AT&T apparently hoping for BEAD subsidies to replace DSL over copper with FTTP

AT&T is apparently hoping for BEAD subsidies to replace its legacy DSL services delivered over twisted pair copper with fiber to the premise (FTTP). States should take a flexible approach in subgranting the subsidies allocated by the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program to afford “ISPs flexibility to identify project areas to include a mix of unserved and underserved locations will allow for the most efficient use of limited funds,” suggested Erin Scarborough, president, Broadband and Connectivity Initiatives in an April blog post. In a blog post this week, Scarborough stated that would allow providers to “identify project areas that combine unserved and underserved locations to enable the most effective and efficient deployments.” For AT&T, those would be locations served by legacy ADSL and VDSL, respectively.

That would comport with the BEAD program rules spelled out in the NTIA’s Notice of Funding Opportunity (NOFO). It permits states to subgrant up to 75 percent of construction costs to builds “constituting a single unserved or underserved broadband-serviceable location, or a grouping of broadband-serviceable locations in which not less than 80 percent of broadband-serviceable locations served by the project are unserved locations or underserved locations.” The NOFO defines “unserved” locations as those not marketed connectivity with throughput of less than 25/3 Mbps and latency exceeding 100ms. “Underserved” locations are those not offered at least 100/20 Mbps. That would encompass premises served by AT&T’s legacy DSL offerings delivered over obsolete twisted pair copper initially designed to support voice telephone service.

Whether states will have sufficient BEAD funding to subgrant subsidies for underserved locations remains to be seen after the NTIA announces state allocations next week. The BEAD NOFO requires states to award subgrants “that ensures the deployment of service to all unserved locations within the Eligible Entity’s jurisdiction.” These unserved locations are likely to be in lower density areas lacking wireline connections, requiring higher capital construction costs and subsidization.

IIJA provides NTIA opportunity to route around flawed "broadband map," use infrastructure-based standard for subsidization.

Extending the process to challenge the U.S. Federal Communications Commission’s data on the availability of broadband Internet access service proposed in recently introduced federal legislation won’t ultimately lead to complete and accurate data for the allocation of infrastructure subsidies to the states. The reason as Doug Dawson details in a blog post is the data is based on marketing claims of providers of where they provide service.

ISPs are pretty much free to claim whatever they want. While there has been a lot of work done to challenge the fabric and the location of possible customers – it’s a lot harder to challenge the coverage claims of specific ISPs. A true challenge would require many millions of individual challenges about the broadband that is available at each home.

While that’s consistent with the nation’s current market-based regulatory paradigm for advanced telecommunications, it can’t possibly be complete and accurate. Nor is it intended to be. The purpose of marketing is to create brand awareness and attract potential customers, not for planning the deployment of critical infrastructure.

Fortunately, the Infrastructure Investment and Jobs Act (IIJA) provides a workaround to the fool’s errand of “broadband mapping” based on marketing claims. It does so with a flexible definition of “broadband” that would allow it to be defined in administrative versus statutory law. Section 60102(a)(2)(B) of the IIJA defines it by reference to 47 Code of Federal Regulations 8.1(b):

Broadband internet access service is a mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence or that is used to evade the protections set forth in this part.

or any successor regulation. (Emphasis added)

Although the context clearly refers to the FCC, there is nothing in the statutory language that limits the promulgation of a successor regulation to the FCC. The National Telecommunications and Information Administration (NTIA), which has prioritized fiber to the premises (FTTP) delivery infrastructure for subsidization in its Broadband Equity, Access and Deployment (BEAD) program, could promulgate its own regulation citing this authority in the IIJA. 

Such a rulemaking could use a fiber infrastructure-based subsidization eligibility standard, consistent with the IIJA’s intent to modernize and expand critical infrastructure in the 21st century. That could include a different challenge process based on the rebuttable presumption that FTTP doesn’t exist -- very likely in what the IIJA identifies as subsidy eligible areas with poor existing service. Those that would challenge FTTP subsidies would be required to show that it does and passes all addresses in their service areas with an exception for extremely remote locations. 

As Dawson writes, "Grant funding could have been done in other ways that didn’t rely on the maps. I don’t think it’s going to make much difference if we delay six months, a year, or four years – the maps are going to remain consistently inconsistent." 

Investor-owned providers make FTTP “land grab.”

Just a few years ago, it would have been hard to imagine investor owned legacy telephone and cable companies would consider a major push into fiber to the premise (FTTP) due to their extractive business model constraints averse to major capital expenditures. That tends to favor fiber builds in high end condominiums and select “fiberhoods” as a luxury amenity.

A recent roundup in Broadband Communities paints a picture of regime change in what an economist quoted in the article calls a fiber “land grab” even in historically less densely developed areas where ROI was too far out to justify investment in FTTP. Cable providers are abandoning coaxial cable and migrating to FTTP. Overbuilding incumbents with fiber – also previously unheard of – is occurring. The overall impression from the article is FTTP is busting out everywhere, albeit a generation late relative to the demand for Internet-based services. (Separately, even private equity -- impatient capital hardly a source for long term capital investment - is getting in on the fiber real estate rush, looking for a future profitable flip.)

