The latest telco FTTP CapEx avoidance strategy: "wireless fiber"

Handcuffing Cities to Help Telecom Giants – Backchannel

This piece by Susan Crawford describes the latest large incumbent legacy telephone company strategy to avoid capital expenditures on fiber to the premise (FTTP): radio. Or as some incumbent voices term it, "wireless fiber." It follows the first CapEx avoidance strategy employed by AT&T a decade ago: running fiber to neighborhood nodes and serving customer premises via existing twisted pair copper designed for analog voice service. Naturally, there were lots of technology and service problems with that approach mixing old and new technology. And like the wireless everywhere strategy, it doesn't serve large portions of telco service territories where population density is lower.

As Crawford points out, wireless infrastructure no matter how fast can't offer the carrying capacity of fiber to accommodate inevitable future increases in bandwidth demand. It requires radios -- many of them -- mounted on utility poles and backhauled by lots of fiber. Running so much fiber into neighborhoods, Crawford begs the question of why not extend it all the way to customer premises (FTTP)? Anticipating resident push back against ubiquitous, unsightly field equipment installations in local government approval processes, the incumbents are aiming to preempt the locals while telling them "wireless fiber" will solve their telecom needs.

West Virginia telecom infrastructure initiative embodies 3 fatal public policy flaws

Charleston Gazette-Mail | Groups push for broadband expansion in WV: Senate President Mitch Carmichael, R-Jackson, said Tuesday that at least two broadband-related bills are in the works, and lawmakers expect to introduce legislation in the coming days. The Senate bill would offer tax credits for companies to help recoup costs of bringing internet to remote areas, said Carmichael, an executive with internet provider Frontier Communications. The bill also may authorize the state to provide loan guarantees to internet firms that plan to expand broadband service. Carmichael said some internet providers want legislation designed to bring internet service to households that don’t currently have it, while other companies support measures that would increase internet speeds.

“We want to [encourage] competition,” Carmichael said. “If we’re going to do investment of any type, it should go to the areas that have no service.” Generation West Virginia, AARP West Virginia and the state Broadband Enhancement Council held a press conference at the state Capitol Tuesday to raise awareness about the importance of high-speed internet service and to unveil a plan — called Gig Ready — to bolster support for broadband expansion.

This West Virginia effort although well intended contains three fatal flaws that are unfortunately frequently embraced by other states and by federal policymakers.

1. Offering loan guarantees and tax credits to legacy telephone and cable companies to invest in advanced telecommunications infrastructure in the belief that will help achieve universal service. It will not. The incumbents' short term business models are designed to extract maximum cash flow from current assets and do not allow them to make significant long term capital investments in new infrastructure. Tax credits and loan guarantees can't overcome that hard economic reality.
2. The belief that the role of government vis telecommunications infrastructure is to promote market competition. Telecom infrastructure is a natural monopoly and cannot and never will be a competitive market. Promoting market competition in telecom infrastructure is like promoting water skiing in the arctic.
3. Sloganeering. Call it Game of Gigs or Gig Ready, slogans can't construct telecom infrastructure. They are not so much aspirations for the future but rather reflect a poverty of action and commitment (harder) relative to a surplus of talk (far easier).

Net neutrality hurts health care and helps porn, Republican senator claims | Ars Technica

Net neutrality hurts health care and helps porn, Republican senator claims | Ars Technica: Sen. Ron Johnson (R-Wisc.) agreed that net neutrality rules harm ISP investment and offered a lengthy analogy to explain why. Johnson said he wants to cut through the “rhetoric, slogans, and buzzwords,” before saying that enforcing net neutrality rules is like letting too many people use a bridge and ruin people’s lawns. Net neutrality rules, he said, also give pornography the same level of network access as remote medical services.

This is an unfortunate outcome of the misplaced obsession with the "net neutrality" aspect of the U.S. Federal Communications Commission's 2015 Open Internet rulemaking that erased the line between legacy and advanced telecommunications services by reclassifying Internet service as a common carrier telecommunications utility under Title II of the Communications Act. The obsession with net neutrality is so exaggerated that the term has become synonymous with the rulemaking.

