AT&T forced to invest in wireline plant to stem residential cord cutting

This item from Bloomberg/Businessweek helps explain why AT&T is opting to invest $6 billion in its wireline infrastructure.  The telco has been bleeding residential connections for years as these customers have dropped landline service and migrated to mobile wireless.  This is particularly true for those residential customers not offered wireline Internet service and thus had no reason to keep their landline account active.

AT&T is apparently now hoping to win those customers back and retain those thinking of cutting the cord by providing them Internet service via its proprietary, VDSL-based U-verse IPDSLAM service.  According to an AT&T news release today announcing its 3-year, $14 billion CAPex plan, U-verse IPDSLAM will provide Internet access and Voice Over Internet Protocol (VoIP) to 24 million customer premises in AT&T's wireline service area by year-end 2013.

AT&T likely to upgrade only small portion of residential wireline plant, analyst predicts

AT&T is likely to upgrade only a fraction of its residential wireline plant to deliver premises Internet to residences that it doesn't currently provide Internet service, according to an analysis by George Notter of Jefferies & Company discussed in this Telecompetitor article.  The telco's strategy is stated to be unveiled next month.

Notter's analysis predicts AT&T will upgrade only about 15 percent of its wireline plant to support its hybrid fiber/copper U-Verse triple play offering.  Some of the remaining premises may be offered AT&T's version of Verizon's LTE-based HomeFusion product, according to Notter. 

AT&T may invest in rural lines rather than divest, CEO says

AT&T may invest in rural lines rather than divest, CEO says: AT&T has said it would consider selling its rural access line unit, but Mr. Stephenson hinted earlier this year that such a sale could prove complex. The difficulty comes from the lines spanning multiple states and therefore needing several regulatory approvals that would likely take significant time.

On Wednesday, he said finding an internal solution for the business would avoid having to go through that process.

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There is also a simple business fact at play.  Who wants to buy obsolete copper cable plant?

He also noted that AT&T's wireless service could ultimately prove to be a solution for fixed-line broadband connections in less-dense markets as its next-generation LTE network rolls out.

"LTE can become a fixed-line replacement or even better than what you get from fixed line," he said.

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If Mr. Stephenson is talking about first generation ADSL, he would be right.  But wireless cannot equal or exceed wireline fiber to the premise.

Public utility district Internet as alternative to Google fiber

Most rural communities lag in the type of broadband Internet service available in urban areas. But northeast of Spokane, in Newport and the surrounding hills and valleys, around 5,000 homes and businesses have the chance to connect soon to a fiber-optic system with lightning-fast speed.


The network being built by the Pend Oreille Public Utility District will allow users to download and upload data all the way up to 1,000 megabits, or 1 gigabit, per second - far faster than the 10 to 20 megabits that is a popular consumer choice today.


It will rival the Google Fiber system rolling out in the Kansas City area and is fast enough to download a movie in seconds, conduct video conferencing at home, and watch multiple high-definition TV programs simultaneously online.


“We believe it’s kind of the footprint for the future of rural communities,” said Joe Onley, manager of the Community Network System for the Pend Oreille PUD

I expect PUDs like this one and consumer cooperatives will take the lead in building out fiber. The key reason is the time to return on investment is too long for private sector players, whether they be AT&T, Verizon, or Google.  And that applies in all areas -- not just rural locations.

Verizon, AT&T Decline Broadband Connect America Funding

Verizon, AT&T Decline Broadband Connect America Funding: Two of those carriers – AT&T and Verizon – yesterday declined all of the funding they had been offered. In a letter to the FCC shared with Telecompetitor, AT&T — which was offered $47.8 million — said it is “optimistic” about its ability to get more broadband into rural areas, “particularly as the technology continues to advance.” But the company said it could not commit to participate in the program until it finalizes that strategy.

