Lexicon of competition in advanced telecommunications

Facilities-based competition: Owners of network infrastructure compete to gain access to end user premises. Incumbents have advantage due to high competitor cost barriers to entry, first mover advantage. “Overbuilders” compete with incumbents with delivery infrastructure offering superior value, end user experience and support, reliability.

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.

U.S. telecom policy faltered in early 1990s with failure of National Information Infrastructure (NII) initiative

Excerpted from Service Unavailable: America’s Telecommunications Infrastructure Crisis

Policy Failure

U.S policymaking on Internet infrastructure began shortly before the Internet was decommissioned as a government-run network in the mid-1990s. In 1993, the Clinton administration issued a policy framework titled The National Information Infrastructure: Agenda for Action.50[i] It called for the construction of an “advanced National Information Infrastructure (NII),” described as “a seamless web of communications networks, computers, databases, and consumer electronics that will put vast amounts of information at users’ fingertips.” Development of the NII, the document stated, “can help unleash an information revolution that will change forever the way people live, work, and interact with each other.” For example:

· People could live almost anywhere they wanted, without foregoing opportunities for useful and fulfilling employment, by “telecommuting” to their offices through an electronic highway;

· The best schools, teachers, and courses would be available to all students, without regard to geography, distance, resources, or disability;

· Services that improve America’s health care system and respond to other important social needs could be available on-line, without waiting in line, when and where you needed them.

Among its nine principles and goals, the policy called for extending the universal service concept to ensure that information resources are available to all at affordable prices. “Because information means empowerment, the government has a duty to ensure that all Americans have access to the resources of the Information Age,” the policy declared.

In addition to this policy document, the Clinton administration sponsored legislation championed by then Vice President Al Gore, who foresaw the coming role Internet-based telecommunications would play in the future. The Telecommunications Infrastructure Act of 1993 created a framework for its integration with the Communications Act of 1934.51[ii] The legislation, which was not enacted and died in Congress, included several findings. The first three findings stated that:

(1) it is in the public interest to encourage the further development of the nation’s telecommunications infrastructure as a means of enhancing the quality of life and promoting economic development and international competitiveness;

(2) telecommunications infrastructure development is particularly crucial to the continued economic development of rural areas that may lack an adequate industrial or service base for continued development;

(3) advancements of the nation’s telecommunications infrastructure will increase the public welfare by helping to speed the delivery of new services, such as distance learning, remote medical sensing, and distribution of health information.

The legislation envisioned Internet telecommunications services being offered over the existing telephone network and would have required telephone companies to provide access to their networks for these services on a nondiscriminatory basis and on reasonable terms and conditions.

Like the NII Agenda for Action policy document preceding it, this legislation reinforced the principle of universal service. It would have required telecommunications carriers contribute to the preservation and advancement of universal service and states to act in coordination with the Federal Communications Commission to “ensure the preservation and advancement of universal service.”

This Clinton administration policy framework, its proposed Telecommunications Infrastructure Act of 1993, as well as 1996 legislation updating the Communications Act of 1934 enacted during the administration were predicated on the convergence of legacy voice telephone service and Internet communications. A foundational policy principle was the belief that competitive market forces could be relied upon to further this convergence and expansion of Internet telecommunications services, making Internet service universally available to all Americans as voice telephone service had been for decades before.

A generation later, it is painfully apparent that it didn’t play out that way. As discussed earlier in this chapter, the high cost of constructing new infrastructure to deliver Internet-based telecommunications services prompted telephone and later cable companies to selectively deploy new infrastructure only in densely populated and relatively affluent areas in order to satisfy shareholder demands for rapid return on investment and high profits and stock dividends. Everyone else was essentially left off the new telecommunications “grid” of the Internet.

The universal Internet service goals of the Clinton administration initiatives went unfulfilled in large part because the administration failed to take into account basic economics: the high costs of constructing and operating new advanced telecommunications infrastructure that create a natural barrier to competition. Markets can only be competitive when barriers to entry are low enough to allow for the entry of new players. Without new entrants, markets cannot meet the fundamental economic definition of a competitive market: one that has many sellers and buyers. Due to these high costs, telecommunications infrastructure functions more as a natural monopoly or a duopoly. Many buyers but few sellers do not a competitive market make.

