Report: Flood of comments on broadband stimulus requests indicate "significant incumbent challenges"

Telecompetitor is reporting Mary Campanola, outreach coordinator for the Rural Utilities Service, told a panel at the Telco TV annual conference and expo Nov. 12 that the agency has received 11,000 comments for the 2,200 applications it received for funding through its Broadband Initiatives Program (BIP). BIP provides grants and low cost loans as part of $7.2 billion set aside for broadband infrastructure subsidies in the American Recovery and Reinvestment Act of 2009.

Telecompetitor quotes Campanola as saying 80 percent of all applications received at least one comment, which according to the interactive blog reveal "significant incumbent challenges" of proposed deployments aimed at providing broadband to areas designated as unserved or underserved.

Since RUS must check out each incumbent challenge, the BIP stimulus dollars will flow slowly. Campanola reportedly said just 18 applications that were due three months ago made it past the initial review phase. Those projects selected for funding will be announced starting in December with award notifications made on a rolling basis well into 2010, Campanola was quoted as saying.

Russia shuns copper for broadband buildout

Light Reading Europe reports TTK, the state-owned Russian telco, is "embarking on a major push into high-speed broadband access, focusing on Russia's less well served cities and towns," noting that about 93 percent of Russia's 140 million inhabitants live outside Moscow.

Notably, those plans don't call for the use of metal wire-based cable plant used in most other nations, typically to provide underpowered DSL over copper. Instead, TTK's Sergey Shavkunov told Light Reading, the company will use a mix of point-to-point fiber, GPON and WiMax as apppropriate.

Obama administration should offer incentives for homeowner-owned fiber over the last mile

The incoming administration of U.S. President-Elect Barack Obama has tagged rebuilding America's aging infrastructure as a key policy objective. That includes its badly outdated last mile telecommunications infrastructure in order to make broadband accessible to more Americans.

Since the primary inadequacy of the telecommunications infrastructure when it comes to supporting broadband-enabled IP services isn't with the long haul and mid-mile portion of the network but rather the so-called "last mile" local access network, the administration should concentrate its efforts on developing incentives to hasten the change out of copper cable to fiber optic cable over this segment.

The administration should pay particular note of a recently issued working paper by the New America Foundation authored by Derek Slater and Tim Wu. The paper, Homes with Tails What If You Could Own Your Internet Connection, recommends state and federal tax credits to create incentives for homeowners to spend a $2,500 to $4,000 to connect their homes to last mile fiber built by existing carriers, neighborhood cooperatives, developers, local governments and private fiber optic vendors.

The authors seem to acknowledge that while there's near universal agreement that fiber over the last mile is essential to the future of America's telecommunications system and the critical role it plays in the nation's economy, there also is a substantial amount of inertia on both the supply and demand sides of the equation that keeps the U.S. stuck behind a technologically obsolete "copper wall" built decades before the Internet was created. The limitations of telcos' circa 1970s and earlier copper cable plants have become painfully obvious to all too many Americans who have vainly attempted for years to subscribe to their telco's DSL (or VDSL)-based services, only to be told it can't reach their homes or the copper cable is too old and degraded to support it or find it can't reliably deliver the throughput they'd like.

Telcos that have to produce quarterly profits are inherently conservative and won't make a long term capital investment in deploying fiber over their entire networks. They argue there's not enough evidence that homeowners will subscribe to fiber-based services at a sufficient "take rate" to justify such a major expenditure unless homes are densely packed cheek to jowl, thus reducing their investment risk. The problem is a lot of Americans don't live in such neighborhoods nor have any desire to do so. And since telcos operate in a duopolistic and often monopolistic market environment, telcos eschew meaningful market research and don't get hard data that might indicate that if they built fiber, customers will sign up for advanced services.

Hence, Slater and Wu posit -- correctly in this blogger's opinion-- that it falls to consumers themselves to break down the copper wall in favor of fiber over the last mile since risk averse telcos will continue to default to the safe status quo whenever possible.

