FCC Expands CAF Definition of Broadband Subsidy-Eligible Areas - 2013-05-22 22:48:29 | Broadcasting & Cable

FCC Expands CAF Definition of Broadband Subsidy-Eligible Areas - 2013-05-22 22:48:29 | Broadcasting & Cable

Summed up, this subsidy program designed to underwrite the cost of building telecommunications infrastructure in high cost areas is ineffective.  Telcos won't apply because they don't want to fully serve these areas and complain the subsidy amounts are too low.  And even if they did want the money, they have to fight cable companies ineligible for the funding (derived from a surcharge on telephone bills) that claim the telcos are upgrading their infrastructures in order to steal their customers.

This circumstance only adds to the argument that communities and particularly those with lower population densities can't expect legacy providers to serve them.  They must build their own publicly and cooperative owned and operated fiber networks.

Light Reading - Google Fiber's Future Looks Limited

Light Reading - Google Fiber's Future Looks Limited: Google is destined to remain a small player in the broadband service market, unable to dislodge cable companies such as AT&T Inc. and Comcast Corp., according to analyst Dexter Thillien of IHS iSuppli.

Outside of a few select metro areas, the costs and risks get too high for Google Fiber's 1Gbit/s broadband service, Thillien writes in a report issued Tuesday.

IHS is not the first to warn against expecting Google to light up fiber across the nation. Last month, analysts at Alliance Bernstein said in a report that they remained "skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the U.S., as costs would be substantial, regulatory and competitive barriers material, and in the end the effort would have limited impact on the global trajectory of the business."

These analyses affirm recent posts on this blog casting doubt on the irrational exuberance of some who believe Google is going to overbuild metal wire-based incumbent telephone and cable company footprints with fiber.  It might make sense on the surface as somnolent incumbents have placed their wireline plant into "harvest" mode (in the case of the cablecos) and runoff mode (telcos).

But as deep as its pockets are, Google simply can't afford anything other than one off, opportunistic builds. And the incumbents can't undertake massive fiber infrastructure CAPex using grandma's shareholder dividend.  As I've been saying for several years, that leaves it up to communities to build their own municipal or cooperatively owned fiber networks.

Verizon Hopes to Nudge Some From Wired to Wireless - NYTimes.com

Verizon Hopes to Nudge Some From Wired to Wireless - NYTimes.com

This story illustrates why communities must build their own fiber networks.  The incumbents like Verizon aren't going to do the job.  As the story notes, that leaves residents and business owners with lousy options:  poor voice quality over garbled wireless premises phone service that can go out in a prolonged power failure and data capped satellite Internet service.

Former FCC Chairman and GTCR Fund See Strong Rural Cable Future

Former FCC Chairman and GTCR Fund See Strong Rural Cable Future: Former FCC Chairman Reed Hundt hopes this week’s acquisition of tier 2 cable company NewWave Communications by investment firm GTCR will be “the first of many.” Telecompetitor spoke this week with Hundt, who headed up the FCC during the Clinton administration and is now an advisor to GTCR.“We believe cable is the universal American communications medium,” said Hundt. “Cable is the essential connection for everyone, especially in rural America.”

 The Telecompetitor article continues:

GTCR’s strategy is interesting, considering that service providers have had difficulty finding a business case for deploying broadband in some rural areas – particularly as distances from population centers increase.

When I asked Hundt about that he said, “Technology keeps producing breakthroughs.”

Indeed it does.  But has it reduced the labor costs associated with deployment and maintenance of wireline Internet infrastructure, which rule of thumb estimates place at about 70 percent of the total?  I haven't heard of of any such technology breakthroughs unless Hundt is talking about using drones to spool and drop cable from the sky and robots to bury and install it on poles.

AT&T CEO: We'll piggyback on Google's Fiber rollout plans | Mobile - CNET News

AT&T CEO: We'll piggyback on Google's Fiber rollout plans | Mobile - CNET News

More mutually assured diminished returns threatened by AT&T.  Ma Bell is basically saying she will overbuild Google to obtain a slice of picked over cherry pie, leaving each competitor serving 15 percent of the premises passed at best.

This should put to rest the hopeful, magical thinking of some who claim Google is somehow going to goad legacy telcos to undertake a broad-based upgrade of their obsolete last mile copper plant to fiber.  Not in this lifetime and not with grandma's shareholder dividend.

