Telecom Predictions for 2019

It’s that time of year when I look forward at what the next year might bring to the industry. I see the following as the biggest telecom trends for 2019:

5G Will Not Save the World (or the Industry). This will be the year when we will finally stop seeing headlines about how 5G will transform society. There will be almost no actual introduction of 5G in networks, but we’ll still see numerous press releases by the big ISPs crowing about fictional 5G achievements.

CAF II Buildout Nearly Complete, but Few Notice. The CAF II upgrades will not have the impact hoped for by the FCC. Many areas that should have gotten speed increases to at least 10/1 Mbps will get something less, but nobody will officially monitor or note it. Households that buy the upgrades to 10/1 will still feel massively underserved since those speeds are already seriously obsolete.

People Will Wonder Why They Bought 5G Cellphones and 802.11ax Routers. The wireless carriers will begin charging premium prices for 5G-capable cellular phone yet there will be no 5G cell sites deployed. Households will upgrade to 802.11ax WiFi routers without realizing that there are no compatible devices in the home. Both sets of customers will feel cheated since there will be zero improvement in performance. Yet we’ll still see a few articles raving about the performance of each technology.

FCC Will Continue to Work Themselves out of the Regulatory Business. The current FCC will continue on the path to deregulate the large carriers to the fullest extent possible. They will continue to slant every decision in the direction of the big ISPs while claiming that every decision helps rural broadband.

Rural America Will Realize that Nobody is Coming to Help. I predict that hundreds of rural communities will finally realize that nobody is bringing them broadband. I expect many more communities to begin offering money for public/private partnerships as they try desperately to not fall on the wrong side of the broadband divide.

Broadband Prices Start to Climb. 2019 will be the first year that the world will notice the big ISP strategy to significantly increase broadband prices. We saw the first indication in November when Charter increased bundled broadband prices by $5 per month – the biggest broadband price increase in my memory. All the big ISPs are hoping to have broadband prices to $90 within 5 – 7 years.

Corporate Lobbyists Will Drive Policy. In 2018 there were numerous FCC decisions that came straight from the pens of telecom lobbyists. In 2019 those lobbyists will drive state and federal telecom legislation and FCC decisions.

Comcast and Charter Continue to Eat into Cellular Market. These two cable companies will quietly, yet significantly begin eating into the cellular markets in urban areas. I still don’t expect a major reaction by the cellar companies, but by 2020 we should start seeing cellular prices take another tumble.

Household Bandwidth Usage Will Continue to Grow. There will be no slowdown in the growth of household broadband as homes add many more bandwidth-capable devices to their homes. Another few million customers will cut the cable TV cord and ratchet up bandwidth usage. Online programming will routinely first offer 4K video and we’ll see the first commercial 8K video online.

We’ll See First Significant Launches of LEO Satellites. There will be little public notice since the early market entries will not be selling rural broadband but will be supporting corporate WANs, cellular transport and the development of outer space networks between satellites.

25 New Online Programmers Emerge. There will be a flood of new online programming options as numerous companies jump into the market. We won’t see many, and possibly no failures this year, but within a few years the market reality will drive out companies that can’t gain enough market share.

Transport Price Pressure Tightens. Anybody selling transport to cellular companies will see big pressure to lower prices. Those who ignore the pressure will find out that the carriers are willing to build fiber to bypass high costs.

Big Companies Will Get Most New Spectrum. The biggest ISPs and cellular carriers will still gobble up the majority of new spectrum, meaning improved spectrum utilization for urban markets while rural America will see nearly zero benefits.

A Corporate Call for Privacy Legislation

Over 200 of the largest companies in the country are proposing a new set of national privacy laws that would apply to large companies nationwide. They are pushing to have this considered by the upcoming Congress.

The coalition includes some of the largest companies in Silicon Valley like Apple and Oracle, but it doesn’t include the big three of Facebook, Google and Amazon. Among the other big businesses included the group are the largest banks like Bank of America and Wells Fargo, big carriers like AT&T and big retailers like Walmart.

