Broadband Shorts – July 2017

Today I’m going to talk about a few topics that relate to broadband, but that are too short for a separate blog.

Popularity of Telehealth. The Health Industry Distributors Association conducted a follow-up survey of people who had met with a doctor via a broadband connection instead of a live office visit. The survey found that a majority of people were very satisfied with the telehealth visit and 54% said that they thought the experience was better than a live office visit.

Interestingly over half of the telehealth users were under 50 and they preferred telehealth because of the convenience. Many said that once they found their doctor would allow telehealth visits that they requested them whenever possible. Of course, many telehealth users live in rural areas where it can be a long drive to make a routine doctor office visit. The doctors involved in telehealth also like it for routine office visits. They do complain, however, that not enough insurance companies have caught up with the concept and that they often encounter reimbursement problems.

Explosion of Mobile Data Usage. Ericsson, the company that supplies a lot of electronics for the cellular industry, has warned cellular companies to prepare for an explosive growth in cellular data traffic over the next five years. They warn that within five years that the average cellphone user will grow from the average of today’s monthly usage of 5 gigabytes to a monthly usage of 26 gigabytes. They say the usage will be up to 6.9 gigabytes just by the end of this year – a 40% growth over last year.

They say that several factors will contribute to the strong growth. Obviously video usage drives a lot of the usage, but there is also huge annual growth from social media usage as those platforms incorporate more video. They also predict that by 2022, as we start to meld 5G cellular into the network, that users will feel more comfortable using data on their cellphones.

New Satellite Broadband. ViaSat just launched a new satellite that will allow for data speeds up to 200 Mbps. The satellite was recently launched and that has a throughput of 300 gigabits per second. The satellite is expected to be placed into service in early 2018 and will boost the company’s Excede broadband product.

The new satellite, dubbed ViaSat 2, will originally augment and eventually replace the company’s current ViaSat 1 satellite. The company currently serves 659,000 customers from the ViaSat 1 satellite plus a few it purchased from WildBlue in 2009. The new satellite will allow an expansion of the customer base.

The company expects that the majority of customers will continue to buy data products with speeds up to 25 Mbps, like those already offered by Excede. This tells me that the faster speeds, while available, are going to be expensive. This satellite will still be in a high earth orbit, which means the continued high latency that makes satellite service incompatible with any real-time applications. And there is no word if the larger capacity will allow the company to raise the stingy data caps that customers seem to universally hate.

Growth of Music Streaming. Nielsen released statistics that show that streaming audio is growing at an explosive rate and seems to have crossed the threshold to become the primary way that most people listen to music. Audio streams in 2017 are 62% higher than just a year ago. The industry has grown from an annual number of 113.5 billion steams to 184 billion in just one year.

Nielsen estimates that total listens to music from all media including albums and music downloads will be 235 billion this year, meaning that streaming video now accounts for 78% of all music listened to.

And this growth has made for some eye-popping numbers. For example, Drake’s release of More Life in March saw 385 million streams in the week after release. Those kinds of numbers swamp the number of people that would listen to a new artist under older media.

The Cost of Building 5G

It seems like I can barely browse industry articles these days without seeing another prediction of the cost of providing fast broadband everywhere in the US. The latest study, just released on July 12 from Deloitte, estimates that it will require at least $130 billion over the next seven years in fiber investment to make the country fully ready for 5G.

Before digesting that number it’s important first to understand what they are talking about. Their study looks at deploying a ‘deep fiber’ network that would bring fiber close to homes and businesses in the country and then use wireless technology to complete the connection to homes. This is not a new concept and for decades we have referred to this as fiber-to-the-curb. This network design never went very far in the past because there wasn’t a good wireless technology around to make that final connection. This differs from an all-fiber connection by replacing a fiber drop wire to the home with wireless electronics. The only way such a network makes sense is if that difference is a significant savings over an all-fiber connection at the home.

We are now on the verge of having the needed wireless technology. There are now some first-generation wireless connections being tested that could finally make this a viable network deployment. And like with everything new, within a decade the wireless electronics needed will improve in function and cost a lot less.

