My Telecom Predictions for 2020

Technical Resource Shortage. There is already a growing shortage of fiber resources that includes engineers, construction companies, and fiber consultants. The upcoming $16.4 billion RDOF program will create a resource shortage in 2020 for those who can help companies seek grant funding. Once the grants are awarded, the size of the program will add stress to the resources needed to build networks. Companies that don’t line up their experts early might find themselves without help.

Broadband Price Increases Are Now Routine. The biggest ISPs including Comcast, AT&T, Charter, Verizon, and others have now made it clear that they will be raising broadband rates annually – at least in the majority of their markets where they don’t face real competition. Anybody building a business plan for a new market has to decide how to predict future rate increases.

5G Cellphones Will Prove to be a Joke. At least for 2020, almost everybody who spends extra for a 5G handset is going to be disappointed. The companies deploying millimeter wave spectrum are doing it in limited downtown areas of major cities – and the speeds are only faster outdoors. Carriers implementing low frequencies like 600 MHz and 850 MHz admit that service won’t be any faster than 4G LTE.

FCC Will Eliminate the Last Vestiges of Regulation. The FCC has been actively tearing down regulations affecting the biggest ISPs. The agency has completely deregulated broadband and killed net neutrality. They’re in the process of gutting the use of unbundled network elements They’ve preempted local authority on the placement of wireless infrastructure. Since there is a chance that the administration will change at the end of the year, the FCC will kill as many regulations as they can during 2020.

T-Mobile / Sprint Merger Will be Approved. While there is a lot of opposition to the merger, the reality is that Sprint is not particularly viable as a cellular carrier. The biggest cable companies are entering the cellular markets and will push down urban cellular prices. Dish Networks seems to have a viable plan to become a major carrier if the T-Mobile/Sprint merger is approved.

Courts Will Chip Away at the 5G Pole Attachment Rules. The authority of the FCC to override local policy for the placement of cellular infrastructure boils down to a state versus federal jurisdiction battle. The courts have already said that cellular companies must heed some historic preservation and aesthetics rules. Ultimately the courts will weaken, but not kill the FCC rules, giving cellular carriers more rights than they historically had, but not full carte blanche authority to place devices anywhere.

State Net Neutrality Will Be Almost as Powerful as Federal Policy. It will be hard for the big ISPs to comply with net neutrality rules in California and Washington without complying everywhere. It’s also likely that more states will pass similar net neutrality rules

The RDOF Grants Will Fund Poor Broadband Solutions. Unfortunately, the $16.4 billion RDOF grants will award some grant money to technologies that are not future-proofed. Since the grants can be awarded for technologies that deliver broadband speeds of as little as 25/3 Mbps, we’ll see money go to technology solutions that might be obsolete before the end of the RDOF implementation period.

Cellular Networks Will Continue to Degrade. The nationwide use of cellular data is currently doubling every two years, which is greatly stressing cellular network quality. The cellular carriers need to implement massive numbers of small cells, add new spectrum, and fully implement 5G to keep up with the growing demand. Since those solutions will take 3 – 7 years to implement, cellular network quality is going to get a lot worse before the problems are solved.

Household Bandwidth Usage Will Continue to Grow. OpenVault says the average home now uses 275 gigabytes of data per month, with cord cutting households using 520 GB per month. Opensignal and Cisco both report that household broadband usage continues to grow rapidly, at about 21% annually, or a doubling every 4 years. There is nothing to suggest this growth will be slowing.

Congress Mandates Cable TV Pricing Disclosure

In a surprise move by Congress, the recent appropriations bill that funds the government through September 2020 includes a new law that mandates that cable companies tell their customers the truth about cable pricing. Labeled as the Television Viewer Protection Act of 2019 the bipartisan law places new requirements on companies selling cable TV.

The bill was originally sponsored by Representative Mike Doyle (D-PA). In the original version of the bill, the cable providers had to advertise the full monthly cost of service. Full cost meant including such things as hidden fees, equipment charges, and any taxes or surcharges added to a cable bill. The bill also requires disclosure about the details of any promotional pricing and cable companies should make it clear when the promotion ends.

