Housing development -- not geographical region -- key determinant of fiber deployment

One of the biggest challenges America has faced over the past two decades resolving its entrenched advanced telecommunications infrastructure deficiencies -- and specifically homes and small businesses where copper telephone lines have not been upgraded to fiber -- is how this nationwide challenge is defined.

The problem tends to be delineated in geographic terms as a modifier to throughput (versus infrastructure), e.g., “urban broadband” and “rural broadband.” This bifurcated geographic focus also drives misguided, ill-fated efforts to “broadband map” regions by census tract based on throughput providers report to the Federal Communications Commission.

It’s often inaccurately compared to electrical power infrastructure in early 20th century America. Electrical power distribution infrastructure fell rather neatly along urban and rural lines in a far less populated nation, with the former electrified while the latter went unwired until the federal government stepped in with loans for consumer utility cooperatives.

Disparate deployment of fiber is far more granular than these regional distinctions. The key determinant isn’t so much whether a region is urban, suburban or exurban. Rather, it’s the type of neighborhood development that exists or is planned over the next five years. New and dense development is favored for fiber builds. Older and less dense is not, even in relatively affluent neighborhoods.

Large ISPs have specialized units dedicated to bringing fiber to multi-family housing and planned unit development neighborhoods. They advertise in a trade journal aptly titled Broadband Communities. Investor-owned providers aren’t likely to build fiber outside of these preferred forms of residential development since they are believed to represent greater assurance of faster returns on investment their shareholders expect. In an article appearing in the January-February 2021 issue of the publication, Jeff Storey, CEO of Lumen, was quoted as telling industry analysts in late 2020 the telephone company will be "micro-targeting in selecting the areas we serve.” 

While that's a prudent strategy to satisfy investors, it clashes with public expectations of access to robust home connectivity regardless of their home address, which by definition isn't likely to be part of a "micro-targeted" fiber deployment.

That’s where the Biden administration’s infrastructure proposal, the American Jobs Plan, comes in to address public expectations that have been conveyed to elected representatives. It would appropriate $100 billion for fiber infrastructure to be deployed by local governments, nonprofits and consumer cooperatives. Notably, the administration’s proposal explicitly recognizes these entities are not expected to generate rapid returns for investors and offer a much needed alternative business structure to ensure fiber is deployed to homes not preferred by investor-owned providers.

Public option advanced telecommunications infrastructure is NOT market competition

This piece by Bloomberg Law repeats the common misconception that advanced telecommunications infrastructure owned by nonprofit consumer cooperatives and public sector entities equates to market competition with incumbent investor-owned providers. 

It’s wrong on two counts. First, advanced telecommunications infrastructure is by definition not a competitive market in which many sellers compete for the business of many buyers. It’s a natural monopoly because high-cost barriers to entry and first mover advantage keep out would be competitors.

Second, consumer cooperatives and public sector providers aren’t formed to gain market share from other sellers. They are created in response to sell side market failure because in a natural monopoly, there isn’t sufficient incentive for multiple sellers to enter the market and compete. That leaves buyers without options and at the mercy of monopoly providers. Government and cooperative owned networks are formed to provide a public option to remedy private market failure.

Why is properly framing government and consumer cooperative owned networks important? It’s very important from a public policy and regulatory perspective. Incumbent providers complain public option providers constitute “unfair competition” because they don’t have to reward investors and enjoy income tax exemptions. The playing field isn’t level, they complain. But it was never a level competitive playing field in the first place, rendering the incumbents’ position moot.

Three propitious elements of Biden administration’s infrastructure proposal

There are three propitious elements relating to advanced telecommunications infrastructure in the Biden administration’s American Jobs Plan asking Congress to invest trillions of dollars in America’s aging infrastructure. As the plan is drafted into legislative language, it is critical these elements be more clearly defined. The administration wants to turn a new page, with an infrastructure reboot for the 21st century as its chief legacy. But in order to do so, it must avoid past references that will make it harder to turn the page and quickly move to a new future.

This paragraph from the White House fact sheet on the proposed plan hits on the key infrastructure policy proposals:

Build high-speed broadband infrastructure to reach 100 percent coverage. The President’s plan prioritizes building “future proof” broadband infrastructure in unserved and underserved areas so that we finally reach 100 percent high-speed broadband coverage. It also prioritizes support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to turn profits and with a commitment to serving entire communities.

The first of the three positive elements is mentioned in the first sentence: “future proof” infrastructure. That is widely interpreted to mean replacing outdated copper telephone lines that reach nearly every American doorstep with fiber. Only fiber has the capacity to keep up with future growth in applications and services that require ever greater amounts of carrying capacity. Legislative language implementing the administration’s plan should set an explicit fiber to the premises (FTTP) infrastructure standard.

The second positive element is in the paragraph title: “100 percent coverage.” In other words, universal service like that achieved with voice telephone service by the latter half of the 20th century. That’s one of the most positive aspects of the plan given America’s checkered crazy quilt of some neighborhoods having landline advanced telecommunications infrastructure reaching all premises while adjacent ones even less than a mile away do not. It will be critical the legislative language incorporate a universal service standard by classifying fiber delivered IP protocol-based telecommunications as a common carrier utility under Title II of the Communications Act.

The administration’s proposal also refers to prioritizes building advanced telecommunications infrastructure in “unserved and underserved areas.” This is a potential minefield that could bog down a future bill implementing the plan given long running debates over the definition of unserved and underserved areas. Enabling legislation should avoid these or similar terms relative to prioritizing spending.

