San Francisco eyes municipal telecom infrastructure project to bring fiber to every doorstep

San Francisco Municipal Broadband Targets $26 Monthly Base Price - Telecompetitor: City officials have recommended construction of a San Francisco municipal broadband network based on a public-private partnership. The recommendations came in a 103-page report issued by the office of Supervisor Mark Farrell on March 15.
According to the San Francisco Municipal Fiber Advisory Panel’s report – Financial Analysis of Options for a Municipal Fiber Optic Network for Citywide Internet Access – a publicly funded broadband utility network would cost the city an estimated $867.3 million in construction costs plus $231.7 million a year in maintenance costs. Projected subscriber revenue would result in an annual deficit of $145 million. Given this, as well as the desire to build in some market competition, the authors recommended the city launch a public-private partnership model that calls for all San Francisco homes and businesses to pay an average $26 per month utility fee for baseline Internet access. Introducing tiered pricing models based on type of service or bandwidth use could offset operating costs and lower baseline fees.

The Utah Telecommunication Open Infrastructure Agency (UTOPIA) had planned to expand its services using a similar financing mechanism with a private finance partner, Macquarie Capital Group. It pulled the plug on the partnership last month amid resistance to the utility fee. However, the model could fare better in the city by the bay due to multiple factors including its relative affluence, more liberal political leanings and its well established place in the information technology industry. Unlike UTOPIA, a regional network involving several municipalities, San Francisco is also a much more compact service area of just 14 square miles with pre-existing municipal infrastructure that would facilitate construction. That likely made it easier for San Francisco to reject the model used by legacy telephone and cable companies and Google Fiber that builds infrastructure serving some but not all neighborhoods.

Why the “more competition” argument for better Internet service is misguided

Hardly a day goes by without calls for “more competition” as the elixir to make modern Internet-based telecommunications services more widely available and offering better value than those offered by the legacy incumbent telephone and cable companies. U.S. Federal Communications Commission Chairman Tom Wheeler has curiously joined the chorus calling for more competition -- even though his agency and its 2015 Open Internet rules are predicated on regulating Internet service as a natural monopoly common carrier utility.

The problem is telecom infrastructure by nature isn’t a competitive market defined as having many sellers and buyers. There are many buyers but there cannot be many sellers because it’s too costly and economically inefficient to have multiple providers building and owning infrastructure connecting homes and businesses. More competition isn’t a solution here. 

In the states, the legacy incumbents reinforce the notion of competition by blocking projects that would threaten their service territory monopolies. From their perspective, these projects represent competition because they would potentially steal away customers. Therefore, proponents reason, competition must be a good thing if the incumbents oppose it. This however illustrates the faulty reasoning of the “more competition” argument. 

The problem is the pro-competition proponents are buying into the incumbents’ concept of competition -- and not a consumer perspective. For the incumbents, any project that would build infrastructure in their service territories is competition. However, for consumers, having a choice among many sellers is competition. That’s not possible with telecommunications infrastructure. But it is possible if the infrastructure is publicly owned like roads and highways. That would open up Internet service to competition since multiple Internet service providers could offer their services over that infrastructure.

Time to punch the reset button on U.S. telecom infrastructure

AT&T, Comcast Kill Local Gigabit Expansion Plans in Tennessee | DSLReports, ISP Information: For some time now municipal broadband operator EPB Broadband (see our user reviews) has been saying that a state law written by AT&T and Comcast lobbyists have prevented the organization from expanding its gigabit broadband offerings (and ten gigabit broadband offerings) throughout Tennessee. These state laws currently exist in more than twenty states, and prohibit towns from deploying their own broadband -- or often even striking public/private partnerships -- even in cases of obvious market failure. A proposal that would have recently lifted this statewide restriction in Tennessee was recently shot down thanks to AT&T and Comcast lobbying. Even a new compromise proposal (which would have simply let EPB expand slightly in the same county where it is headquartered as well as one adjoining county) was shot down, after 27 broadband industry lobbyists -- most of whom belonging to AT&T and Comcast -- fought in unison to kill the proposal.

