NTIA director downplays enhanced infrastructure competition, wireless as U.S. universal broadband access strategy

Here are National Telecommunications and Information Administration (NTIA) Director Lawrence E. Strickling's comments to the U.S. Federal Communications Commission on the FCC's incubating policy recommendation due to Congress next month on how to best achieve broadband access for all Americans.

The notable points of Strickling's letter: neither competitive market forces nor emerging wireless technologies will necessarily get us there. While not stating so directly, Strickling implicitly acknowledges that wireline telecommunications infrastructure like electric power and water distribution is a natural monopoly due to the high cost of building it. Hence, more competition isn't going to be the answer, Strickling suggests, noting however there should be more competition among broadband Internet access services sold over that infrastructure. That means open access networks, although Strickling didn't use that term explicitly in his letter to the FCC.

As for wireless, Strickling writes, it remains unclear that it could provide a viable "third pipe" to deliver advanced telecommunications (IP-based) services to residences and small businesses. Strickling's doubts are well founded. Tim Nulty, who believes fiber to the premises can pencil out even in rural areas, explains why with an aeronautical metaphor. While wireless may offer mobility, he says, a fiber-optic network connected directly to homes boasts nearly unlimited capacity. "Think about 747s and helicopters,” Nulty told The Progressive magazine. “Helicopters are marvelous when they’re used for what they’re good at. But you don’t use them to fly thousands of people between Boston and Chicago. For that you need 747s.”

Nulty made that observation in August 2008 and it's even more relevant today as bandwidth demand has mushroomed with the proliferation of IP-based video content. It would be a mistake for policymakers to punt on wireline, betting on the come that commercial wireless providers will fill in broadband black holes given the many technological, backhaul, terrain and business model challenges they face. In some areas, they have. But it's only a temporary bridge on the road toward fiber to the premises.

USF reform alone won't achieve universal U.S. broadband

Just as the U.S. Federal Communications Commission set a date for the end of analog broadcast television earlier this year as TV signals went digital, it should also establish a sunset date for the legacy Publicly Switched Telephone Network (PSTN), AT&T asserted in a December 21 filing with the FCC.

The business model for the PSTN -- a proprietary network comprised of central office switches, amplifiers and copper cable plant designed to deliver what's known as plain old telephone service -- POTS -- is in a death spiral as the number of people shutting off their landline voice service in favor of wireless and Voice Over Internet Protocol (VOIP) services has accelerated in recent years, AT&T notes. In the meantime, the telco stated, the FCC should modernize its regulations to ensure an orderly transition from the PSTN to an Internet Protocol (IP) based system, taking full regulatory control and ending state oversight authority originally established for regulating POTS.

However, legacy PSTN/POTS isn't alone in suffering from serious business model problems. So does the IP-based model that is the future of telecommunications. The reason: what AT&T describes as the "enormous" amount of capital necessary to complete the build out of required infrastructure to ensure all Americans have access to IP-based services just as basic telephone service is nearly universal. In its filing, AT&T concedes eight to ten percent of American households lack access to broadband, although another estimate released in October placed the figure higher at 12 percent, including even spotty access in major metropolitan areas.

In order to allow telcos to direct more capital investment to building out broadband infrastructure, AT&T proposes the FCC scrap rules requiring telcos to provide POTS so they can redirect funds to upgraded infrastructure capable of delivering IP-based services. "The legacy PSTN network – which is rapidly hemorrhaging customers and revenue – is now diverting much needed funds from investments in broadband networks," AT&T states in its filing.

AT&T also wants the Universal Service Fund (USF) -- created to subsidize the cost of providing POTS in high cost areas -- retasked to do the same for IP-based services. Doing so would help achieve the Obama administration's goal of broadband access for all Americans, according to AT&T.

But there's a difference between USF subsidies for voice telephone service and IP-based services. Deployment and adoption of basic phone service played out over decades. By contrast, there's a huge reservoir of pent up demand for broadband AT&T and other big telcos assured would be offered to all U.S. households when the Telecommunications Act of 1996 was enacted providing telcos tax breaks and other incentives intended to pave the way for them to universally deploy fiber-delivered telecommunications services by 2006. Didn't happen, obviously.

The FCC and other policymakers should keep this history and differences in demand between POTS and IP-based services in mind. Reforming the USF isn't likely to be the sole solution to remedy market failure for IP-based services. They must also encourage alternative business models such as open access fiber networks owned by local governments and telecom cooperatives through subsidies, low cost loans and tax incentives.

