Nearly 900 objections filed in California subsidy program

Nearly 900 objections have been filed with the California Public Utilities Commission (CPUC) protesting proposed projects requesting subsidies to construct advanced telecommunications distribution infrastructure. Under the FFA program rules, an objection must be based on an error of fact, or policy or statutory law. (Click here for a list of objections: PDF / Excel)

The CPUC’s Federal Funding Account (FFA) program received 484 grant applications for projects in every county totaling more than $4.6 billion -- more than double the $2 billion available. The funding is authorized by 2021 California legislation allocating federal funding appropriated by the federal American Rescue Plan Act (ARPA). The ARPA was enacted amid the COVID-19 public health emergency to provide support to state, local, and tribal governments including infrastructure investment.

Similar to the federal Broadband Equity, Access and Deployment (BEAD) program funded under the Infrastructure Investment and Jobs Act (IIJA) of 2021, eligibility is limited to “unserved” areas for which no landline service is offered to “an entire community” of at least 25 Mbps downstream and 3 Mbps upstream. The FFA program rules also take into consideration whether proposed projects would target areas prioritized by the CPUC based on demographic and digital equity information and analysis of the number of low-income households, median household income, disadvantaged community status, and digital equity.

The Golden State Connect Authority (GSCA), a joint powers authority of 40 counties authorized by the 2021 California legislation to build open access fiber to the premise distribution infrastructure, filed objections to 50 projects proposed by AT&T California. The GSCA contends the projects contravene FFA program guidance because they would merely upgrade its existing footprint of landline infrastructure without expanding to outlying locations.

“Additionally, in examination of the sheer number of projects proposed by AT&T statewide and commensurate funding requests, the cumulative request by AT&T for all its projects statewide indicates that the applicant will not have the financial, technical, or operational capacity to complete all the proposed projects within the timeframe required by the Last Mile FFA grant program,” wrote GSCA General Counsel Arthur J. Wylene. “This directly contravenes Last Mile FFA program requirements that an applicant must have the ‘financial, technical, and operational capacity’ to execute the projects for which it has applied within the required timeframes,” i.e. by 2027.

Notably, Jeff Luong, AT&T’s vice president of network engineering, reportedly said at last week’s Fierce Telecom U.S. Broadband Summit that even with AT&T spending about $20 billion per year on infrastructure, “we cannot build out in all the areas we deem as economical.”

According to the CPUC, staff will analyze applications, objections, and their responses and work with applicants and local stakeholders to select the applications most deserving of funding. No awards are expected until first quarter 2024 at the earliest.

Public bonds to finance publicly owned open access regional fiber

Private capital is recognizing the long-term asset value of fiber to the premises (FTTP) advanced telecommunications distribution infrastructure and its ability to generate long term revenue over its estimated 30 to 50-year lifespan. It also offers first mover advantage given FTTP functions as a terminating natural monopoly. The provider that makes the initial fiber connection is unlikely to face competition later from another fiber builder and will own the customer premise for decades.

That’s evidenced in the many private equity deals over the past year with investor owned FTTP players including a joint venture between BlackRock Capital Investment and AT&T. Fundamentally, this is a regime change, shifting away from the more constrained investment model of the large incumbent telephone companies. With their highly leveraged balance sheets and the need to pay large shareholder dividends, the short term value analysis has prevailed. Hence, FTTP deployment is deployed conservatively to areas where ROI and ARPU are projected to be the most favorable, leaving most without.

Now the public bond markets have the opportunity to similarly recognize the long term value and relative safety offered by FTTP networks. To spread risk and cost of deployment to gain economies of scale – particularly important amid labor and supply chain constraints and rising interest rates -- that investment would optimally be leveraged by regional public owned networks.

A model potential path ahead lies in Vermont. In that state, one regional network comprised of 31 towns formed under state law as a Communications Union District (CUD) obtained a BB rating for its $7.53 million 2023 Series A bonds from S&P Global, the nation’s preeminent credit rating agency. “This is a historic moment,” said Stan Williams, ECFiber’s municipal finance advisor. “For the first time, a CUD will be issuing a rated bond, which means that many more investors will be competing to buy those bonds, lowering the interest rate.”

That financing could potentially be expanded significantly if the nine CUDs operating in the state jointly issued a bond to fund their expansion. That could also enhance end user affordability with the financing costs spread over a much larger base.

Doing so would help ensure Vermont can meet its goal of getting FTTP to every location connected to the electrical grid by the end of 2028, particularly given a state audit report earlier this year that identified uncertainly associated with federal grant funding as a risk to attaining it, pointing out the need to identify other funding sources. The audit also noted CUDs have not been partnering for procurement of goods and services, risking higher costs and inferior outcomes.

California proposes to regard areas served by DSL and FWA as potentially eligible for BEAD subgrants

The California Public Utilities Commission (CPUC) has developed a framework to guide eligibility for the state’s $1.86 billion allocation under the federal government’s Broadband Equity, Access and Deployment (BEAD) program. The framework would regard areas served by DSL and fixed wireless service as potentially eligible for BEAD subgrants. The framework is part of a proposed rulemaking issued November 7.