What’s driving the change? A couple of likely factors. There’s first mover advantage: whichever provider gets fiber to the prem first gets a very sticky customer thanks to the terminating monopoly characteristic of these connections. It’s not as though they have multiple fiber connections and can chose among them. Nor is it economically feasible to provide them. Legacy providers may also be lengthening their investment timescale away from the traditional internal ROI standard in order to gain first mover advantage, knowing they’ll own the customer over the long term and the opportunity to sell services to them.

Second, to foster an impression of progress and momentum after years of minimal investment in FTTP fueling public policy discussion of the nation’s advanced telecommunications infrastructure deficiencies displayed in stark relief during the public health restrictions of the 2020 pandemic outbreak. Investor-owned providers probably know that they don’t appear to be making rapid progress to remedy them, support for public and consumer utility coop owned FTTP and appropriations to help fund them will grow despite plying elected officials with campaign contributions. That could also spark proposals to regulate commercial internet delivered services as common carrier public utilities. That would bring with it requirements to honor customer requests for FTTP connections and state rate regulation that are anathema to investor-owned providers.

“Business model agnostic” rating urged by legacy incumbent telco for BEAD subgrants

Investor-owned providers, anxious public policymakers might adopt a fiber to the premises (FTTP) infrastructure standard for advanced telecommunications infrastructure that would complicate their business models, for years urged public policymakers to instead embrace a “technology neutral” standard.

Policymakers at the state level who will distribute $42.5 billion in federal grant subsidies appropriated under the Infrastructure Investment and Jobs Act (IIJA) are now hearing a similar sounding plea – this time aimed at dissuading them from favoring publicly owned FTTP once the federal dollars arrive. Lumen Technologies is urging Oregon to adopt a “Business Model Agnostic” standard when evaluating subcontract awards to connect premises where the vast majority – 80 percent – are not offered throughput meeting what the Federal Communications Commission in 2015 deemed “broadband” or those deemed “underserved” and not offered throughput of at least 100Mbps for downloads and 20Mbps uploads.

In a PowerPoint presentation at the March 30 meeting of Oregon’s Broadband Advisory Council, Lumen cited an open access fiber build by the Kitsap County (Washington) Public Utility District as an example of the risk of not being business model agnostic that shows higher monthly and service drop fees than Lumen charges for its vertically integrated (connection and services) “Quantum” branded FTTP. Jim Farr, manager of Lumen’s Mass Markets Grant Team, also urged Oregon officials to score subgrant applications to favor those having low per premise passed cost to maximize the number of premises connected, which would likely leave less densely developed neighborhoods unconnected.

Lumen’s motivation is clearly to own the customer. Whoever owns the delivery infrastructure owns the customer in a natural monopoly market that characterizes utilities. The problem with that is it turns access to advanced telecommunications into a market commodity, with FTTP regarded as a premium product offering in highly segmented markets where there are sufficient premises and households most likely to generate the fastest return on investment and highest revenues.

That’s contrary to current federal policy expressed by the Biden administration to connect all Americans, highlighted this week by Commerce Secretary Gina Raimondo at an interview with Yahoo Finance. "The reality is, 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,” Raimondo said.

There is another way to get there besides regarding advanced telecommunications as a binary choice between public and private capital. But in order to do so, U.S. telecom policy will have to shift away from the dominant private sector “own the customer” business model in which it has been mired for decades and is the major impediment to near universal access to affordable FTTP connectivity.

That means public (or consumer cooperative) ownership of the infrastructure and various levels of involvement of private capital to design, build, operate and deliver services over it. This eliminates the winner take all dynamic in which investor-owned providers must ensure their shareholders come out as winners. Consequently, the public has been losing for decades as shown by continuing issues with access and affordability. That calls for a more comprehensive, holistic policy instead of doling out one off grants as consolation prizes to the public when the public interest inevitably comes in second place.

Oregon audit reinforces BEAD direction to states on universal service

As states move to the forefront to provide affordable access to advanced telecommunications with the direction of the federal government’s Broadband Equity, Access and Deployment (BEAD) program to develop Five Year Action Plans for universal service, a recent State of Oregon audit report offers them some critical guidance.

It meshes well with the National Telecommunications and Information Administration’s use of the word “action” in the requirement states develop strategies to ensure universal service to all their residents in their Five-Year Action Plans. Those strategies must be actionable roadmaps and not serve as aspirational wish lists that gather dust after they’re issued. From the Oregon Audits Division report:

The (Oregon) Broadband Office published a strategic plan in January of 2020, prior to the COVID-19 pandemic. The plan is high-level and notes: “This plan is aspirational and designed to carry out the mission and directives charged to the Broadband Office. The scope of activities the Broadband Office will ultimately undertake will be enabled, or limited, by the resources available.”

The plan does not contain specific and realistic approaches, strategies, or appropriate KPMs for how these aspirations will be measured, reported, and achieved; nor does it identify what resources would be needed to undertake the scope of activities.

