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.

Copper vaporware as AT&T chief declares DSL obsolete

Every couple of years or so, an article like this one by Tara Seals of V2M appears arguing legacy copper telecommunications infrastructure designed for a pre-Internet analog era is far from obsolete. Technical innovations can extend its lifespan, even as bandwidth demand is increasingly challenging its carrying capacity, particularly from Over The Top (OTT) video content:

Telcos are seeking cost-effective solutions to maximize their legacy infrastructure. Reducing crosstalk across copper bonded pairs using the ITU-T G.vector standard (G.993.5), introducing software solutions to maximize network logistics and using caching in the network are all solutions that are occurring right now, as telcos position themselves to meet the rapidly growing consumer OTT demand.

If that's the case, then why did AT&T CEO Randall Stephenson declare this week that the workhorse technology that has transported Internet protocol content over AT&T's copper network for the past decade and a half -- Digital Subscriber Line (DSL) -- is obsolete?

What about that innovation to stave off copper obsolescence? If it were for real instead of vaporware hype, it would truly provide AT&T tremendous opportunity to offer more wireline Internet services to a lot more customers over its legacy copper plant. Clearly for AT&T, that's not the case as the telco shifts away from residential wireline and is instead concentrating capital expenditures on personal wireless services.

Managing by eyeballing butts in chairs instead of work product comes with $900 billion lost opportunity cost

Despite the rapid growth of the digital economy and the Internet that makes the specific time and location for getting work done less and less relevant, "management attitudes that were born in the days of sweatshops and typing pools still dominate" the American workplace, according to a June 2011 paper authored by Kate Lister and Tom Harnish of the Telework Research Network.

It estimates that if 50 million potential telecommuters in the U.S. worked from home for half the work week, the savings to their employers, communities and themselves would would total over $900 billion annually. As framed by Lister and Harnish, that represents part of the lost opportunity cost of retaining the pre-digital economy management model.

The authors also call for ubiquitous Internet access. "Without uniform access, telework will not be available to those who need it the most," they state.

Horsepower to improve the business case for aerial fiber deployment

One of the toughest nuts to crack in the business case for deploying fiber optic cable plant is the cost of labor, which by some estimates accounts for 70 percent of the price tag.

Now an old world method -- horsepower -- is helping aerial fiber deployments pencil out, as this Reuters story out of Vermont illustrates.

"It just saves so much work - it would take probably 15 guys to do what Fred (a Belgian draft horse) and Claude (his human owner) can do," said Paul Clancy, foreman of a line crew from FairPoint. "They can pull 5,000 feet of cable with no sweat."

On a recent June day, the tall, burly man and his muscular workhorse toiled 10 yards off of a desolate dirt road in hilly Hardwick, Vermont. They were assisting a work crew manning trucks and together they lashed cable to existing aerial utility line strung along wooden power poles.

Motorola CEO, FCC agree: Wireline is for premises Internet connectivity, wireless for mobile access

With telco wireless providers rolling out 4G service, some have raised hopes that it has the bandwidth to rival facilities-based customer premises wireline infrastructure to deliver the full spectrum of Internet service.

Motorola CEO Sanjay Jha dismisses that notion as unrealistic. Wireline will continue to be the optimum method of providing Internet connectivity and high bandwidth video content for “a long time to come,” Jha was quoted as saying this week by The Wall Street Journal.

Jha added that wireless spectrum in the U.S. remains “very limited,” and wireless providers will continue to be the primary supplier of Internet access to consumers outside their home.

Jha's perspective on the respective roles of wireline and wireless is shared by the U.S. Federal Communications Commission. In a May 20, 2011 report to Congress on the availability of advanced telecommunications capability as mandated by the Telecommunications Act of 1996, the Commission rejected arguments by some mobile wireless providers claiming they can provide sufficient bandwidth to substitute for wireline service.

Incumbents’ strategy to lock down underserved, unserved territories could backfire

Telecommunications infrastructure costs a lot to build and maintain. In that regard, it’s like roads and highways. Roads and highways are typically publicly owned and operated because the upfront cost to plan and build them added to the significant expense of ongoing maintenance can’t attract capital. The return on that major investment takes too long. Investment capital can earn a quicker and more certain profit invested elsewhere.

Under the same rationale, legacy telephone and cable companies build and upgrade their networks to provide today’s advanced telecommunications services utilizing Internet protocol on a limited basis— only where they can generate fast returns for inpatient investor capital.

