Buffalo Providing WiFi to Student Homes

Buffalo New York is facing the same homework gap that most school systems are seeing. The city had spent millions of dollars to upgrade broadband to bring computer technology into the classroom but now has numerous students unable to use a digital curriculum due to not having broadband at their homes. Like everywhere else, the city sees that students without home broadband lag behind everybody else.

The City recently decided to tackle a portion of the homework gap and has approved building a WiFi network that will reach the homes of 5,500 students living in downtown Buffalo. They have approved a $1.3 million project to construct a wireless network that will extend the bandwidth available at the schools to surrounding neighborhoods.

Buffalo has what it calls digital deserts, with neighborhoods where more than half of households have no Internet access. This contrasts sharply with other parts of the city and with Erie County as a whole, where 80% of all households are online (with that statistic is depressed by including the digital deserts). The richest parts of the city have neighborhoods with nearly 90% broadband coverage, while there is one neighborhood in downtown with only a 31% household broadband penetration. The WiFi project is targeting two neighborhoods on the east side of downtown where the neighborhoods collectively have only a 40% broadband penetration.

The city is mounting antennas on top of eight downtown schools and other government-owned buildings. These installations take advantage of the gigabit bandwidth already available at City buildings. The network is being designed to reach students living within about two miles of each of the locations. For now, this first trial covers perhaps 5% of the total area of the city but covers neighborhoods with some of the highest needs in terms of students without home broadband.

Students will be able to log onto the school network using the same login used at school. The broadband connection will be limited to access the school network and is not intended to provide normal household broadband. The network will allow students into the highly controlled and curated school network that gives students access schoolwork, school-sponsored video and some access to the web for homework research.

Having access to a computer or tablet is the other half of the homework gap problem. Homes without broadband likely also don’t have computers. The city is working on a plan to let students take home laptops. Last year only seniors were able to take home school laptops, but in this coming year that is being expanded to all high school students in some schools. The city is exploring how to provide devices to students in grades 3 to 8.

Like other school systems, the city understands that smartphones are not the answer. While many students have smartphones, the devices are inadequate for doing homework, and students that try to wade through homework with smartphones fall behind from the frustration of using a small screen for big-screen applications.

Affordability is the main barrier to broadband in many households. In downtown Buffalo, there are three broadband options. The most affordable package from Charter, the incumbent cable company is $64.99. Verizon offers a slow low-price DSL option at $29.99, but this connection is too slow to connect to the school network to do homework. There is also an ISP, BarrierFree, that offers $100 broadband for businesses.

The city is also exploring free citywide WiFi that would bring broadband to everybody, not just to students. There is no easy answer to the homework gap, but perhaps Buffalo’s start is a model that can be explored by others. Recently the Government Accounting Office recommended that the FCC study the idea of using Schools and Libraries funds from the Universal Service Funds to reach students at home. If that fund can help pay for this kind of application, perhaps we can solve the homework gap neighborhood by neighborhood.

CenturyLink Embraces Fiber

CenturyLink seems to have done a 180 in terms of embracing fiber. According to Jeff Storey, the CEO of Centurylink, the company is now defining itself as the ‘go-to provider’ for fiber-based services for business customers. This is in sharp contrast to just a year ago when Storey, as the new CEO said that the company would not be pursuing low-return infrastructure investments.

Storey says that CenturyLink added 5,000 business buildings to fiber in the second quarter, following 4,500 buildings in the first quarter of this year. This contrasts to Level 3 that historically added around 500 buildings per quarter.

It appears the company may be taking a page from the AT&T storybook. AT&T has been building fiber around locations where it already has a fiber POP. This strategy has helped AT&T to now pass over 20 million locations with fiber while avoiding the high cost of large overbuilds.

CenturyLink has an extensive national fiber footprint that it’s accumulated from the purchase over the years of Level 3, Qwest, Broadwing and WilTel. Like AT&T discovered, CenturyLink is sitting close to a huge number of existing opportunities with that existing network, and perhaps that’s the new company strategy – to edge-out and take advantage of nearby low-hanging fruit.

