Analysis & commentary on America's troubled transition from analog telephone service to digital advanced telecommunications and associated infrastructure deficits.
Saturday, September 02, 2023
Lexicon of competition in advanced telecommunications
ISP competition: Internet service providers lease access to open access networks and compete to sell voice, video and data and value added services to end users.
Financial structure competition: Investor owned, market-based network infrastructure versus publicly owned or consumer utility cooperative owned infrastructure. Higher cost capital seeking relatively rapid return on investment versus lower cost, patient capital, respectively.
Thursday, June 04, 2020
Broadband Breakfast: Open Access Network Builders Discuss Ownership Models for Next Generation Broadband Infrastructure
Broadband Breakfast: Open Access Network Builders Discuss Ownership Models for Next Generation Broadband Infrastructure: Panelists agreed in order to fund fiber to the last mile, it is necessary to build into cities first, where network adaption will be high. This will generate the necessary revenue to build into sparser neighborhoods.This is basically the same model employed by investor owned incumbent telephone and cable companies that brought the United States to the place it is today with big gaps in advanced telecom infrastructure and two thirds of homes not having access to a fiber to the prem #FTTP connection.
It cannot scale up quickly enough to catch up the nation to where it should be in 2020 but for its excessive reliance on investor owned providers that led to these shortcomings. The nation needs a crash build public project to bring #FTTP to nearly every American doorstep. The current viral pandemic control measures that shifted knowledge work out of centralized commute-in offices made its advanced telecom infrastructure deficits painfully apparent.
Sunday, March 29, 2015
Open access fiber networks offer way to boost access to Internet services
That business model is inherently limited because it can expand and upgrade service only to the extent new customers and revenues can be added quickly enough to generate a rapid return on the money invested to build out the infrastructure. That circumstance and the high cost of constructing telecommunications infrastructure naturally make telcos and cable companies very conservative when it comes to expanding their networks.
That risk aversion in turn has brought about widespread market failure. There are potential buyers clamoring for service but the telephone and cable companies decline to provide it. This is essentially where the U.S. has been stuck for the past decade, creating massive frustration for consumers and for state and local governments hoping to improve Internet telecommunications access that has grown increasingly vital for their communities and economies.
Fortunately, there is a way out of the mire with open access fiber networks as Andrew Cohill of Wide Open Networks explains in this article appearing in the March/April issue of Broadband Communities magazine. Highly recommended reading for government officials and consumers.
Friday, March 06, 2015
Big incumbent telcos, cablecos should stop the zero sum game, partner with the public sector on open access infrastructure
"A well-built municipal system (or access to public assets in a public/private partnership) should be open to all carriers and to all content and service providers. They would get a chance to sell products and services with vastly higher revenue potential and much greater reliability than they would by nursing ancient infrastructure to drain a few extra years of cash out of hapless, captive customers."
Indeed.
Click here to read the full article.
Monday, December 22, 2014
Incumbent telcos, cablecos should reconsider shunning wholesale open access fiber networks
Tuesday, August 26, 2014
U.S. FTTP infrastructure projects falling into 2 categories
The construction of fiber to the premise (FTTP) Internet infrastructure in the United States is falling into two main categories:
- Projects in large and midsize metro centers such as those started or planned by Google Fiber, AT&T and Century Link as well as some cable companies. An article in the July 2014 issue of Broadband Communities magazine lists these deployments.
- Community or regional projects by local governments, utility cooperatives and public-private partnerships serving less densely populated areas not containing large cities such as those tracked by the Institute for Local Self Reliance.
Cox explicitly named rapid growth as one of its criteria for selecting cities for gigabit deployments. In contrast to municipalities, which often deploy fiber in an effort to jump-start lagging economies, large players favor localities that are healthier to begin with.
For the second category of projects, FTTP is clearly an economic development strategy to a far greater extent than the first. Unlike those in the first category financed by the impatient capital of telcos and cablecos burdened with high debt loads and large shareholder dividend obligations, community or regional projects will rely on patient capital. Sources include long term public bonds and creative public-private partnerships that blend public and private funding such as the Utah Telecommunications Open Infrastructure Agency (UTOPIA).