The result is an incomplete telecom infrastructure. Or to use the transportation metaphor, it’s like having thoroughfares in the central part of town with outliers forced to rely on dirt and gravel roads. Investing additional funds in cable plant and other facilities to provide these services would take too long to cover the cost and begin generating profits on that investment.

But that doesn’t mean legacy providers see those dirt and gravel roads as outside of their transportation system. Since telecom infrastructure is a natural monopoly, investor-owned legacy telcos and cablecos want to keep it locked down as if it were their exclusive franchise.

That underlies the debate over public versus private ownership of telecom infrastructure. Incumbent providers decry public or community owned and operated infrastructure as duplicating their own proprietary networks, constituting unfair competition. Winning that competition from their perspective isn’t about traditional business competition: gaining and retaining market shares. Rather, it’s all about preserving hegemony over their self-declared service (or more accurately, “unservice” territories.)

That’s a zero sum game that produces many losers, condemning millions to an indeterminate future of dirt and gravel roads. According to a recent Federal Communications Commission report, an estimated 26 million Americans are offline and unable to obtain Internet access at a time when the Internet is rapidly replacing the single purpose legacy telephone and cable networks as an all purpose, global telecommunications system capable of simultaneous delivery of voice, data and video services.

Because of its high construction and operating costs, telecom infrastructure is a natural monopoly. However, a deliberate strategy to oppose community-based efforts to build a more complete and sustainable telecom infrastructure to reach those neighborhoods typically served solely by POTS (Plain Old Telephone Service) copper plant and shunned by cable providers could be construed by regulators and the courts as monopolistic and unfair market conduct.

It would be easy to argue citing the recent FCC data on Internet disconnected America that such conduct produces measurable damage and deprives consumers of telecommunications services and choices. For the incumbents, attempting to keep a lock on an unserved or underserved service territory may be more of a liability rather than an asset in the long run.

Attention Netflix: Coordinate your business model with office space

Netflix is running into local government opposition in Los Gatos, Calif. over its plans to build 550,000 square feet of office space in the town.

Netflix is transitioning its delivery platform away from DVDs delivered to customer's homes via postal mail to delivering movies over the Internet.

Why doesn't it do the same with its office space and use a distributed workforce working out of their homes and otherwise remotely instead of relying on a 1950s pre-Internet business model that requires its staff to work in central office buildings?

“Muni broadband” debate based on false premise of “competition”

Connected planet has posted an account of a debate between advocates and opponents of telecom infrastructure built by local governments.

I submit this is a debate based on a false premise. Telecommunications infrastructure tends to be a natural monopoly due to its high CAPex barriers to entry as well as substantial operating and maintenance costs.

By definition, there is no true competition in a monopoly. Nor is competition robust in a duopoly of just two owner/operators of telecom infrastructure that exists throughout much of the United States: a telco and a cable company. A healthy, competitive market by contrast has many buyers and sellers. That does not and cannot describe telecom infrastructure, so any debate over “competition” is a nonstarter.

If the position of the incumbent legacy telcos and cable companies is they should have exclusive ownership and control of telecom infrastructure, I strongly disagree. The incumbents are NOT entitled to a monopoly or duopoly by virtue of their incumbency. Particularly when so many homes and small businesses remain disconnected from the Internet in much of their service territories as the U.S. Federal Communications Commission recently reported, noting that an estimated 26 million Americans remain offline.

Local government and community-based providers such as telecom cooperatives must step into the gap and address this market failure with alternative, nonprofit business models that can function to provide Internet access where investor-owned ones cannot.

FCC: "Significant and persistent" Internet infrastructure deployment gap leaves 26 million Americans offline

The Federal Communications Commission reports this week that a "significant and persistent deployment gap" in Internet telecommunications infrastructure deprives as many as 26 million Americans from Internet access. "This significant and persistent deployment gap is particularly concerning in light of the substantial and growing costs of digital exclusion: Being unable to subscribe to broadband in 2011 is a much bigger obstacle to healthcare, educational, and employment opportunities that are essential for consumer welfare and America’s economic growth and global competitiveness than it was even a few years ago," the FCC notes in its seventh annual report to Congress on the availability of advanced telecommunications capability as mandated by the Telecommunications Act of 1996.

"We thus must conclude that broadband is not being deployed to all Americans in a reasonable and timely fashion, and we underscore how much work remains before we can conclude that all Americans are served by broadband."

In addition, the FCC rejected arguments by mobile wireless providers that their service constitutes Internet infrastructure that's sufficiently robust at at time when the Internet is becoming an all purpose telecommunications system transporting an exponentially growing amount of voice, data and video traffic.

