Breakthroughs in Laser Research

Since the fiber industry relies on laser technology, I periodically look to see the latest breakthroughs and news in the field of laser research.

Beaming Lasers Through Tubes. Luc Thévenaz and a team from the Fiber Optics Group at the École Polytechnique Fédérale de Lausanne in Switzerland have developed a technology that amplifies light through hollow-tube fiber cables.

Today’s fiber has a core of solid glass. As light moves through the glass, the light signal naturally loses intensity due to impurities in the glass, losses at splice points, and light that bounces astray. Eventually, the light signal must be amplified and renewed if the signal is to be beamed for great distances.

Thévenaz and his team reasoned that the light signal would travel further if it could pass through a medium with less resistance than glass. They created hollow fiber glass tubes with the center filled with air. They found that there was less attenuation and resistance as the light traveled through the air tube and that they could beam signals for a much greater distance before needing to amplify the signal. However, at normal air pressure, they found that it was challenging to intercept and amplify the light signal.

They finally struck on the idea of adding pressure to the air in the tube. They found that as air is compressed in the tiny tubes that the air molecules form into regularly spaced clusters, and the compressed air acts to strengthen the light signal, similar to the manner that sound waves propagate through the air. The results were astounding, and they found that they could amplify the light signal as much as 100,000 times. Best of all, this can be done at room temperatures. It works for all frequencies of light from infrared to ultraviolet and it seems to work with any gas.

The implications for the breakthrough is that light signals will be able to be sent for great distances without amplification. The challenge will be to find ways to pressurize the fiber cable (something that we used to do fifty years ago with air-filled copper cable). The original paper is available for purchase in nature photonics.

Bending the Laws of Refraction. Ayman Abouraddy, a professor in the College of Optics and Photonics at the University of Central Florida, along with a team has developed a new kind of laser that doesn’t obey the understood principles of how light refracts and travels through different substances.

Light normally slows down when it travels through denser materials. This is something we all instinctively understand, and it can be seen by putting a spoon into a glass of water. To the eye, it looks like the spoon bends at that point where the water and air meet. This phenomenon is described by Snell’s Law, and if you took physics you probably recall calculating the angles of incidence and refraction predicted by the law.

The new lasers don’t follow Snell’s law. Light is arranged into what the researchers call spacetime wave packets. The packets can be arranged in such a way that they don’t slow down or speed up as they pass through materials of different density. That means that the light signals taking different paths can be timed to arrive at the destination at the same time.

The scientists created the light packets using a device known as a spatial  light modulator which arranges the energy of a pulse of light in a way that the normal properties if space and time are no longer separate. I’m sure like me that you have no idea what that means.

This creates a mind-boggling result in that light can pass through different mediums and yet act as if there is no resistance. The packets still follow another age-old rule in Fermat’s Principle that says that light always travels to take the shortest path. The findings are lading scientists to look at light in a new way and develop new concepts for the best way to transmit light beams. The scientists say this feels as if the old restrictions of physics have been lifted and has given them a host of new avenues of light and laser research.

 The research was funded by the U.S. Office of Naval Research. One of the most immediate uses of the technology would be the ability to communicate simultaneously from planes or satellites with submarines in different locations.  The research paper is also available from nature photonics.

 

The Need for Fiber Technicians

I foresee a coming shortage of trained technicians to work with fiber optics networks. This shortfall has come about for a few reasons. One reason is due to the labor practices of some of the biggest owners of fiber networks like AT&T, Verizon, CenturyLink, and Frontier. All of the big telcos have been downsizing technical staff for various reasons. Much of it has to do with the phasing out of traditional copper networks. The technical staff of the telcos have been systematically downsized for well over a decade, and in doing so these companies have not been hiring many new technicians, but rather training existing copper technicians to become fiber technicians. This has an impact on the whole industry since in the past, many of the trained technicians working throughout the industry began their careers at the big telcos. That funnel of newly trained technicians has dried up compared to the past.

