Friday, June 04, 2010

Incumbents mount new challenges of proposed ARRA telecom infrastructure projects

The Obama administration's policy to support build out of Internet Protocol telecommunications infrastructure with grants and low cost loans is once again running into stiff resistance from legacy incumbent telephone and cable companies.

As they did in a previous round for funding requests for $4.2 billion set aside for this purpose in the American Recovery and Reinvestment Act of 2009 (ARRA), the incumbents are challenging numerous projects proposed for funding under the current funding round of USDA's Rural Utilities Service (RUS) Broadband Initiatives Program (BIP). The challenges are permitted under provisions of the Act that allow incumbents to delay or block proposed projects in their service areas by claiming they already provide advanced telecom services. A searchable list of BIP applicants and incumbent challenges is posted here.

Unlike in the first round of ARRA funding last year, the RUS has not posted details of the challenges. Listed are only the service areas of the proposed projects and the name of the challenging incumbent provider. Incumbent challenges of ARRA telecom infrastructure projects administered by the National Telecommunications and Information Agency's (NTIA) Broadband Technology Opportunities Program (BTOP) have not yet been posted by the NTIA.

Google 1 Gigabit fiber stimululates interest in fiber infrastucture

When Google announced early this year it would build 1 Gbs fiber in a test market somewhere in the United States, it sparked a lot of interest. One outcome and side benefit is Google's gigabit fiber project got locals thinking about fiber-based advanced telecom infrastructure and how to do it themselves knowing that Google isn't going to deploy it everywhere.

Baltimore is one place that realizes that. Baltimore Mayor Stephanie C. Rawlings-Blake wants to explore how to expand high-speed fiber-optic Internet service to city residents with or without Google's help, according to this Baltimore Sun article, and has established a panel to look into it.

"We can't sit here and wait for a gift from Google to fall on us from the sky," said Tom Loveland, the city's volunteer Google czar. "This is our future we're talking about here. Those of us involved in the conversation have seen what other cities have already accomplished. These folks managed to get themselves wired without Google. If they can do it, we can do it, too."

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.

Wednesday, May 19, 2010

California report: Telemedicine may help meet post reform rise in demand

The California state Legislative Analyst's Office recommends Golden State lawmakers consider integrating telemedicine into California's health care delivery system. The suggestion comes in the last sentence of a report the LAO issued last week on the impact of the recently enacted Patient Protection and Affordable Care Act on state health care programs.

The report notes that as more people become medically insured when most of its provisions take effect in 2014, California's health care system may lack capacity to serve a greater number of patients. Telemedicine --videoconferencing with medical professionals and uploading patient data -- offers the potential to make it easier for doctors to consult with patients and possibly serve more of them.

Before telemedicine can be adopted as a lower cost and more convenient method for patients to access medical professionals, the telecommunications infrastructure must be upgraded and expanded to provide reliable, Internet protocol-based service delivered via fiber optic cable connections to residences. Much of that job will fall to community-based entities such as municipal and consumer-owned telecom cooperatives.

Wednesday, May 12, 2010

App-Rising: FCC fudges on fiber

From the perspective of App-Rising, a recent Federal Communications Commission report addressing how to complete America's incomplete IP-based telecom infrastructure suffers from a major flaw. There's too much emphasis on DSL wireline technology intended to serve as a temporary stopgap on the road to fiber to the premises -- technology that will soon be obsolete and already suffers from poor reliability and high maintenance costs given the nation's aging copper cable plant.

The FCC also fudges on fiber by looking to mobile 4G wireless technology as a substitute for fiber to the premises. I agree with App-Rising that's also bad idea. This technology is intended primarily for mobile and not premises service. And unlike fiber, it's not a proven technology. Plus there's no indication 4G won't also become quickly obsolete, unable to scale up as premise bandwidth demand inevitably grows.

