The Kafkaesque consequences of America's piecemeal approach to telecom infrastructure

City of Orr: Not enough fiber? | The Timberjay: The problem at this point really isn’t lack of fiber. There are multiple fiber conduits already in the ground, notes Long, but it’s getting the service out to customers that’s been the hurdle. He notes that Bois Forte tribal offices have exceptional broadband capacity, thanks to the middle-mile fiber project initiated by the Northeast Service Cooperative. But the private partners on that project, who were supposed to utilize that backbone to extend faster connections to residential and commercial customers, have been slow to deliver. “We have more capacity here at the government center than we know what to do with,” said Long. “But no one else can jump on board.”

This is the sad consequence of adopting a piecemeal, segmented view of telecommunications infrastructure: building part of it thinking someone else will come along to construct the rest to connect the end users. Of course, it doesn't always work out that way in America's Keystone Cops method of planning and deploying telecom infrastructure that produces Kafkaesque outcomes such as this suffered by the good folks of Orr, Minnesota.

Uwe Reinhardt on U.S. health care -- he might have said the same about telecom infrastructure

So if you ask me, "Are we ever succumbing to some notions of solidarity as a nation? I would say, "Not at all." I would describe us as a group of people who share a geography. That's a better description of Americans than that we're a real nation with a sense of solidarity.

Uwe Reinhardt, the German born Princeton University economics professor who died earlier this week at age 80, made that comment in the context of the American system of providing and paying for medical care. Americans, he observed, view medical care as a consumer commodity rather than a social service available to all citizens and hence tend to resist policies that would recast health and medical care as a common good. As a commodity, access to its purchase depends on one's income and financial assets. The result is very uneven access to care based on socio-economic status.

If Reinhardt had studied the U.S. telecommunications system as well as health care economics that was his area of expertise, he might have reached a similar assessment. When it comes to access to advanced telecommunications infrastructure, there is no sense of commonweal despite a common national geography. There is a sense that the telecommunications infrastructure one is served by is driven by individual choices on vocation and housing. If you choose to live in a neighborhood that has robust landline infrastructure rather than another that might only be a mile or two away or you earn too little to pay increasing and unregulated rates for commodity "broadband" service, that's your problem.

Rather than implement a federal policy that views telecommunications infrastructure as an interstate asset that benefits all Americans no matter where they live, we leave it to underfunded localities to try to cobble together their own disparate infrastructures with "wildly uneven" prospects, according to a recent compilation. Consequently rather than a coordinated national effort to modernize yesterday's metallic infrastructure designed for voice telephone and cable TV to modern fiber optic infrastructure capable of serving the advanced telecommunications of today and years to come, the United States is attempting to do so on the cheap in a piecemeal and highly incremental manner.

Google Fiber enters building by building urban battle for MDU connectivity

Google Fiber picks MDU cherries in Orange County: Google Fiber is figuring out how to play small ball and still get thousands of fiber to the home subscribers. In its latest blog post, Google tells how it’s expanding its fiber footprint – actually, making lots of tiny paw prints – in the southern California multi-dwelling unit market…

The subscription-based business model employed by incumbent telcos like AT&T as well as newer entrants like Google Fiber clearly favors density because it generates decent ROI on fiber to the premise (FTTP) capital investment. The higher the density the better as these players engage in a form of business urban warfare, fighting for market share building by building.

The problem is not everyone lives in or prefers to live in multi dwelling unit (MDU) properties. In MDUs, the vertically integrated model in which the providers own both the fiber infrastructure as well as proprietary telecommunications services delivered over it works well enough to make a strong business case. But when the density drops, it becomes iffy.

Ironically, that can leave even relatively affluent, low density neighborhoods of single family detached homes without fiber connections as the large investor-owned providers chase after dwelling density. Alternative business models are urgently needed. Without them, these higher value properties could end up becoming devalued due to their lack of fiber connectivity.

