Interest Rates and BEAD

I’ve recently been working with ISPs who are getting worried about what high interest rates might mean for the upcoming BEAD grants. Interest rates keep creeping upward to levels we haven’t seen in decades. Just last week, I saw that home mortgages are now at 8% – and infrastructure loans are only a little less expensive.

For any ISP that was going to borrow most of the BEAD matching funds, the increase in interest rates can be devastating. When BEAD was first announced in 2021, I had clients getting infrastructure loans at 4% or less. There are banks now talking 6% to 7%, with a good possibility that the rates will be even higher next year when it’s finally time to make the final go/no go decision to participate in BEAD.

Except for some exceptions for high-cost areas, most BEAD grants will be capped at 75% of the cost of the infrastructure. However, the NTIA has given instructions to states to stretch BEAD dollars by rewarding applicants who will accept less than a 75% grant. This means that many BEAD applicants will be borrowing to cover more than 25% of the cost of the infrastructure.

BEAD applicants also have to finance other costs that are not covered by the BEAD grants. BEAD grants only pay for broadband-related infrastructure. The grants don’t pay for vehicles, computers, furniture, and any other similar assets. BEAD also doesn’t cover expenses, and a BEAD applicant must cover the labor and other start-up costs for launching a new market. These expenses must be supported by the ISP until revenues grow to cover operational expenses.

It’s hard to stress the importance of interest rates on the viability of a rural business plan. The areas where BEAD will be built are rural, by definition, and will not generate a lot of monthly cash, even when completed and mature. Many of the business plans I’ve reviewed barely cash flow with a 75% grant and the interest rates we saw in 2021. In many business plans, interest expense is one of the major expenses in the early years of the roll-out.

There is another BEAD issue that is also dependent on the interest rate. The guaranteed letter of credit will be more expensive as interest rates increase. For ISPs that will borrow the matching funds, the base loan and letter of credit are a double whammy.

ISPs have a tough choice to make. It seems likely that interest rates will not stay at the high levels we see today. Interest rates may still rise as the Federal Reserve continues the fight against inflation. But historically, high interest rates have always returned to lower levels eventually. It doesn’t seem likely that interest rates are going to drop as low as what we’ve seen in the last decade, since for much of that period the interbank lending rate was near zero.

The hard question for an ISP who is borrowing at high rates is if and when interest rates will drop and if they will be able to refinance BEAD loans. I’ve lived through periods in the past where borrowers faced this same dilemma. Borrowers need to be prognosticators and make some guesses about the future of interest rates. If an ISP believes that rates won’t drop enough to ever be affordable, it’s time to pass on taking grant funding. But if future refinancing seems likely, a borrower has to guess when rates may drop and become affordable.

Interest rates are another of the many BEAD issues that are going to force some ISPs to think twice about taking the grants. Higher interest rates don’t directly affect ISPs that are planning on using equity, but even that’s not entirely true since equity investors consider market financial conditions as part of deciding where to invest.

There couldn’t have been a worse time for the still-increasing interest rates for anybody considering BEAD. The hardest question to answer is what the interest rates might look like in 2025 and 2026 when most of the money will be drawn to pay for construction. If rates start to return to sane levels by then, then the situation will not be as dire as discussed above. But who has the crystal ball that will predict interest rates over the next three years?

The Three Broadband Gaps

One of the three traditional legs of the digital divide is broadband availability. I think there are three distinct broadband gaps that together define the broadband availability gap – the rural broadband gap, the urban affordability gap, and what I call the competition gap.

Everybody knows about the rural broadband gap. I don’t need to say a lot about this because the whole industry is currently fixated on solving the lack of rural broadband through the various major grant programs.

There is also an urban affordability gap where large numbers of homes and entire neighborhoods in cities don’t have a good broadband option that people can afford. While there has been increasing attention to this problem, we are a long way from addressing the issue. There has been a lot of recent attention about the possible demise of the Affordable Connectivity Program (ACP), which gives discounts that are supposed to help solve this gap. But even if the ACP continues, it’s just a band-aid that cannot solve the urban affordability gap – prices from cable companies and other ISPs have grown out of reach of too many households, even with a subsidy.