To put the Deloitte estimate into perspective Verizon claimed to have spent $13 billion on their original FiOS fiber network. Because they were able to overlash fiber onto their own telephone wires the FiOS network cost was built at a relatively low cost of $750 per customer passed. But the Verizon FiOS network never blanketed any city and instead they selectively cherry-picked neighborhoods where the construction costs were the lowest. Verizon had originally told Wall Street they were going to spend $24 billion on fiber, but they abandoned a lot of the planned construction when the costs came in higher than they had expected.

But back to the Deloitte number of $130 billion. That is the cost of just the fiber needed to get deep into every neighborhood in the country. It doesn’t include the electronics needed to broadcast the wireless signal or the electronics needed inside homes and businesses to receive the signal. Nobody yet has any estimate of what that is going to cost, but it won’t be cheap, at least not for a few years. The cost of getting onto utility poles, street lighting poles or of constructing urban towers is not going to be cheap. And the cost of the electronics won’t be cheap until it’s gone through a few generations of refinement. Using Deloitte’s same methodology of estimating and assuming a very conservatively low cost of $500 for electronics per customer, this would add another $30 billion if only half the customers in the country use the new 5G network.

The big question that must be asked when tossing out a number like $130 billion is if there is anybody who is interested in deploying wireless loops in this manner? Such a network would be used to directly compete against the big cable companies. What Deloitte is talking about is not faster cellular service, but fast connections into homes and businesses. Are there any companies willing to spend that much money to go head-to-head with cable networks that will soon be able to deliver gigabit speeds?

The obvious candidates are Verizon and AT&T. Verizon has been talking a lot lately about this potential business plan, and so perhaps they might pursue it. AT&T, while bragging about the amount of money they are spending on fiber, has not shown a huge inclination to dive back into the residential broadband market. And there are not a lot of companies with capital budgets big enough to consider this.

Consider the capital budgets of the five largest telcos. AT&T is on track to spend $22B in 2017, but a lot of that is being spent in Mexico. Verizon’s 2017 capex budget is around $17B. CenturyLink spends something a little less than $3B. Frontier spends around $1B and Windstream spends about $0.8B.

It’s clear that unless AT&T and Verizon are willing to redirect the majority of their capital spending to this new technology that it’s not going to go anywhere. I think it’s clear that both AT&T and Verizon are going to be looking hard at the technologies and doing trials. But even should those trials be successful I can’t see them pouring the needed billions in to build ‘deep fiber’ everywhere. It’s far more likely that the technology will be deployed in the same way that Verizon deployed FiOS – built only where the cost is the lowest and ignoring everybody else.

Both of these companies understand that it’s not going to be easy to wrestle customers back from the big cable companies. Just building these fiber networks is a daunting financial investment – one that Wall Street would likely punish them for undertaking. But even building the needed networks is not going to be any assurance of market success unless they can convince customers they are a better bargain. I just don’t see these companies going hog wild in making the needed investments to deploy this widely, but instead see this as the newest technology for cherry-picking the best opportunities.

Progress on Federal Infrastructure Funding?

I’ve been continuing to follow the federal plans to launch a massive $1 trillion program to rebuild infrastructure, with an eye on possible funding for broadband.

The latest White House proposal includes $25 billion for broadband, spread over ten years. That’s obviously not enough to solve our broadband problem everywhere, but it certainly could put a big dent in it.

The first thing needed to understand the issue is a good estimate of the size of needed investment to build fiber. Back in 2013 an article in Forbes estimated the cost to build fiber everywhere at $140 billion, with the cost to get to most populated areas at half that. Just recently I saw a few news articles citing an estimated cost of $85 billion to bring ‘broadband’ to rural America. But I can’t track down who’s making that estimate or if ‘broadband’ means fiber everywhere or some mix of broadband technologies. But it’s obvious that the cost is going to be greater than $25 billion.

But there is another aspect of the White House proposal that we need to keep an eye on. They envision the government kicking in $200 billion with the rest of the $1 trillion coming from the private sector. Even if the entire $200 billion is in the form of outright grants, that means that a project funded under the federal plan would be getting a 20% grant and would have to somehow finance the other 80% of a project.

I’ve created a lot of rural business plans over the past few years and I can tell that a 20% grant is not going to work in financing rural fiber. That amount of grant might be sufficient when talking about rural county seats and other pockets of somewhat dense population. But all of the studies I’ve done show that it will require grants of 40% to 80% to finance building in rural America.

