US Telecom head fundamentally misstates key obstacle to telecom infrastructure

The Next National Infrastructure Push Must Be Powered by Broadband - Morning Consult: Clarity. Broadband companies have invested more in America’s infrastructure over the last two decades than any other sector of our economy – $1.5 trillion and counting. Yet these same companies in recent years have suffered a case of Washington whiplash. On one hand, heady (and wholly accurate) talk about broadband’s importance to all citizens. On the other, increasingly regressive policy decisions that undermine that potential and are widely credited with 2015’s decline in capital investment in U.S. broadband networks. We need to reverse this troubling trend by establishing policies that encourage investment in new and better broadband.

This opinion from Jonathan Spalter,  president and CEO of the trade association USTelecom, is remarkable in that it fundamentally misstates what is a business problem as a public policy problem for telecommunications companies. The biggest obstacle facing the industry when it comes to investing in telecommunications infrastructure is its own business model. It's out of sync with the long term return on capital that comes with high cost telecom infrastructure, seeking lower risk short term gains. That's not public policy. That's just plain microeconomics.

As usual, AT&T decades late & dollar short, betting heavily on the come

Meanwhile, in terms of its fixed line activities AT&T confirms it is now marketing a 1Gbps connection to nearly four million locations across 46 metropolitan areas nationwide, including more than 650,000 apartments and condominium units. By mid-2019 the telco plans to reach at least 12.5 million locations across 67 metro areas with its fibre service. In addition, AT&T is conducting technology trials over fixed wireless point-to-point mmWave and G.fast technologies with a view to delivering greater speeds and efficiencies within its copper and fibre networks. Finally, the telco expects to launch a new fixed wireless internet (FWI) service in mid-2017 in areas where it has accepted Federal Communication Commission (FCC) Connect America Fund Phase II (CAF II) support. The operator expects to reach more than 400,000 locations by the end of 2017 across 18 states, most of which will get internet access for the first time. By the end of 2020 AT&T plans to reach 1.1 million locations in those 18 states.

It's mind boggling to consider the boldfaced sentence above that notes premises in AT&T service territory will get their first Internet access between 2017 and 2020. Those premises will be served by a bolt on adjunct to its mobile wireless infrastructure that will be obsolete even before its deployed and highly likely bog down during peak periods as its shared bandwidth becomes saturated with heavy, multi-premise demand. Had AT&T's predecessor SBC Communications and other regional bell operating companies stuck to their early 1990s plans to replace their copper networks with fiber to customer premises, they would have likely completed that task by 2008 to 2010. They didn't. Consequently, the quality of America's telecommunications infrastructure has suffered greatly, deficient for the needs of today and tomorrow.

This item from TeleGeography (excerpted above) also outlines AT&T's residential strategy that heavily relies on its mobile wireless plant as a successor to its VDSL-based U-Verse hybrid fiber/copper service that suffers from severe bandwidth constraints due to the aging copper cable plant service customer premises. The wireless link to customer premises is apparently going to replace the twisted pair copper. It remains to be seen whether AT&T can overcome the technological challenge of being able to deliver adequate bandwidth over the wireless link to customer premises. And equally critical, the economic challenge of having to invest considerable capital in fiber to backhaul all of the necessary radios that would essentially require nearly every premise to have one, similar to step down transformers for residential electric service. 

The legacy telco communications strategy to shift focus away from infrastructure deficiencies

Understanding the Broadband Adoption Gap | USTelecom: And most Americans have chosen to take advantage of widely available internet service. According to NTIA’s data, the share of American households using the internet at home has risen from 26 percent (27 million households) in 1998 to 73 percent (92 million households) in 2015. The share of households in which someone uses Internet anywhere—at home or in other locations such as a school, a library, or a workplace—is now at 79 percent, Yet, 33 million U.S. households (27 percent) still do not use the internet at home. Government data suggests (link is external) that the gap between rural and urban area internet usage has remained stubbornly constant at anywhere from 6 to 9 percentage points. In 2015, 69 percent of rural residents reported being online, compared to 75 percent of urban residents. 

This is part of a continued push by the telephone company trade group to shift the focus away from modernizing America's outdated, metallic telecommunications infrastructure to fiber to the premise (FTTP). The strategy is to shift time back 15 to 20 years when consumers were first using Internet protocol-based advanced telecommunications services to "go online" to access email and websites via dialup and later "broadband" Digital Subscriber Line (DSL) service. That glosses over the fact that IP provides other modes of telecommunications including video and voice in addition to these applications. Legacy telcos also like to conflate mobile wireless service with premise service to distract from landline infrastructure deficiencies.