Storey says the company has ordered 4.7 million miles of fiber to add into its urban networks. You have to take that number with a grain of salt since one mile of a 48-strand fiber counts as 48 miles of fiber when counted this way. But this is still a lot of new fiber construction. The one thing that readers of this blog will notice is that the construction is likely to be urban – it’s doubtful that the company is ever going to put another dollar into rural infrastructure. The company recently quietly searched around for the possibility of spinning off its rural business but found no takers. This is likely to mean more of the same for its rural customers – mostly neglect.

The company continues to lose broadband customers. In 2018 the company lost 262,000 broadband customers for a 4.6% drop. In the second quarter of this year, the company lost 56,000 net broadband customers but reports that it lost 78,000 customers with speeds below 20 Mbps and added 22,000 customers with speeds faster than that. Like all of the big telcos, it’s losing DSL customers converting to cable modems.

The company has a long way to go to convince Wall Street that its stock has value. In a May blog, I wrote how the company stock had dropped 43% over a year to a price of $10.89. It’s still sitting in that range with the stock price sitting at $11.56 yesterday.

The Level 3 acquisition is likely to be one of the more interesting stories in the history of our industry. Level 3 was the high-flying telecom company, with stock prices that climbed steadily. It seems that Jeff Storey could do no wrong as earnings grew faster than the rest of the sector. But that all came to a halt with the merger with CenturyLink. I’m sure that both companies thought that Storey could pull CenturyLink upward by tying it to Level 3, but just the opposite occurred. This might be one of the biggest cautionary tales ever in our industry and shows how difficult, and perhaps impossible it is for anybody to turn around one of the big incumbent telcos.

What’s most interesting in this story is that Glen Post and the crew from CenturyLink were in the process of that a slow and steady turnaround. A few years before the CenturyLink merger the company had decided to build residential fiber in its many large city markets and take back a significant piece of the broadband business that had been leaking away. In the year before the Level 3 merger the company had built fiber past nearly 1 million urban passings. We’ll never know now if a few more years of that kind of investment could have turned the company around – not to be a high-flyer like Level 3, but to earn decent long-term returns on broadband infrastructure – the kind that come from making a hundred-year investment in fiber.

A New Cellular Carrier?

One of the most interesting aspects of the proposed merger of Sprint and T-Mobile is that the agreement now includes selling some of Sprint’s spectrum to Dish Networks to enable them to become a 5G cellular provider. This arrangement is part of the compromise required by the Department of Justice to preserve industry competition when the major wireless carriers shrink from four to three.

This agreement would have Dish Networks paying $5 billion for the spectrum assets, which complement the spectrum already owned by Dish. The agreement also includes an MVNO agreement between Dish Networks and T-Mobile that would let Dish enter the cellular market immediately before having to build any network. As part of that arrangement, Dish would purchase Boost Mobile from T-Mobile for $1.4 billion, providing them with an immediate base of cellular customers.

Dish already owns spectrum valued at several billion dollars. The company has been under pressure from the FCC to deploy that spectrum, and Dish recently began building a nationwide narrowband network to support IoT sensors. The company admits they are not happy with the IoT sensor business plan but didn’t want to lose their spectrum. Perhaps the best aspect of this deal from Dish’s perspective is that they are being given a new time clock to use existing spectrum in a more profitable way.

This deal has plenty of critics who don’t believe that Dish can turn into a viable competitor. This includes numerous consumer groups as well as a group of state Attorney Generals who have filed to block the merger. The merger is far from a done deal and is going to court, although it has crossed the major hurdles of getting DOJ approval and informal approval from the FCC.

Dish Chairman Charlie Ergen says the company is ready to become the fourth facility-based cellular carrier in the market. He thinks that launching with a new 5G network will provide some advantages over carriers that will be upgrading older networks. The company faces some significant challenges such as gaining access to tower space in crowded markets. The other cellular carriers have also been busy and have invested significant amounts of capital in building fiber to support cellular small cell sites.