The second category is also distinguished from the first by the ownership and business models of the network infrastructure. In the first category of investor-owned projects, the network is a proprietary, closed access property. The telcos and cablecos that own the networks charge a retail monthly subscription fee to connecting premises.
By contrast, the second category is more likely to utilize an open access business model (such as UTOPIA) where fiber infrastructure is like a public works project such as a road or highway. Instead of selling individual subscriptions to customer premises, an open access model operates as a wholesaler selling network access to Internet service providers who provide services to customer premises. This model is a better option for the second category of projects because it removes the business risk of getting sufficient numbers of premises to sign up for service in order for the network deployment to be economically viable.
Thursday, July 03, 2014
Davis, California exploring FTTP options to address private market failure
Sacramento News & Review - Sacramento Internet is actually really slow - News - Local Stories - July 3, 2014: “It really comes down to market conditions,” said Rob White, chief innovation officer at the city of Davis (yes, that’s a real title). “Putting fiber in the ground or in poles costs money. Most don’t want to do it where there won’t be subscribers or users.”
White said that Davis is exploring a lot of options, one of which involves an international fiber-optics company that offered to install the cables so that it could charge ISPs (the main ones in Davis are Comcast and AT&T) to use its network.
Sacramento might be going the route of cities that have allowed Google or AT&T to build broadband infrastructure for them.
Other options allow cities to choose from either central or decentralized systems. What we have now is more decentralized, in that various companies claim the right to install their own cables in different parts of town and charge customers accordingly. In a centralized system, however, the city would build and control just one fiber-optic network itself and let ISPs use it.
One proposed state law, Assembly Bill 2292, would facilitate this by letting local governments issue bonds to construct broadband infrastructure.
The face of ISPs are companies like Verizon and CenturyLink, so Internet service is seen as a commercial product. But it differs from other commercial products like shoes and microwaves because there is a very tight limit on the space (roads and telephone poles) that makes it physically possible to offer Internet. That has sparked a national debate on whether to treat the Internet as a public utility.
White likened Internet service to firefighting, which used to be a private enterprise. But that meant that a city could have five different companies fighting fires, which made coordination difficult—until fire districts were municipalized as a public utility. Today, with different companies building disparate systems of copper (and now fiber-optic) cables, Internet infrastructure lacks uniformity.
As White put it, “I think we’re exhibiting a market failure in this world of broadband.”
Market failure indeed. It's most painfully evident in large portions of the four county Sacramento region where homes and small businesses have wanted to purchase modern, fast Internet service for the past 10 years but cannot because incumbent telephone and cable companies have redlined their neighborhoods and decline to sell it to them.
White's comparison of multiple commercial telecommunications providers competing to capture subscribers with their own proprietary infrastructure to private fire departments (the first type of fire insurance) is apt. However, the high costs White notes that come with deploying fiber to the premise (FTTP) telecommunications serve to keep out competitors and make the market a natural monopoly unlike private fire protection companies.
Davis has the right idea in regarding telecommunications infrastructure as public infrastructure like roads and highways -- another costly endeavor that doesn't lend itself to market competition -- that benefit everyone whether they drive on them or not. Under this model, access is provided to ISPs on a wholesale basis. The real competition is among the ISPs looking to sell communications and information services over that public infrastructure -- as it should be.
Tuesday, July 01, 2014
Two sharply divergent alternative business models for Internet infrastructure play out in Utah
For the past decade, much of the United States has been plagued by telecommunications infrastructure market failure. Many residences and small businesses need fast, reliable landline premise Internet connections but are unable to obtain them because legacy telephone and cable companies have opted not to upgrade and build out their networks to reach them. Alternative business models are thus urgently needed to ensure they don’t remain isolated from the Internet grid and effectively cut off from the many services it provides.
In Utah, two alternatives to construct and operate fiber to the premise (FTTP) infrastructure -- which is also being referred to as “gigabit broadband” in reference to fiber’s substantial carrying capacity that eliminates sluggishness and latency -- are playing out in close proximity.