The biggest reason “broadband plans” over the past 15 to 20 years have been aspirational is they were conditioned on funding. That’s to be expected for a bet on the come financing strategy that relies on one off government grants. An action plan by contrast has a clearly identified funding source to ensure universal service and not one based on the hope that financing will someday become available.

The resulting lack of progress naturally angers people who’ve had their hopes for modern fiber connections to replace legacy metallic ones dashed for years amid piecemeal, incremental progress that never quite seems to reach them where they live and work despite promises from their elected representatives at all levels of government. A solid plan can help restore their trust in public officials to get the job done where the private market cannot.

The Oregon audit notes “Oregon’s broadband public policy needs to be focused on the future, be more aggressive, be more financially supportive, be more specific, and have a renewed sense of urgency.” (Emphasis added)

Being more financially supportive means Oregon (as well as other states) cannot continue to rely on one off, highly restrictive government grants to attain universal service. They need to develop ongoing organic funding for the both the construction and reliable operation of fiber to the premise (FTTP) advanced telecommunications infrastructure to every doorstep. Grants such as those available through BEAD can only do part of the job – implicit in BEAD’s Five-Year Action Plan requirement.

Private activity bonds could fund regional open access fiber networks

Nearly all U.S. airports are owned by state or local governments, mandated by the federal government to be as self-sustaining as possible, and thus receive little or no direct taxpayer support, according to the Airports Council International-North America (ACI-NA), an industry association representing local, regional and state governing bodies that own and operate commercial airports in the United States and Canada.

Over the past decade, according to the ACA-NA website, about 60 percent of bonds issued to finance airport capital projects were issued as private activity bonds, a type of municipal bond that is issued to finance a facility that serves a public purpose for the benefit of a private user – in this case airline companies. “Private activity bonds used for airport construction and renovation—are the most cost-efficient form of infrastructure financing available today,” the ACA-NA states.

Section 80401 of the Infrastructure Investment and Jobs Act (IIJA) amended Section 142(a) of the Internal Revenue Code of 1986 to specifically include advanced telecommunications infrastructure as an eligible use of private activity bond proceeds. Specifically, for “qualified broadband projects.”

On its face, the eligibility definition is more generous than the IIJA’s Broadband Equity, Access and Deployment (BEAD) program providing grant funding of up to 75 percent of infrastructure deployment costs. Basic BEAD eligibility is limited to builds where at least 80 percent of serviceable addresses lack access to infrastructure providing throughput of at least 20Mbps for downloads and 3Mbps for uploads with latency below 100ms. There is no definition of the minimum number of addresses that must be included. Projects could be as small as a handful of addresses or even a single address.

Eligibility for private activity bond funding is available for projects in one or more census block groups in which more than 50 percent of residential households do not have access to fixed, terrestrial broadband service which delivers at least 25Mbps downstream and at least 3Mbps upstream. Funded projects must provide access with at least 100Mbps for downloads and 20Mbps megabits for second for uploads.

That appears looser than the basic BEAD “unserved” eligibility standard of at least 80 percent of serviceable addresses unserved. But then it gets tighter with an additional qualification, unfortunately creating ambiguity. Private activity bond funding is available “only if at least 90 percent of the locations provided such access under the project are locations where, before the project, a broadband service provider— (i) did not provide service, or (ii) did not provide service meeting the minimum speed requirements.”

In another unfavorable provision, the IIJA amendment to the Internal Revenue Code opens this financing mechanism to potential incumbent gaming and stalling, further requiring existing providers be notified of a planned project and its intended scope and given at least 90 days to provide information on their ability to deploy, manage, and maintain a network capable of providing access at gigabit speeds – essentially fiber to the premises (FTTP).

The aeronautical analogy easily translates to publicly owned regional open access fiber network such as the Utah Telecommunication Open Infrastructure Agency (UTOPIA). Kimberly McKinley, UTOPIA’s chief marketing officer, described its partnership with an open access FTTP network rolling out in Bozeman, Montana as similar to city or state construction financing for airports, according to a recent article in the Bozeman Daily Chronicle.

UTOPIA is also partnering with the Golden State Connect Authority, a joint powers authority of 40 less densely developed California counties to build publicly owned open access FTTP. Its chair, Calaveras County Supervisor Jack Garamendi, compared it to a regional airport authority in a 2022 interview with the Electronic Frontier Foundation.

States face major challenge to develop plans for universal FTTP access

Given America’s highly fragmented, piecemeal deployment of fiber to the premises (FTTP) over the past few decades that continues in the current one, states are confronting a significant challenge to develop plans to ensure it reaches most every doorstep.

Last year, all states and territories received planning grants under the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program – part of the Infrastructure Investment and Jobs Act (IIJA).

That funding requires states to develop Five-Year Action Plans in 2023 that will inform their requests for $42.5 billion in grants to subsidize advanced telecommunications infrastructure, with priority afforded to FTTP. The plans must include “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.” 

This comes amid a rapid increase in FTTP deployment that some have likened to a land grab in order to obtain first mover market advantage. Conditions are ripe. FTTP is a virtually unregulated natural monopoly with strong demand, present and future. That makes it attractive to investor-owned companies where those factors combined with sufficiently high development density and household incomes support the business case. Private equity has even gotten in on gold rush, hoping to flip fiber assets in the future to large providers looking to expand their footprints without investing their own capital by rolling up smaller players.

