Reality Pricing Coming for Online Video

I’ve been a cord cutter for many years and over the last few years, I’ve tried the various vMVPDs that offer channel line-ups that somewhat mimic traditional cable TV. I’ve tried Sling TV, DirecTV Now and Playstation Vue. In every case I’ve always scratched my head wondering how these products could offer prices that are lower than the wholesale price of the content from programmers. There are only two possibilities – either these companies have been setting low prices to gain market share or they had been able to negotiate far better deals for content than the rest of the industry.

Of course, the answer is that they’ve been subsidizing these products. And Wall Street is now pressuring these companies to end the subsidies and become profitable. There is probably no better example of this than AT&T’s DirecTV Now service. When DirecTV Now launched it carried a price tag of $35 per month for about a hundred channels of programming. The low price was clearly set as a reaction to a similarly low price from Sling TV which was the first big successful vMVPD.

Both companies offered line-ups including the channels that most households watch. This included the high-price programming from ESPN and numerous other quality networks. The initial pricing was crazy – a similar package on traditional cable was priced at $60 – $70.

The low pricing has worked for DirectTV Now. They are getting close to surpassing the Sling TV in subscribers. AT&T has featured DirecTV Now in its advertising and has been shuttling customers from the satellite-based DirecTV to the online product.

But AT&T company just got realistic with the product. They have collapsed from four options down to two options now priced at $50 and $70 per month. The company got ready for this shift by eliminating special promotional prices in the fourth quarter of last year. They had roughly half a million customers who were paying even less than their published low prices. When AT&T raised the rates they immediately lost over half of those promotional customers.

Not only are prices rising, but the company has significantly trimmed the channel counts. The new $50 package will have only about 40 channels while the $70 package will have 50 channels. It’s worth noting that both packages now include HBO, which is the flagship AT&T product. HBO is by far the most expensive programming in the industry and AT&T has now reconfigured DirecTV Now to be HBO plus other premium channels.

The new prices are realistic and also include a profit margin. It will be interesting to see how the DirecTV Now customer base reacts to such a drastic change. I’m sure many of them will flee to cheaper alternatives. But the company may also attract customers that subscribe directly to HBO to upgrade.

The big question is if there will be cheaper alternatives? The online industry has been around long enough that it is now out of its infancy and investors are starting to expect profits from any company in this space. The new realistic pricing by AT&T is likely to drive the other online programmers to also get more realistic.

These price increases have ramifications for cord-cutting. It’s been easy to justify cutting the cord when you could ditch a $70 per month traditional cable product for a $35 online one that has the channels you most watch. But there is less allure from going online when the alternative choice is just as expensive as the traditional one. There is always going to be some savings from jumping online – if nothing else customers can escape the exorbitant fees for renting a settop box.

It’s clear that AT&T is counting on HBO as the allure for its online offering. That product is available in a number of places on the web for a monthly rate of $15, so including that in the $50 and $70 product still distinguishes DirecTV Now from the other vMVPD providers.

What is clear by this move is that we are approaching the time when companies are willing to eat huge losses to gain online market share. That market share is worthless if customers leave in droves when there is a rate increase. These big companies don’t seem to have fully grasped that there is zero customer loyalty online. Viewers don’t really care who the underlying company is that is carrying their favorite programming – it’s the content they care about. The big cable companies have to break their long history of making decisions like near-monopolies.

Where’s the CAF II Success?

If you’ve read this blog you know I’ve been a big critic of the FCC’s CAF II program that gave over $10 billion in federal subsidies to the biggest telcos to improve rural broadband. My complaint is that the program set the embarrassingly low goal of improving rural broadband to speeds of at least 10/1 Mbps. My complaint is that this money could have done a huge amount of good had it been put up to reverse auction as was done with the leftover customers from this program last year – many ISPs would have used this funding to help to build rural fiber. Instead, the telcos are using the money mostly to upgrade DSL.

While I think the program was ill-conceived and was a giveaway to the big telco lobbyists, I am at least glad that it is improving rural broadband. For a household with no broadband, a 10 Mbps product might provide basic access to broadband services for the first time. We are now into the fifth year of the six-year program, so we ought to be seeing the results of these upgrades. USTelecom just published a blog saying that deployments are ahead of schedule and that CAF II is a quiet success.

The telcos have told the FCC they are largely on track – by the end of 2018 they should have upgraded broadband for at least 60% of the required households. AT&T and Windstream report that they have made at least 60% of the needed upgrades everywhere. Frontier says they are on track in 27 of the 29 states needing upgrades. CenturyLink says they are on track in only 23 of 33 states that are getting CAF II upgrades. According to USTelecom, over 2.1 million households should now be seeing faster speeds.

