Is 5G Really a Fiber Replacement?

I recently saw a short interview in FierceWireless with Balan Nair, CTO of Liberty Global. In case you haven’t heard of the company, they are the biggest cable company in the world with over 28 million customers.

One of the things he discussed was the practical widespread implementation of 5G gigabit technology. He voiced the same thing I have been thinking for the last year about the economics of deploying 5G. He was quoted as saying, “5G will be a ‘game-changer’ in its superior ability to transfer data, but the technology will not replace fixed-network broadband services anytime soon. The economics just aren’t there. You’re talking about buying hundreds of towers and all of that spectrum. And on the residential end, putting a device outside the window and wiring it back into the home. It’s a question of business model and if you plan on making any money. The economics benefit fixed.”

The big telcos are making a big deal out of 5G, mostly I think to appear cutting-edge to their investors. And I have no doubt that in certain places like dense urban downtowns that 5G might be the best way to speed up gigabit broadband deployment. But I look at what’s involved in deploying the technology anywhere else and I have a hard time seeing the economic case for using 5G to bring fast broadband to the masses.

5G will definitely make an impact in urban downtowns. You might assume that cities already have a great fiber infrastructure, but this often isn’t the case. Look at Verizon’s FiOS deployment strategy in the past – they deployed fiber where the construction was the most cost effective, and that meant suburban areas where they had existing pole lines or conduit. Verizon largely avoided much of the downtowns of eastern cities because the cost per mile of fiber construction was too expensive.

Now, 5G can be deployed from the top of high-rises to reach the many downtown buildings that never got fiber. New York City recently sued Verizon since the company reneged on its promise to build fiber everywhere and there are still 1 million living units in the city that never got fiber broadband. Verizon, or somebody else is going to be able to use 5G in the densely populated cities to bring faster broadband, and as Nair said, this might be a game changer.

But as soon as you get out of downtowns and high-rises the math no longer favors 5G. There are three components of a 5G network that are not going to be cheap in suburbia. First, 5G needs fiber. You might be able to use a little wireless backhaul in a 5G network, but a significant portion of the network must be fiber fed. And in most of the country that fiber is not in place. Deloitte recently estimated that the cost for just the fiber to bring 5G everywhere is $130 billion. There is nobody rushing to make that investment.

5G then needs somewhere to place the transmitters. This is more easily achieved in a downtown where there are many tall rooftops and existing towers. But the short delivery distances for millimeter wave frequencies mean that transmitters need to be relatively close the end-user. And in suburban areas that’s going to mean somehow building a lot of new towers or else placing smaller transmitters on existing poles. We know suburbia hates tall towers and it’s always a struggle to build new ones. And the issues associated with getting access to suburban poles are well documented. An ISP needs to affordably get onto poles and also get fiber to those poles – two expensive and time-consuming challenges.

And then there is the economics of the electronics. Because millimeter wave spectrum is easily disrupted by foliage or any impediments it means that there won’t be too many homes served from any one pole-mounted transmitter. But the 5G revenue stream still has to cover both ends of the radios as well as wiring into the home.

I build a lot of landline business plans and I can’t see this making any economic sense for widespread deployment. In many cases this 5G network might be more expensive and slower to deploy than an all-fiber network.

I instead envision companies using 5G technology to cherry pick. There will be plenty of places where there is existing fiber and poles that can be used to serve suburban apartment complexes or business districts. I can see strategic deployment in those areas and the technology used in the same way that Verizon deployed fiber – 5G will deployed only where it makes sense. But like with FiOS, there are going to be huge areas where there will be no 5G deployment, even in relatively dense suburbia. And the business case for rural America is even bleaker. 5G will find a market niche and will be one more technology tool for bringing faster broadband – where it makes economic sense.

The End of the Free Web

The web model of using advertising revenues to pay those who create content is quickly breaking down and it’s going to drastically change the free web we are all used to. It feels like a lot longer, but the advertising web model has now been operating for only twenty years. Before that people and companies built web sites and posted content they thought was interesting, but nobody got compensated for anything on the web.

But then a few companies like AOL discovered that companies were willing to pay to place advertising on web pages and the web advertising industry was born. Today news articles and other content on the web are plastered with ads of various kinds. And it is these ads that have funded the new industry of web content providers. These are now numerous web magazines and other websites that are largely funded by the revenues from ads. Most of the news articles you read on the web have been funded from the ad revenues.