Local governments that have for years heard complaints from residents and businesses about poor Internet access that grew louder during the public health restrictions of the pandemic that turned homes into places to work and study are handing over their federal pandemic relief dollars to incumbent providers to build FTTP.

Some local governments are building their own. Others have banded together to form regional telecommunications authorities to deploy FTTP where the business case is weak for investor owned providers. In rural areas, electric utility cooperatives are getting into the telecommunications business with FTTP.

Since the U.S. regards Internet protocol (IP) telecommunications as an information service and not a utility (that could change in California under proposed legislation), none of these providers are required to extend FTTP to any home or business that requests service. The result is disparate deployment in discrete areas, leaving a lot of holes in the FTTP Swiss cheese.

Consequently, states face significant challenges to attain a goal of universal FTTP access and developing a meaningful plan that closes the gaps with insufficient market or regulatory incentive for the various aforementioned providers to fill them amid a tight labor market for FTTP technicians and installers.

The $42.5 billion in grants to subsidize advanced telecommunications infrastructure appropriated in the IIJA is intended to help achieve that under the NTIA’s Internet for All initiative, allowing states to contract with providers to build infrastructure and cover up to 75 percent of the capital cost of deployment.

However, as currently structured under the IIJA, those subsidies aren’t targeted to underwriting FTTP. Much of it could end up being requested by cable companies to incrementally edge out their existing coax footprints since the NTIA rules on BEAD funding allow awards for projects of a small number of serviceable addresses and even a single address. Moreover, the NTIA’s BEAD eligibility requirements bar subsidization where a mobile wireless provider using licensed spectrum also advertises fixed premise service meeting minimum throughput standards.

Fiber flippers: Private equity investment in FTTP

For market-based providers, a fundamental reason why the modernization of legacy copper telecommunications delivery infrastructure to fiber has been slow is lack of patient investment capital. Shareholders of the dominant telephone and cable companies that operate as rent seeking natural monopolies are reluctant to upgrade and build out fiber in the service territories of these companies. These are risk averse, impatient investors who expect a quick return on capital investment within five years or so. They fear significant capex will erode their historically fat shareholder dividends that are a feature of these rent seeking natural monopolies. That short investment timeline is poorly aligned with investing in infrastructure with its large upfront costs and long wait for ROI, notwithstanding the lower opex costs of fiber modernization from legacy metallic plant.

In a similar vein, one would not expect relatively impatient investment capital in the form private equity and asset management firms would find investing in fiber to the premise (FTTP) infrastructure appealing. But it’s ironically occurring.

A prominent example is AT&T’s recently announced joint venture with the asset management firm Blackrock, Gigapower. Blackrock will take some of the capex burden off AT&T shareholders to allow the company to increase fiber deployments including in areas not within AT&T’s traditional service territory. Here, Blackrock is effectively serving as a bridge capital provider, stumping up capex dollars that AT&T would be reluctant to make out of its own funds in order to boost revenues. While the terms and conditions of the deal are not public, Blackrock would likely sell its stake to AT&T after several years, with AT&T paying a premium on that investment in order to capture more FTTP customers during that period than it might otherwise on its own.

Although Gigapower is nominally structured with an open access wholesale business model, AT&T will likely end up the sole service provider consistent with its current business model that recognizes owning the fiber connection to the customer means owning the customer.

Another example is playing out in the WISP space. Private investment company GI Partners recently acquired Rise Broadband with an eye on fibering its fixed wireless customer base. “GI Partners is committing meaningful new capital to improve customer experience and accelerate Rise Broadband’s rollout of fiber-to-the-home services for rural American homes and businesses,” GI Partners said in a news release this week announcing the deal. “Rise’s existing network infrastructure is uniquely positioned to execute a fiber expansion effort that will provide rural communities with next generation broadband service.” Investing in WISPs appears logical in that by definition, residential WISP customers are not passed by fiber, thus offering fiber deployers first mover advantage. That new fiber could in turn be flipped to a larger provider looking to roll up a larger customer base.

In July 2022, private equity firm Oak Hill Capital announced that it formed Omni Fiber “to bring to market a new option for high-speed Internet service in small and mid-sized markets in the Midwest that have historically been underserved by the large phone and cable companies.” The firm said its $250 million investment will “bring state-of-the-art fiber Internet, TV, and phone services to homes and businesses in communities across the Midwest.”

While some of these private FTTP investment deals will likely look to states for a share of the $43.45 billion appropriated as grants to the states in the Infrastructure Investment and Jobs Act of 2021 (IIJA) for advanced telecommunications infrastructure, Oak Hill said Omni Fiber “will not need to rely on grants or subsidies from federal, state, or local governments to build its network.”

West Des Moines, Iowa offers model for states, regions to scale up open access fiber telecom infrastructure

To ensure the timely modernization of legacy metallic telecommunications delivery infrastructure to fiber to the premise (FTTP) infrastructure at significant scale, new models for its construction and operation are needed. Investor-owned providers using vertically integrated, closed access networks tend to restrict capital investment to densely populated areas compatible with their business models that demand a rapid return on investment.

