Monthly Archives: March 2022

National Broadband Growth is Slowing

Leichtman Research recently released the broadband customer statistics for the end of the fourth quarter of 2021. The numbers show that broadband growth has slowed significantly for the sixteen largest ISPs tracked by the company. LRG compiles these statistics from customer counts provided to stockholders, except for Cox which is privately owned.

Net customer additions sank each quarter during the year.  The first quarter of 2021 saw over 1 million net new broadband customers. That dropped to just under 900,000 in the second quarter, 630,000 in the third quarter, and now 423,000 in the fourth quarter. The statistics for all of 2021 and for the fourth quarter are as follows:

Annual % 4Q %
4Q 2021 Change Change Change Change
Comcast 30,574,000 1,327,000 4.3% 213,000 0.7%
Charter 28,879,000 1,210,000 4.2% 190,000 0.6%
AT&T 15,384,000 120,000 0.8% (6,000) 0.0%
Verizon 7,129,000 236,000 3.3% 28,000 0.4%
Cox 5,380,000 150,000 2.8% 20,000 0.4%
CenturyLink 4,767,000 (248,000) -5.2% (70,000) -1.5%
Altice 4,389,600 (3,400) -0.1% (1,900) 0.0%
Frontier 2,834,000 (35,000) -1.2% 10,000 0.4%
Mediacom 1,438,000 25,000 1.7% (3,000) -0.2%
Windstream 1,109,300 55,200 5.0% 17,500 1.5%
Cable ONE 992,000 63,000 6.4% 25,000 2.4%
Atlantic Broadband 698,000 18,778 2.7% (222) 0.0%
WOW! 498,800 12,900 2.6% 2,200 0.4%
TDS 493,300 32,700 6.6% 3,200 0.6%
Cincinnati Bell 436,100 3,900 0.9% 1,000 0.2%
Consolidated 401,357 (16,793) -4.2% (6,097) -1.6%
Total 105,403,457 2,951,285 2.8% 422,681 0.4%
Cable 72,849,400 2,803,278 3.8% 445,078 0.6%
Telco 32,554,057 148,007 0.5% (22,397) -0.1%
           
Fixed Wireless 874,000 719,000 82.3%    

There are a few interesting things to keep an eye on in the future. The growth for Comcast and Charter have slowed significantly and my prediction is that there will come a quarter within a year where one or both of them will lose net customers. For several years running, Frontier has been bleeding customers but seems to be turning it around. The big loser is now CenturyLink.

For some reason, LRG is leaving out fixed cellular customers. At the end of 2021, T-Mobile reported 646,000 fixed cellular customers, with 546,000 added in 2021. Verizon is up to 228,000 fixed cellular customers, up by 173,000 during 2021. The two companies, along with AT&T, are making a major push in this market and expect to add millions of customers in 2022 – many at the expense of the other ISPs on the list. It’s an odd choice to exclude these customers since the speeds on fixed cellular are faster than the DSL delivered by the telcos on the list. Also missing are other big providers that are probably larger than Consolidated, like a few of the largest WISPs and fiber overbuilders like Google Fiber.

But even after counting the growth of fixed cellular broadband, it’s obvious that the broadband market growth has cooled. The burst of new customers in 2020 and the first half of 2021 were clearly fueled by homes buying broadband during the pandemic.

It’s also worth noting that the numbers for WOW! and Atlantic Broadband (now Breezeline) have been adjusted for the sale of customers by WOW!.

The BEAD Grant Dilemma

I’m seeing rural counties facing some interesting dilemmas about where to offer local support for the giant upcoming federal grant funds that will hopefully build broadband in their counties. I believe that counties that are willing to provide local matching grants from ARPA or other funds will rise to the top of the list of list of who gets funded. I’m fairly certain that most state grant programs are going to support an ISP that has strong local support, including local financial backing, over ISPs that don’t.

