Wednesday, May 26, 2010

Telco layoffs spotlight difficult transition from POTS to IP services

The telecommunications industry is undergoing great upheaval during the transition from POTS (Plain Old Telephone Service) to wireless and next generation Internet Protocol-based telecommunications technology, producing mixed and seemingly paradoxical company news.

Case in point: Roseville, Calif.-based SureWest Communications. The fiber to the premises telco announced this week it would lay off seven percent of its work force due to weakness in the POTS side of its business at the same time the IP side of its shop is growing.

An obvious question is why not retrain or shift the downsized POTS workers to accommodate the growth in IP-based services? The answer: while demand for IP-based services is stiff and will only grow stronger, growth prospects in that segment are constrained by the inability of investor-owned telcos like SureWest to build out their IP infrastructures to reach more customer premises. Doing so requires more CAPEX than their business models can accommodate.

SureWest's big counterparts, AT&T and Verizon, have slowed their IP infrastructure buildouts. AT&T began hitting the brakes on its mixed fiber/copper Project Lightspeed/U-Verse buildout as general economic conditions deteriorated in 2008. Just before last Christmas, AT&T went as far as pronouncing its POTS business in a "death spiral." Verizon recently stopped expanding the footprint of its fiber optic FiOS plant and repositioned itself as an urban wireless provider.

The demand for IP services is strong, providing a potential growth industry at a time when jobs and economic activity are greatly needed. (Consider that most residential customers have retained their IP services during the current recession). But the legacy POTS carriers can't ramp up to meet it. That situation requires alternative providers such as local governments and consumer telecom cooperatives step up to meet the need.

Wednesday, May 19, 2010

California report: Telemedicine may help meet post reform rise in demand

The California state Legislative Analyst's Office recommends Golden State lawmakers consider integrating telemedicine into California's health care delivery system. The suggestion comes in the last sentence of a report the LAO issued last week on the impact of the recently enacted Patient Protection and Affordable Care Act on state health care programs.

The report notes that as more people become medically insured when most of its provisions take effect in 2014, California's health care system may lack capacity to serve a greater number of patients. Telemedicine --videoconferencing with medical professionals and uploading patient data -- offers the potential to make it easier for doctors to consult with patients and possibly serve more of them.

Before telemedicine can be adopted as a lower cost and more convenient method for patients to access medical professionals, the telecommunications infrastructure must be upgraded and expanded to provide reliable, Internet protocol-based service delivered via fiber optic cable connections to residences. Much of that job will fall to community-based entities such as municipal and consumer-owned telecom cooperatives.

Wednesday, May 12, 2010

App-Rising: FCC fudges on fiber

From the perspective of App-Rising, a recent Federal Communications Commission report addressing how to complete America's incomplete IP-based telecom infrastructure suffers from a major flaw. There's too much emphasis on DSL wireline technology intended to serve as a temporary stopgap on the road to fiber to the premises -- technology that will soon be obsolete and already suffers from poor reliability and high maintenance costs given the nation's aging copper cable plant.

The FCC also fudges on fiber by looking to mobile 4G wireless technology as a substitute for fiber to the premises. I agree with App-Rising that's also bad idea. This technology is intended primarily for mobile and not premises service. And unlike fiber, it's not a proven technology. Plus there's no indication 4G won't also become quickly obsolete, unable to scale up as premise bandwidth demand inevitably grows.

U.S. telecom market needs alternative business models, not more regulation

Telecommunications like other infrastructure such as roads, electric power transmission equipment, natural gas and water lines that serve homes and businesses is not a competitive market. It is a natural monopoly and at best a duopoly. Overlaid by market failure, represented by 7 million U.S. homes the Federal Communications Commission estimates are off the telecom grid because they are located outside cable company footprints or unable to subscribe to DSL due to distance limitations. Last October, the Yankee Group estimated about 12 percent of U.S. households, including those in some major metropolitan areas, lack access to broadband service.

This is perceived as a regulatory conundrum by regulators like the FCC. Too much regulation, the legacy telco and cable companies warn, will choke off infrastructure investment. The implication that will make the existing market failure worse. But would it really? The legacy carriers' own business models already severely limit network build out to neatly defined geographic and demographic market segments that can generate a return on investment in about five years.

The real challenge facing regulators isn't regulating the market. This is a market that needs stimulating and alternative business approaches that will solve the existing market failure and create a new telecom market to deliver the Internet protocol-based telecommunications services Americans need now and into the future.

Sunday, May 09, 2010

Economic development goals pit local goverments against legacy telcos, cable companies

Local government economic development agendas are clashing with investor-owed legacy telcos and cable companies in North Carolina as the Associated Press reports in this item appearing in The Daily Reflector.

The locals want fiber optic-based infrastructure to attract employers and create jobs. The business models of the incumbent telco and cable companies preclude them from profitably providing it. But rather than accept that business reality and seek more profitable business ventures, they've engaged in disinformation by declaring telecom infrastructure -- a natural monopoly -- as a competitive market. Therefore, they've argued to North Carolina lawmakers, local governments should get voter approval before issuing bonds to cover the cost of municipally owned telecom infrastructure in order to level the "competitive" playing field.