Subsidies of up to 75 percent of construction costs may be available in the near term through the federal Infrastructure Investment and Jobs Act (IIJA) of 2021. But eligibility restrictions on the funding will likely result in it being allocated only in the most remote and insular parts of the country since those restrictions are designed to protect the markets of incumbent providers that have a presence outside of those areas. That will leave it to the states to come up with new approaches.

One promising appearing model is emerging in West Des Moines, Iowa. The municipality finances and builds the basic supporting infrastructure – in this case buried conduit. But it could also be aerial fiber on metal half height poles placed in existing rights of way, for example. A private sector network operator – here Google Fiber – installs the telecommunications infrastructure: the fiber, network electronics and premise connections. It shares part of its end user revenues with the local government to finance bond debt incurred by the government to construct the supporting infrastructure. Since it is operated as an open access network, other providers can pay a fee to access it and the end users it serves.

This model for the construction and operation is particularly well suited to exurban and small town America that like West Des Moines are only partially served by legacy providers using metallic infrastructure.

To make it rapidly scale to meet burgeoning demand for connectivity, this model provides a framework for a statewide or regional scope – for example local governments forming a regional telecommunications authority like California’s Golden State Connect Authority. Like roads and highways and airports -- the Golden State Connect Authority regards advanced telecommunications infrastructure similar to regional airports – very substantial financing capacity is needed beyond that which individual local governments can provide. In addition, the limited, one off grant subsidies that have been the predominant financing model don’t provide funding sufficient for the task at hand.

U.S. telecom infrastructure crisis natural outcome of nation’s failure to address foundational questions

America’s advanced telecom policy failure stems from the failure to address two fundamental questions:

1/ How much would it accurately cost to bring fiber to most every American doorstep?

2/ What are the optimal roles of the public and private sectors in financing, building and operating this critical infrastructure -- and constructing it in the most expeditious manner given only about one third of homes have fiber connections?

The failure to honestly ask and answer these questions and make clear policy choices based on the answers has led to the default market-based, incremental, ad hoc and highly granular efforts dating to the mid-1990s. That has led to using throughput as a metric of progress vs. replacing legacy metallic telephone and cable delivery infrastructure with fiber to the premise (FTTP) and what scholars like Christopher Ali describe as “The Politics of Good Enough” and barely adequate infrastructure prone to near term obsolescence. While Ali frames his argument in binary terms of urban vs. rural infrastructure similar to the deployment of electric power distribution infrastructure in the early 20th century, it extends to other geographic settlement areas due to highly granular, incremental market driven deployment based on household density and demographics and other factors.

The failure to address these overarching questions and make solid policy decisions has in its place produced sloganeering like “Internet for All” -- meaningless and merely aspirational without a realistic plan to get the nation there -- and getting lost in the weeds.

A glaring example is “broadband mapping” and the controversy surrounding the FCC’s related efforts that will determine the allocation of advanced telecommunications infrastructure subsidies appropriated in the Infrastructure Investment and Jobs Act of 2021. “Broadband mapping” encapsulates the previously mentioned flawed policy of defining progress based on throughput vs. infrastructure modernization. Even more fundamentally, the failure to determine the optimal roles of the public and private sectors, with mapping as protectionist response by investor-owned providers seeking to protect their interests in the meantime.

Third front opens in advanced telecommunications infrastructure subsidy wars

A third battlefront is opening between shareholders of big telephone and cable companies and the broader public interest over rules governing federal and state subsidies to boost access to affordable and reliable advanced telecommunications. It’s over so-called “technological neutrality” and specifically fiber to the premise (FTTP) versus wireless distribution infrastructure.

The other two likely points of contention are over the accuracy of the Federal Communications Commission’s forthcoming “broadband maps” to determine how much funding states will receive through the federal Infrastructure Bill’s Broadband Equity, Access, and Deployment (BEAD) Program (several states lack confidence in any federal maps, preferring their own maps that could them at odds with the federal government) and whether proposed BEAD infrastructure projects proposed by public and nonprofit fiber to the premise (FTTP) providers include sufficient “unserved” addresses not advertised reliable service with throughput of at least 20 Mbps down and 3 Mbps up.

The big investor owned, vertically integrated providers want the subsidies to go toward any technology that’s capable of meeting minimum throughput (100/20) and reliability. But at least some policymakers argue the best use of public dollars is to invest them in more durable FTTP infrastructure given its 30-50 year or longer lifespan and headroom to accommodate the well-established trend of increasingly bandwidth hungry end user device applications. They include the National Telecommunications and Information Administration, the federal agency administering the BEAD state grant funds and the California Public Utilities Commission (CPUC) at the state level.

On April 21, 2022, the CPUC issued a final decision adopting staff proposed rules for its Federal Funding (capital subsidy) Account (FFA) based on the grant rules promulgated by the U.S. Treasury Department for State and Local Government Capital Projects Fund contained in the American Rescue Plan Act (ARPA). For advanced telecommunications infrastructure, those rules limit funding eligibility to “reliable wireline broadband infrastructure.”