You may wonder why that matters. I think many counties fear that nobody is going to seek the $42.5 BEAD grant funding in their county – and some are probably right. But I also think there is a good possibility that some counties are going to see multiple ISPs seeking the big grant dollars in their county. There are seemingly a lot of companies considering the $42.5 billion BEAD grant program. It seems likely that an ISP that already won any significant RDOF award in a county will pursue the BEAD grants to fill in the nearby areas not covered by RDOF. We now know that big ISPs like AT&T, Frontier, Windstream, Charter, and likely others will pursue the big grant funding. I’m betting that new companies we’ve never heard of before, backed by private equity money, will pop out of the woodwork for this grant.

The dilemma faced by many counties is that they might not want any of these entities to win the BEAD grants and become the new monopoly ISP. Many rural areas are already dubious of RDOF winners that are bringing a wireless solution instead of fiber. They wonder if the wireless technologies will bring the futureproof broadband solution needed for the rest of this century.

Counties are rightfully leery about having some of the big ISPs win the BEAD grants, particularly the big telcos. The big telephone companies carry a lot of the blame for the poor condition of broadband in the rural areas. The telcos slowly abandoned rural America starting in the 1980s. They closed local customer service offices. They cut back on technician staff to the point where it is nearly impossible to get a problem fixed quickly, if at all. They stopped making any investments in rural areas, so in-place technologies were frozen at a time when technology everywhere else was being modernized in the rural areas served by smaller telephone companies and cooperatives.

The question that communities are wrestling with is if they should trust the big telcos again? What’s to stop the big companies from taking federal grants, building just enough to meet the letter of the law, underfunding maintenance going forward, and starting the cycle of ignoring the market all over again. If a new fiber network is not properly maintained, it will begin to see problems in a decade and could become a paperweight in two decades.

I also suspect most local communities are going to be leery of new investor-backed ISPs created just to take advantage of the BEAD grants. Even with grant funding, there is not enough margin in a rural ISP business to make the kinds of returns that investors are seeking. It seems likely that grant chasers will already have a seven-year plan to flip the property to earn the desired return. A community partnering with one of these new ISPs might end up with somebody they don’t want as the ISP in a decade.

Many counties already have one or more local ISPs they know and like. This might be a small telco or cooperative that is serving part of the county or in the county next door. It might be a local WISP that provides great customer service. Unfortunately, we’re going to see many cases where the smaller ISPs are unwilling or unable to pursue all of the big grant opportunities around them. Small companies all have a natural credit limit, and many have a weak balance sheet, and they might be unable to borrow the needed matching funds.

There are also counties with no natural local ISPs. If you look at a map of the footprints of the big telcos you’ll see plenty of counties that are not close to an independent telephone company or cooperative. Remember that companies like Frontier, CenturyLink, and Windstream grew by gobbling up hundreds of smaller telephone companies.

Counties should be having the conversation today with local ISPs to see if there is one or more they are willing to back. Counties also need to give serious consideration to contributing some local grants. The local matching could come from ARPA funding, but some counties consider broadband to be important enough that they are floating bonds to help pay for better broadband.

This is no guarantee that an ISP a county backs will be an automatic winner of grant funding. I’m sure we’ll see some well-funded big ISPs make plays to serve large contiguous swaths of counties – and grant offices might find that an easier grant to administer. But I think that counties that pick the ISPs they want to partner with and that put up local matching funds will have a high probability of getting the ISP of their choice. Counties who do nothing might end up getting a technology solution or a big ISP they don’t like – or no solution at all.

Do You Require Binding Arbitration?

Cory Doctorow recently wrote an interesting blog about binding arbitration. In recent years, binding arbitration has become common and is routinely used by companies to stop unhappy customers from suing them.

Binding arbitration seems like a sensible path to choose between two companies doing business. I’ve assisted in several binding arbitration complaints between carriers, and it’s faster, more efficient, and less costly for companies than wading into the court system.

But corporations have gone overboard and now routinely include a binding arbitration clause in non-negotiable agreements with customers. I don’t know anybody who thinks they have any choice when required to sign an online Term of Service. It’s hard to call these documents a contract because they are not negotiable – we either sign the online agreement, or we can’t use the online service.

