West Des Moines, Iowa offers model for states, regions to scale up open access fiber telecom infrastructure

To ensure the timely modernization of legacy metallic telecommunications delivery infrastructure to fiber to the premise (FTTP) infrastructure at significant scale, new models for its construction and operation are needed. Investor-owned providers using vertically integrated, closed access networks tend to restrict capital investment to densely populated areas compatible with their business models that demand a rapid return on investment.

Subsidies of up to 75 percent of construction costs may be available in the near term through the federal Infrastructure Investment and Jobs Act (IIJA) of 2021. But eligibility restrictions on the funding will likely result in it being allocated only in the most remote and insular parts of the country since those restrictions are designed to protect the markets of incumbent providers that have a presence outside of those areas. That will leave it to the states to come up with new approaches.

One promising appearing model is emerging in West Des Moines, Iowa. The municipality finances and builds the basic supporting infrastructure – in this case buried conduit. But it could also be aerial fiber on metal half height poles placed in existing rights of way, for example. A private sector network operator – here Google Fiber – installs the telecommunications infrastructure: the fiber, network electronics and premise connections. It shares part of its end user revenues with the local government to finance bond debt incurred by the government to construct the supporting infrastructure. Since it is operated as an open access network, other providers can pay a fee to access it and the end users it serves.

This model for the construction and operation is particularly well suited to exurban and small town America that like West Des Moines are only partially served by legacy providers using metallic infrastructure.

To make it rapidly scale to meet burgeoning demand for connectivity, this model provides a framework for a statewide or regional scope – for example local governments forming a regional telecommunications authority like California’s Golden State Connect Authority. Like roads and highways and airports -- the Golden State Connect Authority regards advanced telecommunications infrastructure similar to regional airports – very substantial financing capacity is needed beyond that which individual local governments can provide. In addition, the limited, one off grant subsidies that have been the predominant financing model don’t provide funding sufficient for the task at hand.

U.S. telecom infrastructure crisis natural outcome of nation’s failure to address foundational questions

America’s advanced telecom policy failure stems from the failure to address two fundamental questions:

1/ How much would it accurately cost to bring fiber to most every American doorstep?

2/ What are the optimal roles of the public and private sectors in financing, building and operating this critical infrastructure -- and constructing it in the most expeditious manner given only about one third of homes have fiber connections?

The failure to honestly ask and answer these questions and make clear policy choices based on the answers has led to the default market-based, incremental, ad hoc and highly granular efforts dating to the mid-1990s. That has led to using throughput as a metric of progress vs. replacing legacy metallic telephone and cable delivery infrastructure with fiber to the premise (FTTP) and what scholars like Christopher Ali describe as “The Politics of Good Enough” and barely adequate infrastructure prone to near term obsolescence. While Ali frames his argument in binary terms of urban vs. rural infrastructure similar to the deployment of electric power distribution infrastructure in the early 20th century, it extends to other geographic settlement areas due to highly granular, incremental market driven deployment based on household density and demographics and other factors.

The failure to address these overarching questions and make solid policy decisions has in its place produced sloganeering like “Internet for All” -- meaningless and merely aspirational without a realistic plan to get the nation there -- and getting lost in the weeds.

A glaring example is “broadband mapping” and the controversy surrounding the FCC’s related efforts that will determine the allocation of advanced telecommunications infrastructure subsidies appropriated in the Infrastructure Investment and Jobs Act of 2021. “Broadband mapping” encapsulates the previously mentioned flawed policy of defining progress based on throughput vs. infrastructure modernization. Even more fundamentally, the failure to determine the optimal roles of the public and private sectors, with mapping as protectionist response by investor-owned providers seeking to protect their interests in the meantime.

On telecom infrastructure modernization, politics of "good enough" likely to prevail at expense of FTTP

Despite the enactment of the Biden administration’s Infrastructure Investment and Jobs Act (IIJA) one year ago, the United States is unlikely to show significant progress over the foreseeable in modernizing its legacy metallic telephone and cable TV distribution infrastructure to fiber to the premises (FTTP) for advanced telecommunications. Here are some of the reasons:

• Policymakers will likely argue that getting American homes connected as quickly as possible – the urgent need shown during pandemic restrictions – is paramount and hence any technology that can do that is “good enough.” They’ll also argue that fixed terrestrial wireless (FWA) and satellite delivered connectivity have demonstrated their ability to do that, particularly in areas that meet the legislation’s Broadband Equity, Access, and Deployment (BEAD) Program (BEAD) primary eligibility standard for construction subsidies (>80% of prems are unable to order service with throughput of 25/3 Mbps or greater). That could also lead to efforts to regulate the rates for these technologies since they typically priced above landline delivered services.
  
