Thursday, May 25, 2017

Silicon Valley needs heartland help in net neutrality fight - Axios

Silicon Valley needs heartland help in net neutrality fight - Axios: The Bay Area has long been a bastion of support for strong net neutrality rules. Now supporters are looking somewhere else for backup: Trump country. Why it matters: With net neutrality rules under assault, proponents know they need to get the attention of policymakers with roots in the heartland to show support isn't isolated to the Silicon Valley bubble.
This is the crux of the problem defining the U.S. Federal Communications Commission 2015 Open Internet regulations as "net neutrality." It really doesn't mean much to the average telecommunications consumer. Moreover, in the heartland the real benefit of the regulations classifying Internet as a common carrier telecommunications utility service under Title II of the Communications Act is Title II's universal service and anti-redlining provisions. These are real world concerns in the heartland, where millions of Americans have been turned down for years by incumbent ISPs when they attempt to obtain landline Internet connections to their homes and small businesses.

Wednesday, May 24, 2017

Observations on Penn Law review of muni fiber

New Penn research assesses financial viability of municipal fiber networks •Penn Law: Using industry standard financial analysis tools on five years of official data, the study finds that 11 out of the 20 fiber networks assessed do not generate enough cash to cover their current operating costs and only two out of the 20 are on track to recover their total project costs during their 30-40 years of expected useful life. Key findings include:

  • 11 of 20 projects studied are cash-flow negative, many substantially so.
  • 5 of the 9 cash-flow positive projects are generating returns that are so small that it would take more than a century to recover project costs.
  • 2 of the 9 cash-flow positive projects would have a recovery period of 61-65 years, beyond the expected useful life of a fiber network.
  • Only 2 of the 20 projects studied earned enough to expect to cover their project costs during the useful life of the networks, one of which is an outlier that serves an industrial city with few residents.
  • The analysis also models the returns for a hypothetical project, finding it would take over 100 years to recover expected project costs.

Three observations on this study:

  1. The study's findings do not invalidate the concept of municipally operated telecommunications infrastructure per se. Rather, they suggest the financial model requires further assessment and adjusting and enhanced federal subsidization.
  2. The scope of the study does not encompass the external benefits of modernized telecommunications infrastructure, particularly in areas where investor-owned private network investment would also be NPV (Net Present Value) negative, miring these areas with substandard infrastructures and associated adverse economic implications.
  3. The executive summary states that "[a]lthough some claim that investing in fiber serves a necessary function of future-proofing a municipality’s infrastructure, evidence shows little current need for such high broadband speeds." This is the classic infrastructure planning error of estimating future infrastructure needs based on present needs and detracts greatly from the study's credibility since this point is typically made by legacy incumbent telephone and cable companies opposed to public sector telecommunications infrastructure modernization projects as an encroachment on their largely unregulated service territory monopolies.

Tuesday, May 23, 2017

Potential game changer: PG&E could alter California telecom landscape


Image result for pg&e

An application by Pacific Gas & Electric to the California Public Utilities Commission to become a wholesale operator of fiber optic telecommunications infrastructure could be game changer in California where many customer premises nominally in the service territory of AT&T lack landline Internet connections or are limited to slow first generation DSL service over deteriorating copper cable plant.

PG&E’s vast 70,000 square mile northern and central California electric service territory overlaps regions of the Golden State where telecom infrastructure deficiencies are most prevalent: in and around the Central Valley municipalities of Modesto and Fresno, in the Sierra Nevada foothills east and northeast of the state capital of Sacramento in Placer and El Dorado counties and up the Interstate 5 corridor in Sutter, Butte and Yuba counties to the Shasta County seat of Redding in far northern part of the state. In addition to AT&T, PG&E’s electric service territory encompasses the telecom service territories of Frontier, Consolidated Communications and Citizens Telecommunications Company of California. All of these telcos could be customers of PG&E’s planned wholesale fiber as well as mobile wireless operators seeking backhaul bandwidth.

If approved by regulators, PG&E’s application could also attract new players who would like to provide fiber-based premise telecommunications service in areas lacking robust landline connections but can’t make the numbers work due to the high cost of building new fiber infrastructure and deploying field equipment. Having PG&E build it and lease it to them as competitive local exchange carriers (CLECs) would solve that problem. PG&E would also be spared considerable deployment expense and delay since it owns utility poles that would provide the backbone for aerial fiber plant, the optimal infrastructure architecture to serve such a large and geographically diverse area, much of it with rugged terrain.

PG&E’s move holds the potential promise of universal service for northern and central California, which for many years has been a crazy quilt checkerboard of served, undeserved and unserved areas, leaving many consumers to struggle with substandard, poor value dialup, legacy DSL, fixed and mobile wireless and satellite service.

For more background on PG&E’s application, Steve Blum’s Blog has more details here and here.

Wednesday, May 17, 2017

House Dems Propose $40B Broadband Investment | Multichannel

House Dems Propose $40B Broadband Investment | Multichannel: According to a breakout of the bill, the broadband investment is spread out over five years and will use a reverse auction to subsidize broadband in "unserved" areas (75% of the funds, or $30 billion), with the remaining 25% (that would be $10 billion) going to states via a separate reverse auction. But if there are no unserved areas in a state, that state could use the funds to serve underserved areas--or as ISPs see it, overbuild existing service--or for connecting libraries and schools or to deploy next gen 911.

The $30 billion would have to go to private entities, but the $10 billion could go to muni broadband buildouts.The broadband will have to be high-speed--at least 100 Mbps downstream, and 3 Mbps up, with a carveout for remote areas, where 25 Mbps/3 mbps would qualify. Given that it has money for muni broadband and for potential overbuilds, both of which the reigning Republican majority has issues with--as do ISPs--the bill's prospects are probably not very bright.

I tend to agree with this analysis. As long as it remains the policy of the United States to primarily rely on legacy private investor-owned telephone and cable companies to upgrade and build out modern fiber optic telecommunications infrastructure to homes, businesses and institutions, any funding allocated to public sector entities will encounter strong resistance from the telco/cableco lobby. Those industries want to retain their prerogative under the current de facto light touch regulatory regime to do so on their schedule and in neighborhoods of their choosing. Even if that means for the foreseeable, millions of Americans will remain unserved with fiber connections or even first generation DSL first rolled out in the 1990s.