The other reason for a shortage of trained telecom technicians is the recent explosion of new fiber construction. Companies everywhere are building fiber networks. The big carriers have been investing heavily in fiber. For example, over the past four years, AT&T built fiber to pass over 12 million homes and businesses. Verizon has been building fiber across the country to provide fiber to its cellular towers – including small cell sites that are scattered throughout most urban areas. Verizon says it also plans to pass 30 million homes with what is essentially fiber-to-the-curb technology using wireless loops.

There is also a huge amount of fiber being built by smaller companies. The FCC’s ACAM program from the Universal Service Fund spurred the construction of rural fiber in areas served by small telephone companies and cooperatives. Electric cooperatives have joined the fray in many rural markets. Various independent fiber overbuilders have been building fiber in small towns and in a few urban markets of the country.

The FCC is helping to fuel the demand for fiber construction. For example, they will soon be awarding the two biggest telecom grant programs ever. In October the FCC will hold a reverse auction to award $16.4 billion to construct rural broadband networks over the next six years. Another $4 billion will be awarded from that program next year. The FCC will also be awarding $9 billion for the 5G Fund, and much of that money will be used to build fiber networks to beef up rural cellular coverage. Meanwhile, a majority of states now have broadband grant programs, and the level of funding to these programs is increasing due to the recognition during the pandemic that millions of students don’t have access to broadband at their homes.

All of this fiber construction has already resulted in a recent shortage in trained fiber technicians needed for fiber construction. Almost all of the ISPs I’m working with are seeing increased bids for the labor cost of fiber construction. It’s becoming clear that the demand for trained construction crews is outpacing the number of available construction crews nationwide. Already in 2020, we don’t have enough trained fiber technicians to meet the demand for fiber construction – and this is going to get worse.

But construction is only half the story. We also need fiber technicians to maintain and operate fiber networks after they are constructed. Operational fiber networks require fiber technicians in trucks as well as electronics technicians to connect customers to fiber, respond to trouble calls, and maintain the network. All of the billions being poured into building fiber networks will require an army of new technicians to maintain and service the new networks.

The US is not equipped to easily double the number of fiber technicians over the next decade – but we’re going to have to find a way to do that. There are some formal training programs for fiber technicians, mostly being done by trade schools or technical colleges that sponsor apprenticeship programs for technicians for the CFOT or CPCT certification process. But the majority of fiber technicians are trained on the job by starting as hands-on journeymen.

The bottom line is that this is a growing field for people looking for a career. The high demand for technicians is going to drive up salaries, particularly for well-trained technicians. Unfortunately, this kind of shortage also means that the cost of building fiber is going to increase due to the excess of demand over supply for qualified technicians.

Apple Buys into 5G

Apple is coming out with a full range of new 5G iPhones. The phones have been designed to use the full range of new frequencies that the various cellular companies are touting as 5G, up to and including the millimeter wave spectrum offered in center cities by Verizon. In addition to 5G, the phones have new features like a better camera, better ease at using wireless charging, and a lidar scanner. The last change is the most revolutionary since lidar allows apps on the phone to better see and react to the surrounding environment.

But Apple is going all-in on the 5G concept. It’s a natural thing to do since cellular carriers have been talking non-stop about 5G for the last few years. However, by heavily advertising the new phones as 5G capable, Apple is possibly setting themselves up to be the brunt of consumer dissatisfaction when the public realizes that what’s being sold as 5G is just a repackaged version of 4G. The new features from an upgrade in cellular specifications will get rolled out over a decade, like we saw with the transition from 4G to 5G. In terms of the improvements of these new phones, were probably now at 4.1G, which is a far cry from what 5G will be like in ten years.

What I find most disturbing about the whole 5G phenomenon is that the cellular companies have essentially sold the public on the advantages of faster cellular speeds without anybody ever asking the big question of why cellphones need faster speed. Cellphones are, by definition, a single user device. The biggest data application that most people ever do on a cellphone is to watch video. If  4G phone is sufficient to watch video, then what’s the advantage up spending a lot of money to upgrade to 5G? Home broadband needs fast broadband to allow multiple people to use the broadband at the same time, but that isn’t true for a cellphone.

