Welcome to episode 248 of The Digital Life, a show about our insights into the future of design and technology. I’m your host, Jon Follett, and with me is founder and co-host, Dirk Knemeyer.
Our guest this week is Brough Turner, who is the founder of netBlazr. Brough, welcome to the show.
Today we’re going to chat about a very currently political and topical conversation of net neutrality, the digital divide, and fast cheap internet for all, which is why Brough is with us here today. For those of us who might not have a complete understanding of the topic, Brough, what is net neutrality and why is it so important?
Okay. Basically in the US we have a monopoly in most places, to some extent a duopoly, but very restricted number of providers who are giving you access to the internet. Most people will have a cell phone with some kind of internet connectivity and some kind of fixed internet in their home. There is only one viable competitor for the fixed internet and that’s Comcast. There are a few providers, so as soon as you have a monopoly or a very limited number of providers, there is a risk of the people who have the power will do more than just deliver the service. They’ll control what you get over the service or they’ll differentially price things. We’ve seen this with Comcast basically trying to hold up Netflix for extra payments, so even though I get internet from Comcast and I’m paying Comcast for access to the entire internet, Comcast is going to Netflix and saying, “We won’t let you get to any of our users unless you pay us extra money.”
So there’s certain content that Comcast is restricting, in some sense, for me. That’s a violation of what people refer to as net neutrality. Now, there’s all sorts of other confusing things that get in there. People take the term and stretch it to other domains, but the root problem, the original source of the term, is we got a monopoly or close to a monopoly controlling our access to the internet, and we don’t want that company … Personally I hate the idea we have a monopoly, but given we have a monopoly who dominates our access to the internet, we don’t want the people who control our access to be able to decide what we’re listening to or we’re connecting to, what we’re doing with it.
I’m an anti-capitalist, so far be it for me to stand up for big corporate interests, certainly. However, Netflix is a service that sucks a lot of bandwidth, right? The serving of videos, compared to say, reading text on the internet, there’s a massive difference in the amount of data that is moving through those two experiences. So from a logic, commonsense perspective, is there some argument to be made that if the user is using high bandwidth services, that there should be something, that Comcast should be getting more money from you or more money from Netflix, or more … I don’t know, right? I’m just-
If you’re looking at something where, again, access to the internet … If I’m paying for access to the internet and Comcast wants to say, “Well, if you want to use more than a terabyte a month, I’m going to charge you something extra, or if you want to use bandwidth in the early evening when my peaks are, I’ll charge you extra,” that’s a reasonable thing. If Comcast … now … separate thing, they’ve got a monopoly, so what the hell price are they picking and is it real and so forth-
But if there were competition, and remember if you do, in the 1990s between 1994 and 2000, the primary technology for delivering the internet was dial-up. During that era, the dial-up, the base level connectivity, as the phone system was open to everybody, it was a regulated monopoly and the internet ran on top.
In 1994 there were a dozen ISPs in the world. In 2000 there were 10,000 ISPs in the United States. It just burgeoned because the underlying transport was available, and in that market, if my ISP didn’t like delivering whatever … we didn’t have Netflix then … but didn’t like delivering some kind of content or some amount of traffic, they could restrict me and I’d go to somebody else so I could get that. So in a competitive market you don’t have any of these problems. In this market we’ve got a monopolist or a couple of oligopolists, if you will, who basically get to decide, and I have a problem with that.
Why did that competitive market disappear? Why were there tens of thousands and now there’s three, or whatever the-
The issue is there is a natural monopoly in terms of getting physical infrastructure to my house or to my business. There’s only one right of way in front of my house, and in most of the world there is only one right of way. Some weird people have two rights of way in the different sides of their condo complex or something, but basically there’s one path, so it does make sense that there is a natural monopoly on access. The problem is, rationally, if the world were the way I would like it, that would be a dark fiber which has a 20 to 50-year lifetime, put in as part of a public utility, or as a condominium if I live in a community, I pay for the fiber back to some aggregation point like a telephone central office, and then I get to choose who lights it. Because the moment you connect technology to the end of the fiber, you and I know that electronics, three years later it’s functionally obsolete and six years later it’s completely obsolete because there’s something better.