Businesses Lining Up for Service in Longmont, FTTH Build-Out Studied | community broadband networks

Businesses Lining Up for Service in Longmont, FTTH Build-Out Studied | community broadband networks: If LPC wants to pursue a triple play offering, Uptown estimates it would cost another $6 million. At this point, LPC does not consider triple play a good investment:

"The young generation that's active now, they don't watch TV in the conventional way," Jordan said. At a recent presentation, he said, when he asked a college student how often he watched traditional scheduled TV programming, the response was "Never."

The implication here is the subscriber television channel Internet service offering is losing its appeal going forward with the changing viewing habits of younger adults.  This is a potentially huge disruption of the current business models of both incumbent cable providers and telcos offering TV in service bundles like AT&T's U-Verse product.  It's also very disruptive of the TV advertising business model that has traditionally targeted younger adults.  

California lawmakers revise legislation governing Internet infrastructure subsidy program

California lawmakers are scaling back a previously proposed increased appropriation for the state’s broadband infrastructure grant and loan subsidy program. As amended this week, SB 740 would also redefine the policy goal of California Public Utilities Commission’s California Advanced Service Fund (CASF) to fund projects to ensure broadband access to at least 98 percent of California households by 2016. SB 740 would also prioritize funding for those areas of the Golden State deemed to be “unserved.” The CPUC has defined this to mean “an area that is not served by any form of wireline or wireless facilities-based broadband, such that Internet connectivity is available only through dial-up service or no broadband service can be identified.”

From a practical perspective, this means only modest wireless Internet infrastructure projects will be subsidized by the CASF since unserved areas per the CPUC’s definition are likely to be very thinly populated. These will also likely be very low budget projects per the CPUC’s decision to require project sponsors kick in 30 percent of the project costs for unserved areas.

The CPUC has also written the CASF rules to discourage community fiber builds by allowing projects in “underserved areas” only if the area has no wireline or wireless service offered at advertised speeds of at least 6 mbps download and 1.5 mbps up. That means an area that is only partially served by an existing wireline providers could not be overbuilt to fill in the coverage gaps. Under the rule, such project would also not qualify since wireless providers could merely advertise service at the minimum speeds, further slicing and dicing a potential fiber service area such to render the project ineligible under the rules. On top of that, the rules require community fiber project sponsors to kick in 40 percent of the project costs – an onerous burden for newly formed entities.

The upshot is California policymakers will end up going through the motions and the CASF monies left largely unspent as sizable areas of the state unserved by the incumbent telephone and cable companies are consigned to technologically substandard, low value Internet service options.

Google Project May Spur Broadband Competition - NYTimes.com

Google Project May Spur Broadband Competition - NYTimes.com

The take away from this story is it's highly unlikely incumbent telephone and cable companies will upgrade and build out their infrastructures to provide better Internet connectivity and serve more premises.  It makes more business sense for them to preserve the status quo and harvest whatever profits can be had from their existing cable plants. Particularly given the fact that the legacy incumbents pay fat dividends to their shareholders. Google pays none.

The NY Times piece postulates it will take an third party like Google to break the inertia.  But Google thus far is pursuing fiber builds in only a few metro areas of the United States including Kansas City and Austin and lacks a strategy to serve the nearly 20 million Americans forced to live off the Internet grid because the incumbent telcos and cablecos won't serve their homes.  These areas will have to rely on good old fashioned American self help and build fiber to the premises infrastructure operated by local governments and consumer cooperatives as was done in much of the nation in the 1930s and 1940s for electricity and telephone service.

There's also the sheer enormity of the financial challenge that would test the resources of even the deepest pocketed players like Google.  In 2009, the U.S. Federal Communications Commission projected it would cost $350 billion to universally deliver 100 Mbps or faster Internet connections to all American homes and businesses.  That's more than the sum of Google's 2012 revenues.

California PUC-created nonprofit warrants review

Today’s Sacramento Bee reports on the increased legislative scrutiny being applied to the California Public Utilities Commission and whether it is adequately fulfilling its mission of ensuring safe and reliable utility service.

According to the Bee, a California Senate committee is requesting that the state’s Fair Political Practices Commission investigate nonprofits established by the PUC for “possible conflicts of interest or bequesting violations” including the California Emerging Technology Fund (CETF).

Lawmakers should also look into whether the CETF is fulfilling its stated mission “to close the ‘Digital Divide’ by accelerating the deployment and adoption of broadband to unserved and underserved communities and populations.”