Nobody is talking about what I call the competition gap. Most places in the U.S. have only one ISP that can deliver fast broadband of speeds greater than 100/20 Mbps. Why does this matter? It is becoming clear that the majority of people and businesses nationwide want relatively fast broadband. OpenVault reported that in June 2023, only 11% of broadband users in the country are subscribing to broadband products with speeds under 100 Mbps. Only 27% are subscribing to broadband products with speeds under 200 Mbps. Almost 32% of homes nationwide are now subscribed to gigabit broadband. This represents a huge shift, and as recently as June 2021, 20% of broadband users were buying speeds under 100 Mbps, and 68% of homes were buying speeds under 200 Mbps. In June 2021, less than 11% of homes were buying gigabit broadband.

It’s clear that residential customers are willing to buy products with faster speeds. There will be a few ISPs who respond to this blog with the observation that the quality of broadband connection matters more than speed – but that is clearly not what the public thinks. An ever-increasing number of residential customers are willing to pay a premium price to get faster broadband.

The only widespread gigabit broadband technologies available are hybrid fiber-coaxial networks operated by cable companies or fiber. There are a few other fast broadband technologies like the fiber-to-the-curb technology that Verizon operates as 5G Home Plus. There are other technologies that are faster than 100/20 Mbps but which don’t deliver the gigabit speeds that people want. The relatively new FWA cellular broadband is capable today of delivering speeds of between 100 and 300 Mbps within a mile or so from a cellular tower. Some WISPs are upgrading to newer radios that can deliver speeds far in excess of 100/20 Mbps, although most WISP networks still use older technology.

The bottom line is that in most of the country, the only place with real broadband competition is where an ISP with fast technology overbuilt a cable company. There is a lot of fiber construction underway, and the number of neighborhoods with two choices of fast broadband is growing. But it’s still not unusual to find entire counties where nobody has a choice of two fast ISPs. The majority of people in the country still have little or no real competition.

Many ISPs will dispute the lack of choice and say that most folks have multiple choices of ISPs. This is backed up by the FCC broadband maps. If you look at most homes and businesses in the FCC maps, there are multiple ISPs claiming to be able to serve almost every address. I’m sure that the FCC will issue a new broadband report to Congress one of these days, bragging about how great the broadband choice is across the country. The FCC maps show that I have a choice of ten ISPs at my home. But the options available to me are mostly not viable. Most of my choices are DSL, satellite broadband, and cellular broadband – and from that list, only Viasat claims 100 Mbps download speed.

There are real consequences of having only one fast ISP in a city or a neighborhood. When there is only one fast ISP, that company holds a virtual monopoly. There are clearly documented consequences of being served by ISPs that have a virtual monopoly. We know that monopoly providers tend to have higher prices, less than stellar customer service, and technology that is not as up-to-date as competitive neighborhoods.

I know that the competition gap is real since my consulting firm conducts a lot of broadband surveys. In every survey we’ve done for many years, at least half of respondents say they want increased competition – which for most people means a choice of a second fast ISP. Far too many households and businesses lament that they only have one practical choice of broadband.

I hear from communities every day that are served by a cable company but want faster broadband. Regardless of what the FCC says or ISPs claim, folks are unhappy to live in communities with no broadband choice. The competition gap is real and is going to become more apparent over time as county seats see the rural areas around them getting fiber while they are stuck with an older coaxial network.

Is Broadband Essential?

There is an easy way to simplify the upcoming battle between the FCC and big ISPs over Title II regulation and net neutrality. The public expects government to regulate industries that are essential. That’s the reason we regulate electric companies and drinking water quality. It’s the reason we regulate meat and drug safety. Governments also eventually regulate companies or industries that gain monopoly power since monopolies inevitably engage in practices that harm the public or unfairly compete in the marketplace to drive out competition. Monopolies that deliver essential services should get the most regulatory scrutiny.

Now that the FCC has formally started the process of placing some regulations on ISPs, we’re going to hear a lot of reasons from big ISPs why they don’t need to be regulated. They are going to march out testimonials telling us what wonderful corporate citizens they are. Big ISPs will tell us how the prices they charge us are fair and are even getting less expensive over time. They will attack the regulators and say that attempts to regulate them are only for political reasons. They will publicize opinions by industry experts who will say that regulation isn’t needed (with many of the experts on the big ISP payroll). They will swear that they don’t do anything that requires regulation. They will cry wolf and say that regulation will drive up prices. And they will deflect any conversation about regulation using red herrings to make the discussion about something else. I’ve already seen all of these tactics in just the last few weeks.