One year ago, the big incumbent telcos urged the FCC to reform the Universal Service Fund with standards that would effectively subsidize deployment of first generation DSL service introduced more than a decade ago.  Now that the USF has been reformed into the Connect America Fund along the lines of what they wanted, they're saying thanks but no thanks to the subsidies.  Most likely because the legacy DSL standards the telcos proposed last year were already outdated by a decade or more -- and now look even more obsolete and unable to keep up with burgeoning bandwidth needs.

AT&T struggles with burden of legacy copper wireline plant

This Bloomberg item shows how the nation's largest wireline telecom player continues to struggle under the burden of its outdated legacy infrastructure.  According to the article, AT&T is trying to decide whether to sell off wireline plant where it does not offer its DSL-based U-Verse triple play product.

At issue is whether to upgrade field distribution equipment to extend the reach of U-Verse to more premises.  But doing so still relies on AT&T's decades-old, legacy copper cable plant to bring the service to residential premises.  That plant is less than optimal for transporting the higher frequency and more interference-prone VDSL protocol utilized by U-Verse, boosting the volume of customer service calls and increasing operating expenses.  The technical limitations of the copper plant also bar AT&T from reaching about 5 million residential premises that remain disconnected from the Internet, as noted in the article by Barclay Capital analyst James Ratcliffe.

Telcos propose reforming USF to subsidize legacy DSL

A half dozen first and second tier telcos including America's largest, AT&T and Verizon, are proposing to replace the existing Universal Service Fund that subsidizes switched voice service with two new subsidy programs to provide Internet connectivity in high cost areas. The proposal was made in a July 29 filing with the U.S. Federal Communications Commission.

One program would support wireline service, the Connect America Fund (CAF). The other, the Advanced Mobility/Satellite Fund, would subsidize wireless and satellite service in the least populated, highest cost areas of the nation. The CAF subsidy would be highly granular -- down to the census block level served by an existing telco central office.

The CAF is aimed at subsidizing buildout of the telcos' legacy Digital Subscriber Line (DSL) service using fiber to feed remote DSLAMs that serve premises using the existing copper cable plant. The CAF plan proposes approximating the FCC's current asynchronous minimum definition of broadband, 4 Mbs for the download side of the connection and 1 Mbs for uploads. (The CAF proposal calls for an upload speed of 768 Kbs)

The filing comes just one week after AT&T CEO Randall Stephenson declared DSL obsolete technology. Apparently it's not for those parts of AT&T's service area where the company has opted not to invest in building out its VDSL-based U-Verse service. For those areas, legacy ADSL that offered throughput at the current FCC minimum that was state of the art technology a decade ago will have to suffice.

If these telcos had been smart and exercised even a slight degree of foresight, they would have made this proposal in the late 1990s when they first began to roll out DSL service. Or by 2000 at the latest. At that time, they clearly knew a business case couldn't be made to deploy DSL in large swaths of their service territories without some form of subsidization.

This proposal is not only tardy by a decade or more. It sets the throughput bar too low by fixing it on today's current minimum definition of broadband. With Internet bandwidth demand growing at a rapid pace to support increasingly bandwidth hungry applications -- most notably video -- today's 4 Mbs down and 1 Mbs up standard is by definition the edge of tomorrow's obsolescence. Some would argue it's already obsolete.

The incumbent telcos' proposal also comes as community broadband projects are taking off and building out in many parts of the nation that provide far faster, future proof Internet connectivity using fiber to the premise connections.

Copper vaporware as AT&T chief declares DSL obsolete

Every couple of years or so, an article like this one by Tara Seals of V2M appears arguing legacy copper telecommunications infrastructure designed for a pre-Internet analog era is far from obsolete. Technical innovations can extend its lifespan, even as bandwidth demand is increasingly challenging its carrying capacity, particularly from Over The Top (OTT) video content:

Telcos are seeking cost-effective solutions to maximize their legacy infrastructure. Reducing crosstalk across copper bonded pairs using the ITU-T G.vector standard (G.993.5), introducing software solutions to maximize network logistics and using caching in the network are all solutions that are occurring right now, as telcos position themselves to meet the rapidly growing consumer OTT demand.

