Lutnick’s right. Americans aren’t getting the benefit of the bargain -- of universal service.

U.S. Commerce Secretary Howard Lutnick announced June 6 that the Trump administration would be revising the program rules for the $43.45 billion Broadband Equity and Deployment (BEAD) program, authorized by the Infrastructure Investment and Jobs Act of 2021 (IIJA).

Lutnick said the program requires retooling in order to ensure Americans can obtain the full “benefit of the bargain” Congress intended in enacting the IIJA: broadband deployment. The Biden administration, in keeping with the infrastructure construction and modernization intent of the IIJA, administered BEAD with an infrastructure focus and specifically fiber to the premises (FTTP) and middle mile advanced telecommunications infrastructure.

The current administration however is reverting to the policy framework in place since the 1990s. It defines “broadband” as a service based on specified “high speed” throughput. The infrastructure to deliver it isn’t specified in this “technology neural” policy. In the original version of the IIJA, it was: FTTP. That fell away in a subsequent amendment of the legislation. (See earlier blog post here).

By deemphasizing landline infrastructure and instead making BEAD subsidies available for cheaper and less reliable non-landline infrastructure delivered service as fixed wireless and low earth orbit satellite, the Trump administration will “connect more Americans to broadband more quickly, and at a lower cost to the American taxpayer,” said Lutnick, who also serves as acting administrator of the National Telecommunications and Information Administration (NTIA), charged with implementing BEAD.

However, Americans have never gotten the real benefit of the bargain: universal service of Internet protocol-based advanced telecommunications delivered by landline like voice telephone service before it. The expectation of that bargain was expressed as public policy in the Telecommunications Act of 1996.

According to the Federal Communications Commission, the Act “expanded the traditional goal of universal service to include increased access to both telecommunications and advanced services …for all consumers at just, reasonable and affordable rates.”

The closest federal policy came to mandating universal access to advanced telecommunications was in 2015 when the FCC placed Internet protocol telecommunications under Title II of the Communications Act of 1934, classifying it as a common carrier utility requiring reasonable requests for service be honored and barring neighborhood redlining. The FCC declined to enforce its regulation adopting the reclassification and ultimately reversed course in 2018, repealing it.

The IIJA did not affirmatively express public policy of universal service. It merely stated findings that access is “essential to full participation in modern life in the United States.” Universal service is described in the legislation by its inverse: a “persistent ‘digital divide’ in the United States.” It charged states receiving planning grants to only determine how long it would take to construct infrastructure providing universal service.

That Americans have not seen universal landline delivered advanced telecommunications reflects a longstanding problem of insufficient political will for policy ensuring fiber would reach most every American doorstep. That would constitute “belt and suspenders” advanced telecommunications infrastructure that would serve well into the 21st century.

Instead, Americans have seen numerous, limited one off subsidies largely directed to investor owned providers with limited capacity to invest. Often that has meant no FTTP belt and only wireless suspenders to reliably hold up the trousers of its connectivity needs over the long term.

Multiple factors align against universal FTTP over near term

Each state and territory then must set up and administer its own broadband infrastructure grant program using the statutory framework to distribute the money to the internet service providers that will be building the networks. Importantly, Congress directed that each state and territory must ensure every broadband serviceable location in its jurisdiction gets connectivity as a condition of receiving the bulk of BEAD funding. (Emphasis added)

https://broadbandbreakfast.com/tim-stelzig-a-new-approach-to-connecting-all-americans-to-the-internet/

The Infrastructure Investment and Jobs Act of 2021 (IIJA) as the 1996 Telecommunications Act before it states public policy intent of universal advanced telecom service. The IIJA placed responsibility on the states to implement it. The IIJA appropriated $43.45 billion for delivery infrastructure to the states as “once in a generation” seed funding under the law’s Broadband Equity and Deployment (BEAD) program.

BEAD required states to develop Five Year Action Plans with timelines to achieve universal service. It also requires states to "rigorously explore ways” to cover the cost of advanced telecommunications infrastructure builds eligible for BEAD subsidies with other sources of funding. BEAD program rules developed by the Biden administration require they include “a comprehensive, high-level plan attain universal service.”

As the plans were filed with the National Telecommunications and Information Administration (NTIA) in 2023, it became clear states would have to come up with significant organic funding sources. Oregon’s plan indicated the state would need nearly five times its $689 million BEAD allocation to build universal fiber to the premises (FTTP) infrastructure at an estimated cost of $3.3 billion deployed over a five year period.

Similarly, California’s plan stated the Golden State is unable to assure timely construction of universal FTTP infrastructure – estimated to cost $9.78 billion including infrastructure hardening in areas with high wildfire risk – because less than half that amount is available as federal and state subsidy funding. The plan offered no strategy to bridge the gap such as a state bond measure.

Consequently, states and also the federal government that assumed office this year are looking to wireless delivery technologies such as fixed terrestrial wireless and low earth orbit satellite. That has sparked controversy over whether dollars appropriated under the IIJA are best invested funding durable infrastructure in line with the bill’s infrastructure focus or emphasizing service delivery to get more American homes connected.

