Cord Cutting Continues in Q2 2020

The largest traditional cable providers collectively lost over 1.5 million customers in the second quarter of 2020 – an overall loss of 2.0% of customers. This is the smaller than the loss in the first quarter of 1.7 million net customers. To put the quarter’s loss into perspective, the big cable providers lost 16,700 cable customers per day throughout the quarter.

The numbers below come from Leichtman Research Group which compiles these numbers from reports made to investors, except for Cox which is estimated. The numbers reported are for the largest cable providers, and Leichtman estimates that these companies represent 95% of all cable customers in the country.

Following is a comparison of the second quarter subscriber numbers compared to the end of the first quarter of 2020:

1Q 2020 2Q 2019 Change % Change
Comcast 20,367,000 20,845,000 (478,000) -2.3%
Charter 16,168,000 16,074,000 94,000 0.6%
DirecTV 14,290,000 15,136,000 (846,000) -5.6%
Dish TV 9,017,000 9,057,000 (40,000) -0.4%
Verizon 4,062,000 4,145,000 (83,000) -2.0%
Cox 3,770,000 3,820,000 (50,000) -1.3%
AT&T U-verse 3,400,000 3,440,000 (40,000) -1.2%
Altice 3,102,900 3,137,500 (34,600) -1.1%
Mediacom 676,000 693,000 (17,000) -2.5%
Frontier 560,000 594,000 (34,000) -5.7%
Atlantic Broadband 311,845 314,645 (2,800) -0.9%
Cable One 290,000 303,000 (13,000) -4.3%
     
Total 76,014,745 77,559,145 (1,544,400) -2.0%
Total Cable 44,685,745 45,187,145 (501,400) -1.1%
Total Satellite 23,307,000 24,193,000 (886,000) -3.7%
Total Telco 8,022,000 8,179,000 (157,000) -1.9%

Some observations about the numbers:

  • The big loser is AT&T, which lost 886,000 traditional video customers between DirecTV and AT&T U-verse. For many quarters AT&T claimed losses were due to the company eliminating low-margin customers. It seems losses are more likely now due to price increases.
  • The big percentage loser is Frontier that lost almost 6% of its cable customers in the quarter. The Frontier numbers have been lowered for both quarters to reflect the sale of its property in the Pacific northwest.
  • While DirecTV continues to bleed customers, Dish Networks has seemed to have stemmed losses.
  • The most interesting story is for Charter that gained customers during the quarter. The company credits the gains to offering a lower-price package and also to a marketing campaign that is giving two months free of broadband. 329,000 customers took that offer in the second quarter and nearly half of those customers elected to add on cable TV and/or cellular service, both of which were for pay, and not free. Charter has been beating the industry as a whole for cable subscribers every quarter since Q3 2018.

The losses of cable companies continue to mount at dizzying levels for the industry. This is the sixth consecutive quarter where the industry lost over one million cable subscribers. The big providers collectively have lost 3.2 million customers this year, from a starting point of 79.3 million customers at the end of 2019.

It’s especially worth noting that these losses happened during a quarter when the biggest ISPs gained over 1.2 million customers for the quarter.

We’re likely going to have to wait to understand exactly what is happening in the cable industry. For example, a recent large survey from TiVO showed that 25% of US homes have downgraded to less expensive cable packages (cord-shaving). That would mean total revenue losses over and above what would be expected by just net customer losses.

Interestingly, homes don’t seem to be fleeing traditional cable for the online equivalents. Leichtman also tracks Hulu Live, Sling TV, and DirecTV Now and those three companies collectively lost 24,000 customers for the quarter.

CBRS Auction Winners

The FCC held a recent auction for the  3.5GHz Citizens Band Radio Spectrum (CBRS). The auction went for 76 rounds and raised over $4.5 billion for the FCC. This auction was unique in that spectrum was licensed at the county-level awarding up to seven licensed 10 MHz channels in each county. Each PAL (Priority Access License) is good for 10 years.

CBRS spectrum can be used in several applications. The spectrum has good field operating parameters and falls in the middle between the two existing blocks of spectrum used for WiFi. This makes the spectrum ideal for rural point-to-multipoint fixed wireless broadband since it can carry a decent amount of bandwidth for a decent distance. The best aspect of this spectrum is that it’s licensed and will largely be free from interference. For the same reasons, this is also a good spectrum for cellular data.