Under BEAD and its authorizing legislation, the Infrastructure Investment and Jobs Act (IIJA), the primary scope of proposed projects eligible for state subgrants is where at least 80 percent of serviceable addresses are not offered service with throughput greater than 25Mbs for downloads and 3Mbps for uploads at latency of less than 100ms, designated “unserved.” Those where at least 80 percent are not offered 100Mbps/20Mbps are deemed “underserved.” 

“The CPUC will treat locations that the National Broadband Map shows to have available qualifying broadband service (i.e., a location that is “served”) delivered via DSL as ‘underserved.’" The CPUC's proposed framework is consistent with BEAD program guidance that acknowledges that in some cases, DSL does not provide consistent access to advertised speeds. "To the extent a particular location is identified on the Broadband DATA Maps as served by DSL at speeds that warrant treatment of that location as 'served' or 'underserved' but is not in fact reliably served at such speeds, this would be a proper basis for challenging the relevant location’s service status during the challenge process created by the Eligible Entity," the guidance states.

The CPUC notes this "will better reflect the locations eligible for BEAD funding because it will facilitate the phase-out of legacy copper facilities and ensure the delivery of ‘future-proof’ broadband service, the proposed framework states. “This designation cannot be challenged or rebutted by the provider.”

Additionally, the CPUC will presume 5,829 locations the National Broadband Map shows “underserved” by DSL as “unserved” for reported speeds that are lower than 30/5, for which there is supporting evidence that speeds consistently deliver below 25/3 service. “Considering the low prospects of providers investing in maintenance of legacy copper plant, low speed DSL should be replaced as soon as feasible with more future-proof infrastructure. This modification will better reflect the locations eligible for BEAD funding because it will facilitate the phase-out of legacy copper facilities and ensure the delivery of ‘future-proof’ broadband service,” the CPUC concluded.

“Due to the possibility of California’s BEAD allocation being fully committed to deploying service to unserved locations, this modification will also ensure that locations served by low-speed DSL are not excluded from eligibility for this critical investment,” citing AT&T’s application for relief from its landline voice telephone service carrier of last resort obligation in rural areas of the Golden State under Title II of the federal Communications Act.

The proposed rulemaking would also regard 36,887 locations that the National Broadband Map shows as “underserved” delivered over Licensed Fixed Wireless (LFW) as “unserved” for reported speeds that are lower than or equal to 30/5 Mbps:

"As a technical matter, fixed wireless speeds fluctuate heavily,” the framework notes. “Given this, speeds that barely qualify as underserved will likely be below 25/3 service during peak usage times. This is especially true of older fixed wireless deployments that struggle to reach higher speeds and mitigate interference and line of sight issues. In fixed wireless networks, service performance can be affected by a customer’s proximity to a base station, the capacity of the cell site, the number of other users connected to the same cell site, the surrounding terrain, and radio frequency interference. Additionally, fixed wireless networks require a clear line-of-sight. Therefore, obstructions, such as trees, can block radio signals and impact the reliability of fixed wireless networks. Poor weather conditions, including rain, can affect the availability and quality of a customer’s fixed wireless service.”

Cellular fixed wireless will similarly undergo critical scrutiny when determining whether an area is deemed eligible as underserved:

“The CPUC has observed that some fixed wireless operators report 25/3 or 100/20 speeds on the National Broadband Map even where their networks frequently reach those speeds only under optimal circumstances and have not been replicated in other testing environments, such as the CPUC’s own CalSPEED process. User agreements for leading providers of cellular fixed wireless indicate that users will be deprioritized during periods of network congestion, decreasing the likelihood that service delivered to consumers will meet the claimed thresholds, especially in future years as network utilization increases.”

The CPUC explained its rationale as due to the possibility of California’s BEAD allocation being fully committed to deploying service to unserved locations. “This modification will also ensure that locations served by low-speed and unreliable cellular fixed wireless are not excluded from eligibility for this critical investment.”

The CPUC said it will treat locations that the National Broadband Map shows to be “underserved” or “served” as “unserved” if rigorous speed test methodologies show otherwise. “This modification will better reflect the locations eligible for BEAD funding because it will consider the actual speeds of locations, leveraging the extensive data collection already conducted by the CPUC and reducing the administrative burden on challengers, providers, and CPUC staff to process challenges for locations already successfully challenged using equivalent evidence to that required for BEAD challenges.”

Concurrent FCC rulemakings would bar redlining for Internet service

One month after proposing a rulemaking to classify Internet protocol-based advanced telecommunications as a common carrier utility subject to universal service and non-discrimination mandates, the U.S. Federal Communications Commission will take up a similar rulemaking. The FCC’s proposed rulemaking Preventing Digital Discrimination is set for a vote at its November 15 meeting. It is primarily intended to remedy disparate impact (versus intentional) discrimination by providers that affects neighborhoods based on their demographics: income level, race, ethnicity, color, religion and national origin.

