Asymmetrical Information

I switched my business phone lines from Verizon to AT&T yesterday and reduced my bill by 75%.

Thank God I wasn't on any stupid "do not call" list. ;-)

Nothing's better than a little competition. The old school phone companies have been living off of the technology for more than 50 years. Instead of anticipating and encouraging change they stuck with the old formula and It isn't going to work much longer. We've been monitoring this Skype thing over at the Chicago Report.

The only reason these companies are still in business is because they're monopolies. If voice communication were handled over the internet it would cost at most 1 cent a minute. Communications policy in the US is an absolute disaster.

While I don't disagree that Verizon may be in trouble, that has got to be one of the technically-dumbest articles I've read in a while.

"When it comes to broadband, Verizon offers DSL, a technology that is inferior to cable. It's slower and less scalable in terms of bringing on more bandwidth."

For the bargain basement physical plant, that's exactly backwards. DSL will have a lower peak bandwidth, but each user has dedicated bandwidth between them and the central network switch. All cable modem users on a system share the same bandwidth (which led to some mighty bitching for early installations).

For the non-bargain basement physical plant, the company puts in neighborhood access multiplexers with fast links between the multiplexers and the backbone. Because cable modems are inherently less scalable, the cablecos were forced to do this early on. (When you have to roll out fiber optics because the customers are going ballistic, you have not created a scalable system.) DSL providers have the choice of doing it; if they do it shortens the line length and increases the customer's peak bandwidth.

"DSL is harder to install, troubleshoot (forgot your password? You'll get a new one in the mail—paper mail that is—three days later), and use."

What a moron. Good hardware from a good company is a breeze. Crappy hardware or a crappy company sucks. Password reset isn't a DSL problem, it's a bureaucracy problem.

"(DSL originated as a kludge to get better data speeds out of old copper wires)."

You want to talk kluge, look at the bidirectional amplifiers and local access multiplexer crap the cablecos have to do. DSL involves some simple filters and standard telephone cable.

"The idea is that Verizon's DSL subscribers, as a reward for their loyalty, can go online wirelessly for free through Verizon whenever they find themselves near a Wi-Fi-enabled pay phone. A "killer app" this is not. Manhattan is unlike any other American city. It's hard to imagine people on the freeway in St. Louis going online while zipping by pay phones at 65 miles an hour. In the cable world, Wi-Fi base stations are seamlessly integrated within the cable modem, which happens to sit where it's most effective: in your house."

Whereas the the Time Warner alternative he touts is limited to, you guessed it, NYC. Maybe he should read the pages he links to.

"But what's good for consumers is potentially disastrous for Verizon, which has spent billions of dollars building its wireless network—the nation's largest—at a cost it has yet to recoup."

But did they build too many base stations? That's the only question that matters. If they put the right number with the right overlap in the right areas, they'll attract customers because of superior coverage. If they pulled a Wal-Mart in multiple markets, they can afford to ride through a blood bath in certain local markets.

I agree with no-one. If even I can find holes in Bennahum's arguments, they're Swiss cheese at best (Irish lace at worst?).

... DSL providers like Verizon are trying to attract customers by slashing prices, a short-term fix with dangerous long-term consequences. At some point DSL could become unprofitable, generating insufficient cash flow to finance investment in upgrades.

No one outside the Baby Bells seems to know how much DSL actually costs the providers. If Verizon can offer broadband for, say, $20/month and still make a profit, I think the cable companies will be the ones becoming unprofitable. Even if that's only 512 or 640 kpbs vs. cable's usual 1.5 mbps, I expect there'd be a lot of takers.

Also, it seems to me that Bennahum's article keeps talking about Verizon's problems, but all of these difficulties apply equally well to other companies in the industry. Maybe there's a reason that Verizon has more cell phone subscribers than anyone else? Maybe AT&T and Cingular are scared that their customers will switch to Verizon? There are probably good reasons to focus on Verizon's vulnerabilities, but Bennahum says surprisingly little about why Verizon is uniquely in trouble... which makes me think that it's not.

My family use to spend around $70 a month with SBC. That bill is now down to $26. We currently must have a land base telephone to support our home burglary system. Still, once our three year contract runs out---we will be switching even this service over to our Time Warner cable providers. I expect to completely sever our ties to SBC within the next two years.

DSL requires near-perfect phone lines from the house to the switching center. It's just not going to happen around here as long as Verizon has the monopoly on local phone lines. Back when they were called GTE, they took eight years to replace a phone line (pole to house) that shorted out in every heavy rain. This is in Michigan where it rains most of the time it isn't snowing.

Another advantage of DSL over cable modem is that you don't have to pay for cable TV (as you do in my area). I don't watch much television and therefore save my self $35 a month with DSL.

The telcos might try to have Skype declared illegal, and they have deeper pockets to pay campaign contributions than the music industry has, especially now that Microsoft is entering the mobile phone business. While MS probably couldn't care less what happens to telcos providing services over telephone lines, Skype could become a problem for them via WiFi.

"The telcos might try to have Skype declared illegal,..."

They can try but even if they do chasing down and prosecuting users might be a wild goose chase and cause them even more bad publicity then the RIAA has created for themselves.

The user database is decentralized, you will not have stolen content on your computer and a Skype call looks to most systems just like regular surfing traffic.

On the other hand there are folks, both commercial and governmental, with large vested interests in the current world. The encumbent telcos have large, but diminishing, revenue streams from long distance calls and governments at all levels have tax streams that increment with every minute of charged usage. So there could be some significant pressure to criminalize or regulate.