More nonsensical "broadband mapping" BS

Senators Agree That Accurate Mapping is Essential for Broadband Expansion: The CN subsidiary, Connect Michigan, found 44 percent of working-age Michigan adults rely on Internet access to seek or apply for jobs, while 22 percent further their education by taking online classes. But, it all starts with accurate data mapping, which is so important. A fact U.S. Senators Gary Peters (D-MI), Joe Manchin (D-WV), Roger Wicker (R-MS), Brian Schatz (D-HI), Deb Fischer (R-NE), Jerry Moran (R-KS), and Amy Klobuchar (D-MN) each acknowledged this week when they introduced the Rural Access bill.

“Millions of rural Americans in Kansas and many other states depend on the promise of mobile broadband buildout efforts, and this critical expansion depends on the accuracy of current coverage data and uniformity in how it is collected,” Senator Moran told Global Affairs. “As we work to close the broadband gap, our providers must have standardized, clear data so they can plan out ways to reach communities most in need of access.” “We can’t close the digital divide if we don’t know where the problem is,” Senator Schatz said. “This bill will help us understand which communities still have bad wireless broadband coverage, so that we can move ahead and fix it.”


This is complete nonsense (or bullshit if you prefer) for two reasons:

1. It conflates premise service needed by the families, businesses, schools, agricultural producers and people who need access to seek or apply for jobs or take online classes -- cited in the news release -- with mobile wireless service. They aren't one in the same.

2. It assumes the "digital divide" can be closed by mapping areas redlined by incumbent landline ISPs. Problem is the incumbent ISPs already know where the redlined neighborhoods are since they redlined them in the first place. What's a "broadband map" going to do to change that situation? Moreover, providers other than incumbents can't plop down discrete networks to fill the swiss cheese holes represented the redlined neighborhoods because telecommunications infrastructure operates as a network over wide areas. Nor would the economics pencil out.

Monday, May 15, 2017

FCC Chair Pai shows apparent lack of knowledge on wireless Internet

Pai: Wired, Wireless Appear Very Competitive To Him | Multichannel: At an American Enterprise Institute speech recapping his first 100 days, Pai was asked about that relative competitiveness by host and AEI visiting scholar Jeffrey Eisenach, who was a member of the Trump FCC transition team. Eisenach asked whether Pai thought that wireless is now a substitute for wireline. Pai said, for him, at least, "they are very competitive offerings." The "for him" is because the chairman is always careful to separate his views from what the FCC as a whole might conclude based on the fact record before it. But he suggested that fact record could be a strong one. Pai said that as 4g LTE and 5G networks get rolled out, and the next generation of Wi-Fi is rolled out, " I think we are increasingly going to see that wireless is not this 'imperfect substitute' for wired connections. "It is going to be the dominant means, the preferable means, by which people access the Internet."
This needs to be placed in the proper context. Currently, wireless networks are primarily intended to serve mobile users as a complement to premise service -- and not a substitute since even nominally "unlimited" hotspot plans come with quite restrictive bandwidth useage limitations. In addition, most industry experts don't see even the next generation of mobile wireless, 5G, being able to replace fiber premise service when it's expected to be rolled out in 2020. Assuming Pai is quoted accurately, one might hope that an FCC chair would demonstrate a greater depth of knowledge and bring a more nuanced perspective to this topic.

Friday, May 12, 2017

Legacy incumbent providers should reassess stance on public sector telecom infrastructure

Incumbent legacy telephone and cable companies are wont to complain that public sector telecommunications infrastructure modernization projects represent unfair market competition. That’s not an accurate characterization, and here’s why. The goal of market competition is to offer better value products and services to gain market share from competitors.

Public sector telecom modernization projects don’t have an explicit objective of taking away market share from incumbent providers. Rather, their goal is to offer a more complete and robust network than incumbent, investor owned providers can build within a reasonable time frame given the short term ROI constraints of their business models that disfavor infrastructure modernization CAPex. That goal is typically in support of broader economic development objectives, not capturing market share from existing legacy providers. Thus if these providers lose market shares in public sector telecom infrastructure initiatives, it is incidental and not part of an intentional strategy. Public policy should not protect legacy providers from losing market share due to infrastructure modernization needs they cannot meet.

That said, there is potentially lucrative role for legacy providers. They have lots of experience and know how to operate and maintain telecom infrastructure. They can partner with the public sector to fulfill these functions, viewing the public sector as a customer and not a competitive threat.

More underpowered, bass ackwards state telecom infrastructure planning

Charleston Gazette-Mail | Broadband council prepares for expanded role: The council will have three different maps for showing internet access: service areas below 6 mbps, service areas between 6 to 25 mbps and service areas with speeds above 25 mbps. Twenty-five mbps is considered the minimum standard for broadband by the Federal Communication Commission. “Having these maps can help us determine where the fiber is and where it isn’t,” Hinton said.
If the United States had built roads and highways and other critical infrastructure like this -- by first mapping where the infrastructure is missing instead of planning where to build it -- much of the nation would have been driving on dirt roads well into the late 20th century.

Telecommunications infrastructure is by nature a broad reaching network. It can't just be "plopped down" in discrete locales and neighborhoods as one AT&T representative correctly explained about a decade ago. It must be built out on a widespread basis and as quickly as possible given the nation is already a generation behind where it should be when it comes to constructing it. It's too big of a job to be left to small states like West Virginia that can't begin to devote the billions of dollars needed. Only the federal government is up to the task.

Friday, May 05, 2017

"Everyplace outside a metropolitan area was experiencing the same issues.”

Georgia Tackles the Digital Divide - Broadband Communities Magazine In summer 2016, Gooch and State Rep. Don Parsons formed a joint committee that included 10 members of both legislative houses and held a series of hearings all over Georgia. The committee heard testimony from local governments, state agencies, academic researchers, chambers of commerce, health care providers, incumbent telcos, trade associations and many other interested parties. In addition, it posted an online survey to ask residents about their broadband experiences. With very little promotion, the survey received 12,000 responses. Both the formal testimony and the survey responses confirmed that rural broadband was deficient all through rural Georgia – not just in the areas served by the provider in Gooch’s district. “Everyplace outside a metropolitan area was experiencing the same issues,” Gooch says. “There was no incentive for the providers to upgrade their infrastructures. It was an eye-opening conversation – all these people were from different parts of the state and had different phone companies.”