Why the propaganda campaign? Because as the nation's crisis of inadequate telecom infrastructure deepens and grows more urgent, pressure builds for public policy solutions that could seriously disrupt the industry as it lacks the resources to address the infrastructure gaps. Lacking the financial resources, all the industry can do is to attempt to reframe the issue in an attempt to ward off any disruptive policy changes.

State "Connect" efforts symbolic, fail to address U.S. telecom infrastructure deficiencies

Yemassee, Furman to get new fire trucks | The Hampton County Guardian: According to Connect South Carolina's website, the non-profit organization’s mission is to increase high-speed Internet access, adoption and use to diversify the economy and ensure South Carolina's competitiveness in the connected global economy of the 21st Century, the website states. Connect South Carolina was commissioned by the Office of the Governor to work with each of the state's broadband providers to create detailed maps of broadband coverage and to assess the current state of broadband adoption, community-by-community, across South Carolina. Connect South Carolina will continue to develop and update broadband data over time, ensuring state policymakers and citizens alike are equipped with important information. Connect South Carolina's efforts are funded by the United States Department of Commerce's State Broadband Initiative (SBI) Grant Program through the National Telecommunications and Information Administration. More information is available at www.broadbandusa.gov.

This exemplifies the misguided and misleading "Connect" response throughout the United States to the nation's telecommunications infrastructure deficit. It is predicated on a lack of information as the source of the deficit. Gathering information about deficient infrastructure as well as use of existing telecommunications infrastructure isn't going to remedy the deficits. But policymakers have endorsed the approach because it gives the appearance of doing something about them.

Federal government must take lead on U.S. telecom infrastructure modernization

Under Trump, look to cities and metros to power America forward | Brookings Institution: As Republicans begin to exercise relatively unchecked executive and legislative power, it remains to be seen how they will interact with core tenets of our country’s federalist arrangement. The Trump administration and the Republican legislature should recognize that many essential public functions can only realistically be provided by the federal government. Washington must lead in promoting American interests overseas, providing a safety net for the elderly and disadvantaged, protecting civil rights, maintaining environmental and regulatory standards, and funding basic science and research. If the Republican-led federal government relinquishes these responsibilities, our country will undoubtedly suffer.

But on many other matters that determine our country’s future prosperity and shared growth—the vitality of our businesses, the education of our children, the quality of our infrastructure, the vibrancy of our public spaces, and the skills of our workers—Washington is a junior investor and partial decider. Of every public dollar spent on K-12 education and transportation infrastructure, for example, the federal government invests only 12 cents and 25 cents, respectively. These small contributions are also likely to decline further as our nation’s elderly population grows and spending on healthcare and retirement programs rises.

Relying on local governments to fill in the innumerable gaps in modern fiber optic telecommunications infrastructure is folly. State and local government budgets were decimated in the 2008 economic crisis and it's taking years to fully recover. They also have a pressing need to modernize other aging infrastructure such as roads, schools, and sewer and water systems. Not to mention the enormous burden of health care benefits and public employee pension obligations.

Telecommunications infrastructure is fundamentally interstate and international and not municipal. Replacing yesterday's metallic infrastructure designed to support voice telephone and cable television service with fiber optic infrastructure to support today's Internet-based telecommunications requires many billions of dollars of investment state and local governments cannot fund. The federal government -- not state and local government -- must take the lead as the senior investor.

AT&T official rejects comparison between today's telecom infrastructure gaps and electric power disparties of 1930s

Arkansas Cooperatives Apply Rural Electrification Model to Internet Access | Arkansas Business News | ArkansasBusiness.com: Cooperatives around the country, he said, are comparing providing broadband to bringing electricity to rural residents in the 1930s, calling it the next necessity for rural America. For-profit providers disagree with the rural electrification analogy. Ed Drilling, president of AT&T’s Arkansas Division, said internet is different because there was a guarantee in the 1930s that every resident would buy electricity and pay a usage-based price for it, while only 30 percent might buy broadband access and pay a fixed-rate price for it.

There is a clear parallel here to another failed market: individual health insurance. The Patient Protection and Affordable Care Act employs a similar guarantee -- the individual shared responsibility mandate that everyone have some form of health coverage -- in exchange for health plan issuers agreeing to provide coverage to whomever applies for it without medical underwriting. That is intended to remedy market failure on both the sell and buy sides by effectively forcing sellers and buyers together.

