Is Ultrafast Broadband a Novelty?

FCC Commissioner Michael O’Reilly recently said that ultrafast broadband is a novelty. He specifically said, “The outcry for things like ultrahigh-speed service in certain areas means longer waits for those who have no access or still rely on dialup service, as providers rush to serve the denser and more profitable areas that seek upgrades to this level. . . Today, ultrafast residential service is a novelty and good for marketing, but the tiny percentage of people using it cannot drive our policy decisions.

These statements are not surprising coming from Commissioner O’Reilly. He voted two years ago against setting the current 25/3 Mbps definition of broadband and thought that number was too high. In a dissent to that ruling he said the 25/3 definition was unrealistically high and said, “While the statute directs us to look at “advanced” telecommunications capability, this stretches the concept to an untenable extreme. Some people, for example, believe, probably incorrectly, that we are on the path to interplanetary teleportation. Should we include the estimated bandwidth for that as well? “

I don’t understand why Commissioner O’Reilly is still taking this position today. Most of the big ISPs have climbed on board the big bandwidth wagon. Comcast and Cox and other cable companies are upgrading their cable networks to DOCSIS 3.1 in order to provide gigabit speeds. CenturyLink built fiber past almost a million homes last year. Altice says they are tearing out their coaxial networks and replacing them with fiber. AT&T claims to have plans to build fiber to pass 12 million homes and businesses. Numerous small overbuilders around the country are offering gigabit speeds.

You don’t have to go back too many years to a time when the big ISPs all agreed with O’Reilly. The big cable companies in particular repeatedly made it clear that people didn’t need any more bandwidth than what the cable companies were delivering. The cable companies fiercely resisted increasing data speeds for many years and many cable networks kept data speeds in the 6 Mbps download range even though their networks were capable of delivering higher speeds without the need for upgrades.

Part of the old reasoning for that position was that the ISPs were afraid that if they gave people faster speeds then they would then use those speeds and swamp the networks. But Google came along and upset the whole ISP world by offering an inexpensive gigabit product. The cable companies in cities like Kansas City and Austin had little choice and increased speeds across the board. And once they increased in those markets they had little choice but to improve speeds everywhere.

The cable companies found the same thing that all of my clients have found when increasing data speeds. Generally a unilateral increase in customer data speeds does not cause a big increase in data usage unless the customers were throttled and constrained before the increase. Most customers don’t use any more data when speeds get faster – they just enjoy the experience more.

Of course, customers want to download more data every year and the amount of total download doubles about every three years. But that phenomenon is separate from data speeds. All of the things we do on the web requires more bandwidth over time. You scroll through a Facebook page today and you encounter dozens of videos, for example. But having faster speeds available does not directly lead to increased data usage. Speed just gets the things done faster and more enjoyably.

Commissioner O’Reilly thinks it would be better if ISPs would somehow invest to bring mediocre data speeds to everybody in the country rather than investing in ultrafast speeds to urban areas. No doubt that would make the FCC’s life easier if rural people all had broadband. But it’s fairly obvious that big ISPs wouldn’t be investing in their urban networks unless those investments made them more money. And it’s just as obvious that the big ISPs have figured out that they can’t make the profits they want in rural America.

I’m not sure what constituency Commissioner O’Reilly is trying to please with these statements. Certainly any urban customers that are happily buying the ultrafast speeds he is referring to. Certainly the ISPs investing in faster data speeds think it’s a good business decision.

I think Commissioner O’Reilly and others at the FCC would like to see the rural broadband issue go away. They hope that the CAF II investments being made by the big telcos will make the rural areas happy and that the issue will evaporate. They want to be able to claim that they fixed the broadband problems in America by making sure that everybody gets at least a little bit of bandwidth.

But it’s not going to work that way. Certainly many rural customers who have had no broadband will be happy to finally get speeds of 10 – 15 Mbps from the CAF II program. Those kind of speeds will finally allow rural homes to take some part in the Internet. But then those folks will look around and see that they still don’t enjoy the same Internet access as folks in the urban areas. Instead of solving the rural broadband problem I think the CAF II program is just going to whet the rural appetite for faster broadband and then rural folks will begin yelling even louder for better broadband.