Fiber telecom infrastructure key, not "broadband speed"

Beyond Speed: FCC Should Focus on Broadband Experience: The market has evolved to where all-fiber connectivity is everyone’s goal, and it is time that the FCC got on board as well. In our comments to the FCC, the Fiber Broadband Association encourages the FCC to use an “all-fiber” metric — examining whether customers have access to all-fiber networks — to assess our country’s advanced telecommunications. “Robust fiber networks aren’t just capable of meeting community and enterprise needs throughout the United States; they’re essential to doing so,” says FBA President and CEO Heather Burnett Gold. “Fiber broadband has what it takes to take our country’s digital potential to the next level, and access to fiber is the critical first step.” If we want to accurately measure Americans’ access to sufficient broadband technology, looking just at speed won’t do. We must be looking at the technology that can actually provide high-performance, future-proof broadband service: fiber.

This organization is right on the money. As readers of this blog as well as my eBook Service Unavailable: America's Telecommunications Infrastructure Crisis know, I've emphasized the same point. The United States should focus like a laser (pun intended) on rapidly bringing fiber connections to every home, business and public institution. It's all about modernizing the nation's vital telecommunications infrastructure to fiber, not "broadband speed."

Fearing state imposed universal service obligations and rate regulation, legacy incumbent telcos, cablecos seek federal cover

A decade ago as Internet-based telecommunications grew and began transporting video content, telephone and cable companies feared local governments would using their video franchising authority established in the cable TV era require them to build out their infrastructures to ensure all residents had connections. The pre-Internet cable television franchise had evolved. It was no longer just about entertainment. In the Internet era, it was now the full panoply of advanced telecommunications services: voice and data as well as video. That in turn would stoke demand for better infrastructure that could reliably deliver them.

However, the legacy incumbent telephone and cable companies didn’t want to be forced to upgrade and build out their cable plants to serve all customer premises in order to do business in numerous localities. Their business models are based on serving selected neighborhoods within arbitrary “footprints” of “serviceable” premises and not entire local government jurisdictions.

They initially sought relief in Washington from Congress and the U.S. Federal Communications Commission to preempt state – and by extension local -- video franchise regulation. That would take care of a multiplicity of potentially troublesome local governments imposing universal service conditions under their video franchising authority. But the National Governors Association and the National Conference of State Legislatures pushed back, wanting to keep video franchising within state jurisdiction.

Incumbents were able to easily pivot from that objection to their Plan B to kill local government video franchising authority: lobby state governments to take it over from local governments. That effort was quite successful, with state video franchising laws put on the books in state after state in the mid-2000s. Those laws such as California’s Digital Infrastructure and Video Competition Act of 2006 did not mandate video franchisees provide universal service by some future date in areas where they were awarded state franchises, thus sanctioning neighborhood redlining. Consequently, local governments that often receive complaints from constituents denied landline connections to advanced telecommunications service by the big incumbents are powerless to do anything about it since those connections fall under state video franchising authority. Calling one’s state representative isn’t helpful either since the incumbents have captured legislatures and state telecommunications regulatory agencies by buying political influence with campaign contributions.

The fight over universal service has now shifted from video franchising to a new regulatory front. But this time around, the incumbents ironically want protection from the states. They’re concerned that if the federal government continues avoid enforcement of universal service policy expressed in the Communications Act as amended in 1996 or the FCC’s 2015 Open Internet rulemaking -- or scraps the Open Internet rulemaking altogether -- the states might opt impose their own universal service obligations.

The big legacy incumbents are also worried over the prospect of states regulating service rates as authorized in the federal Open Internet rulemaking. In the two years the Open Internet rulemaking has been the law of the land, the FCC hasn’t enforced that provision either.

Given widespread complaints voiced by state and local elected officials over both spotty access to service due to neighborhood redlining and affordability challenges for low income households, the incumbents have reason for concern. Two of the nation’s largest telephone and cable companies, Verizon and Comcast, respectfully, are urging the FCC to enact a “clear, affirmative” rule preempting states, declaring federal primacy over state regulatory jurisdiction. However, such a rulemaking could fail to hold up in court against a statute enacted by a state legislature given a 2016 decision by the United States Court of Appeal Sixth District in State of Tennessee et al. v FCC & USA finding the FCC could not preempt state law without express federal statutory authority to do so. That could set up a grueling battle in Congress between the big telcos and cablecos and the states over the regulation of advanced telecommunications services.

