Burlington Telecom head: Broadband infrastructure a natural monopoly that should be publicly owned

Here's a guy who really understands the economic big picture when it comes to broadband infrastructure: Tim Nulty, director of Burlington Telecom, which built a publicly owned broadband system serving the city of Burlington, Vermont.

Nulty sets out crystal clear guidance for public policymakers on broadband infrastructure: it's a natural monopoly that by its very nature can't foster robust market competition to ensure the needs of the public are met. Hence, Nulty says, it should be in the public rather than private sector like roads and highways. Nulty's observation has enormous implications for the current misguided notion being embraced by some states at the behest of AT&T that state regulation preempting local governments will lead to a competitive market for advanced services. AT&T's approach creates a duopoly of telcos and cable companies and a duopoly does not a competitive market make.

Here's an excerpt from a recent profile of Nulty appearing in Vermont's Business People magazine:

He likens his fiber-optic superhighway to a more commonly understood network. "Nobody thinks twice about the roads being in the hands of the public," Nulty says. "The thought that a private company could own the roads and charge whatever they pleased to anybody who goes on them is ludicrous anywhere in the world. That's what this is: the public roads."

FCC finally abandons useless 1996 broadband measurement standard, will require more detailed reports by providers

The Federal Communications Commission, which for years has been the target of justified criticism for failing to update how it measures broadband adoption as required by the Telecommunications Act of 1996, is finally getting up to speed with more than a decade of changing technology.

Instead of the much derided standard of measuring by ZIP Code and deeming the entire ZIP Code as having broadband service if it has just one subscriber with a data connection of 200kbs in just one direction, the FCC announced today it adopted an order expanding the number of broadband reporting speed tiers to capture more precise information about upload and download broadband speeds.

The next semi-annual report on broadband deploying covering the second half of 2007 and subsequent reports will also require broadband providers to report the number of broadband subscribers by census tract, broken down by speed tier and technology type, the FCC announced.

FCC broadband data for first half of 2007 show nation plagued by persistent telco broadband black holes

The Federal Communications Commission's semi-annual report on broadband deployment as required by the Telecommunications Act of 1996 covering the first half of 2007 is out and the numbers aren't good. (See Table 14) They show virtually no improvement in the percentage of residences that can get high speed Internet from their telcos during the first half of 2007 compared to all of 2006.

On average, nearly 20 percent of Americans still are unable to get broadband from their incumbent telephone companies. In some states -- notably Vermont, Virginia, New Hampshire and Maine -- the number is even worse, with fully one third of state households cut off from the modern era of telecommunications. No state exceeds the 91 percent availability rate of Georgia, though Nevada and California come close with 90 percent and 89 percent, respectively.

Kentucky's figure of 87 percent also casts doubt on the claim of Connect Kentucky in an Aug. 9, 2007 news release that 94 percent of households in the Blue Grass State can get broadband and no households will be left in digital darkness by the end of 2007. The organization was the subject of a January expose by Public Knowledge's Art Brodsky, who debunked its overblown broadband access claims.

Seattle gets serious about building municipal fiber infrastructure

The Puget Sound Business Journal reports Seattle city officials, growing increasingly frustrated with the metal wire-based broadband offerings of incumbent telco/cable duopolists Qwest and Comcast, are preparing to issue a request for proposals to build a fiber optic telecommunications infrastructure.

According to the newspaper, in 2005 a city-commissioned task force recommended a fiber-to-the-premise (FTTP) system as the best way to provide Seattle's populace with high-bandwidth voice, video and data options.

Support building for California legislation allowing local governments to construct broadband infrastructure

Political support appears to be building for legislation that would authorize community service districts, a form of California local government, to construct broadband infrastructure.

Humboldt County Supervisor Supervisor Roger Rodoni is asking the county's supes to write a legislative committee in support of the legislation, according to The Eureka Reporter.

“With passage of this bill, Humboldt County would have opportunities to bring in multiple broadband services and help to prevent the gridlock we’ve had in the recent past because of our limited broadband service,” Rodoni was quoted as saying.