A Regulatory Definition of Broadband

In one of the more bizarre filings I’ve seen at the FCC, the National Cable Television Association (NCTA) asked the FCC to abandon the two-year old definition of broadband set at 25 Mbps down and 3 Mbps up. NCTA is the lobbying and trade association of the largest cable companies like Comcast, Charter, Cox, Mediacom, Altice, etc. Smaller cable companies along with smaller telephone companies have a different trade association, the American Cable Association (ACA). This was a short filing that was a follow-up to an ex parte meeting, and rather than tell you what they said, the gist of the letter is as follows:

We urged the Commission to state clearly in the next report that “advanced telecommunications capability” simply denotes an “advanced” level of broadband, and that the previously adopted benchmark of 25 Mbps/3 Mbps is not the only valid or economically significant measure of broadband service. By the same token, we recommended that the next report should keep separate its discussion of whether “advanced telecommunications capability” is being deployed in a reasonable and timely manner, on the one hand, and any discussion of the state of the “broadband” marketplace on the other.  We noted that the next report presents an opportunity for the Commission to recognize that competition in the broadband marketplace is robust and rapidly evolving in most areas, while at the same time identifying opportunities to close the digital divide in unserved rural areas.

The reason I call it bizarre is that I can’t fathom the motivation behind this effort. Let me look at each of the different parts of this statement. First, they don’t think that the 25/3 threshold is the ‘only valid or economically significant measure of broadband service.’ I would think the 25/3 threshold would please these companies because these big cable companies almost universally already deploy networks capable of delivering speeds greater than that threshold. And in many markets their competition, mostly DSL, does not meet these speeds. So why are they complaining about a definition of broadband that they clearly meet?

They don’t offer an alternative standard and it’s hard to think there can be a standard other than broadband speed. It seems to me that eliminating the speed standard would help their competition and it would allow DSL and wireless WISPs to claim to have the same kind of broadband as a cable modem.

They then ask the FCC to not link discussions about broadband being deployed in a reasonable and timely manner with any actual state of the broadband marketplace. The FCC has been ordered by Congress to report on those two things and it’s hard to think of a way to discuss one without the other. I’m not sure how the FCC can talk about the state of the broadband industry without looking at the number of consumers buying broadband and showing the broadband speeds that are made available to them. Those FCC reports do a great job of highlighting the regional differences in broadband speeds, and more importantly the difference between urban and rural broadband speeds.

But again, why do the cable companies want to break that link in the way that the FCC reports broadband usage? The cable companies are at the top of the heap when it comes to broadband speeds. Comcast says they are going to have gigabit speeds available throughout their footprint within the next few years. Cox has announced major upgrades. Even smaller members like Altice say they are upgrading to all fiber (which might get them tossed out of NCTA). These FCC reports generally highlight the inadequacy of DSL outside of the cable company footprints and don’t show urban broadband in a bad light.

Finally, they want the FCC to recognize that there is robust competition in broadband. And maybe this is what is bothering them because more and more the cable companies are being referred to as monopolies. The fact is there is not robust competition for broadband. Verizon has FiOS in the northeast and a few other major cities have a fiber competitor in addition to the cable and telephone incumbents. But in other markets the cable companies are killing the telephone companies. Cable companies continue to add millions of new customers annually at the expense of DSL. AT&T and Verizon are currently working to tear down rural copper, and in another decade they will begin tearing down urban copper. At that point the cable companies will have won the landline broadband war completely unless there is a surprising upsurge in building urban fiber.

The only other reason the cable companies might be asking for this is that both Comcast and Charter are talking about getting into the wireless business. As such they could begin selling rural LTE broadband – a product that does not meet the FCC’s definition of broadband. I can’t think of any other reason, because for the most part the big cable companies have won the broadband wars in their markets. This filing would have been business as usual coming from the telcos, but it’s a surprising request from the cable companies.

Regulation and Capital Spending

At the recent Mobile World Congress, FCC Chairman Ajit Pai said that one of his reasons he wants to reverse Title II regulation is that it has had a drastic impact on capital spending by ISPs. He says that the new regulations have been a disincentive for the ISPs to invest in broadband.

The Chairman bases that position on statistics provided by USTelecom which are based upon work done by Hal Singer, a Senior Fellow at GW Institute for Public Policy. Mr. Singer created the following table that shows the domestic capital spending for the big ISPs for 2014 through 2016. And indeed, this table shows a 5.6% drop, or $3.6 billion a year from 2014 to 2016 – which Mr. Singer attributes to Title II regulation.

2014

2015

2016

AT&T $21.1 $17.3 $17.8
Verizon $17.2 $17.8 $17.1
Comcast $6.4 $7.1 $7.7
Sprint $3.8 $3.9 $1.4
Time Warner Cable $4.1 $4.4 $3.8
T-Mobile $4.3 $4.7 $4.7
CenturyLink $3.0 $2.9 $3.0
Charter $2.2 $1.9 $3.1
Cablevision $0.9 $0.8 $0.6
Frontier $0.6 $0.7 $1.3
US Cellular $0.6 $0.5 $0.5
Suddenlink $0.3 $0.4 $0.3
   Total $64.6 $62.4 $61.0

But like with all statistics, it’s not hard to draw different conclusions from the same set of numbers. For example, all of the drop in capital spending can be attributed to AT&T and Sprint. Taking those companies out of the table shows that capital spending for the other big ISPs is up $2.1 billion or 5% from 2014 to 2016.