Georgia's experience shows deficient advanced telecommunications infrastructure is a widespread problem not limited to one part of the state. Nor is it limited to one state. Georgia's experience repeats all over the United States.

Deficient telecommunications infrastructure is not a local or state specific problem. It's a national issue requiring a national solution to bring robust fiber optic telecom infrastructure to every state in the union and to the doorstep of every American home, school and business. And just as long distance telephone service was interstate in the 20th century, so is Internet protocol-based service.

Thursday, May 04, 2017

The adverse impact of deficient telecommunications infrastructure

Municipal Broadband | POTs and PANs: Local governments are finding that nobody wants to buy homes without broadband if there is a nearby community with broadband. Worse, communities are seeing businesses move away or bypass them when considering new locations. Lack of broadband puts school kids at a definite disadvantage and there are still a lot of households that drive kids daily to public hotspots just to do homework. And lack of broadband takes away all the opportunities for working at home – probably the biggest area of job growth in rural America. I see small communities – even down to really small sizes like townships with 700 residents – trying to find ways to build a broadband network. I’ve read a few hundred RFPs from rural communities over the last few years, and probably not more than 5% want to become an ISP. But they will do so if they can’t find a commercial company willing to do it. Rural communities largely favor of public-private partnerships. More and more of them are willing to kick money into a building a network if an ISP will invest in their community and operate a broadband network. I believe that within a decade we are going to start seeing broadband ‘deserts’ where communities without broadband start withering – just as happened in the past to communities that didn’t get electricity, or that were bypassed by railroads or interstate highways. It’s hard to think that a community today can keep their kids at home without broadband – and this is starting to scare local governments.

I agree with the writer that the impact of not having advanced telecommunications infrastructure in the 21st century will indeed have negative consequences just as the lack of electrical distribution and transportation infrastructure did in the 20th. But the analogy isn’t directly comparable what’s happening on the ground. Electrical distribution and transportation infrastructure deficiencies
(and railroads in the 19th) affected large regions of the nation in early in the previous century. The lack of advanced telecommunications service on the other hand is better equated to neighborhood redlining associated with mortgage lenders and insurance companies. It’s far more granular. A household can be served by advanced landline telecommunications infrastructure while another just down the road, over the hill or around the bend is not. This post at Steve Blum's blog as well as any number of “broadband maps” paint a crazy quilt of served and unserved areas that looks like this:

And as unfortunate members of those unserved households will attest, their pleas for service have fallen on deaf ears for more than a decade now or have been met with vague promises of service. Someday. Maybe. But mostly likely not because they don’t fit the business models of investor-owned providers that is incompatible with high cost, long term investment required for infrastructure
projects. 

Wednesday, May 03, 2017

Capito introduces bill intended to spur rural broadband expansion | The State Journal | theet.com

Capito introduces bill intended to spur rural broadband expansion | The State Journal | theet.com: U.S. Sen. Shelley Moore Capito, R-W.Va., has introduced federal legislation intended to make it easier for companies to expand broadband internet service to rural communities. Capito introduced the Gigibit Opportunity Act on Wednesday, May 3, according to a a news release. The legislation would give temporary tax deferments to broadband providers and allow communities to set up "Gigabit Opportunity Zones" to encourage expansion.

Perhaps well intended, but misses the mark. Private sector ISPs aren't deterred from investing in telecommunications infrastructure due to tax burdens. Rather, it's long waits for return on investment with their business models based on selling subscriptions one premise at a time to Internet-enabled services over their networks.

Infrastructure costs a lot -- billions. The United States isn't going to get the advanced telecommunications infrastructure it needs quickly today and for the future as demand for service and bandwidth grows exponentially by offering tax breaks worth millions. Particularly by continuing to rely on private sector investment due to the aforementioned ROI obstacle. The public sector has to take the lead just as it has with roads and highways.

Tuesday, May 02, 2017

Beyond Net Neutrality: The Importance of Title II for Broadband - Public Knowledge

Beyond Net Neutrality: The Importance of Title II for Broadband - Public Knowledge: Title II classification is critical for protecting an open internet, but it is also just as important for preserving our values of service to all Americans, including universal service and consumer protection. Broadband has the power to transform people’s everyday lives. Title II classification of broadband must remain in place to continue protecting the fundamental values of our communications systems.
H/T to Yosef Getachew of Public Knowledge for this item emphasizing the Federal Communications Commission's reclassification of Internet as a common carrier telecommunications utility under Title II of the U.S. Communications Act in its 2015 Open Internet Rulemaking. 

Title II's universal service provision has unfortunately been buried under the mainstream media "net neutrality" meme that is utterly meaningless from the perspective of the 34 million Americans the FCC found in 2016 lack access to advanced telecommunications infrastructure capable of delivering high quality voice, data, graphics and video. Here's what I wrote on the topic shortly before the rulemaking was adopted.

A universal service standard prevents all too common crazy quilt pattern of telecom infrastructure deployment such as this accompanying a post at Steve Blum's blog illustrating how legacy incumbent providers engage in neighborhood cherry picking and redlining.

Saturday, April 29, 2017

Deceptive deal: Verizon Wireless 4G LTE "unlimited" isn't

Verizon Wireless which like other wireless ISPs has historically offered metered "data plans," sold in multiple price tiers based on the amount of data transacted over the connection. Under pressure from falling subscriber growth, Verizon Wireless recently introduced an "unlimited" service that dispenses with the meter and offers a flat monthly recurring charge under a 2-year contract. Sounds like a good deal, right, especially for the many households in areas redlined by landline ISPs and without an option for service?

Wrong. It's a lousy, deceptive deal. The VZ Wireless meter is still running under this so-called "unlimited" service which is in fact data limited. And it's a hard limit. Once the meter hits 10GB, the service is shunted off VZ Wireless's 4G LTE network and onto its outmoded and crippled 3G network that can't support streaming or Skype until the start of the next monthly billing cycle.