The third and related salubrious piece of the administration’s proposal recognizes that investor owned providers aren’t up to the goal of universal service. Expecting them to finance, own, build, operate and maintain advanced telecommunications infrastructure demands too much from their shareholders and violates their expectations for robust earnings and dividends. It’s long past time to abandon total reliance on them to build the infrastructure the nation needs.

Consistent with a universal FTTP infrastructure standard, legislation should create a “public option” and support the construction of “networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to turn profits and with a commitment to serving entire communities.” Many of these entities have already begun to plan and deploy FTTP networks and are properly prioritized in the administration’s proposal.

ITIF grossly misrepresents nature of advanced telecom infrastructure -- a natural monopoly-- as competitive market

WASHINGTON—Following the Biden administration’s budget plan today, announcing a $100 billion investment over the next eight years to deploy broadband throughout rural America, the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, released the following statement from ITIF Director of Broadband and Spectrum Policy Doug Brake:

Biden’s broadband infrastructure plan goes overboard and threatens to undermine the system of private competition that successfully serves most of the United States.  

No doubt, the United States sorely needs subsidies for rural broadband, but this isn’t an area to turn all the dials up to 11.

If not properly targetted, such a large investment risks undermining incentives for private capital to invest even where it can do so profitably, which ultimately erodes the engine of innovation for next-generation connectivity.

https://itif.org/publications/2021/03/31/biden-broadband-plan-goes-overboard-and-threatens-undermine-private

This is a gross misrepresentation. Telecommunications infrastructure does not and cannot practically function as a competitive market. High cost barriers and first mover advantage make it unfeasible to have multiple operators. If Brake's logic held and other utilities were a competitive market, Americans would have multiple electric, gas and water lines connecting to their homes, with each provider competing to have consumers choose their line. That's not the case because utilities function as a natural monopoly and not a competitive market.

It's also inaccurate to portray the nation's advanced telecom infrastructure deficiencies as limited to rural areas. They exist anywhere deemed insufficiently profitable by investor owned providers as the ITIF's statement suggests. 

 

Biden administration’s infrastructure initiative must reorder roles and responsibilities for advanced telecommunications

If the United States is to rapidly modernize its outdated copper telephone infrastructure to fiber optic lines reaching every American doorstep – the need for which became painfully apparent with pandemic public health restrictions that turned homes into offices, classrooms and clinics – it’s imperative the Biden administration’s infrastructure revitalization initiative reallocate roles and responsibilities in order to make that happen.

A major impediment has been expecting too much of legacy telephone companies. For the past three decades, advanced telecommunications policy has placed the burden on them to do it all: own, finance, design, build and operate. They simply lack the capacity to take on all five functions, even with subsidies to make financing easier. Subsidies haven't worked because unlike legacy voice telephone service where companies must provide connections to all homes requesting them, there is no regulatory incentive to utilize them.

Infrastructure requires billions of dollars. Investors in these companies aren’t willing to make those major investments unless they generate returns in five to six years. That limits them to dense urban and suburban neighborhoods and greenfield and multifamily developments, leavings others unfibered for the foreseeable. These companies also have highly leveraged balance sheets that limit their ability to finance construction even if their investors were more favorably inclined and willing to wait longer for financial paybacks or accept lower shareholder dividends.

These circumstances demand a reallocation of the five functions between the public and private sectors to get the nation to where it needs to be in the 21st century of digital, Internet protocol powered advanced telecommunications. The public sector and utility consumer cooperatives will have to take on finance and ownership and leave it to the investor-owned companies to do what they can reasonably be expected do and do best: design, build and operate -- and not own and finance. As the Biden administration introduces its proposed infrastructure revitalization program, this reordering of roles and responsibilities will be an essential component.

ITIF’s flawed stance on subsidization of advanced telecommunications infrastructure

The Information Technology & Innovation Foundation (ITIF) aptly notes that federal government subsidization of U.S. advanced telecommunications infrastructure has fallen short. Despite tens of billions in subsidies, the ITIF writes in a policy paper issued today, too many American homes lack connectivity. But the ITIF makes the common error of inaccurately defining the scope of the problem as “rural-urban.”

That ignores the fact that advanced telecommunications infrastructure deployment is far more granular. It’s no longer 1950 when most Americans lived either in cities or on farms. They now live in a variety of communities including exurbs at the edges of metro areas and small towns. Many are poorly served because large investor-owned telephone companies have modernized outdated copper lines designed for 20th century voice telephone service to fiber optic lines needed for the digital 21st for only about a third of homes in their service territories. They’ve largely skipped over homes in the exurbs and small towns and instead cherry-picked homes in more densely developed metro centers that better conform to their business models requiring rapid return on investment.

The ITIF correctly notes a major weakness of current U.S. advanced telecommunications infrastructure subsidization policy intended to support bringing service to every American doorstep (the Universal Service Fund) relies on an outdated formula designed for 20th century voice telephone service. It’s highly illogical because extracting subsidies from old technology in decline does not scale up to support the growth of Internet protocol-based technology that’s replacing it.

The ITIF indirectly argues against subsidies for fiber to the premises (FTTP) infrastructure, terming it an overly costly “gold plated” technology. The other side of that argument is subsidy dollars are best invested in delivery technology with life expectancies of multiple decades and not a single decade or less. As the adage goes, one can pay now or one can pay later. A major fault of American advanced telecommunications infrastructure subsidy policy has tended toward the later. The leaves ongoing infrastructure deficits the ITIF points out, requiring the indefinite, repeated need for additional subsidies. Policymakers didn’t subsidize copper telephone infrastructure that way, nor should they with advanced telecommunications infrastructure. Copper proved “future proof” for most of the 20th century as would fiber in the 21st.

