US Telcos Teeter Toward Bankruptcy As Comcast's Broadband Monopoly Grows
from the dysfunction-junction dept
We’ve noted time and time again how the US broadband industry’s biggest problem is a lack of healthy competition. In countless markets consumers either have the choice of a terrible phone company or a cable giant. The nation’s phone companies have spent the last decade refusing to upgrade (or in some cases even repair) their aging DSL lines, because they don’t see residential broadband as worth their while. That in turn is giving giants like Comcast and Spectrum an ever greater monopoly in many markets, reducing the already muted incentive to compete on price or shore up historically terrible customer service.
It’s a weird problem that’s widely ignored by both parties, and it just keeps getting worse. This week, US telco Windstream filed for bankruptcy protection, partially thanks to a dispute with one of the company’s creditors, netting a $310 million settlement Windstream couldn’t swallow. More specifically, hedge fund Aurelius Capital Management had argued that a two-year-old spinoff of the company’s fiber-optic cable network violated the covenants on one of its bonds, prohibiting “sale-leaseback transactions.” The court agreed.
Windstream, for its part, issued a statement insisting that none of this was the company’s fault, and that the bankruptcy protection wouldn’t impact customers:
“Windstream did not arrive in Chapter 11 due to operational failures and currently does not anticipate the need to restructure material operations,? Thomas said. ?While it is unfortunate that Aurelius engaged in these tactics to advance its returns at the expense of Windstream, we look forward to working through the financial restructuring process to secure a sustainable capital structure so we can maintain our strong operational performance and continue serving our customers for many years to come.”
But Windstream’s inability to swallow the court ruling comes directly from the company’s already shaky footing.
Windstream was already $5.6 billion in debt and, like many US telcos, stuck in a cycle of dysfunction. Customers continue to flee to cable competitors at an alarming rate, because the telco often refuses to seriously upgrade its DSL lines to fiber at any real scale. And it can’t upgrade its DSL lines to fiber at any scale because customers are leaving at an alarming rate, draining their coffers. Watching these companies (and a few oddly bullish investors) pretend this ends well for anybody involved has often been a comedy of errors.
Windstream isn’t alone; telco giant Frontier has also been perched precariously on this cliff for the last few years. Our collective bipartisan reaction to this has been to throw a few million in subsidies at the problem and hope the regulatory capture and other obvious sector problems just magically fix themselves. The problem is so bad, many towns and cities have been forced to build their own broadband networks, something that’s immediately vilified as “socialistic” by the same industry whose greed, apathy, and incompetence caused the problem in the first place.
None of this stuff sees much interest in the broader tech sector, but it should.
As vertically-integrated cable giants like Comcast and Spectrum enjoy even greater monopolies over internet access at modern speeds, it has a trickle down impact on the internet ecosystem as a whole, especially in the wake of the death of net neutrality. Comcast’s growing power opens the door to broader anti-competitive behavior unchecked by neither regulatory oversight nor healthy competition, impacting all of the smaller businesses hoping to compete for mindshare. Some like to claim that 5G will be some magical panacea that comes in and provides a competitive counterbalance to this dysfunction, but we’ve noted how that’s not likely for a wide variety of reasons.
Natural monopolies dominating the on ramp to the internet and much of the content doesn’t end well for anybody in the ecosystem, especially given America’s comic inability to enforce antitrust. The broadband industry’s issues are a problem that exponentially impacts everything on the internet, yet it’s a problem we continue to turn a blind eye to in the hopes it will all just magically sort itself out.
Filed Under: bankruptcy, broadband, cable, competition, dsl
Companies: comcast, windstream
Comments on “US Telcos Teeter Toward Bankruptcy As Comcast's Broadband Monopoly Grows”
Come on Starlink!
The SpaceX satellite based ISP can’t get here fast enough. Sign me up now!
Re: Come on Starlink!
Oh, that’ll solve everything!
No worries.
Re: Re: Come on Starlink!
It should at least provide competition to every ISP on earth. See how incumbent ISPs reacted to Google Fiber deployment. Now multiply that by the entire planet.
Re: Come on Starlink!
