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.
Friday, October 20, 2023
Thursday, October 19, 2023
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.
Monday, October 02, 2023
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.
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.
Thursday, September 28, 2023
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.
Wednesday, September 27, 2023
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.
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.
Monday, September 25, 2023
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.
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.
Monday, September 18, 2023
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.
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.
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