With the level of dissatisfaction in the states over access and affordability to landline delivered advanced telecommunications services, it’s not a fight the incumbents would automatically win despite the massive lobbying and campaign cash they can bring to bear in Washington. Many if not most candidates for state and local offices have made access to and affordability of advanced telecommunications services a campaign issue, terming it infrastructure vital to commerce, education and telehealth services. In addition, the level of need and public interest is much higher now than it was a decade ago when the incumbents were lobbying state governments to enact statewide video franchise laws.

Why legacy incumbent telephone and cable companies want FCC re-reclassification as information service providers. Hint: It’s not “net neutrality.”

If the U.S. Federal Communications Commission revokes its 2015 Open Internet rulemaking classifying Internet as a telecommunications common carrier utility under Title II of the Communications Act and restores the previous rule classifying it as information service under Title I of the law as expected before year end, it will set the stage for another round of litigation just as that which followed after the 2015 rule was adopted. This time however it will be public and consumer interests that will be challenging the FCC rather than legacy incumbent telephone and cable companies. And the governing statute, the Communications Act, might well be on their side. Section 3(a)(1)(41) of the Act as amended in 1996 defines an information service as follows:

INFORMATION SERVICE- The term `information service' means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.

The legacy incumbent telephone and cable companies want the FCC to define their Internet protocol delivered services using that definition, essentially equating them with services like LexisNexis or Intelius. Their problem however is these companies market Internet protocol-based telecommunications services such as data, voice and video delivered over their connections to customer premises. If they were merely information services like LexisNexis or Intelius, they wouldn’t market physical premise connections sold in throughput speed tiers for a monthly recurring fee. In so doing, they are arguably offering telecommunications service, which the statute defines as “the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.”

So what is the incumbents’ main motive in not wanting to be classified as telecommunications providers under Title II of the Act? Hint: It’s not “net neutrality” – the requirement they treat the bits and bytes of Internet protocol moving over their networks equally regardless of origin. The primary reason to avoid being classified as telecommunications providers is to escape the requirement in the Communications Act as amended in 1996 that they provide advanced telecommunications capability to all areas of the nation consistent with the public interest, convenience and necessity. It must enable users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology per Section 706(c)(1) of the statute. Elected policymakers at all levels of government generally agree advanced telecommunications capability is even more in the public interest and vital to the constituents they represent than it was when the 1996 Act was enacted two decades ago.

Incumbents also chafe at the prospect of price regulation as advanced telecommunications providers as authorized at Section 706(a) of the Act. Bottom line, if they are regulated solely as providing an information service and not as telecommunications common carriers, then they would be able to continue to redline neighborhoods they don’t wish to serve and charge customers in those they do whatever they wish – just as they have since the statute was enacted without meaningful regulatory enforcement. That might serve the interests of their shareholders, but clearly doesn’t comport with the public interest specified in the statute.

Legacy metallic telcos, cablecos fight rear guard actions against local FTTP initiatives

Municipal broadband advocates cry foul amid Seattle mayoral race: An ongoing debate over making broadband internet a public utility in Seattle is surfacing in the city's mayoral election, and advocates for the cause are crying foul over contributions large telecommunications companies have made in the race. Comcast and CenturyLink, two internet service providers in Seattle, collectively donated about $50,000 to a political action committee supporting Jenny Durkan, a candidate who opposes municipal broadband. Municipal broadband advocates say that the telecom companies’ donations represent efforts to maintain the duopoly they have in the region. The PAC is the Civic Alliance for a Sound Economy (CASE), which is sponsored by the Seattle Metropolitan Chamber of Commerce. “If I was running one of the most powerful monopolies of the modern era, I’d be donating as much as I could to take over local politics also,” said Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance.

Mitchell is correct. Due to high cost barriers to competitor entry, telecommunications infrastructure functions as a natural monopoly, a fact recognized in the previous regulatory regime governing analog voice telephone service. Title II of the U.S. Communications Act requires telephone companies to provide service to anyone requesting it and authorized state public utility commissions to regulate their rates since market forces cannot in a monopoly market. 