U.S. telecom market needs alternative business models, not more regulation

Telecommunications like other infrastructure such as roads, electric power transmission equipment, natural gas and water lines that serve homes and businesses is not a competitive market. It is a natural monopoly and at best a duopoly. Overlaid by market failure, represented by 7 million U.S. homes the Federal Communications Commission estimates are off the telecom grid 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, lack access to broadband service.

This is perceived as a regulatory conundrum by regulators like the FCC. Too much regulation, the legacy telco and cable companies warn, will choke off infrastructure investment. The implication that will make the existing market failure worse. But would it really? The legacy carriers' own business models already severely limit network build out to neatly defined geographic and demographic market segments that can generate a return on investment in about five years.

The real challenge facing regulators isn't regulating the market. This is a market that needs stimulating and alternative business approaches that will solve the existing market failure and create a new telecom market to deliver the Internet protocol-based telecommunications services Americans need now and into the future.

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.

Friday, May 07, 2010

Recommended reading: "Breaking the Broadband Monopoly"

Just as bringing electric power to homes and farms was America's great infrastructure challenge in the early decades of the 20th century, building out telecommunications infrastructure is the challenge of the early 21st as FCC Chairman Julius Genachowski has observed.

Christopher Mitchell of the Institute for Local Self-Reliance has issued a call for Americans rise to this new challenge just as they did in the 1930s with the Rural Electrification Administration and local utility cooperatives. While noting that every generation believes it bears a bigger burden than those before it, Mitchell asserts building out telecom infrastructure while difficult can be done just as it was with electric power lines.

Mitchell like author Jack Lessinger suggests this build out like electrification of nearly a century ago will help fuel an economic boom. (Building telecom infrastructure publicly and cooperatively also fits into Lessinger's emerging socioeconomic paradigm where "what's in it for me" is being supplanted by a new ethic of "what's in it for us.")

I strongly recommend reading Mitchell's latest white paper, Breaking the Broadband Monopoly. It's a comprehensive and very current treatise on and making the case for locally owned and operated telecom infrastructure. The paper is loaded with examples of community projects, examples of how legacy incumbent carriers fighting the future have attempted to stymie them, and tips and traps to avoid for community activists and local governments looking to take control of their telecommunications destiny and build their own local networks.

Will FCC enforce USF build out requirement?

It remains to be seen to what extent this week's decision by U.S. Federal Communications Commission Chairman Julius Genachowski to subject Internet protocol-based telecommunications to some but not all requirements of Title II of the Communications Act of 1934 will achieve his goal of bringing a badly needed upgrade to the U.S. telecommunications infrastructure.

Genachowski has described the challenge of replacing infrastructure designed many years ago to provide voice telephone service to an IP-based system that serves all Americans no matter where they make their homes and businesses as the "critical infrastructure challenge of our generation." That infrastructure challenge is greatest at the local level -- the so-called "last mile" of the system that connects to customer premises.

As explained by FCC General Counsel Austin Schlick, Genachowski's decision to apply Section 254 of Title II of the Act would support the FCC's plans to retask the Universal Service Fund (USF) that subsidizes service in high cost areas from POTS (Plain Old Telephone Service) to IP. As amended by the Communications Act of 1996, Section 254 requires the FCC to pursue policies to achieve access to advanced telecommunications and information services in all regions of the nation including those in rural and high cost areas that are "reasonably comparable" to services and rates offered in urban areas.

It's unknown at this point to what extent the FCC will as part of its plan to revamp the Universal Service Fund to help achieve ubiquitous access will enforce (or alternatively grant forbearance from) another provision of the Act designed to put teeth in the USF via a build out requirement. Title II Section 214(e)(3) empowers the FCC to "determine which common carrier or carriers are best able to provide such service to the requesting unserved community or portion thereof and shall order such carrier or carriers to provide such service for that unserved community or portion thereof." Notably, Section 214(e)(3) is absent from Schlick's explanation of the evolving FCC policy.