A review of the CETF website, its annual reports and a summary of 2013 grant investments shows no funding awarded to advance the direct, tangible deployment of advanced telecommunications infrastructure to serve residential premises despite findings by a state broadband task force in 2008 that nearly 2,000 California towns and communities lack broadband access.

Without the infrastructure for broadband access, promoting its adoption is putting the cart before the horse and nothing more than window dressing. This is policy failure piled on top of market failure.

WISP targets incumbent wireline providers

An El Dorado County, California Wireless Internet Service Provider (WISP) is challenging incumbent telephone and cable providers in a small, suburban segment of the county.

Cal.net's "Urban Wireless Internet" is offered at a flat $40 monthly fee with no contractual commitments -- clearly aimed at undercutting the triple play bundle pricing of the incumbents.  The service offering claims asymmetrical connectivity of 15 Mbs down and 3 Mbs up. There's a $95 installation fee.

FTTN: An alternative Google fiber model to build out Internet infrastructure

Google has been getting a lot of attention lately over its current and planned fiber to the premise (FTTP) builds in Kansas City, Austin, Texas and potentially Provo, Utah. But Google is unlikely to expand that model to the outer suburban, exurban and rural areas of the United States anytime soon for the same reason the incumbent telephone and cable companies have declined to do so: too few potential subscribers to justify the business case for the sizeable investment.
 

However, Google may be able to make the numbers pencil better with a fiber to the node (FTTN) network in these unserved and underserved areas, mixing in aerial fiber cable plant where the cost of burying fiber conduit is overly expensive. Using the FTTN model described in this November 2008 white paper, Google would bring Internet “trunk” connections to neighborhood nodes.  Property owners could join together in a telecom cooperative – compared to a condominium in the paper -- to build the final fiber segment to bridge the gap from their premises to the neighborhood nodes.  The cost of the construction for those projects in rural areas can be financed by low cost, long term loan funding offered by the federal Rural Utilities Service.

The paper notes the property owners would economically benefit given research showing adding a fiber “tail” to a residential property increases its marketability, thereby allowing property owners to recoup and potentially profit from any upfront investment they would have to make to fund the cooperative and get wired up.

It’s worth noting that although disclaiming official representation of Google, the white paper titled Homes with Tails: What if you could own your Internet connection? is co-authored by Derek Slater, a Google policy analyst. Back when Slater wrote the paper, Google wasn’t in the fiber infrastructure business. Now that it is, Google management would be well advised to dust off Slater’s paper and give it another look.

Look Out Google Fiber, $35-A-Month Gigabit Internet Comes to Vermont - Digits - WSJ

Look Out Google Fiber, $35-A-Month Gigabit Internet Comes to Vermont - Digits - WSJ: VTel’s Chief Executive Michel Guite says he’s made it a personal mission to upgrade the company’s legacy phone network, which dates back to 1890, with fiber for the broadband age. The company was able to afford the upgrades largely by winning federal stimulus awards set aside for broadband. Using $94 million in stimulus money, VTel has invested in stringing 1,200 miles of fiber across a number of rural Vermont counties over the past year. Mr. Guite says the gigabit service should be available across VTel’s footprint in coming months.

VTel joins an increasing number of rural telephone companies who, having lost DSL share to cable Internet over the years, are reinvesting in fiber-to-the-home networks.

As Google targets large metro areas of the United States for fiber rollouts, small incumbent local exchange carriers (ILECs) like this one are upgrading their outmoded copper cable infrastructure with fiber to the premise (FTTP). Nevertheless, significant gaps will remain, particularly in areas of the U.S. served by top tier telcos like AT&T and Verizon that have essentially put their copper networks into runoff mode with no plans to upgrade them with fiber plant as they concentrate their CAPex on mobile wireless services.  Due to their smaller populations, these areas are also unlikely to attract Google fiber and will have to build their own community-based FTTP networks.

Google's Fiber Takeover Plan Expands: Will Kill Cable & Carriers

Google's Fiber Takeover Plan Expands: Will Kill Cable & Carriers - Google is going to kill AT&T, Verizon, Sprint, T-Mobile and the cable companies. Kids don’t talk on the phone and they don’t have a ton of money. If they can be reasonably sure they’ll have a wifi network, then they are simply not going to sign up for AT&T or Verizon.

It’s game over... in five short years.

