Worldwide Broadband Prices

Cable.co.uk has updated their comparison of worldwide broadband prices. Their report consists of a spreadsheet that compares broadband prices in 195 countries. If you didn’t know there were that many countries, many of the ones on the list are small island countries. The study considered the products offered by the major ISPs in each country. I assume they are using published prices and not some estimate of speeds that customers actually receive.

It’s not easy to compare broadband products because broadband speeds vary significantly around the world. The spreadsheet ranks countries by monthly price, expressed in US dollars, but you can use the spreadsheet to compare other factors. For example, looking at the cost per megabit provides a different perspective.

The US didn’t fare well in a comparison of overall pricing and came in at 119, with a monthly price for broadband at $67.69. This is down three places from last year. The US price was calculated using 25 ISP packages that had an average speed of 54 Mbps and a price per megabit of $1.26.

The cheapest broadband in the world is in Ukraine where the month price is US $5.00 with average download speed of 112 Mbps. To show how hard these comparisons are to make, the second cheapest broadband is in Sri Lanka with a monthly price of $US $5.56, but an average speed of only 11 Mbps, followed by Iran with a monthly price of US $8.20 per month, but a download speed of only 3 Mbps. The largest country at the top of the rankings is Russia, at number 4, where the average cost of broadband is US $9.77 per month with average speeds of 31 Mbps.

At the bottom of the list were two sub-Saharan countries: Mauritania with an average price of US $768.16 for 6 Mbps and Namibia with an average price of US $383.83 for 22 Mbps. Also at the bottom was Papua New Guinea with an average price of US $571.67 for 7 Mbps.

The US fares a little better when ranking by cost per megabit. With a price of $1.26 per megabit we’re at number 56. Number 1 on this comparison is Singapore with a price of US $0.03 per megabit, due to delivering an average speed of 1.6 Gbps for a price of US $50.43 per month. At the bottom of the list were two other sub-Saharan countries, Somalia and Niger that have average broadband speeds of less than 1 Mbps.

Finally, I compared countries by average Internet download speeds. The US came in at number 39 with an average speed of 54 Mbps. At the top of the list is Singapore with the 1.6 Gbps speed. Second is Jersey, in the Channel Islands off Normandy with a speed of 468 Mbps and Panama with an average speed of 273 Mbps.

Like all statistics there is a story go with all of the various countries. For example, China has an average broadband speed of 98 Mbps with an average price of US $41.29 per month. However, China is similar to the US and their data speed blends cities with gigabit speeds with smaller markets with much slower speeds. Among the countries with fast download speeds are places like Hong Kong, Bulgaria and Ireland where the government has set a priority and dedicated public money to building broadband infrastructure.

Since these comparisons are made using advertised prices and speeds, they don’t represent the total actual cost to consumers. For example, in this country some ISPs jack up the price of broadband by requiring an expensive monthly modem rental. In some markets in the US the ISPs deliver significantly slower speeds than advertised, making the products a lot more expensive on a per megabit basis. Many ISPs here also offer bundled discounts, making the prices lower than advertised. I’ve studied broadband prices in specific US markets and I know how hard it is to understand the real cost of broadband – and I’m sure these sorts of things are true in other countries as well. However, the average price of $67.69 for the US doesn’t seem out of line.

US broadband trends will change our rankings over the next few years. For example, prices by the big ISPs are on the increase, as witnessed by the recent $5 monthly increase by Charter for bundled broadband. Wall Street analysts all expect broadband prices in the US to now increase every year after a decade of stable prices. However, the cost per megabit ought to be tumbling here since the big cable companies recently increased customer speeds unilaterally – meaning millions of US customers now have broadband that is significantly faster than just a year ago.

Even with all of the issues of comparing broadband in countries with widely disparate conditions, this kind of comparison is useful. The main takeaway for me from this table is that most of the economic rivals of the US in Asia and Europe have faster broadband speeds than here, and lower monthly prices. Our trend is to increase broadband speeds, at least in urban areas, but prices are going to climb at the same time. If you look at broadband as a basic utility that’s necessary to be competitive, we aren’t stacking up very well.

When Will Small ISPs Offer Wireless Loops?

I wrote last week about what it’s going to take for the big wireless companies to offer 5G fixed wireless in neighborhoods. Their biggest hurdle is going to be the availability of fiber deep inside neighborhoods. Today I look at what it would take for fiber overbuilders to integrate 5G wireless loops into their fiber networks. By definition, fiber overbuilders already build fiber deep into neighborhoods. What factors will enable fiber overbuilders to consider using wireless loops in those networks?