The challenge of building a new nationwide cellular network from scratch is intimidating. As a satellite provider, the company does not already operate an extensive landline network. The logistics of hiring the needed talent and constructing the core network infrastructure is a major challenge. A few years ago Dish had estimated the cost to build a nationwide cellular network at $10 billion. The company says they have already released an RFI and an RFP to start the process of hiring contractors to build the new network.

Ergen says the company could build the core network in 2020 and could construct a network to cover 70% of the homes in the country by 2023. As far as being competitive, Dish says they would enter the market with ‘disruptive’ pricing to capture market share.

Dish needs something like this if it is to survive. The company lost over 1.1 million satellite TV customers last year, a little over 10% of its customer base. It looks like cord cutting is accelerating this year and one has to wonder how long they will remain as a viable business.

Interestingly, Dish won’t be the only new competitor in the cellular market. Comcast recently spent over $1.7 billion on spectrum. The company has been reselling cellular service and offering low-price broadband as part of its bundle for the last few years. The company reporting hitting 1.2 million cellular customers at the beginning of this year. While Comcast is not likely to tackle building a nationwide network, they could become a formidable competitor in the urban markets where they are already the cable provider. Other cellular companies like Charter and Altice are considering a similar path.

Is Broadband Growth Slowing – 2Q 2019?

Leichtman Research Group recently released the broadband customer statistics for the second quarter of 2019 for the largest cable and telephone companies. Leichtman added Atlantic Broadband and TDS to their tracking list for the first time – both companies now have more customers than Cincinnati Bell, the smallest company on the list. Leichtman compiles these numbers from the statistics provided to stockholders. The numbers are lower than broadband customers counted at the FCC, and I think that most of the difference is to due to the way many of these companies count broadband to apartment buildings. If they provide a gigabit pipe to serve an apartment building they count that as 1 customer, whereas the FCC is likely counting the number of apartment units served.

2Q 2019 Added % Change
Comcast 27,807,000 209,000 0.8%
Charter 25,945,000 258,000 1.0%
AT&T 15,698,000 (39,000) -0.2%
Verizon 6,968,000 (5,000) -0.1%
Cox 5,120,000 20,000 0.4%
CenturyLink 4,750,000 (56,000) -1.2%
Altice 4,168,100 13,100 0.3%
Frontier 3,626,000 (71,000) -1.9%
Mediacom 1,303,000 15,000 1.2%
Windstream 1,034,300 1,900 0.2%
Consolidated 783,008 2,288 0.3%
WOW 765,500 (400) -0.1%
Cable ONE 681,762 3,377 0.5%
Atlantic Broadband 443,696 14,134 3.3%
TDS 433,400 5,800 1.4%
Cincinnati Bell 425,500 (1,200) -0.3%
Total 99,952,266 369,999 0.4%

Currently, these companies are seeing a composite annual rate of growth of broadband customers of 1.6% annually. These largest ISPs will surpass 100 million customers during this current quarter. Leichtman notes that these sixteen companies have added 13.5 million broadband customers over the last five years and 28.9 million over the last ten years.

These numbers raise the question if we are finally starting to see overall growth in the broadband market slow down. Consider the comparison of the second quarter of 2018 and 2019 annualized:

‘                                        2018                 2019

Cable Companies        2,987,721        2,128,844

Telcos                           ( 472,124)        ( 648,848)

Annualized Total         2,425,597        1,479,996

According to the FCC, over 85% of homes now have a broadband connection. Adjusting that statistics for rural homes that can’t get broadband, the penetration rate everywhere else is over 90%.

The growth of broadband customers added by cable company customers is slowing, with Comcast and Charter continue to be the only companies adding significant quantities of customers (over 200,000 each for the quarter).

Loss of telco broadband customers has increased over last year, mostly due to Frontier and CenturyLink losing DSL customers.

There are significant implications for cable companies if broadband growth stagnates because cable stock prices have been fueled by revenue growth driven by new broadband customers. As the number of broadband customers levels off, many industry analysts expect the companies to begin regularly raising broadband rates to meet Wall Street earnings expectations. We’ve seen the first signs of broadband rate increases over the last year, and the above slowdown is bound to rachet up the pressure on the cable companies.

