Can LTE Fixed Wireless Solve the Rural Digital Divide?

I’ve been working in rural counties all over the US and have found that a lot of rural homes are using a fixed 4G LTE wireless product for home broadband. All three big cellular companies have a fixed LTE product for the home. The product typically involves installing a small dish outside of a home that receives broadband using 4G LTE broadband from a nearby cell tower.

The big cellular companies have bombarded the press for the last several years touting how 5G cellular might solve rural broadband gaps. The way the wireless companies price and market these products is a precursor for what they will likely do with 5G (assuming 5G even comes to rural places). I haven’t looked into the LTE products in a while and so I researched the LTE broadband products intended as home broadband. I knew these products were expensive, but I had forgotten how stingy these plans are with broadband.

Verizon. Verizon’s hotspot product has four available pricing tiers based upon the monthly data allowance. The 10 GB plan is $60, the 20 GB plan is $90, the 30 GB plan is $120, and the 40 GB plan is $150. The real cost killer is that Verizon bills additional gigabits for $10 each.

Verizon says that broadband speeds average from 5 – 12 Mbps download and 2 – 5 Mbps upload. I recently talked to a customer using this plan who told me that when a customer doesn’t agree to pay the overage charges that Verizon throttles speeds to a crawl once the monthly data limit has been reached.

T-Mobile. T-Mobile has six hotspot pricing plans based upon the monthly data usage. The 2 GB plan is $10. The 6 GB plan is $25, the 10 GB plan is $40, the 14 GB plan is $55, the 18 GB plan is $70, and the 22 GB plan is $85. Each plan offers a $5 discount for customers who authorize autopay. The killer with this plan is that speeds revert to 3G speeds when the cap has been met. The plans also include unlimited texting.

It’s worth noting that T-Mobile will offer a plan that provides 100 GB of monthly data to qualified students for the next 5 years as one of the promises made to merge with Sprint. I haven’t seen the definition of eligible households, but the company estimated 10 million homes would be eligible.

AT&T. AT&T has two plans. In areas where AT&T is the incumbent telephone provider and accepted CAF II funding, the company decided to provide 4G LTE fixed cellular broadband to satisfy their CAF II requirements. The company had accepted $2.56 billion from the FCC’s Universal Service fund with payments spread over six years. That funding covered 1,117,806 rural homes, providing AT&T with a subsidy of $2,296 per home.

That CAF II product is priced at $50 per month and comes with a 250 GB data cap. AT&T says that speeds are at least 10/1 Mbps (since that was the FCC requirement). The killer with this plan is that customers pay $10 for each additional 50 GB block of data, and payments aren’t capped until a customer spends $200 extra.

Outside of the CAF II areas, AT&T has three hotspot plans. That includes 3 GB of data for $25, 10 GB of data for $50, and 18 GB of data for $75. Extra data ranges from $10 for 1 GB with the $25-dollar plan to $10 for 2 extra GBs with the $72 plan.

Do These Products Solve the Rural Digital Divide? I think not – the core hotspot products define the digital divide. Rural customers who have no other options are paying for some of the most expensive broadband in the world. You have to look at distressed third world countries to see similarly high prices per gigabyte. Recall in looking at these prices that these products are for home broadband – not for cellphones.

  • Verizon’s plans range from $3.75 to $6.00 per gigabyte. Additional gigabytes are $10 each.
  • T-Mobile data prices range from $3.86 to $5 per gigabyte. After hitting the data cap, the company throttles customers rather than provide more expensive data.
  • AT&T hotspots are the most expensive and range from $4.16 to $8.22 per gigabyte. Extra gigabytes on AT&T range between $5 and $10 per gigabyte.
  • AT&T’s CAF II product is much more affordable. However, customers can still spend up to $250 per month. Additionally, AT&T charges $100 for installation, which is outrageous considering the company collected $2,296 from the FCC for each of the 1.1 million potential customers. The CAF II money had to have gone almost entirely to AT&T’s bottom line.

What is somewhat ironic is that the cellular companies don’t aggressively advertise the product in rural America, even at these incredibly high prices. I guess that the cellular carriers don’t want to sink any money into rural cell sites or pay for more backhaul, so they are reluctant to sell very much of these products in any one location.

Why Does the FCC Support Data Caps?

Most people may not have noticed that the upcoming RDOF grants allow, and even encourage ISPs to enforce data caps on customers. I have a hard time thinking of even one reason why the FCC would suggest that ISPs use data caps.