People do get frustrated with smartphones that get poor coverage inside big building, in elevators, in the inevitable cellular dead zones in every town, or rural areas too far away from cell towers. 5G phones won’t fix any of these problems because poor cellular coverage happens in areas that naturally block or can’t receive wireless signals. No technology can make up for lack of wireless signal.

The big new 5G feature in the iPhones is the ability to use all of the different frequencies that the cellular companies are now transmitting. However, these frequencies aren’t additive – if somebody grabs a new ‘5G’ frequency, the bandwidth on that frequency doesn’t add to what they were receiving on 4G. Instead, the user gets whatever frequency is available on the new spectrum channel. In many cases, the new 5G frequencies are lower than traditional cellular frequencies, and so data speeds are going to be a little slower.

The cellular companies are hoping that Apple is successful. The traditional frequencies used for 4G have been getting crowded, particularly in urban areas. Cellular data traffic has been growing at the torrid pace of 24% per year, and the traditional cellular network using big towers is getting overwhelmed.

Cellular companies have been trying to offload the 4G traffic volumes from the traditional cellular networks by opening up thousands of small cell sites. But their biggest hope for relieving 4G was to open up new bands of spectrum – which they have done. Every data connection made on a new frequency band is one that isn’t going to clog up the old and overfull cellular network. Introducing new bands of frequency doesn’t do the cellular networks any good unless people start using the new frequency bands – and that’s where the iPhone is a godsend to cellular companies. Huge volumes of data will finally migrate to the newly opened frequency bands as these new iPhones hit the market.

Unfortunately, users will likely not see any advantages from the change. Users will be migrating connection to a different frequency band, but it’s still 4G. It will be curious to see who takes the heat when the expensive new phones don’t outperform the old phones – will it be Apple or the cellular carriers?

The Regulatory Struggle to Maintain Copper Networks

The California Public Utilities Commission has been investigating the quality of service performance on the telco networks operated by AT&T and Frontier. The agency hired the consulting firm Economics and Technology, Inc. to investigate numerous consumer complaints made against the two telcos. Thanks go to Steve Blum for following this issue in his blog.

Anybody who still has service on the two carriers will not be surprised by the findings. The full study findings have not yet been released by the CPUC, but the portions that have been made public are mostly what would be expected.

For example, the report shows a correlation between household incomes in neighborhoods and the quality of service. As an example, the average household incomes are higher in neighborhoods where AT&T has replaced copper with fiber. More striking is a correlation between service calls and household income. The annual frequency of repair calls is double for neighborhoods where the average household income is $42,000 per year or less compared to neighborhoods with household incomes of $88,000 or more.

Part of that difference is likely because more high-income neighborhoods have fiber, which has fewer problems and generally requires less maintenance. But there are also hints in the report that this might be due to economic redlining where higher-income neighborhoods get a higher priority from AT&T.

This is not the first time that AT&T has been accused of redlining. I wrote a blog a few years ago about a detailed study made in Dallas, Texas that showed a direct correlation between the technology being delivered and household incomes. That study followed up on a similar report from Cleveland, Ohio, and the same things could likely be said for the older telco networks in almost every big city.

The big telcos are in a rough spot. The older copper networks have largely outlived their economic lives and are full of problems. Over the years copper pairs of wire in the outdoor cables have gone bad and the remaining number of working copper pairs decreases each year. The electronics used to deliver older versions of DSL are long out of production by the telco vendors.

I’m not defending the big telcos, because the telcos caused a lot of their own problems. The telcos have deemphasized copper maintenance for decades. The copper networks would be in bad shape today even had they been maintained perfectly. But purposefully neglected maintenance has hastened the deterioration of copper networks. Additionally, the big telcos have also been laying off copper-based technicians over the last decade and the folks who knew how to best diagnose problems on copper networks are long gone from the companies. Consumers have painfully learned that the most important factor in getting a repair made for DSL or copper is the knowledge of the technician that shows up to investigate an issue.