That final version of the law softened the disclosure requirement and cable companies can still promote deceptive special pricing. However, a cable provider must notify customers buying a new plan within 24-hours “by phone, in person, online, or by other reasonable means” of the full cost of buying the service. Customers then have 24-hours from the time the cable company sends the notice to cancel service with no penalty. The cynic in me believes that cable companies will find ways to meet the law and still be deceptive – such as putting the pricing notice at the end of a long email message that customers aren’t likely to read. However, if cable providers follow the spirit of the law, it should end the practice of customers seeing bills that are much higher than what they expect. Another provision of the new law is that cable providers can no longer charge for equipment they don’t provide – something that Frontier was accused of during the last year.

Interestingly, the law only affects cable TV pricing and not pricing for broadband or telephone service. I hope the cable companies don’t somehow shift hidden fees to these other services. The law also seems to ignore the fact that a majority of traditional cable customers buy a bundle of multiple services. The cable companies have never come clean with customers about how bundling discounts work, leaving the companies with the flexibility to penalize customers for withdrawing any one of the bundled services. I suspect the cable companies will somehow not come clean about bundling prices for cable TV, even with this new law.

The bill gives cable companies six months to implement the new practices. Oddly, the bill also allows the FCC to extend the starting date up to six additional months. It’s hard to picture any reason for the FCC to extend the deadline other than kowtowing to the cable companies.

From a consumer perspective, this law is long overdue. For the last five years, the cable companies have disguised much of their rate increases by folding them into hidden fees rather than into advertised rates. A few months ago, Consumer Reports reported that the hidden fees for the big cable companies range from $22.96 monthly for AT&T U-verse to $43.79 for Verizon FiOS.

The timing of this new law is interesting from a market perspective. We’re now seeing cord-cutting at a record pace, and forcing the cable companies to be honest with customers is likely to accelerate cord cutting even more.

Smaller cable providers that compete against the big companies have always been torn about how to advertise their prices. Some match the practices of the big cable companies and have hidden fees and advertise deceptively low prices. Others have taken the high road and advertise the full price of service while pointing out that their competitor’s pricing is deceptive. These new rules make it easier for smaller cable companies to disclose their full prices and to challenge the big cable companies to do the same.

The new law also includes several other changes for the cable industry. The law allows the 5-year sunset provision that has allowed satellite TV providers to import distant local network stations for rural customers. The companies have always argued that the cost of negotiating with every local station across the country is astronomical and that they would allow network channels to go dark rather than seek deals with every local network affiliate in the country. I guess we’ll soon find out if that’s true when the satellite providers can no longer bring in network stations from out of the market. I would hope that a satellite provider that decides not to deliver network affiliates like ABC, CBS, FOX, or NBC will lower the price of the cable package to reflect undelivered channels.

Finally, the bill includes a requirement that local stations and programmers negotiate programming contracts in good faith. That’s an idea that has been bouncing around for a while in response to local stations negotiating in large groups instead of individually. In the last year, we have seen programming go dark at a record pace when stations and programmers are deadlocked in negotiations. We’ll have to wait a while to see if this stronger language gives the FCC any real leverage to end retransmission disputes.

The Government’s Role in 5G

It’s been really interesting to watch how much the federal government talks about 5G technology. I’ve not seen anything else like this in my adult lifetime, although there may have been times in the past, such as the advent of railroads or electricity that the federal government took such an active interest in new technology.

The government gets involved to some extent in many new technologies, but with 5G there has been a steady and persistent dialog about how 5G is vital to our economic future, and pronouncements of why we must implement 5G as quickly as possible to stay ahead of the rest of the world. As I’ve watched the way the government talks about 5G, it makes me wonder why we never heard the same urgency for breakthroughs like personal computers, the world wide web, or understanding the human genome.

A good example of what I’m talking about came in November when a bipartisan group of senators sent a letter to Robert O’Brien, the current national security advisor asking for a better government strategy for 5G. They claimed they are concerned that China is winning the 5G war, which they believe creates a security threat for the US.

I’ve been hearing about the 5G war for a few years now and I still don’t know what it means. 5G is ultimately a broadband technology. I can’t figure out how the US is harmed if China gets better broadband. If there is now a 5G war, then why hasn’t there been a fiber-to-the-home war? I saw recently where China passed us in the number of last-mile fiber connections, and there wasn’t a peep about it out of Congress.

The market reality of 5G looks a lot different than the rhetoric from the politicians. Cellular carriers worldwide are crowing about 5G deployment, yet those deployments contain none of the key technology that defines 5G performance. There is no frequency slicing. There is no bonding together of multiple frequencies to create larger data pipes. There is no massive expansion of the number of connections that can be made at a website. Cellphones can’t yet connect to multiple cell sites. What we have instead, for now, are new frequencies layered on top of 4G LTE.

