I ran across an interesting article on Wireless Estimator.com that talks about a quickly growing rift between big wireless carriers and the myriad of smaller contractors that help them build and maintain networks. The article points out the disconnect between what the big carriers are willing to pay and what small contractors say they need to remain viable.

There has always been a tense dynamic between big carriers and small contractors. The big carriers have typically wanted to pay below-market labor rates and make up for it by offering long-term contracts with guaranteed work. The guaranteed long-term employment is attractive to many small contractors because they know that the alternative is to always be hunting for work and occasionally having no work.

This arrangement has worked for the last decade because we’ve been in a period of low inflation. Contractors could accept multi-year contracts at fixed rates with the knowledge that the rates would still be higher than their costs in a few years.

But every generation or so, when the economy enters into a cycle of inflation, the long-term contracts no longer work for small contractors. Compensation rates negotiated a few years ago are no longer profitable, and the owners of small contracting companies are squeezed to the point of making little or no profit, or even losing money by continuing to work.

What I have always found amazing is that we never learn from history. This is at least the fourth time in my career that we’ve run into the same issue – and the result is always the same. The big carriers are initially unwilling to talk about renegotiating compensation rates and adamantly insist that small contractors adhere to their contracts. Small contractors are squeezed, and many of them walk away from unprofitable contracts. Eventually, when the carriers can’t get the work done, common sense enters the picture, and rates are renegotiated at realistic levels to match the new cost of doing business.

This time is a little different than in past years since the big carriers are all spending huge dollars on infrastructure. In past economic downturns, the amount of infrastructure spending typically dipped along with the rest of the economy. But the entire telecom industry is currently going gung-ho in implementing 5G small cell sites or laying fiber.

This gives some market power to contractors who do generic work. If Verizon or AT&T won’t pay enough for crews to construct fiber, a contractor has numerous other opportunities to work on the huge number of other projects looking for fiber crews. But it’s still not an easy decision to walk away from a carrier that has provided steady work for the last decade. The contractors in the worse position are those that specialize. For example, a contractor who only builds wireless towers is not going to be able to easily transition to other work.

This is not only a telecom issue, but it is happening across the economy. I know a company that rehabs vacated apartments when tenants change that recently walked away from a long-term contract that was no longer profitable. Any small contractor working on a fixed compensation contract is probably feeling the pinch.

There is no culprit in this story – it’s the consequence of an unexpected change in the economy. Big and small companies alike have grown used to having minimal inflation and don’t build anything into contracts that allow for a renegotiation of rates. If you think back to times of higher inflation, contracts always included escalator clauses to compensate for external changes in costs. This isn’t ancient history – it was a routine part of contracts as recently as the 90s. But when the economy gets good, everybody seems to get amnesia and forget about past inflation.

If the big carriers want to keep building networks at a frenetic pace, they will have to listen to the financial plight of the folks who are building their networks. If not, they’ll find themselves far behind schedule and falling behind faster over time. Big companies almost instinctively resist paying more for standard commodities, but eventually, the new economy forces them to get realistic. Unfortunately, this means one more big disruption in an industry that is already in huge turmoil. When somebody tries to understand the causes of supply chain problems – fair labor compensation is another among the many causes.

AT&T CEO John Stankey was recently quoted as saying that the federal infrastructure legislation might draw the company into greatly expanding its fiber footprint. Stankey says the company’s goal might be expanded to reach 30 million fiber passings due to federal grant funding – up from an earlier 25 million goal.

It’s likely that the other big telcos and cable companies are thinking the same way. We already saw Charter grab over $1 billion from the RDOF program. Since RDOF award areas can often be described as a checkerboard or as swiss cheese, additional federal infrastructure grant money could help somebody like Charter fill in the holes in the RDOF grant areas.

It’s likely that companies like Frontier and Windstream will chase a lot of federal grant money if it’s made available. It’s a little less clear how Verizon and CenturyLink might react to huge amounts of federal grant funding.