Finally, the ITIF’s concern with the higher cost tradeoff of investing subsidy dollars in fiber over inferior and more obsolescence prone infrastructure fails to consider the inherit conflict of interest between investors and end users of advanced telecommunications infrastructure. Large investor-owned companies must answer first to their shareholders and are naturally sensitive to the cost of building and maintaining advanced telecommunications infrastructure. When cost considerations are brought to bear, households are likely to lose out in the calculation of how to apply subsidies. Particularly when subsidies are awarded without regulatory incentive – the universal service requirement that was put in place for legacy copper telephone service.

Shifting post-COVID-19 residential settlement trend requires new direction on advanced telecom infrastructure

COVID19 has opened our eyes to a new possibility.  Give people a choice of where to live – one that does not depend on where they make their living – and they vote with their feet for lower density, more green space and, most of all, for affordable costs. It has become clear that the celebrated “magnet cities” are threatened by their own success.  They are dangerously overcrowded.  They are vastly over-priced for all but the most over-paid.  That’s why San Francisco and Manhattan have only half the number of children per household as the US metropolitan average, while suburbs and exurbs have over one-third more.  Without kids, a community stagnates, even if it you can’t see it now.

The Intelligent Community Forum has been predicting for some time that the future belongs to small-to-midsize places with the broadband assets to fully participate in the global economy.  The internet is a distributed platform that offers equal access to those who can afford it regardless of location – as long as your location has good broadband. The unexpected gift of COVID19 is to show that this future possibility is real.  It is not where you live that determines your economic destiny.  It is how well connected you are and whether you have the education and skills to make the most of it.  Those are the issues that deserve our full attention as we recover from the first global plague of the 21^st Century.

https://www.benton.org/blog/whatever-happened-magnet-cities

America's current reliance on large investor owned companies to build and operate advanced telecommunications infrastructure has led very uneven, highly granular deployment and affordable access. These companies prefer to build infrastructure to serve dense housing development because their investors require rapid returns on capital investment. A higher concentration of homes better assures those rapid returns investors demand. 

As this article notes, demand for advanced telecommunications is heading in the opposite direction, toward less dense development, a trend that preceeds the pandemic. That has enormous implications for U.S. telecom policy and suggests a new direction is necessary, shifting away from reliance on large investor owned providers and toward alternatives. These include companies backed with patient investment capital more aligned with the high costs and slow ROI of infrastructure, regionally owned and operated public sector owned infrastructure and consumer cooperatives.

Congress and Biden administration have historic opportunity to reset American telecommunications policy.

Congress and the Biden administration have an historic opportunity to reset American telecommunications policy and put it on a more progressive path going forward. In 1996, Congress and the Clinton administration enacted the Telecommunications Act. It’s based on the goal of attaining higher throughput – referred to as “broadband” and “high speed Internet.” The statute become law at a time when it was decidedly sluggish and most Americans were “going online” with dialup modems connected to copper telephone lines designed and built to provide voice phone service in the early to mid-20th century.

A major flaw of the law is it failed to provide a clear policy framework to guide and speed the migration of that copper to fiber to deliver Internet protocol-based voice, data and video services in the 21st. Instead, the policy underpinning the 1996 law was “technology neutrality,” grounded in the hope that market competition would somehow deliver better throughput.

Twenty-five years later in the third decade of the new century as a pandemic has made homes into offices, classrooms and clinics, Americans continue to struggle with slow and unreliable connectivity and access and affordability challenges. Elected representatives are deluged with constituent complaints as policymakers unproductively argue over “broadband” speeds, maps and subsidies. It is exceedingly clear new policy direction is needed to ensure fiber reaches every American doorstep just as copper telephone line did in the previous century and that service is affordable.

A vignette that aptly illustrates America's troubled transition from copper to fiber

Jared Mauch, a senior network architect at Akamai in his day job, moved into his house in 2002. At that point, he got a T1 line when 1.5Mbps was "a really great Internet connection," he said. As broadband technology advanced, Mauch expected that an ISP would eventually wire up his house with cable or fiber. It never happened.

He eventually switched to a wireless Internet service provider that delivered about 50Mbps. Mauch at one point contacted Comcast, which told him it would charge $50,000 to extend its cable network to his house. "If they had priced it at $10,000, I would have written them a check," Mauch told Ars. "It was so high at $50,000 that it made me consider if this is worthwhile. Why would I pay them to expand their network if I get nothing back out of it?"

AT&T, the incumbent phone company, finally offered DSL to Mauch about five years ago, he said. However, AT&T's advertised plans for his neighborhood topped out at a measly 1.5Mbps—a good speed in 2002, not in 2020. AT&T stopped offering basic DSL to new customers in October and hasn't upgraded many rural areas to modern replacements, leaving users like Mauch without any great options.

 

This account is not atypical and illustrates how telecom infrastructure bogged down in the transition from analog voice telephone to digital Internet protocol (IP) services, leaving consumers in the lurch. And why cable TV companies can't be expected to fill the gap because they are in the entertainment business and not telecommunications.

California panel: Filling in fiber advanced telecommunications infrastructure gaps would cost $6.8 billion

An expert panel directed by California Gov. Gavin Newsom to develop a strategy to attain affordable universal access to advanced telecommunications estimates it would cost $6.8 billion to build passive optical fiber network infrastructure in support of that goal in areas of the Golden State where fiber hasn’t been deployed. The California Broadband Council’s Broadband Action Plan for 2020 – the first year of an iterative five year plan – notes America’s largest state has faced longstanding advanced telecommunications infrastructure deficits, which it terms a “complex and deep rooted” challenge.