In its 2015 Open Internet rulemaking, the U.S. Federal Communications Commission made it clear Title II also applies to digital telecommunications delivered using Internet protocol technology. But the United States hasn’t found the regulatory fortitude to enforce that requirement, allowing landline advanced telecommunications providers to redline neighborhoods they don’t want to serve and charge whatever they want. Most pundits expect the FCC to repeal that rulemaking later this month and turn the clock back to the start of the new century when Internet was still a relatively novel “information” service where people “went online” with “broadband” (versus narrowband dialup) connections.

Meanwhile, telephone and cable companies find themselves fighting rear guard actions by localities all over the nation that like Seattle prefer fiber optic infrastructure over metallic cable that isn’t bundled with proprietary services -- known as an open access network. They're tired of waiting and understandably have lost confidence after years of incumbent promises of fiber upgrades that never materialized because their business models can't absorb the needed capital expenditures.

Had the nation engaged in sound public policymaking and prudent planning a generation ago when it became apparent telecommunications was transitioning from analog to digital Internet protocol, the legacy incumbents wouldn’t find themselves fighting these battles. But since they themselves heavily influenced public policy on telecommunications over the past few decades, they hoisted themselves on their own petard and became among the most hated companies in America.

Both legacy incumbents and consumers are wrong about competition in landline delivered advanced telecom service

Legacy incumbent telephone and cable companies and consumer and public interest advocates describe advanced telecommunications landline infrastructure as a competitive market. The former argue that it’s robustly competitive, affording consumers plenty of choices particularly in dense, urban areas. The latter complain there’s little or no competition in most areas where it’s a market duopoly at best. The choice is between either a legacy telephone company or a cable company. Oftentimes there is no choice at all, with only one of the two -- or neither -- offering service.

They’re both off base. Telecommunications infrastructure like that of other utilities delivering electric power, natural gas, water and sewer service to homes and businesses is a natural monopoly. Its inherent microeconomics don’t allow for a competitive market, one that by definition has many sellers and buyers with relatively equal access to information on price and quality.

Telecommunications service is like other utilities because it provides essential, necessary services for modern life. Thus it will always have many buyers but not a lot of sellers. That’s because the costs of installing and maintaining its delivery infrastructure are so high they deter other providers from entering the space. Would be providers are also deterred because it's inherently difficult to lure away customers from a well established incumbent since consumers don’t frequently go shopping for a new utility provider like they might for furniture, clothing or personal electronics. Hence, for most utilities there is only one provider or as noted earlier, perhaps two for advanced landline telecommunications service.

Both sides nevertheless continue to delude themselves and attempt to convince others they are right. The legacy incumbent phone and cable companies do so because they want to keep policymakers and regulators off their backs. They contend landline delivered advanced telecommunications is a competitive industry and thus requires only “light touch” regulation to protect consumers since market forces will adequately do the job.

Consumers believe the legacy providers have them over a barrel. They redline their neighborhoods and refuse to offer service on a par with that sold to nearby neighbors. Or they offer service, but with poor quality and reliability and exorbitantly priced. As they do with other services, the first inclination of consumers is to call for more competition. If telecommunications were a competitive retail market, they believe, then they could choose among a variety of providers clamoring for their business. The reality of course is far from that and complaints of shoddy customer service are rampant.

Both sides also mischaracterize public sector initiatives to build fiber optic infrastructure as market competition. Public sector entities aren’t out to compete for market share with incumbent legacy telephone and cable companies with the hope of driving them out of business as is the case with true market competition. They build advanced telecom infrastructure to facilitate economic development and achieve community goals.
 
Consumers want a competitive market for advanced telecommunications infrastructure, viewing it as a tonic for better quality service and value. It cannot and never will be a competitive market. The incumbent providers argue it's already a competitive market. It isn’t. It’s time to end the nonsense from both camps and their delusions of market competition in advanced landline telecommunications infrastructure and put ownership of it firmly in the public sector since it cannot function as a truly competitive market.