It's understandable the legacy telephone and cable companies want to keep out interlopers who might threaten their de facto monopolies for Internet service. The incumbent protectionism on display in Tennessee plays out in multiple states in the form of laws barring public sector involvement in telecom infrastructure projects or as this month in California and Kentucky, efforts to block fiber to the premise (FTTP) projects from gaining access to utility poles. This obstructionism isn't going to go away and requires a major reset in order for it to come to an end.

As I wrote in my recently issued eBook Service Unavailable: America's Telecommunications Infrastructure Crisis, the nation is already two decades behind where it should be relative to replacing its legacy metal wire telecom infrastructure with FTTP. The book proposes the federal government construct universal FTTP as public works. As roads and highway were to the 20th century, it's vital infrastructure for the 20th that's too important to be left in control of the legacy incumbents. It's time to punch the reset button so the United States can move forward to the future.

Vermont regional telecom district accesses institutional bond funding for expansion

ECFiber's growth plans could double service area | Vermont Business Magazine: ECFiber, based in Royalton and now officially known as the East Central Vermont Telecommunications District, announced plans to activate 110 miles of network in 2016 and build an additional 250 miles in 2017. “Working with bond underwriters, we believe ECFiber has reached the point in its financial development that allows us to access institutional capital markets for the first time in 2016,” says Irv Thomae, District Chairman. “Since 2011, we have relied on 450 local investors, some state-provided dark fiber, and VTA and Connectivity Fund grants to build the first 340 miles of network. By the end of 2016 we will be in parts of 21 of our 24 member towns, but many neighborhoods that desperately need ECFiber service cannot afford to raise the $30,000 per mile to complete a build. Outside financing would finally allow us to build to those towns that need us the most, not just those where we can raise capital.”

Regional telecom fiber modernization projects such as the Utah Telecommunication Open Infrastructure Agency and WiredWest in western Massachusetts have hit obstacles obtaining sufficient capitalization to expand. Due to the high cost of infrastructure projects, access to capital finance markets is critical given limited funding available from local governments and property owners.

According to this story by Vermont Business Magazine, the East Central Vermont Telecommunications District is accessing the institutional bond market for the first time for needed expansion capital, a development that bears watching since it demonstrates the bond markets' receptiveness to working with projects sponsored by utility districts.

Google fights AT&T, Comcast over Bay Area Google Fiber service - San Jose Mercury News

Google fights AT&T, Comcast over Bay Area Google Fiber service - San Jose Mercury News: MOUNTAIN VIEW -- Google's plan to bring ultrahigh-speed Internet service to the Bay Area has run into a decidedly nontech hurdle: utility poles. To roll out Google Fiber in five Silicon Valley cities, the tech giant needs access to the poles for stringing up fiber cable. But in several cities a who's who of Google competitors are standing in the way. The outcome of the pole fight is likely to have a profound effect on which communities get Google Fiber and which don't. "The infrastructure needs to be mostly above ground," said MoffettNathanson Research analyst Craig Moffett. "You can't proceed ... if you don't have pole access." Similar battles have played out in other cities across the nation, slowing Google's multibillion-dollar program while competitors push forward with their own gigabit-speed offerings.

This illustrates the death by thousand cuts delaying strategy of the legacy incumbent telephone and cable companies to protect their service territory monopolies from interlopers offering telecommunications infrastructure far superior to their own. Those legacy dinosaurs have armies of attorneys prepped to spend years if not decades in the courts erecting legal speed bumps to slow the progress of new entrants like Google Fiber.

Some observers believe the U.S. Federal Communications Commission's promulgation of its Open Internet rules in 2015 deeming Internet service providers common carrier utilities would make pole access easier. But so did others when Congress amended the Communications Act in 1996 to allow competitive local exchange carriers (CLECs) the right to use incumbent telephone central offices and cable plant to offer competing telephone and DSL services that was just emerging in the late 1990s. The incumbent telcos took a decidedly uncooperative and litigious stance to hamstring those providers as well.