  
• Fixed wireless – licensed or not – and satellite will be deemed “good enough” after intense lobbying of the federal and state governments over the BEAD subsidy eligibility standards. Notably, the director of the National Telecommunications and Information Administration (NTIA) – charged with overseeing the distribution of the subsidies – suggested satellite and fixed terrestrial wireless will have to suffice in some high cost areas of the nation.
  
  
• The FCC’s recently released “broadband map” that will determine eligibility for infrastructure construction subsidies designates areas currently served by satellite and mobile wireless providers offering licensed FWA as ineligible for funding.
  
  
• Coax cable and second generation DSL fiber to the curb (FTTC) infrastructure will also be deemed “good enough” over FTTP in more densely settled parts of the nation. The cable industry will continue to refine its DOCSIS signal compression technology and only invest in FTTP selectively in newly built residential subdivisions whereas just a couple of years ago, they were installing coax in newer developments.

States and regions need to step up to ensure timely transition to fiber from metallic telecom infrastructure

Given ongoing political gridlock in Washington and the lack of comprehensive federal policy to rapidly modernize America’s legacy metallic telecom infrastructure built in the previous century to deliver analog telephone service and cable TV to fiber for the current one, it now falls to states and regions to take the lead.

States and localities have looked to multiple time-limited and heavily restricted federal grant sources over the past 15 years or so as their primary source of funding -- most recently infrastructure subsidies contained in the American Rescue Plan Act state and local government coronavirus relief legislation.

But to move the nation rapidly forward with world class fiber reaching most every American doorstep, they will have to generate their own dedicated revenue and regard federal dollars as supplemental and not primary. States should consider telecom bill surcharges to service long term bonds to finance publicly owned advanced telecommunications infrastructure construction and operations.

This has to be a state and regional effort given the necessities of scale and time. Local governments tend to look at advanced telecommunications infrastructure deficits like sections of deteriorating road needing replacement. That approach is too piecemeal and incremental and won’t bring fiber to most every address in a reasonably rapid time frame -- the urgency of which became painfully apparent when pandemic restrictions turned homes into workplaces, places of learning and extensions of medical clinics.

Local governments are reluctant to impose parcel taxes that would provide sufficient funding such that grant funding would play a minor supplemental role. This is important because even with $45 billion appropriated for advanced telecommunications infrastructure in the federal Infrastructure Investment and Jobs Act enacted one year ago, provisions of the legislation restrict its use to the most remote and insular areas of the nation. That allocation may turn out to be spread too thinly given the nation’s large land mass and the funds being earmarked for extremely remote areas where construction and operational costs are the highest.

This shouldn’t be viewed in binary terms as an all or nothing choice between the public and private sectors. While state and regional infrastructure should be publicly built and financed as roads and highways are, private sector actors play a critical role in designing, building and operating this infrastructure in addition to offering advanced telecommunications and information services. NGOs such as consumer utility cooperatives also play an important role, particularly in rural areas where they have historically operated.

Fearing universal service mandate, price regulation small and medium size incumbents claim robust market competition makes Title II regulation unnecessary

ACA Connects, a trade association of small and medium sized telephone and cable companies, has issued a white paper titled Broadband Is Competition Thriving Across America. Anticipating ongoing policy debate on regulation of advanced telecommunications, it presents data it claims show the Federal Communications Commission need not readopt regulations that regard Internet protocol telecommunications as a common carrier utility regulated under Title II of the Communications Act as the Biden administration urged in a July 9, 2021 executive order.

The paper argues robust competitive market forces make regulation unnecessary because nearly nine out of 10 American homes have access to advanced telecommunications meeting the FCC’s throughput-based definition of “broadband.” Homes having access to that and higher bandwidth is likely to increase based on current trends, it adds.

The paper relies on Form 477 reports on their service availability that providers must file with the FCC. The data includes providers using cable, DSL, fiber or fixed wireless technologies but not satellite or other technologies “because capacity limitations may limit the competitive impact of providers using these technologies.”

