Regulating Cable TV versus OTT

Regulation often makes no sense, particularly in times when technology is transforming an industry. There is no better example of this than the way we regulate cable TV today.

Traditional cable TV is heavily regulated at the federal, state, and local levels. The FCC website has a nice summary of the history of federal cable regulation. The industry is less heavily regulated today than it was forty years ago, but there are still a lot of federal regulations that apply to cable TV. At the local level, franchise taxes levied on cable service are a huge revenue source for local government.

The FCC website includes a definition of cable television as follows: “Cable television is a video delivery service provided by a cable operator to subscribers via a coaxial cable or fiber optics.  Programming delivered without a wire via satellite or other facilities is not “cable television” under the Commission’s definitions.”

All of the federal cable regulations are aimed at cable TV signal that enters the home via a coaxial or fiber wire. Satellite or wireless delivery of television signal is not considered to be traditional cable TV, although the FCC does regulate satellite TV under a different set of rules.

The FCC has chosen to ignore its own definition of cable TV for programming that is delivered over the web. I’ve subscribed to the online cable alternatives Sling TV, Playstation Vue, and YouTube TV. Over time those services have come to look more and more like traditional cable TV. My subscription to Playstation Vue (before it folded) included all of the same local channels that I would receive from a traditional cable subscription. The service included a channel guide, and from a functional perspective, it was impossible to make any meaningful distinction between the Playstation Vue product and the same product I might buy from a cable company.

From a technical perspective it’s hard to see the difference between the online programming and traditional cable. Both come into the home over coaxial or fiber cables. Both offer a line-up of local channels and a similar mix of national programming. Both services offer options like DVR service to record programming to watch later. If you were to show both services to somebody who had never seen TV before, they’d probably not see any difference in the two services.

But there is a huge regulatory difference between traditional cable TV and online programming, particularly at the local level. Franchise fees of up to 5% are levied onto traditional cable TV from Charter, Comcast, or AT&T – but no franchise fees are levied against Sling TV or YouTube TV. Cable companies are arguing that this difference alone gives online programming a competitive edge – and it’s hard to disagree with them.

To make matters even more confusing, there are now cable products that sit somewhere in between traditional TV and online TV. ISPs are no longer building cable headends to download cable signal from satellites. Instead they are buying cable channels wholesale. The entire channel line-up is pumped into an ISP on a big broadband connection. The channel line-ups look a lot like both traditional cable channels and online cable line-ups like YouTube TV. In the newest cable wholesale products the ISP doesn’t even need a traditional setup box and can deliver straight to smart TVs or use something like a Roku stick.

For now, most ISPs that are reselling the wholesale TV are registering as cable providers and are collecting franchise fees. But I won’t be surprised if an ISP challenges this and argues that wholesale cable service is not the same as traditional cable TV.e

From a regulatory perspective, our current treatment of cable service is closely analogous to the difference between traditional telephone service and voice over IP (VoIP). ISPs successful fought to define VoIP as a non-regulated service, although there is no functional difference between the two products at the customer level. There is no discernible difference between a telephone line provided by AT&T over telephone wires and telephone service provided by Comcast over cable wires – but the products get a drastically difference regulatory treatment. It’s hard to think that we aren’t going to soon see legal challenges by cable companies trying to avoid collecting franchise fees – and I think there is a decent chance that courts will side with them.

Smart Cities and Surveillance

One of the linchpins is most proposals to provide smart city technology is the deployment of surveillance cameras. This is usually sold to cities as a way to improve security and to give police a leg up before responding to 911 calls.

A case in point is the city of Oakland. Oakland, along with other major US ports received a grant to install security cameras in the port in an attempt to step up national security after 9/11. But the City Council decided to take this concept farther and voted to expand the port security system to cover the entire city and its 400,000 residents. The City justified the system because, in addition to providing video that might help to solve crimes, the system came with other bells and whistles like a gunshot detector that could pin down the origin location for gunshots.

But the camera systems in the City went beyond just providing crime-fighting tools. For instance, the system purchased by the City included software that could read and record vehicle license plates and included first-generation facial recognition software. In 2014 the City removed the surveillance system everywhere outside the port after a huge outcry from citizens about being watched by the City.

More recently in May, Sidewalk Labs, a division of Google Alphabet, scrapped plans to build the city of the future on 800 acres along Lake Ontario in Toronto. Sidewalk Labs had proposed a smart city where sensors would be embedded everywhere in the new city. They envisioned a smart city made life easier by melting snow from sidewalks, automatically deploying awnings to block the summer sun, and making sure that traffic always flows without interruption. Sidewalk Labs envisioned a horde of robots using underground streets that would deliver packages and remove trash. The public pushed back against the idea because they feared that Google would track everything done by residents and would use that data to profile every aspect of the lives of people living in the new city.

More quietly, over 600 police departments have partnered with citizens that install Ring cameras at their homes. Citizens can register their Ring cameras with police departments which can use the cameras to see what’s happening on residential streets. In answering inquiries from Congress, Amazon admitted that the police were free to use video they collected through the Ring cameras in any way and could store and use the images forever.

Recently there are new concerns about surveillance as facial recognition software is maturing as a technology. The Boston City Council recently passed an ordinance that banned the use of facial recognition technology other than in limited personal-use cases such as allowing facial recognition as a tool for logging onto computers. The City Council worried that facial recognition is a massive invasion of privacy and a threat to civil liberties. Boston joined San Francisco, Oakland, and Cambridge, MA in banning the technology.

There is starting to be a lot of public pushback against facial recognition. Amazon recently announced that it would suspend police use of its facial recognition software. Microsoft made a similar pledge and said they won’t sell facial recognition technology to police departments until there is a federal law governing the use of the technology.

Not every City is against surveillance. Currently, 8 of the top 10 cities in the world with the most surveillance cameras are in China. In China, the country is rapidly migrating to a system where people can shop and pay for things using facial recognition technology – a person’s face is their credit card. Shoppers peer into a camera at check-out and are automatically charged for their purchases. The downside of the technology is that the State knows everywhere that people go, everywhere they shop, and everything they buy.

The other two cities with the most surveillance cameras are London and Atlanta. London began installing cameras years ago as a result of security fears concerning Northern Ireland. But the camera systems were greatly expanded after a few terrorist attacks in the city in recent years. Atlanta has installed a network of over 11,000 cameras that are used by the police department under the name of Operation Shield. The video surveillance system routinely identifies stolen cars by monitoring license plates. The City says that they curtail privacy abuses by limiting the ability of most police staff to use the system – but privacy advocates are not so sure. Interestingly, most of Atlanta’s network, estimated to cost $300 million, was privately funded.

Surveillance is a sticky topic and will likely become more so as more cities start using facial recognition software. My bet is that future deployment of smart city technology will depend upon where communities land on the surveillance issue.

Charter Considering RDOF Grants

Charter let the world know that it plans to pursue RDOF grant funding in its most recent 8-K filing with the Securities and Exchange Commission. The company says that it might pursue grant funding to build to ‘multi-million passings’ involving ‘multi-billion investments’. It’s an interesting strategy. Charter already serves rural county seats and other towns across the country which puts them close to many of the areas where RDOF funding is available.

The RDOF grants cover the most rural and remote pockets of customers in the country. While there are some small rural towns included in the RDOF grant footprint, most of the customers covered by the grants are truly rural, consisting of farms and scattered homes in rural counties.

Charter will have to make some technology choices about how to serve rural America. The company can win the most money in the grant process if they file as a gigabit-speed provider. Gigabit speeds are available today with fiber technology and also with the hybrid fiber-coaxial networks operated by Charter and other cable companies. The RDOF grants can be awarded to technologies that support speeds over 25/3 Mbps. However, the grant includes incentives to favor ISPs willing to use faster technologies.

Charter could pursue slower technologies, like fixed wireless, but that funding is harder to win. To date, none of the big cable companies have ventured into wireless technology, other than a few trials. It’s always been a bit of a mystery why Charter and other cable companies haven’t erected wireless antennae at the fringes of their network to cheaply capture customers just out of reach of the HFC networks. My theory has always been that big cable companies are not nimble enough to handle drastically different technology platforms since all of their processes are designed for around coaxial and fiber technologies.

Charter is likely considering building fiber-to-the-home networks if they win RDOF grant funding. The hybrid fiber-coaxial technology that cable companies use in urban areas is poorly suited to serving scattered rural customers. The signal on an HFC network has to be boosted every two miles or so, and every time the signal is amplified some of the effective bandwidth carried on the network is lost. It would be a major challenge to maintain gigabit speeds required by the grants on a rural HFC network. It would only be possible with lots of fiber and tiny neighborhood nodes serving only a few homes. Charter has often cited the technology challenges of uses HFC technology in low-density areas as the reason it doesn’t expand outward from existing markets – and those reasons still hold true.

