 fee on

to

subscribers, which it is not prohibited to do under Federal law."

...

If you look at that agreement, you will see that it specifically does
not apply to Internet services, and it specifically prohibits any
monopolies.

This is simply a charge for access to "public right of way" or a payment
to the city for stuff the city has to maintain to support AT&T's
infrastructure.

For example, if AT&T undergrounds cables under a street, this increases
the maintenance cost of that street because they must now be sure to
avoid AT&T's cables when they dig and must take those cables into
consideration for any civil engineering work they do. I don't see that
as an "access fee for subscribers".

What I am concerned with happening is a cash-strapped city seeing
Comcast (or any provider, really) trying to charge for access to
subscribers and then the city saying "wait a minute, who are you to sell
access to our people to a third party? If you are going to charge third
parties for access to those eyeballs, then you can pay us, in turn for
that access." And from there it all goes down hill. Comcast charges
for access to eyeballs and then the cities turn around and charge
Comcast an "access" fee and then it becomes ubiquitous and cities start
charging all ISPs for "eyeball" access as a revenue source. It is the
opening of a box that is better left closed, in my opinion.

13

Running a wire to everyone's house is a natural monopoly. It just
doesn't make sense, financially or technically, to try and manage 50
different companies all trying to install 50 different wires into every
house just to have competition at the IP layer. It also wouldn't make
sense to have 5 different competing water companies trying to service
your house, etc. This is where government regulation of the entities who
ARE granted the monopoly status comes into play, to protect consumers
against abuses like we're seeing Comcast commit today.

Personally I think the right answer is to enforce a legal separation
between the layer 1 and layer 3 infrastructure providers, and require
that the layer 1 network provide non-discriminatory access to any
company who wishes to provide IP to the end user. But that would take a
lot of work to implement, and there are billions of dollars at work
lobbying against it, so I don't expect it to happen any time soon. :slight_smile:

14

Personally I think the right answer is to enforce a legal separation
between the layer 1 and layer 3 infrastructure providers, and require
that the layer 1 network provide non-discriminatory access to any
company who wishes to provide IP to the end user. But that would take

a

lot of work to implement, and there are billions of dollars at work
lobbying against it, so I don't expect it to happen any time soon. :slight_smile:

--
Richard A Steenbergen <ras@e-gerbil.net> http://www.e-
gerbil.net/ras
GPG Key ID: 0xF8B12CBC (7535 7F59 8204 ED1F CC1C 53AF 4C41 5ECA F8B1
2CBC)

I agree. The "highway" model of commerce is better than the "railroad"
model of commerce.

15

In a message written on Sun, Dec 19, 2010 at 08:20:49PM -0500, Bryan Fields wrote:

The government granting a monopoly is the problem, and more lame government
regulation is not the solution. Let everyone compete on a level playing
field, not by allowing one company to buy a monopoly enforced by men with guns.

While I like the concept, reality doesn't allow it. When speaking
about the folks who actually run fiber/copper/coax to the home there
are a number of physical, real world issues.

Rights of way specifically easements, poll space and similar are
limited quantities. There is both a finite number of folks who can
put in resources in any reasonable way, and an expoentially increasing
chance of them damaging each other as they pack in closer and closer.

There is also the problem that most residents get really upset if
the road between home and the grocery store is torn up this week
by AT&T, next week by Comcast, the following week by Level 3, the
next week by Cogent and is then a rutted potholed mess. Many cities
are requring carriers to do joint physical duct builds to keep from
digging up streets repeatedly, but due to the inconvenience factor
but also because it reduces the lifespan of the streets, and thus
raises costs to residents.

After looking at many models I think Australia might be on to
something. The model is that a quasi-government monopoly provides
the last mile physical wire, but is unable to sell services on it.
Basically they only provide UNE's. Then, at the switching center
any ISP can pick up those UNE's and provide services. Competition
to the end user, while the last mile is always a single povider
limiting the issues above. Many cities are trying the same with
electric service, one companie provides the transport infrastructure
and when you select a generation provider.

Simply put, physical real world issues means there will never be
individual residences in most places where there are 6-10 wired
infrastructures coming in, so the user can select one and 5-9 can
go unused. Huge waste, lots of problems running it that add cost
and create conditions users don't like.

I dream of a day where we have municipal fiber to the home, leased to
any ISP who wants to show up at the local central office for a dollar a
two a month so there can be true competition in end-user services.

16

This is the argument the government uses to keep first class mail service as an exclusive monopoly service for the USPS, claiming you wouldn't want 50 different mail carriers marching up and down your walk every day. Yet we aren't seeing a big problem with package delivery. Currently you have 3 choices, USPS, UPS, and FedEx. The market can't support more than 3 or 4 package delivery services (e.g. we had 4 with DHL, which didn't survive the financial melt down). Why not open up the market for telco wiring and just see what happens? There might be 5 or perhaps even 10 players who try to enter the market, but there won't be 50 - it simply won't make financial sense for additional players to try to enter the market after a certain number of players are already in. And there certainly won't be 50 all trying to service the same neighborhood.

And if a competing water service thought they could do better than the incumbent, why not let them put in a competing water project? If they think they can make money after the cost of the infrastructure, then they may be onto something. We don't have to worry that too many would join in, the laws of diminishing returns would make it unprofitable for the nth company to build out the infrastructure to enter the market.

jc

17

Personally I think the right answer is to enforce a legal separation
between the layer 1 and layer 3 infrastructure providers, and require
that the layer 1 network provide non-discriminatory access to any
company who wishes to provide IP to the end user.

SE

18

Because they'd have to dig up the streets, people's yards, etc. to do it.

There really are some natural monopolies.

Regards,
-drc

19

Take a second and think about what THAT would do to the ratio wars.
Imagine if any hosting/content provider, with potentially hundreds or
thousands of gigabits of unused inbound capacity on their networks,
could easily get into providing IP service to eyeballs. Even ignoring
the existing 95th percentile silliness like "free inbound transit",
which would no doubt rapidly evaporate under this kind of model, the
difference in efficiencies between the highly competetive hosting world
and the highly non-competetive last mile world are simply staggering.
For many content networks, it would be an opportunity to start making
money on their bits instead of paying for them, and networks without
content expertise would be in serious trouble.

I personally can't think of a single thing with more potential for
massive disruption to the business models of incumbent providers. There
are so many billions of dollars at stake protecting the status quo that
it's not even funny, which IMHO is why you'll never see any of this
happen in the US, in any kind of scale at any rate. :slight_smile:

20

The laws of diminishing returns have already set the bar for the point
at which it's not profitable for a new company to enter the market and
try to compete. Right now the number is roughly 2, cable and dsl, give
or take a few outliers. I do believe the point would be to encourage a
little more competition than that. :slight_smile: