Bright House Networks - Legacy → Re: Brighthouse Tampa Bay Rate Increase (March 2011)

As always I enjoy a lively and respectful conversation with you Rebus. You're the only one I know besides myself that can sit down and write a book for a forum post :) so here goes and I'll try to go down your very good list.


First, let me preface this by reiterating that equipment costs for BHN have gone down. Modems are dirt cheap now. So is fiber. And the SFPs. And that nicely equipped six-figure Juniper M-series router will route tens of Gigabits/sec more than the last six-figure router they bought.

Their transit costs have decreased by virtue of (a) more favorable pricing with Level3, and (b) use of the T-bone network.

Now, to the meat of the subject. Let's pull the TV service out of it for a moment and focus on internet operations. Consider the typical NSP-- take your pick-- that isn't also a content provider, other than offering CDN services. Cogent. Hurricane Electric. InterNAP. Level3. TWTC. Savvis. UUnet (a/k/a VZB). These companies shuttle bits locally, regionally, nationally, globally. And they do so in an environment such that their fees have been declining steadily. Some would argue they've gone too low. But nonetheless, the decline is real, justifyable, necessary. How is it they can drop prices, while BHN needs to raise them?


I will generally concede that fees for said services have come down significantly. How that applies to BHN or any other carrier for that matter I can't say. I don't know.

You ask how BHN or any other provider needs to raise them but you leave out the rest of the equation. It's not just about transport costs. Yea they probably have gone down (one would hope) but other costs have gone up and while some of the savings offset costs there still is that carryover that we must agree exists and needs to be paid for. Providers are businesses and as such they are in business to make money.

In a Star Trek world money is meaningless as everyone has everything they need or want provided. This is not the society we live in and as such our economy is driven by business. Businesses that don't make a profit don't remain in business very long. I don't think that you nor I are in a position to question what is a fair and equitable profit for a specific provider. I can't do that because I come from a business owner background and I sure as hell wouldn't sit around and let others dictate what my profits would be. Not gonna do it.


The difference between BHN and, say, Level3 or Global Crossing, is BHN has significantly fewer competitors in the neighborhoods they service. At the datacenter, I can exchange traffic with just about any NSP in the country. If I can't pick them up directly in Tampa, I can backhaul (L2 transport is cheap) to NoTA or Telemark in Miami, or 55/56 Marietta in Atlanta. Just about every carrier that matters has a POP in Miami or Atlanta. So guess what... they have to compete for my business, and if I don't like what I get, I turn down my BGP session and drop my cross-connect with them at the end of the term, and XC with another provider.

BHN on the other hand, has me as a (relatively) captive audience. Their sole competitors are Verizon DSL or FIOS, and a few miscellaneous DSL providers riding VZ dry loops that are becoming less relevant every day. They know they can raise rates with far less chance of losing me as a customer, than they could if.... say for example... I was picking up a Gig-E from them at 400 N Tampa St. (For those who don't know, you can buy commercial transit with a full BGP table from BHN just like you can from the carriers you know-- Level3, AT&T, InterNAP, Sprint, Cogent, et al.) Now to add another twist, BHN's prices for this enterprise/datacenter-class service have come DOWN in recent years, while prices for their "consumer" grade internet service have gone up. Go figure.


I'm not a great follower of the competition is king mantra that permeates certain halls of DSLR. This applies especially in the Florida market because there is plenty of competition in most areas and prices continue to rise across the spectrum of providers (hell Verizon raised their core prices 5 times in less than two years here).

What does that tell you? Well...either they are all in collusion with each other and involved in the grandest price fixing scheme of the century (and an ice cube has a better chance of surviving in hell than that happening) OR costs of doing business have increased at ever increasing levels for all providers AND the market appears capable of bearing the additional costs.

Notice I just said something key here...the market seems capable of bearing the additional costs. I'm a firm believer in market driven economics. The consumer in time will dictate prices and so far this has held more weight than anything the guys chanting competition is king have managed to produce. Prices will get to a tipping point where the consumer will say enough. I can't afford this and will either drop the product altogether or subscribe only to the lowest price tiers regardless of product or provider. This will force all involved (programmers, providers etc) to sit down and get realistic about their expectations. This hasn't happened yet but it's coming...can't tell ya when...but it's coming. The alternative which is lose lose for everyone is government involvement and we sooo do not want to go there now do we.