“Providing fiber connectivity across California will take a long time, and require considerable investment from the state and the federal government,” the plan notes. It calls for Identifying alternative financing opportunities with government and philanthropic partners to maximize funding for new infrastructure. These include working with local governments to explore opportunities for public financing, including but not limited to bond instruments and alternative financial models and strategies such as making public infrastructure available for lease.

Appropriate role for legacy telcos, cablecos in advanced telecom infrastructure: design, build, operate. But not own.

Finish the Job of Connecting Every American

From COVID relief to budget decisions, take bold and decisive action to finish the job of connecting every American home, business and anchor institution to U.S. broadband infrastructure. Particularly amid a global pandemic, the fact that an estimated 18 million American homes do not have broadband access is unacceptable. Working together—public resources alongside private expertise, technology and networks—this is the most solvable of our nation’s leading challenges. Resources + political will = universal connectivity.

— SPECIFIC 100-DAYS ACTIONS —

• Advance legislation to rapidly and fully invest in the broadband infrastructure programs required to quickly and permanently close the digital divide in America. USTelecom members are ready to immediately go to work with government partners to build these networks, including fiber investment deeper into all corners of America

 https://spark.adobe.com/page/KDnqM9tW5sAo7/#finish-the-job-of-connecting-every-american

The partnership proposed by the industry group USTelecom for the first 100 days of the incoming Biden administration needs clarification that to ensure public funds are appropriately used to build advanced telecom infrastructure and bring fiber to every American doorstep, it should be publicly owned. Subsidies given to legacy incumbent telephone and cable companies since the 1990s have not remedied America's advanced telecom infrastructure deficiencies. Repeating more of the same would be poor public policy. USTelecom members can indeed play a role in this public-private partnership: to design, build and operate. But not own.

"Broadband vouchers" a misguided notion for expanding home Internet access

Remote work and learning during the pandemic compelled some lawmakers to get creative in expanding broadband availability. In Delaware and Alabama, state officials earmarked parts of their CARES Act funding to create broadband vouchers—monthly service rebates—for households with school-age children.

It’s an established way of expanding telecommunications access. For years, the FCC has disbursed monthly discounts to millions of low-income households through the “Lifeline” program. Voucher programs also have the potential to expand broadband availability and competition in underserved rural areas.

Broadband Breakfast: Brent Skorup and Michael Kotrous: Modernize High-Cost Support with Rural Broadband Vouchers

There are multiple problems with this concept. The most fundamental is it assumes U.S. telecom infrastructure deficiencies are due to buy side market failure. In fact, sell side market failure is responsible. The demand is there. For many years, households lacking landline Internet service have begged telephone and cable companies for connections, often to no avail and eventually giving up. (Lately, they've been barraging their elected representatives as the need for connectivity has grown more urgent). The main reason is these companies require rapid returns on investment in extending service to these homes. When analyzing the needed investment, net present value doesn't pencil. Tossing vouchers into the mix isn't likely to meaningfully improve the business case. 

In addition, unlike analog telephone service regulated under Title I of the Communications Act, Internet in the United States is regulated as an optional information service under Title II of the Act and not as a telecommunications utility with subsidies to connect homes in high cost areas. Consequently, there is no regulatory incentive to connect every home requesting service. 

Finally, to make service more affordable to low income households, regulated lifeline rates such as used for voice telephone service are an already existing mechanism to help achieve that. Vouchers wouldn't be needed with the proper regulatory policy in place.

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.

AT&T’s residential market shortcomings

 

As AT&T would have it, the telecommunications giant is enthusiastic about serving the residential market and connecting homes to fiber. AT&T Communications CEO Jeff McElfresh told a Bank of America Merrill Lynch TMT Conference in June 2020 the company will increase its investment in fiber connections. "We are laser-like focused on finding the most efficient path to expanding the footprint of our fiber offerings," McElfresh said. "It's a great business. It's got great margins. It's got great returns. There's nothing not to like about it, and we're going to lean into it."

McElfresh’s comments represent a turnabout from a year earlier, when AT&T downplayed its residential fiber ambitions and dismissed hundreds of field technicians after completing a limited build out to meet regulatory obligations attached to its acquisition of DirecTV. "That's behind us now," McElfresh’s predecessor John Donovan told FierceTelecom. "We'll continue to invest in fiber, but we'll do it based on the incremental, economic case. We're not running to any household target."

For single family home neighborhoods, AT&T makes residential fiber available only to discrete pockets, reports industry observer Doug Dawson. AT&T also markets residential fiber to multifamily dwellings that require less capital investment and produce comparatively faster returns. One analyst suggests AT&T is weak at executing fiber build outs, unable or unwilling to focus on the necessary details of neighborhood telecommunications infrastructure deployment. (Jim Patterson, Curing AT&T’s Sickness, 10/12/20) Other analysts point to high debt on AT&T’s balance sheet that constrains its ability to finance a broad move into residential fiber.

In less dense exurban and rural neighborhoods, AT&T is phasing out its legacy ADSL service, halting new connections as of October 1, 2020. In these areas, AT&T offers fixed wireless residential service over its 4G LTE mobile infrastructure but with throughput limited to a small fraction of what a fiber connection could handle. Dawson notes the company has not actively marketed the service (most likely to preserve limited radio spectrum at the same time the company encourages high bandwidth video streaming). Moreover, the company was notably absent among bidders for the FCC’s recently closed Rural Digital Opportunities Fund (RDOF) subsidy reverse auction.

