Remembering Global Crossing

I saw a notice recently that Gary Winnick died. He was the founder of Global Crossing. This is worth a way-back machine look because the Global Crossing story is the perfect metaphor for remembering the craziness of the telecom industry in the late 1990s.

Winnick founded Global Crossing in March 1997 with a $35 million equity investment from himself and the Canadian Imperial Bank of Commerce. 1997 was right after the Telecommunications Act of 1996, and there was huge money pouring into the U.S. telecom industry due to the opportunity to create Competitive Local Exchange Carriers (CLECs) that were suddenly allowed to compete for local telephone service using the networks of the largest telephone companies.

Winnick’s original vision was to build the first privately financed undersea fiber network connecting North America, Latin America, Europe, and Asia.

Winnick and the other executives were highly successful in raising money and raised $800 million in debt by June 1998. Global Crossing went public in August 1998, raising an instant $399 million from the IPO. Like many other telecom stocks at the time, the stock price saw a meteoric rise, and by the end of 1999, the company’s stock had grown to an amazing market capitalization of $47 billion.

The sudden success of the stock changed the direction of the company, and Global Crossing went on an acquisition tear based on its increased stock price. In May 1999, GlobalCrossing made the news when the 2-year-old company made an offer to buy US West but was outbid by Qwest. In July 1999 the company paid $885 million for the undersea maintenance business operated by Cable & Wireless. At the end of 1999, the company entered the telephone market by buying Frontier Communications for $9.9 billion and renamed it as Global Crossings North America. It also paid $1.3 billion for SB Submarine Cable and $1.65 billion for Racal Telecom.

Within a relatively short time, the company had trouble meeting monthly debt payments and sold Frontier Communications for $3.65 billion in the summer of 2001. Global Crossing never made a profit. In the fourth quarter of 2001, the company had losses of $3.4 billion on revenues of $792 million. In January 2002, Global Crossing filed for bankruptcy. This is the fourth biggest bankruptcy in history and was huge financial news at the time. But the Global Crossing story was not extraordinary in the telecom sector as the entire CLEC industry was also imploding.

There was instantly a raft of lawsuits accusing the management team of accounting fraud and of not disclosing the real financial position. Between 1998 and 2001, Winnick sold $420 million of company stock while other executives sold $900 million, much of it after internal company reports of impending financial problems. While there were some large settlements by the company, the executive team got off with relatively minor contributions to lawsuit settlements.

Global Crossing emerged from bankruptcy at the end of 2003. The company made a few more acquisitions and eventually sold to Level 3 Communications for $3 billion in 2011. It’s ironic that the remnants of the upstart that tried to buy US West ended up being absorbed by CenturyLink, the US West successor when it merged with Level 3.

Global Crossing came literally out of nowhere after the passage of the Telecom Act and leveraged a relatively small equity investment into many billions of market value. Global Crossing and other new telecom companies were able to go public and see big stock price gains without ever getting close to making a profit. But the bubble didn’t last long, and the CLEC crash was part of the overall dot.com crash, where investors lost huge amounts of money when the two sectors collapsed.

For those working in the industry, the crazy stock valuations at the time made no sense. I can remember half a dozen startup CLECs who raised money, each promising to win a 30% market share of the Atlanta telecom market. Money was thrown at the fledgling industry, including a huge amount of funding provided by telecom vendors.

The Global Crossing story is worth remembering because it demonstrates the excesses that can come quickly when outside capital floods into an industry. I am seeing some of this same craze today, with dozens of venture groups pouring money into the broadband sector. However, it’s not as nearly as superheated today as the late 1990s, but I still have to wonder where these investors expect to find high returns. But we will probably never see another telecom company that will burst onto the scene and then implode as dramatically as Global Crossing.

Big ISPs Hate the FCC’s Digital Discrimination Rules

The big ISPs certainly have their knickers in a knot over the adoption of digital discrimination rules by the FCC. The FCC was required to adopt some version of digital discrimination rules by language included in the Infrastructure Investment and Jobs Act. The IIJA Act says that the FCC needs to prevent discrimination based on income level, race, ethnicity, color, religion, or national origin.