As you might expect, a proposed law coming from the large corporations would be favorable to them. They are proposing the following:

  • Eliminate Conflicting Regulations. They want one federal set of standards. States currently have developed different standards for privacy and for issues like defining sensitive information. There are also differing standards by industry such as for medical, banking and general corporations;
  • Self-regulation. The group wants the government to define the requirements that must be met but don’t want specific methodologies or processes mandated. They argue that there is a history of government technical standards being obsolete before they are published;
  • Companies Can Determine Interface with Consumers. The big companies want to decide how much rights to give to their customers. They don’t want mandates for defining how customer data can be used or for requiring consumer consent to use data. They don’t want mandates giving consumers the right to access, change or delete their data;
  • National Standard for Breach Notification. They want federal, rather than differing state rules on how and when a corporation must notify customers if their data has been breached by hackers;
  • Put the FTC in Charge of these Issues. They want the FTC to enforce these laws rather than State Attorney Generals;
  • Wants the Laws to Only Apply to Large Corporations. They don’t want rigid new requirements on small businesses that don’t process much personal data.

There are several reasons big companies are pushing for legislation. There are currently different privacy standards around the country due to actions brought by various State Attorney Generals and they’d like to see one federal standard. But like most laws the primary driver behind this legislation is monetary. Corporations are seeing some huge hits to the bottom line as a result of data breaches and they hope that having national rules will provide a shield against damages – they hope that a company that is meeting federal standards would be shielded from large lawsuits after data breaches.

I look at this legislation both as a consumer and as somebody working in the small carrier industry. With my consumer hat on there are both good and bad aspects of the proposed rules. On the positive side a set of federal regulations ought to be in place for a complex issue that affects so many different industries. For example, it is hard for a corporation to know what to do about a data breach if they have to satisfy differing rules by state.

But the negatives are huge from a consumer perspective. It’s typical political obfuscation to call this a privacy law because it doesn’t provide any extra privacy for consumers. Instead it would let each corporation decide what they want to disclose to the public and how companies use consumer data. A better name for the plan might be the Data Breach Lawsuit Protections Act.

There are also pros and cons for this for small carriers. I think all of my clients would agree that we don’t need a new set of regulations and obligations for small carriers, so small carriers will favor the concept of excusing smaller companies from some aspect of regulations.

However, all ISPs are damaged if the public comes to distrust ISPs because of the behavior of the largest ISPs. Small ISPs already provide consumer privacy. I’ve never heard of a small ISP that monitors customer data, let alone one that is trying to monetize their customers’ data. Small ISPs are already affording significant privacy rights to customers compared to the practices of AT&T, Verizon or Comcast who clearly view customer data as a valuable asset to be exploited rather than something to protect. The ISP industry as a whole would benefit by having rules that foster greater customer trust.

I’m not sure, however, that many small ISPs would automatically notify customers after a data breach – it’s a hard question for every corporation to deal with. I think customers would trust us more if there were clear rules about what to do in the case of a breach. This proposed law reminds me that this is something we should already be talking about because every ISP is vulnerable to hacking. Every ISP ought to be having this conversation now to develop a policy on data breaches – and we ought to tell our customers our plans. Small ISPs shouldn’t need a law to remind us that our customers want to trust us.

No Blog Today

I tried to write a blog today, but as you can see my daughter’s kitten Benji, who came home with her from college has other ideas.

Merry Christmas to all!

Doug

Americans Love Their Media

One of the best sources for understanding trends in media consumption is Nielsen. Their recently released Total Audience Report for the second quarter of 2018 supplies detailed statistics on how Americans consume media including live TV, radio, Internet Browsing, gaming and smart phones. They are the only ones I know who pull this all together and who also trend media usage over time.

Media in general is a major factor in the life of US adults. In the second quarter of this year the average adult spent an average of 10 hours and 45 minutes per day using some form of media. That usage varies by age with adults aged 50-64 at the highest with an average of 11 hours and 49 minutes per day. What might surprise many is that adults aged 18-34 were the lowest demographic at just over 8 hours of media use per day.

The time spent on various types of media is intriguing. Live and time-shifted TV is still king and the average adult watches TV for 4 hours and 21 minutes per day. Next is using apps on smart phones at 2 hours 19 minutes per day. Radio usage is third with an average of 1 hour 49 minutes per day. Smaller categories include game consoles at 44 minutes per day, using tablets at 43 minutes per day and browsing the Internet on a computer at 32 minutes per day.