The biggest winner in the auction was Verizon which spent $1.89 billion on the spectrum. The company landed 557 PALs licenses in 57 counties. The company needed this spectrum to fill-in mid-range spectrum for 5G. Verizon has also recently announced a fixed cellular broadband product for rural homes and this spectrum could provide an interference-free way to deliver that product from rural cell sites.

As expected, Dish networks was also a big winner and will be paying $913 million for CBRS spectrum. As the newest nationwide cellular carrier, the company needed this spectrum to fill in the holes in the cellular spectrum it already controls. The other traditional cellular companies were a no-show. AT&T didn’t buy any of the CBRS spectrum. T-Mobile only purchased 8 PALs licenses in six counties.

The largest cable companies scored big in the auction. Charter bought $464 million of spectrum, Comcast is paying $458 million for spectrum, and Cox purchased $212 million of spectrum. As the newest entrants in the cellular business, Comcast and Charter have been buying wholesale cellular broadband from Verizon – this spectrum will let them shift to their own cell sites for a lot of cellular traffic. There is also speculation that cable companies might be planning on using the new spectrum to launch a fixed-wireless product in the rural areas surrounding their cable properties. Both Charter and Cox have entered the upcoming RDOF auction that is awarding $16.4 billion for rural broadband and the companies might be planning on using this spectrum to cover any areas they can win in that reverse auction.

One of the smaller cable companies, Midcontinent Communications, spent over $8.8 million for PALs licenses. Midco already won sizable rural grants to deploy 100 Mbps broadband in Minnesota and the Dakotas. This spectrum will help the company meet those grant pledges and perhaps allow it to pursue RDOF grants.

There were a few other large bidders. One was Nextlink which provides fixed wireless broadband today in Texas, Oklahoma, Kansas, Nebraska, Iowa, and Illinois. Windstream purchased over 1,000 PALs and the traditional telco is likely going to replace aging rural copper with wireless service, while also possibly be expanding into new service territories with fixed wireless. SAL Spectrum LLC won 1,569 PALs. This company owns numerous other blocks of spectrum and it’s not clear who the user of this new spectrum might be.

The biggest news is that the auction allowed smaller bidders to win licensed spectrum. There were 228 different winners in the auction, most of which are small WISPs, telcos, and electric cooperatives. These entities benefited by the FCC’s willingness to auction the spectrum at the county level. Most previous wireless spectrum was allocated using much larger footprints, which kept small bidders from acquiring spectrum.

Loving to Hate Our Big ISPs

The American Customer Satisfaction Survey (ACSI) was released earlier this summer that ranks hundreds of companies that provide services for consumers. Historically cable companies and ISPs have fared poorly in these rankings compared to other businesses in the country. The running joke reported in numerous articles about this survey is that people like the IRS more than they like their cable company (and that is still true this year).

But something interesting happened in this year’s survey and the ranking for cable companies collectively improved by 3% and consumer confidence in ISPs climbed 5%. There is no easy way to understand a national satisfaction survey, but those trends are interesting to contemplate.

Let’s start by looking at the numbers. Consumers still rank cable TV providers as the least liked group of companies in the country across all industries, joined at the bottom by ISPs. The ACSI ranks each company and each industry segment on a scale of 1 to 100. The top-rated industries are breweries (84%), personal care and cleaning products (82), soft drinks (82), and food manufacturing (81).

By contrast, cable providers are ranked the lowest at 64 followed closely by ISPs at 65. Joining these companies at the bottom are local governments (65.5), video-on-demand providers (68), and the federal government (68.1).

The overall ranking for cable providers grew from a 62 in 2019 to a 64 in 2020. I can only speculate why people like cable companies a little more this year. This could be due in part to huge growth in cord-cutters who no longer watch traditional cable TV and who might perhaps no longer rate a product they don’t use. Or perhaps folks have come to appreciate the cable product more during the pandemic when people are going out less, and likely watching TV more.

The cable providers at the bottom of the rankings continue to get low satisfaction ratings, with Suddenlink (56), Frontier (58), and Mediacom (60). Just above these companies are two of the largest cable providers – Charter (60) and Cox (61). But all of these companies had a slightly improved satisfaction ranking over 2019. The highest-ranked cable providers continue to be Verizon FiOS (70) and AT&T U-verse (70), now relabeled as AT&T TV.