The AT&T official stops short of suggesting a requirement that every premise take service in exchange for halting current market practice by AT&T and other investor-owned telecom providers that cherry picks some areas while redlining others within their nominal service territories -- market conduct that's now illegal under the U.S. Federal Communications Commission's 2015 Open Internet rulemaking.

AT&T is correct that the electrical distribution infrastructure deficits of the early 20th century differ from the telecommunications infrastructure gaps of 2016. Back then, electrical distribution infrastructure was largely concentrated in urban areas, leaving entire rural regions unserved and in the dark. A major difference is today's Internet-based telecommunications infrastructure is deployed in rural areas but in a very granular and arbitrary manner that leaves one neighborhood or even part of a road or street unserved or poorly served while an adjacent one has decent access.

Doug Dawson's policy Rx for telecom infrastructure

A couple of telecom policy prescriptions from fellow blogger Doug Dawson that make a lot of sense:

A New Telecom Act? | POTs and PANs: Fund Fiber Everywhere. There was recently a bill introduced in Congress to add $50M to the RUS for rural broadband grants. That makes such a tiny dent in the problem as to be embarrassing. If we believe as a country that broadband is essential for our economic future, then let’s do what other countries have done and start a federal program to build fiber everywhere, from rural America to inner cities. I could write a week’s worth of blogs about how this could be done, but it needs to be done. 

Dawson's spot on here. Under current public policy (the U.S. Federal Communications Commission's 2015 Open Internet regulations), Internet telecommunications is considered a common carrier public utility with a universal access mandate like Plain Old Telephone Service (POTS) for decades beforehand. But de facto policy is to grant an effective franchise to dominant legacy telephone and cable companies to operate in limited "footprints," negating universal service. Dawson's also right on in criticizing pathetically underfunded and largely symbolic efforts to create a "public option" for telecommunications infrastructure. The United States can't do the job by setting aside millions for infrastructure that costs billions to construct and operate.

Stop Subsidizing Non-Broadband. It should be impossible for the FCC to provide any funding or subsidies to broadband connections that don’t meet their own definition of what constitutes broadband speeds.

Again, Dawson hits on a huge disconnect between de jure and de facto public policy on telecom infrastructure. It makes no sense to waste money on technology that's obsolete the day it's deployed such as the FCC's 2015 high cost area subsidy program rules allowing funding of technology that was state of the art in 2005. I would go even further than Dawson's proposal in suggesting abandoning the fixation with "broadband speed" altogether and instead defining all premise telecom infrastructure as fiber optic technology.

Incumbent "fight the future" propaganda agenda: Keep calendar fixed at year 2000, lower expectations

Understanding the Broadband Adoption Gap | USTelecom: Some 26 million households (21 percent) are never online. To bring these remaining 33 million non-internet households online, price and affordability have been the more common levers that advocates and government have used. However, less than a quarter (24 percent) of the 33 million non-internet homes cite price as the main reason they don’t have access at home.

More than half (55 percent) of these non-internet households say they don’t need the internet or have no interest in Facebook, Pinterest, Snapchat, Pandora and the myriad other apps and services available online. That’s more than twice the number of households that say they can’t afford internet services.

These digital “don’t cares” are a much tougher segment to address through industry and government programs focused on price and affordability. Instead, programs must also focus on demonstrating that internet is relevant and useful to these consumers. USTelecom supports programs aimed at closing the digital divide and bringing more Americans online. In recent comments to the Commerce Department, USTelecom suggested more research needs to be done on why consumers aren’t going online. Digital literacy is significantly under-studied and federal researchers should focus on those issues, ideally in partnership with experts who work with the unconnected.

This is more of the same tired incumbent propaganda aimed at keeping the calendar fixed circa 2000 when the Internet meant "going online" to visit websites and get email. Legacy incumbent telephone companies know that Internet protocol-based technology supports not only these services but also voice and video residential premise services. That however requires modernizing their infrastructures from metal wires to fiber optic lines to reliably deliver them -- something their CAPex averse business models won't allow.

That reality motivates their "fight the future" strategy designed to lower expectations and attempt to shift blame to tepid consumer demand when in fact America's telecommunications infrastructure deficiencies and disparities are due to market failure on the sell side. Closely related to keeping the focus on "broadband adoption" is the fixation on "broadband speeds." That supports a retro oriented mindset since having adequate bandwidth was necessary to access online services in the early days of the Internet as well as the unit-based, consumption billing models employed in the days of Plain Old Telephone Service (POTS).