Where AT&T is building fiber to serve enterprise consumers (via dedicated Ethernet) it is not generally investing in premise drops and field distribution equipment to serve adjacent single family home residential neighborhoods. According to an October 2020 report by the Communications Workers of America, the labor union representing AT&T line technicians, and the National Digital Inclusion Alliance, 63 percent of 1,500 line technicians surveyed report that AT&T is not installing splitting equipment to enable home connections even where a fiber backbone exists.

With little focus on residential fiber, AT&T is instead looking to gain revenues in the consumer segment from streaming video and mobile wireless offerings as it experiences a steady decline in linear TV subscribers, legacy and wireline delivered services, according to Zacks Investment Research.

Will a Biden administration back publicly owned advanced telecommunications infrastructure as a means of attaining universal access and affordability?

Should former Vice President Joe Biden be deemed the winner of the presidency and a Biden administration installed early next year, the campaign’s policy positions on advanced telecommunications infrastructure reveal the outlines of how the new administration might proceed.

The overarching policy choice is between continuing the laisse faire policy of the past three decades of regarding Internet protocol-based telecommunications as a commercial market of “broadband” bandwidth. Or recognizing advanced telecommunications infrastructure as essential infrastructure like electric power and roads and highways.

Integral to the latter policy is recognizing the broad socio-economic benefits of advanced telecommunications infrastructure, known in economics as positive externalities. They are described as external because they lie outside the narrow interest of commercial investors to extract profits and rents from selling broadband bandwidth in a natural monopoly landline market. Those external benefits – and the lack thereof considering the nation’s substantial access and affordability challenges -- have become very apparent with the public health restrictions and social distancing accompanying the SARS-CoV-2 contagion that converted homes into offices, classrooms and clinics.

Key to attaining the broader external benefits of advanced telecommunications infrastructure is that it be universally accessible and affordable. As well as public ownership of advanced telecommunications infrastructure that eliminates the inherent conflict between the broader public interest and the narrow interest of investors to build it only where there’s a strong business case. What do the Biden campaign’s positions signal on these issues?

Biden’s campaign calls for “universal broadband access” as part of an initiative to modernize transportation and water infrastructure. Biden also recognizes the socio-economic benefit of universally accessible and affordable advanced telecommunications infrastructure:

“As the COVID-19 crisis has revealed, Americans everywhere need universal, reliable, affordable, and high-speed internet to do their jobs, participate equally in remote school learning and stay connected. This digital divide needs to be closed everywhere, from lower-income urban schools to rural America, to many older Americans as well as those living on tribal lands. Just like rural electrification several generations ago, universal broadband is long overdue and critical to broadly shared economic success.”

However, Biden does not explicitly call for publicly owned advanced telecommunications infrastructure as he has to improve access and affordability for non-group medical plans with a government operated “public option” plan. The Democratic Party campaign platform recommendations that Biden and Sen. Bernie Sanders jointly authored after Biden emerged as the Democratic Party presidential nominee calls for preempting state laws that prohibit municipalities and rural co-ops from building publicly-owned broadband networks and for increased federal support for municipally owned networks.

Should a Biden administration take office in January, it bears watching to what extent it supports publicly owned advanced telecommunications infrastructure as a means of attaining universal access and affordability.

Distinguishing between edge content provider market power and natural monopoly of telecom distribution infrastructure

The Tech Antitrust Problem No One Is Talking About | WIRED: 

After years of building political pressure for antitrust scrutiny of major tech companies, this month Congress and the US government delivered. The House Antitrust Subcommittee released a report accusing Apple, Amazon, Google, and Facebook of monopolistic behavior. The Department of Justice filed a complaint against Google alleging the company prevents consumers from sampling other search engines. The new fervor for tech antitrust has so far overlooked an equally obvious target: US broadband providers. “If you want to talk about a history of using gatekeeper power to harm competitors, there are few better examples,” says Gigi Sohn, a fellow at the Georgetown Law Institute for Technology Law & Policy.

When it comes to antitrust, it's important to distinguish between FAANG edge content providers and commercially owned and operated advanced telecommunications infrastructure. The major difference is the former isn't a natural monopoly. However, landline telecom infrastructure that connects to customer premises functions as a natural monopoly due to high capital cost barriers and long duration return on investment that tends to keep would be competitors out. Moreover, competition among multiple sellers isn't economically rational as Investopedia describes:

Multiple utility companies wouldn't be feasible since there would need to be multiple distribution networks such as sewer lines, electricity poles, and water pipes for each competitor. Since it's economically sensible to have utilities operate as natural monopolies, governments allow them to exist. However, the industry is heavily regulated to ensure that consumers get fair pricing and proper services.

In other words, competitive market forces cannot function to ensure access and value in a natural monopoly market. Both are frequently missing in advanced telecom distribution infrastructure, with uneven access due to sell side market failure.  

Antitrust assumes competition is possible and thus is intended to check a seller from attaining too much market power and promote competition. But it's an impossible undertaking in natural monopoly market like advanced telecom distribution infrastructure where competitive market forces don't come into play.

"Better Than Nothing," Starlink satellite service illustrates bankrupt U.S. telecom infrastructure modernization policy

Texas Schools Partner With SpaceX on High-Speed Internet: After schools shut down in March due to COVID-19, a survey of families in ECISD found that 39 percent did not have internet access in their homes, or had limited internet access. "Right behind me, you are looking at the community of Pleasant Farms that has very limited broadband service. We have children; we have families; we have educators living in this community and having the internet in their home is extremely difficult, if not impossible. But because of Space X and their Starlink technology, they are right now circling a series of satellites above this area and they will beam a high-quality broadband signal to our families, providing high-quality, high speed broadband access so our children can continue the learning process ...," Muri said. Muri said ECISD has worked diligently with the local community and state officials to explore opportunities for students, but also looking long-term. "Short-term solutions are not the answer," Muri said. "We need solutions that provide permanent solutions, permanent opportunities for kids not only in ECISD but across our state and across our nation ..."