Charter claims to have expanded to add 1.5 million homes to its existing networks over the last two years, and in the 8-K filing says these are mostly rural customers. However, from what I’ve heard, most of these new Charter neighborhoods are in small subdivisions surrounding existing Charter markets. Charter has not been building rural networks to reach 1.5 million farms.

Charter and the other big cable companies have quietly introduced last-mile fiber technology into their networks. When cable companies build into new subdivisions today, they mostly do so with fiber technology.

It would be interesting if Charter’s strategy is to use the grant money to build fiber to farms. I know plenty of other ISPs considering the same business plan in places where there is enough RDOF grant funding available to make a business case.

There is no guarantee that Charter will ultimately win any grant funding and filing the grant short form on July 15 only gives Charter the option to participate in the auction in October. However, if the company bids in the auction, it will be good news for markets where Charter would build fiber technology. The big downside to the RDOF grant process is that in markets where no ISPs propose to build gigabit technology, the funding could end up going to satellite broadband providers – and there is no rural neighborhood that would prefer Viasat over Charter.

Will There Be a Credit Crunch?

ISPs are collectively going to be borrowing huge amounts of money over the next year as a result of the various state and local grant programs. For example, the $16.4 billion RDOF grant likely will drive ISPs to borrow many billions to match the grant awards. The federal ReConnect grants and the numerous State grant programs will also drive significant new debt.

I’ve followed the banking industry for decades and I’ve seen how banks react to economic stress. In my adult lifetime, I’ve witnessed several major economic downturns. The economy took a major downward turn in 1973-75, in 1981-82, after the dot-com crash in 2001, and most recently in 2007-09. In each of these cases, banks reacted by tightening credit, meaning that it became harder, or even impossible to borrow money.

The COVID-19 pandemic is different than these other recessions in that the reaction to the virus crashed an otherwise healthy economy. The pre-pandemic economy was showing some signs that the decade of growth was slowing, but the economy at the beginning of this year was in relatively good shape. That pre-pandemic economy should easily have been able to support the loans needed for a major expansion of broadband.

The pandemic has stressed banks in unusual ways. For example, banks have generated a huge amount of loans to small businesses to support the Paycheck Protection Program that’s part of the recent stimulus relief plans. While these loans are ultimately backed by the government, they’ve eaten severely into bank cash reserves.

Banks are also seeing a lot of bad debt due to the pandemic. Tens of millions of people are currently out of work and many are having trouble making debt payments on mortgages, car loans, student loans, credit cards, you name it. Huge numbers of businesses have shut their doors, or even if still open have curtailed or stopped making rent or mortgage payments. I’ve read numerous predictions that there will be a business real estate crisis soon as landlords react to suddenly vacant buildings.

Banks have already started to react in ways that you would expect during any downturn. Small businesses that are still open have had lines of credit frozen. It’s gotten harder to apply for a home mortgage. Banks have already cut back on lending new money to small businesses.

During past downturns, banks also curtailed loans to larger businesses. I can remember several times when industry lenders like CoBank and RTFC either stopped lending or became far more selective in making loans. Just a decade ago there was a short period of time when even Fortune 500 companies had trouble borrowing money.

It’s really hard to predict bank behavior right now since this is not a ‘normal’ recession. Underneath all of the current ugly financial news is a hope that the economy can spring back to life if medical science develops a vaccine or effective treatment. Unfortunately, there are parts of the economy that are not likely to come back quickly, or even at all. Many of the small businesses that are still shut due to the pandemic are likely not coming back. We’ve seen a big string of major retailers fail, and that is going to cascade to kill shopping malls and shopping districts. A lot of businesses say that they intend to continue with work-from-home initiatives that were forced upon them during the pandemic – and that means a lot of empty business real estate.

What matters most to ISPs right now is what the banking industry is going to be like by the end of this year. What happens if many of the ISPs looking for matching funds for grants are unable to borrow? How might the FCC react if billions of grants fall onto the floor due to a lending crisis?

I don’t have a crystal ball and this blog is not meant as a prediction that borrowing is going to dry up. But I’ve seen enough recessions to know that lending is not going to continue unchanged. Anybody thinking about accepting large amounts of grants needs to think about a back-up plan if it becomes harder to borrow. The FCC and ISPs have all assumed that that matching funds will  be readily available for anybody that lands a large grant. It’s historically been relatively easy to borrow for projects that are funding largely by grants – but this is definitely not normal times.

The FCC Finally Tackles New Mapping

Almost a year after having first approved the concept, the FCC recently started the process of developing new databases and maps. Last August the FCC approved the concept of having ISPs report broadband coverage by polygons, meaning that ISPs would draw lines around areas where they have active broadband customers or areas where ISPs can install a customer within a week of a request for service.