ISPs didn’t fare much better. It’s worth noting that this list contains many of the same companies on the cable provider list, but consumers are asked to rank cable services separately from broadband services. The overall satisfaction for ISPs grew from a 62 in 2019 to a 65 in 2020. The same three providers are at the bottom – Frontier (55), Suddenlink (57), and Mediacom (59). At the top are the same two providers – Verizon FiOS (73) and AT&T Internet (68).

Part of the explanation of the change in approval ratings for the industries might be little more than statistical variance within the range of sampling. The rankings of individual ISPs vary from year to year. Consider Charter, ranked as an ISP. The company was ranked highest in 2013 and 2017 at a 65 ranking and lowest in 2015 (57) and 2019 (59). This year’s increase might just be variance within the expected range of sampling results.

What matters a lot more is that our cable companies and ISPs are generally consumer’s least favorite companies. This has always benefited smaller ISPs that compete against the big companies. One of the most common forms of advertising for smaller ISPs is, “We are not them”.

People don’t rate cable companies and ISPs so low due because they deliver technical products. Other technology sectors have much higher satisfaction ratings such as landline telephones (70), cellphones (74), computer software (78), internet search engines (76), and social media (70). Consumers are also like electric utilities a lot more than cable companies and ISPs – electric coops (73), and investor-owned and muni electric companies (72).

It’s always been somewhat disheartening to work in an industry that folks love to hate. But I’ve always been comforted by the fact that my smaller ISP and cable clients generally fare extremely well when competing against the big ISPs and cable companies. I have to assume this means people like small ISPs more than the big ones – or perhaps hate them a little less. That’s something every small ISP should periodically consider.

Will Cable Companies Ignore Pleas for Faster Uploads?

One of the biggest impacts of the pandemic on broadband networks has been that homes suddenly care about upload speeds. Homes that largely lived off of downloading video transitioned to having adults and students at home and simultaneously trying to connect to remote work and school servers. People who were happy with their broadband speeds pre-pandemic suddenly found their broadband connection to be inadequate. Industry statistics show that huge numbers of people have upgraded to faster broadband products hoping to improve the home broadband performance without realizing that their performance bottleneck is due to inadequate upload speeds.

The cable industry has largely ignored upload bandwidth in the past. DOCSIS technology that operates the cable broadband networks allows as much as one-eight of total bandwidth to be dedicated to uploading. However, many cable broadband connections are configured with something less than that, because very few homeowners, other than perhaps photographers or others professionals who routinely send big files have ever cared about upload speeds. To make matters worse, the cable industry generally has squeezed the upload data stream into the portion of a cable network spectrum that has the most noise and interference. That never mattered to most people when sending files, but it matters when trying to maintain a steady connection to a work or school WAN.

But suddenly upload speeds matter to a lot of households. Some of the current pressure on upload speeds will be mitigated as K12 students eventually return to the classroom, but there seems to be widespread consensus that we’re going to see more adults permanently working from home.

It’s going to be interesting to see how the big cable companies react to the upload crisis. I’ve not seen many of them talking about the issue publicly and I suspect they are hoping this will go away when the pandemic ends. The cable companies have to know that they will be competing against technologies that offer faster upload data speeds. AT&T built fiber in the last few years to pass over 12 million homes. Telcos like CenturyLink and Windstream are quietly building fiber in some communities. Verizon says it’s going to pass 30 million homes with its fiber-to-the-curb technology using millimeter wave spectrum. And private ISPs are edging fiber into cable markets all over the country.

The cable companies have possible solutions on the horizon. Cable Labs recently announced the release of the DOCSIS 4.0 standard that will allow cable companies to offer symmetrical bandwidth. The gear for this technology ought to hit the market starting next year, but industry tech writers who interview cable company management seem to agree that the big cable companies have no appetite for paying for a new round of upgrades.

The cable companies all upgraded to DOSCSIS 3.1 in the last few years that added the capability for a gigabit download product. The web is full of pronouncements from the CTOs of the big cable companies saying that they hope to get a decade out of this last upgrade. Are any of these companies going to be willing to make a major new investment in new technology so soon after the last upgrade? In many markets the cable companies have become de facto monopolies, and that inevitably leads to milking technology upgrades for as long as possible.