So the timescale for the natural monopoly fits very well with dark fiber, but the moment you light it up, then you can argue about is that a natural monopoly or is that an artificial one created by a government that’s been captured by a corporation. When you do what Comcast has done, which is to vertically integrate everything, all the services, not just ethernet but IP, but whatever, and television, and they’d like to control Netflix, they’re using the physical access which is a natural monopoly to create an artificial, a government … basically they have a franchise from the local town or from the state, just like the phone company has a franchise from the state, they’ve got a government-provided monopoly and now they want to integrate everything above it, vertically integrate so they can control everything and maximize their revenue.
You and I might loath Comcast, but in a capitalist society, that’s what they are incentivized to do, is to try and create those monopolies and just-
-acquire, expand, destroy, right?
Yup, right, right. The real issue is … and this is the trade-off, you want to regulate something because it’s completely unfair. On the other hand, historically the regulator gets captured by people who are regulated. Regulatory capture is like a standard economics term, and you end up with certainly the phone company is in bed with the state regulators and everybody else, and has been since the 1930s. About every 30 years there’s a big congressional investigation and new something or other, and it gets re-sorted, but the last re-sorting anybody had here in the US was the Telecom Act of 1996, and the interesting thing was even though the internet was bursting out during the 90s, in this multi-thousand page congressional bill that passed, the word ‘internet’ only appears three times. It’s too early, so there is no legal basis-
Instead it’s regulation added after the fact by people who have enabling legislation, primarily the FCC based on their enabling act from 1934, slightly modified in the 60s and slightly modified in 1996, but basically the network neutrality stuff that everybody is talking about, they refer to Title II of the FCC enabling, the Communications Act of 1934.
They were worried about what? The telegraph, back then, right?
No, telephone. They were worried about telephone in 19 … So there we are, we are arguing about something that was designed for analog telephones in 1934. That legal structure and all the court decisions that happened over decades, that’s what we have to fight about.
So what is the current law or the current regulation regarding net neutrality? Because there’s been a bit of a shift-
Yeah, so from the mid-90s up through 2015, we got various attempts … when there were particular egregious things that happened, the FCC as the principal body who has some legal authority in this area, came up with a thing, they were guidelines, they were legal, regulatory requirements under different interpretations of the 1934 law. There was Madison … something or other deal back in the 90s where somebody was preventing VoIP over the infrastructure and stuff like that. Each of these resulted in the FCC intervening more and more, but the pre-eminent thing of the early 2010s was something where the FCC was using part of the 1934 act, it was referred to as ‘ancillary authority’, to enforce a set of rules which we would call ‘net neutrality’.
Verizon and others challenged this in court, it went all the way to the Supreme Court, and the Supreme Court said, “Well, reading the statue from 1934, it really doesn’t work. If you want to do this, the only way that you’re legally permitted to do this is under your Title II authority. You would have to decide that internet services are a Title II service, at which point you could impose these kinds of regulations.” Now, I find that really gross because the Title II regulations are extremely onerous, and that’s like the other way in terms of really screwing the world up, but given there’s no new law and you have to apply … So under the very dying days of the Obama administration, the FCC declared that internet access was a Title II service and they imposed a set of rules which were going to go into effect early in the Trump administration, and with the flip of whatever, Chairman Pai, who was a commissioner under the old setup and is now the Chairman … The FCC has five member commissioners and votes are typically three to two, and who’s in charge depends on the administration at the moment, and it’s typically always three to two.
It went from three Democrats and two Republicans to three Republicans and two Democrats, and so the FCC determined that the Title II thing was wrong and they flipped it all back. Really, if you read the rationale that was done in 2015 and 2016 to rationalize making the service part of Title II, it’s plausible … I don’t like Title II but at least it’s the only way open short of congressional … a new law. So there’s no way to really fix it correctly, this was the way to do it. The FCC’s justification under Commission Pai for unrolling this is just technically flawed. Their arguments are really questionable.
How technically flawed, why are the arguments questionable? Make it more concrete for us.