The main purpose of binding arbitration in these kinds of one-sided agreements is to eliminate class-action lawsuits. Corporations know that customers are not going to take them to court over a small claim, but they fear large groups of customers acting together in a class-action lawsuit. In most cases, a customer ‘signing’ an online Terms of Service gives up their rights to take part in class-action suits. The arbitration clause generally makes it clear that arbitration is the only way to settle disputes.

Doctorow’s blog talks about how the use of mandatory arbitration has started to boomerang on big companies. Over 100,000 unhappy customers have asked for arbitration with Intuit. The company has been running a bait-and-switch free tax form service that never worked but which instead led people to expensive tax solutions. Intuit offered $40 million to customers to settle the issue, but Judge Charles Breyer of the U.S. District Court for the Northern District of California told Intuit that it had to stick with arbitration since that was the only solution offered to customers. This means Intuit must foot the bill for the individual arbitration complaints – a process that could cost it over $175 million.

Reading this blog sent me to look at the big ISPs in our industry. Sure enough, every big ISP I looked at had binding arbitration in its customer Terms of Service. A few had an interesting twist. AT&T says that binding arbitration must be used to settle all disputes other than bodily injury or death. Comcast gives customers 30 days to opt out of binding arbitration by writing a letter to its corporate attorneys in Philadelphia. But all of the big ISPs are obviously worried about big class-action lawsuits.

I wonder how many smaller ISPs require binding arbitration. It’s something I’ve never recommended to my clients because I think one of the things that distinguish small ISPs from the big guys is a willingness to make things work. A binding arbitration clause says to customers, “Talk to my lawyers and not to me”. A small ISP is doing something wrong if a dispute with a customer ends up in an arbitration dispute or in a court.

If your Terms of Service require arbitration, you ought to reconsider. I can’t think of a single reason why a small ISP should hide behind a legal trick instead of talking to customers when there is a problem.

Who is Using ACP?

The FCC announced on February 14 that 10 million households have enrolled in the new Affordable Connectivity Plan (ACP) that provides a $30 monthly discount off broadband bills. That’s a big number, but I’ve seen estimates that as many as 30 million homes might qualify for the discount. The Universal Service Administration Company (USAC) has released a few high-level details of the program that also bridges back to the predecessor Emergency Broadband Benefit (EBB) program.

The ACP plan is a new version of the EBB plan that was created by the Consolidated Appropriations Act, and that provided a discount of $50 per month for eligible homes as a response to the pandemic. The ACP replaced the EBB plan on December 31, 2021 and the nine million households were largely transitioned to the new plan – some no longer qualified for the new plan.

At the end of January, the ACP had 9,697,257 subscribers. Almost 6.4 million subscribers were getting the ACP discount for cellular plans, over 3.2 million subscribers of fixed broadband (cable, DSL, and fiber) were getting the discount, and only 54,000 subscribers of fixed wireless and satellite were enrolled.

One surprising aspect of the ACP plan is the relatively small number of households subscribing to the plans through traditional ISPs. For the fixed ISP, the 3.2 million ACP customers represent about 3.8% of the subscriber base of these companies collectively. WISP and satellite companies are only slightly behind in ACP subscribers at 3.7% of the customer base. I compare these percentages to 2020 Census data that shows that 11.4% of households live under the poverty level. Since the ACP plan is available to homes with incomes up to 200% of the 2021 Federal Poverty Guidelines, the eligible households are far higher than 11.4% of the population. I haven’t seen any good estimates of the total eligible households.

The most surprising statistic is that the ACP is mostly going to cellular carriers. That mostly means families with traditional cellular data plans, although it looks like the three big cellular companies are now up to almost one million homes using fixed cellular broadband plans with unlimited data.

I looked at how the cellular carriers are marketing ACP, and the AT&T plan is typical of the others. AT&T is offering a phone with unlimited telephone and text and 5 gigabytes of data for $30 per month. For an eligible ACP family that means a free plan – although each household is eligible for only one discount. An ACP customer can upgrade to 15 gigabytes and pay $10 out-of-pocket, or to AT&T’s ‘unlimited’ plan for $20 per month – a plan that is not unlimited and where data speeds are reported to be restricted after hitting 22 GB per month.