Instead of relying on market competition, the Clinton and subsequent administrations and Congresses should have put in place a plan to fund universal FTTP. Had the United States chosen that policy direction instead of relying on market forces alone, every home business and institutional premise would likely have fiber connections in 2015.

50 The National Information Infrastructure: Agenda for Action, September 15, 1993, https://archive.org/stream/04Kahle000911/04Kahle000911_djvu.txt.

51 Senate Bill 1086 (103rd Congress, introduced June 9, 1993), https://www.govtrack.us/congress/bills/103/s1086.

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.

Sohn: Legacy incumbent telcos, cablecos should see publicly owned open access advanced telecommunications infrastructure as business opportunity and not competitive threat.

Gigi Sohn, executive director of the American Association of Public Broadband, urges incumbent telcos and cablecos facing the significant expense of modernizing their legacy metallic delivery networks to fiber to view publicly owned, open access fiber as a good business opportunity to offer services over the fiber instead of viewing it as a competitive threat.

We are hearing a lot about public-private partnerships now. But Sohn is talking about a true partnership versus local governments merely handing over federal and state dollars to the incumbents as subsidies to build out their infrastructures but not necessarily to provide universal service to all addresses within their jurisdiction.

Here’s what Sohn said on this in a podcast interview this week with Mike Masnick of TechDirt at 47:50:

“Perhaps we should have started with open access to begin with. The facilities-based competition when you have cable competing against telecom competing against wireless, maybe wasn’t the best idea. But it’s the world we live in now and we can fix it by having more open access. I’m always encouraging the incumbents to see community broadband, open access as a business opportunity and not as a competitive threat. And some have approached me quietly and said yes, Gigi, we’d like to find ways to work together and I think that’s really refreshing.”

Facilities-based competition is arguably a wasteful use of high cost infrastructure. “It’s a waste of resources more than anything,” says Carl Åhslund, CEO of Open Infra. “Everyone fights, they have to build their own network if they want customers, but it doesn’t make sense. You don’t have two water lines.”

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.

Vermont draft BEAD Five Year Action Plan: FTTP to all on grid addresses by year end 2028.

The state of Vermont expects fiber to the premises (FTTP) advanced telecommunications infrastructure will reach every location connected to the electrical grid by the end of 2028. That’s according to a draft Five Year Action Plan setting a timeline and budget to achieve universal service in the state as required by the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program.

“Vermont shares NTIA’s strong preference for deploying end-to-end fiber connectivity to all unserved and underserved locations, as well as all eligible CAIs. Aligned with the VCBB’s statutory mandate, this approach prioritizes quality, scalability, and reliability,” the draft plan states.

The draft plan anticipates all remote off grid locations will be reached by other technologies deemed “reliable” by the NTIA: 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.

The draft plan estimates the cost of extending fiber to all of Vermont’s approximately 50,000 locations not served by fiber excluding locations where the U.S. Federal Communications Commission has allocated grants to subsidize infrastructure under its Rural Digital Opportunity Fund (RDOF) at $500-$700 million. The plan anticipates subsidies under BEAD, the American Rescue Plan Act’s Capital Projects Fund, subgrantee matches, and other funding sources will cover this cost.

The estimate is based on road miles. The upper estimate accounts for the risk of project cost overruns due to inflation, supply chain challenges, and labor shortages. The draft plan notes additional, more extensive analysis will be required to develop a more precise cost estimate. The state intends to refine the estimate in its initial proposal to the NTIA for BEAD infrastructure subsidy funding.

The plan notes the Vermont Community Broadband Board (VCBB) will continue its support of efforts by Communications Union Districts (CUDs) organized under state law to submit and gain approval for applications for grants to extend their end-to-end fiber networks. CUDs are two or more towns that join as a municipality to jointly build telecommunications infrastructure.

Oregon draft BEAD Five Year Action Plan: Federal allocation insufficient to attain universal FTTP

The Oregon Broadband Office has posted its draft Five Year Action Plan required by the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program authorized by the Infrastructure Investment and Jobs Act (IIJA). The program mandates states develop the plan this year including “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.

The draft plan indicates Oregon would need nearly five times its $689 million BEAD allocation to build universal fiber infrastructure at an estimated cost of $3.3 billion deployed over a five year period.