Okay, there is a really thorough answer to that if somebody is really interested, which appears in the EFF’s … that is the Electronic Freedom Foundation’s filing with the FCC on why the rules shouldn’t be repealed. It’s like 60 or 70 pages, you go through the table of contents, you can skim and probably only read 20 pages. There are dozens of reasons and it’s a techie … buried and whatever, but if there is any techies listening who want to look at it, I strongly suggest that you go to the Electronic Freedom Foundation website and search for their filing to the FCC on net neutrality. It’s got a title on the order of Internet Engineers’ Input on Net Neutrality, and it’s a excellent document and it digs into the techie detail at any level if somebody would want to go to … and it has tons of history about each of the egregious things that have happened in stages from the mid-90s through to 2014 or something.
For the people who don’t think it’s egregious, how would they respond? What would their argument be? What would they be saying?
The FCC’s got all sorts of justifications in their document about why they decided that it’s not Title II. The EFF thing refutes those one by one. It really comes down to we’re talking about how do you warp something that nobody in 1934 could even have thought of, to fit this law that was passed in 1934 that’s only been minutely revised a few times since then. So we are talking about baloney.
So it’s obtuseness that’s similar to strict constitutionalists, basically.
Yeah, yeah, one way or another either side has to somewhat warp things because we’re talking about something that’s just totally not part of … You could say rationally the real thing you should do is have some regulatory … have a law that made sense, but frankly I’m fearful of that because I view Congress personally as being 100% a political process that’s owned by … it’s a question of who has the most money to fight one side or another. I’m really cynical, so you don’t get me started on-
Yeah, and sometimes I feel really despairing, and the only time I feel optimistic is when I look at the history of Congress, and in the 19th century or whenever it’s always been this bad, so-
Civilization to this point.
So in the end, the thing that I would like to see is … as an engineer, the thing that makes sense is that you would have regulated utility in the things that are a natural monopoly, or you would live in a condominium community or maybe a community like Arlington, but you’d get a single set of individual fibers from every dwelling or every building to a central aggregation point, and those fibers would be owned by the town or by a regulated utility, or in a condominium fashion by the owners of the buildings. In any event, as dark fiber, and if it comes to an aggregation point where there is thousands of such fibers, then you can bet that competing carriers will come to that location to compete to light up these fibers. That’s a model which makes a lot of sense, that’s a model which actually exists in Stockholm and a few places, very few places around the world, and it works incredibly well. Because you get hundreds of ISPs competing to light up these dark fibers, and you get the vibrant market we had in the US in the 1990s back again.
You’re a founder of a company called netBlazr, so you have a professional role in this whole ecosystem.
Maybe tell us a little bit about that.
Yes, so I’ve been pissed about this subject since at least 2002 or 2001, ever since the early 2000s. In the late 2000s I was speaking and writing on this subject, and I did some comparisons of the cost of a hundred-megabits symmetric internet service in these major cities around the world, the fifth of which was New York City where it wasn’t available. You looked and it turned out that if there was fiber infrastructure anywhere that was open at layer zero, with dark fiber, you get vibrant competition. As the open access got higher up, you got less and less competition and higher prices, and you reached New York where the open access was at layer three, above IP, where there wasn’t such a service at all in 2008. So when I was effectively at loose ends, that is the company I’d founded in the 90s was split up and sold off in pieces in 2008, and I was doing some consulting in 2009 and trying to figure out what I was going to do, part of my background was also in RF. I’d done a whole bunch with 3G wireless in the early 2000s, so I got to thinking about could I go wireless and run around the monopolists, and the answer is in rural areas there were tons of people already doing it. A couple of thousand at that point, and probably three or four thousand now.
Out of necessity, I guess.
Yeah, out of necessity, because it was a zero choice if you lived on a farm. But as I looked at that stuff, I came up with a couple of different business plans for possible businesses, two of which … one was to try and become an internet service provider. That’s the one that worked in netBlazr. The other of which involved a complicated radio that I thought would allow me to get a consumer-installed window-based device, and I have to say that I’ve used up almost a million dollars in National Science Foundation grant money on that, and I don’t … that business has not turned into a viable business yet.
Somewhere there’s a Republican pissed about that allocation of money, I got to tell you.
Yeah, yeah, yeah, and I will say I probably won’t do another National Science Foundation whatever just because if you can’t raise real money from seed money investors, or put your own money in, it probably doesn’t make sense, and I shouldn’t have done that. It was probably five years too early.
Let the market help you work your ideas out.