But ad revenue of this kind are disappearing and this is likely going to mean a major transformation of the web in the near future. Here are some of the main reasons that ad revenues are changing:

  • People have changed the way that they find and read content. Twenty years ago we all had a list of our favorite bookmarked sites and we would peruse those web sites from time to time to catch up on their content. But today the majority of people get their content through an intermediate platform like Facebook, Twitter or Google. These platforms learn about your tastes and they direct articles of interest to you. We no longer search for content, but rather content finds us.
  • And that means that the big platforms like Facebook control the flow of content. A few years ago Facebook reacted to user complaints that their feeds were too long and busy and the company reacted to this by only flowing a percentage of potential content to users. That meant that a person might not see that an old high school friend bought a new puppy, but it also meant that each user on Facebook saw fewer web articles. The impact from this change was dramatic to web publishers, who on average saw a 50% immediate drop in their revenue from Facebook.
  • Meanwhile the big platforms decided that they should keep more advertising revenue and they are now promoting content directly on their platform. For example, Facebook now pays people to create content and Facebook favors this over content created elsewhere – which has further decreased ad revenues.
  • Advertisers have also gotten leery about the web advertising environment. This has worked using instantaneous auctions where web sites bid for advertising slots. Web sites willing to pay the most get the best advertising content, but the automated selling platforms strives to place every ad somewhere on the web. This resulted in large companies getting grief after finding their ads on unsavory web sites. Big companies were not enamored in finding that they were advertising on sites promoting racism or radical political views. So the big companies have been redirecting their advertising dollars away from the auction-driven ad system and have instead been placing ads directly on ‘safer’ sites or directly on the big web platforms. Google and Facebook together now collect the majority of web advertising.
  • There has also been a huge growth in ad blockers. People use ad blockers in an attempt to block many of the obnoxious ads – those that pop up and interrupt with reading content. But using ad blockers also deprive revenue for those sites that any user most values. While only miniscule amounts of money flow from each ad view, it all adds up and ad blockers are killing huge numbers of views.
  • The last straw is that web browsers are starting to block ads automatically. For example, the new version of Chrome will block ads by default. Soon, anybody using these browsers will be free of auction-generated ads, but in doing so will kill even more ad revenues that have been paying those that create the content that people want to read.

We are already seeing what this shift means. We are seeing content providers now asking readers to directly contribute to help keep them in business. More drastically we are seeing a lot of the quality content on the web go behind paywalls. That content is only being made available to those willing to subscribe to the content. And we are seeing a drop in new quality content being created since many content creators have been forced to make a living elsewhere.

But the quiet outcome of this is that a huge chunk of web content is going to disappear. This probably means the death of content like “The ten cutest puppies we found this week”, but it also means that writers and journalists that have been compensated from web advertising will disappear from the web. We’ll then be left with the content sponsored by the big platforms like Facebook or content behind paywalls like the Washington Post. And that means the end of the free web that we all love and have come to expect.

Lowering the Official Speed of Broadband

The FCC’s intention to kill net neutrality is getting all of the headlines, but there is another quieter battle going on at the FCC that has even bigger implications for rural America.

The last FCC under Chairman Tom Wheeler raised the definition of broadband in 2015 to 25/3 Mbps, up from the archaic definition of 4/1. In doing so the FCC set the speed based upon the way that an average household uses broadband. At the time many people argued that the FCC’s way of measuring broadband need was somewhat contrived – and perhaps it was because it’s really a challenge to define how much broadband a home needs. It’s not as easy as just adding up the various web connections as I described in a recent blog.

The FCC is now considering lowering the definition of broadband down to 10/1 Mbps. That would be a dagger to the heart of rural broadband, as I will discuss below.

One only has to look at the big ISPs to see that the FCC is ignoring the realities of the market. The big cable companies have all set minimum broadband speeds above the 25/3 Mbps current FCC broadband definition. Charter’s base broadband product for a new customer is 60 Mbps. Depending upon the market Comcast’s base speeds are 50 Mbps or 75 Mbps. AT&T says they are starting to back out of their DSL business because their fastest U-verse product only has speeds up to 50 Mbps. These big ISPs all get it and they know that customers are only happy with their broadband connection when it works without problems. And providing more speed than 25/3 Mbps is how these companies are satisfying that customer demand.

Unfortunately the FCC’s definition of broadband has huge real life implications. The big urban ISPs won’t change what they are doing, but a lower threshold could kill attempts to improve rural broadband. The FCC has a mandate from Congress to take steps to make sure that everybody in the country has adequate broadband. When the FCC increased the definition to 25/3 Mbps they instantly recognized that 55 million people didn’t have broadband. And that forced them to take steps to fix the problem. Since 2015 there has been a lot of rural broadband construction and upgrades made by cable networks in small town America and the latest estimates I’ve seen say that the number of those without 25/3 Mbps broadband is now down to around 39 million. That’s still a lot of people.

