A New National Broadband Plan?

Senator Edward Markey (D-Mass) introduced a bill that would require that the FCC create a new National Broadband Plan by July 2021. This plan would lay out the national goals needed for broadband going forward and also provide an update on how the COVID-19 crisis has impacted Internet access. I am not a big fan of the concept of a national plan for many reasons.

Can’t Trust FCC Data. The FCC would base any analysis in a new plan on the same flawed data they are using for everything else related to broadband. At this point, the best description of the FCC’s broadband data is that it is a fairy tale – and not one with a happy ending.

Gives Politicians Talking Points rather than Action Plans. A national broadband plan gives every politician talking points to sound like they care about broadband – which is a far cry from an action plan to do something about broadband. When politicians don’t want to fix a problem they study it.

Makes No Sense if Broadband is Unregulated. Why would the government create a plan for an industry over which the government has zero influence? The FCC has gifted the broadband industry with ‘light-touch regulation’ which is a code word for no regulation at all. The FCC canned Title II regulatory authority and handed the tiny remaining remnant of broadband regulation to the Federal Trade Commission – which is not a regulatory agency.

The Last National Broadband Plan was a Total Bust. There is no need for a National Broadband Plan if it doesn’t include a requirement that the FCC should try hard to tackle any recommendations made. Almost nothing from the last broadband plan came to pass – the FCC and the rest of the federal government stopped even paying lip service to the last plan within a year after it was published. Consider the primary goals of the last National Broadband Plan that were to have been implemented by 2019:

  • At least 100 million homes should have affordable access to 100/50 Mbps broadband. Because the cable companies implemented DOCSIS standards in urban areas, more than 100 million people now have access to 100 Mbps download speeds. But only a tiny fraction of that number – homes with fiber, have access to the 50 Mbps upload speed goal. It’s also impossible to make a case that US broadband is affordable – US broadband prices are almost double the rates in Europe and the far East.
  • The US should lead the word in mobile innovation and have the fastest and most extensive wireless network of any nation. US wireless broadband is far from the fastest in the world – our neighbor Canada is much closer to that goal than is the US. Everybody acknowledges that there are giant areas of rural America without good wireline broadband, but most people have no idea that cellular coverage is also miserable in a lot of rural America.
  • Every American Community should have gigabit access to anchor institutions such as schools, libraries, and government buildings. We probably came the closest to meeting this goal, at least for schools, and over 90% of schools now have gigabit access. However, much of that gain came through poorly-aimed federal grants that paid a huge amount of money to bring fiber to anchor institutions while ignoring the neighborhoods around them – and in many cases, the fiber serving government buildings is legally blocked from being used to help anybody else.
  • Every American should have affordable access to robust broadband and the means and the skills to subscribe. A decade after the last National Broadband Plan there are still huge numbers of rural homes with no broadband, or with broadband that barely functions. Instead of finding broadband solutions for rural America, we have an FCC that congratulates itself each year for being on the right trajectory for solving the broadband gap.
  • To ensure that America leads in the clean energy economy, every America should be able to use broadband to track and manage their real-time energy consumption. I can’t come up with anything other than a facepalm for this goal.

As hard as I try, I can’t think of even one reason why we should waste federal dollars to develop a new national broadband plan. Such a plan will have no teeth and will pass out of memory soon after it’s completed.

Cord Cutting Accelerates in 1Q 2020

The largest traditional cable providers collectively lost over 1.7 million customers in the first quarter of 2020 – an overall loss of 2.2% in customers. This is the biggest overall drop in customers ever in a quarter. To put this loss into perspective, the big cable providers lost 18,800 customers every day.

The numbers below come from Leichtman Research Group which compiles these numbers from reports made to investors, except for Cox which is estimated. The numbers reported are for the largest cable providers, and Leichtman estimates that these companies represent 95% of all cable customers in the country.

Following is a comparison of the first quarter subscriber numbers compared to the end of 2019:

1Q 2020 4Q 2019 Change % Change
Comcast 20,845,000 21,254,000 (409,000) -1.9%
Charter 16,074,000 16,144,000 (70,000) -0.4%
DirecTV 15,136,000 16,033,000 (897,000) -5.6%
Dish Networks 9,012,000 9,144,000 (132,000) -1.4%
Verizon 4,145,000 4,229,000 (84,000) -2.0%
Cox 3,820,000 3,865,000 (45,000) -1.2%
AT&T U-verse 3,440,000 3,440,000 0 0.0%
Altice 3,137,500 3,179,200 (41,700) -1.3%
Mediacom 693,000 710,000 (17,000) -2.4%
Frontier 621,000 660,000 (39,000) -5.9%
Atlantic Broadband 306,252 308,638 (2,386) -0.8%
Cable One 303,000 314,000 (11,000) -3.5%
Total 77,532,752 79,280,838 (1,748,086) -2.2%
Total Cable 45,178,752 45,774,838 (596,086) -1.3%
Total Satellite 24,148,000 25,427,000 (1,029,000 -4.1%
Total Telco 8,206,000 8,639,000 (123,000) -1.5%