Similarly, the CPUC FFA decision favors FTTP, noting “fiber optic infrastructure is scalable and enables the next generation of application solutions for all communities.” That displeases large incumbent providers that regard fixed wireless as a “firewall” to protect their nominal service territories from government owned and nonprofit providers that would use the federal subsidies for their own fiber builds, according to Steve Blum of Tellus Venture Associates, a consultant to California cities and counties.

Large incumbents including AT&T, Consolidated Communications, Frontier and trade associations CTIA and US Telecom - the Broadband Association are backing an urgency measure pending in the California Legislature to counter the CPUC decision, expressly authorizing wireless internet service providers to receive CPUC infrastructure subsidy funding. It's opposed by an association of 39 California counties and the Electronic Frontier Foundation.

Current California law, Public Utilities Code Section 281(f)(1) requires the CPUC award infrastructure subsidies on a “technology-neutral basis, taking into account the useful economic life of capital investments, and including both wireline and wireless technology.” The CPUC FFA decision incentivizes fiber given its longer lifespan compared to fixed wireless infrastructure. “Our determination of what wireline technologies offer reliable service is consistent with the Final (U.S. Treasury Capital Projects) Rule, which found that these legacy technologies typically lag on speeds, latency, and other factors, as compared to more modern technologies like fiber," the CPUC decision states.

U.S. telecom subsidy policy reliant on one off grants for "broadband" bandwidth without universal service mandate

Baltimore Eyes Federal Funds for Municipal Broadband - Bloomberg:

For decades, the phone carriers and cable companies have collected billions in fees and federal funds aimed at subsidizing service to underserved areas like Johnston Square. And yet, the mission has fallen short of the goals, said Ali.“Will we be seeing the largest incumbents swoop down on state broadband offices and simply gobble up the money?” Ali said. “This is the one big shot. We cannot let history repeat itself. Otherwise we’re going to need another $65 billion in 10 years.

That would be Christopher Ali, associate professor of media studies at the University of Virginia. Ali adroitly points up a major flaw in U.S. telecommunications policy of heavily relying on one off grants to subsidize "broadband" bandwidth instead of a coordinated, unified subsidy program combined with a universal service mandate as with voice telephone service. Updated to specify a fiber to the premises (FTTP) infrastructure standard.

Lacking fiber to the prem #FTTP infrastructure standard, report highlights folly of U.S. grant funding policy to boost broadband speed

GAO calls for cohesive federal strategy to curb fragmented broadband funding | Fierce Telecom:

The GAO further added minimum required broadband deployment speeds vary among programs and continue to change. In 2016 for instance, recipients of USDA’s Rural Utilities Service (RUS) Community Connect program were required to deploy broadband speeds of at least 10/1 Mbps. That required speed increased to 25/3 Mbps by 2018.

Meanwhile, the FCC’s High Cost Connect America Fund Phase II program, which ran from 2015 through 2020, maintained the 10/1 threshold. And under FCC’s Rural Digital Opportunity Fund Phase 1 auction, 25/3 Mbps was the benchmark for areas to be considered unserved and thus eligible for funding.

The report's findings indicate agencies are still figuring out what the standard for broadband service should be. The FCC’s long-anticipated, revamped broadband maps are set to be released sometime this fall, and they may help more precisely allocate broadband funds where they’re needed.

Advanced telecommunications fraught with heightened political peril with enactment of infrastructure bill

Due to excessive reliance on privatized advanced telecommunications infrastructure and weak regulatory and market incentives, the United States is many years behind where it should be when it comes to replacing ubiquitous copper telephone lines built for an era of voice telephone service with fiber for today’s Internet-protocol enabled services. That became painfully apparent with public health social distancing measures during the COVID-19 pandemic that made households very reliant on advanced telecommunications for work, education, purchasing goods and services, virtual medical care and entertainment. Impatience with lack of reliable, affordable access -- present pre-pandemic -- reached a boiling point.

The enactment of advanced telecommunications infrastructure subsidies in the Infrastructure Investment and Jobs Act last November has raised expectations of rapid relief after years of dashed political promises by elected officials to address the issue. The billions in subsidies set aside for advanced telecommunications infrastructure has been characterized as a once in a lifetime investment to finally put it to rest.

But the legislative provisions of the subsidies to be granted states as well as recently issued rules governing the grants will likely introduce additional delay even before any infrastructure is built. Expect months if not years of delays as incumbent investor-owned telephone and cable companies battle states, smaller upstarts and publicly owned projects over eligibility rules governing the subsidies and how they can be used.

Unlike transportation infrastructure such as roads, highways and airports that are expected to take many years to plan and build, voters may well have far less patient expectations. They’ll want to see fast, tangible progress when it comes to advanced telecommunications infrastructure. Especially with neighbors just down the road or around the bend who have fiber connections, envious while they try to get by on DSL over aged copper and wireless workarounds. Or fiber on a nearby utility pole but no affordable residential service in the case of Vermonter Claudia Harris. They’ll naturally think since they’ve been waiting for years for fiber, all those billions in federal subsidies should easily bridge the gap to their homes in short order. When it doesn’t quickly materialize, elected officials at all levels of government could face angry blowback from voters. They are well aware of the high level of concern among their constituents, noting complaints about Internet access and affordability are among the top issues raised by them.