If the current FCC lowers the definition to 10/1 Mbps then many of those 39 million people will instantly be deemed to have broadband after all. That would take the FCC off the hook to try to solve the rural broadband gap. To really show that this is just a political decision, the FCC is also contemplating counting a cellular broadband connection as an acceptable form of broadband. In doing so they will then be able to declare that anybody that can get this new slower speed on a cellphone has an adequate broadband solution.

Of course, when I say this is all just politics there are those that said the same thing when the Wheeler FCC raised the definition to 25/3 Mbps. At that time critics might have been right. In 2015 there were a lot of homes that were happy with speeds less than 25/3 Mbps and that definition might have been a little bit of a stretch for the average home.

But when you take all of the politics out of it, the reality is that the amount of broadband that homes need keeps growing. Any attempt to define broadband will be obsolete within a few years as broadband usage continues on the path of doubling every three years. A home that needed 15 or 20 Mbps download in 2015 might now easily need more than 25/3 Mbps. That’s how the math behind geometric growth is manifested. .

It is disheartening to see the FCC playing these kinds of political games. They only need to go visit any rural kid trying to do homework to understand that 10/1 Mbps broadband on a cellphone is not broadband. The FCC only needs to go talk to somebody in rural America who can’t take a good-paying work-at-home job because they don’t have good broadband. They only need to go and talk to farmers who are losing productivity due to lack of a good broadband connection. And they only need to talk to rural homeowners who can’t find a buyer for their home that doesn’t have broadband.

This is too critical of an economic issue for the country to let the definition of broadband change according to the politics of the administration in office. Rather than political haggling over the official definition of broadband we ought to try something new. For example, we could set a goal that rural America ought to at least have half of the average speeds of broadband available in urban America. Using some kind of metric that people can understand would take the politics out of this. This is a metric that companies like Akamai already quantify and measure. The amount of broadband that homes needs is a constantly growing figure and pinning it down with one number is always going to be inadequate. So maybe it’s time to remove politics from the issue and make it fact based.

Maybe Coops are the Answer

I’ve been talking with a lot of rural counties lately and also with rural service providers. For the vast majority of rural broadband projects the biggest roadblock to getting started is almost always funding. Building fiber-to-the-home or even fiber backbones to extend fiber deeper into rural communities is expensive and there are not a lot of funding sources ready to support fiber projects. But there is one business structure that can sometimes make financing a little easier and perhaps it is time for more communities to consider forming a cooperative as a way to get a broadband solution.

Cooperatives are governed under federal law by the Capper Volstead Act. There are also state laws governing coops that differ a bit from state to state, but are mostly the same everywhere. A cooperative is a legal entity owned and controlled by its members and members generally are also the consumers of its products or services. Cooperatives are typically based on the cooperative values of self-help, self-responsibility, community concern, and caring for others. Cooperatives generally aim to provide their goods or services at close to cost and any excess earnings are generally required by law to be reinvested in the enterprise or returned to individual patrons based on patronage of the cooperative.

There are several advantages of coops that make them worth considering:

  • Coops are corporations and not municipal entities. Coops ought to be exempt from all of the many state laws that prohibit or discourage municipal ownership of broadband networks. If you’re in a place that makes it hard to create a municipal broadband solution then a cooperative might be a great alternative.
  • Cooperatives don’t have the same profit-motive as privately-owned entities. From a financing perspective this makes them look more like a municipal venture in that a coop is happy with cash flows that cover costs rather than having to also make a profit.
  • Cooperatives often have some tax advantages over other kinds of corporations. For example, ‘profits’ from serving their customers is often income-tax free. This can vary by state, but for the most part cooperatives pay little income taxes as long as they focus only on serving their own members.
  • The typical financing sources for broadband are used to working with cooperatives. The RUS, part of the Department of Agriculture has a long history of lending to cooperatives. CoBank, a bank that is part of the US Farm Credit System was established specifically to loan to agricultural, electric and telecom cooperatives. While the RUS was tasked a number of years ago to include municipalities under their umbrella, the nuances of that program make it nearly impossible for a municipality to borrow from them.
  • Cooperatives have a unique funding source that is not available to anybody else. Coops are allowed to loan excess cash to each other and I’ve seen new coops get low, or even zero interest loans from other cooperatives to help them get started. Many older electric and agriculture coops sit on big cash reserves that they might consider lending – particularly when the new telecom cooperative covers the same member territory.