Scott Muri, superintendent of a Texas school district, is right. Short term gee whiz approaches like this don't provide the long term telecommunications infrastructure needed on the ground -- namely fiber to the premise (FTTP). It's a logical progression from legacy copper telephone infrastructure that has gone off the tracks, leaving Americans grasping at “Better Than Nothing” solutions as the Starlink satellite service is dubbed.

New eBook: U.S. Telecom Infrastructure Crisis: America’s botched modernization of copper to fiber -- and the path forward

 

In 2020 as public health restrictions due to the coronavirus pandemic suddenly converted millions of American homes into offices, classrooms and medical clinics, the nation’s accumulated deficits in advanced telecommunications infrastructure and related challenges of access and affordability that had been in place for years reached a crisis point.

The root of the problem is a failure of planning and policy over the past quarter century to ensure decades old copper telephone lines that reach every American doorstep were modernized with fiber optic lines to support Internet delivered digital telecommunications. The nation lacks a comprehensive, coordinated transition plan and relies on various underfunded, piecemeal efforts.

The cause of the failure: public policymakers focused on the wrong thing: incremental gains in “broadband” speed instead of replacing the copper with fiber beginning a generation ago. With the enactment of the 1996 Telecommunications Act, policymakers erred in assuming fiber would be just one of several technologies that would compete with copper rather than pursuing a deliberate policy to ensure the timely replacement of copper with fiber.Consequently, fiber reaches less than a third of American homes in 2020. That’s far short of the goal of the Federal Communications Commission’s National Broadband Plan prepared for Congress in 2010 that called for 100 million homes to have affordable fiber-level connections a decade later.

U.S. telecommunications policy primarily serves the needs of for profit companies that lack incentive to rapidly speed construction of fiber to solve America’s advanced telecommunications infrastructure deficits. There’s an inherent conflict between their investors’ focus on short term earnings and the broader public interest of having universally accessible and affordable fiber connections.

This book describes how the crisis is affecting Americans, the factors that brought it about and prolong it, the outlook for its resolution and a framework for the path forward: publicly owned, open access fiber infrastructure passing reaching every home as telephone service did in the mid-20th century.

The audience for this book is public policymakers, telecommunications regulators and the general public. Members of these groups acknowledge the essential nature of advanced telecommunications infrastructure as a utility. That recognition has grown more urgent over time and especially so with the 2020 coronavirus pandemic and sharply increased reliance on home connectivity and working from home.

The book is currently available here on Amazon Kindle and will soon be available though all eBook retailers.

America's haphazard, fragmented approach to telecom infrastructure modernization: Filling in "broadband" potholes

SC begins small broadband internet expansion in 23 counties | The State: More than $50 million worth of broadband expansion projects will start this month in 23 counties around the state to help close the internet service gap exposed by the COVID-19 pandemic. The shovel-ready projects are being made possible, in part, with funding from the CARES Act, federal coronavirus aid that must be spent by the end of the year. The dollars will help internet providers expand service to areas where it may take longer to turn a profit. The broadband projects are a good start, but also a drop in the bucket toward closing the state’s broadband access gap. There are 650,000 South Carolinians and 180,000 households in the state without high-speed internet access.

States have been struggling to adequately fund advanced telecommunications infrastructure needs years before the start of the current SARS-CoV-2 pandemic earlier this year. Public health measures put in place to slow the spread of the contagion have made widespread infrastructure deficits painfully apparent as Americans work and school at home.

States are now rushing to try to address the problem with very little time and money allocated by the federal government via COVID-19 relief funds (CARES Act) that must be expended by the end of 2020. It's emblematic of the nation's short term policy approach of treating the deficits like potholes needing to be filled in.

There's never enough policy and resource commitment to properly pave the roads. Motorists complain incessantly about bad roads and a bumpy ride on Al Gore's circa 1990s "information highway." Federal and state governments respond with a little money for a short term fix for some of the potholes. Drivers continue to complain and the cycle repeats year after year. It will continue until there's a policy commitment to replace the legacy copper telephone connections that reach every home, small business and school with fiber.

Hopes for patient capital investment in open access advanced telecom infrastructure may prove unfeasible

Private Investment in Community Digital Infrastructure: Gaps will continue until localities and investors find viable solutions that better align community needs with investors’ returns on their investments. The critical first step is to pivot to a digital infrastructure approach in which the long-term economic benefits to community growth and business success accrue to the network deployers, leading to a virtuous cycle that increases network revenue opportunities and returns
on investment.

The author, Michael Curri of Strategic Networks Group, correctly identifies a major reason behind advanced telecom infrastructure deficiencies that have plagued the United States for many years. Investor owned companies build infrastructure where it generates the biggest and fastest returns on investment. They lack business or regulatory incentive to do so outside of their discrete "footprints" of cherry picked neighborhoods. 

That private interest to reward shareholders does not align with the broader public interest in having the infrastructure reach all premises. Localities hoping for infrastructure gains by partnering with private providers run the risk of replicating the problem of unconnected neighborhoods since they too require rapid returns on investment and thus are inclined to prioritize only limited areas to attain the fastest return on their dollars.

The solution, Curri argues, is substituting more patient capital held by pension funds and private infrastructure capital firms that doesn't require a return in five years or less. The risk/reward tradeoff is infrastructure is there for the long run and will generate solid returns for many years. Additionally, investment in open access infrastructure will provide broader benefits for their economies and residents  -- what economists refer to as externalities -- that are of little or no interest to investor owned providers.

