New eBook: U.S. Telecom Infrastructure Crisis: America’s botched modernization of copper to fiber -- and the path forward

 

In 2020 as public health restrictions due to the coronavirus pandemic suddenly converted millions of American homes into offices, classrooms and medical clinics, the nation’s accumulated deficits in advanced telecommunications infrastructure and related challenges of access and affordability that had been in place for years reached a crisis point.

The root of the problem is a failure of planning and policy over the past quarter century to ensure decades old copper telephone lines that reach every American doorstep were modernized with fiber optic lines to support Internet delivered digital telecommunications. The nation lacks a comprehensive, coordinated transition plan and relies on various underfunded, piecemeal efforts.

The cause of the failure: public policymakers focused on the wrong thing: incremental gains in “broadband” speed instead of replacing the copper with fiber beginning a generation ago. With the enactment of the 1996 Telecommunications Act, policymakers erred in assuming fiber would be just one of several technologies that would compete with copper rather than pursuing a deliberate policy to ensure the timely replacement of copper with fiber.Consequently, fiber reaches less than a third of American homes in 2020. That’s far short of the goal of the Federal Communications Commission’s National Broadband Plan prepared for Congress in 2010 that called for 100 million homes to have affordable fiber-level connections a decade later.

U.S. telecommunications policy primarily serves the needs of for profit companies that lack incentive to rapidly speed construction of fiber to solve America’s advanced telecommunications infrastructure deficits. There’s an inherent conflict between their investors’ focus on short term earnings and the broader public interest of having universally accessible and affordable fiber connections.

This book describes how the crisis is affecting Americans, the factors that brought it about and prolong it, the outlook for its resolution and a framework for the path forward: publicly owned, open access fiber infrastructure passing reaching every home as telephone service did in the mid-20th century.

The audience for this book is public policymakers, telecommunications regulators and the general public. Members of these groups acknowledge the essential nature of advanced telecommunications infrastructure as a utility. That recognition has grown more urgent over time and especially so with the 2020 coronavirus pandemic and sharply increased reliance on home connectivity and working from home.

The book is currently available here on Amazon Kindle and will soon be available though all eBook retailers.

America's haphazard, fragmented approach to telecom infrastructure modernization: Filling in "broadband" potholes

SC begins small broadband internet expansion in 23 counties | The State: More than $50 million worth of broadband expansion projects will start this month in 23 counties around the state to help close the internet service gap exposed by the COVID-19 pandemic. The shovel-ready projects are being made possible, in part, with funding from the CARES Act, federal coronavirus aid that must be spent by the end of the year. The dollars will help internet providers expand service to areas where it may take longer to turn a profit. The broadband projects are a good start, but also a drop in the bucket toward closing the state’s broadband access gap. There are 650,000 South Carolinians and 180,000 households in the state without high-speed internet access.

States have been struggling to adequately fund advanced telecommunications infrastructure needs years before the start of the current SARS-CoV-2 pandemic earlier this year. Public health measures put in place to slow the spread of the contagion have made widespread infrastructure deficits painfully apparent as Americans work and school at home.

States are now rushing to try to address the problem with very little time and money allocated by the federal government via COVID-19 relief funds (CARES Act) that must be expended by the end of 2020. It's emblematic of the nation's short term policy approach of treating the deficits like potholes needing to be filled in.

There's never enough policy and resource commitment to properly pave the roads. Motorists complain incessantly about bad roads and a bumpy ride on Al Gore's circa 1990s "information highway." Federal and state governments respond with a little money for a short term fix for some of the potholes. Drivers continue to complain and the cycle repeats year after year. It will continue until there's a policy commitment to replace the legacy copper telephone connections that reach every home, small business and school with fiber.

Hopes for patient capital investment in open access advanced telecom infrastructure may prove unfeasible

Private Investment in Community Digital Infrastructure: Gaps will continue until localities and investors find viable solutions that better align community needs with investors’ returns on their investments. The critical first step is to pivot to a digital infrastructure approach in which the long-term economic benefits to community growth and business success accrue to the network deployers, leading to a virtuous cycle that increases network revenue opportunities and returns
on investment.