Thursday, May 08, 2014
Future of U.S. telecommunications infrastructure could be determined in Utah
Drew Clark of BroadbandBreakfast has written an overview of the two models: a closed access network based on the business model used by incumbent telephone and cable companies and an open access network operated by a public-private partnership. In a closed access network, the network operator acts as a retailer that “owns” the customer, billing them monthly based on subscribed services. By comparison, an open access network is akin to a public thoroughfare. It wholesales network access to information and service providers that pay to reach customers.
Provo is the site of the closed access model operated by Google Fiber, which is purchasing iProvo, a municipally operated network. Nearby, an open access network operated by the Utah Open Telecommunications Infrastructure Agency (UTOPIA) serves 11 cities. Both the iProvo and UTOPIA networks have encountered financial difficulties but already have deployed a significant amount of fiber serving customer premises, making them attractive test beds for the contrasting business models.
Macquarie Capital, an Australian-based investment company that invests in large scale infrastructure projects like airports, is proposing to invest more than $300 million of debt and equity financing as part of a 30-year leasehold of the UTOPIA network. The rest of the funding needed to fully build out the network would come from a monthly telecommunications utility fee on all residences and businesses within the 11 cities of $18-20 per household, $9-10 per apartment unit and $36-40 per business connection, according to Clark’s summary. Residences would receive free access to a basic broadband network initially offering 3 Mbps symmetrical connectivity.
The key strength of the UTOPIA model is the utility fee assessed on all premises that helps mitigate the business risk of whether enough premises will sign up for services to generate sufficient revenues to offset construction and operating costs and in the case of investor-owned networks, generate operating profits within a reasonable time frame. This uncertainly has been the primary obstacle to build out of incumbent telephone and cable company networks that operate on the customer subscription model. Since Google Fiber uses the same model, it is similarly constrained and thus limits its fiber networks to select “fiberhoods” where the company believes enough premises will subscribe to its network.
UTOPIA’s open access model also has some uncertainty associated with it -- whether Internet service providers will choose to offer services over the network. Since the open access model is novel in the United States and runs counter to the dominant closed access model, UTOPIA has had difficulty attracting enough ISPs necessary to offer services in order to attract customers. Offsetting this uncertainty, however, is the UTOPIA model’s ability to scale and build out to reach areas ignored by closed access, investor-owned networks leery of the business risk associated with deploying to these areas that leaves about one in five U.S. homes without Internet connections.
Friday, February 28, 2014
Policy debate -- not market competition -- predominates in U.S. premises Internet infrastructure
Sunday, December 22, 2013
Possible alternative to capitalize U.S. FTTP build out emerges in Utah
In Utah, a new strategy is emerging involving a global firm that with patient capital that specializes in big dollar infrastructure projects. The Salt Lake City Tribune reports Macquarie Capital Group, an Australian firm that advises and invests in public projects around the world, will launch an engineering and feasibility study to operate Utah's 11-city UTOPIA FTTP network in a public-private partnership:
Macquarie’s investors — including pension funds, large insurance firms and private endowments — were seeking to develop stable, long-term investment opportunities and were drawn to technology-based projects, Hann said.If the feasibility study proves fruitful and Macquarie agrees to take over the network, it likely will entail a deal in which the firm would assume management of the network for 30 years and invest in building out and upgrading the rest of the lines to neighborhood homes, Hann said.The network would remain an open-access network and Macquarie would partner with third-party Internet service providers, he said.
Saturday, April 13, 2013
Deterrence: AT&T launches pyrrhic war of mutually assured diminished returns against Google
The announcement amounts to a declaration of pyrrhic war by Ma Bell, designed to impose diminished returns on Google since the economics of competing fiber infrastructures could drive down take rates and ARPU for each player. AT&T is sending a message of deterrence to anyone that dares to invade its sovereign service territory with FTTP infrastructure faces mutually assured prolonged ROI and potential losses.
Meanwhile, as Ma Bell and the Googlers engage in a war of attrition in a select few metro battlefields, much of the United States can and should pursue a more peaceful and sane alternative in municipal and cooperatively constructed and owned open access FTTP infrastructure.
Thursday, January 10, 2013
Internet co-creator says U.S. broadband competition has ‘evaporated’ - Yahoo! News
Internet co-creator says U.S. broadband competition has ‘evaporated’ - Yahoo! News: Cerf didn’t offer any concrete suggestions for ways to make the American broadband market more competitive, but generally dismissed the idea that deregulating broadband services would magically lead to more options and lower prices for consumers.