Wednesday, April 26, 2017

FCC Chair Pai wrongly describes natural monopoly of telecom infrastructure as competitive market

FCC Chairman Ajit Pai on Why He's Rejecting Net Neutrality Rules - Reason.com: If left in place, however, the Title II rules could harm the commercial internet, which Pai described as "one of the most incredible free market innovations in history. Companies like Google and Facebook and Netflix became household names precisely because we didn't have the government micromanaging how the internet would operate," said Pai, who noted that the Clinton-era decision not to regulate the Internet like a phone utility or a broadcast network was one of the most important factors in the rise of our new economy.
Companies like Google (excepting Google Fiber's now defunct venture into fiber to the premise service), Facebook and Netflix aren't network providers. Consequently, they don't face the high costs associated with building and operating telecommunications infrastructure serving homes, businesses and institutions that deters market competition and promotes market failure.
Ajit Pai: The funny thing about that is because it's precisely because the phone company was a slow moving monopolist. That's exactly the point we're trying to make. These rules, Title II rules were designed to regulate Ma Bell, and the promise with Ma Bell, the deal with the government was, we'll give you a monopoly as long as you give universal service to the country. As a result, for decades, we didn't see innovation in the network we didn't see innovation in phones and it's when you have a competitive marketplace and you let go of that impulse to regulate everything preemptively, that you finally get to see more of a competitive environment.
Pai is engaging in the distortion of describing the natural monopoly market that telecommunications infrastructure is as a competitive market. Wishing it were competitive won't make it so. The cost barriers to entry are simply too high. Just ask Google Fiber. Or the 34 million Americans who have experienced sell side market failure, their homes and small business not offered landline connections capable of delivering high-quality voice, data, graphics and video, according to figures released by the U.S. Federal Communications Commission in 2016. Market failure is hardly an indicator of a robustly competitive market.

Pai's predecessor Tom Wheeler indulged in the misguided notion that telecom infrastructure could be competitive market, even though the FCC under his leadership adopted the 2015 Open Internet rulemaking predicated on regulating Internet service as a natural monopoly, classifying it as a common carrier telecommunications utility.

Sunday, April 23, 2017

No FCC enforcement of universal service, anti-redlining provisions of Open Internet rulemaking

Cable, internet connection still not available for many: After 36 years of not being able to access standard internet and cable TV at their home in Deerfield, Gloria and Greg Kasprowicz recently had a Spectrum representative come to their door asking if they would like to have service. The couple, who live three miles from the local Spectrum headquarters on Firehouse Road, were excited when the representative told them they could get service through Spectrum, so they set up an appointment and waited anxiously.

But the date and time of the installment came and went, and no one showed up. So Gloria gave Spectrum a call to see what was going on and was told the company wasn’t able to service her house at this time. “What do you do at this point?” Gloria asked. “(Service) comes up from the bottom of the road, so the first couple of houses, I believe, have it. And it comes down the road to probably a half a mile up the road from us. There’s like a mile stretch — the last mile — for some reason they started from the top and came down and started from the bottom and came up.”

Technically under the U.S. Federal Communications Commission's 2015 Open Internet rulemaking that classified Internet protocol-based telecommunications as a common carrier telecommunications service, Spectrum would have to honor the Kasprowiczs' request for service. That's because the reclassification under Title II of the federal Communications Act includes that requirement as part of Title II's universal service and anti-redlining provisions. But despite adopting the rule, The FCC has never enforced those requirements. The current FCC chairman, Ajit Pai, is reportedly preparing to reverse the rulemaking.

Friday, April 21, 2017

NC bill that permits leasing of muni fiber raises question of how it reduces infrastructure construction costs

Rural broadband internet bill passes NC House | News & Observer: House Bill 68 is titled the BRIGHT Futures Act, which stands for Broadband, Retail, Internet of Things, Grid Power, Healthcare and Training. Its main goal is expanding access to high-speed, broadband internet in rural areas of the state where it’s often too expensive for private service providers to extend their lines.

*  *  *
Bill sponsors say cities, towns and counties could make use of what’s known as “dark fiber” – additional capacity in existing infrastructure that government uses to connect traffic lights, schools and public facilities. Leasing capacity to private internet providers could provide revenue to local governments that could support the expansion of
government-owned fiber networks.
The problem as stated here is it's too costly for private telecom providers to extend their infrastructure to rural areas. So how does allowing these providers to lease local government owned fiber address the cost of building the needed infrastructure that connects homes and small businesses? Particularly given the challenging business case to justify building infrastructure to serve these areas?

Monday, April 17, 2017

A concise summary of poor state of American telecom

The FCC Is Leading Us Toward Catastrophe – Backchannel: Adding a little internet-y flavor to basic, physical telecommunications lines makes zero difference to the economics of building these essential connections. Because the upfront costs of building communications lines — very physical things, lots of labor costs involved — are high, because no one needs two lines to their house, and because it was cheaper to upgrade the cable systems to higher speeds than to dig up copper wires and replace them with fiber, we have ended up with a country subject to geographically divided markets, private, unconstrained monopolies, and big holes where internet access is rare and expensive where it exists at all. In urban areas, local cable monopolies generally wield tremendous power and charge as much as they like. Rural places, meanwhile, are often relegated to inadequate connections over copper phone lines.

Susan Crawford provides an concise summary of the poor state of American telecommunications borne out of misguided and excessive reliance on market forces to modernize and build out the nation's telecom infrastructure in a natural monopoly market where market forces don't work.

Saturday, April 15, 2017

Robert W. Taylor, a pioneer of the modern computer, dies at 85 - LA Times

Robert W. Taylor, a pioneer of the modern computer, dies at 85 - LA Times: Robert W. Taylor, one of the most important figures in the creation of the modern computer and the Internet, has died. He was 85. According to his son Kurt Taylor, the scientist died Thursday at his home in Woodside. He suffered from Parkinson’s disease and other ailments. Taylor’s name was not known to the public, but it was a byword in computer science and networking, where he was a key innovator who transformed the world of technology. Taylor was a Pentagon researcher in the 1960s when he launched Arpanet, which evolved into what we know today as the Internet.
Presaging the concern in our current time over disparate access to advanced Internet-based telecommunications, Taylor wrote the following in a paper he co-authored, The Computer as a Communication Device published in April 1968 in Science and Society:
For the society, the impact will be good or bad, depending mainly on the question: Will "to be on line" be a privilege or a right? If only a favored segment of the population gets a chance to enjoy the advantage of "intelligence amplification," the network may exaggerate the discontinuity in the spectrum of intellectual opportunity.

