Wednesday, January 30, 2008

Semiconductor firms hope for better broadband over copper

One might think with the price of copper on the rise, telcos would be better off selling their aged copper cables for scrap metal and using the proceeds to defray the cost of installing "future proof" fiber optic cable allowing them to offer more advanced services over the so-called "last mile" to the customer.

On the other hand, they may be hoping that R&D efforts to increase the ability of copper cable -- which was designed to handle analog voice signals and not far more delicate, digital broadband traffic -- to carry DSL and IPTV signals farther and faster with fewer errors, permitting copper lines to stave off obsolescence.

Xtendwave announced today it received patents for technology that improves broadband and HDTV service by increasing the speed, capacity and distance of signals traveling over existing copper phone lines. The company claims the technology enables broadband providers "to far surpass the limits of their existing DSL services without re-engineering, replacing or upgrading their existing network infrastructure."

Separately, Portland, Oregon-based Rim Semiconductor Company announced this week that it has developed an Internet Protocol Subscriber Line™ specification that it claims provides fiber-like speeds over the existing copper telephone lines. According to the company, its proprietary Cupria™ processor is able to crunch data traffic at 40 megabits per second (Mpbs) over 5,500 feet (1.67km) on 26AWG (0.40mm) telephone wire. Existing technologies are able to achieve just 15 mbps at this distance on this wire type, the company claims.

Wednesday, January 23, 2008

Cash flow, depreciation trump infrastructure investment at AT&T

If you're in AT&T's 22-state service area and wondering why your phone service is poor or you can't get broadband from the big telco, DSL Prime's Dave Burstein has done some digging into AT&T's financials that may offer an explanation.

Burstein finds company suffers from a myopic fixation on cash flow at the expense of investing in the future of its infrastructure. A good indication, Burstein writes, is comparing depreciation to capital expenditures:

Most significant, AT&T's capital spending since 2002 has been cut in half to 20 to 30 percent less than their depreciation. Over five years, their depreciation was $42B and their capex $31B. Unless they have a major discrepancy in their balance sheet, that implies they are not maintaining their network. This has raised their cash flow and stock price significantly, but presumably will bite them eventually.

Burstein's take on the recent decline in AT&T's stock price -- which the company lamely suggested was due to residential wire line customers not paying their bills -- suggests Ma Bell's derriere is exposed and already being bitten.

U.S. Supreme Court asks for government brief in anti-trust suit against AT&T

The Associated Press reports the U.S. Supreme Court has asked Solicitor General Paul Clement for his opinion on whether the high court should review a Sept. 11 ruling by Ninth Circuit U.S. Court of Appeals allowing an anti-trust suit against AT&T by four California Internet Service Providers (ISPs) to go forward.

The ISPs contend AT&T jacked up wholesale prices it charged ISPs for access to its lines in order to subject the ISPs to a "pricing squeeze" as part of a scheme to drive consumers to SBC's proprietary retail DSL services.

According to the AP, the court's request for Clement's opinion shows at least some of the justices are interested in taking up the case, Linkline Communications et. al. v. SBC California, et. al.

From a market perspective, the suit spotlights a major roadblock in the implementation of federal law enacted in 1996 designed to speed the deployment of advanced telecommunications services including broadband Internet access. If the allegations of the ISPs are correct, they explain to a large extent why AT&T has not fully built out its broadband infrastructure because it set its DSL prices too low to cover the cost of doing so in much of its service area, leaving sprawling broadband black holes.

Watch for AT&T to continue to mount a scorched earth legal strategy to prevent this lawsuit from proceeding on the merits since it could effectively turn the clock back to 1984 when the break up of AT&T was ordered by a federal court. Tellingly, another big telco that could also find itself facing anti-trust litigation, Verizon, has filed in brief in the case in support of AT&T.

Think tank urges federal investment in broadband infrastructure

A paper published this week by the Center for American Progress concludes broadband deployment cannot be left in the hands of the private sector. This policy has left much of America unable to access advanced telecommunications services and placing the nation at a competitive disadvantage to other industrialized nations.

Instead, the United States should undertake a massive federal investment in advanced telecommunications infrastructure using a variety of technologies on a scale like the Eisenhower administration's National Highway Program in the mid 1950s that built America's interstates.

Writes Mark Lloyd, author of the paper, Ubiquity Requires Redundancy The Case for Federal Investment in Broadband:

The United States will not meet President Bush’s goal of universal broadband by the end of 2007—not by a long shot. The number of subscribers to Internet services is growing faster than the adoption of “dial-up,” yet for the most part these subscribers are not connected to the broadband technology Congress described in 1996 as a two-way communications service capable of high-speed delivery of data, voice, and video.