FCC – Please Don’t Fund 25/3 Broadband

The current FCC recognizes the disaster that was created when the original CAF II grant program subsidized the construction of broadband that supports speeds of only 10/1 Mbps. Several FCC commissioners have said that they don’t want to repeat that disaster. Had the CAF II grant monies been allowed for companies other than the big telcos, much of the money would have gone to fiber ISPs and we’d see a lot more areas covered with good broadband today (meaning fewer headaches for the FCC).

Today I ask the question: what speeds should the new $20.4 billion RDOF grant fund support? In the NPRM for the RDOF grant program, the FCC suggests that the minimum speed they will fund is 25/3 Mbps. It looks like the funding for these grants will start in 2021, and like the CAF II program, anybody taking the money will have six years to complete the broadband construction. I think the right way to think about the speeds for these grants is to look at likely broadband speeds at the end of the construction period in 2027, not at where the world is at two years before the RDOF is even started. If the FCC bases the program on broadband speeds today, they will be making the same error as on the original CAF II – they will use federal money to build broadband that is obsolete before it’s even constructed.

I start by referring to a recent blog where I challenge the idea that 25/3 should be the definition of broadband today. To quickly summarize that blog, we know that broadband demand has been growing constantly since the days of dial-up – and the growth in broadband demand applies to speeds as well as volume of monthly downloading. Both Cisco and Ookla have shown that broadband demand has been growing at a rate if about 21% annually for many years.

At a bare minimum, the definition of broadband today ought to be 50 Mbps download – and that definition is a minimum speed, not a goal that should be used for building tomorrow’s broadband. As I said earlier, in a world where demand continues to grow, today’s definition of broadband shouldn’t matter – what matters is the likely demand for broadband in 2027 when the RDOF networks are operational.

Trending the demand curve chart for download speeds forward presents a story that the FCC doesn’t want to hear. The need for speed is going to continue to increase. If the growth trend holds (and these trends have been steady since the days of dial-up), then the definition of broadband by 2027 ought to be 250 Mbps – meaning by then nobody should build a network that can’t meet that speed.

2019 2020 2021 2022 2023 2024 2025 2026 2027
54 65 78 95 115 139 168 204 246

The big cable companies already recognize what the FCC won’t acknowledge. The minimum speed offered to new customers on urban cable networks today is at least 100 Mbps, and most users can order a gigabit. The cable companies know that if they provide fast speeds they get a lot fewer complaints from customers. In my city of Asheville, NC, Charter unilaterally increased the speed of broadband in 2018 from 60/6 Mbps to 135/20 Mbps. Anybody who has watched the history of cable company broadband knows that they will increase speeds at least once before 2027 to stay ahead of the demand curve. It wouldn’t be surprising by 2027 if cable company minimum speeds are 300 – 500 Mbps. Do we really want to be funding 25/3 rural broadband when speeds in cities will be fifteen times faster?

Will the world behave exactly like this chart – not likely. But will homes in 2027 be happy with 25/3 Mbps broadband – most definitely not. Given a choice, homes don’t even want 25/3 Mbps broadband today. We are already seeing hordes of urban customers abandoning urban DSL that delivers speeds between 25 Mbps and 50 Mbps.

If the FCC funds 25/3 Mbps broadband in the RDOF grant they will be duplicating one of the dumbest FCC decisions ever made – when CAF II funded 10/1 Mbps broadband. The FCC will be funding networks that are massively obsolete before they are even built, and they will be spending scarce federal dollars to again not solve the rural digital divide. There will continue to be cries from rural America to bring real broadband that works and by 2027 we’ll probably be talking about CAF IV grants to try this all over again.

The Definition of Broadband

When the FCC set the definition of broadband at 25/3 Mbps in January of 2015, I thought it was a reasonable definition. At the time the FCC said that 25/3 Mbps was the minimum speed that defined broadband, and anything faster than 25/3 Mbps was considered to be broadband, and anything slower wasn’t broadband.

2015 was forever ago in terms of broadband usage and there have been speed increases across the industry since then. All of the big cable companies have unilaterally increased their base broadband speeds to between 100 Mbps and 200 Mbps. Numerous small telcos have upgraded their copper networks to fiber. Even the big telcos have increased speeds in rural America through CAF II upgrades that increased speeds to 10/1 Mbps – and the telcos all say they did much better in some places.