If that's the case, then why did AT&T CEO Randall Stephenson declare this week that the workhorse technology that has transported Internet protocol content over AT&T's copper network for the past decade and a half -- Digital Subscriber Line (DSL) -- is obsolete?

What about that innovation to stave off copper obsolescence? If it were for real instead of vaporware hype, it would truly provide AT&T tremendous opportunity to offer more wireline Internet services to a lot more customers over its legacy copper plant. Clearly for AT&T, that's not the case as the telco shifts away from residential wireline and is instead concentrating capital expenditures on personal wireless services.

AT&T exec suggests wireless will save its residential market segment

AT&T may be the nation's largest telecommunications company. But its size hasn't helped it meet the challenge of upgrading its cable plant to transport Internet protocol-based services. AT&T provided wireline Internet connectivity first through dial up and ISDN connections in the early 1990s, and then DSL as the 1990s turned into the 2000s. Starting in 2006, AT&T brought fiber closer to customer premises -- but not to them -- with its FTTN (Fiber to the Node) U-Verse service utilizing VDSL. Some new, dense greenfield developments received U-Verse service via direct fiber to the premises connections.

New home construction cratered shortly after U-Verse rolled out, leaving only more challenging FTTN brownfield opportunities. They are more challenging because the old cooper cable plant designed for POTS (Plain Old Telephone Service) is used to carry high compressed VDSL signals that quickly degrade with distance, limiting the size of the potential U-Verse customer base.

Faced with these challenges to reach customer premises and seeing strong growth on the wireless side of its business, AT&T not surprisingly sees its future in the wireless space. "The future is wireless broadband and we must keep that in front of us at all times," Tim Ray, executive director for AT&T External Affairs in Northern California, said at a recent roundtable discussion hosted by Sacramento-based Valley Vision.

In 2010, Valley Vision formed the Connected Capital Area Broadband Consortium (CCABC), a coalition "which seeks to identify and coordinate strategic broadband investments in the six-county Sacramento region aimed at improving broadband infrastructure, access and adoption." Ray, who sits on Valley Vision's board of directors, appeared to suggest wireless Internet connectivity will be able to substitute for wireline connectivity, noting "27 percent of homes no longer have wire line and this trend will continue to grow."

Ray's wrong and engaged in wishful thinking. There's currently nothing indicating wireless Internet service -- which is aimed at mobile devices with a low bandwidth allocation per customer  -- can provide sufficient capacity to handle burgeoning bandwidth consumption and be able to reliably deliver to customer premises high definition video content and applications like video conferencing and telemedicine. Indeed, AT&T's wireless infrastructure is already choked with far lower bandwidth traffic from devices such as the iPhone.

AT&T is in conflict with its own business model. It's in the telecommunications business which by its nature requires lots of CAPEX and OPEX. But it expects to get a full ROI within 5 years on its CAPEX. That's not going happen in most places except perhaps in new dense greenfield developments, which as previously mentioned also aren't happening.

The Economist: Why LTE can't substitute for fiber

Some believe the Internet will become untethered over the last mile and point to cutting edge wireless transmission technology known as LTE or 4G. The two biggest telcos in the U.S., Verizon and AT&T, are rolling it out (or are about to in the case of AT&T.)

But it won't be able to replace the nation's aging copper cable infrastructure that has grown increasingly difficult and costly to operate reliably. Nor is it likely to provide sufficient capacity for future growth in bandwidth demand -- something that Verizon and AT&T are acutely aware having faced growth pains and capacity constraints with their current generation of 3G wireless.

The Economist explains why:

Already LTE has shown itself good for at least 5Mbps—impressive for a mobile technology still in its infancy (see “Generational change”, December 3rd, 2010). But with peak speeds of 1Gbps theoretically possible, LTE’s next iteration should make downloads of 100Mbps over the airwaves a matter of routine. Developments beyond that could lead to near-gigabit speeds.