But as you might expect, there are other issues that present challenges for new cooperatives:

  • Any lender to a new fiber venture is going to want to see some equity put into a new venture so that it is not 100% financed. It can be more of a challenge for a cooperative to raise equity compared to a commercial company because there is no way to guarantee that such equity will earn a good return or that it can be returned in any reasonable time frame. So this basically means that an equity drive means asking prospective members in the community for money. I’ve seen a few cooperatives get started and it can be done – but it’s not easy.
  • Cooperatives are governed by Boards elected from the membership base. Existing coops hire employees to operate the business and these employees provide the technical expertise that makes lenders trust lending to the business. But until a new cooperative is funded and can hire those employees there is a classic chicken-and-egg dilemma in that a lender can’t be positive that the cooperative knows how to operate their business.
  • The local acceptance of the cooperative idea varies by region. In some places in the Midwest a majority of local businesses are cooperatives, but there are other places where there are few if any cooperatives.

There are many situations where a cooperative might be the only reasonable operating structure for a rural area to get the broadband they want. If a community is not finding any solutions from a commercial provider and is unable to provide municipal funding, then a cooperative is well worth considering.

Measuring Mobile Broadband Speeds

I was using Google search on my cellphone a few days ago and I thought my connect time was sluggish. That prompted me to take a look at the download speeds on cellular networks, something I haven’t checked in a while.

There are two different companies that track and report on mobile data speeds, and the two companies report significantly different results. First is Ookla, which offers a speed test for all kinds of web connections. Their latest US speed test results represent cellphone users who took their speed test in the first half of this year. Ookla reports that US cellular download speeds have increased 19% over the last year and are now at an average of 22.69 Mbps. They report that the average upload speeds are 8.51 Mbps, an improvement of 4% over the last year. Ookla also found that rural mobile broadband speeds are 20.9% slower at urban speeds and are at an average of 17.93 Mbps.

The other company tracking mobile broadband speeds reports a different result. Akamai reports that the average cellular download speed for the whole US was 10.7 Mbps for the first quarter of 2017, less than half of the result shown by Ookla.

This is the kind of difference that can have you scratching your head. But the difference is significant since cellular companies widely brag about the higher Ookla numbers, and these are the numbers that end up being shown to regulators and policy makers.

So what are the differences between the two numbers? The Ookla numbers are the results of cellphone users who voluntarily take their speed test. The latest published numbers represent tests from 3 million cellular devices (smartphones and tablets) worldwide. The Akamai results are calculated in a totally different way. Akamai has monitoring equipment at a big percentage of the world’s internet POPs and they measure the actual achieved speeds of all web traffic that comes through these POPs. They measure the broadband being used on all of the actual connections they can see (which in the US is most of them).

So why would these results be so different and what are the actual mobile broadband speeds in the US? The Ookla results are from speed tests, which last less than a minute. So Ookla speed test measures the potential speed that a user could theoretically achieve on the web. It’s a test of the full bandwidth capability of the connection. But this is not necessarily the actual results for cellphone users for a few reasons:

  • Cellphone providers and many other ISPs often provide a burst of speeds for the first minute or two of a broadband connection. Since the vast majority of web events are short-term events this provides users with greater speeds than would be achieved if they measured the speed over a longer time interval. Even with a speed test you often can notice the speed tailing off by the end of the test – this is the ‘burst’ slowing down.
  • Many web experts have suspected that the big ISPs provide priority routing for somebody taking a speed test. This would not be hard to do since there are only a few commonly used speed test sites. If priority routing is real, then speed test results are cooked to be higher than would be achieved when connecting to other web sites.

The Akamai numbers also can’t be used without some interpretation. They are measuring achieved speeds, which means the actual connection speeds for mobile web connections. If somebody is watching a video on their cellphone, then Akamai would be measuring the speed of that connection, which is not the same as measuring the full potential speed for that same cellphone.

The two companies are measuring something totally different and the results are not comparable. But the good news is that both companies have been tracking the same things for years and so they both can see the changes in broadband speeds. They also both measure speeds around the world and are able to compare US speeds with others. But even that makes for an interesting comparison. Ookla says that US mobile speed test results are 44th in a world ranking. That implies that the mobile networks in other countries make faster connections. Akamai didn’t rank the countries, but the US is pretty far down the list. A lot of countries in Europe and Asia have faster actual connection speeds than the US, and even a few countries in Africa like Kenya and Egypt are faster than here. My conclusion from all of this is that ‘actual’ speeds are somewhere between the two numbers. But I doubt we’ll ever know. The Akamai numbers, though, represent what all cell users in aggregate are actually using, and perhaps that’s the best number.