The big controversy that has stirred the big ISPs is the definition of discrimination. The ISPs wanted discrimination to be defined as intentional discrimination where an ISP purposefully decides not to serve somebody. The trouble with that definition is that it would likely require a whistleblower with documentation from inside an ISP to prove intent. The FCC adopted intentional discrimination but also adopted what it calls disparate market impacts, which means the agency can consider discrimination that is obvious in the market without having to prove an ISP’s intent.

The ISPs have been screaming loudly against the FCC decision. Perhaps one of the best summaries of the ISP’s outrage comes from a recent editorial in the Wall Street Journal. I don’t provide links to articles behind paywalls, but a Wall Street Journal editorial warns that the new rules will weaken the Internet by giving the FCC the power to micromanage the industry. They roll out examples of how the FCC might abuse its new power.

“Marketing materials that feature too many white people could be ruled discriminatory. Companies could be forced to scrap credit checks that cause more minorities to be rejected for smartphone leasing plans. Providers could even be punished for charging the same prices to all customers since their rates might have a disparate financial impact on minorities. The FCC could likewise prohibit low-cost wireless plans that include data caps because these are selected more often by people with lower incomes. . . Wireless carriers might also be prohibited from building out 5G networks in suburbs and city downtowns before inner cities and rural areas.”

I have always enjoyed a good lobbying rant, and the above is a classic. We saw a lot of the same kind of overblown rhetoric from both sides during the process leading up to the net neutrality decision a few years ago.

It’s obvious that the Wall Street Journal has fully adopted the arguments being made by the giant ISPs. The reality is that big ISPs don’t want any regulatory rules or oversight. It’s laughable to think the FCC would be upset that an ISP charges everybody the same rates. That’s the very definition of non-discrimination. Discrimination is more likely going to be claimed due to practices like the study last year that uncovered that Charter was offering the highest prices in the poorest neighborhoods of Los Angeles.

The big ISPs are particularly distraught over the idea of the FCC monitoring digital discrimination since it is coupled with a likely vote to reintroduce Title II regulation of broadband. They are worried that the combination of the two sets of regulations will mean they won’t be free to do anything they like in the market. The unspoken worry that the big ISPs don’t want to talk about is the fear that regulators will put pressure on them to stop big annual rate increases. It’s hard to fathom the FCC ever deciding to directly regulate broadband rates, but it’s not hard to picture them putting public pressure on ISPs to keep rates affordable.

The Wall Street Journal is using the rhetorical trick of pointing out the most extreme ways that the new regulations could be used. But it’s rare for regulators to go to the extremes. The new regulations do not mean that the FCC is going to come down on the big ISPs with a hammer. The FCC didn’t do that the last time when Title II was the regulatory framework. But it does mean that the FCC is likely to call out some of the most obvious abuses by the big ISPs and possibly force them to cease the worst practices.

That’s what regulation is supposed to do. A handful of large ISPs have near-monopoly power in the broadband market, and the job of regulators is to balance that power by making sure that the general public still gets a fair shake. You’ll not hear the big ISPs talking about that.

My Predictions for 2024

BEAD Predictions. It’s clear that most state broadband offices are going to try to award all of the BEAD grants in 2024. There will be barely any BEAD construction completed in 2024, but there will be big hoopla over the handful of customers that get connected before the end of the year.

A lot of pundits have been predicting that a large majority of the funding will go to the largest ISPs to build fiber. But after reading the grant rules in numerous states, I’m not so sure. In some states, the big companies will win it all. States that emphasize the cost of the grant per passing might end up giving all of the money to WISPs. A few state rules are so obtuse that even the big ISPs might decide to take their money to a neighboring state.

RDOF Troubles. I’ve talked with a lot of local governments that haven’t heard a peep from RDOF winners. Most winners will be required to have completed 40% of the RDOF construction by the end of 2024, so this is the year that will flush out ISPs that are going to default. Defaults will probably be too late to attract any BEAD funding.

Wireless Technology Improvements Shake up the Market. 6 GHz radios will change the WISP landscape. New radios that include the giant 6 GHz channels will deliver much faster speeds. More WISPs will begin advertising gigabit speeds in 2024, but most will not deliver what they advertise – but speeds will still be fast.