The author, Michael Curri of Strategic Networks Group, correctly identifies a major reason behind advanced telecom infrastructure deficiencies that have plagued the United States for many years. Investor owned companies build infrastructure where it generates the biggest and fastest returns on investment. They lack business or regulatory incentive to do so outside of their discrete "footprints" of cherry picked neighborhoods. 

That private interest to reward shareholders does not align with the broader public interest in having the infrastructure reach all premises. Localities hoping for infrastructure gains by partnering with private providers run the risk of replicating the problem of unconnected neighborhoods since they too require rapid returns on investment and thus are inclined to prioritize only limited areas to attain the fastest return on their dollars.

The solution, Curri argues, is substituting more patient capital held by pension funds and private infrastructure capital firms that doesn't require a return in five years or less. The risk/reward tradeoff is infrastructure is there for the long run and will generate solid returns for many years. Additionally, investment in open access infrastructure will provide broader benefits for their economies and residents  -- what economists refer to as externalities -- that are of little or no interest to investor owned providers.

Curri correctly points out the presence of incumbent investor owned incumbent providers poses a challenge to the ubiquitous infrastructure needed to attain those externalities. Those incumbents have already grabbed those neighborhoods that spin off the most revenues, complicating obtaining sufficient revenues to attract patient investment capital.

The essential problem for Curri is his concept requires premises to subscribe to services, emulating the subscription-based business model of the incumbents other than it calls for open versus closed access infrastructure. Subscription revenue would be supplemented by charges to service providers to offer services over the open access infrastructure as well as mobile wireless backhaul and "specific value-added services and smart-community services."

Potential patient capital investors may well see the presence of incumbent providers who will seek to protect their private monopolies as a key risk factor that would outweigh the many positive aspects of Currie's concept. Unless in the unlikely event those incumbent providers signal a withdrawal, it may prove unfeasible.

A "free market ethos" does not apply to advanced telecom infrastructure

Online school forces America to confront the digital divide: What went wrong over the years? How did the birthplace of the internet become a nation where broadband is unavailable to large chunks of the population, keeping students from taking part fully in modern education and their parents from taking advantage of the modern economy? Big investments have been made in the internet in the U.S., but not uniformly or with an eye to expanding connectivity as far as possible. It’s not a task that private industry cares to take on, nor is it one that the public sector can solve on its own—not in a country with such a strident free-market ethos. (Emphasis added)

This is a false dichotomy. Advanced telecommunications infrastructure tends toward natural monopoly and not a robust competitive market. As much as some would like it to be, high cost barriers to entry and first mover advantage don't permit that to be the case.

Desperate for fiber connectivity amid pandemic, states grasp for constrained federal funding

The long road to expand NH broadband - NH Business Review: Federal requirements for the CARES Act — such as the requirement broadband networks are prepared to make residential connections by Dec. 15 or else not be reimbursed — were meant to expedite projects to meet immediate needs. Bordering on unrealistic, the guidelines were criticized by the Monadnock Broadband Group and others interviewed by NH Business Review for excluding efforts that were already underway or could have made planning inroads with financial assistance.  “We put an initial $50 million into the fund because it was completely unknown what the application process would yield,” said Sununu. “I think we could have done a lot more with this money, but we just didn’t have the time. That was one of the biggest drawbacks is the time constraints the federal government put on these dollars.”

States desperately need federal funding to build fiber to the premise advanced telecom infrastructure now that homes due to pandemic public health measures now serve as workplaces, classroom, medical clinics and require robust symmetric connectivity. Feeling the pain most sharply are homes lacking access to commercial fiber providers due to neighborhood redlining and monthly rates out of reach for economically stressed households.

As this article highlights, navigating the tight constraints placed available federal funding is producing frustration. CARES Act funding is designed as short term emergency funding to help state and local governments cover costs related to responding to the pandemic and not specifically purposed for longer term infrastructure projects.

Redlined in Duanesburg, NY

Rural areas in NYS are in need of broadband amid the COVID-19 pandemic | WHEC.com: Felton has lived on Creek Road there for nearly 25 years. She never thought all these years later, and all these years of technological advances later, she still wouldn’t have broadband. Amid the pandemic, she and her husband have been working from home. Her daughter has been doing her schoolwork right alongside them. Fortunately, they can afford a hot spot, but it doesn’t always work.