New frequency does not equal 5G. The millimeter wave spectrum is faster in the handful of neighborhoods where people can go outside in the winter to use it. The carriers admit that the 600 MHz and the850 MHz spectrum being deployed won’t result in faster speeds than 4G LTE.

AT&T recently announced a significant cut in its capital budget for 2020 – something that is hard to imagine if there is an urgent need to deploy 5G faster than the Chinese. The reality is that the big cellular companies are struggling to find a business case for 5G. They are starting to realize that a lot of people aren’t willing to pay more for faster cellular data. Some of their other big uses for 5G such as using it for self-driving cars, or for supplanting WiFi as the technology to handle IoT devices are still years into the future and may never come to fruition.

The other Washington DC talking point is that 5G networks will be 100 times faster than today’s cellular data. That may be true in the tiny downtown urban areas that get saturated with outdoor millimeter wave broadband. I have a hard time thinking this is anything more than a gimmick that will never become widespread. A dense fiber network is needed to support the millimeter wave transmitters, and it’s hard to think that the revenues from millimeter wave broadband will ever justify building the needed network.

It’s starting to look like the real reason for the talk about a 5G war is to drum up sympathy for the big cellular carriers as a justification for big government giveaways. The FCC has been generous to the cellular carriers in the last few years. They killed broadband regulation and net neutrality. They gave the cellphone carriers the right to place cellular equipment anywhere in the public right-of-way. Just recently the FCC created a 5G Fund to give $9 billion to the cellular carriers to expand their networks in rural areas. The FCC has been freeing up every imaginable band of spectrum for 5G.

That sounds like that ought to be enough, but since these giveaways are behind us, I wonder why I’m still hearing the rhetoric, such as the recent letter from Senators. Are we going to be seeing other big giveaways? Is the government perhaps going to give billions of dollars to build urban and suburban 5G networks so that we don’t lose the 5G war? I’m at a loss to think of anything else that the government could do to push 5G beyond what they’ve already done.

There doesn’t seem to be anything that the US government can do in terms of developing 5G technology faster. Corporations all over the world are furiously working to implement the many new aspects of the 5G specifications. Many of the corporations doing the key research are not even American, and labs at Nokia and several Chinese companies are among the leaders in developing the core equipment used to transmit 5G. It’s hard to think there is anything the US government could do to help us win the 5G war from a technical perspective.

I must admit that I’m starting to cringe when I hear federal officials talk about the 5G war. It makes me believe that there more big handouts coming to the cellular carriers. I hate the idea of the federal government handing billions to these big carriers while we continue to have lousy rural broadband – which is largely the fault of these same big carriers. My response to these Senators is that we shouldn’t be trying to win the 5G war if that means losing the landline broadband war.

The Battle over DNS

One of the hottest topics in the computer world this year is controversy over DNS-over-HTTPS (or DoH). DNS stands for domain name system and is the protocol that acts like the telephone directory for the web. The DNS system translates domain names, such as ‘https://www.google.com/’ to an IP address so that the request can be routed over the Internet. Every device connected to the Internet has a unique IP address, and the DNS system helps to establish a 2-way connection across the web, in this example, between a Google server and a user.

DNS is one of the oldest protocols on the web and hasn’t changed much since it was created. Domain name requests are sent in plain text to an ISP which then converts the domain name to an IP address and routes the user’s request to connect.

DoH takes the ISP out of the picture since web browsers will initiate the DSN lookup. Currently, DoH is built into a few browsers such as Mozilla Firefox and Google Chrome, and most of the major browsers have plans to enable DoH. A web brower will use the DoH protocol to encrypt a domain name request and send it to a third party DNS database provider for routing.

Proponents of DoH cite several advantages of the new routing protocol. First, DoH stops ISPs from recording browser history – one of the biggest privacy concerns, since an ISP knows every web site visited. A user’s browser history reveals a huge amount of information. Of course, some new entity will take over the role of DNS routing and could also create a browser history. Mozilla is using Cloudflare to route DNS, and Cloudflare says that it deletes all browser history every day. This same promise of privacy may not be true for all DoH providers and users might want to think twice before choosing somebody like Google to initiate DoH and collect browser history.

DoH also stops man-in-the-middle attacks. That’s where somebody intercepts a DNS request and sends the user to a different web site. There have been cases in the past where viruses rerouted user traffic to specific web sites to stimulate web usage. Other schemes have rerouted traffic to fake banking or shopping sites to try to coax credit card or account numbers out of users.