It’s also worth noting that the CAF II program should improve broadband for many more households that are not covered directly by the program. For example, when upgrading DSL for a CAF II area that surrounds a town, those living in the town should also see better broadband. The secondary benefit of the CAF program is that rural towns should be seeing speeds increasing from 6 Mbps or slower to as fast as 25 Mbps. By now many more millions of households should be seeing faster broadband due to CAF II.

What I find puzzling is that I would expect to see an upward burst of broadband customers for the big telcos because of CAF II. But the numbers aren’t showing that. There were four telcos that accepted more than $1 billion from the program, as follows, and three of them lost broadband customers in 2018:

Funding Households Per Household 2018 Broadband Customers
CenturyLink $3.09 B 1,190,016 $2,593 (262,000)
AT&T $2.96 B 1,265,036 $2,342 (18,000)
Frontier $1.7 B 659,587 $2,578 (203,000)
Windstream $1.07 B 413,345 $2,595 8,400
Total CAF II $10.05 B 4,075,840 $2,467

Windstream is the only telco of the four that gained customers last year. Windstream’s footprint is probably the most rural of the four telcos. We know that every telco is losing the battle for customers in towns where cable companies are increasing speeds on coaxial networks. Windstream seems to be offsetting those losses, and I can conjecture it’s because they have been selling more rural broadband.

AT&T is in a category all by itself. It’s impossible to know how AT&T is faring with CAF II. They are largely implementing CAF II using their cellular network (with the goal of tearing down rural copper). The company has also been deploying fiber past millions of homes and business in urban areas. They are clearly losing the residential broadband battle in urban markets to companies like Comcast and Charter. However, I can tell you anecdotally that AT&T hasn’t given up on urban copper. They have knocked on my door in Asheville, NC at least three times in the last year trying to sell DSL. I have to assume that they are also marketing broadband improvements in rural areas.

CenturyLink and Frontier are clearly bleeding broadband customers and each lost over 200,000 customers just in the last year. I have to wonder how hard these companies are marketing improved rural broadband. Both companies work in urban and suburban markets but also in numerous county seats situated in rural counties. Like every telco they are losing DSL customers in these markets to the cable company competitors.

Just like I have anecdotal evidence that AT&T is still pushing copper I hear stories that say the opposite for CenturyLink and Frontier. I worked in a few rural counties last year where the CAF II upgrades were reported as complete. And yet the communities seemed unaware of the improvements. Local politicians who bear the brunt of complaints from households that want better broadband weren’t aware of any upgrades – which tells me their rural constituents weren’t aware of upgrades.

I honestly don’t know what this all means. I really expected to find more positive evidence of the impact of CAF II. From what I know of rural America, households ought to leap at the opportunity to buy 10/1 Mbps DSL if they’ve had no broadband in the past. Are the upgrades being done but not being followed up with a marketing and public awareness campaign? Are actual upgraded speed not meeting the 10/1 Mbps goal? Are the upgrades really being made as reported to the FCC? We’re perhaps a year and a half away from the completion of CAF II, so I guess we’ll find out soon enough.

Cord Cutting is For Real

It’s obvious in looking at the performance of cable companies in 2018 that cord cutting is now for real. The fourth quarter count of cable customers for the largest providers was recently reported by the Leichtman Research Group. These companies represent roughly 95% of the national cable market.

4Q 2018 4Q 2017 Change
Comcast 21,986,000 22,357,000 (371,000) -1.7%
DirecTV 19,222,000 20,458,000 (1,236,000) -6.0%
Charter 16,606,000 16,850,000 (244,000) -1.4%
Dish 9,905,000 11,030,000 (1,125,000) -10.2%
Verizon 4,451,000 4,619,000 (168,000) -3.6%
Cox 4,015,000 4,130,000 (115,000) -2.8%
AT&T 3,704,000 3,657,000 47,000  1.3%
Altice 3,307,500 3,405,500 (98,000) -2.9%
Frontier 838,000    961,000 (123,000) -12.8%
Mediacom 776,000    821,000 (45,000) -5.5%
Cable ONE 326,423    363,888 (37,465) -10.3%
  Total 85,136,923 88,652,388 (3,515,465) -4.0%

I’m thinking back to 2017 when most analysts were predicting perhaps a 2% drop in 2018 in total market share due to cord cutting. Since 2018 is only the second year with real evidence of cord cutting, the 4% loss of total market share demonstrates big changes in customer sentiment.