The likely outcome of this debate as far the as the IIJA is concerned will favor the later. The IIJA’s telecom infrastructure funding formula isn’t oriented to infrastructure despite the bill’s purpose and title. Rather, it’s based on need and specifically deepening bandwidth constraints that exist because FTTP has not timely been deployed to replace legacy copper telephone delivery infrastructure incapable of handling ever increasing Internet protocol-based service demand. Only half of all U.S. households had access to FTTP connections in 2024 according to the Fiber Broadband Association’s 2024 Fiber Deployment survey by RVA LLC Market Research & Consulting (RVA).

While the Biden administration nevertheless prioritized funding FTTP, impatience with poor service options in less densely populated areas that have existed for many years as well as short term fiscal conservatism – are combining with the IIJA’s service orientation and the lack of adequately funded state plans to attain universal FTTP to mitigate against universal FTTP over the near term. Another major factor is deteriorated utility poles that increases costs via replacement or resort to more costly underground infrastructure as well as patchwork of pole ownership and access hurdles.       

Origin of “tech neutral” shift for BEAD subsidies lies in 2021 infrastructure bill

This week’s policy shift on the advanced telecommunications infrastructure subsidy component of the Infrastructure Investment and Jobs Act (IIJA) to make it “tech neutral” and give less preference to fiber to the premises (FTTP) has its origins in 2021 as the IIJA was being enacted. The change -- which emphasizes rapid deployment -- is expected afford greater consideration to subsidizing providers of fixed terrestrial wireless and low earth orbit (LEO) satellite Internet.

The original bill sponsored by the Biden administration would have appropriated $100 billion for fiber infrastructure to be primarily deployed by local governments, nonprofits and consumer cooperatives. The administration noted supporting these entities would allow subsidy dollars to go further since they operate without the need to generate profits for investor-owned entities.

Opposition from legacy telephone and cable companies watered down the bill to cut the funding to $43.45 billion for delivery infrastructure. Instead of FTTP, the bill employed a throughput versus infrastructure-based standard for the subsidies.

Accordingly, the funding program was chartered as Broadband Equity Access and Deployment (BEAD). Funding was restricted to premises not able to obtain bandwidth of 25Mbs down and 3Mbps up. “Broadband” was defined as 100Mbps down and 20Mbps up with latency of 100 milliseconds or less.

At that point, the legislation – nominally dedicated to improving various categories of essential infrastructure – deemphasized infrastructure and instead the level of “broadband” service available at a given address. It retained a market-based policy despite widespread market failure the bill was intended to mitigate. This favored incumbent telephone and cable companies looking to incrementally edge out their existing infrastructures and providing a substantial degree of protection from publicly owned and utility cooperative operators.

The administration however sought to maintain an FTTP infrastructure focus in its rules for the BEAD program, describing it as less prone to obsolescence and thus able to deliver the best long-term value.

This week’s policy shift and the designation of throughput – broadband – in the IIJA now puts fixed wireless and satellite providers on a strong footing for subsidization. They could plausibly argue that any technology that can deliver “broadband” as specified in the IIJA should be eligible.

Industry sponsored white paper points to public, consumer utility coop ownership of fiber telecom delivery infrastructure to achieve broad socioeconomic benefit.

In the fourth decade since telecommunications began to shift to Internet protocol-based technologies, about half the connections to U.S. homes have not yet been modernized to fiber optic lines. That’s according to a recently published white paper commissioned by the Fiber Broadband Association and Frontier Communications.

The paper points to a clear reason: excessive reliance on investor owed deployers who lack incentive to fully build out fiber. According to the paper, this is because they naturally look to benefit their own economic interests and are not directly seeking the broader socioeconomic benefits that come with fiber connections reaching most every doorstep. Those are identified in economic terms in the paper as positive externalities: unintended, incidental (i.e. external) benefits beyond the narrow economic incentive of investors to earn the highest level of profit in the shortest time. That leads to micro market segmentation as seen on so-called “broadband maps” that an East Texas local government official compared to the spotted coat of a Dalmatian. (Related story from The Texas Tribune)

 

Lonnie Hunt, with his spotted map to visualize broadband availability in East Texas, at the McKenzie-Merket Alumni Center at Texas Tech University in Lubbock on Nov. 18, 2022. Credit: Mark Rogers for The Texas Tribune  

The paper’s authors estimate deploying fiber to 56 million households that are in tracts unserved by fiber has the potential to generate at least $3.24 trillion in terms of net present value (NPV) in incremental economic impact.

“Society as a whole benefits from the positive externalities of fiber deployment,” the paper notes. “However, no group of private investors can fully capture these benefits. As a result, a private market equilibrium that balances the marginal revenue and marginal cost of fiber deployment will lead to an under-provision of fiber resources, resulting in market failure.”

The 1996 Telecom Act and the Telecommunications Infrastructure Act of 1993 before it recognized the broader socioeconomic knock on effects of ubiquitous access to advanced telecommunications infrastructure. But the flaw in both is their exclusive reliance on investor-owned providers and market forces to bring them to fruition. They overlooked the economic misalignment identified in the white paper between the more limited, short-term interests of private players and the longer-term public interest. Both failed to establish clear, well thought out public policy to balance them.

For analog voice telecommunications, public policy is to regulate them as common carrier utilities under Title II of the Communications Act of 1934 to ensure widespread, affordable access. However, even though Internet access is now seen as a de facto utility, it is still not legally recognized as such four decades after the Internet digitized and transformed telecommunications.