America mired in telecom infrastructure incrementalism due to misaligned incentives, lack of commitment and lowered expectations

Three decades into the 21st century and a digital socio-economy, the United States remains unlikely to timely modernize its legacy copper telephone lines that reach nearly every American doorstep to fiber to the premises (FTTP). Instead of world class advanced telecommunications infrastructure, the nation is mired in incrementalism amid a patchwork of isolated pockets of fiber connecting only a third of all U.S homes. The nation will likely remain that way for the foreseeable barring a major change in public policy.

These are the root causes:

1. The issue is defined by its primary symptom – insufficient “broadband” bandwidth – instead of the lack of FTTP infrastructure that constrains bandwidth.
   
   
2. Overreliance on vertically integrated, investor-owned providers lacking both incentive and adequate resources to build out FTTP. They lack incentive because there is no regulatory requirement like that for legacy voice telephone service to provide service to customers requesting it. Internet protocol-based telecommunications are not regulated as a common carrier utility but rather an elective information service like a cable TV package. They lack capital expansion funds because their shareholders are averse to spending them and expect an ongoing stream of high earnings and dividends. They also lack the ability to finance new infrastructure due to balance sheets already overburdened with debt.
   
   
3. Localities have incentive to build fiber to serve their residents and promote economic development. But they lack resources to do so and the ability to raise tax dollars to finance its construction due to tax resistance/exhaustion. Consequently, some planning is done but most don’t proceed or are undertaken as limited scope "pilot projects." Federal and state governments reinforce limited local infrastructure by awarding grants for builds in "unserved" and "underserved" areas as determined by advertised throughput claims of commercial providers. (See #1).
   
   
4. Finally, lowered expectations of progress, even on the part of those who advocate for it. The fatalistic thinking is significant progress on infrastructure cannot be had because large vertically integrated telephone and cable companies determine telecom policy and favor a conservative approach due to #2. Progressives settle for limited local builds as small victories, further locking in incrementalism.

Biden administration, Congress have more to do on advanced telecom infrastructure in 2022

The Biden administration and Congress should enact legislation in 2022 that specifically focuses on advanced telecommunications infrastructure (ATI) and targets sufficient funding to federal and state agencies with the goal of rapidly modernizing legacy telephone copper that reaches nearly every American doorstep to fiber.

The ATI components of Infrastructure Investment and Jobs Act (IIJA) enacted in November won’t achieve that. There isn’t enough funding to do the job. In California, for example, Sen. Alex Padilla estimates the IIJA would bring only $1 billion to the nation’s largest state for ATI. Much more – probably four times the total $45 billion appropriated – is needed for the nation as a whole.

In addition, the IIJA fails to specify an infrastructure-based standard for ATI which might be reasonably expected in an infrastructure measure. Instead, it sets a throughput-based service level standard that will create controversy and delay over how grant money the bill appropriates to the states is to be spent. That service level standard will leave many American homes with substandard infrastructure and render them ineligible for fiber projects able meet their future needs and to obtain maximum long-term value for taxpayer dollars. Cable TV and wireless internet service providers have provided a partial and temporary solution to fill fiber gaps -- but are just that.

The 2022 legislation should establish and fund federal-state regional ATI projects. These large scale government owned networks can bring the necessary purchasing power and economies of scale to speed construction of fiber ATI amid labor and material supply chain constraints. Only about one third of all American homes have access to fiber connections that should have reached all but the most remote by 2010.

These projects should build open access fiber networks and give large telephone companies that know how to design, build and operate fiber networks at scale opportunity to competitively bid for contracts to do the work. Government ownership of the networks avoids the inherent conflict of interest in directly funding these investor-owned firms that must place the interests of their shareholders ahead of the broader public’s when it comes to spending public dollars.

These companies and their employees would additionally benefit if the 2022 legislation established a national fiber corps and training programs to form a workforce to bolster the ranks of experienced technicians that have been depleted over the past two decades.

The bill should also contain elements to ensure rapid coordination of permitting needed across federal, state and local jurisdictions. As it stands now, multiple permits are required to construct ATI that can snarl and delay projects for years. The IIJA establishes an Interagency Infrastructure Permitting Improvement Center to implement reforms to improve interagency coordination and expedite projects relating to the permitting and environmental review of major transportation infrastructure projects. The 2022 legislation should expand its scope to include federal-state ATI projects.

IIJA challenge process sets stage for battles between WISPs and telcos

The advanced telecommunications infrastructure (ATI) component of the Infrastructure Investment and Jobs Act (IIJA) allows for challenges of proposed projects that request states award 75 percent grant subsidies appropriated for ATI in the bill. Challengers can claim a proposed project does not meet the funding eligibility standard of at least 80 percent of premises within the project scope as being “unserved." That's defined as being unable to obtain reliable service with a minimum throughput of 25 Mbps/3Mbps with latency sufficient to support real-time, interactive applications. The statute authorizes states to adjudicate challenges. The National Telecommunications and Information Administration can reverse state determinations and modify the challenge process.

