Regional FTTP initiatives may have better odds of success than municipal projects

Broadband for all: 8 next steps for Seattle | Crosscut: According to the city’s study, Seattle would have to invest $460 million to $660 million in building this network. Seattle would need to get 43 percent of potential customers choosing the service at $75 a month in order to break even. Such a “take rate” is virtually impossible due to the serious competition already in place from Comcast, Wave, CenturyLink, Verizon, AT&T and other services. 

Seattle's situation shows that local government efforts to build universal fiber to the premise (FTTP) telecommunications infrastructure face high financial hurdles in urban areas where there are multiple incumbent providers.

Unlike municipal projects like these, regional FTTP initiatives in less urbanized parts of the United States where incumbent telephone and cable companies have less infrastructure and there are sizable areas lacking any landline Internet connectivity options may face better odds of financial viability. One such example is WiredWest, a cooperative of 44 Western Massachusetts towns that is in the formative stages and picking up speed quickly.

AT&T’s planned “wireless local loop” plant could help it meet its Title II universal service obligation

When AT&T began the regulatory review process of its planned acquisition of DirecTV one year ago, it proposed to offer fixed wireless Internet service to about 13 million residential premises in its service territory not offered Internet service in order to improve the deal’s odds of gaining approval. These premises were never offered AT&T’s legacy ADSL service after it was introduced more than a decade ago. And even if they were today, ADSL would fall far short the Federal Communications Commission’s speed-based minimum standard for Internet service of 25 Mbps for downloads and 3 Mbps up.

Now that the FCC’s rules deeming Internet a common carrier telecommunications service under Title II of the Communications Act are going into effect requiring Internet service providers to “furnish such communication service upon reasonable request” under Title II’s universal service and nondiscrimination provisions, AT&T may be seeking another, more important role for its planned “wireless local loop” fixed wireless plant. 

Specifically, helping it meet its universal service obligations. With so many premises in its service territory refused Internet service for a decade or longer, AT&T could face a potential barrage of complaints and penalties if these premises remain without premises Internet service and it continues to say no to service requests.

However, as arstechnica reports today, AT&T’s fixed wireless service is expected to provide connectivity of up to 20 Mbps – below the FCC’s minimum standard for Internet service. The only way to get more wireless bandwidth is more fiber backhaul bandwidth and/or more wireless transmitters. That means AT&T would likely have to spend more than it would like on its planned “wireless local loop” plant to bring service up to the FCC’s standard in order to keep itself out of hot water with regulators.

‘Quad Play:’ Remedy for the failed "triple play" business model as Title II universal service obligation kicks in?

Are Americans Ready to Pay for ‘Quad Play’? - WSJ: A combination of T-Mobile US Inc. and Dish Network Corp. would merge two companies rooted in different industries.

For consumers, it would merge some of the fastest-growing bills in their budgets.

American households spent more than $191 a month on average for television, Internet and phone services in 2013, according to Labor Department data. That was up 24% from 2007 and about what they spent on health insurance.

The question is whether Americans are going to take to paying all that to one company. The prospect isn’t so far-out anymore. With satellite broadcaster Dish Network pursuing a merger with wireless carrier T-Mobile US, AT&T Inc. about to close a $49 billion acquisition of Dish rival DirecTV and cable companies experimenting with cellphone plans, many of the services that keep people entertained and in touch are moving under the same roof.

Such providers are betting on so-called convergence—the idea that they will be better off if they can bulk up, as services that used to flow via different wires and satellite dishes all start traveling on the Internet.

It makes technical sense to deliver all these telecommunications services via Internet Protocol (IP). But there's a disconnect between Internet technology and economics. Many homes and small businesses are not offered landline premise Internet service since the economics of the current "triple play" business model (phone, Internet and TV) don't pencil when the costs of infrastructure CAPex and OPex are factored in.

Will bundling in mobile wireless to create a "quad play" offering improve the business case? One might think so when there's ARPU approaching $200 a month. And it might well better once new rules issued by the U.S. Federal Communications Commission go into effect this month classifying Internet as a telecommunications service under Title II of the Communications Act.

Title II subjects Internet service providers to universal service and nondiscrimination requirements and bars ISPs from redlining higher cost neighborhoods not offered triple play services. That in turn increases the pressure on ISPs to consolidate to ensure they can offer these all inclusive service bundles under their preferred vertically integrated business models where they own both the Internet "pipe" to the home and the services delivered over it.