Obviously, any ISP is free to chase grant funding if it comes available. But I must admit that it will make me nervous if the big ISPs grab huge amounts of funding.

The big telcos have an atrocious track record in rural America. One of the primary reasons that we have a rural infrastructure crisis is due to the giant telcos being bad stewards of rural networks. I can remember as far back as the early 90s when the big telcos began to neglect copper networks. For decades they put the absolute bare minimum amount of capital spending into rural networks while steadily reducing the rural technician workforce year after year.

The big ISPs could have chosen the same path as the smaller rural telcos. Most smaller telcos maintained and extended the useful life of the copper networks. Over the years, the smaller telcos extended fiber deeper into rural areas so that DSL speeds were increased to over 25/3 Mbps. When additional federal subsidies came along in the ACAM program, the small telcos already had built fiber deep into rural areas, which made them able to borrow the money to build fiber for customers.

The big telcos did just the opposite. They built rural fiber only in the rare cases when it was instantly profitable, such as reaching cell towers. When the CAF II program came along, rather than use the money to improve networks, the big telcos did the least possible with that funding, and in many cases, seemingly pocketed a lot of the subsidy.

It makes me angry to see the big telcos now talk about chasing big subsidies to build fiber in the same areas that they neglected for thirty or forty years. I don’t believe that the big ISPs will be good stewards of new rural fiber networks any more than they were of copper networks. I think it’s inevitable big ISPs will repeat history and slowly cut back on capital and technicians until rural fiber networks barely limp along. These companies are highly decentralized and operate in regions. In this business structure, it’s inevitable that local managers will seek to improve bonuses by trimming costs. It’s these little cost cuts, year after year, region after region, that results in a decimated maintenance workforce and budget. I find it impossible to believe that big telcos will treat new fiber networks any differently than they did copper networks. Big ISPs are never going to be comfortable working in markets where drive time between customers is high and where revenues are low.

I doubt that there is anybody who thinks that AT&T will make the same long-term effort to take care of rural networks as is done routinely by cooperatives. And yet, I can’t think of any way to stop these companies from grabbing the grant money if Congress passes the infrastructure legislation. Watching them take the funding will be like watching a slow, decades-long train wreck, as grant-funded fiber networks slowly deteriorate from lack of maintenance.

The only hope I can see is that the infrastructure spending might be distributed by the states. There are states that are fed up with the way that the big ISPs have treated the public and which might refuse to give them grant money. Unfortunately, there are equally as many states where the big ISPs have purchased the legislators by steady contributions over the years and where the grant money might go mostly to the big ISPs.

The Wall Street Journal broke a story about the apparent interest from Zayo for purchasing Uniti and Windstream. It was reported that Zayo has been in talks with Uniti since June. For those that might not keep up with the nuances of the industry, Uniti owns all of the network access of Windstream.

Windstream decided in January 2014 to spin off and move its copper and fiber assets into a REIT, which is a real estate investment trust, a formal kind of investment vehicle defined by law. A REIT generally owns real estate like apartment buildings, shopping malls, or perhaps specialty real estate like storage buildings or college dorms. REITs sell ownership shares to the public, similarly to stocks. An investor in a REIT is making a real-estate investment while gaining safety by spreading risk across multiple properties. Since its formation, Uniti has added other assets to the portfolio, but the Windstream assets still represent 70% of its assets.

It makes sense that Zayo would be interested in Uniti. Zayo is the largest independent owner of long-haul fiber, and Uniti owns significant fiber assets. Zayo was created to grow by acquisition and purchased over thirty fiber networks between 2007 and 2014. Zayo now owns over 130,000 miles of fiber in the U.S. and Europe. In March of 2020, affiliates of Digital Colony Partners and the EQT Infrastructure IV fund purchased all Zayo stock and took the company private.