Big cellular companies will use C-Band spectrum to boost speeds on FWA broadband. But a lot of rural counties that are hoping to get faster speeds will not see the new technology deployed in 2024.

The Beginning of Consolidation. We’re going to see some interesting acquisitions in 2024. I don’t know who, but some of them will be big names. There is a huge amount of venture capital suddenly interested in broadband, and as it becomes clear that these companies will not win as much BEAD grants as they hoped, they’ll turn their attention to acquisitions.

Cable Companies Will Lose Broadband Customers. The large cable companies collectively gained only 4,700 customers in the third quarter of this year, and the only one that grew was Charter. In 2024, customer losses will increase each quarter, and the cable industry is going to panic. Cable company board rooms are at a loss on how to stem the losses. They are now banking that the public will be happy with faster upload speeds with mid-split upgrades, but that isn’t going to impress customers who are offered a fiber alternative or a much cheaper FWA alternative.

Little Impact from FCC Broadband Regulation. If you listen to the rhetoric from the big ISPs, the double whammy of Title II regulation and the new digital discrimination rules will devastate ISPs and kill innovation and new investments. The reality is that there will barely be a peep from regulators concerning the new regulations in 2024. Some minor investigations will be undertaken, but the new regulation will have almost no impact on the market or investments.

Congress Will Let ACP Lapse. There seems to be a big consensus in Congress that the ACP program should continue., But I can’t picture the currently dysfunctional Congress approving new funding for the subsidy program before ACP runs dry. I think ACP will get renewed later in 2024, but only after first lapsing, which will create chaos for ISPs and customers. When ACP is renewed, the number of eligible households will be greatly pared down.

The FCC Will Launch the 5G Fund. This is intended to bring more rural cell towers. The industry says that $9 billion is not nearly enough to reach all of the places that need better cellular coverage, so counties and states will lobby fiercely to get included in the funding.

Big ISPs Will Continue to Buy Back Stocks Rather than Invest in Networks or Maintenance. This may be the least bold prediction I have ever made.

In-kind Contributions for BEAD Grants

The process of winning BEAD grants is expensive, and grant applicants should do everything possible to lower out-of-pocket costs for winning the grant. Of the most interesting ways to lower the cost of accepting a grant is through the use of in-kind matches. In-kind contributions recognize non-cash benefits of property, goods, or services that will benefit a BEAD project. In-kind matches can be used as part of the process of calculating the matching funds being provided by a BEAD grant applicant, and many other grant programs also allow for in-kind matches.

To use a simple example, if a grant applicant must provide a 25% grant match, then any approved in-kind matches can be used to satisfy a portion of that match requirement. If a grant applicant can justify 5% of the cost of the project as in-kind contributions, then the cash matching in this example would be reduced to 20%.

The BEAD grant process explicitly allows for in-kind matches. The use of in-kind matches for any federal program is described in federal regulation § 200.306 – Cost Sharing or Matching. I must warn you that the federal rules for in-kind matches are confusing, even for accountants.

In-kind matches can be contributed by the grant applicant or by a third party like the local government. The Frequently Asked Questions for BEAD provides a list of examples of costs that might be considered as an in-kind match:

  • Employee or volunteer services
  • Equipment
  • Supplies
  • Indirect costs (this one has me scratching my head)
  • Computer hardware and software
  • Use of facilities
  • Access to rights-of-way
  • Pole attachments
  • Conduits
  • Easements
  • Access to other types of infrastructure

How might an in-kind match work? Here are a few examples.

  • There might already be empty conduits in the BEAD grant area that can be used by the BEAD grant winner to save money on construction. If the BEAD grant winner or some other owner of the conduit, like a local government, doesn’t charge for the use of the conduit, a value can be calculated for the benefit from the conduit and used as an in-kind match.
  • A grant applicant might have already obtained rights-of-ways inside the BEAD grant area. Or perhaps a local government is willing to provide the rights-of-ways for free to encourage the construction of fiber. Some of that past or current value of contributed rights-of-way can be recognized as an in-kind contribution.
  • A grant applicant might have made a significant investment in mapping or engineering software in the past. If it can use that software for the BEAD process without a new large charge, then some portion of the value of the software might be considered as an in-kind contribution.
  • A local government might provide free permitting, location services, or traffic control as a way to encourage the construction of a fiber network. The imputed value of those services at market rates can be an in-kind contribution.
  • An ISP might have multiple reels of fiber already in inventory. The cost of that fiber can be used as an in-kind contribution as long as it is not also billed as material for the construction process.