As we’ve known from the long-time tracking from Nielsen, the hours watching TV varies widely by age group. Adults over 65 watch TV almost 7 hours per day. But a statistic that scares the whole television industry is that adults aged 18-34 are only watching an average of 2 hours per day. There have been several studies over the last few years that concluded that television viewing habits adopted when we are young carry forward for life. Those over 65 are from the generation stretching back to the birth of TV and it’s still an important part of their life, while younger people have chosen other ways to consume media. This doesn’t bode well for the future of TV.

Some other categories of usage have become common for everybody. All adults under 65 now spend between 2 and 3 hours per day using apps on a smartphone. Those over 65 are at about half that usage. Also, average usage of tablets is about 46 minutes per day for everybody over 34, and at 33 minutes per day for those under 34.

Another interesting statistic is how we use media throughout the day. We’re all familiar with the fact that TV usage peaks in the evenings with viewing at prime time double the TV viewing for the rest of the day. But interestingly, the use of combined digital media – smartphones, computers and tablets – is consistent from 8 AM through bedtime.

Another interesting statistic is what Nielsen calls reach – what percentage of adults are touched by a given media during the week. The leader in this category is radio that reaches 92% of adults at least once during a week. Next is live and time-shifted TV that reaches 87% of us. Smart phone apps reach 78% of adults during a week, and Internet on a computer reaches 54% of people each week.

There are some other interesting statistics in the report. 24% of households now have a smart speaker device like the Amazon Echo. That’s pretty amazing for a technology that didn’t exist just three years ago. 19% of adults listen to a podcast each week. 15% of us now listen to satellite radio. I would guess that many people would think that social media has overtaken our lives, but the average adult spends 44 minutes per day on a social media platform.

Another interesting statistic is how we watch TV. Almost 83% of adults watch TV in some manner. 81% of them still watch traditional cable TV; 13% watch TV using an antenna and 6% watch TV on the Internet. It’s easy for us in the Industry to think that Internet TV has taken over the industry, but most households are still watching TV the traditional way. This statistic should scare network planners because it highlights the huge amount of video that could transition to online in the future.

Of course, none of us are average and I doubt that anybody that reads this matches the overall statistics. Like other baby boomers I grew up in a time when the only media available was TV and radio and it’s always interesting to pause and consider the huge number of options we have today. These options mean we all use media in our own individual way. It’s still interesting, though, to see how our individual use of media aggregates into a national average – which is what drives the telecom industry we work in.

FCC Says Big ISPs Delivering the Speeds they Market

The FCC recently released the reports from its speed test program for both 2017 and 2018. The reports summarize the results of the FCC’s Measuring Broadband America (MBA) that samples the actual performance of broadband customers by installing measuring devices at their homes. This program began in 2011 and these are the 7thand 8threport from the program. These used to be issued as separate reports, but these reports along with a number of other FCC reports are now being released together in one large annual filing. The link to the reports can be found here. The 2017 report begins at page 349 of the document and the 2018 report on page 463.

These tests are given to volunteer households of large ISPs only – those that cover 80% of all broadband customers in the country. This list of ISPs contains the big cable companies, big telcos, satellite broadband providers.

The primary conclusion of both reports is that “For most of the major broadband providers that were tested, measured speeds were 100% of advertised speeds or better between the peak hours (1 p.m. to 11 p.m. local time).

Frankly, that conclusion is impossible for me to believe and indicates that there is something in this testing program that is different than the reported experience by many customers in the real world. Consider all of the following:

  • It’s possible that the FCC is somehow doctoring the speed data, or at least not reporting all of the data they gather. Ars technica reports that SamKnows, the firm doing the measuring for these tests said they have been collecting data from between 6,000 and 10,000 homes during the time of these tests. But the reports are basing data on about 4,500 locations. This is an FCC that seems adverse to reporting things it doesn’t like, so there is certainly a chance that there is selective editing of the data used to create the report.
  • It’s clear that the reported users in these test results are not from rural America. My experience over the last decade is that virtually nobody in rural America is receiving the advertised broadband speeds. It’s virtually impossible for a rural DSL customer to getthe advertised speeds since they live far away from the core DSLAM modems that provide broadband. It’s worth noting that both reports admit that satellite broadband underperforms.