I can only speculate why the cellular companies are selling ACP at twice the rate of landline ISPs. It’s fairly obvious that cellular companies are far better at marketing than landline ISPs. My cable company mails me marketing literature every month, and I don’t think we’ve ever opened one. But I hear advertising about the latest cellular plans all of the time, which is perhaps easier to pull off for companies that work nationwide.

I also think there is a demographic issue at play. We know from looking at FCC 477 data that landline penetration rates in the poorest neighborhoods of major cities are far lower than elsewhere. It’s not unusual to find neighborhoods where less than half of homes have a landline broadband connection, and some neighborhoods are far lower than that. The cellular companies have become the de facto ISP in some poor neighborhoods because it’s an easy choice to pick a cellphone for a household budget that can afford both cellular and landline broadband. The ACP plan dollars are going to where the need is. Let’s face it, even after a $30 dollar discount most cable company plans are still unaffordable for low-income homes.

Interestingly, this is not how the plan is being portrayed by policymakers. ACP is being portrayed as helping to solve the digital divide, and I’m not sure that it is. Cellphone data is many things, but it is not a substitute for a landline broadband connection for students trying to do homework. A 5 or a 15-gigabyte cellphone data plan will allow somebody to participate in many of the most important parts of the digital world. But these plans are not a substitute for a landline connection when OpenVault reported recently that the average landline broadband subscriber now uses over half of a terabyte of data per month. Let’s not pretend that 5 gigabytes per month is a reasonable substitute for 500 gigabytes. Giving one family member a discount on a cellphone is also not solving the digital divide – with a 95% national cellular penetration rate, that home almost certainly had the cell phone before the discount plans.

Don’t read these observations as being negative against the ACP program. I think giving a discount to low-income homes for connectivity is a good idea. But just as happened with the Lifeline plan in the past, DC policymakers seem to be declaring ACP a success without looking at how the plan is being deployed. We aren’t going to solve the digital divide by giving $30 discounts to cell phone users.

Network Requirements for the Metaverse

I’ve often joked that I don’t play computer games because I’m holding out for a holodeck. While that may sound ridiculously far-future, we’re on the verge of seeing web-based virtual reality that will be a major step towards a holodeck. There is already some awesome virtual reality software and games where a person can get immersed in another world using a headset. But it will be a big leap to move virtual reality online where people from anywhere can join in a game together like is done in the movie Ready Player One. If you haven’t seen it, it’s a movie from 2018 about a believable future worldwide gaming phenomenon.

Meta (formerly Facebook) is investing heavily in creating a platform that can host game designers and others to launch virtual reality apps. When Meta first announced that it was going to tackle the metaverse, people assumed the company was off designing games, but the company is instead tackling the technology that will enable the use of online virtual reality.

Meta says there are some key requirements that will be needed to support the metaverse.

  • Fast symmetrical broadband speeds. And they aren’t just talking about one gigabit bandwidth – faster speeds will be needed to transmit the huge amounts of data needed to create real-time virtual reality worlds.
  • Low latency, under 10 milliseconds. Well-designed last-mile fiber networks have speeds in this range today. But Meta isn’t talking only about the last mile network, but the middle mile network used to connect users to the cloud. The company says that middle-mile carriers will need to step up their game. Some networks are already this fast, but many are not.
  • We’re going to need higher resolution video – 4K is not good enough resolution to convey the pixels needed to create immersive worlds. And that means big data files.
  • With big data files, we’re going to need the next generation of video compression that can compress huge data files in real-time and that can be decompressed without adding delay to the signal.
  • To make everything work together in real-time will require cooperation in the network between entities. Some traffic optimization is done today by network operators while content providers do their own optimization – it’s going to take a coordinated real-time integrated process of network optimization that includes all parties to the metaverse.
  • Metaverse software must be able to adapt to the user. While designed for a high-bandwidth, low latency fiber customer, the metaverse system must be able to adapt to the local network conditions. We do this in a minor way today when Netflix dummies down the video signal to match a user’s bandwidth.
  • What Meta didn’t way is that we’ll need ISPs willing to deliver the fast 2-way traffic needed to make the metaverse work in homes.