The FCC has been slow-rolling the process for the last year. They made announcements over a year ago that made rural America think that better maps are coming that will make it easier to correctly identify areas that have poor broadband. But last year’s big announcement only adopted the concept of better maps, and the recent vote took the first step towards implementing the concept.

Even now, it’s not clear that the FCC is ready to implement the new maps and the agency is still saying that it doesn’t have the money to change the ISP reporting process. This is hard to believe from an agency that is self-funded by fees and by spectrum auctions – the agency could have required the industry to pay for the new mapping at any time – but the FCC wants a specific allocation of funding from Congress. This feels like another delaying tactic.

There are good reasons for the FCC to not want better mapping. The FCC is required by law to take action to solve any big glaring difference between broadband availability in urban and rural areas. The agency has been doing everything possible over the last decade to not have to take such extraordinary steps.

Everybody involved in rural broadband knows that the current maps are dreadful. ISPs are free to claim broadband coverage and speeds in any manner they want, and from my experience, most rural counties have areas where broadband coverage or speeds are overstated. In many cases the overstatement of broadband is unbelievable. I recently was working with counties in Washington, New Mexico, and Minnesota where the FCC databases show 100% broadband coverage in rural areas when in real life there is almost zero broadband outside of towns.

This same mandate is the primary reason why the FCC doesn’t increase the definition of broadband, which has been set at 25/3 Mbps since 2015. Residents in well over half of the country, in cities and suburbs, have the option to buy broadband of 100 Mbps or faster. But the FCC sticks with the slower definition for rural America so that it doesn’t have to recognize that millions of rural homes, many in county seats in rural counties, don’t have broadband as good as in larger cities.

It is that same requirement to solve poor broadband that has driven the FCC to stick with mapping that FCC Commissioners all admit is inadequate. If the FCC fixes the maps, then many more millions of homes will become properly classified as not having broadband, and the FCC will be required to tackle the problem.

Unfortunately, I don’t hold out a lot of hope for the new broadband mapping process. The biggest reason that today’s mapping doesn’t work is that ISPs are not required to tell the truth. Drawing polygons might decrease some of the areas where the ISPs claim coverage that doesn’t exist – but there is nothing in the new rules that force ISPs to report honest speeds. A rural county is still going to have overstated broadband coverage if ISPs continue to claim imaginary speeds – sometimes amazingly exaggerated. One of the counties I recently was working with has two wireless ISPs that claim countywide coverage of 100 Mbps broadband when it looks like the ISPs don’t operate in the county. The new mapping is not going to fix anything if an ISP can draw false polygons or report imaginary speeds. The new maps aren’t going to stop the exaggeration of rural DSL speeds by the big telcos.

Unfortunately, there are huge negative repercussions for areas where the ISPs lie about broadband coverage. The best example is the current RDOF auction where the FCC is awarding $16.4 billion in grants. None of the areas where ISPs have lied about broadband coverage are included in that grant program and won’t be included in future grants as long as ISPs keep lying about broadband coverage.

Lets not forget that ISPs have motivation for lying to the FCC about broadband coverage. Keeping grants our of rural areas shields the ISPs already operating there and protects rural ISPs that are selling 2 Mbps broadband for $70 per month. If these areas get grants the ISPs lose their customers. The penalties for overstating broadband speeds and coverage ought to be immense. In my mind, if an ISP deprives a rural county from getting broadband grants, then the ISP ought to be liable for the lost grant funding. If the FCC was to assess huge penalties for cheating the maps would be cleaned up overnight without having to switch to the polygons.

As usual, the FCC is pursuing the wrong solution and I suspect they know so. The big problem with the current maps is that ISPs lie about their coverage areas and about the speeds that are being delivered to customers. The FCC has the ability to require truthfulness and to fine ISPs that don’t follow its rules. The FCC could have implemented penalties for false reporting any time in the last decade. Implementing new mapping without implementing penalties for lying is just kicking the can down the road for a few more years so that the FCC won’t have to address the real rural broadband shortfalls in the country.

Video Trends During the Pandemic

TiVo recently published an infographic that discusses the drastic changes in video viewing habits as a result of the COVID-19 pandemic. TiVO looked at video viewing habits between March 27 and May 4 compared to the video viewing from the month before the pandemic. As might be expected, people forced to stay home are watching a lot more video content.