The authors aptly acknowledge that many homeowners might balk at dropping a few thousand bucks to connect their homes to locally owned fiber and that there needs to be a compelling financial argument in addition to bringing their dwellings into the modern telecommunications age. In this regard, they point to a study by RVA & Associates, a market research firm that focuses on fiber networks, estimating that fiber connection increases the value of a home by about $4000. If the Obama administration combined that with a tax break, the proposition becomes even more appealing, particularly along with incentives for mortgage companies and other lenders to extend low interest fiber loans to homeowners. The tax breaks could be partially offset by stimulating economic activity that would bring in additional tax revenues.

Slater and Wu are to be commended for advancing the discussion beyond the true but tired themes of how much the nation is falling behind other developed countries when it comes to broadband and needs a national broadband policy to outlining a strategy to make it happen. It's no longer useful to call for a vague "national broadband policy." Since the U.S. is already years behind where it should be when it comes to broadband telecommunications infrastructure, what's sorely needed an action plan and rapid implementation. The solutions don't have to be perfect when the dreary U.S. broadband status quo is unacceptable and grows increasingly so as time goes on. As business gurus Tom Peters and Robert H. Waterman Jr. advised in their 1982 book In Search of Excellence: Ready, Fire, Aim.

Cynical spin campaign shifts broadband build out burden to consumers

Telecommunications companies are engaged in a subtle PR campaign that attempts to shift the burden to consumers to prove they want broadband before they build out their infrastructures in order to make it available. Their position -- made clear in this PC World item via Yahoo News -- is unless demand can be shown, we aren't building it.

It's really nothing more than a cynical, self serving delaying tactic, part of the paper chase diversion of drawing maps and aggregating demand that allows the telcos and cable companies to sit back and do nothing, content to depreciate their aging and increasingly obsolete infrastructures instead of investing in upgrading them for the modern Internet era of telecommunications. They're essentially saying, if consumers can't prove to our satisfaction they really want broadband, then they can get by with circa 1992 dialup connections or go suck a satellite and put up with high cost and sluggish, often unreliable connections. The problem is consumers won't ever be able to do so since the true intent is to buy time, not prove market demand.

Consultant Jeff Kagan tells PC World most consumers don't need more than a 3Mbps connection even as broadband providers are rolling out connections up to 20Mbps. For now and for those mired in broadband black holes for years, Kagan's right. But just because most consumers don't need a 20Mbps connection doesn't mean they don't need -- or want as some industry apologists suggest -- a 3Mbps connection. Providers should be providing broadband throughout their entire service areas at that minimum level of service right now and planning for 20Mbps connections in the near future.

Qwest petitions FCC for $4.2B in USF funds to defray broadband infrastructure costs

The Denver Business Journal reports Denver-based telco Qwest has filed a petition with the Federal Communications Commission seeking $4.2 billion from the Universal Service Fund to defray the cost of deploying broadband infrastructure in its 14-state service area located in the western United States.

According to the newspaper, current FCC rules make the funds inaccessbile to Qwest.

Another think tank report calls for U.S. broadband policy leadership

America has an incomplete telecommunications infrastructure that frequently fails to provide broadband over much of its "last mile" and places the U.S. behind many other industrialized nations measured on broadband access and cost. The problem persists because of private market failure, lack of government leadership and proactive policies and ideological gridlock, concludes a report released this week.

Like other think tanks that warn the U.S. is at a crisis point for broadband, the Information Technology and Innovation Foundation calls for a strong, effective national broadband policy, arguing that broadband is too critical to the economic well being of the nation to be left solely to market forces. Both public policymakers and private sector providers play a key leadership role, the report asserts, as occurs in other nations with greater broadband access at lower cost:

We should be able to agree that the United States can do better on broadband. The most important step the United States can take as a nation to improve our broadband performance may be to move beyond the divisive and unproductive debate over broadband policy that revolves around arguments about whether we are behind or ahead; whether our relative position is due to policy or other factors; whether unbundling is a magic bullet or an investment killer; and of course, whether net neutrality is the greatest threat to the Internet since its inception or something that is an anachronistic concept.

It’s time to reject the view that somehow this is a zero-sum game between corporate America and government. Both must clearly play a leadership role if we are to make headway on broadband performance. This means shifting the debate to focus on the key issues: how to enact public policies that emphasize the primary goal— getting as many American households as possible using high-speed broadband networks to engage in all sorts of online activities, including education, health care, work, commerce, and interacting with their government.