So what’s going on with AT&T? There are a number of reasons for their change in capital spending:

·         During these same years the company made massive capital investments in DirecTV ($3 billion over the last few years) and also on the company’s purchase and expansion of its cellular network into Mexico ($3 billion over 4 years). Those numbers are not included in the above table and it’s easy to argue that the company just set different priorities and diverted normal domestic capital to these two giant ventures. If you add those capital expenditures into the table then AT&T’s capital spending has grown – just not their ‘domestic’ spending on traditional broadband.

·         AT&T has been making a huge effort to update its cellular network using software defined networking (SDN) as described at this AT&T website. They have been decommissioning traditional hardware at cell sites and installing much less expensive, off-the-shelf routers that can now control the cell sites from centralized data centers. They have already converted over half of their cell sites and this upgrade means vastly reduced spending on traditional cell site electronics. The company has been bragging about this shift to investors for several years.

·         AT&T has also retracted from expanding traditional big tower cell sites. For a number of years AT&T has been spending money to get fiber to its more remote cell sites, and that upgrade is largely done.

Sprint can also be easily explained. This is a company in trouble and that has been well documented over the last few years. A number of attempts to find a buyer has fallen through. What’s not shown on this table is that in 2013 (the year before the table begins) Sprint spent $6.4 billion on capital in a massive system-wide upgrade to LTE. Since then the company has very publicly stated that they are cutting capital spending to conserve cash. The company is only expanding now with carefully selected small cell deployments. But the company is clearly in network maintenance mode and is spending only what is needed to keep the cell sites functioning. Also included in the drop in spending is a change in the way that Sprint treats leased cellphones – they used to capitalize the phones and they now expense them.

There are going to be further decreases in future telecom capital spending across the industry. I expect capital spending for all four big wireless companies to keep decreasing due to efficiencies from SDN. We are now seeing a burst of spending from cable companies due to upgrades to DOCSIS 3.1, but when that’s done I would expect a significant decline in their capital spending as well. We are entering a time when improvements in software will lower the need for new hardware – not just in telecom, but in many other sectors as well.

I have always been annoyed when statistics are used to falsely justify public policy. There is no evidence that the big ISPS have changed their spending habits in any drastic way due to Title II regulations. The argument that Title II has affected capital spending comes directly from constant press releases from USTelecom, and the FCC Chairman should be above repeating arguments from lobbyists. If the FCC wants to undo Title II then it should just do it – there are a number of valid reasons why this might be good policy. But it’s disingenuous to cook up false reasons for why the change is needed.

The Big ISPs and Regulation

FCC_New_LogoLast week Chairman Ajit Pai halted the impending implementation of the new privacy rules that were to stop the big ISPs from monetizing customer data without customer permission. The Chairman’s stated reason is that he didn’t want to see different rules applied to the big ISPs than to big web companies like Facebook and Google. That argument sounds like a valid reason, but as you will see below, there is no easy path towards treating all of these companies the same.

The stay applied to FCC rules covering a wide variety of privacy issues. The rules were to require the big ISPs to get customer permission to use their data. The rules also created specific security requirements at the ISPs defining how ISPs have to protect customer data and how and when they had to disclose data breaches to customers.

So here is where the confusion starts. The FCC clearly has no authority to regulate the web and what it calls edge-providers – companies like Facebook and Google. It would take an Act of Congress to give the FCC any authority to regulate the web – something that neither Democratic nor Republican administrations have had an appetite for.

Chairman Pai did suggest that perhaps the easiest solution is to hand ISP security issues to the Federal Trade Commission. But the new head of the FTC said this the agency would have no authority to regulate ISPs as long as Title II authority gives this authority to the FCC. So perhaps this action is an indicator that Chairman Pai intends to reverse Title II regulation. He’s said that he is against net neutrality and the FCC used the tool of Title II regulation to implement it. So killing Title II regulations would also get rid of net neutrality.

But what is not being talked about is that the FTC has never contemplated privacy rules as sweeping as the ones implemented by the FCC. The FTC already could impose these rules on Facebook, Google and everybody else on the web, but has never taken any serious steps towards doing so.