The RDOF grants have four performance tiers for ISPs, with the auction rules weighted to give preference to faster data speeds. Each of these performance tiers comes with a suggested monthly usage allotment – which means a data cap. ISPs that will deliver speeds of either 25/3 Mbps or 50/5 Mbps can introduce a data cap of 250 gigabytes or the U.S. average, whichever is higher. ISPs offering speeds of 100/20 Mbps or 1 Gbps/500 Mbps can set a data cap at 2 terabytes.

The natural question is to ask why the FCC is setting any data cap at all? Remember, this is an FCC that no longer regulates broadband, and yet they are suggesting rules that encourage ISPs that win the grant funding to introduce data caps. Past experience says that if the rules allow for data caps, the ISPs that win the money are likely to implement them.

I find the data caps for the 25/3 Mbps and 50/5 Mbps to be intriguing since ISPs can’t set the data caps at less than the US average. Who is going to measure that? The FCC doesn’t gather the kind of data needed to measure data caps around the country. Further, there are companies like CenturyLink that have data caps but that often don’t enforce them. I haven’t the foggiest idea how anybody would measure the national average data cap.

It’s important to put these data caps into perspective. The data caps on the slower products are incredibly stingy at 250 gigabytes per month.  OpenVault reported earlier this year that the average US home used 344 gigabytes of data per month in December 2019, up from 274 gigabytes a year earlier. Due to the impact of COVID-19, that number exploded to 402.5 gigabytes by the end of March. Homes being limited to using 250 gigabytes of data are being told not to use their broadband like everybody else. It’s nearly impossible for a home that has people working from home or students doing schoolwork at home to limit themselves to only 250 gigabytes of data per month.

Even the 2 terabyte data caps for faster broadband will become problematic is a few years. OpenVault says that over 10% of homes were already using more than 1 terabyte of data as of the end of the first quarter of 2020 and 1.2% were using over 2 terabytes. By the time these networks are built with RDOF money it wouldn’t be surprising for 10% of homes to be using more than the 2-terabyte cap.

With these grant rules the FCC is actively supporting ISP to introducing data caps that are smaller than the national average broadband usage at the end of 2018 and that will easily be less than half of the national average usage by the time the networks funded by the RDOF grants are constructed.

It seems like the FCC never learns any lessons. Every grant program they have administered has some major flaws. The FCC is handing out billions of dollars to provide broadband to home that don’t have it today. This program is a major boon for the rural communities that get broadband because of the grants. But with these rules, the RDOF money will be used to bring broadband to homes for the first time and immediately cripple homes from using that broadband due to data caps. For the federal government to support a 250-gigabyte data cap is an incredibly bad policy. They are saying to folks – here, we funded broadband, but don’t use it. I can’t conceive of any reason why data caps are even mentioned in the grant rules unless this is another case of bowing to the lobbyists from the big ISPs or the satellite broadband providers.

Looking at the bigger picture, it’s somewhat surprising that the FCC would take any position on things like data caps since they have given away their authority to regulate broadband. What these grant rules tells us is that this FCC would heartily support data caps if they still had that authority. This provision in this grant program provides tacit support to Comcast and AT&T to bill customers huge amounts of extra money for exceeding arbitrary and stingy data caps.

Privacy in the Age of COVID-19

The Washington Post reports that a recent poll they conducted shows that 3 out of 5 Americans are unable or unwilling to use an infection-alerting app that is being developed jointly by Google and Apple. About 1 in 6 adults can’t use the app because they don’t own a smartphone – with the lowest ownership levels for those 65 and older. People with smartphones evenly split between those willing versus unwilling to use such an app.

The major concern among those not willing to use such an app comes from the distrust people have about the ability or willingness of those two tech companies to protect the privacy of their health data. This unwillingness to use such an app, particularly after already seeing the impact that the virus is having on the economy is disturbing to scientists who have said that 60% or more of the public would need to use such an app for it to be effective.

This distrust of tech companies is nothing new. In November the Pew Research Center published the results of the survey that showed how Americans feel about online privacy. That study’s preliminary finding was that more than 60% of Americans think it’s impossible to go through daily life without being tracked by tech companies or the government.

To make that finding worse, almost 70% of adults think that tech companies will use their data in ways they are uncomfortable with. Almost 80% believe that tech companies won’t publicly admit guilt if they are caught misusing people’s data. People don’t feel that data collected about them is secure and 70% believe data is less secure now than it was five years ago.

Almost 80% of people are concerned about what social media sites and advertisers know about them. Probably the most damning result of the survey is that 80% of Americans feel that they have no control over how data is collected about them.

