Patient pension capital funding for FTTP could be game changer

The modernization of America’s legacy twisted pair copper plant to fiber to the premise (FTTP) has been inhibited – described by observers as “stalled” and “stalemated”– by the conservative, risk averse business models of large investor owned players that require relatively rapid and assured returns on capital investment while also paying generous shareholder dividends. Several years ago, Verizon scaled back its FTTP deployment. In 2016, Google Fiber paused new deployments. AT&T hit the brakes on its FTTP deployments this year at the same time voters and policymakers want to press the gas pedal.

The sluggish progress has prompted localities to seek alternative business models that can more rapidly build FTTP infrastructure serving all and not just some premises along with rising demand for greater reliability and better value. The task isn’t easy. State and local governments and their taxpayers still feel the trauma of the economic crisis a decade ago. They’re thus risk averse when it comes to taking on debt or assessing new taxes. If localities are to build FTTP infrastructure and operations and maintenance, they will have to investigate new financing models that require less public funding.

One that is emerging and bears watching is localities partnering with operators of open access FTTP networks that tap pension funds as a source of patient capital. The 30-50 year lifespan of FTTP telecom infrastructure is far better aligned with the long term investment horizon of pension funds than the shorter timelines of investor owned ISPs. And now that advanced telecommunications is considered an essential utility (but not by legacy telcos and cablecos who prefer it be regarded as an information and entertainment service) and FTTP as a future proof means of delivering it to homes, businesses and institutions, there’s less uncertainty its ability to generate demand and revenue over the long term.

So far, European pension management firms appear to be in the game. However, it’s possible American pension funds like the mammoth California Public Employees' Retirement System (CalPERS) could jump in. There are plenty of localities just within California that could be potential partners on FTTP projects, particularly given the state’s two thirds voter approval requirement for most new taxes amid indications of tax exhaustion.

AT&T Targets Labor, Wireline Footprint in New Cost-Cutting Effort | Light Reading

AT&T Targets Labor, Wireline Footprint in New Cost-Cutting Effort | Light Reading: Wireline reductions
As for other cost-cutting efforts, Stankey said AT&T would also look into its wireline operations with an eye toward "product rationalization" and "geographic and footprint rationalization."

"There's a huge opportunity for us to look at our wireline business and how our customers are laid out, and start thinking about what we do to take out layers of cost -- based on the geography we serve and the products that we support -- that maybe have run their course in a fairly mature business," he said, but didn't elaborate further.

AT&T has a very conservative stance on building out fiber to serve residential customers. It's about to get even more so, signalling a likely full and final retreat from the residential market.

To reduce commute transportation demand and further its climate goals, California should tap pension funds to support advanced telecommunications infrastructure

California Governor Gavin Newsom recently issued an executive order directing the state Department of Finance to create a Climate Investment Framework. The order notes that while the state has established an ambitious goal of reducing greenhouse gas emissions 40 percent below 1990 levels by 2030, emissions from automobiles and other forms of transportation remain a “stubborn driver” of emissions. The order further directs the State Transportation Agency to reduce transportation-based emissions by reducing vehicle miles traveled by bringing jobs and housing in closer proximity and to “encourage people to shift from cars to other modes of transportation.” The order also calls for the state to leverage its $700 billion pension investment portfolio and assets to advance California’s climate leadership.

Placing jobs and housing in closer proximity has historically proven to be difficult to achieve in California given local governments have much more direct jurisdiction over land use planning than the state. A better approach would be to leverage pension funds to support regional projects by local governments to build much needed modern fiber optic telecommunications infrastructure. Pension funds the patient capital needed for long term investments such as infrastructure. This strategy would reduce commute transportation demand by better connecting California communities and allowing office workers to more easily work from their homes and co-working centers instead of piling onto freeways daily and spewing vehicular emissions. It’s particularly timely as the state’s high housing prices in metro areas drive lengthening commutes as people seek affordable homes often located at the edges of metro areas and beyond. This is where advanced telecommunications infrastructure tends to be the weakest but provides the greatest benefit.