DoH also makes it harder for ISPs to engage in targeted advertising. This is something the big ISPs have been eyeing as they try to chip away at the huge advertising revenues earned by Google and Facebook. One of the most interesting benefits of DoH is that it makes it harder for authoritarian regimes to track the web activity of dissidents.

DNS-over-HTTPS is not the only alternate DNS routing protocol and web companies are also exploring DNS over TLS (DoT), which uses the transport layer security protocol on the web to encrypt the DNS request. Over time, the safest alternate protocol will likely prevail, but the goal of both of these new protocols is to encrypt the DNS process to make it safer, with a secondary goal of improving privacy.

Many big ISPs clearly hate the alternate DNS routing schemes since they lose access to customer browsing history. Vice recently reported about a big lobbying effort by Comcast to convince lawmakers to disallow DoH. The protocol is causing controversy in Great Britain where ISPs are required to block pornography unless a user specifically allows it. For now, Mozilla does not offer DoH in Great Britain, but there will be no easy way to stop it after it gets built into the core Android browser and other ubiquitous platforms. Corporate IT staff are also worried about DoH because it makes it more difficult to track employees visiting social media during work hours or browsing dangerous parts of the dark web.

There will be more public discussion about DoH routing as more web browsers include the protocol. Before the dust settles there is likely to be an ongoing tug-of-war between big ISPs, big web companies, and users as the public demands privacy.

Ho, Ho, Holy Rate Increase!

It’s that time of year when customers get an unwanted Christmas present from cable companies in the form of a rate increase. The largest providers – Comcast, Charter, and AT&T have all announced rate increases. A few others like Cox and Mediacom generally announce price hikes in January. Altice typically raises rates in June.

The cycle of raising rates routinely has gone on for so many years that it feels routine. To give some credit to the cable companies, programmers continue to increase the cost of buying content every year. In fact, most programming contracts last 3 – 5 years and annual rate hikes are usually baked into the contracts.

What’s becoming mystifying is why the programmers and cable companies can’t sit down and find a way to control costs. The rate of cord cutting is climbing at a dizzying rate and with each rate increase, the industry is losing millions of customers.

Comcast

Comcast is raising rates on Basic cable, their smallest packages from $30 to $35, a 17% rate increase. The company is also raising the broadcast TV fee from $10 to $14.95 per month, a 50% increase.

Comcast is also raising the rate of Internet access by $3. I’ve been warning for a few years that annual broadband rate increases will become routine, even though there is no underlying cost of offering broadband that can be pointed to in the same manner. The big cable companies are raising broadband rates to increase earnings to satisfy Wall Street. A $3 rate increase may not seem like a lot, but for a company with over 28 million broadband customers, $3 translates to $1 billion to the bottom line.

Comcast also made changes to other fees. For example, the fee for a returned payment (bad check or credit card number) went from $10 to $30.

Charter

The Charter rate increases already went into effect in November. Charter raised the rates on the three most popular tiers of cable TV – Spectrum Select, TV Silver, and TV Gold by $7.50 per month. Charter also raised the rate for the broadcast fee by from $12.00 to $13.50. The company raised the rate on a settop box by 50 cents, from $7.50 to $8.00. A customer with one settop box saw an overall increase of $9.50 per month.

Charter raised the price of its basic Internet package (100 Mbps – 200 Mbps) from $65 to $70.

AT&T   

AT&T announced rate increases that take effect in January. AT&T raised cable rates for customers using U-verse by $3 to $7 per month. The U-family package increases by $3 while the largest U400 package increases by $7. The broadcast TV fee will increase up to $2, depending upon the market. AT&T also will increase the Federal Regulatory Recovery Fee by $0.07, and for the life of me, I have no idea what this is. I’m not aware of any FCC charges on cable TV and this is something AT&T pockets.

AT&T raised rates on DirecTV customers yet again, after having a rate increase in August. The new increases range from $1 per month for basic choice up to $8 per month for the Premier package. AT&T is also raising the regional sports fees by as much as $2, depending upon the market.

The largest rate increase at AT&T went unannounced as the company has decided to cut back and not renew promotional rates. As promotional plans have ended, AT&T is moving customers to full rates. In just the third quarter of this year, DirecTV lost almost 1.1 million customers as customers have balked at paying full rates.

