Opinion: Internet infrastructure can't be built in a reasonable time frame with limited, incremental funding

Want to boost rural tourism in Maine? Raise Internet speeds — Opinion — Bangor Daily News — BDN Maine: The catch is that corporate providers, like Time Warner Cable and FairPoint Communications, see no profit in extending fiber optics to remote, sparsely populated areas. So the state must be involved, and several remedies are being explored at the State House. Most of these approaches are “incrementalist”; that is, focused on giving slightly more funding to the ConnectME Authority. One proposal would authorize ConnectME to provide more grants so additional communities can plan for extending fiber-optic networks, creating wireless nodes and boosting connection speeds. Other bills propose small bonds to boost ConnectME’s funding.

Incrementalism, however, has fundamental limitations: Few rural communities are prepared to compete for limited ConnectME funds, and few low-density, low-income communities can afford broadband investment on their own. With incrementalism, it will take years, perhaps decades, to connect all of Maine.

Some progress is better than none, but ultimately rural Maine needs a “big push,” analogous to the New Deal’s Rural Electrification program that transformed life in rural America. The big push strategy’s basic premise is that broadband is critical for rural economic competitiveness and also a public good to which all should have access. Rural electrification relied on community-level planning, but it was also backed by massive public investment.

The author of this op-ed nails it. Internet infrastructure like any infrastructure is costly and can't be put in place in a reasonable time frame with limited, incremental funding. The states can't do it alone. The United States needs a national Internet initiative on the scale that built today's highway and electrical distribution infrastructures.

The medium is the message: Google Fiber is primarily an advertising platform

Lest anyone forget that notwithstanding Google's construction of proprietary closed access fiber to the premise networks in a few metro areas of the United States, Google's core business is and remains advertising. FTTP is simply a better way to put ads on more screens and in front of more eyeballs, albeit an expensive one -- hence the limited deployment of Google Fiber.

And what better way than the leading advertising medium: high (and super high) definition TV. Over the next few weeks, Google Fiber will test targeted TV ads over its Kansas City build. The ads will run during existing ad breaks, along with national ads, on live TV and DVR-recorded programs and will be matched to the viewer based on geography, the type of program being shown or viewing history, according to a March 20 post by Google Fiber. Subscribers will be able to opt out of seeing ads based on viewing history, according to the post.

In addition to generating advertising revenue, the TV ads will also help offset operating costs, particularly the rising costs of TV programming. Google recently increased the monthly price of its TV and Internet bundle to $130 a month, according to a report in the Kansas City Star.

Advertising on large screen devices is critical to Google's business according to this analysis which notes online stores that advertise via Google are not optimized for small smartphone displays.

US federal government will have to provide substantial funding for Internet infrastructure construction

Obama: This federal council will jumpstart broadband - CNET: Obama first introduced this idea in January, when he traveled to Cedar Falls, Iowa to announce his plan to promote "Broadband that Works," a public-private effort to help more Americans get access to speedier broadband.

As part of this new push, he urged the FCC to strike down state laws to ensure communities could build or expand their own 1 gigabit-per-second networks, which offer downloads 100 times faster than conventional connections.

The new council will include 25 federal agencies and departments that will work with private industry to understand how the federal government can help communities increase broadband investment and reduce barriers to deployment. The council will be co-chaired by the U.S. Commerce and Agriculture departments. The council will report back to Obama, within 150 days, with the steps each agency will take to advance these goals, including specific regulatory actions or budget proposals.

The biggest barrier to Internet infrastructure investment is private market failure on the sell side. That's been patently obvious for more than a decade; it doesn't take more than two dozen federal agencies and departments to ascertain that. The existing dominant U.S. commercial model for providing telecommunications services is based on selling "subscriptions" to and "owning" the customer, consistent with the natural monopoly market that favors large vertically integrated legacy telephone and cable TV providers.

Its primary weakness is it is wholly dependent on ARPU and ROI which don't easily pencil out in much of the nation and aren't likely to given that labor costs that make up about 70 percent of network deployment and maintenance expense are not declining and don't benefit from economies of scale. This produces an all or nothing scenario and lots of winners and losers -- with millions of premises stuck in the latter category for nearly two decades.