Almost 97% of respondents to the poll said they have been asked to agree to a company’s privacy policy. But only 9% say they always read the privacy policies and 36% have never read them. This is not surprising since the legalese included in most privacy policies requires reading comprehension at a college level.

There is no mystery about why people are worried about the collection of personal data. There have been headlines for several years talking about how personal data has been misused. The Facebook / Cambridge Analytica data scandal showed a giant tech company selling personal data that was used to sway voters. The big cellular companies were caught several times selling customer location data that lets whoever buy it understand where people travel throughout each day. Phone apps of all sorts report back location data, web browsing data, and shopping habits and nobody seems to be able to tell us where that data is sold. Even the supposed privacy advocate Apple lets contractors listen to Siri recordings.

It’s not a surprise that with the level of distrust of tech companies that it’s becoming common for politicians to react to privacy breaches. For example, a bill was introduced into the House last year that would authorize the Federal Trade Commission to fine tech companies to as much as 4% of their gross revenues for privacy violations.

California recently enacted a new privacy law with strict requirements on web companies that mimic the regulations used in Europe. Web companies must provide California consumers the ability to opt-out from having their personal information sold to others. Consumers must be given the option to have their data deleted from the site. Consumes must be provided the opportunity to view the data collected about them. Consumers also must be shown the identity of third parties that have purchased their data.

The unwillingness to use the COVID-tracking app is probably the societal signal that the hands-off approach we’ve had for regulating the Internet needs to come to an end. Most hands-off policies were developed twenty years ago when AOL was conquering the business world and legislators didn’t want to tamp down on a nascent industry. The tech companies are among the biggest and richest companies in the world and there is no reason to not regulate some of their worst practices. This won’t be an easy genie to put back in the bottle, but we have to try.

CenturyLink Expanding Fiber

CenturyLink recently announced its fiber plans for 2020 and says it will be building to pass 400,000 homes and businesses with fiber this year as a follow-up to 2019 that saw the company add 300,000 passings. Like with all big telco announcements, a bit of looking behind the scenes is needed to understand what the company is doing.

In 2017 CenturyLink was engaged in a major fiber expansion plan and built that year to pass 900,000 homes and businesses, mostly in large cities and surrounding suburbs in places like Seattle, Phoenix, and Denver. Those expansions plans were put on hold when new CEO Jeff Storey replaced the telco-minded Glen Post. One of Storey’s first announcements as CEO was that the company was no longer going to pursue capital projects with ‘infrastructure returns’ and building FTTH came to a screeching halt.

It was a lot harder than Storey might have hoped to inject the Level 3 mindset into a 100-year-old telco, and the company bogged down and stock prices dropped. Starting last year, the company started talking again about aggressively expanding its fiber network to add large buildings to the network. The company recently said it had connected to over 18,000 buildings last year. In digging deeper into things the company discussed over the last year, it seems that those buildings were a combination of multi-tenant business buildings and apartment complexes. The company also said that it was building a lot of the new fiber in 2019 to reach small cell sites.

The company also recently announced that it had added 300,000 passings as a result of the fiber expansion last year – a number that I can’t find mentioned as a goal last year. This does not mean that the company built fiber to pass 300,000 homes. Many of the passings came from the 18,000 buildings that were added to the network. CenturyLink has also entered into a contract to operate the fiber network in Springfield, MO – a network that is funded, built, and owned by the City. The 85,000 or so passings from that project seem to be included in the fiber passings claimed for 2019 and planned for 2020.

CenturyLink says it plans to add 400,000 fiber passings this year. The company is still aggressively adding buildings to the network and is also still building to small cell sites. The markets on the list for this year’s expansion include Denver, Omaha, Phoenix, Portland., Salt Lake City, Spokane, Springfield, MO, and a few others.

CenturyLink says the fiber expansion is starting to pay off. While the company lost a net of 11,000 broadband customers in the first quarter of this year, they added 60,000 subscribers with speeds of 100 Mbps or faster. Those gains were part of the industry gain of over 1.1 million broadband customers in the first quarter – at least some of which came as a result of the needs of employees and students being forced to work from home.

The company has gotten back into the infrastructure business somewhat reluctantly but now seems to have embraced some aspects of fiber expansion. CenturyLink is still bullish about adding buildings to the network and are at number four in terms of on-net buildings. I would be surprised if the fiber expansion includes any significant construction to reach single-family homes. It seems a lot more likely that the company is picking off low-hanging fruit in places where it is installing fiber to reach small cell sites or lucrative buildings. That’s the same philosophy that helped AT&T add over 12 million fiber passings over the last few years.