I must note that these examples are all subject to being approved by the State Broadband Office that will be administering a given BEAD grant. No in-kind contribution is automatic, and the normal process is to negotiate the use and the value of each in-kind contribution with the party awarding the grant. But since it looks like State Broadband Offices are going to be rushing the grant application process, it’s worth claiming as many legitimate in-kind matches as possible to help with the initial grant scoring.

Calculating in-kind contributions is worth pursuing because almost every BEAD grant project will benefit from some existing assets or services that can be classified as in-kind contributions. Every dollar recognized as an in-kind contribution reduces the cash contribution needed for the grant matching.

I’ve also note that there are a number of states that are giving extra grant scoring points for applicants who have local contributions towards a BEAd project. Many local governments will be unable to make cash contributions towards BEAD projects, but it’s well worth talking to them now about contributing in-kind matches.

Traditional Cable Continues to Plummet

Leichtman Research Group recently released the cable customer counts for the largest providers of traditional cable service in the third quarter of 2023. LRG compiles most of these numbers from the statistics provided to stockholders, except for Cox and Mediacom – they now combine an estimate for both companies. Leichtman says this group of companies represents 96% of all traditional U.S. cable customers.

The traditional cable providers continue to lose customers at a torrid pace, losing almost 1.8 million customers in the second quarter, even faster than the second quarter. Overall, the traditional cable providers lost over 19,700 customers every day during the quarter. The overall penetration of traditional cable TV is now around 43% of all households, down from 73% at the end of 2017.

3Q 2022 Change Change
Comcast 14,495,000 (490,000) -3.3%
Charter 14,379,000 (327,000) -2.2%
DirecTV 11,850,000 (500,000) -4.0%
Dish Network 6,720,000 (181,000) -2.6%
Cox & Mediacom 3,340,000 (100,000) -3.0%
Verizon 3,076,000 (79,000) -2.5%
Altice 2,326,500 (79,400) -3.3%
Breezeline 288,881 (8,071) -2.7%
Frontier 248,000 (19,000) -7.1%
Cable ONE 148,900 (9,200) -5.8%
   Total 56,772,281 (1,792,671) -3.1%
YouTube 6,500,000 600,000 10.2%
Hulu Live 4,600,000 300,000 7.0%
Sling TV 2,120,000 117,000 5.8%
FuboTV 1,477,000 310,000 26.6%
Total Cable Company 34,729,381 (1,013,671) -2.8%
Total Telco / Satellite 21,894,000 (799,000) -3.4%
Total vMvPD 13,370,000 1,327,000 9.9%

Losses were big across the board for both cable companies, satellite companies, and telcos.

In the third quarter, the alternative programming options like YouTube and Hulu Live picked up a lot of the customers that were lost by traditional cable providers.

Broadband Subscribers 3Q 2023

Leichtman Research Group recently released broadband customer statistics for the end of the third quarter of 2023 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than for Cox and Mediacom, which are estimated and now reported together. Leichtman says this group of companies represents 96% of all US landline broadband customers.

The first quarter of the year shows a continuation of the trend where all of the growth in broadband is coming from T-Mobile and Verizon FWA fixed cellular wireless. Those two companies added 941,000 customers, while the rest of the ISPs collectively added only 8,000 customers.