Some observations of the numbers:

  • Note that AT&T no longer reports customers by division, so Leichtman has reflected all of their losses as DirecTV and shown no losses for AT&T U-verse.
  • The big loser is AT&T, which lost nearly 897,000 traditional video customers between DirecTV and AT&T U-verse.
  • The big percentage loser is Frontier that lost almost 6% of its cable customers in the quarter.
  • The big cable companies fared the best, but still lost 1.3% of their customer base in the quarter.
  • Satellite TV continues to dive and lost more than 4% of customers in the quarter.

Leitchman speculated that the magnitude of the losses could be due to the impact of COVID-19. However, the story seems to be a bit more complex than that. Several of the big companies reported about the same level of disconnects as in recent quarters but saw a big drop-off in new customers buying service. It’s worth noting that the above losses were experienced even while these same companies saw an increase of over 1 million new broadband customers in the same quarter- the best growth in broadband since 2015.

The full impact of COVID-19 will likely be seen in the next quarter. There has to be an impact from over 23 million newly unemployed people this year, as of mid-May. Cutting cable is one of the most obvious ways for a household to save money.

There may be evidence that COVID-19 had an impact by the end of March. Leichtman also tracks the subscribers of the online TV services that are owned by the above companies. Collectively, there was a loss of 319,000 customers by Hulu Live, Sling TV, and DirecTV Now. Additionally, Paystation Vue exited the market in the first quarter. However, YouTube TV is reported to be growing and had over 2 million customers by the end of February.

Losses of this magnitude have to be rolling downhill in the industry. These losses mean a lot lower revenues for cable TV networks. It means a lot less franchise revenues for local governments. It means lower advertising revenues from loss of eyeballs.

Dish – the Newest Cellular Carrier

One of the primary reasons that the T-Mobile and Sprint merger got approved was the agreement that Dish Networks will become the fourth nationwide cellular carrier. Now that the merger has been completed, Dish is off and running to take the steps needed to launch a new nationwide 5G network.

Dish is preparing to launch the cellular business with a lot of spectrum. The company is already sitting on 600 MHz and 700 MHz spectrum that covers most of the country. The company also owns blocks of 1,700 MHz AWS spectrum that is the workhorse in cellular networks. As part of the merger arrangement, Dish is purchasing Sprint’s 800 MHz spectrum.

The company envisions a new ‘virtual’ network that will be 100% software-driven, which would give the company the most modern cellular network in the country. If the network can be built quickly enough, the company should have an advantage for speed-to-market as new 5G features are introduced into the cellular network.

Like with any new venture, the company’s biggest challenge is going to be cash. Dish already paid T-Mobile $1.4 billion for the prepaid cellular company Boost Mobile. Dish is also paying $3.6 billion for the 800 MHz spectrum from Sprint. Meanwhile, Dish’s existing core satellite business continues to lose customers and revenues – the company lost 511,000 customers in 2019, and another 132,000 in the first quarter of this year – that’s 6.5% of its customer base.

Dish faces an immediate liquidity problem that has become complicated by the COVID-19 crisis. The company had enough cash on hand to pay off debt of $1.1 billion that will be due in May. But the company still faces debt retirements of $2 billion due in both June 2021 and 2022. Additionally, the company needs to raise an estimated $9 billion to build the new cellular network. The company needs to raise at least several billion in equity in a hurry if it wants to attract the needed new debt. That will be challenging due to the COVID-19 crisis as many big investors are sitting on the sidelines waiting for the markets to stabilize.

To really complicate things, Dish is operating under a tight time clock. As part of the merger agreement, Dish agreed to build over 15,000 cell sites by June 2023 that will cover 70% of the US population. That commitment not only requires Dish to raise the needed funds, but to get major construction started while the country is dealing with the COVID-19 crisis. The company faces fines of up to $2 billion for failure to meet that commitment. Dish has been battling with the FCC for years due to its failure to use its spectrum holding, so the deal comes with the tight timeline to ensure that the spectrum finally gets used to serve customers.

One of the interesting challenges the company faces is getting onto existing towers. Many of the most desirable urban towers are already full. It seems logical that T-Mobile will be decommissioning duplicative Sprint tower space over time, but that’s not something that will happen overnight, particularly with the COVID-19 crisis. It also seems likely that Dish will get caught up by the various supply chain issues that are cropping up everywhere in the industry due to the coronavirus.