The easiest way to look at the right definition of broadband today is to begin with the 25/3 Mbps level set at the beginning of 2015. If that was a reasonable definition at the beginning of 2015, what’s a reasonable definition today? Both Cisco and Ookla track actual speeds achieved by households and both say that actual broadband speeds have been increasing nationally about 21% annually. Apply a 21% annual growth rate to the 25 Mbps download speeds set in 2015 would predict that the definition of broadband today should be 54 Mbps:

2015 2016 2017 2018 2019
25 30 37 44 54

We also have a lot of anecdotal evidence that households want faster speeds. Households have been regularly bailing on urban DSL and moving to faster cable company broadband. A lot of urban DSL can be delivered at speeds between 25 and 50 Mbps, and many homes are finding that to be inadequate. Unfortunately, the big telcos aren’t going to provide the detail needed to understand this phenomenon, but it’s clearly been happening on a big scale.

It’s a little sketchier to apply this same logic to upload speeds. There was a lot of disagreement about using the 3 Mbps download speed standard established in 2015. It seems to have been set to mollify the cable companies that wanted to assign most of their bandwidth to download. However, since 2015 most of the big cable companies have upgraded to DOCSIS 3.1 and they can now provide significantly faster uploads. My home broadband was upgraded by Charter in 2018 from 60/6 Mbps to 135/20 Mbps. It seems ridiculous to keep upload speed goals low, and if I was magically put onto the FCC, I wouldn’t support an upload speed goal of less than 20 Mbps.

You may recall that the FCC justified the 25/3 Mbps definition of broadband by looking at the various download functions that could be done by a family of four. The FCC examined numerous scenarios that considered uses like video streaming, surfing the web, and gaming. The FCC scenario was naive because they didn’t account for the fact that the vast majority of homes use WiFi. Most people don’t realize that WiFi networks generate a lot of overhead due to collisions of data streams – particularly when a household is trying to do multiple big bandwidth applications at the same time. When I made my judgment about the 25/3 Mbps definition back in 2015, I accounted for WiFi overheads and I still thought that 25/3 Mbps was a reasonable definition for the minimum speed of broadband.

Unfortunately, this FCC is never going to unilaterally increase the definition of broadband, because by doing so they would reclassify millions of homes as not having broadband. The FCC’s broadband maps are dreadful, but even with the bad data, it’s obvious that if the definition of broadband was 50/20 Mbps today that a huge number of homes would fall below that target.

The big problem with the failure to recognize the realities of household broadband demand is that the FCC is using the already-obsolete definition of 25/3 Mbps to make policy decisions. I have a follow-up blog to this one that will argue that using that speed as the definition of the upcoming $20.4 billion RDOF grants will be as big of a disaster as the prior FCC decision to hand out billions to upgrade to 10/1 Mbps DSL in the CAF II program.

The fact that household broadband demand grows over time is not news. We have been on roughly the same demand curve growth since the advent of dial-up. It’s massively frustrating to see politics interfere with what is a straight engineering issue. As homes use more broadband, particularly when they want to do multiple broadband tasks at the same time, their demand for faster broadband grows. I can understand that no administration wants to recognize that things are worse than they want them to be – so they don’t want to set the definition of broadband at the right speed. But it’s disappointing to see when the function of the FCC is supposed to be to make sure that America gets the broadband infrastructure it needs. If the agency was operated by technologists instead of political appointees we wouldn’t even be having this debate.

Why Aren’t We Talking about Technology Disruption?

One of the most interesting aspects of modern society is how rapidly we adapt to new technology. Perhaps the best illustration of this is the smartphone. In the short period of a decade, we went from a new invention to the point where the large majority of the American public has a smartphone. Today the smartphone is so pervasive that recent statistics from Pew show that 96% of those under between 18 and 29 have a smartphone.

