Showing posts with label legacy carriers. Show all posts
Showing posts with label legacy carriers. Show all posts

Sunday, July 31, 2011

Telcos propose reforming USF to subsidize legacy DSL

A half dozen first and second tier telcos including America's largest, AT&T and Verizon, are proposing to replace the existing Universal Service Fund that subsidizes switched voice service with two new subsidy programs to provide Internet connectivity in high cost areas. The proposal was made in a July 29 filing with the U.S. Federal Communications Commission.

One program would support wireline service, the Connect America Fund (CAF). The other, the Advanced Mobility/Satellite Fund, would subsidize wireless and satellite service in the least populated, highest cost areas of the nation. The CAF subsidy would be highly granular -- down to the census block level served by an existing telco central office.

The CAF is aimed at subsidizing buildout of the telcos' legacy Digital Subscriber Line (DSL) service using fiber to feed remote DSLAMs that serve premises using the existing copper cable plant. The CAF plan proposes approximating the FCC's current asynchronous minimum definition of broadband, 4 Mbs for the download side of the connection and 1 Mbs for uploads. (The CAF proposal calls for an upload speed of 768 Kbs)

The filing comes just one week after AT&T CEO Randall Stephenson declared DSL obsolete technology.
Apparently it's not for those parts of AT&T's service area where the company has opted not to invest in building out its VDSL-based U-Verse service. For those areas, legacy ADSL that offered throughput at the current FCC minimum that was state of the art technology a decade ago will have to suffice.

If these telcos had been smart and exercised even a slight degree of foresight, they would have made this proposal in the late 1990s when they first began to roll out DSL service. Or by 2000 at the latest. At that time, they clearly knew a business case couldn't be made to deploy DSL in large swaths of their service territories without some form of subsidization.

This proposal is not only tardy by a decade or more. It sets the throughput bar too low by fixing it on today's current minimum definition of broadband. With Internet bandwidth demand growing at a rapid pace to support increasingly bandwidth hungry applications -- most notably video -- today's 4 Mbs down and 1 Mbs up standard is by definition the edge of tomorrow's obsolescence. Some would argue it's already obsolete.

The incumbent telcos' proposal also comes as community broadband projects are taking off and building out in many parts of the nation that provide far faster, future proof Internet connectivity using fiber to the premise connections.

Wednesday, June 02, 2010

Emotion rather than logic drives incumbent opposition to local telecom infrastructure improvements

In a recent email exchange with Craig Settles, I've attempted to plumb the paradox of why incumbent legacy telco and cable companies will as Settles put it "rush in like storm troopers" before local providers can activate their own Internet Protocol (IP) telecom infrastructures. Infrastructure built by local governments and consumer cooperatives because it doesn't pencil out for the shareholder-owned incumbents to construct. The result: a plethora of "broadband black holes" and underserved/overpriced areas due to incomplete infrastructure that extends only as far as the incumbents' business models allow.

The question that vexed me is why the incumbents would come in on the heels of community-based provider deployments when they've already concluded there isn't enough business to make it worth their while to expand and upgrade their plants in the first place. Particularly for take rates south of 30 percent and a shift to Internet-based video content that makes consumers less inclined to purchase pricey 300 channel TV packages that are among incumbents' most profitable service offerings.

Settles explanation: there is no logical, business M.O at work in this circumstance. Telcos and cable companies that normally operate in a logical, numbers driven mode (for example, cable providers don't deploy infrastructure unless it strictly falls within a pre-approved, set ratio of occupied premises per linear mile) suddenly turn illogical when a community-based provider emerges with an alternative and typically nonprofit business model that avoids obstacles that limit the incumbents' ability to expand their footprints.

Since incumbents tend to regard their service areas as proprietary, exclusive franchises regardless of how much -- or how little -- they actually provide IP-based services, they view community-based providers as interlopers invading their turf. That provokes an illogical, emotion driven response.

"It's nothing about logic," Settles explains "It's often paranoia -- if one community builds a better network than what we offer, other communities will follow suit and sometimes a case of whose belt is longer. Incumbents seem to prefer to destroy a community network rather than figure out how to adapt services to leverage that network." In other words, a classic pissing contest in which a large, distant corporation attempts to impose its corporate will upon local residents -- who know their needs best -- for the sake of preserving its own pride.

In this respect, the incumbents aren't actually fighting the local upstarts who would dare challenge their territorial hegemony. They're really fighting the future. The incumbents' perceived enemy isn't so much the community-based providers. It's the alternative business paradigm they represent and which fostered their creation.

Wednesday, May 26, 2010

Telco layoffs spotlight difficult transition from POTS to IP services

The telecommunications industry is undergoing great upheaval during the transition from POTS (Plain Old Telephone Service) to wireless and next generation Internet Protocol-based telecommunications technology, producing mixed and seemingly paradoxical company news.

Case in point: Roseville, Calif.-based SureWest Communications. The fiber to the premises telco announced this week it would lay off seven percent of its work force due to weakness in the POTS side of its business at the same time the IP side of its shop is growing.

An obvious question is why not retrain or shift the downsized POTS workers to accommodate the growth in IP-based services? The answer: while demand for IP-based services is stiff and will only grow stronger, growth prospects in that segment are constrained by the inability of investor-owned telcos like SureWest to build out their IP infrastructures to reach more customer premises. Doing so requires more CAPEX than their business models can accommodate.

SureWest's big counterparts, AT&T and Verizon, have slowed their IP infrastructure buildouts. AT&T began hitting the brakes on its mixed fiber/copper Project Lightspeed/U-Verse buildout as general economic conditions deteriorated in 2008. Just before last Christmas, AT&T went as far as pronouncing its POTS business in a "death spiral." Verizon recently stopped expanding the footprint of its fiber optic FiOS plant and repositioned itself as an urban wireless provider.

