The Nation's Telcos Are Hemorrhaging Customers Because They Refuse To Upgrade Their Networks

from the don't-build-it-and-they-won't-come dept

Thu, Aug 10th 2017 2:49am — Karl Bode

So we've noted for a while how despite all the hype surrounding next-gen wireless and gigabit fiber builds like Google Fiber, vast swaths of this country are actually facing less broadband competition than ever before. That's in large part thanks to the nation's phone companies, which have effectively given up on upgrading their lagging DSL networks at any real scale. One net result is millions of customers paying an arm and a leg for sub 6 Mbps DSL service that doesn't even technically meet the FCC's new standard 25 Mbps definition of broadband.

And it's not changing anytime soon. Verizon has all but frozen next-gen upgrades as it shifts its focus to gobbling up failed 90s internet brands to help it sling video advertisements at Millennials (poorly, we might add). But smaller telcos like Frontier, CenturyLink and Windstream have similarly been losing broadband customers hand over foot as they flee to faster cable competitors. Even Wall Street, which has historically and myopically disliked putting any money back into broadband networks, has started to take notice, resulting in the nation's telco stocks taking a precipitous dive in recent months:

"Shares in the wireline ILEC/RLEC space (CenturyLink, Frontier, Windstream) have endured the worst three consecutive quarters in industry history, with shares plummeting an average of -20% in 4Q16, -21% in 1Q17, and -24% in 2Q17 (we note another -5% in 3Q17 thus far), mostly from Frontier and Windstream as CenturyLink shares are being supported by the Level 3 acquisition,” Cowen said in a research note."

It has gotten to the point where some Wall Street analysts have even gone so far as to *gasp* recommend that some of these companies actually upgrade their networks if they want to remain relevant. Ironic, since it was Wall Street's relentless focus on short-term gains and avoiding these necessary network upgrades that help put these companies in this position to begin with:

"Jennifer Fritzsche, senior analyst for telecommunications services at Wells Fargo, doesn't think Frontier can actually right said ship without offering consumers a better broadband product.

"It is hard to fix a problem just by cutting costs when your competition (cable) is only pressing its foot heavier on the capex and fiber pedal," Fritzsche said.

But instead of upgrading the networks they already have, many telcos are trying to please Wall Street by focusing on growth for growth's sake. Frontier recently gobbled up Verizon's unwanted DSL customers in California, Texas and Florida in the belief that bigger automatically means better. But Frontier not only saddled itself with massive additional debt and outdated copper landlines Verizon had neglected for years, but it bungled the acquisition so badly it actually forced many of these subscribers to flee to cable even faster. Focusing on growth for growth's sake now has Frontier teetering on the verge of bankruptcy.

But the more problematic impact of all this is that across countless markets, consumers looking for current-generation broadband often only have one option: cable providers. These cable providers are on the cusp of enjoying a greater broadband monopoly than ever before, resulting in less incentive than ever to shore up their historically awful customer service, and only encouraging their slow but steady deployment of arbitrary and unnecessary usage caps. Combine that with the Trump administration's intense focus on eliminating all consumer protections in the telecom space, and it shouldn't take a tea leaf reader to see how this could potentially end very badly for consumers and competitors alike.

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Filed Under: broadband, competition, dsl, investment, telcos, wall street
Companies: centurtylink, frontier, verizon, windstream

38 Comments

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Anonymous Coward, 10 Aug 2017 @ 4:23am

Well they're certainly not hemorrhaging customers because they want them to have the latest bleeding-edge technology attached to nose-bleed inducing data rates.

DSL - damned slow links

Ah for the good old days of pony express and data delivered on pigeon-carried USBs.
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Anonymous Coward, 10 Aug 2017 @ 4:45am

I'm writing from Germany, which is at the bottom of connection speeds in Europe. My DSL provider plays a very clever game: I never get my promised speed but only ~55%. That's just enough to avoid a contract termination without notice.

Be it Germany or the US: ISPs need to die. Mesh networking is the way to go. Unfortunately the bullies and profiteers are standing ready to smash down any efforts.
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Ninja (profile), 10 Aug 2017 @ 5:05am

Re:
If memory serves I've read an article a few months ago talking about new tweaks that could increase bandwidth supported by copper lines tenfold. It would give their older networks some breath while they invest in upgrades. Of course this will lower short-term profits.
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Ninja (profile), 10 Aug 2017 @ 5:07am

Re:
Not really. With proper regulation separating service from infra-structure things may work better.