There are a few other technology upgrades on the horizon that could provide relief for upload speeds. There has been a move by several vendors to explore expanding the bandwidth used inside a coaxial cable. A coaxial cable network acts like a captive radio network that uses a big range of different frequencies. Cable systems historically used as much as 1 GHz of total spectrum. In recent years with the advent of DOCSIS 4.0 that’s been expanded to 1.2 GHz of total spectrum. The technology now exists to upgrade cable networks to 1.8 GHz. That would provide a huge additional pile of spectrum that could be dedicated to bandwidth. But such an upgrade would require changing out a lot of network components such as amplifiers, power taps, and modems. Such an upgrade might be nearly as expensive as a shift to DOCSIS 4.0.

The bottom line is that any significant changes to create more upload bandwidth inside cable networks will cost a lot of money. I bet that the big cable companies will stick with the current technology migration plan that would keep DOCSIS 3.1 for the rest of this decade. Likely the only thing that might prompt cable companies to upgrade sooner would be competitors mass deploying technologies that are marketed for having faster upload speeds. The most likely future is that the big cable companies will introduce DOCSIS 4.0 selectively in the few markets where they are feeling competitive pressure, but that most of households are not going to see the upload speeds that people now want.

The Reverse Donut

A lot of rural areas are going to get fiber over the next five years. This is due to the various large federal grant programs like ReConnect and RDOF. New rural broadband is also coming from the numerous electric cooperatives that have decided to build broadband in the areas where they serve rural electric customers. This is all great news because once a rural area has fiber it ought to be ready for the rest of this century.

These new fiber networks are going to revive and transform many of these areas. People who want to work from home will move to existing rural homes and build new homes. It doesn’t take a lot of high-paying jobs to revive a rural economy. Rural communities are also hoping that fiber can slow the drain of people migrating to cities to find work.

However, nothing this transformational is without consequences. I’m already starting to see some of the consequences of what happens when rural areas get fiber but the towns in a county don’t. I’ve been referring to this phenomenon as the reverse donut, where all of the rural areas around a county seat or mid-sized rural town have fiber but the town doesn’t. Today, most of rural America has better broadband in towns than in rural areas, and maps of broadband in most counties looks like only the donut holes have broadband.

Every broadband grant program in the country is aimed at rural areas that have little or no broadband, and that’s how it should be. But I’ve worked in dozens of counties where everybody just assumes that broadband in towns is okay, particularly if a town is served by a cable company.

In many cases, this is not true. Small rural towns often don’t have the same quality of broadband as larger towns. DSL in smaller towns is often of the oldest vintage and delivers speeds under 5 Mbps. Small town cable systems often underperform. Such systems might have been built in the 1970s and have been largely neglected since then. Aging and deteriorated coaxial cable performs even more poorly than old telephone copper since the network acts as a huge radio antenna and attracts spectral interference through any open cable splice point. It’s also not unusual in smaller communities to find neighborhoods that don’t have cable broadband. The houses might have been built at a time when the local cable company didn’t have the money to construct new cables.

When my firm helps communities to do speed tests, it’s not unusual to find a significant percentage of cable subscribers in small towns with download speed far under 100 Mbps, and in some of the worst cases under 10 Mbps. It’s a big mistake to think that cable company technology translates to good speeds because when the network is poorly maintained this is often not true. It does no good for a cable company to jam new technology upgrades on top of bad copper.

There are going to be some predictable consequences of communities with the reverse broadband donut. New housing construction is likely to occur outside town instead of inside of in town. That means that over time that the demand for government services will shift. Most counties have geared services like law enforcement, school transportation, trash services, and numerous other government services and programs around serving the county seat. Over time property values in towns will dip compared to newer homes with fiber in rural areas.

This is not to say that any of these changes are bad – but having better broadband in rural areas instead of towns will definitely change communities over time. I talk to people in rural county seats all of the time and many of them are incredulous that there is no grant money to help them get better broadband. The good news is that it’s often possible to build a profitable fiber network in small towns without any need for grants. But that is not going to happen unless towns take a proactive approach to attract an ISP willing to invest in their community or even decide to build their own fiber network.