FCC draft broadband plan: Incorrect diagnosis, wrong prescription

The U.S. Federal Communications Commission today unveiled the underlying policy principles that will frame the plan it must present to Congress in February to expand advanced telecommunications infrastructure to ensure all Americans have broadband access. The FCC was charged with developing the plan under the American Recovery and Reinvestment Act of 2009 signed into law by President Barack Obama in February.

A basic principle is encouraging competition to "build on the attributes of the American broadband ecosystem." That's something of a head scratcher as Tim Nulty and other experts have accurately pointed out that telecommunications infrastructure is a natural and not market-created monopoly. It's a lack of adequate infrastructure -- and not vendors who want to offer services over it -- that has brought about the large gaps in broadband availability in the United States.

Given that, it's not apparent how encouraging competition will even begin to fulfill the Obama administration's goal of universal broadband access. The problem isn't lack of competitors. It's lack of any providers because their for profit business models simply don't allow them to profitably deploy infrastructure within broadband black holes. No amount of enhanced competition can alter that business reality.

If the FCC accepts that reality, then its final recommendation to Congress in February must by implication call for alternative ownership and business models for last mile -- and some middle mile -- telecom infrastructure.

Report recognizes lack of broadband access in "non urban" areas of U.S.

When it comes to discussing advanced telecommunications infrastructure, one of my major peeves is the frequent over generalization of the United States into just two categories -- urban and rural -- as if it were still the early 20th century when electric power or other utilities bypassed entire rural counties and regions before they were built out.

In the case of advanced telecom infrastructure, it's far more granular than that. It can be available on one street or road -- even in the burbs -- but not on the next. Indeed, many visitors find this blog after a search query on the vexing question of why they're stuck on dialup while a nearby neighbor can get wireline broadband.

So it's heartening to see that this recently issued forecast by The Insight Research Corporation despite its "urban vs. rural" dichotomy gives some degree of recognition that of an estimated 12 million households in the U.S. that lack access to broadband, not all are confined to rural areas. Some are situated in "non urban" areas, i.e. outlying suburbs, exurbs and less densely populated portions of metropolitan regions.

Here's the relevant excerpt:

While the exact number of households that do not have access to broadband service is unknown, even to the government, INSIGHT estimates that at least 12 million rural and non-urban market households do not have access to any broadband service due to the lack of supporting terrestrial infrastructure.

Insight estimates that with a minimum cost of $1,500 per household, it would cost in excess of $18 billion to build out advanced telecom infrastructure to serve them.

Reducing demand for California state office space through telework

As deficit plagued California continues to grapple with red ink and sells off state owned office buildings to help bring in much needed cash, California Assembly consultant and Auburn, Calif. councilmember Kevin Hanley believes California can reduce the cost of office space to house state workers Monday through Friday.

Here's how, according to Hanley: state managers should shrink the cubicle jungle by allowing state workers to work remotely from home part of the work week. In his Sacramento Bee op-ed piece, Hanley notes the information technology is there. The problem is outdated supervisory technique that relies too much eyeballing workers rather than measuring job performance based on their work product.

I would add that for some California state workers -- particularly those living in outlying areas and who generate the most carbon emissions to get to work -- telecommunications infrastructure also needs updating from early 1990s era dial up to provide robust Internet connectivity options.

California PUC conditionally funds start up cooperative's middle mile project

The California Public Utilities Commission has demonstrated its support of start up telecom cooperatives -- entities this blogger believes play a crucial role in the rapid expansion of advanced telecommunications infrastructure in areas that are not sufficiently profitable for incumbent providers.

In a resolution adopted earlier this week, the CPUC agreed to fund 19 percent of the California Broadband Cooperative's planned open access wholesale middle fiber project along 448 miles of Highway 395 in the Golden State's Eastern Sierra area including the counties of Mono, Inyo, Eastern Kern and San Bernardino. Coop membership is open to local governments, institutions and Internet Service Providers.

The 19 percent funding level is beyond the 10 percent level the CPUC established in July in an effort to utilize its $100 million California Advanced Services Fund (CASF) to leverage $7.2 billion in federal subsidies for broadband telecommunications infrastructure allocated in the American Recovery and Reinvestment Act (ARRA). The CASF funding is contingent on the project being approved for ARRA funding.

