WSJ gets it wrong on Title II Internet universal service obligation

How Fast Internet Affects Home Prices - WSJ: Telecom companies by law are required to make telephone service available to every residence in their service areas, but the same isn’t true for all high speed Internet providers.

The Federal Communications Commission's newly issued Open Internet rules that took effect June 12 reclassified Internet service from an optional information service to a mandatory common carrier telecommunications service under Title II of the Communications Act, thereby bringing Internet service under the same universal service obligation as telephone service.

This is a glaring example of how the mainstream and much of the info tech media have buried and lost this quintessential Title II requirement as it was termed by Harold Feld of Public Knowledge under the rubric of "net neutrality."

Pew continues to survey as if it's 1999 on "Internet adoption"

Pew: Internet Penetration Reaches Saturation Levels – For Some - Telecompetitor: Internet penetration in the U.S. has reached saturation levels, at least for some groups, according to an analysis of 15 years of data collected by a Pew Research Center unit that has been tracking and studying Internet adoption and use in the U.S. since 2000.

The Internet saturation point has been reached for Americans – young Americans especially – with high levels of education and those who live in more affluent households, Pew highlights in “Americans’ Internet Access: 2000-2015.”

More than 8 in 10 of all American adults – 84 percent – now use the Internet, up from about half in 2000. Seventy percent of young U.S. adults used the Internet in 2000. That has increased steadily since 2000: Today 96 percent of young U.S. adults use the Internet. In contrast, it wasn’t until 2012 that more than half of U.S. adults 65 and older said they do.

These surveys of "Internet adoption" are growing increasingly irrelevant as the Internet delivers various types of services including data, video, voice, telemedicine, distance learning and control of home systems. The Internet is not a distinct service but rather a means of delivering multiple services -- and is now classified as a common carrier telecommunications service by the U.S. Federal Communications Commission.

That Pew continues to do these retrospective, backward looking surveys is puzzling in 2015. It does fit nicely however with the strategy of the legacy incumbent telephone and cable companies and their outmoded metallic Internet infrastructures to keep the concept of "the Internet" as it was in 1999 when it was used solely for data such as email and the then relatively new World Wide Web.

Fundamental flaw: Linear thinking prevails in an exponentially changing world of Internet-based telecom

The Law of Accelerating Returns | POTs and PANs: The FCC recently set the new definition of broadband at 25 Mbps. When I look around at the demand in the world today at how households use broadband services, this feels about right. But at the same time, the FCC has agreed to pour billions of dollars through the Connect America Fund to assist the largest telcos in upgrading their rural DSL to 15 Mbps. Not only is that speed not even as fast as today’s definition of broadband, but the telcos have up to seven years to deploy the upgraded technology, during which time the broadband needs of the customers this is intended for will have increased to four times higher than today’s needs. And likely, once the subsidy stops the telcos will say that they are finished upgrading and this will probably be the last broadband upgrade in those areas for another twenty years, at which point the average household’s broadband needs will be 32 times higher than today.

I laud Google and a few others for pushing the idea of gigabit networks. This concept says that we should leap over the exponential curve and build a network today that is already future-proofed. I see networks all over the country that have the capacity to provide much faster speeds than are being sold to customers. I still see cable company networks with tons of customers still sitting at 3 Mbps to 6 Mbps as the basic download speed and fiber networks with customers being sold 10 Mbps to 20 Mbps products. And I have to ask: why?

Some excerpts from an excellent blog post from Doug Dawson of CCG Consulting that explains to a great extent why the United States suffers from inadequate telecom infrastructure: employing an ill suited linear planning and business model for today's Internet-based telecommunications space that is expanding exponentially. I too have asked why -- why providers and regulators view Internet-based telecom like a consumptive utility such as electric power, water or natural gas and base their business models on packaging and selling bandwidth rather than telecommunications services? For example, see this provider's "dedicated optical fiber" service that slices and dices bandwidth into seven (yes, seven) bandwidth tiers at exorbitant prices on a fiber circuit that can easily deliver 1 Gigabit of bandwidth.