If the United States is to have modern telecommunications infrastructure in the 21st century that serves all Americans wherever they live or operate their businesses, the federal government must commit big as it did for electrification, water, telephone and highways in the 20th century. The states don't have the funding to do the job on their own such as Maine, for example, where the state has appropriated only $1 million to fund Internet infrastructure projects that won't go very far when billions are needed. In New York, $500 million in matching public funds isn't attracting much interest as legacy incumbent providers stand warily on the sidelines.

What will be truly interesting is what regulatory actions and budget proposals will be recommended by the newly created federal council. On the regulatory front, the Federal Communications Commission has already acted by deeming the Internet as a common carrier telecommunications service. That leaves it up to fiscal strategies, which should include substantial technical assistance and infrastructure funding for the states along the lines of existing block grant and federal highway programs. Or in recognition that the nation is a generation behind on construction progress, the federal government could built it directly on a crash program basis with early completion bonuses for contractors. Then operate the network on an open access basis, contracting for operations and maintenance and leasing out access to providers under long term contracts.

Obama administration continues to ignore US need for ubiquitous FTTP

The Obama administration continues to ignore the need for ubiquitous fiber to the premise infrastructure serving all American homes and small businesses.

The administration instead is pursuing a PR campaign to shift attention to mobile wireless service that can't accommodate growing premise bandwidth demand as well as pointless activities such as "broadband mapping" and measuring "broadband speeds" that will do nothing to construct the FTTP infrastructure the nation should have been putting in place a generation ago.

Major fail: West Virginia Internet infrastructure policy

The Charleston Gazette | W.Va. broadband panel to get new duties, but no funds: Roper’s group supported the broadband expansion bill, arguing the project would help improve education and healthcare, and spur entrepreneurship in West Virginia.

“If we solely depend on private industry, we’ll just stay at the status quo,” Roper said. “If students can’t access textbooks online at home, and if doctors can’t access electronic health records, we’re in trouble. [Broadband] is like good roads and water lines. It’s everything.”

This sums up the situation well, but the state's plan is to essentially pass the buck (and the hat) while continuing the useless exercise of mapping and comparing "broadband speeds" -- the do nothing approach favored by all too many state and local governments that won't build needed infrastructure:

The new legislation, which Tomblin is expected to sign into law, creates a “broadband enhancement fund,” but state lawmakers didn’t set aside any money for the fund. The bill, however, seems to  allow outside groups to donate to the fund. The panel also will receive any  money remaining from the former Broadband Deployment Council’s account, but the  council announced last year that it planned to spend all leftover funds on  final reports and audits. At the outset, the new broadband  council is expected to gather data about residential and business customers’  Internet speeds – and compare speeds to those advertised by broadband  providers. The new council also will be asked to examine existing  broadband networks.

Accelerating implosion of pay TV will hasten AT&T exit from residential wireline

The accelerating implosion of subscription pay TV offerings will hasten AT&T’s exit from the residential wireline market segment and could also result in the telco’s withdrawal of its planned acquisition of satellite provider DirecTV announced in 2014.

AT&T offers video packages with its U-Verse-branded triple play Internet-video-voice product. With the DirecTV deal pending regulatory approval, AT&T hopes to expand its audience of potential viewers and consequently, boost its purchasing power with TV programming providers as negotiations with the programming providers have hardened in recent years.

Viewers have historically regarded the TV programming packages as a poor value for the money since they typically watch only a handful of a few hundred channels. Now they can stream only the video programming they desire via their Internet connections, disrupting the triple play revenue model.

In addition, AT&T’s U-Verse product is delivered to residences over its aging legacy last mile copper cable plant that offers far less bandwidth headroom -- much of it consumed by video -- than hybrid fiber-coax (HFC) cable plants. To keep technologically abreast of cable, AT&T would have to replace its copper plant with fiber. But it is unable to easily do so, constrained by shareholder expectations for earnings and high dividends that militate against substantial capital expenditures.