In the initial round of ARRA broadband funding that closed in August, the National Telecommunications and Information Administration's (NTIA) Broadband Technology Opportunities Program (BTOP) generally required project grant applicants to put up a 20 percent funding match. In an effort to get more California projects funded, CASF kicked in half the match amount, bringing total project funding up to 90 percent. That left it to applicants to come up with the remaining a 10 percent match.

However, the California Broadband Cooperative noted as a start up nonprofit with no financial history it would find it all but impossible to come up with the 10 percent match for its proposed $101.4 million project under grant and loan subsidies for broadband infrastructure construction under the BTOP and the USDA's Rural Utilities Service (RUS) program.

Kudos to the California PUC for recognizing that alternative, nonprofit business models like cooperatives are needed in the quest to close the digital divide in California and that these entities face unique and substantial start up funding challenges. As the NTIA and USDA draw up new rules governing an upcoming and final round of funding for broadband infrastructure projects early next year, the agencies should keep the California PUC's action in mind.

Obama proposes additional funds for broadband infrastructure

President Barack Obama said in a speech today at the Brookings Institution that more federal subsidies are forthcoming for broadband infrastructure as part of a renewed effort to create badly needed jobs. Whatever the amount, it will supplement the $7.2 billion already allocated in the American Recovery and Reinvestment Act Obama signed into law in February.

Here's the relevant excerpt from a transcript of the president's remarks posted on the White House Web site:

Second, we're proposing a boost in investment in the nation's infrastructure beyond what was included in the Recovery Act, to continue modernizing our transportation and communications networks. These are needed public works that engage private sector companies, spurring hiring all across the country.

Already, more than 10,000 of these projects have been funded through the Recovery Act. And by design, Recovery Act work on roads, bridges, water systems, Superfund sites, broadband networks, and clean energy projects will all be ramping up in the months ahead.

Whatever the additional amount agreed to by the president and Congress, there's still a long way to go given the consensus view that the $7.2 billion in the economic stimulus package represents a mere down payment on what the U.S. needs to invest to modernize its outmoded and incomplete telecommunications infrastructure as Blair Levin, the Federal Communications Commission's broadband czar, generally described the amount as the Obama administration prepared to take office one year ago.

Kiplinger predicts U.S. tax to bolster telecom infrastructure

The Kiplinger Letter is predicting the U.S. Federal Communications Commission will propose a tax next year to subsidize private telcos and cable companies' cost to build out broadband to serve all Americans. The American Recovery and Reinvestment Act of 2009 tasked the FCC with providing Congress a plan for universal broadband access by Feb. 17, 2010. Kiplinger Senior Associate Editor Richard Sammon forecasts the tax will be part of the plan.

But at the same time, Sammon says enacting such a tax will prove politically difficult. The take away is the FCC should be considering alternative entities that can roll out advanced telecommunications infrastructure for less money than the big telcos and cable companies that must produce hefty profits and pay fat dividends to satisfy shareholders.

That means turning to the nonprofit sector and specifically local governments and consumer-owned telecom cooperatives. There, taxpayer dollars can go farther and these smaller, more nimble entities can move more rapidly to deploy broadband infrastructure to fill in the areas where the business models of the large telcos and cable companies don't pencil out. Instead of new taxes, policymakers should enact tax breaks to encourage homeowners and small businesses to buy their own last mile fiber connections through cooperative ventures and public/private partnerships.

The need for alternative business models is underscored in a report prepared for the FCC by the Columbia Institute for Tele-Information and released last month.

A key conclusion: a significant number of homes -- 5 to 10 million representing 4.5 to 9 percent of U.S. households -- will continue to have "significantly inferior choices in broadband" between now and 2015. "Most of these homes will have wireless or wired service broadband available only at speeds substantially lower than the speeds available to the rest of the country," the report notes, adding that some homes "will have no choice except satellite broadband, which has some performance attributes that make it less satisfactory for many applications than a terrestrial broadband service."

FCC puts broadband in proper perspective

The term broadband -- generally used to refer to Internet connectivity beyond first generation dial up access -- is a component of the larger transformation of the telecommunications infrastructure. The legacy Public Switched Telephone Network (PSTN) system that relies on copper cables and central office switches owned by the phone companies is of the pre Internet period. In the post Internet age, the Internet itself is becoming the phone system. Routers take the place of telephone switches and fiber optics supersede copper cable.

The U.S. Federal Communications Commission (FCC) put broadband into its proper perspective in a public notice issued Dec. 1 calling for public comment on this conversion of telecommunications infrastructure from a "circuit switched network to an all-IP (Internet Protocol) network."

