Analysis & commentary on America's troubled transition from analog telephone service to digital advanced telecommunications and associated infrastructure deficits.
Monday, February 19, 2024
The d factor: Why publicly owned, financed FTTP may not balance the Crawford equation
The United States stumbled in the late 1980s and early 1990s by failing to develop a comprehensive strategy to transition from the legacy copper to fiber to support digital Internet protocol voice, video and data services. Instead, fiber to the premises (FTTP) was left to the market whims of investor owned companies that construct it only where it meets their rate of return and profitability standards. That’s typically densely settled urban and suburban areas.
That leaves much of the nation outside these areas unfibered with uncertain prospects for FTTP amid a multiplicity of siloed federal and state grant programs. Only recently have these programs begun to favor FTTP for subsidization albeit with eligibility still based on marketed “broadband” bandwidth to protect the customer “footprints” of incumbent providers from interlopers.
An open question is can publicly owned and financed regional telecom authorities provide a lower cost work around to the investor owned providers whose business structures require them to generate profits and dividends for their owners and pay income taxes on their earnings?
Let’s call Crawford’s vision the Crawford equation and express ubiquitous access as x and affordability as y. Can these alternative business models solve for both since they avoid the higher structural costs of the investor owned business model?
They may not. It boils down to the same reason for both: residential density. Let’s call it the d factor. For the investor owned providers, building FTTP isn’t likely to pencil out in less densely developed exurban areas with lower d value featuring curvilinear roads instead of suburban and urban grid-style development. These areas typically fall short of the investor owned standard of about 15 homes per linear road mile. That translates to more road miles and a relatively lower number of homes per mile. That leads to higher construction costs and longer returns on investment, diminishing the short term profitability investors desire and more certain revenues debtholders want for debt service.
For publicly owned providers and particularly open access FTTP networks reliant on network revenues to service capital bonds, bond underwriters prefer a sizable number of end users to ensure bonds secured by network revenues obtain sufficient revenue from end user fees. That correlates with d. A higher d factor translates to more end users. That translates to lower default risk since there is more revenue to secure debt service. The y factor -- affordability -- can also be adversely affected by networks seeking to boost the x factor in less densely developed areas.
For ISPs offering services to end users, the d factor is similarly critical. ISPs aren’t going to be interested in leasing network access unless there is a sizable market of end users, particularly since they are likely competing against other ISPs on an open access network.
Bottom line, publicly owned and financed FTTP infrastructure may not solve the Crawford equation for much of exurban America where telecom infrastructure is often substandard and not up the needs of knowledge workers migrating to metro fringes and beyond.
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.
Monday, April 10, 2017
U.S. at crossroads on telecom infrastructure modernization. The choice is to look to the past -- or to the future.
Wednesday, March 29, 2017
The latest telco FTTP CapEx avoidance strategy: "wireless fiber"
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.
Tuesday, June 28, 2016
Lacking specific sum, does Hillary Clinton's infrastructure modernization plan dedicate enough for telecom?
Connect allAmericans to the digital economy with 21st century Internet access.Hillary Clinton's Infrastructure Plan: Building Tomorrow's Economy Today
Clinton believes that high-speed Internet access is not a luxury; it is a necessity for equal opportunity and social mobility in a 21st century economy. That’s why she will finish the job of connecting America’s households to the Internet, committing that by 2020, 100 percent of households in America will have access to affordable broadband that delivers world-class speeds sufficient to meet families’ needs.
Per the above item from her campaign website, presumptive Democratic presidential nominee Hillary Clinton is proposing universal Internet access that's currently required under the U.S. Federal Communications Commission's 2015 Open Internet rulemaking classifying Internet as a common carrier telecommunications (versus information) service.
What's new is Clinton's proposed federal funding programs to help finance the necessary infrastructure to make universal service a reality that would dedicate $275 billion over five years for infrastructure investment. A national infrastructure bank seeded with $25 billion would leverage private capital to generate an additional $225 billion in direct loans, loan guarantees, and other forms of credit enhancement along the lines of what Susan Crawford suggested earlier this year, renewing and expanding the Obama administration's Build America Bonds program. Crawford correctly asserts that there are boatloads of private capital sitting on the sidelines seeking better returns that could be leveraged to undertake the long delayed task of modernizing America's telecommunications infrastructure with fiber to the premise for the Internet age.