I think, though, this one will be too difficult for the corps(es) and their cronies to spin in a way that will pass even a modest laugh test.

I'll agree with those who say the bashing of DSL in the Slate article was overdone.

I've had both DSL and cable modems in my home and we got rid of the cable, kept the DSL, and the DSL service has been fine. (And that's a Verizon DSL line too).

That's not to say there aren't problems with DSL (I avoid a big one by living just a block from the phone switching center) but there are problems with cable too that were worse for us.

If DSL was as bad as that story says it wouldn't be competitive *at all* with people who have cable lines into their homes anyhow, as we do, yet it is.

Another advantage of DSL over cable modem is that you don't have to pay for cable TV (as you do in my area). I don't watch much television and therefore save my self $35 a month with DSL.

Kevin, just fyi, Comcast here doesn't require you to get cable TV to get a cable modem. I think they charge you an extra $10 per month, tho; everyone I know who has a cable modem also gets cable TV, if only the standard 50 channels.

The telcos might try to have Skype declared illegal...

Ralf (and Steve), I don't see any theory that could be used to make Skype illegal. It's not like there's copyright involved, for example. 20 or 30 years ago, regulators (or Congress) could claim they were worried about consumers being defrauded or something, but that argument won't fly now. I suppose, over time, enough convoluted regulations could be introduced, but the problem is now, not ten years from now.

And, as Steve says, enforcement would be very difficult, which makes it even less likely that regulation will be attempted.

Legal action against Skype is unlikely. Should Skype grow to the point where it's diverting significant revenue, there will be millions of people using it. Politicians won't want to lose so many votes.

The only reason these companies are still in business is because they're monopolies. If voice communication were handled over the internet it would cost at most 1 cent a minute. Communications policy in the US is an absolute disaster.

The internet IS phone lines. Someone else just pays for them.

And "no-one" was just as one sided in his or her little cable diatribe as the article was about DSL. Thanks for the DSL advertising recap.

About the only thing this guy got right was the devastating effects of over-regulation in the industry. Most people I know would rather slit their wrists than read the latest FCC triennial order and quite frankly I'm suprised more people don't slit their wrists after reading it.

The internet IS phone lines.

The internet began life as a military project designed to maintain communications after a nuclear strike. It didn't use phone lines.

Phone lines use a dedicated circuit for voice commumications. The internet uses packet switching. Packet switching offers a tremendous advantage in efficiency over dedicated circuits.

Many people use dial-up services to connect to the internet, and perhaps this promotes the mistaken idea that the internet consists of phone circuits.

Ian Callum said:

The internet began life as a military project designed to maintain communications after a nuclear strike.

No. The Internet (note capitalization) began life as a blue-sky computer science project under the aegis of ARPA, the Advanced Research Projects Agency. In the early '60s, it was becoming increasingly obvious that batch-mode computers lacked flexibility and tended to imprison the data they operated on. The vision of the ARPANET was to build communities of people, linked by networked interactive computers. The military funded it because they were afraid, with good reason that it turned out, that commercial vendors were happy selling payroll processing systems and wouldn't take the risk of funding such radical research.

For the curious, do a websearch on battlespace infosphere or C4I to see the modern bleeding-edge of the ARPANET's descendents.

It didn't use phone lines.

<hermione granger> A History of ARPANET says "The IMP [Interface Message Processor] was the decided upon method of connecting the participants computers (hosts) to each other via phone lines." </hermione granger>

Phone lines use a dedicated circuit for voice commumications.

Phone lines present the illusion of a dedicated circuit. For many years now, it's been a virtual circuit, backed up by an unholy melange of multiplexers, modems, radios, digitizers, and packetized links. For expensive links they even use data compression to cram more virtual voice circuits onto a given hardware link. CDMA cellphones go so far as to transmit on the same frequencies at the same time, and use fancy signal processing to untangle the virtual circuits.

Describing the physical layer as "phones lines" introduces confusion. The real distinction is between using dedicated circuits and packet switching. Packet switching is the superior technology.

Bell monopolies have been a great obstacle to the development of sound communications policy in the US. Compare what South Korea has accomplished with what the US has done and it's obvious that we're falling behind in this vital area. Being stuck with obsolete communications systems is a huge economic problem.

I currently am a manager (and former tech) in an outsourced call center troubleshooting SBC DSL issues. The Slate article is right - DSL, for the most part, sucks. A lot of this is due to the providers' braindead insistence on the use of PPPoE, an absurd protocol that requires customers to sign in to what should be an always-on connection. So many of our center's calls are generated due to PPPoE authentication errors that I am convinced that, between that and the cost of maintaining Radius and LDAP servers, the provider is losing more money on implementing and supporting PPPoE than they would lose on IP addresses and bandwidth if they gave everyone a straight, bridged DHCP always-on connection. Another culprit is regulatory issues that require a legal separation between the ISP and the telco. That means that my techs don't have the tools that they need to effectively troubleshoot line-related issues, and that fixing line issues requires coordination between what is in essence two separate companies. My TWC cable connection at home, on the other hand, is plagued with none of this crap. I have a single point of contact if something breaks, and the connection is a true always-on pipe. As for the shared bandwidth, I've never seen any real problems - not even with 4 PCs in the same house hooked up via a NAT router. Professional-level SDSL offerings probably provide a higher grade of service, but consumer-grade ADSL currently is a very buggy technology, at least as it is currently implemented by SBC.

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