Re: LARIAT and Comcast not same problem

[David Farber <dave () farber net>]

________________________________________
From: Dave Burstein [daveb () dslprime com]
Sent: Friday, February 15, 2008 5:30 PM
To: Andrew C Burnette; David Farber
Subject: Re: [IP] LARIAT and Comcast not same problem

Andrew

I'd love to know where BellSouth said that publicly. I have it off the record, but not reportable from anyone in North 
America. On the record, I have Liberty Global Cable and direct estimates based on equipment costs.  My off the record 
sources are authoritative.

     I've written the problem with cable upstream is that they are still essentially using a 1998 design. Dave (who 
wrote a book on that subject) [ Delivering Internet Connections over Cable by Dave Farber, Mark E. Laubach, Stephen D. 
Dukes djf] knows the details better than I. Both the CEO of Comcast and the CTO of Scientific Atlanta told me in 2006 
we'd have full DOCSIS 3.0 in 2007, which would address the problem quickly. Unfortunately, the chips still aren't ready 
and will probably put this off until 2009.

    Some thoughts from my economics training, now very rusty. Brett's problem actually is "cost", not "value" He really 
does have higher costs, so he and his competitors would need to charge more.  Prices are related to cost when there are 
competitive providers. The value of a service to most user is higher,but more suppliers drive the price closer to 
marginal cost + an "ordinary rate of profit." (Difficult issues here in telecom with very high fixed costs, but that 
doesn't change this argument.) The value of my broadband service to me might be $75/month, but competition forces 
Verizon to sell it for $35. When a seller explains a price is based on "value", that suggests there is demand but 
insufficient supply. Otherwise prices would come down. This is interesting because you can draw an inference 
competition is weak when prices move in a way different than cost. For example, DSL costs overall have been coming 
down, even including a generous allowance for bandwidth costs. (Modems are cheaper, support drops significantly when 
most of your users have been on the service over a year, scale matters, etc.) Therefore, when AT&T raised most DSL 
prices about 20% a few weeks ago, I took that as confirmation competition isn't working well.

It is possible to run a large broadband network without traffic shaping like Comcast, because Verizon, AT&T, and 
Free.fr do it. A key Comcast claim in the FCC filing is that this is impossible. Source: Verizon SVP Tom Tauke, AT&T 
SVP Jim Cicconi, AT&T CEO testifying at the Senate, numerous technical sources.
Internet growth rates per subscriber are little changed for the last five years at 35-45%, not increasing or a crisis 
brought on by video. Source: Odlyzko's excellent MINTS page and Comcast's filing with the 40% number for 2007
Over that same period, the costs of delivering that bandwidth have gone down at a Moore's Law pace of 25-40% (switches, 
routers, etc.) The result is that the carrier's cost of bandwidth has been flat to down for five years. The total 
bandwidth cost is typically $1/month/customer. Multiple sources
It's probably impossible to build a network that never degrades even in emergencies like 9/11 or Katrina. It is 
possible to affordably build a network that virtually never seriously degrades even demanding applications like 
highquality web video. Evidence: Free.fr, Verizon FIOS, AT&T U-Verse, and my home DSL line do that today, by company 
claim and all reports I've found.
My conclusion, which allows one to be in favor or opposed to NN, is that neutral networks aren't free, but are 
practical at a definable price.
    I respect the opinion of Dave and others that getting the government involved could create even more problems. My 
opinion is grounded on my research that almost any likely scenario puts the maximum cost of upgrading to a neutral 
network less than $1/month, and it's easy to project costs of a few dimes on a $30-50 month service. I believe that's a 
good tradeoff for the customer and system.
Dave Burstein
Editor, DSL Prime
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