Anybody who has ever launched a new broadband venture knows the other challenges facing the company. All of this growth much be done by a company that is just now hiring the staff who will pull it off. Deploying to 15,000 cellular sites in two years would be an intimidating challenge for any existing cellular company, and the idea of being nimble with a company that is adding the needed staff during the build-out period is frankly scary. Dish will obviously have to rely on outsourcing a lot of the cell site acquisition and construction – but in an industry that already has full employment, there aren’t hordes of skilled technicians sitting on the sidelines waiting for work. One of the key positions that is massively short-handed nationwide is experienced tower climbers.

Every detail of making this work is an intimidating task. For example, the company will need to arrange for 15,000 fiber backhaul connections to provide the needed bandwidth. Dish will have to conduct 15,000 load analyses on towers – something that is unique to each tower and that is done to make sure a tower can safely accommodate the new dishes and that the tower will hold up in windy conditions. Dish also needs to build one or more gigantic network operations centers to operate the new network. I can’t recall any equally ambitious telecom project.

Cellular customers everywhere should be rooting for the company to pull this off. Dish president Charlie Ergan has promised to compete vigorously on price to win market share – something that will be good for customers even if they don’t change to Dish.

The chances are high that the company won’t make its June 2023 deadline. The already overaggressive business plan will be further complicated by COVID-19 issues which likely means it will take longer to raise the needed money while dealing with issues like dealing with social distancing for the staff and supply chain delays. If the company meets some decent percentage of the plan, I hope the FCC will let them off the hook for fines. The country could use a new cellular network, particularly one that is technically superior to the other carriers and that wants to set low prices.

Home Broadband Usage Explodes

ISPs have all been reporting increased bandwidth usage due to employees and students being asked to work from home during the COVID-19 pandemic. Perhaps the best proof we’ve seen yet of the huge increase in home broadband usage comes from OpenVault, which has been tracking home broadband usage for several years.

The company reported that as of the end of March that the average US home used 402.5 gigabytes of usage, up 17% from the 344.0 gigabytes reported just 3 months earlier at the end of 2019, and up 47% from the 273.5 gigabytes measured a year earlier. OpenVault says that most of the growth was realized in the last two weeks of March as employees and students started working from home in earnest.

The OpenVault numbers represent total bandwidth used by a home, meaning the numbers are a combination of download and upload usage. OpenVault validated the widely reported phenomenon that the demand for upload bandwidth is increasing far more than the need for downloading.

Another interesting way to look at broadband usage is by considering the median usage – which is the speed at which half of homes use more and half less broadband. The median broadband usage is the US has always been lower than average usage because of the large number of rural homes that are stuck using slow broadband connections. A home with a 1 Mbps download speed cannot easily use the same amount of bandwidth as a home with a 100 Mbps connection. Median usage for the first quarter was at 233.6 gigabytes, up 60% from 146.0 gigabytes from a year earlier, and up 22% from the 190.7 gigabytes used at the end of 2019. The big news in the growth of median speeds is that even homes with slower broadband connections are burning through more broadband.

One of the most startling numbers to come from OpenVault is what they call power users – homes that are using more than 1 terabyte of data per month. At the end of March, 10% of all US homes were using a terabyte of data, an increase of 138% over the 4.2% of homes that used a terabyte of data just three months earlier at the end of 2019. Even more interesting, 1.2% of homes used 2 terabytes of data at the end up march, up 215% from the end of December. The big ISPs like Comcast are supposedly not billing for data caps during the pandemic – but they must be licking their chops at the flood of new revenues this is going to create if broadband usage doesn’t return to pre-COVID levels.

We saw the demand for faster broadband products also leap upward. At the end of March the percentage of homes subscribing to gigabit data products jumped to 3.75% of homes, up from 2.8% at the end of 2019 and up from 1.9% a year earlier. Amazingly, more than 1% of all homes in the US upgraded to a gigabit data plan in just the last three months – that’s something that’s been predicted for years. Those homes are not likely going to downgrade to slower speeds – so gigabit broadband is now becoming a significant segment of the market. OpenVault says that 12% of US homes now subscribe to speeds of 200 Mbps or faster.

The OpenVault data also validates what’s been reported widely by ISPs – that the patten of broadband usage is changing by time of day. In the recent past the peak period for broadband usage – the busy hour – was always in the evenings. In the first quarter the amount of usage in the evenings was flat and all of the increased usage came during the daytime as employees and students used broadband and video conferences to function.

OpenVault says that usage peaked in the third week of March. It will be interesting going forward to see the how home usage changes. OpenVault doesn’t have any better crystal ball than the rest of us, but they are predicting that broadband usage will never return to the historic patters. They predict that a lot of people will continue to work from home, meaning increased broadband demand during the day. They believe there will be continued pressure on the upload data paths. People who have learned to videoconference during the recent months are likely to continue that practice in the future. Companies and employees that realize they can be productive at home are likely to work more from home, even if only on a part-time basis.