The demand for IP services is strong, providing a potential growth industry at a time when jobs and economic activity are greatly needed. (Consider that most residential customers have retained their IP services during the current recession). But the legacy POTS carriers can't ramp up to meet it. That situation requires alternative providers such as local governments and consumer telecom cooperatives step up to meet the need.

Sunday, May 09, 2010

Economic development goals pit local goverments against legacy telcos, cable companies

Local government economic development agendas are clashing with investor-owed legacy telcos and cable companies in North Carolina as the Associated Press reports in this item appearing in The Daily Reflector.

The locals want fiber optic-based infrastructure to attract employers and create jobs. The business models of the incumbent telco and cable companies preclude them from profitably providing it. But rather than accept that business reality and seek more profitable business ventures, they've engaged in disinformation by declaring telecom infrastructure -- a natural monopoly -- as a competitive market. Therefore, they've argued to North Carolina lawmakers, local governments should get voter approval before issuing bonds to cover the cost of municipally owned telecom infrastructure in order to level the "competitive" playing field.

That sounds reasonable on its face. But the incumbent agenda isn't driven by public interest by ensuring prudent expenditure of public funds. It's a self interested one aimed at introducing delay. Unfortunately for the incumbent investor-owned providers, that merely adds costs and does nothing to increase profits. That could depress their share values and potentially leave them open to shareholder lawsuits.

Saturday, April 24, 2010

Paradigm shift in telecommunications underway

As the legacy publicly switched telephone network (PSTN) becomes increasingly obsolete (it's in a "death spiral" according a pre-Christmas 2009 Federal Communications Commission filing by AT&T), regulators like the FCC are grappling with a paradigm shift in telecommunications.

The FCC's current regulatory framework is more oriented toward PSTN than the Internet that is rapidly replacing it. It too is growing outmoded, leaving regulators struggling to devise a successor.

And as FCC Chairman Julius Genachowski has noted, the FCC also faces a major challenge in figuring out how to best address market failure that has left at least seven million U.S. households offline according to the FCC's own estimates. At a time when the PSTN is replaced by the Internet, if you don't have an "always on" terrestrial Internet connection, you don't have modern telecommunications service. As PSTN becomes obsolete, so does the PSTN means of Internet connectivity: dialup access that was state of the art nearly two decades ago.

This is truly a time of major transition in telecommunications. As with any major shift, there will be a tension between those who want to hang on to the old paradigm -- in this case the legacy single purpose "telephone" and "cable" companies whose business models are based on billing for incremental services delivered over closed, proprietary networks -- and those who want speed the shift toward alternative business models based on open access IP-based networks.

Wednesday, April 14, 2010

FCC National Broadband Plan lacks sense of urgency

Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) today gave voice to my own concern that the Federal Communications Commission's National Broadband Plan mandated by the American Recovery and Reinvestment Act of 2009 is more of a wish list than an action plan.

Particularly considering that according to an FCC estimate released when the plan was unveiled last month, 7 million U.S. homes are offline because they are located outside cable company footprints or unable to subscribe to DSL due to distance limitations. Last October, the Yankee Group estimated about 12 percent of U.S. households, including those in some major metropolitan areas, have no access to broadband service.

That's a big infrastructure problem reflecting the fact that the United States is easily a decade behind where it should be considering the rapid growth of the Internet and next generation, Internet-protocol based telecommunications.

Rockefeller's message to the FCC is a problem of this magnitude requires a sense of urgency to bridge the digital divide. I agree with him. As a representative of a state with sizable rural areas, Rockefeller wants the FCC to focus its plan on rural America where IP-based telecom infrastructure is the weakest and least developed.

I would include many metro areas as well, particularly neighborhoods where housing density and topography don't allow legacy wireline cable and telcos to profitably build out their systems. As I have stated repeatedly, the FCC's plan should help alternative entities such as nonprofit coops start up to rapidly construct this critical infrastructure where the legacy providers cannot afford to do so.

Saturday, March 27, 2010

Legacy telco regulatory concerns overblown as Internet replaces PSTN

The United States is moving from an era of the highly regulated, proprietary publicly switched telephone network (PSTN) to a new telecommunications paradigm in which the Internet is replacing the PSTN and the "plain old telephone service" (POTS) it delivered.

Both of America's biggest investor-owned telcos, AT&T and Verizon, have heralded the death of PSTN/POTS. Verizon is adopting Internet protocol-based next generation technology in its place. AT&T went so far as to declare its legacy, copper-based wireline infrastructure in a "death spiral" in a filing with the U.S. Federal Communications Commission just before last Christmas. That business, AT&T wrote, cannot be sustained as more and more residential customers drop their land line phone service for wireless PCS devices or use their Internet connections to make voice calls.

As the nation adopts this new Internet-based telecom infrastructure, the legacy carriers are worried that the FCC will attempt to overregulate it. Those concerns are overblown. There will be no need for increased regulation at a time when the telecom infrastructure is changing and alternative business models -- most notably locally owned open access fiber infrastructure -- are emerging.

Strict regulatory oversight is only needed in a monopolistic market. New business models such as municipal and cooperative-owned open access fiber networks dilute the monopolistic market power of the legacy carriers and thus the need for enhanced regulation. If enhanced regulation does come about, it will likely be aimed at penalizing legacy telcos that stand in the way of federal policy to expand advanced telecommunications infrastructure and Internet access with uncompetitive market practices.