The California Commission is likely at some point to threaten the big telcos with penalties or sanctions, as been done in the past and also by regulators in other states. But the regulators have little power to effect improvements in the situation. Regulators can’t force the telcos to upgrade to fiber. And no amount of documentation and complaining is going to make the obsolete copper networks function any better. AT&T just announced that on October 1 that it is not longer going to add new customers to the DSL network – that’s likely to really rile the California Commission.

I’m not sure exactly how it will happen, but the day is going to come, likely during the coming decade when telcos will just throw up their hands and declare they are walking away from copper, with zero pretenses that they are going to replace it with something else.  Regulators will rant and rave, but I can’t see any ways that they can stop the inevitable – copper networks at some point won’t work well enough to be worth pretending otherwise.

A Comcast Product for Cord-cutters

It’s been interesting to watch how the big cable companies have been trying to battle cord-cutting. Comcast has had a product for a while that is aimed directly at cord-cutters.  It’s labeled as Flex and is a video streaming service that is only available to Comcast broadband customers who are not buying a Comcast TV product.

Comcast hoped that Flex would be a direct competitor to Roku, Amazon Firestick, and Google Chrome. The Flex product clearly wants to keep customers who cut the cord inside the Comcast umbrella.

The product delivers 10,000 programs including Comcast content and content from other free online services like Pluto, Xumo, and Tubi. Content comes with commercials. For now, Comcast is also throwing in Comcast’s paid service Peacock for free. The Flex platform also gives customers an easy portal to watch Netflix, Amazon Prime, HBO, and Hulu.

Flex is certainly price right and currently is free for Xfinity broadband customers. When first introduced, Comcast was charging $4.95. Flex still requires the Comcast settop box and remote. I’m guessing the price came down when Comcast found few buyers willing to rent a box to get free content.

There is a big difference between Flex and competitors like Firestick or Roku in that customers can only use the apps on the platform that Comcast has installed. No additional apps for video or music services can be added to the app. This is probably the biggest disadvantage of Flex in that people are using a lot of different video apps online. I have an Amazon Firestick and it will let me add any online video app regardless of whether the app provider has a deal with Amazon.

When Comcast first introduced the Flex product, I thought the company wanted to become another superbundler like Amazon. Amazon allows customers to buy a subscription to a huge array of different online apps, and I assume Amazon gets a slice of revenue for delivering customers to partner video platforms. There are many video services for which Amazon has become the primary marketing channel. Amazon even suggests content that requires a subscription to the partner apps. The superbundler concept is likely profitable. Amazon has to be doing well taking a small slice of the revenue stream from nearly one hundred other platforms.

Amazon’s made it clear a few years ago that it wanted to become the one-stop shop for online video content, and Amazon has bundled together far more content than anybody else. But in the last year, we’ve seen the rise of proprietary platforms from CBS, Apple, Disney, and others including Comcast’s Peacock that won’t cross-market with Amazon and others. It’s not looking like any one bundler is going to be able to pull together a giant percentage of online video content.

It’s less clear how Comcast intends to benefit from Flex. I assume Comcast gets a share of ad revenues generated on platforms like Pluto. But there doesn’t seem to any other major benefit to the company for operating the Flex program, particularly since they are providing the settop box to Flex customers for free. The plan probably made financial sense at a monthly $4.95 rate, but it’s hard to see the long-term benefit to Comcast of offering a free service. Perhaps the one big benefit to Comcast is that the settop box used for Flex can also be used to control smart home and other Comcast products. Perhaps the company is using Flex to draw in customers for these other products.

Comcast has one big advantage over anybody else in the industry in that every Flex customer is already a Comcast broadband customer. That should mean that Comcast has little incremental cost for delivering the free content offered by Flex. It’s easy to forget that Netflix and all of the other online providers must maintain an expensive network to enable them to disseminate video content.

The Flex product is somewhat symbolic of the attempt for industry players to somehow be relevant in the online video market. The product doesn’t drive direct revenue for Comcast even though the company must provide a settop box. The platform is proprietary, which seems to be the new norm for video platforms. It’s one more of the many confusing choices faced by cord-cutters.