It’s my belief that a county or community is not done the job until everybody has great broadband. Counties that will be getting rural fiber are lucky if their towns already have good broadband. But many counties will look up in a few years and see the consequences of having the reverse donut.

Big Broadband Growth in the Second Quarter

Leichtman Research Group recently released the broadband customer statistics for the end of the second quarter of 2020 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than for Cox, which is estimated. Leichtman says this group of companies represents 96% of all US landline broadband customers.

The second quarter shows big growth in broadband customers with almost one and a quarter million customers added to the big ISPs in the second quarter. However, due to the pandemic, those numbers need to be accompanied by an asterisk based upon several factors that are inflating broadband subscribers. Before discussing those issues, the following are the statistics for the first and second quarters of 2020.

6/30/20 2Q Change % Change 1Q 20 Adds
Comcast 29,429,000 323,000 1.1% 477,000
Charter 28,096,000 850,000 3.1% 582.000
AT&T 15,201,000 (114,000) -0.7% (74,000)
Verizon 6,959,000 (23,000) -0.3% 26,000
Cox 5,280,000 50,000 1.0% 60,000
CenturyLink 4,638,000 (29,000) -0.6% (11,000)
Altice 4,307,800 70,400 1.7% 50,100
Frontier 3,142,000 (41,000) -1.3% (33,000)
Mediacom 1,396,000 47,000 3.5% 21,000
Windstream 1,089,400 22,100 2.1% 18,000
Cable ONE 838,000 45,000 5.7% 21,000
WOW! 805,600 8,000 1.0% 16,100
Consolidated 791,203 5,078 0.6% 1,960
TDS 479,500 19,500 4.2% 4,800
Atlantic Broadband 478,689 6,000 1.3% 5,770
Cincinnati Bell 432,000 4,500 1.1% 1,800
103,363,192 1,243,578 1.2% 1,166,530
         
Total Cable 69,216,233 1,399,400 2.0% 1,231,970
Total Telco 33,184,925 (155,822) -0.5% (65,440)

Going purely by the numbers, the cable companies collectively added 1.4 million customers in the second quarter compared to the first quarter. However, there are some issues related to the pandemic that are inflating the second-quarter numbers. First, Charter alone added 160,000 free households during the quarter as the company kindly provided free broadband to homes with students with no broadband. But is a home that is not paying a broadband bill really a customer?

All of the ISPs on this list were not disconnecting customers for non-payment in the second quarter due to the pandemic. With tens of millions of people newly unemployed, it seems likely that the ISPs are going to be disconnecting a lot of customers when that policy finally ends. The ISPs all have to be discussing how long to extend that policy. It seems unrealistic that they will continue to provide free broadband to millions too far into the future.

I don’t think anybody, including the ISPs know how many customers they will lose as a result of the pandemic. We got something of a clue during the second quarter when almost 1.6 million households disconnected cable TV. A lot of that cord-cutting has to be coming from homes that could no longer afford to pay their cable bill. At some point there is going to be a reckoning and many of the gains shown in the first and second quarters of 2020 will be wiped out by homes that can no longer afford broadband.

But there is another industry story that is not reflected in these numbers. It seems that a huge number of homes have been upgrading to faster broadband speeds. OpenVault reported recently that at the end of the second quarter 4.9% of homes were subscribed to gigabit broadband products, more than double the 2.1% of gigabit subscribed at the end of the second quarter of 2019. Students and adults working at home have been finding that their existing broadband plans are inadequate for multiple people to connect to remote servers simultaneously.

The quarterly numbers continue to reflect the migration away from DSL. Many of the telcos showing customer losses have been actively adding customers on fiber, so DSL losses are a lot larger than are indicated by the net numbers above.

Investigating Robocalls

Researchers in the computer science department at NC State undertook a study to investigate robocalls. The study is the first step in a broader effort to find tools to reduce robocalls. The premise for the study is that we can’t easily fix the robocalling problem without first understanding how robocallers work. The first findings of the team were published in August in a paper, Who’s Calling. Characterizing Robocalls through Audio and Metadata Analysis.

In order to study masses of robocalls, the researches worked with Bandwidth, Inc. to set up 66,606 telephone numbers. They monitored these lines for eleven months ending early in 2020. During that time, they received almost 1.5 million unsolicited calls.