Incumbents' petition to block FCC's Title II rules faces steep legal hurdles, likely dismissal

John Eggerton of Broadcasting & Cable outlines the legal arguments being made by incumbent telephone and cable companies seeking to block enforcement of the Federal Communication Commission's recently promulgated regulations reclassifying Internet services as common carrier telecommunications services under Title II of the Communications Act.

The incumbents' petition is likely to be dismissed. The reason is what's known as judicial deference: courts generally defer to regulatory agencies' interpretation of statutory law requirements. The doctrine holds that regulators have the necessary expertise to discern and apply the finer points of statutes whereas judges, who generally do not, are naturally reluctant to second guess the decisions of regulators or interject themselves into disagreements over statutory law between regulators and regulated entities. Under the doctrine of judicial deference, the appropriate forum to work out disagreements with regulators over application of statutory law is the rulemaking process and not the courts.

In this case, the incumbents face an especially steep challenge because the Communications Act specifically grants the FCC broad discretion to apply Title II of the Act in the first section of Title II. Section 201(b) states that "[t]he Commissioner may prescribe such rules and regulations as may be necessary in the public interest to carry out the provisions of this Act."

Tom Wheeler tells cable industry to stop complaining, start competing | Ars Technica

Tom Wheeler tells cable industry to stop complaining, start competing | Ars Technica: Part of looking forward, in Wheeler's opinion, is boosting competition. With some exceptions, cable companies have generally not competed against each other, letting a single company dominate each region instead of "overbuilding" in each other's territory.

"You don't have a lot of competition, especially at the higher speeds that are increasingly important to the consumer of online video," Wheeler said. This means there isn't the kind of "intense and constant pressure to continue to improve" as there was in the days when DSL posed a serious threat to cable, he said.

The thing is, Mr. Chairman, telecommunications infrastructure doesn't easily lend itself to competition due to the high costs to build and maintain it. It functions as a natural monopoly like roads and highways and electrical distribution infrastructure. We don't build competing thoroughfares to offer motorists the choice of taking Highway "A" and "B" and "C," for example from the same starting point to the same destination. Or multiple power lines serving the same property. Having multiple landline Internet connections passing by premises is similarly overkill and economically wasteful. Just ask any of the legacy phone companies who feel compelled to issue news releases announcing "gigabit fiber" to compete with Google Fiber. It's a helluva lot cheaper to issue a news release than to actually overbuild competing infrastructure and doesn't risk the ire of shareholders averse to big capital expenditures.

The competition Wheeler's FCC and the federal government should be supporting is helping fund the planning and construction of open access fiber to the premise telecommunications infrastructure over which Internet Service Providers would compete to sell services to customer premises. This would also potentially provide greater opportunity for new services than could be offered over a vertically integrated cable provider that owns both the pipe and the services offered over it.

FCC's Sohn: Wired Broadband Competition Lacking | Broadcasting & Cable

FCC's Sohn: Wired Broadband Competition Lacking | Broadcasting & Cable: Gigi Sohn, senior counselor to FCC chairman Tom Wheeler, told a New Haven, Conn., audience Monday that "the simple truth is that meaningful competition for high-speed wired broadband is lacking."

She came not to bury broadband, but to praise the state's 1 gig community broadband project as a way to provide that "lacking" competition.

Viewed in the context of landline Internet infrastructure as a whole, Sohn is correct. It's a natural monopoly due to high cost barriers that keep out potential competitors as well as inefficiencies that make building parallel infrastructures as nonsensical as building multiple competing roads and highways serving the same area. If they were privately owned and operated for profit -- as is most telecommunications infrastructure in the U.S. -- the likelihood of their having a net present value greater than zero is slim to none.

What this story as well as many others lamenting the lack of "broadband competition" fail to mention is how Connecticut's project does offer competition to the consumer for Internet services via open access fiber infrastructure that provides wholesale access to Internet Service Providers (ISPs) as an alternative to the vertically integrated, closed access infrastructures used by the legacy telephone and cable companies as well as Google Fiber. ISPs would then compete to sell their services to consumers. From the CT Gig Project website:

Competition:

The open-access model would introduce true competition into the Internet
marketplace. The idea is to build the infrastructure and then give Internet
providers equal access to utilize it. Your Internet choices should be made
based on price and service, not solely by the town boundaries you reside in.

Internet infrastructure emerging as political issue in UK; America likely to follow

When people in the United Kingdom go online, many of them likely mutter -- or shout -- “bloody hell,” particularly in the evenings when video streaming gobbles up bandwidth and degrades the quality of their connections.