These incumbent delaying tactics deepen America's telecommunications infrastructure crisis because they push a nation that's already a generation behind where it should be in terms of replacing its legacy metal cable system with fiber to the premise (FTTP) even more behind the curve. The situation calls for aggressive federal intervention in the form of a crash program to modernize and build out this vital telecom infrastructure to serve the nation's needs in the 21st century.

Obama administration, FCC use incumbent "broadband adoption" talking point designed to shift attention from nation's telecom infrastructure deficiencies

Obama Seeks Broadband for 20 Million More Low-Income Subscribers - The New York Times: The White House also released a report outlining the economic effects of broadband adoption, focused on how families without broadband at home are at a disadvantage in finding jobs.

Once again, the Obama administration and the U.S. Federal Communications Commission conflate access to advanced telecommunications service with its use. They are two different things. The unfortunate use of the term "broadband adoption" parrots a favorite talking point of the legacy telephone and cable companies to take the focus off the nation's telecommunications infrastructure deficiencies that leave some 34 million Americans without access to landline premise service according to the FCC's most recent estimate released in January. After all, the incumbent argument goes, why should we build Internet telecom infrastructure when people aren't using computers at home and therefore not adopting "broadband?"

The term "broadband" dates back to the late 1990s when people were beginning to migrate from narrowband, dial up Internet service to faster "broadband" connections. The context there was personal computer connections to the Internet. Which is also outdated given that today, Internet connections also provide voice and video services that don't require a personal computer.

As long as policymakers insist upon living in 1999, it will be difficult for America to advance into the 21st century.

DSL faces obsolescence -- with no successor in place

Two Tales of DSL | POTs and PANs: But the problem for all DSL providers is that within a few years the demand for broadband speed is going to exceed their capabilities. The statistic that I always like to quote is that household demand for broadband speeds doubles about every three years. This has happened since the earliest days of dial-up. One doesn’t have to chart out too many years in the future when the speeds that can be delivered on DSL are not going to satisfy anybody.

Telecom consultant Doug Dawson lays out the disconcerting reality that is a major manifestation of America's telecommunications infrastructure crisis. Digital subscriber line (DSL) technology was put in place as a temporary method of enabling Internet protocol service over twisted pair copper cable that delivered voice service pre-Internet. The problem is there is no succession plan to replace the copper with modern fiber to the premise (FTTP) technology as I discuss in my recent eBook Service Unavailable: America's Telecommunications Infrastructure Crisis.

Susan Crawford's Rx for ailing U.S. telecom infrastructure

Susan Crawford has added another component to her prescription to cure America's ailing telecom infrastructure, modernizing it with fiber optic technology to replace the increasingly obsolete metallic cables the legacy telephone and cable monopolies use to connect homes and businesses.

In January, she proposed the financial element: harnessing private investment capital via a regionally administered federal telecom infrastructure development and finance agency, funded by federally subsidized bond proceeds. (See related blog post)

Google Fiber's recent move to use existing fiber infrastructure owned by local governments in those select areas it will offer services spurred Crawford to elaborate on the infrastructure component of her solution. Her proposed federal telecom infrastructure development and finance agency would help local governments build open access fiber networks and sell access to retail providers on a wholesale basis.

Crawford sees Google Fiber's willingness to sell retail services over municipal infrastructure it does not own as a game changing move because the business model of local government-owned open access networks like Utah's Utah Telecommunication Open Infrastructure Agency (UTOPIA) have historically not meshed with the vertically integrated, monopolistic business models of the legacy telephone and cable companies that shun open access infrastructure. That model is based on owning the customer and selling monthly subscriptions to one premise at a time. That makes it highly risk averse since these legacy providers target their infrastructure only where they can get the most subscriptions and redline other neighborhoods that aren't as promising, creating widespread market failure and access disparities.