This failure to connect over half the country to advanced telecommunications service is not a technological failure. It is a 21st century public policy failure. In the 1990s, policies established by the Clinton administration to encourage public/private telecommunications partnerships, to connect schools and libraries to the World Wide Web, and to allow competitive service providers onto the networks of the local telephone monopolies all sped up the deployment of broadband around most of the nation. These policies were either deliberately abandoned or hampered by the Bush administration.

Friday, January 18, 2008

Tennessee governor says broadband build out his priority as lawmakers mull statewide IPTV franchise bill

Tennessee Gov. Phil Bredesen wisely understands that broadband build out is the single most important issue in AT&T's push in the current legislative session for legislation allowing it to bypass local governments in its quest to sell Internet Protocol-based TV over broadband connections.

According to this Associated Press report, Bredesen hopes to influence the legislative debate this year after similar legislation bogged down in the 2007 legislative session.

"The issue for me is not coming down on the side of cable or AT&T - it's just an issue of that I don't think we have adequate broadband coverage in Tennessee," the AP quoted Bredeson as saying.

Thursday, January 17, 2008

California Broadband Task Force issues report with several build out recommendations

The California Broadband Task Force (CBTF) formed in late 2006 by Gov. Arnold Schwarzenegger issued its final report Thursday recommending several measures to encourage broadband infrastructure build out in the state so that all Californians can have high speed Internet access. They include:

  1. Issuing infrastructure bonds and investing the proceeds with private sector companies to finance broadband infrastructure in unserved and underserved areas.
  2. Utilizing the California Advanced Services Fund (CASF) recently created by the California Public Utilities Commission to use existing phone bill surcharges to subsidize broadband deployment in high cost areas.
  3. Giving broadband providers a 10 percent tax credit on capital expenditures for investment in current generation broadband infrastructure capable of delivering combined download and upload speeds between 1mbs and 10mbs and a 20 percent credit for next-generation broadband infrastructure capable of providing combined throughput that exceeds 50mbs.
  4. Urging the Legislature to reauthorize the Rural Telecommunications Infrastructure Grant Program, a $10 million appropriation administered by the CPUC providing grants of up to $2.5 million per project, when it expires at the end of 2008. The report also recommends the $2.5 million grant cap be lifted.
  5. Authorizing local governments chartered as Community Service Districts (CSDs) to provide broadband service, either directly or through a contractor, if a private sector provider is unable or unwilling to deploy service to district residents.
  6. Providing access to state rights of way on a cost recovery basis for wireless broadband providers to bring service to presently unserved areas.
  7. Offering broadband providers space on state-owned properties on a cost basis to accommodate broadband distribution facilities.

The CBTF report did not set a time frame to achieve universal broadband access in California. The CBTF was tasked to “remove barriers to broadband access, identify opportunities for increased broadband adoption, and enable the creation and deployment of new advanced communication technologies.” Gov. Schwarzenegger also requested that the CBTF “pay particular attention to how broadband can be used to substantially benefit educational institutions, healthcare institutions, community-based organizations, and governmental institutions.”

A number of maps of wire line-based broadband access were developed by the CBTF that show broadband infrastructure is deployed unevenly throughout California, with nearly 2,000 towns and communities lacking broadband access while other parts of the state, mostly in metro areas of Southern California, enjoy state of the art connections.

The report views broadband as vital form of infrastructure. “Just as California has invested in other critical infrastructure such as roads, electricity, and water, the CBTF believes that the state must seize the opportunity to promote private-sector investment, leverage public/private partnerships, and lead the effort to increase broadband availability and adoption,” the report states.

A key question is whether the build out incentives proffered by the CBTF will be enough to fill in California's broadband black holes in a relatively short period of time without expanding the state's current universal telephone service requirement to include broadband services.

An executive summary of the report can be viewed by clicking here.

The full report of the CBTF can be viewed by clicking here.

A spokeswoman for Schwarzenegger said the governor applauds the CBTF report and will be reviewing its recommendations.

In April of 2006, Schwarzenegger suggested a news conference that $200 million of Proposition 1D funds, the school construction bond approved by voters in November 2006, that are earmarked to expand the use of telemedicine could be used to help subsidize broadband build out in California.