Who Owns Your Connected Device?

It’s been clear for years that IoT companies gather a large amount of data from customers. Everything from a smart thermometer to your new car gathers and reports data back to the cloud. California has tried to tackle customer data privacy through the California Consumer Privacy Act that went into effect on January 1.

Web companies must provide California consumers the ability to opt-out from having their personal information sold to others. Consumers must be given the option to have their data deleted from the site. Consumers must be provided the opportunity to view the data collected about them. Consumers also must be shown the identity of third parties that have purchased their data. The new law defines personal data broadly to include things like name, address, online identifiers, IP addresses, email addresses, purchasing history, geolocation data, audio/video data, biometric data, or any effort made to classify customers by personality type or trends.

However, there is one area that the new law doesn’t cover. There are examples over the last few years of IoT companies making devices obsolete and nonfunctional. Two examples that got a lot press involve Charter security systems and Sonos smart speakers.

When Charter purchased Time Warner Cable, the company decided that it didn’t want to support the home security business it had inherited. Charter ended its security business line earlier this year and advised customers that the company would no longer provide alarm monitoring. Unfortunately for customers, this means their security devices become non-functional. Customers probably felt safe in choosing Time Warner Cable as a security company because the company touted that they were using off-the-shelf electronics like Ring cameras and Abode security devices – two of the most common brands of DIY smart devices.

Unfortunately for customers, most of the devices won’t work without being connected to the Charter cloud because the company modified the software to only work in a Charter environment. Customers can connect some of the smart devices like smart thermostats and lights to a different hub, but customers can’t repurpose the security devices, which are the most expensive parts of most systems. When the Charter service ended, homeowners were left with security systems that can’t connect to a monitoring service or law enforcement. Charter’s decision to exit the security business turned the devices into bricks.

In a similar situation, Sonos notified owners of older smart speakers that it will no longer support the devices, meaning no more software upgrades or security upgrades. The older speakers will continue to function but can become vulnerable to hackers. Sonos offered owners of the older speakers a 30% discount on newer speakers.

It’s not unusual for older electronics to become obsolete and to no longer be serviced by the manufacturer – it’s something we’re familiar with in the telecom industry. What is unusual is that Sonos told customers that they cannot sell their older speakers without permission from the company. Sonos has this ability because the speakers communicate with the Sonos cloud. Sonos is not going to allow the old speakers to be registered by somebody else. If I was a Sonos customer I would also assume this to mean that the company is likely to eventually block old speakers from their cloud. The company’s notification told customers that their speakers are essentially a worthless brick. This is a shock to folks who spent a lot of money on top-of-the-line speakers.

There are numerous examples of similar incidents in the smart device industry. Google shut down the Revolv smart hub in 2016, making the device unusable. John Deere has the ability to shut off farm equipment costing hundreds of thousands of dollars if farmers use somebody other than John Deere for service. My HP printer gave me warnings that the printer would stop working if I didn’t purchase an HP ink-replacement plan.

This raises the question if consumers really own a device if the manufacturer or some partner of the manufacturer has the ability at some future time to shut the device down. Unfortunately, when consumers buy smart devices they never get any warning of the rights of the manufacturer to kill the devices in the future.

I’m sure the buyers of the Sonos speakers feel betrayed. People likely expect decent speakers to last for decades. I have a hard time imagining somebody taking Sonos up on the offer to buy new speakers at a discount to replace the old ones because in a few years the company is likely to obsolete the new speakers as well. We all have gotten used to the idea of planned obsolescence. Microsoft stops supporting older versions of Windows and users continue to use the older software at their risk. But Microsoft doesn’t shut down computers running old versions of Windows as Charter is doing. Microsoft doesn’t stop a customer from selling a computer loaded with Windows 5 to somebody else, as Sonos is doing.

These two examples provide a warning to consumers that smart devices might come with an expiration date. Any device that continues to interface with the original manufacturer through the cloud can be shut down. It would be an interesting lawsuit if a Sonos customer sues the company for essentially stealing their device.

It’s inevitable that devices grow obsolete over time. Sonos says the older speakers don’t contain enough memory to accept software updates. That’s probably true, but the company went way over the line when they decided to kill old speakers rather than let somebody sell them. Their actions tell customers that they were only renting the speakers and that they always belonged to Sonos.

Is Teleworking Here to Stay?

Broadband networks are stretched thin today due to the large numbers of adults and students working from home. There are a lot of stories on the web that indicate that a lot of employees are not going to be going back to the office when the pandemic is over.