While the FBA/Frontier paper doesn’t do so explicitly, it makes a strong argument for public and consumer utility cooperative ownership of advanced telecommunications infrastructure. By definition, these ownership structures are affirmatively intended to realize the positive socioeconomic benefits of access and affordability. For them, these are not merely incidental externalities but an organizing principle.

Connecticut's inexplicable archipelago strategy for BEAD subsidies

In breaking up the state into workable regions, the Connecticut broadband office is asking grant applicants to propose bringing fiber to every location. But, Pisacich says, “terrestrial-based providers may not be able to serve those locations without huge costs, so they may not even bid.”

As a result, the office is allowing the islands to be separated into their own region, when needed. That way, one provider can bring fiber to the area aside from the islands, and other providers employing alternative technologies can deliver broadband to the islands.

By using this approach, Pisacich expects to receive “multiple applications, have multiple options, and then we’ll be able to get those harder locations served within the timeframe.”

https://blandinonbroadband.org/2024/10/16/connecticut-has-99-percent-broadband-coverage-but-so-do-many-mn-counties-what-can-we-learn/ 

Assuming locations in the surrounding "sea" are on the electrical grid, what doesn't add up is why the "islands" can't be reached with fiber to the premises (FTTP) particularly with substantial subsidization from the Infrastructure Investment and Jobs Act's BEAD program intended to reach high cost areas. Are they off the grid? Most likely not. If they can be served by electrical power infrastructure, why can't they be reached with fiber?

Draft BEAD program update would give states more leeway to use LEO, FWA services using unlicensed spectrum when more economical than FTTP.

In a March 2023 interview, U.S. Secretary of Commerce Gina Raimondo said, “If we're going to connect every American, including the tens of millions of Americans who now don't have the internet, we're going to have to lay fiber all across this country.” But $43.5 billion in construction subsidies appropriated in the Infrastructure Investment and Jobs Act of 2021 appears insufficient to bring fiber connections to most every American doorstep as with copper telephone lines in the previous century.

Instead, Low Earth Orbit (LEO) satellite and fixed wireless service (FWA) using unlicensed spectrum may have to suffice to fill the many thousands of holes in the Swiss cheese deployment of landline advanced telecommunications infrastructure over the past three decades. That has left a considerable number of discrete locations lacking it or served by older telephone and cable infrastructure that falls short of current federal standards for reliable internet protocol-based voice, video and data service.

That’s the upshot of draft Broadband Equity, Access and Deployment (BEAD) program guidance issued this week by the Department of Commerce’s National Telecommunications and Information Administration (NTIA). Those voids are seen on splotchy federal and state “broadband maps” of existing service where investor owned providers bypassed discrete locations they determined would not produce an adequate return on investment or profit.

While the draft guidance reiterates a preference for fiber to the premise (FTTP) projects in existing program guidance, it permits state subgrants to LEO satellite service providers and ground-based fixed wireless providers using unlicensed spectrum for projects where FTTP would require such a large degree of subsidization (up to 75% of project costs) -- or a lack of interest from service providers -- that states would be challenged to connect all premises to service meeting specifications for minimum throughput and reliability as required by the BEAD program. Accordingly, the draft revised guidance states these “alternative technologies” can to be used when it would be “less expensive” to do so.

Moreover, the draft guidance would bar states from funding projects where LEO satellite or fixed wireless service meeting minimum service specifications already exists or is being subsidized by another government program, which could potentially render large portions of the nation ineligible for BEAD subsidies.

The draft guidance would authorize states to use their grant funds to make subgrants to these providers to help customers pay for non-recurring installation and premise equipment costs, which for LEO service can run several hundred dollars. However, it’s unclear whether these services would meet the existing BEAD program guidance requiring states to ensure subgrant funded projects offer service at rates affordable to low and middle income households.

Publicly owned FTTP deployment models: prioritizing low rural density versus favoring high suburban density

Among publicly owned fiber to the premise (FTTP) networks financed by public bonds, two opposite deployment strategies are emerging. One prioritizes low density rural areas where private market failure is deeply entrenched, making them unlikely to be fibered in the foreseeable future. The other prioritizes high density suburban areas where there’s presently a fiber gold rush on to gain the all-important first mover advantage.

It’s important because first to connect a premise with fiber creates an asset with long term value unlikely to be overbuilt later by a competing fiber network. That has generated political resistance and dark money PR campaigns likely funded by investor owned providers.

An example of the former is Vermont’s use of local government units known as communication union districts (CUDs) Click here for an excellent documentary on how they’ve been formed and their progress building fiber to residences that conventional wisdom holds FTTP is impossible.

Low density is prioritized in Vermont’s CUDs because nearly all settlement is rural. There’s no mindset among Vermonters in these CUDs that those who live in less settled areas should go to the back of the line (or move away as investor owned providers suggest) while those living in more densely settled areas should get connected first. Instead, a cooperative can do New England Yankee spirit prevails. We’re all rural and we’re all in this together recognizing investor owned providers are not going to meet our need for advanced telecommunications.

The latter example is represented by the Utah Telecommunication Open Infrastructure Agency (dba UTOPIA Fiber), owned by a consortium of 20 cities. UTOPIA is building FTTP in more densely developed suburban areas featuring gridline layouts rather than curvilinear, windy roads found in rural and exurban areas. (See recent UTOPIA “footprint” releases here and here).