Homes are watching a lot more streaming services. In the period studied, TiVO reports that viewership hours watching Netflix were up 33%, Hulu was up 36%, Amazon Prime and HBO Go were up 80%.

One of the biggest jumps in content was kid’s programming that had grown by 27% by mid-April. That’s much larger than increases in other kinds of programming. As might be expected, sports viewership dropped 62%, It’s surprising the drop wasn’t more since live sports essentially disappeared by April, but the remaining sports viewers were watching reruns of classic sports events. It will be curious to see sports viewing for June.

TiVO offers its subscribers a big pile of free content they label as TiVO+. This content includes ads, and TiVo say viewing jump 41% after the pandemic. The company thinks this indicates that viewers are still willing to view ads to get content they haven’t seen before.

TiVO also recently published its 1Q 2020 Video Trends Report that looks deeper into a wide range of statistics concerning video. The end of the first quarter saw the start of the pandemic and TiVO reports a number of statistics that show big increases in video viewing.

The statistic that jumps out the most is that TiVO saw video viewership on the TiVO platform grow an amazing 58%, and that covered the wide range from live TV, streaming video services, and watching shows recorded to watch later. TiVO saw the average home increase viewing of news content by 2 hours per week.

One of the more interesting statistics is when people were watching video. Since the advent of streaming services, the heaviest viewing of content has been on weekends. During the pandemic, TiVO says that weekday viewing now mirrors historic weekend viewing, and weekend viewing has climbed to match historic levels of viewing only seen on holidays.

The TiVo quarterly report includes a result of a survey as well as covering how customers use the TiVO platform. The survey had some interesting results:

  • Over 82% of homes with a traditional cable TV service says that local content is important to them, compared to 62% of homes that only use streaming services. This shows that local content is likely to still be a big driver for homes keeping traditional TV.
  • The survey showed a climbing interest in free ad-supported streaming services such as Crackle, Tubi TV, and Pluto TV. 66% of survey respondents still pay for a traditional TV subscription, 36% watch the free ad-supported content, and 34% pay for a streaming service like Netflix.
  • Many survey respondents either like or aren’t bothered by advertising. 57% of traditional TV watchers don’t mind ads and 48% of homes with steaming services don’t mind ads,
  • Churn remains an issue for the industry. Over 21% of homes with traditional cable TV report dropping an online video service during the previous 6 months. 11% of homes that only watch streaming services dropped a service in the last 6 months.
  • The survey also asked about broadband use. 12% of survey respondents said they had cut or switched broadband service during the previous 6 months. 55% said broadband was becoming too expensive. 38% said their broadband provider didn’t provide a fast enough service they could afford. This is the first such report I’ve seen about broadband churn since it’s a topic that the big ISPs don’t talk about.
  • Survey respondents reported a lot of discontent about the ease of finding content to watch. 84% wished there was a way to browse content across all of the platforms they use. 77% expressed a willingness to buy all of their content from a single provider that could offer an integrated guide.

The bottom line is that video viewing has skyrocketed during the pandemic as people are stuck staying at home. It’s going to be really interesting to see what happens to video when the pandemic is over.

5G Carriers Hoping for Handouts

The Information Technology Industry Council (ITI) published a recent report that looks at “5G policy Principles and 5G Essentials for Global Policymakers’. For those who don’t know ITI, they are a DC-based lobbying group that represents most of heavy-hitter tech firms, and which works to help shape policy on tax, trade, talent, security, access, and sustainability issues. I don’t think I’ve seen another document that so clearly outlines the hopes of the big US cellular companies.

The paper makes specific policy proposals. In the area of innovation and investment, the paper proposes that the government provide incentives for 5G research and development. It asks governments to support open and interoperable network solutions so that 5G technology works everywhere – unlike with 4G where US cellphones don’t work in Europe. ITI warns that the industry will need a lot more datacenter technicians, cloud administrators, and cybersecurity experts, and asks governments to invest in workforce training. Finally, it asks for the free flow of data across borders.

In the area of 5G deployment, the report recommends freeing up more spectrum for 5G. The report also recommends harmonizing spectrum bands around the world to help make handsets universally usable. There is a recommendation to use targeted government funding to complement private sector investment in 5G. Finally, the report asks for governments to force local siting and licensing reform to speed up 5G deployment.

In the area of 5G security, the paper promotes the idea of supply chain security to ‘consider the geopolitical implications of manufacturing locations’ (keeping out the Chinese). The ITI also suggests that government and industry must share responsibility and collaborate on security.

