Former FCC Chairman and GTCR Fund See Strong Rural Cable Future

Former FCC Chairman and GTCR Fund See Strong Rural Cable Future: Former FCC Chairman Reed Hundt hopes this week’s acquisition of tier 2 cable company NewWave Communications by investment firm GTCR will be “the first of many.” Telecompetitor spoke this week with Hundt, who headed up the FCC during the Clinton administration and is now an advisor to GTCR.“We believe cable is the universal American communications medium,” said Hundt. “Cable is the essential connection for everyone, especially in rural America.”

 The Telecompetitor article continues:

GTCR’s strategy is interesting, considering that service providers have had difficulty finding a business case for deploying broadband in some rural areas – particularly as distances from population centers increase.

When I asked Hundt about that he said, “Technology keeps producing breakthroughs.”

Indeed it does.  But has it reduced the labor costs associated with deployment and maintenance of wireline Internet infrastructure, which rule of thumb estimates place at about 70 percent of the total?  I haven't heard of of any such technology breakthroughs unless Hundt is talking about using drones to spool and drop cable from the sky and robots to bury and install it on poles.

AT&T CEO: We'll piggyback on Google's Fiber rollout plans | Mobile - CNET News

AT&T CEO: We'll piggyback on Google's Fiber rollout plans | Mobile - CNET News

More mutually assured diminished returns threatened by AT&T.  Ma Bell is basically saying she will overbuild Google to obtain a slice of picked over cherry pie, leaving each competitor serving 15 percent of the premises passed at best.

This should put to rest the hopeful, magical thinking of some who claim Google is somehow going to goad legacy telcos to undertake a broad-based upgrade of their obsolete last mile copper plant to fiber.  Not in this lifetime and not with grandma's shareholder dividend.

Businesses Lining Up for Service in Longmont, FTTH Build-Out Studied | community broadband networks

Businesses Lining Up for Service in Longmont, FTTH Build-Out Studied | community broadband networks: If LPC wants to pursue a triple play offering, Uptown estimates it would cost another $6 million. At this point, LPC does not consider triple play a good investment:

"The young generation that's active now, they don't watch TV in the conventional way," Jordan said. At a recent presentation, he said, when he asked a college student how often he watched traditional scheduled TV programming, the response was "Never."

The implication here is the subscriber television channel Internet service offering is losing its appeal going forward with the changing viewing habits of younger adults.  This is a potentially huge disruption of the current business models of both incumbent cable providers and telcos offering TV in service bundles like AT&T's U-Verse product.  It's also very disruptive of the TV advertising business model that has traditionally targeted younger adults.  

California lawmakers revise legislation governing Internet infrastructure subsidy program

California lawmakers are scaling back a previously proposed increased appropriation for the state’s broadband infrastructure grant and loan subsidy program. As amended this week, SB 740 would also redefine the policy goal of California Public Utilities Commission’s California Advanced Service Fund (CASF) to fund projects to ensure broadband access to at least 98 percent of California households by 2016. SB 740 would also prioritize funding for those areas of the Golden State deemed to be “unserved.” The CPUC has defined this to mean “an area that is not served by any form of wireline or wireless facilities-based broadband, such that Internet connectivity is available only through dial-up service or no broadband service can be identified.”

From a practical perspective, this means only modest wireless Internet infrastructure projects will be subsidized by the CASF since unserved areas per the CPUC’s definition are likely to be very thinly populated. These will also likely be very low budget projects per the CPUC’s decision to require project sponsors kick in 30 percent of the project costs for unserved areas.

The CPUC has also written the CASF rules to discourage community fiber builds by allowing projects in “underserved areas” only if the area has no wireline or wireless service offered at advertised speeds of at least 6 mbps download and 1.5 mbps up. That means an area that is only partially served by an existing wireline providers could not be overbuilt to fill in the coverage gaps. Under the rule, such project would also not qualify since wireless providers could merely advertise service at the minimum speeds, further slicing and dicing a potential fiber service area such to render the project ineligible under the rules. On top of that, the rules require community fiber project sponsors to kick in 40 percent of the project costs – an onerous burden for newly formed entities.

The upshot is California policymakers will end up going through the motions and the CASF monies left largely unspent as sizable areas of the state unserved by the incumbent telephone and cable companies are consigned to technologically substandard, low value Internet service options.

Google Project May Spur Broadband Competition - NYTimes.com

Google Project May Spur Broadband Competition - NYTimes.com

The take away from this story is it's highly unlikely incumbent telephone and cable companies will upgrade and build out their infrastructures to provide better Internet connectivity and serve more premises.  It makes more business sense for them to preserve the status quo and harvest whatever profits can be had from their existing cable plants. Particularly given the fact that the legacy incumbents pay fat dividends to their shareholders. Google pays none.

The NY Times piece postulates it will take an third party like Google to break the inertia.  But Google thus far is pursuing fiber builds in only a few metro areas of the United States including Kansas City and Austin and lacks a strategy to serve the nearly 20 million Americans forced to live off the Internet grid because the incumbent telcos and cablecos won't serve their homes.  These areas will have to rely on good old fashioned American self help and build fiber to the premises infrastructure operated by local governments and consumer cooperatives as was done in much of the nation in the 1930s and 1940s for electricity and telephone service.

There's also the sheer enormity of the financial challenge that would test the resources of even the deepest pocketed players like Google.  In 2009, the U.S. Federal Communications Commission projected it would cost $350 billion to universally deliver 100 Mbps or faster Internet connections to all American homes and businesses.  That's more than the sum of Google's 2012 revenues.

California PUC-created nonprofit warrants review

Today’s Sacramento Bee reports on the increased legislative scrutiny being applied to the California Public Utilities Commission and whether it is adequately fulfilling its mission of ensuring safe and reliable utility service.

According to the Bee, a California Senate committee is requesting that the state’s Fair Political Practices Commission investigate nonprofits established by the PUC for “possible conflicts of interest or bequesting violations” including the California Emerging Technology Fund (CETF).

Lawmakers should also look into whether the CETF is fulfilling its stated mission “to close the ‘Digital Divide’ by accelerating the deployment and adoption of broadband to unserved and underserved communities and populations.”

A review of the CETF website, its annual reports and a summary of 2013 grant investments shows no funding awarded to advance the direct, tangible deployment of advanced telecommunications infrastructure to serve residential premises despite findings by a state broadband task force in 2008 that nearly 2,000 California towns and communities lack broadband access.

Without the infrastructure for broadband access, promoting its adoption is putting the cart before the horse and nothing more than window dressing. This is policy failure piled on top of market failure.