The Open Internet rulemaking does properly require ISPs to treat all telecommunications traffic equally and without preference as to content. But with millions of Americans left offline and many still using circa 1994 dialup access that was state of the art when Bill Clinton was serving his first term as president, the higher value of the rulemaking is bringing Internet service under the universal service and anti-redlining requirements of Title II that have governed telephone service for decades -- and not debating whether the network should give priority to porn or any other information. Those requirements also comport with Metcalfe's Law, which holds a network is only as valuable as the number of subscribers on it.

Senate to Look at Infrastructure Challenges | Broadcasting & Cable

Senate to Look at Infrastructure Challenges | Broadcasting & Cable: The Senate Commerce Committee has scheduled a hearing for Wednesday, March 1, on the telecom and transportation infrastructure challenge. The Donald Trump Administration has pledged a trillion-dollar infrastructure upgrade, which is expected to include broadband infrastructure. In addition, there are legislative efforts to spur infrastructure buildouts, and FCC chairman Ajit Pai has backed making broadband part of that effort as well.

“With a national discussion on federal infrastructure investment underway, it’s worth remembering that many Americans live far away from the highest-ticket projects their tax dollars are asked to fund,” said Sen. John Thune (R-S.D.), chairman of the committee, in announcing the hearing. “This hearing will look at how wise infrastructure investment decisions can ensure that all Americans benefit from improvements to national transportation and digital networks.”

It's great to see Sen. Thune recognizing that digital telecommunications infrastructure is also important 21st century infrastructure. Yes, 20th century transportation infrastructure is also need of investment. But it shouldn't come at the expense of telecom infrastructure that like roads and highways has also been neglected for decades.

Had proper planning and policies been put in place a generation ago as I write in my recent ebook Service Unavailable: America's Telecommunications Infrastructure Crisis, nearly all American homes, schools and businesses would have fiber optic connections by 2010 rather than relying on the failed investor owned corporate business model that has caught the nation up short. That leaves millions of Americans unable to access modern advanced telecommunications services or served by poor value and sluggish metallic connections that can't accommodate the growing bandwidth demand of today and tomorrow's digital economy.

The digital economy requires the capacity to handle the efficient movement of ideas, products and services just as 20th century transportation infrastructure did for people, goods and services. Telecom infrastructure thus should be properly regarded as interstate infrastructure as is transportation infrastructure.

R&D won't solve America's urgent telecom infrastructure deficiencies

That group “really push[es] a comprehensive narrative that the U.S. broadband -- private-sector broadband -- has failed the country, that we are falling behind other countries in our broadband performance,” said Doug Brake, telecom policy analyst at ITIF and coauthor of “How Broadband Populists Are Pushing for Government-Run Internet One Step at a Time,” released in January. The populists think “we have these rapacious broadband monopolists that are not upgrading and just harvesting rents from the entire population,” Brake said. “We see that narrative as being incorrect on almost all the points that it puts forward.” Broadband populists have a two-pronged approach and use small tactical debates to achieve their overall goal, Brake said. On one hand, they support the bottom-up solution of government-owned infrastructure with internet service providers delivering services on top of it -- even while acknowledging the limitations of that approach. “We think that that model does not fundamentally support long-term innovation,” Brake said. “That’s competition just based on price andcustomer service. It’s not competition based on the technology itself.” He said he’d rather see ISPs incentivized to pour money into research and development of the next generation of broadband, for instance.

The debate over muni broadband expansion -- GCN

Brake's position is utter nonsense. Fiber optic connections to customer premises could have been made to nearly every American home, school and business by 2010 had the nation put in place the right telecommunications policy and planning in the late 1980s and early 1990s when it was becoming apparent that telecom would shift from analog to digital and be distributed via Internet protocol. Fiber optic infrastructure remains the state of the art telecommunications infrastructure technology, with plenty of capacity to carry burgeoning bandwidth demand well into the future. Performing R&D on a possible successor is fine. But it's not going to solve today's urgent telecommunications infrastructure needs that require rapid deployment of fiber connections.

As for Brake's characterization of incumbent legacy telephone and cable companies being "rapacious broadband monopolists that are not upgrading and just harvesting rents," they had better well be. Because it's exactly what their investors expect of them: minimal capital expenditures and maximizing revenues from a captive, natural monopoly market.

