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Telcos Lay $200 Billion Goose Egg

Jason Lee Miller
Staff Writer
Published: 2006-05-12

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The U.S. is ranked 12th in broadband penetration, says AT&T CEO Ed Whiteacre, and in order to bring America up to speed through fiber-to-the-premises (fttp) wiring, content providers are going to have to pony up to use his "pipes." He doesn't mention that the new pipes to be built have already been paid for, and they're very late in coming.

"This is not right," Whitacre told the Detroit Economic Club. "It makes no sense that our country, which took the Internet out of the lab and into the living room, now lags so many others."

And he's absolutely right, it doesn't make sense, but maybe not for the reasons he suggests. After wandering in the desert of dial-up and DSL over century-old copper lines for the past decade, the telecoms are promising the broadband milk and honey of the 2010s, when we should be there by now.

"Convergence" is the buzzword they use to begin conversations about competing with cable companies not only in Internet service, but also in IPTV, and telephony services. To get there, it's going to cost a lot of money and, while arguing against Network Neutrality principles in Congress, it's going to require a tiered network of premium services (which means more cost and limited access for subscribers) and a charge to major content providers like Google, Yahoo, and Microsoft, to pay beyond their usual bandwidth fees to guarantee quality delivery. The cost for small businesses trying to establish an online presence will also go up significantly.

It also means oodles of cash from double-dipping on both ends, which Verizon says is necessary for a build out of infrastructure as engineers are deployed to replace copper wiring with fiber nationwide. The goal is 100 Mbs delivery, a speed that Verizon's John Czwartacki says will "cost north of $1,500" per home as Verizon passes 6 million homes by 2007.

Czwartacki asks, "who's paying for that?"

According to BellSouth chief architect Henry Kafka and TeleTruth's Bruce Kushnick, we (taxpayers and subscribers) already have paid for it. WebProNews' David Utter points us to both sources back in February and March.

From Telephony Online:

Today's average residential broadband user consumes about 2 gigbytes of data per month, Kafka estimated, which costs the service provider about $1. As downloading feature films becomes more popular, they might consume an average of 9 gigabytes per month, costing carriers $4.50.

Mr. Utter quips:

Essentially, today's user in a location where the choice for broadband is between a single cable provider and a single telecom DSL provider pays about $40 per month for a dollar's worth of service. 'Excessive' could be an understatement regarding that price.

For the IPTV user of the future, bandwidth consumption is expected to be massive, and with it, so will be the cost to carriers. For years subscribers have made a down payment on those costs. The little end of the money funnel will direct the bulk of funds toward infrastructure to support IPTV (i.e., transitioning from copper to fiber). But Kushnick charges that funding for the build out was supplied through hundreds of billions dollars in tax breaks and incentives piled atop an empire of broken promises.

Kushnick, who has filed a complaint with the Federal Trade Commission (FTC) asking for an investigation, writes:

Starting in the early 1990's, the Clinton-Gore Administration had aggressive plans to create the "National Infrastructure Initiative" to rewire ALL of America with fiber optic wiring, replacing the 100 year old copper wire. The Bell companies - SBC, Verizon, BellSouth and Qwest, claimed that they would step up to the plate and rewire homes, schools, libraries, government agencies, businesses and hospitals, etc. if they received financial incentives.

Kushnick's "$200 Billion Broadband Scandal" says the government was promised 86 million households with fiber wiring delivering bi-directional 45 Mbps speeds, capable of handling 500 channels by 2006. He calls it a fraud case, with deft omission in the annals of the FCC, that cost households at least $2000 a piece but got nothing in return.

"Customers paid for a fiber optic wire and got DSL over the old copper wiring - it's like ordering a Ferrari and getting a bicycle," he writes in the "Bait and Switch" bullet.

I changed my mind. Mr. Whiteacre is not correct; it does make sense that America is lagging in broadband service. It was planned that way. If it costs, as Mr. Czwartacki said, $1,500 per household for 100Mbs, maybe we're in for a $500 rebate. Or maybe, instead, the sky will fall on the Internet as Verizon has suggested.

After providing the link to Kushnick's webpage for comment, Czwartacki had not responded by press time.


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About the Author:
Jason L. Miller is a staff writer for WebProNews covering technology and business.

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