To give broadband providers the economic incentives to invest in broadband infrastructure, the report offers these specific recommendations:

1. More favorable tax policies to encourage investment in broadband networks, such as accelerated depreciation and exempting broadband services from federal, state, and local taxation.

2. Continue to make more spectrum, including “white spaces,” available for next-generation wireless data networks.

3. Expand the Department of Agriculture’s Rural Utilities Service Broadband Program and target the program to places that currently do not have non-satellite broadband available.

4. Reform the federal Universal Service Fund program to extend support for rural broadband to all carriers, and consider providing the funding through a reverse auction mechanism.

5. Fund a national program to co-fund state-level broadband support programs, such as Connect Kentucky or North Carolina e-NC Authority.

6. Promote the widespread use of a national, user-generated, Internet-based broadband mapping system that would track location, speed, and price of broadband.

7. State and local governments should take action to make it easier for providers to deploy broadband services, including making it easier to access rights-of-way.

8. Support initiatives around the nation to encourage broadband usage and digital literacy.

9. Fund a revitalized Technology Opportunities Program, with a particular focus on the development of nationally scalable Web-based projects that address particular social needs, including law enforcement, health care, education, and access for persons with disabilities.

10. Exempt broadband Internet access from federal, state, and local taxes.

11. Support new applications, including putting more public content online, improving e-government, and supporting telework, telemedicine, and online learning programs.

Mapmaking a diversion on the road to full broadband deployment

One of the biggest diversions to filling in America’s many persistent broadband black holes is the idea of geographically mapping broadband availability. It’s been a prominent activity of telco industry backed nonprofits and broadband task forces and working groups established by state governments with the goal of increasing broadband access. Those mapmaking efforts have in turn influenced some in Congress to propose mapping the entire nation.

Unfortunately, too many well intended policymakers and broadband advocates have fallen into the misguided notion that in order increase broadband access, it must first be known where the broadband black holes are.

But rather than speeding broadband deployment, the mapping proposals have slowed it by creating an unnecessary way station on the road to full broadband deployment. They’ve produced disputes among telcos and cable companies who believe the maps will reveal their deployment strategies to competitors. (Not true, but that’s beside the point) Then there are debates among the providers and the mapmakers over the degree of granularity. Should the maps be drawn based on five-digit ZIP Codes, ZIP plus 4 or census tracts?

These mapping exercises are essentially busy work that distracts from the real task at hand: the need to deploy broadband infrastructure to eliminate those areas lacking it as rapidly as possible. Plus they give the telcos and cable companies an excuse to avoid further deployments until the scope of the maps is agreed upon and the maps are drawn up. When they’re completed, we end up with some nice pretty maps to look at but new no actual broadband deployment. Cynics might understandably suggest that’s a stall tactic on the part of the providers.

The maps also create a platform from which the providers can mount more empty promises of broadband deployment like AT&T's bogus Project Pronto. I recall attending a community meeting with AT&T’s predecessor entity SBC Communications in 2002 at which the telco displayed a large wall map showing a goal of broadband deployment to nearly 100 percent of its service areas by 2006. Here it is 2008 and Project Pronto turned out to be Project Punt.

The telcos and cable companies know where they've deployed broadband infrastructure. Public policymakers typically do not. Since local elected officials already represent a given geographical area, it’s very easy for them to poll their constituents on their Web sites, by mail and town hall meetings to ask them if they have broadband. Those living in broadband black holes will give them an earful. No mapping required.

AT&T has itself to blame and not economy for slowing residential wireline revenues

Last month, AT&T's chairman and CEO Randall Stephenson told an industry conference a slowing economy is taking a toll on the telco's residential wireline broadband market segment.

That doesn't exactly square with a forecast by the Telecommunications Industry Association (TIA), which said yesterday that the telecommunications industry should see strong growth over the next three years, driven largely by increasing demand for broadband.

Reports Grant Gross of IDG News Service:

The trade group expects the worldwide telecom market to grow to $4.6 trillion by 2011, compared to about $3.9 trillion in 2006. About $1.3 trillion of the 2011 market will come from the United States, the TIA said.

