Thursday, February 26, 2015

Disparate Internet access likely to continue in US without comprehensive policy, strategies

Want Fiber? Do more to get it, Google exec tells cities | Gigaom: The upshot for the foreseeable future is a patchwork of different broadband speeds across the country as competitors flock to easy-access markets, while leaving many millions of others (including me in Brooklyn) stuck with monopoly service.

According to Cogent CEO Dave Schaeffer, who also spoke on the panel, this situation will require a future wave of policy inducements to produce more broadband offerings.

Lacking comprehensive policy inducements and strategy to further the construction of fiber optic telecommunications infrastructure to reach all homes and businesses and updating outmoded metal wire infrastructure operated by incumbent telephone and cable companies, the United States does indeed face a less than bright future of disparate Internet access in both metro and rural areas.

Today's adoption of rules by the U.S. Federal Communications Commission only partially implementing Title II of the Communications Act subjecting the Internet to common carrier utility regulation will serve to reinforce the disparity without a solid universal service obligation. More in depth analysis of the FCC's action will follow here once the final rulemaking is published in the Federal Register.

Wednesday, February 25, 2015

Google Fiber's business model emulates -- and shares same downsides -- as incumbents'

Google Fiber: Make It Easier For Us Or Enjoy Time Warner Cable | DSLReports, ISP Information: Numerous cities have been so eager to get Google Fiber, they've signed rather sweetheart deals that, for example, allow Google to simply walk away from builds should TV subscriber uptake numbers not be met. Perks also include the right to redline and cherry pick deployment neighborhoods...

This illustrates how closely Google Fiber's triple play business model emulates that of legacy incumbent telephone and cable companies. And also how vulnerable it is to TV programming costs that are squeezing all but the biggest players such as Comcast and Time Warner.

What's ironic is localities across the United States have literally begged Google Fiber for relief from the legacy incumbents. Google has adopted much of the incumbents' triple play business model but utilizes fiber to the premise plant instead of wire or cable. And since it's such a high cost model, it naturally leads to market segmentation (cherry picking and redlining neighborhoods based on expected revenue) that reinforces an entrenched infrastructure gap that leaves one in five American homes unable to order landline Internet service.

Monday, February 23, 2015

AEI overlooks lack of investment in aging telecom infrastructure

Don't make the Internet a public utility AEI: The result is that public utilities are among our least innovative, worst-performing industries. Search the phrase “America’s aging infrastructure” and you will find dozens of articles and studies detailing lack of adequate investment in our bridges, gas pipelines, electricity transmission systems and other utilities. Sixty-two percent of the gas mains in Washington, for example, are more than 50 years old.

Similarly, one can do a search and find plenty of references to America's aging metal wire telecommunications infrastructure where market forces alone fail to provide sufficient incentive for investment to replace it with fiber.


Wednesday, February 18, 2015

Ellsworth, Maine exemplifies local efforts to address U.S. telecom infrastructure deficit -- and need for federal assistance

Council backs broadband Internet project - The Ellsworth American: Lili Pew, a real estate agent who heads the EBDC broadband committee, pointed out many people have home-based jobs or businesses. She said the number one question she hears from her clients looking at Ellsworth is, “Do I have access to high-speed broadband?”

Running fiber lines to every residence in Ellsworth would be cost-prohibitive — in the range of $8 million to $12 million, according to Tilson — but there are other ways to reach parts of the city that Pew said are “in the black hole of technology right now.”

Paul said service that is “five, 10, 20 times faster” than what customers have currently can be provided wirelessly using the same type of service cell phone users have. Hamilton said Ellsworth “is blessed by having good towers in place already.”

This account out of Ellsworth, Maine illustrates the American can do spirit of meeting and responding to a challenge -- in this case constructing fiber optic telecommunications infrastructure to enable the locality to participate in the digital 21st century economy.

This story is playing out all over the United States as cities and towns like Ellsworth take their telecommunications destiny into their own hands. It also shows these localities will need significant funding assistance from the federal government to ensure all homes and businesses have fiber connections. Ellsworth's economic development TIF (tax-increment financing) program won't provide enough funding to ensure all of its residents will have fiber connections.