Affordable Technology. Number one on the list is cheaper technology. There is a long history in the wireless industry where new technologies only become affordable after at least one big company buys a lot of units. Fifteen years ago the FCC auctioned LMDS and MMDS spectrum with a lot of hoopla and promise. However, these spectrum bands were barely used because no big companies elected to use them. The reality of the manufacturing world is that prices only come down with big volumes of sales. Manufacturers need to have enough revenue to see them through several rounds of technical upgrades and tweaks, which are always needed when fine-tuning how wireless gear works in the wild.

Verizon is the only company talking about deploying a significant volume of 5G fixed wireless equipment. However, their current first-generation equipment is not 5G compliant and they won’t be deploying actual 5G gear for a few years. Time will tell if they buy enough gear to get equipment prices to an affordable level for the rest of the industry. We also must consider that Verizon might use proprietary technology that won’t be available to others. The use of proprietary hardware is creeping throughout the industry and can be seen with gear like data center switches and Comcast’s settop boxes. The rest of the industry won’t benefit if Verizon takes the proprietary approach – yet another new worry for the industry.

Life Cycle Costs. Anybody considering 5G also needs to consider the full life cycle costs of 5G versus fiber. An ISP will need to compare the life cycle cost of fiber drops and fiber electronics versus the cost of the 5G electronics. There are a couple of costs to consider:

  • We don’t know what Verizon is paying for gear, but at the early stage of the industry my guess is that 5G electronics are still expensive compared to fiber drops.
  • Fiber drops last for a long time. I would expect that most of the fiber drops built twenty years ago for Verizon FiOS are still going strong. It’s likely that 5G electronics on poles will have to replaced or upgraded every 7 – 10 years.
  • Anybody that builds fiber drops to homes knows that over time that some of those drops are abandoned as homes stop buying service. Over time there can be a sizable inventory of unused drops that aren’t driving any revenue – I’ve seen this grow to as many as 5% of total drops over time.
  • Another cost consideration is maintenance costs. We know from long experience that wireless networks require a lot more tinkering and maintenance effort than fiber networks. Fiber technology has gotten so stable that most companies know they can build fiber and not have to worry much about maintenance for the first five to ten years. Fiber technology is getting even more stable as many ISPs are moving the ONTs inside the premise. That’s going to be a hard to match with 5G wireless networks with differing temperatures and precipitation conditions.

We won’t be able to make this cost comparison until 5G electronics are widely available and after a few brave ISPs suffer through the first generation of the technology.

Spectrum. Spectrum is a huge issue. Verizon and other big ISPs are going to have access to licensed spectrum for 5G that’s not going to be available to anybody else. It’s likely that companies like Verizon will get fast speeds by bonding together multiple bands of millimeter wave spectrum while smaller providers will be limited to only unlicensed spectrum bands. The FCC is in the early stages of allocating the various bands of millimeter wave spectrum, so we don’t yet have a clear picture of the unlicensed options that will be available to smaller ISPs.

Faster speeds. There are some fiber overbuilders that already provide a gigabit product to all customers, and it’s likely over time that they will go even faster. Verizon is reporting speeds in the first 5G deployments between 300 Mbps and a gigabit, and many fiber overbuilders are not going to want a network where speeds vary by local conditions, and from customer to customer. Wireless speeds in the field using millimeter wave spectrum are never going to be as consistently reliable and predictable as a fiber-based technology.

Summary. It’s far too early to understand the potential for 5G wireless loops. If the various issues can be clarified, I’m sure that numerous small ISPs will consider 5G. The big unknowns for now are the cost of the electronics and the amount of spectrum that will be available to small ISPs. But even after those two things are known it’s going to be a complex decision for a network owner. I don’t foresee any mad rush by smaller fiber overbuilders to embrace 5G.

Fighting Spoofing

One of the biggest problems with the telephone network today is spoofing – where robocalls are generated using stolen numbers to mask the identity of the caller. Spoofing and robocalls are the biggest source of complaints to the FCC and NANC (the North American Numbering Council) reports that in 2016 there were 2.4 billion robocalls per month – a number that has surely grown. As recently as a year ago I rarely got robocalls on my cellphone but now get half a dozen per day.

The FCC called upon NANC to find a solution to the problem. NANC used the Call Authentication Trust Anchor Working Group to find a solution to the problem. In May of this year the FCC accepted the recommendations of this group to implement a ‘taken’ system to authenticate that calling numbers are authentic.  Last week Chairman Ajit Pai asked the industry to speed up implementation of the solution, warning that the FCC would issue an order to do so if the industry didn’t solve the problem quickly.

The proposed solution involves a new process used to authenticate the originating telephone number for calls. The concept is to issue ‘tokens’ to carriers that allow them to authenticate, in real-time, that the originating number of a telephone call is really from the party that owns the number. This will mean a whole new overlay on the PSTN to make this validation quickly before a call is terminated.