The UTOPIA advised Golden State Connect Authority (GSCA) comprised of 40 nominally rural California counties plans to begin construction this year and is similarly prioritizing more densely settled areas of its member counties. It is doing so to accelerate network revenues needed for an aggressive financing schedule allowing servicing of bond debt soon after the fiber is built.

The takeaway here draws from history. Rural areas like those in Vermont’s CUDs formed electric utility cooperatives early in the 20th century when as with advanced telecommunications, it was apparent investor owned providers were not going to show up, favoring more profitable urban areas for their electrical infrastructure. That alters the density calculus and the motivation to connect premises least likely to be connected.

That history is absent in the case of Utah’s UTOPIA and California’s GSCA where residential settlement patterns are decidedly more mixed. While federal and state subsidies such as the Broadband Equity, Access, and Deployment (BEAD) Program target rural areas, areas too dense to be considered rural but too sparsely settled to be deemed suburban may potentially go unfibered as virtual knowledge workers move to these exurban metro fringes.

Yesterday, today and tomorrow in FTTP

 2000-2020

• Incumbents slow walk, cherry pick FTTP buildout; business models cannot accommodate capex need.
• Publicly owned FTTP emerges as lower cost business model alternative, built by some municipalities in densely settled areas and handful of private operators and utility coops in rural areas.
• Some limited interest by private infrastructure funds (Macquarie) and Euro pension funds as sources of more patient capital to finance FTTP construction.

2020-2030

• COVID public health measures spotlight need for more FTTP as knowledge work, education, medicine and retail increasingly virtualize online. Investment community realizes incumbents unable to meet demand and seriously explore investment opportunities.
• Increased interest on part of private infrastructure funds (e.g. BlackRock joint venture with AT&T), private equity firms and Euro infrastructure funds in investing in privately held FTTP. They provide more patient and copious capital with 8-10 year time horizon than incumbent capex with ROI standard of 5-7 years. High existing debt loads also severely limit in house debt financing. These alternative investment sources have stronger motivation to invest vs. incumbents with risk premium payday opportunity at end of 8-10 year investment cycle when consolidator buys their stakes.
• Interest in public bond debt financing also growing with publicly owned regional FTTP players looking for bond capital to finance growth (i.e. UTOPIA, ECFiber and other Vermont CUDs, Golden State Connect Authority.)
• Both private and public investment will be limited to urban and suburban areas with some limited investment in exurban greenfields and PUDs. But more capital available for private investment, drawn by shorter investment cycle (10 vs. 20+ year public bond maturity).
• BEAD will facilitate some rural FTTP but will be largely limited to incremental edge outs by large telcos and cable companies.
• With limited FTTP investment in rural areas, LEOs will assume dominant position. WISPs will struggle to survive over next 8-10 years, unable to compete with LEOs.

The logical flaw in AT&T's claim copper telephone landlines no longer needed

"AT&T said in a statement that input and feedback from community stakeholders, including comments in public hearings held and planned “is a critical part of the process of upgrading customers from outdated copper lines to more advanced, higher speed technologies like fiber and wireless, which consumers are increasingly demanding.” (Emphasis added)

https://www.mercurynews.com/2024/02/28/opposition-mounts-to-atts-plan-to-stop-landline-service-in-most-of-bay-area/

There is a logical flaw in this reasoning that suggests modernizing the legacy copper voice telephone lines to fiber to the premises (FTTP) has and is occurring because customers demand it. Hence, the logic goes, there is no need to keep the copper landlines. 

The issue isn't customer demand but rather FTTP availability. It's absent in much if not most of AT&T's service territory because AT&T and other telcos instead of replacing it with FTTP kept it in place for decades for dialup and digital subscriber line (DSL) internet. If there had been a timely and orderly transition to FTTP from copper, the issue of whether to keep copper landlines in place wouldn't be an issue.

AT&T might reasonably argue the copper wasn't replaced with FTTP because the business case -- meeting internal ROI requirements -- wasn't there. That calls for a lower cost business model such as a consumer utility cooperative or public ownership that doesn't have to generate profits for investors and pay income taxes.  

Update 4/18/24: AT&T California offered the self evident solution: replace the copper with fiber:

[W]e are working with communities across California to upgrade our older copper networks to more resilient, advanced technologies like fiber. For rural communities, upgrading our network not only helps narrow the digital divide, but it also means improving network resiliency, which helps networks withstand and recover from natural disasters and severe weather events.

AT&T’s two pronged fiber build out strategy

AT&T appears to be pursuing a two pronged strategy to build out fiber to the premises (FTTP) delivery infrastructure. The first is targeting densely built up metro areas with its Gigapower joint venture with BlackRock’s Global Infrastructure Fund. The second using subsidies extended to the states from the 2021 Infrastructure Investment and Jobs Act’s (IIJA) Broadband Equity, Access, and Deployment (BEAD) Program to build FTTP infrastructure in less densely developed areas that meet the program’s funding eligibility requirements.

Last fall, AT&T urged states to award the BEAD subsidies for contiguous builds that qualify as unserved (where at least 80 percent of serviceable addresses in the project are not offered throughput of 25/3 Mbps or better) and underserved (where at least 80 percent of serviceable addresses are not offered throughput of 100/20 Mbps or better). However, under BEAD, states must first exhaust their funding allocations on subsidies for projects addressing unserved locations.