One thing you must consider. Generally speaking the cost of internet in our area is lower than most parts of the country and the offerings are far superior to say the least. So for us to complain too loudly about things might be akin to shooting ourselves in the ass. We're pretty damned fortunate compared to many parts of the country. I have relatives in California who would kill to have the speeds and prices we do right here. Right now they're stuck on DSL because the local cable provider who does have a monoply and happens to be Comcast charges almost 4 times what the local telco does.

Contrary to myth BHN is not a monoply here there are options in every market. Now you may not like those options but they are options and we have to agree this is fact...not fiction. That said ...prices haven't come down now have they. So much for that competition is king mantra.....pooof...gone :)


When it comes down to it, what percentage of customers require truck rolls each month for repair to internet service? That's already priced into the service. I agree that employee costs, benefits, fuel, etc., have gone up-- but I'm hoping you'll admit the backend costs (transit per Mbps, equipment at the POPs, premises, and in between) to carry the bits have gone down. It costs BHN a lot less today to carry a Gbps of customer traffic today than it did 5 years ago.


You're making assumptions I can't make. I don't know. I'm coming from the perspective of any business owner. I happen to know certain costs because I ask AND from a previous business of my own I have a firm understanding of what it costs to send a tech to your home. Backend costs have come down but to what degree for BHN or ANY provider I can't tell you and I don't think its realistic for us to pass judgement when we don't have all the facts.


Geek, you and I have a friendly relationship on these forums and I'm sure it will remain so.... whether we agree, or agree to disagree. Tone is sometimes hard to discern from the written word, so rest assured I'm typing this with no malice... just somewhat of a bad taste in my mouth from BHN's decision to include internet (and phone) in their latest money-grab. If TV/programming costs go up, pass them on to video consumers. That's fair. But if your voice and data costs go down or even remain level, DON'T increase rates on them to subsidize the latest cash-grab from ESPN, Fox News, or whomever.


I think you are still holding on to my previous response to you that I posted a clarification to. When I answered your post I was speaking generally not specific to any provider actually because every single one of them raised rates this year in case you didn't notice. I can't tell you if they (BHN) actually spread the operating cost increase cost across all operating units because I just don't know the answer. I will point this out though. In case you hadn't noticed BHN core internet service rates had not increased in many years and considering that one thing alone...it was due.

As for the last sentence there. Speaking hypthetically what would you do in a situation like that. You are obviously aware of the cash grab al a networks this year. If you were faced with the same situation of being forced to raise video product pricing to the point that it literally priced people out of being able to afford cable (in other words breached the market willingness or capability to pay) what would you do?

(Keep in mind that you still have to make a profit and remain viable...no cheating here)

1). Raise the video prices and take your chances on losing subscribers at least in the short term until the competition re-trans agreements come due and they are faced with the very same situation and hope your customer would come back to you realizing that all things considered you were a better provider.

2). Tell the networks to stuff it where the sun doesn't shine and let them go dark facing the wrath of angry consumers who don't care and don't want to know that what you did was in the best interest of all and would jump ship in a heartbeat if you dared let this happen.

3). Spread the increased costs over your other operating units in an effort to soften the blow to consumers in the hopes that some sanity will prevail in retrans pricing sometime in the near future.

How would you handle this oh wise Rebus because I know one thing...I don't have an answer. I could follow my gut and that would be option 3.

As always sir I enjoy your lively and spirited debates and I do understand how you feel please don't mistake my intentions here. I'm a consumer and right now everything I buy or need is going up in price and it sucks. Right now I'm making buying decisions based on what I need vss what I just want to have.

I suspect we all are in the same position...whether we're talking about individuals or businesses

BHN is probably happy to have my family as a good customer because our house's loop length for AT&T U-verse is simply too long for their VDSL2 (People across the street can get U-verse). Also AT&T's ADSL2+ CO based IP-DSLAM doesn't reach me because apparently I'm 19k from their CO. I'm not kidding, this is in a nice suburb and apparently AT&T took the wise decision to instead of build a NEW CO, they took their existing CO in the city south of US and used that instead. So certain city blocks like mine, their ONLY option for broadband is BHN unless you count capped Verizon LTE or other forms of 3G.

Interesting, Here in FL they have the ADSL2+ DSLAM's outside the CO, Sure some are in the CO. But you can see the lawn fridges around here literally labeled "DSLAM". This is also where they have been loading up the VRAD's for U-Verse.