Here are two stories about a trend towards more teleworking from the dozens that a Google search uncovered. The government in Travis County, TX says that as many as 3,000 of their 5,000 employees might be asked to work from home at the end of the pandemic. This is a large county that includes Austin and the surrounding suburbs. There are about 2,000 employees who can’t work from home including law enforcement, medical examiners, and offices that work with the public like the County Clerk’s office – but the government will consider sending everybody else home to work. The County says that productivity has gone up since employees went home and the County is pleased with the noticeable difference in air pollution from fewer commuters.

An article in Marketwatch had interviews with the CEOs of six tech companies and all thought that a significant portion of the workforce would never be brought back to the office after the end of the pandemic. For example, Stewart Butterfield of Slack recently told investors that he would expect 20% to 40% of the company’s workforce to remain at home. The other CEOs voiced similar opinions. They also said their companies are also likely to permanently dial-back on travel and attendance at conferences. The CEOs were excited about the options created by being able to hire talented employees from across the country.

There are some obvious impacts if companies everywhere adopt this kind of thinking. It bodes poorly for expensive office space in downtown areas. There would be a big downturn in all of the businesses that serve commuters, like restaurants and parking garages if a significant portion of workers never returns to the big city centers. There would be a drop in transit revenues and road tolls.

It also has long-term implications for broadband. While the big ISPs are all telling the world that their networks are handling the increased traffic that’s pouring into and out of neighborhoods today, those working at home know better. By now everybody has experienced video calls where some callers are pixelating or disappearing in the middle of a call. Everybody probably also has friends who are telling them the stories of wresting with poor broadband outside of cities – where only one family member at a time can use the broadband.

ISPs have seen a one-time spike in usage that may never fully go away. Most of the increased usage comes from people doing office work or schoolwork over the broadband network that would formerly have been done inside of a school or office server environment. People are teleconferencing now for conversations that would have happened in a conference room or cubicle.

One of the most likely outcomes of people working from home is going to be a big outcry from folks demanding faster upload connection speeds. A lot of the problems experienced from working at home during COVID-19 comes from the miserly upload speeds that broadband technologies other than fiber provide to a home. Cable companies, in particular, are likely to increase upload speeds – something they’ve purposefully kept small in order to provide as much download speed as possible. But there is a world of difference between a 100/5 Mbps connection and a 90/15 Mbps connection.

ISPs are also going to have to get used to a different demand curve. Residential broadband networks have always been busiest in the evenings when everybody is at home using the Internet for videos and gaming. During COVID we’ve seen some interesting shifts in broadband usage by time of day. Daytime usage is up significantly, while evening usage has not grown, and many ISPs say evening usage has decreased. The busy hour in a neighborhood may no longer be 8:00 PM.

This also means that we need to get used to the idea of Zoom and Go-to-Meeting because a lot of the people we deal with will be working from home. There are likely to be many societal changes that evolve from this pandemic, but it doesn’t take a crystal ball to see that working from home is going to be a lot more prevalent than before.

Finding a Business Case for 5G

We are now more than a year into what the carriers are labeling as 5G. If you read this blog regularly you know by now that I don’t think we’ve seen any 5G yet – what has been introduced so far is new spectrum. A new band of spectrum can improve broadband performance in crowded markets, and so the carriers are getting some praise for this development. But these new spectrum bands are operating as 4G LTE and are not yet 5G.

However, we’re getting closer to 5G. Within another few years we will start to see some of the innovations contained in the 5G standards hit the market. This won’t be spectacular at first. Remember that the carrier’s primary short-term goal for 5G is to improve the capacity of cellular networks to get ahead of the exploding demand curve. Cellular data traffic is growing at an astronomical 36% annually and that is stressing cellular networks to keep up with demand. 5G is part of a 3-prong approach to increase capacity – introducing small cells, introducing new spectrum, and finally introducing 5G features. These three changes ought to brace cellular networks for another decade, although eventually, the networks will hit a wall again if growth stays on the current growth curve.

Over the last two and three years, the cellular carriers and the press were full of stories of the wonderful ways that 5G would transform our world. AT&T, Verizon, and T-Mobile spun stories about having gigabit cellular, having fleets of self-driving cars, and having big broadband with us wherever we go. You may not have noticed, but those stories have disappeared. The carriers are not talking much about 5G capabilities other than faster speeds. They are no longer trying to soothe investors with stories of huge future 5G revenue streams.

I think the reason for this is that cellular carriers don’t have any grand visions of future 5G revenues. They still have not built a business case for 5G that justifies the cost of deploying dense networks of small cells.  Consider some of the ideas that were highly touted just a year or two ago.

Millimeter wave spectrum that can deliver gigabit broadband speeds is likely to remain a novelty. The carriers have introduced this in downtown urban neighborhoods to produce a marketing wow factors with TV commercials showing broadband speeds faster than a gigabit. But millimeter wave networks only work outdoors., and even that is funky since everything including a customer’s body can block the signal. There is no business case for spending the money for dense fiber-fed networks since cellphones are not designed for big bandwidth applications. Urban 4G is already pretty good, and there is no benefit other than bragging rights for a customer to shell out extra money for a millimeter wave phone and data plan.