But back to my own cellphone, which is what prompted me to investigate this. Using the Ookla speed test I showed a 13 Mbps download and 5 Mbps upload speed. There was also a troublesome 147 ms of latency, which is probably what is accounting for my slow web experience. But I also learned how subjective these speeds are. I walked around the neighborhood and got different results as I changed distances from cell towers. This was a reminder that cellular data speeds are locally specific and that the distance you are from a cell site is perhaps the most important factor in determining your speed. And that means that it’s impossible to have a meaningful talk about mobile data speeds since they vary widely within the serving area of every cell site in the world.

What I Believe

Doug Dawson, 2017

I’ve been espousing a number of opinions lately in my blog postings about rural broadband and I thought it would be a useful exercise for myself to list what I believe about the rural broadband situation in the US. So please humor me a bit today while I summarize my beliefs.

I believe that the lack of broadband in rural America is approaching a crisis. There are millions of homes with no broadband, meaning that these homes can’t partake in modern on-line society. It’s becoming very clear that kids without broadband are at an educational disadvantage. Homes without broadband can’t be part of the new information work-at-home economy. It’s easy to think that lack of broadband is an isolated or local issue, but, when plotted on the map, most of the geographic area of the entire country has poor or no broadband.

And the issue is not just homes without broadband as there are many millions of other homes with poor broadband. There are homes limping by with slow DSL, sometimes not much faster than dial-up. There are numerous homes served by rural WISPs using wireless technology that is not fiber-fed and is only delivering a few Mbps. There are a lot of homes using satellite broadband which is costly, has latency that doesn’t allow for any real-time activity and which has miserly data caps. Finally there are homes spending hundreds of dollars per month using their cellphones as hotspots and paying the outrageously expensive prices for cellular gigabytes.

I believe that those regions without broadband will fall drastically behind. Families with kids won’t want to live there and homes in such areas will lose value. People will abandon these broadband dead zones over time and we will begin to create broadband deserts. This will inevitably create a huge drag on the US economy as rural America falls behind and withers away.

I also believe that fiber is the only real long-term solution to rural broadband – lots of fiber. The constant press about 5G wireless has convinced many that our broadband future is wireless. This might come to pass in dense urban areas, but for the 5G technology to work in a rural setting it will require almost the same amount of fiber as a FTTP network. So we need a lot of rural fiber construction even if the future delivery to the home might be wireless.

I believe that any government effort to help rural broadband needs to be spent building fiber. Today the FCC is spending a lot of money to beef up large telco DSL and cellular broadband, and these efforts are doomed to fail in rural areas. Families will be initially happy to get a 10 Mbps connection after having no broadband, but it will soon become obvious that this is not the same broadband that everybody else has. And within a decade or so a 10 Mbps connection will feel as obsolete as a 1-2 Mbps connection feels today. The CAF II DSL and cellular broadband upgrades are temporary band-aids that don’t solve the rural broadband gap.

I believe that any willing entity ought to be allowed to tackle the rural broadband gap. The successful efforts by the large telcos and cable companies to keep municipalities from building broadband in many states stinks of corruption. The large ISPs have spent millions lobbying to get anti-municipal laws passed while demonstrating that they are not willing to invest their own money in rural America. A rural county that needs broadband ought to be able to tackle the problem if they are willing to pay for it. Almost no rural municipality wants to tackle this and be the service provider. I am a huge fan of public private partnerships and see a lot of them being formed – but not every rural place in the country has a willing commercial partner and should not be penalized due to their geographic happenstance.

I believe we ought to remove any other roadblocks to solving the rural broadband crisis. We need to repeal any state or local regulations that make it harder and more expensive to build fiber. This means making it a lot easier to get onto poles and requiring pole owners and existing utilities to cooperate. This means not layering on rules for grant funding that require environmental reviews for long-established public rights-of-way. It means not requiring rural broadband projects to have to pay prevailing urban wages for rural construction. It means eliminating burdensome permitting and other rules that can slow down projects and add to costs.

I believe that government needs to play a role in solving the rural broadband crisis. One only has to look at a few successful state programs like the DEED grants in Minnesota that are being used to successfully help fund rural fiber networks. Government played a huge role years ago in making sure that the whole country got electricity and telephone service. I hope we have not grown too partisan and jaded to recognize that we need to step up and do the same thing for rural broadband. Government investments made in those earlier ventures like electrifying America literally paid back the initial government outlay hundreds of times over through the new taxes generated by the beneficiaries.

I believe we have to find a way to make it easier for those that want to invest in rural broadband to borrow the needed money. I often see that finding funding is the number one roadblock to rural fiber projects. Banks no longer make long-term infrastructure investments. We have one federal funding source at the Rural Utilities Service (RUS) that makes loans for broadband – but that system is broken. The RUS has a huge backlog of loan applications and the loan process takes too long. And the process has still not been made friendly to municipalities or start-ups and mostly only funds established telcos and electric coops. We need something new or something better to help fund rural broadband.