She said for the past six years she has been trying to get broadband to all the town. Duanesburg has a franchise agreement with Charter Communications. “Our town franchise requires them to serve areas with 20 homes per mile, this road that I live on we have about 10 homes per mile,” said Felton. “We're not in the middle of nowhere. I'm two miles from Hannaford and I still don't have a wired connection because there's not sufficient return on investment for Charter to provide it.”

For two decades, the lack of sufficient return on investment has been identified as the cause of America's advanced telecom infrastructure deficiencies. It raises a fundamental question: If universal and affordable access are goals as many public policymakers assert, why do they continue to expect investor owned companies to fill the gaps when the cash flow isn't there? It's the Einsteinian definition of insanity. In this case, pursuing the same public policy and expecting a different result.

Exurban growth has major implications for advanced telecom infrastructure policy, planning

Editorial: California fires’ cruel cycle of natural and human disaster - SFChronicle.com: While the population of California and most of the Bay Area grew little in 2019, and Los Angeles County lost residents for the second year running, according to the state Department of Finance, most of the fastest-growing cities and counties were on the metropolitan edges. San Joaquin and San Benito counties, both in the outer orbit of the Bay Area, were alone in the region in experiencing more than a percentage point of growth, much of it due to housing production. Excluding rebuilding to compensate for earlier wildfire losses, the cities that saw the greatest housing-related population growth were also on the outskirts of the Bay Area — including Lathrop in San Joaquin County and Rio Vista in Solano County — or within an extreme commute of Los Angeles. This continues a long-term trend. Six of the nation’s 25 fastest-growing cities over the past two decades were in California, according to one analysis of census data, and all were on the sprawling boundaries of cities and metropolises.

Big implications here for current advanced telecom infrastructure policy and planning. The reason is these areas on the edges of metro areas while nominally exurban have been regarded by telephone and cable companies as rural and thus suffer from spotty advanced telecom infrastructure.

The return on investment doesn't come fast enough under their business models to justify investment and current federal and state subsidy programs don't offer sufficient incentive to build. Cable companies remain in their confined franchise 1970s "footprints." Telephone companies allow decades old copper lines to rot on the poles instead of modernizing them to fiber to the premise, with only some customers served by limited range and throughput first generation ADSL over copper.

While frustrating to many exurbanites before the public health restrictions of the COVID-19 pandemic that has turned homes into workplaces, schools and medical clinics, deficient advanced telecom infrastructure has taken on a new degree of urgency in the exurbs.

Why advanced telecommunications infrastructure subsidies don’t make Internet service available to all Americans – explained in five points

1. For many decades, federal and state governments surcharged phone bills to subsidize infrastructure for voice telephone service in high cost areas. These subsidies paid to telephone companies made sense because the companies had an obligation to honor reasonable requests for service – the universal service mandate for telecommunications services under Title II of the Communications Act of 1934. But that requirement does not apply to advanced telecommunications delivered by Internet protocol because the U.S. Federal Communications Commission does not consider advanced telecommunications to be a telecommunications service but rather an optionally provided information service under Title I of the Communications Act akin to America Online and CompuServe in the early years of mass Internet access.
2. Current federal and state subsidy programs don’t directly subsidize the construction of infrastructure in high cost areas. Instead, there exists a mishmash of programs designed to deliver various arbitrary throughput levels, known as “broadband speed.” Instead of determining where to subsidize infrastructure, federal and state governments attempt to map a moving target of advertised broadband speeds in order to determine where to direct subsidies.
3. Without a universal service mandate, investor owned advanced telecommunications providers have little incentive to seek subsidies since they can instead direct capital investments to lower cost and more immediately profitable infrastructure deployments.
4. Since high cost subsidies are available to various actors including non-incumbent investor owned providers, cooperatives and state and local governments, incumbent providers often oppose the award of subsidies within their nominal service territories and “footprints.” They regard these geographical areas as proprietary and other would be providers as interlopers. 
5. The amount of available subsidy funding is too little relative to need and there is inadequate monitoring of how it's spent.