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The Department of Justice released a statement on August 16th, that it will allow the controversial Verizon/SpectrumCo deal to move forward with changes. We have watched this deal, bringing you you detailed review and analysis by experts along with opinions from those affected. One week later, the slightly altered deal was also blessed by the FCC.
Many telecommunications policy and economic experts opposed the deal on the basis that it will further erode the already feeble competition in the market. In addition to a swap of spectrum between Verizon and T-Mobile, the agreement consists of side marketing arrangements wherein Verizon agrees not to impinge in the market now filled with SpectrumCo (Comcast, Time Warner Cable, Cox, and Bright House Communications).
Verizon has been accused of hoarding spectrum it doesn't need. The marketing arrangements constitute anti-competitive tools that the DOJ has decided need some adjusting. From the announcement:
In December, 2010, Verizon Wireless began operating its network via C-Block spectrum with licenses it acquired in the 2008 auction. In keeping with net neutrality rules unique to C-Block usage, Verizon agreed long ago that it would not block or limit consumers' ability to tether on their 4G LTE network.
Tethering allows a consumer to use a device, such as a smartphone, as a modem to funnel Internet access to an additional device. On July 31, the FCC agreed to end an investigation into whether or not Verizon Wireless had violated this rule. In exchange, Verizon Wireless would make a $1.25 million "voluntary contribution." Verizon Wireless did not admit it broke the rules. The FCC's consent decree requires the practice cease and that Verizon Wireless implement policies to curtail the behavior.
The story began in 2011. Verizon Wireless began charging its customers an addition $20 per month to allow them to tether additional devices to their smartphones and called the feature "Mobile Broadband Connect."
The Free Press filed a complaint. The FCC began their investigation in October, 2011. From the Free Press website:
Free Press argued that by preventing customers from downloading these applications that allow customers to use their phones as mobile hotspots, Verizon violated conditions of its 700 MHz C Block licenses, the spectrum in which Verizon operates its LTE service. When Verizon purchased the licenses, it agreed to abide by conditions that it not “deny, limit or restrict” its customers’ ability to use the applications or devices of their choosing.
The company also asked the Google Play Store store to block Verizon Wireless customers from accessing software that would enable tethering. Google complied with the request, even though it has often advocated for net neutrality, but were not investigated because they are not an ISP.
If you are a current or potential Verizon customer, by now you know that you no longer have the option to order stand alone DSL. When the business decision became public knowledge in April, DSL Reports.com looked into the apparent step backward and found existing customers were grandfathered in but:
However, if you disconnect and reconnect, or move to a new address -- you'll have to add voice service. Users are also being told that if they make any changes to their existing DSL service (increase/decrease speed) they'll also be forced to add local phone service. One customer was actually told that he needed to call every six months just to ensure they didn't change his plan and auto-enroll him in voice service.
By alienating customers from DSL, Verizon can begin shifting more customers to its LTE service, which is more expensive. Susie Madrak, from Crooks and Liars, speculated on possible repercussions for rural America:
Rural areas could see the biggest impact from the shift, as Verizon pulls DSL and instead sells those users LTE services with at a high price point ($15 per gigabyte overages). Verizon then hopes to sell those users cap-gobbling video services via their upcoming Redbox streaming video joint venture. Expect there to be plenty of gaps where rural users suddenly lose landline and DSL connectivity but can't get LTE. With Verizon and AT&T having killed off regulatory oversight in most states -- you can expect nothing to be done about it, despite both companies having been given billions in subsidies over the years to get those users online.
The belief is that current DSL customers who don't want (or can't afford) the switch to the LTE service will move to Verizon's cable competition. Normally, losing customers to the competition is to be avoided, but when your new marketing partners ARE the competition, it's no big deal.
And for all its accusations, Larsen says Mediacom will not sue. Spending millions of dollars on a lawsuit in a place where the company serves so few homes, he said, "is not a great business decision."We have previously covered the many false and disproved accusations Mediacom have leveled against Lake County. The Strib article reiterates that these charges have been found to have no merit. The article also reiterates that the County has a real need that private companies have failed to meet:
The conflict that ensued is part of a national struggle. Public officials and some of their constituents argue that rural broadband is like rural electrification: It's a lifeline for small-town America that the free market will not extend. "We've been ridiculously underserved in this area for years," said Andy Fisher, who owns a Lake County bed-and-breakfast and a rural cross-country skiing lodge. The cable companies "are working in the interest of their profits. But if they're not going to serve this area, what are we going to do?"And yet, Mediacom sees itself as the underdog!
"Lake County wants to make this into a David and Goliath story, where Mediacom is Goliath and poor little Lake County is David," said Tom Larsen, Mediacom's group vice president of legal and public affairs. "The truth is we're David because we're fighting [the government]. It's just the same story repeated all over the country."Fascinating. Mediacom has billions in revenues whereas the County deals with budgets in the millions. Sure Mediacom is between 100 and 1000 times bigger than Lake County, it still wants to stop a project serving thousands of unserved people (that it believes is doomed to fail) because it is too disadvantaged.
Several months ago, we wrote this post but it got lost in the system. We think it still worthwhile, so here it is.
The word "cartel" drums up many negative annotations - drug cartels, oil cartels. Never anything positive, such as bunny cartels or chocolate cartels. Harold Feld (of Public Knowledge) explains the emergence of another cartel in My Insanely Long Field Guide To The Verizon/SpectrumCo/Cox Deal, on his Tales of the Sausage Factory blog. This is great tutorial on how the deal came about and what it can mean for the future of broadband.