This may all sound out of reach, but Meta already has early prototypes of the concepts working in the lab. We’re seeing last-mile fiber builders now using XGS-PON that can deliver 10-gigabit symmetrical broadband. We’re seeing new middle-mile routes with 300-gigabit pipes reaching out to smaller and smaller cities.

The metaverse and web-based virtual reality will only become possible when there are enough people in the world connected to a fast fiber connection. We’re certainly on that path in the U.S. with plans for various ISPs to build fiber to pass nearly 50 million more homes in just the next few years. Meta envisions a platform where it supplies the muscles and tens of thousands of develops independently create metaverse worlds. That’s not quite a holodeck – but I might just give it a try.

New FCC Mapping Deadlines Announced

On March 4, the FCC released its long-awaited new instructions for how ISPs are to report broadband coverage, speeds, and customers to the FCC. The order also provides a timeline for reporting to the FCC in the new formats. The new reporting is still called the FCC 477 data filing, but the format has changed significantly.

These reporting rules are the culmination of several years of effort by the FCC to revamp the way the agency collects broadband data. The current broadband data is so erroneous today from some ISPs that it’s hard to take any statistics coming out of the FCC seriously. But today’s blog is not to bash the FCC’s past mapping performance but to let ISPs know what must be reported this summer. Following are the highlights of the new rules, which can be found here.

Who Must File? Any fixed or mobile entity that acts as the ISP for at least one customer on June 30, 2022 must file. It seems like in almost every county I work in, I find an ISP or two that is not reporting to the FCC. I’m wondering if the agency is going to make any effort to find the non-filers.

Interestingly, any federal agency along with state, local, and Tribal governments can also file broadband mapping and coverage data. I don’t think this data is automatically going into the new FCC map, but rather starts building what the FCC is calling a challenge process for those that don’t agree with what ISPs report.

Due Date. The new FCC reporting portal will be open on June 30. ISPs must complete filings by September 1. The FCC expects to be on the normal schedule with two filings due in 2023.

The FCC warned separately a few weeks ago that it may accelerate and shorten the September 1 date, so I advise ISPs to report early. If this is like any other large government reporting portal, there are bound to be glitches this first time – so don’t wait until the last minute.

The New Reporting Data.

The big change is that ISPs must submit shapefiles for polygons that define the service territory. Each polygon should include existing customers along with homes or businesses that can be connected within 10 business days of a request for service. If an ISP doesn’t want to provide shapefiles it can provide the detailed location of each customer. WISPS and cellular carriers must file propagation maps from each transmitter along with details of signal strength and heat map data. The 477 reporting now also requires traditional telephone and VoIP subscriber data. Cellular carriers must show broadband and voice coverage separately if it’s not the same service area.

This is the most material change in the new 477 data and will have the biggest impact if ISPs file correctly. For example, if done right, these maps will identify the last home served along every road leaving towns served by a cable company. This reporting is a lot more complicated for rural ISPs, and as I’ve written recently, I don’t know how rural WISPs can meet this requirement with any accuracy.

How to File. ISPs can either input data into the new FCC portal or submit data to the FCC using an API.

Double Reporting. An important thing to note is that ISPs are required for this filing to file in both the new and the old 477 system – you must file twice.

The FCC is banking heavily on this new data being more accurate than the past 477 data. I think in some ways it will, if ISPs like the cable companies draw accurate shapefiles. But I’m extremely skeptical that this is going to fix the problem of ISPs overstating broadband speeds – and that’s the issue the FCC has promised will be fixed to support the BEAD grants. I guess we’ll find out some time this winter after the FCC crunches the new data.

Note that anybody who analyzes FCC data for broadband coverage and speed is likely to have a steep learning curve to understand the new data.

Big Future for Telemedicine?

According to a report just released by McKinsey & Company, we are on the verge of seeing a major shift to health care from home. The report says that as much as $265 billion in annual fees to Medicare and Medicare Advantage could shift to homes by 2025.

We’ve already seen the start of the trend towards telemedicine. The spending on telemedicine was 38 times higher in 2021 compared to 2020. Most of that shift is obviously due to the pandemic. The report suggests that 2025 in-home medical care will increase to three to four times the 2021 level.