Finally, in the area of standards, the ITI asks that governments avoid promoting country-specific standards to promote worldwide interoperability – something we failed to do with 4G. The paper suggests that governments should encourage consistent industry engagement in worldwide efforts to create standards.

The paper is titled to suggest that it is a list of policies to be pursued globally. But once I digested all of the recommendations, it’s clear that this is a paper intended to influence U.S. policymakers. Some of the recommendations, such as pushing federal solutions to override local barriers to 5G deployment are strictly U.S. issues. Most of the countries around the planet rely on cellular broadband as the primary source of connectivity, and in most countries, the rules are already slanted in favor of allowing wireless deployment.

If there were any doubts that this piece is sponsored by the big carriers, the paper ends with a summary of the conclusions of a 2018 report from Accenture that was published at the height of the 5G hype. That paper claims that “In the United States alone, 5G is expected to generate up to $275 billion in infrastructure investment, thus creating approximately three million new jobs and boosting GDP by $500 billion annually.’

The current reality of the 5G industry is already vastly different than that 2018 vision. Over the last few years, the big telcos have laid off many tens of thousands of workers and are heading in the exact opposite direction as suggested by the quote. In a recent blog, I noted that the cellular companies are still struggling to define an economic business case for 5G. At least for now, this doesn’t feel like an industry headed for those lofty goals.

The paper goes on to make huge claims for 5G. For instance, the paper claims that 5G has the ultimate capacity to deliver 20 Gbps broadband speeds. That’s such an outlandish claim that there is not much that can be done with it other than an eye-roll.

The paper also touts that 5G will ultimately be able to handle up to 1,000,000 separate connections to devices in a square mile from a single transmitter. If that claim was realistic, I have to wonder why the carriers are bothering to build small cells if a single cell site will have that much capacity. That paper also envisions a world where every device in our lives is connected to a 5G data plan so that we have to pay to connect devices. That ignores the reality that WiFi has already won the connectivity battle and that WiFi will be magnitudes better with the introduction of WiFi 6 and the 6 GHz spectrum band.

This is an industry piece aimed at persuading legislators that 5G is an amazing technology – the paper stops just short of claiming that 5G can leap over tall buildings in a single bound. However, most the paper also paints a picture of an industry that wants big government handouts to achieve the technology goals.  The recommendations in the paper ask for government financial help for training staff and ask for subsidized R&D. The paper also wants government help in eliminating regulation and squashing any local input into the placement of cell sites. It’s hard to understand why an industry that is going to conquer the world and create $500 billion in annual GDP, as this paper suggests, would need so much government help.

The Homework Gap is Not Just a Rural Problem

It’s been interesting watching the States react to the COVID-19 pandemic. There are headlines from all over the country about how States are taking emergency steps to bring some broadband to rural students using steps like beefing up external broadband at schools, creating temporary hotspots installed in school buses, and giving out computers and hot spots to rural students. These steps are all needed at a time when students are being asked to learn at homes in communities that have no broadband.

It’s easy to forget that there are many more students in our towns and cities without home broadband than rural households. Consider the list of the ten cities with the worst household broadband penetration rates, as compiled by NDIA – the National Digital Inclusion Alliance.

1          Brownsville, TX                     47.13%

2          Pharr, Texas                            46.24%

3          Rossier, LA                             45.30%

4          Lorain, OH                             37.29%

5          Compton, CA                         37.05%

6          Lynwood, CA                         36.19%

7          Newport News, VA                35.58%

8          Shreveport, LA                       35.49%

9          Flint, MI                                  35.16%

10        East Los Angeles, CA            33.06%

Right below this list are plenty of other cities with high numbers of home with no broadband. For example, sitting at number 20 on the list is Memphis, TN at 29.38%. Add to this the staggering statistic from the National Center for Homeless Education that over 1.5 million students are homeless in 2020 and are not counted in the above statistics – a statistic that’s likely to skyrocket due to high unemployment.

Solving the urban homework gap is often a huge challenge due to the sheer number of student homes with no broadband. Getting computers and hotspots for huge numbers or urban students can be an overwhelming problem that cities have been struggling with for years.

