New telecom infrastructure financing model struggles to emerge in Utah

A new public-private model to finance the construction and operation of modern fiber to the premise (FTTP) telecommunications infrastructure is struggling to emerge in Utah. Of 11 Utah cities that would be part of a public-private partnership to build out an existing FTTP network serving their region, only half have agreed to participate in the partnership as of this week’s deadline to decide. (See story here)

The sticking point is on the public side of the proposed partnership that entails a $20 monthly utility fee to finance construction and operating costs over a 30-year period. Since the Utah Telecommunications Open Infrastructure Agency (UTOPIA) network is an open access network that will build a fiber telecommunications highway to about 160,000 premises, the utility fee is based on the principle that like paved roads, all properties benefit from its presence directly or indirectly, both in the present and the future.

Those cities that have declined to participate in the UTOPIA partnership should revisit their decision. For four reasons:

1. FTTP telecommunications infrastructure is needed to serve burgeoning demand for Internet connectivity and high capacity performance both now and in the future. Premise Internet service is shifting into a new phase where it is an essential telecommunications service like telephone service was in the 20^th century and not an add-on feature to telephone or cable service in those limited areas where it is offered.
2. Like roads, telecommunications infrastructure is expensive to build and maintain. That prevents the formation of a healthy competitive market since these high costs make it a natural monopoly. The existing private telephone and cable companies thus have no competitive incentive to upgrade and build out FTTP infrastructure. Private investor-owned providers are also highly risk averse when it comes to expansion since they owe a primary duty to their shareholders to generate profits and dividends with customer needs subordinate to that duty.
3. Given high construction and operating costs, neither the private sector nor state and local government can shoulder the burden alone. Both must pool their financial resources into a public-private partnership to generate the large sums of necessary capital.
4. The $240 annual utility fee needed to make the deal pencil out is a modest amount that approximates what many households are already paying every two months for telecommunications services.

Incumbent telcos can't build fiber to the premise infrastructure

Instead, they:

Talk talk
Talk talk 
Talk talk
Talk talk

AT&T's dubious "wireless local loop" strategy to boost Internet reach if DirecTV deal blessed by regulators

AT&T’s hard sell on DirecTV: A new type of broadband network - Yahoo Finance: AT&T, however, still owns those 2.3 GHz airwaves in the Wireless Communications Services (WCS) band. In fact, it recently consolidated its WCS holdings across much of the country. And through a compromise with the satellite radio industry, it managed to clear the interference issues that previously made the band useless for wireless data services.

AT&T has said it will use WCS for LTE, but it’s beginning to look like it won’t build the same kind of LTE network it uses to connect phones, tablets and cars. Broadband spectrum analyst Tim Farrar believes AT&T plans to use those 2.3 GHz frequencies for its planned air-to-ground in-flight network. It may choose to use WCS for its fixed wireless network as well. Instead of transmitting to a plane in the sky, the network could link to an antenna. And that antenna could be conveniently mounted on a DirecTV satellite dish – all part of a bundled broadband and TV package.

This is more of the same 23rd century Star Trek quantum subspace channel magical thinking to rationalize an ABF (anything but fiber) infrastructure deployment strategy. Frequencies in that band may work in relatively flat terrain like AT&T's home state of Texas. But they can't penetrate more rugged and forested portions of AT&T's service territory where many premises are still only offered antiquated 1990s dialup Internet. A small New Hampshire wireless Internet service provider explains the problem in this item:

“The challenge with our technology is the land, the hills and valleys,” says Foucher. “The amount of trees is the other major factor. We might be able to connect one person, but their next-door neighbor might be behind a stand of trees that absorb the signals"

And consider this excerpt from a Wall Street Journal item on AT&T's Federal Communications Commission filing on the proposed merger:

If the deal goes ahead, however, it’s unclear how much of an improvement the fixed wireless technology will be. In its application with Federal Communications Commission for the DirecTV deal, AT&T said the transaction makes investing in the technology more feasible, but noted that the service is “relatively untested technology” and “its success in the marketplace is thus unproven.”

FCC examining reasons for Internet traffic jams - Yahoo Finance

FCC examining reasons for Internet traffic jams - Yahoo Finance: Former FCC Commissioner Michael Powell, now president of National Cable & Telecommunications Association, blasted Netflix and other unnamed Internet companies for trying to "move the goal posts" to suit their own interests. "They want to protect their profits by ensuring that the disproportionate impact caused by delivering traffic to their customers is spread across all broadband subscribers and not just those who actually use the service," Powell wrote in a blog post earlier this week.

Powell's narrow, outdated cable TV perspective is old school thinking that no longer works given the growing multiplicity of those holding a stake in and benefiting from modern Internet-based telecommunications and its vital role in interstate and international commerce.