As noted in the above linked blog post, AT&T’s BEAD funding appears predicated on the two generations of Digital Subscriber Line (DSL) technology that runs over its legacy copper voice telephone delivery infrastructure. The first, ADSL, will in many less densely developed areas qualify as unserved since it typically provides bandwidth lower than 25/3 Mbps. However, these areas are often adjacent to those served by its second generation VDSL technology. Those areas won’t qualify as unserved but could likely qualify as underserved.

Federal and state officials overseeing the award of BEAD funds will likely come under pressure from AT&T to liberally interpret the program rules to allow subsidization of contiguous FTTP projects spanning areas including both types of DSL technology. Expect AT&T to argue that this will provide the most efficient use of the funds and cover the greatest number of serviceable locations as well as meeting the BEAD program's preference for FTTP.

The d factor: Why publicly owned, financed FTTP may not balance the Crawford equation

Author Susan Crawford in her 2019 book Fiber: The Coming Tech Revolution – And Why America Might Miss It, set out a vision of ubiquitous and affordable fiber connections as with copper delivered voice telephone service in the 20th century.

The United States stumbled in the late 1980s and early 1990s by failing to develop a comprehensive strategy to transition from the legacy copper to fiber to support digital Internet protocol voice, video and data services. Instead, fiber to the premises (FTTP) was left to the market whims of investor owned companies that construct it only where it meets their rate of return and profitability standards. That’s typically densely settled urban and suburban areas.

That leaves much of the nation outside these areas unfibered with uncertain prospects for FTTP amid a multiplicity of siloed federal and state grant programs. Only recently have these programs begun to favor FTTP for subsidization albeit with eligibility still based on marketed “broadband” bandwidth to protect the customer “footprints” of incumbent providers from interlopers.

An open question is can publicly owned and financed regional telecom authorities provide a lower cost work around to the investor owned providers whose business structures require them to generate profits and dividends for their owners and pay income taxes on their earnings?

Let’s call Crawford’s vision the Crawford equation and express ubiquitous access as x and affordability as y. Can these alternative business models solve for both since they avoid the higher structural costs of the investor owned business model?

They may not. It boils down to the same reason for both: residential density. Let’s call it the d factor. For the investor owned providers, building FTTP isn’t likely to pencil out in less densely developed exurban areas with lower d value featuring curvilinear roads instead of suburban and urban grid-style development. These areas typically fall short of the investor owned standard of about 15 homes per linear road mile. That translates to more road miles and a relatively lower number of homes per mile. That leads to higher construction costs and longer returns on investment, diminishing the short term profitability investors desire and more certain revenues debtholders want for debt service.

For publicly owned providers and particularly open access FTTP networks reliant on network revenues to service capital bonds, bond underwriters prefer a sizable number of end users to ensure bonds secured by network revenues obtain sufficient revenue from end user fees. That correlates with d. A higher d factor translates to more end users. That translates to lower default risk since there is more revenue to secure debt service. The y factor -- affordability -- can also be adversely affected by networks seeking to boost the x factor in less densely developed areas.

For ISPs offering services to end users, the d factor is similarly critical. ISPs aren’t going to be interested in leasing network access unless there is a sizable market of end users, particularly since they are likely competing against other ISPs on an open access network.

Bottom line, publicly owned and financed FTTP infrastructure may not solve the Crawford equation for much of exurban America where telecom infrastructure is often substandard and not up the needs of knowledge workers migrating to metro fringes and beyond.

Groups urge NTIA’s Davidson to adhere to preference for FTTP in BEAD subsidies

America’s adversarial Pinata telecom policy is heating up. Three telecom trade groups urged the National Telecommunications and Information Administration (NTIA) to resist calls for alternative technologies and maintain a long term focus that prioritizes grant funding of fiber to the premises (FTTP) advanced telecommunications infrastructure in its Broadband Access, Equity, and Deployment (BEAD) program.

The organizations also called on the NTIA “to establish metrics going forward to track whether States and Territories have fulfilled their responsibilities to connect all eligible locations to high-performance broadband service and maximize all-fiber builds, the critical communications infrastructure for the 21st Century.”

While the groups didn’t specifically mention fixed wireless access (FWA) as an alternative to FTTP, their joint letter is clearly intended to head off arguments by FWA providers that they can get more locations connected faster and cheaper than constructing FTTP. Another FTTP alternative is extending coaxial cable plant that comprises the majority of the delivery infrastructure used by cable companies, the dominant providers of landline IP telecom.

“Too often, as federal broadband funding programs have moved from concept to implementation, there has been a tendency to seek to support broadband infrastructure that is ‘just good enough’ for the moment,” the NTCA–The Rural Broadband Association, the Fiber Broadband Association and ACA Connects–America’s Communications Association wrote the NTIA’s Alan Davidson in a February 2, 2024 letter.

“Under these prior programs, initial lofty goals of giving every American robust and affordable connectivity that will last for generations have given way to delivering the bare minimum to satisfy user demands here and now – leaving consumers and communities vexed and resulting in the need to establish yet more programs to address the needs left unaddressed.”