The rumor that Zayo is interested in Windstream is a puzzler. Windstream is a traditional large telephone company that has also grown through acquisition. Windstream was originally formed with the joined assets from Alltel and Valor (GTE Southwest). Windstream went on to buy other telcos, including CT Communications (Concord Telephone Company), D&E Communications, Iowa Telecom, and Nuvox.

It’s hard to think of a reason why Zayo would want to get mired in being a last-mile ISP, especially with an acquisition that is still laden with copper DSL networks. When Windstream recently emerged from bankruptcy, it announced that its future involves building a lot of last-mile fiber – but that fiber has still to be built. Somebody is going to have to invest a lot of money to meet Windstream’s stated fiber goals.

It’s conceivable that Zayo is being enticed by the many billions of federal grants on the horizon that would come from a federal infrastructure plan. But even with grant funding, rural fiber networks are never going to generate the kind of returns that a company like Zayo wants – not to mention the daily headache of Zayo becoming enmeshed in becoming the ISP to rural customers.

We already know what that kind of merger looks like. We saw a merger between CenturyLink and Level 3 a few years ago that was a bigger version of this merger. Level 3 was a high-flying transport provider with stock that was rapidly climbing as the company consistently beat earnings expectations. Level 3 was perfectly poised for the broadband explosion we’ve seen over the past decade.

But that merger almost immediately dragged Level 3 down and the merged companies have a lot more of the earnings characteristics of CenturyLink than of Level 3. It’s hard to think that Zayo wants even a small piece of what happened to Level 3. Copper networks will be an albatross around anybody’s neck.

The only reason I can fathom for buying both companies would be to merge Windstream with its former last-mile assets still owned by Uniti and then spin off the recombined telco. This would allow Zayo to keep Uniti’s long-haul and business sales units and not have to own or touch Uniti’s last-mile networks. A recombined Windstream would be in better condition to pursue fedral grants.

However, the telecom world has never failed to entertain us with deals that the rest of the industry saw immediately as disasters. I don’t know anybody who thought that Level 3 could somehow solve CenturyLink’s last-mile woes. Nobody thought AT&T could become a media company through the acquisition of Warner Media. Fifteen years later, we’re still wondering what possessed Verizon to buy AOL and Yahoo. Does Zayo really want to join this illustrious group?

Cities have been given direct funding through the Coronavirus State and Local Recovery Funds as part of the American Rescue Plan Act. This is a once-in-a-lifetime opportunity for cities to tackle local broadband issues. This funding is intended to address and fix issues related to the pandemic, and those issues clearly include fixing issues where inadequate broadband failed the public during the pandemic.

There are those hoping that even more such funding might be coming from the $10 billion Coronavirus Capital Projects Fund to help cities, but the rules for this funding will require that states satisfy rural broadband issues first before considering other uses. That may still mean some money for cities in some states – but most of this money will likely go to fix rural broadband.

I’ve been hearing from cities across the country that are looking for ways to use the grant funding. I’ve heard some interesting ideas.

Expanded Broadband For Students. Almost every community in the country had problems connecting students to schools during the pandemic. This was a disaster in many communities when many students didn’t have computers or home broadband. Cities are talking about using the money to be better ready for future problems. That means more community WiFi hotspots. Some communities are using CBRS or other spectrum to create wireless links to student homes.

Improved Broadband for Low-Income Neighborhoods. Along the same lines as the item above, many communities are considering building fiber to serve public housing or to neighborhoods that can’t afford broadband. Cities typically don’t want to be an ISP, so this idea often involves an ISP operating partner. The ultimate goal of these initiatives is to bring affordable broadband.

Better Broadband for Business Districts. Business districts took a huge hit from the pandemic, and there are many communities reporting that 25% or more of local businesses went under during the pandemic. Communities are considering using fast and affordable broadband as an incentive for economic development to lure businesses to vacant storefronts.