The big losers are the satellite companies which lost 2,361,000 customers in 2018. These losses are offset a little bit since the satellite companies also have the largest online video services. Dish’s Sling TV added 205,000 customers in 2018 and AT&T’s DirecTV Now added 436,000 – but the net customer loss for these companies is still 1.7 million for the year.

In 2018 Comcast and Charter didn’t fare as poorly as the rest of the industry. However, their smaller loss of cable customers is probably due to the fact that both companies saw more than 5% growth of new broadband customers (2.6 million in total) in 2018, and those new customers undoubtedly are shielding cord cutting losses by older subscribers.

It’s still too early to make any real predictions about the future trajectory for cord cutting. We know that price is a large factor in cord cutting and cable providers are still facing huge price increases in buying programming. That will continue to drive cable prices higher. The big cable companies have done their best to disguise recent price increases by shoving rate increases into local programming or sports programming ‘fees’. However, the public is catching onto that scheme and also can still see that their overall monthly payments are increasing.

It’s starting to look like online programming might cost as much as traditional cable TV. For the last few years there have been alternatives like DirecTV Now, Playstation Vue and Sling TV that have offered the most-watched networks for bargain prices. But the recent big rate increase from DirecTV Now is probably signaling that the days of subsidized online programming are over.

Further, the online programming world continues to splinter as each owner of programming rolls out their own online products. The cost of replacing what people most want to watch online might soon be higher even than traditional cable TV if it requires separate subscriptions to Disney, CBS, NBC and the many other new standalone packages that a cord cutter must cobble together. A family that really wants to save money on TV has to settle for some subset of the online alternatives, and the big question will be if households are willing to do that.

But at least for now it looks like cord cutting is roaring ahead. The average loss of traditional cable customers in 2018 is almost 300,000 per month, and the rate of loss is accelerating. At least for now, the industry is seeing a rout, and that has to be scaring boards rooms everywhere.

Predicting 5G CAPEX

If you ever want a bad headache, spend a few hours researching predictions about the future trajectory of capital spending by the big players in the telecom industry. It’s a topic worth following since the big ISPs all said that eliminating net neutrality and other regulation would unleash them to spend lavishly on new networks.

I was looking through projections over the past year that were forecasting capital spending for 2019. My main motivation in looking at these projections was to see if the big companies are actually planning on spending money yet on 5G. I figured the best way to get past all of the 5G hype is to follow the advice from the movie All the President’s Men, and “Follow the money”.

I started by looking at projections from the beginning of 2018. The headlines at that time centered around the big benefits to the industry from the Tax Cut and Jobs Act passed in December 2017. That legislation created an annual benefit to AT&T of $2.2 billion and a benefit to Verizon of $4 billion annually. At the beginning of 2018 industry analysts predicted the companies would roll those savings into increased capital spending. However, like with most big corporations those savings were not rolled back into the business.

There were rosy predictions at the start of last year about 2018 and 2019 capital spending. For example, the analysts at Deutsche Bank Research said in February 2018 that capital spending by the wireless carriers would increase by 14% in 2018 and even more into the future. It’s not hard to understand the enthusiasm of the analysts because the carriers were fueling this story. Early in 2018 Verizon said they would be investing $35 billion in 5G and AT&T said they would invest $40 billion.

This enthusiasm was fueled all last year by promises from AT&T and Verizon to roll out 5G by the end of 2018. In June the analysts at Oppenheimer raised forecasts of capital spending for 2019 by $18 billion by Verizon and $25 billion for AT&T. However, at the end of last year we saw the 5G announcements had been nothing but hype when AT&T announced an imaginary 5G product and Verizon installed fixed wireless in a few hundred homes.

As recently as the fourth quarter of last year a number of analysts were still predicting greater capital spending for wireless this year compared to 2018. For example, MoffettNathanson LLC predicted 2019 capital spending would be up 3.3% in 2019. Most other analysts made similar projections.

As the books closed for 2018 it became obvious that the big wireless companies hadn’t spent nearly as much as expected for the year. For example, Verizon actual spending was $1.5 billion less than their own initial projections. AT&T came in $3 billion less than projected. When real spending materializes you start to understand the complexity of these budgets. For example, AT&T said that part of the reason for lower capital spending was due to delays in the deployment of FirstNet, the nationwide public safety network. I sit here wondering why FirstNet was even included in their capital budget since it’s not being funded from AT&T’s own revenues, but 100% by taxpayers.