Netflix is just one of many services the Internet makes available just as roads and highways bring us both direct benefit when we travel over them and indirect benefit when they bring us goods and services. We need a new way of thinking and a new way of building out and regulating the Internet ecosystem that takes into account this reality.

Clashing perspectives from core and edge network players show urgent need for Internet policy review

FCC looking into slow Internet download speeds - Yahoo News: "Netflix has been paying (for traffic delivery) since inception. It wants free, I get it, but someone has to pay for it," Jim Cicconi, AT&T Inc senior executive vice president for external and legislative affairs, said earlier this week.

Netflix streaming accounts for nearly one-third of North American web traffic during peak times, according to research by Sandvine Corp.

Netflix vice president for global public policy, Christopher Libertelli, this week said the company already invests money in delivering traffic to the Internet provider.

"We pay a lot of money to drop content at the doorstep of an ISP. All we're really asking is for the ISPs to swing the door open," Libertelli said at the Aspen Institute think tank. "This has become a new choke point."

These statements make clear as day that it's high time for a core to edge review of Internet policy. 

Netflix believes it is adding value to the network edge operators like AT&T by providing core content for their customers. AT&T and other edge providers however hold the exact opposite view -- that Netflix is instead imposing a cost burden to transport that core content to the homes and businesses they serve. Meanwhile, edge providers prevent core provider content from fully reaching all potential consumers with ultra risk averse policies that leave much of the last mile network infrastructure in their service territories only partially constructed.

AT&T already selling DirecTV

AT&T isn't waiting for regulatory approval of its recently announced acquisition of DirecTV to start bulking up the DirecTV subscriber base in order to gain greater bargaining power with television programming wholesalers -- the business rationale for the deal.

AT&T has launched a direct mail campaign pitching DirecTV as "Digital TV from AT&T," targeted at redlined portions of its service territory where it has no landline Internet infrastructure. Reviewing the fine print on the reverse of the direct mail piece reveals the "Digital TV from AT&T" is in fact DirecTV. The direct mail promo also pitches residential POTS (plain old telephone service).

Consumers have been able to get POTS and satellite TV for decades. Without an offer of a new and/or compelling value, the direct mail piece isn't likely to be appealing or gain many new DirecTV subscribers for AT&T. Instead, it's likely to end up in the waste can or junk mail recycling.

Verizon threatens to sue Netflix in war of words over video quality | PCWorld

Verizon threatens to sue Netflix in war of words over video quality | PCWorld

Netflix has cut deals with Comcast and Verizon to get priority treatment for its video streams. But Netflix isn't at all happy about having done so, characterizing it as highway robbery and extortion. And Netflix is making it clear it expects these edge providers to ensure a congestion free experience for Netflix customers under the agreements.

Verizon's position outlined in this story is other network factors not within its control can degrade connectivity and it thus can't be held responsible. That's likely tick off Netflix even more and escalate tensions into a scorched earth court battle. And perhaps into a deal with Google Fiber to go around the incumbent telephone and cable providers?

The growing tensions and threat of litigation makes it clear a holistic, universal pricing and settlement scheme is urgently needed to ensure providers at the core, transport and edge of the network are fairly compensated and share responsibility for stewardship of the Internet ecosystem and ensuring all -- and not just some -- premises at the edge can obtain landline connectivity. If the private players cannot accomplish this, it becomes more likely the government will intervene and do it for them.

"VolksNet" solution in Deustchland: residents build their own fiber to the premise infrastructure

German villagers build own broadband network - The Local

With around 22 kilometres of network needed to link up all of the
houses to the high-speed data highway, "we would never have found a
company willing to supply the necessary fibre-optics," said mayor Holger
Jensen. Some 58 other communities in Northern Friesland face
similar difficulties and so the idea was born of clubbing together -
businesses, individuals and villages - to secure access to a modern
technology that is taken for granted in most German towns and cities.

In many nations, governments proclaim they are responding to private market failure that leaves homes and businesses disconnected from modern Internet access. These Germans have a backup plan in case that doesn't happen: they're building it themselves. I'm dubbing it "VolksNet;" maybe the idea will catch on elsewhere in Germany and other places.

The FCC may finally admit that 4Mbps doesn’t count as ‘broadband’ anymore - Yahoo News

The FCC may finally admit that 4Mbps doesn’t count as ‘broadband’ anymore - Yahoo News

It's sheer folly to try to define "broadband" in 2014 based on throughput speed. Even the term "broadband" itself is obsolete since it was first used in the 1990s to differentiate service more advanced than dialup "narrowband."

What the U.S. needs is ubiquitous fiber to the premise telecommunications infrastructure and a real plan to achieve it and not more useless debating games and PR spin over what constitutes "broadband."