USTelecom is right -- and wrong -- on public telecom infrastructure

Survey: Most Americans cities to build, sell Internet plans: Proponents of independent Internet networks argue that a "public option" for Internet access could help drive down the price of broadband and increase speeds. Opponents say the expense of building new networks represents an unacceptable financial risk for many local governments. "Municipal broadband networks too often end up failing and costing taxpayers millions," said USTelecom, a trade association representing Internet providers and telecom companies.

USTelecom is right. Modernizing telecommunications infrastructure rapidly enough to meet the nation's needs in an era of Internet protocol-based services will indeed cost tax dollars. It simply has to because infrastructure costs billions to build. That high price is not compatible with the short term business models of private investor owned legacy telephone and cable companies. That's why they're confined to piecemeal build outs and bandwidth rationing that leave many existing and putative customers in their service territories unserved and undeserved and complaining about lousy, poor value service. Even conservatives are waking up to the fact of this market failure, recognizing that market forces don't work well when it comes to high cost infrastructure. And it's about time.

USTelecom is also correct that local governments face significant financial risk due to the large sums involved. That's why I propose in my eBook Service Unavailable: America’s Telecommunications Infrastructure Crisis a federal "public option" since only the federal government -- and not state and local government -- can shoulder the burden.

Where USTelecom as well as those who support local government telecom infrastructure modernization projects are wrong is claiming these projects represent market competition with legacy incumbent telephone and cable companies. They do not and cannot. Local governments are responding to market failure, not any desire to compete in the telecommunications industry. They are looking to meet their needs to support economic development in the digital economy and address their citizens' complaints about crappy service from the incumbents. That situation has occurred because telecommunications infrastructure by definition is a natural monopoly and not a competitive market characterized by many sellers and buyers. Thus market forces fail, too weak to provide incentive for incumbent telephone and cable companies to provide better service.

Monday, April 10, 2017

U.S. at crossroads on telecom infrastructure modernization. The choice is to look to the past -- or to the future.

The United States stands at a crossroads when it comes to modernizing its telecommunications infrastructure. Many observers including Susan Crawford and this writer believe that modernization must be future-focused, providing an infrastructure that’s sufficiently robust and able to accommodate the rapidly growing demand for bandwidth that comes with the transition to digital, Internet-protocol based telecommunications. That means replacing the legacy metallic infrastructure that worked well for telephone and cable TV service in the 20th century with the infrastructure of the 21st: fiber optic connections serving every American doorstep. The future is big and it demands big thinking.

Others such as Doug Brake of the Information Technology & Innovation Foundation argue for a retrogressive approach that encourages us to think small. It proposes incremental fixes, prioritizing those areas worst impacted by market failure borne out of the misguided heavy reliance on investor-owned infrastructure. Instead of producing a future of bandwidth abundance where the term “broadband speed” is obsoleted, Brake’s incremental outlook would condemn Americans to a future of ongoing bandwidth poverty and its adverse effects for the larger socio-economy.

Saturday, April 08, 2017

Competition isn't the answer for better premise telecom service

California lawmakers give cable utility perks, without utility obligations: Historically, there was a difference between telephone companies, which have been state regulated utilities for more than a century, and cable companies, which were originally franchised by local governments but managed to escape that oversight ten years ago. At least in California. Today, the differences are diminishingly small, particularly in urban and suburban markets where cable and telephone companies sell the same services and enjoy a comfortable, unregulated duopoly.

The distinguishing characteristics of a natural monopoly are high initial capital costs, usually related to infrastructure construction, and powerful economies of scale, both of which give the first mover in the market insurmountable advantages over would be competitors. In the old analog world, telephone and television service were completely different businesses, linked only by a common dependence on wireline networks. Now, both offer voice and video, and face competition in those segments from wireless providers. But they are also almost always the only wireline broadband option and wireless service is not a credible substitute, in either practical or microeconomic terms.

This is an excellent and much needed microeconomic description of the dominant privately owned telecommunications infrastructure that dominates in the United States that is all too often absent from the current policy discussion. Many ask why there isn’t competition in the telecommunications industry like exists in most consumer products and services. If it works there, then it must work in telecommunications also. More competition is the answer for better choice and consumer value, they conclude.

But as Steve Blum explains in his blog post, that reasoning is fatally flawed. More competition isn’t possible in a natural monopoly market where high cost barriers and the power of incumbency deter would be competitors. (Just ask Google how its flagging Google Fiber venture worked out) Telecommunications infrastructure will never be a robustly competitive market, defined as one with many sellers and buyers offering consumers many choices, enabling market forces that allow consumers to choose the best value and force out uncompetitive players.

When it comes to landline premise telecommunications service, most Americans can select from no more than two providers. And sadly for millions, none at all since the business model of vertically integrated investor owned providers must naturally redline and cherry pick among neighborhoods, creating winners and losers among consumers. As long as the nation relies on this broken model, it
will continue to lag when it comes to building the world class telecom infrastructure it needs to accommodate the explosion in digital communications.

Wednesday, March 29, 2017

The latest telco FTTP CapEx avoidance strategy: "wireless fiber"

Handcuffing Cities to Help Telecom Giants – Backchannel

This piece by Susan Crawford describes the latest large incumbent legacy telephone company strategy to avoid capital expenditures on fiber to the premise (FTTP): radio. Or as some incumbent voices term it, "wireless fiber." It follows the first CapEx avoidance strategy employed by AT&T a decade ago: running fiber to neighborhood nodes and serving customer premises via existing twisted pair copper designed for analog voice service. Naturally, there were lots of technology and service problems with that approach mixing old and new technology. And like the wireless everywhere strategy, it doesn't serve large portions of telco service territories where population density is lower.