By the time I got to looking at 2019 the picture gets incredibly muddled. There are still those predicting 2% to 3% more capital spending for 2019. But we also see the big carriers admitting to their investors that there will be little spending on 5G this year. This first big capital expenditure in 5G will be for the core electronics for 5G cell sites called the RAN. It doesn’t look like there will be a 5G RAN available for a few more years. Both cellular carriers admit that they are not spending much on 4G LTE infrastructure other than working on cell site densification in urban areas through the deployment of small cell sites aimed at relieving pressure on the big tower cell sites.

I’ll be honest that all I got out of this reading was the headache because I still have no idea about how much money these big carriers will spend this year. This is probably not abnormal in an industry under so much flux and I would imagine there are still decisions being made inside these companies every day that will change capital spending even in this year. The one thing I came away with was a clear picture that there will be very little spending in 2019 on 5G, which means that the announcements of the carriers to have 5G cellular products by 2020 are clearly still hype.

But there are still those in the industry with rosy predictions. The research firm IDC predicts that spending on 5G core equipment will increase worldwide from $500 million this year to $26 billion per year in 2022. Ericsson is predicting that 5G will account for 50% of mobile subscriptions in the US by 2023 along with a worldwide penetration at 20% that year. That seems to be in conflict with Cisco which recently predicted worldwide 5G penetration of 3% by the end of 2022. I have no idea which of these predictions is right, but I now know that we can’t put any faith in predictions about 5G spending or deployment, so perhaps all of this reading was not in vain.

Ending Bans on Broadband Deployment

The big telcos have been successful over the years in squashing competition. When there’s been an opportunity, they’ve marshalled through legislation to block local governments and cooperatives from entering the broadband business. There is no better way to protect legacy revenues than by legally barring those entities that might decide to compete by building better broadband.

A number of states have laws that ban electric cooperatives from offering broadband. It amazes me how such laws came into place. Some legislator wrote and got enough votes to enact a law that tells customer-owned companies that they can’t put fiber on the poles and the rights-of-ways that they already own. I find it hard to believe that politicians would directly oppose the rural citizens who own cooperatives. The only explanation for such laws is the lobbying and donations made to politicians by the big telcos.

If you’ve never looked at the locations of electric cooperatives, most are extremely rural – they were created to build bring electricity to the places where no commercial electric company would make the investment in infrastructure. It’s not a coincidence that these are the same rural areas where the big telcos stopped making investments decades ago, and these are the many of the same rural places with poor or nonexistent broadband.

The tide is turning, and a number of states are reversing these laws to enable electric cooperatives to get into the broadband business. Last June the state of Indiana passed the Facilitating Internet Broadband Rural Expansion (FIBRE) Act that enables electric cooperatives to build and operate fiber networks. Since that act, several Indiana Cooperatives such as Jackson County Rural Electric Membership Corporation, South Central Indiana REMC, and Orange County REMC have decided to deploy fiber networks to reach rural customers. A number of other cooperatives are considering broadband deployment.

In January of this year the legislature in Mississippi unanimously approved the Mississippi Broadband Enabling Act that allows the 25 electric cooperatives in the state to build broadband networks.

In Texas, Senator Robert Nichols introduced SB 14, legislation modeled after Indiana’s FIBRE Act to enable the electric cooperatives in the state to provide broadband.

It’s clear to me why the tide has turned in favor of electric cooperatives and municipalities building fiber networks. In the numerous rural counties I have visited in the last year the local politicians have been telling me that lack of broadband is the number one issue in their jurisdiction. Homeowners without broadband are demanding that local politicians find a broadband solution. Members of rural electric cooperatives are begging their Boards to build fiber.

I think it’s starting to dawn on many rural communities that nobody has plans to bring them broadband. I’ve talked to numerous rural households and farmers in the last year who describe the agony of raising school kids in a home with no broadband or in operating a farm that’s at an automatic disadvantage to farms that have broadband. Rural communities are starting to realize that they must find their own broadband solution.

It’s easy to draw a parallel between what’s happening today and what happened a century ago when these same rural areas figured out a way to bring electricity to their communities. They looked then in envy at the towns with electricity in the same way that rural residents today can see broadband just out of their grasp.

We recently conducted a survey for a rural electric cooperative where every respondent to the survey was in favor of bringing fiber – even those households who didn’t own a computer or want broadband in their own homes. I’ve never before seen a survey where everybody supported fiber broadband.

These laws are passing because rural residents are fed up with the inaction of the big telcos. It’s just as extraordinary to see the Mississippi law passed unanimously to oppose the big telcos as it is to see every resident of a community support broadband. The tide has definitely turned.