According to the FCC, the rulemaking implements section 60506 of the Infrastructure Investment and Jobs Act of 2021. It states federal policy that “insofar as technically and economically feasible— subscribers should benefit from equal access to broadband internet access service within the service area of a provider of such service.” Section 60506 defines equal access as “the equal opportunity to subscribe to an offered service that provides comparable speeds, capacities, latency, and other quality of service metrics in a given area, for comparable terms and conditions.”

Since IP telecom is currently classified as lightly regulated optional information service under Title I of the Communications Act, providers are free to deploy delivery infrastructure wherever they wish and at rates of their choosing. They naturally prefer denser, higher income neighborhoods that will produce faster return on capital investment (ROI) and where households are less price sensitive and more inclined to subscribe to higher priced services, thereby maximizing average revenue per unit (ARPU).

The proposed rulemaking gives providers an out by allowing them to defend deployment and pricing decisions based on technical and economic feasibility. They could conceivably argue that they must be more conservative in building infrastructure in lower income neighborhoods and charge more for comparable services than those offered in higher income communities in order to feasibly meet their ROI and ARPU targets. The higher rates in turn would be out of reach of some lower income households, making them less likely to sign up for services and perpetuating an unvirtuous cycle. Similarly, they could argue middle mile infrastructure isn’t adequate to serve a given community, thus making delivery infrastructure deployment technically unfeasible. It's entirely logical to segment markets and pricing in a market-based scheme under Title I regulation. Disparate market impact will be a natural outcome. Additionally, providers choosing to build fiber in higher income areas but not in lower income areas could be seen as intentional discrimination based on income, i.e. disparate treatment.

The proposed rulemaking apparently contemplates a comparison of deployment activity to help regulators establish a pattern of market conduct demonstrating discrimination. That assessment would be based on a mandate on providers annually report on their deployment activities:

We propose that each annual report must address the following components to provide a
comprehensive picture of each major deployment, maintenance, and upgrade project completed or substantially completed for each state and territory within its service area or footprint: (1) the nature of each project completed or substantially completed in the calendar year immediately preceding the submission of the report (i.e., deployment, upgrade, maintenance, or a combination thereof); (2) the number of housing units affected by the project (i.e., the number of housing units whose broadband availability or quality is positively impacted by the project) by census tract (utilizing the system presently used in the BDC); and (3) a narrative description of the project and of the areas served by the project, to allow for greater precision and clarity regarding what the project is designed to accomplish and what communities are served by the project. 

While the language of the proposed rulemaking includes providers’ more proscriptive term to describe where they have built infrastructure and offer advanced telecommunications services , i.e. “footprint,” should the FCC reclassify Internet protocol telecommunications as a utility under Title II of the Communications Act as proposed in a separate notice of proposed rulemaking issued September 28, 2023, Safeguarding and Securing the Open Internet, 47 U.S.C. 214(e)(5) affords state public utility commissions and the FCC authority to develop their own geographic parameters for the purpose of Title II’s universal service mandate requiring providers to offer service to all serviceable addresses within the service area:

(5) “Service area” defined

The term “service area” means a geographic area established by a State commission (or the Commission under paragraph (6)) for the purpose of determining universal service obligations and support mechanisms. In the case of an area served by a rural telephone company, “service area” means such company’s “study area” unless and until the Commission and the States, after taking into account recommendations of a Federal-State Joint Board instituted under section 410(c) of this title, establish a different definition of service area for such company.

Similar to the FCC’s Preventing Digital Discrimination rulemaking, reclassification of IP services under Title II would give regulators additional statutory authority to sanction discriminatory conduct under 47 U.S.C. 202, titled Discrimination and Preferences. While FCC is forbearing rate regulation in the proposed Title II reclassification rulemaking, this provision makes it unlawful for common carriers engage in “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.” The statute allows for fines of $6,000 for each violation and $300 daily penalties for ongoing violations.

"Community broadband" sounds great in concept. Paying for it is another matter.

Schaffer is a firm advocate for communities taking ownership – literal ownership – of their broadband network: bringing “a high-quality, universal service” to everyone – “not for profit, but for service.”

There’s a cost to that, of course, but the community then can make decisions about how to lower that cost, she said. “When you take the profit margin out of it, it allows you to serve more people” at a reasonable price.

https://dailyyonder.com/a-rural-calling-peggy-schaffer/2023/10/25/

Or whether communities are willing bear any cost whatsoever that would incur bond debt and new taxes to service it. It's a hard sell for many with ongoing concerns over public and personal finances, an aging population and resistance to new taxes for infrastructure. That's why private ownership along with its attendant problems of limited access and affordability will remain predominant in the United States.

Sohn avoids mention of FCC Title II rules in recent speech

In a speech last week, Gigi Sohn, executive director of the American Association for Public Broadband, conceded that advanced telecommunications infrastructure will largely remain in the hands of private sector investors. Sohn has also questioned the notion of private sector market competition as the means to ensure advanced telecommunications infrastructure reaches all American doorstep.

It’s a logical conclusion since telecommunications like other utilities tends toward monopoly. Companies aren’t going to compete to bring multiple proprietary fiber connections to a given address because it’s economically inefficient and favors those that make the first connection. One might gain customers by bringing in a second fiber line, taking them from the provider of the first. But the return on investment rapidly diminishes with additional lines. This is not a competitive market defined by many sellers and many buyers. Many buyers, yes, but there won’t be many sellers. 