Fiber for Industrial Parks. This is more of a traditional economic development idea, but the pandemic forced a lot of businesses to fail. Bringing fiber to industrial parks that don’t have fiber is a way to help keep existing businesses in operation and to create an opportunity to take advantage of any national effort to reclaim domestic manufacturing.

Innovation Zones. One of the more interesting ideas is to create an innovation zone. This can mean many things. Perhaps this means creating a business incubator space to nurture start-up businesses. It might mean providing co-working space to those who work from home but need access to conference rooms and meeting spaces. It might mean bringing high-speed broadband, green power, and new technologies to bear to help rejuvenate a run-down neighborhood.

Government Savings. Cities that are undertaking the above initiatives are also looking to use any fiber construction to connect local government locations onto a private network to reduce broadband bills. This is particularly needed as cable companies are refusing to offer I-nets when renewing cable franchises. Of particular interest is building fiber to libraries that did not have enough broadband to satisfy the public’s needs during the pandemic. Building fiber to connect anchor institutions reduces the long-term cost of government.

T-Mobile has started to aggressively roll out its 5G Home Internet Service that provides home broadband from the company’s cellular towers. The 5G name is a misnomer because this still uses the company’s 4G LTE network – but all of the big cellular companies are mislabeling cellular broadband as 5G.

The product is being launched from an agreement with the FCC for allowing T-Mobile to purchase Sprint in November 2019. T-Mobile agreed at that time to make fixed broadband available to 97% of the households in the country by November 2022 and 99% of households by November 2025. The pandemic put T-Mobile behind schedule, but in a recent investor call the company says that the product is now available to 30 million households. The company says it still intends to meet the 97% coverage goal by the end of 2022.

This month, T-Mobile dropped the price to $50 per month. T-Mobile is advertising the product at speeds that average around 100 Mbps download. T-Mobile doesn’t make any claims about upload speeds, but in searching reviews from customers, upload speeds seem to range between 10 and 15 Mbps.

Bandwidth is unlimited, but the product has some unusual caveats. The company says, “Home Internet is not intended for unattended use, automatic data feeds, automated machine-to-machine connections, or uses that automatically consume unreasonable amounts of available network capacity.” This would seemingly block broadband usage for functions like backing up data in the cloud or automatically uploading files at night to an office server. The terms of service don’t say if this is prohibited or just throttled.

The product is not for the sports fan with a giant 4K television. T-Mobile automatically throttles all video to a lower resolution. This also might not be attractive to gamers, with average latency between 30 and 40 ms – a little more lag than most cable company connections.

The T-Mobile modem is placed inside the home, so the speed will be whatever signal can penetrate the outside walls. Customers report that coverage is best with the gateway placed close to a window facing a cellular tower. Like with all cellular coverage, this won’t work for every home. Cities tend to have a lot of small cellular dead zones caused by hilly streets or neighboring homes that can block the signal.

The broadband product uses the same network as T-Mobile cellphones, so data speeds will likely decrease in times of busy cellular usage – the terms of service state that cellphone usage gets priority over the fixed product.

It’s an interesting product and could be market disruptive. T-Mobile believes it will have 500,000 customers by the end of this year, which would make the company the 16^th largest ISP. A year ago, T-Mobile said its goal was to have 7 million customers by the end of 2025, which would make it the fifth-largest ISP, just below Verizon.

It’s an interesting broadband product. In cities this is the product that should displace DSL, which is increasingly being used by households that care most about saving money. Homes with multiple users and big bandwidth demands are probably not going to like the restrictions – or the upload speeds, which are about the same as with a cable modem connection.