5G vs. WiFi

The big cellular carriers envision a future where every smart device is connected to their cellular networks rather than to WiFi. They envision every home having to pay a monthly subscription to maintain connectivity for their wired devices. They envision every new car and truck coming with a subscription to cellular service.

I notice that the cellular providers talk about generating IoT revenues, but they’re never specific that the real vision is for everybody to buy additional cellular subscriptions. Most IoT applications will be low-bandwidth yet the carriers have been spreading the false message that 5G is all about faster broadband. I just saw another ludicrous article yesterday predicting how 5G was going to bring mobile gigabit broadband to rural America – a pure fantasy that is being fed by the public relations machines at Verizon and AT&T.

We aren’t seeing much press about the most important aspect of the new 5G specifications – that each cell site will be able to make up to 100,000 simultaneous connections. This isn’t being done for cellphones. It’s rare these days except in a few over-crowded places for a cellular call not to be connected. Placing a few small cell sites at the busiest places in most cities could solve most cellular bottlenecks without an upgrade to 5G.

The 100,000 connections give the wireless carriers the tool that can make a connection to every smart TV, smart washer and dryer, home video camera, burglar alarm sensor and every other wired device in a home. The big carriers are launching a direct challenge to WiFi as the wireless technology of choice for connecting our devices.

AT&T and Verizon envision every home having a new $10, $20 or $30 subscription to keep all of the devices connected. They also envision becoming the repository of all IoT data – moving them in front of Google and others in the chase for collecting the big data that drives advertising revenues. This is something they definitely don’t talk about.

It doesn’t take much of a thought exercise to understand that 5G is not about faster cellular service. Cellular subscribers will gladly take faster cellular broadband, but they probably aren’t willing to pay more for it. T-Mobile is already making that clear by announcing that they won’t charge more for 5G. The carriers are not going to spend tens of billions to implement 5G cellular technology that doesn’t drive the new revenues needed to pay for it. 5G is about IoT, plain and simple.

Today all of our home devices use WiFi. While WiFi is far from perfect, it seems to do an adequate job in connecting to the video camera at the front door, the smart TV, and the sensors in various appliances and devices around the home. WiFi has a few major advantages over cellular broadband – it’s already in our homes and connected to our devices and doesn’t require an additional monthly subscription.

I think people will resist another forced subscription. HP recently reported that the vast majority of their customers that buy 4G LTE-enabled laptops disable the cellular connection almost as soon as the new computer is out of the box. In this day of cellphones, very few car owners sign-up for the cellular subscription for OnStar when the free trial expires. I know that I personally would not buy a home device that eventually needed another cellular subscription to function.

The cellular carriers make a valid point in saying that WiFi is already growing inadequate for busy homes. But there are already short-term and long-term fixes on the way. The short-term fix is the upcoming migration to WiFi 6 using the 802.11ax standard. The new WiFi will better use MIMO antennas, frequency slicing and other techniques to allow for prioritization of devices and a more reliable connection to multiple devices.

The ultimate indoor broadband network will be a combination of WiFi and millimeter wave, or even faster spectrum. Higher frequency spectrum could provide bandwidth for the devices that use big bandwidth while keeping other devices on mid-range spectrum WiFi – getting the best from both sets of spectrum. That combination will allow for the easy integration, without interference for the connection of gigabit devices and also of tiny sensors that only communicate sporadically.

This is not the future that AT&T and Verizon want, because this is a world controlled by consumers who buy the wireless boxes that best suit them. I envision a future indoor-only wireless network that won’t require licensed spectrum or a cellular subscription since the millimeter waves and other higher frequencies won’t pass outdoors through walls.

The cellular carriers will have a monopoly on the outdoor sensor market. They will undoubtedly make the connections to smart cars, to smart agriculture, and to outdoor smart city sensors. But I think they will have a huge uphill battle convincing households to pay another monthly subscription for something that can be done better using a few well-placed routers.

One-Web Launches Broadband Satellites

Earlier this month OneWeb launched six test satellites intended for an eventual satellite fleet intended to provide broadband. The six satellites were launched from a Soyuz launch vehicle from the Guiana Space Center in Kourou, French Guiana.

OneWeb was started by Greg Wyler of Virginia in 2012, originally under the name of WorldVu. Since then the company has picked up heavy-hitter investors like Virgin, Airbus, SoftBank and Qualcomm. The company’s plan is to launch an initial constellation of 650 satellites that will blanket the earth, with ultimate deployment of 1,980 satellites. The plans are to deploy thirty of the sixty-five pound satellites with each launch. That means twenty-two successful launches are needed to deploy the first round.

