Tipping point may be at hand; advantage public sector ownership of advanced telecom infrastructure

Municipal broadband internet: The next public utility? | Smart Cities Dive: Despite many cities and counties looking to put together a municipal broadband initiative of their own, there remains strong opposition from telecom companies, as well as concerns over cost. While the CTC report found that municipal internet in Seattle is feasible, it also raised concerns about the price tag of the project, which is complicated by the fact that SCL cannot assume additional financial risk and so would need guaranteed payments to cover operations and maintenance.

The legacy incumbent investor owned telephone and cable companies have been conservative in modernizing their infrastructures to fiber and building out to reach every customer premise in their nominal service territories. It goes back two decades to the late 1990s when telephone companies offered digital subscriber line (DSL) as a luxury upgrade over standard sluggish dialup service. Soon thereafter, cable companies offered IP telecom services as an extra cost add on to create more lucrative service bundles beyond their traditional TV programming.

Naturally, these companies wanted to offer a high end upgrade product only where there were a sufficient number of densely developed neighborhoods with incomes high enough they would be a good bet to sign up. Those neighborhoods deemed too risky are redlined -- where too many of them remain today with some 19 million Americans lacking access to landline connections according to current U.S. Federal Communications Commission data. 

Now a tipping point may be at hand. Instead of being regarded as a luxury service as in the past, IP telecom service delivering voice, video and data is widely becoming viewed as a basic utility like voice telephone service was before it, with nearly every home, school, business and institutional building expected to have a landline connection. That shifting expectation alters the risk picture for investing in building universal fiber to the premise #FTTP. If most everyone will take the service, the risk of not generating sufficient revenues to cover capital and operational costs of the infrastructure decreases considerably. Particularly if it's offered at single price point affordable by most rather than costly, confusing and misleading offers that plague today's IP services. Yes, potentially lower ARPU, but a lot more end users to spread out the costs. And there should be subsidies for low income households; it's better they pay something rather than nothing because they can't afford it.

The public sector is beginning to see things as this story suggests. It has a major advantage over investor-owned ISPs in having access to far more patient capital that does not demand a rapid return on investment. Public sector owners of advanced telecom infrastructure also have an advantage in having more broad-based incentives to get it built in the form of what Paul de Sa, former head of the U.S. Federal Communications Commission's Office of Strategic Planning and Policy Analysis, termed "positive externalities" in a white paper since retracted by the current FCC. That's an economic term referring to the beneficial, knock on impacts on economic activity, healthcare, property values and local tax bases, education, and transportation demand reduction when most every premise can get connected to modern, advanced telecom infrastructure.

That's not to say there's no role for investor owned players. They know how to build and operate advanced telecommunications networks and should partner with public sector owners to bring the United States to where it should be amid explosive demand that shows no signs of slowing down.

U.S. falling well short of 2010 National Broadband Plan goal of 100 million homes passed by fiber next year

Small Fiber Builders Making an Impact | POTs and PANs: The research firm RVA, LLC conducted a study for the Fiber Broadband Association looking at the number of homes and businesses that are now passed and/or served with fiber. The numbers show that smaller fiber providers are collectively having a big impact on the industry.

RVA found that as of September 2018 there were 18.4 million homes with fiber, up from 15 million a year earlier.

Goal #1 of U.S. 2010 National Broadband Plan: 100 million homes have affordable #FTTP connections by 2020. With less than a year to go, it appears highly unlikely to be achieved.

Looking back a generation shows still unrealized U.S. policy vision

Excerpted from Service Unavailable: America’s Telecommunications Infrastructure Crisis (2015):

U.S policymaking on Internet infrastructure began shortly before the Internet was decommissioned as a government-run network in the mid-1990s. In 1993, the Clinton administration issued a policy framework titled The National Information Infrastructure: Agenda for Action.[i] It called for the construction of an “advanced National Information Infrastructure (NII),” described as “a seamless web of communications networks, computers, databases, and consumer electronics that will put vast amounts of information at users’ fingertips.” Development of the NII, the document stated, “can help unleash an information revolution that will change forever the way people live, work, and interact with each other.” For example:

· People could live almost anywhere they wanted, without foregoing opportunities for useful and fulfilling employment, by “telecommuting” to their offices through an electronic highway;

· The best schools, teachers, and courses would be available to all students, without regard to geography, distance, resources, or disability;

· Services that improve America’s health care system and respond to other important social needs could be available on-line, without waiting in line, when and where you needed them.