That leaves AT&T with only one viable option – to continue to sell off chucks of its residential market as it did in December 2014, spinning off its Connecticut residential landline unit, including Internet and TV services to Frontier Communications for $2 billion.

FCC’s Title II order adopts ultra light touch on net neutrality enforcement

While much of the media has been abuzz over the concept of net neutrality – the principle that all Internet traffic be treated equally – an initial review of the FCC’s report and order issued last week classifying Internet services as telecommunications services under Title II of the Communications Act indicates the regulatory agency is adopting a decidedly light touch approach on enforcing net neutrality. The question of whether net neutrality is being respected has arisen at interconnection between network layers, choke points specifically addressed in the FCC’s order and report.

Paragraph 4 states the order’s policy respecting net neutrality, described in the media as a ban on network providers creating paid fast lanes, drawing on the metaphor of toll lanes on a busy freeway:

4. The lesson of this period, and the overwhelming consensus on the record, is that  carefully-tailored rules to protect Internet openness will allow investment and innovation to continue to flourish. Consistent with that experience and the record built in this proceeding, today we adopt carefully-tailored rules that would prevent specific practices we know are harmful to Internet openness— blocking, throttling, and paid prioritization—as well as a strong standard of conduct designed to prevent the deployment of new practices that would harm Internet openness. We also enhance our transparency rule to ensure that consumers are fully informed as to whether the services they purchase are delivering what they expect.

Paragraph 30 however specifically declines to apply Title II rules to interconnection, noting frictions among commercial players have produced differing accounts of how Internet data traffic is being handled:

30. But this Order does not apply the open Internet rules to interconnection. Three factors  are critical in informing this approach to interconnection. First, the nature of Internet traffic, driven by massive consumption of video, has challenged traditional arrangements—placing more emphasis on the use of CDNs or even direct connections between content providers (like Netflix or Google) and last-mile broadband providers. Second, it is clear that consumers have been subject to degradation resulting from commercial disagreements, perhaps most notably in a series of disputes between Netflix and large last-mile broadband providers. But, third, the causes of past disruption and—just as importantly—the potential for future degradation through interconnection disputes—are reflected in very different narratives in the record.

At paragraph 31 of the order, the FCC opts for an information gathering stance vis a vis disputes over interconnection rather than a strong enforcement role:

31. While we have more than a decade’s worth of experience with last-mile practices, we lack a similar depth of background in the Internet traffic exchange context. Thus, we find that the best approach is to watch, learn, and act as required, but not intervene now, especially not with prescriptive rules. This Order—for the first time—provides authority to consider claims involving interconnection, a process that is sure to bring greater understanding to the Commission.

Levin's Law of Internet Infrastructure Inertia may prevail over FCC universal service mandate

This week’s report and order by the U.S. Federal Communications Commission that imposes a universal service requirement on Internet infrastructure providers may do little to over the next decade to ensure all premises have access to landline Internet connections.

As they did soon after the Communications Act was amended in 1996 requiring telephone companies to share their network infrastructures with competitive providers, the large telephone companies -- joined by cable companies – could challenge the rule in the courts and drag their feet implementing it.

They might also argue that they cannot afford to provide universal service within their service territories because there are insufficient subsidies given this week’s draft order defers enforcement of Section 254(d) of the Communications Act requiring telecommunications carriers to fund universal service.

With a generation of progress toward connecting all American premises with fiber already squandered, the associated delays could buy the big incumbent telephone and cable companies another 10 years or more of business as usual, allowing them to continue to cherry pick communities, neighborhoods and roads and streets they prefer to serve and redline those they reject.

That would leave Levin's Law of Internet Infrastructure Inertia* intact and the resulting entrenched disparate access to landline Internet service that leaves about one in five U.S. homes and small businesses unable to order service.

*Blair Levin, a former U.S Federal Communications Commission official and lead author of the FCC’s 2010 National Broadband Plan observed in 2012 that the major landline ISPs had no plans to improve and build out their infrastructures. “For most Americans, five years from now, the best network available to them will be the same network they have today," Levin stated.