The Magnitude of the Urban Digital Divide

The web is full of stories of rural areas with no broadband options, and I’ve spent a lot of time in the last few decades helping rural areas get better broadband. There has not been nearly as much coverage of the huge broadband gap in urban areas. There are a lot of urban homes that can’t afford broadband and, in many cases got bypassed when the telcos and/or cable companies built their networks.

I just saw a statistic that made me realize the magnitude of the urban broadband divide. There has always been a lot of urban homes that don’t have broadband, but the issue took on new importance when schools were forced to send students home to work. I read an article in the Democrat and Chronicle, from Rochester, New York that says that 20% of residences in New York City don’t have access to home broadband. That’s a pretty typical percentage in looking at cities across the country. The statistic that astounded me was that this translates into 750,000 students who don’t have a way to tackle schoolwork from home.

That number is mind-boggling. There are more students in NYC without home broadband than the total number of residents of Alaska, Vermont, Wyoming, or Washington DC. The article says that the percentage of homes without broadband is in the same 20% range in Rochester and Buffalo. In Syracuse, the percentage of homes without broadband is much higher at 32%. Nationwide my firm has studied urban markets where the percentage of homes without broadband ranges from under 10% to as high as 35%.

We know the primary reasons that homes don’t have broadband. Surveys and studies over the years in different markets have uncovered the same list of primary reasons homes don’t have broadband. Some homes simply aren’t interested in broadband and wouldn’t use it if was free. Some homes have low broadband needs and are happy with what they can get from a cellular plan. The biggest single barrier is the price – broadband has grown to be more expensive over time and many homes have a hard time justifying paying for broadband when they are struggling to pay for food or rent. Some homes can afford broadband but can’t also afford to keep a working computer in the home. Some people don’t know how to use a computer and need training in basic computer skills. The last reason we see given for not having broadband is a dislike for the way that ISPs and social media misuse personal data.

Around the country, some communities have found solutions for some of these problems. The gigantic challenge is how to apply solutions at the scale of a big city. How can a city provide digital literacy training on computer skills to several hundred thousand people? How do you get hundreds of thousands of computers into homes that need them? And the big dollar question is how to subsidize the cost of a monthly broadband connection to half a million homes.

What’s scary is that every other city is similar, with some in even worse shape than New York City. How do you scale up and provide solutions when the universe of people on the wrong side of the digital divide is 10 million to 20 million?

Local communities have tackled some of these issues during the pandemic. I’ve talked to rural counties that are making sure that every student has a computer at home and that every student has enough broadband to connect to school servers – usually using cellular hot spots. However, local governments are not going to be able to keep paying the fees for home broadband – even in a small community that will add up to a lot of money over time.

We can’t shy away from tackling digital divide issues just because the problem is so large and is found in almost every community. Local solutions can make a real difference, particularly in smaller communities – but the magnitude of the digital divide is too immense to easily tackle in larger cities.

The Race to Bury Net Neutrality

The Internet is currently full of news articles describing how the FCC will soon be putting to bed the last vestiges of its order a few years ago to eliminate net neutrality rules. The order that is widely being called the net neutrality ruling was a far-reaching change at the FCC that essentially wrote the FCC out of any role in regulating broadband.

Eliminating net neutrality rules was only a small part of that order. Net neutrality is a set of principles that describe how ISPs and network owners are to not discriminate between bits carried over the Internet. Most of the largest ISPs said that they could live with the net neutrality principles, and eliminating net neutrality was not a high priority for companies like AT&T and Comcast. The real priority for the big ISPs was to take advantage of a friendly FCC that was open and willing to deregulated broadband – particularly willing to eliminate any threat of broadband rate regulation.

So when you read the flood or articles this month talking about net neutrality, you need to substitute the term ‘net neutrality’ with ‘regulating broadband’ as you read articles on the topic. The FCC chose to disguise their attempt to kill regulation under the moniker of net neutrality and was successful since the average American probably has no idea that the FCC no longer regulates ISPs and broadband.