I also worry that part of the federal funding might also include loans, like was done a few years ago with the Stimulus broadband awards. Some of those projects got a mix of outright grants as well as long-term loans from the RUS. If the federal contribution is not all grants then its usefulness in rural America will be even more diminished.

This is not to say that the federal program might not offer different levels of grants and not stick to the overall 20% for everything. But if 20% grants are all that is offered there are not going to be many takers. A grant of that magnitude probably might bring fiber to suburbs and mid-sized towns, but not to rural America.

If the grants were set to 50% of the cost of a project it would stimulate a lot of rural fiber construction. We’ve seen this in action in programs like the DEED grants in Minnesota that have been funding $20M to $30M per year in the form of matching grants. In that state the various LECs, from the smallest up through CenturyLink, are using grant money to bring broadband to unserved rural customers. But Minnesota is unusual and is one of a handful of states where there are numerous telcos willing to branch out to serve the areas around them if these kinds of grants are available.

One of the biggest hurdles I see for building rural broadband is the availability of private capital. Even with a 50% grant the operators of these new networks will need to finance the other 50% of the projects. There is certainly cash available for this and having a federal infrastructure program might attract more lenders. But there is a natural lending limit on all telcos, big and small.

A large percentage of the smaller telcos I know have already been borrowing money to build fiber within their own operating areas, and those companies are not going to be able to borrow much more money even if it is available. Even the big companies have constraints. CenturyLink currently has an annual capital budget of about $3 billion per year and that is largely going towards building fiber in their urban markets. It’s hard to see them taking any real interest in building rural fiber if they have to borrow to do so. Many of the mid-sized telcos like Frontier and Windstream are already heavily leveraged and would have a hard time borrowing much. And Verizon and AT&T have made it very clear that they no longer want to be in the rural wire business. I’m not sure those companies would take on these networks if the federal government paid for all of it.

So having a federal broadband infrastructure program sounds great. But when you look a little closer at how it might work it starts to look troublesome. There are certainly a number of companies that would step up to build rural broadband if the grants are large enough to make the numbers work. But I’m not sure that there is any combination of companies that are able or willing to tackle all of the areas without broadband. It could end up being a program where there is more funding than takers.

AT&T’s CAF II Data Caps

AT&T recently launched its CAF II cellular data plan in a number of rural areas. This is being launched from the federal program that is giving AT&T $2.5 billion dollars spread over 6 years to bring broadband to about 1.1 million homes. That works out to $2,300 per home.

Customers are guaranteed speeds of at least 10 Mbps down and 1 Mbps up. The broadband product is priced at $60 per month with a contract or $70 per month with no contract. Installation is $99. The product comes with a WiFi router that also includes 4 Ethernet ports for wired connections.

For a rural household that has never had broadband this is finally going to get them connected to the web like everybody else. But the 10 Mbps speed of the product is already obsolete and in the footnotes to the product AT&T warns that a customer may not be able to watch two HD video streams at the same time.

But the real killer is the data cap which is set at 160 gigabytes per month. Extra data above this limit will cost a household $10 for each 50 gigabytes (or fraction thereof). AT&T has obviously set the data cap this low because that was the cap suggested by the FCC in the CAF II order.

Let me throw out some statistics that shed some light on how puny the 160 GB month cap is. Following are some statistics about data usage for common functions in the home:

  • The average desktop or laptop uses about 3 GB per month for basic functions like email, upgrading software, etc.
  • Cisco says that the average smartphone uses about 8 GB per month on WiFi.
  • Web browsing uses about 150 MB per hour.
  • Streaming music uses 1 GB for 24 hours of streaming
  • Facebook estimates that it’s average user uses the service for 20 hours per month, which consumes 2.5 GB.
  • Video is the real bandwidth eater. Netflix says that an SD video uses 0.7 GB per hour or 1.4 GB for a movie. They say HD video uses 3 GB per hour or 6 GB per movie.
  • The average online gamer uses at least 5 GB per month, and for some games much more than this.

So how does all of this stack up for an average family of three? It might look something like this:

3 computers / laptops                      9 GB

3 Smartphones                                24 GB

60 hours of web browsing               9 GB

3 social networks                              8 GB

60 hours of streaming music          3 GB

1 Gamer                                             5 GB

Schoolwork                                      10 GB

Subtotal                                            68 GB

This leaves 92 GB for watching video for a month. That will allow a home to watch 15 HD movies a month or 30 1-hour shows. That means one TV show per day for the whole household. Any more than that and you’d go over the data cap. The majority of video content on the web is now only available in HD and much of the content on Netflix and Amazon no longer come in SD. To make matters worse, these services are now starting to offer 4k video which is 4 times more data intensive than HD video.