There was talk for a while that 5G would displace WiFi inside homes and businesses. The idea was that 5G could do a better job of keeping data private while also bringing blazing speeds. However, the FCC has approved new WiFi spectrum that when coupled with WiFi 6 technology promises a magnitude improvement in WiFi performance. Once people start using the new WiFi there is going to be little interest in paying a monthly subscription for something that can be done well with off-the-shelf routers.

There still is talk about using 5G in medicine, touting things like the ability of surgeons to perform remote surgery. But is that ever really going to be a thing? It’s taken fifteen years and the COVID-19 crisis to get doctors to finally try telemedicine. There can’t be many doctors ready to tackle performing surgery in another city using robots. It’s also hard to think that insurance companies are going to support surgery that could go off the rails due to a fiber cut or electronics failure. 5G has also been touted as making it easier to monitor patients away from hospitals. But that’s a small bandwidth application that can be handled fine with the ever-improving 4G LTE.

There has been the hope of using 5G technology to help automate factories, and that sounds like a legitimate use of 5G. Factories that need high-precision and low latency are perfect for 5G. This will avoid any interference issues that might come with WiFi. But are there going to be enough new factories using this technology to move the financial bottom line of AT&T or Verizon?

For several years there was a story spun about how self-driving vehicles would communicate with the cloud using 5G. This never made any sense because for this to work there would have to be a dense cellular network built along every road. If the fleets of self-driving cars are developed before the 5G network, they’ll find a solution other than 5G. There also came the ugly realization that networks crash and the image of all the cars coming to a halt in a city because of a broadband outage means this may never become a reality.

Finally, there was talk of how 5G would free people from the monopoly power of the cable companies for broadband. People could have their entertainment with them at all times everywhere. However, most people are smart enough to know that the big cellular companies are also ugly monopolies. They have been engaging in bad behavior such as selling customer location data, even after being told by the FTC to stop the practice. The cellular companies are not going to win an argument that they have the moral high ground.

I have been trying to figure out the 5G revenue stream for several years and I’m no closer to it today than I was three years ago. Some people are willing to pay extra money to get faster cellular broadband speeds, but most customers think they are already paying for this in their cellular subscription. If Dish is successful in launching a new 5G network, the price pressure for 5G will likely be downward rather than increasing. The cellular carriers are going to introduce 5G even without new revenue streams because it’s the only way to keep their networks from crashing in a few years. But what they do after that is still a mystery to me.

 

Just a quick personal note. I’ve now published 1,800 blogs since I started in March 2013. That’s about 1,600 more than I thought I would be able to do. I tell myself once in a while that I’ll stop writing this blog when I run out of topics – but that doesn’t seem like it will be happening any time soon. I thank those of you who have been reading my musings. Onward to 1,800 more!

Why Homes Don’t Have Broadband

I write all of the time about the rural digital divide – about homes that have no broadband options or that have terrible options such as extremely slow DSL or wireless service. The COVID-19 crisis has reminded us that there are also a lot of homes in cities and towns that don’t have broadband.

John B. Horrigan published a paper earlier this year titled Measuring the Gap that makes the point that the reasons that homes don’t have broadband are complicated. There have been studies over the years that have tried to pin down the primary reason that homes don’t have broadband, but by doing so the studies have glossed over the fact that most homes have multiple reasons for not having broadband.

A good example of this is a Pew Research Center survey in 2019 that explored the issue. In that survey:

  • 50% of respondents said that high prices is a reason for not having broadband, but only 21% said price is the primary reason.
  • 45% of respondents said they relied on smartphones that could do everything they need, but only 23% said that was the primary reason for not buying broadband.
  • 43% said they were able to get access to the Internet from a source outside the home, but only 11% gave that as the primary reason.
  • 45% said that the cost of a computer is too expensive, but only 10% gave that as the primary reason.

As Horrigan points out, sometimes there is bias in the questions being asked in a survey. If the surveyor has pre-conceived ideas about why folks don’t have broadband they will miss some of the reasons. Consider a 2017 survey from the California Emerging Technology Fund. This survey showed different reasons than Pew for why homes don’t have broadband because the survey asked different questions. The survey showed:

  • 69% said the cost of monthly access and of affording a computer or smartphone was too high. 34% listed this as the primary reason for not having broadband.
  • 44% said it was too difficult to set up a computer and to learn how to use broadband, which 12% gave this as the primary reason.
  • 42% said they were concerned about privacy and computer viruses, while 21% gave this as the primary reason for not having broadband.
  • 41% said they had a lack of interest in being online, with 22% giving this as the primary reason for not having broadband.