Big ISPs will do everything possible to avoid having an open discussion about why big ISPs should be regulated. If explained in the simplest terms, almost everybody would agree that big ISPs should be regulated since they deliver essential services and have monopoly power.

The monopoly power of the big ISPs is easy to prove. The four biggest ISPs – Comcast, Charter, AT&T, and Verizon serve nearly 75% of all broadband customers in the country. All four also sell cellular broadband and collectively control the large majority of that market as well. Any industry where four companies control the large majority of the market is clearly under the sway of monopoly power.

It’s not hard to make an argument that broadband is essential and growing more so each year. Most people would agree that agriculture, water, housing, energy, healthcare, and banking are the most essential industries for daily life. In the short 25-year history of broadband, it has grown to join this list.

Like banking, broadband is now an industry that supports every other industry. While many of us still know a few small businesses that don’t use broadband, even those businesses benefit from the broadband that is essential to the logistics for the raw materials and products that support them.

But broadband is not only essential to other industries; it is essential in the daily lives of people. A recent U.S. News and World Report survey showed that 85% of Americans now go online every day. A lot of us have jobs that wouldn’t exist without broadband. Broadband is essential for education. The broadband industry is at the heart of how we communicate with each other. I could easily write multiple blogs to list the ways that people have become reliant on broadband – and that long list would clearly demonstrates that broadband has become essential.

A society that doesn’t regulate essential industries is at risk of falling prey to companies that abuse consumers who must buy the services. The danger to the public only gets worse when the companies that control essential services are also monopolies. All of the other essential industries I’ve listed above are regulated, and not just in the U.S., but in all of other industrialized nations.

Big ISPs can’t make the argument that they don’t harm the public. Broadband prices have already grown out of the reach of many families, and the affordability gap is climbing. Big ISPs dissemble and claim that their prices have grown slower than inflation, but that is demonstrably not so. In 2005, the price of cable broadband and DSL from the biggest ISPs was around $40 per month. Price increases to keep up with inflation would have that price today around $63. The two big cable companies now have prices for basic broadband between $85 and $100.

So tune out the non-stop red herrings and misdirection you are going to see from the big ISPs for the rest of this winter. They have been extremely successful in shedding regulation, and they will now fight tooth and nail to keep regulation at bay. Don’t buy their many arguments about why regulation isn’t necessary. The big ISPs deliver an essential commodity and have monopoly powers – it would be a travesty not to regulate them.

Starlink Promising Satellite Cellular Service

Starlink recently launched a new webpage that advertises the future ability to deliver text, voice, and data to 4G cell phones via satellite.

The texting service is supposed to be available in 2024 with voice and data coming in 2025. The service will require a user to have a view of the open sky. I would also guess that a user will have to be stationary and not in a moving vehicle. The service is likely going to be aimed at people who spend a lot of time outdoors, in places out of reach of cell towers. There is no talk yet about price, but this seems like a premium service and will probably be priced accordingly.

T-Mobile’s service will be able to connect through any of its many satellites, and reports have said that speeds will be relatively slow, at perhaps only a few Mbps.

Starlink says that users of the service will be able to connect to users in cellular networks that participate in the program. The initial list of network partners includes T-Mobile in the U.S., Rogers in Canada, Optus in Australia, One NZ in New Zealand, Kodi in Japan, and SALT in Switzerland.

There is already an early version of satellite texting. Apple provides texting to 911 through a satellite connection to those using an Apple 14  or newer iPhone. The text connection to 911 is slow and takes about 15 seconds to complete a transaction. The service allows very limited follow-up texts between public safety and the person initiating the 911 call. Apple is providing this service for free today but will eventually likely charge for using it.

AT&T claims to have made the first broadband connection with an unmodified cell phone and a satellite in September. The company used AT&T’s 5G spectrum and a Samsung Galaxy S22 to connect a caller from a dead cellular zone in Maui, Hawaii to one in Madrid, Spain. This test was done in conjunction with AST SpaceMobile. The first test achieved a download speed to the phone in Maui of 10 Mbps, but AST has subsequently been able to boost the speed to 14 Mbps. AST plans to launch five BlueBird satellites in the first quarter of 2024 to support the cellular satellite effort.