In addition to developing the specifications for how the process will work, the NANC working group recommended the following industry process for making this work:

  • The industry needs to select a governance authority to take ownership of the process so that it’s implemented uniformly across the industry;
  • The working group also recommended that a policy administrator be chosen that will administer the day-to-day implementation of the new process;
  • The working group also recommended specific roles and responsibilities for the governance authority and policy administrator;
  • Set the goal to have those two entities in place within a year. I think the FCC Chairman’s frustration is due to the fact that this was recommended in May 2018 and I don’t think that the governance authority or policy administrator have been chosen.

Of course, this means a new industry protocol and process and comes with a slew of new acronyms. Primary among this is SHAKEN which represents new SIP protocols used specifically for purpose of creating the all authentication tokens. Also used is STIR (secure telephone identity revisited) which is the IETF group that created the specific protocols for telephony. This leads to the cute acronym SHAKEN/STIR which is being used to describe the whole process (and which would definitely not be approved by James Bond).

The working specifications recognize that what is being prepared is just the first step in the process. They understand that as soon as they implement any solution that spammers will instantly begin looking for workarounds. The initial concept is to first begin be implementing this with the largest carriers and that will still leave a lot of holes with numbers assigned to smaller carriers, numbers deep inside PBX trunk groups, numbers used for Internet calling like Skype. However, the goal is to eventually cover the whole industry.

The concept is that this is going to have to be a dynamic process. I envision it much like the software companies that build spam filters. The group making this work will have to constantly create patches to fix vulnerabilities used by spammers. I have my doubts that anything like this will ever fully stop spoofing and that spammers will always be one step ahead of the spoofing police.

This is a concern for small carriers because it sounds like something new that a voice provider is going to have to pay for. It’s likely that there will be vendors that can do this for small carriers, but that sounds like another check to write to be able to provide voice service.

Can You Trust Your Small ISP?

FCC Commissioner Michael O’Rielly recently made a speech at the Media Institute “Free Speech America” Gala in which he made some serious allegations against municipal broadband. From that speech:

In addition to creating competitive distortions and misdirecting scarce resources that should go to bringing broadband to the truly unserved areas, municipal broadband networks have engaged in significant First Amendment mischief. As Professor Enrique Armijo of the Elon University School of Law has shown in his research, municipalities such as Chattanooga, Tennessee, and Wilson, North Carolina, have been notorious for their use of speech codes in the terms of service of state-owned networks, prohibiting users from transmitting content that falls into amorphous categories like “hateful” or “threatening.” These content-based restrictions, implicating protected categories of speech, would never pass muster under strict scrutiny. In addition to conditioning network use upon waiver of the user’s First Amendment rights, these terms are practically impossible to interpret objectively, and are inherently up to the whim of a bureaucrat’s discretion. How frightening.

Let me address the three allegations he’s made against municipal broadband:

Municipalities create competitive distortion. The fact is that most US markets have almost no real competition – they instead have weak competition between a cable company and telco. O’Rielly is repeating a familiar talking point of the big ISPs who don’t want any competition. Customers love real competition whether it comes from a municipal provider or from a fiber overbuilder.  Consumer Reports recently listed the Chattanooga municipal ISP cited by O’Rielly as the ISP with the highest customer satisfaction in the country. I think what O’Rielly and the big ISPs call market distortion, consumers would call real competition.

Municipalities misdirect needed investments from unserved areas.. This is a particularly ironic statement. Wilson, Greenlight used those ‘scarce resources’ to build fiber to the nearby tiny unserved town of Pinetops, NC. Anti-municipal legislation in in North Carolina first required that Wilson not bill outside of their city boundaries. That same legislation then forced Wilson to sell or abandon the network when Suddenlink decided by build in the town.

Anybody who knows the industry knows that the big ISPs are not investing a single nickel of their own money in rural broadband. The big ISPs have been willing to spend the FCC’s tax money to implement 10/1 Mbps broadband from the CAF II program, but otherwise they don’t care a whit about the unserved areas of the country. I’m really not sure who Commissioner O’Rielly thinks will invest in rural America if the FCC precludes rural towns, counties and townships from solving their local lack of broadband.

Municipalities restrict First Amendment rights of customers. This allegation is almost too ridiculous to respond to. Take the example of Wilson, North Carolina, who the Commissioner singled out. The wording of the Wilson terms of service are nearly identical to the terms of service from Charter, the largest ISP in the region. I’ve not done the same comparison for Chattanooga, but I’ve done so for around twenty other municipal ISPs and they all typically mimic the terms of service of their commercial competitors.

A have a lot of clients that are municipal fiber providers, fiber overbuilders and small telcos. I can’t think of one example over the last decade when one of my clients unilaterally shut down a customer for things they’ve said on the web. They mimic the terms of service from the big ISPs, because all ISPs are occasionally asked by law enforcement to shut down a user who is harassing somebody or otherwise engaging in nefarious, illegal or other bad practices on the web. The terms of service give the ISPs the cover to disconnect customers under such circumstances.