The consequence of the linear, incremental thinking that dominates in telecom manifests in what I have termed Levin's Law of Internet Infrastructure Inertia.*

*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.

Homeowners near Palmer Divide stuck with slow Internet or no Int - KOAA.com | Continuous News | Colorado Springs and Pueblo

Homeowners near Palmer Divide stuck with slow Internet or no Int - KOAA.com | Continuous News | Colorado Springs and Pueblo: Imagine moving into your dream home, only to find out no company will provide you with Internet access.

We're not talking about living 60 miles away in the country, but near the Palmer Divide in northern El Paso County.

Five homeowners associations have joined together to create the Palmer Divide Broadband Coalition, a team hoping to grab the attention of state leaders and local officials to help bring broadband into their neighborhoods.

“Homeowners have been trying for about 8 or 9 years to get broadband service,” Palmer Divide Broadband Coalition Chris Davis said. "We've had home sales that were lost and properties that were under contract where they buyers backed out when they found out that broadband service was not going to be available to that home."

Keep an eye on this growing pain point with America's inadequate telecommunications infrastructure. The problem is creating direct adverse economic impact on communities redlined by legacy telephone and cable companies and otherwise left off the Internet grid.

Seattle's search for a viable FTTP business model

Gigabit Internet access for $45 a month: How Seattle could make it happen - GeekWire: Seattle’s top technology and budget officials say the city can’t bear the cost on its own, if funding for the project comes purely from subscriber fees. But they acknowledge that the city would have a better chance of bankrolling the build-out by adding a property tax to the mix.

A property tax would have several advantages. First, under the financial models used by consultant Columbia Telecommunications Corp., the monthly fee for subscribing to Seattle’s municipal Internet service would drop to $45/month if a property tax were used to subsidize the cost, rather than the $75/month envisioned otherwise.

This, in turn, would make it tougher for Comcast, CenturyLink or any other commercial provider to engage in a price war with the city.

This article is an excellent, comprehensive overview of the financial challenges Seattle faces in pursuing its decade-long goal of building fiber to the premise (FTTP) telecommunications infrastructure for Emerald City residents. Adding public funding in the form of property assessment reduces the so-called "take rate" risk of a purely subscriber paid business model for fiber to the premise (FTTP) such as employed by investor-owned incumbent telephone and cable companies.

As I've blogged previously, from a policy perspective a property assessment makes economic sense because studies have shown a fiber connection to a property boosts its market value just as does a paved road running nearby. It also has the knock on effect for local governments of bolstering economic activity and the tax revenue that such activity generates. Bringing public funding into the mix is also part of the business models of regional FTTP projects including the Utah Telecommunication Open Infrastructure Agency's (UTOPIA) public-private partnership (property fees) and WiredWest in western Massachusetts (municipal bonds supplemented by state grant funding).

But as long as incumbent telephone and cable companies are in the picture to the extent they are in large urban areas like Seattle, even mitigating the take rate risk with public funding doesn't solve all the financial challenges as noted in the article:

In an interview last week about the consultant’s report, Matmiller also cautioned that there would be no guarantee of success with the scenario of a $45/month rate subsidized by property taxes. “We still want a model that puts less risk to the system,” he said.“Even though it’s a cheaper monthly amount, if Comcast or a competitor comes in and uses their pricing power to match it and takes away the consumer argument to switch over, then we are stuck in same boat where now you’re paying a property tax and we have to shut down the system.”

Seattle like other municipalities reserves the nuclear option of inverse condemnation if it wants to push the incumbents out of the way in the name of progress to get FTTP to all city residents in a timely manner given the incumbents have no incentive to move quickly given their monopoly status. But that too comes with major downsides. The city would have to pay fair market value to the incumbents to acquire legacy metallic cable plant, adding more costs and likely years of delay as the condemnation process wound through the legal system.

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.