Tuesday, January 15, 2008

AT&T's failed broadband deployment strategy

AT&T has a bad habit of starting broadband technology deployments with bold declarations of new "projects," but half heartedly following through on them, leaving its infrastructure in disarray and like an unfinished information highway to nowhere.

Near the start of the current decade, AT&T (then SBC Communications) announced Project Pronto. The goal was to speed up the deployment of high speed Internet services — Digital Subscriber Line (DSL) over copper cable and twisted pair — to 80 percent of the phone company’s service area by 2002 and throughout its entire service area by 2006. Both deadlines were missed, with more than one in five residential customers unable to obtain any broadband services from the telco by the end of that year.

Now AT&T has decided to abandon that incomplete project in favor of another -- Project Lightspeed. It eschews the legacy DSL of the failed Project Pronto in favor of faster DSL -- VDSL -- running over a hybrid of fiber to the node (FTTN) and copper to the premises. The purpose of Project Lightspeed is to provide the necessary infrastructure to deliver AT&T's bundled Internet Protocol-based voice, data and video services known as U-Verse.

Like Project Pronto before it, Project Lightspeed/U-Verse appears to be faltering amid various technological and market challenges with the number of subscribers falling far below AT&T's goals and setting the stage for yet another incomplete initiative.

Complicating the picture is AT&T's decision to halt new deployments of its older legacy DSL technology in favor of the new VDSL Project Lightspeed platform, leaving large segments of customers who have been waiting for years for DSL hookups left in the lurch.

AT&T badly needs a management shakeup. It's time for an end to the fits and starts of ill-fated "projects" in favor of a new, long term comprehensive broadband strategy. It should commit itself to a deployment plan that covers all -- and not just selected portions -- of its 22-state service area and see it through to timely completion.

AT&T's customers deserve better. So do its shareholders, whom I believe would have the patience and perseverance AT&T's management has been lacking and would back a comprehensive broadband strategy if management clearly laid out the long term benefits.

The future of AT&T is at stake. It must decide if it wants to enter the digital, Internet telecommunications age or remain a mere "telephone company," content to rest on its laurels and passively depreciate its aging analog copper cable infrastructure while burdening itself with large dividend payments (recently five percent or $1.60 a share) that divert funds from needed investment in technology research and updated delivery infrastructure. If it chooses the latter course, then it shouldn't be surprised if bears and short sellers start stalking the company in the near future.

Saturday, January 12, 2008

Connect Kentucky draws fire from debunker

Art Brodsky of Public Knowledge has penned a lengthy examination of the nonprofit Connect Kentucky in which he debunks its claim that more than 90 percent of the state has access broadband Internet access:

“They haven’t impressed anybody in the state” with the data collection, the source said. Another Kentucky source said that the information on deployment wasn’t at all useful to non-Connect members. Connect’s claim that more than 90 percent of the state has access to broadband has been met with a great deal of skepticism. “It’s a joke,” one knowledgeable source said, echoing what others also believe.

Sources with knowledge of the program said there were a myriad of problems. Connect Kentucky’s results were overstated by a methodology that determined everyone within a 2.5-mile radius from a telephone company facility capable of supplying Digital Subscriber Line (DSL) service was indeed capable of getting the service. However, that assumption was not always true, the source said.

Federal Communications Commission data on DSL availability in Kentucky appear to back up Brodsky. In November, the FCC reported that 85 percent of telco customers were able to get high speed services as of Dec. 31, 2006. (See table 14)

And your California-based blogger who is located within 2.5 miles of an unactivated DSL remote terminal can certainly confirm that it doesn't necessarily mean service is available.

Thursday, January 10, 2008

Vermont deal with Fairpoint condemns state to "a dead-end future," union official says

Vermont regulators have given the go ahead to North Carolina-based Fairpoint Communications to purchase Verizon's telephone system in the state for $2.7 billion.

The Charlotte Observer reports the International Brotherhood of Electrical Workers Local 2326, which represents about 500 Verizon employees, is unhappy with the deal. The local's business manager, Mike Spillane, says it condemns Vermonters to "a dead-end future that impacts the economy and jobs."

"We're going to be stuck with a DSL copper-based product that's the horse and buggy of broadband," Spillane told the newspaper.

Under the terms of the approval, that horse and buggy run will only cover half the state by 2010, meaning those not on the route will have to dial up or suck a satellite for the foreseeable.

Wednesday, January 09, 2008

FCC chairman hopes 700mhz auction will increase broadband access

Federal Communications Commission Chairman Kevin Martin has high hopes the 700 megahertz spectrum that will be left vacant when TV signals go all digital in February 2009 will "dramatically increase" wireless broadband service in rural areas.