Among its nine principles and goals, the policy called for extending the universal service concept to ensure that information resources are available to all at affordable prices. “Because information means empowerment, the government has a duty to ensure that all Americans have access to the resources of the Information Age,” the policy declared.

In addition to this policy document, the Clinton administration sponsored legislation championed by then Vice President Al Gore, who foresaw the coming role Internet-based telecommunications would play in the future. The Telecommunications Infrastructure Act of 1993 created a framework for its integration with the Communications Act of 1934.[ii] The legislation, which was not enacted and died in Congress, included several findings. The first three findings stated that:

(1) it is in the public interest to encourage the further development of the nation’s telecommunications infrastructure as a means of enhancing the quality of life and promoting economic development and international competitiveness;

(2) telecommunications infrastructure development is particularly crucial to the continued economic development of rural areas that may lack an adequate industrial or service base for continued development;

(3) advancements of the nation’s telecommunications infrastructure will increase the public welfare by helping to speed the delivery of new services, such as distance learning, remote medical sensing, and distribution of health information.

[i] The National Information Infrastructure: Agenda for Action, September 15, 1993, https://archive.org/stream/04Kahle000911/04Kahle000911_djvu.txt

[ii] Senate Bill 1086 (103rd Congress, introduced June 9, 1993), https://www.govtrack.us/congress/bills/103/s1086.

U.S. losing its build big moxie: telecom infrastructure modernization case in point

Can America Still Build Big? A California Rail Project Raises Doubts - The New York Times: The need for increased infrastructure investment has been one of America’s few remaining bipartisan issues, although left and right differ over whether public money or private money would finance it. President Barack Obama made reinvesting in roads, bridges and power plants a cornerstone of the 2009 economic stimulus package, and during the 2016 presidential campaign seemingly the only disagreement Hillary Clinton and Donald Trump had on infrastructure was about which of their administrations would spend more on it. The issue unites truckers and train buffs, unions and Wall Street, economists from the left and right.

And yet, when it comes to spending the money — and actually getting things built — very little progress has been made. Following a brief spike during the recession, government investment has hovered around 3.3 percent of gross domestic product for the past few years, which is the lowest since the 1940s. In the meantime, roads, bridges and train tracks have gotten steadily older while proposals for new projects are delayed by political intransigence and legal delays.

The failure of the United States to timely modernize its legacy metallic telecommunications infrastructure built for the analog age of telephone and cable TV to fiber optic technology for the digital age is a pertinent example. Federal, state and local elected representatives uniformly proclaim the need is great with many at the state and local level saying it's the number one topic of constituent contacts. It's a major disconnect between what's needed and what's actually being built, reflecting the loss of America's moxie to think big and act big.

Meanwhile as the phone and cable companies incrementally upgrade their legacy infrastructures in search of high margin luxury "broadband speed" rents instead of bringing fiber to every doorstep as was the case with phone service, the nation is already a generation late and falling further behind where it should be in 2019. Fiber connections should have reached every home, school, business and government building by 2010 at the latest. The title of author Susan Crawford's recently published book Fiber: The Coming Tech Revolution―and Why America Might Miss It points up the tardiness of this vital infrastructure reboot. It's not just a hypothetical. As Crawford's book notes, compared to other nations it already has.

Pennsylvania: Another underfunded, sloganistic statewide universal service initiative

Governor Wolf makes case for statewide broadband to support education - WFMZ: Restore Pennsylvania is an infrastructure initiative funded by the monetization of a severance tax. Restore Pennsylvania would invest $4.5 billion over the next four years in projects throughout the commonwealth. The initiative would address five priority infrastructure areas including high speed internet access, storm preparedness and disaster recovery, downstream manufacturing, business development, and energy infrastructure, demolition, revitalization, and renewal, and transportation capital projects.

States cannot achieve universal advanced telecom service with these kinds of woefully underfunded, sloganistic initiatives. There simply won't be enough money if the pot is shared with other infrastructure needs as it is here. In a state as large as Pennsylvania, it's doubtful there would be enough even if the entire sum was dedicated to telecom infrastructure. This is too big of a job for states to tackle on their own. The federal government must lead.