Also note that this subtotal doesn’t include other normal functions. Working from home can use a lot of bandwidth. Taking online courses is data intensive. IoT devices like home security cameras can use a lot of bandwidth. And we are starting to see smart home devices add up to a pile of data that goes on behind the scenes without our knowledge.

The fact is that within a few years the average home is going to likely exceed the AT&T data cap without watching any video. The bandwidth used for everything we do on the web keeps increasing over time.

To show how ridiculously low this cap is, compare it to AT&T’s ‘access’ program which supplies broadband to low-income homes for speeds up to the same 10 Mbps and prices up to $10 per month. That low-income plan has a 1 terabyte data cap – over six times higher than the CAF II data cap. Since the company offers both products from the cellular network it’s impossible for the company to claim that the data caps are due to network constraints or any other technical issues. AT&T set the data cap at the low 160 GB because the FCC stupidly suggested that low amount in the CAF II order. The low data cap is clearly about money.

The last time we measured our home with 3 users we used over 700 GB per month. We are cord cutters and watch all video on the web. We work from home. And our daughter was taking on-line classes. Under the AT&T CAF II product our monthly bill would be $170 per month. And even then we would have a data product that would not allow us to do the things we want to do, because the 10 Mbps download speed would not allow all three of us to use the web at the same time. If you’ve been reading my blog you’ve heard me say often what a colossal waste of money the CAF II program is. The FCC gave AT&T $2.5 billion to foist this dreadful bandwidth product on rural America.

Latest Industry Statistics

The statistics are out for the biggest cable TV and data providers for the first quarter of the year and they show an industry that is still undergoing big changes. Broadband keeps growing and cable TV is starting to take some serious hits.

Perhaps the most relevant statistic of all is that there are now more broadband customers in the country than cable TV customers. The crossover happened sometime during the last quarter. This happened a little sooner than predicted due to plunging cable subscribers.

For the quarter the cable companies continued to clobber the telcos in terms of broadband customers. Led by big growth in broadband customers at Comcast and Charter the cable companies collectively added a little over 1 million new broadband customers for the quarter. Charter led the growth with 458,000 new broadband subscribers with Comcast a close second at 430,000 new customers.

Led by Frontier’s loss of 107,000 broadband customers for the quarter the telcos collectively lost 45,000 net customers for the quarter. Most of Frontier’s losses stem from the botched acquisition of Verizon FiOS properties. Verizon lost 27,000 customers for the quarter while AT&T U-verse was the only success among telcos adding 90,000 new customers for the quarter.

Looking back over the last year the telcos together lost 727,000 broadband customers while the cable companies together gained 3.11 million customers during the same period. The cable companies now control 63.2% of the broadband market, up from 61.5% of the market a year ago.

Overall the broadband market grew by 2.38 million new broadband subscribers for over the last year ending March 31. It’s a market controlled largely by the giant ISPs and the largest cable companies and telcos together account for 93.9 million broadband subscribers.

Cable TV shows a very different picture. The largest seven cable providers collectively lost 487,000 video subscribers for the quarter. That includes AT&T losing 233,000, Charter losing 100,000, Dish Networks losing 143,000, Verizon losing 13,000, Cox losing 4,000 and Altice losing 35,000. The only company to gain cable subscribers was Comcast, which gained 41,000.

Total industry cable subscriber losses were 762,000 for the quarter as smaller cable companies and telcos are also losing customers. That is five times larger than the industry losses of 141,000 in the first quarter of last year. This industry is now losing 2.4% of the market per year, but that r is clearly accelerating and will probably grow larger. The annual rate of decline is already significantly higher than last year’s rate of 1.8%.

At this point it’s clear that cord cutting is picking up steam and this was the worst performance ever by the industry.