I'm glad I get 110% of my contract speed at any time though :/
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Bergman (profile), 10 Aug 2017 @ 5:19am

Re: Re:
Better to go bankrupt tomorrow than spend a penny today.

If American industry had always had that attitude, we'd be a continent of nothing but third world countries today.
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Anonymous Coward, 10 Aug 2017 @ 5:20am

Re:
Mesh networking can be useful in low population density areas running primarily a text based Internet and where each connection to the backbone is servicing a few dozen people. However carrying video streams for a few thousand people, and providing the necessary connection to the rest of the Internet requires rather more expensive equipment.
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MyNameHere (profile), 10 Aug 2017 @ 5:20am

Copper has it's limitations, and the phone companies know that. It's a really big problem in the US where outside of the main centers you have fairly low population density and long distances to cover. DSL has a max effective connection length of less than 6000 meters, or about 3.5 miles. It is also fairly limited in terms of speed and overall capacity, except in very, very short runs.

Fiber optic, on the other hand, can run pretty darn far. More importantly, fiber only solves the biggest issues (distance to the central office or DSLAM) if you have fiber to the house.

Fiber to the neighborhood seems like a good idea, but that requires building remote buildings to terminate the fiber and distribute to customers. It also doesn't really solve the issue of houses being spaced far apart, as the restictions of the remaining copper would still be in the way.

More of these companies appear to be looking towards wireless as a solution. Rewiring their customers to fiber just doesn't seem to be in the cards.
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newton, 10 Aug 2017 @ 5:34am

so how fix this mess ?
.....well OK, same old story here -- big bad Telcos are harming consumers due to lack of competition.

What would be Techdirt's ideal solution to this problem?

If TD could wave a magic wand and install the 'ideal' people in full control of FCC/Congress/Presidency/SCOTUS ---- then exactly what should those good people do to solve this problem?

(it often helps with difficult problems to work backwards from a postulated ideal solution.... to figure out the necessary process to get there)
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Anonymous Coward, 10 Aug 2017 @ 7:08am

huh?
wait a minute? Is TD over here talking positively about Free Market actions were people help fix a problem without "regulation".

Yep... the sky is falling, TD went total anarchy over here!
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digitalplowboy (profile), 10 Aug 2017 @ 7:16am

Tech isn't whole story
Even with FTTH customers still leave. I worked for an ILEC for over a decade. I built the network/technology, 50% of customers were FTTH. The requirement of a phone line is what pushes many customers away. Naked internet is too expensive (NECA charges). We had towns with FTTH that 30%+ of households didn't have our services.

Is cellular a true broadband competitor? Not really, not for me not for you. But for the teleco they still lose customers to them for phone and internet. Telco loses customers to Cable Co. phone, internet, video. Even though Cable Co. takes weeks to fix issues compared to hours that the telco I worked for. Basically same cost to build network with less customers to spread cost over.
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Anonymous Coward, 10 Aug 2017 @ 7:32am

Upgrade to cable.

That is a real funny thought, because any cable company customer, if they had a choice, would dump their current provider.

I have Cablevision in New Jersey. Verizon isn't running FIOs in our town, so it is either Cable, DTV or phone company Internet, not much of a choice.

Cutting programming/phone service doesn't help much, because then the Internet service price goes up. Using a mobile device isn't a reality, their data charges are even higher.

Only way to change this is with Muni-Broadband, but that isn't likely to happen, another option is to privatize the cables and let others use it, but I don't see anyone deciding to run cable even if they can get free access.
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Anonymous Coward, 10 Aug 2017 @ 7:32am

Re:
Of course - provide what generates the most income rather than what the customer wants and then force said customers to use your less than desirable product/service - brilliant!
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Anonymous Coward, 10 Aug 2017 @ 7:34am

Re: so how fix this mess ?
It looks as though you have not been following along, are you new here?
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Anonymous Coward, 10 Aug 2017 @ 7:35am

Re: huh?
False Dichotomy
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JoeCool (profile), 10 Aug 2017 @ 7:48am

Re:
In the US, it's not 6000 meters, it's 20000 feet. :P In any case, that's PER SECTION, not total length. Every 20000 foot section has to feed a box that handles the next 20000 foot section, with one last 20000 section on the last box to prevent reflections. You can have several houses per 20000 foot section - I'm the very last house on the last 20000 foot section for the DSL in my neighborhood.