Rather than chocolate, drugs, oil, or bunnies, the product in question is telecommunications services. At the heart of the cartel are the familiar names: Verizon, Cox, and SpectrumCo. The latter being a consortium of Comcast, Time Warner Cable, and Bright House. All the big hitters in telecom are involved in a way that is veiled, secretive, and not good for competition.
"It's almost as if your companies got in a room together, and you agreed to throw in the towel and stop competing against each other," Sen. Al Franken to representatives from Verizon and the cable companies at the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, March 21, 2012.
Feld's investigation begins with the licensing and collecting of spectrum by SpectrumCo but ends with a more practical look at how these big hitters have decided that it is better to join forces than to compete. Side agreements, secretive multi-layered entities, and threaded loopholes keep the FCC at bay. This begins as an article about telecommunications, but quickly expands into an antitrust primer. The most alarming facet of this situation is that the product in question is information.
Joel Kelsey of Free Press testified at that same committee, warning how this deal will compromise access, quality, and affordability to broadband in America and how drive us further behind the rest of the world.
On August 16, 2012, the Department of Justice announced that it approved the deal with changes. Citing:
This town has a very progressive economic development organization. They even have their own Youtube video promoting Ponca City as the place to locate your business. The city’s history has been shaped by the petroleum industry since Conoco Oil once had their headquarters here. Now, they highlight their fast-track permitting, workforce training, state and local incentive programs and a completely wireless community. [emphasis in original]A local article in Ponca City News notes,
All residents in the city limits of Ponca City have access to free Wi-Fi adding to the ease of web-based business and small start-ups.As we have noted many times, publicly owned broadband networks can play an important role in economic development strategies.
Arlington County, Virginia is taking advantage of a series of planned projects to create their own fiber optic network, ConnectArlington. The County is moving into phase II of its three part plan to improve connectivity with a publicly owned fiber network.
Some creative thinking and inter-agency collaboration seem to be the keys to success in Arlington. Both the County and the Arlington Public Schools will own the new asset. Additionally, the network will improve the County Public Safety network. Back in March, Tanya Roscola reported on the planing and benefits of the ConnectArlington in Government Technology.
Arlington County's cable franchise agreement with Comcast is up for renewal in 2013. As part of that agreement, the schools and county facilities have been connected to each other at no cost to the County. Even though there are still active negotiations, the ConnectArlington website notes that the outcome is uncertain. The County does not know if the new agreement will include the same arrangement. Local leaders are not waiting to find out, citing need in the community and recent opportunities that reduce installation costs.
Other communities, from Palo Alto in California to Martin County in Florida, have found Comcast pushing unreasonable prices for services in franchise negotiations. Smart communities have invested in their own networks rather than continue depending on Comcast.
Like schools all around the country, Arlington increasingly relies on high-capacity networks for day-to-day functions both in and out of the classroom. Digital textbooks, tablets, and online testing enhance the educational adventure, but require more and more bandwidth and connectivity. From the article:
Through ConnectArlington, Arlington Public Schools will be able to take advantage of Internet2 for distance learning. At no cost, students will be able to communicate with teachers and access electronic textbooks and online courses from wireless hot spots.
Riverside, California was just named the Intelligent Community of the Year 2012 by the Intelligent Communities Forum. It is only the fourth U.S. city to win in the 14-year history of the award. Among its top qualifications are a publicly owned fiber optic network linking public buildings (eliminating the need for any leased lines) and a free Wi-Fi network that aids an impressive digital inclusion approach.
The path to the award began in 2005, when the City hired a full time CIO, Steve Reneker, and launched SmartRiverside as a way to attract technology companies. In addition to efforts to connect to California's reputation as a technology leader, the City invested in the basics. From a Government Technology article:
A year later, the City Council addressed physical infrastructure needs by approving Riverside Renaissance, a $2 billion effort to improve traffic flow; replace aging water, sewer and electric infrastructure; and expand and improve police, fire, parks, library and other community facilities.
“We’ve done a number of things that have changed Riverside to make us competitive,” said Mayor Ron Loveridge.
Part of being competitive was capitalizing on the City's existing fiber network ring, managed and maintained by the City Public Utility. The fiber network was originally focused on running the operational facilities for power and water but according to Reneker, via email:
...over the past 4 years, IT was able to work with our City Manager’s office and finance the construction of fiber to every City facility. So all telco lines have been eliminated and now all voice, data and video traverses the 1Gb network to City Hall. In addition, the City went live with City wide WiFi in May 2007, and the fiber was run to 6 tower locations to enable WiFi coverage city wide.
The fiber network provides the needed infrastucture to offer free Wifi all over the City. From the Intelligent Communities website:
But microwave networks can be faster than their fiber-optic counterparts. Signals shot in a straight line between microwave dishes within sight of each other don't have to negotiate the mountains, buildings and other obstacles that lengthen the trip by cable. Because of their height, cell towers are prime locations for the dishes. On the downside, microwave networks are less reliable than cables, because signals can be disrupted by bad weather and other interference. They also can't carry as much information.So I figured this was a good weekend story because of the wireless/fiber angle but also because it is a reminder that Wall Street invests narrowly for its benefit. Extracting value from the market by having a 1 millionth of a second advantage over everyone else provides no value for the rest of us. This is not a system that is rationally allocating capital, it is a system that allows vampires to suck the life out of us. And that is a very good reason to find ways of being self-reliant.