Wednesday, February 03, 2016

Wheeler talking through his hat on "cable competition"

Stop the Cap! FCC Chairman Tells Crowd He's "Not Done Enough" to Bring More Cable Competition: FCC Chairman Thomas Wheeler confessed he “has not done enough” to bring consumers more competition to Comcast, Time Warner Cable, Charter, and other cable operators.

This is complete nonsense from Wheeler. Cable is not a competitive market. It exists in a natural monopoly/duopoly market. The chairman can't make it more competitive any more than he could interstate highways if were were head of the U.S. Department of Transportation.

Wheeler's view of the cable market as a competitive one is also at odds with the FCC's adoption one year ago of its Open Internet rulemaking deeming Internet service provided by cable, telephone and other ISPs a common carrier telecommunications utility under Title II of the Communications Act. That title is predicated on a monopoly -- and not a competitive -- market.

Thursday, January 28, 2016

Unpacking incumbent opposition to KentuckyWired

Tom Eblen: Some telecoms, anti-government groups oppose new state broadband network | Lexington Herald-Leader:  The Kentucky Telecom Association, which represents 15 rural Internet providers, thinks KentuckyWired should be reconsidered, claiming it would duplicate existing infrastructure and undermine existing businesses that need their state and school service contracts.
There is likely an element of truth in incumbents' claims that publicly owned middle mile telecom infrastructure would duplicate existing privately-owned infrastructure in some parts of the state. But that doesn't mean it shouldn't be built. However, it should be part of an integrated plan to build a complete network of publicly owned last mile fiber to the premise infrastructure.
KentuckyWired is a partnership between the state and several companies that are building and would operate the 3,200-mile “middle-mile” network linking all 120 counties. From each county, any Internet provider could lease network space, build “last-mile” lines and compete to offer services to homes and businesses.
This is wishful thinking based on a fundamental misapprehension of the market economics of private owned telecom infrastructure. Investor-owned Internet service providers aren't typically going to be interested in connecting to publicly owned middle mile infrastructure to build out fiber to serve all premises. For two main reasons. First and most important, because the ROI on last mile is too far out in the future to make investment worthwhile. Second, because connecting their last mile networks to publicly owned middle mile infrastructure is contrary to the proprietary, closed access architecture of their business models that prefer maintaining control over both the middle and last miles.

There's a third and less likely possibility -- that KentuckyWired will make it easier for local governments to build FTTP infrastructure serving their residents. It's improbable for most except for those with pre-existing municipal utilities due to local governments lacking the financial wherewithal as they struggle to meet existing and future obligations such as employee pensions.

Tuesday, January 26, 2016

New England state a microcosm of last mile telecom access barriers, disparities

A consultant's report prepared for the State of Connecticut on the state of its telecommunications infrastructure found significant access barriers and disparities. From the summary:

From our urban surveys in Hartford, Connecticut we found evidence of higher-quality fiber and cable broadband services in proximity to the poorly served locations. However, the individuals at those locations reported that service providers decline to connect users to those services, or will do so only at a prohibitively high cost—approximately $10,000 to $30,000 for a short street crossing. Also, services are costly—from $1,000 to $2,000 per month.

We found based on our field survey in rural areas that most areas had copper telephone service, areas in proximity to towns have cable TV, and there is frequently a third fiber telecommunications provider on major routes between towns and in in proximity to State buildings, fire stations, and libraries. However, these services were not readily available to many institutions and businesses—requiring significant effort by the institutions to understand their options and to be connected.

The report also found small business suffer poor telecommunications service. They are unable to obain the level of service they need relative to available services, face long delays in obtaining services, or are unable to obtain service even when infrastructure is relatively nearby.

 The full report issued this week by the state's Office of Consumer Counsel can be accessed here.

Saturday, January 23, 2016

Misunderstanding of market economics underlies U.S. telecom infrastructure deficiencies

Fiber-Optic Network Construction Highlights Widespread Lack of Broadband in Salinas Valley, Calif.: Joel Staker of the Central Coast Broadband Consortium estimated the project would cost between $20 million and $30 million, half of which the group was hoping the USDA would be capable of funding.

After quietly listening throughout the entire discussion, Mensah thanked the stakeholders for their time and commitment. She also said that the USDA no longer had grant money available for such projects, but a long-term loan was not out of the question.

“I can see that the scale of need and gaps in service are severe in your region,” Mensah said. “However, I am concerned that if government steps in to accomplish this we would be displacing private industry, which is something we are very careful not to do.”

This story illustrates the circular thinking and poor grasp of market economics impeding the construction of badly needed telecommunications infrastructure in the United States. Areas such as this one near California's Silicon Valley suffer from last mile infrastructure gaps due to a lack of investment by the private sector. Consequently, those adversely affected look to the public sector for help.

Public officials however are reluctant to provide funding, concerned as the USDA official quoted that doing so would deter private sector investment. However, if private sector interest in building last mile infrastructure was there, the "last mile problem" wouldn't exist in the first place and the locals wouldn't be looking to the federal government for assistance.