Commissioner O’Rielly has it backwards and it’s the big ISPs that daily violate the trust of their customers. Small ISPs don’t use deep packet inspection to read emails or messaging. Small ISPs don’t record and then sell or use customer web search history. Small ISPs don’t track what their customers do on the web. Smalll ISPs don’t monetize their customer’s data.

Commissioner O’Rielly ought to talk with some customers of the two ISPs he’s singled out. Those customers will tell them that they trust their local municipal ISP far more than they trust Comcast or Charter or AT&T. The Commissioner’s talking points come straight from the big ISP lobbyists and he further supports his position by citing a discredited whitepaper paid for by the big ISPs. If the Commissioner spent more time outside the Beltway he’d find out that people love and trust their small ISPs – be that a municipality, a fiber overbuilder or a small telco.

Where Will 5G Find Fiber?

I was talking to one of my clients about 5G. This particular client is a fiber-overbuilder and they verified something I’ve suspected – they don’t plan to ever make any of their fiber available for a 5G provider wanting to deploy 5G small cell sites. They reason that 5G point-to-point radios, like Verizon is now launching, would compete directly with their retail broadband products and they can’t think of a scenario where they would assist a competitor to poach their own retail customers.

This is a break with the past because this client today provides fiber to a number of the big cellular towers and hopes to continue those sales. These are good revenue and help to offset the cost of building fiber to the towers. This leads me to ask the title question of this blog – where are the 5G providers going to find the needed fiber? A lot of the rosy predictions I’ve read for widespread 5G deployment assume that 5G providers will be able to take advantage of the fiber that’s already been deployed by others, and I’m not so sure that’s true.

I have no doubt that big backhaul fiber providers like Level 3 or Zayo will sell 5G connectivity where they have the capacity. However, much of their fiber network is not strategically located for 5G. First, 5G networks are going to need to get to numerous poles, and that requires fiber with existing access point. Much of the fiber built by companies like Level 3 was built to get to specific buildings or big cellular towers that anticipate the need for other access points. These fiber companies are also leery about tapping into fibers feed their largest customers, who often pay extra for guaranteed service. A lot of their fiber is underground and not easy to get to the needed pole connections.

Of more relevance is that these carriers are not going to own a lot of fiber that goes deep into neighborhoods where the 5G providers want to deploy. Most of the fiber built deep into residential neighborhoods has been built by fiber-to-the-premise overbuilders or cable companies. These companies use their fiber to sell retail broadband to residents and businesses. Fiber overbuilders, from Google Fiber down to the smallest municipal fiber network are not likely to sell fiber to the pole in neighborhoods where they are already a retail ISP.

The cable companies are not going to make their fiber available for 5G – they’ve made it clear that their future path lies in the DOCSIS 3.1 upgrades, including upgrading beyond gigabit speeds as needed. All of the major cable companies have said that have the ultimate end-game of fiber-to-the-premise. They’ve all cited 5G as one of the reasons they are increasing speeds and are not likely to sell access to a major competitor.

AT&T is the only other carriers with an extensive fiber network that goes deep into many neighborhoods. However, AT&T has been building FTTP connections in neighborhoods where they have fiber. For now, they don’t intend to mimic Verizon and are going to stick with FTTP rather than 5G. It would be tactically smart for AT&T to refuse to sell 5G connections to others. But AT&T is the hardest company in the industry to predict because they wear so many hats, and their retail fiber ISP business is in a different business silo than their wholesale fiber connection business – so who knows what they will do.

I don’t see a glut of existing fiber sitting waiting to sell to 5G providers. That seems to be the major hurdle for the rapid 5G deployment that the FCC, the White House and the cellular carriers have all been loudly touting. How many 5G companies are going to want to make the gigantic needed investment in fiber to get deep into neighborhoods?

I think the folks in Washington DC have gotten a false sense of the potential for 5G by seeing what Verizon is doing. But Verizon is taking advantage of the many billions of dollars of fiber they have already built over the years, and their 5G network is going to follow that fiber footprint. There are not many other companies with a glut of fiber that can be leveraged it in the same manner as Verizon.

Verizon has already announced that they will be passing roughly 11 million homes with fiber. They can be that specific because they know what’s close to their existing fiber. I doubt that they are going to expand anywhere else, just like they didn’t expand FiOS where the construction costs weren’t low. If Verizon can’t afford to deploy 5G where they don’t already have fiber, then how can anybody else justify it? Deploying 5G is like deploying any new network – it is only going to make financial sense where deployment costs are reasonable – and for now that means where there is already easy access to fiber. I think the opportunities for rapid 5G deployment are a lot less than what policy-makers think.

