Modernizing telecom infrastructure too big of a job to be left to cities

101 US Cities Have Pledged to Secure High Speed Internet | Motherboard: The US has a big and rather complicated internet speed problem. Its broadband infrastructure is woefully behind in speed and price compared to a broad swath of other countries, and much of this has to do with its tenacious commitment to maintaining the status quo: that is, giving big telecommunications companies a lot of our money without being able to demand a fair amount in return. But here’s a change: 101 cities are have agreed to band together to bring their residents gigabit-speed internet connections, even if they have to build it themselves.

Municipal governments are justifiably concerned that not having modern fiber to the premise telecommunications infrastructure adversely affects their economies, making them less than desirable destinations for residents and businesses considering locating there. The problem is constructing and maintaining it isn't in the budgets of local governments still reeling in the aftermath of the 2008 economic crisis. Other infrastructure such as streets, public buildings and water and sewer systems are at the end of their useful lives, competing for any dollars that could be directed toward building telecommunications infrastructure. Local governments nationwide are also strapped with enormous public pension obligations.

Aside from these financial challenges, legacy incumbent telephone and cable companies regard their service areas as sovereign territories, deploying armies of lawyers and lobbyists to defend them from local governments hoping to build fiber to the premise infrastructure to remedy service deficits and access disparities. Thus far, no munis appear inclined to assert their jurisdictional authority by exercising inverse condemnation powers and/or creating Internet telecommunications franchises. Even if they did, it would likely result in costly litigation that would delay construction for years if not decades at a time when telecom infrastructure modernization is already a generation late.

These circumstances do not bode well for municipal telecom infrastructure efforts. Given the billions needed to upgrade the nation's legacy telecom infrastructure in order to bring fiber connections to every American home, school and business, a national telecommunications infrastructure modernization initiative is clearly needed. Telecom infrastructure doesn't serve only cities. It connects cities to their states, states to other states and the nation to the world. It supports interstate commerce and is fundamentally interstate in nature, not just urban or rural as it is often mischaracterized. Building interstate infrastructure is a national undertaking that can't be left to local governments to accomplish.

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.

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.

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.

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.

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.

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.