Technology for Mortals

Five months ago, Saul Hansell of the New York Times took Verizon behind the woodshed for being the corporate equivalent of the village idiot.  Verizon, according to Hansell’s source Craig Moffett, was giving consumers a Maserati for the price of a Volkswagen because Verizon’s new FiOS service was based on super expensive Fiber To The Home (FTTH) technology.  Yesterday, Mr. Hansell took Verizon behind the woodshed again because Verizon might stand to benefit the most from the broadband stimulus tax credits for deploying the most FTTH.  But given the fact that Verizon has been such a good corporate citizen by being the only large telecom operator to risk huge amounts of capital to deploy fiber to the home, would it not stand to reason that Verizon deservedly gets a proportional benefit from tax credits designed to spur this kind of behavior?

One of Saul Hansell’s assertions is that Verizon could get $1.6 billion over next two years for doing nothing different than Verizon had already planned to do.  This of course assumes that Verizon was not going to scale back their FTTH plans as a prudent response to the economic crisis where consumers are tightening their belts on spending.  It also assumes that Verizon wouldn’t increase their level of investments as a response to the tax credits.

Another gripe raised in Hansell’s piece is that tax credits apply to next generation broadband deployment for any residential subscriber and not just unserved, low-income and rural areas.  But is Mr. Hansell seriously suggesting that we should only incentivize next generation broadband for unserved, low-income and rural areas? The bulk of the broadband market does not fall into these three categories so if we want the biggest increase in broadband investments and therefore the most amount of economic stimulus and jobs, we cannot just focus on these three areas.

Most people don’t know the magnitude of risk that Verizon took to deploy FTTH despite early opposition from Verizon share holders.  Because of Verizon, the United States has some of the most FTTH deployment to detached single family homes which are very expensive to wire compared to dense multi dwelling units in countries like France, Korea, and Japan.  Verizon has had to invest more than $3,700 per subscriber (assuming 25% uptake) to give people the fastest and highest capacity broadband and television service in the nation.  Roughly half of the money spent by Verizon went directly to the hard working men and women that installed fiber to over 10 million homes.  Even the money spent on equipment and material put someone to work designing, manufacturing, marketing, and selling that equipment.

Despite all the criticism, the beauty of tax credits is the multiplier effect where one dollar of tax breaks can easily spur five dollars of private investment.  In ITIF’s January 2009 paper “The Digital Road To Recovery“, we estimated that a one year $10 billion investment in broadband networks will support approximately 498,000 new or retained jobs in the United States.  In this economic storm where workers are getting laid off left and right, stimulating labor intensive broadband projects sounds just like what the doctor ordered.  More broadband investments lead to more telecom jobs and more manufacturing jobs or at the very least it means fewer layoffs.  This translates to lower unemployment which not only means fewer unemployment checks paid out by the government, but ultimately more tax revenues from more workers which means the government and society gets a good return on investment.

I like to do things right. Sadly, sometimes doing things “right” gets in the way of doing them well, or doing them at all. In my most recent case, I needed to stop trying to set my network up “right”, and do it “wrong”. Now, instead of looking like an enterprise network like I wanted, it resembles a residential network on steroids. In reality, it actually makes sense… it is founded on residential technology (Verizon FiOS), after all, which just does not support the networking schemes that enterprise networks use. All in all, the question really is, “does it meet our needs?” And in this case, I’ll take the 30/5 service for a few hudred dollars and a residential-style networking scheme over 1.5/1.5 and an enterprise-style networking scheme any day of the week.

J.Ja

Update – Verizon FiOS, sometimes the “wrong way” is the right way

Over the last few years, a lot of consumer grade broadband technology has been marketed to businesses. Usually the ISP will call it “Business Class” or something like that, and charge a big markup. To justify the markup, they will do something like add a pittance of an SLA (like promising an onsite tech dispatch in 4 business hours), or maybe some guaranteed bandwidth, or possibly offer blocks of static IP addreses.

The problem is, these companies really do not understand what businesses need, even if the company owns another division that provisions T1 lines or other business class services. These companies create their “business class” offiering by having a seperate support number for those customers and putting some annotations on the contract, but the process is still based out of the consumer grade stuff.

Instead, these companies need to flip the equation around. Instead of trying to backport some of the process from the “enterprise class” groups to the consumer groups, they need to bring the consumer technologies into the mix that the “enterprise class” groups support and provision. Period. The fact is, with the way that the consumer grade groups approach things like customer satisfaction, cost cutting, customer service, technical support, etc. is not what businesses will tolerate.

Right now, I am having major problems with not one but two such companies. Verizon’s “Business Class FiOS” does not “get” the idea that customers with a block of static IP addresses do not want to just NAT everything behind their $50 router, they actually want to provide routing with a real device (in this case, a Cisco 1841 router). Time Warner’s “Business Class RoadRunner” service is simply falling all over itself over the fact that I moved… and every time I move, the way they handle things gets worse, not better.

These technologies should be creaming the established T1 and T3 providers. They cost a fraction of the price with just as much uptime and more bandwidth. But until these companies get their acts together in terms of how they handle customers, they will never be “business class” enough to capture huge amounts of true business customers, beyond small offices without dedicated IT staff.

J.Ja