Makes life interesting, even if we don't always agree. I am... BUT there has to be true competition. A duopoly is not competition. The presence of Knology, for example, doesn't really count because their reach is limited. In my 'hood the only players are VZ and BHN, again with the exception of a few dry-loop DSL providers limping along at 2002 speeds. Clear Wi-Max has the potential to make things interesting in a year or two, IF they manage not to shoot themselves in both feet. I'm hopeful, but not quite holding my breath yet.I have no hard data to back it up, but my gut tells me it was because they could. Hook users, cheap. Generate buzz. And once everyone's addicted to (a rather outstanding product), raise prices knowing there's nobody else in town that can get near some of the things FIOS does. I'll be honest, now that I've lived with uploads that peak out around 31 Mbps (we both know I telecommute and have legit reasons for doing multi-GB uploads) there's no way I could live without them. If FIOS doubled in price, I'd still keep it even though I'd scream and cuss every time the bill came due.BINGO.... the market will bear the costs. In the 21st century, the internet is almost as important as electricity itself. If Progress Energy raised rates to 25-cents per kWh, we wouldn't shut off service; we'd just have to make some adjustments in other spending.

BHN and VZ know that most people would give up a LOT of things before disconnecting from the 'net. Just consider the millions of collective shrieks and mass panic when Facebook has an outage. Raise the price-- people will still pay.

It's similar to $4 gasoline-- we try to conserve, but can't go cold turkey. Or cigarettes. When I was a kid, they were 50-cents a pack. Today, what are they?... something like $4 a pack? And people keep smoking.Mmmmm.... let's agree to disagree, over shades of difference. That assumes consumers have an alternative, in order to force the provider's hand. What's my choice if I decide to vote with my wallet? Drop VZ and BHN? Then what? What other viable choice is there at this very moment? None really.I'm a Libertarian-leaning registered Republican who loves certain parts of the Tea Party platform.... so that should make it clear how I feel about government. But I will say that in the complete absense of corporate conscience, there are some instances when gov't regulation is necessary. Think open access to copper for competing DSL in the 90's-- and the highly positive effect that had for consumer choice.

And I don't know how old you are, but if you're a little grey on top like me, you'll remember what happened when Jimmy Carter deregulated the oil industry in the late 70s. I vividly remember gasoline jumping from 69.9c to 87.9c literally overnight the day the new rules took effect. Then the windfall profits tax went away. And all these years later, what do we have? Oil companies setting record profit levels in the midst of the worst rececession in 80 years. Not records for the company itself-- records for the highest profits, of any company, in the history of the world.

Certain industries which are so critical to our society-- and which have failed, in the absense of regulation, to act in good faith-- unfortunately need to be more closely regulated. (insurance, utilities, energy....)Because they can. See my point? But look what happened when Wilson, NC, and Lafayette, LA, (and others) plumbed themselves with community fiber. The local cable operators had no choice but to get more competitive. I do realize muni-fiber operators (like GreenlightNC) are not in business to deliver profits to shareholders, but it goes to show that IF a provider can charge "that much less" and cover all costs, then whatever the cableco charges on top of that is tasty profit. A sensible portion of gravy on supper tastes pretty good. Too much gravy, and it becomes quite distasteful.I'm more sensitive to the issue, because my dayjob has me dealing with (among other things) transit purchases and the chain of costs-- CapEx, OpEx-- incurred to offer network (cloud) based services. And my hard costs to deliver the "same" services have not, in aggregate, increased in the past 10 years. Therefore we have not increased our prices. We've grown our profits by increasing our service offerings and the size of our customer base.That's a good question, and I don't have an answer right now. I do know that softening the blow with option (3) means no steep video price increases, so consumers don't get as angry, there won't be a major outcry, networks will never get the message and retrans costs will only go up. Remember the adage about putting a frog in water and turning up the heat SLOWLY until he unwittingly cooks to death? IMO, consumers need to see exactly WHAT is driving these increases. Don't shield them from the truth by asking (internet-only customers like me) to subsidize the cost of Joe Sixpack's ESPN subscription. This is like adding to the national debt to delay cutting services. If you don't make the tough unpopular decisions NOW, it will only get worse.

So it would be either (1) or (2). My gut tells me that (1) is the best option as long as you make the effort to be transparent with consumers. If Network X raises rates $3.15 per subscriber, make it VERY clear-- in bold print on Page 1 of the monthly billing statement-- that the $3.15 increase is due to a Network X. That brings 2 advantages. First, you focus the wrath of the customers where it belongs-- Network X. Second, other operators will follow suit. When VZ sees BHN is doing it, they'll do it too. Monkey see, monkey do. And this will serve to reinforce the first benefit-- collective rage against Network X. I'll let you fill in the blanks on what happens next.
Ditto.