My experience comes from working extensively in rural America across the country. When we do broadband studies we elicit households to take speed tests so we can see actual performance. Admittedly speed tests have issues and are not as accurate as the measuring being done by SamKnows. They are likely connecting directly to the incoming broadband signal at the modem while most households today use WiFi, which affects self-administered speed test results. But in the many rural speed tests we’ve seen households perform, it’s rare to see a rural customer getting the speed they are paying for, and often they get just a tiny fraction of that speed, with results sometimes barely better than dial-up.

In general I test speed tests because we also do broadband studies for larger towns, and sometimes the speed tests show good performance by the ISP. For example, we studied a City recently with about 40,000 homes and for the most part Comcast was delivering speeds that often exceeded the advertised speeds. This makes me believe that the major speed test sites, while not perfect, are not terrible and can be believed to represent a whole community.

However, I’ve also studied larger communities where a major ISP underperforms across the board. I’ve rarely seen DSL meet advertised speeds for the majority of customers in a community. And I’ve studied communities where the cable company was slower than advertised for everybody.

The FCC results are also hard to believe because we know from the press that there are whole communities where a major ISP underperforms. As an example is a long-running battle in upstate New York where Charter has been delivering speeds at a fraction of the advertised speeds – the performance was so poor that the State is trying to kick Charter out of the state.

I have similar anecdotal evidence at my own house. My ISP is also Charter. They currently tell me that my speed ought to be 200 Mbps but I’m getting about 135 Mbps. Before the recent upgrade I was also getting less than what they said. I’m not unhappy with the 135 Mbps, but if my house was part of the FCC test it would show a connection getting only 2/3 of the advertised speeds.

The ars technica article I cited above is worth reading because they dig deeper into the data. I must admit that I got stopped at the first page of each report where they said that the large ISPs are mostly delivering the speeds they are advertising, because I know for much of the country that is not true. That makes me suspect that there is doctoring of data somehow. Perhaps the results mostly come from larger communities where the speeds are okay. Maybe the FCC is doctoring the data and excluding poor test results. Perhaps the ISPs know which homes are being measured and give them special attention. I don’t know the details of how the report was generated, but I have too much experience in the real world to accept the conclusions that big ISPs deliver the speeds they advertised.

How Much Better is 802.11ax?

The new WiFi standard 802.11ax is expected to be ratified and released as a standard sometime next year. In the new industry nomenclature this now be called WiFi-6. A lot of the woes we have today with bandwidth in our home is due to the current 802.11ac standard that this will be replacing. 802.11ax will introduce a number of significant improvements that ought to improve home WiFi performance.

To understand why these improvements are important we need to first understand the shortcomings of the current WiFi protocols. The industry groups that developed the current WiFi standards had no idea that WiFi would become so prevalent and that the average home might have dozens of WiFi capable devices. The current problems all arise from a WiFi router trying to satisfy multiple demands for a data stream from multiple devices. Unlike cellular technologies, WiFi has no central traffic cop and every device in the environment can make an equal claim for connectivity. When a WiFi router has more demands for usage than it has available channels it pauses and interrupts all data streams until it chooses how to reallocate bandwidth. In a busy environment these stops and restarts can be nearly continuous.

The improvements from 802.11ax will all come from smarter ways to handle requests for connectivity from multiple devices. There is only a small improvement in overall bandwidth with a raw physical data rate of 500 Mbps compared to 422 for 802.11ac. Here are the major new innovations:

Orthogonal Frequency-Division Multiple Access (OFDMA). This improvement will likely have the biggest impact in a home. OFDMA can slice the few big existing WiFi channels into smaller channels, being called resource units. A router will be able to make multiple smaller bandwidth connections using resource units and avoid packet collision and the start/stop cycle of each device asking for primary connectivity.

Bi-Directional Multi-User MIMO. In the last few years we’ve seen home WiFi routers introduce MIMO, which uses multiple antennas to make connections to different devices. This solves one of the problems of WiFi by allowing multiple devices to download separate data streams at the same time without interference. But today’s WiFi MIMO still has one big problem in that the MIMO only work for downloading. Whenever there is a request for any device to use a channel for uploading, today’s MIMO pauses all the downloading streams. Bi-Directional MIMO will allow for 2-way data streams meaning that a request to upload won’t kill downstream transmissions.