Driving these increases will be broadband, with its consumption doubling in 2006 and quadrupling again in 2007, said Arthur Gruen of Wilkofsky Gruen Associates, a consultancy that focuses on telecom and other industries. Video and entertainment applications are pushing customers to buy more broadband and telecom providers to build more capacity, he said.

Rather than the blame the economy, AT&T need only look in the closest mirror for declining residential wireline revenues. It has halted DSL buildouts, failing to meet its "Project Pronto" goal of systemwide DSL availability by last year. The telco is currently engaged in a half hearted effort to build a halfway capable system (Project Lightspeed/U-Verse) that will meet only a fraction of the burgeoning demand for integrated IP services in the residential segment.

AT&T can hardly blame the economy when it chooses to sit back and milk existing revenues and depreciation from its aging copper cable based system rather than aggressively growing its residential business.

Governor: "We ought to consider what Tennesseans want"

Tennessee Gov. Phil Bredesen made it clear earlier this year his policy priority as AT&T seeks legislation allowing it to offer advanced broadband services under a state charter is ensuring the company build out a complete infrastructure rather than the partial one that presently leaves many state residents on the wrong side of the digital divide.

Bredesen underscored that point in remarks reported by the Associated Press Feb. 4 that suggest he's putting the interests of his constituents first:

"Last year and so far this year, it's shaping up into what AT&T wants versus what the cable TV companies want," Bredesen said. "Maybe at some point, we ought to consider what Tennesseans want. It's something I am taking a look at how I might have an influence on."

California Broadband Task Force issues report with several build out recommendations

The California Broadband Task Force (CBTF) formed in late 2006 by Gov. Arnold Schwarzenegger issued its final report Thursday recommending several measures to encourage broadband infrastructure build out in the state so that all Californians can have high speed Internet access. They include:

1. Issuing infrastructure bonds and investing the proceeds with private sector companies to finance broadband infrastructure in unserved and underserved areas.
2. Utilizing the California Advanced Services Fund (CASF) recently created by the California Public Utilities Commission to use existing phone bill surcharges to subsidize broadband deployment in high cost areas.
3. Giving broadband providers a 10 percent tax credit on capital expenditures for investment in current generation broadband infrastructure capable of delivering combined download and upload speeds between 1mbs and 10mbs and a 20 percent credit for next-generation broadband infrastructure capable of providing combined throughput that exceeds 50mbs.
4. Urging the Legislature to reauthorize the Rural Telecommunications Infrastructure Grant Program, a $10 million appropriation administered by the CPUC providing grants of up to $2.5 million per project, when it expires at the end of 2008. The report also recommends the $2.5 million grant cap be lifted.
5. Authorizing local governments chartered as Community Service Districts (CSDs) to provide broadband service, either directly or through a contractor, if a private sector provider is unable or unwilling to deploy service to district residents.
6. Providing access to state rights of way on a cost recovery basis for wireless broadband providers to bring service to presently unserved areas.
7. Offering broadband providers space on state-owned properties on a cost basis to accommodate broadband distribution facilities.

The CBTF report did not set a time frame to achieve universal broadband access in California. The CBTF was tasked to “remove barriers to broadband access, identify opportunities for increased broadband adoption, and enable the creation and deployment of new advanced communication technologies.” Gov. Schwarzenegger also requested that the CBTF “pay particular attention to how broadband can be used to substantially benefit educational institutions, healthcare institutions, community-based organizations, and governmental institutions.”

A number of maps of wire line-based broadband access were developed by the CBTF that show broadband infrastructure is deployed unevenly throughout California, with nearly 2,000 towns and communities lacking broadband access while other parts of the state, mostly in metro areas of Southern California, enjoy state of the art connections.

The report views broadband as vital form of infrastructure. “Just as California has invested in other critical infrastructure such as roads, electricity, and water, the CBTF believes that the state must seize the opportunity to promote private-sector investment, leverage public/private partnerships, and lead the effort to increase broadband availability and adoption,” the report states.

A key question is whether the build out incentives proffered by the CBTF will be enough to fill in California's broadband black holes in a relatively short period of time without expanding the state's current universal telephone service requirement to include broadband services.

An executive summary of the report can be viewed by clicking here.

The full report of the CBTF can be viewed by clicking here.