The notice describes broadband as "a leading indicator of the major transitions in communications technology and services" and "a growing platform over which the consumer accesses a multitude of services, including voice, data, and video in an integrated way across applications and providers."

The FCC notice shows the agency -- charged under the American Recovery and Reinvestment Act of 2009 with developing recommendations for Congress by next February on how to best achieve universal broadband access -- is thinking beyond broadband and of the larger regulatory scheme in "the spirit of understanding the scope and breadth of the policy issues associated with this transition" and the "appropriate policy framework to facilitate and respond to" this shift.

Incumbents v. Illinois over proposed broadband stimulus projects

The telco/cable duopoly has gone to battle stations in Illinois, where according to this report in Crain's Chicago Business it's opposing five dozen applications for federal subsidies for broadband telecommunications infrastructure build out including projects proposed by the state of Illinois, Chicago and Cook County. The subsidies are contained in $7.2 billion allocated in the American Recovery and Reinvestment Act signed into law in February.

According to the story, the incumbents contend the projects would overbuild their proprietary cable plants that already provide adequate broadband access. But the Illinois Department of Central Management Services counters that the proposed project areas must rely on leased circuits costing hundreds of dollars per month (such as 1970s era T-1 lines) that are "too costly to achieve statewide 21st-century information and communication capabilities."

Playing the T-1 card? If the state of Illinois has the facts right, this story sheds light on what might be the incumbent telcos' strategy for challenging proposed broadband stimulus projects: simply contending broadband is available most everywhere in developed areas of the United States since anyone can order up a T-1 or higher bandwidth leased line. That's hardly the case when price is taken into account. If this is the linchpin of the incumbent telcos' strategy to shoot down proposed broadband stimulus projects, it's not likely to go over well and will earn the incumbents even greater enmity.

Minnesota wants all state residents able to telecommute by 2015

Minnesota has established a functionality-based broadband goal: all residents of the state should be able telecommute -- work from home -- by 2015. That would require advanced telecommunications infrastructure able to allow them to video conference, according to Rick King, COO of Thomson Reuters, who chaired the Minnesota High Speed Broadband Task Force. That functional definition translates to download speeds of 10-20 Mbs and upload speeds of 5-10 Mbs, reports mnsun.com.

The federal government and other states, particularly those with major commuter congestion and especially those like California looking to reduce greenhouse gas emissions, should look to Minnesota. It has taken a major step forward in defining what advanced telecommunications infrastructure should enable without getting caught up in the feeds and speeds debate over how "broadband" should be defined.

Fighting the future: Telco/cable duopoly resorts to astroturfing to preserve status quo

Here's a key passage from a screed by Tim Karr of Free Press deploring the use of phony grassroots "astroturf" groups by the telco/cable duopoly to cloak its self interested protectionism in populist-sounding righteousness:

On Internet policy, astroturf groups have pocketed millions from industry to fulfill Job No. 1: Lock in incumbent phone and cable companies' control over high-speed Internet connections in America. At present, these companies provide 97 percent of fixed connections into American homes, a status quo they are willing to spend untold sums to maintain.

Brigham City, Utah: Pioneering America's telecom future

America's brightest and most promising version of its advanced telecommunications future is playing out in Brigham City, Utah. Residents there aren't waiting for the incumbent telco and cable companies to build fiber infrastructure to reach their premises. In the pioneering spirit of the great American West where consumer cooperatives formed a century ago to provide telephone service, they're doing it themselves, reports App-Rising.

According to App-Rising, 1,600 residents have paid $3,000 to install fiber to their homes, which will give them access to various providers via one of the nation's first open access networks, UTOPIA.

The concept is right out of a working paper issued one year ago by the New America Foundation authored by Derek Slater and Tim Wu titled Homes with Tails What If You Could Own Your Internet Connection. Like those for solar power, the paper recommends state and federal tax credits to create incentives for homeowners to buy their own fiber.

This concept has great potential to fill in the great many broadband black holes found throughout the West. As the Federal Communications Commission prepares recommendations to Congress due in two months on government policy to expand broadband access, it should put this open access, consumer owned fiber to the premises model -- and tax credits to encourage its use -- on the top of its list.

It's the infrastructure, stupid

This Rollcall article by think tankers Robert Shapiro of the Georgetown Center for Business and Public Policy and Kevin Hassett of the American Enterprise Institute implies that broadband black holes are caused by a lack of Internet bandwidth. To fill in the holes, Shapiro and Hassett suggest, simply charge large bandwidth users more.