Spatial Frequency Reuse. This will have the most benefit in apartments or in homes that have networked multiple WiFi routers. Today a WiFi transmission will pause for any request for connection, even for connections made to a neighbor’s router from the neighbor’s devices. Spatial Frequency Reuse doesn’t fix that problem, but it allows neighboring 802.11.ax routers to coordinate and to adjust the power of transmission requests to increase the chance that a device can connect to and maintain a connection to the proper router.

Target Wake Time. This will allow small devices to remain silent most of the time and only communicate at specific and pre-set times. Today a WiFi router can’t distinguish between a request from a smart blender and a smart TV, and requests from multiple small devices can badly interfere with the streams we care about to big devices. This feature will reduce, and distribute over time the requests for connectivity from the ever-growing horde of small devices we all have.

There’s no rush to go out and buy and 802.11ax router, although tech stores will soon be pushing them. Like all generations of WiFi they will be backwards compatible with earlier WiFi standards, but for a few years they won’t do anything differently than your current router. This is because all of the above features require updated WiFi edge devices that also contain the new 802.11ax standard. There won’t be many devices manufactured with the new standard even in 2019. Even after we introduce 802.11ax devices into our home we’ll continue to be frustrated since our older WiFi edge devices will continue to communicate in the same inefficient way as today.

Does the Farm Bill Kill USDA Loans?

Today I feel like the Grinch, because I see the broadband provisions in the Farm Bill largely killing the USDA loan program and I don’t see anybody else writing about it. I’ve seen dozens of articles praising the new broadband programs created last week by the passage of the Farm Bill. To be fair, three of the announced programs are good news. The legislation created the following outright grants that, while small, are going to bring some solutions for rural broadband. The bill funds these three programs through 2023:

  • Funds the Community Connect grants at $50 million annually. These grants have been around for many years and distribute grants based upon an economic test, with grants intended for the poorest areas getting preference;
  • $10 million annually in a new program to fund middle mile fiber in rural areas;
  • $10 million annually for the grant program that was formerly called the “Rural Gigabit Network Pilot Program” but which has been relabeled as the “Innovative Broadband Advancement Program”. These grants are to be awarded to programs that demonstrate innovative technologies or methods of broadband deployment.

I’ve seen estimates that it might take as much as $60 billion in federal assistance to bring broadband everywhere in rural America and these three grants are barely a blip against the huge rural broadband shortfall – but they are better than nothing.

The flagship broadband announcement in the Farm Bill is the announcement that $350 million a per year will be given the existing USDA loan program, and that the loan awards can now also contain some portion of broadband grants, which might make it easier to build in high-cost areas.

But there is one killer provision of that new funding which I think might make it almost impossible to use. Any area receiving this funding can’t have more than 10% of households that can receive 10/1 Mbps broadband. That’s the same speed test that is being applied to the $600 million e-Connectivity grant program that I discussed in yesterday’s blog. This is a drastic change for USDA loans that currently can be awarded for areas where up to 85% of households can already get 10/1 Mbps broadband. Congress has decided to provide federal funding in the future only for those areas that have no broadband rather than spending money to upgrade inadequate broadband.

If the USDA strictly applies this 10% test I think it will become nearly impossible to get a USDA broadband loan starting in 2019. The 10% test will work for the e-Connectivity grants because ISPs can request funding for small pockets of homes that meet the 10% test. Companies that use the e-Connectivity grants to fund unserved homes can still use other funds to build the rest of a rural area.

But outright USDA loans don’t work that way. Anybody getting one of these loans has to pledge 100% of their company’s assets to the USDA and also give the USDA first lien over all other debt. Since other lenders won’t accept a second lien, then anybody going after a future loan from the program will have to get 100% of the funding from the USDA. And that’s where the 10% test will kill the loan program. There are very few places that still meet the 10% test – at least on paper. The big telcos are going to be claiming good DSL throughout rural America and in most places the big telco DSL is just good enough to cover more than 10% of homes in an area.

I’ve seen this legislation touted as a boon to rural electric cooperatives since many of them are considering building fiber to cover their whole service area. I would venture to say that there is no electric coop in the country that will pass the 10% test for their whole service area – and most of them don’t come even close.

