FCC chair signals end of “broadband” era and rise of FTTP

Sooner or later – more likely sooner – the Federal Communications Commission (FCC) will recognize the irrelevance and futility of defining and subsidizing landline premise telecommunications infrastructure based on specified “broadband” download and upload speeds as Internet bandwidth demand growth tracks Moore’s Law for microprocessor processing power, doubling every 18-24 months.

Consequently, it will likely repurpose the mission of the FCC’s Connect America Fund (CAF) program created to subsidize infrastructure construction in high cost areas to instead help defray the cost of deploying fiber to the premise (FTTP) infrastructure in these areas. At the same time, the FCC could also realize that significantly greater funding will be needed to do the job than the $9 billion the CAF has budgeted for its second phase covering the period 2014-2019.

The FCC this year recognized that its current eligibility criterion for CAF subsidies is potentially outdated. It’s targeted to high cost areas where premises are not served by landline connections providing at least 4 Mbs down and 1 Mbs up. The FCC issued a notice of inquiry in August to take testimony as to whether that standard should be increased and modified to include latency as well as speed.

In prepared remarks delivered this week, FCC Chairman Tom Wheeler suggested 25 Mbs should be considered the new minimum. He went on to observe that might also be too low and only a quarter of the throughput that Americans presently expect given their growing appetites for high definition streaming video and multiple connected devices in their homes and small businesses.

“Today, a majority of American homes have access to 100 Mbs,” Wheeler continued. “It is that kind of bandwidth that we should be pointing to as we move further into the 21st century. And while it’s good that a majority of American homes have access to 100 Mbs, it is not acceptable that more than 40 percent do not.”

Relative to high cost areas, Wheeler noted the FCC “will continue to establish requirements for our universal service programs, but beyond that, consumers are establishing their own expectations.” That recognition of end user needs represents a significant departure from existing policy where telecommunications providers and governments tell consumers in these areas what they should expect instead of the reverse. It’s also an implicit recognition that there should be a single standard and not a separate and lesser standard for high cost areas of the nation. Which makes sense given that core content providers and other services are tailored for a single standard of quality at the network edge.

Noting FTTP deployments in several metro areas of the U.S., Wheeler impliedly recognized FTTP infrastructure is replacing the speed-based “broadband” metal wire paradigm of the legacy telephone and cable companies. That model utilizes “bandwidth by the bucket,” speed-based pricing tiers based on the assumption that metal wire infrastructure has limited carrying capacity and that service must accordingly be rationed and priced based on demand.

Wheeler recognized with FTTP, that pricing model that irks many consumers faces obsolescence. “Once fiber is in place, its beauty is that throughput increases are largely a matter of upgrading the electronics at both ends, something that costs much less than laying new connections,” Wheeler said.

Wheeler also acknowledged that mobile wireless services cannot substitute for FTTP. “While LTE and LTE-A offer new potential, consumers have yet to see how these technologies will be used to offer fixed wireless service,” he said.

FCC's Wheeler: US needs more high-speed broadband competition | PCWorld

FCC's Wheeler: US needs more high-speed broadband competition | PCWorld: U.S. residents lack meaningful choices for broadband providers that offer 25Mbps or faster download speeds, and the U.S. Federal Communications Commission will push for more competition, the agency’s chairman said Thursday.

While more than 93 percent of U.S. residents have access to a broadband provider, fewer than 15 percent can buy service from more than two wired providers that offer “yesterday’s broadband” with 4Mbps download speeds, FCC Chairman Tom Wheeler said during a speech at Washington, D.C., startup incubator 1776.

“At the low end of throughput ... the majority of Americans have a choice of only two providers,” Wheeler said. “That is what economists call a duopoly, a marketplace that is typically characterized by less than vibrant competition.

As long as Internet service providers own the infrastructure that connects customer premises, there will never be any meaningful degree of competition, owing to the fact that telecommunications infrastructure due to high costs and barriers to entry functions in a natural monopoly market. As Andrew Cohill wrote in his 2010 white paper, that's about as inefficient and senseless as having FedEx or UPS operate proprietary roads to serve neighborhoods that are closed to competing shipping services.