Curri correctly points out the presence of incumbent investor owned incumbent providers poses a challenge to the ubiquitous infrastructure needed to attain those externalities. Those incumbents have already grabbed those neighborhoods that spin off the most revenues, complicating obtaining sufficient revenues to attract patient investment capital.

The essential problem for Curri is his concept requires premises to subscribe to services, emulating the subscription-based business model of the incumbents other than it calls for open versus closed access infrastructure. Subscription revenue would be supplemented by charges to service providers to offer services over the open access infrastructure as well as mobile wireless backhaul and "specific value-added services and smart-community services."

Potential patient capital investors may well see the presence of incumbent providers who will seek to protect their private monopolies as a key risk factor that would outweigh the many positive aspects of Currie's concept. Unless in the unlikely event those incumbent providers signal a withdrawal, it may prove unfeasible.

A "free market ethos" does not apply to advanced telecom infrastructure

Online school forces America to confront the digital divide: What went wrong over the years? How did the birthplace of the internet become a nation where broadband is unavailable to large chunks of the population, keeping students from taking part fully in modern education and their parents from taking advantage of the modern economy? Big investments have been made in the internet in the U.S., but not uniformly or with an eye to expanding connectivity as far as possible. It’s not a task that private industry cares to take on, nor is it one that the public sector can solve on its own—not in a country with such a strident free-market ethos. (Emphasis added)

This is a false dichotomy. Advanced telecommunications infrastructure tends toward natural monopoly and not a robust competitive market. As much as some would like it to be, high cost barriers to entry and first mover advantage don't permit that to be the case.

Desperate for fiber connectivity amid pandemic, states grasp for constrained federal funding

The long road to expand NH broadband - NH Business Review: Federal requirements for the CARES Act — such as the requirement broadband networks are prepared to make residential connections by Dec. 15 or else not be reimbursed — were meant to expedite projects to meet immediate needs. Bordering on unrealistic, the guidelines were criticized by the Monadnock Broadband Group and others interviewed by NH Business Review for excluding efforts that were already underway or could have made planning inroads with financial assistance.  “We put an initial $50 million into the fund because it was completely unknown what the application process would yield,” said Sununu. “I think we could have done a lot more with this money, but we just didn’t have the time. That was one of the biggest drawbacks is the time constraints the federal government put on these dollars.”

States desperately need federal funding to build fiber to the premise advanced telecom infrastructure now that homes due to pandemic public health measures now serve as workplaces, classroom, medical clinics and require robust symmetric connectivity. Feeling the pain most sharply are homes lacking access to commercial fiber providers due to neighborhood redlining and monthly rates out of reach for economically stressed households.

As this article highlights, navigating the tight constraints placed available federal funding is producing frustration. CARES Act funding is designed as short term emergency funding to help state and local governments cover costs related to responding to the pandemic and not specifically purposed for longer term infrastructure projects.

Redlined in Duanesburg, NY

Rural areas in NYS are in need of broadband amid the COVID-19 pandemic | WHEC.com: Felton has lived on Creek Road there for nearly 25 years. She never thought all these years later, and all these years of technological advances later, she still wouldn’t have broadband. Amid the pandemic, she and her husband have been working from home. Her daughter has been doing her schoolwork right alongside them. Fortunately, they can afford a hot spot, but it doesn’t always work.

She said for the past six years she has been trying to get broadband to all the town. Duanesburg has a franchise agreement with Charter Communications. “Our town franchise requires them to serve areas with 20 homes per mile, this road that I live on we have about 10 homes per mile,” said Felton. “We're not in the middle of nowhere. I'm two miles from Hannaford and I still don't have a wired connection because there's not sufficient return on investment for Charter to provide it.”

For two decades, the lack of sufficient return on investment has been identified as the cause of America's advanced telecom infrastructure deficiencies. It raises a fundamental question: If universal and affordable access are goals as many public policymakers assert, why do they continue to expect investor owned companies to fill the gaps when the cash flow isn't there? It's the Einsteinian definition of insanity. In this case, pursuing the same public policy and expecting a different result.

Exurban growth has major implications for advanced telecom infrastructure policy, planning

Editorial: California fires’ cruel cycle of natural and human disaster - SFChronicle.com: While the population of California and most of the Bay Area grew little in 2019, and Los Angeles County lost residents for the second year running, according to the state Department of Finance, most of the fastest-growing cities and counties were on the metropolitan edges. San Joaquin and San Benito counties, both in the outer orbit of the Bay Area, were alone in the region in experiencing more than a percentage point of growth, much of it due to housing production. Excluding rebuilding to compensate for earlier wildfire losses, the cities that saw the greatest housing-related population growth were also on the outskirts of the Bay Area — including Lathrop in San Joaquin County and Rio Vista in Solano County — or within an extreme commute of Los Angeles. This continues a long-term trend. Six of the nation’s 25 fastest-growing cities over the past two decades were in California, according to one analysis of census data, and all were on the sprawling boundaries of cities and metropolises.

Big implications here for current advanced telecom infrastructure policy and planning. The reason is these areas on the edges of metro areas while nominally exurban have been regarded by telephone and cable companies as rural and thus suffer from spotty advanced telecom infrastructure.

The return on investment doesn't come fast enough under their business models to justify investment and current federal and state subsidy programs don't offer sufficient incentive to build. Cable companies remain in their confined franchise 1970s "footprints." Telephone companies allow decades old copper lines to rot on the poles instead of modernizing them to fiber to the premise, with only some customers served by limited range and throughput first generation ADSL over copper.