An electric coop won’t be able to use the USDA money to build fiber everywhere – if they carve out USDA money to cover the areas that pass the 10% test, then nobody will loan them the money to build the rest. The 100% pledge and lien provisions of the USDA don’t allow for a secondary lender.

Huge swaths of rural America are now theoretically covered by the various CAF II programs, so those areas either now have 10/1 Mbps or are supposed to get it sometime over the next six years from the reverse auction awards. I believe all areas covered by CAF will be considered ineligible for these USDA loans.

I went back and read the law several times because I saw articles that got the facts of the new loan program wrong. The specific rules for the new programs can be found in the latest copy of the Farm bill, starting at Section 6101.

It’s obvious that the big telcos have gotten to the legislators who are writing this legislation. It looks like the 10% and 10/1 test will be the new norm for getting federal broadband funding. As each year goes by fewer and fewer places will qualify for this funding and monies will go unclaimed. Meanwhile, areas that have really crappy broadband, but where more than 10% of homes have fully inadequate 10/1 Mbps speeds will not be eligible for this funding. I saw articles where members of Congress are claiming that this bill will help to solve the rural broadband problem – but the actual provisions of the new USDA loan program tell a different story. This feels more like a sham than a plan to me.

Please see the attached comment that softens these comments. Turns out that 100 USDA loans in the future won’t have to pass the 10% test – that applies if an applicants wants any grant funding.

Gotchas in the e-Connectivity Grant Program

The high-level rules came out on Thursday for the USDA e-Connectivity grants being administered by the RUS. This is $560 million of grants and loans that were authorized by Congress last spring – this was first announced as a $600 million program and I’m not sure where the other $40 million went. I’m not going to list all of the rules of the grants – I’ve seen a dozen websites already that have summarized the key grant requirements. Instead I’m going to talk about a few requirements that I think will be show stoppers for many potential applicants.

RUS Loans are Still Draconian. Only 1/3 of the funding will be outright grants, with the other 2/3 being outright loans or 50/50 loans and grants. This means that most of funding can only go to those who are already RUS borrowers or who are willing and able to accept the draconian RUS loan provisions.

Anybody accepting an RUS loan must pledge 100% of their existing assets to the RUS and also give the RUS an exclusive first lien position on the company. What this means is that anybody that already has a loan elsewhere is not going to be able to take these loans. Existing lenders like CFC. CoBank, or any commercial bank will not accept a second loan position to these new awards. A huge number of telcos and electric cooperatives that borrow elsewhere won’t be able to accept RUS loans, eliminating them from consideration for anything but the 100% grant portion of the program.

These same loan restrictions also make it unlikely that any government entity can accept an award that includes am RUS loan. I’ve worked with nearly a dozen government entities that have pursued RUS loans and none of them have successfully been able to overcome the pledge and other lending hurdles.

The 10% Test. The program has a gotcha slipped in by Congress that no more than 10% of the locations covered by the program can already have existing broadband 10/1 Mbps or greater speeds. This is a giant change from past RUS award programs that allowed up to 85% to have 10/1 speeds. Applicants need to take this requirement seriously and I expect any applications that can’t the lack of existing broadband will be quickly tossed out of consideration. This is not a flexible rule and was inserted into the grant rules by big telco lobbyists who don’t want to see any competition.

This means that any parts of the country previously covered by any federal funding program that required 10/1 Mbps speeds will not be eligible – including past award areas that haven’t yet been upgraded, like the areas recently awarded under the CAF II reverse auction. Applicants are going to have to be extremely careful in defining study areas, almost on a home by home basis. I fully expect RUS to test the study areas hard and I’m positive that outside parties (like incumbent telcos) will be able to intervene if they think an applicant fails this test.

The worst part of this is that we know that the rural broadband maps suck and that there are many places that the FCC considers to have 10/1 broadband that doesn’t have it. Applicants will have a big uphill battle to get funding in these areas.

Requires Two Years of Sound Audits. Applicants need to produce two years of audited solid historical financial performance – meaning start-ups need not bother with the grants. The RUS hasn’t forgotten the big problems they had with start-up companies during the stimulus grant program.