Fiber optics don't need a building for every split/termination, just a small box. If you aren't familiar with the tech, google for fiber optic junction box. They're really not very big at all, and fairly cheap! Not that you're ISP won't charge thousands if they need to put one in. ;)
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Anonymous Coward, 10 Aug 2017 @ 7:52am

The simple fact is, the Telco's haven't bothered to do anything for years and their lines are rotting away. What have their plans been to do something about it? NOTHING! The simple fact is, you can gobble up other company's to get more users on a dying network, but the simple fact is, most of those people are older people. People dying off from old age. Those still with a Home phone line, still using DSL.

People aren't signing up for that these days. Their market is shrinking and it's going to drop off pretty fast. The only way to fix this is to start laying down Fiber. Offer good prices for service and most importantly, Good customer service and people would flee the cable company's!!! Sticking with doing nothing means them going out of business in a number of years. Most of these company's if they keep doing what they're doing will be gone in 20 years at most.

Wireless Networks is not a solution. It's the cheap way to go, but SUCKS!!! We had it here at work for many years and it was really SSSLLLLLOOOOWWWW. But it was the only thing we could get at the time until Comcast finally ran a line into our building. A really large wire!!! Now we have 100Mbps service. So much faster then before. Though I have 200Mbps service at home currently.

The wireless was like 1.5Mbps speed. Had the Dish on the roof pointing to their antenna. The only choice is going to be Cable IF you're luckily. Kind of funny to say as customer service stinks. Prices stink! No real competition and it's just getting worse.

I hate saying it, but towns and city's will have to create their own Networks. I'm not a fan of Government doing it, but if the Private market is going to do nothing, there's not a whole lot of choice. Yet the Cable company's will fight that.
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Anonymous Coward, 10 Aug 2017 @ 8:00am

Re: Re: huh?
I guess you didn't catch the sarcasm...

TD regulars makes the anarchy claim against those that argue for Free Market, instead of "more regulation".

I guess its okay for you guys to make them, but not me, even when I am being sarcastic about it for a reason.
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Anonymous Coward, 10 Aug 2017 @ 8:02am

Re: Re:

If memory serves I've read an article a few months ago talking about new tweaks that could increase bandwidth supported by copper lines tenfold. It would give their older networks some breath while they invest in upgrades.

There's always some article like that. In Canada, there's 50 Mbit/s DSL; in the UK, 80 Mbit/s. Manufacturers are always promising more: gigabit speeds have been achieved in labs, probably only with extremely short distances. But telcos have to put new equipment in their cabinets for that, which US telcos are not doing (do they even have remote nodes? 6 Mbit/s suggests they're going straight to the CO).

Fibre equipment is getting cheap, and going straight to that would be cheaper in the long term... which as we've established, they've stopped thinking about.
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Anonymous Coward, 10 Aug 2017 @ 8:17am

Re: Re:

Mesh networking can be useful in low population density areas running primarily a text based Internet and where each connection to the backbone is servicing a few dozen people.

Why not high-density areas? I'm sure it's not easy, latency being an obvious difficulty, but more mesh-routers mean more paths through the network and much more bandwidth; and technologies like MIMO and beamforming (and maybe even lasers) can reduce interference.

Peer-to-peer technology can help in other ways, like ensuring popular data is cached throughout the network. We don't need everyone mesh-routing to California to get the exact same videos.
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Anonymous Coward, 10 Aug 2017 @ 8:19am

Re: Re: Re: huh?
No, it's just impossible to tell your sarcasm from the regular crazies here. I wonder if there's an easy and clever way to differentiate you two? /s
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Jeffrey Nonken (profile), 10 Aug 2017 @ 8:20am

"But the more problematic impact of all this is that across countless markets, consumers looking for current-generation broadband often only have one option: cable providers."

If there's only one, it's not an option.
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Anonymous Coward, 10 Aug 2017 @ 8:46am

Re: Re: Re: Re: huh?
Just two?
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JoeCool (profile), 10 Aug 2017 @ 9:00am

Re:
The local cable company doesn't run cable where I live. My choices are DSL (5M, which I have), or wireless (up to 12M, but only outside peak hours, more like dial-up during peak).
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Anonymous Coward, 10 Aug 2017 @ 9:00am

Re: Re: Re:

Why not high-density areas?