Because of that, halting the privacy rules feels like Chairman Pai is just letting the big ISPs off the hook. The big ISPs have been lobbying against these rules from the second they were passed. The ISPs are jealous of the giant revenues that the web companies are making from data mining of consumer data. And the ISPs want to protect what they’ve already been doing. It’s been well known, for example, that AT&T has been monetizing customer data. The leaks from Edward Snowden showed that AT&T has been supplying far more data to the NSA than is required by the Patriot Act. There are reports of a lucrative multi-billion dollar AT&T product line called ‘Hemisphere’ that has been selling customer phone and internet records to the federal government and to local law enforcement agencies.

What I think all of this means is that we have seen the end, for a while of any government agency trying to provide privacy protection for customers. This mainly bothers me as a consumer more than as a consultant. I work entirely with smaller ISPs and none of them have the ability to use customer data in the same way that the big companies do. This latest FCC action only immediately affects perhaps the dozen largest ISPs.

There is a big functional different between ISPs and edge-providers like Facebook. An ISP can see every keystroke a customer makes on the web, except for those that are made inside some encrypted program. But almost nobody uses encryption and so your ISP knows every web site you visit, the contents of every email you write, and every query you make to a search engine. And they know even more about you from your cellphone records – where you traveled and when.

But the difference between Facebook and the ISPs is that nobody makes you use Facebook. I really hate the way that the big companies like Facebook and Google track everything you do inside their platforms. I dropped off Facebook last year partly for this reason.  I also rarely use Google as a search engine and don’t use Gmail or Google’s Chrome web browser. I can largely avoid the big web companies, but I can’t avoid my ISP. And like most Americans I don’t have any real option but to use a big ISP for broadband access.

I’m probably like most Americans and don’t feel like I have a lot to hide. But that still does not mean that I want big companies following my every movement, my every purchase, my every email and every web site I visit. That has far too much “big brother” about it for my liking. I know today that this data is mostly being used to develop targeted marketing, but this information could also easily be used for nefarious purposes, and some of that is starting to happen.

As much as this reversal of the privacy rules bothers me as a consumer, the big picture here is that, for now, the big ISPs finally have the FCC they want. This FCC has already said it’s going to reverse or gut net neutrality. This FCC just said they aren’t going to review the AT&T and Time Warner merger. Killing the privacy rules is final proof, only a month after the new Chairman has been in charge, that the big ISPs are likely to get everything they want. And I don’t think that is a healthy thing for the industry or for consumers.

The Fight Over Wireless Pole Attachments

PoleAll around the country there are fights going on between pole owners, governments, and wireless carriers over pole attachments and related issues for small cell deployment. Small cells are the first new technology that is mostly interested in non-traditional attachments, but will soon be followed by a proliferation of companies also wanting to hang devices to transmit millimeter wave radios and wireless local loops. The fights cover a wide range of different issues:

Safety. Most current pole rules were created for the purposes of keeping it safe for technicians to work on poles, particularly during bad weather conditions. Some of the devices that carriers now want to hang on poles are not small. Some are the size of dorm refrigerators or even a bit larger. And these devices are connected to live electric wires. Adding such devices to poles can make it significantly harder for a technician trying to restore power during a rain or snow storm. Just maneuvering around such devices can be a major safety concern even in good weather.

New Poles / Taller Poles. There are reports of wireless carriers asking to install new poles as tall as 120 feet in city rights-of-way. For network deployments that include wireless backhaul it’s vital that each small cell or other device has a clear line-of-sight to other devices in the network – and being higher in the air can create the needed wireless network.

In most towns the poles are not taller than 60 feet and often shorter. Taller poles create a whole new set of problems. They might mean a whole new level of tree trimming or even eliminating taller trees – and many communities take great pride in their trees. And these new poles will need power, meaning stringing more wires in the air, which can detract from the aesthetics of a residential neighborhood as well as to create more issues with downed power lines and trees to keep trimmed.

This also raises the issue of the long-term impact of such new poles. Many cities have moved other utilities underground or have multi-year programs to migrate existing utilities underground. These new wireless-only poles also require a power feed, and at least some of them require a fiber feed. Can a carrier require a wireless pole/tower in a neighborhood where everything else is already underground? Can they insist that their poles be left standing during future conversions of neighborhoods to underground utilities?

There is also the issue of sharing such new poles. Cities fear that they will be swamped with requests for new poles from companies wanting to deploy wireless technologies. It’s not hard to picture an NFL city that might have a dozen different companies wanting to deploy wireless devices – and it’s not hard to picture this resulting in chaos and a proliferation of multiple new poles on the same streets as well as numerous new electric lines to connect all of the new devices.