We know that lack of home broadband directly correlates to poor performance in school. Earlier this year, the Quello Center at Michigan State University released a definitive study that was able to isolate the lack of home broadband from other factors like poverty. That study showed that:

  • Students with home Internet access had an overall grade point average of 3.18 while students with no Internet access at home had a GPA of 2.81.
  • During the study, 64% of students with no home Internet access sometimes left homework undone compared to only 17% of students with a high-speed connection at home.
  • Students without home Internet access spend an average of 30 minutes longer doing homework each evening.
  • The study showed that students with no Internet at home often had no alternative access to broadband. 35% of students with no broadband also didn’t have a computer at home. 34% of students had no access to alternate sources of broadband such as a library, church, community center, or homes of a neighbor or relative.
  • The most important finding of the study was that there is a huge gap in digital skills for students without home broadband. To quote the study, “The gap in digital skills between students with no home access or cell phone only and those with fast or slow home Internet access is equivalent to the gap in digital skills between 8th and 11th-grade students.” It’s almost too hard to grasp that the average 11th-grade student without home broadband had the equivalent digital skills an 8th grader with home broadband.

A recent article talks about steps that Detroit has been taking to try to bring broadband to more students.

  • A local ISP, 123Net has been bringing gigabit access to southwest Detroit. A pilot project has brought Internet access to a few student homes and the goal is to find funding to expand the initiative.
  • There is a petition drive underway to create a ballot initiative that would ask the public to have the city address the digital divide as a basic city service.
  • The Public Lighting Department has been installing streetlights that come equipped with Internet connectivity. The hope is that over time that low-income neighborhoods can be blanketed with outdoor WiFi.

There are no easy answers for solving the urban homework gap because the issue is generally wrapped into the larger issue of addressing poverty. But as the Quello study points out, it’s vital that we try.

Digital Inclusion Studies

I’ve been contacted by a number of communities this year that want to talk about finding solutions for homes that don’t have broadband. It’s an interesting phenomenon because policy people have talked about the digital divide for the past twenty years, but I’m getting serious inquiries asking about ways to solve the problem rather than just quantifying the number of homes without broadband. I’m sure part of the reason for this is the realization of the number of homes where students were unable to continue schoolwork at home or where workers couldn’t transition to home due to the lack of broadband, lack of computers, or other reasons.

The first thing I recommend to a community is to identify the primary reasons in their community for why homes don’t have good broadband. There have been studies done over the years that have identified a number of different reasons why homes don’t have broadband. Some of the reasons why homes don’t have broadband include:

  • Some homes can’t afford the price of broadband
  • Some homes can’t afford to buy, maintain, and replace computers.
  • Some people don’t know how to use computers and need training before they are comfortable using a computer and a broadband connection.
  • Some people are intimidated by technology.
  • Some people are worried about security and are afraid of breaches of their privacy.
  • Some people are satisfied with access to the broadband they have at locations outside of the home.
  • Some people are satisfied with the broadband they get using their smartphone.
  • And some people simply have no interest or desire to go online (although this is often a convenient way to not admit some of the issues above).

As you might imagine, the prevalence of these issues differs widely by community. A community can’t start crafting digital inclusion solutions until they understand which of these issues are the primary drivers in their community for why homes don’t have broadband.

The easiest way to quantify the percentage of homes that fit into the various categories is with a well-designed statistically valid survey. To be useful, such a survey will have to be done differently than simple surveys that might measure things like existing broadband penetration rates. Here are a few ideas on how to best conduct this kind of survey:

  • Several studies have shown that most people without home broadband have more than one reason why they don’t have it. A survey ought to ask people to explore all of the reasons why people don’t have home broadband.
  • The survey should then be designed to delve more deeply into the primary reasons somebody doesn’t have broadband. That means a different set of questions would be asked about each of the above reasons why folks don’t have broadband. For example, the survey might dig deeper into the two primary reasons given by each respondent.

The results of this kind of survey is likely going to be eye-opening for most cities. It’s easy for policymakers to have preconceptions about why homes don’t have broadband, and it’s likely that the real issues are different than what policymakers assume.

Another important step in figuring out digital inclusion solutions is to understand where the needs are in a city. I see cities today gathering interesting demographic data that can be mapped. For example, I’ve seen a lot of school systems that have identified the address of every K12 student who doesn’t have adequate broadband or who doesn’t have a home computer. Understanding where these homes are is a needed component to finding a solution. Cities often have access to a wide array of other demographic data that might help to understand where homes most need a broadband solution. It’s hard to know ahead of time which data will be the most useful, but cities have data like a list of homes that qualify for reduced lunch programs, homes that are receiving rent or a housing subsidy, homes that are occupied by the elderly, etc.

After all of this research, the hard work starts to start solving the digital divide. But understanding the primary issues driving lack of access means that programs can be devised to tackle the most important issues first. If the primary driver of home broadband is lack of home computers, then a program to get computers into home will likely be effective. If the primary driver in a community is lack of computer skills, then computer training courses ought to help the most people.