The Federal Communications Commission's Connect America Fund isn't up to the task and hasn't been sufficiently tapped by providers to build needed telecom infrastructure in areas where it's not quickly profitable. What's needed is a far more robust federal program to provide funding to states and localities on a scale like that of the Rural Electric Administration in the 1930s to bridge the gap in Ellsworth and other places like it.

Saturday, February 14, 2015

Center for Public Integrity delves deep into U.S. Internet infrastructure challenges

A great read on investigative journalism by the Center for Public Integrity that delves deeply into the market and policy challenges of building a complete and modern Internet infrastructure in the United States in 2015. Here’s a summary of the fundamental elements covered in the article.

Incumbent telephone and cable companies can’t afford to upgrade and build out their Internet infrastructures to fully serve their service territories. So they lobby and give campaign contributions to policymakers to allow them to preserve their incomplete networks that leave many disconnected from the Internet. Reporter Allan Holmes describes a typical scenario in much of the nation where those networks don’t extend to reach many suburban and exurban homes:

But then you go outside of Tullahoma (South Carolina), you just drive like 3, 4, 5 miles outside of Tullahoma into this suburban area where there are some very nice homes, and they don’t have Internet access. They don’t even have AT&T, U-verse or Charter Communications which is another telecom there who provides service in Tullahoma. They don’t serve this area.

Leaving these people unserved creates political pressure for action to solve the problem – naturally leading local governments to build their own infrastructure to serve their citizens just as they did in the 1930s for electrical service. That in turn generates resistance from the incumbents to preserve the status quo and put roadblocks in their path. Legislators like Tennessee State Representative Glen Casada are being squeezed by increasing pressure from both the incumbent telephone and cable providers that support their campaigns and the constituents who elect them and want good Internet connections as Holmes relates a conversation with Casada:

“My district is about 2/3 high-speed and 1/3 non-high-speed. So I do hear a lot of that, and I talk to several of those providers: ‘we need help, what’s the solution?’ and their retort is ‘well, we can’t afford to go to the southeast corner of your county because we would lose money and lose money hand over fist.’ And I said ‘we’ve got to figure this out, and real quick, because if we don’t figure it out, then we’re going to have to go with a solution that may not be palatable to the free market system.’ So there is an answer, I contend we have to work it out and figure it out so that the free market solves it, because if a government-run entity solves it, it’s got long-term negative implications.”

The challenge Casada faces is the market for telecommunications infrastructure isn’t a competitive one. It’s a natural monopoly due to the high cost barriers that keep out potential competitors. It’s that natural monopoly that the incumbents want to preserve by keeping local governments from building their own Internet infrastructure with protectionist laws. 

Casada can however have market competition for services provided over Internet infrastructure by treating the infrastructure like public works such as a road or highway. But a competitive market with many sellers and buyers isn’t going to happen for Internet infrastructure because it is fundamentally at odds with market economics.

The larger story underlying this one is the disruption and discomfort that naturally comes with technological and economic change – in this case replacing 20th century metallic legacy telephone and cable TV infrastructures with modern fiber optic networks for the 21st century. Naturally the legacy providers will resist this transition out of fear of adverse economic consequences for their shareholders and employees. But policymakers must also consider the economic opportunity and job creation ubiquitous modern fiber Internet infrastructure will enable.

Thursday, February 12, 2015

For consumers, Title II common carrier universal service obligation far more important than net neutrality

U.S. Federal Communications Commission Chairman Tom Wheeler’s trial balloon proposing to place monopolistic Internet service providers under Title II of the Communications Act and subjecting them to common carrier utility regulation has generated considerable discussion and media coverage of net neutrality – the principle that all Internet traffic be handled equally by Internet Service Providers (ISPs). The net neutrality issue applies at the deeper layers of the Internet affecting business relationships between core content providers like Netflix and Yahoo and so-called “transport layer” players like Level 3 Communications, Verizon and AT&T. Wheeler proposes that Title II regulation would enable the FCC to place rules on these arrangements to ensure they are “just and reasonable” and prohibit blocking, throttling and paid prioritization.