Gov. Brown sets California's priorities for U.S. infrastructure bill -- but telecom not on list

Brown Sets California's Priorities For Trump Infrastructure Bill - capradio.org: Gov. Jerry Brown’s administration has released its list of California priorities for a potential federal infrastructure funding package backed by President Trump. The list is noteworthy not only for the projects it includes but for the ones left off. On the list? Highway projects throughout the state, including new carpool and toll-charging express lanes. California’s earthquake early warning system. And, of course, Brown’s legacy projects: high-speed rail and the Delta tunnels. “Mostly, the projects that we have submitted all have a request of $100 million or more,“ says the governor's transportation secretary, Brian Kelly. “So we really did focus on larger projects with clear, long-term and short-term benefits to the state.” Notably absent? Two prominent water storage projects backed strongly by California Republicans: Sites Reservoir northeast of Sacramento and Temperance Flat Dam northeast of Fresno.

Also missing from the list: telecommunications infrastructure. This in a state regarded as a leader in information and communications technology and home to Silicon Valley as surrounding communities continue to lack modern fiber optic service. Telecom infrastructure deficiencies are most pronounced in the Golden State's Central Valley municipalities of Modesto and Fresno, in the Sierra Nevada foothills east and northeast of the state capital of Sacramento in Placer and El Dorado counties, and up the Interstate 5 corridor in Sutter, Butte and Yuba counties to the Shasta County seat of Redding. (See related post here). Is is truly good public policy to finance 20th century infrastructure while neglecting vital infrastructure for the 21st?

U.S. requires crash federal telecom infrastructure program

Like other forms of infrastructure that were largely built out in the 20th century – such as transportation, energy, water and sewage – broadband is a foundation for economic activity across many sectors. But, unlike other potential infrastructure priorities, the public benefits of broadband could grow exponentially in the coming decades, as the nation is just beginning to realize the potential innovation and productivity gains from combining high bandwidth, low-latency connectivity with massive sensor, computing, and storage capabilities.

Unlike most other types of infrastructure, the nation’s digital infrastructure is largely corporate owned and generates revenues from paying subscribers. However, the private carriers who invest in broadband capex do not, in general, capture the full benefits of those investments (e.g., the positive externalities of the internet economy and the multipliers from increasing innovation and efficiency in adjacent sectors), so their investment levels are lower and slower than would be optimal for the country. (Emphasis added). The public-policy challenge, therefore, is to increase largely private capital flows to levels consistent with the potential public benefits of abundant, ubiquitous broadband without crowding out existing private sector investment.

The above is excerpted from a white paper by Paul de Sa, who formerly headed the U.S. Federal Communications Commission's Office of Strategic Planning and Policy Analysis. The paper was published on the U.S. Federal Communications Commission website last month. de Sa's point on the larger benefits of ubiquitous modern telecommunications infrastructure and its economic stimulus and multiplier effect mirrors my own, discussed in my recent eBook, Service Unavailable: America's Telecommunications Infrastructure Crisis.

I fully agree with de Sa's assessment that relying on the current dominant model of privately owned infrastructure where Internet Service Providers own the connections to customer premises as well as the services offered over them cannot support rapid and robust infrastructure construction to catch the nation up to where it needs to accommodate exploding bandwidth demand today and in the future. It's naturally limited by investment risk that comes with selling and servicing monthly subscriptions one customer premise at a time that constrains access to the needed many billions of investment capital and is prone to market failure. Until the United States explicitly recognizes the limitations of this model and treats telecommunications as the national infrastructure asset that it is and launches a crash publicly-financed telecom infrastructure initiative, the nation will continue to rapidly fall further behind as the 21st century advances.

As a footnote, de Sa's paper was retracted this week by his acting replacement, Wayne A. Leighton. (h/t to Steve Blum's blog).

FCC’s O’Reilly defends unacceptable status quo in U.S. telecom infrastructure

As federal policymakers consider addressing America’s telecommunications infrastructure deficit as part of a broad national infrastructure modernization plan, Federal Communications Commissioner Michael O’Reilly has written a blog post clearly intended to lower expectations and preserve an unacceptable status quo. It comes at a time when the United States by 2010 should have had modern, fiber optic-based telecommunications infrastructure deployed serving every home, small businesses and public institution instead of the legacy metallic telephone and cable company infrastructure he wants to preserve. Not to mention the national embarrassment of third world satellite Internet and dialup serving too many American homes where landline telecom connections – metallic or fiber – are nonexistent.