Due to the low-earth orbits of the satellites, at about 745 miles above earth, the OneWeb satellites will avoid the huge latency that is inherent from current satellite broadband providers like HughesNet, which uses satellites orbiting at 22,000 miles above the earth. The OneWeb specifications filed with the FCC talks about having latency in the same range as cable TV networks in the 25-30 millisecond range. But where a few high-orbit satellites can see the whole earth, the big fleet of low-orbit satellites is needed just to be able in see everywhere.

The company is already behind schedule. The company had originally promised coverage across Alaska by the end of 2019. They are now talking about having customers demos sometime in 2020 with live broadband service in 2021. The timeline matter for a satellite company because the bandwidth license from the FCC requires that they launch 50% of their satellites within six years and all of them within nine years. Right now, OneWeb and also Elon Musk’s SpaceX have both fallen seriously behind the needed deployment timeline.

The company’s original goal was to bring low-latency satellite broadband to everybody in Alaska. While they are still talking about bringing broadband to those who don’t have it today, their new business plan is to sell directly to airlines and cruise ship lines and to sell wholesale to ISPs who will then market to the end user.

It will be interesting to see what kinds of speeds will really be delivered. The company talks today about a maximum speed of 500 Mbps. But I compare that number to the claim that 5G cellphones can work at 600 Mbps, as demonstrated last year by Sprint – it’s possible only in a perfect lab setting. The best analog to a satellite network is a wireless transmitter on a tower in a point-to-multipoint network. That transmitter is capable of making a relatively small number of big-bandwidth connections or many more low-bandwidth connections. The economic sweet spot will likely be to offer many connections at 50 – 100 Mbps rather than fewer connections at a higher speed.

It’s an interesting business model. The upfront cost of manufacturing and launching the satellites is high. It’s likely that a few launches will go awry and destroy satellites. But other than replacing satellites that go bad over time, the maintenance costs are low. The real issue will be the bandwidth that can be delivered. Speeds of 50 – 100 Mbps will be welcomed in the rural US for those with no better option. But like with all low-bandwidth technologies – adequate broadband that feels okay today will feel a lot slower in a decade as household bandwidth demand continues to grow. The best long-term market for the satellite providers will be those places on the planet that are not likely to have a landline alternative – which is why they first targeted rural Alaska.

Assuming that the low-earth satellites deliver as promised, they will become part of the broadband landscape in a few years. It’s going to be interesting to see how they play in the rural US and around the world.

There’s No 5G Race

FCC Chairman Ajit Pai was recently quoted in the Wall Street Journal as saying, “In my view, we’re in the lead with respect to 5G”. Over the last few months I’ve heard this same sentiment expressed in terms of how the US needs to win the 5G race.

This talk is just more hype and propaganda from the wireless industry that is trying to create a false crisis concerning 5G in order to convince politicians that we need to break our regulatory traditions and give the wireless carriers everything they want. After all, what politician wants to be blamed for the US losing the 5G race? This kind of propaganda works. I was just at an industry trade association show and heard three or four people say that the US needs to win the 5G race.

There is no 5G race; there is no 5G war; there is no 5G crisis. Anybody that repeats these phrases is wittingly or unwittingly pushing the lobbying agenda of the big wireless companies. Some clever marketer at one of the cellular carriers invented the imaginary 5G race as a great way to emphasize the importance of 5G.

Stop and think about it for a second. 5G is a telecom technology, not some kind of military secret that some countries are going to have, while others will be denied. 5G technology is being developed by a host of multinational vendors that are going to sell it to anybody who wants it. It’s not a race when everybody is allowed to win. If China, or Germany, or Finland makes a 5G breakthrough and implements some aspect of 5G first, within a year that same technology will be in the gear available to everybody.

What I really don’t get about this kind of hype and rhetoric is that 5G is basically a new platform for delivering bandwidth. If we are so fired up to not lose the 5G race, then why have we been so complacent about losing the fiber race? The US is far down on the list of countries in terms of our broadband infrastructure. We’ve not deployed fiber optics nearly as quickly as many other countries, and worse we still have millions of households with no broadband and many tens of millions of others with inadequate broadband. That’s the race we need to win because we are keeping whole communities out of the new economy, whch hurts us all.

I hope that my readers don’t think I’m against 5G because I’m for any technology that improves access to bandwidth. What I’m against is the industry hype that paints 5G as the technology that will save our country – because it will not. Today, more than 95% of the bandwidth we use is carried over wires, and 5G isn’t going to move that needle much. There are clearly some bandwidth needs that only wireless will solve, but households and businesses are going to continue to rely on wires to move big bandwidth.