The basis for the groups’ position is the Infrastructure Investment and Jobs Act (IIJA) authorization allowing Davidson to develop technical criteria that prioritizes advanced telecommunications infrastructure eligible for BEAD funding based on throughput, reliability, and consistency in quality of service. The rationale as stated in the IIJA is to “ensure that the network built by the project can easily scale speeds over time to meet the evolving connectivity needs of households and businesses” and provide backhaul for wireless technologies and other advanced services. The NTIA in its Notice of Funding Opportunity (NOFO) for the BEAD program specifically defined that as “end-to-end fiber-optic facilities to each end-user premises.”

FWA seems like a lower cost alternative to FTTP -- until radio propagation constraints taken into account.

Outside of our urban cores and highway corridors, many modern life-enhancing technologies remain unavailable. For underserved constituencies, health outcomes are less positive; educational and business opportunities are more limited; and a myriad of other harms are borne by our more rural constituencies. But 5G FWA stands to finally connect those communities that remain unserved or underserved. Because this technology can span distances and cross terrains that coaxial and fiber cannot, at a fraction of the cost, more communities will be connected using 5G FWA than ever before. 

https://broadbandbreakfast.com/2023/08/sascha-meinrath-12-gigahertz-band-is-key-to-bridging-the-digital-divide/

The challenge is very limited propagation. The high frequencies used by FYA like the 12 Gigahertz cited in this article have very limited reach. Propagation distance is inversely correlated to the frequency. High frequencies can carry more data than lower ones. But the tradeoff is they don’t travel very far. Consequently, homes and businesses close to FWA radio towers get good throughput as Doug Dawson explains in this blog post. But just a bit farther out, it drops off dramatically as this example of a Sacramento, California suburb illustrates using two relatively lower frequencies. For 12 Gigahertz, the propagation circle of coverage would be even smaller. 

To overcome these limits, in rural areas it would seem to make sense to deploy radios close to customer premises mounted on existing utility poles or new dedicated poles. But the tradeoff there would be those radios would need fiber to feed them. At which the economics would point to connecting the premises to fiber directly as the most cost-effective approach. 

States struggle to devise solid, actionable plans to achieve universal service

“Maine's existing internet infrastructure is largely a patchwork of individual private networks. The infrastructure behind these networks was generally not created to support the goal of universal broadband access throughout the state. While public and private investments over the last decade have added essential infrastructure to support this goal, the job is not done, and too many areas of Maine remain unserved.”

That excerpt from Maine’s Five Year Action Plan required by the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program describes every American state and territory, encapsulating the fundamental problem of the nation’s highly fragmented advanced telecommunications infrastructure that falls short of universal service, leaving many without quality, affordable connectivity.

Consistent with current federal policy of subsidiarity leaving it to the states to establish universal service like that for landline telephone service, BEAD requires states to devise plans to provide universal service reaching every doorstep. The Five Year Action Plans must include timelines, cost estimates and funding sources to bring it about, with a subsidy funding preference for fiber to the premises (FTTP) delivery infrastructure.

The NTIA characterizes the $43 billion in BEAD subsidies largely targeted to exurban and rural areas deemed unworthy of investment by investor owned providers as a once in a generation initiative. “We are writing the next chapter of the great American infrastructure story,” said BEAD Program Director Evan Feinman. “But this is going to require a true whole-of-society effort” involving federal and state officials, local governments, providers, co-operatives, and communities.

However, a review of BEAD Five Year Action Plans filed with the NTIA as of this week shows states are struggling to devise solid, actionable plans to achieve universal service. Most are largely aspirational. Several note that BEAD subsidies alone cannot fully fund universal service along with an alphabet soup of other federal and state grant programs put in place over the past few decades. That’s implicit in BEAD program guidance that require the plans to include federal, state, and local funding sources to attain it. But nearly all the plans don’t identify state or other local funding sources to address the deficit in federal funding. Others point to the continued use of FTTP stopgaps such as fixed wireless and satellite service along with the expectation investor owned providers will build out their infrastructures.

The state plans generally point to a prolongation of the historical pattern of incremental construction that will leave universal service out of reach for the foreseeable despite the state plans stating advanced telecommunications infrastructure will reach all residents by the end of the decade. One off grant funding has encouraged the incrementalism since it only nibbles away at the infrastructure deficits rather than eliminating them, producing what analyst Karl Bode aptly describes as “half built,” incomplete infrastructure.

A single, long term, low interest federal loan program for lower cost government owned and consumer utility cooperative-owed FTTP infrastructure is a better option than the current confusing mix of grant programs. It would have program integrity built in via loan underwriting standards and collateralized network assets to protect public dollars – dollars that would go further with these lower cost deployers and attain universal service more rapidly since they don’t bear the burden of generating profits and dividends for investors as well as income taxes.

In sum, the state Five Year Plans reflect no true “uni” in the BEAD universal service initiative: one single guiding program policy principle and sufficient dedication of resources to close the infrastructure gaps and bring about universal service.

Will Gigapower truly operate as open access network?

A cynical view of the investor owned open access fiber to the premises (FTTP) Gigapower build – AT&T’s joint venture with BlackRock – might hold that AT&T will end up as the sole service layer provider. AT&T will initially serve as the “anchor tenant” ISP riding on Gigapower glass.

