Fixed Wireless and CAF II

Bill Smith, the President of Technology Operations at AT&T just announced that the company will use fixed wireless to meet CAF II requirements when it is ‘uneconomical to build wireline’. The CAF II requirements are that AT&T (and every other large telco that took the funding) must provide 10/1 Mbps broadband to everybody within defined rural geographical areas. The FCC awarded the telcos billions of dollars over 6 years to complete the upgrades.

On the day I first read of the CAF II awards I expected that AT&T and some of the other telcos would use wireless to fulfill the obligations. I am very familiar with a lot of the rural areas where the CAF II money was awarded and I know it would take a lot more money than what the FCC was providing to build broadband to these areas that have little or no broadband today.

There are only a few technological approaches that can be considered in the rural areas covered by CAF II:

• Fiber is the ultimate broadband delivery mechanism, but there is no chance that any of the big telcos will build rural last-mile fiber to satisfy this requirement. I’ve looked at some rural counties recently where the cost to build fiber can be 5 – 10 times more than what CAF II is providing.
• Expanded DSL. Most of the CAF II areas have either no DSL or incredibly slow DSL where the customers are too far from the DSL hub. The only way to bring 10/1 DSL to rural America is to build a lot of fiber deep into rural areas and then initiate the DSL out in the hinterlands. This is also expensive, but because it keeps the existing copper lines it costs a lot less than building fiber everywhere.
• Point-to-Multipoint Wireless. In this technology transmitters are put onto towers and where the 3.65 GHz spectrum is available can deliver 10 Mbps or more up to perhaps 6 miles. The distance are only out to about 4 miles at most if using WiFi spectrum. There are several problems with this technology. First, existing towers are sometimes scarce in rural areas and this means building new towers. Second, this isn’t a great solution where there are a lot of trees or a lot of hilly terrain. It’s a great solution in the plains, not so great in Appalachia. Finally, this equipment has a life-cycle of perhaps 7 – 10 years before it has to be replaced. After the CAF II funds are spent and this equipment wears out it might mean that in decade that customers on this technology will revert to no broadband.
• Cellular Data. This is data delivered using licensed spectrum and AT&T has a mountain of it, and in rural areas this spectrum is largely unused. But to get 10/1 speeds everywhere means building new towers, and probably fiber to reach those towers.

Most people think of cellular data as something that only works on cellphones. But there are all sorts of devices that can receive cellular bandwidth, such as phones and data modems that work directly from cellular signals.

But the biggest issue with the cellular solution isn’t technological. As long as somebody is close enough to a cell site it will work (with the caveat that if the cell site is too busy a user might get no signal). The real issue is price. If AT&T is going to price fixed data similarly to cellular data, then this is not a broadband solution. Cellular broadband in the US is about the most expensive broadband in the developed world. At an average cost of about $8 per downloaded gigabit of data, it doesn’t take much for a normal household to rack up huge bills.

Comcast recently said that their average customer download is around 100 gigabits per month. At cellular prices that would cost $800 to $1,000 a month, which is not what the FCC had in mind for CAF II. There are many homes in rural America already using their cellphones for data. I recently talked to a rural household that sees bills of $500 per month in the summer when the kids are home all of the time – and that’s with constantly telling the kids to stay off broadband.

AT&T has a dilemma if they sell their cellular data to cellphone users at today’s high prices but sell it to fixed broadband customers at a lower price. Since fixed data customers will use a lot more data if it’s not too expensive, this will kill their argument that cellular data needs to be so expensive due to congestion at the towers. So I’ll be very interested to see how AT&T’s plan is implemented. I hope that if AT&T implements their first CAF II market at cellular data prices that the FCC pulls the plug on the rest of the funding. And if AT&T offers cellular data for CAF II customers at a reduced rate then all of their cellphone customers ought to raise holy hell.