The team’s next goal is to be able to identify the source of robocalls so that some of the bigger offenders can be shut down. The team says they have made progress towards that end and will be publishing more results as they reach conclusions. Ultimately, the team wants to develop tools to help combat robocalling.

The first round of research did reveal some facts about robocalling that contradicts commonly held beliefs about robocalling.

First, they found that the volumes of robocalls received were nearly identical month to month and were not increasing as the public believes – at least during the eleven-month period.

The team answered and recorded incoming calls and made an unexpected finding that 62% of robocalls included practically no audio. I’ve received many calls over the years that had silence at the other end and always wondered why such calls were made. It’s a mystery why somebody is taking the trouble of making huge volumes of calls that are delivering no message. Perhaps it’s from faulty audio technology at the robocaller’s end, but the percentage of empty calls is surprising.

The only other explanation I can think of is that somebody is somehow profiting from the call volumes of empty calls and that the calls are generated to pump telecom settlements. But the amount of compensation between carriers for calls has been so greatly reduced or eliminated that it’s hard to picture somebody making much money from even huge volumes of short calls.

They also found phones that answer robocalls did not see an increased volume of robocalls. The popular wisdom is that people shouldn’t answer calls from numbers they don’t recognize because that leads to even more robocalls. The team found that phones that always answer robocalls didn’t receive any more calls than phones that never answer.

The team did witness the event they labeled as a call storm. A few of their phones received huge volumes of calls for a day or two. They figure that a robocaller had mimicked the caller ID from one of these numbers and that the huge volume of calls came from people calling back to ask who had called them.

Finally, the most promising research is the ability to identify robocaller campaigns. These are events when a given robocaller is making a lot of calls in a short period of time. During the research, they identified 2,687 specific robocalling campaigns where the same robocaller was calling multiple numbers in the pool. The researchers believe that it is these campaigns that account for a large percentage of the robocalls being made. Their next research direction is looking for ways to identify a robocaller campaign early so that carriers can shut it down.

I was hoping that the research might explain why I get one robocall every month from the 202 area code. The recording is in Chinese and the best I can tell it comes from a telecom company. I’ve always figured this was Huawei telling me that they are no threat and that there is no 5G race.

The Blandin Foundation

Something new that I’m seeing as a result of the pandemic is that a number of private foundations are now helping communities tackle the digital divide and digital inclusion issues. Today I want to talk about a foundation that has been effectively addressing these issues for years. The Blandin Foundation from the small town of Grand Rapids, Minnesota has been a powerful influence in promoting and furthering rural broadband in the state. I’ve known the folks at Blandin for many years and have seen first-hand how their work has benefitted rural broadband in Minnesota.

The Blandin Foundation was created in 1941 with a gift from Charles K. Blandin. Mr. Blandin started his career as a roving newspaperman and eventually came to own a successful paper mill in Grand Rapids. The foundation was created to benefit the area around Grand Rapids, but over time grew to work with rural issues around Minnesota.

The direction provided by the founder was to undertake work that would lead to the ‘betterment of mankind”. The foundation originally concentrated on leadership training, and over the year, Blandin has trained over 7,000 local community leaders and 600 tribal leaders around the state on leadership skills. The foundation saw that one of the best ways to help local communities was to help local leaders develop the skills that would make them more effective.

As the foundation worked with rural communities, they realized in the early 2000s that broadband had become an integral component of the solution for almost every problem that rural communities were facing. Blandin branched out from leadership training and in 2003 began to tackle the lack of adequate broadband in rural Minnesota.

Blandin’s most effective tool has been using grants to create two-year partnerships with communities that want to solve broadband gaps. Blandin provides matching grants of up to $75,000 to tackle a wide range of issues associated with broadband.

One component of these grants provides $25,000 to help pay for a broadband feasibility study. These studies have specific goals of identifying the cost of building a broadband network using a range of technologies. The studies also look at market demand to help estimate how many people in a community might buy broadband if it was available. These studies have proven to be extremely useful since they are used by communities to talk with potential ISP partners. ISPs find the results of the studies to be useful since it answers the basic questions the cost of construction and the potential revenues that might come from a given community. I know of dozens of examples in Minnesota where the feasibility studies have led to ISPs seeking grants or directly building broadband networks in communities.