FCC adopts Internet universal service obligation

Finding the United States needs improved Internet access, the U.S. Federal Communications Commission today released a report and order classifying Internet service as a common carrier telecommunications service under Title II of the Communications Act. That subjects Internet service providers (ISPs) to the same common carrier universal service obligations under which telephone companies operate, requiring them to provide connections to all customers requesting service in their service territories. Harold Feld of Public Knowledge recently termed universal service “the quintessential common-carrier obligation.”

Under prior FCC rules, Internet service was classified as an information service under Title I of the Act, relieving ISPs of the obligation to provide Internet service to any premise requesting it. Consequently, for more than a decade ISPs have effectively redlined communities, neighborhoods and even portions of roads and streets by not building out their infrastructures to serve them.

The FCC's reclassification of Internet as a Title II telecommunications service invokes Section 201(a) of the Communications Act:

"It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor..."

The FCC's order and rulemaking also applies Section 254(b)(3) of the Communications Act that requires ISPs to provide access to advanced telecommunications in all regions of the nation:

(3) Access in rural and high cost areas

Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services, including interexchange services and advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas.

The report and order also applies Section 214(e)(3) of the Communications Act, which empowers the FCC to "determine which common carrier or carriers are best able to provide such service to the requesting unserved community or portion thereof and shall order such carrier or carriers to provide such service for that unserved community or portion thereof."

In addition, within the scope of the FCC's action is Section 202 of the Act, which contains an anti-redlining provision barring providers from discriminating against localities in providing service. The report and order notes complaints of violations will be addressed on a case-by-case basis.

In applying most of Section 254 of the Act to ISPs, the FCC noted it rejected calls to delay or phase in its enforcement:

“Even prior to the classification of broadband Internet access service adopted here, the Commission already supported broadband services to schools, libraries, and health care providers and supported broadband-capable networks in high-cost areas. Broadband Internet access service was, and is, a key focus of those universal service policies, and classification today simply provides another statutory justification in support of these policies going forward. Under our broader section 10(a)(3) public interest analysis, the historical focus of our universal service policies on advancing end-users’ access to broadband Internet access service persuades us to give much less weight to arguments that we should proceed incrementally in this context… We therefore conclude that these universal service policy-making provisions of section 254, and the interrelated requirements of section 214(e), give us greater flexibility in pursuing those policies, and outweighs any limited incremental effects (if any) on broadband providers in this context. Because forbearance would not be in the public interest under section 10(a)(3), we apply these provisions of section 254 and 214(e) and our implementing rules with respect to broadband Internet access service.”

Unpacking USTelecom FCC forbearance petition: no obligation to continue copper plant

GN 14-126: USTelecom Comments on 2015 Broadband Progress Report | USTelecom: First, the Commission should grant the petition that USTelecom filed in October 2014 that seeks forbearance from various outdated regulatory requirements applicable only to incumbent local exchange carriers (“ILECs”). As USTelecom explained in its Forbearance Petition, unlike most broadband providers – including cable, wireless, and competitive fiber providers – ILECs are not free to focus their expenditures on next-generation networks designed to deliver the higher-speed broadband services customers increasingly crave; instead they “must direct a substantial portion of their expenditures to maintaining legacy networks and fulfilling regulatory mandates whose costs far exceed any benefits.”

USTelecom is correct in noting there's little point in investing in obsolete copper networks. But its petition to the U.S. Federal Communications Commission fails to cite any regulations that specifically require telephone companies to deliver services solely over copper and not fiber.

Instead, the filing appears to pick a bone with existing rules governing ILEC last mile network operations and access -- rules that are predicated on ILECs having a monopoly over last mile infrastructure. The petition does not explain how these rules operate to discourage investment to upgrade copper networks to fiber.

Expect more legacy incumbent telephone company complaints as the FCC adopts final rules later this year reclassifying Internet service as a common carrier utility under Title II of the Communications Act.