Mr. Cerf's dearth of suggestions to increase competition is because there are none as long as he's talking about investor-owned telecommunications infrastructure competition. What's needed to end years of these continuing lamentations by Cerf and others is publicly- or consumer-owned open access fiber to the premise infrastructure where service providers pay for network access and compete for customers. As Andrew Cohill aptly put it a few years ago, the current investor-owned model is broken because it's about as economically inefficient and nonsensical as having package delivery predicated on Federal Express or UPS to first have to invest in building private roads so their delivery trucks can reach customers.
Saturday, January 05, 2013
Broadband Expert Survey of US Consumers Finds 94% Believe They Are Overpaying for Their Broadband Service - Houston Chronicle
In a nationwide survey of more than 30,000 online consumers conducted by Broadband Expert, an overwhelming majority of respondents -- 94% -- believe they are paying too much for their broadband package and more than 25% have only one Internet provider to choose from. Of those surveyed 77% of respondents said they would like an easy apples-to-apples solution to be able to compare plans and prices when choosing a provider.Americans aren't going to get the kind of market they want until the business model changes. Due to high barriers to entry, it's not practical to have competing telecommunication infrastructure any more than it is to have competition for other types of infrastructure like roads and highways. What's needed is publicly or consumer owned open access telecommunications infrastructure where service providers compete on price and service.
When asked about the ease of currently shopping for and comparing plans, 35% are totally discouraged by the complexity of comparing carriers on multiple websites. Even more alarming one-third of Americans do not know where to even start to shop for and compare broadband prices and services.
“Based on our online survey, it is clear that American consumers are frustrated with the amount they are being charged for internet access and are looking for an easy way to shop for and compare digital services such as Internet, TV and phone,” said Rob Webber, CEO, Broadband Expert. Webber goes on to say that he believes “like for like comparison of internet service providers and their packages helps encourage competitive pricing and better deals for consumers”.
Saturday, February 19, 2011
Obama administration should focus on community-run open access fiber, not 4G wireless
The Obama administration's recent announcement of its National Wireless Initiative to subsidize the build out of 4th generation (4G) wireless Internet to make it available to least 98 percent of Americans appears based on the assumption that cutting edge wireless telecommunications technology can play a central role in the nation's telecom infrastructure.
I'm not convinced. 4G wireless is only just emerging and remains unproven in terms of whether it can deliver sufficient bandwidth at the same time bandwidth demand is increasing exponentially. It's primarily designed for mobile use and portable devices such as smart phones and IPads that are gobbling bandwidth at such a prodigious rate that providers have a difficult time meeting the demand. That's why they ration bandwidth and penalize wireless customers who use more than 5 GB per month. The rationing is due to a more basic telecom infrastructure problem: the lack of adequate wire line infrastructure to "backhaul" or feed the distribution system that supports that huge and growing universe of wireless devices.
The administration's wireless initiative seems to suggest that people can "cut the cord" for Internet access just as they have done for wire line voice service, which requires far less bandwidth. 4G wireless, the administration apparently believes, can provide access to medical tests, online courses and applications that have not yet been invented.
That remains to be seen. What is certain now is wire line fiber optic connections to American households and businesses can deliver more than enough bandwidth for today's needs without the need for rationing plus plenty of additional capacity for those yet to be invented applications. The administration's telecom infrastructure efforts should focus on bringing it to the 24 million Americans that Federal Communications Chairman Julius Genachowski said remain disconnected from the Internet. "The infrastructure simply isn’t there," Genachowski explained.
The reason: It's simply not sufficiently profitable for investor owned providers to build it. Alternative, lower cost methods are urgently needed. The best and most rapid way to bring about these alternatives is to focus at the local level and provide local governments and consumer telecom cooperatives technical assistance grants and low cost loans to build open access fiber networks to serve their communities.
The administration's health care reform legislation allocates $5 billion in technical assistance grants to for new health insurance cooperatives to pool risk and purchase health coverage for their members. The administration should provide a similar amount of technical assistance funding for local governments and telecom cooperatives to help them plan and design open access fiber optic telecom networks.