Lawmakers should broaden the scope of the legislation, SB 1191, to include all forms of local government in California considering a January 2008 report by report by Gov. Arnold Schwarzenegger's Broadband Task Force finding nearly 2,000 California communities lack high speed Internet access.

WISP gets $35 million low interest loan from USDA, plans major expansion

One month ago, I blogged about Wireless Internet Service Providers (WISPs) sweeping into America's heartland where wire line broadband providers refuse to go. One of the WISPs, Stelera Wireless, rolled out service in Floresville & Poth, Texas using recently auctioned advanced wireless service (AWS) spectrum offering average speeds of 1.5-2 Mbps down and 350-380 Kbps for uploads. According to Stelera's CEO Ed Evans, the company is the first in the nation to introduce this technology in support of a wireless network purely focused on broadband services.

Stelera announced today it has received $35 million in low interest loan funds from the US Department of Agriculture that will allow it to expand to 55 towns and cities that have 20,000 or fewer inhabitants.

The WISP plans to use the capital infusion to expand to serve locations in Texas, Kansas, New Mexico, Colorado, North Dakota, South Dakota, Washington, Oregon and Arizona. Larger markets will be included as growth continues, the company said.

A major potential roadblock to the company's growth plans could present itself in the form of expanded wireless options offered by cell phone providers that provide throughput speeds in the same range as Stelera's. Stelera and other WISPs will have to offer significantly higher average throughput speeds -- in the neighborhood of 5 to 10 Mbs -- and solid connections if they expect to have a competitive market advantage over these services.

Telco regulators should prohibit passive "soft" divestiture and require companies to upgrade or sell off assets

The two major telcos in the United States, AT&T and Verizon, have segmented their residential wire line markets into three groups.

The first segment is where the telcos are deploying their state-of-the-art infrastructure. For AT&T, it’s the company’s hybrid fiber-copper based VDSL “Project Lightspeed” rollout in support of its Internet/Video/Voice “triple play” U-Verse product bundle. For Verizon, it’s the telco’s FiOS fiber to the premises infrastructure that like U-Verse offers the triple play bundle but with far greater bandwidth and expansion capacity. This “prime” segment comprises only a small percentage of each company’s total residential lines.

The second residential wire line segment features “double play” offerings of broadband Internet and traditional analog POTS (plain old telephone service) delivered over copper cable infrastructure. Broadband is provided by legacy ADSL central office DSLAMs and remote terminals. This “preferred” segment comprises the bulk of the two telcos’ residential customer base.

Which brings us to the third and last market segment. Call it the “non preferred” orphan segment. It is in the words of one independent ISP being kept on life support, serviced only when necessary by makeshift “bubble gum and bailing wire” repairs. Traditional voice service can be spotty, particularly when it rains and afterwards when the sun expands and dries aging aerial cables. Broadband Internet access is nonexistent and residential customers are stuck using early 1990s era dial up technology. In many cases, DSL remote terminals have been installed but were never activated and are now considered obsolete, destined never to be “turned up” in telco parlance. While comprising about 20 percent of the telcos’ residential subscriber base, this third segment accounts for the bulk of repair costs and generates the most complaints to regulators.

This segment has been divested by the telcos, either actively or passively. An example of active divestiture is Verizon’s sale of large portions of its residential territory in several New England states including Maine and Vermont. AT&T, by contrast, has chosen the route of passive or "soft" divestiture. AT&T doesn’t want to service its tertiary residential market segment or upgrade the infrastructure within it in order to offer more services, but the company hasn’t made any efforts to spin off portions of it either. Consequently, the millions of unfortunate residents of this market segment are stuck in telecommunications limbo land where time stands still and the calendar still reads 1991.

Since these companies typically hold monopolistic positions in their third and least desired segments, regulators should prohibit the neglectful passive divestiture practiced most prominently by AT&T and give the telcos a choice: bring your services up to modern standards or sell and get out and make way for other providers who can offer better services.