A well-designed digital inclusion study is the first place to start for a community that wants to solve the digital divide. You can’t fix the problems until you’ve identified them.

The Rush to Complete CAF II

I’ve noticed that the big telcos are talking about efforts they are making this year to complete their obligations under the CAF II grant rewards that gave them over $9 billion to improve rural broadband to speeds of at least 10/1 Mbps. The telcos have had six years to make the upgrades and those upgrades must be finished by the end of this year.

It’s easy to understand why the telcos want to finish the required upgrades for which they’ve been paid. The FCC’s Universal Service statutes define the penalties for failure to comply with the mandates of CAF II in 47 CFR § 54.320 – Compliance and Recordkeeping for the High-cost Program.

The rules outline that the FCC can withhold USF payments to the telcos for missing interim deadlines. For example, CenturyLink reported to the FCC at the end of last year that it had not met all of the required upgrade goals that were to be completed by the end of 2019. The FCC should have responded to that notification by withholding some of the 2020 payments to CenturyLink until the company comes into compliance with its obligations. But as long as the telco finished the required upgrades by the end of 2020, it eventually will receive all of the CAF II funding.

But failure to meet the final milestone in 2020 obligations brings harsh penalties. If a telco doesn’t complete the CAF II construction by the end of this year, the FCC is obligated in these rules to recover 1.89 times the amount of subsidy provided to the telco to make the upgrades, plus 10% of the total support provided to a carrier over the term of the program.

The amount of CAF II awards vary by locality, but the average CAF II grants were for between $2,000 and $3,000 per household in the CAF II areas, meaning the penalties would be between $3,800 and $5,700 per household that didn’t see a CAF II upgrade plus 10% of the total support for a given area. That’s a substantial and permanent penalty and it’s no wonder that the telcos are pushing to complete CAF II.

Once a telco has certified that the CAF II upgrades are complete there are other penalties if the upgraded areas don’t deliver the speeds required by the CAF II program – in this case, speeds of at least 10/1 Mbps. Compliance with these rules is verified with FCC-mandated speed tests.

The testing rules are weighted heavily in the ISP’s favor. To keep full funding, a telco must achieve 80% of the expected upland and download speed 80% of the time. This means that the big telcos must only achieve a download speed of 8 Mbps for 80% of customers to meet the CAF standard. The 10/1 Mbps target was low enough, but the FCC testing rules make it a lot easier for ISPs to meet the CAF II obligations. There are financial penalties for ISPs that don’t meet the FCC tests. For example, ISPs that have between 85% and 100% of 80% threshold lose 5% of their FCC support. At the upper extreme, ISPs with less than 55% of the 80% threshold lose 25% of their support.

Consider what these two sets of rules mean for the big telcos. The big penalties come if a telco is honest and tells the FCC that they didn’t complete the CAF II build-out at the end of 2020. In that case, the telco would have to give back more than two times the subsidy it received for each household that doesn’t get upgraded.

However, if a big telcos says they met the buildout requirements, their potential penalty is reduced to 25% of the CAF II subsidy for areas where there were no upgrades. And that penalty assumes that the areas that weren’t upgraded are tested by the FCC. The FCC testing rules allow the telcos to provide inputs on where to test.

I’ve heard a lot of anecdotal evidence that that Frontier and a few other telcos didn’t make some of the needed CAF II upgrades. There are whole counties where recent wide-spread speed testing didn’t find any rural customers getting speeds faster than 5 Mbps download. The telcos still have until the end of this year to complete CAF II, so it’s premature to know that these areas won’t get CAF II upgrades. But if the rumors I’ve been hearing are true, the telcos can falsely declare to the FCC that they made the upgrades and then take their chances during the testing process that the full extent of their cheating won’t be detected.

There are huge parts of rural America that seemingly have been shortchanged by the CAF II program. The sad consequence of this is that these households would have been able to eke by during the COVID-19 crisis if they had been provided with 10/1 Mbps broadband. What I heard from all over the country is that households in the CAF II areas have seen no improvements in DSL over the six years of the CAF II program.

If the FCC really wants to do the right thing it would ask for local feedback at the end of the CAF II program at the end of this year. The FCC can map every household on Google Maps that should have gotten a CAF II upgrade, and there are local officials all over rural America who would love to verify if these upgrades brought anything close to 10/1 Mbps speeds. Instead, I expect the FCC to quietly sweep the whole CAF II topic under the rug, and we’ll likely never hear much about it after the end of this year.