TELECOM Digest OnLine - Sorted: Re: Prairie Stream Out of Business

Re: Prairie Stream Out of Business

Mike Sandman (
Sat, 11 Nov 2006 09:38:25 -0600

That's a terrible story about Prairie Stream.

While it's a real blow to lose phone and broadband service for Prairie
Stream subscribers, it shouldn't be a surprise. It's going to happen
across the country, in a disruption of service for millions of
broadband subscribers.

The FCC deregulated the DSL business a couple of years ago, telling
RBOCs that they don't have to offer any discounts to broadband
providers who co-locate their equipment in the CO to provide DSL. That
pretty much spelled the end of non-RBOC DSL.

If a company is reselling an RBOCs telephone service or they're an
agent for an RBOC, how long they can do it is setout in the contract
they signed with the RBOC. It's likely the contract can be cancelled
by either party, so building a business based on getting a specific
deal from the RBOC (or any big company?) seems like a real risk.

The biggest threat coming down the line is for customers of Covad, who
has definitely built their business on using the phone company's
copper to get their broadband and T1 service to the premise. Covad has
begun offering dedicated ADSL, which brings ADSL service down a
dedicated pair they lease from the RBOC (similar to SDSL or a T1). Is
that safer than providing ADSL on top of an RBOC phone line? Probably
not much, since if Covad goes away a zillion businesses in the US are
in deep stuff -- whether the DSL (or T1) was on top of a phone line or
on a dedicated pair.

The RBOCs (there really aren't many left, maybe I should just say
LEC?) are offering incredible deals on Broadband. So are the cable
companies. This isn't because it's got suddenly cheaper for them to
provide service. It's because they're looking at the big picture.

The big picture for all of us is that if we want to get a fast
Internet connection to Google or some other big company's web site,
that big company is going to start having to pay a toll to the RBOC
for the privilege of letting you or I get to that site (fast).
Actually, if the company doesn't pay the toll, the RBOC will still let
us get to the site, but it will be slowed to the point that we
probably won't want to use that site.

The bottom line is that while ten years ago the phone companies were
looking like they had a questionable future, today they're poised to
make more money than anybody would have ever dreamed of -- assuming
that we're all going to want to get to the Internet faster rather than
slower (a pretty good assumption?).

So the RBOCs give us a great deal on broadband to get us as a
customer. They are even providing better DSL service than in the
past, although if you need support you should still probably ask your
dog first. When the end of net neutrality comes (sooner rather than
later), where different services will take different (faster) paths in
exchange for a toll, the RBOCs will be able to hold us hostage in
exchange for companies like Google paying big bucks to get to us (on
the faster path).

The same thing will happen with cable companies who will also go for
the toll, since that have a ton of subscribers to hold hostage. Ditto
Broadband Over Power Line providers (if it ever comes to pass), and
even Covad if they're still around. If Google and other companies on
the Internet have to pay extra for us to be able to see their content
faster, there's no question that we're going to end up paying more
than our currently cheap broadband bill, one way or another.

So why is all this happening? Only one reason ... the stock market.
The guys who run these big companies have a horrible job. They can't
just make a reasonable profit. They have to make sure they make
significantly more money every quarter than the previous quarter. If
they don't do it, the stockholders will demand their head -- and
they'll either be headless or be out of a job.

The real question is whether subscribers are going to be willing to
pay for faster stuff on the Internet. I'm personally not downloading
movies or big files, so I literally can't see any difference between
my 728K DSL at home, the 1.55 Meg SDSL at the office, or the 3 Meg
ADSL at the office.

That might be because every DSLAM in the Central Office (where the
Internet is connected to your phone line) is fed by one or more T1s to
the Internet. If there are 20 customers on that DSLAM all browsing
the Internet at the same time, but there's just one T1 on the DSLAM
connected to the Internet, even if everybody on that DSLAM had 3 Meg
ADSL -- they're limited by the bandwidth the 20 users are simultaneously
using off the single 1.55 Meg T1 to the Internet. There's a similar
situation with cable broadband -- it slows down when more neighbors are
using it.

For Google's core business, that's a good story. When I do a search, I
send very little information to Google's computers, the computer has
to find the results fast, and Google sends me back a page of results
-- which I'd get quickly even on a dial-up modem. If Google wants me
to download videos and their path to me is only 56K because it's
crippled by my Internet provider, they're going to have to pay the
toll or I'm going to have to find a different way to get movies (drive
to Blockbuster?).

For You Tube or any other company offering downloads of short videos
or music, the speed of the path to us isn't going to matter much
unless they really cripple it down to maybe 128K or even 56K, which
could be a possibility.

The end result is that big companies are going to get bigger, and
small companies are in peril. The real reason? We're all looking for
the cheapest deal right now, without thinking about the big
picture. Whether the big picture is putting all of our communications
eggs in the phone company's basket, buying most of our oil from the
Middle East, or buying everything else from China, we're going to pay
later for the deal we get today.

Mike Sandman

[TELECOM Digest Editor's Note: Mike Sandman has been a friend of the
Digest for about a decade now, and offers an excellent line of telecom-
related peripherals and accessories at his web site

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