Google Fiber had initially followed the same model in its proprietary infrastructure projects such as in Kansas City and Austin, Texas. Now it is saying if a local government like Huntsville, Alabama has the resources to build fiber to the premise to serve its residents, it will be happy to sell services on that network. Crawford's federal bond finance model could scale up open access networks nationwide by aiding localities that lack Huntsville's pre-existing municipal electric company infrastructure to build their own.

The Cord Empire Strikes Back - Bloomberg Gadfly

The Cord Empire Strikes Back - Bloomberg Gadfly: Like in the rule-making for set-top boxes, incumbents are showing they're good at putting up roadblocks. AT&T last week sued the city and county and said local officials don't have the authority to regulate attachments to its poles. The telecom company also said tinkering with its equipment might cause outages for its own customers.

As the scuffles show, breaking Big Cable won't be easy. And it is cringeworthy that Americans' best chance to end the cable-and-telecom monopoly may lie with Google, another monopolist. But if the status quo doesn't change, ambitions for more robust Internet connections and more compelling home entertainment options will be realized painfully slowly, or not at all.

Telecommunications infrastructure is a natural monopoly. As such, it warrants strong monopoly regulation such as Title II of the Communications Act (implementing regulations symbolically adopted but not being enforced by the U.S. Federal Communications Commission ) or government ownership. The United States currently has neither and is reaping the consequences in the form of widely disparate access and high prices. The legacy incumbent telephone and cable companies are only all too happy to take advantage.

A manifesto for telecom infrastructure in the 21st century

More than a decade into the twenty-first century, it is clear a new set of principles is needed to support the modernization and expansion of telecommunications infrastructure. Much of the United States remains without adequate advanced telecommunications infrastructure necessary to deliver modern voice, data and video telecommunications services to homes, schools and businesses. A major impediment is how the problem and solutions are conceptualized, based on the subscription-based, vertically integrated proprietary infrastructure model established in the pre-Internet era. A new set of principles is necessary in order to move forward in the 21^st century.

1. Holistic view of telecommunications infrastructure. Rather than discrete, local “broadband networks,” a holistic view of telecommunications infrastructure is needed in accordance with Metcalfe’s Law, which holds the value of a network increases with the number of connections to it. A complete network enables users to obtain information and communicate across town, across state borders and globally. 
   
2.  With fiber to the premise (FTTP) infrastructure, throughput speed should not be key metric. There exists a general consensus that FTTP infrastructure has the capacity to support both current and future telecommunications needs and is not prone to obsolescence. Given fiber’s large carrying capacity, throughput speed should no longer be used as a primary method of defining telecommunications infrastructure.
   
3. Public works infrastructure. Due to high costs of construction and maintenance, telecommunications infrastructure should be built and maintained as public infrastructure like streets and highways. Its high cost structure does not allow it to function as a competitive market offering and produces widespread market failure and disparate access.

Yet another think tank makes false "market competition" argument in defense of legacy incumbent telephone and cable companies

Don’t put bureaucrats in charge of broadband | Columns | richmondregister.com: State lawmakers instead should search for ways to eliminate barriers to additional investment by private ISPs instead of raiding their customer base, which threatens to drive them, the jobs they support and tax revenues they send to Frankfort out of the commonwealth altogether.

By ending KentuckyWired once and for all, the Bevin administration would accomplish what federal bureaucrats who want to dictate the Bluegrass State’s broadband policy can’t be trusted to do: protect the best interests of Kentucky taxpayers and consumers who pay the bills.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.

Yet another think tank attempts to argue public sector investment -- even disregarding the fact that it's woefully insufficient -- is inappropriate for telecommunications infrastructure because telecommunications infrastructure is a competitive market. This is the falsity at the heart of the argument. It's not a competitive market because competitive markets by definition have many sellers and many buyers. Telecommunications infrastructure, however, is a natural monopoly or duopoly market because the high cost of building and maintaining it keep out potential new providers. That makes it like other high cost infrastructure such as roads and highways that are financed by the public and not private sector.

