Legacy telco regulatory concerns overblown as Internet replaces PSTN

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

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

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

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

Study points to demise of burbs as bedroom communities

A study by the Chicago-based Center for Neighborhood Technology found that long commutes to jobs in the Los Angeles basin from California's Inland Empire area (San Bernardino/Riverside) aren't really worth it when the cost of commuting is factored in. For decades, housing that costs less than comparable real estate closer to jobs in L.A. was the draw that fueled the region's growth. But when the costs of hours spent in cars and gasoline and maintenance are taken into account, it comes out a wash. (And arguably, potentially a net loss when the adverse work/life balance and health effects are included).

This story reported in the Inland Empire's Press Enterprise is a harbinger of socio-economist Jack Lessinger's predicted end of the surburbs. If their main attraction -- more spacious housing and bigger lot sizes for the buck -- begins to disappear, then the demise of the burbs as bedroom communities is at hand.

Local and regional planners want to revamp the region to bring in more employment to reduce out-commuting. But that can't be the only approach as it's likely not enough local jobs can be created to achieve a rough jobs/housing balance. Lots of creative and information-based work will continue to be connected to L.A.-based institutions. Those who work for them need robust telecommunications infrastructure to interact with and deliver their work product from their homes and local communities. This infrastructure is as critical to the survival of these suburban regions as the freeways that created them.

Virgin trials aerial FTTP in UK countryside

Conventional wisdom holds that fiber to the premises telecom plant isn't cost feasible in less populated regions because it requires costly trenching and won't generate sufficient revenues. Some U.S. telecom experts including Tim Nulty have challenged that notion. Now Virgin Media is going to attempt to prove the conventional wisdom wrong with a FTTP aerial deployment in the rural UK village of Woolhampton, according to this TechWorld item.

If Virgin can show aerial fiber to the premise is doable even within a for-profit business context, it could spur both for profit and nonprofit aerial fiber build outs in the U.S. and elsewhere.

Alternative telecom business models urgently needed

Fundamentally, America's outmoded and incomplete telecommunications infrastructure isn't solely an infrastructure issue. Rather, it's a business model challenge caused by market failure that discourages the build out of this vital infrastructure to allow all homes and businesses access to the Internet protocol based telecommunications technology that is today's standard for Internet access, video and voice communications. 

As such, the market failure that has brought about the current travesty of the world's most advanced economy dotted with broadband black holes demands alternative business models to fill in the gaps. It also requires a paradigm shift in thinking away from the proprietary, investor owned telco and cable infrastructure that's based on a business model suited to the 20th century and not the 21st. Bob Frankston and Andrew Cohill of Design Nine note the 20th Century telecommunications business model provides services similar to other utilities such as water and electricity. The more you use, the more you pay. As Cohill puts it, it's about selling "bandwidth by the bucket." 

As Internet era dawned with dial up access in the early 1990s, telcos simply sold and billed Internet access like an additional voice calling feature. They have continued to do so with DSL and ISDN before it. In Cohill's view, this business model to use a military acronym is FUBAR. "This business model is fundamentally broken," Cohill declared in a recently issued white paper. "There is no way to fix it." Why? Because building advanced telecommunications infrastructure cannot pencil out for telcos and cable companies based on a business model of selling an incremental, usage-based menu of services over their proprietary cable plant. It simply doesn't generate enough revenue to be profitable. That's why they have adopted an ultra conservative posture when it comes to expanding their infrastructures, leaving millions of would be customers in their so-called "service areas" unable to access services they could otherwise sell to them. So conservative, in fact, that telcos and cable companies will parse a single road or street providing some residents and businesses with broadband access while their neighbors go without, making lack of broadband access a problem that occurs in non-rural as well as rural areas. 

As previously noted on this blog, the search term that brings the largest volume of visits is "my neighbor can get broadband but I can't." As U.S. policymakers are about to consider a framework for a national broadband plan to be issued this month by the Federal Communications Commission, Cohill has proposed an alternative business model that probably won't be in the FCC's plan but deserves to be. It calls for a public private partnership between regional and local governments and private sector Internet Service providers (ISPs). Local governments sell bonds to finance the construction of fiber optic-based infrastructure and then service the bond debt by selling access to ISPs. Federal and state government can help defray construction costs with grants and loans. Telecommunications infrastructure under Cohill's "Third Way" isn't owned by a telco or cable company but instead is public infrastructure like roads and highways.

In effect, Cohill and others who support this alternative business model propose the deprivatization of telecommunications infrastructure while retaining a private market of competitors who wish to sell various communication and entertainment services. It's called an "open access" network. Cohill"s "Third Way" provides a solution to those who believe more competition is needed for telecommunications services. Since telecommunications infrastructure is itself a natural monopoly due to the high cost of constructing it, an open access network puts in place the framework for a competitive market for telecommunications services sold to homes and businesses. Cohill argues that the United States can no longer wait for telcos and cable companies to build out their infrastructures -- and he's right. Moreover, he asserts, in a weak economy where business and job creation are desperately needed, retaining a failed business model of telco and cable owned infrastructure in areas that lack adequate broadband access is "disastrous" from an economic development perspective. 