The biggest losers have stories about their poor performance. Charter says it is doing better among its own historic customers but is losing a lot of customers from the Time Warner acquisition as Charter raises rates and does away with Time Warner promotional discounts. AT&T has been phasing out of cable TV over its U-Verse network. This is a DSL service that has speeds as high as 45 Mbps, but which is proving to be inadequate to carry both cable TV and broadband together. Dish Networks has been bogged down in numerous carriage and retransmission fights with programmers and has had a number of channels taken off the air.

But even considering all of these stories it’s clear that customers are leaving the big companies. Surveys of cord cutters show that very few of them come back to traditional cable after cutting the cord after they get used to getting programming in a different way.

What is probably most strikingly different about the numbers is that for years the first quarter has performed the best for the cable industry, which in recent years has still seen customer gains even while other quarters were trending downward. We’ll have to see what this terrible first quarter means for the rest of 2017.



Another Reversal of the FilmOn X Decision

In the continuing saga of looking for alternate ways to get programming to the home, the U.S. Court of Appeals for the Ninth Circuit reversed an earlier ruling that said that FilmOn X had a right to retransmit over-the-air television signals.

FilmOn is a global provider of internet-based programming. They carry over 600 channels of broadcast TV from around the world. They also carry a big library of movies and offer a few of their own theme-based channels (such as Shockmasters that specialize in Alfred Hitchcock movies and television shows).

I won’t go through the history of the company and its attempts to carry the major US networks like ABC, NBC, CBS and Fox. The company was granted the right to carry this content several times in various courts and then had those decisions reversed by other courts. This case marks the third time that the company has been told it doesn’t have the right to retransmit these networks.

The company has tried several ways of delivering these networks to customers. They originally just grabbed the signals out of the air and put them on the internet. When told this wasn’t allowed by the courts they then set up satellite farms to wirelessly send individual signals to customers in a manner similar to Aereo.

This latest ruling said specifically that FilmOn is not eligible to call itself a cable company and to demand that local stations sell them content. That ruling hinged upon testimony provided by the US Patent office that said that such authority for internet-based retransmission was not clear. This differed from an earlier US Supreme Court ruling in the Aereo case that said that internet retransmission was equivalent to cable retransmission.

What’s really at the heart of this case is the definition of who is eligible to retransmit signals from the major over-the-air networks. Congress, through various laws, has given the right (and usually also the obligation) for landline-based cable companies to carry the major networks. Cable companies are obligated to carry those stations that are within certain distances from their customer base.

But over the years those that have been allowed to carry local programming has grown. Within the last decade the satellite cable companies began carrying local stations in many markets. I lived in the Caribbean for many years and some of the cable providers in Puerto Rico and the Virgin Islands somehow obtained the rights to carry some New York City local stations. Today there are a number of OTT providers like Sling TV and Playstation Vue that are carrying local network stations.

But the current rules draw a firm distinction between those that must carry local programming and everybody else. And this gives the flexibility to local stations to decide if they will sell their signal to those without the automatic rights. The big networks have decided to provide programming to Sling TV, but not to FilmOn or Aereo.

Originally both FilmOn and Aereo captured the broadcast signals from the air and put them onto their own networks. That obviously angered the big networks and they got that ruling reversed. But then these providers refused to sell their signal to these two companies. One has to think that was partly done to punish these companies for challenging them, and perhaps partly due to the cable companies who lobbied against competition.

This ruling could really stifle new OTT providers. It seems one part of the OTT appeal is the ability to deliver local network programming as part of their packages. This ruling gives local stations the ability to choose who can or cannot buy their signal, and to thus pick winners and losers in the competitive OTT battlefield.

It’s hard to think that this makes any sense. But Congress or the FCC could clarify this issue if they cared to tackle it. Just over two years ago the FCC put out a Notice for Proposed Rulemaking asking about this exact topic. The FCC wanted to clarify the rights for internet-based programmers to buy content, and in that docket the FCC had suggested that anybody ought to be allowed to buy programming if they agree to pay the market rates for it. But the FCC has never acted in that docket which has led to today’s situation where some providers are given programming and others not. The have-nots aren’t just companies like FilmOn and Aereo, and it’s been reported for years that Apple has been unable to get programming rights.

At some point this needs to be clarified. The last companies we want deciding who can or cannot offer programming services are the major networks, especially since some of them are owned by cable companies. I have no idea if the FCC will address this, but they need to.