The caveat here is Clinton's funding proposals cover all infrastructure modernization needs, including transportation, energy and water systems, constituting an "infrastructure gap" that her campaign notes runs in the trillions of dollars. No specific sum is earmarked for telecom infrastructure. Without that specific dollar amount, the question is will there be enough for it?
Also concerning is Clinton defines telecom infrastructure not in terms of the infrastructure itself, but rather in vague terms of "world class" connection speeds. Connection speed is how the legacy telephone and cable companies define their Internet-based telecom services. It's a backward rather than forward-looking perspective and is central maintaining a paradigm of constrained "broadband" bandwidth that in turn supports high prices and minimal investment in modern infrastructure such as fiber to the premise (FTTP).
Thursday, April 28, 2016
U.S. telecom infrastructure modernization an interstate and not urban issue
In the last analysis, the United States is a nation of states, not of cities. Telecommunications infrastructure is fundamentally interstate, connecting cities and states to each other and the nation to the world. It would be a mistake to view it too narrowly as an urban matter.
Thursday, March 03, 2016
Susan Crawford's Rx for ailing U.S. telecom infrastructure
In January, she proposed the financial element: harnessing private investment capital via a regionally administered federal telecom infrastructure development and finance agency, funded by federally subsidized bond proceeds. (See related blog post)
Google Fiber's recent move to use existing fiber infrastructure owned by local governments in those select areas it will offer services spurred Crawford to elaborate on the infrastructure component of her solution. Her proposed federal telecom infrastructure development and finance agency would help local governments build open access fiber networks and sell access to retail providers on a wholesale basis.
Crawford sees Google Fiber's willingness to sell retail services over municipal infrastructure it does not own as a game changing move because the business model of local government-owned open access networks like Utah's Utah Telecommunication Open Infrastructure Agency (UTOPIA) have historically not meshed with the vertically integrated, monopolistic business models of the legacy telephone and cable companies that shun open access infrastructure. That model is based on owning the customer and selling monthly subscriptions to one premise at a time. That makes it highly risk averse since these legacy providers target their infrastructure only where they can get the most subscriptions and redline other neighborhoods that aren't as promising, creating widespread market failure and access disparities.
Google Fiber had initially followed the same model in its proprietary infrastructure projects such as in Kansas City and Austin, Texas. Now it is saying if a local government like Huntsville, Alabama has the resources to build fiber to the premise to serve its residents, it will be happy to sell services on that network. Crawford's federal bond finance model could scale up open access networks nationwide by aiding localities that lack Huntsville's pre-existing municipal electric company infrastructure to build their own.
Wednesday, January 13, 2016
Why U.S. FTTP infrastructure deployment won't follow the 20th century timeline for electrification
I disagree with the comparison to the deployment of electrical distribution infrastructure in the previous century. Information and communications technology is moving at a far faster pace in the 21st century. We're seeing robust, pent up demand for Internet service that is far outstripping the ability of Internet service providers to deliver it at reasonable, affordable rates due to widespread market failure. Americans simply will not tolerate such a prolonged wait for universal FTTP service.
Politics also argues for a much more compressed timeline than my esteemed (and anonymous for now) colleague envisions. The United States is close to or already at a political tipping point in terms of protecting the de facto monopolies of the legacy incumbent telephone and cable companies -- among the most hated and least respected institutions in the nation. That inevitable tipping point is when their lobbying currency is greatly devalued relative to consumer and business demand for Internet services that grows stronger by the day.
Finally, the pace of technological progress is far faster than in the early 20th century. A disruptive technological development could come along that would drastically reduce the time and cost of deploying FTTP. For example, super strong and lightweight carbon fiber or nanotube sheaths that could be deployed on poles by remotely operated drones once the poles are made ready. That would greatly reduce labor costs, which is the major FTTP cost challenge. As well as maintenance costs since the sheaths would be wind resistant and squirrel proof.