The paper states common-carrier-style regulation would be “particularly problematic” because of “rapid technological change.” That’s been a consistent message from incumbent investor-owned companies wishing to defer capital investment in upgrading legacy metallic outside plant to fiber to the premise (FTTP) for as long as possible to protect their bottom lines.

That rationale is understandable, but based on a false premise. No new advanced telecommunications delivery infrastructure technologies have emerged that are superior to FTTP, which has been around for decades. Perhaps by the 23rd century, it will be obsoleted by a Star Trek-like quantum subspace channel. But not over the foreseeable future.

While not stated directly, the apparent purpose of the paper stems from concerns that readoption of the Title II regulatory scheme will subject the organization’s member companies to universal service mandates and state rate regulation through public utility commissions.

Framing advanced telecommunications service as a competitive market undercuts the regulatory rationale for Title II regulation because it is predicated on telecommunications as a natural monopoly market like other utilities that don’t lend themselves to meaningful market competition being claimed by ACA Connects. That requires prices to be regulated because market forces won't act to control them and protect affordability. Also, universal service/non-discrimination mandates since homes in areas deemed unprofitable to connect would go without.

Notably, the July 2021 Biden administration executive order was issued with the purpose of promoting competition in the U.S. economy, implicitly recognizing competition is negligible in advanced telecommunications that is dominated by large investor-owned corporations. ACA Connects urges if the Title II rules are readopted, they should apply only to these entities and exempt smaller players like its members. Additionally, its white paper points to the stated plans by large providers to deploy fiber to the premises (FTTP) as evidence of strong market competition making utility regulation unnecessary.

Third front opens in advanced telecommunications infrastructure subsidy wars

A third battlefront is opening between shareholders of big telephone and cable companies and the broader public interest over rules governing federal and state subsidies to boost access to affordable and reliable advanced telecommunications. It’s over so-called “technological neutrality” and specifically fiber to the premise (FTTP) versus wireless distribution infrastructure.

The other two likely points of contention are over the accuracy of the Federal Communications Commission’s forthcoming “broadband maps” to determine how much funding states will receive through the federal Infrastructure Bill’s Broadband Equity, Access, and Deployment (BEAD) Program (several states lack confidence in any federal maps, preferring their own maps that could them at odds with the federal government) and whether proposed BEAD infrastructure projects proposed by public and nonprofit fiber to the premise (FTTP) providers include sufficient “unserved” addresses not advertised reliable service with throughput of at least 20 Mbps down and 3 Mbps up.

The big investor owned, vertically integrated providers want the subsidies to go toward any technology that’s capable of meeting minimum throughput (100/20) and reliability. But at least some policymakers argue the best use of public dollars is to invest them in more durable FTTP infrastructure given its 30-50 year or longer lifespan and headroom to accommodate the well-established trend of increasingly bandwidth hungry end user device applications. They include the National Telecommunications and Information Administration, the federal agency administering the BEAD state grant funds and the California Public Utilities Commission (CPUC) at the state level.

On April 21, 2022, the CPUC issued a final decision adopting staff proposed rules for its Federal Funding (capital subsidy) Account (FFA) based on the grant rules promulgated by the U.S. Treasury Department for State and Local Government Capital Projects Fund contained in the American Rescue Plan Act (ARPA). For advanced telecommunications infrastructure, those rules limit funding eligibility to “reliable wireline broadband infrastructure.”

Similarly, the CPUC FFA decision favors FTTP, noting “fiber optic infrastructure is scalable and enables the next generation of application solutions for all communities.” That displeases large incumbent providers that regard fixed wireless as a “firewall” to protect their nominal service territories from government owned and nonprofit providers that would use the federal subsidies for their own fiber builds, according to Steve Blum of Tellus Venture Associates, a consultant to California cities and counties.

Large incumbents including AT&T, Consolidated Communications, Frontier and trade associations CTIA and US Telecom - the Broadband Association are backing an urgency measure pending in the California Legislature to counter the CPUC decision, expressly authorizing wireless internet service providers to receive CPUC infrastructure subsidy funding. It's opposed by an association of 39 California counties and the Electronic Frontier Foundation.