That sounds reasonable on its face. But the incumbent agenda isn't driven by public interest by ensuring prudent expenditure of public funds. It's a self interested one aimed at introducing delay. Unfortunately for the incumbent investor-owned providers, that merely adds costs and does nothing to increase profits. That could depress their share values and potentially leave them open to shareholder lawsuits.

Friday, May 07, 2010

Recommended reading: "Breaking the Broadband Monopoly"

Just as bringing electric power to homes and farms was America's great infrastructure challenge in the early decades of the 20th century, building out telecommunications infrastructure is the challenge of the early 21st as FCC Chairman Julius Genachowski has observed.

Christopher Mitchell of the Institute for Local Self-Reliance has issued a call for Americans rise to this new challenge just as they did in the 1930s with the Rural Electrification Administration and local utility cooperatives. While noting that every generation believes it bears a bigger burden than those before it, Mitchell asserts building out telecom infrastructure while difficult can be done just as it was with electric power lines.

Mitchell like author Jack Lessinger suggests this build out like electrification of nearly a century ago will help fuel an economic boom. (Building telecom infrastructure publicly and cooperatively also fits into Lessinger's emerging socioeconomic paradigm where "what's in it for me" is being supplanted by a new ethic of "what's in it for us.")

I strongly recommend reading Mitchell's latest white paper, Breaking the Broadband Monopoly. It's a comprehensive and very current treatise on and making the case for locally owned and operated telecom infrastructure. The paper is loaded with examples of community projects, examples of how legacy incumbent carriers fighting the future have attempted to stymie them, and tips and traps to avoid for community activists and local governments looking to take control of their telecommunications destiny and build their own local networks.

Will FCC enforce USF build out requirement?

It remains to be seen to what extent this week's decision by U.S. Federal Communications Commission Chairman Julius Genachowski to subject Internet protocol-based telecommunications to some but not all requirements of Title II of the Communications Act of 1934 will achieve his goal of bringing a badly needed upgrade to the U.S. telecommunications infrastructure.

Genachowski has described the challenge of replacing infrastructure designed many years ago to provide voice telephone service to an IP-based system that serves all Americans no matter where they make their homes and businesses as the "critical infrastructure challenge of our generation." That infrastructure challenge is greatest at the local level -- the so-called "last mile" of the system that connects to customer premises.

As explained by FCC General Counsel Austin Schlick, Genachowski's decision to apply Section 254 of Title II of the Act would support the FCC's plans to retask the Universal Service Fund (USF) that subsidizes service in high cost areas from POTS (Plain Old Telephone Service) to IP. As amended by the Communications Act of 1996, Section 254 requires the FCC to pursue policies to achieve access to advanced telecommunications and information services in all regions of the nation including those in rural and high cost areas that are "reasonably comparable" to services and rates offered in urban areas.

It's unknown at this point to what extent the FCC will as part of its plan to revamp the Universal Service Fund to help achieve ubiquitous access will enforce (or alternatively grant forbearance from) another provision of the Act designed to put teeth in the USF via a build out requirement. Title II Section 214(e)(3) empowers the FCC to "determine which common carrier or carriers are best able to provide such service to the requesting unserved community or portion thereof and shall order such carrier or carriers to provide such service for that unserved community or portion thereof." Notably, Section 214(e)(3) is absent from Schlick's explanation of the evolving FCC policy.

Sunday, May 02, 2010

California legislation would expand subsidy program

As the U.S. Federal Communications Commission considers retasking the Universal Service Fund that was originally formed to subsidize voice telephone service in high cost areas to advanced telecommunications infrastructure, California is considering urgency legislation to expand and make permanent its own similar subsidy program.

The California Advanced Services Fund (CASF) was established by the California Public Utilities Commission in December 2007 to subsidize advanced telecom infrastructure in high cost unserved and underserved areas of the state. Up to $100 million was allocated from a 25 percent surcharge on intrastate long distance calls, with the CASF surcharge offset by an equal reduction in the California High Cost Fund-B surcharge created to subsidize deployment of basic voice telephone service.

SB 1040 would leave the CASF in place indefinitely and expand its budget to $250 million with up to $25 million available in any given fiscal year. The urgency measure also liberalizes the use of CASF funds. To subsidize broadband infrastructure construction, $20 million would be allocated to grants and $3 million for loans.

One of the most important elements would be a new Regional Broadband Consortia Grant Account that earmarks $2 million in technical assistance grants to fund the cost of broadband deployment activities other than actual infrastructure construction. The money would be available to a wide variety of groups including local and regional governments, schools and colleges, health care providers, libraries and community-based organizations.

This is a critical element of the bill since many such entities that were interested in applying for broadband infrastructure grants and loans appropriated in the American Recovery and Reinvestment Act of 2009 lacked adequate funding to retain experts to help them with the engineering and business planning work needed in order to prepare project proposals.

A California Senate floor analysis of SB 1040 notes the Senate Energy, Utilities and Communications Committee was told at a Feb. 16 hearing that four percent of Californians - 1.4 million people in mostly rural areas, do not have access to broadband service. Only about half of Californians have Internet access at speeds meeting the CPUC's definition of basic broadband of 3 Mbs down and 1 Mbs up.

SB 1040 is advancing without opposition and would become law immediately after being signed by the governor. The CPUC would then open a rulemaking proceeding to implement the new CASF provisions later this year.
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