FCC Proposes New WiFi Spectrum

On December 17 the FCC issued a Notice of Proposed Rulemaking for the 5.9 GHz spectrum band that would create new public spectrum that can be used for WiFi or other purposes. The 5.9 GHz spectrum band was previously assigned in 2013 to support DSRC (Dedicated Short Range Communications), a technology to communicate between cars, and between cars and infrastructure. The spectrum band covered by the order is 75 megahertz wide. The FCC suggests that the lower 45 megahertz be made available to anybody as new public spectrum. They’ve assigned the highest 20 megahertz for a newer smart car technology called C-V2X. The FCC tentatively kept the remaining bandwidth for the older DSRC technology, dependent upon the users of that technology convincing the agency that it’s viable – otherwise, it also converts to C-V2X usage.

DSRC technology has been around for twenty years. The goal of the technology is to allow cars to communicate with each other and to communicate with infrastructure like toll booths or traffic measuring sensors. One of the biggest benefits touted for DSRC is increased safety so that cars will know what’s going on around them, such as when a car ahead is braking suddenly.

For the new technology, the V2X stands for vehicle-to-everything. Earlier this year Ford broke from the rest of the industry and dropped research in DSRC communications in favor of C-V2X. Ford says they will introduce C-V2X into their whole fleet in 2022. Ford touts the technology as enabling cars to ‘see around corners’ due to the ability to gather data from other cars in the neighborhood. They believe the new technology will improve safety, reduce accidents, allow things like safely forming convoys of vehicles on open highways, and act as an important step towards autonomous cars. C-V2X uses the 3GPP standard and provides an easy interface between 5G and vehicles.

This decision was not without controversy. The Department of Transportation strenuously opposed the reduction of spectrum assigned for vehicle purposes. The DOT painted the picture of the spectrum providing a huge benefit for traffic safety in the future, while the FCC argued that the auto industry has done a poor job of developing applications to use the spectrum.

This is an NPRM, meaning that there will be a cycle of public comments before the FCC votes on the order. I think we can expect major filings by the transportation industry describing reasons why taking away most of this spectrum is a bad idea. On the day of the FCC vote, Elaine Chao, the Secretary of Transportation said that the FCC is valuing Netflix over public safety – so this could yet become an ugly fight.

Perhaps the biggest news from the announcement is the big slice of the spectrum that will be repositioned for public use – a decision praised by the WiFi Alliance. The FCC proposes to make this public spectrum that is open to everybody, not just specifically for WiFi. The order anticipates that 5G carriers might use the spectrum for cellular offload. If the cellular carriers heavily use the spectrum in urban areas, then the DOT might be right and this might be a giveaway of 5G spectrum without an auction.

There is no guarantee that the cellular carriers will heavily use the spectrum. Recall a few years ago there was the opportunity for the cellular carriers to dip into the existing WiFi spectrum using LTE-U to offload busy cellular networks. The carriers used LTE-U much less than anticipated by the WiFi industry, which had warned that cellular offload could overwhelm WiFi. It turns out the cellular carriers don’t like spectrum where they have to deal with unpredictable interference.

Even if the cellular carriers use the spectrum for cellular offload in urban areas, the new public block ought to be mostly empty in rural America. That will create an additional spectrum band to help boost point-to-multipoint radios.

Regardless of how the new spectrum might be used outdoors, it ought to provide a boost to indoor WiFi. The spectrum sits just a little higher than the current 5.4 GHz WiFi band and should significantly boost home WiFi speeds and volume capability. The new spectrum will provide an opportunity to reduce interference with existing WiFi networks by providing more channels for spread home use.

This particular docket shows why spectrum decisions at the FCC are so difficult. Every potential use for this mid-range spectrum creates significant public good. How do you weigh safer driving against better 5G or against better rural broadband?

A Tale of Tackling the Digital Divide

A new book came out in November that tells about one of the first attempts to solve the digital divide on a large scale. The book is The Charisma Machine: The Life, Death, and Legacy of One Laptop per Child published by MIT Press and available on Amazon and other places online.  In 2005, Nicholas Negroponte, the founder of MIT Media Lab created a program that he hoped would solve the digital divide in the third world. The program was called One Laptop per Child (OLPC) and delivered inexpensive laptops to children between the ages of 6 and 12 in third world countries.

The program was nearly a complete bust. The stripped-down computers were produced for a price of about $100. A third world country had to come up with the money to buy the computers, and many did, and over 3 million computers were sold. But the realities of using computers in the third world became quickly apparent. Many students didn’t have access to electricity – the laptop came with a hand crank that could be used to charge it, but it didn’t work very well. Computers also broke and there was no process in place to repair computers with problems.