Sunday, May 02, 2010

California legislation would expand subsidy program

As the U.S. Federal Communications Commission considers retasking the Universal Service Fund that was originally formed to subsidize voice telephone service in high cost areas to advanced telecommunications infrastructure, California is considering urgency legislation to expand and make permanent its own similar subsidy program.

The California Advanced Services Fund (CASF) was established by the California Public Utilities Commission in December 2007 to subsidize advanced telecom infrastructure in high cost unserved and underserved areas of the state. Up to $100 million was allocated from a 25 percent surcharge on intrastate long distance calls, with the CASF surcharge offset by an equal reduction in the California High Cost Fund-B surcharge created to subsidize deployment of basic voice telephone service.

SB 1040 would leave the CASF in place indefinitely and expand its budget to $250 million with up to $25 million available in any given fiscal year. The urgency measure also liberalizes the use of CASF funds. To subsidize broadband infrastructure construction, $20 million would be allocated to grants and $3 million for loans.

One of the most important elements would be a new Regional Broadband Consortia Grant Account that earmarks $2 million in technical assistance grants to fund the cost of broadband deployment activities other than actual infrastructure construction. The money would be available to a wide variety of groups including local and regional governments, schools and colleges, health care providers, libraries and community-based organizations.

This is a critical element of the bill since many such entities that were interested in applying for broadband infrastructure grants and loans appropriated in the American Recovery and Reinvestment Act of 2009 lacked adequate funding to retain experts to help them with the engineering and business planning work needed in order to prepare project proposals.

A California Senate floor analysis of SB 1040 notes the Senate Energy, Utilities and Communications Committee was told at a Feb. 16 hearing that four percent of Californians - 1.4 million people in mostly rural areas, do not have access to broadband service. Only about half of Californians have Internet access at speeds meeting the CPUC's definition of basic broadband of 3 Mbs down and 1 Mbs up.

SB 1040 is advancing without opposition and would become law immediately after being signed by the governor. The CPUC would then open a rulemaking proceeding to implement the new CASF provisions later this year.

Sunday, April 25, 2010

Another downside to legacy copper plant: cable thieves

One of the best known weaknesses of legacy copper telecommunications plant is its limited carrying capacity compared to fiber optic cable. It also has another downside: it's vulnerable to theft by those hoping to sell the metal to scrap dealers as this BBC story illustrates.

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.

Friday, April 16, 2010

Fed up with circular debate over telecom market failure, British village acts to get broadband

While the UK government (just like America's) engages in a ridiculous circular debate over whether market failure has hampered the deployment of modern telecommunications infrastructure, the residents of Lyddington, Rutland have cried "bullocks!"and taken matters into their own hands.

No debate over market failure there, where according to this Telegraph article their petitions to the incumbent providers to bring them broadband got them nothing. So several local businesses are investing fiber optic cable that will bring the townspeople connectivity of 40 Mbs for £30 a month.

A key excerpt:

Dr Charles Trotman, head of rural business development at the Country Land and Business Association welcomed the project.

But he warned that not all local communities will be able to do it themselves and the next Government must put in place measures to ensure the whole country has superfast broadband.

"You cannot rely on the markets to do it because we know for a fact that large telecommunication companies will not invest in rural areas because there is no market return. If they are not willing to do it then someone has to do it and you have to have a central strategy set by Government"

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.

Friday, April 09, 2010

FCC's National Broadband Plan needs bottom up incentives to bridge last mile

America's telecommunications infrastructure is least complete along the so-called last mile (referred to by some as the "first mile") that bridges middle mile distribution backhaul to homes and businesses. The U.S. Federal Communications recognized this in a footnote in a chapter addressing broadband availability in its recently released National Broadband Plan, noting 7 million housing units lie outside cable company networks or more than approximately 11,000-12,000 feet from telco distribution equipment providing DSL service. Six million housing units lack access to terrestrial broadband capable of providing downloads at speeds the FCC minimally defines as broadband because they are situated more than 16,000 feet from the nearest DSLAM.