Current California law, Public Utilities Code Section 281(f)(1) requires the CPUC award infrastructure subsidies on a “technology-neutral basis, taking into account the useful economic life of capital investments, and including both wireline and wireless technology.” The CPUC FFA decision incentivizes fiber given its longer lifespan compared to fixed wireless infrastructure. “Our determination of what wireline technologies offer reliable service is consistent with the Final (U.S. Treasury Capital Projects) Rule, which found that these legacy technologies typically lag on speeds, latency, and other factors, as compared to more modern technologies like fiber," the CPUC decision states.

Regional open access fiber as the telecom regional airports of the 21st century

As the U.S. continues to debate the role of public and private ownership and operation of advanced telecommunications infrastructure, a California local government official offers simple aeronautical analogy to progress beyond the debate and bring ubiquitous connectivity to nearly every American doorstep.

Just as local governments own and operate regional airports, regional open access fiber infrastructure can serve as the airports for internet service providers operating as the airlines. Like airlines that rent terminal space at airports, the ISPs would rent access to the infrastructure to deliver service to their customers.

Calaveras County, California Supervisor Jack Garamendi’s concept makes a lot of sense. Investor owned vertically integrated providers cannot afford to bring fiber connections serve all homes, businesses and institutions in their nominal service areas. That’s because their investors expect relatively short term returns on capital investments incompatible with the long term investment horizon for infrastructure. Hence, the nation is handicapped with partially deployed infrastructure with only about a third of all homes having access to fiber connections that should have reached nearly all of them by 2010 with better policy and planning.

Now Garamendi is working to build what amounts to a regional airport system serving 38 California counties as president of the Golden State Connect Authority (GSCA). As a joint powers authority and governmental entity, the GSCA plans to access the public bond markets to finance the fiber. That’s more patient capital that’s compatible with fiber infrastructure serviceable for decades – much like airports. California legislation enacted in 2021 appropriates continuous funding to help secure the bond debt.

The GSCA is modeling itself on and working with the State of Utah’s Telecommunication Open Infrastructure Agency (UTOPIA), a group of 11 Utah cities that joined together in 2004 to build, deploy, and operate fiber infrastructure connecting all homes and businesses.

According to Garamendi, the GSCA plans to ramp up deployment of fiber rapidly, starting with more densely settled areas. “We’ll go fast and we’ll pick up speed,” he said at an Electronic Frontier Foundation event this week.

Let’s hope so. The GSCA must avoid only partially deploying like the large corporate investor-owned telephone companies that serve limited, more densely developed areas. Great numbers of residents and small businesses in GSCA counties have coped with lack of landline connections for many years – even in not so thinly populated exurban areas at the outlying edges of metro counties, forced to rely on high cost, low value wireless services.

The GSCA won’t be able to bring fiber to every location, Garamendi noted, given some are in very remote rural areas of the Golden State. But access to patient capital will allow it to go much farther than the far less patient capital of investor-owned providers that naturally cherry pick areas conforming to their stringent rate of return and profitability standards. 

State and regional public telecom entities like UTOPIA and the GSCA offer the nation a badly needed self sustaining model to build and operate fiber networks to provide near universal service and affordable access. Such self sustaining business structures are particularly needed in the absence of coordinated, sustained federal policy and funding designed to ensure fiber connections reach all American homes and small businesses.

Regionalism isn't new for telecom infrastructure. Telephone companies were structured as interstate regional bell operating companies formed upon the divestiture of AT&T in 1982.

Just a few miles outside of town: Falling through the cracks with outdated 1950 view of U.S. residential settlement

A good problem to have: Managing the ARPA windfall in a small NC county - Carolina Public Press:

Having more GREAT grant money to expand broadband is a point of interest for Madison County, where census data shows 72.4% of residents have a broadband internet connection — significantly less than the state’s 83.4% average.

“The grants that have been awarded — other grants not connected to this — over the years have been to reach the far outstretched parts of rural counties,” Young said. “What’s left is the people close to town that weren’t close enough. The outskirts of the county have some internet, but those a few miles outside of town are still living in 1991.”

This is a basic problem in how the U.S. subsidizes advanced telecom infrastructure. It takes a binary view of residential settlement patterns as if it were still 1950 and people either lived in town or on farms while overlooking the edges of metro areas and exurbs. Housing density in these areas is higher than rural but lower than the suburbs. But it's too low for investor owned infrastructure to be profitably built and operated. As a result, they fall through the cracks and are overlooked by both the private and public sectors.