Of the two, though, a fixed link like fibre remains the better bet. Sooner or later, even a 4G wireless protocol such as LTE or its country-cousin WiMAX will become overwhelmed by the exponential growth of mobile traffic. By contrast, an optical link to the home could use a multitude of different wavelengths to boost throughput almost indefinitely.

Network World also weighs in:

So the next question about wireless broadband as a substitute. Recall that according to the U.S. Government Centers for Disease Control and Prevention (CDC), 1 in 4 homes has cut the legacy wireline phone cord in favor of wireless-only voice. Could we see wireless substitution rates that high for broadband access? We think not because radio spectrum is a limited resource, and unlike wireless voice networks that have plenty of spectrum to manage voice calls, if 25% of broadband users shifted from wireline access, the demand for wireless broadband would likely exceed available spectrum given today's technology.

Blair Levin stuck in the failed paradigm of investor owned telecom infrastructure

Blair Levin, who exited as executive director of the Omnibus Broadband Initiative at the U.S. Federal Communications Commission in May to become a fellow at the Aspen Institute, has penned a white paper issued last week by the think tank calling for retasking the Universal Service Fund (USF) from subsidizing basic telephone service in high cost areas to defraying the cost of deploying advanced telecommunications infrastructure.

Specifically, Levin advocates $10 billion in USF funding subsidize infrastructure capable of supporting the FCC's current minimum throughput standard of 4 Mbs down and 1 Mbs up to nearly all premises by 2020. Levin also proposes using USF funding to support "the adoption of broadband by low-income Americans and other non-adopter communities."

Levin's paper is based on some fundamental flaws. Levin has confined his thinking to the investor owned telco paradigm whose market failure is responsible for the inadequate, incomplete and outmoded telecom infrastructure that plagues much of the United States today in rural, quasi rural and metro areas. This infrastructure needs a massive revamping and it won't happen with just $10 billion in USF subsidies. In an interim report on its National Broadband Plan released in September 2008, the FCC estimated it would cost as much as $350 billion to build next generation telecom infrastructure to serve 100 million American homes. Ten billion dollars by comparison would barely make a dent.

This isn't to argue for much larger USF subsidies to telcos. Instead of appropriating $10 billion to subsidize infrastructure that will be obsolete well before 2020, the U.S. should face the fact that incumbent investor owned telcos simply can't afford to deploy the next generation of Internet protocol-based telecommunications infrastructure in a timely manner. The business case just doesn't pencil out. AT&T essentially conceded this point in a Dec. 21, 2009 filing with the FCC, pointing to the "enormous" amount of capital necessary to complete the build out of required infrastructure to ensure all Americans have access to IP-based services just as basic telephone service is nearly universal.

Instead of Levin's failed private market model, the U.S. instead should support policies that treat advanced telecommunications infrastructure as a public infrastructure like roads and highways such as advocated by Andrew Cohill and others. Allowing the private sector to attempt to build this vital infrastructure is economically untenable.

Levin's proposed use of USF monies to support "adoption of broadband by low-income Americans and other non-adopter communities" unfortunately amplifies a cynical canard advanced by legacy telcos and their astroturf groups. The unstated goal is to lower expectations and keep the calendar fixed in 1999 when Americans were just beginning to adopt "broadband" and "high speed" Internet access in personal computing. The Internet protocol-based infrastructure America needs now and in the future isn't just about computers connecting to the Internet for email and viewing web pages. It will support voice, video, teleconferencing, telework, telemedicine and uses that haven't yet been conceived.

DSL reaches end of line as interim pre-fiber to the premises technology

Digital Subscriber Line (DSL) was deployed by telcos starting in the late 1990s as an interim technology to bring Internet Protocol-based telecommunications services to customer premises before fiber optic connections could be brought to them.