Right to Say No. Cities largely want the right to decide what goes in their rights-of-way. This often has manifested with requirements that anybody that wants access to rights-of-way get some sort of a franchise. It also has meant the development of local ordinances that define the whole process of using rights-of-way from the permitting process through installation techniques. But the carriers are currently lobbying at the state level and at the FCC to make uniform rules to apply everywhere. If the FCC or a state passes blanket rules there are many cities likely to challenge such rules in court.

Fees for Attachments. The carriers are also lobbying heavily to define the fee structure for attachments of these sorts of new connections. Compensation has always been an issue and my guess is that at some point the FCC will step in here in the same manner they did in the past with other pole attachments.

General Irony. I find it ironic that AT&T is leading the battle to get good terms for attaching wireless devices. AT&T has been the primary entity that has been fighting hard against Google to keep them off AT&T poles. And now AT&T wants the right to force their way onto poles owned by others. But in the regulatory world if we have ever learned any lesson it’s that big companies don’t seem to have a problem with arguing both sides of the same argument when it suits their purposes.

Putting the Lifeline Program on Hold

FCC_New_LogoEarlier this month the FCC under new Chairman Ajit Pai reversed earlier FCC approval for nine Lifeline providers who had been granted the ability to provide either wireline or wireless Lifeline broadband service. The Lifeline program grants a subsidy of $9.25 per month for low-income customers.

These were the first nine companies that had filed for the new Lifeline Broadband Provider designation to provide the subsidy for broadband connections. The Lifeline program for 32 years has provided this same subsidy to telephone service, but last year the program was extended also to data services – with the caveat that a given household is only eligible for one monthly subsidy.

The nine providers are Spot On, Boomerang Wireless, KonaTel, FreedomPop, AR Designs, Kajeet, Liberty, Northland Cable, and Wabash Independent Networks. Four of the providers had obtained their new Lifeline status on December 1 with the others being granted in January. Boomerang Wireless had already started to serve lifeline-eligible customers and the FCC ordered them to notify their customers and to cancel all lifeline subsidies within 60 days of the new order.

The stated reason for the reversals was that the FCC wanted to “promote program integrity by providing the Bureau with additional time to consider measures that might be necessary to prevent further waste, fraud, and abuse in the Lifeline program.” None of these companies has been accused of fraud but rather were the first nine companies to be granted the status of Lifeline Broadband Provider with the ability to sell a subsidized data product.

The fraud issue is an interesting one because the FCC had already overhauled the Lifeline processes to protect against fraud. For years carriers were allowed to self-certify that customers met at least one of several qualifications that made them eligible for Lifeline. But the FCC eliminated self-certification by publishing a national list of eligible customers – the list provided by and updated by other federal agencies overseeing eligible programs.

The FCC had also done compliance audits over the last several years looking for Lifeline fraud and didn’t find much of it. The new FCC order cited a $30 million settlement from Total Call Mobile that had been found to be seeking reimbursement for duplicate and ineligible customers. But the vast majority of the lifeline providers were found to have few or no issues.

Customers may have other options because the 800 carriers that already provide a Lifeline voice subsidy are now also allowed to provide a data subsidy. But nobody knows how many of these existing providers plan to offer subsidized data, and in fact over 80 Lifeline-eligible carriers recently asked to be excused from the program. This includes most of the biggest carriers in the country including AT&T, Verizon, CenturyLink, Charter, Cox, Frontier, Fairpoint, Windstream and Cincinnati Bell. There were also a lot of wireless carriers asking to be excused from the program.

It’s possible that politics has something to do with this order. The FCC under past Chairman Wheeler had reset the Lifeline program’s annual budget to $2.25 billion a year, indexed to inflation. There are Republicans in Congress who have called for the program to be capped instead at $1.75 billion annually. Stopping these new providers is one way to stop the program from growing. One would think that the withdrawal of the biggest carriers from the program will also greatly shrink the fund.

The most interesting thing about this order to me is that it seems to conflict with statements made by new Chairman Pai. On his first day as Chairman he addressed FCC employees and told them that one of his top goals was to bring broadband to all Americans. But this reversal of Lifeline status came just three days later and seems contrary to that goal.

It’s certainly possible that after more internal review that these companies might still be granted Lifeline status. But this also might instead be an indicator that the new Chairman wants to curb the Lifeline program, or maybe even eliminate it. I guess we are going to have to wait a while to see what this all means, including the Chairman’s statements about expanding broadband to all.