Innovation is exploding in nearly every field of technology, and the public has gotten so used to change that we barely notice announcements that would have made worldwide headlines a few decades ago. I remembre as a kid when Life Magazine had an issue largely dedicated to nylon and polymers and had the world talking about something that wouldn’t even get noticed today. People seem to accept miracle materials, gene splicing, and self-driving cars as normal technical advances. People now give DNA test kits as Christmas presents. Nobody blinks an eye when big data is used to profile and track us all. We accept cloud computing as just another computer technology. In our little broadband corner of the technology world, the general public has learned that fiber and gigabit speeds are the desired broadband technology.

What I find perhaps particularly interesting is that we don’t talk much about upcoming technologies that will completely change the world. A few technologies get talked to death such as 5G and self-driving cars. But technologists now understand that 5G is, in itself, not a disruptive technology – although it might unleash other disruptive technologies such as ubiquitous sensors throughout our environment. The idea of self-driving cars no longer seems disruptive since I can already achieve the same outcome by calling an Uber. The advent of self-driving semi trucks will be far more disruptive and will lower the cost of the nationwide supply chain when we use fleets of self-driving electric trucks.

I’ve always been intrigued about those who peer into the future and I read everything I can find about upcoming technologies. From the things I read there are a few truly disruptive technologies on the horizon. Consider the following innovations that aren’t too far in the future:

Talking to Computers. This will be the most important breakthrough in history in terms of the interface between humans and technology. In a few short generations, we’ve gone from typing on keyboards, to using a mouse, to using cellphones – but the end game will be talking directly to our computers using natural conversational language. We’ve already seen significant progress with natural language processing and are on a path to be able to converse with computers in the same way we communicate with other people. That will trigger a huge transition in society. Computers will fade into the background since we’ll have the full power of the cloud anywhere that we’re connected to the cloud. Today we get a tiny inkling by seeing how people use Apple Siri or Amazon Alexa – but these are rudimentary voice recognition systems. It’s nearly impossible to predict how mankind will react to having the full power of the web with us all of the time.

Space Elevator. In 2012 the Japanese announced a nationwide goal of building a space elevator by 2050. That goal has now been pulled forward to 2045. A space elevator will be transformational since it will free mankind from the confines of the planet earth. With a space elevator we can cheaply and safely move people and materials to and from space. We can drag up the raw materials needed to build huge space factories that can then take advantage of the mineral riches in the asteroid belt. From there we can colonize the moon and mars, build huge space cities and build spaceships to explore nearby stars. The cost of the space elevator is still estimated to only be around $90 billion, the same as the cost of the high-speed rail system between Osaka and Tokyo.

Alternate Energy. We are in the process of weaning mankind from fossil fuel energy sources. While there is a long way to go, several countries in Europe have the goal to be off carbon fuels within the coming decade. The EU already gets 30% of electricity from alternate energy sources. The big breakthrough might finally come from fusion power. This is something that has been 30 years away my whole adult life, but scientists at MIT and other places have developed the needed magnets that can contain the plasma necessary for a fusion reaction and some scientists are now predicting fusion power is now only 15 years away. Fusion power would supply unlimited non-polluting energy, which would transform the whole world, particularly the third world.

An argument can be made that there are other equally disruptive technologies on the horizon like artificial intelligence, robotics, gene-editing, virtual reality, battery storage, and big data processing. Nothing on the list would be as significant as a self-aware computer – but many scientists still think that’s likely to be far into the future. What we can be sure of is that breakthroughs in technology and science will continue to come at us rapidly from all directions. I wonder if the general public will even notice the mosts important breakthroughs or if change has gotten so ho hum that it’s just an expected part of life.

Worldwide Broadband Trends

Hootsuite is the premier tracker of social media usage around the world. They publish numerous reports annually that track broadband statistics and social media statistic from around the world.

They report the following statistics for the end of 2018. The world has been seeing one million new users online every day since January 2018. That means there are 11 new users on the web every second. There are now 5.11 billion mobile subscribers in the world, 67% of the world’s population. 4.39 billion people have access of some sort to the internet, about 57% of the people in the world. There are 3.48 billion people who use social media.

Mobile subscribers increased by 2% in 2018. Internet users increased by 9.1% and active social media users increased by 9%.