A spokeswoman for Schwarzenegger said the governor applauds the CBTF report and will be reviewing its recommendations.

In April of 2006, Schwarzenegger suggested a news conference that $200 million of Proposition 1D funds, the school construction bond approved by voters in November 2006, that are earmarked to expand the use of telemedicine could be used to help subsidize broadband build out in California.

California PUC allocates $100 million as broadband build out incentive

The California Public Utilities Commission announced it has formed the California Advanced Services Fund (CASF), allocating $100 million in matching funds for 2008 and 2009 to encourage broadband providers to bring service to unserved and underserved areas of the state. In order to qualify, providers will be evaluated on a broadband throughput benchmark of 3 Mbps download and 1 Mbps upload and would also have to offer Voice Over Internet Protocol (VOIP) service.

The CPUC said the funds will come from a .25 percent surcharge on telephone bills, estimated to be five cents a month for an average customer. The CASF surcharge will be offset by an equal reduction in the California High Cost Fund-B surcharge created to subsidize deployment of basic voice telephone service.

One year ago, your blogger suggested the administration of Gov. Arnold Schwarzenegger direct the CPUC to reform the five funds in California's Universal Service Fund program including the High Cost Fund-B -- which together received a total of $2.8 billion since 2003 to serve more than 7,600 designated high-cost areas -- to help speed the deployment of high speed Internet access in higher cost areas of the state.

The CPUC action sets a deadline of June 2, 2008 for submission of CASF funding requests. Consideration will be technology neutral and applicants will be required to provide a minimum of 60 percent matching funds as a prerequisite for consideration of their applications.

The CPUC decision finds that broadband infrastructure is critical to the economic health and welfare of the state and that "ubiquitous deployment of broadband holds tremendous opportunities for consumers, technology providers, and content providers, and is important to the continued health and economic development in California."

"Today's decision signals that this state is not content to sit around waiting for federal action to bring broadband to every part of our state," said CPUC President Michael R. Peevey. "We encourage every broadband provider in California to be a part of the solution for ending the digital divide in our state and participate in the CASF process."

As with other state-based broadband build out initiatives, the question is whether funding in the millions is sufficient to result in a meaningful expansion of broadband considering that in California and other states, the existing metal wire line based infrastructure is increasingly obsolete for the deployment of advanced telecommunications services and requires billions of dollars of investment to bring it up to date.

Here are links to the decision implementing the program and related proceeding documents.

Will state broadband build out incentives be enough?

As states gear up public-private partnerships to provide incentives to broadband telecommunications providers to build out their incomplete infrastructures, the question of whether these programs will be sufficient arises.

In allocating $5 million in seed funding for competitive grants to research, design and implement accessible Internet for unserved and underserved areas of rural and urban New York, Gov. Eliot Spitzer made clear the funds would not be used to build needed digital infrastructure. "Instead, state money will be used to leverage matching funds from the private and not-for-profit sectors," Spitzer noted. "In the end, it is New York's vibrant telecommunications sector—together with their tireless and invaluable workers—who will implement this vision in partnership with government."

But will telecom providers respond to the state incentives and will relatively paltry sums such as New York's $5 million begin to make a dent in the billions that are needed to bring a metal wire-based telecom infrastructure built decades ago for an analog, pre-Internet era technologically up to date? Especially considering that America's existing telecom infrastructure is already at least a decade behind where it should be to meet current needs and becomes increasingly obsolete as demand for high speed Internet access at greater bandwidth grows.

As this reality is confronted, a number of public policy options emerge. Should the states float multi-billion dollar bond issues – perhaps combined with tax breaks -- to provide low interest loans to telecommunications providers in order to provide more patient capital that the providers themselves cannot access given their short-term earnings horizons?

Or might these state-level efforts prove inadequate, providing too little money over too long a period to fund the massive investment that should have been made a decade or more ago in order to bring America's telecommunications system to the point where it should be today? It certainly seems likely, which would lead to calls for the federal government to step into the gap.

AT&T distorts build out as socioeconomic issue

As it did in California and other states where it has sought statewide broadband franchising statutes, AT&T is once again distorting the issue of build out requirements as one of socioeconomic status.