The FCC is holding a vote on October 27, just before the presidential election to cement the last open pieces from the FCC’s order to eliminate broadband regulation. The FCC’s order to write the agency out of broadband regulation was challenged in federal court. The court basically said that the FCC had the regulatory authority to either change the rules (or not change the rules) to walk away from broadband regulation.

However, the court said that the FCC needs to demonstrate that eliminating regulatory authority over broadband didn’t impact three areas negatively. The FCC was asked to clarify:

  • How eliminating broadband regulation impacts public safety;
  • How the FCC can still regulate pole attachments if it doesn’t regulate broadband;
  • If walking away from regulation negatively impacts the FCC’s ability to offer the FCC Lifeline programs that benefit low-income Americans.

On October 27 the FCC is going to take a vote to say that it’s earlier order doesn’t negatively impact any of these issues. It’s clear that that the FCC wants to finish the elimination of broadband regulation before the election on the chance that a new Democratic president will mean a new head of the FCC. The FCC has openly said that it changed the rules on broadband regulation in such a way that will make it hard for a future FCC to overturn its order.

A new FCC can obviously undo anything that was done by a previous FCC. However, the net neutrality order was done in such a way that a new FCC would have to go through the full cycle of the FCC’s processes that including various cycles of notices of proposed rulemaking, a final rulemaking, and then the inevitable court challenges to any attempt to reregulate broadband – all done with vigorous opposition from the big ISPs. The process of reversing the deregulation of broadband would likely stretch over many years.

However, there is a much shorter and quicker path for reversing the FCC’s order. Congress is free to reset the FCC rules in any way it seems fit, and Congress could finally pass a new telecom act. There hasn’t been any major telecom legislation out of Congress since 1996 – during the heyday of dial-up Internet. In today’s political environment it would take a Democratic sweep of the White House and both houses of Congress to get new telecom legislation passed.

Even should that happen with the election, the new Democratic majority would have to agree on what is contained in a new telecom act. I can’t foresee that being an easy or quick process. There is an accumulation of topics in addition to broadband regulation that would benefit from Congressional clarification including privacy, regulation of web companies, solving the digital divide, elimination of outdated cable TV and telephone regulations, a national policy on spectrum, regulation of low orbit satellites, and a host of smaller issues.

If the Democrats don’t make a clean sweep of Congress and the White House, then the current FCC will largely have succeeded and it might be many years until a determined FCC could reestablish any regulatory authority over broadband. What is clear to somebody who closely watches industry regulation – it’s going to be interesting few years ahead of us in this industry regardless of what happens at the polls in November.

Partners are Where You Find Them

An interesting new partnership has been formed between Windstream and Colquitt Electric Membership Corp. of Georgia to build a rural fiber network. Windstream is a large price-cap telco that recently emerged from an interesting bankruptcy. Colquitt is a rural electric cooperative.

Only high-level terms of the partnership have been released. Windstream will own the fiber network, will provide broadband and other services, and will own the customers. Colquitt will provide access and rights-of-ways on poles and Colquitt technicians will place the new fiber on poles. Colquitt will get access to some fibers on the new network to connect electric substations and other electric network components to fiber. The partnership is described as having a network that is ‘jointly built and jointly-owned’.

The area to be served is rural and is described as having around 7 people per square mile. It’s a little hard to put that statistic into perspective because the most commonly used metric in the industry for understanding density is the number of homes per mile of road – however, the area sounds sparsely populated.

The state of Georgia decided a few years ago to allow electric cooperatives to become ISPs – a restriction that was imposed years ago by legislation prompted by telco incumbents. Many states have recently lifted such restrictions in an attempt to find more solutions to solve the rural broadband gap.

Partnerships with larger price-cap telephone companies to provide fiber broadband is a new phenomenon. An argument can be made that decisions made by price-cap telcos over the years are one of the major reasons why much of rural America is still served by DSL broadband provided over old and poorly-maintained copper networks.