As Crawford points out, wireless infrastructure no matter how fast can't offer the carrying capacity of fiber to accommodate inevitable future increases in bandwidth demand. It requires radios -- many of them -- mounted on utility poles and backhauled by lots of fiber. Running so much fiber into neighborhoods, Crawford begs the question of why not extend it all the way to customer premises (FTTP)? Anticipating resident push back against ubiquitous, unsightly field equipment installations in local government approval processes, the incumbents are aiming to preempt the locals while telling them "wireless fiber" will solve their telecom needs.

Sunday, March 12, 2017

West Virginia telecom infrastructure initiative embodies 3 fatal public policy flaws

Charleston Gazette-Mail | Groups push for broadband expansion in WV: Senate President Mitch Carmichael, R-Jackson, said Tuesday that at least two broadband-related bills are in the works, and lawmakers expect to introduce legislation in the coming days. The Senate bill would offer tax credits for companies to help recoup costs of bringing internet to remote areas, said Carmichael, an executive with internet provider Frontier Communications. The bill also may authorize the state to provide loan guarantees to internet firms that plan to expand broadband service. Carmichael said some internet providers want legislation designed to bring internet service to households that don’t currently have it, while other companies support measures that would increase internet speeds.

“We want to [encourage] competition,” Carmichael said. “If we’re going to do investment of any type, it should go to the areas that have no service.” Generation West Virginia, AARP West Virginia and the state Broadband Enhancement Council held a press conference at the state Capitol Tuesday to raise awareness about the importance of high-speed internet service and to unveil a plan — called Gig Ready — to bolster support for broadband expansion.

This West Virginia effort although well intended contains three fatal flaws that are unfortunately frequently embraced by other states and by federal policymakers.
  1. Offering loan guarantees and tax credits to legacy telephone and cable companies to invest in advanced telecommunications infrastructure in the belief that will help achieve universal service. It will not. The incumbents' short term business models are designed to extract maximum cash flow from current assets and do not allow them to make significant long term capital investments in new infrastructure. Tax credits and loan guarantees can't overcome that hard economic reality.
  2. The belief that the role of government vis telecommunications infrastructure is to promote market competition. Telecom infrastructure is a natural monopoly and cannot and never will be a competitive market. Promoting market competition in telecom infrastructure is like promoting water skiing in the arctic.
  3. Sloganeering. Call it Game of Gigs or Gig Ready, slogans can't construct telecom infrastructure. They are not so much aspirations for the future but rather reflect a poverty of action and commitment (harder) relative to a surplus of talk (far easier).

Thursday, March 09, 2017

Net neutrality hurts health care and helps porn, Republican senator claims | Ars Technica

Net neutrality hurts health care and helps porn, Republican senator claims | Ars Technica: Sen. Ron Johnson (R-Wisc.) agreed that net neutrality rules harm ISP investment and offered a lengthy analogy to explain why. Johnson said he wants to cut through the “rhetoric, slogans, and buzzwords,” before saying that enforcing net neutrality rules is like letting too many people use a bridge and ruin people’s lawns. Net neutrality rules, he said, also give pornography the same level of network access as remote medical services.

This is an unfortunate outcome of the misplaced obsession with the "net neutrality" aspect of the U.S. Federal Communications Commission's 2015 Open Internet rulemaking that erased the line between legacy and advanced telecommunications services by reclassifying Internet service as a common carrier telecommunications utility under Title II of the Communications Act. The obsession with net neutrality is so exaggerated that the term has become synonymous with the rulemaking.

The Open Internet rulemaking does properly require ISPs to treat all telecommunications traffic equally and without preference as to content. But with millions of Americans left offline and many still using circa 1994 dialup access that was state of the art when Bill Clinton was serving his first term as president, the higher value of the rulemaking is bringing Internet service under the universal service and anti-redlining requirements of Title II that have governed telephone service for decades -- and not debating whether the network should give priority to porn or any other information. Those requirements also comport with Metcalfe's Law, which holds a network is only as valuable as the number of subscribers on it.

Monday, February 27, 2017

Senate to Look at Infrastructure Challenges | Broadcasting & Cable

Senate to Look at Infrastructure Challenges | Broadcasting & Cable: The Senate Commerce Committee has scheduled a hearing for Wednesday, March 1, on the telecom and transportation infrastructure challenge. The Donald Trump Administration has pledged a trillion-dollar infrastructure upgrade, which is expected to include broadband infrastructure. In addition, there are legislative efforts to spur infrastructure buildouts, and FCC chairman Ajit Pai has backed making broadband part of that effort as well.

“With a national discussion on federal infrastructure investment underway, it’s worth remembering that many Americans live far away from the highest-ticket projects their tax dollars are asked to fund,” said Sen. John Thune (R-S.D.), chairman of the committee, in announcing the hearing. “This hearing will look at how wise infrastructure investment decisions can ensure that all Americans benefit from improvements to national transportation and digital networks.”


It's great to see Sen. Thune recognizing that digital telecommunications infrastructure is also important 21st century infrastructure. Yes, 20th century transportation infrastructure is also need of investment. But it shouldn't come at the expense of telecom infrastructure that like roads and highways has also been neglected for decades.

Had proper planning and policies been put in place a generation ago as I write in my recent ebook Service Unavailable: America's Telecommunications Infrastructure Crisis, nearly all American homes, schools and businesses would have fiber optic connections by 2010 rather than relying on the failed investor owned corporate business model that has caught the nation up short. That leaves millions of Americans unable to access modern advanced telecommunications services or served by poor value and sluggish metallic connections that can't accommodate the growing bandwidth demand of today and tomorrow's digital economy.

The digital economy requires the capacity to handle the efficient movement of ideas, products and services just as 20th century transportation infrastructure did for people, goods and services. Telecom infrastructure thus should be properly regarded as interstate infrastructure as is transportation infrastructure.