This story also points up the misguided thinking that once middle mile fiber is in place and anchor institutions such as government offices and schools are connected, the private sector will step in to build fiber to the premise to serve the rest of the community. That typically doesn't happen because the ROI doesn't pencil out quickly enough. That economic reality goes to the heart of the problem. Many people including public officials have difficulty understanding that market failure can and most often does occur for telecommunications infrastructure due to its high costs and lengthy wait for ROI.

Monday, January 18, 2016

FCC declines to forbear universal service requirement; AT&T complains

The FCC’s Half-Shoveled Sidewalk | AT&T Public Policy Blog

This blog post by AT&T notes that it wants the U.S. Federal Communications Commission to relieve it from the obligation to provide landline voice service to all premises in its service territory requesting it, even those in areas not eligible for subsidization through the FCC's universal service subsidy program, the Connect America Fund (CAF). While the subject of the requested relief is voice telephone service, it also extends to Internet service now that the FCC reclassified it as a common carrier telecommunications service subject to the Communication Act's universal service obligations under its 2015 Open Internet Order

Although not mentioned in AT&T's blog post, that's the real issue here. AT&T does not want to invest in upgrading and building out its infrastructure to bring landline Internet service to all premises in its service territory -- service that would also be capable of delivering voice service.

Germane to AT&T's complaint are those communities where the cost of deployment is relatively high, but not high enough to justify universal service fund subsidies intended for high cost rural regions. There are a lot of these neighborhoods in its vast service territory because AT&T continues to rely on limited range, obsolete (in its own words) DSL technology to deliver Internet service over aging copper plant that cannot reliably serve premises more than a couple of miles from its central offices or field distribution nodes.

The question going forward is whether the FCC pursuant to its Open Internet order will enforce the universal service obligation on AT&T when a consumer living in one of these unserved areas beyond the range of DSL technology requests Internet service. So far, the FCC has shown no inclination of doing so as AT&T allows its legacy copper plant to rot on the poles. Consumers in these redlined neighborhoods will continue to face the worst of all worlds: no service from their nominal ISP, nor meaningful regulatory action to remedy their plight.

Thursday, January 14, 2016

Time to switch to fiscal economic stimulus -- starting with a U.S. telecom infrastructure initiative

If the United States had instituted a fiscal economic stimulus program to build fiber optic telecommunications infrastructure to reach every American home, school and business when the economic downturn began in 2008, it might well have completed the job by now. And for a mere fraction of the $3.5 trillion the U.S. Federal Reserve Bank spent to buy bonds under its quantitative easing program. The program has ended amid indications this monetary stimulus didn't have its intended effect with continued slow economic growth and slack in the labor market.

Now that monetary stimulus has proven less than effective, it's time to take a closer look at fiscal economic stimulus. For starters, a massive federal telecommunications infrastructure initiative to achieve the previously mentioned goal to fiber up the nation. Many of those dollars invested in this critical 21st century infrastructure would return to the federal treasury, thanks to the multiplier effect of creating new businesses and jobs.

Wednesday, January 13, 2016

Why U.S. FTTP infrastructure deployment won't follow the 20th century timeline for electrification

Here's how a colleague thinks Susan Crawford's forecast of a long winter of telecom discontent might play out in the coming years as the nation wanders in the darkness unlit by fiber to the premise. He believes "very, very few cities and no counties" have the money or the political will to pursue FTTP telecommunications infrastructure. The construction of FTTP infrastructure reaching all American homes, schools and businesses, he predicts, will play out over decades as electrification did in the early part of the 20th century. There will be 20 or 30 years of isolated private or municipal builds, followed by another 20 or 30 years of federally funded infill to cover the remaining unfibered areas. 

I disagree with the comparison to the deployment of electrical distribution infrastructure in the previous century. Information and communications technology is moving at a far faster pace in the 21st century. We're seeing robust, pent up demand for Internet service that is far outstripping the ability of Internet service providers to deliver it at reasonable, affordable rates due to widespread market failure. Americans simply will not tolerate such a prolonged wait for universal FTTP service.

Politics also argues for a much more compressed timeline than my esteemed (and anonymous for now) colleague envisions. The United States is close to or already at a political tipping point in terms of protecting the de facto monopolies of the legacy incumbent telephone and cable companies -- among the most hated and least respected institutions in the nation. That inevitable tipping point is when their lobbying currency is greatly devalued relative to consumer and business demand for Internet services that grows stronger by the day. 

Finally, the pace of technological progress is far faster than in the early 20th century. A disruptive technological development could come along that would drastically reduce the time and cost of deploying FTTP. For example, super strong and lightweight carbon fiber or nanotube sheaths that could be deployed on poles by remotely operated drones once the poles are made ready. That would greatly reduce labor costs, which is the major FTTP cost challenge. As well as maintenance costs since the sheaths would be wind resistant and squirrel proof.