Jeff Storey is still adamantly painting a picture of a company that is focused on enterprise services and business applications. Any expansion into residential neighborhoods is likely a by-product of taking advantage of fiber built to pursue the primary goal.

But no matter how they are getting there, it’s good to see CenturyLink building fiber again. In 2018 it looked like they might permanently duck out of fiber construction. However, the stock market disappointment, and perhaps seeing AT&T success with limited fiber expansion convinced management some that fiber can earn more than infrastructure returns.

The Quiet Growth of the Quad Play

A few years ago, some of the largest cable companies announced they were getting into the cellular business. At the time, this got a tiny amount of press but overall the press didn’t take these companies seriously or consider them to be potential major players in the cellular business.

Comcast Charter and Altice have quietly been adding cellular customers over the last three years.

  • Comcast recently reported that the company added 216,000 cellular lines during the first quarter of 2020, bringing their total lines to 2.3 million.
  • Charter added 290,000 customers in the first quarter, bringing the company to 1.4 million mobile lines.
  • Altice added 41,000 customers in the first quarter, bringing them to 110,000 mobile lines.

These growth and total customer numbers may not sound spectacular but consider that in the first quarter saw AT&T add a small number of net customers and Verizon lose a small number of net customers. These three cable companies are definitely eating into the market growth of the big carriers. Craig Moffett, the leading analyst for the communications sector declared last December that the cable companies must be considered as serious players in the cellular space.

For now, all three companies are acting as MVNOs and are purchasing wholesale cellular minutes and data from the big cellular carriers. But that won’t last forever. Comcast has made it clear that the company is in the wireless game for the long-haul. The company purchased $1.7 billion in white space spectrum in the Philadelphia market in 2017 and said that it will be bidding in the upcoming CMRS auction.

A company like Comcast doesn’t need to worry about rolling out a big national network like Dish Networks is tackling. Comcast can improve margins on the cellular business by selectively deploying cell sites in parts of markets where they have the highest traffic volumes. Comcast should be able to deploy small cells selectively in their major urban markets and be able to peel a lot of minutes off the MVNO arrangements where it makes sense. That would significantly increase their margins.

The cable companies have something in their favor that the cellular companies can’t match – the ability to bundle inexpensive cellular service in with products that customers value like home broadband. Each of the three cable companies is only offering cellular to existing customers.

Consider the Comcast plan. It’s only available to Comcast broadband customers. Customers have a choice of four data plans 1 GB for $15 per month, 3 GB for $30 per month, $10 GB for $60 per month, or unlimited data for $45 per phone. All of these plans include unlimited calling and texting. A customer can add up to 5 devices for a plan, and that can include phones for multiple family members, tablets, etc.

I have a friend who bought the Comcast plan when it first came out and it cut her family’s cellphone bills in half. The quality is as good as when they were AT&T subscribers, and their usage is likely still riding the AT&T network.

The big cellular companies have stopped growing. They’ve seen cellular prices drop over the last two years and their revenue per customer is dropping. AT&T and Verizon will start feeling real pain if the cellular companies continue to take more than half a million customers per quarter. The two companies are faced with T-Mobile greatly expanding its number of cell sites to meet the terms of the merger with Sprint. And both companies have to worried about seeing Dish Networks hit the market in two years or so with the most modern 5G network that will be software-driven.

Americans love bundles and it’s likely that the word will continue to spread that cable companies can save them money on their cellular plan. As word of mouth continues to spread that the cable companies are in the business to stay, these companies are likely to accelerate customer acquisition. The FCC was worried about losing Sprint from the market and made the T-Mobile merger contingent upon having Dish enter the cellular business. I’m guessing they didn’t take the competition from the cable companies seriously – but over time we are likely to see real competition for our cellular business.

A New National Broadband Plan?

Senator Edward Markey (D-Mass) introduced a bill that would require that the FCC create a new National Broadband Plan by July 2021. This plan would lay out the national goals needed for broadband going forward and also provide an update on how the COVID-19 crisis has impacted Internet access. I am not a big fan of the concept of a national plan for many reasons.

Can’t Trust FCC Data. The FCC would base any analysis in a new plan on the same flawed data they are using for everything else related to broadband. At this point, the best description of the FCC’s broadband data is that it is a fairy tale – and not one with a happy ending.