The latency will change the way conversations work, at least once people become accustomed to it, and that might not only be difficult, but it might take a long time.
Gamer’s won’t be able to use the system, at least not for games, as reacting to other players in split seconds is crucial for some games. Now if games were developed to incorporate latency in the game play, at least some gamer’s might use the system.
Sites like Techdirt that are fairly static, or not interactive in a time sensitive manner, won’t be affected, but some sites where filling out forms have timeouts could cause some serious problems.
I am all for the competitive aspects of such a system, but latency is a problem that won’t go away easily, if at all.
Re: Re: Come on Starlink!
Latency will not be an issue with Starlink since satellites will only be a few hundred miles up, rather than 20,000+ miles with current satellite systems. Latency has already been measured with Starlink test satellites and has results similar to terrestrial ISPs. Starlink is really a game changer for the ISP industry since SpaceX will be able to market internet services to the entire planet.
Re: Re: Re: Come on Starlink!
I am cautiously optimistic – however, I don’t believe that Elon Musk or his corporations are at all immune from the same corruption that’s taken hold of the large ISPs.
Re: Re: Re:2 Come on Starlink!
Elon wants to send people to Mars, and he’s planning on using Starlink revenue to pay for his trips. He has a vested interest to see broad adoption so revenues are high.
Re: Re: Re:3 Come on Starlink!
I remain cautiously optimistic. Starlink has potential to be a good thing, but there remains the old problem of natural monopolies. Satellite infrastructure doesn’t make sense to build copies of, so while there may be competition beween Starlink and Comcast, depending on how the actual build-out occurs, you could still wind up with the same problems that regional monopolies have.
I don’t trust Elon Musk and SpaceX not to go down the same insanely profitable, despite being wildly predatory, paths that Comcast and Charter have gone down if they should get the opportunity.
Re: Re: Re:3 Come on Starlink!
He has a vested interest in not getting sanctioned by the SEC, too. Just because something is in his economic interest doesn’t mean he’s going to do it.
Re: Re: Re: Come on Starlink!
…when the constellation is complete, which is meant to happen long after the service launches. The latency shouldn’t be terrible at the start, but may be much higher than the lowest numbers they’re claiming.
Re: Re: Re:2 Come on Starlink!
Good point.
Re: Re: Come on Starlink!
One possible major benefit, if it winds up being truly global and truly affordable (I have some doubts if affordability will be the case) is that it could offer a viable option in places where there is none.
While issues of latency aren’t going to go away easily, a connection could well be better than no connection.
Of course, something like this could easily fall prey to the exact same problems that plague broadband, given the same problem of it being a natural monopoly.
Re: Re: Re: Come on Starlink!
[quote]Mark Handley, University College London built a simulator based on public details from the FCC
filings to understand the latency properties of the network.
They evaluate how to use the laser links to provide a network and look at the problem of routing on this network. They conclude the SpaceX Starlink network can provide lower latency communications than any possible terrestrial optical fiber network for communications over distances greater than about 3000 kilometers.[/quote]https://www.nextbigfuture.com/2018/11/spacex-low-latency-starlink-satellite-network-will-be-massively-profitable.html
Using "latency using StarLink" as a search parameter I could find no sites supporting your claims. I did find many claiming that SpaceX system is anticipated to be faster that cable with lower latency..
Multiple posts claiming problems with StarLink that are not supported anywhere that I could find indicates to me that you are a troll.
Re: Re: Re:2 Come on Starlink!
It’s nice to see some realistic numbers. I wonder how backbone providers will react; they’re not quite as anti-competitive as consumer ISPs are they? Long-distance laser links could beat those numbers, but one would have to balance tower height with atmospheric distance limitations. (The next step after that would be to convince the high-speed traders to fund a link through the earth. Maybe Elon can help…)
Re: Re: Re:2 Come on Starlink!
Multiple posts claiming problems with StarLink that are not supported anywhere that I could find indicates to me that you are a troll.
What? Did you fail to read what I actually said? I am cautiously optimistic about the service. Latency or no latency, I don’t really care, the numbers are meaningless to me and whether there is latency is less important than that there is, in fact, service to places that don’t have service.