But we’ve seen several similar partnerships with price-cap telcos. CenturyLink has partnered with the City of Springfield, Missouri to provide fiber. Consolidated Communications has partnered with several villages in New Hampshire to build fiber. Cincinnati Bell has partnered with the Butler Rural Electric Cooperative in Ohio.

This announcement is a reminder to rural communities and electric cooperatives that broadband partners might be found in unexpected places. It’s easy for rural folks to assume that the telcos that built and have been operating the dreadful copper networks are not interested in providing better service. In this case, the network is being built in a rural community and it’s extremely unlikely that Windstream could justify investing the full cost to build fiber – the return and payback on investment would never meet corporate earnings metrics and would make no sense as an investment. However, sharing the costs with the electric cooperative must have reduced Windstream’s costs to the point where the project makes financial sense.

That is the power of partnerships. Investing all of the cost to build fiber in this case probably didn’t make financial sense to either the electric cooperative or to Windstream. Both parties have something to gain out of the transaction. Windstream gains customers who will like the broadband service on fiber. The cooperative gets a fiber network connecting substations. Both are contributing to an improved community that will benefit both companies in the long-term. We’ve seen that fiber can reinvigorate a rural community. Many people want to live in rural areas but need good broadband to work from home – having a fiber network should attract new residents and keep residents some local people from leaving the area to find better broadband.

During the last year, my advice to rural communities is to have a serious discussion with the incumbent providers. Historically I’ve always advised to not bother with the incumbents because over decades I had never seen a large incumbent telco respond to plea to improve service. This is still a rare occurrence, but this partnership, and the ones mentioned earlier illustrate that it’s worth having the discussion on the outside chance that you hit the right note and the right opportunity to get the attention of the incumbents.

AT&T Stops DSL Sales

USA Today reported last week that AT&T stopped selling new DSL to customers on October 1. This is an event that will transform the broadband landscape in a negative way across the country. There are a number of immediate consequences of this action by the company.

Probably the most dramatic impact will be that many rural customers will no longer have an option for landline broadband. While rural DSL broadband is slow, a DSL connection at speeds between 1 Mbps and 6 Mbps beats the alternatives – which is satellite broadband or cellular hotspots. Since there are a lot of rural homes where those two technologies don’t work, this means some homes will suddenly have no broadband option. Expect to soon see stories of folks who buy rural homes and then find they have no option to buy broadband.

In cities where AT&T DSL is the only alternative to a cable company broadband service, this move bestows total monopoly power to the cable company. Our firm does broadband surveys and we still find markets where AT&T DSL represents as much as a 30% market share. Many homes buy DSL because it costs less, and that option just got taken off the table in AT&T markets. And just like in rural markets, every city has customers who’s only choice is DSL. For various reasons, there are streets in most cities where the cable companies never constructed network. Any customer moving into one of these broadband deserts will find themselves with no broadband alternative.

According to an article just published by Ars Technica, only 28% of AT&T broadband customers have access to AT&T fiber – anybody living in the neighborhoods without fiber will no longer be able to buy broadband from AT&T. That has to equate to tens of millions of households that just lost a broadband option. The FCC proudly measure the number of homes with multiple broadband options, and I’ll be curious to see if they recognize this sea change in the market.

This change will stop the practice of customers who hop back and forth between DSL and cable company broadband to save money. I just talked to a customer the other day that has bounced between DSL and cable company broadband for almost twenty years. Both the cable company and the telco offer introductory prices each time for swapping, and this customer has gone back and forth between the ISPs regularly every few years. In neighborhoods where AT&T is the telco DSL provider, this might mean the end of introductory special prices from the cable company – they now have zero incentive to compete for customers.

I would have to think that Verizon will eye this announcement closely. They have openly said that they want to do away from copper network technology. This might be all of the push needed for Verizon to follow suit. This announcement might be citied in telco history as the beggining of the end of copper wires. AT&T says they won’t be tossing folks off DSL service, but will no longer connect new customers to the DSL technology. Over time this is going to mean fewer and fewer customers on copper, and I suspect AT&T already has a date in mind when they walk away from the technology completely.