That dissatisfaction with Internet service is now being politically mobilized, with nearly 20 percent of UK voters indicating Internet infrastructure policy will be top of mind when they go to the polls, according to a recent survey. That number will likely rise as bandwidth demand inexorably grows at pace rivalling Moore’s Law on microprocessor capacity, doubling about every 18-24 months.

Similarly, I expect American voters will increasingly cast their votes based on candidates’ positions on Internet infrastructure expansion given the U.S. Federal Communications Commission reported in January that Internet infrastructure deployment in the United States was failing to keep pace with today’s advanced, high-quality voice, data, graphics and video offerings. The FCC’s 2015 Broadband Progress Report found 55 million Americans – 17 percent of the population – lack access to Internet connections capable of delivering bandwidth of 25 Mbps for downloads and 3 Mbps for upload.

An indication of Americans’ growing political interest in Internet service is the large volume of comments the FCC received on its recent rulemaking that classified Internet as a common carrier telecommunications service as well as the substantial coverage of the issue in mainstream media.

Media accounts lament lack of "broadband competition" in U.S. but overlook the solution: open access fiber infrastructure

This is how Internet speed and price in the U.S. compares to the rest of the world: So why are Americans paying more for slower service? The answer: There’s limited competition in the broadband market.

In fact, half of American homes have only two options for Internet service providers for basic broadband, according to the Federal Communications Commission. And for faster speeds, a majority of households have only one choice.

Everyone favors competition for Internet services. But what most media stories miss including this one is the only way to get it is through open access fiber to the premise telecommunications infrastructure that offers wholesale access to Internet service providers and other vendors selling services to consumers such as is the case in some of the comparative nations. In the U.S., competition is limited because vertically integrated providers like Comcast, AT&T and Verizon own the infrastructure over which they offer services like data, video and voice.

The story goes on report that "a handful of cities have chosen to create their own municipal broadband services to compete with private broadband providers: Chattanooga, Tennessee, Bristol, Virginia, Lafayette, Louisiana, Cedar Falls, Iowa, and Wilson, North Carolina."

This is inaccurate. These municipalities have not endeavored to compete with the legacy incumbent telephone and cable companies. Rather, they acted to address private market failure on the sell side. Their citizens and businesses want fiber to the premise Internet connections the incumbent providers are unable to offer them.

States can't do it alone -- federal funding needed to modernize U.S. telecom infrastructure

Coalition seeks overhaul of Maine broadband plan - The Portland Press Herald / Maine Sunday Telegram: A coalition of Maine businesses, towns and nonprofit groups on Tuesday threw its support behind a bill to overhaul the state’s broadband policy for the first time in nearly a decade, a component of which suggests financing the expansion of high-speed Internet service through a new tax on cellphones.

The proposal, introduced by state Rep. Sara Gideon, D-Freeport, would require an updated strategic plan to expand broadband access in Maine and stronger efforts to support community broadband planning efforts.

Members of the Maine Broadband Coalition – a collection of more than three dozen towns and cities, businesses and nonprofit organizations – said expanding access to high-speed Internet service is expensive, but necessary for economic development.

“This is not a million-dollar problem. It is far larger,” said Fletcher Kittredge, chief executive officer of Great Works Internet and a member of the coalition.

Kittredge nails it. State telecommunications infrastructure financing programs provide funding in the modest millions for infrastructure that costs billions to deploy. The United States needs to revamp its telecommunications for the Internet age just as it financed electrical distribution facilities and highways in the 20th century.

Given the U.S. Federal Communications Commission has deemed Internet telecommunications a common carrier utility -- one that plays a vital role in supporting interstate commerce  -- the federal government clearly has a stake. It should appropriate comprehensive funding to get the job done and not leave it solely to the states that lack the economic resources to do it themselves. Federal funding for telecom infrastructure modernization would produce a multiplier effect that will return much of it to the U.S. Treasury through increased economic activity.

Google's wireless service leaves bandwidth rationed business model undisturbed

Google's soft launch today of its Project Fi mobile wireless offering won't be a game changer for homes and small businesses unfortunate enough to be located outside the limited footprints of landline Internet service providers (or not in a Google Fiber "fiberhood") and reliant on wireless premise Internet service such as Verizon's 4G Installed service offering.

While Project Fi does allow the creation of wireless hot spots at a customer premise, it retains the metered pricing schemes of existing wireless providers wherein end users must purchase monthly bandwidth allowance levels, referred to as "bandwidth by the bucket."