The US and northern Europe both lead the world in Internet access with 95% of the population using the internet from a landline or cellular connection. The rest of the world is still far behind. While we talk about the great connectivity in parts of the far east, the region has a 60% penetration of people who use the Internet. That’s lower than the 63% penetration in Central America and 74% in South America. The areas with the worst broadband coverage are middle Africa at only 12%, eastern Africa at 32% and western Africa at 41%.

The largest growth of Internet users is in India, which saw almost 100 million new Internet users in 2018, a 21% increase. That represents 25% of all new Internet users in the world for last year. Some other countries are growing faster, such as Afghanistan at 156%, Cote D’Ivoire at 69%, Cambodia at 56%, Iran at 29%, and Italy at 27%.  Hootsuite has been tracking Internet users since 2014 and has seen more than 1.9 billion people added to the Internet since then.

The World Wide Web turns 30 this year (that’s hard for many to believe!). It took 16 years to add the first billion users, 6 more years to add the second billion. The internet is now adding a billion users every 2.7 years.

The importance of cellular broadband has grown over time. In 2014, 26% of users connected to the web using a cellular phone. Today that has grown to 48%. The average Internet user worldwide uses the Internet an average of 6 hours and 42 minutes per day. The biggest daily users of the web are in the Philippines, with daily usage over 10 hours per day. In the US the average is 6.5 hours per day.

Google has the world’s two most popular web sites with Google search at number 1 and YouTube at number 2. Facebook is in third, with the top ten rounded out by Baidu, Wikipedia, Yahoo, Twitter, Pornhub, Yandex, and Instagram.

GlobalWebIndex reports that 92% of Internet users (about 4 billion) now watch video each month. To put that into perspective, there are an estimated 6 billion people around the world have access to a television.

It’s estimated that more than 1 billion users now stream games, with Fortnite being the number one game in the world. There are also a billion people who watch other people play games, with 700 million people who watch e-sports.

About 40% of Internet users now interface with the web using voice. In China and India over half of users interface the web with voice.

Social media grew by 288 million new users last year. The US still leads with social media with 70% of Americans internet users connected to at least one social media site. China also has a 70% social media penetration followed by 67% in northern Europe and 66% in South America. China added 95 million users to social media in 2018 followed by India at 60 million and Indonesia at 20 million. Worldwide the average social media usage is 2 hours and 16 minutes per day. The Philippines again leads in this category where daily usage is 4 hours and 12 minutes. In the US it’s a little over 2 hours per day.

While there are still billions with no access to the web, the web keeps growing at a rapid pace around the world. There are efforts by companies like Google, Facebook, and the satellite broadband providers to bring better broadband to the parts of the world with no connections.

Providing Local Content to Rural America

This fall we can look forward to a big battle in Congress over the rules regulating cable TV. The rules that govern the rights of satellite TV providers to carry local network affiliates (ABC, CBS, NBC, and FOX) will be expiring. If Congress takes no action it’s possible that local networks could disappear from satellite cable lineups.

In 2014 Congress passed the STELAR Act (Satellite Television Extension and Localism Act Reauthorization). This legislation allowed satellite providers to deliver distant network stations into rural markets rather than having to negotiate with individual stations in every market. This has acted to hold down satellite TV costs since it makes local stations agreeable to negotiate fees with the satellite providers at reasonable fees.

This is a big contrast to the way that landline cable networks have to pay for local programming. In the 1992 Cable Act, Congress enacted the idea of retransmission consent. These rules were intended to protect local network affiliates since many cable companies at the time were electing to not add local stations channels to their line-ups. The 1992 Act made it mandatory for cable companies to carry local networks, and for the most part, they did so for free.

However, over the last decade, as local stations were losing advertising revenues, they have stepped up charges to cable companies to carry their signal. The fees for access to local network affiliates in most markets has skyrocketed and contributes $10 – $12 per month towards the cost of cable TV bills in most markets (in a few a lot more).

There is a lot of pressure on Congress to look at the whole retransmission issue while they are considering the STELAR renewal for satellite companies. Congress hasn’t made any significant regulatory changes for the cable industry since the 1992 Act and the industry has changed drastically in the last few years.