“Long-term planning is likely to require additional federal and state funding beyond the BEAD funding because the cost estimate for universal service under a universal fiber-to-the-premises model…exceeds NTIA’s BEAD allocation,” the draft plan states. “In the interim, the state will plan to use its BEAD allocation of $688,914,932.17 in the most cost-effective manner by using a mix of technologies.” The draft plan’s estimate for universal fiber to the premises (FTTP) infrastructure includes a total of 26,347 miles of new fiber construction reaching 158,152 locations. That is estimated to be 71.9 percent underground infrastructure and 28.1 percent aerial using existing poles.

While BEAD program guidance prioritizes FTTP given its reliability and technical flexibility to expand to accommodate future demand, the guidance allows use of non FTTP infrastructure in areas states designate as extremely high cost that exceed a state designated threshold for subsidy dollars to connect eligible locations. Those 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. According to the draft plan, Oregon intends to award its federal BEAD allocation “to potential subrecipient partners to achieve universal service.” The draft plan states Oregon “will look to maximize this allocated funding through a mix of technologies to serve as many Oregonians as possible.”

The origins of the FCC "speed trap" and U.S. digital exclusion, inequity

Longtime telecom industry observer and blogger Doug Dawson delves into the origins of the “speed trap” U.S. telecom policy has fallen into as it struggles to provide ubiquitous, affordable advanced telecommunications infrastructure. It begins with the definition of the colloquial term to describe advanced telecommunications: “broadband.”

This raises a question of the purpose of having a definition of broadband. That requirement comes from Section 706 of the Telecommunications Act of 1996 that requires that the FCC make sure that broadband is deployed on a reasonable and timely basis to everybody in the country. The FCC interpreted that requirement to mean that it couldn’t measure broadband deployment unless it created a definition of broadband. The FCC uses its definition of broadband to count the number of homes that have or don’t have broadband.

https://potsandpansbyccg.com/2023/07/28/too-little-too-late/

Section 706 is codified at 47 U.S. Code § 1302(d)(1), to define advanced telecommunications capability:

The term “advanced telecommunications capability” is defined, without regard to any transmission media or technology, as high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology. (Emphasis added).

"Broadband" isn’t defined in the statute. As Dawson notes, the FCC has attempted to define it over the past three decades, distinguishing it from narrowband dialup connectivity commonplace when the 1996 law was enacted. This created sluggish dialup as an anchor, making a commercial market in incremental improvements over dialup sold as an upgrade at a price premium. The more bandwidth, the larger the upgrade and the higher the price.

That market has become firmly entrenched, creating a perception of bandwidth scarcity and digital exclusion leading to what is now termed the “digital divide:” a split between those who can order and afford to pay for sufficient bandwidth to access “high-quality voice, data, graphics, and video telecommunications” referenced in the law and those who cannot – typically those living where the commercial return on infrastructure investment is insufficiently profitable in the broader market context. The commercial market in incremental bandwidth improvements reinforced the FCC policy Dawson describes as both are based on the metric of incremental bandwidth gains.

Supporting this circumstance is the lack of an affirmative policy to modernize copper to fiber to the premises connections. The technology came about two decades before the emergence of the mass market Internet.

First developed in the 1970s, fiber-optics have revolutionized the telecommunications industry and have played a major role in the advent of the Information Age.[7] Because of its advantages over electrical transmission, optical fibers have largely replaced copper wire communications in backbone networks in the developed world.[8]

https://en.wikipedia.org/wiki/Fiber-optic_communication

Legacy telephone companies built on copper developed for carrying analog voice telephone service saw fiber’s potential to deliver high-quality voice, data, graphics, and video telecommunications. By the early 1990s, they planned to replace their legacy copper with fiber to support the rollout of video services. But they opted not to make the transition, instead investing in more readily profitable mobile wireless services according to industry analyst Bruce Kushnick. They included NYNEX, the regional bell operating company created after the 1982 court ordered breakup of AT&T that was rebranded as Verizon. Verizon’s copper to fiber transition was short lived, from 2005 to 2010.

AT&T likely to seek BEAD subsidies for fixed wireless serving “extremely high cost” locations

WASHINGTON, July 26, 2023 – AT&T is set to be competitive in the $42.5 billion Broadband Equity Access and Deployment subgrant process, said CEO John Stankey during the company’s second-quarter earnings call Wednesday, adding fixed-wireless technology will be key to connecting hard-to-reach areas using the subsidies.