3Q 2023

2Q 2023

Change

Change
Comcast

32,287,000

32,305,000

-18,000

-0.10%
Charter

30,649,000

30,586,000

63,000

0.20%
AT&T

15,296,000

15,304,000

-8,000

-0.10%
Verizon

7,612,000

7,562,000

50,000

0.70%
Cox & Mediacom

7,035,000

7,035,000

0

0.00%
Altice

4,545,400

4,576,100

-30,700

-0.70%
T-Mobile FWA

4,235,000

3,678,000

557,000

15.10%
Frontier

2,881,000

2,865,000

16,000

0.60%
Lumen

2,836,000

2,909,000

-73,000

-2.50%
Verizon FWA

2,679,000

2,295,000

384,000

16.70%
Windstream

1,175,000

1,175,000

0

0.00%
Cable ONE

1,057,400

1,057,900

-500

0.00%
Breezeline

671,762

680,785

-9,023

-1.30%
TDS

532,600

523,600

9,000

1.70%
Consolidated

386,221

376,829

9,392

2.50%
Total

113,878,383

112,929,214

949,169

0.80%
Cable

76,245,562

76,240,785

4,777

0.00%
Telco

30,718,821

30,715,429

3,392

0.00%
FWA

6,914,000

5,973,000

941,000

15.80%

In the telco sector, the big loser was Lumen, which lost 2.5% of its broadband customers in the quarter. AT&T had a tiny loss, and all other telcos saw growth. Leichtman is not yet separately tracking AT&T’s FWA customers, but AT&T reported recently that it is adding 2,000 FWA customers per week. I assume those are included in the AT&T totals. During this quarter, Frontier grew to have more broadband customers than Lumen – a big turnaround after Frontier lost customers for years.

For the second quarter in a row, the only cable company with positive growth was Charter – its strategy of expanding its footprint into rural areas is clearly covering for losses elsewhere.

FWA cellular companies added more customers than the previous quarter and experienced an enormous 15.8% growth for the quarter. If similar growth happens in the fourth quarter, T-Mobile will pass Altice in size, and Verizon will pass both Frontier and Lumen.

Canada Unbundles Fiber Networks

In an interesting move, the CRTC (Canadian Radio-television and Telecommunications Commission) is forcing large telephone company fiber networks to open their fiber networks to competition. The press release from the CRTC says that change is being made to increase choice and affordability for high-speed Internet service.

The proceeding that led to this decision began in March as the CRTC investigated if it makes sense to allow smaller ISPs to use the big company networks on an interim basis. This was a major proceeding at the CRTC, with over 300 parties filing comments.

The change was prompted by a significant decline in competition across the country. In Ontario and Quebec, ISPs other than the telephone companies lost 47% of their customers over the last two years. That decline is not due entirely to customers changing to the big telco fiber networks but also comes as the big companies have been buying smaller competitors. The big concern of the CRTC is that this drop means that customers are quickly losing choice when looking for an ISP and that the big telcos are increasingly gaining monopoly power.

The big telephone companies have built most of the fiber in the country and provide fiber technology to 60% of Canadian homes and businesses. Other fiber providers cover only 5% of the households and businesses in the country.

The big telcos have been given six months to implement the order and to allow competitors to gain access to their networks. The order creates what we refer to in the U.S. as open-access networks. The big telcos will have to figure out how to allow access to competitors and how to bill for the new services.

This is an extraordinary ruling in that it forces networks that the telcos have privately funded to be opened to competition. The big telcos have all said that they will probably not build new fiber after this ruling, and they probably shouldn’t.

The U.S. tried this with the Telecommunications Act of 1996, which forced the big telcos here to unbundle their copper networks and allow competitors to buy copper loops. But that decision was different because the copper networks were already old and largely depreciated. The telephone companies had already recovered the cost of the copper networks several times over.

Even so, Congress completely missed the boat with the 1996 Act. The purpose of the Act was to promote telephone competition. As the Act was being drafted in 1995, there was not much of a broadband industry other than T1s on copper and a few folks using dial-up to reach the brand-new Internet. Little did Congress realize that soon after the Act was passed the broadband industry would explode due to AOL finding a way to make dial-up usable for the average person. This was quickly followed by the introduction of DSL on copper and early cable modems that created the broadband industry we know today. The Act would have been written very differently had Congress understood it was standing on the threshold of broadband.

The Canadian decision really bothers me. Canada is forcing the telcos that have invested billions to build new fiber networks to share them with the competition. There is no way that the telcos could have planned for this, and this has to destroy their business plans.