It’s unlikely that any of these services are going to be competing with mainstream cell phone connectivity. The speeds will be slower, and the satellite constellations will not be equipped to process the amount of data associated with normal cellphone service. There is no need to pay extra to use a satellite connection for anybody in reach of a cell tower or a WiFi connection.

I’m not sure if most people appreciate how much of the land mass of the U.S. has little or no cell service. Practically every county I’ve worked in has large dead cellular zones. Providing even rudimentary cell coverage in remote areas is a valuable new service for the many people who work in remote places. I can picture that farmers, park rangers, and anybody who spends a lot of time in unconnected areas will want this service as soon as it is available. I envision the satellite companies and cellular companies generating good revenue while filling this needed market niche.

Reinventing ReConnect

Your guess is as good as mine about whether Congress will ever pass the draft annual Agriculture Reauthorization Bill as written. It’s my understanding that the legislation includes new money for the ReConnect grant program that is administered by the Rural Utility Service (RUS), which is part of the Department of Agriculture.

This has been a successful grant program, and I know of quite a few rural projects that have been funded through these grants. The ReConnect grants only fund areas that are remote and include a test that gives priorities to grant areas that are the farthest distance from towns and cities.

There have been changes in the broadband industry that have made it harder each year to define a ReConnect grant area. The RUS grant rules favor grant requests that cover large contiguous areas. You can cobble together grant service areas that include multiple different geographic pockets of homes and businesses, but this involves a lot more paperwork.

It’s getting quickly harder to find big contiguous unserved areas. This started with the CAF II reverse auction and really came to fruition with the Rural Digital Opportunity Fund (RDOF). That subsidy program awarded subsidies by Census blocks, often widely scattered across a county. When I saw the first RDOF map, I quickly started thinking of RDOF as the Swiss cheese program. RDOF often chops rural areas into small pieces and leaves behind scattered pockets of homes that are not easy to aggregate into a grant like ReConnect.

This chopping up of grant areas continued as States and counties have been awarding broadband grants, often for grant areas that cherry pick the densest pockets of homes. This not only breaks the remaining unserved areas into more Swiss cheese, but it also makes it harder to justify somebody asking for a grant to serve the areas that are left over.

It’s going to get hard to find grant areas after BEAD grants start being awarded. The BEAD grants are supposed to bring broadband to all unserved locations in each state and hopefully also to the underserved. But I think everybody who understands the industry knows this will not happen as planned. There are already states that are saying that BEAD funding won’t cover everybody. There will be ISPs that don’t build everything they promised. There will be ISPs using technologies that won’t reach everybody as promised. There will be ISPs that financially fail and don’t finish the grant projects. And this won’t just be for BEAD – there are going to be plenty of areas supposedly covered by RDOF that won’t get the broadband they have been promised.

The biggest pile of places that won’t get broadband from BEAD are the millions of places that are still incorrectly identified on the FCC maps as served but which aren’t. These places won’t start to become apparent until after the BEAD grants are awarded and mapped and people living in areas with no good broadband start to make noise.

It’s very unlikely that the locations that get missed by RDOF and BEAD will easily fit into the current ReConnect grant template. ReConnect might be the only major ongoing grant program, and if ReConnect is going to reach the places left over from other federal grants, the RUS is going to have to make some significant changes.

First, it has to become easier to ask for funding for small pockets of homes. The RUS has purposefully given out a small number of large grants in each grant cycle to reduce its burden of monitoring the grant construction. But there are even more significant changes needed. For example, the RUS requires a substantial pledge of other assets to get an RUS grant. Unless somebody is already an RUS borrower, they are not likely to accept draconian collateral pledges for small grants.

Currently, the ReConnect grant is totally reliant on the FCC maps, and that has to change as well – because many of the places that will be missed with broadband will be incorrectly labeled as served by the FCC. The ReConnect process is complicated, it’s a challenge to input grant requests that must tie to penny while doing so in financial formats that nobody outside of the RUS understands.