Why you shouldn’t buy the miracle broadband network Softbank’s Masayoshi Son is selling - Yahoo Finance

Why you shouldn’t buy the miracle broadband network Softbank’s Masayoshi Son is selling - Yahoo Finance

An excellent reality check by GigaOM's Kevin Fitchard on claims by Masayoshi and other wireless space players that wireless can substitute for landline premises Internet service.

The numbers simply don't pencil out in terms of cost and carrying capacity and aren't ever likely to as premises bandwidth demand keeps growing rapidly. Star Trek's 23rd century quantum subspace channel hasn't yet arrived, space fans.

Like health insurance, tipping point of market dysfunction will come for premise Internet service

• Low customer satisfaction levels and high churn
• Rising prices and poor value
• Little choice among providers
• Market segmented into haves and have nots

All of these conditions describe the sickly individual health insurance market as it existed prior to the enactment of the Patient Protection and Affordable Care Act reforms that took effect at the start of the year. They also accurately define the market for premise Internet telecommunications service in 2014.

For the pre-Affordable Care Act individual health insurance market, a tipping point was reached in early 2010 when a California health plan issuer raised premium rates by nearly 40 percent for some plans. At the same time, millions of Americans not covered by employer or government health plans couldn’t purchase coverage at any price due to pre-existing medical conditions.

Today, millions of Americans face the same predicament when it comes to landline premises Internet service because none is available for sale to them -- two decades after most people accessed the Internet by slow, dialup modems still being used today. Mirroring poor customer satisfaction with health insurers, consumers give low ratings to telephone and cable companies.

Like the individual health insurance market, dissatisfaction with premise Internet telecommunications service will soon reach a tipping point that forces positive change. Tipping points are hard to predict precisely. They occur when the right combination of events and public sentiment converge at exactly the right time and place.

For landline Internet premise market dysfunction, it’s inevitable that point will soon be reached. It’s only a question of how and when we’ll get there.

One thing’s for certain. When a market for a product or service of vital importance to the nation’s economic well-being can’t remedy its own dysfunction, massive government intervention becomes more likely.

DirecTV CEO's hopes for AT&T deal could be disappointed

DirecTV CEO Mike White

DirecTV CEO Mike White

DirecTV CEO Mike White

White: AT&T Deal Unlocks Potential | Multichanne: White also sees a big customer service opportunity in the deal, allowing DirecTV to offer more products in a single truck roll.

“To me the real opportunity is growth,” White continued. “For us this is a real unlock, it unlocks our way to better serve rural areas, when you think about the 15 million [customer] build out of rural areas. We have been salivating to be able to do [a] one bill and one install experience for the customer and not have two different people show up on two different days, to run it from one call center. This is an enormous opportunity for DirecTV that’s one of the things we could not have gotten with any other partner.”

DirecTV Mike White's belief that AT&T will follow through with a commitment it announced concurrently with its planned acquisition of DirecTV to expand its Internet footprint to reach an additional 15 million premises could prove illusory, dashing his hopes of expanded cross marketing opportunities. For more than a decade, AT&T has announced various infrastructure expansion initiatives including Project Pronto, Project Lightspeed and most recently, Project VIP that have turned out to be far more sizzle than steak.

Yet another AT&T premise infrastructure deployment by press release

Included in AT&T’s announcement today of its acquisition of DirectTV is yet another in a long legacy of Internet premise infrastructure deployments by press release over the years including Project Pronto, Project Lightspeed and Project VIP that were essentially PR gambits.

AT&T said cash generated by unspecified "merger synergies" (most likely lower costs for TV programming) will enable it to provide premise Internet service to 15 million customer premises in its service territory utilizing a combination of technologies including fiber to the premises and fixed wireless. The planned infrastructure deployments will be completed within four years of the closure of the DirecTV transaction, according to AT&T.

Most likely “Project DirecTV” or whatever AT&T calls it will be forgotten within a year or two and any reduced TV programming costs will instead be allocated to shareholder dividends and executive compensation.

Boneheaded media coverage and analysis of AT&T purchase of DirecTV

AT&T close to announcing DirecTV acquisition: sources - Yahoo Finance: The deal would combine the largest U.S. satellite provider and the country's No. 2 wireless carrier, expanding AT&T's customer base by 20 million for its U-verse fiber product, which provides television and Internet service.

The transaction may also allow current DirecTV customers to get Internet service where AT&T u-Verse is available. DirecTV's growth has been hurt because unlike cable companies, it is unable to offer broadband alongside its TV subscriber services. AT&T has about 10.4 million u-Verse Internet customers in states such as California and Texas.

"AT&T just upped the ante," said Roger Entner, lead analyst at Recon Analytics, referring to the BuzzFeed report. "They have become an even more integrated telecom provider and are no longer tied to their U-Verse footprint."