That view is justified by the history of the unbundling of AT&T’s copper distribution network assets as well as those of other telephone companies mandated by the 1996 Telecommunications Act. The Act required the telcos to providing access to ISPs to compete with its own services. Since these competitive local exchange carriers (CLECs) were all selling the same thing – dialup access and later DSL over platforms like AOL, CompuServe and Netscape – it was difficult to for the CLECs to differentiate their service offerings from those of other ISPs and the incumbent telcos. That prompted a race to the bottom price war that AT&T and other telcos with their deep coffers would ultimately win, being able to hold out for the duration. In addition, a 2006 U.S. Court of Appeals decision held incumbent telcos were not obliged to provide CLECs access to fiber to the premises (FTTP) that was just beginning to replace the legacy copper in limited builds.

However, if AT&T were to monopolize Gigapower as the sole and not just the anchor tenant, the business model wouldn’t benefit from lease revenue paid by other ISPs leasing access to network assets Gigapower expects to defray capital and operating costs. But a cynical take there might be Gigapower will operate as a truly open access network for only the first seven to 10 years to help it finance capex and opex costs for fiber delivery infrastructure outside of its current service area that it couldn’t otherwise justify spending on its own. After which it would become exclusively AT&T’s with the Gigapower terminating and non renewing completing ISP service provider contracts.

More patient capital meets burgeoning demand for fiber

A shift is underway in capital investment in fiber to the premises (FTTP) advanced telecommunications infrastructure. In the United States, FTTP investment has lagged for decades due to the capital investment limitations of investor owned telephone companies. They are constrained by overleveraged balance sheets and investor expectations of traditionally high shareholder dividends that necessitate rapid returns on any capital investment. Those limitations became apparent in the late 2000s when Verizon faced a shareholder revolt, forcing it to scale back plans to modernize its legacy copper outside plant to FTTP. It later moved into fixed wireless that offered lower capital costs. Infrastructure investment is a long term proposition that requires patient capital not found in these companies.

Now AT&T is attempting a workaround to access more patient capital with its Gigapower joint venture with investment firm BlackRock to invest in open access FTTP delivery infrastructure outside of its service area. That patient capital includes state and local pension funds, sovereign wealth funds, and family endowments, Adam Walz, told a panel presentation this week by Broadband Breakfast. Walz is managing director of BlackRock’s Global Infrastructure Fund focused on investments in digital infrastructure opportunities across fiber networks, data centers, and wireless infrastructure.

Notably, other builders of open access FTTP also rely on patient capital including UTOPIA Fiber, owned and financially backed by a 20 Utah municipalities and privately owned SiFi Networks, funded by European pension fund APG. However, Gigapower CEO and retired AT&T executive Bill Hogg, said these players have “nowhere near the scale we will have,” claiming Gigapower will be “much larger than any other provider in the space. The scale at which we are going to operate will be a differentiator in the U.S. marketplace.”

But patient capital doesn’t mean it isn’t concerned about maximizing returns. All these players are targeting more densely developed areas most likely to produce strong ROI and ARPU, capitalizing on the strong demand for FTTP delivered services. Had U.S. telecom policymakers made more erudite decisions decades ago, fiber would have reached nearly all American doorsteps by 2010 at the latest instead of the estimated 40 percent currently. That gives Gigapower lots of runway as well as first mover advantage: first with fiber owns the location for the long term. “We’ve found plenty of attractive locations to build fiber where there’s no fiber today,” Hogg said, pointing to Las Vegas (Google Fiber is looking at that metro as it enters Nevada) and locales in Florida and Arizona. 

The concentration on densely developed areas will require patient capital investment by governments and consumer utility cooperatives to serve less developed areas, particularly those at the exurban edges of metro areas that have seen in migration by knowledge workers as knowledge work decentralizes out of urban cores.

Sohn questions key policy premise of 1996 Telecommunications Act

Gigi Sohn, executive director of the American Association of Public Broadband, made a profound observation on U.S. telecommunications policy in a podcast interview this week with Mike Masnick of TechDirt at (around 47:50)

 “The facilities-based competition when you have cable competing against telecom competing against wireless, maybe wasn’t the best idea."

Sohn is essentially -- and astutely-- questioning a fundamental policy premise of the 1996 Telecommunications Act and once held by her former boss, Federal Communications Commission Chairman Tom Wheeler: that facilities-based competition would unleash market forces that would benefit all Americans by bringing them affordable Internet access. 

This is also referred to as "technological neutrality" in the context of subsidizing advanced telecommunications infrastructure. The assumption baked into law -- along with opening up the legacy metallic copper telephone delivery plant to Internet Service Providers -- is market competition would benefit all Americans regardless of their location by bringing them access to the then-emerging form of digital telecommunications. 

It was incorrect largely because fiber optic delivery technology existed in the 1990s that was technologically capable of modernizing the legacy copper and cable coax connections to homes, businesses and institutions. No technology has emerged since that's superior to fiber when it comes to delivering high quality, reliable digital, voice and video services.

Another fundamental flaw in this policy was seeing connectivity as a market commodity of "broadband bandwidth" instead of a natural monopoly that utilities are and where market forces don't operate to benefit buyers and instead strongly favor sellers. A single fiber connection would suffice; fiber to the premises (FTTP) should have been designated as the national telecom delivery infrastructure standard. There is no need for more than one fiber connection or other type of technologies for premise service.