All the discussion over net neutrality however has overshadowed a far more important element of Title II that would apply to common telecommunications carriers -- which ISPs would be deemed if the FCC ultimately adopts rules later this month placing ISPs under Title II. ISPs would no longer be able to serve only parts of communities and even portions of roads and streets, a problem the FCC recognizes leaves millions of Americans unserved by wireline Internet connections in a report issued last month. Like telephone providers currently subject to universal service mandates under Title II regulation, any premise would be able to order Internet service meeting specified standards. ISPs aren’t going to like the disruption that brings to their business models based on market segmentation and redlining less densely populated – and desirable -- neighborhoods. Even municipally-operated ISPs don’t relish the prospect, filing a letter this week with the FCC opposing a potential Title II rulemaking:

“[W]e fear that Title II regulation will undermine the business model that supports our network, raises our costs and hinders our ability to further deploy broadband…Our ability to repay current debt obligations and raise capital at attractive rates could well be adversely affected if we lose control over our retail rates or the use of and access to our networks.”

Some believe the universal service requirement will be applied only relative to eligibility for federal infrastructure subsidies for high cost areas offered through the FCC’s Connect America Fund (CAF). If that ends up being the case in whatever rules the FCC ultimately adopts, it won’t likely move the needle much to speed up infrastructure deployment to these areas since there is little business incentive for ISPs to tap into the grossly underfunded CAF as they concentrate on select wireline market segments and mobile wireless services.

Friday, February 06, 2015

It's a bird, it's a plane, it's the rebirth of satellite Internet | Network World

It's a bird, it's a plane, it's the rebirth of satellite Internet | Network World: There's a ton of room for providers who want to help people in remote or sparsely-populated areas get online, both at home and abroad, dovetailing nicely with the Obama administration's stated goal of getting more Americans online in service of furthering education and stimulating the economy.
The problem is there is also a ton of premises on satellite Internet that aren't in remote or sparsely populated areas of the United States. They're at the outer edges of metro areas, exurbs and semi-rural areas lying outside of the limited footprints of landline Internet infrastructure. While mainstream and tech media may hype a "rebirth," the fact is satellite sucks and is a national embarrassment that so many still rely on it in 2015.

Thursday, February 05, 2015

No fast or slow lanes for Internet? New rules proposed | The Sacramento Bee

No fast or slow lanes for Internet? New rules proposed | The Sacramento Bee: "Net neutrality" means that whether you're trying to buy a necklace on Etsy, stream the season premiere of Netflix's "House of Cards" or watch a music video on Google's YouTube, your Internet service provider would have to load all of those websites equally quickly.
This is a much less important problem in the United States than inadequate Internet infrastructure that leaves millions of American homes and small businesses to substandard slow dialup, satellite or costly bandwidth rationed mobile wireless connections. The Federal Communications Commission recently reported that Internet infrastructure is not being deployed in a timely manner.

Wednesday, February 04, 2015

FCC Chair Wheeler may still be trying to split the baby on regulation of Internet as common carrier telecom service

U.S. Federal Communications Commission Chairman Tom Wheeler issued a fact sheet today summarizing a draft rulemaking the FCC will vote on this month to classify Internet service as a common carrier telecommunications utility under Title II of the Communications Act. It should be borne in mind this document represents a starting point in the FCC's deliberations preceding formal promulgation of proposed regulations and the public comment period before their final adoption.

Here are some quick takes on some of the provisions mentioned in the FCC fact sheet:

Reasonable Network Management: For the purposes of the rules, other than paid prioritization, an ISP may engage in reasonable network management. This recognizes the need of broadband providers to manage the technical and engineering aspects of their networks.
This is a big loophole that will likely send net neutrality proponents up the wall. A major friction point between core content providers and ISPs is the edge ISPs won't upgrade their last mile networks to fiber to support higher throughput. "Reasonable network management" could thus mean core content will have to be throttled so as to not overwhelm their networks.
Some data services do not go over the public Internet, and therefore are not “broadband Internet access” services subject to Title II oversight (VoIP from a cable system is an example,
This carves out Internet voice service from Title II -- a major telecommunications service.

Bolsters universal service fund support for broadband service in the future through partial application of Section 254.
It will be interesting to see what exactly "partial" means. Section 254(b) of the Communications Act requires common carriers to provide access to advanced telecommunications and information services (i.e. Internet service) in all regions of the nation. Will the FCC provide waivers for some areas of the country even as it finds Internet infrastructure is not being timely deployed to all parts of the nation?