Gives Politicians Talking Points rather than Action Plans. A national broadband plan gives every politician talking points to sound like they care about broadband – which is a far cry from an action plan to do something about broadband. When politicians don’t want to fix a problem they study it.

Makes No Sense if Broadband is Unregulated. Why would the government create a plan for an industry over which the government has zero influence? The FCC has gifted the broadband industry with ‘light-touch regulation’ which is a code word for no regulation at all. The FCC canned Title II regulatory authority and handed the tiny remaining remnant of broadband regulation to the Federal Trade Commission – which is not a regulatory agency.

The Last National Broadband Plan was a Total Bust. There is no need for a National Broadband Plan if it doesn’t include a requirement that the FCC should try hard to tackle any recommendations made. Almost nothing from the last broadband plan came to pass – the FCC and the rest of the federal government stopped even paying lip service to the last plan within a year after it was published. Consider the primary goals of the last National Broadband Plan that were to have been implemented by 2019:

  • At least 100 million homes should have affordable access to 100/50 Mbps broadband. Because the cable companies implemented DOCSIS standards in urban areas, more than 100 million people now have access to 100 Mbps download speeds. But only a tiny fraction of that number – homes with fiber, have access to the 50 Mbps upload speed goal. It’s also impossible to make a case that US broadband is affordable – US broadband prices are almost double the rates in Europe and the far East.
  • The US should lead the word in mobile innovation and have the fastest and most extensive wireless network of any nation. US wireless broadband is far from the fastest in the world – our neighbor Canada is much closer to that goal than is the US. Everybody acknowledges that there are giant areas of rural America without good wireline broadband, but most people have no idea that cellular coverage is also miserable in a lot of rural America.
  • Every American Community should have gigabit access to anchor institutions such as schools, libraries, and government buildings. We probably came the closest to meeting this goal, at least for schools, and over 90% of schools now have gigabit access. However, much of that gain came through poorly-aimed federal grants that paid a huge amount of money to bring fiber to anchor institutions while ignoring the neighborhoods around them – and in many cases, the fiber serving government buildings is legally blocked from being used to help anybody else.
  • Every American should have affordable access to robust broadband and the means and the skills to subscribe. A decade after the last National Broadband Plan there are still huge numbers of rural homes with no broadband, or with broadband that barely functions. Instead of finding broadband solutions for rural America, we have an FCC that congratulates itself each year for being on the right trajectory for solving the broadband gap.
  • To ensure that America leads in the clean energy economy, every America should be able to use broadband to track and manage their real-time energy consumption. I can’t come up with anything other than a facepalm for this goal.

As hard as I try, I can’t think of even one reason why we should waste federal dollars to develop a new national broadband plan. Such a plan will have no teeth and will pass out of memory soon after it’s completed.

Cord Cutting Accelerates in 1Q 2020

The largest traditional cable providers collectively lost over 1.7 million customers in the first quarter of 2020 – an overall loss of 2.2% in customers. This is the biggest overall drop in customers ever in a quarter. To put this loss into perspective, the big cable providers lost 18,800 customers every day.

The numbers below come from Leichtman Research Group which compiles these numbers from reports made to investors, except for Cox which is estimated. The numbers reported are for the largest cable providers, and Leichtman estimates that these companies represent 95% of all cable customers in the country.

Following is a comparison of the first quarter subscriber numbers compared to the end of 2019:

1Q 2020 4Q 2019 Change % Change
Comcast 20,845,000 21,254,000 (409,000) -1.9%
Charter 16,074,000 16,144,000 (70,000) -0.4%
DirecTV 15,136,000 16,033,000 (897,000) -5.6%
Dish Networks 9,012,000 9,144,000 (132,000) -1.4%
Verizon 4,145,000 4,229,000 (84,000) -2.0%
Cox 3,820,000 3,865,000 (45,000) -1.2%
AT&T U-verse 3,440,000 3,440,000 0 0.0%
Altice 3,137,500 3,179,200 (41,700) -1.3%
Mediacom 693,000 710,000 (17,000) -2.4%
Frontier 621,000 660,000 (39,000) -5.9%
Atlantic Broadband 306,252 308,638 (2,386) -0.8%
Cable One 303,000 314,000 (11,000) -3.5%
Total 77,532,752 79,280,838 (1,748,086) -2.2%
Total Cable 45,178,752 45,774,838 (596,086) -1.3%
Total Satellite 24,148,000 25,427,000 (1,029,000 -4.1%
Total Telco 8,206,000 8,639,000 (123,000) -1.5%

Some observations of the numbers:

  • Note that AT&T no longer reports customers by division, so Leichtman has reflected all of their losses as DirecTV and shown no losses for AT&T U-verse.
  • The big loser is AT&T, which lost nearly 897,000 traditional video customers between DirecTV and AT&T U-verse.
  • The big percentage loser is Frontier that lost almost 6% of its cable customers in the quarter.
  • The big cable companies fared the best, but still lost 1.3% of their customer base in the quarter.
  • Satellite TV continues to dive and lost more than 4% of customers in the quarter.