Now DSL faces a crisis that dramatically shortens the days it can play this role. While DSL allows telcos to use existing copper plant designed for Plain Old Telephone Service (POTS), that copper plant is aged and deteriorating quickly. DSL tends to work best over newer, more pristine copper. But there's not much of that (if any) being deployed these days. Meanwhile, DSL customers complain about connections that run slower than advertised or are prone to outages as DSL signals struggle across ancient pairs of twisted copper.

And since about 2008 and amid the current economic downturn, telcos have pared back their DSL rollouts. Verizon concentrated on fiber to the premises via its FiOS product offering, prompting customer complaints it was neglecting its copper plant and repairing it with bubble gum and duct tape.

Here's the crisis: Now that DSL has served its role as an interim IP solution on the road to fiber to the premises, the United States is not prepared to make the transition to fiber. Stunningly, this gap in the technology transition isn't addressed in the Federal Communications Commission's National Broadband Plan issued this past spring. Nor is there any indication the nation's two largest telcos are seriously addressing it. Verizon recently halted build out of its FiOS fiber plant. AT&T opted for a hybrid model of fiber to the node and copper to the premise for its U-Verse product. But the VDSL transmission technology that powers U-Verse suffers from far greater distance limitations than previous generations of DSL and greatly limits U-Verse's service footprint.

It will fall to smaller, locally owned and operated telcos, local governments and telecom cooperatives to pick up where DSL left off (or in many cases, left out for those not serviceable by DSL). The National Broadband Plan should recognize that DSL over copper is dead or dying and support efforts by these entities to deploy fiber to the premises with technical assistance grants and infrastructure construction grants and low cost loans.

On death bed, aged copper POTS plant dials 911

In a late December filing with the U.S. Federal Communications Commission, AT&T pronounced its residential wireline segment in a "death spiral."

While the big telco was figuratively referring to the business prospects of the segment, the aged POTS copper cable plant is literally dying in parts of California and calling the paramedics.

Old lines no longer in active service are generating electronic farts that produce phantom 911 calls according to this Capitol Weekly article that reports on efforts in the California Legislature to fix to the problem. (Good luck with that).

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.

Legacy telco regulatory concerns overblown as Internet replaces PSTN

The United States is moving from an era of the highly regulated, proprietary publicly switched telephone network (PSTN) to a new telecommunications paradigm in which the Internet is replacing the PSTN and the "plain old telephone service" (POTS) it delivered.

Both of America's biggest investor-owned telcos, AT&T and Verizon, have heralded the death of PSTN/POTS. Verizon is adopting Internet protocol-based next generation technology in its place. AT&T went so far as to declare its legacy, copper-based wireline infrastructure in a "death spiral" in a filing with the U.S. Federal Communications Commission just before last Christmas. That business, AT&T wrote, cannot be sustained as more and more residential customers drop their land line phone service for wireless PCS devices or use their Internet connections to make voice calls.

As the nation adopts this new Internet-based telecom infrastructure, the legacy carriers are worried that the FCC will attempt to overregulate it. Those concerns are overblown. There will be no need for increased regulation at a time when the telecom infrastructure is changing and alternative business models -- most notably locally owned open access fiber infrastructure -- are emerging.

Strict regulatory oversight is only needed in a monopolistic market. New business models such as municipal and cooperative-owned open access fiber networks dilute the monopolistic market power of the legacy carriers and thus the need for enhanced regulation. If enhanced regulation does come about, it will likely be aimed at penalizing legacy telcos that stand in the way of federal policy to expand advanced telecommunications infrastructure and Internet access with uncompetitive market practices.

U-Verse won't bail AT&T out of its residential wireline woes

Here's a notable report by Todd Spangler of Multichannel News on AT&T's revenues from its hybrid fiber/copper VDSL triple play U-Verse service that suggests while posting increases in customers and revenue, they may be too little and too late to offset a dramatic decline in AT&T's residential wireline market segment. In a Dec. 21, 2009 filing with the U.S. Federal Communications Commission, AT&T in unusually blunt language called the downward trend a "death spiral."