When I ask wireless engineers about the future they almost all have painted the same picture. Over time we will migrate to a mixture of WiFi and millimeter wave spectrum indoors to move around big data. When virtual and augmented reality was first mentioned a few years ago, one of the big promises we heard was for telepresence, where we’ll be able to meet and talk with remote people as if they are sitting with us. That technology hasn’t moved forward because it requires huge broadband beyond what today’s WiFi routers can deliver. Indoor 5G using millimeter wave spectrum will finally unleash gigabit applications within the home.

The current hype for 5G has only one purpose. It’s a slick way for the wireless carriers to push the government to take the actions they want. 5G was raised as one of the reasons to kill net neutrality. It’s being touted as a reason to gut most of the rest of existing telecom legislation. 5G is being used as the reason to give away huge blocks of mid-range spectrum exclusively to the big wireless companies. It’s pretty amazing that the government would give so much away for a technology that will roll out slowly over the next decade.

Please think twice before you buy into the 5G hype. It takes about five minutes of thinking to poke a hole in every bit of 5G hype. There is no race for 5G deployment and the US, by definition, can’t be ahead or behind in the so-called race towards 5G. This is just another new broadband technology and the wireless carriers and other entrepreneurs will deploy 5G in the US when it makes economic sense. Instead of giving the wireless companies everything on their wish list, a better strategy by the FCC would be to make sure the country has enough fiber to make 5G work.

The Slow Deployment of 5G

Somebody asked me a few days ago why I write so much about 5G. My response is that I am intrigued by the 5G hype. The major players in the industry have been devoting big dollars to promote a technology that is still mostly vaporware. The most interesting thing about 5G is how politicians, regulators and the public have bought into the hype. I’ve never seen anything like it. I can remember other times when the world was abuzz over a new technology, but this was usually a reaction to an actual technology you could buy like the first laptop computers, the first iPhone and the first iPod.

Anybody that understands our industry knew that it will take a number of years to roll out any major new technology, particularly a wireless technology since wireless behaves differently in the field compared to the lab. We’re only a year past the release of 5G standards, and it’s unrealistic to think those standards could be translated into operation hardware and software systems in such a short time. You only have to look back at the history of 4G, which started as slowly as 5G and which finally had the first fully-compliant 4G cell site late last year.  It’s going to take just as long until we see a fully functional 5G cell site. What we will see, over time, is the incremental introduction of some of the aspects of 5G as they get translated from lab to the field. That rollout is further complicated for cellular use by the timeline needed to get 5G-ready handsets into peoples’ hands.

This blog was prompted by a Verizon announcement that 5G mobile services will be coming to 30 cities later this year. Of course, the announcement was short on details, because those details would probably be embarrassing for Verizon. I would expect that the company will introduce a tiny few aspects of 5G into the cell sites in business districts of major cities and claim that as a 5G roll-out.

What does that a roll-out this year mean for cellular customers? There are not yet any 5G capable cellphones. Both AT&T and Verizon have been working with Samsung to introduce a 5G version of their S10 phone later this year. Verizon has also been reported to be working with Lenovo for a 5G modular upgrade later this year. I’m guessing these phones are going to come with a premium price tag for the early adaptors willing to pay for 5G bragging rights. These phones will only work as 5G from the handful of cell sites with 5G gear – and that will only be for a tiny subset of the 5G specifications. I remember when one of my friends bought one of the first 4G phones and crowed about how it worked in downtown DC. At the time I told him his great performance was because he was probably the only guy using 4G – and sure enough, his performance dropped as others joined the new technology.

On the same day that I saw this Verizon announcement I also saw a prediction by Cisco that only 3% of cellular connections will occur over a 5G network by the end of 2022. This might be the best thing I’ve seen that pops the 5G hype. Even for folks buying the early 5G phones, there will be a dearth of cell sites around the country that will work with 5G for a number of years. Anybody who understands the lifecycle of cellular upgrades agrees with the Cisco timeline. It takes years to work through the cycle of upgrading cell sites, upgrading handsets and then getting those handsets to the public.

The same is true for the other technologies that are also being called 5G. Verizon made a huge splash just a few months ago about introducing 5G broadband using millimeter wave spectrum in four cities. Even at the time of that announcement, it was clear that those radios were not using the 5G standard, and Verizon quietly announced recently that they were ceasing those deployments while they wait for actual 5G technology. Those deployments were actually a beta test of millimeter wave radios, not the start of a rapid nationwide deployment of 5G broadband from poles.