I’m a big fan of open-access when somebody builds a network to intentionally be open. But forcing this on existing networks feels like confiscation. The telcos have done the right thing and invested in fiber and are being punished for doing too well. It’s hard to think that this won’t slow or stop anybody else from building fiber, which is bad news for the 40% of Canadians who don’t have it. I’ll be the first to admit that I don’t understand the nuances of the Canadian broadband market, but I’ve read summaries of all of the comments in this proceeding, and I have a hard time seeing the justification for the decision.

The Definition of Upload Speed

The FCC is in the process of increasing the definition of broadband from today’s paltry 25/3 Mbps to 100/20 Mbps. This blog looks at the FCC’s decision to consider 20 Mbps as the definition of upload.

We know where the 20 Mbps number comes from. Early discussions of the BEAD grant rules considered that grant-eligible areas would be anywhere that customers don’t have the option to purchase broadband with speeds of at least 100/100 Mbps. But cable companies and the wireless industry went ballistic, and there was furious lobbying to lower the BEAD coverage definition to 100/20 Mbps. The reason for this was obvious since both technologies at the time could meet the 100 Mbps download speed but could not meet a 100 Mbps upload speed requirement.

This means that the 20 Mbps definition is a political compromise that has nothing to do with the broadband speeds that households and businesses need. Interestingly, technology in those two industries is changing quickly, and cable companies and WISPs are on the verge of being able to meet 100 Mbps uploads if they upgrade to the latest technology.

Several of the big cable companies are currently implementing mid-split technology upgrades that I’ve seen reported as delivering from 100 Mbps to 300 Mbps upload speeds depending upon the local conditions in a cable company network. The big cable companies have all said that they intend to implement DOCSIS 4.0 upgrades that will enable gigabit upload speeds. But cable companies will likely continue to fight to keep the 20 Mbps definition because they will not want to upgrade their networks in smaller and non-competitive markets.

We’re also on the verge of big changes in fixed wireless technology. As WISPs implement the newest radios, and particularly when they integrate 6 GHz spectrum, the networks will be able to deliver much faster speeds. Wireless network technology is interesting in that the ISP can determine the amount of upload and download speed to offer – and as overall speeds get faster, WISPs will be able to deliver 100 Mbps speeds if they elect to do so.

We’re also seeing speed increases from FWA cellular wireless. Verizon recently reported the ability to deliver much faster speeds with the introduction of C-Band spectrum into towers. If they choose, Verizon and the other carriers using C-Band could also meet a 100 Mbps upload speed.

The FCC should consider a faster definition of broadband just because of the changes in technology. There is no reason to set a low definition of 20 Mbps upload that only rewards ISPs that want to stick with older technology. To do so is reminiscent of past FCC decisions that protected DSL long after it was obsolete.

What I find puzzling is that in the NOI, the FCC argued for a faster definition of upload speeds. They mention a study by the Consortium School Network (CoSN) that says that a single student working at home should have a 12 Mbps connection and a 20 Mbps connection is not sufficient to allow multiple students to work from home. The FCC also acknowledges that there are a lot of uses of broadband today that need faster connections. For example, the NOI cites that a 25 Mbps connection is needed for 4K video conferencing, telehealth, and remote learning. The FCC cites that graphics-intensive work can require a 45 Mbps connection. And they acknowledge what millions of gamers will tell you, which is that a 20 Mbps connection is far from adequate. Keeping a 20 Mbps definition of broadband is a regulatory decision that says that these faster uses of broadband are not important or needed.

We also can’t forget that the definition of broadband is not just for households. Cable company networks that offer 20 Mbps upload to businesses are massively inadequate. Businesses have migrated a lot of functions to the cloud, and I could list fifty ways that businesses want to use upload broadband – and many can’t due to slow technologies.

You might think that the definition of broadband is not important – but it says that any ISP connection slower than the definition is not really broadband. If the FCC considers a faster upload speed it will provide an incentive for ISPs to upgrade technology to meet a faster definition – since customers will demand speeds that are considered to be broadband.