Leasing Rural Cellular Spectrum

I don’t write often about potential legislation since there are numerous bills submitted to Congress every year that never make it out of committees. But there is a recently proposed bill that could create both an opportunity to expand rural broadband and also a threat to those already serving rural areas.

The bill is H.R. 1814 the Rural Spectrum Accessibility Act.  It has been introduced as a bipartisan bill by Congressmen Adam Kinzinger (R-IL) and Dave Loebsack (D-IA). It’s a very short bill, with the full text here. The bill is currently being considered by the House Energy and Commerce Committee.

The bill proposes to encourage owners of cellular wireless spectrum to partition or disaggregate their spectrum for use in rural areas and to lease the spectrum to small carriers. In this case a small carrier is defined as any carrier that has fewer than 1,500 employees (which most of the folks reading this blog would consider as a pretty large carrier!).

The bill would instruct the FCC to extend the license for three years for any wireless license holder that agrees to lease spectrum under this new law. That is a major boon to wireless spectrum holders and one would imagine that many of them would look for opportunities to take advantage of this offer.

The leased spectrum could only be used in rural areas, which is defined in the normal definition used for most other regulatory purposes as towns or with populations less than 20,000 and all areas that we think of as rural.

The Opportunity. The opportunity would be a new way for rural carriers to provide broadband. Numerous rural carriers are now offering wireless point-to-multipoint broadband using unlicensed spectrum. But the range of coverage with this technology is relatively short with the strongest signals only carrying for a few miles. Unlicensed spectrum is subject to interference by foliage or any physical barrier like a hill.

But cellular spectrum carries up to three times further when used for point-to-multipoint data. Depending upon the density and the number of customers to serve, this spectrum could be used to deliver fairly robust broadband. I’ve talked to customers on the new point-to-multipoint service offered by AT&T that receive data bursts as fast as 30 Mbps. But in really rural areas with a handful of customers, speeds could be considerably faster than that. I’d note that AT&T apparently only offers the faster speed in short burst, but a rural carrier could establish that as a permanent speed. In addition to greater distance, the cellular spectrum also travels well through foliage, through walls at homes, and even bounces over hills fairly well.

The opportunity is for rural carriers to be able to bring data services to customers at a greater distance from a tower, but probably most importantly would offer a wireless option for carriers operating in heavily wooded areas like Appalachia or the Pacific Northwest. Unlicensed spectrum is a poor alternative in those places.

The Threat. Of course, there also exists a threat to every existing rural carrier in that some other carrier can now compete with them in rural areas. The bill says that the spectrum would be available to any small ‘carrier’ and that generally means anybody that is certified by states – meaning not only ILECs, but competitive CLECs.

If this becomes law I would envision rural CLECs asking to lease spectrum. I also envision carriers like WISPs becoming carriers in order to use this spectrum.

It certainly is an interesting idea. Wireless license holders have always had the ability to lease spectrum in rural areas. I have three clients who have been able to lease cellular spectrum from Sprint, for example. But for the most part it’s always been difficult to get the attention of rural spectrum owners, and I know several clients have been unable to lease spectrum from any of the existing license holders. For the most part the cellular license holders aren’t interested in dealing with small carriers. This legislation would still not guarantee that spectrum would be made available, but it would add an incentive for license holders to make such leases.

The Latest on Federal Broadband Infrastructure

There is a lot of talk in DC of working towards a federal infrastructure funding plan this year. So today I’m going discuss some of the latest news about infrastructure, particularly as it affects broadband funding.

Shovel Ready Projects. A few weeks ago the White House said that they only favored funding ‘shovel-ready’ projects. meaning those projects that have already had enough engineering and financial work done to understand the costs and benefits. The President said that he didn’t want to fund projects that would then take ten years to get started, something that is not that unusual for highway projects.

Size of the Funding. US Transportation Secretary Elaine Chao last week said that the administration’s infrastructure plan would be for $1 trillion spread over ten years. That’s the first time we’ve heard any specific numbers and time frame. There is no telling at this point whether the funding would be spread evenly over the years. Secretary Chao said the details of the plan would be released later this year.

Including Broadband? Secretary Chao said that that “the proposal will cover more than transportation infrastructure, it will include energy, water and potentially broadband and veterans hospitals as well.” This certainly tells us that broadband funding is not a sure thing at this point.