Communities use these grants in numerous other ways. I talked to Bernadine Joselyn, the Director of Public Policy and Engagement. She told me that communities are resourceful and often use this single grant to fund over a dozen initiatives associated with finding better broadband. This document shows the kinds of local initiatives that are funded by these matching grants.

Blandin doesn’t just hand communities the grants but works with them to effectively use the funding to find real solutions. Blandin works closely with communities as they implement grant programs. For example, every grant comes with up to 32 hours of technical assistance to help communities understand the technology and complexities of broadband.

Blandin also has an ongoing mission to educate the public about broadband. They hold periodic webinars that delve into broadband topics. They have an annual broadband conference where communities can meet others who are looking to solve the same problems. They write one of my favorite broadband blogs that looks at topics specific to broadband in Minnesota.

I know from experience that Blandin has made a big difference in Minnesota. There are numerous communities that now have better broadband that came as a direct result of the grants provided by Blandin. I know that many of the foundations that are now looking at broadband issues are seeking a way to be effective. They could learn a lot from the approach taken by Blandin and the successes they have had from working directly with communities.

Broadband and New Factories

There is a lot of talk across the political spectrum about the need to bring manufacturing back to the US. The pandemic has made it clear that the US is far too dependent on other countries that make the things we need to succeed. I found it painful back in March and April watching governors pleading with foreign countries to ship us the basic supplies needed to test for the coronavirus.

Medical supplies are just the tip of the iceberg and as a country, we’ve outsourced goods across the spectrum. It’s disappointing to look at the iconic American companies that no longer make their goods in the US. We’ve outsourced Schwinn bikes, Rawlings baseballs, Levi jeans, Converse All-star sneakers, Fisher-Price toys, Samsonite luggage, Brach’s candy, Fender guitars, Dell computers, Black & Decker and Craftsman tools, Radio-Flyer red wagons, and even America Girl and Barbie dolls.

Over 60,000 US factories have shut since 2001 when China joined the WTO. Manufacturing jobs at the end of WW2 II represented over 60% of all jobs in the US economy, and that has dropped today to under 9%. The reasons we’ve lost American factories are complex. While much of it can be blamed on manufacturers chasing higher margins through lower labor costs, many US factories also grew old and obsolete as owners didn’t put profits back into modernization. The strong US dollar has often contributed to US-made goods being at a disadvantage on world markets.

The current administration has made it a priority to create American manufacturing jobs and has succeeded in adding back about 900,000 manufacturing jobs since the start of 2017. Joe Biden in his recent presidential acceptance speech talked about creating policies that would create 5 million new manufacturing jobs. The pandemic has made it clear to politicians on both sides of the aisle that we need to manufacture critical goods like drugs and electronics in this country again. It’s insane for the country to have to rely on others for basic commodities like medicines.

The question I ask today is if communities in America are ready for new factories? New factories are different than traditional factories. New factories will almost universally include at least some level of automation. New factories will require a fast and secure broadband connection. Factories today are tied into the cloud for much of the software they use. They use the Internet to interface real-time with suppliers and customers. Factories are often connected to other branches of the company that collaborate over broadband in real-time.

Any community that wants to attract new factories must have great business broadband. That means not only fiber to connect to the business parks where factories are located, but it means diverse fiber routing so that a factory doesn’t lose broadband if somebody cuts a fiber inside of a city. It also means having diverse Internet routes leaving a city so that a fiber cut doesn’t isolate broadband. Factories are not going to locations where the Internet connections are not iron-clad.

Many communities I work with are still working to solve the first issue, which is to build the basic fiber infrastructure. We always hear about communities that have made the big plunge to build fiber to everybody in town, but there are far more communities that have quietly found ways to bring fiber to industrial parks and other key employers.

However, building fiber to business parks is only half of the needed solution. It’s just as important to a community that the fiber connection between the community and the Internet is secure. Factories really don’t care if the reason for fiber outages is inside or outside the community – they want to locate in places where broadband connections are virtually guaranteed.

Unfortunately, many communities are served by poor middle-mile networks that make the community susceptible to Internet outages. This blog from May talks about the counties in northwest Colorado that have suffered as a region every time there has been an outage on CenturyLink’s middle-mile fiber. It was fairly common for a fiber outage in the region to knock out broadband to the whole region and the key infrastructure like hospitals, law enforcement, and factories. These communities banded together to construct Project THOR – a fiber network built to guarantees that a fiber cut or an electronics outage doesn’t disrupt broadband.