Instead of a robust federal telecommunications infrastructure program, O’Reilly seeks to protect the incumbent telephone and cable companies by preserving their emphasis on “broadband speeds” and the related and increasingly outdated, tail chasing debate over how much speed is sufficient. That fits nicely with the legacy incumbents’ outdated metal cable connections to premises since those lack the capacity of fiber to serve burgeoning bandwidth demand. In his points about geography and population density, O’Reilly also lends support to incumbents’ redlining market practices based on premise density in violation of the FCC’s 2015 Open Internet rulemaking making Internet a universally available common carrier telecommunications utility. That speed-based versus fiber to the premise (FTTP) metric comports with the FCC’s weak subsidy program that funds incumbents’ deployment of obsolete infrastructure on a par with circa 2005 DSL.

In sum, O’Reilly’s position is all about incrementalism and buying more time for these legacy incumbent providers. Public policymakers have already allowed them to buy a quarter century of delay as American has fallen ever further behind in the 21^st century, when modern telecommunications infrastructure is as critical as roads and highway were in the previous century. It’s time for that to end.

Finally, O’Reilly -- like former FCC Chairman Tom Wheeler before him --miscasts telecommunications infrastructure as a competitive market. If it were, there would be lots of service providers to choose from and sufficient capital to finance their ventures. The fact that there are not reflects simple microeconomics. High cost endeavors like infrastructure erect natural barriers to new providers. In telecommunications infrastructure, incumbents also exert a chilling effect with their natural monopolies since new providers are reluctant to take on the risk of overbuilding them – a primary reason for Google Fiber’s recent retrenchment.

Neither investor-owned ISPs nor "muni broadband" can meet America's urgent telecom infrastructure modernization need

How Broadband Populists Are Pushing for Government-Run Internet One Step at a Time | ITIF: To most observers of U.S. broadband policy, the regular and increasingly heated debates in this area appear to be about an evolving set of discrete issues: net neutrality, broadband privacy, set-top box competition, usage-based pricing, mergers, municipal broadband, international rankings, and so on. As each issue emerges, the factions take their positions—companies fighting for their firms’ advantage, “public interest” groups working for more regulation, free market advocates working for less, and some moderate academics and think tanks taking more nuanced and varied positions.

But at a higher level, these debates are about more than the specific issue at hand; they are subcomponents of a broader debate about the kind of broadband system America should have. One side wants to remain on the path that has brought America to where it is today: a lightly regulated industry made up of competing private companies relying on a variety of technologies. Another side, made up of mostly public interest groups and some liberal academics, rejects this, advocating instead for a heavily regulated, utility-like industry at minimum and ideally a government-owned system made up of municipal networks. The Information Technology and Innovation Foundation (ITIF) firmly believes the former model—lightly regulated competition—is the superior one. But if we are to get broadband policy right going forward, it’s this broader strategic issue we need to identify and debate, not just narrow tactical matters.

Broadband networks are a critical part of America’s digital technology system and, as such, the issue of how to continue to drive investment and innovation in these networks is worthy of robust and sustained debate. But the broadband policy debate should be transparent about what it really involves: Is America better off with an ISP industry that is structured the way the vast majority of the U.S. economy is structured (private-sector firms competing to provide the best product or service at a competitive price, with the role of government to limit abuse and support gaps where private-sector competition does not respond), or do we want to transform this largely successful industry model into either a regulated utility monopoly model or government-owned networks? As we ponder this question, policymakers need to understand what the debate is fundamentally about and what is at stake as broadband populists push for each one of their thousand cuts.

Actually, neither leaving telecommunications infrastructure fully in the hands of the private sector nor relying on local "municipal broadband" builds will bring the United States modern, fiber optic telecommunications infrastructure rapidly enough to meet the ever growing bandwidth demand of Internet protocol-based services. The former because of sell side market failure due to slow and uncertain return on investment inherent in its customer premise subscription-based business model. The latter because state and local governments lack the capital and debt capacity to finance publicly owned telecom infrastructure with so many competing needs for aging infrastructure such as roads, schools and sewer and water systems as well as enormous public pension obligations.

Only the federal government has the resources and policy power to meet this critical infrastructure need of the 21st century as I posit in my 2015 eBook, Service Unavailable: America's Telecommunications Infrastructure Crisis. Telecommunications infrastructure like the highway system is fundamentally interstate and not municipal, connecting states to each other and the nation to the world. It's too important to be left to either the private sector alone or state and local governments that lack the resources to do the job.