Ironically, AT&T just recently announced that they were going to claim a seventh year of CAF II support in 2021 and will collect over $427 million in subsidies next year to supposedly support rural DSL. Hopefully, the FCC will view this announcement as grounds for stopping such payments. It would be absolutely insane to give millions to AT&T to support a technology that the company will no longer sell or install.

This timing of the announcement is also curious at a time when the pandemic is still raging. This means a home that needs to buy broadband to support students or adults working from home will no longer have that option if the only wired connection is AT&T DSL.

This announcement also creates an interesting dilemma for the FCC. Will the FCC pretend that the huge AT&T DSL footprint still exists? It’s impossible to pretend that areas have a broadband option when the only provider of landline service refused to connect new customers. I’m sure the FCC will act as if this announcement never happened – because recognizing it means now counting millions of homes as having no broadband option.

This day has been inevitably coming for decades. Regulators have long pretended that they could demand that the big telcos keep supporting an obsolete technology. AT&T and Verizon have been telling regulators for years that they are going to walk away from copper, and now one of the big telcos is doing so. It’s just a matter of time until AT&T begins decommissioning DSLAMs and starts tearing down copper wires for the salvage value – and I can’t see any way that regulators can stop them.

FCC Kills CableCards

The FCC Commissioners recently unanimously voted to eliminate the rules that require cable companies to support devices that use CableCard technology for connecting to video services. The largest user of the technology is TiVo, but consumers have also been able to buy settop boxes using the technology rather than paying monthly to lease a box from the cable company.

The requirement for CableCards came from the Telecommunications Act of 1996. The congressional authors of that act thought that consumers ought to have an alternative to leasing a mandatory settop box from a cable company. After some industry wrangling, the FCC ordered that cable companies be ready to allow devices with CableCards by July 2000.

The big cable companies hated the CableCard rule and refused to share network security keys with CableCard manufacturers, making it a major challenge for a customer to install a CableCard device. In 2005 the FCC clarified the original order and told cable companies that software had to be separate than settop box devices so that CableCards could connect to cable company networks.

Over time, the software on cable networks has grown increasingly complex, and CableCard technology never became plug and play. Anybody who has ever installed a TiVo box knows the challenge of getting the CableCard software to talk to a specific local cable system. Because of this, and because of ongoing resistance to cable companies to make it easy for CableCards to work, no major market for consumer-owned settop boxes ever emerged. However, even in recent years, there have been sales of roughly half a million CableCard devices per quarter.

The biggest user of CableCard technology is TiVo which has a CableCard in every DVR recorder it sells. The FCC order doesn’t force cable companies to continue to support CableCard technology, but they likely will. Any cable company settop box built before 2015 uses CableCard technology – that was the easiest way for the cable companies to make CableCards work.

However, the FCC eliminated the last vestige of regulation on CableCards, so there is nothing to stop a cable company from cutting off CableCard devices, other than perhaps a desire to not push more households to cut the cord. Cable companies are also free to charge extra to consumers for connecting with a CableCard device.

It’s more likely that CableCard devices will just become technically obsolete over time. Without the FCC’s rules in place, the cable companies might not worry about the impact on CableCards as they update settop box software. This likely spells the end of the traditional TiVo box that could record many hours of video to watch later. Most cable companies offer an alternate to TiVo and allow customers to record and store programming in the cloud rather than on a device in the home. However, TiVo and other companies already started that transition, and TiVo introduced a cloud DVR service in 2018 for a cord-cutter that allows recording of video content that comes from any source such as over-the-air, or from an online service.

Consumers who have used CableCard devices face having to eventually pay the monthly fee for a settop box if they want to keep traditional cable TV service. Ironically, there might be a bigger need for a settop box alternative today than there was in 2000. Largely freed from regulation, the cable companies have raised fees on settop boxes, and I’ve seen monthly rental rates as high as $15 per month.

In the end, the CableCard regulation was largely a bust. It provided an alternative to renting settop boxes, but the cable companies never stopped fighting the idea and never made it easy for consumers to connect and use a CableCard device.