Assuming that you mean radio based mesh networking, the assigned bandwidth has to be shared between all the nodes that can see each other. Also, unless there is a high density of connection to the outside Internet, the actual connections to the Internet end up carrying traffic for hundreds to thousand of subscribers.

Most of the time, you and your neighbors WiFis work fine because they cannot see each other, while with mesh networking you want to see and connect via four or more neighbors, which also means you are sharing bandwidth. If you are also relaying for neighbors,that is twice the bandwidth consumption, as you both receive and transmit packets going both ways.

Mobile phone networks use careful planning of frequencies used, based on hexagon cells, so that there is always at least one cell on a different set of frequencies between two cells using the same frequency. In high density areas, they just use smaller cells, with lower antenna placement, and lower power to increase capacity. Also each cell is directly connected by wire or fiber to the rest on the Internet, so it is NOT a mesh system as far as traffic routing is concerned.concerned.
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Anonymous Coward, 10 Aug 2017 @ 9:43am

Re: Re: Re: huh?
In order to disambiguate a comment relative to sarcasm, some people resort to a two character symbol "/s" placed at the end of said comment to indicate that it was indeed intended to be sarcastic.
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Anonymous Coward, 10 Aug 2017 @ 9:45am

Re:
"towns and city's will have to create their own Networks"

Except that big telco has written and passed laws in mnay locales to stop that exact thing.
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Anonymous Coward, 10 Aug 2017 @ 9:52am

Laying fiber generally isn't a problem. There is a whole lot of dark fiber out there. Turning it on is the problem.
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Anonymous Coward, 10 Aug 2017 @ 10:02am

Re: Re: Re: Re: huh?
I was assuming that...

"Yep... the sky is falling, TD went total anarchy over here!"

Was fulfilling that role. It seems I have overestimated the crowd around here.
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Anonymous Coward, 10 Aug 2017 @ 10:02am

Re: Re:
"Unfortunately the bullies and profiteers are standing ready to smash down any efforts."

There you go. You fulfilled the statement.

Please how it CAN be done. Enough with the reasons won why it cannot.

Provide solutions, not more obstacles.
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JoeCool (profile), 10 Aug 2017 @ 12:26pm

Re: Re: Re: Re: Re: huh?
No, TD just gets a LOT of trolls, so when in doubt, it's PROBABLY a troll. If my own posts are in doubt when I'm joking/sarcastic, I will usually use a ;) or sometimes the /s to let folks who don't recognize my screen name know that I'm joking.
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Mike Masnick (profile), 10 Aug 2017 @ 1:59pm

Re: huh?
As has been explained to you *repeatedly* we tend to be more free market supporters here than not. However, as we've explained (again, repeatedly) to you directly, in the telco space there is clear market failure, requiring some other solution -- and the current net neutrality rules are clear, concise and do the job with little downside risk. We have, for years, pushed back against EXCESSIVE regulation in nearly everyplace it's come up, including the FCC. We even warned about some potential problems with the existing rules.

And yet, for reasons that elude me, you keep insisting because we feel that there was market failure in this one narrow area, that we always support regulation and never a free market.

So weird. It's almost like you don't care about truth and just want to be trollish.
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MyNameHere (profile), 10 Aug 2017 @ 5:22pm

Re: Re:
Joe, 6000 meters is exactly 19685.04 feet.

Every feed box requires to be maintained. The 6000 meter limit means that if there are only 2 or 3 hours on a given run, then you have to consider those costs covered by only 3 potential subscribers.

Also, it would not be very functional to provide copper wire connectivity to everyone in the town back to a single CO, as the distances (when you consider the route the wires must take) might require multiple sections. Modern networking basically says that you run from your CO to a remote point, install a small switching building, and have all of the local connections terminate there. At that point, they are turned into IP traffic, plugged into a router. It's way easier and cheaper to connection router to router with a single fiber optic run, which can generally go the full distance for most local phone companies without needing any boosts.

There is also the question of maintenance. Installing and maintaining all the cable isn't anywhere near as easy as maintaining a fiber to the neighborhood setup.