The report cites several changes in the healthcare industry that are contributing to the trend for more in-home healthcare:

  • 40% of patients who have used telemedicine say they expect to keep using it in the future. It’s a big burden on working families to try to get to the doctor’s office during the workday, and telemedicine makes it easier for many families to seek health care.
  • There are new technologies that make it easier to deal with remote patients. As an example, 20% of all medical practices in April 2021 were using devices that allow for electronic patient monitoring.
  • There has been a huge investment made in the digital healthcare market. Venture capital to support new digital healthcare companies was $29.1 billion in 2021, up from $14.9 billion in 2020 and $8.2 billion in 2019.
  • There is a rapidly growing industry that brings health care to the home. I probably don’t pay as much attention to this industry as I should, but this is the first time I heard the term Care at Home providers. These are health care professionals that visit patients at home.

The report points out that there are still a lot of changes to be made for the industry to fully adopt the care at home health care model. For example, insurance companies must recognize and reimburse in-home care at the same payment level as for doctors and hospital care.

The report suggests that the biggest change will come from the general public, who will insist on in-home care if that is an option. Very few people want to trudge to a health care facility for repetitive treatments like dialysis, infusions, or simple consultations.

The report predicts that more physician groups will adopt care at home after seeing case studies of the effectiveness of treating patients at home.

Even as long as twenty years ago, I remember seeing predictions that telemedicine would be one of the first ubiquitous outcomes of the spread of broadband. I can remember hearing a lot of predictions of how broadband-enabled technology would enable seniors to live unassisted until later in life. It’s been obvious for that whole time long that this is something that many people want, but it has never materialized in any major way. Physicians and insurance companies have been reluctant to try telemedicine until the pandemic forced the issue.

We’ve come a long way with broadband in twenty years. The latest estimates are that over 87% of homes have a wired broadband connection, and 95% of adults have cell phones. Maybe telemedicine has finally arrived – we aren’t going to have to wait long to test the McKinsey prediction.

Big ISPs Never Stop Trying

A bill has been introduced in the Minnesota legislature (Minnesota HF 3605) that looks to bypass the normal way of making State broadband grants. The bill is described as a line-extension funding mechanism that would provide funding to bring broadband to homes that have no broadband alternative.

I like the idea of ISPs being encouraged to extend their service areas. Cable companies for years have been faulted for not building the next half-mile or mile past where service stops at the edge of every city. The households outside of an existing cable network often have the least chance of finding any other broadband solution since the lousy FCC maps often identify them as having great broadband options when they have none. But I have a lot of problems with this particular bill as the way to reach such homes:

  • The bill doesn’t define what it means for a household to not have available broadband. For example, there are very few homes in Minnesota that are not in the range of a WISP.
  • The amount of possible compensation, at $25,000 per home is far too high. As Ann Treacy of the Blandin Foundation points out, the average state broadband grant in previous years has averaged $2,225 per household. Even the new federal grant programs that will provide up to 75% of the cost to build to remote locations will likely be providing less than $10,000 per customer in the highest cost places and far less in many others. The $25,000 cap sounds like a land grab by ISPs to snag $25,000 in funding while spending a few thousand to bring broadband. This is a waste of state money, and ISPs should only be reimbursed for some portion of what they spend.
  • I think I’m most bothered because this could be a way to fund cable company expansion in places they should have expanded with their own money. Many cable companies have ignored pleas from residents living outside of towns, even when the areas in question have a high enough housing density to meet the cable company’s supposed construction metrics. This bill should have a density test and should not be using grant money to reach households in areas that don’t need grants. Perhaps there also ought to be some kind of distance test, with this money unavailable near to towns.
  • The awards are to be made by a reverse auction, by individual address. I know that realistically that only the big companies will wade through the needed paperwork to chase funding in this complicated way. This is essentially a separate auction, by customer. ISPs with the staff to wade through the process can grab the full $25,000 per potential customer.
  • Households kick off the auction by signing up on a state portal. This bill creates a big burden on a state broadband office to verify that each address doesn’t already have a broadband option – and also that somebody else isn’t already scheduled to build in the area.
  • Two-thirds of the bill addresses easements, which seem completely unneeded. Homes and businesses must actively join the list of eligible households – and it seems highly unlikely that a home is going to ask to get better broadband and then refuse to agree to an ISP going onto the property. This seems more like a backdoor way for the cable companies to get into MDUs or housing developments that want to charge for easements. This bill is not the right way to deal with that access issue, and unsurprisingly, this bill is written 100% in favor of the ISPs.
  • This potentially could create a huge funding obligation for the state. Every home with broadband could enter the portal, and that would mean the end to normal state broadband grant programs – it means the state will have agreed to fund broadband to everywhere that needs it at $25,000 a pop – if the state passes this it better be ready to write some possibly huge checks. And that’s probably the second most troublesome issue with this idea. While described as a line extension bill, every home in the state without good broadband could join the portal. If this is really a line extension bill, then why not only make it eligible within some set distance from existing broadband networks?
  • I’ve read the bill several times, and it looks like it excludes electric cooperatives from participation – but legalese is sometimes hard to understand, so I’m not certain.