The policy of the United States has been to preserve this very market structure of which the Federal Communications Commission chair laments. What's needed to achieve any level of real competition is to encourage and fund the construction of publicly owned open access fiber to the premise networks where ISPs compete to sell services to customer premises. Call it the public option for telecommunications in the Internet age.

Broadband and the future of learning | Computerworld

Broadband and the future of learning | Computerworld: Since learning may take place anywhere and anytime, connected learners also need broadband access outside of school. Although 70% of U.S. households now have broadband, millions of households still do not. Private-sector initiatives are helping to expand access. For example, Comcast’s Internet Essentials program offers low-income families broadband service for $9.95 a month, along with the option to purchase an Internet-ready computer for under $150 and free digital literacy training. In its first three years of operation, the program has provided affordable broadband service to more than 350,000 households.

It should be noted that Comcast and other incumbent legacy providers redline many neighborhoods, leaving them without access to modern landline Internet connectivity at any price.

There are also promising public-private partnerships to increase access. In Forsyth County, Georgia, the local school district worked with the Chamber of Commerce to create a directory of free Wi-Fi locations in the community and to provide participating businesses with signs indicating where free Wi-Fi is available. And a middle school in Manchester, Tenn., that has equipped all sixth-graders with iPads had convinced local businesses to open their Wi-Fi hotspots to students to maximize the benefits of their technology tools.

Public-private partnerships need to go far beyond Wi-Fi and help construct fiber to the premise infrastructure to make blended learning possible since it heavily relies on students having adequate access in their homes. A good example is in Utah, where an investment firm, MacQuarie Capital, is partnering with the Utah Telecommunications Open Infrastructure Agency (UTOPIA) to finance and complete the construction of open access fiber to the premise infrastructure.

Telecom Plan Raises Questions About Future Internet Service | Vermont Public Radio

Telecom Plan Raises Questions About Future Internet Service | Vermont Public Radio: “It’s shortsighted to make that investment in technology that can’t go the whole nine yards,” says Irv Thomae, chairman of the governing board of ECFiber, which currently serves 800 customers in six central Vermont towns.

Thomae says the draft plan doesn’t represent a commitment to the Legislature’s goal.

“If the Telecom Plan says we aren’t to take the 100 Mbps seriously, then we aren’t going to take it seriously,” he says.

Thomae says state funded "dark fiber" projects constructed by the Vermont Telecommunications Authority should be the model for reaching the 2014 goal. These projects enable service providers to lease space and compete for customers.

Thomae says the state should raise money through the sale of bonds to finance an extensive dark fiber system.

Thomae raises a key issue on U.S. telecom infrastructure planning and financing policy. The nation is at an inflection point where the service line extensions of the legacy telephone and cable companies have gone about as far as they can within their business models in terms of making landline Internet service accessible to all American homes and businesses. And possessing the capacity to deliver the bandwidth that will be needed going forward as bandwidth demand doubles every couple of years or so, consistent with Moore's Law on microprocessor development.

Vermont's situation is a metaphor for the United States as a whole and points to the need for greatly expanded public sector financing capacity for this infrastructure that's as critical to the 21st century as highways and electricity were to the 20th.

How big telecom smothers city-run broadband | Center for Public Integrity

How big telecom smothers city-run broadband | Center for Public Integrity: “We don’t quarrel with the fact that AT&T has shareholders that it has to answer to,” Bowling said with a drawl while sitting in the spacious wood-paneled den of her log-cabin-style home. “That’s fine, and I believe in capitalism and the free market. But when they won’t come in, then Tennesseans have an obligation to do it themselves.” 

Republican Tennessee State Senator Janice Bowling puts this debate over the role of the public sector in financing or building telecommunications infrastructure into the proper perspective. It's not a contest over capitalism or any other economic philosophy. It's about the hard reality that markets aren't perfect and can and do fail. When that market is for a service like telecommunications that plays such a central role in the health of the economy as a whole, public sector involvement is entirely appropriate and the interests of a single sector of the economy must take a subordinate position.

At a meeting three weeks after Bowling introduced Senate Bill 2562, the state’s three largest telecommunications companies — AT&T, Charter, and Comcast Corp. — tried to convince Republican leaders to relegate the measure to so-called “summer study,” a black hole that effectively kills a bill. Bowling, described as “feisty” by her constituents, initially beat back the effort and thought she’d get a vote.