"While use of mobile broadband is growing, that growth to date is mainly in lower speed ranges that may not be able to support the applications and services identified by Congress, such as high-quality video," the FCC's report states. "MetroPCS and others ask the Commission to reverse its conclusion, given the prevalence of wireless technology," the report continues. "While MetroPCS and others have noted the general expansion of mobile wireless across the country, they failed to demonstrate that wireless broadband is provided at 4 Mbps/1 Mbps actual speed (or reasonable proxy) in the unserved areas."

Most importantly, the FCC identifies the key reason why so many Americans remain disconnected: investor owned providers can't profitably earn a return on their investment -- mostly upfront and ongoing labor costs -- in order to justify building out their networks to serve more premises. "In the absence of programs that provide additional support, the private sector will not bring broadband to Americans living in areas where there is no business case for operating a broadband network," the report states.

Short of labor costs declining dramatically, that will continue to be the case. And unless communities explore alternative nonprofit business models such as municipal and cooperatively-owned open access fiber to the premises infrastructure, the FCC will continue to report on a "significant and persistent" infrastructure gap next year and subsequent years.

Battling over accuracy of broadband maps plays into hands of legacy providers

Readers of this blog know that I've long regarded so-called "broadband mapping" as well as as focusing on "broadband adoption" as strategies cooked up by the PR shops of the big legacy telco and cable companies to divert attention away from the lack of advanced telecom infrastructure. As long as people are battling over the accuracy of "broadband maps," they aren't taking matters into their own hands and money isn't being invested to construct fiber to the premises telecom infrastructure to fill in the availability gaps the mappers are attempting to document.

The Associated Press reports Vermont Gov. Peter Shumlin is steamed that existing "broadband maps" -- probably including the useless National Broadband Map paid for by our federal tax dollars -- show his home near Putney, Vermont has DSL service. Not true, the guv says. So he's countered with his own state-run mapping program, BroadbandVT.org

Instead of trying to see who can most accurately map broadband black holes -- an exercise about as useful as mapping the celestial variety -- Vermonters should call upon their independent New England spirit and create cooperatives to build fiber to their homes and businesses. That spirit is apparently alive and well in western Massachusetts, where the Wired West announced this week that several towns voted in favor of moving forward to formalize creation of a municipal telecommunications cooperative to build sorely needed fiber to the premises telecom infrastructure.

Despite growth of Internet telecommunications, majority of employers don't allow telework

We may be living in the era of Internet telecommunications where most any generation, analysis and manipulation of words and numbers can be done from most anywhere having adequate telecom infrastructure.

But for most American businesses, that fact hasn't yet fully registered. Most still believe this type of work can only be done in office buildings and cubicles, which in turn reinforces that time sucking activity known as commuting. At a time when people are strapped for time and want to reduce their carbon footprints. And exercise more and perhaps lower their employers' soaring health care costs in the process.

The results of a random telephone survey of nearly 10,000 businesses in a dozen states last year found only 23 percent allow telework. The results are reported in a white paper issued today by Connected Nation, Leveraging Technology to Stimulate Economic Growth.

AT&T exec suggests wireless will save its residential market segment

AT&T may be the nation's largest telecommunications company. But its size hasn't helped it meet the challenge of upgrading its cable plant to transport Internet protocol-based services. AT&T provided wireline Internet connectivity first through dial up and ISDN connections in the early 1990s, and then DSL as the 1990s turned into the 2000s. Starting in 2006, AT&T brought fiber closer to customer premises -- but not to them -- with its FTTN (Fiber to the Node) U-Verse service utilizing VDSL. Some new, dense greenfield developments received U-Verse service via direct fiber to the premises connections.

New home construction cratered shortly after U-Verse rolled out, leaving only more challenging FTTN brownfield opportunities. They are more challenging because the old cooper cable plant designed for POTS (Plain Old Telephone Service) is used to carry high compressed VDSL signals that quickly degrade with distance, limiting the size of the potential U-Verse customer base.

Faced with these challenges to reach customer premises and seeing strong growth on the wireless side of its business, AT&T not surprisingly sees its future in the wireless space. "The future is wireless broadband and we must keep that in front of us at all times," Tim Ray, executive director for AT&T External Affairs in Northern California, said at a recent roundtable discussion hosted by Sacramento-based Valley Vision.

In 2010, Valley Vision formed the Connected Capital Area Broadband Consortium (CCABC), a coalition "which seeks to identify and coordinate strategic broadband investments in the six-county Sacramento region aimed at improving broadband infrastructure, access and adoption." Ray, who sits on Valley Vision's board of directors, appeared to suggest wireless Internet connectivity will be able to substitute for wireline connectivity, noting "27 percent of homes no longer have wire line and this trend will continue to grow."