Accordingly, Martin told the International Consumer Electronics Show in Las Vegas this week that the FCC will require companies that gain part of the spectrum in the FCC auction set for Jan. 24 to use and not just hold onto it. "We want to make sure that that's being put to use as quickly as possible. ... That's really going to be the ultimate test of [the auction's] success," the Seattle Times quoted Martin as saying.

New Web site to track broadband availability info News Service reports today a Web site will be launched this month called Visitors will be able to enter their location, the price of their broadband service and satisfication level. Eventually a speed test will measure connection quality.

Tuesday, January 08, 2008

AT&T's tepid investment in residential market comes home to roost

AT&T is experiencing declining revenues in its residential wireline market segment, the telco's chairman and CEO Randall Stephenson told Citi's Entertainment, Media and Telecom Conference. Wall Street responded by pushing down AT&T's share price 4.7 percent to $39.10 in afternoon trading.

The Associated Press quotes Stephenson as blaming softness in the residential wireline segment on disconnections by consumers struggling to pay household bills.

However, what's likely the real reason is AT&T's own flawed residential strategy. AT&T has stubbornly resisted investing in upgrades to its aging and increasingly obsolete last mile copper-based distribution system. Consequently, the telco is unable to offer high speed Internet services and bundles of voice and broadband within large portions of its 22-state service area to the residential and growing home office-based market segment.

Moreover, AT&T's Project U-Verse rollout offering "triple play" bundles including television service based on a hybrid of fiber optic and copper cable has run into a variety of technological and market-based obstacles, causing the company to consistently miss projections for new U-Verse customers.

Friday, January 04, 2008

Netflix's movie-to-TV scheme premature

Netflix's announcement that it will deliver downloadable films directly to televisions via high speed Internet connections is clearly premature given the current pathetic state of America's broadband infrastructure. Even compressed, full motion audio and video requires lots of bandwidth -- and that bandwidth isn't there for most U.S. households. Even more so with high definition video, which Netflix ultimately hopes to deliver.

Many households lack even basic broadband access needed to view graphics-intensive Web sites. A significant portion of those that have high speed Internet access connect at speeds too slow to make regular movie downloading technologically feasible.

Netflix's move is part of a broader trend in which the content providers will drive broadband deployment. Without these bandwidth dependent applications creating demand for enhanced broadband connections, progress would likely continue to move at a glacial pace, increasing the ever-widening digital divide.

California communities lacking basic phone service underscore Golden State digital divide

This Sacramento Bee story about a small Northern California enclave not far from the state capitol of Sacramento finally getting telephone service sheds some light on why advanced telecommunications services based on broadband Internet access are lagging in the Golden State. After all, if some communities in a state that prides itself on its technological leadership are only now getting plain old telephone service (POTS) nine years into the 21st century, it's a safe bet that there are plenty of others with phone service that lack the necessary infrastructure to provide high speed Internet access.

The Bee story notes a "surprisingly long list of far-flung California communities still lacking telephone service: Lost Hills in Fresno County, Pine Mountain in Kern County and Siskiyou County's Eddy Gulch, Godfrey Ranch and Swillup Creek, to name a few."

Last fall, the Federal Communications Commission reported that nearly 20 percent of California telco customers weren't offered DSL service as of the end of 2006. (See Table 14)

In July, a Public Policy Institute of California concluded California is riddled with broadband black holes due to lack of access to broadband services, finding only about 30 percent of Northern Californians can get them.

Hawaii Broadband Task Force issues preliminary report

Following the lead of state-level broadband task forces in California, Kentucky, North Carolina and Ohio, the Hawaii Broadband Task Force has issued its intial report to the governor and legislature.

During 2008, the task force plans to work with the federal government and other states to determine how many states have initiated broadband data collection projects, created unified authorities to drive broadband deployment, and instituted regulatory reforms.

The Hawaii panel will also determine whether other states have considered policies to increase the deployment of Fiber-to-the-Home (FTTH) or are relying exclusively on telcos and cable companies to make their own business cases for these investments based on expected return to investors/owners.

The task force will wrap up its work with recommended policy, regulatory, informational, developmental, and leadership initiatives "that would stimulate both the demand for and competitive supply of advanced broadband capability and services throughout the state."

California's Broadband Task Force, which has a similar charter to Hawaii's, issued an interim report several months ago. It was set to issue a full report in December that is now expected to be completed sometime this month.
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