That’s when Joelle Phillips, president of AT&T’s Tennessee operations, leaned toward her across the table in a conference room next to the House caucus leader’s office and said tersely, “Well, I’d hate for this to end up in litigation,” Bowling recalls.

Actually, no. Legacy incumbent telephone and cable companies love litigation because it fits perfectly with their strategy of buying time and years of delay since they are unable to invest sufficient funds to upgrade their monopolistic and dupolistic telecommunications markets due the limitations of their business models.

Unpacking claims of “unfair competition” when the public sector finances or builds fiber to the premise infrastructure

Incumbent telephone and cable companies often cry “unfair competition” when the public sector invests in or builds fiber to the premise (FTTP) infrastructure. Let’s unpack that assertion. From the point of view of these companies, anyone who builds infrastructure they don’t own is a competitor. They really don’t compete to gain customers in a given geographical area. That’s because telecommunications infrastructure isn’t truly a competitive market characterized by many sellers and buyers. Rather than competing for customers, the incumbents’ true interest is in protecting their monopoly or duopoly status.

True competition occurs in a market where buyers and sellers are on a level playing field and buyers have relatively equal access to market players and information on their services, benefits, prices and value offered. That doesn’t happen in telecommunications infrastructure. Incumbents have the upper hand in deciding which neighborhoods they will serve, what services will be offered and at what price. And they don’t disclose where they plan to build FTTP infrastructure.

The public sector typically gets involved in investing in or building FTTP infrastructure not to compete with the incumbents, but to remedy the market failure they create given their power to pick winners and losers among the neighborhoods they opt to serve and those they choose to redline and not offer service.

Finally, since the public sector typically invests in open access infrastructure and provides wholesale access to Internet service providers (including the incumbents), that’s also not direct market competition with incumbent telephone and cable companies. It’s an entirely different playing field and certainly not the same one used by the incumbents who won’t play ball unless they own the field. Hence, there’s no direct competition, fair or unfair.

U.S. FTTP infrastructure projects falling into 2 categories

The construction of fiber to the premise (FTTP) Internet infrastructure in the United States is falling into two main categories:

1. Projects in large and midsize metro centers such as those started or planned by Google Fiber, AT&T and Century Link as well as some cable companies. An article in the July 2014 issue of Broadband Communities magazine lists these deployments.
2. Community or regional projects by local governments, utility cooperatives and public-private partnerships serving less densely populated areas not containing large cities such as those tracked by the Institute for Local Self Reliance.

The bifurcation of these infrastructure projects is distinguished by the economic health of their respective markets. Those in the first category undertaken by investor-owned providers that need a rapid return on investment are targeted to markets undergoing rapid economic growth, Broadband Communities editor Masha Zager writes in her article on large metro projects, citing the FTTP deployment strategy of Cox Communications:

Cox explicitly named rapid growth as one of its criteria for selecting cities for gigabit deployments. In contrast to municipalities, which often deploy fiber in an effort to jump-start lagging economies, large players favor localities that are healthier to begin with.

For the second category of projects, FTTP is clearly an economic development strategy to a far greater extent than the first. Unlike those in the first category financed by the impatient capital of telcos and cablecos burdened with high debt loads and large shareholder dividend obligations, community or regional projects will rely on patient capital. Sources include long term public bonds and creative public-private partnerships that blend public and private funding such as the Utah Telecommunications Open Infrastructure Agency (UTOPIA).

The second category is also distinguished from the first by the ownership and business models of the network infrastructure. In the first category of investor-owned projects, the network is a proprietary, closed access property. The telcos and cablecos that own the networks charge a retail monthly subscription fee to connecting premises.

By contrast, the second category is more likely to utilize an open access business model (such as UTOPIA) where fiber infrastructure is like a public works project such as a road or highway. Instead of selling individual subscriptions to customer premises, an open access model operates as a wholesaler selling network access to Internet service providers who provide services to customer premises. This model is a better option for the second category of projects because it removes the business risk of getting sufficient numbers of premises to sign up for service in order for the network deployment to be economically viable.