This time it's Tennessee and AT&T Tennessee President Gregg Morton is insisting that AT&T supports language in proposed state franchise legislation that prohibits red-lining of low income neighborhoods.

That's an irrelevant red herring. Building out advanced telecommunications infrastructure has nothing to do with neighborhood income levels. AT&T wants states to issue franchises rather than local governments because they know the locals will rightly insist they serve their entire communities and not just parts of them with an incomplete system.

The reality in Tennessee and other states where it has petitioned for state franchise laws is that AT&T wants to build advanced telecommunications infrastructure on the cheap, leaving some residents and businesses with access to advanced broadband-based services and others without.

Tennessee should reject this effort and tell AT&T and other backers of the bill it won't tolerate dividing the state into digital haves and digital have nots.

Reverse regulation and the race to the bottom

This excerpt from the Jackson, Tennessee Sun once again reveals the real competition between the telcos and cable companies isn't about who can get the most customers with upgraded infrastructure that's able to provide advanced telecommunications and video services. Instead, it's just the opposite in the perverse state of today's wire line telecommunications industry. It's a battle in which the telcos and cable companies compete to serve the narrowest geographical base of potential customers while devising rules to force the other guy to serve the broadest possible base. Call it reverse regulation. In most industries, businesses want regulation that allows them to reach more -- not fewer -- customers. Not in wire line telecommunications, in which the players are engaged in a race not to the top, but to the bottom. (Incidentially, Sen. Ketron is dreaming if he truly believes AT&T plans to roll out its fiber/copper hybrid project U-Verse infrastructure in rural areas. U-Verse is targeted exclusively to select urban/suburban areas.)

By using its existing infrastructure, AT&T could reach smaller rural communities that do not have, and may never have, cable service because of their size, said state Sen. Bill Ketron, R-Murfreesboro. Ketron is the main sponsor of the cable legislation. The bill does not ask for any state funding for AT&T.

"The faster we get broadband into our rural communities, the faster those communities can be connected to the world," Ketron said. "Not only from our children in education in being connected but in providing the economic link to industrial development to those communities."

(Tennessee Cable and Telecommunications Association Executive Director )Briggs argues otherwise.

"They have said they intend to serve 70 communities, and there are over 500 to 600 franchises," Briggs said, "so right there it tells you they do not intend to serve everyone."

Wisconsin lawmaker likes Illinois 90 percent build out standard

Wisconsin state Senator Kathleen Vinehout isn't about to roll over to Ma Bell's proposed advanced telecommunications services regulatory framework that would require a far lower build out standard for AT&T's Project U-Verse product.

Vinehout likes what Illinois has done in requiring the company to build out its hybrid fiber and copper cable U-Verse infrastructure to serve 90 percent of the state rather than the 50 percent build out requirement favored by AT&T that leaves large areas on the wrong side of the digital divide:

Not every state meekly surrendered to AT&T. Illinois passed a bill with real teeth, including very specific consumer protection standards: requirements to bring services to 90 percent of the state, standards for quality, and protection for community access television.

Connecticut AG wants to force AT&T to serve entire state with IPTV

Now here's a turnabout. Over the past two years, AT&T has lobbied states for laws that allow them to go around local governments and get statewide "video franchises." Looking out for their constituents, most local governments (unlike El Dorado County, California) naturally want advanced broadband telecommunications services including video available for all of their residents. But Ma Bell and other telcos -- as well as the cable companies -- instead want to pick and choose winners and losers when it comes to determining who will get service.

Connecticut isn't one of the two dozen or so states that put a statewide franchise law on the books. Nevertheless State Attorney General Richard Blumenthal worries that AT&T will work with the locals to leave much of the state on the wrong side of the digital divide and has petitioned the state's Department of Public Utility Control urging it to require Ma Bell to get a statewide franchise.

"Because AT&T serves virtually the entire state, the company needs to apply for a statewide license requiring it to eventually provide IPTV (Internet Protocol Television) service to all households, Blumenthal said in a press release. AT&T, which already offers IPTV in a few communities, had wanted to provide the service without state regulation and only in selected areas, according to Blumenthal's office.

Don't let the references to cable or video franchises and IPTV confuse the main issue. This issue isn't about TV or video competition. It's all about broadband buildout and closing the widespread digital divide.