My concerns are that the system will remain vulnerable to the same problems that face all natural monopolies. I don’t see any reason why Starlink wouldn’t take the same path of anti-consumer tactics that Comcast et al have taken. I don’t trust corporations to not be greedy.
Re: Re: Re:2 Come on Starlink!
So, while Musk has announced test results of 25ms, he failed to note whether it was one way or round trip. its also likely under ideal conditions, which may not be the conditions in the real world.
Then there is this FCC filing: which lists that the test was supposed to be run at 1125 km, the operational height of Starlink. However, publicly available satellite positioning data shows that Tintin A and Tintin B are in a far lower 514KM orbit, something that would likely increase transit times. They are only approved for operations at the 1125 KM orbit. Between these two facts, if optimal conditions latency at 514 KM is 25ms, then operational latency at 1125km should be expected to be higher as real world conditions and longer transit times become a thing.
Also, cable latency between the test areas is already lower then 25ms in optimal conditions.
Re: Re: Come on Starlink!
Best case scenario for the latency using StarLink will be 50ms, which is a big deal for some online games.
For social media, , browsing, streaming etc latency doesn’t really matter unless it’s very high.
Re: Re: Re: Come on Starlink!
The test satellites have shown 25ms latency which is on par with terrestrial ISPs:
https://advanced-television.com/2018/05/29/tintin-a-and-b-delivering-25-milliseconds-latency/
Re: Re: Re:2 Come on Starlink!
They also are only at 45% of operational orbit height. Meaning, at the correct orbit of 1125km instead of the test satellite’s orbit of 514km, that 25ms latency will likely be closer to 50ms.
Re: Re: Re:2 Come on Starlink!
Musk didn’t specify whether that 25ms was round-trip or one-way. Given his track record I have to assume it’s one-way. That article also suggests that the tests were between locations in Washington and LA or Fremont. Being in Washington state and using fiber built out by Verizon I currently get 18ms ping times to LA. That’s fairly incredible as it is given that it takes 30+ hops for that short distance (I can remember when that would have been a 4 to 5 hop route).
25 versus 18ms isn’t a big difference to most but for a gamer it can easily mean the difference between winning and losing. And I expect when the satellite network is loaded with traffic that the stated 25ms jumps up closer to 50ms. It’s not easy to add bandwidth to a tiny platform floating in the sky.
The big benefit of StarLink is suddenly all those underserved small and rural communities around the world will have access to the internet. But I doubt the high density urban areas will see much benefit in pricing as a result.
Re: Re: Re: Come on Starlink!
50 ms is GOOD, not bad. My cable internet pings google at 50 to 100 ms, and that is typical. As a developer, I can assure you that most online games are written to accommodate latencies over 100 ms for just this reason.
Re: Re: Re:2 Come on Starlink!
As a developer, I can assure YOU that 50ms is crap, and you’re full of it about "most online games." A good ping is under 20ms. I’ve rarely has a ping of 50-100ms. UGH, that’s crap.
Re: Re: Re:3 Come on Starlink!
No, any good online game will be written to handle those latencies, but very good players will find them intolerable. Even by cable standards, 50 ms is on the high side, and is a sign of an overloaded network (or a poorly configured one, e.g. with DOCSIS2 clients not separated from faster DOCSIS3 ones).
Re: Re: Re:4 Come on Starlink!
Pings over 50 ms are common for most players. It’s the reality of US internet. I’ve never seen a project that counted on less than 50 ms, and even local networks often run more than 20 ms. Anyone touting less than 25 ms latencies is on a GOOD $200/month fiber connection, not the far more common cable or DSL.
Re: Re: Re:5 Come on Starlink!
No project will count on it, but serious ping-sensitive gamers would call that tolerable at best, not good. If a better ISP were available they’d switch.
Uhh, I’m getting 9 ms round-trip on my Canadian VDSL, to 8.8.8.8 (and about the same to one of my ISP’s servers, which must mean they have Google hardware in their datacentre). I didn’t expect or need it, and don’t know how common it is. I’m sure there’s bad DSL in much of the USA (and I used to have it here), but you’ve gotta have good DSL somewhere.