* * *
Stankey estimated that fixed-wireless services will be in demand following the allocation of BEAD funds despite the program’s preference for fiber connection, saying that fixed-wireless is the only way to connect every address in hard-to-reach geographies. He expects that AT&T’s fixed-wireless offerings will be a competitive offer in broadband builds for decades to come.

https://broadbandbreakfast.com/2023/07/att-expects-fixed-wireless-itself-to-be-competitive-in-bead-applications/

AT&T appears to be targeting fixed wireless access (FWA) to what are defined in the NTIA’s BEAD program guidance as “extremely high cost” locations. Those are addresses where deploying fiber would exceed a subsidy amount threshold “above which (a state) may decline to select a proposal if use of an alternative technology meeting the BEAD Program’s technical requirements would be less expensive.” (Given materials and more recently labor pool constraints, those costs are likely to be considerably higher than they would have otherwise been with a more timely and orderly migration from copper to fiber.)

Those technical requirements define “reliable” service by throughput (at least 100/20Mbps with latency less than or equal to 100 milliseconds) as well as delivery infrastructure (fiber, hybrid fiber-coaxial technology; digital subscriber line (DSL) technology or terrestrial fixed wireless technology utilizing entirely licensed spectrum or using a hybrid of licensed and unlicensed spectrum).

For extremely high cost locations, BEAD program guidance allows states to choose fiber alternatives involving a less costly technology for that location “even if that technology does not meet the definition of Reliable Broadband Service but otherwise satisfies the Program’s technical requirements.” (Emphasis in original)

That gives those proposing FWA-based BEAD deployments an out. However, as Doug Dawson writes at his POTS and PANS blog, the quality of fixed wireless service varies considerably based on the distance from the radio transmitting it and the amount of mobile wireless traffic. In addition, the challenging topography likely to exist in extremely high cost locations as well as tall trees pose propagation challenges to line of sight FWA signals.

Stankey acknowledges these limitations as he was quoted in this Light Reading analysis:

"It's going to be key in certain parts of our consumer segment as we work through the next phase of our cost-reduction efforts," Stankey said. "It is [also] a means for us to begin finding a good catch to shut down other infrastructure and still serve customers." He added that one big caveat is ensuring that there's ample wireless capacity for Internet Air to deliver the kinds of speeds that customers require.

As for shutting down “other infrastructure,” Stankey is apparently referring to its legacy copper outside plant built for voice telephone service. AT&T is petitioning state telecom regulators to relieve it of Title II Carrier of Last Resort requirements in high cost areas to get out from under the high cost of maintaining this deteriorating, decades old delivery infrastructure. They mandate telephone companies provide landline voice service over the legacy copper to all customers requesting it.

Analysis: Timid, fearful public policymakers led to U.S. telecom infrastructure deficits

Politicians and regulators talk a lot about how they want to “bridge the digital divide.” But most of them lack the political courage to correctly identify why that divide still exists in 2023: regional telecom monopolies, protected by corrupt state and federal politicians, that have worked tirelessly over thirty years to consolidate power, crush all meaningful competition, and jack up the cost of service.

After FCC Debacle, Gigi Sohn Shifts Focus To Challenging Comcast, AT&T With Community-Built Broadband Networks

The cited lack of political courage is counter cultural and ahistorical. Americans have history dating back to the founding of the nation of mustering backbone, standing up to bullies and saying no. Appears their elected representatives better find that backbone -- and soon. Or they'll have something to truly fear: angry constituents and voters inclined to boot them from office.

Frustrated by decades of monopoly dysfunction, towns and cities all over the country have decided to build their own networks, whether it’s municipal, built on the back of city-owned power utilities, or via cooperatives. There’s a lot of very cool stuff happening in this space that was supercharged by the peak COVID frustration with unreliable broadband and home schooling.

Utilities function as a natural monopoly. The dysfunction is the result of flawed public policy that regards advanced telecom as a competitive market, defined as one having many sellers and buyers with relatively equal access to information on costs and value. Without the framework for a competitive market and the operation of market forces, public and cooperative ownership is not only superior but necessary. And it shouldn't just be individual communities. The scope should be regional such as Utah's UTOPIA Fiber in order to generate more favorable economies of scale, crucial now amid tight material and labor markets.