Mr. Waters is preying on economic ignorance to make a disingenuous argument and in so doing is rendering a great disservice at a time when the nation's telecommunications infrastructure is far behind where it should be in 2016 and for the future. He also employs a favored tactic of the dinosaur incumbents by focusing the discussion on "broadband speeds" in order to distract from the need to replace America's outdated metallic landline telecommunications infrastructure with modern fiber to the premise networks -- a thought trap that has ensnared most public policymakers and the mainstream and info tech media. It's time he and others stopped trying to postpone the future to protect last century's telephone and cable companies and allow technological progress to take its course into the 21st century.

If a meter of FTTP was installed every time a politician uttered the phrase "Access to broadband is essential," the entire nation would be fibered by now

Congressional Rural Broadband Caucus Launches | Multichannel: “Access to broadband is essential," said (Bob) Latta, vice chairman of the House Communications Subcommittee in a statement.

If a meter of fiber to the premise telecommunications infrastructure was deployed for each time a politician repeated that phrase over the past 10 years, every American address would have a fiber connection in 2016.

Slogans stating an obvious need do nothing to address it. What's needed is a national policy and fully funded initiative to construct fiber to the premise infrastructure every American premise needs in the 21st century. And stop allowing 20th century legacy telephone and cable company dinosaurs to postpone the future to serve their own interests.

Legacy incumbents circle the wagons against WV telecom infrastucture initiative

Charleston Gazette-Mail | Senate OKs creating state-owned broadband network: The West Virginia Senate approved legislation Thursday that would create a state-owned broadband Internet network, but Frontier Communications and cable companies already are lobbying members of the House of Delegates to kill the bill. State senators voted 29-5 to build a fiber-optic network “zone by zone” across West Virginia, using money borrowed through the Water Development Authority, one of the few state agencies authorized to issue bonds.

The legislation (SB 315) aims to expand high-speed Internet in rural areas, drive down prices and bolster Internet speeds.“This bill is one that can really promote West Virginia and move our state forward,” said Sen. Chris Walters, R-Putnam. “Without this type of infrastructure, we aren't giving the people the opportunity to succeed.”

Senate Majority Leader Mitch Carmichael, a Frontier executive, sharply criticized the legislation on the Senate floor, saying the bill would discourage Internet providers from expanding existing broadband networks or building new ones. “The capital allocations are chilled when they know the government is going to be competing,” said Carmichael, R-Jackson. “The best way to deliver broadband is through the private sector. We don't have to always turn to government to solve technological issues.

If it were only a technological issue as Mr. Carmichael wrongly frames it, it would merely need a technological solution the private sector could provide. In fact, it's a market issue. The state is attempting to address private market failure to construct telecommunications infrastructure needed for the 21st century. In that regard, it's also not about market competition. By definition, competitive markets are not failed markets.

Curb your enthusiasm: Google Fiber won't likely serve "thousands" of municipalities

Google To Use City-Owned Network To Bring Fiber To Huntsville 02/22/2016: This private-public model for broadband could spread far beyond Huntsville, according to muni-broadband proponent Christopher Mitchell, director of the Institute for Local Self-Reliance's Community Broadband Networks Initiative."In many ways, I think this is a tremendously hopeful development," Mitchell tells MediaPost. "It gives cities a great confidence that if they build passive infrastructure, they will be able to work with ISPs."

Mitchell adds that many of the municipal officials he has spoken with recently have said they're willing to build fiber networks, but not provide broadband or telephone services. He adds that he expects a few other cities cities to follow Huntsville's lead in the next one to two years, and that "thousands" of municipalities could ultimately do so.