Re: Come on Starlink!
From the [Starlink](https://en.wikipedia.org/wiki/Starlink_(satellite_constellation) Wikipedia page :-
carry up to 50% of all backhaul communications traffic and up to 10% of local Internet traffic in high-density cities.
So your mileage may vary depending on where you live and how many of your neighbours jump on board.
Also a consideration is that last year there were 114 launches world wide, of which Spacex provided 21, so where is the launch capacity going to come from.
Executives and Ostriches
There seems to be a common tendency in executive suites to sleepwalk towards disaster; create every more fantastical spreadsheets explaining how this company or that – Chrysler, Sears or any large department store, AIG and Lehman Bros, even the City of Detroit – will somehow turn around if their company performance would simply follow these artsy Powerpoint charts. This seems to contradict the suggestion that senior executives are somewhat smart and know what they are doing.
Sadly this most recent example simply reinforces the concept that executives lack the ability to see beyond the door of the boardroom.
Re: Executives and Ostriches
You sir are an optimistic.
The executive suit has three characteristics.
Doing the job is not part of the job description which means that in fact only fool do their job.
Hedge Funds
It’s a wake up call to finance reform when hedge funds can burden these companies with massive debt and then walk away with the money.
Is this how capitalism is supposed to work? Maybe we need to push out an update that blocks these shenanigans. (Or would that be "government interference in the free market"?)
Re: Hedge Funds
We have plenty of other laws and regulations to prevent predatory practices by corporations in the US. But it’s hard to tell who to root for… The corporations trying to screw us (the consumers) at every opportunity or the government doing the same?
Re: Hedge Funds
In this case, hedge funds or private Equity firms are not to blame. The debt discussed is actually caused by these DSL broadband providers trying to grow by purchasing aging networks that other providers no longer wish to service. They take on large debt to purchase the network, but inevitably struggle because they then don’t have the ability to take on more debt to maintain the networks. The key here is the moves look forward thinking, with a bad plan for operations going forward.
Hedge Funds and private equity firms are an issue due to the efforts to build up a short term stock value and then take on debt to fund stock buybacks and large dividends. The moves look entirely short term, with no plan for forward operations. It is entirely about the short term gain for stock holders, which are mostly the Hedge fund or Private Equity Firms. That is how I distinguish bad executive action from bad stockholder action.
Once a company becomes accustomed to the strategy of rent-seeking, whether they intended to do so or not, they are never able to return to more wholesome business models.
AT&T, Verizon, the others… they just want to reap profits. Copper lines could or would not do that. While a saner company would take this as a hint to start selling something people actually wanted (fiber to the curb), they were too lazy to do this. "It’s too hard, it costs too much, people won’t want it!" they shrieked. Then decided to milk their FCC licenses for all they’re worth.
Their plan (as much as any company has a plan beyond the immediate next quarter) is to do this for the coming decades. They’ll roll out a fake fiber deployment here or there when a local politician gets antsy, but that’s it.
It’s much the same in cable-land. They will milk their not-really-fiber network for all it’s worth for the coming decades (even if they don’t have decades). This is complicated because their little monopoly has so many drawbacks, licensing fees for content providers being one of those.
They don’t want to become simple telecom companies… very little profit in that, and people will become accustomed to having more bandwidth, necessitating infrastructure upgrades that will cost even more for less profit. It would be much better if millennials just learned to love 500 channels of infomercials and reality tv show reruns for $200/month.
The sort of business catastrophe that it would take to hollow out the management at these companies enough that they’d wake up and start behaving correctly is also the sort that they’d never survive. And certainly not survive with the resources to catch up on all the infrastructure upgrades that they’ve procrastinated on.
We need a corporate death sentence penalty. The corporation is dissolved, material assets sold off at auction, intellectual property reverts to the public domain, and C-level management and BoD are banned-for-life from ever holding such positions at any company again.
With AT&T, Verizon, and Comcast gone from the world, things wouldn’t automatically/instantly be better, but maybe we’d get something half-decent in the next 10 or 20 years. Nothing else will save us from becoming a technology backwater.