The Transition to IP Telephony

ATTAT&T reported to the FCC about the progress of its transition of customers from a traditional TDM network to an all-IP network. AT&T had undertaken two trials of such a conversion in Carbon Hill, AL and Delray Beach, FL.

These were voluntary trials. AT&T had advertised widely and asked customers to move to the new IP-based services. In Carbon Hill 36% of residents and 28% of businesses voluntarily moved to the new service. In Delray Beach the numbers were similar with 38% and 25% converting. AT&T reported there were no reports of degraded service, including the transition of business customers to IP-based Centrex and similar services.

Since the trials were announced AT&T has also grandfathered Centrex and TV1-Analog Video service, meaning they will take no new orders for the services. The company also asked the FCC’s permission to discontinue 13 legacy services that are obsolete. This includes products that most people never heard of like 4-wire and voice-grade telemetry and various alarm bridging services. The company also has asked permission to discontinue six operator services including collect calling, person-to-person calling, billed to third party, busy line verification, busy line interrupt and international directory assistance.

These trials need to be put into perspective. From a technical perspective there is no reason to think that transitioning these service from TDM to IP-based technology wouldn’t work because a lot of the rest of the telephony world made that transition years ago. Cable companies like Comcast and anybody operating on an all-fiber network has been offering IP-based telephone products for many years. AT&T’s offerings include many products that are strictly copper-based, such as the legacy products they want to discontinue.

And that leads to the whole purpose behind these trials. AT&T wants to move customers off old copper networks to either a landline or wireless IP-based solution. Since the company’s goal is to tear down copper, the vast majority of such transitions will be to the company’s cellular network. A miniscule percentage of AT&T’s customers are on fiber – particularly residential customers since the company has launched very little FTTP in that market.

The trials are largely the result of what happened to Verizon on Fire Island a few years ago after Hurricane Sandy. There Verizon didn’t replace destroyed copper but moved people to a cellular-based service. But unlike these trials, which were meticulously slow and careful, it seems that in many of the Fire Island cases Verizon did not offer equivalent services to what they had offered before the hurricane. Apparently things like burglar alarms, medical monitoring devices, and other services didn’t work on the new wireless connections.

The FCC has already granted these big telcos the ability to tear down copper as long as they follow customer notification processes. My guess is that after these trials are blessed by the FCC that the companies will begin ripping down rural copper all over the country.

I expect that many customers are going to be unhappy when they lose their copper. Anybody who has traveled in rural areas understands that cellular coverage is often spotty, or even non-existent. Customers are worried about being cut off from telephony services inside their homes. It’s a legitimate concern for somebody with poor cellular service and with little or no broadband options, like we see in millions of rural homes and businesses.

But the time is coming soon when these transitions will not be voluntary like was done in these two communities. The big telcos will issue the legally required notices, and then they will proceed to shut off and tear down the copper. In doing so they will have undone the original FCC’s goal set by the Telecommunications Act of 1934, which was to make telephone service available everywhere. There are now going to be homes and communities that are going to be cut off from a workable alternative to make reliable voice calls.

I honestly never thought I’d see this happen. But I guess it was the pretty obvious end game after it became clear decades ago that the big telcos were not going to properly maintain their rural copper networks. We aren’t too far from the day when copper telephone networks join the list of other technologies that outlived their usefulness and are a thing of the past – at least for the giant telcos. There are still other companies like Frontier and Windstream that are fighting to extend the life of their copper, but we’ll have to see what the future holds for them and their customers.

Time for a New Telecom Act, Part 2

FCC_New_LogoYesterday’s blog postulated that we would see a new telecom act this year from Congress. That blog looked at what was accomplished by the last Telecommunications Act of 1996. Today I’m looking ahead at the issues that a new Act needs to address.

Last week we learned more about how the process will probably work. A new telecom act would likely be spearheaded by the Energy and Commerce Subcommittee on Communications and Technology. Last week Rep. Marsha Blackburn, head of that committee, told the press that she favored giving the new FCC a shot at fixing the things under its purview before the House would tackle a new Act. The FCC doesn’t have the authority to make many of the needed changes in telecom regulation, but it does have considerable power. Anyway, this probably means a new act is at least a year away.

Here are some of the things that I think the FCC and Congress need to address to modernize telecom:

Need for More Spectrum. It’s becoming clear that a lot of big ISPs are thinking of deploying 5Gn and various other millimeter wave technologies. The FCC needs to continue to open up more spectrum for broadband. There is still a lot of spectrum has been reserved for government use and there needs to be more attempts to share frequency when possible. There also needs to be a fresh look taken at how frequency is used. Historically many bands of frequency had narrow channels aimed at accommodating voice traffic or a single channel of television. From an engineering perspective we can get a lot more out of spectrum if we can make wider channels in the spectrum bands that are already in use.