Again, I’m not against the idea of funding line extensions. But this bill was clearly written by the big ISPS who are going to use it to make a profit while expanding networks. The reverse auction is too slanted towards big ISP, too burdensome for the state, and could fund areas that don’t really deserve grant funding. Minnesota already has a grant program that can fund these same areas, and there is a huge pile of federal money coming to the state later this year. I’d say the big ISPs have done an end-around the normal grant process with this legislation so that they don’t have to play in the sandbox with everybody else. Unfortunately, the latest I hear, the legislation is moving forward.

Household Broadband Usage Up Again

OpenVault just published its Broadband Insights Report for the end of the fourth quarter of 2021. As usual, the results are astounding and demonstrate the continued strong growth of household broadband usage.

I think one of the most useful statistics from OpenVault is the average household usage of broadband. Below is the trend in average U.S. household broadband usage since 2018. These numbers include combined download and upload usage.

1st Quarter 2018          215 Gigabytes

1st Quarter 2019          274 Gigabytes

1st Quarter 2020          403 Gigabytes

1st Quarter 2021          462 Gigabytes

4th Quarter 2021         536 Gigabytes

There were not many people in the industry in 2018 who would have believed that the average home usage in 2021 would be using over a half terabyte of data each month.

Another startling number is the percentage of U.S. households that now use over a terabyte of data each month – something that OpenVault calls power users. The following statistics also reach back to 2018. OpenVault says that 2.7% of all U.S. households now use over two terabytes of data per month. These statistics must be sweet music to those ISPs with data caps that penalize home for using the broadband they’ve purchased.

4th Quarter 2018            4.0%

4th Quarter 2019            7.3%

4th Quarter 2020          14.1%

4th Quarter 2021         16.1%

I think that the most interesting statistic is the rapid migration of customers to faster broadband tiers. The following table shows the percentage of nationwide households subscribed to various broadband speed plans just since June 2020.

June 2020 June 2021 Sept 2021 Dec 2021
Under 50 Mbps 18.4% 10.5% 9.8% 9.4%
50 – 99 Mbps 20.4% 9.6% 8.0% 7.6%
100 – 199 Mbps 37.8% 47.5% 38.4% 36.9%
200 – 499 Mbps 13.5% 17.2% 27.4% 28.5%
500 – 999 Mbps 5.0% 4.7% 5.1% 5.5%
1 Gbps 4.9% 10.5% 11.4% 12.2%

In just the last year, the number of households subscribed to gigabit broadband is up 250%, while the number subscribed to slower speeds has dropped precipitously. Many millions of homes over the last year upgraded to faster broadband plans.

But a big part of this shift comes from a change in the definition of existing broadband plans. For example, several of the big cable companies have started to describe the basic broadband package as delivering speeds up to 200 Mbps. From what we can see, in many cities changing the description of the product to 200 Mbps did not mean a change in the speeds that customers are receiving – this seems in many cases to be a marketing shift to make cable broadband look faster.