While frustrating to many exurbanites before the public health restrictions of the COVID-19 pandemic that has turned homes into workplaces, schools and medical clinics, deficient advanced telecom infrastructure has taken on a new degree of urgency in the exurbs.

Why advanced telecommunications infrastructure subsidies don’t make Internet service available to all Americans – explained in five points

1. For many decades, federal and state governments surcharged phone bills to subsidize infrastructure for voice telephone service in high cost areas. These subsidies paid to telephone companies made sense because the companies had an obligation to honor reasonable requests for service – the universal service mandate for telecommunications services under Title II of the Communications Act of 1934. But that requirement does not apply to advanced telecommunications delivered by Internet protocol because the U.S. Federal Communications Commission does not consider advanced telecommunications to be a telecommunications service but rather an optionally provided information service under Title I of the Communications Act akin to America Online and CompuServe in the early years of mass Internet access.
2. Current federal and state subsidy programs don’t directly subsidize the construction of infrastructure in high cost areas. Instead, there exists a mishmash of programs designed to deliver various arbitrary throughput levels, known as “broadband speed.” Instead of determining where to subsidize infrastructure, federal and state governments attempt to map a moving target of advertised broadband speeds in order to determine where to direct subsidies.
3. Without a universal service mandate, investor owned advanced telecommunications providers have little incentive to seek subsidies since they can instead direct capital investments to lower cost and more immediately profitable infrastructure deployments.
4. Since high cost subsidies are available to various actors including non-incumbent investor owned providers, cooperatives and state and local governments, incumbent providers often oppose the award of subsidies within their nominal service territories and “footprints.” They regard these geographical areas as proprietary and other would be providers as interlopers. 
5. The amount of available subsidy funding is too little relative to need and there is inadequate monitoring of how it's spent.
   

The "digital divide" wouldn't exist had copper phone lines been replaced with fiber

Lack of Broadband Handcuffs At-Home Schooling in Ohio: As Columbus, Ohio, students look toward a school year with largely online learning, a new report shows that more than 30% of households in some city neighborhoods don't have broadband access. The gap is not due to lack of infrastructure — internet service providers are available in even the most-impoverished areas — but the result of economic factors, technical literacy and personal choice, researchers said. Internet service is now "the fourth utility," on par with electricity, natural gas and water, said Pat Losinski, president and CEO of the Columbus Metropolitan Library. "I don't know if we've called it out that way as a community and a nation, but it really is," he said.  The Columbus library system handles about 1.6 million reservations for computer use each year, Losinski said. "We have been trying to do the best that we can to serve that need," he said. "But what's happened in the last 120 days is this issue has been laid bare in ways it hadn't been in the past."

Actually, it is due to infrastructure. And what's happened in the last 120 days in Columbus, Ohio isn't necessarily local to that metro or confined to that short time frame. Had the United States as a nation undertaken a comprehensive plan to transition its legacy copper telephone to fiber three decades ago, this problem would be non existent. Households would obtain voice, video and data using Internet protocol technology over fiber connections. 

Consequently, there wouldn't be gaps for data connections commonly referred to as the "digital divide" and blended learning  -- a combination of school and home-based education -- would be in place and able to better weather a pandemic. Moreover, had the U.S. planned this telecommunications infrastructure transition rather than allowing "broadband" to be sold as a luxury option, lower income households would have had time to become more familiar with Internet-delivered services. Particularly considering personal computers have been around for decades and have become more affordable over time.

If U.S. transportation infrastructure emulated telecom policy, nation would be hodgepodge of toll roads with $1, $5, $10 and $20 fare lanes

Broadband Breakfast: Innovation and Contrarianism Define Bob Frankston, Champion of Broadband: In a recent Broadband Breakfast Live Online event, Frankston spoke about the role of municipal versus private broadband networks, arguing that private networks were unnecessary.

“All they do is help packets mosey along,” he said. “…They don’t guarantee that you’re going to get to your destination, they just provide an opportunity.”

Frankston's right. If transportation infrastructure emulated U.S. telecom policy, the nation would be a patchwork quilt of multiple privately owned toll roads with $1, $5, $10 and $20 fare lanes. Everyplace else would be served by unpaved roads and lanes with greedy trolls waiting under creaky wooden bridges for passing megabits. But let's waste time and resources and map this hodgepodge and 20 years later complain about all the shitty roads.

Legislative proposal claims goal of modernizing U.S. telecom infrastructure. But it doesn't have a plan to get there.

GOP Leaders Offer Broadband Framework - Multichannel: Senate Commerce Committee chairman Roger Wicker (R-Miss.) and House Energy & Commerce Committee ranking member Greg Walden (R-Ore.) describe it as a foundation for legislative action related to the COVID-19 economic recovery. In the process, they said, the proposals would "modernize the nation’s communications infrastructure, allow all Americans to participate in the digital economy, and enhance U.S. network security, reliability, and resiliency."

According to its backers framework would include 1) authorizing funding for the FCC to complete accurate broadband mapping efforts, something FCC chair Ajit Pai has been calling for; 2) making sure students have access to broadband, 3) making sure those having trouble paying for broadband can still get it, 4) promoting digital equity; and 5) helping carriers "working tirelessly to to keep Americans connected" during the pandemic.

Problem is none of these five items will meet the goal of modernizing the nation's legacy copper telephone connections that reach most every American doorstep with fiber to the prem #FTTP. This has been a fundamental problem in U.S. telecommunications policy for a generation. It is focused on treating the symptoms of its failure to modernize copper to fiber and talking all around that rather than adopting policy and plans to tackle it head on.

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.