‘Tis the Season for Rate Increases

Charter just announced their annual rate increases for cable TV and broadband. They are usually the first of the big companies to announce since they increase rates in November, while most other big companies do so after the new year.

The announced increases include the following:

  • The Broadcast TV surcharge will increase from $8.85 to $9.95 per month.
  • Settop box fees will increase from $6.99 to $7.50 per month.
  • Broadband prices for customers who are bundled with cable TV will increase from $54.99 to $59.99 per month.
  • Broadband prices for standalone broadband (no cable TV) will increase from $64.99 to $65.99 per month.

The cable TV increases follow the pattern we’ve seen among the big cable companies in that they are raising ancillary fees instead of the basic prices for cable packages. The Broadcast TV surcharge, which is paid by every TV subscriber, covers the costs of retransmission fees that Charter pays to over-the-air networks like ABC, CBS, FOX and NBC. Most customers probably think this is included in the cost of basic cable service, but by shifting this to a separate fee the cable companies can continue to advertise a low price for basic cable. I know what a lot of my clients pay for retransmission fees, and none of them are yet paying $9.95 per month, so it looks like Charter is padding this number with some profits.

I’m surprised that the Federal Trade Commission hasn’t slapped one of the cable companies for this billing practice. They have created ancillary fees like the Charter’s Broadcast TV surcharge along with other fees such as a ‘sports fee’ in order to be able to advertise prices that are lower than what customers pay. When a new customer subscribes to cable they often end up paying $15 – $20 more than the advertised price.

The settop box fee is another place where cable companies make a lot of money. Charter probably pays no more than $100 for a settop box, so their new increased fee of $7.50 per month pays back the cost of the box in only 13 months. The box fee is the most profitable part of the cable business since customers tend to keep settop boxes for an average of 5 years or more. At least Charter’s settop box rate is lower than the $9.95 currently charged by Comcast.

The real headline is the increase in broadband rates. I was just talking to a client yesterday who mentioned that they hadn’t changed broadband prices in over fifteen years. We have now entered an era where cable companies are likely to raise broadband prices every year. They are losing cable customers and telephone customers every year. While broadband customers are still increasing, the growth is now due to continued poaching of DSL customers since the overall pool of broadband customers is no longer growing rapidly. This means that the only way Charter and other cable companies will be able to meet Wall Street earnings expectations in the long-run is by raising broadband rates.

The $5 rate increase for bundled broadband is the largest broadband rate increase I’ve ever seen. Charter doesn’t disclose the number of customers that buy bundles. My firm, CCG conducts surveys for customers and we typically see around 70% of households buying a bundle of services. If 70% of Charter’s 24 million broadband customers are in bundles this equates to $1 billion in new annual revenues and bottom line for the company. Charter won’t realize the whole $1 billion since some customers are going to be under term contracts, but this is still by far the largest increase in broadband prices I’ve ever seen.

Interestingly, Charter just made it easier for customers to cut the cord. Before the rate increase there was a $10 per month differential between the price of bundled and unbundled broadband – meaning that somebody that dropped Charter cable would have seen a $10 rate increase. That penalty is now lowered to $5 per month. However, Charter just made up for that with the big rate increase.

Charter has recently increased broadband speeds across-the-board. They advertise that the minimum speed for their basic product has been increased from 100 Mbps to 200 Mbps (although in my markets speeds have increased from 60 Mbps to 135 Mbps). I’m guessing that Charter is hoping the speed increases will help to justify the $5 broadband rate increase that a lot of their customers are going to see.

Delays in Satellite Broadband

One of the big unknowns for rural broadband is if there will ever be a better satellite broadband option. The industry was surprised last year when Elon Musk announced that he planned to blanket the earth with over 4,000 satellites and operate as a worldwide ISP under the newly formed Starlink. These satellites would be launched by SpaceX, another Elon Musk company that that provides commercial rocket launches.

I’ve been following the financial news about the Elon Musk family of businesses, and about SpaceX and Starlink more specifically, since a successful launch of the business could provide another rural option for broadband.

There are several financial analysts predicting that Starlink is now largely on hold, due mostly to funding issues. They report that Starlink has stopped hiring the new employees needed to implement the business plan. Further, it appears that SpaceX needs up to $10 billion to fulfill its own business plan and that any money raised by the company is likely to go there first before Starlink is funded. At a minimum this probably means a major delay in satellite launches for Starlink.

These analysts warn that the SpaceX business plan is not yet solid. The commercial launch business is now seeing other major competitors. ULA, the existing major competitor to SpaceX has been stepping up their game. Boeing is behind Space Launch Systems, another newcomer to the field. Jeff Bezos of Amazon has started Blue Origin and has started construction on a spaceflight center in Florida. There is also a new competitor announced in Japan. The competition is going to drive down the cost of space launches and will also spread the launches among numerous parties, diluting any early advantage enjoyed by SpaceX.