Anyway .. but the ISP piece, I didn’t know enough, people said, “Oh, you can’t do this. There’s too much …” there’s five gigahertz unlicensed spectrum, and there’s no way you could possibly do this in a city, there’s just too much interference and so forth. But with directional antennas, you can overcome an enormous amount of interference just by concentrating where you are transmitting and concentrating where your receiver is listening. So I thought there was a good chance of that and I worked out a bunch of things, and we started out. I have to say we started in May of 2010, and we tried a lot of different business models including trying to get businesses to participate in cooperative things, and trying … yeah, a lot of things, the sort of hippie view of the world that didn’t work. In the end, people basically want a solution and they don’t want to have to be involved in it.
So we became a more conventional ISP except we’re using wireless, and what we found is you can reach almost anywhere with so-so service, and you can reach clusters of people, for example apartment buildings, condos, and any place where there is a little bit of density, you can afford to bring in really high-capacity multi-gigabit links and provide everybody … We started with 300/300 megabits per second service. We’ve upped that to 500/500 and in the next 12 months I committed to the rest of the people that we’ll have one gig symmetric services in at least some of our buildings, and be working on upgrades.
For context, how does that compare to a Comcast, it’s a garden-variety Comcast service?
Yeah, so Comcast is providing a bunch of different speeds for downloads.
What’s typical? Just a … because the numbers you’re using, I’m sure, are meaningless to our listeners.
Yeah, okay, okay. You can get twenty-five, fifty, a hundred, a couple of hundred megabits down. The thing with Comcast is using their cable TV infrastructure, they have a lot of capacity going towards you, very limited return channel. So they’ve recently announced … and I saw a demo, this is not actually available yet … they’ve announced they’re going to have gigabit internet connectivity, and I know the CTO of Comcast. He’s a friend, even though we’re bitter enemies …
I love you, but I don’t think he’s scared of you, I got to tell you.
I don’t think he’s scared of me, absolutely. He was happy to show me the whole thing. … down in Falmouth in September and he had just done a demo thing, and he had … and he had a gigabit down and 30 megabits up, and he was the only one connected there so there was no other competition, so it did work. There was no … Practically speaking, with their infrastructure they do have the capacity to deliver downstream capacities that they’re promising. They have a very limited capacity to deliver upstream bandwidth.
Without completely replacing …
Yeah, without replacing everything, which they’ll get to some day.
… gradually, but they need to put that off. They would have to go back to the capital markets for an enormous amount of money to do that, so they’re doing little incremental things. The downstream side, when they run out of capacity, they can put more TV channels together, and when they run into conflicts of too many people on the same thing, they can extend the fiber a bit further out, divide a set of cable TV stuff into two separate fibers. So there’s a bunch of things they can do and they’re doing them incrementally, and people bitch that they’re not doing them fast enough because they’re promising this and delivering this-
And so forth, but there are practical … As a monopolist I don’t like their pricing, or any of their ability to abuse their position, but as a technologist and as a business person, they’re doing something that’s entirely rational in terms of you’re not going to go back to the capital well and raise money to deliver fiber to a hundred million residences. That’s an insane amount of money, a trillion dollars here, a trillion there, and it’s just unbelievable even for … So the interesting thing is, even doing it wirelessly it is a capital-intensive business.
When I say we can go to a building with 50 apartments or 100 apartments and bring in a ton of capacity, we need maybe $5,000 to $15,000 or $20,000 of capital investment to get the capacity to the building, and get the wiring in the building and get set up, so we can start signing up customers. So it makes sense, if it’s a 200-unit apartment building, especially if it’s a brand new one where everybody isn’t already locked into a Comcast contract, for a 50-unit building you have to think about, “Well, what’s it actually going to cost me and how many people am I going to flip in six months, and how many are going to take two years?”
It’s not hard to flip people from Comcast, but a lot of people are on contracts and things, a two-year commitment, and if I look at our business, we raised a bunch of seed money from family and friends, if you will, convertible notes, and we reached profitability some time ago. We are close to throwing off enough cash to fund our capital investments to keep growing. That’s the real … profitability is okay but if you need to invest capital to keep growing, where does it come from? And the answer in the near future will be it comes from all the money we’re making, we’re pouring back into expanding. But we’re trivial compared to Comcast. We’re 3,000 subscribers in Boston. We doubled last year and like to double this year, but that’s still irrelevant compared to-
It sounds like the city of Boston is your focus right now. Any plans to move beyond Boston into other geographies?