The challenge process sets the stage for battles between fixed Wireless Internet Service Providers (WISPs) and telephone companies once the funding becomes available next year. Verizon, AT&T are looking at C-band spectrum as a cheaper alternative to building fiber to the home. Should these telcos seek IIJA grant subsidies to expand their fixed premise wireless presence using C-band spectrum as AT&T CEO John Stankey suggested this week, WISPs could conceivably contest proposed projects as ineligible because WISPs already offer service meeting the minimum throughput standard. WISPs could use the same rationale to challenge proposed telco fiber to the premise (FTTP) builds using IIJA subsidy funds. Either way, FTTP deployment – already decades behind where it should be in terms of modernizing legacy copper telephone lines and building capacity for future bandwidth demand – would be further delayed.

WISPs are likely to view both IIJA subsidized telco expansion scenarios as an existential threat to their business model. Telcos could easily undercut their relatively high monthly rates for fixed prem wireless service. Telcos also benefit from greater economies of scale and lower costs since they could deploy their own fiber backhaul circuits. And telco owned FTTP would decimate WISPs since most customers would quickly switch to telco fiber once it became available and at lower monthly rates than WISP service. 

The forthcoming fixed wireless fights -- and most importantly the prolonged delay of modernizing copper to fiber -- could be avoided if the IIJA was revised to establish an FTTP infrastructure subsidy eligibility standard rather than the throughput-based standard in the bill as enacted.

FTTP out in the middle of nowhere

If lawmakers don’t revisit the advanced telecommunications infrastructure (ATI) component of the Infrastructure Investment and Jobs Act (IIJA) in the new year and the law is implemented strictly as written, 75 percent grant subsidies for fiber to the premise (FTTP) projects would likely be available only for those in extremely remote areas of the country where the cost per premise passed exceeds $10,000. 

That because the law makes those subsidies available only to builds where at least 80 percent of the premises to be served lack existing infrastructure that can provide minimum throughput of 25 Mbps down and 3 Mbps up with latency sufficient to support real-time, interactive applications. Additionally, its funding formula favors projects in these “unserved” areas that have higher than average costs due to their remoteness, and sparse settlement and topography.

While the federal agency designated to implement that ATI component of the IIJA – the National Telecommunications and Information Administration -- has until May 15, 2022 to set up a program to administer the subsidies, U.S. Commerce Secretary Gina Raimondo has indicated funding would be limited to these highly remote areas. "We have to make sure we don't spend this money overbuilding" existing infrastructure, Raimondo was quoted as saying in this Reuters story.

The upshot is the $43.45 billion in grants earmarked for ATI would likely be spent to connect a relatively very small number of remote premises given the high cost of connecting them, leaving behind metro area exurban areas and small towns with numerous gaps in existing ATI.

Explicit fiber to the prem FTTP telecom infrastructure standard absent in infrastructure measure. But it contains language favoring it.

The Infrastructure Investment and Jobs Act passed out of the Senate this week falls short of the Biden administration’s “build back better” pledge by failing to establish an explicit fiber to the premises FTTP advanced telecommunications infrastructure standard to replace outmoded 20th century copper telephone lines.

Instead, the bill establishes a throughput-based service level standard inconsistent with the administration’s goal of building “future proof” telecom infrastructure. It’s a much-needed objective. The past four decades have shown that throughput-based standards tend to become quickly outdated as end user bandwidth demand inexorably grows. Only fiber infrastructure has the headroom to accommodate that demand well into the future.

However, language in the legislation indirectly favors fiber. It requires the National Telecommunications and Information Administration prioritize infrastructure funded by $42 billion of grants to states 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.” Not a direct fiber infrastructure specification. But a good operational definition that could influence the NTIA to promulgate rules on funding eligibility and awards that favor a de facto fiber standard.

Additionally, the measure defines a “reliable” service standard that fits well with fiber. It’s “service that meets performance criteria for service availability, adaptability to changing end-user requirements, length of serviceable life, or other criteria, other than upload and download speeds, as determined by the NTIA in coordination with the Federal Communications Commission. (Emphasis added) It would also require the NTIA to develop and incorporate best practices “for ensuring reliability and resilience” of the infrastructure funded by the measure.

California bill would use existing phone surcharge to secure bonds for local government and cooperative-owned fiber to the premise infrastructure

Proposed legislation introduced this month in the California state Senate offers a potentially viable means of financing fiber to the premise (FTTP) advanced telecommunications infrastructure builds owned by local governments and nonprofits such as consumer telecom cooperatives. It does so by creating a financing mechanism to secure bonds to fund FTTP construction with proceeds from an existing California Public Utilities Commission (CPUC) surcharge on voice lines to subsidize advanced telecom projects in high cost areas of the state not served by incumbent landline and wireless internet service providers.

Debt service for the bonds could also be provided by project sponsors since the proposed legislation authorizes the CPUC to require they demonstrate the ability to reasonably finance and implement the projects utilizing the proposed bond financing.

The measure is proposed as an urgency measure that would take effect immediately upon enactment.