And finally, I believe we can do better. I believe that most Americans, including those that live in cities, understand that every part of the country should be connected together with the web. This is not a partisan issue and I’ve never met a rural politician of any political affiliation who doesn’t understand the need for rural broadband. I just wish that I could believe right now that the FCC, the Congress, the big banks and others will do the right things necessary to fix the problem – but I am afraid I am not optimistic.

Are You Texting Your Customers?

In the last year I’ve found all sorts of my outside interactions now involve texting. I get texts from the dentist affirming an appointment, texts from a furniture company making sure I was home during a delivery, and texts from AT&T wireless for my cellular billing. All these various businesses have found that texting saves them money. Yet I have only a few ISP clients that make wide use of texting. I find that a bit surprising because I can think of a number of ways that texting can be a big money saver for an ISP.

The most obvious one is that it can save from making unneeded truck rolls. Every ISP I know says that truck rolls are expensive, and there is nothing more wasteful than making a truck roll to a customer who is not at home. I’m sure that is why the furniture company made the text and they would not have tried to deliver if I wasn’t at home. Better yet, texting puts a technician into direct contact with the customer and allows them to work out a plan if a customer isn’t home.

But there is probably even a bigger savings in the way that AT&T uses texting. They send me a text each month when they bill me and invite me to view my bill online. This saves them from having to mail a paper bill – something that makes no sense to somebody like me that uses autopay to pay my cellular bill. I can’t imagine I would ever open an AT&T paper bill and they would be spending money and margin to send me one. Many of my clients tell me that today that over half of their customers pay by bank debit or credit card and there is a huge savings from not mailing paper bills to these customers.

I do have a few clients that use texting and they report some other significant savings. For example, they say that texting has greatly reduced their uncollectible billing. They say that it’s far more effective to prompt customers immediately if they are late in paying their bills, and that most customers promptly pay when reminded. That’s particularly effective if you give them an immediate opportunity to pay the bill by credit card.

But the savings that surprised me a bit is the fact that companies that allow interactive texting with customers report that they have significantly reduced the number of calls to customer service. There are a two primary issues that prompt the majority of calls to customer service – outages and billing inquiries.

I have a client who uses texts to inform customers about outages. Customers can get quickly frustrated if they don’t know what’s happening and when service will be restored. This client has tied texting into their OSS and network mapping system and can send texts to only those customers that have outages. And they can inform customers proactively of planned maintenance outages. They say this largely eliminates calls about outages and particularly works great after hours when they are not answering the phones.

Texting can also be a good way to answer a lot of billing inquiries. Texting can be a great tool for answering simple customer questions like their outstanding balance or the due date of their payment. It takes a lot less time for both the customer and the company to answer a simple question by text. This is a great way to communicate with customers (like me) who would always choose an option other than making a call and getting into a customer service queue.

There are a few issues with texting to be aware of. There are some archaic FCC rules that define requirements for when customers text you. This harkens back to the day when many people paid for each text message – something that barely exists any longer. But the rules are still in place and are something to be aware of. There are also rules about using texting as a form of marketing – again, something that can be done in a way that doesn’t violate the FCC rules.

There are a wide range of texting solutions. At one end of the spectrum your technicians can text customers from their cellphones. But in order to get all of the advantages listed above you will want a fully interactive texting platform that’s integrated into your OSS/BSS. Feel free to contact me and I can describe the best solutions on the market.

The End of Satellite TV?

Randall Stephenson, the CEO of AT&T, recently announced that the company will be working to replace their satellite TV (DirecTV) with an OTT offering over the web. The company plans to launch the first beta trials by the end of this year. The ultimate goal will be for the online offering to eventually replace the satellite offering.

He didn’t provide any specific details of the planned offering other than comparing it to the current DirecTV Now offering that carries about 100 channels and is a direct competitor to landline cable TV.

Obviously the company has a lot of details to work out. DirecTV currently has over 20 million customers and along with Comcast is the only other cable provider that added customers over the last year ending in the second quarter. The biggest online live broadcast offering today is Dish Network’s Sling TV with around 2 million customers. AT&T faces numerous technical challenges if they want to transfer their huge customer base onto the web.

People always speculate why AT&T bought DirecTV and perhaps now we finally have the answer. The product will be marketed nationwide, not just in the AT&T footprint. The big advantage for AT&T is that they are not saddled with FCC rules that create the large cable bundles of 200 channels, and so perhaps they have found a way to make online bundles of cable channels profitable again. It seems that there are probably more profits in a 100-channel line-up than in traditional cable offerings. The same may not be true for skinny bundles and there is a lot of speculation that low-price OTT offerings like Sling TV at $20 don’t make any money.