The FCC forced this commitment on T-Mobile in hopes of improving rural broadband. It’s going to do that, and rural homes should start paying attention to see when it comes to your local cell site. But the big issue in rural areas is going to be the distance that people live from a cell site. The broadband speeds will start dropping at about a mile from a cell site, will be weak after two miles, and non-existent at three miles. Even after T-Mobile puts this product on every cell site, it’s not going to reach 97% of homes. The FCC cellular coverage maps are even more of a joke than landline broadband maps. I’ve worked in a lot of rural counties in recent years where cellular voice coverage is weak or non-existent, and the coverage for the broadband product will be even smaller. But even a home two miles from a cell site might love this product if it can deliver 25 Mbps and replace a DSL connection delivering a fraction of that.

There are similar products being deployed by AT&T and Verizon, and one would assume eventually by Sprint. For now, T-Mobile is the most aggressive in deployment, probably due to the agreement with the FCC. But cellular data is poised to enter our markets as a significant competitor.

People ask me a lot about what Starlink means for somebody building a rural broadband network. That set me to contemplate the long-term prospects for LEO satellite broadband.

Today, the broadband provided by Starlink is a boon to rural subscribers who have had no alternatives. Hundreds of thousands of prospective customers have gotten onto the Starlink waiting list. It’s not hard to understand why when the rural broadband alternatives are extraordinarily slow rural DSL, high orbit satellite broadband, or cellular hotspots. A rural resident who gets Starlink broadband delivering 50 Mbps to 150 Mbps feels like they won the broadband lottery.

Assuming that Starlink and the other satellites can deliver the same decent broadband to larger numbers of users, the companies should do extremely well for the rest of this decade. That’s still a big if because there are still hurdles for Starlink to overcome. It must find enough backhaul to fully support the satellite constellation  – we know from other broadband technologies what poor backhaul means. There are spectrum battles at the FCC that might limit Starlink’s backhaul. Starlink also still has to launch many thousands of satellites, and according to Elon Musk, still needs $30 billion to finish the build.

But let’s assume that Starlink raises the money, launches the needed satellites, and gets the backhaul bandwidth needed to keep broadband speeds up. I foresee other issues that all of the satellite companies will face if I look out after ten years.

Landline Competition. Assuming that Congress gets its act together and passes a rural broadband bill, then many of the natural rural markets for Starlink will be getting fiber. It’s hard to see satellite broadband keeping much market share if fiber can bring more broadband for a lower price. Fiber is likely to never be everywhere in the country, but it could end up in most places. One only has to look at the Dakotas to see that there is a sustainable business plan for fiber-to-the-home if the initial fiber construction is subsidized. As the richer markets like the U.S., Canada, Australia, Europe, and the far east get fiber, the potential market for selling satellite broadband will be much diminished. We’re not going to see rural fiber everywhere immediately, but in a decade, we might be seeing a lot of it.

Prices. I also wonder about Starlink’s ability to sell broadband outside of wealthy economies.  I’ve read articles by several analysts who say that Starlink needs the $99 price everywhere to be viable. If this is so, then Starlink broadband is not a viable product in much of the world – there are not a lot of people in the third world who can pony up $99 per month for broadband.

Starlink also has to worry about competition from Jeff Bezos. One has to assume that Amazon will offer irresistible bundles of broadband tied to delivery and video services. If Starlink really needs a high price to succeed, it will be vulnerable to a ruthless competitor.

Growth in Broadband Demand. The issue that nobody talks about is the ever-growing demand for broadband. Since 2018 the national average monthly household use of broadband has grown from 215 gigabytes to 433 gigabytes. The growth has been on the same curve since the early 1980s. Even if the Starlink constellation can find enough backhaul to provide adequate speeds today, how will the technology keep up when demand in ten years will be ten times higher or in twenty years will demand will be a hundred times higher?

Viasat, which uses geosynchronous satellites at 22,000 miles above the earth, handles the demand issue by imposing severe data caps. On Viasat, a plan to get just 100 gigabytes of usage for a month is $170, with a 2-year contract required. A household that is limited to 100 gigabytes per month is not participating in the modern broadband world. If low-orbit satellite providers have to implement data caps to remain viable, their days will become numbered.