Sohn’s declaration that advanced telecommunications will remain in private hands as a service that naturally tends toward monopoly has powerful implications since market forces aren’t going to balance for buyers’ interests in access and value. Strong, meaningfully enforced regulation is needed to ensure universal and affordable access. Without it, providers are free to offer fiber connections available wherever they want at whatever price they choose.

It is thus striking that Sohn in her remarks voiced no support whatsoever for the Federal Communications Commission's (FCC) proposed readoption of regulations that would classify advanced telecommunications under Title II of the Telecommunications Act of 1934. That would make advanced telecom service a common carrier utility where reasonable requests for service – i.e., serviceable addresses – must be honored. No cherry picking and no neighborhood redlining.

It’s even more striking that Sohn didn’t refer to Title II given she promulgated the same regulations while on the staff of the FCC in 2015. The FCC in a split vote opened comment reviving the Title II regulations just two days after Sohn’s speech. As it did in 2015, however, the FCC is setting aside granting state public utility commissions authority over rates charged end users to help ensure affordable access.

AT&T urges states to favor contiguous BEAD funded projects serving both unserved and underserved locations

AT&T is urging states to award subsidies of up to 75 percent of construction costs allocated by the federal government’s Broadband Equity, Access and Deployment (BEAD) program for combined projects containing both unserved (where at least 80 percent of serviceable addresses in the project are not offered throughput of 25/3 Mbps or better) and underserved (where at least 80 percent of serviceable addresses are not offered throughput of 100/20 Mbps or better).

In so doing, AT&T is clearly indicating it plans to use any BEAD funding it is awarded to edge out its footprint. Some addresses could be served by VDSL over AT&T’s existing copper cable plant and qualify as underserved under BEAD program rules. As DSL signals degrade with distance, addresses farther out from its central offices and DSLAMs would likely not and be served by first generation ADSL – or no landline connections whatsoever – falling below the 25/3 Mbps cutoff and thus qualify as unserved. Some addresses in the latter category might ostensibly be designated as extremely high cost locations that AT&T would serve with fixed wireless.

A potential problem AT&T faces at least some states in urging BEAD funding for contiguous unserved/underserved projects is BEAD program rules require states to first award funds for projects reaching unserved locations. Underserved projects can only be funded if there are enough funds remaining from a state’s BEAD allocation after all unserved locations have been served.

AT&T is apparently aware. “We know that this won’t be possible in every state," writes Erin Scarborough, president of AT&T’s Broadband and Connectivity Initiatives, in a blog post. As the “next best alternative,” Scarborough urges states to group eligible locations into the smallest geographic unit possible, such as a census block, and allow providers to combine them into project areas. “This would still enable providers to design efficient deployments that maximize the use of existing infrastructure,” Scarborough wrote.

Near term outlook, trends for advanced telecom infrastructure

U.S. telecom policy will continue to favor investor owned, market-based advanced telecommunications infrastructure despite its higher cost compared to public and consumer-owned (utility cooperative) infrastructure. The predominant role of privately owned legacy telephone and cable infrastructure reinforces path dependency.

Government and consumer utility coop owned open access fiber to the premise infrastructure missed significant expansion opportunity from 1998 to 2019 as telephone companies made minimal investments in fiber to the premise (FTTP) delivery infrastructure, keeping legacy copper outside plant in place. Lack of political will, unrealistic expectations of incumbent providers, unfavorable demographic and economic trends, tax resistance and reliance on limited grant programs for majority of funding versus organic debt funding severely limited their expansion.

Boosted by infusions of private equity investment, investor owned FTTP builds will be expanded beyond what providers could otherwise achieve on their own due to limited capex constrained by overleveraged balance sheets and dependence on expected network revenues to meet rate of return goals. Private equity investment is motivated by a potential premium upon exit in five to seven years through sale of their stakes to their provider partners and/or network consolidators. Investment will be primary focused on newer existing and planned suburban developments in selected metros. Private equity investment is predicated on regarding FTTP as long term asset that affords first mover advantage. Connecting the customer premise means owning the customer since only one fiber connection will meet current and future service needs.

Advanced telecommunications infrastructure subsidies allocated by the 2021 Infrastructure Investment and Jobs Act will mostly go to large telephone and cable companies to incrementally edge out their networks in rural and exurban areas, primarily to dense clusters of homes and those in areas of cut off density not reached by existing landline advanced telecommunications infrastructure. Some BEAD funding will subsidize wireless in remote rural areas to provide both fixed and mobile services.

FTTP networks in less densely developed areas will receive some subsidization from existing programs as well as a new potential high cost area subsidy program to replace the FCC Universal Service Fund, particularly if the FCC reclassifies Internet protocol telecommunications service as a common carrier utility.

FWA seems like a lower cost alternative to FTTP -- until radio propagation constraints taken into account.