Probably Not Outright Grants. Secretary Chao also reiterated what the administration had said earlier that any funding was going to favor public-private partnerships and was not likely to directly fund projects. This has always been expected, but this doesn’t tell us anything about the nature of the support. There was talk during the transition of the infrastructure plan to heavily favor using tax credits, meaning that it would favor and induce large companies to invest in infrastructure.

I suspect the idea of public private partnerships for roads tells us to expect a lot of new tolls roads. Advisers to Trump have said they would rely on federal tax credits and public-private partnerships rather than federal spending to pay for a new infrastructure program. The concept of public-private partnership is a bit puzzling when it comes to broadband in that there are many states where local governments can’t participate in broadband or are severely restricted from doing so.

FCC’s Position. FCC Chairman Ajit Pai said recently that any broadband funding ought to be handled through the Universal Service Fund mechanisms since it already has the processes in place to handle such funding. The Chairman came out heavily in favor of significant broadband funding for rural areas as well as funding what he calls Gigabit Opportunity Zones that would provide tax incentives for serving low income areas.

Bipartisan Support for Broadband. In early February 48 US Senators from both parties sent a letter to the President supporting the idea that any infrastructure plans should include funding for broadband. My guess is that this is due to the complaints that all politicians are hearing these days from those without adequate broadband.

Democratic Alternative. And of course, since this is Washington DC, there is also an alternate infrastructure plan. Senate Democrats unveiled an alternative $1 trillion plan that would more directly fund infrastructure with mostly outright grants. Their plan includes not only roads and bridges, but also broadband networks, hospitals run by the Department of Veterans Affairs, and schools. In general there is a lot of Democratic support for broadband funding and the plan allocated $20 billion for broadband. I guess the trillion dollar question will be if this is a topic that might find some bilateral agreement.

What are the Odds? When it comes to Washington and politics I don’t have any better crystal ball than anybody else. But it does look like there is bipartisan support for doing something with infrastructure and even more bipartisan support to make sure that broadband is included in any funding package. It’s probably a good time for small service providers to make sure that your DC representatives hear from you. And it’s a good time for those without broadband to yell even louder.

Broadband Shorts – March 2017

Today I’m writing about a few interesting topics that are not long enough to justify a standalone blog:

Google Scanning Non-user Emails. There has been an ongoing class action lawsuit against Google for scanning emails from non-Google customers. Google has been open for years about the fact that they scan email that originates through a Gmail account. The company scans Gmail for references to items that might be of interest to advertisers and then sell that condensed data to others. This explains how you can start seeing ads for new cars after emailing that you are looking for a new car.

There are no specific numbers available for how much they make from scanning Gmail, but this is part of their overall advertising revenues which were $79.4 billion for 2016, up 18% over 2015.  The class action suit deals with emails that are sent to Gmail users from non-Gmail domains. It turns out that Google scans these emails as well, although non-Gmail users have never agreed to the terms of service that applies to Gmail users. This lawsuit will be an important test of customer privacy rights, particularly if Google loses and appeals to a higher court. This is a germane topic right now since the big ISPs are all expected to do similar scanning of customer data now that the FCC and Congress have weakened consumer privacy rights for broadband.

Verizon FiOS and New York City. This relationship is back in the news since the City is suing Verizon for not meeting its promise to bring broadband to everybody in the city in 2008. Verizon has made FiOS available to 2.2 million of the 3.3 million homes and businesses in the city.

The argument is one of the definition of a passing. Verizon says that they have met their obligation and that the gap is due to landlords that won’t allow Verizon into their buildings. But the city claims that Verizon hasn’t built fiber on every street in the city and also that the company has often elected to not enter older buildings due to the cost of distributing fiber inside the buildings. A number of landlords claim that they have asked Verizon into their buildings but that the company either elected to not enter the buildings or else insisted on an exclusive arrangement for broadband services as a condition for entering a building.

New Applications for Satellite Broadband.  The FCC has received 5 new applications for launching geostationary satellite networks bringing the total requests up to 17. Now SpaceX, OneWeb, Telesat, O3b Networks and Theia Holdings are also asking permission to launch satellite networks that would provide broadband using the V Band of spectrum from 37 GHz to 50 GHz. Boeing also expanded their earlier November request to add the 50.4 GHz to 52.4 GHz bands. I’m not sure how the FCC picks winners from this big pile – and if they don’t we are going to see busy skies.