The FCC's plan sets a goal of providing at least 100 million homes access with download speeds of at least 100 Mbs per second and upload speeds of at least 50 Mbs per second by 2020. In an interim report released in September, the FCC estimated reaching the "100/100" goal would cost as much as $350 billion.

The "100/100" goal is laudable. But a more pressing infrastructure shortfall now mires millions in the early 1990s with dialup access or subpar satellite Internet access that's a national embarrassment that should only be offered in Alaska or the north woods of Maine. The FCC report estimates bridging that gap would require existing providers to spend $24 billion on upgraded and expanded infrastructure. Investor-owned legacy providers aren't going to spend that kind of money. So the FCC proposes remaking the Universal Service Fund and other programs designed to subsidize legacy voice telephone service in high cost areas into the Connect America Fund (CAF). Recognizing this would yield just $15.5 billion over the next decade, the FCC's plan also calls on Congress to appropriate additional subsidies of a "few billion dollars" annually over the next 2-3 years to accelerate construction of advanced telecommunications infrastructure.

The weakness of the FCC's plan is that it relies too much on investor-owned telco and cable providers already burdened with outdated, legacy wire plant and the inherent limitations of their for-profit business models. These providers must naturally place their proprietary business interests ahead of any national goal for transitioning the nation's currently outmoded telecommunications infrastructure to one that delivers a range of Internet-protocol based services via fiber over the last mile. Consider, for example, that neither of the nation's largest telcos are currently expanding their own plants to bring fiber to customer premises. AT&T has except for some greenfield developments chosen to build out fiber only to neighborhood nodes, relying on legacy copper wire connections to reach customers. Verizon recently called a halt to further expansion of its FiOS fiber to the premises plant.

While the FCC's plan urges Congress to boost funding of the Rural Utilities Service's
Community Connect program intended to provide funding for broadband to communities that are otherwise unserved, it doesn't go far enough. Instead of largely relying legacy providers to build out advanced telecom infrastructure from the top down to reach the last mile, it really needs to provide incentives that work from the bottom up.

One that holds promise is giving home and small business owners tax breaks to build their own last mile fiber much like current tax law provides incentives for solar power generation equipment. Tax breaks for properties with fiber "tails" as they were described in a November 2008 paper issued by the New America Foundation would help local governments and telecom cooperatives build fiber infrastructure since the tax savings would make it easier for property owners to pay fees for connection costs or fund coop memberships. Building out broadband infrastructure is primarily a business model problem. Providing tax credits for fiber "tails" would provide impetus to urgently needed alternative business models for modernizing America's telecom infrastructure.

Friday, April 02, 2010

The view from the UK: America's "lame" "costly" "third-world" telecom infrastructure

The Economist offers this critical perspective on America's "lame" "costly" "third-world" telecommunications infrastructure that combines the worst of all worlds with poor quality service at high cost compared to other advanced nations. But the dreary state of affairs isn't much better across the pond in the magazine's UK home base either. Just a few months ago, Prince Charles warned much of the British countryside is in danger of becoming a "broadband desert," hamstrung by an aging, latency copper wire infrastructure that can't deliver sufficient throughput to enough of the populace.

As Exhibit A of the U.S. broadband gap, the magazine pointed to the outpouring of supplications to Google urging the company to roll out its experimental 1 Gigabit fiber to the premises telecom infrastructure in their communities.

Much of the article goes on to repeat the same points made elsewhere about the flaws of the U.S. telecom paradigm and the sturm und drang industrialized nations are undergoing as they transition from legacy wireline single purpose systems designed to deliver voice and television signals to fiber optic infrastructures capable of providing multimedia and interactive applications using Internet protocol.

The article closes with a bit of wireless vaporware by suggesting Verizon is abandoning its FiOS fiber to the premises service in favor of Long Term Evolution (LTE) wireless service that could deliver 150Mbs. Perhaps over Starfleet Command's quantum sub-space channel. But not in today's world where people are literally jumping into freezing lakes in hopes of getting Google to deploy real state of the art fiber technology to their homes and businesses.