Friday, February 10, 2017

R&D won't solve America's urgent telecom infrastructure deficiencies

That group “really push[es] a comprehensive narrative that the U.S. broadband -- private-sector broadband -- has failed the country, that we are falling behind other countries in our broadband performance,” said Doug Brake, telecom policy analyst at ITIF and coauthor of “How Broadband Populists Are Pushing for Government-Run Internet One Step at a Time,” released in January. The populists think “we have these rapacious broadband monopolists that are not upgrading and just harvesting rents from the entire population,” Brake said. “We see that narrative as being incorrect on almost all the points that it puts forward.” Broadband populists have a two-pronged approach and use small tactical debates to achieve their overall goal, Brake said. On one hand, they support the bottom-up solution of government-owned infrastructure with internet service providers delivering services on top of it -- even while acknowledging the limitations of that approach. “We think that that model does not fundamentally support long-term innovation,” Brake said. “That’s competition just based on price andcustomer service. It’s not competition based on the technology itself.” He said he’d rather see ISPs incentivized to pour money into research and development of the next generation of broadband, for instance.
The debate over muni broadband expansion -- GCN

Brake's position is utter nonsense. Fiber optic connections to customer premises could have been made to nearly every American home, school and business by 2010 had the nation put in place the right telecommunications policy and planning in the late 1980s and early 1990s when it was becoming apparent that telecom would shift from analog to digital and be distributed via Internet protocol. Fiber optic infrastructure remains the state of the art telecommunications infrastructure technology, with plenty of capacity to carry burgeoning bandwidth demand well into the future. Performing R&D on a possible successor is fine. But it's not going to solve today's urgent telecommunications infrastructure needs that require rapid deployment of fiber connections.

As for Brake's characterization of incumbent legacy telephone and cable companies being "rapacious broadband monopolists that are not upgrading and just harvesting rents," they had better well be. Because it's exactly what their investors expect of them: minimal capital expenditures and maximizing revenues from a captive, natural monopoly market.

Wednesday, February 08, 2017

Gov. Brown sets California's priorities for U.S. infrastructure bill -- but telecom not on list

Brown Sets California's Priorities For Trump Infrastructure Bill - capradio.org: Gov. Jerry Brown’s administration has released its list of California priorities for a potential federal infrastructure funding package backed by President Trump. The list is noteworthy not only for the projects it includes but for the ones left off. On the list? Highway projects throughout the state, including new carpool and toll-charging express lanes. California’s earthquake early warning system. And, of course, Brown’s legacy projects: high-speed rail and the Delta tunnels. “Mostly, the projects that we have submitted all have a request of $100 million or more,“ says the governor's transportation secretary, Brian Kelly. “So we really did focus on larger projects with clear, long-term and short-term benefits to the state.” Notably absent? Two prominent water storage projects backed strongly by California Republicans: Sites Reservoir northeast of Sacramento and Temperance Flat Dam northeast of Fresno.

Also missing from the list: telecommunications infrastructure. This in a state regarded as a leader in information and communications technology and home to Silicon Valley as surrounding communities continue to lack modern fiber optic service. Telecom infrastructure deficiencies are most pronounced in the Golden State's Central Valley municipalities of Modesto and Fresno, in the Sierra Nevada foothills east and northeast of the state capital of Sacramento in Placer and El Dorado counties, and up the Interstate 5 corridor in Sutter, Butte and Yuba counties to the Shasta County seat of Redding. (See related post here). Is is truly good public policy to finance 20th century infrastructure while neglecting vital infrastructure for the 21st?

Sunday, February 05, 2017

U.S. requires crash federal telecom infrastructure program

Like other forms of infrastructure that were largely built out in the 20th century – such as transportation, energy, water and sewage – broadband is a foundation for economic activity across many sectors. But, unlike other potential infrastructure priorities, the public benefits of broadband could grow exponentially in the coming decades, as the nation is just beginning to realize the potential innovation and productivity gains from combining high bandwidth, low-latency connectivity with massive sensor, computing, and storage capabilities.

Unlike most other types of infrastructure, the nation’s digital infrastructure is largely corporate owned and generates revenues from paying subscribers. However, the private carriers who invest in broadband capex do not, in general, capture the full benefits of those investments (e.g., the positive externalities of the internet economy and the multipliers from increasing innovation and efficiency in adjacent sectors), so their investment levels are lower and slower than would be optimal for the country. (Emphasis added). The public-policy challenge, therefore, is to increase largely private capital flows to levels consistent with the potential public benefits of abundant, ubiquitous broadband without crowding out existing private sector investment.

The above is excerpted from a white paper by Paul de Sa, who formerly headed the U.S. Federal Communications Commission's Office of Strategic Planning and Policy Analysis. The paper was published on the U.S. Federal Communications Commission website last month. de Sa's point on the larger benefits of ubiquitous modern telecommunications infrastructure and its economic stimulus and multiplier effect mirrors my own, discussed in my recent eBook, Service Unavailable: America's Telecommunications Infrastructure Crisis.

I fully agree with de Sa's assessment that relying on the current dominant model of privately owned infrastructure where Internet Service Providers own the connections to customer premises as well as the services offered over them cannot support rapid and robust infrastructure construction to catch the nation up to where it needs to accommodate exploding bandwidth demand today and in the future. It's naturally limited by investment risk that comes with selling and servicing monthly subscriptions one customer premise at a time that constrains access to the needed many billions of investment capital and is prone to market failure. Until the United States explicitly recognizes the limitations of this model and treats telecommunications as the national infrastructure asset that it is and launches a crash publicly-financed telecom infrastructure initiative, the nation will continue to rapidly fall further behind as the 21st century advances.

As a footnote, de Sa's paper was retracted this week by his acting replacement, Wayne A. Leighton. (h/t to Steve Blum's blog).

Friday, February 03, 2017

FCC’s O’Reilly defends unacceptable status quo in U.S. telecom infrastructure

As federal policymakers consider addressing America’s telecommunications infrastructure deficit as part of a broad national infrastructure modernization plan, Federal Communications Commissioner Michael O’Reilly has written a blog post clearly intended to lower expectations and preserve an unacceptable status quo. It comes at a time when the United States by 2010 should have had modern, fiber optic-based telecommunications infrastructure deployed serving every home, small businesses and public institution instead of the legacy metallic telephone and cable company infrastructure he wants to preserve. Not to mention the national embarrassment of third world satellite Internet and dialup serving too many American homes where landline telecom connections – metallic or fiber – are nonexistent.