The problem with their analysis is that it assumes broadband black holes are a pricing problem. Wrong answer. It's an infrastructure problem. The holes are there because the business models of the incumbent telco and cable providers don't allow them to fill them. The investor-owned incumbents must earn a return on their capital expenditures within five years but they can only do so in selected parts of their service areas. Hence, limited availability of the advanced telecommunications infrastructure necessary to deliver Internet protocol-based advanced telecommunications services. The telco/cable duopoly has long charged business users higher prices to subsidize services to lower revenue residential customers. That pricing differential has done nothing to spur investment in investor-owned advanced telecommunications infrastructure.

What's needed to fill in the broadband black holes are alternative business models such as nonprofit consumer-owned telecom cooperatives formed a century ago when the investor owned telcos were unable to profitably provide telephone service to large parts of the nation. Local governments can play a similar role.

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.

Broadband demand vs. supply siders: Real debate or a diversion?

As in macroeconomics, an ideological split appears to be developing among supply siders and demand siders over government policy designed to make broadband available to all Americans.

The demand siders tend to hail from the telco/cable duopoly such as Kyle McSlarrow, the president and CEO of the National Cable and Telecommunications Association (NCTA). Policy should focus on the demand side, McSlarrow told a conference hosted by the Family Online Safety Institute. "[T]he way we need to think about this is to think about this in terms of broadband adoption. We have it a little backwards right now."

Demand siders got a boost last week with the release of a study by the Information Technology and Innovation Foundation concluding the U.S. should create several programs to address demand for broadband in addition to subsidizing deployment of advanced telecommunications infrastructure.

Supply siders however question the need for government programs to stimulate broadband demand. IDG News Service reported at a recent California forum, some speakers suggested broadband adoption would continue to rise in the U.S. without significant help from the government. Connecting to broadband will eventually be like electricity, easy and inexpensive, Google cofounder Sergey Brin was quoted as saying.

I question whether the supply/demand side debate is real or contrived. The fact that the demand siders tend to be in the telco/cable camp raises my suspicion that their pushing the issue of adoption is more of a tactical move than substantial policy difference, aimed at diverting attention away from the problem of numerous broadband black holes. Last month, the Yankee Group issued a report noting about 12 percent of U.S. households, including those in some major metropolitan areas, have no access to broadband service, landing the U.S. at a dismal 15th in broadband penetration worldwide.

Even if we were to give the telco/cable duopoly the benefit of the doubt and accept a true policy split exists, I'd have to lean toward the supply siders. Unlike the far slower rate of adoption for basic telephone service, demand for and adoption of broadband has been explosive by comparison.

We also have to be careful not to frame the issue too narrowly. It's not just about high speed Internet connectivity but rather the larger migration to next generation, Internet Protocol-based telecommunications infrastructure than can provide not just fast Internet connections but also voice communication and TV/video -- both services that have very high rates of adoption in the United States.

Shifting telecom paradigm poses challenge as FCC crafts broadband plan

The U.S. Federal Communications Commission is drafting recommendations due to Congress in a little more than three month's time on a national policy to ensure universal broadband access.

It's no easy task. The reason? We're in the midst of a paradigm shift away from yesterday's proprietary, closed single purpose telephone and cable systems to an open Internet-based system that can deliver everything these systems provided and so much more.

In fact, yesterday's closed telco/cable paradigm is itself the major impediment to universal broadband because its business model cannot easily accommodate that goal. Subsidizing it to expand broadband access using old models designed to expand access to the basic telephone service of yesteryear isn't likely to accomplish the goal of universal broadband access. The subsidies will prove to be too little, too late (such as this legislative proposal to expand the Universal Service Fund to include broadband defined as the soon to be obsolete speed of 1.5 Mbs), unable to keep up with the rapid advance of IP-based applications and their accompanying demand for ever greater speeds and bandwidth. It's like like subsidizing mainframe computing and keypunch machines in a new distributed computing age of powerful servers and microcomputers.

It is therefore essential that the FCC think outside of the box of the legacy telco/cable duopoly and look to innovative approaches and alternative business models as it prepares its recommendations. At the top of the list should be locally owned and operated open access fiber to the premises infrastructure. Whether these systems are operated by local governments, cooperatives or public/private partnerships, they can be more rapidly deployed and are thus more likely to expediently meet the goal of expanding broadband access to all Americans while simultaneously providing protection against technological obsolescence.