The biggest failure came due to a lack of adult supervision and training for using the computers. For example, in Paraguay, the most successful trial of OLPC, teachers make half the minimum wage in the country and very few of them understood the computers well enough to teach children how to use them. In Africa, the teaching role often is done by mothers who had no training on how to use a computer.

There was also very little Internet access in these third world countries in 2005 (and many places are still without access). Only a small percentage of children had access to the Internet and without that, there wasn’t a lot of things to do on the computers other than play some simple games or attempt to write code – something most kids had no idea how to do.

Proponents of solving the digital divide now understand that there are three components in a fully successful digital divide program. Just as with OLPC, many schools in the US now have programs that give laptops or tablets to all students – many who don’t have a computer in their homes. Teachers supply the training and context for using computers, and teachers get intensive training on using computers as part of the overall curriculum of the schools. These programs also have ways to deal with broken or lost computers.

Most school systems still haven’t found a solution for the third leg of solving the digital divide – getting broadband access into the homes of children with computers. We now call this lack of home broadband the homework divide since children without home broadband access lag behind other students, even when all have access to the same computers and computer curriculum.

There are places that are tackling the homework divide, but in most communities, that’s the hardest and most expensive part of solving the digital divide. I wrote a blog earlier this year talking about the program in Buffalo New York to bring WiFi into the homes of thousands of students without access to broadband. Many communities are looking at similar solutions. Some of the cities that have built fiber-to-the-home have a low-income product to promote getting broadband to school children.

The folks behind OLPC had good intentions. Today there are a host of people with experience in solving the digital divide who could have told the program it would fail. Solving the digital divide is not easy and it is not cheap. A successful digital divide effort needs to provide a lot more than just computers to be successful. There is a tiny fraction of kids who can run with computers without much help. But the vast majority of students need help to learn how to use a computer – and the training must be done in a way to motivate kids to stick with it.

This is not a cheap book, priced at over $20 for kindle and $33 in paperback. However, it’s an interesting read and worth it to anybody thinking of tackling the digital divide. The OLPC program made almost every mistake possible and the book is a primer of what not to do to solve the digital divide. I kept wanted to leap into the screen yelling, “No, no, no”, to the mistakes made by the program.

FCC Proposes to Further Curtail UNEs

The FCC voted on November 22 to issue a Notice of Proposed Rulemaking that will largely eliminate the use of unbundled network elements (UNEs) by competitors. This was a surprise order because there was not the usual chain of aggrieved parties on the record asking for the docket – it seems to be unprompted and generated by the FCC directly. It’s been well known for decades that the large telcos have wanted to get rid of UNEs and they likely have been pushing for this behind the scenes and off the record.

UNEs are portions of the telcos copper and dark fiber networks that have been made available to competitors since the Telecommunications Act of 1996. There are two primary uses of UNEs today. First, competitors buy a copper UNE and deliver better DSL than the telcos using modern DSL technology. I know of cases where competitors are offering several hundred Mbps speeds to businesses by bonding multiple UNEs. Like every product that competes with cable broadband, the use of DSL UNEs has been declining, but there must still be hundreds of thousands, if not a few million homes and businesses in the country served by newer DSL technology on UNEs.

UNEs are also used by competitors to interconnect to the big telco networks. There was a movement a decade ago by the FCC to transition the telecom network to all-digital – but that never happened. Competitive carriers must buy still buy traditional T1 and T3 UNEs (28 T1s) to interface with the big telco networks. CLECs (Competitive Local Exchange Carriers) that offer voice services use these UNEs to connect to the public switched telephone network. I doubt the FCC understands the extent to which such connections are required by the big telcos – and the extent that there might not be alternatives available to CLECs. Eliminating these UNEs is particularly puzzling since the upcoming RDOF grants will require all grant recipients to offer voice services – it would be ironic if grant recipients are unable to connect voice from these new networks to the rest of the world.