SpaceX was counting on riding the coattails of other commercial launches to get the broadband satellites into space. The company is scheduled to complete 28 launches by the end of this year but is only scheduled so far for 18 launches in 2019. The company is also banking on making money from selling commercial space travel to rich tourists, but the analysts doubt that will be enough revenue to keep the company afloat.

Starlink had originally announced plans to have 40 million broadband subscribers generating $30 billion in annual revenues by 2025. That’s an average revenue per customer of $63 dollars per month. It now looks like the date for getting the company started will be significantly delayed. Starlink launched two test satellites earlier this year, but has not reported how they performed.

I’ve also wondered if Starlink would strongly pursue the residential broadband business in North America. While they will be a great alternative for rural America, they will be just another player in cities. Being an ISP makes a lot more sense in those parts of the world where the company could enjoy a near-monopoly.

In the US and Canada there is probably a lot more money to be made instead by serving the many proposed small cell sites if 5G turns out to be a relevant business plan. Starlink says they can deliver speeds of a gigabit or more to a given customer, but the math behind the bandwidth available at any given satellite means that would only be available to a relatively small number of customers rather than to the whole residential market. Speeds for residential broadband are likely to be at much lower speeds. However, gigabit satellite broadband could be the backhaul solution that 5G needs and might let it escape the bottleneck of needing fiber everywhere. I’ve never seen any discussion of such a partnership, but that’s probably because the satellite business is still somewhat theoretical and at a minimum, delayed from the original projected time line.

Disasters and Regulation

Both Ajit Pai, the Chairman of the FCC and Governor Rick Scott of Florida have expressed frustration over the speed of recovery of communication in the Florida Panhandle following hurricane Michael. I don’t think anybody expects communications to be restored quickly in the neighborhood by the shore where even the houses are gone, and the frustration is more with lack of communications in areas that were damaged, but not totally devastated.

There are a number of issues to be considered when looking at the slow recovery – regulation, technology and the profitability of the telecom carriers.

The regulatory issues are pretty clear. Back when AT&T or some smaller independent telephone company would have served this area we would have seen the same sort of response from the telephone companies as we see today from the power companies. AT&T and other telcos from around the country would have mobilized swarms of technicians to replace fallen wires. The electronics vendors would have gone to extraordinary lengths to shuffle and direct all of their resources to the disaster areas.

We had plenty of hurricanes during the time when we had telephone monopolies and the telephone linemen were out working as furiously as the power companies to restore service. I remember from the time when I worked at Southwestern Bell that the company had disaster plans in place and routinely reviewed the plans with employees who might be activated during emergencies – the company made disaster a recovery an everyday part of operating the monopoly business.

But the days of monopoly are long past. The phone company is now far from a monopoly and probably only serves a small percentage of the customers in any given area. The big telcos have had huge layoffs over the years and don’t have the staffs that can swarm the area. I wouldn’t be surprised if they don’t even have disaster plans.

Cable companies are the closest thing we have to monopolies and I expect them to put wires back in a reasonable time after a bad storm – but there are many parts of the hurricane-struck area that aren’t served by a cable company. A cable company is still not likely to get the same swarm of technicians like we saw in the regulated telco days.

As we saw with hurricane Sandy, the telcos no longer rushes to fix the damage. After that storm Verizon decided that they weren’t going to fix the copper and used the storm as an opportunity to switch customers to all-wireless cellular broadband. That’s not a change that can be implemented quickly and we saw some of the areas after Sandy without telecom for months. I expect AT&T is going through the same thought process for much of the area from hurricane Michael and is not going to put back copper wires.

There are also technical issues to consider. I’m willing to bet that the primary cause of frustration is the slow recovery of the cellular towers. Unlike the telephone network there is little redundancy built into the cellular networks. When the towers, antennae and equipment huts around a tower are damaged there is no quick fix, and replacements need to be shipped in. Unlike the major coordinated disaster plans of the old Ma Bell, I doubt that the cellular carriers have react-immediately disaster recovery plans. That kind of planning costs money. The companies would need to hold dozens of cell sites in place as spares that were ready to be shipped out on a moment’s notice. That’s not profitable and there is no regulatory agency insisting that the cellular companies have such plans in place.

As the technology at the edge increases, the time needed for recover from a disaster increases. I remember that this was a concern for telcos when they first placed DSL cabinets in neighborhoods – they knew it would take a lot longer to recover from destroyed electronics compared to the days when the outside network was most just copper wires. The cellular networks are the same, and we are about to enter a time when 5G and other new technologies will place electronics deep into neighborhoods. As slow as the recovery might be for hurricane Michael, it’s going to be worse when we are relying on dispersed 5G electronics deep in the field – it takes longer to fix the electronics and the backhaul networks than it is to put wires back on poles.