Constant Need to Replace Satellites. One of the most unusual aspects of low-orbit satellites is that satellites are expected to be replaced every five years or so. That means that the satellite company will face the giant cost of paying for rocket launches forever, just to stay in place. If Starlink ever grows to maturity, it will still have to constantly replace satellites, even if that means no new revenues. Any broadband technology suddenly feels a lot less attractive if the owner has to replace 20% of the network every year in perpetuity.

Summary. Assuming that the satellite companies actually raise the money, launch the needed thousands of satellites into orbit, and keep broadband speeds at a decent level, it’s not hard picturing the companies getting many millions of customers and even being profitable by the end of this decade. But the bigger long-term question is how a satellite company can sustain a business in a world where broadband demand is likely to outstrip the ability of satellites to deliver? The inability to keep up with demand is what ultimately killed DSL and is putting huge pressure today on cable companies to improve upload speeds. I think keeping up with demand will be the long-term Achilles heel for LEO satellites.

2021 is going to into history as the year when the whole country is finally talking about rural broadband. The pandemic made it clear that many millions of households and even entire communities don’t have adequate broadband. Congress and the White House responded by funding billions of dollars for improved broadband in the ARPA legislation. We are perhaps edging closer to an infrastructure bill that will allocate tens of billions of additional dollars to fix a lot of the rural broadband divide.

An issue that seems to have fallen off the radar is rural cellular coverage. In 2020, the FCC halted its plans to fund a reverse auction for a $9 billion 5G Fund that was intended to improve rural cellular coverage. That program was halted after it became apparent that Verizon and others were reporting inaccurate cellular coverage data to the FCC – much like the problem we have with FCC broadband maps. In July of this year, the FCC started another round of data collection, so the plans for the 5G fund must still be in play.

The topic has come to my attention recently as my consulting firm was doing several surveys in rural counties. In these surveys, between 30% and 50% of survey respondents said that they had little or no cellular coverage at their homes. In all of these cases, the FCC data from cellular carriers showed ubiquitous coverage throughout each county.

To be fair, the FCC reporting for cellular coverage is outdated. In its annual report to Congress, the FCC reports the percentage of homes and businesses in every county that can receive 5/1 Mbps LTE coverage. Ookla recently reported that the millions of speed tests show that the average national cellular download speed in early 2021 was 76.6 Mbps for AT&T, 82.4 Mbps for T-Mobile, and 67.2 Mbps for Verizon. The FCC is still reporting on a cellular speed that is far slower than the speed that a majority of cellular customers can receive – much in the manner that it keeps focusing on 25/3 Mbps as the definition of broadband.

But it’s really troublesome when the FCC reports to Congress that whole counties can get 5/1 Mbps cellular broadband when residents tell us they have almost no cellular overage. It’s hard to understand why members of Congress who live in some of these rural counties don’t push back on the FCC.

I’ve heard the same kind of rural stories about rural cellular coverage that I’ve heard about rural broadband. People say that coverage peters out during their commute home, and they have no coverage in their neighborhood. I heard the other day from somebody who told me they only get weak cellular coverage in one tiny part of their backyard – anybody of my age remembers running around the corner of airports trying to find that magic spot.

I would venture to say that almost everybody reading this blog knows of cellular dead spots. I live in the center of a city, and there is no Verizon coverage at my house – yet there is good Verizon coverage at the other end of my block. I have relatives that live in a nearby older suburb who have weak and intermittent cellular coverage for the entire neighborhood from both AT&T and Verizon. Every Uber driver in this area can paint a pretty accurate picture of the location of cellular dead zones – and there are a lot of them.

Cellular dead zones are largely a matter of geography and topography. I don’t know if it’s realistic to think that Verizon should be required to show the dead zone at my house on its cellular coverage maps. But I wonder how many people buy homes in hilly cities like mine, only to find that cellphones don’t work. I decided to not make an offer to buy a home here when my cellphone didn’t work at the house.