Senate Democrats to propose $1 trillion infrastructure plan

News from The Associated Press: A proposal by two of Trump's financial advisers circulated just after the election calls for using $137 billion in tax credits to generate $1 trillion in private investment in infrastructure projects over 10 years. But investors are typically interested only in projects that have a revenue stream like tolls to produce a profit. Charging tolls for roads and bridges is often unpopular. A recent Washington Post poll found that 66 percent of the public opposes granting tax credits to investors who put their money into transportation projects in exchange for the right to charge tolls. The American Association of State Highway and Transportation Officials and transportation industry lobbying groups want a hike in direct federal spending instead of tax credits. What is needed most, they say, is money to address the growing backlog of maintenance and repair projects, most of which are unsuitable for tolling.

This also applies to America's aging and obsolete telecommunications infrastructure. It should have been modernized with fiber optic technology all the way to customer premises starting a quarter of a century ago. Instead today, the nation remains on outmoded metal wire infrastructure designed for the pre-Internet days of telephone and cable TV service.

The financial points of this article also apply. Just as it won't for roads and highways, a for-profit business model isn't going to generate the low hundreds of billions of dollars needed to build the telecom infrastructure to accommodate the ever increasing demand for Internet protocol-driven bandwidth. There simply isn't enough return on investment given the enormous capital expenditure requirements. Ditto tax incentives.

Americans also understandably dislike a toll-based scheme that subjects them to the tender mercies of vertically integrated Internet Service Providers (ISPs) -- who because they own both the pipe that brings telecom services to customer premises as well as the services delivered over it -- enjoy hugely disproportionate market power. Just ask anyone who received a notice their monthly bill would be going up this year. Telecom infrastructure should be in the public realm and treated -- and funded-- as a public good.

Why aggressive federal intiative needed to modernize inadequate U.S. telecom infrastructure

Virginia “Broadband Deployment Act” would kill municipal broadband deployment | Ars Technica: Virginia lawmakers are considering a bill called the "Virginia Broadband Deployment Act," but instead of resulting in more broadband deployment, the legislation would make it more difficult for municipalities to offer Internet service.

The Virginia House of Delegates legislation proposed this week by Republican lawmaker Kathy Byron (full text) would prohibit municipal broadband deployments except in very limited circumstances. Among other things, a locality wouldn't be allowed to offer Internet service if an existing network already provides 10Mbps download and 1Mbps upload speeds to 90 percent of potential customers. That speed threshold is low enough that it can be met by old DSL lines in areas that haven't received more modern cable and fiber networks.

This is a big part of the justification for an aggressive federal telecom infrastructure initiative to build and publicly own fiber optic connections to nearly every American home, business and institutions. While many have placed hope in state and local government "muni broadband" efforts, they won't scale and rapidly enough to address the nation's current and future telecom needs. The nation now faces an infrastructure crisis, getting further and further behind the demand curve as time goes on and the need for robust connectivity grows.

There are two reasons why these local efforts fall short. First and most importantly, existing state and local governments lack the many billions of dollars and debt capacity needed to finance the job. They're already strapped by deferred infrastructure maintenance such as for highways, roads, government buildings, and water and sewerage systems. Not to mention the yawning economic black hole of underfunded public employee pension obligations that sucks up state and local funds. In a similar vein, we don't read accounts of new special districts being formed to build and operate telecom infrastructure, with the locals signing on to tax themselves to pay for it.

The second is the legacy incumbent telephone and cable companies call the shots on telecom infrastructure and will do -- as the above story reports -- whatever it takes to keep control, even if it means keeping in place obsolete infrastructure and impeding technological progress with minimalist incrementalism. State and local governments are simply outgunned by boatloads of campaign cash and armies of lobbyists and propagandists intent on keeping the calendar set at 1999 in order not to disrupt their capital expenditure averse business models. Nor is there any real private sector threat. For example, Google Fiber got its ass kicked and then publicly mocked by AT&T when it ventured into the telecom infrastructure business to connect homes with fiber and forming public-private partnerships with local governments.

As I wrote in my 2015 eBook, Service Unavailable: America’s Telecommunications Infrastructure Crisis, the United States requires an aggressive federal initiative to modernize the nation's aging and hugely inadequate telecom infrastructure so that it serves all Americans and not just some. Only the federal government has the authority and resources to make that happen and is justified in doing so given the essentially interstate nature of telecommunications.

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.