This hyped up prediction calls for a reality check.  In 2009, the U.S. Federal Communications Commission projected it would cost $350 billion to universally deliver 100 Mbps or faster Internet connections to all American homes and businesses, which would like Google's 1 Gigabit service would require fiber to the premise infrastructure. (Consider when the FCC issued this cost projection in September 2009, 100 Mbps was considered the gold standard for Internet throughput -- just one tenth of what Google fiber delivers.)

Assuming minimal change in the cost of deployment -- about 70 percent being labor -- that sizable sum would require Google to expend an average of $70 billion each of the five years -- $20 billion more than Google's reported revenues for 2012.  If this article's prediction were to become reality, Google would have to joint venture with other deep pocketed players since it alone could not hope to singlehandedly render the nation's cable and telephone companies obsolete in the span of just half a decade.

Google chooses Provo, Utah, as next city to receive search giant's ultra-fast Internet service | Fox News

Google chooses Provo, Utah, as next city to receive search giant's ultra-fast Internet service | Fox News: The rollout is an expensive undertaking and gamble for Google, which hopes it will drive innovation and pressure phone and cable companies to improve their networks. Google benefits when people spend more time online.

The "pressure phone and cable companies to improve their networks" rationale is  repeatedly made in media accounts to explain Google's fiber to the premise (FTTP) builds in some metro areas of the United States.  But is it really true, notwithstanding AT&T's pyrrhic posturing in Austin, Texas?  It implies the incumbent cable providers and telcos are somehow reluctant to improve their networks.  But upgrading their networks is how they can capture more customers and sell more services.  If doing so generated sufficient revenues and profits, they would do it without hesitation, Google or no.  The issue is their business models don't have sufficient funding for large scale capital expenditures on new plant and equipment.  And no one has yet devised a way to more cheaply deploy fiber to the premise Internet infrastructure -- of which an estimated 70 percent of the cost is labor.

Another major issue overlooked in media accounts of the Google FTTP builds is they don't address the large gaps in Internet access that the U.S. Federal Communications Commission in 2012 estimated leave about 19 million Americans offline.  The reason they don't is Google shares the same limitations of the investor-owned business model as the incumbent cablecos and telcos that cannot profitably serve areas that remain disconnected and still accessing the Internet via obsolete, circa 1993 dialup connections and satellite Internet.

Dish Network Offers To Buy Sprint In $25.5 Billion Deal

Dish Network Offers To Buy Sprint In $25.5 Billion Deal: For years, Dish has been able to grow rapidly by luring cable TV subscribers with better deals. But its subscriber numbers have been flat for the past three years. Unlike TV cables, satellite dishes aren't good conduits for Internet access. That means that Dish and larger rival DirecTV have been left behind in the rush to connect homes to broadband, while cable has been able to retain customers by offering TV, Internet and phone bundles

Nor are mobile wireless networks good "conduits" for premises Internet access.  This is a move of desperation on the part of Dish Network.  The trend is toward high capacity, low latency premises Internet service delivered via cable or optimally, fiber optic infrastructure.  Both the satellite TV providers and the dedicated satellite Internet providers such as HughesNet are caught on the wrong side of the trend and face a limited future.

Deterrence: AT&T launches pyrrhic war of mutually assured diminished returns against Google

On the heels of Google's announcement it will build fiber to the premise (FTTP) Internet infrastructure serving the Austin, Texas area, AT&T announced it will build its own 1 gigabit FTTP infrastructure to match Google's.

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. 

Holy disruption, Batman! Tech upstarts threaten TV broadcast model | Reuters

Tech upstarts threaten TV broadcast model | Reuters

Around the time television began to reach most U.S. homes in the 1940s and 1950s, cable TV came into being with CATV (Community Antenna Television), using a single large antenna to pull in and pipe weak, distant TV signals via cable into communities at the fuzzy, snowy edges of metro area TV broadcast signals.

Now just as it has distributed broadcast radio from all over the globe for the past decade and longer, the Internet is becoming a global CATV of sorts, capturing broadcast signals over thousands of antennas, according to this Reuters dispatch.  

This poses a major disruptive threat to the business models of paid cable TV and satellite featuring packages of hundreds of channels. Not to mention over the air TV broadcasters that have invested large sums to upgrade to digital TV broadcast equipment and transmitters with the end of analog TV broadcasts.

As the late mass communications theorist Marshall McLuhan wrote of television in its 1964 heyday, "The medium is the message." Now that medium is no longer TV.  It's the Internet.