If we are going to see a resurgence of new factories, then communities need to make an honest assessment of the local and regional broadband capabilities and vulnerabilities. Cities that have sound broadband infrastructure need to be crowing about it, and communities with gaps in Internet capability need to get in gear and find ways to solve broadband problems. If we indeed see a flood of new factories being built, it might be a once-in-a-generation event, and cities don’t want to miss out due to not having decent basic fiber infrastructure.

Who’s Chasing RDOF Grants?

There is a veritable Who’s Who of big companies that have registered for the upcoming RDOF auction. All of the hundreds of small potential bidders to the auction have to be a bit nervous seeing the list of companies they could end up bidding against.

As a reminder, RDOF stands for Rural Digital Opportunity Fund and is an auction that starts in October that will award up to $16.4 billion in broadband funding. The money will be awarded by reverse auction in a process that favors faster technologies, but also favors those willing to take the lowest amount of grant per customer. The areas that are eligible for the funding are among the most remote places in the country, which is why the list of potential large bidders is puzzling.

There are some big cable companies on the list: Altice, Charter Communications, Cox Communications, Atlantic Broadband, Midco, and Mediacom Communications. These companies serve many of the county seats or other nearby towns to many of the RDOF areas. One has to wonder what these companies have in mind. The only one that has chased any significant federal grants in the past is Midco in Minnesota and North Dakota. Midco has been using grant money to extend fiber backhaul to connect its smallest markets, to build last-mile broadband in some tiny towns, and to build fixed wireless in rural areas surrounding its cable markets.

One has to wonder if the other cable companies have a similar plan. It’s incredibly inefficient to build traditional hybrid coaxial-fiber networks in rural areas, so it’s unlikely that the cable companies will be extending their existing networks. The RDOF auction is being done by Census blocks, which in rural areas can cover a large area. The winner of the auction for a given Census block must offer service to everybody in that block. I also have a hard time envisioning all of these big cable companies getting into the wireless business like Midco is doing, so their presence in the auction is a bit of a mystery.

Then there are the traditional large telcos including Frontier, Windstream, Consolidated Communications, and CenturyLink. These companies already serve many of the areas that are covered by the reverse auction. These are the rural areas where these companies have largely neglected the old copper wiring and either offer no broadband or dreadfully slow DSL. The minimum technology allowed to enter the auction must deliver 25/3 Mbps broadband. It’s almost painful to think that these companies would chase the funding and promise to upgrade DSL to 25/3 Mbps after these companies largely botched an upgrade to 10/1 Mbps DSL in the just-ending CAF II grants. The cynic in me says they are willing to pretend to upgrade DSL all over again if that means substantial grant money. I have to think that some of these companies are considering deploying fixed wireless. To the extent any of these companies is willing to take on new debt or use equity, they could also build fiber. None of these companies has built a substantial amount of fiber to truly rural places, but may these grants are the inducement they were waiting for.

Verizon and U.S. Cellular have registered for the auction. You have to think the cellular carriers will be deploying fixed cellular broadband like the 4G FWA product that Verizon just announced recently. These companies already have equipment on towers in many of the RDOF grant areas and would love to grab a subsidy to roll out a product they might be selling in these areas anyway.

Then there are the satellite companies SpaceX, Hughes Network Systems, and Viasat. Viasat has won federal grant money before for selling broadband from its high-altitude satellites. SpaceX is the wildcard since nobody knows anything about the pricing or real speeds they can provide. We know that Elon Musk has been lobbying the FCC to let him have a shot at the billions up for grabs in this auction.

There is another interesting wildcard with Starry. Their business plan is currently selling fixed wireless to large apartment buildings in center cities and they’ve developed a proprietary technology that’s perfect for that application. They must have something else in mind in chasing grant money in remote areas that are 180 degrees different than their normal business model. Starry founder Chet Kanojia is incredibly creative, so he probably has a new technology in mind if he wins auction funding.

There may be other big players in the auction as well since many of the registered bidders are participating under partnerships or corporations that are disguising their identity for now. I think one thing is clear and some of the rural ISPs and cooperative who think nobody else is interested in their markets will get a surprise early in the auction. These big companies didn’t register for the grant auction to sit on the sidelines.