This move would enable AT&T to leap forward and to easily keep up with the latest video technology. Almost all legacy video is using dated technology like the satellite DBS, the QAM on cable networks and even AT&T’s own first-generation IPTV headends. With an online product the company can get completely out of the settop box and the installation business for TV. They can also easily keep up with new formats and standards, such as the ability to immediately be able to offer 4K video everywhere. Going online makes it a lot easier to meet future customer demands as the industry continues to change rapidly.

But this has to be scary news for rural America. AT&T and Verizon have both made it clear they would like to tear down legacy copper networks, which will make it hard or impossible for some parts of rural America to make voice calls. If copper wires disappear then Cable TV over satellite is the only other modern telecom product available in a lot of rural America. If it’s phased out then much of rural America falls off the telecom map entirely.

While we have no idea if Dish Networks has similar plans, but the fact that they are migrating customers to Sling TV indicates that they might. This could turn ugly for rural America.

Obviously a quality OTT video product requires a quality broadband connection – something that is not available in millions of rural homes. It’s not hard to envision a future in which a home without good broadband might be isolated from the outside world.

It’s clear that the big companies like AT&T are focused only on bottom-line, and perhaps they should be. But one of the primary benefits of having incumbent regulated providers was that everybody in the country was offered the same choice of products. But unfortunately, the never-ending growth of broadband demand has broken the old legacy system. It was one thing to make sure that everybody was connected to the low-bandwidth voice network, but it’s something altogether different to make sure that rural America gets the same broadband as everybody else.

I can remember a time when I was a kid that a lot of rural homes didn’t have cable TV. Some rural homes were lucky enough to get a few TV stations over the air if they had a tall antenna. But many homes had no TV options due to the happenstance of their location. Satellite TV came along and fixed this issue and one expects when visiting a farm today to see a satellite dish in the yard or on the roof. This might become soon another of those quaint memories that are a thing of the past. But in doing so it will add to the political pressure to find a workable rural broadband solution.

Generations Matter

Nielsen recently published their first quarter Total Audience Report for Q1 2017. It’s the best evidence that I’ve seen yet that there is a huge difference between generations when it comes to video viewing habits. Compared to most surveys that look at a few thousand people, these statistics are based on almost 300,000 households.

The report examined in detail the viewing habits of the different US generations – Generation Z (ages 2 – 20), Millennials (ages 21 – 37), Generation X (ages 38 – 52), Baby Boomers (ages 53 – 70) and the Greatest Generation (ages 71+). What might surprise a lot of people is that Generation Z and the Millennials together now make up 48% of the US population – and that means their viewing habits are rapidly growing in importance to the cable TV industry.

The report outlines how the various generations own or use various devices or services. But note that these responses represent the entire household. So, for example, when Nielsen sought answers from somebody in generation Z it’s likely that the answers represent what is owned by their parents who are likely a millennial or in generation X. Here are a few interesting statistics:

  • The broadband penetration rate between generations is about the same, ranging from 82% to 85% of households. It wasn’t too many years ago when the baby boomer households lagged in broadband adoption.
  • There is a significant difference in the use of OTT services like Netflix. 73% of homes representing generation Z subscribe to an OTT service, but only 51% of baby boomer only households.
  • Baby boomers also lag in smartphone adoption at 86% with the younger generations all between 95% and 97% adoption.
  • Baby boomers also lag in the adoption of an enabled smart TV (meaning it’s connected to the web). 28% of baby boomers have an enabled smart TV while younger households are at about 39%.

The biggest difference highlighted in the report is the daily time spent using various entertainment media that includes such things as TV, radio, game consoles, and surfing the Internet.

The big concern to the cable industry is the time spent watching cable content. For example, the average monthly TV viewing for those over 65 is 231 hours of live TV and 34 hours of time-sifted TV. But for people aged 12-17 that is only 60 hours live and 10 hours time-shifted. For ages 18-24 it’s 72 hours live and 12 hours time-shifted. For ages 25-34 it’s 101 hours live and 19 hours time-shifted. This is probably the best proof I’ve seen of how much less younger generations are invested in traditional TV.

This drastic difference for TV stands out because for other kinds of media there is not such a stark difference. For example, those over 65 spend about 67 hours per month using apps on smartphones while those 18-24 use 77 hours and those 25-34 use 76 hours.

There even wasn’t a drastic difference in the number of hours spent monthly watching video on a smartphone with those over 65 watching 2 hours per month compared to 7 hours for those 18-24 and 6 hours for those 25-34.