California, Vermont on the right path prioritizing FTTP

The California Public Utilities Commission (CPUC) presented its draft 5-year plan to connect the state’s unserved with broadband using the $1.86 billion BEAD funding it received, and at the same time warned the total $4 billion available in state and federal funding won't be enough.

Critics of “the fiber-above all” approach have called the CPUC’s concerns “unsurprising.”

“The fiber lobby has done a great job of pitching itself as kind of the end-all, be-all, and it does have a lot of great case study for it. But there are other opportunities that can come along,” said the Wireless Internet Service Provider Association’s (WISPA) state advocacy manager for California, Steve Schwerbel.

Colorado BEAD plan is ‘agnostic’ to fiber versus fixed wireless

Wireless Internet Service Providers (WISPs) have been a valuable stopgap for widespread deficits in landline advanced telecommunications infrastructure, first coming on the scene about two decades ago when telephone companies instead of fiber deployed digital subscriber line (DSL) technology that couldn't reach many customer locations over their aging copper delivery infrastructure.

But federal policy should regard them as just that and not subsidize them going forward, particularly in any major federal infrastructure improvement initiative such as the Infrastructure Investment and Jobs Act (IIJA).

They grapple with a difficult business model in which they must purchase landline backhaul at high cost or use microwave. That forces them to offer service at high monthly rates in limited areas in order to profitably operate, hindering affordable access to even what the federal government deems basic access. They also face technical challenges of terrain and foliage growth that blocks wireless signals from reliably reaching end user premises, limiting their potential customer base and promoting churn off. And most importantly, limitations on bandwidth imposed by radio spectrum physics that does not allow them to feasibly accommodate growing bandwidth demand.

California and other states such as Vermont are demonstrating the correct, forward looking approach to set fiber to the premises (FTTP) as the standard for advanced telecommunications delivery infrastructure.

Lacking goal of universal fiber, incrementalism dominates

Billions of dollars in recently announced federal grants have been called a once-in-a-generation opportunity for internet service in rural America. But the same prediction was made about other plans, and some of those fell far short of their goals.

Billions in rural internet grants could be a once-in-a generation opportunity

That’s because these are incremental and not wholistic ongoing initiatives to bring fiber to every doorstep that was connected to copper telephone lines in the previous century. They will inevitably come up short with limited timelines and budgets and “technical neutrality” favoring substandard stopgaps when this isn’t the clearly expressed goal.

Wisconsin has roughly 246,000 locations lacking access to even minimum broadband speeds of 25 megabit per second downloads and 3 Mbps uploads, and another 217,000 without access to 100 Mbps downloads and 20 Mbps uploads, adequate speeds for many households, according to the state Public Service Commission. The locations are spread across the entire state, said PSC Chairwoman Rebecca Cameron Valcq.

Once again, incrementalism is the reason. Investor-owned telephone and cable companies extend service to discrete, cherry picked neighborhoods where they expect a relatively rapid return on investment and that generate sufficient revenues to be profitable. The resulting infrastructure deficiencies cannot be neatly categorized into broad residential settlement patterns e.g., urban, suburban, exurban, rural. As Karl Bode described the issue, it’s infrastructure that is only half completed, leaving many addresses without fiber connections:

I’ve spent the better part of a life writing about how federal and state telecom regulators and politicians throw billions at companies for fiber networks that then somehow, repeatedly and quite mysteriously, never arrive. It happens over and over and over again, with only fleeting penalties for big ISPs that miss meaningful deployment goals.

California BEAD Five Year Action Plan: Substantially greater funding needed for universal FTTP.

California is unable to assure the timely construction of universal fiber to the premises (FTTP) infrastructure – estimated to cost $9.78 billion including infrastructure hardening in areas with high wildfire risk – because less than half that amount is available as federal and state subsidy funding.

That’s according to the state’s draft Five Year Action Plan required by the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program. BEAD requires states to file “a comprehensive, high-level plan for providing reliable, affordable, high-speed internet service throughout the (state) including the estimated timeline and cost for universal service.” Additionally, the plans must include an estimated timeline and cost for universal service and planned utilization of federal, state, and local funding sources to pay for it.

“This estimate assumes no re-use of existing infrastructure (e.g., poles, conduit, manholes, etc.) in the total investment,” the draft plan prepared by the California Public Utilities Commission states. “The timeline for universal service with fiber-to-the-premises would extend beyond the BEAD funding timeline and require additional federal and state funding.”

The draft plan cautions given the Golden State’s large size, it may be challenging for BEAD-funded subgrantees to deploy infrastructure within the required five-year timeline. Additionally, “the CPUC recognizes that developing sufficient capacity may be a challenge for some potential subgrantees, including small ISPs and localities and other entities” as well as permitting challenges.

Oregon’s draft Five Year Action Plan similarly concluded that state’s BEAD funding allocation would not sufficiently subsidize universal FTTP. Like Oregon, California’s draft plan calls for the possible use of alternatives funded by the state’s $1.86 billion BEAD allocation. Those deemed “reliable” by the NTIA include hybrid fiber-coaxial cable, digital subscriber line (DSL) technology and terrestrial fixed wireless utilizing entirely licensed spectrum or using a hybrid of licensed and unlicensed spectrum.