Greater Boston is our … we have buildings in Cambridge, in Somerville, as far out as Medford, Brookline, but absolutely it’s Greater Boston area. Things that we can reach wirelessly from one of our fiber feed points, and the fiber feed points are either in Boston or in Cambridge. If I felt confident that we had all the technology, the monitoring systems, the training, and policies and procedures in place to make this be smooth instead of a day by day struggle, scrambling to keep up with new sales, then the gutsy thing would be to say, “Ah, here’s the model. It costs this many million, you can get to this, whatever, in two years, and you can get to this in five years,” and then go out, raise money.
There’s at least 50 cities that could do the same thing. In fact, if you look at Brooklyn or the Bronx or Queens, by themselves each one is at least as good as the Greater Boston area. The other approach, which is the more incremental thing, is you find a cluster of three or five buildings you can sign up in an area where there are 20 or 30 buildings that are candidates, and you use that as a toe hold. One thing is, “Gee, we got some people in Quincy who are interested. What if we can move down …” you could go down the coast of Connecticut along the New Haven and Hartford Railway to New York City, and there’s just one thing after another which are more modest things that you could get into with less money. So there is a number of possible growth strategies.
We’re not the only people doing this. One of the older companies that stumbled into this is a company called WebPass that sold out to Google a couple of years ago. They’re in San Francisco, Seattle, Chicago, Miami. They were in Boston but it looks like we were too much competition for them, because Google’s announced they’re not doing any more WebPass in Boston, is not signing up any more subscribers. But there are companies like that and I’m aware of five or six such companies. So what we’re doing is not unique and it is hopeful that at least apartment buildings and condos in urban areas can be connected in a fashion that’s very competitive to anybody else. Over the next five or ten years I would expect a lot of that to happen, and once it becomes well-established there’ll be roll-ups.
So I expect that if we lead the roll-up we’ll be rich, and if we get dragged into a roll-up, we’ll at least do okay. That’s the long-term thing. In the end it ought to be fiber, but wireless is a way to get there. Wireless is the only thing to work around the lack of access to the right of way. Just talking about right of ways, that is the problem, is where is the right of way and who can put stuff in the right of way. netBlazr actually has a bunch of fiber in some places, but one example is in the Mission Park complex in Huntington Avenue in Jamaica Plain, South Roxbury, Brookline border. That’s 1,100 units of mixed-use subsidized housing, and its multiple city blocks. We serve every unit there now. We’re almost … we’re not quite done building out yet, but … and we do it with fiber to all the buildings, until you have to cross a city street, and then we use wireless.
So there’s fiber on the other side, but we have to cross a city street with the wireless, because the overhead of getting anything in the city right of way is beyond belief. So nobody even bothers and we haven’t started to try and tackle that.
Brough, thanks so much for joining us on the show today. We appreciate your perspective.
Listeners, remember that while you are listening to the show, you can follow along with the things that we’re mentioning here in real-time. Just head over to thedigitalife.com, that’s just one L in thedigitalife, and go to the page for this episode. We’ve included links to pretty much everything mentioned by everybody, so it’s a rich information resource to take advantage of while you’re listening, or afterword if you’re trying to remember something that you liked. You can find The Digital Life on iTunes, SoundCloud, Stitcher, Player FM and Google Play. And if you want to follow us outside of the show, you can follow me on Twitter at Jon Follett, that’s J-O-N F-O-L-L-E-T-T, and of course the whole show is brought to you by GoInvo, a studio designing the future of healthcare and emerging technologies, which you can check out at goinvo.com. That’s G-O-I-N-V-O dot com. Dirk?
You can follow me on twitter at dknemeyer, that’s at D-K-N-E-M-E-Y-E-R, and thanks so much for listening.
Brough, where can folks get in touch with you online?
Certainly twitter, B-R-O-U-G-H. Gmail, B-R-O-U-G-H-T-U-R-N-E-R at Gmail dot com. I may or may not respond quickly, it totally depends on how swamped I am keeping up with netBlazr.
Excellent. That’s it for episode 248 of The Digital Life. For Dirk Knemeyer, I’m John Follett and we’ll see you next time.