AT&T had an even more ludicrous announcement at the end of 2018 where they announced 5G broadband that involved deployment of WiFi hotspots that were supposedly fed by 5G. However, this was a true phantom product for which they had no pricing and that nobody could order. And since no AT&T cell sites have been upgraded to 5G, one had to wonder how this involved any 5G technology. It’s clear this was technology roll-out by press release only so that they could have the bragging rights of saying they were the first ones to have 5G.

The final announcement I saw on that same day was one by T-Mobile saying they would begin deploying early 5G in cell sites in 2020. But the real news is that they aren’t planning on charging any more for any extra 5G speeds or features.

I come back to my original question about why I write about 5G so often. A lot of my clients ask me if they should be worried about 5G and I don’t have an answer for them. I can see that actual 5G technology is going to take a lot longer to come to market than the big carriers would have you believe. But I look at T-Mobile’s announcement on price and I also have to wonder what the cellular companies will really do once 5G works. Will AT&T and Verizon both spend billions to put 5G small cells in residential neighborhoods if it doesn’t drive any new cellular revenues? I have to admit that I’m skeptical – we’re going to have to wait to see what the carriers do rather than listen to what they say.

Making a Safe Web

Tim Berners-Lee was one of the founders of the Internet and implemented the first successful communication between a client and a server using HTTP in 1989. He’s always been a proponent for an open Internet and doesn’t like how the web has changed. The biggest profits on the web today come from the sale of customer data.

Berners-Lee has launched a new company along with cybersecurity expert John Bruce that proposes to ‘restore rightful ownership of the data back to every web user”. The new start-up is called Inrupt which is proposing to develop an alternate web for users who want to protect their data and their identity.

Berner-Lee has been working at the Computer Sciences and Artificial Intelligence Laboratory (CSAIL) at MIT to develop a software platform that can support his new concept. The platform is called Solid, which has the main goal of decoupling web applications from the data they produce.

Today our personal data is stored all over the web. Our ISPs make copies of a lot of our data. Platforms like Google, Facebook, Amazon, and Twitter gather and store data on us. Each of these companies captures a little piece of the picture of who we each are. These companies use our data for their own purposes and then sell it to companies that buy, sort and compile that data to make profiles on all of us. I saw a disturbing statistic recently that there are now up to 1,400 data points created daily for the typical data user every day – data gathered from our cellphones, smart devices, and our online web activity.

The Solid platform would change the fundamental structure of data storage. Each person on the Solid platform would create a cache of their own personal data. That data could be stored on personal servers or on servers supplied by companies that are part of the Solid cloud. The data would be encrypted and protected against prying.

Then, companies like Berners-Lee’s Inrupt would develop apps that perform functions users want without storing any customer data. Take the example of shopping for new health insurance. An insurance company that agrees to be part of the Solid platform would develop an app that would analyze your personal data to determine if you are a good candidate for the insurance policy. This app would work on your server to analyze your medical records and other relevant personal information. The app would do its analysis and decide if you are a good candidate for a policy. It might report information back to the insurance company such as some sort of rating of you as a potential customer, but the insurance would never see the personal data.

The Solid concept is counting on the proposition that there are a lot of people who don’t want to share their personal data on the open web. Berners-Lee is banking that there are plenty of developers who would design applications for those in the Solid community. Over time the Solid-based apps can provide an alternate web for the privacy-minded, separate and apart from the data-collection web we share today.

Berners-Lee expects that this will first take a foothold in industry groups that value privacy like coders, lawyers, CPAs, investment advisors, etc. Those industries have a strong desire to keep their client’s data private, and there is no better way to do that than by having the client keep their own data. This relieves lawyers, CPAs and other professionals from the ever-growing liabilities from data breaches of client data.

Over time Berners-Lee hopes that all sorts of other platforms will want to cater to a growing base of privacy-minded users. He’s hoping for a web ecosystem of search engines, news feeds, social media platforms, and shopping sites that want to sell software and services to Solid users, but with the promise of not gathering personal data. One would think current existing privacy-minded platforms like Mozilla Firefox would join this community. I would love to see a Solid-based cellphone operating system. I’d love to use an ISP that is part of this effort.

It’s an interesting concept and one I’ll be watching. I am personally uneasy about the data being gathered on each of us. I don’t like the idea of applying for health insurance, a credit card or a home mortgage and being judged in secret by data that is purchased about me on the web. None of us has any idea of the validity and correctness of such data. And I doubt that anybody wants to be judged by somebody like a mortgage lender using non-financial data like our politics, our web searches, or the places we visit in person as reported by our cellphones. We now live in a surveillance world and Berners-Lee is giving us the hope of escaping that world.