Outside of our urban cores and highway corridors, many modern life-enhancing technologies remain unavailable. For underserved constituencies, health outcomes are less positive; educational and business opportunities are more limited; and a myriad of other harms are borne by our more rural constituencies. But 5G FWA stands to finally connect those communities that remain unserved or underserved. Because this technology can span distances and cross terrains that coaxial and fiber cannot, at a fraction of the cost, more communities will be connected using 5G FWA than ever before. 

https://broadbandbreakfast.com/2023/08/sascha-meinrath-12-gigahertz-band-is-key-to-bridging-the-digital-divide/

The challenge is very limited propagation. The high frequencies used by FYA like the 12 Gigahertz cited in this article have very limited reach. Propagation distance is inversely correlated to the frequency. High frequencies can carry more data than lower ones. But the tradeoff is they don’t travel very far. Consequently, homes and businesses close to FWA radio towers get good throughput as Doug Dawson explains in this blog post. But just a bit farther out, it drops off dramatically as this example of a Sacramento, California suburb illustrates using two relatively lower frequencies. For 12 Gigahertz, the propagation circle of coverage would be even smaller. 

To overcome these limits, in rural areas it would seem to make sense to deploy radios close to customer premises mounted on existing utility poles or new dedicated poles. But the tradeoff there would be those radios would need fiber to feed them. At which the economics would point to connecting the premises to fiber directly as the most cost-effective approach. 

States struggle to devise solid, actionable plans to achieve universal service

“Maine's existing internet infrastructure is largely a patchwork of individual private networks. The infrastructure behind these networks was generally not created to support the goal of universal broadband access throughout the state. While public and private investments over the last decade have added essential infrastructure to support this goal, the job is not done, and too many areas of Maine remain unserved.”

That excerpt from Maine’s Five Year Action Plan required by the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program describes every American state and territory, encapsulating the fundamental problem of the nation’s highly fragmented advanced telecommunications infrastructure that falls short of universal service, leaving many without quality, affordable connectivity.

Consistent with current federal policy of subsidiarity leaving it to the states to establish universal service like that for landline telephone service, BEAD requires states to devise plans to provide universal service reaching every doorstep. The Five Year Action Plans must include timelines, cost estimates and funding sources to bring it about, with a subsidy funding preference for fiber to the premises (FTTP) delivery infrastructure.

The NTIA characterizes the $43 billion in BEAD subsidies largely targeted to exurban and rural areas deemed unworthy of investment by investor owned providers as a once in a generation initiative. “We are writing the next chapter of the great American infrastructure story,” said BEAD Program Director Evan Feinman. “But this is going to require a true whole-of-society effort” involving federal and state officials, local governments, providers, co-operatives, and communities.

However, a review of BEAD Five Year Action Plans filed with the NTIA as of this week shows states are struggling to devise solid, actionable plans to achieve universal service. Most are largely aspirational. Several note that BEAD subsidies alone cannot fully fund universal service along with an alphabet soup of other federal and state grant programs put in place over the past few decades. That’s implicit in BEAD program guidance that require the plans to include federal, state, and local funding sources to attain it. But nearly all the plans don’t identify state or other local funding sources to address the deficit in federal funding. Others point to the continued use of FTTP stopgaps such as fixed wireless and satellite service along with the expectation investor owned providers will build out their infrastructures.

The state plans generally point to a prolongation of the historical pattern of incremental construction that will leave universal service out of reach for the foreseeable despite the state plans stating advanced telecommunications infrastructure will reach all residents by the end of the decade. One off grant funding has encouraged the incrementalism since it only nibbles away at the infrastructure deficits rather than eliminating them, producing what analyst Karl Bode aptly describes as “half built,” incomplete infrastructure.

A single, long term, low interest federal loan program for lower cost government owned and consumer utility cooperative-owed FTTP infrastructure is a better option than the current confusing mix of grant programs. It would have program integrity built in via loan underwriting standards and collateralized network assets to protect public dollars – dollars that would go further with these lower cost deployers and attain universal service more rapidly since they don’t bear the burden of generating profits and dividends for investors as well as income taxes.

In sum, the state Five Year Plans reflect no true “uni” in the BEAD universal service initiative: one single guiding program policy principle and sufficient dedication of resources to close the infrastructure gaps and bring about universal service.

North Carolina homes in "digital distress" reliant on mobile access

The map below shows the percentage of homes that rely on mobile devices only or have no devices and either have no internet access or cellular data only.

 

 Source: STATE OF NORTH CAROLINA BEAD Program Five-Year Plan.

FCC’s proposed readoption of Title II rules won’t likely increase access and affordability

The Federal Communications Commission’s proposed rulemaking that would once again reclassify internet services as common carrier telecommunications utilities under Title II of the Communications Act from their current classification as information services under Title I of the statute in theory isn’t likely to have any meaningful impact on access and affordability.

President Joe Biden encouraged the FCC to adopt the rulemaking in a July 9, 2021 executive order, Promoting Competition in the American Economy. But the intent of the order to promote competition is at odds with the underlying rationale of Title II regulation that was used for decades to regulate voice telephone service. That regulatory scheme is properly predicated on the notion that telecommunications like other utilities functions as a natural terminating monopoly. The high cost of building utility infrastructure naturally deters potential competitors from entry – a point made by FCC Chairwoman Jessica Rosenworcel in a speech announcing the proposed rulemaking.