Anonymous Kills 20% of Dark Web. Last month the hackers who work under the name ‘Anonymous’ knocked down about 20% of the web sites from the dark web. The hackers were targeting cyber criminals who profit from child pornography. Of particular interest was a group known as Freedom Hosting, a group that Anonymous claims has over 50% of their servers dedicated to child pornography.

This was the first known major case of hackers trying to regulate the dark web. This part of the Internet is full of pornography and other kinds of criminal content. The Anonymous hackers also alerted law enforcement about the content they uncovered.

AT&T’s Broadband Trials

John Donovan, the chief strategy officer for AT&T, spoke at the Mobile World Congress recently and said that the company was trying five different technologies for the last mile. This includes WLL (wireless local loop), G.Fast, 5G, AirGig and fiber-to-the-premise. He said the company would be examining the economics of all of different technologies. Let me look at each one, in relation to AT&T.

Wireless Local Loop (WLL). The technology uses the companies LTE bandwidth but utilizes a point-to-multipoint network configuration. By using a small dish on the house to receive the signal the company is getting better bandwidth than can be received from normal broadcast cellular. The company has been doing trials on various different versions of the technology for many years. But there are a few recent trials of the newest technology that AT&T will be using for much of its deployment in rural America as part of the CAF II plan. That plan requires the ISP to deliver at least 10/1 Mbps. AT&T says that the technology is delivering speeds of 15 to 25 Mbps. The company says that even at the edge of a cellular network that a customer can get 10 Mbps about 90% of the time.

G.Fast. This is a technology that uses high frequencies to put more bandwidth on telephone copper wire. Speeds are reported to be as high as 500 Mbps, but only for very short distances under 200 feet. AT&T recently announced a G.Fast trial in an apartment building in Minneapolis. The technology is also being tested by CenturyLink and Windstream. All of these trials are using existing telephone copper inside of existing apartment buildings to deliver broadband. So this is not really a last mile technology. AT&T brings fiber to the apartment complex and then uses G.Fast as an inside wire technology. If they find it to be reliable this would be a great alternative to rewiring apartments with fiber.

5G. AT&T recently announced a few trials of early 5G technologies in Austin. They are looking at several technology ideas such carrier aggregation (combining many frequencies). But these are just trials, and AT&T is one of the companies helping to test pre-5G ideas as part of the worldwide effort to define the 5G specifications. These are not tests of market-ready technologies, but are instead field trials for various concepts needed to make 5G work. There is no doubt that AT&T will eventually replace LTE wireless with 5G wireless, but that transition is still many years in the future. The company is claiming to be testing 5G for the press release benefits – but these are not tests of a viable last mile technology – just tests that are moving lab concepts to early field trials.

AirGig. This one remains a mystery. AT&T says it will begin trialing the technology later this year with two power companies. There has been a little bit of clarification of the technology since the initial press release. This is not a broadband over powerline technology – it’s completely wireless and is using the open lines-of-sight on top of power poles to create a clear path for millimeter wave radios. The company has also said that they don’t know yet which wireless technology will be used to go from the poles into the home – they said the whole range of licensed spectrum is under consideration including the LTE frequencies. And if that’s the case then the AirGig is a fiber-replacement, but the delivery to homes would be about the same as WLL.

FTTP. Donovan referred to fiber-to-the-home as a trial, but by now the company understands the economics of fiber. The company keeps stretching the truth a bit about their fiber deployments. The company keeps saying that they have deployed fiber to 4 million homes, with 8 million more coming in the next three years. But the fact is they have actually only passed the 4 million homes that they can market to as is disclosed on their own web site. The twelve million home target was something that was dictated by the FCC as part of the settlement allowing the company to buy DirecTV.

We don’t know how many fiber customers AT&T has. They are mostly marketing this to apartment buildings, although there are residential customers around the country saying they have it. But they have not sold big piles of fiber connections like Verizon FiOS. This can be seen by looking at the steady drop in total AT&T data customers – 16.03 million in 2014, 15.78 million in 2015 and 15.62 million at the end of the third quarter of 2016. AT&T’s fiber is not really priced to be super-competitive, except in markets where they compete with Google Fiber. Their normal prices elsewhere on fiber are $70 for 100 Mbps, $80 for 300 Mbps and $99 for a gigabit.