Tackling Cybersecurity. 2016 was a year when security breaches led the industry news weekly. There is no easy fix for security issues, but there are big steps that can be taken. For example, we are flooding the world with IoT devices that are easily hacked and which can now be used to launch coordinated denial of service attacks. With Congressional backing the FCC could create standards to make IoT devices more secure. The government will never make us free from hacking, but there are a lot of sensible standards and fixes needed for IoT devices.

Expanding Access to Fast Broadband. As somebody who works regularly in rural America I know that lack of broadband there is now one of the biggest problems identified by rural households. We need to find ways to get good broadband to more places, and we have to do this smartly by building infrastructure that will last for decades. We’ve already seen how not to do this with the CAF II program that is being used to expand DSL and LTE wireless – two technologies that are already inadequate today.

Unless we see that fiber is built everywhere this is going to be an ongoing major issue. For example, if we fix broadband for those that have none but ignore the bigger swathe of the country that has only marginally acceptable broadband today, we will be back in a decade looking at how to fix broadband in those places.

We also need rules that unleashes anybody willing to spend money on fiber. I see numerous rural counties and towns that are ready to spring for bond issues to get fiber. We need rules that allow anybody willing to invest in fiber be able to do so – be that local governments, electric cooperatives, rural telcos or anybody else.

Infrastructure Issues. There are still a lot of infrastructure roadblocks to deploying fiber. We have never done a good job of fulfilling the mandate from the 1996 Act to provide access to poles and conduit. And we are now looking at deploying a fiber-fed wireless network that is going to mean bringing both fiber and power to buildings, rooftops, poles and other infrastructure. We need to find a way to get this done without also trampling over the legitimate concerns of local jurisdictions. For example, the FCC can’t just demand that cities allow free and quick fiber construction if that means digging up newly paved streets or overburdening poles – we need to find rules that work. And we need to do a much better job of this than we have done so far.

Programming. It’s now clear that online video content is competitive alternative to traditional cable TV. We need rules that unleash cable companies and anybody else to sell programming that people really want to buy. That means stepping away from the current rigid cable rules that mandate the giant channel lineups. Companies need to be free to create programming bundles that people want to buy. This might mean allowing a la carte programming. And there must be rules that require content providers to sell to everybody in an unbiased manner.

I don’t know how many of these big issues the current FCC is going to be willing to tackle. It seems like a lot of their agenda for the first six months will be to undo things ordered by the previous FCC. While I understand the desire to mold the FCC to the political persuasion of whatever party is in power, most of the issues on my list above are not partisan. They are just things that we all need to solve if we are to have a telecom infrastructure that serves us all well.

Time for a New Telecom Act, Part 1

capitalNothing is ever certain in the regulatory world, but it looks like there is a good chance that we will see a new telecom act this year. There are certainly parts of the old Telecommunications Act of 1996 that need to be refreshed and there are a lot of new topics like broadband, OTT and the IoT that need to be addressed by Congress. Today’s blog is going to review the old telecom act and tomorrow I will address the changes that I hope are included in any new act.

It’s hard to believe but the Telecommunications Act of 1996 was enacted 21 years ago. From a technological perspective that was almost the dark ages. 1996 was the year that AOL launched its unlimited dial-up product for $19.95 per month (before then subscribers paid by the minute). This drew millions of people to the Internet and convinced them to pay a monthly fee for access. DSL and cable modems were still in the lab and dial-up access ruled the world.

The main thrust of the 1996 Act was to create more competition with telephone service. Ma Bell had been broken up in 1984 which had resulted in long distance competition. Long distance rates dropped steadily over the years after divestiture. Congress decided that it was time to also create competition for dial tone. They recognized that the roadblock to competition was that the big telcos owned the vast majority of the copper lines going to homes and businesses and that nobody was likely to build a second telecom network.

So the Act implemented new rules to promote competition. Some of the changed mandated by the new Act were:

  • Creating a new regulatory category for telephone competitors that was labeled CLEC (Competitive Local Exchange Carrier).
  • Requiring the big telcos to ‘unbundle’ their copper network. This meant that they had to provide access to their copper plant to CLECs. To accomplish this the FCC mandated that CLECs had the right to interconnect to the big telco networks and to collocate in their central offices when necessary.
  • Mandating that the big telcos offer up telecom services for resale. They basically had to sell bulk services to competitors who could then sell them to customers.
  • Requiring that anybody that wanted to build new network be given access to poles and conduits and be allowed to connect to telco network at any reasonable place of their choosing.