Utility infrastructure also affords incumbents first mover advantage, making it difficult for would be competitors to dislodge them. Investor owned utilities recognize the value there since connecting a customer premise essentially means owning the customer for the long term and potentially selling out to a consolidator for a big future payday. That incentive is now drawing in private equity capital into fiber to the premise (FTTP) deployment in areas where FTTP is spotty or nonexistent.

Since these microeconomic conditions cannot assure universal and affordable access, Title II does so by making telecommunications a common carrier utility, barring discrimination, and requiring reasonable requests for service be honored. It also allows for rate regulation. Authority for the latter was not included when the FCC last reclassified internet as a utility in a 2015 rulemaking and won’t in the forthcoming one, according to Rosenworcel. But the non-discrimination/universal service mandate – that Public Knowledge's Harold Feld has termed "the quintessential common-carrier obligation" – was.

Should it also reappear in the new proposed rulemaking expected to largely mirror the 2015 rulemaking, it’s questionable whether it will be meaningfully enforced. The FCC didn’t enforce that provision of the 2015 rulemaking, effectively letting service providers off the hook in response to a consumer complaint that a request for service wasn’t honored. All providers have to do is claim the customer location isn’t in its current footprint and the complaint is summarily dismissed. Similarly, providers might argue a request for service outside of its existing footprint is unreasonable since the necessary delivery infrastructure doesn’t exist, rendering the universal service mandate moot and allowing continued neighborhood redlining.

How open access model disrupts, offers potential to more rapidly scale FTTP infrastructure.

Open access infrastructure, wherein service providers lease the access layer of fiber to the premises (FTTP) networks to gain access to subscribers, offers substantial potential to alter the economics of deploying FTTP. FTTP deployment has lagged in the United States – currently passing less than half of all homes – because the business case for its deployment is based on recovering capital investment in a short term time horizon of 5-7 years from residential subscription fees. These deployers sell both access to its proprietary delivery infrastructure and bundled services delivered over a vertically integrated offering of web, email, as well as video channels and voice over internet protocol (VOIP).

Their business case analysis considers internal rate of return standards, the number of homes likely to purchase known as “take rate,” and projected average revenue per household unit or ARPU. That calculus has historically favored household density and income with the former carrying the most weight since the cost of deployment would be spread across more homes.

Open access infrastructure changes this revenue structure. Instead of solely relying on end user revenues, it derives some from leases to service providers. In the case of Utah’s UTOPIA Fiber open access network, fully 70 percent comes from service providers and the balance from end users. Open access infrastructure must attain significant scale to reach a lot of end users in order to offer an attractive market to service providers to lease access to the network.

The open access model also lengthens the investment time horizon allowing deployers to attract more patient capital that doesn’t need to hit ROI over the short term. It’s in it for the long game. The demand for FTTP is there – owing in large part to the fact that more than half of U.S. households lack access to it - and will continue to be. It’s also a long term asset with a life span of 30 to 50 years. And it’s sticky, affording deployers first mover advantage. Whoever deploys first is likely to own that end user premise customer for decades.

As one of the first open access networks formed in the early 2000s, UTOPIA Fiber has achieved the scale necessary to make the model work, serving 20 Utah municipalities that collectively own the network. The financial appeal of the open access model has also attracted private players including SiFi Networks, which according to its website is now in 11 American cities. More recently, AT&T is getting in on the open access action, forming a joint venture with BlackRock to deploy open access FTTP outside of AT&T’s existing service area.

Northern California could potentially host the nation’s largest regional open access network in terms of scale and geography, serving 40 member counties of the Rural County Representatives of California (RCRC) with the RCRC’s nascent Golden State Connect Authority, formed in 2021 as a joint powers authority. There, the open access model could provide FTTP in less densely populated areas passed over by the large, investor owned telephone and cable companies under the traditional closed access bundled services business model. Many households there are forced to rely on substandard, expensive wireless services.

Will Gigapower truly operate as open access network?

A cynical view of the investor owned open access fiber to the premises (FTTP) Gigapower build – AT&T’s joint venture with BlackRock – might hold that AT&T will end up as the sole service layer provider. AT&T will initially serve as the “anchor tenant” ISP riding on Gigapower glass.

That view is justified by the history of the unbundling of AT&T’s copper distribution network assets as well as those of other telephone companies mandated by the 1996 Telecommunications Act. The Act required the telcos to providing access to ISPs to compete with its own services. Since these competitive local exchange carriers (CLECs) were all selling the same thing – dialup access and later DSL over platforms like AOL, CompuServe and Netscape – it was difficult to for the CLECs to differentiate their service offerings from those of other ISPs and the incumbent telcos. That prompted a race to the bottom price war that AT&T and other telcos with their deep coffers would ultimately win, being able to hold out for the duration. In addition, a 2006 U.S. Court of Appeals decision held incumbent telcos were not obliged to provide CLECs access to fiber to the premises (FTTP) that was just beginning to replace the legacy copper in limited builds.