Unfortunately, the FCC will likely adopt the 20 Mbps definition, and millions of homes, and particularly businesses, will continue to suffer with inadequate upload speeds for the next five years until the FCC looks again at the definition of broadband. This is a chance for the FCC to implement a policy change that will have real market implications. But the FCC probably doesn’t want to face the ISP lobbying effort to keep an inadequate definition of broadband – even as ISPs are already making upgrades that can meet a faster definition.

Fifty States – Fifty Different BEAD Grants

When the NTIA suggested BEAD grant rules, a lot of industry folks assumed that states would largely follow the NTIA suggestions and that there would be a lot of similarity in the BEAD grant rules between states. It turns out that the opposite is happening, and many State Broadband Offices are taking unique approaches. In this blog, I compare the BEAD grant rules for Georgia and Illinois. I picked these states only because these are the two most recent rules I’ve read – but every other state plan I’ve read is also different than these two. It looks like fifty states means fifty different BEAD grant programs. Following is a high-level comparison of the two states:

Overall Approach. Georgia will only accept grants in the first round that offer to build fiber – other technologies will only be considered in a subsequent grant round if there isn’t enough money or grant requests for bringing fiber. The Georgia rules also strongly reward ISPs who propose to build an entire county.

Illinois has at least a two-step grant program. The first grant round will only accept proposals to build high-cost areas (that are designated as such by the state). The second round is for everything else. This is an odd approach since ISPs will fear winning high-cost areas but then not winning the nearby areas that together would constitute a coherent study area.

Most Important Scoring Metrics. Georgia gives 50 out of 100 points based on the amount of grant requested per location. Since everybody will be proposing fiber, the costs should be similar, so an applicant can grab the most grant points by offering the greatest percentage of matching funds. An ISP willing to contribute 40% of the cost of building will likely beat somebody who wants to contribute the minimum 25% matching. But this like RDOF, and an ISP is only competing against those that bid for the same County.

Illinois will award 25 of 100 points based strictly on the amount of matching offered. An ISP offering less than a 30% match will win 0 points. An ISP must cover 60% of the cost of the project to get the full 25 points. Illinois awards another 25 points for the cost of the grant award per passing compared to a not-yet-published suggested reference cost per location calculated by the state. By definition, this approach strongly favors lower-cost technologies like wireless.

Broadband Rates. Georgia will award 15 points to an ISP that promises that symmetrical gigabit prices will always be lower than the rates for the service in Metropolitan areas of Georgia.

Illinois will award 20 points for ISPs to meet specific price targets (5 points for each): $30 for 100/20 Mbps. $50 for 100/100 Mbps. $80 for 500/1000 Mbps. $100 for symmetrical gigabit.

Local Support. Georgia will award up to 9 points based on the volume and strength of the support from local communities.

Illinois will award 4 points for breadth and depth of local support and another 4 points if local community members or organizations make a verified financial commitment to the grant.

Other Grant Points

 Georgia:

  • 10 points for compliance with fair labor laws
  • 8 points for broadband speeds
  • 5 points for speed of network construction and deployment
  • 2 points for having been an ISP in Georgia for at least three years
  • 1 point for having a headquarters in Georgia

Illinois

  • 5 points for compliance with fair labor laws
  • 6 points for broadband speeds
  • 6 points for offering open-access
  • 3 points for speed of network construction and deployment
  • 2 points for working in a community that has participated in the Accelerate Illinois program.

My Summary. If I didn’t know these are both BEAD grants, I would never guess these are from the same funding source. The scoring emphasizes drastically different priorities.

Georgia. It will be interesting to see if the NTIA will allow the state to shut out other technologies. The scoring benefit from bidding for entire counties might violate the Congressional edict that grants can be as small as a single location. The emphasis on whole-county bids will make it hard for ISPs that want to edge out from existing networks or electric coops that only want to build in their own territory.

Illinois. The scoring benefit for meeting specific prices for specific products seems to violate Congressional intent that specified that BEAD should not set or influence rates. The huge amount of matching required to get grant points seems to not recognize that BEAD areas are extremely rural, by definition. I’ve never seen a rural fiber business plan that can tolerate 40% to 60% equity contributions – that’s why nobody has built these areas. The grant points from comparing actual costs to some target cost set by the state means these grants are going to heavily favor lower-cost wireless technology. The points for open-access are a head-scratcher since it’s almost impossible to successfully operate a rural open-access network unless it can serve 20,000 or more customers.