Re: RENTSEEKING
I remember when my local telco in Canada started deploying DSL to replace dial-up around 2000. I kept reading Jerry Pournelle’s blog on the massive difficulties he was having just getting DSL to work in a huge population center like LA, and here I was in a small rural town – but I got my DSL modem, plugged it in, and once it figured out it could not work with a wire in and out of dial-up, had to be direct connect – it worked immediately and I had no problems.
WTF was wrong with the telcos in the USA then and now? it’s not rocket surgery.
Re: Re: RENTSEEKING
That is an anecdotal example that does not reflect the broader DSL rollout. I had one of the first DSL setups in the East Bay and it worked like a champ.
Working in IT, I was able to see many DSL rollouts and they went much better than the esteemed Mr. Pournelle described.
Re: Re:
If they refuse to upgrade, they can either give up their telecom sections and hope they figure out streaming, or be dismantled and reassembled as a telecom service who is permanently banned from mergers of any kind, with whatever else was part of them left public domain.
Sucks
Well, that really sucks. Windstream was the only competitor where I live. They may claim it won’t affect their customers, but reality tends to differ significantly. And while I’m not their customer, if they do wind up withdrawing around here, I foresee higher prices from Spectrum, as well as lower speeds as more former Windstream customers turn to the only other alternative.
Dear Telcos….
When you manage to kill off those few tiny competitors who upset you greatly… who do you think your cohorts are gonna look at to destroy next?
Survival of the fittest… and you fat, 4 pack a day smokers, with gilded CEO paychecks are easy targets. Its gonna be funny watching your fat asses in your hoverrounds jousting with each other trying to win a game you rigged for decades. You captured legislators & the federal agency who is supposed to be on our side… what happens when the favored son of one of your competitors gets the top spot & sets his sights on you at the bod of his masters.
I hope you manage to slit your own throats as you kill your enemies, we all know where it went wrong last time & we won’t go back.
Shareholder lawsuits
…and ignored by the telcos, somehow. They’re publically traded companies; how are the CEOs being allowed to run them into bankruptcy? Whether due to incompetence or corruption (cf. Eddie Lampert and Sears), we should be seeing shareholder lawsuits over this.
These phones companies are so DUMB! They don’t want to upgrade to FIBER. DSL gets slower and slower in comparison to Cable. Which by the way offers VOIP service also. If you can also get your phone Home service from Cable, and even that is a dying thing as people just have a cell phone ONLY, what does the phone company have left that people want?
They had YEARS to start laying down fiber and upgrade their networks for real high-speed Internet. Instead, they don’t want to even FIX what they already have. Keep collecting money for as long as they can and not invest in anything.
So an even bigger 1 choice monopoly in Cable company only. I tried with DSL, but the cost wasn’t much cheaper than cable and they didn’t want to make a deal with me and I said fine, I’ll be calling back shortly once I have Cable Internet ready to do. I did just that. A week later I called to cancel service and then they tried to make a deal, and I said, too bad. I already pulled out your crap and am signed up to Comcast Internet with much faster speed.
I didn’t want to go to Comcast. AT&T pretty much forced me to make that move.
I don’t see 5G as the solution either. 5G has a shorter range, which means you need more towers in the area for it to be useful. The 1TB cap of Comcast is bad enough. I’ve already gone past that in the last 2 months. Cell service is even worse. It’s not unlimited, they slow you way down and charge even more money. Satellite is generally, REALLY SUCKS. I don’t know much about StarLink from Elon Musk. I know lower satellites, so less travel distance. But that also means you need more of them, and you have to replace them far more often and they won’t stay in orbit for nearly as long because of how low of an orbit they are in. You have to launch all those from Rockets. That’s not cheap. Satellites also have limited bandwidth. I think it’s yet something else overhyped by Elon Musk!!!
Telco Issues
Frontier shoots themselves in the foot by requiring a Credit Check and usually requires an expensive deposit if your credit is less than perfect.
Their pricey equipment fee of $11.00+ per Set-Top Box and their "extra" fee’s are what drives their current customers away as well as scare new potential customers away.
To me, they are doing their worst, purposely, from a business perspective. They WANT to file for bankruptcy.