However, if AT&T were to monopolize Gigapower as the sole and not just the anchor tenant, the business model wouldn’t benefit from lease revenue paid by other ISPs leasing access to network assets Gigapower expects to defray capital and operating costs. But a cynical take there might be Gigapower will operate as a truly open access network for only the first seven to 10 years to help it finance capex and opex costs for fiber delivery infrastructure outside of its current service area that it couldn’t otherwise justify spending on its own. After which it would become exclusively AT&T’s with the Gigapower terminating and non renewing completing ISP service provider contracts.

Open access FTTP offers potential route to having edge providers defray FTTP infrastructure costs

AT&T’s joint venture with BlackRock to build and operate fiber to the premise delivery infrastructure as an open access network has implications for an issue related to how infrastructure deployment and operating costs are financed. Particularly, how revenues from internet service providers can defray the cost of planning, constructing, and operating it.

Some telecom industry trade groups have argued “big tech” edge providers such as Google, Microsoft, Amazon, and Meta should contribute to these expenses since their businesses benefit from the FTTP infrastructure providing them access to subscribers of their services and delivery platforms. The argument has been raised in a statutorily mandated U.S. Federal Communications Commission inquiry on universal service and the future of the Universal Service Fund as well as before EU regulators.

In an open access network, service providers pay to lease access from the network operator. Service provider leases could potentially offer investor owned telephone companies an indirect route to get edge providers to help defray them via contracts with ISPs offering services on open access networks. Edge providers would pay the ISPs to bundle their offerings and offer them to end users. Such an arrangement would naturally favor the scale of larger networks such as AT&T’s joint venture Gigapower hopes to attain.

Bringing ISP lease revenue to the table alters the traditional business case analysis for deploying FTTP since it provides owners/operators a revenue source independent of monthly end user or subscriber fees. Traditionally, business case analyses focus on household take rate and ARPU revenue estimates only. That has left many households effectively redlined for FTTP because a viable business case often cannot be made based solely on subscriber revenues.

Service provider lease revenue can flip the analysis, instead constituting most of the network revenues instead of end user subscriptions. For example, the publicly owned open access network UTOPIA Fiber gets 70 percent of revenues from these leases, according to a preliminary bond offering issued April 14, 2022 for $30 million in tax exempt telecommunications revenue bonds. The balance is from end user service contract fees.

More patient capital meets burgeoning demand for fiber

A shift is underway in capital investment in fiber to the premises (FTTP) advanced telecommunications infrastructure. In the United States, FTTP investment has lagged for decades due to the capital investment limitations of investor owned telephone companies. They are constrained by overleveraged balance sheets and investor expectations of traditionally high shareholder dividends that necessitate rapid returns on any capital investment. Those limitations became apparent in the late 2000s when Verizon faced a shareholder revolt, forcing it to scale back plans to modernize its legacy copper outside plant to FTTP. It later moved into fixed wireless that offered lower capital costs. Infrastructure investment is a long term proposition that requires patient capital not found in these companies.

Now AT&T is attempting a workaround to access more patient capital with its Gigapower joint venture with investment firm BlackRock to invest in open access FTTP delivery infrastructure outside of its service area. That patient capital includes state and local pension funds, sovereign wealth funds, and family endowments, Adam Walz, told a panel presentation this week by Broadband Breakfast. Walz is managing director of BlackRock’s Global Infrastructure Fund focused on investments in digital infrastructure opportunities across fiber networks, data centers, and wireless infrastructure.

Notably, other builders of open access FTTP also rely on patient capital including UTOPIA Fiber, owned and financially backed by a 20 Utah municipalities and privately owned SiFi Networks, funded by European pension fund APG. However, Gigapower CEO and retired AT&T executive Bill Hogg, said these players have “nowhere near the scale we will have,” claiming Gigapower will be “much larger than any other provider in the space. The scale at which we are going to operate will be a differentiator in the U.S. marketplace.”

But patient capital doesn’t mean it isn’t concerned about maximizing returns. All these players are targeting more densely developed areas most likely to produce strong ROI and ARPU, capitalizing on the strong demand for FTTP delivered services. Had U.S. telecom policymakers made more erudite decisions decades ago, fiber would have reached nearly all American doorsteps by 2010 at the latest instead of the estimated 40 percent currently. That gives Gigapower lots of runway as well as first mover advantage: first with fiber owns the location for the long term. “We’ve found plenty of attractive locations to build fiber where there’s no fiber today,” Hogg said, pointing to Las Vegas (Google Fiber is looking at that metro as it enters Nevada) and locales in Florida and Arizona. 

The concentration on densely developed areas will require patient capital investment by governments and consumer utility cooperatives to serve less developed areas, particularly those at the exurban edges of metro areas that have seen in migration by knowledge workers as knowledge work decentralizes out of urban cores.

U.S. should create authority to administer long term, low interest loans for open access advanced telecom infrastructure

Concerns have been raised regarding access to grant funds for advanced telecommunications infrastructure appropriated in the Infrastructure Investment and Jobs Act (IIJA) specifically the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program that administers the funds. To ensure program integrity – that grant funds subsidize the construction of infrastructure – the NTIA requires a 25 percent match as well as a bank letter of credit that would allow the NTIA to claw back monies not used for that purpose.