Leitchman speculated that the magnitude of the losses could be due to the impact of COVID-19. However, the story seems to be a bit more complex than that. Several of the big companies reported about the same level of disconnects as in recent quarters but saw a big drop-off in new customers buying service. It’s worth noting that the above losses were experienced even while these same companies saw an increase of over 1 million new broadband customers in the same quarter- the best growth in broadband since 2015.

The full impact of COVID-19 will likely be seen in the next quarter. There has to be an impact from over 23 million newly unemployed people this year, as of mid-May. Cutting cable is one of the most obvious ways for a household to save money.

There may be evidence that COVID-19 had an impact by the end of March. Leichtman also tracks the subscribers of the online TV services that are owned by the above companies. Collectively, there was a loss of 319,000 customers by Hulu Live, Sling TV, and DirecTV Now. Additionally, Paystation Vue exited the market in the first quarter. However, YouTube TV is reported to be growing and had over 2 million customers by the end of February.

Losses of this magnitude have to be rolling downhill in the industry. These losses mean a lot lower revenues for cable TV networks. It means a lot less franchise revenues for local governments. It means lower advertising revenues from loss of eyeballs.

Dish – the Newest Cellular Carrier

One of the primary reasons that the T-Mobile and Sprint merger got approved was the agreement that Dish Networks will become the fourth nationwide cellular carrier. Now that the merger has been completed, Dish is off and running to take the steps needed to launch a new nationwide 5G network.

Dish is preparing to launch the cellular business with a lot of spectrum. The company is already sitting on 600 MHz and 700 MHz spectrum that covers most of the country. The company also owns blocks of 1,700 MHz AWS spectrum that is the workhorse in cellular networks. As part of the merger arrangement, Dish is purchasing Sprint’s 800 MHz spectrum.

The company envisions a new ‘virtual’ network that will be 100% software-driven, which would give the company the most modern cellular network in the country. If the network can be built quickly enough, the company should have an advantage for speed-to-market as new 5G features are introduced into the cellular network.

Like with any new venture, the company’s biggest challenge is going to be cash. Dish already paid T-Mobile $1.4 billion for the prepaid cellular company Boost Mobile. Dish is also paying $3.6 billion for the 800 MHz spectrum from Sprint. Meanwhile, Dish’s existing core satellite business continues to lose customers and revenues – the company lost 511,000 customers in 2019, and another 132,000 in the first quarter of this year – that’s 6.5% of its customer base.

Dish faces an immediate liquidity problem that has become complicated by the COVID-19 crisis. The company had enough cash on hand to pay off debt of $1.1 billion that will be due in May. But the company still faces debt retirements of $2 billion due in both June 2021 and 2022. Additionally, the company needs to raise an estimated $9 billion to build the new cellular network. The company needs to raise at least several billion in equity in a hurry if it wants to attract the needed new debt. That will be challenging due to the COVID-19 crisis as many big investors are sitting on the sidelines waiting for the markets to stabilize.

To really complicate things, Dish is operating under a tight time clock. As part of the merger agreement, Dish agreed to build over 15,000 cell sites by June 2023 that will cover 70% of the US population. That commitment not only requires Dish to raise the needed funds, but to get major construction started while the country is dealing with the COVID-19 crisis. The company faces fines of up to $2 billion for failure to meet that commitment. Dish has been battling with the FCC for years due to its failure to use its spectrum holding, so the deal comes with the tight timeline to ensure that the spectrum finally gets used to serve customers.

One of the interesting challenges the company faces is getting onto existing towers. Many of the most desirable urban towers are already full. It seems logical that T-Mobile will be decommissioning duplicative Sprint tower space over time, but that’s not something that will happen overnight, particularly with the COVID-19 crisis. It also seems likely that Dish will get caught up by the various supply chain issues that are cropping up everywhere in the industry due to the coronavirus.