Thousands? Unlikely. Few local governments have the existing utility infrastructure or financial resources to build fiber to the premise networks serving their residents as they continue to recover from the 2008 economic collapse and face competing demands for other infrastructure such as roads and sewer systems and public pension obligations.

Facebook's Telecom Infra Project appears focused on mobile wireless and not premise service

Telecom Infra Project – The Telecom Infra Project (TIP) is an engineering-focused initiative driven by operators, infrastructure providers, system integrators, and other technology companies that aim to reimagine the traditional approach to building and deploying telecom network infrastructure.: The growth of the internet and the rise of data-intensive services like video and virtual reality require us all to collaborate on the development of new technologies, rethink how we deploy existing technologies, and focus on simplicity, flexibility, and efficiency in everything we do.

TIP will explore new approaches and technologies across three initial focus areas: access, backhaul, and core and management. The project groups within these areas will leverage the unique engineering and operational expertise of each member. They will focus on developing new technologies and exploring new approaches to deploying in both developed and emerging markets.

This Facebook-led R&D effort appears targeted at disrupting the mobile device market as the two illustrations on the left of the below schematic suggests. No mention is made of fiber optic to the premise telecom infrastructure needed to adequately serve homes, businesses and public institutions that can provide the robust bandwidth necessary for these settings. Premise service is dominated by stodgy, techno-averse telephone and cable dinosaurs with shitty service options and customer service and is also a fat target for massive disruption.

UTOPIA reconnoiters as resistance to local parcel fee halts PPP with Macquarie

Macquarie is probably dead, and that’s probably okay – Free UTOPIA!: While I wasn’t able to attend the latest UTOPIA board meeting (bit of a drive from Cedar City), I did get a summary of what was discussed during that meeting. One of the things that came up was the long-delayed Macquarie deal. For all intents and purposes, it’s most likely not going to happen. There appears to be slow action on a binding public vote and the utility fee was very unpopular (and wasn’t coming down). The board has voted to pay Macquarie what they are due and take those reports as valuable information to plan for the future with no further action.

As this blog reported last March, resistance to a utility parcel fee stalled progress on a public-private partnership between the Utah Telecommunication Open Infrastructure Agency (UTOPIA) and an Australian firm that invests in public infrastructure projects, Macquarie Capital Group. That resistance created a massive stumbling block to the expansion and financial future of the UTOPIA regional fiber to the premise (FTTP) that serves 11 Utah municipalities.

Now nearly a year later as the blog cited above reports, that resistance has proven fatal to the partnership. In order for it to work under the long term financial plan prepared by Macquarie, the parcel fee was a necessary component of the partnership given that a public-private partnership by definition requires the contribution of public financial resources. No public contribution means no partnership, leaving the private partner like a single hand clapping.

This development is yet another example of the lack of adequate funding mechanisms at the state and local government level to ensure the construction of FTTP telecom infrastructure serving all American homes, businesses, and public institutions. The situation calls for an aggressive federal public works program to construct this needed infrastructure for the 21st century as I propose in my recently issued eBook Service Unavailable: America’s Telecommunications Infrastructure Crisis.

Telco CEO offers succinct description of FTTP market failure at network edge

Cincinnati Bell to Slow Fiber Build by 2017 | DSLReports, ISP Information: "Our buildout of fiber is 100 percent success-based and as long as we see the returns that are appropriate we're going to continue to build," Cincinnati Bell CEO Ted Torbeck told attendees of the company's earnings call.

"We anticipate by the end of the year we'll be somewhere over 60 percent and we fully anticipate that we'll be getting close to the upper range where in 2017 our build will decline significantly. The cost of the build is increasing as we expected as we build out and we're getting to the edge of the buildout and it's getting more expensive," the CEO added. "Once we reach the threshold where the margin decreases to the level is acceptable we'll stop the build.

A very succinct description of market failure in the words of a telco CEO that explains why private market forces cannot ensure the ubiquitous fiber to the premise infrastructure needed in the 21st century.