Critics will likely argue that the open access model is too radical and hasn't been sufficiently tested in the real world to ensure it pencils out where a proprietary, investor owned closed network cannot. Cohill would point to three open access networks his company orchestrated in Virginia and Florida to show that it can. Given studies linking expanded broadband access with economic growth, the open access business model, regional and local governments should not look to solely the feds for solutions. Since they stand to benefit from increased per capita incomes (and by extension, higher tax revenues), they should take their telecommunications -- and their economic destinies -- into their own hands and explore this much needed alternative business model to the dysfunctional, failed market of the status quo. The current privately-owned telecommunications "ecosystem" as some in the FCC have termed it isn't sustainable and cannot be expected to accommodate the burgeoning growth of digital telecommunications services and the concomitant demand for bandwidth. New business models such as proposed by Cohill and others are urgently needed now.

Reports of broadband stimulus awards warrant closer reading

There have been a number of stories lately reporting on awards of U.S. broadband infrastructure subsidies under the American Recovery and Reinvestment Act of 2009. They warrant reading with a closer eye when it comes to the end users that will actually benefit from the subsidies. For example, this AP story on the award of an $80 million grant for advanced telecommunications infrastructure in Louisiana that reports 100,000 households, 15,000 businesses and 150 institutions such as schools, universities and medical centers will benefit from the award.

The last paragraph is key:

Private Internet service providers will use the cable to bring service to homes and businesses.

More accurately, IF there is sufficient last mile infrastructure over which these ISPs can provide service. Most likely, this award is for middle mile infrastructure that feeds the last mile -- the segment that is most often missing and in greatest need of subsidization. Middle mile infrastructure subsidies have been favored thus far among awards announced by the federal agencies administering the stimulus dollars. But both middle and last mile infrastructure are necessary to create a complete telecommunications infrastructure that will meet the public policy intent contained in the stimulus legislation of making advanced telecommunications services available to all Americans.

Network experts like Andrew Cohill of Design Nine understand this fundamental aspect of networking. Networks that don't adequately connect end users aren't truly networks. Cohill describes the last mile as the "first mile" in recognition of this fact.

Preliminary FCC broadband policy report ducks issue of incomplete telecom infrastructure

For the millions of Americans who live and work in broadband black holes, a preview released this week of a forthcoming Federal Communications Commission policy recommendation to Congress offers practically no hope their situations will improve over the foreseeable.

The FCC's National Broadband Plan: National Purposes Update released Feb. 18 contains 56 pages of bullet points, charts and graphs that cover just about every topic related to broadband except for the nation's most pressing broadband problem: incomplete and inadequate advanced telecommunications infrastructure that's necessary to deliver broadband to all Americans.

The final report is due to Congress by March 17. If the report doesn't address this critical issue in a substantive manner and instead dances all around it as this week's preview suggests, it will be seen as a whitewash of platitudes that will quickly be shelved and forgotten.

Google's fiber foray: Likely goal is to test alternative business model

Google's demonstration of concept fiber to the premises "experiment" announced last week could represent the start of a major transformation of how consumers receive information in an age where information is increasingly delivered via Internet protocol.

The potential transformation: from the telco/cable business model that brings the bulk of Americans Internet access that due to CAPEX constraints cannot reach about 12 percent of U.S households to the advertising-based business model used for decades by mass broadcasters. Investors provide much of the funding needed for costly transmitters and other broadcast equipment. But advertisers provide another deep and ongoing source of cash to invest in the necessary broadcast equipment to reach consumers.

Google's experiment isn't likely about testing fiber to the premises technology. Fiber is a well demonstrated means of getting lots of bits and bytes to the doorstep with plenty of capacity to spare. Rather, I suspect it's to explore an alternative business model to bring Internet protocol-based services to homes that is to a large degree based on the network broadcasting business model.

Notably, Google's announcement comes as the U.S. government struggles with the inherent conflict of implementing policies to expand advanced telecommunications infrastructure to all Americans while paying homage to the privately owned telco/cable dominated Internet "ecosystem" that makes doing so impossible without substantial subsidies in a time of economic penury.

In the 1960's, mass communications theorist Marshall McLuhan predicted an electronic global village linked together by a broadcast television -- a medium so powerful that the medium itself would be as important as its content. "The medium is the message,” he famously declared. While McLuhan's observation was about TV, in retrospect it applies even more so to the Internet. Google's foray into fiber may well have been undertaken with McLuhan firmly in mind.