Ray's wrong and engaged in wishful thinking. There's currently nothing indicating wireless Internet service -- which is aimed at mobile devices with a low bandwidth allocation per customer  -- can provide sufficient capacity to handle burgeoning bandwidth consumption and be able to reliably deliver to customer premises high definition video content and applications like video conferencing and telemedicine. Indeed, AT&T's wireless infrastructure is already choked with far lower bandwidth traffic from devices such as the iPhone.

AT&T is in conflict with its own business model. It's in the telecommunications business which by its nature requires lots of CAPEX and OPEX. But it expects to get a full ROI within 5 years on its CAPEX. That's not going happen in most places except perhaps in new dense greenfield developments, which as previously mentioned also aren't happening.

More patient capital the key advantage of community telecom infrastrucuture

Craig Settles explains the advantages of community fiber telecom infrastructure in this Government Technology piece.  The key advantage over investor-owed infrastructure can be summed up in three words: more patient capital.  Telecom infrastructure built by local governments and cooperatives doesn't need a return on investment in just 3-5 years -- an inherent flaw of the investor-owed business model given the high capital cost of constructing and operating it. 

Settles correctly notes there is money to be made for private players -- if they are willing to partner with communities in open access fiber projects and abandon the outdated business model of 100 percent ownership and monopolistic control.

Communities must build fiber telecom infrastructure where incumbents cannot

As bandwidth demand grows exponentially for Internet protocol-based telecommunications, Geoff Daily aptly notes the debate over what infrastructure can best deliver it to customers is over. Only fiber can do the job, he writes on his blog App-Rising. The task, therefore, is to bring it to their doorsteps. "With this context we can now define fiber-to-the-home as bringing the full power of the Internet to your front door," Daily writes.

Indeed. Daily adds to get there, public policymakers and consumers must be educated on the significance of fiber telecom infrastructure. And we must end the useless demonizing of for-profit providers whose business models don't allow them to both bring fiber to consumers' premises and make money for their investors. Don't expect them to do something they can't.

Instead, I would add, consumers must find alternative business models to build vital fiber-based telecommunications infrastructure in their communities not served by investor-owned providers. I'm not just talking the talk here. I'm walking the walk in my own community. I encourage other communities to do so as well.

Obama administration should focus on community-run open access fiber, not 4G wireless

The Obama administration's recent announcement of its National Wireless Initiative to subsidize the build out of 4th generation (4G) wireless Internet to make it available to least 98 percent of Americans appears based on the assumption that cutting edge wireless telecommunications technology can play a central role in the nation's telecom infrastructure.

I'm not convinced. 4G wireless is only just emerging and remains unproven in terms of whether it can deliver sufficient bandwidth at the same time bandwidth demand is increasing exponentially. It's primarily designed for mobile use and portable devices such as smart phones and IPads that are gobbling bandwidth at such a prodigious rate that providers have a difficult time meeting the demand. That's why they ration bandwidth and penalize wireless customers who use more than 5 GB per month. The rationing is due to a more basic telecom infrastructure problem: the lack of adequate wire line infrastructure to "backhaul" or feed the distribution system that supports that huge and growing universe of wireless devices.

The administration's wireless initiative seems to suggest that people can "cut the cord" for Internet access just as they have done for wire line voice service, which requires far less bandwidth. 4G wireless, the administration apparently believes, can provide access to medical tests, online courses and applications that have not yet been invented.

That remains to be seen. What is certain now is wire line fiber optic connections to American households and businesses can deliver more than enough bandwidth for today's needs without the need for rationing plus plenty of additional capacity for those yet to be invented applications. The administration's telecom infrastructure efforts should focus on bringing it to the 24 million Americans that Federal Communications Chairman Julius Genachowski said remain disconnected from the Internet. "The infrastructure simply isn’t there," Genachowski explained.

The reason: It's simply not sufficiently profitable for investor owned providers to build it. Alternative, lower cost methods are urgently needed. The best and most rapid way to bring about these alternatives is to focus at the local level and provide local governments and consumer telecom cooperatives technical assistance grants and low cost loans to build open access fiber networks to serve their communities.

The administration's health care reform legislation allocates $5 billion in technical assistance grants to for new health insurance cooperatives to pool risk and purchase health coverage for their members. The administration should provide a similar amount of technical assistance funding for local governments and telecom cooperatives to help them plan and design open access fiber optic telecom networks.