In 2022, the U.S. Government Accountability Office identified a patchwork of more than 100 federal programs administered by 15 agencies that could be used to expand access. The GAO recommended the NTIA identify key statutory limitations to program alignment and develop legislative proposals as appropriate. The NTIA agreed with its recommendations, the GAO reported, and agreed to report to Congress by May 31, 2026 on barriers and statutory limitations that limit broadband program alignment and offer legislative proposals to address them.

Earlier this year in prepared Congressional testimony, the GAO called for national strategy needed to coordinate fragmented, overlapping federal programs, noting fragmentation and overlap can lead to the risk of duplicative support. Three months before, the Federal Communications Commission reported to Congress the Broadband Interagency Coordination Act, which directed the FCC, the National Telecommunications and Information Administration (NTIA) and U.S. Department of Agriculture (USDA) to take a whole-of-government approach to advanced telecommunications infrastructure deployment. The FCC reported an interagency agreement among them “significantly facilitated efficient use of federal funds” and “established a consistent, robust channel for communications among the agencies concerning their respective funding programs.”

The NTIA is finding and will continue to find administering the BEAD program to be challenging. Questions over the accuracy of “broadband maps” created by the FCC to map marketed bandwidth to determine funding eligibility threaten to tie up timely disbursement of funds to the states in addition to the aforementioned concerns over the letter of credit requirement. While opponents see the letter of credit requirement as a way of favoring large investor-owned telephone and cable companies and locking out nonprofit and public sector applicants, it builds in a measure of program integrity to protect public dollars from misappropriation. The downside is by favoring the large investor incumbents along with the eligibility requirements based on their current Swiss cheese service offerings, it will promote continued limited, discrete infrastructure builds (they can be as small as one address under NTIA’s program guidance) that conflict with the expressed intent of the guidance that states develop plans for universal service for all their residents.

Here's what NTIA should recommend to Congress -- and not wait until May 2026 but do so ASAP:

• All existing federal grant programs be eliminated and uncommitted funds placed under a federal 501(c)(1) nonprofit Advanced Telecommunications Authority to administer low interest loans with terms of 30 or more years to state and local governments and 501(c)(12) consumer telecom cooperatives to construct universally available, open access fiber to the premises transmission and delivery infrastructure as well as middle mile transmission infrastructure.
• State and local governments and 501(c)(12) consumer telecom cooperatives would be authorized to issue transparent and fair competitive requests for proposals and qualifications for entities to design, build and operate the infrastructure similar to road and highway projects.
• Since the funds would be structured as loans, the authority should be authorized to develop program rules to mitigate the risk of loan defaults and ensure fully (and not partially) built infrastructure, extending loan funds via regional offices as project milestones are complete and meet construction and quality of service standards.
• States would be authorized to create interstate regional advanced telecommunications infrastructure authorities to enhance economies of scale and access to labor and materials and to ensure timely construction of essential middle mile transmission infrastructure.
• States would be encouraged to expedite permitting approvals and access to rights to way for both new aerial poles and underground infrastructure.
• The publicly owned infrastructure built by the regional authorities would be authorized to charge only nominal access fees to end users. They would be authorized to assess access fees on service and content providers offering services on the infrastructure to defray operational and maintenance costs.

Critics of these measures would likely argue they cannot attain universal, affordable access. But the current market and bandwidth (versus infrastructure)-based strategies clearly cannot in a timely manner. Market-based competition has a role. But in order to serve the public interest, government must take the lead to harness market forces and ensure public funds are used for public purposes.

A better alternative to picking winners and losers

One of our aims at the MIC Center in organizing the Democratizing the Internet symposium was to bring together visionaries whose critique runs deeper and whose political imaginary for the internet’s future is more expansive than the tinkerers. This cohort of thinkers relate the manifold maladies that plague the contemporary internet to its underlying political economy. In this view, there is a structural antagonism between the owners of the internet and its users, between the profit interests of digital monopolists and the public’s interest in an open, empowering internet. In other words: we can have an internet that works for Silicon Valley and telecom companies, or we can have an internet that works for the people. But we cannot have both.

https://techpolicy.press/another-internet-is-possible-if-you-believe-it-is/

Why do public policymakers insist on picking winners and losers when it comes to modernizing the nation’s outdated metallic advanced telecommunications infrastructure to fiber reaching most every American doorstep as copper telephone lines did in the 20th century? They typically declare the shareholders of investor owned companies the winners and the public the losers.

The usual explanation is lobbying power of the investor owned players. It’s not that simple. Policymakers know who those lobbyists represent. They are intentionally favoring that much smaller cohort of shareholders over the much larger general public interest in accessible and affordable fiber delivered advanced telecommunications. Good for the shareholders seeking rents in a natural monopoly utility market but poor public policy.

There is an alternative where both groups can win. The public sector owns the infrastructure and the private sector can make money and create jobs designing, building, operating, and offering services over it and compete via competitive public bids.

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.