Environmental Impacts. Applicants must analyze the environmental and national historic preservation impacts of a grant request. It’s possible to get out of this requirement if a state official will declare that these tests aren’t required for applicants from their state. Applicants are also going to need affidavits from a state official to describe state broadband grant programs and to describe any conflicts with a grant filing.

Record Keeping. In order to meet the 10% rule I expect study areas to be disjointed –pocket of homes here and there scattered over a larger area. Applicants will somehow have to track costs of construction in these small pockets and not mingle costs with other nearby areas that were not included in a grant supplication. It’s going to be hard to show an audit trail of invoices that are just for the study area.

Prevailing Wage. The announcement doesn’t mention prevailing wage, but I expect this to apply. In past RUS grants this requirement has been included in the detailed descriptions of the grant process that hasn’t yet been released. Prevailing wage means paying construction labor at rates determine by each state, and which in many states reflect the cost of building in the largest cities and not in the rural areas. Prevailing wages can sometimes be so much higher than actual construction company rates that the difference in the wages can wipe out most of the benefit if getting a 50% grant.

Matching Funds Spent First. The grants require that matching funds must be 100% spent before any RUS money. That means the funding sources that incur the highest interest rates must be spent first, adding to the cost of the project. The source of the matching funds needs to be identified by the time of the grant filings.

I’m positive that many will be excited about a new large broadband grant program, but the above grant requirements are going to scare off or disqualify many potential applicants. These hurdles are not by accident – the big telcos really don’t want anybody competing against them and have stacked the deck with the nuances of the rules.

Private 5G Networks

One of the emerging uses for 5G is to create private 5G cellular networks for large businesses. The best candidates for 5G technology are businesses that need to connect and control a lot of devices or those that need the low latency promised by the 5G standards. This might include businesses like robotized factories, chemical plants, busy shipping ports and airports.

5G has some advantages over other technologies like WiFi, 4G LTE and Ethernet that makes it ideal for communications rich environments. Cellular network can replace the costly and bulky hard-wired networks needed for Ethernet. It’s not practical to wire an Ethernet network to the hordes of tiny IoT sensors that are needed to operate a modern manufacturing factory. It’s also not practical to have a hard-wired network in a dynamic environment where equipment needs to be moved for various purposes.

5G holds a number of advantages over WiFi and 4G. Frequency slicing means that just the right amount of bandwidth can be delivered to every device in the factory, from the smallest sensor to devices that must upload or download large amounts of data. The 5G standard also allows for setting priorities by device so that mission critical devices always get priority over background devices. The low latency on 5G means that there can be real time coordination and feedback between devices when that’s needed for time-critical manufacturing devices. 5G also offers the ability to communicate simultaneously with a huge number of devices, something that is not practical or possible with WiFi or LTE.

Any discussion of IoT in the past has generally evoked discussion of factories with huge number of tiny sensors that monitor and control every aspect of the manufacturing process. While there have been big strides in developing robotized factories, that concept of a concentrated communications mesh to control the factories has not been possible until the 5G standard.

We are a few years away from having 5G networks that can deliver on all of the promised benefits of the standard. The big telecom manufacturers like Ericsson, Huawei, Qualcomm and Nokia along with numerous smaller companies are working on perfecting the technology and the devices that will support advanced IoT networks.

I read that an Audi plant in Germany is already experimenting with a private cellular network to control the robots that glue car components together. Its robot networks were hard-wired and were not providing fast enough feedback to the robots for the needed precision of the tasks. The company says it’s pleased with the performance so far. However, that test was not yet real 5G and any real use of 5G in factories is still a few years off as manufacturers perfect the wireless technology and perfect the sensor networks.

Probably the biggest challenge in the US will be finding the spectrum to make this work. In the US most of the spectrum that is best suited to operating a 5G factory are sold in huge geographic footprints and the spectrum will be owned by the typical large spectrum holders. Large factory owners might agree to lease spectrum from the large carriers, but they are not going to want those carriers to insert themselves into the design or operation of these complex networks.

In Europe there are already discussions at the various regulatory bodies on possibly setting aside spectrum for factories and other large private users. However, in this country to do so means opening the door to allowing the spectrum to be sold for smaller footprints – something the large wireless carriers would surely challenge. It would be somewhat ironic if the US takes the lead in developing 5G technology but then can’t make it work in factories due to our spectrum allocation policies.