The Act was immediately successful and unleashed a flurry of competitive activity. Giant new CLECs were formed that collocated in telco offices gained access to copper loops. The most popular product was the unbundled T1 that allowed new competitors to sell data and telephone services to businesses over one connection. There were also giant companies formed to tackle resale. I recall that one of my clients in those days, Talk America, got over one million residential customers by reselling local phone service along with cheap long distance. Many consultants were formed to help the new competitive companies including my company, CCG Consulting.

The Act also brought about many other changes, some of the most significant being:

  • The regional Bell companies were allowed to get into the long distance business and compete against AT&T.
  • The Act granted the FCC the right of preemption to allow it to override conflicting state rules.
  • The Act created intercarrier compensation for paying for the exchange of traffic between telcos and CLECs.
  • The Act also shook up the Universal Service Fund and made compensation more directly cost-based.
  • The Act also tackled a number of other regulatory issues such as preempting telecom services from franchise fees, establishing rules to define obscene programming, and enabling the over-the-air transmission of digital TV signals.

In many ways the 1996 Act was a big success. Prices for telecom services plummeted in subsequent years. But over time the effective lobbying of the large telcos reversed some of the aspects of the Act, like resale and the unbundling of dark fiber. The Act also did not foresee the explosion of cellphones and of landline broadband and those industries have never gotten the same level of regulatory scrutiny that applies to telephone service. There are still CLECs today making a living by providing DSL over telephone copper. But the increasing needs for faster broadband speeds is starting to make that technology irrelevant and it’s definitely time to consider a new Act to deal with today’s issues.

Regulating the IoT

Nest_Diamond_ThermostatThe FCC has joined other government agencies and private organizations that are concerned about the lack of security with the Internet of Things. The agency issued a 50-page research paper that discussed the issue and came to some troubling conclusions.

From the report: The large and diverse number of IoT vendors, who are driven by competition to keep prices low, hinders coordinated efforts to build security by design into the IoT on a voluntary basis. Left unchecked, the growing IoT widens the gap between the ideal investment from the commercial point of view and from society’s view.

That’s not nearly as strident as the sentiment expressed by most industry experts who understand that most IoT device makers look at security only as an afterthought. It’s been demonstrated repeatedly that almost every IoT device on the market can be hacked, often quite easily. There are exceptions, but a large percentage of devices have little or no defense against hacking.

The Department of Homeland Security is also looking at IoT and issued a set of guidelines they want to the industry to adopt. DHS believes that unprotected IoT devices are a national security threat. We now saw good evidence of this last month after massive denial of service attacks were launched from security cameras and home appliances. The DHS guidelines suggest some common sense requirements like allowing devices to have unique passwords and allowing IoT devices to receive needed software updates.

The Federal Trade Commission is also looking at IoT security issues. The agency recently announced a $25,000 prize to anybody who could offer a security solution for dealing with outdated software in IoT devices.

The Department of Commerce also recently issued IoT guidelines, but the guidelines seem to be aimed internally at the agency and not at the wider world.

This all raises the question of who should be regulating IoT? Right now the answer is nobody – there is no agency that has clear jurisdiction to impose any requirements on the IoT industry. And that is because such authority can only be granted by Congress. We’ve seen this same thing happen many times in the last fifty years as new technologies spring into existence that don’t fit neatly into any existing jurisdictional bucket.

The closest process we have to what is needed to regulate at least part of the IoT today is the way the FCC certifies new wireless and other telecom devices. Most people don’t realize it, but all phones and many other kinds of telecom gear undergo vigorous testing at the FCC to make the sure the devices do what they say they do and to make sure that they won’t interfere with the rest of the world. We need a similar process to tst and certify IoT devices because we can’t ever just take the IoT manufacturers’ words that their devices meet and standards that are developed.

But the FCC today has zero authority to regulate the IoT. For now they have created the ability to regulate ISPs through Title II regulations – but that is expected to be reversed or watered down soon. But even that authority doesn’t give them any jurisdiction over the IoT. Like many technologies, the IoT is something new that doesn’t fit into any existing regulatory framework.

It’s not really comforting, but there are a bunch of other new industries with the same situation. There is no agency that has any clear regulatory authority over driverless cars. Nobody has any real authority to regulate artificial intelligence. There are only very minimal regulations for gene-splicing.

I think most of us believe that some level of regulation is good for these big society-changing technologies. Certainly if nobody regulates the IoT we will have disaster after disaster from misuse of the technology. I hope we don’t wait too long to tackle this until it’s too late and there are billions of poorly manufactured IoT devices in the world that can’t be fixed.