The latest report also includes a few other interesting statistics:

  • Average upload broadband usage is now up to 32 gigabytes per month. OpenVault hasn’t been tracking this for very long, and this has grown from 25 gigabytes of data per month in the third quarter of 2020 – a 28% increase.
  • The average U.S. home now has 25 connected devices.

The FCC Tackles MDU Broadband

The FCC recently adopted new rules that are aimed at bringing competition to apartments, condominiums, and other multi-tenant residential buildings. The FCC press release on the order is titled, “FCC Bans Exclusive Contracts for Telecommunications Services in Apartment Buildings”. The new FCC ruling found that exclusive arrangements between ISPs and landlords hurt consumers. The new rules passed with a 4-0 bipartisan vote.

It’s an issue that the FCC has been chasing for years, including a ruling in 2007 that banned a list of exclusive arrangements between ISPs and landlords. The main purpose of that order was to ban deceptive contracts that ISPs enforced to keep exclusive rights to buildings against the will of landlords. But the order did not create an outright ban of mutually-agreed-upon arrangements, and many landlords still have an exclusive arrangement with a single ISP.

The current ruling bans specific practices between ISPs and landlords that the FCC says block competition.

  • The order bans exclusive revenue share arrangements where the ISP and a landlord agree that the ISP is the only one who can give a cut of revenues to the landlord.
  • Also banned are graduated revenue sharing arrangements where the percentage of revenues shared with a landlord increases as the number of tenants subscribed to an ISP grows.
  • Also banned are sale-and-leaseback arrangements where an ISP sells inside wiring to the landlord and then leases it back in an exclusive basis so that other ISPs can’t use the wiring.
  • Finally, the order requires ISPs that marketing in apartments to disclose to tenants in plain language if they have an exclusive marketing arrangement with the landlord. The intent of this ruling is to let tenants know if there are other competitive choices.

It’s hard to develop regulatory rules for a market that encompasses a wide range of circumstances in multi-tenant buildings. For instance, there is fierce competition to become the ISP for high-end apartments and off-campus student housing at large universities. The ISPs that serve these kinds of buildings compete by bringing amenities other than tenant broadband, such as WiFi everywhere inside and outside of buildings, and smart home functions that use the ubiquitous broadband.

But many apartment buildings aren’t attractive to ISPs. Some older buildings are hard to serve because of physical challenges like not having a place for an ISP to house electronics or no separate electric meters for ISP equipment. Some apartments have high churn, which increases an ISP’s costs. No change in FCC rules will lure ISPs to compete inside of buildings that are hard to serve or that aren’t financially lucrative.

One simple challenge is the ability for multiple ISPs to string fiber to apartment units. A common fiber wiring technique hides the fiber in the upper corners of hallways, and it’s hard to imagine how multiple ISPs can use this same wiring process, so the first ISP in place will have an advantage over later ISPs.

One issue the FCC ruling didn’t acknowledge is the popularity of bundling broadband in with the rent. A Parks Associates survey released last July showed that 40% of apartment tenants liked having broadband included in the rent. This ruling might make it a challenge for a landlord to bundle broadband with the rent.

I also foresee some market risks from the ruling. There are now many ISPs that specialize in serving apartments that might decide that the added competition and risk make it impossible to profitably serve buildings. It’s likely, at least in some cases, that open competition rules might discourage ISP investments in MDUs and decrease choices rather than promote it.

But the FCC is reacting to a slew of consumer complaints it received as a result of an FCC request for comments in September 2021. There are a lot of unhappy apartment tenants who complain of high prices, slow speeds, and poor customer service from ISPs. An ISP with an exclusive arrangement is a monopoly in that building, and there is a long track record of ways that monopolies cut corners to maximize profits.

It’s a tough issue. Since every apartment building is unique, there will be buildings where the tenants benefit from these new rules and others that might be harmed by them – and the same might said of anything that regulators try to do in such a complicated market. It’s hard to fault the FCC for trying to pinch off additional arrangements between ISPs and landlords that harm tenants. Over the years, ISPs have found legal loopholes around any new FCC rules concerning apartments, and it’s likely that determined ISPs and landlords can still find ways to create exclusive arrangements. I doubt that we’ve heard the end of this topic.