The only other media with a stark difference is video game consoles with those over 65 using 13 hours per month while those 18-24 use 49 hours per month. Other things like listening to the radio or using a multimedia device (like Roku or Apple TV) are similar across generations.

The drastic difference in TV viewing has serious repercussions for the industry. For example, TV is no longer a medium to be used to reach those aged 18-24 since they watch TV over 180 hours less per month than those over 65. We’re seeing a big shift in advertising dollars and during the last year the amount spent on web advertising surpassed TV advertising for the first time. When you trend this forward a decade it spells bad news for the broadcasting and cable industries. For many years there was a big hope that as people get older that they would revert to the usage patterns of their parents. But the evidence shows that the opposite seems to be true – that kids keep their viewing habits as they grow older.

When you compare this report to earlier ones it’s obvious that the difference between generations is widening. Just comparing to 2016 those over 65 are watching more TV each month while the youngest generations are cutting back on TV over time – Generation Z watched 15 minutes less TV per day just since 2016.

Pent-up Customer Demand

I’ve recently read several articles that talk about how the new ‘unlimited’ cellular plans have increased data demands. One article quoted analyst Chetan Sharma who pointed to research done by Opanga Networks that show that Verizon’s daytime data traffic has doubled since the introduction of the unlimited cellular data plans.

These plans aren’t really unlimited, but have increased the monthly data caps to much higher levels of 20 Gigabytes or more per month. For the average cellular user this is a large enough increase to allow them to stop self-limiting their cellular data usage. It finally frees customers to use their cellphones in the way they want.

This phenomenon was expected and is familiar to any network owner who has ever done a major broadband network upgrade. I’ve worked with a number of companies over the years that have improved customer broadband and they always see a similar surge in customer broadband usage. For example, companies that have made the transition from DSL to fiber have seen this same immediate surge in customer use of the network.

But it doesn’t take a network upgrade to experience this kind of surge. I’ve had customers that operate fiber networks that have had the same phenomenon when they increased network speeds. When one of my clients moved their basic broadband product from 10 Mbps to 50 Mbps they experienced almost the same thing as Verizon.

This surge comes from freeing pent-up customer demand for broadband. Customers limit their data usage when their broadband connection isn’t fast enough. For example, with a slow broadband connection they quickly learn that they can’t watch two different video streams simultaneously. Or parents might not let their kids game online while somebody else is watching streaming video. Customers quickly understand that slow download speeds impede their ability to do multiple things at the same time. And they learn to curtail their broadband usage accordingly.

But when customers find they can do multiple things at the same time they do so. They begin to use the broadband for anything they want to do and they stop curtailing usage. When a lot of customers discover they are no longer throttled then network owner experiences an immediate surge in broadband usage. Customers will use broadband in multiple ways simultaneously in the evenings. They will begin watching HD video instead of SD video. They will subscribe to OTT video services for the first time.

But speed is not the only thing that curtails customer usage. In the case of the unlimited wireless data plans it is the fear of exceeding a costly data cap that curtails usage. The same thing can happen for home broadband usage that has data caps – customers consciously don’t use bandwidth to avoid getting higher monthly bills.

There is an interesting thing that always happens following these data surges when customers are freed to do what they want. The amount of usage surges higher, like Verizon’s doubling, and then it flattens out at a higher usage level.

It’s been well known that home broadband usage, both in terms of desired speeds and total monthly downloads, has been doubling every three years for decades. Any time that customer broadband usage is somehow capped or curtailed, customers will catch up to this original curve and will start looking like other customers that don’t have broadband restrictions.

ISPs need to be aware of this phenomenon. I still know of numerous fiber-to-the-home networks that have base data products of 10 Mbps or 20 Mbps. The owners of these networks are squelching their customers’ usage and they are dictating to customers what they can and cannot do.

The bigger ISPs understand this. The cable companies have kept ahead of the customer broadband demand curve by unilaterally increasing data speeds. In many markets the base broadband product is now at least 60 Mbps – higher than the FCC definition of broadband and higher than what most customers need today. Cable companies have learned that giving customers a little more broadband than they need stops most complaints about broadband.

Little ISPs and fiber network owners need to understand this as well. There is not a lot of excuse on a gigabit-capable network for a fiber-owner to limit customers to speeds under 25 Mbps. Their base product ought to be at least as fast as what the big cable companies offer.

I know it is fear of having a surge in network usage that stops a lot of network owners from increasing speeds. I think a lot of them also don’t fully grasp the real implications of broadband demand constantly growing in a geometric manner. When a network owner first set speeds at 10 Mbps that might have been a great speed – but it’s now holding back customers from using the data product they are paying for. I always ask network owners the question – why did you build a fiber network if you don’t want customers to use all of the broadband they want?