FCC RDOF subsidy rules: USTelecom has no legitimate complaint

USTelecom on RDOF Impact: When the ILEC is No Longer the Carrier of Last Resort - Telecompetitor: The upshot is that while the CAF II auction diverted a relatively small portion of subsidies that would normally have gone to the price cap carriers to other entities, the RDOF has the potential to trigger a more dramatic shift away from the price cap carriers. As the report authors, note, “[c]ompletely shutting off access to federal universal service support to an incumbent in favor of a competitor is a new frontier in the evolution of the support mechanism.” As subsidies for price cap territories go to companies other than the incumbents, “the ILEC should be relieved of all federal and state obligations to provide service in such areas,” the authors argue. (Emphasis added)

USTelecom has nothing to complain about here. Incumbent Local Exchange Carriers have no obligation to provide advanced telecom service (ATS) to all premises in their service territories -- only voice telephone service. That's thanks to the U.S. Federal Communications Commission's 2018 repeal of the previous Obama era FCC's Open Internet rulemaking in 2015 classifying ATS as a telecommunications utility under Title II of the federal Communications Act and thus subject to universal service and non-discrimination mandates. The current FCC instead opted to classify ATS as an information service under Title I of the statute, turning the calendar back to 1990 and the days of CompuServe and AOL.

Push back on public option fiber based on fallacious argument utility infrastructure a competitive market

North Carolina considers loosening municipal broadband regulations: In May, Gov. Roy Cooper announced $9.8 million for broadband expansion to rural areas as part of a $35 million initiative to improve internet access across the entire state. Municipal broadband, however, has a troubled history in North Carolina and beyond.The bill cleared the North Carolina House State and Local Government Committee on Wednesday and will move to the chamber’s Finance Committee for a second vote, but industry officials are opposed. Spectrum’s senior director of government relations, Brian Gregory, said the increased competition from public entities would backfire.

“It’s especially troubling for us because our employees and our companies are going to be taxed to have competition against us, and that competition on top of that is also our regulator,” Gregory told WRAL, the NBC affiliate in Raleigh.

The thing is, advanced telecom infrastructure is NOT a competitive market. In fact, it's arguably a failed market because so many people who want better landline connections to their homes and small businesses and are willing to pay for them aren't able to buy them. Investor owned telephone and cable companies must also deal with inherent limitations on what they can invest in modernizing their infrastructures to fiber to the premise. Investors naturally push back when it comes to sacrificing profits and dividends to capital expenditures.

U.S. needs universal FTTP telecom infrastructure as public utility standard

The Benton Foundation has pulled together policy positions of several Democratic presidential candidates in a blog post, 2020 Candidates Offer Plans to Extend the Reach of Broadband. Of these candidates, only Elizabeth Warren offers a plan for universal fiber to the premise (FTTP) advanced telecommunications infrastructure as a public utility. It’s a position recognizing:

1. It’s what’s needed to rapidly modernize the nation’s legacy metal cable built for the pre-digital era of telephone and cable TV service to provide the capacity to handle rapidly growing bandwidth demand;
2. There isn’t and will likely never be a viable business case for private sector investment alone to achieve this in the foreseeable future due to the high labor costs of building utility infrastructure, and;
3. There’s an inherent conflict of interest between private investment and public interests when it comes to modernizing the nation’s telecommunications infrastructure. The public interest is clearly for modernizing to FTTP to enable economic activity, education, medical care and civic engagement. The private investor interest priority isn’t necessarily modernization of telecommunications infrastructure and its positive effects but instead to offer premium, higher margin service offerings based on throughput speed tiers. Warren’s proposal includes throughput speed (symmetric 100Mbs) but only as basic service quality standard.

The goal of universal FTTP as a public utility properly establishes an infrastructure-based standard for the nation considering only a small portion of the country has FTTP connections. That’s far behind where the United States should be in 2019 given that it should have achieved near universal FTTP at least a decade ago.  It’s the right goal for where the nation is now. Not a geographic or bandwidth-based goal of extending “rural broadband” or “improving broadband maps.” Broadband and specifically the lack thereof isn't a solution but rather the primary symptom of the lack of FTTP infrastructure and the consequent weaknesses of existing metallic infrastructure. If it reached nearly every American doorstep, "broadband" speeds and maps wouldn't even be part of the lexicon.