Instead of a robust federal telecommunications infrastructure program, O’Reilly seeks to protect the incumbent telephone and cable companies by preserving their emphasis on “broadband speeds” and the related and increasingly outdated, tail chasing debate over how much speed is sufficient. That fits nicely with the legacy incumbents’ outdated metal cable connections to premises since those lack the capacity of fiber to serve burgeoning bandwidth demand. In his points about geography and population density, O’Reilly also lends support to incumbents’ redlining market practices based on premise density in violation of the FCC’s 2015 Open Internet rulemaking making Internet a universally available common carrier telecommunications utility. That speed-based versus fiber to the premise (FTTP) metric comports with the FCC’s weak subsidy program that funds incumbents’ deployment of obsolete infrastructure on a par with circa 2005 DSL.

In sum, O’Reilly’s position is all about incrementalism and buying more time for these legacy incumbent providers. Public policymakers have already allowed them to buy a quarter century of delay as American has fallen ever further behind in the 21st century, when modern telecommunications infrastructure is as critical as roads and highway were in the previous century. It’s time for that to end.

Finally, O’Reilly -- like former FCC Chairman Tom Wheeler before him --miscasts telecommunications infrastructure as a competitive market. If it were, there would be lots of service providers to choose from and sufficient capital to finance their ventures. The fact that there are not reflects simple microeconomics. High cost endeavors like infrastructure erect natural barriers to new providers. In telecommunications infrastructure, incumbents also exert a chilling effect with their natural monopolies since new providers are reluctant to take on the risk of overbuilding them – a primary reason for Google Fiber’s recent retrenchment.

Saturday, January 28, 2017

Neither investor-owned ISPs nor "muni broadband" can meet America's urgent telecom infrastructure modernization need

How Broadband Populists Are Pushing for Government-Run Internet One Step at a Time | ITIF: To most observers of U.S. broadband policy, the regular and increasingly heated debates in this area appear to be about an evolving set of discrete issues: net neutrality, broadband privacy, set-top box competition, usage-based pricing, mergers, municipal broadband, international rankings, and so on. As each issue emerges, the factions take their positions—companies fighting for their firms’ advantage, “public interest” groups working for more regulation, free market advocates working for less, and some moderate academics and think tanks taking more nuanced and varied positions.

But at a higher level, these debates are about more than the specific issue at hand; they are subcomponents of a broader debate about the kind of broadband system America should have. One side wants to remain on the path that has brought America to where it is today: a lightly regulated industry made up of competing private companies relying on a variety of technologies. Another side, made up of mostly public interest groups and some liberal academics, rejects this, advocating instead for a heavily regulated, utility-like industry at minimum and ideally a government-owned system made up of municipal networks. The Information Technology and Innovation Foundation (ITIF) firmly believes the former model—lightly regulated competition—is the superior one. But if we are to get broadband policy right going forward, it’s this broader strategic issue we need to identify and debate, not just narrow tactical matters.

Broadband networks are a critical part of America’s digital technology system and, as such, the issue of how to continue to drive investment and innovation in these networks is worthy of robust and sustained debate. But the broadband policy debate should be transparent about what it really involves: Is America better off with an ISP industry that is structured the way the vast majority of the U.S. economy is structured (private-sector firms competing to provide the best product or service at a competitive price, with the role of government to limit abuse and support gaps where private-sector competition does not respond), or do we want to transform this largely successful industry model into either a regulated utility monopoly model or government-owned networks? As we ponder this question, policymakers need to understand what the debate is fundamentally about and what is at stake as broadband populists push for each one of their thousand cuts.

Actually, neither leaving telecommunications infrastructure fully in the hands of the private sector nor relying on local "municipal broadband" builds will bring the United States modern, fiber optic telecommunications infrastructure rapidly enough to meet the ever growing bandwidth demand of Internet protocol-based services. The former because of sell side market failure due to slow and uncertain return on investment inherent in its customer premise subscription-based business model. The latter because state and local governments lack the capital and debt capacity to finance publicly owned telecom infrastructure with so many competing needs for aging infrastructure such as roads, schools and sewer and water systems as well as enormous public pension obligations.

Only the federal government has the resources and policy power to meet this critical infrastructure need of the 21st century as I posit in my 2015 eBook, Service Unavailable: America's Telecommunications Infrastructure Crisis. Telecommunications infrastructure like the highway system is fundamentally interstate and not municipal, connecting states to each other and the nation to the world. It's too important to be left to either the private sector alone or state and local governments that lack the resources to do the job.

Tuesday, January 24, 2017

Senate Democrats to propose $1 trillion infrastructure plan

News from The Associated Press: A proposal by two of Trump's financial advisers circulated just after the election calls for using $137 billion in tax credits to generate $1 trillion in private investment in infrastructure projects over 10 years. But investors are typically interested only in projects that have a revenue stream like tolls to produce a profit. Charging tolls for roads and bridges is often unpopular. A recent Washington Post poll found that 66 percent of the public opposes granting tax credits to investors who put their money into transportation projects in exchange for the right to charge tolls. The American Association of State Highway and Transportation Officials and transportation industry lobbying groups want a hike in direct federal spending instead of tax credits. What is needed most, they say, is money to address the growing backlog of maintenance and repair projects, most of which are unsuitable for tolling.

This also applies to America's aging and obsolete telecommunications infrastructure. It should have been modernized with fiber optic technology all the way to customer premises starting a quarter of a century ago. Instead today, the nation remains on outmoded metal wire infrastructure designed for the pre-Internet days of telephone and cable TV service.

The financial points of this article also apply. Just as it won't for roads and highways, a for-profit business model isn't going to generate the low hundreds of billions of dollars needed to build the telecom infrastructure to accommodate the ever increasing demand for Internet protocol-driven bandwidth. There simply isn't enough return on investment given the enormous capital expenditure requirements. Ditto tax incentives.

Americans also understandably dislike a toll-based scheme that subjects them to the tender mercies of vertically integrated Internet Service Providers (ISPs) -- who because they own both the pipe that brings telecom services to customer premises as well as the services delivered over it -- enjoy hugely disproportionate market power. Just ask anyone who received a notice their monthly bill would be going up this year. Telecom infrastructure should be in the public realm and treated -- and funded-- as a public good.
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