This proposed order will eliminate the following kinds of UNEs:

  • DS1 (single lines) and DS3 (T1s) loops in counties previously deemed competitive by the FCC. The exception is that DS1 single line loops will still be available in rural areas – presumably using the flawed FCC maps that define areas without broadband. In North Carolina where I live, this would eliminate UNEs in 67 of the 100 counties. I’m familiar with many of the counties on the list and I think the folks in many of these counties like Moore and Stanley will be surprised to find that they are considered as competitive.
  • DS0 loops in urban census blocks. These loops are also used to provide DSL.
  • Subloops in the same areas that eliminate other kinds of loops. Subloops are connections to homes inside a subdivision if that subdivision is served by telco DSL from the entrance to the subdivision.
  • Dark fiber transport in wire centers within a half-mile of alternative fiber. Unless ‘alternative fiber’ is defined carefully, this could eliminate dark fiber when there is no actual alternative.

The NPRM would require a 3-year transition for anybody using the UNEs. I’m not sure what transition means since a carrier can either use a UNE or they can’t. It seems this would give competitors three more years to continue to serve customers before they lose the UNE connection.

The FCC is painting the NPRM as part of its ongoing effort to eliminate unneeded regulations. However, UNEs are not unneeded – there are competitive carriers using UNEs to deliver products that customers want to buy. This FCC has always said that the main thrust of eliminating regulations is to increase competition. This particular order will decrease broadband competition and will force a lot of customers to find a more costly broadband alternative. The FCC should not be actively trying to eliminate UNEs if homes are happy with 25 Mbps or 50 Mbps broadband delivered on copper UNEs.

The big telcos have been trying to eliminate the requirement to unbundle their network since the 1996 Act. The FCC eliminated some UNE requirements earlier this year, and in that docket, the FCC said they didn’t eliminate broadband UNEs because the market still valued them. Now, barely half a year later, the FCC has done an about-face and wants to throw DSL competitors out of urban and suburban markets.

It’s also an odd order from a financial perspective. The big telcos will lose the revenues if UNEs disappear – they are a significant source of revenue on old copper. Customers will be tossed off services they like. The real beneficiaries of the order are the cable companies that will pick up the displaced customers – which is an odd thing for the FCC to be pushing when the cable companies are inching towards monopoly.

AT&T Cutting Capital Spending

AT&T announced it will be reducing capital spending in 2020. That news is significant for several reasons. AT&T’s capital plans are always big news because they have the largest annual capital budget of the big telcos and cable companies. The AT&T capital budget for 2019 was $23 billion. It’s big news when they are only planning on spending $20 billion in 2020.

It’s worth noting that some of AT&T’s capital spending is not being done with their own money. In 2020 they will be receiving the final installment of $428 million for the sixth year of the CAF II program. AT&T recently announced that they are 75% finished the construction of the FirstNet network for first responders, so the company should be receiving the last 25% of the $6.5 billion of federal funding next year. In future years AT&T will likely be collecting some significant share of the recently announced $9 billion 5G Fund paid out of the Universal Service Fund to bring better cellular service for the most rural parts of the country.

There are ripples throughout the telecom sector when AT&T increases or decreases its capital budget. For example, a significant slash of AT&T spending has a significant impact on the various major electronics vendors that will now have to lower their revenue expectations for 2020. While the whole telecom sector is busy, this still means lower revenues for the major telecom vendors.

This reduction in AT&T spending makes me wonder about the 5G war we are supposedly having with China. If you listen to the carrier-driven rhetoric in Washington DC, you would think that there is an urgent need to spend huge amounts of capital immediately on 5G infrastructure. It was that rhetoric that gave the FCC cover to double the size of the recently announced 5G Fund to $9 billion.

It’s hard to imagine that AT&T would be cutting its capital budget if 5G implementation was truly a national priority and a crisis. The truth about 5G can be seen by how the cellular carrier CEOs communicate with their stockholders – the big carriers are struggling right now to find an immediate business case that justifies huge spending on 5G. It turns out that much of the public isn’t willing to pay more for faster cellular broadband. Every carrier has a list of future benefits from 5G, but there are no applications that will create the quick revenues that would prompt AT&T to keep spending capital at historic levels.

This is not to say that AT&T and the other wireless carriers aren’t spending money on 5G – but AT&T is fitting 5G expansion into its shrinking capital budget. Contrary to everything that the carriers have been telling Washington DC, the carriers are not planning on spending massive amounts of their own money on 5G just yet.

Lower capital spending by AT&T also takes the wind out of the sails of the FCC’s argument that net neutrality was holding back the big ISPs from making capital expenditures. This was the primary reason cited by FCC Chairman Ajit Pai for killing net neutrality and Title II regulation. He argued that overregulation was stopping the big carriers from investing, and he’s still making this same argument today to justify his decision. If Chairman Pai was right, we should be seeing AT&T increase capital spending rather than cutting it.