The results of those two surveys are drastically different because the surveys asked different questions. If a survey doesn’t provide the option to say that privacy is a reason for not having broadband, then that gets missed. People can only respond to the questions asked in a survey as presented to them. For example, there were 12% of respondents in the second survey above that worried about privacy as their primary reason for not having broadband. There had to be people that felt the same way in the Pew survey, but since that question was never asked, respondents were forced to pick from among the choices they were given.

This highlights one of the issues of using surveys to find out why people do certain things. Surveys are best used when measuring what people do. For example, a well-designed survey can make a great and reliable estimate of the number of homes in a community that don’t have a home computer. But it’s a lot tougher to use a survey to find out why homes don’t have computers since there might be dozens of reasons for not having one.

Another issue to consider is that people might not tell a surveyor the truthful answer to a question if they think the response is personal. For example, people don’t like to admit that using a computer is too hard for them or that they are intimidated by technology. Many people are not going to tell a stranger that they can’t figure out how to use a computer. However, those same people might willingly share that they would be more likely to use a computer if they had better training. The manner of asking this sort of question can change the response.

This blog is not meant to bash surveys, because a survey is one of the best tools available for understanding broadband in a market. A survey can quantify how many people use different ISPs and can measure their happiness with the various ISPs already in the market. A survey can provide a decently reliable estimate of the percentage of the community that will consider switching to a new ISP. But surveys are a lot less reliable when they ask people to reveal personal reasons why they do or don’t do something – for the simple reason that people are often unwilling to share their shortcomings and fears with a stranger.

This is something to keep in mind if you want to use a survey to understand broadband in your community. Asking questions about sensitive subjects produce unreliable results. As an example, surveys do a lousy job of predicting what people are willing to pay for broadband. A survey can quantify what somebody would like to pay for broadband, but that is not the same question of what they will pay. I’ve seen surveys convince ISPs to set low broadband rates due to faulty survey questions. It’s somewhat meaningless when somebody who is already paying $75 per month for broadband tells you they would only change to a new ISP that charges $45. Such a respondent is likely somewhat embarrassed to admit they are paying too much for broadband today, and that bias makes their answer unreliable.

Writing good survey questions is an art. I’ve been doing that for twenty years and I still find situations where it’s nearly impossible to get the answers that clients are hoping for when the survey probes into questions that customers don’t necessarily want to answer.

COVID-19 Boosts 1Q 2020 Broadband Subscribers

Leichtman Research Group recently released the broadband customer statistics for the end of the first quarter of 2020 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than Cox, which is estimated. Leichtman says this group of companies represents 96% of all US landline broadband customers.

The big news is that additions in the first quarter were up nearly 85% over the number of customers added in the fourth quarter of 2019.  For the quarter, these large ISPs collectively saw growth that annualizes to 4.8%. This was the biggest quarterly overall subscriber growth since early 2015.

3/31/20 1Q Change % Change 4Q 19 Adds
Comcast 29,106,000 477,000 1.7% 443,000
Charter 27,246,000 582,000 2.2% 339.000
AT&T 15,315,000 (74,000) -0.5% (186,000)
Verizon 6,982,000 26,000 0.4% (5,000)
Cox 5,230,000 60,000 1.2% 25,000
CenturyLink 4,667,000 (11,000) -0.2% (36,000)
Altice 4,237,300 50,100 1.2% 7,000
Frontier 3,480,000 (33,000) -0.9% (55,000)
Mediacom 1,349,000 21,000 1.6% 12,000
Windstream 1,067,300 18,000 1.7% 9,300
WOW 797,600 16,100 2.1% 7,600
Cable ONE 793,000 20,000 2.6% 83,862
Consolidated 786,125 1,960 0.2% 14
TDS 460,000 4,800 1.1% 17,500
Atlantic Broadband 457,233 5,770 1.3% 5,326
Cincinnati Bell 427,500 1,800 0.4% 1,600
Total 102,401,158 1,166,530 1.2% 669,788
Total Cable 69,216,233 1,231,970 1.8% 922,788
Total Telco 33,184,925 (65,440) -0.2% (253,586)

We know that a lot of the growth was due to COVID-19, which drove employees and students to work from homes. A lot of homes likely purchased broadband for this purpose. These big ISPs also pledged to the FCC that they wouldn’t disconnect customers for non-payment during the pandemic. However, the real impact of that policy won’t show up until the second quarter.

Comcast and Charter continue to dominate the rest of industry, and accounted for 86% of total net growth for the quarter. The large cable companies collectively gained over 922,000 subscribers, which their biggest quarterly growth since 2007. The telcos collectively still lost customers for the quarter, but losses are significantly less than in 2019. The biggest telco loser was AT&T which lost 186,000 customers for the quarter. Frontier continued to lose the biggest percentage of its customer base and lost nearly 1% of its broadband customer base during the quarter.