Bottom line: Georgia obviously favors fiber to the exclusion of other technologies. My best guess is that the big scoring related grant dollars per passing will favor big ISPs over small ones. For Illinois, I’m not sure if it’s intentional, but WISPs are going to score far better than anybody proposing to build fiber. Georgia could get border-to-border fiber while Illinois could get border-to-border wireless.

Again, these two plans were not chosen because they are extreme examples. These two plan just demonstrate the wide variance of state philosophies behind BEAD. I must note that these are proposed plans that might get changed before being sent to the NTIA. It will be interesting to see how pressure from ISPs and the public influence the final rules. The NTIA also will have to approve these plans.

I also have to wonder if State political leaders understand the direction that their State Broadband Offices are taking – because the grant scoring rules are going to largely define who has a chance of winning in each state – both the technology that is favored and the size of ISPs that are likely to win.

Upgrades for FWA Cellular Wireless

In the recent third quarter earnings call, Verizon CEO Hans Vestberg expressed strong support and belief in the future of the company’s FWA wireless broadband product. This product provides home and business broadband that uses the same cellular spectrum used today to provide bandwidth for cellphones.

There is good reason for the company to be optimistic about the broadband product. In only a few short years the company has added almost 2.7 million FWA customers, and most of its broadband customer growth in the third quarter of this year came from FWA. As noted by Vestberg, rapid growth has continued even after the company increased the price of the product by $10 per month.

As I have addressed in several blogs, there are some limitations on the current FWA product. The biggest downside is that the fast speeds advertised for FWA by Verizon and T-Mobile are only available for customers that live within a mile or so of a cell tower. Speeds seem to cut in half in the second mile from a tower and drop significantly by the third mile.

Another drawback is that both Verizon and T-Mobile throttle the bandwidth for FWA any time that cellphone usage gets heavy. In scouring through multiple speed tests, we have found customers who vary between fast and extremely slow speeds – which might be evidence of this throttling.

But Vestberg mentioned a big technology boost that will be coming to the Verizon FWA product. Verizon purchased a lot of C-Band spectrum in an FCC auction in 2021. This is spectrum that sits between 3.7 GHz and 3.98 GHz. The licensed spectrum provides Verizon with anywhere from 140 MHz to 200 MHz of cellular bandwidth in markets across the country.

Vestberg says the company is starting to upgrade busy urban towers with the extra C-Band spectrum. He implied that the upgrades will be coming to other urban towers and some suburban towers in 2024.

He said the C-Band spectrum will double or triple the cellular bandwidth depth in most markets. He said that using the new spectrum for FWA could result in speeds as fast as 900 Mbps to 2.4 Gbps. Like all speed claims made by ISPs, those speeds are likely faster than anybody will see in real life and probably represent theoretical maximums. However, FWA users can expect a big boost in speeds, particularly those living near towers.

I have to assume that Verizon has already built C-Band capabilities into its home FWA receivers, so speed upgrades ought to be realized immediately after an upgrade. A lot of the newest cell phones also already include C-Band capabilities. Verizon seems to have the most aggressive plan for C-Band, but AT&T has started to deploy the spectrum in a few markets. T-Mobile owns C-Band spectrum, but still seems to be hanging on the sidelines for upgrades.

Significant speed increases to FWA can make the product into a potent competitor to cable companies, at least for customers within a close distance of a cellular tower. The FWA prices are far lower than the prices charged by the big cable companies for broadband, and fast speeds can make this a viable alternative.

The first generation of FWA has delivered speeds in the 100-300 Mbps range. That has been fast enough to attract millions of customers. But the first generation product has felt more like a big upgrade to DSL rather than a direct threat to cable companies. But if the current speeds are really doubled or tripled, many households are going to be attracted by the lower prices on FWA. It’s an interesting product to market since the attractiveness for customers is in a direct relationship to the strength of the cellular signal that reaches their home –  an extremely local situation.