The issue that nobody wants to talk about is that all of the big companies in the telecom market are now publicly traded companies that exist to maximize quarterly earnings. Having disaster plans in place costs money – and the big companies these days don’t spend anything extra that’s not mandatory. Call it lack of regulation or call it an emphasis on the profit motive, but the big ISPs and cellular companies have no motivation or incentive to make extraordinary efforts after a disaster. I doubt that the existing regulatory powers even give the FCC any authority to impose such rules – particular with broadband, since the FCC says they are no longer regulating it.

Will South Dakota Get 5G?

The Senate Commerce Committee held a recent hearing in Sioux Falls, South Dakota talking about the benefits that 5G will bring to the state. The hearing was chaired by Senator John Thune, who’s one of the primary telecom-related members of Congress.

A local paper quoted Thune as claiming that 5G is going to transform the economy of the country and of the state. He cited the same 5G talking points used by the FCC in their recent order that mandated cheap and fast connections to poles for 5G transmitters. Thune also said we’re in a race with China, Japan and South Korea and that we can’t afford to lose the 5G race.  FCC Commissioner Brad Carr was at the hearing and said that 5G could bring hundreds of millions of dollars of economic benefit to the state. He also estimated that realizing the benefits of 5G would require hundreds of thousands of small cells mounted on poles and light poles in the state.

The numbers cited in this hearing stun me. What would it mean to have hundreds of thousands of 5G transmitters on poles in South Dakota and could such a network create hundreds of millions of benefits for the state? I decided to try to put those numbers into context.

I still don’t know what a 5G transmitter on a pole will cost. I’ve heard that a full-blown small cell site currently costs more than $15,000 – but I have to assume that in order to make this even reasonably profitable that most of the devices in a 5G network will have to cost far less (and likely have far less functionality than a full-blown small cell site). Assuming thst that manufacturers will somehow get the installed price down to $2,500 each, then deploying on 200,000 poles (derived from “hundreds of thousands of poles”) equates to a cost in the state for just for the pole electronics of $500 million. This doesn’t include the cost of the fiber and other backhaul costs needed to support the 5G gigabit network.

I look at that $500 million number, knowing that it’s only a portion of the cost of deploying 5G and I wonder who is going to make that kind of investment in South Dakota. It’s not going to be the two primary incumbents, CenturyLink or Midco, the primary cable TV incumbent. It’s unlikely that Verizon owns any significant amounts of fiber in the state and they are not likely to do much there. I look around the industry and I can’t see any major player who would make a $500 million investment in a state with so few people.

Consider the demographics. South Dakota is one of the least populated states and the Census estimates the population to be around 870,000 with almost 400,000 housing units. The biggest city is Sioux Falls with a population of 176,000, Rapid City has 70,000 and cities are much smaller after that. When you get outside the cities it’s one of the least densely populated states.

Even if somebody made that kind of investment in South Dakota, how do they make their money back? Very few large public companies today are willing to earn infrastructure returns on investments, which is one of the primary drivers of our infrastructure crisis. Almost nobody other than governments are willing to invest in projects that have 10 and 20-year paybacks. This is the primary reason why no big ISPs are building residential fiber-to-the-home. It’s hard to envision the paybacks for 5G being much faster than fiber.

If I do the math on a $500 million investment, it would require a new revenue stream of $35 per month for every one of the 400,000 households in North Dakota to repay that investment in 3 years. Even at 6 years that’s still $17.50 per month for every household in the state. When you consider that only a much smaller percentage of people would somehow pay for some sort of theoretical 5G product, the cost per potential customer becomes gigantic – if 25% of the people in the state somehow bought a 5G product that would require a new expenditure of $70 per home per month to pay this investment off in the six years that Wall Street might find acceptable.

Of course, the investment is not just $500 million because there are a lot of other costs to bringing a widespread 5G network. To build the kind of network envisioned at the Congressional hearing has to cost far north of a billion dollars, any possibly several billions if a lot of fiber has to be built. That makes me wonder what the 5G hype is all about. It’s hard to envision anybody making this kind of investment in South Dakota. I’m not busting on South Dakota because this same cost to benefit applies to any place outside of large NFL cities with a high density of households.

I don’t have a crystal ball and I can’t say that somebody won’t invest in 5G in states like South Dakota. But I understand business plans and paybacks and I can’t foresee any of the current big ISPs in the industry making the needed investments where housing density is low. Smaller ISPs can’t raise the huge amount of needed money. It’s certainly possible that some of the neighborhoods a few cities in the state might see some 5G, but that’s probably not going to be on anybody’s radar for a while. I’m skeptical because I just can’t see a way to make the math work.