I continue to be vexed by boneheaded media coverage and analysis of this deal. First of all, AT&T does not have a "U-verse fiber product." For the vast majority of U-Verse residential customers, it's based on twisted copper pair using VDSL IPTV transmission technology, with fiber backhauling the field equipment. Second, DirecTV is a satellite TV service that is separate and distinct from integrated telecommunications services delivered over landline connections via Internet protocol. Third, there's nothing about this deal if it consummates that "may allow current DirecTV customers to get Internet service where AT&T u-Verse is available." U-Verse is offered in only a selected portion of AT&T's service territory whereas DirectTV is offered most anywhere. The two have nothing to do with one another.

Finally, analyst Roger Entner's comment that the DirecTV acquisition would make AT&T "an even more integrated telecom provider ... no longer tied to their U-Verse footprint" makes no sense whatsoever. Offering satellite TV does not make AT&T or any other telco "a more integrated telecom provider."  Direct broadcast satellite TV has been around as a stand alone service for many years before AT&T or other telcos began offering DSL-based premises Internet service in the late 1990s. However, Entner's reference to AT&T uncoupling from its U-Verse footprint does make sense if viewed in the context of AT&T turning to DBS as part of a strategic withdrawal from U-Verse due to technological obsolescence of IPTV over copper and its inability to upgrade to fiber to offer a competitive level of service quality on a par with cable TV.

FCC reports contradict ISP claims that build out requirement would deter infrastructure investment

Broadband CEOs to FCC: We're not a utility - CNET: The main argument from the CEOs is that reclassifying broadband services so that they're regulated like the telephone network rather than the light regulatory approach the FCC currently takes with the Internet would kill future investment in broadband networks. They argue that the current regulatory framework is why broadband and wireless companies invest more than $60 billion a year in their networks. They claim this more than $1.2 trillion investment over the years has resulted in great improvements in broadband networks every year.

If this is in fact true, consider that the U.S. Federal Communications Commission (FCC) found insufficient deployment of Internet infrastructure in annual progress reports mandated by the 1996 Telecommunications Act. In 2011, the FCC concluded a "significant and persistent deployment gap" in Internet telecommunications infrastructure deprives as many as 26 million Americans of Internet access.

Time for the FCC to hit the reset button on Internet regulation

Congressional Democrats jump into net neutrality mix - Tony Romm and Brooks Boliek - POLITICO.com: AT&T, meanwhile, launched a counteroffensive. Executives from the company warned the FCC in a Thursday meeting not to reclassify broadband as a telecommunications service, saying such a step “would ignite multiyear regulatory controversies on a variety of issues,” according to a filing with the commission. Telecoms dislike that approach because they fear new regulations would unfairly restrict their business.

By classifying Internet service on a par with telephone service subject to common carrier mandates that all premises be offered service, the U.S. Federal Communications Commission (FCC) would not be restricting telecoms. Just the opposite. It would be opening up their markets beyond where they want to go by forcing them to embrace the fact that the Internet is the new telecommunications system. Notably, that's something the telcos themselves acknowledge in petitioning the FCC for relief from rules governing analog plain old telephone service (POTS) so they can allocate more capital investment to Internet infrastructure. With this reclassification of the Internet as a telecommunications service, telcos would be barred from their current market segmentation practices that arbitrarily redline parts of neighborhoods and even discrete roads and streets.

Telcos have been trying to hold onto the past by acting as if it's still 1996 and the Internet is a novel information service and not the global telecommunications service it has now become, carrying voice, data and video. It's time for the FCC to do an intervention and point to a calendar that reads 2014 (and for the Obama administration to fire the enablers who help the telcos cling to the past.) And at the same time, develop a new regulatory framework that allows a fair and orderly settlement scheme across all network layers and boundary points as called for by industry expert Michael Elling. As Elling correctly points out, that's what the "net neutrality" debate is really all about.

Forum discusses broadband possibilities in Alcona - TheAlpenaNews.com | News, Sports, Jobs, Michigan, Community Information - The Alpena News

Forum discusses broadband possibilities in Alcona - TheAlpenaNews.com | News, Sports, Jobs, Michigan, Community Information - The Alpena News

Community forums like this have been going on for at least a decade throughout the United States with little or no change in the status quo. People and community leaders show up and tout the benefits of landline Internet access and demand more of it. Incumbent providers counter they're doing the best they can within the limits of their monthly subscription-based business models that constrain the extent to which they can modernize and build out their networks. And round and round it goes as the locals and community leaders grow increasingly frustrated over the lack of progress.

As I blogged yesterday, Utah may provide a way out of this circular trap. Instead of wholly relying on Internet service provider subscription revenue to fund infrastructure construction and operating costs, nearly a dozen municipalities there are looking into a private-public partnership (PPP) that would entail a per-premise utility fee to help fund them. Communities across the U.S. that are tired of unproductive "broadband" forums should be looking to Utah as a potential path forward.