Monday, January 11, 2016
America’s winter of telecom discontent calls for strong, unified federal intervention to bring the spring
Crawford and I agree fiber is the only option for ensuring the nation has the telecom infrastructure it needs now and for the future. We can’t get there trying to subsidize yesterday’s “broadband” speeds or hoping that somehow the laws of physics can be overcome and wireless and satellite will magically offer a cheap workaround. We also agree a unified, federal strategy is needed that also takes a regional approach.
Sunday, July 20, 2014
The FCC wants to let cities build their own broadband. House Republicans disagree. - Vox
House Republicans would be well advised to consult with or hire new, better economic advisors. They demonstrate a fundamental misapprehension of telecommunications infrastructure in viewing it as a competitive market when in fact it's a natural monopoly as Susan Crawford notes (see the embedded video interview).
Competitive markets (like retail grocery and furniture, for example) have many sellers and many buyers. Due to high cost barriers to entry, telecommunications infrastructure is not characterized by a multitude of sellers and will likely never be a competitive market. It's a utility like telephone service as Crawford correctly observes, and should be regulated accordingly.
Sunday, December 04, 2011
Susan Crawford on the state of U.S. Internet access
As the title of her piece suggests, Internet access is highly fragmented. Cable companies provide limited wired access in discrete, monopolistic markets in densely populated metro areas for those able to afford the $100 monthly cost (when bundled with voice phone and video) that these cablecos can increase at will absent the check and balance of market forces and rate regulation.
Meanwhile, lower income Americans who can't afford both wired and wireless access rely on wireless smartphones for Internet connectivity that costs half as much as bundled wired access. So must those who can afford wired access but can't get it at any price because of incomplete build out of wireline infrastructure. But it's not full access and comes with major disadvantages versus wired premises service. Crawford explains:
The problem is that smartphone access is not a substitute for wired. The vast majority of jobs require online applications, but it is hard to type up a résumé on a hand-held device; it is hard to get a college degree from a remote location using wireless. Few people would start a business using only a wireless connection.
It is not just inconvenient — many of these activities are physically impossible via a wireless connection. By their nature, the airwaves suffer from severe capacity limitations: the same five gigabytes of data that might take nine minutes to download over a high-speed cable connection would take an hour and 15 minutes to travel over a wireless connection.
Even if a smartphone had the technical potential to compete with wired, users would still be hampered by the monthly data caps put in place by AT&T and Verizon, by far the largest wireless carriers in America.
Wednesday, November 02, 2011
Cable emerges as dominant commercial ISP
As Susan P. Crawford explains in this Harvard Law & Policy Review article The Communications Crisis in America, compared to incumbent telcos and wireless and satellite ISPs, only cable offers sufficiently robust bandwidth and headroom going forward. Telcos can't keep up since they would incur unabsorbable costs to replace their obsolete copper cable plants with fiber -- costs that would also make their generous stock dividends obsolete.
That's not likely to change despite the Federal Communications Commission's recent reforming of the Universal Service Fund (USF) from subsidizing plain old telephone service (POTS) in high cost areas to Internet. The Connect America Fund (CAF) requires telcos merely provide first generation DSL-level connectivity of 4Mbs for downloads and 1Mbs up and allocates only $4.5 billion a year -- hardly enough to meaningfully offset the cost of changing out decades-old copper plant for fiber.
In the wireless realm, the physics of radio spectrum hamstring wireless ISPs while satellite Internet -- on the verge of obsolescence from the day it was introduced -- has clearly reached its expiration date.
With cable now the dominant commercial Internet provider for most Americans, Crawford argues for increased government scrutiny of its monopoly market power. Crawford's position may draw support from community networks that have gone up against cable companies that pull out all the political stops to preserve their monopolies. The cable guys don't always win as Longmont, Colorado showed this week and as reported by Christopher Mitchell of Community Broadband Networks. Community networks also have a technological carrying capacity edge over the hybrid coax/fiber cable plant employed by cable companies since they typically deploy full fiber to the premises networks.