Spangler reports that while AT&T's U-verse revenue nearly tripled over 2009 (despite a sharp economic downturn) and is approaching an annualized rate of $3 billion, it nevertheless represents less than five percent of total wireline segment revenue. Spangler notes even that strong growth isn't sufficient to offset flagging wireline segment revenues, which fell six percent in 2009 to $65.7 billion.

Meanwhile, AT&T disclosed this week it would spend $2 billion on its wireless infrastructure -- money that won't be going into wireline CAPEX to build out the U-Verse footprint. Doing that is a costly proposition given U-Verse involves expensive field distribution equipment that can deliver service only 3,000 feet over existing copper cable plant -- plant that often requires even more money to bring it up to technical standards to reliably carry VDSL signals. That's not an issue in new neighborhoods, where U-Verse is delivered over fiber to the premises. But few such locales are being developed with new home construction at its lowest level in decades.

In sum, U-Verse isn't likely going to bail AT&T out of its troubles in residential wireline and may ultimately lead to the big telco pulling out of the market segment to concentrate on wireless in the retail market as I predicted in September 2008.

FCC chief: Formulating U.S. broadband deployment policy "really hard"

Federal Communications Commission Chairman Julius Genachowski offered some perspective this week on why the FCC has asked Congress for another month to complete its policy recommendations on expanding advanced telecommunications infrastructure to all Americans.

"I can't tell you that we've figured out the solution completely and I can't tell you that we'll figure out the solution to this perfectly by the time we do the National Broadband Plan," he told GigaOM, according to this Reuters dispatch. "This is really hard."

Indeed it is, because this isn't about simply tweaking the existing, incomplete infrastructure -- or "ecosystem" as some federal officials have termed it -- that leaves lots of Americans reliant on the outdated copper-based infrastructure put in place decades ago to deliver plain old telephone service (POTS).

As AT&T noted in a recent FCC filing, that system is on the verge of obsolescence. The United States now needs a new infrastructure for a new Internet-protocol based range of telecom services that go far beyond standard voice service. Genachowski has described it as "the critical infrastructure challenge of our generation."

Getting there won't be a natural extension of the old infrastructure but instead a radical overhaul calling for new business models, particularly among the last and middle mile segments. It's as much of a business model challenge as an infrastructure challenge. That scope forces the FCC to engage in original, outside the box thinking -- which as Genachowski aptly noted is hard -- but necessary -- work.

USF reform alone won't achieve universal U.S. broadband

Just as the U.S. Federal Communications Commission set a date for the end of analog broadcast television earlier this year as TV signals went digital, it should also establish a sunset date for the legacy Publicly Switched Telephone Network (PSTN), AT&T asserted in a December 21 filing with the FCC.

The business model for the PSTN -- a proprietary network comprised of central office switches, amplifiers and copper cable plant designed to deliver what's known as plain old telephone service -- POTS -- is in a death spiral as the number of people shutting off their landline voice service in favor of wireless and Voice Over Internet Protocol (VOIP) services has accelerated in recent years, AT&T notes. In the meantime, the telco stated, the FCC should modernize its regulations to ensure an orderly transition from the PSTN to an Internet Protocol (IP) based system, taking full regulatory control and ending state oversight authority originally established for regulating POTS.

However, legacy PSTN/POTS isn't alone in suffering from serious business model problems. So does the IP-based model that is the future of telecommunications. The reason: what AT&T describes as the "enormous" amount of capital necessary to complete the build out of required infrastructure to ensure all Americans have access to IP-based services just as basic telephone service is nearly universal. In its filing, AT&T concedes eight to ten percent of American households lack access to broadband, although another estimate released in October placed the figure higher at 12 percent, including even spotty access in major metropolitan areas.

In order to allow telcos to direct more capital investment to building out broadband infrastructure, AT&T proposes the FCC scrap rules requiring telcos to provide POTS so they can redirect funds to upgraded infrastructure capable of delivering IP-based services. "The legacy PSTN network – which is rapidly hemorrhaging customers and revenue – is now diverting much needed funds from investments in broadband networks," AT&T states in its filing.