Anybody who has ever launched a new broadband venture knows the other challenges facing the company. All of this growth much be done by a company that is just now hiring the staff who will pull it off. Deploying to 15,000 cellular sites in two years would be an intimidating challenge for any existing cellular company, and the idea of being nimble with a company that is adding the needed staff during the build-out period is frankly scary. Dish will obviously have to rely on outsourcing a lot of the cell site acquisition and construction – but in an industry that already has full employment, there aren’t hordes of skilled technicians sitting on the sidelines waiting for work. One of the key positions that is massively short-handed nationwide is experienced tower climbers.

Every detail of making this work is an intimidating task. For example, the company will need to arrange for 15,000 fiber backhaul connections to provide the needed bandwidth. Dish will have to conduct 15,000 load analyses on towers – something that is unique to each tower and that is done to make sure a tower can safely accommodate the new dishes and that the tower will hold up in windy conditions. Dish also needs to build one or more gigantic network operations centers to operate the new network. I can’t recall any equally ambitious telecom project.

Cellular customers everywhere should be rooting for the company to pull this off. Dish president Charlie Ergan has promised to compete vigorously on price to win market share – something that will be good for customers even if they don’t change to Dish.

The chances are high that the company won’t make its June 2023 deadline. The already overaggressive business plan will be further complicated by COVID-19 issues which likely means it will take longer to raise the needed money while dealing with issues like dealing with social distancing for the staff and supply chain delays. If the company meets some decent percentage of the plan, I hope the FCC will let them off the hook for fines. The country could use a new cellular network, particularly one that is technically superior to the other carriers and that wants to set low prices.

Home Broadband Usage Explodes

ISPs have all been reporting increased bandwidth usage due to employees and students being asked to work from home during the COVID-19 pandemic. Perhaps the best proof we’ve seen yet of the huge increase in home broadband usage comes from OpenVault, which has been tracking home broadband usage for several years.

The company reported that as of the end of March that the average US home used 402.5 gigabytes of usage, up 17% from the 344.0 gigabytes reported just 3 months earlier at the end of 2019, and up 47% from the 273.5 gigabytes measured a year earlier. OpenVault says that most of the growth was realized in the last two weeks of March as employees and students started working from home in earnest.

The OpenVault numbers represent total bandwidth used by a home, meaning the numbers are a combination of download and upload usage. OpenVault validated the widely reported phenomenon that the demand for upload bandwidth is increasing far more than the need for downloading.

Another interesting way to look at broadband usage is by considering the median usage – which is the speed at which half of homes use more and half less broadband. The median broadband usage is the US has always been lower than average usage because of the large number of rural homes that are stuck using slow broadband connections. A home with a 1 Mbps download speed cannot easily use the same amount of bandwidth as a home with a 100 Mbps connection. Median usage for the first quarter was at 233.6 gigabytes, up 60% from 146.0 gigabytes from a year earlier, and up 22% from the 190.7 gigabytes used at the end of 2019. The big news in the growth of median speeds is that even homes with slower broadband connections are burning through more broadband.

One of the most startling numbers to come from OpenVault is what they call power users – homes that are using more than 1 terabyte of data per month. At the end of March, 10% of all US homes were using a terabyte of data, an increase of 138% over the 4.2% of homes that used a terabyte of data just three months earlier at the end of 2019. Even more interesting, 1.2% of homes used 2 terabytes of data at the end up march, up 215% from the end of December. The big ISPs like Comcast are supposedly not billing for data caps during the pandemic – but they must be licking their chops at the flood of new revenues this is going to create if broadband usage doesn’t return to pre-COVID levels.

We saw the demand for faster broadband products also leap upward. At the end of March the percentage of homes subscribing to gigabit data products jumped to 3.75% of homes, up from 2.8% at the end of 2019 and up from 1.9% a year earlier. Amazingly, more than 1% of all homes in the US upgraded to a gigabit data plan in just the last three months – that’s something that’s been predicted for years. Those homes are not likely going to downgrade to slower speeds – so gigabit broadband is now becoming a significant segment of the market. OpenVault says that 12% of US homes now subscribe to speeds of 200 Mbps or faster.

The OpenVault data also validates what’s been reported widely by ISPs – that the patten of broadband usage is changing by time of day. In the recent past the peak period for broadband usage – the busy hour – was always in the evenings. In the first quarter the amount of usage in the evenings was flat and all of the increased usage came during the daytime as employees and students used broadband and video conferences to function.

OpenVault says that usage peaked in the third week of March. It will be interesting going forward to see the how home usage changes. OpenVault doesn’t have any better crystal ball than the rest of us, but they are predicting that broadband usage will never return to the historic patters. They predict that a lot of people will continue to work from home, meaning increased broadband demand during the day. They believe there will be continued pressure on the upload data paths. People who have learned to videoconference during the recent months are likely to continue that practice in the future. Companies and employees that realize they can be productive at home are likely to work more from home, even if only on a part-time basis.