The proposed Order applies “core” provisions of Title II: Sections 201 and 202 (e.g., no
“unjust and unreasonable practices.”
Section 202 bars “discrimination in charges, practices, classifications, regulations, facilities, or services...” It also contains an anti-redlining provision barring providers from discriminating against localities in providing service. That means dominant providers would have to serve all premises in their service territories and not just selected neighborhoods, roads and streets as is current practice.

No last-mile unbundling.
This effectively neuters common carrier under Title II and protects the closed access monopoly incumbent providers enjoy over what services are sold to customers since they would continue to be able to bar access to ISPs offering competing content and services.

Tuesday, February 03, 2015

UTOPIA’S “fiber highway” offers roadmap to greater competition for premise telecommunications services

A major complaint about Internet service in the United States is legacy incumbent telephone and cable companies lack incentive to provide better value and customer service and to build out their networks to fully serve communities and neighborhoods and not just selected segments. Many believe the solution is introducing more competition.

But given that telecommunications infrastructure costs a lot to build and maintain, that circumstance creates high economic barriers to potential competitors. That leaves the incumbent telephone and cable companies firmly entrenched in a market that naturally tends to be monopolistic. It puts them in the dominant position and consumers in the weaker role, forced to be what economists call “price takers,” meaning they must pay whatever their ISP charges or go without service. 

Summed up, a market that’s naturally monopolistic can’t easily be transformed into a competitive one without a radical reordering. One such example is the Utah Telecommunication Open Infrastructure Agency (UTOPIA), which operates its regional fiber telecom infrastructure as public works -- like a road or highway. That introduces competition by giving consumers the choice of what Internet services they want to purchase and from which ISPs. “The value to users is generated through greater choice of providers that generates a shift in the balance of power from the ISPs to the user and the superior service that the new network will provide,” notes this recent update by Macquarie Capital on its public-private partnership venture with UTOPIA.

As the report notes, there has been some resistance to a key financing element: a proposed monthly utility fee. But as it also points out, the estimated $22.60 monthly utility fee is offset by better value consumers would receive than as price takers of the incumbent telephone and cable companies.

As the maxim holds, there’s no free lunch. But some lunch deals are better than others, particularly when they help fund fiber to all and not just some premises as with Google Fiber’s “fiberhoods.” UTOPIA’s open access model provides the additional advantage of ensuring everyone is connected regardless of where they live or operate their business. Applied on a regional basis as UTOPIA plans, the utility fee model is a particularly important financing mechanism in places like Bettendorf, Iowa and Danbury, New Hampshire -- small localities that would be challenged to fund Internet infrastructure construction without new revenue streams.

The Obama administration and the Federal Communications Commission – looking for ways to increase competition for premise telecommunications service amid a growing tide of consumer dissatisfaction – would be wise to look to UTOPIA’s open “fiber highway” model. And consider tax incentives such as making utility fees tax deductible for all taxpayers to make them more palatable.

Monday, February 02, 2015

The FCC is moving to preempt state broadband limits - The Washington Post

The FCC is moving to preempt state broadband limits - The Washington Post: Under Section 706 of the Communications Act, the FCC is authorized to promote the deployment of broadband in the United States. By ruling that the anti-municipal state laws constitute barriers to that mission, the FCC's draft order invokes Section 706 in preempting the laws.

But that theory has already been questioned by Republicans who believe private investment is a more effective tool for rolling out high-speed broadband. 

Private investment in theory might be effective -- if there was a lot more of it. The legacy, shareholder owned incumbent providers are constrained in their capital investment capacity by the demand for short term profits and high dividend obligations and debt loads. Witness Verizon, for example. The company stopped new build outs of its FiOS fiber to the premise infrastructure in response to shareholder concerns.

Private pension money might be brought into play as is the case with Australia-based Macquarie Capital, the financial partner of the Utah Telecommunication Open Infrastructure Agency (UTOPIA). But so far no other similar financiers with the billions that are needed have emerged.

In summary, there really isn't any point in debating what's the best source of U.S. fiber to the premise telecommunications infrastructure funding. What's truly important is that there be an adequate and viable funding source -- something the nation is currently lacking.
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