Deploying 5G – It’s no Panacea

This was published last week as an article on WRAL Techwire, a Raleigh TV station. 

If you read many articles about 5G, you’d think that we’re on the cusp having wireless broadband brought to most homes in America, providing homes with another option for broadband. This idea was recently bolstered by news that Verizon plans to offer 5G wireless broadband to as many as 11 million homes over the next few years.

However, Verizon has one huge advantage over the rest of the market in that they already own an extensive fiber network that reaches to cellular towers, large businesses, schools, large apartment complexes and high-rise buildings. Verizon plans on leveraging this existing network to bring wireless broadband to neighborhoods lucky enough to be near to their fiber. It’s unlikely that anybody else will copy the Verizon business plan – the other big telcos with large fiber networks, AT&T and CenturyLink, have made it clear that they are not pursuing 5G broadband to homes.

Verizon has a second benefit that few others share. As a huge cellular carrier, Verizon will benefit by relieving the pressure on their cellular networks in neighborhoods where they offer 5G. The bandwidth being demanded on cellular networks is the fastest growing sector of the industry with total bandwidth requirements doubling every 18 months. Verizon will save a lot of money by not having to bolster their cellular backbones in 5G neighborhoods.

So, what would it take for anybody else to provide the same 5G wireless technology as Verizon? The 5G technology relies on the placement of small transmitters on utility poles or street lights and the FCC just passed rules making it easier for a provider to get the needed connections. Each transmitter will be able to wirelessly transmit broadband to homes or businesses in the immediate area. Verizon press releases say the effective distance for delivering a signal is up to 2,000 feet, but most of the industry thinks the realistic distance is closer to 1,000 feet. That means that any given pole-transmitter will be able to ‘see’ anywhere from a handful up to a few dozen homes, depending upon what’s called line-of-sight. The 5G spectrum requires a relatively clear path between the transmitter and a dish placed on the home – and that means that 5G is best deployed on straight streets without curves, hills, dense tree cover or anything that decreases the number of homes within range of a transmitter.

The first-generation Verizon technology claims broadband speeds of around 300 Mbps, with the goal to eventually reach gigabit speeds. That level of bandwidth can only be delivered to the pole-mounted unit in two ways – with fiber or with a high-bandwidth wireless link. If wireless backhaul is used to bring broadband to the poles there can be no obstructions between the pole units and the wireless basestation – unlike many kinds of wireless transmission, high-bandwidth wireless backhaul can’t tolerate any obstructions in the transmission path. That requirement for pure line-of-sight will make wireless backhaul impractical in many neighborhoods.

Where wireless backhaul won’t work a 5G network will require fiber to each pole transmitter. The cost of building fiber to neighborhoods is the biggest barrier to widespread 5G deployment. It’s expensive to string fiber in residential neighborhoods. The cost of putting fiber on poles can be expensive if there are already a lot of other wires on the poles (from the electric, cable and telephone companies). In neighborhoods where other utilities are underground the cost of constructing fiber can be exorbitantly high.

To summarize, a 5G network need transmitters on poles that are close to homes and also needs fiber at or nearby to each pole transmitter to backhaul these signals. The technology is only going to make financial sense in a few circumstances. In the case of Verizon, the technology is reasonably affordable since the company will rely on already-existing fiber. An ISP without existing fiber is only going to deploy 5G where the cost of building fiber or wireless backhaul is reasonably affordable. This means neighborhoods without a lot of impediments like hills, curvy roads, heavy foliage or other impediments that would restrict the performance of the wireless network. This means not building in neighborhoods where the poles are short or don’t have enough room to add a new fiber. It means avoiding neighborhoods where the utilities are already buried. An ideal 5G neighborhood is also going to need significant housing density, with houses relatively close together without a lot of empty lots.

This technology is also not suited to downtown areas with high-rises; there are better wireless technologies for delivering a large data connection to a single building, such as the high bandwidth millimeter wave radios used by Webpass. 5G technology also is not going to make a lot of sense where the housing density is too low, such as suburbs with large lots. 5G broadband is definitely not a solution for rural areas where homes and farms are too far apart.

5G technology is not going to be a panacea that will bring broadband to most of America. Most neighborhoods are going to fail one of the needed parameters – by having poles without room for fiber, by having curvy roads where a transmitter can only reach a few homes, etc. It’s going to be as much of a challenge for an ISP to justify building 5G as it is to build fiber to each customer. Verizon claims their costs are a fraction of building fiber to homes, but that’s only because they are building from existing fiber. There are few other ISPs with large, underutilized fiber networks that will be able to copy the Verizon roadmap. With the current technology the cost of deploying 5G looks to be nearly identical to the cost of deploying fiber-to-the-home.