Who Owns Your Connected Device?

It’s been clear for years that IoT companies gather a large amount of data from customers. Everything from a smart thermometer to your new car gathers and reports data back to the cloud. California has tried to tackle customer data privacy through the California Consumer Privacy Act that went into effect on January 1.

Web companies must provide California consumers the ability to opt-out from having their personal information sold to others. Consumers must be given the option to have their data deleted from the site. Consumers must be provided the opportunity to view the data collected about them. Consumers also must be shown the identity of third parties that have purchased their data. The new law defines personal data broadly to include things like name, address, online identifiers, IP addresses, email addresses, purchasing history, geolocation data, audio/video data, biometric data, or any effort made to classify customers by personality type or trends.

However, there is one area that the new law doesn’t cover. There are examples over the last few years of IoT companies making devices obsolete and nonfunctional. Two examples that got a lot press involve Charter security systems and Sonos smart speakers.

When Charter purchased Time Warner Cable, the company decided that it didn’t want to support the home security business it had inherited. Charter ended its security business line earlier this year and advised customers that the company would no longer provide alarm monitoring. Unfortunately for customers, this means their security devices become non-functional. Customers probably felt safe in choosing Time Warner Cable as a security company because the company touted that they were using off-the-shelf electronics like Ring cameras and Abode security devices – two of the most common brands of DIY smart devices.

Unfortunately for customers, most of the devices won’t work without being connected to the Charter cloud because the company modified the software to only work in a Charter environment. Customers can connect some of the smart devices like smart thermostats and lights to a different hub, but customers can’t repurpose the security devices, which are the most expensive parts of most systems. When the Charter service ended, homeowners were left with security systems that can’t connect to a monitoring service or law enforcement. Charter’s decision to exit the security business turned the devices into bricks.

In a similar situation, Sonos notified owners of older smart speakers that it will no longer support the devices, meaning no more software upgrades or security upgrades. The older speakers will continue to function but can become vulnerable to hackers. Sonos offered owners of the older speakers a 30% discount on newer speakers.

It’s not unusual for older electronics to become obsolete and to no longer be serviced by the manufacturer – it’s something we’re familiar with in the telecom industry. What is unusual is that Sonos told customers that they cannot sell their older speakers without permission from the company. Sonos has this ability because the speakers communicate with the Sonos cloud. Sonos is not going to allow the old speakers to be registered by somebody else. If I was a Sonos customer I would also assume this to mean that the company is likely to eventually block old speakers from their cloud. The company’s notification told customers that their speakers are essentially a worthless brick. This is a shock to folks who spent a lot of money on top-of-the-line speakers.

There are numerous examples of similar incidents in the smart device industry. Google shut down the Revolv smart hub in 2016, making the device unusable. John Deere has the ability to shut off farm equipment costing hundreds of thousands of dollars if farmers use somebody other than John Deere for service. My HP printer gave me warnings that the printer would stop working if I didn’t purchase an HP ink-replacement plan.

This raises the question if consumers really own a device if the manufacturer or some partner of the manufacturer has the ability at some future time to shut the device down. Unfortunately, when consumers buy smart devices they never get any warning of the rights of the manufacturer to kill the devices in the future.

I’m sure the buyers of the Sonos speakers feel betrayed. People likely expect decent speakers to last for decades. I have a hard time imagining somebody taking Sonos up on the offer to buy new speakers at a discount to replace the old ones because in a few years the company is likely to obsolete the new speakers as well. We all have gotten used to the idea of planned obsolescence. Microsoft stops supporting older versions of Windows and users continue to use the older software at their risk. But Microsoft doesn’t shut down computers running old versions of Windows as Charter is doing. Microsoft doesn’t stop a customer from selling a computer loaded with Windows 5 to somebody else, as Sonos is doing.

These two examples provide a warning to consumers that smart devices might come with an expiration date. Any device that continues to interface with the original manufacturer through the cloud can be shut down. It would be an interesting lawsuit if a Sonos customer sues the company for essentially stealing their device.

It’s inevitable that devices grow obsolete over time. Sonos says the older speakers don’t contain enough memory to accept software updates. That’s probably true, but the company went way over the line when they decided to kill old speakers rather than let somebody sell them. Their actions tell customers that they were only renting the speakers and that they always belonged to Sonos.