The problems in cellular rural areas are much more of a concern than my half-block of bad coverage. In rural counties, poor coverage comes from the combination of two issues – distance from a tower and terrain. In cities, there are cell towers within a mile or two of everybody, and with the introduction of small cells, even closer in many cases. In rural counties, there might only be a few cell sites, and many residents live more than two miles from the nearest tower.

I am lucky enough to live in a place that is ideal for growing vegetables. I’m up in the mountains, where temperatures are moderate, and we have an average of three inches of rain every month all year. For the past several years, I have bought a big box of fresh produce every week from two local farms. I have never eaten so well, and I am comforted by knowing exactly where my vegetables were raised. I consider myself lucky to even have this option.

Most people in the country buy broadband from a handful of giant ISPs – The four largest ISPs serve more than three-fourths of all broadband customers in the country. But some people are lucky enough to benefit from great local ISPs in the same way that I benefit from being near to local vegetable farms.

There is a wide variety of local ISPs that includes independent telephone companies, telephone cooperatives, municipal ISPs, electric cooperatives, independent fiber overbuilders, and WISPs. Not all local ISPs are great – but from the stories I hear around the country, most people served by local ISPs feel lucky to have the local option.

There was a time 75 years ago when the federal government acknowledged that local is better. When it became clear that the big commercial electric companies were never going to build and serve in rural America, somebody in the federal government came up with the brilliant idea of letting communities build and operate their own electric companies through cooperatives. This didn’t cost the government much since the federal electrification plan provided long-term loans through the Rural Utility Service, and the cooperatives repaid the government for funding rural electric networks.

We’re in the process of handing out billion in federal grants to build rural broadband networks, and there isn’t one shred of localism in the new federal programs. Instead, the government is handing out huge grants that are often lucrative enough to instead attract the biggest ISPs and speculative investors to build rural broadband.

Does anybody really think that AT&T or Charter really wants to provide broadband in rural America? AT&T spent the last forty years milking the last vestiges of profits out of rural networks while making zero investments. Charter and other big ISPs are not going to like the much higher operating costs in rural areas that come from long truck rolls and increased maintenance costs to keep up with huge miles of rural miles.

The big federal grants are providing an incentive for big ISPs or speculative investors to build fiber networks because the grants make it possible to earn high returns. It’s impossible to believe that a big ISP like AT&T is going to provide the same level of customer service, repairs, and network maintenance as would be done by a local ISP. I don’t need a crystal ball to know that there will be a huge difference in twenty years between a fiber network built today by a giant ISP and one built by a rural cooperative. Without future grants, AT&T won’t invest in future electronics upgrades, and the company won’t do the routine maintenance needed to keep the network in good working order. Cooperative fiber networks will be humming along like brand new while the big ISP networks will already be showing signs of age.

The electrification program didn’t include grants, and the newly formed cooperatives eventually repaid the federal government for lending it the money to build power grids. I can’t imagine that the federal government has ever made a better investment or gotten a better return than it did from the electrification loans – the only things that come even close are Interstate highways and the G.I. Bill that sent millions to college after WW II.

In a real slap-down against localism, current federal broadband grant programs are actually stacked against small local ISPs. Federal grants expect a grant recipient to prove upfront that it has the matching funds to pay for the portion of the project not funded from a grant. Small ISPs typically don’t have the kind of balance sheets that traditional banks are looking for, and I know small ISPs that are unable to get grants due to the inability to raise the matching funds. And forget about starting a new cooperative – the grants and banks are not interested in helping start-ups.

It’s a shame that we forgot about the most successful program imaginable for building rural networks. Forty years from now, we are going to see that many of the areas where big ISPs get grant money today will have gone to hell and will need federal funding relief again. But rural markets operated by good local ISPs will be humming nicely along in forty or a hundred years from now. Broadband is one of the areas where local really is better. We all know this, but little guys don’t get a say in writing grant rules.