A hybrid model of medical care would also be good for telecommunications

Health Care Spending In The US And Taiwan: A Response To <em>It’s The Prices, And A Tribute To Uwe Reinhardt</em> | Health Affairs: Uwe Reinhardt And Taiwan’s Single-Payer Health System

In 1989, as a high-level government adviser to Taiwan when it was planning to implement universal health insurance, Uwe boldly recommended a single-payer system. Taiwan’s government accepted this recommendation in 1990 and implemented its single-payer National Health Insurance (NHI) in 1995.
Uwe based his recommendation on three policy considerations. First, a single-payer system is effective in controlling cost; this was a major policy goal of the government as health spending in Taiwan was growing rapidly. Second, a single-payer system is equitable: coverage is universal and all insured are treated equally regardless of ability to pay or preexisting conditions. Third, a single payer system is administratively simple and easy for the public to understand. The NHI has achieved all three policy goals. Uwe also suggested that Taiwan retain its predominantly private delivery system. He believed that the private sector has an important role to play in a nation’s health care system. As long as financing and payment were within the purview of government, a mixed delivery system of private and public providers could work well within a single-payer framework. Taiwan’s experience has shown this to indeed be the case. (Emphasis added)

As with health care, the Americans pay more and get less value than other nations for telecommunications services. In a parallel with advanced telecom services, many Americans find needed medical care inaccessible or unaffordable. The late health care economist Uwe Reinhardt's prescription for Taiwan was putting the government in charge of the financial side of medical care while allowing the private sector to do what it does best: providing care.

The United States should do the same for another essential and high cost service: telecommunications. Let the telecom providers do what they do best -- planning, building and operating networks -- and relieve them of the burdens of infrastructure finance and ownership. Their weaknesses here have led to widespread infrastructure deficiencies, market failure and poor value service offerings. Hybrid models get around the winner take all, win-lose dynamics and allow providers and consumers to both benefit.

FCC chief touts hybrid fiber and next gen wireless delivery infrastructure as viable alternative to FTTP

U.S. Federal Communications Commission Chairman Ajit Pai said a hybrid infrastructure of next generation wireless backhauled by fiber offers an alternative delivery method for fixed premise advanced telecom service where the return on investment to connect premises directly to fiber isn't adequate.

Industry observers are skeptical of this scenario, noting next generation wireless service requires the construction of substantial new fiber infrastructure to support it, significantly weakening the investment case.

Pai disagrees, arguing that sufficient fiber infrastructure is already in place to move ahead with deployment. "Part of the reason is, in terms of the possibilities of fixed wireless, given the fiber penetration that some of your members have," he told the NTCA-The Rural Broadband Association in New Orleans earlier this week. Pai urged the group to "think broadly" about "how to extend this great fiber penetration you’ve got." 

Generation into IP telecom era, AT&T still has no durable, scalable premise service delivery infrastructure

AT&T Does a Flip Flop on Fixed 5G, Now Sees It “Unequivocably” a Landline Broadband Replacement - Telecompetitor: “As we look at 5G will you have enough capacity to have a good broadband product that serves as a streaming service for all of your DIRECTV NOW, your Netflix, et cetera?” asked Stephenson in a SeekingAlpha transcript of today’s earnings call. “I absolutely am convinced that we will have that capacity, particularly as we turn up millimeter wave spectrum. That’s where the capacity and the performance comes from and that’s where you’ll begin to see a broad – a true replacement opportunity for fixed line broadband. So I have little doubt that in the three to five year time horizon you’ll start to see substitution of wireless for fixed line broadband.”

The concerns that Stephens expressed last year related primarily to the cost of backhaul to support 5G fixed wireless. Stephens apparently also was envisioning fixed 5G wireless being deployed in the millimeter wave spectrum band. Millimeter wave spectrum will support the highest broadband speeds, but over relatively short distances. Hence there is a need for dense backhaul infrastructure.

It is unclear what has caused the company to have a change of heart about the prospects for an AT&T fixed 5G wireless offering. Interestingly, however, the company recently released a policy paper touting the potential of using its AirGig fixed broadband technology in combination with 5G. Although the paper doesn’t provide details, perhaps AT&T is looking at the possibility of using AirGig to provide backhaul for fixed 5G.

A generation into IP telecom era, AT&T has no proven durable premise service delivery infrastructure easily scalable throughout its service area as its 1990s DSL over copper outside plant goes obsolete. AirGig remains an experimental technology. And the millimeter wave frequencies used by 5G can't penetrate objects.