Fiber optic is generally the same. The biggest advantage is that you can splice and divide the fiber with junctions and you can do this over a much longer distance. So your 6000 meter DSL can become 20 miles or more.
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Anonymous Coward, 10 Aug 2017 @ 8:42pm

Re: Re: Re: Re:

Assuming that you mean radio based mesh networking, the assigned bandwidth has to be shared between all the nodes that can see each other.

Not entirely true, with good enough beamforming. In theory anyway, but such things do become more practical over time.

Also, unless there is a high density of connection to the outside Internet, the actual connections to the Internet end up carrying traffic for hundreds to thousand of subscribers.

Tor works reasonably well without a ton of nodes, and only a minority are exit nodes. It works even better when you don't need to exit the network, and we could try to do the same with a mesh network. Links across unpopulated areas (oceans...) will remain a problem for non-cacheable uses, but those links were always less of a problem than the consumer links.

If you are also relaying for neighbors,that is twice the bandwidth consumption, as you both receive and transmit packets going both ways.

Those packets go in different directions, so could go across different, minimally-interfering, antennas.
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MyNameHere (profile), 10 Aug 2017 @ 9:05pm

Re: Re: huh?
I think the contradiction you have is the same as almost everyone else. We want the benefits of a free market and competition to drive innovation and keep prices low, but at the same time we love regulation that furthers our personal view of the way things should be.

Essentially, your desire to have online competition in video and other high bandwidth areas means that you want the ISPs and such to have their hands tied by regulation. You want to create the level online playing field regardless of cost or effect. I can udnerstand your point of view.

However, NN is fixing things from the wrong end. The real solution would be mandated breaking up of the media conglomerates who have turned themselves into content providing verticals. Getting the neutral ISPs away from the not-so-neutral content providers and distributors would be a big step in the right direction.

Your competition issues are inherent in the current ownership situation. UNtil you change that situation, everything else will be King Canute situation. The tide will find a way around the rules and we will be back at square one.
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Anonymous Coward, 10 Aug 2017 @ 11:02pm

Re: Re: Re:
I should have worded it differently:

"Unfortunately legislatory bullies are teaming up with the ISP profiteers to create obstacles for independent projects, of course with the goal to smash down those efforts".

The solutions are already there. In Germany it's called Freifunk, creating mesh WiFi networks. About the US I'm not well informed. There was the Free Network Foundation, but their website is defunct (looked yesterday).

If you get struck down, you stand up, adapt to the new conditions and continue the efforts. The alternative is to perish.
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Anonymous Coward, 11 Aug 2017 @ 1:51am

Re: Re: Re: Re: Re:

Not entirely true, with good enough beamforming. In theory anyway, but such things do become more practical over time.

Beam forming systems are not that helpful in high population density areas, as how many houses are in a narrow beam pointed to a neighbors house down the line of a street.

The density of connections to nodes outside the local mesh has to be considered. The lower the ratio of such nodes to the nodes in the mesh, the more the network becomes to look like a set of star networks linked to a central node, and the more the bandwidth of that node comes to dominate the networks bandwidth capacity. Also that requires management of connecting nodes, and oh look you have just started to build a mobile phone network.

I am not saying that mesh networking has no real uses, it does in low population density areas. I am saying that it, and satellite have severe restriction when used in high population density areas, because of the problems of forming enough isolated beams to serve all the potential users.
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Ninja (profile), 11 Aug 2017 @ 6:36am

Re: Re: Re: huh?
Dude, can't you read what he said? Are you some sort of functional illiterate that reads but doesn't understand the words?
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Thad, 11 Aug 2017 @ 4:19pm

Re: so how fix this mess ?
FCC: Stop blaming net neutrality for the lack of expansion of infrastructure, and acknowledge that the true cause is that there's no profit in it. Stop pretending that the problem is "solved" because people don't really need broadband if they've got cell phones. Stop making excuses and acknowledge that there is a market failure. And if telecoms have not lived up to their obligations, take away their subsidies and fine them.

Appoint members of state and municipal governments, and consumer advocates, in advisory positions, not just industry representatives.

Congress: Explicitly allow states and municipalities to set up their own competing ISPs, and preempt any state laws to the contrary. Create incentives for telecoms to expand and maintain their networks, and take away government funds from ones that don't.

The courts: Break up the monopolies. If there is only one owner of last-mile broadband infrastructure in an area, then separate it from the ISP that provides service over that line. Penalize companies that breach contract.
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