AT&T also wants the Universal Service Fund (USF) -- created to subsidize the cost of providing POTS in high cost areas -- retasked to do the same for IP-based services. Doing so would help achieve the Obama administration's goal of broadband access for all Americans, according to AT&T.

But there's a difference between USF subsidies for voice telephone service and IP-based services. Deployment and adoption of basic phone service played out over decades. By contrast, there's a huge reservoir of pent up demand for broadband AT&T and other big telcos assured would be offered to all U.S. households when the Telecommunications Act of 1996 was enacted providing telcos tax breaks and other incentives intended to pave the way for them to universally deploy fiber-delivered telecommunications services by 2006. Didn't happen, obviously.

The FCC and other policymakers should keep this history and differences in demand between POTS and IP-based services in mind. Reforming the USF isn't likely to be the sole solution to remedy market failure for IP-based services. They must also encourage alternative business models such as open access fiber networks owned by local governments and telecom cooperatives through subsidies, low cost loans and tax incentives.

IP-based service convergence rendering broadband debate irrelevant

Comcast's move into digital voice in 2006, AT&T's disclosure to Investor's Business Daily two years ago that it ultimately plans to shut down its existing voice network and replace it with a VOIP (Voice Over Internet Protocol) system in the limited areas where its U-Verse offering is being deployed and Verizon CEO Ivan Seidenberg's assertion at a Goldman Sachs investor conference last week that his company is migrating from the publicly switched telephone network (PSTN) and central offices designed to handle plain old telephone service (POTS) delivered over twisted pair copper wire to fiber to the premises (FTTP) all signal that wireline telecommunications is undergoing a paradigm shift.

The transition is away from the single purpose voice telephone and cable TV systems of the past to Internet-protocol based telecommunications infrastructure capable of delivering various media including high speed Internet connectivity, voice and video.

This paradigm shift is rendering the debate at the U.S. Federal Communications Commission and elsewhere over what constitutes broadband Internet increasingly irrelevant. What's gaining importance isn't the download and upload speeds that have dominated the debate over defining broadband but rather how to ensure these various IP-based services can be reliably and economically delivered to end users.

That takes a new and improved telecommunications infrastructure. This emerging IP-based infrastructure and the business models that can most rapidly deploy and support it is what truly deserve attention going forward. The pointless back and forth over how to define broadband keeps the conversation oriented retrospectively to the 1990s instead of where it needs to be: forward into the 21st century.

Verizon abandons PSTN, commits to next generation IP-based services

Verizon has become the first big telco to fully commit to next generation Internet Protocol-based service delivered over fiber in which the Internet replaces the publicly switched telephone network (PSTN) designed for plain old telephone service (POTS) delivered over twisted pair copper wire.

“We don’t look any different than Google,” Verizon CEO Ivan Seidenberg told a Goldman Sachs investor conference last week. “We can begin to look at eliminating central offices, call centers and garages.” Seidenberg's remarks were reported in Saul Hansell's Bits column in The New York Times.

That means a much smaller, shrinking wireline footprint for Verizon as the company sells off its old copper plant and deploys its FiOS fiber to the premises plant. In effect, Verizon is starting almost from scratch to build a new wireline plant. And just as with the early copper cable plant, urban areas will see it many years before those living outside them will. That sets the stage for history to repeat the cycle of the early copper POTS deployments of a century ago in which less densely populated areas established telecom cooperatives in the meantime. Only this time the coops will be putting up fiber instead of metal.

In contrast to Verizon, the dominant American telco, AT&T, is trying to keep one foot in its PSTN past by attempting to pound the square peg of ever increasing IP-based bandwidth demand -- particularly for video -- into the round hole of copper POTS with its Project Lightspeed/U-Verse FTTN architecture. This gambit leaves AT&T far less strategic headroom and could ultimately lead to the company getting out of residential wireline altogether in the first part of 2010.