Rhode Island universal Internet service bill introduced

GoLocalProv | Chippendale: Homes Without Internet Access Leave Students Unable to Excel in School: Representative Michael Chippendale (R-Foster, Glocester, Coventry) has introduced legislation that would bring broadband internet to households that currently have no means of accessing it. The bill stipulates that “any public utility providing phone, cable television, or broadband internet service to 75% of the eligible residents of any single city or town shall make available said phone, cable television, or internet services to the remaining 25% of the city or town.” Also, “any broadband service provider which provides internet service to any city or town that is part of a school district that utilizes portable internet devices for student learning at home and has broadband internet provided to at least 25% of the eligible residents of any single city or town, must provide broadband internet service for all residents of the city or town.”

While the U.S. Federal Communications Commission appears to be passing on a universal Internet service obligation in its forthcoming final rules deeming ISPs as common telecommunications carriers under Title II of the Communications Act, this could be the first of a state-based movement to impose such a requirement.

It should be noted this is a limited universal access measure and won't help localities in the all too common scenario where ISPs commonly serve only the doughnut hole of half of all premises -- those close to the center of town -- but not those outside of the center.

Tennesseans want fiber Internet service

More and more areas of the United States are recognizing they need to build fiber telecommunications infrastructure just as they built their own roads and highways. The excerpts below from this story explain why and the growing political sentiment that is reaching a tipping point.

Farm Bureau backs EPB expansions | Local News | Times Free Press: Sen. Todd Gardenhire, R-Chattanooga, said he backs Bowling's bill because his top priority is getting high-speed Internet to rural areas of south Bradley County that are in his district. Some 800 families would benefit, he said.

He said Charter, Comcast and AT&T told him "it's not profitable" to do it. In Gardenhire's view, "private enterprise has given up on taking care of the people."

Some south Bradley Countians are less than a mile from EPB's service area but can't get its broadband, leaving them with dial-up service and a slow connection speed. Joyce Coltrin, whose wholesale nursery is in southern Bradley County, relies on her cellphone to access the Internet.

"It's very hard to use an iPhone for business," said Coltrin, who heads a group of 160 households who call themselves "citizens striving to be part of the 21st century." They, too, have been pushing state legislators to change the law.

*  *  *

Wireless in particular "is capable of a tiny fraction of what fiber can deliver, with respect to speed, reliability, and capacity," she said. "Because of data caps and usage-based pricing, it's also very, very expensive for anyone who uses a lot of bandwidth, such as families who home-school and therefore require lots of online video." Saying that a community "doesn't need fiber because it has DSL or wireless is like saying that the nation doesn't need the Interstatehighway system because we have the Santa Fe trail," Hovis argued.

Big incumbent telcos, cablecos should stop the zero sum game, partner with the public sector on open access infrastructure

Steven S. Ross of Broadband Communities magazine opines in the January/February 2015 issue that legacy incumbent telephone and cable companies should abandon their win/lose, zero sum, all or nothing attitudes toward telecommunications infrastructure and partner with the public sector on open access infrastructure:

"A well-built municipal system (or access to public assets in a public/private partnership) should be open to all carriers and to all content and service providers. They would get a chance to sell products and services with vastly higher revenue potential and much greater reliability than they would by nursing ancient infrastructure to drain a few extra years of cash out of hapless, captive customers."

Indeed.

Click here to read the full article.

On telecom infrastructure, policymakers must choose between sanctioning market failure or serving their constituents

Rural Tennesseans limited in Internet choices

As time goes on, it’s going to grow increasingly difficult for policymakers to continue to provide protection to legacy telephone and cable companies that want to preserve their partial service area infrastructure footprints. Such protectionist policies amount to government sanctioned market failure.

In the face of market failure, naturally those who live outside the boundaries of those limited footprints are looking to the public sector for help to get landline telecommunications service -- just as they did nearly a century ago for electrical distribution infrastructure. 

If their elected representatives fail to support them, they will face growing political risk come election time, particularly as more stories like this one show they’ve sold out their constituents by taking campaign contributions from the legacy providers.

Sell fiber enabled services, not “gigabit.”

There’s a well-established maxim in the sales of information and communications technology (ICT) products and services: Don’t sell bits and bytes, feeds and speeds. Instead, sell features and benefits. There’s a good reason for this selling principle. Most consumers aren’t interested in technology. They’re interested in what it can do to benefit them and its value for the money invested.