Just looking back to 2014 when the STELAR act was passed, online content providers like Netflix represented only 2% of the industry. Today there is a slew of online content providers and there are now more households buying online content than subscribing to traditional cable packages. With cord-cutting, the numbers are shifting drastically, with the latest figures trending towards traditional cable losing as much as 5% of total market share this year.

We are also seeing escalating battles over carriage of content. There were 213 blackouts in the industry as of the end of July, contrasted with 165 blackouts for last year. Last month a battle between AT&T and CBS caused those channels to go dark. There has been a running battle between Dish Networks and Univision this year. It’s becoming obvious that the cable companies are no longer willing to automatically accept huge rate increases from local network affiliates.

It’s a classic battle of huge companies. Cable companies are pushing to break the required nature of retransmission consent rules that require them to carry local stations – that rule gives cable companies almost no negotiating power. Meanwhile, the big networks like ABC and CBS have been benefitting from the retransmission revenues. While these fees are theoretically paid to local stations, the parent networks sweep most of this money into their own coffers. The network owners are pushing hard to keep the retransmission consent rules intact.

Most local stations now charge between $2 and $3 monthly to cable companies for every customer that receives their signal. It’s an interesting dynamic because a majority of people could instead get this content for free through the use of rabbit ears. Additionally, most of the national content from the big networks is available online – it’s not hard to find ways to watch the shows from CBS or NBC. The big monthly retransmission fees only add local programming like news and local sports to cable subscribers.

The cord-cutting phenomenon tells us that many households are willing to walk away from local programming if it saves them money. I was in a meeting last with ten people, and not one of them watches local news and local programming. The big question facing Congress is how relevant local content is to most households. There are many people who still love local news and local sports, but that universe keeps shrinking as households are deluged with content alternatives. Expect to hear lots of rhetoric this fall as both sides rachet up arguments for Congress.

 

GAO Supports Broadband to Students

In an interesting move, the General Accounting Office released a paper that suggests that the FCC should expand the use of E-Rate funding to allow wireless connections to student homes. The E-Rate program is one of the major components of the Universal Service Fund. Today the E-Rate program can be used to construct fiber assets to reach schools or to subsidize fast broadband connections to schools that demonstrate the financial need.

Specifically, the GAO “recommended that the FCC assess and report on the potential benefits, costs, and challenges of making wireless access off school grounds eligible for E-rate.” The GAO recommendation went on to discuss the impact of the homework gap that puts students without home broadband at risk for falling behind their peers.

I’m sure that every rural broadband advocate understands this issue and applauds the GAO for making this suggestion. However, this seems extraordinary coming from the GAO and seems outside of their stated scope and function. The GAO is the internal auditor of the US government and is often called the congressional watchdog agency that examines how taxpayer dollars are spent. The GAO routinely provides reports to Congress with ideas on how the government can save money and work more efficiently.

I may have missed it, but I can’t remember the agency ever making policy suggestions of this magnitude to the FCC in the past. This seems like a particularly puzzling recommendation because it’s a suggestion on how to spend existing E-Rate money in a different way rather than suggesting ways for the FCC to save money.

The GAO report does a great job of describing the homework gap. The report discusses challenges that school-age children face in doing homework without a computer. The GAO found that many homes without home broadband rely on cellular connectivity, which is largely inadequate for doing homework. The report points out the shortcoming and challenges on the following chart for the alternatives to home broadband such as libraries, community centers, coffee shops, and outdoor WiFi around schools.

The GAO looked into six pilot projects at schools that tried to alleviate the homework gap using wireless technology to connect to students. The GAO pointed out that in 2016 that two schools asked for FCC waivers in the E-Rate program to provide wireless connectivity to students, but the FCC never reacted to the waiver requests.

The GAO concludes the report by recommending that the FCC take steps to assess and publish the potential benefits, costs, and challenges of making off-premises wireless access eligible for E-rate support. The has already FCC agreed with GAO’s recommendation, so I’m sure there will be an assessment coming in the near-future.