This growth is impressive, and much of the boost has to be due to an increased need for home broadband. We’ll have to wait until later in the year to see the impact of having over 36 million people file for unemployment and for potentially millions of small businesses to close. There has been a long-running debate in the industry about whether broadband is recession-proof. Arguments can be made that homes out of work will hang onto broadband as long as they can in the hopes it can help them find work. In a few quarters, we’ll find out.

Enough is Enough

CenturyLink recently petitioned the FCC to allow them to be late in implementing the CAF II upgrades where the FCC doled out $11 billion to upgrade rural broadband speeds to 10/1 Mbps. The ostensible reason for the delay is the COVID-19 pandemic, but CenturyLink was already behind and notified the FCC earlier this year that they hadn’t completed their 2019 CAF II installation in 23 out of 33 states.

I say enough is enough. It’s time for the FCC to demand a reckoning of CAF II and begin handing out draconian penalties to the telcos that didn’t meet their obligations. I’m positive that if this was assessed fairly that the FCC will find that the vast majority of big telco customers have never gotten an upgrade to 10/1 Mbps.

Let’s start by looking at CenturyLink’s request. There is no reasonable explanation they can offer for not meeting their obligations in 2019. That was the fourth of a five-year buildout obligation, and the company has known for years what’s needed to be done – and they had the federal money in their pocket to make the upgrades. The claim for this year is also largely bogus. I have a lot of clients that are being cautious now about entering customer premises, but I don’t know any carrier that has stopped doing work outside of customer homes. I can’t think of any practical reason that COVID-19 would cause a delay for CenturyLink. Even if they upgrade somebody’s DSL, they could mail them a new modem – telcos have been having customers self-install DSL modems for twenty years.

It’s time to stop the pretense that CenturyLink or the other big telcos have been busy upgrading rural DSL. I don’t know anybody who thinks that’s happened. I have anecdotal evidence that it hasn’t, My company has been helping rural counties with broadband feasibility studies for many years. In the last four years, we’ve been asking rural customers to take speed tests – and I’ve never seen even one rural DSL connection that transmits at a speed of 10/1 Mbps. I’ve haven’t seen many that have tested above 5 Mbps. I’ve seen a whole lot that tested at less than 3, 2 or even 1 Mbps. Many of these tests have been in areas that are supposed to have CAF II upgrades.

I’ve also never talked to any County officials who have heard from the telcos that their county got rural broadband upgrades. One would think the telcos would brag locally when they were finished with upgrades as a pitch to get new customers. After all, customers that have only had slow DSL or satellite service should be flocking to 10/1 DSL. I’ve also not seen a marketing campaign talking about faster speeds due to CAF II. I’ve been searching the web for years to find testimonials from customers talking about their free upgrade to 10/1 Mbps, but I’ve never found anybody who has ever said that. This is not to say there have been zero upgrades in the CAF II areas, but I see no evidence of widespread upgrades.

The reality is that CenturyLink got new leadership a few years ago who immediately announced that the company was going to stop making ‘infrastructure return’ investments. We have Frontier that miraculously recently found 16,000 Census blocks that now have speeds of at least 25/3 Mbps when I’m still looking for proof that they upgraded places to 10/1 Mbps. Go interview folks in West Virginia if you think they’ve made any CAF II upgrades.

The FCC has a choice now. They can wimp out and grant the delay that CenturyLink is requesting, or the agency can come down on the side of rural broadband. There is no middle ground when it comes to CAF II. This FCC didn’t make the original CAF II decision – but they are the ones that are supposed to make sure the upgrades are done, and they are supposed to be penalizing telcos that failed to make the upgrades.

The response to CenturyLink’s request should be a giant penalty for missing the 2019 deadlines and a reminder that the company is still on the hook for 2020 unless they want more fines.

The FCC also needs to aggressively start testing in the areas that have supposedly gotten CAF II upgrades. This doesn’t have to be a big expensive testing program. We know exactly where CAF II should have been implemented – the FCC has made it easy by overlaying the CAF II footprint over Google maps. The FCC could ask County administrators across the US to solicit a speed test at CAF II locations – the Counties would be glad to oblige. If the FCC wanted to know the truth about CAF II they could get massive feedback within a few weeks about the abject failure of the CAF II program.

The ultimate penalty ought to be the return of CAF II money to the Universal Service Fund for areas that aren’t upgraded to 10/1 Mbps. Then the money could finally be given to somebody that will upgrade to real broadband. The CAF II program was ill-conceived, but the big telcos should have used that money to bring rural speeds up to 10/1 Mbps. Had they done so, we’d have millions of more homes that wouldn’t be struggling so hard during COVID-19. This FCC has a chance to do their job and set things right.