The same rule applies in telecommunications. But it has been violated in the marketing of fiber to the premise (FTTP) services, where Internet Service Providers have defined FTTP by its speed – its ability to deliver bandwidths of 1 gigabit or more. Problem is, only a small percentage of consumers really know what the term “gigabit” means, according to a survey by Pivot Group spotlighted in the January/February issue of Broadband Communities magazine. (Sell Services, Not Speed)

“Service providers spend an awful lot of time and marketing spend emphasizing speed, but this research reveals consumers are confused regarding speed references and perceive that their current speed package is sufficient,” Dave Nieuwstraten, president of Pivot Group and co-author of the study, observes.

The takeaway: What really matters isn’t gigabit bandwidth per se but rather the services FTTP can enable in the home where people have high definition televisions, desktop and laptop computers and personal devices such as tablets and smartphones all being supported by the home’s Internet connection. FTTP will play an increasingly important role in the delivery of video content as more is delivered via the Internet, enhancing its value to consumers sensitive to high price points for Internet service used to support only web browsing and email. That will increasingly be so as live sports migrates to Internet streaming.

In the era of FTTP, it’s really no longer useful to market bandwidth or brand it with a speed-based term such as "gigabit” or “broadband” -- a now obsolete term used in the 1990s to distinguish narrowband dialup Internet access from first generation ADSL services. Similarly, marketing Internet services with speed/bandwidth price tiers is no longer truly relevant for premise services. Without benefits described, consumers will naturally tend toward lower cost options.

Emphasizing the utility and benefits of a FTTP connection also fits well with the open access, wholesale model where the owner of the FTTP infrastructure sells access to ISPs who in turn sell retail services delivered over it. Including new ones mentioned in the Broadband Communities article such as installing and supporting the next generation of more robust home Wi-Fi needed to enable all of those wireless devices being used in today’s homes and home-based businesses.

Disparate Internet access likely to continue in US without comprehensive policy, strategies

Want Fiber? Do more to get it, Google exec tells cities | Gigaom: The upshot for the foreseeable future is a patchwork of different broadband speeds across the country as competitors flock to easy-access markets, while leaving many millions of others (including me in Brooklyn) stuck with monopoly service.

According to Cogent CEO Dave Schaeffer, who also spoke on the panel, this situation will require a future wave of policy inducements to produce more broadband offerings.

Lacking comprehensive policy inducements and strategy to further the construction of fiber optic telecommunications infrastructure to reach all homes and businesses and updating outmoded metal wire infrastructure operated by incumbent telephone and cable companies, the United States does indeed face a less than bright future of disparate Internet access in both metro and rural areas.

Today's adoption of rules by the U.S. Federal Communications Commission only partially implementing Title II of the Communications Act subjecting the Internet to common carrier utility regulation will serve to reinforce the disparity without a solid universal service obligation. More in depth analysis of the FCC's action will follow here once the final rulemaking is published in the Federal Register.

Google Fiber's business model emulates -- and shares same downsides -- as incumbents'

Google Fiber: Make It Easier For Us Or Enjoy Time Warner Cable | DSLReports, ISP Information: Numerous cities have been so eager to get Google Fiber, they've signed rather sweetheart deals that, for example, allow Google to simply walk away from builds should TV subscriber uptake numbers not be met. Perks also include the right to redline and cherry pick deployment neighborhoods...

This illustrates how closely Google Fiber's triple play business model emulates that of legacy incumbent telephone and cable companies. And also how vulnerable it is to TV programming costs that are squeezing all but the biggest players such as Comcast and Time Warner.

What's ironic is localities across the United States have literally begged Google Fiber for relief from the legacy incumbents. Google has adopted much of the incumbents' triple play business model but utilizes fiber to the premise plant instead of wire or cable. And since it's such a high cost model, it naturally leads to market segmentation (cherry picking and redlining neighborhoods based on expected revenue) that reinforces an entrenched infrastructure gap that leaves one in five American homes unable to order landline Internet service.