That makes the service a poor value for premises service. It's easy to blow through the bandwidth allowances and end up with a large bill via software updates and video streaming. Parents in homes with teenage children who stream video such as Netflix have been shocked by jaw dropping bills. Or who do class work online, which has been spotlighted by Federal Communications Commissioner Jessica Rosenworcel as a key issue in America's Internet access disparities.

The Project Fi Plan and Pricing FAQ states:

Do you offer an unlimited data plan?

No, we do not offer an unlimited data plan. We believe you should only pay for the data you use.

 And you'll pay for it, all right.

If Google truly wishes to disrupt the existing wireless business model, it should build out fiber closer to neighborhoods and homes lacking fiber to the premise service and use it to backhaul really robust and not bandwidth rationed wireless service. This would be an interim step in a longer term effort to deploy fiber to the premise connections in these areas.

Title II universal service obligation could complicate, delay Comcast-Time Warner merger

New regulations issued this month by the U.S. Federal Communications Commission reclassifying Internet access service as a common carrier telecommunications service subject to universal service requirements under Title II of the Communications Act could complicate and delay Comcast’s planned acquisition of Time Warner Cable.

Comcast is currently the dominant Internet service provider in many markets and its domination would increase if the merger is consummated. In addition, Comcast typically provides Internet bandwidth at or above the FCC’s definition of 25Mbps. While the FCC is opting to forbear several Title II provisions, the universal service requirement is not one of them. 

Utilities regulators in states where the combined companies have major market presence could well require the combined entity to provide service to all customer premises in their service territories under the Title II universal access mandate as a condition of approval of the merger. Under current market practices, cable and telephone companies deploy infrastructure to deliver Internet services in limited footprints that serve only selected neighborhoods and parts of streets and roads. To gain a green light from the California Public Utilities Commission, Comcast is offering to spend $25 million on building out infrastructure to serve unserved communities. That’s mere table crumbs that won’t go far in a state as large as California as Steve Blum of Tellus Venture Associates notes on his blog.

Imposing universal service as a merger condition would likely significantly alter the financials of the deal and potentially doom it since shareholders of both companies are likely to object to any major capital construction expenditures to expand infrastructure.

The new rules take effect June 12, 2015. Meanwhile, legacy telephone and cable companies and their trade groups have gone to court to attempt to block them from becoming law. Presumably they could argue enforcement of the universal service obligation would subject them to immediate financial harm and the rules therefore must be put on ice until the merits of their legal arguments against them can undergo judicial review. By the same token, regulators could in turn opt to put the Comcast-Time Warner consolidation on hold pending the outcome of the litigation challenging the FCC’s Title II rulemaking.

A crisis in telecommunications infrastructure as Moore's Law turns 50

Silicon Valley marks 50 years of Moore's Law - ContraCostaTimes.com: Thanks to Moore's Law, people carry smartphones in their pocket or purse that are more powerful than the biggest computers made in 1965 -- or 1995, for that matter. Without it, there would be no slender laptops, no computers powerful enough to chart a genome or design modern medicine's lifesaving drugs. Streaming video, social media, search, the cloud -- none of that would be possible on today's scale.

"It fueled the information age," said Craig Hampel, chief scientist at Rambus, a Sunnyvale semiconductor company. "As you drive around Silicon Valley, 99 percent of the companies you see wouldn't be here" without cheap computer memory due to Moore's Law.

As I've blogged in this space before, Moore's Law is directly affecting and redefining Internet telecommunications where bandwidth demand is growing at a pace comparable to microprocessor capacity.

That's creating a crisis because the fiber optic telecommunications infrastructure serving homes, businesses and institutions that's needed to accommodate this growth isn't in place in most areas or plans drawn up for its construction and financing.

Telemedicine: Benefitting Providers & Patients | USTelecom

Telemedicine: Benefitting Providers & Patients | USTelecom

A number of presenters at this week's California Telehealth Network 2015 Summit #TELEHEALTH2015 mentioned deficient telecommunications infrastructure and services as a key impediment to greater adoption of telehealth, particularly in rural areas where it can offer the greatest benefit to patients and providers.

New eBook cites telecommunications infrastructure deficiencies as impediment to location independent knowledge work

My new eBook Last Rush Hour: The Decentralization of Knowledge Work in the Twenty-First Century is out. This book discusses how the proliferation of Information and Communications Technology (ICT) is changing how, when and where knowledge work is done and the implications for individuals, organizations and society.

Telecommunications infrastructure deficiencies are mentioned as a speed bump slowing the momentum of this major socio-economic shift.