The idea that there is a direct correlation between capital spending and regulation was always fictional. Big ISPs spend money on capital that they think will increase future returns – it’s hard to imagine regulations that would stop the big companies from pursuing good business ideas. AT&T’s capital spending is much more related to what its competitors like Verizon, T-Mobile, and Comcast are doing. When the FCC killed Title II regulation and net neutrality, the agency was removing the last regulations major from a broadband industry that was already barely regulated. It’s hard to think that change had much impact in the Board room or the business development groups at the big ISPs.

It’s worth noting that AT&T has now joined many other big US corporations and is using free cash to buy back its own stock. The company already announced plans to buy back $4 billion of its own stock in the first quarter of 2020 – retiring roughly 100 million shares. I’m sure that decision had some impact on the capital budget. This might mean that AT&T upper management values stock buy-backs to increase earnings per share more than they value capital spending.

Fiber Resource Shortages

The fiber industry is as busy as I have ever seen it, and it’s about to get even busier. The cellular carriers, particularly Verizon are actively building fiber to reach small cell sites. The cable companies are building a significant amount of fiber, particularly Altice which is upgrading to FTTP. The FCC is going to award $9 billion in 2020 for the 5G Fund grant program, much which will go for fiber to reach rural cell sites. The FCC will be awarding $16.4 billion in 2020 for RDOF grants to build rural broadband infrastructure. There are state broadband grant programs in many states providing funds to help with rural broadband projects. Independent telephone companies are still building rural fiber to meet their ACAM responsibilities. Electric coops all over the country are jumping into the fiber business. Finally, there are dozens of active fiber overbuilders building into new markets.

All of this fiber activity is going to mean a shortfall of industry resources of all kinds. I’ve already witnessed construction delays in projects this year due to resource shortages and I fear delays will increase in 2020 and beyond. Following is a list of the industry resources that I think will be in short demand or under stress, meaning that some fiber projects will have problems.

Construction Crews. I’ve worked with several projects this year that had problems finding enough construction crews. It’s not hard to imagine a shortfall of underground boring crews, aerial construction crews, or splicers as the industry gets busier. Maybe even more troubling will be a shortage of good fiber project managers. As we’ve seen in busy markets in the past, crew shortages are likely to result in higher construction labor rates.

Engineers. Almost every engineering company I know is already working at nearly full capacity. It won’t be surprising within a year to see engineering firms being selective about who they will work for.

Fiber and Fiber Components. I saw a few projects get slowed down this year due to backlogs of fiber cable and various components like handholes. I can recall worse shortages, but I suspect that we will soon not take the normal delivery intervals in the supply chain for granted.

Pole Attachment Processing. Many of the big pole owners, like commercial electric companies, say they are swamped with pole attachment requests. It will be interesting to see if One Touch Make Ready helps to relive the work pressure, or if it adds to the stress at utilities as they try to meet tighter time frames.

Rights-of-Way / Permits. I’ve already seen a few railroad crossings take longer than normal, with the railroads complaining that they are swamped with crossing requests. Expect the same thing for bridges and interstate underpasses. Expect the Department of Transportation in some states to be slow in issuing permits to build on state highways.

Grant Writers. You might assume that anybody can write a grant, but the specialists who write winning grant proposals for fiber projects are definitely a limited resource.

Consultants. Every consultant I know has a limited capacity in terms of the number of big projects like feasibility studies that they can tackle at the same time. I know I’m already being selective about taking on new work and I expect others are doing the same.

Loan Applications. After the stimulus broadband grants were awarded, the loan application backlog at the RUS grew to 18 months, meaning an applicant had to wait that long before the RUS even looked at an application. Expect the RUS backlogs and of other lenders to start growing again with the RDOF grant awards.

Banking. I can remember a few times during my career when banks like CoBank cut back on issuing new loans. All banks have a natural lending limit and I’m not sure that the normal industry banking institutions – the RUS, CoBank, and RTFC – can collectively float the dollar volume of new loans needed to support the RDOF program, let alone the many other broadband projects that are seeking funding.

All of these potential resource shortages portend problems for anybody building fiber. It’s hard to imagine a fiber project of any size that isn’t going to hit by at least a few of these delays. I’m sure I’ll hear of a few cases where these delays will be crippling. I think anybody planning to build fiber needs to anticipate delays and build them into their schedule because delays cost time, and time costs money.