California Internet infrastructure subsidy rules erect roadblocks for last mile fiber projects

A notable aspect of California’s eight-year-old program to subsidize the cost of constructing Internet telecommunications infrastructure is the general lack of participation by incumbent telephone and cable companies. In that regard, it has not fulfilled the usual public purpose of subsidy programs designed to help offset the costs of building and operating telecommunications infrastructure in high cost areas such as those used for landline telephone service.

The program, the California Advanced Service Fund (CASF), is administered by the California Public Utilities Commission, which is directed under California Public Utilities Code Section 281(a) to "administer the CASF to encourage deployment of high-quality advanced communications services to all Californians that will promote economic growth, job creation, and the substantial social benefits of advanced information and communications technologies..."

Instead, the CASF has subsidized mostly middle mile fiber and a small number of last mile wireline and wireless projects by non-incumbents. The last mile projects have nearly all been located in remote areas of California not served by the incumbent telephone and cable companies. Proposed projects elsewhere such as the Bright Fiber project in the Sierra Nevada foothills have been subject to lengthy bureaucratic delays under CPUC rules governing CASF eligibility.

The rules parse the state into thousands of discrete “unserved” and “underserved” areas where existing providers don’t sell specified advanced telecommunications services and authorize incumbents to challenge projects that would overbuild them and fall outside of these designated areas. The rules and a federally-funded project by the CPUC to map these areas have served to erect red tape roadblocks that stymie projects proposed by non-incumbents as project proposers, incumbents and consumer advocates argue over the mapped territories and boundaries. These parochial disputes have chewed up enormous amounts of time and resources and delayed construction of much needed telecommunications infrastructure, defeating the public policy intent of Section 281(a).

While California is not among about 20 states that have statutes designed to protect incumbents from overbuilders, the CASF rules have operated to produce a similar result, leaving millions of California residents without robust wireline Internet service options. California innovated much of today’s information and communications technology and is rightly regarded as a leader in the field. However, when it comes to advanced telecommunications infrastructure, the Golden State is a laggard.

Why legacy telcos, cablecos are incorrect in arguing government-built fiber telecom infrastructure is "unfair competition"

The primary public policy argument advanced by the legacy incumbent telephone and cable companies in support of state laws proscribing or prohibiting the public sector from building or subsidizing community owned fiber to the premise (FTTP) Internet telecommunications infrastructure is that doing so represents unfair competition against them.

It’s a fallacious argument because the incumbents and communities aren’t in the same business – a basic prerequisite for market competition.

The incumbents are in the business of packaging and selling discrete bits of Internet bandwidth. They sell it by throughput speed with speed tiered pricing for wired premise service and by volume – the gigabit -- for mobile (and inappropriately for premise) wireless services. The faster the connection and the more bandwidth consumed, the higher the price. Naturally, the incumbents segment their service territories and product offerings to generate the highest possible profit for that bandwidth. After all, they owe it to their shareholders.

State and local governments on the other hand aren’t in the bandwidth business or selling it to generate maximum profit. They are in the infrastructure business – planning, constructing and financing it to support public objectives such as economic development and enhancing the delivery of public services. In the 20th century, they did that by building roads and highways. In the 21st, they do it by building FTTP infrastructure.

Tiered rates for Internet service cannot be justified and demand attention from utility regulators

Homeowners and business operators are familiar with tiered rates in which a premise pays more for using higher amounts of water, electricity or natural gas. These are consumptive utilities that impose greater costs on utilities to provide them in larger quantities, thus justifying higher rates. At the same time, tiered rates encourage conservation of these finite resources by tapping into the economic principle of price elasticity. The principle holds that as price increases, demand declines and vice versa.

Encouraging conservation by making consumers pay more to use more – and hence reducing demand via price elasticity – makes sense in the case of water, for example, in the severe drought being experienced in California and other parts of the western United States. But it doesn’t make sense for America’s latest utility as recently declared by the U.S. Federal Communications Commission: Internet telecommunications service.

Internet service providers inappropriately price the utility as if it were a consumptive, resource-based one like water, electricity or natural gas. For example, this week Frontier Communications announced it is offering fiber-delivered Internet service with speed tiers of 30/30, 50/50, 75/75, 100/100 and 150/150 Mbps in Beaverton, Oregon. The higher the speed, the higher the monthly price.

It makes no sense to slice and dice Internet bandwidth like this on a fiber circuit with huge carrying capacity. Nor can it be rationally argued that providing higher speed tiers to a customer premise imposes higher marginal costs to deliver them and they therefore should be priced above lower speed tiers. This market practice cannot be economically justified. Moreover, it is exploitative of and unfair to consumers and demands attention by telecommunications regulators.