In a post-BEAD world, any future grants are going to have to be creative, nimble, and able to bring solutions to small grant areas without a huge amount of paperwork. Unless the RUS is willing or able to change how it awards grants, this could be a grant program with very few future takers – and that would be a shame.

Broadband Choice

One of the most questionable facts circulating in the broadband industry is that a large percentage of homes in the country have multiple ISP options. I wrote a recent blog about a survey done by U.S. News and World Report. One of the facts noted in that report is that the FCC data shows that 94% of homes have a choice of three or more ISPs.

I’ve seen similar statistics elsewhere, and it’s not hard to see that this information comes from the latest FCC mapping data. I’m not surprised to find that the FCC maps show that 94% of homes in the country have three or more ISPs claiming the ability to provide service. But that is very different than saying that folks have three real choices of ISP.

Consider my home. I live in a city, and the FCC map shows that I have nine choices of ISP. But do I really? Some of the ISPs listed as serving my house are not viable options. For example, UScellular claims to offer a connection of 2 Mbps download and 0.064 Mbps upload. I live in a hilly and woody city, and I doubt that even that slow speed is actually available. Another local cellular company says I can get 25/3 Mbps, but I am skeptical in my hilly and wooded town. AT&T is listed with two DSL options at 75/20 Mbps and 18/2.5 Mbps. I have three satellite options listed, but my home is surrounded by mountains on all four sides and we have a limited view of the horizon. The fastest satellite option listed is Viasat at 100/2 Mbps – which is much faster than what speed tests indicate. In the previous version of the map, T-Mobile showed a speed of 0.2 Mbps download at my home but didn’t claim coverage in the latest maps.

I’ve looked at the similar details in the FCC maps at counties all around the country, and a large percentage of the ISPs available at most homes are not real options. If it wasn’t so expensive to do so, I’m tempted to try to buy broadband from every ISP listed at my home to find out if they can really serve here – and if they can deliver the speeds listed on the FCC map. My bet is that due to the geography in my area, that three or four of the options listed are not really available at my home and that most of the ones listed would badly underperform the speeds claimed in the FCC maps.

But that’s only half of the story. I think a large percentage of families these days like mine and want a broadband connection that is vigorous enough to support the way they use broadband. There are only a handful of broadband options for homes that want high-quality broadband.

  • Fiber is the gold standard of quality broadband.
  • The two biggest cable companies together have over half of the nationwide broadband subscribers. I’m on Charter, which claims I can buy download speeds up to a gigabit.
  • Verizon 5G Home Plus is essentially fiber-to-the curb. This is available in limited markets, but I’ve seen recent speed tests for the technology with gigabit download speeds.
  • Customers within a mile or so of towers equipped with FWA cellular wireless are seeing speeds from 100 – 300 Mbps download. But outside of that distance, the speeds drop quickly. The  carriers also throttle broadband any time that cell phone usage gets heavy in a given neighborhood.
  • Some fixed wireless WISPs are delivering fast speeds with the newest radios. Speed tests show that most WISPs have not yet upgraded, but faster speeds are on the horizon for WISPs that will make the upgrades.
  • Starlink is a great option when there is no cable company or fiber available – but how many people in cities are willing to pay more for a slower option?

I work at home and am online a lot, and I would never take the chance of putting my businesses on an underperforming ISP – and I think a lot of people feel the same way.

I’ve lately been using the term Competition Gap to describe this situation. While many ISPs claim to have wide coverage, most households don’t feel like they have real options. In my city, it’s hard to picture somebody working at home who isn’t using Charter or the various pockets of AT&T fiber. For now, the FWA towers are too far outside of the city to be a viable option.

I think most folks in my city would tell you they only have either one or two real choices for quality broadband, and they would be laugh if you told them they had nine. ISP. There are certainly still people in my city here who use DSL. There might be a tiny handful using the satellite or cellular broadband. But most of the folks choosing these slower options are either casual broadband users or can’t afford the big ISP broadband prices.

The idea that 94% of U.S. homes have three or more real broadband options is ludicrous. I would guess that the percentage of homes in the country with even two quality choices is significantly lower than 50%.

The FCC hasn’t issued an annual broadband report since 2021, probably due to not having a fifth Commissioner. It will be interesting to see what the FCC claims about broadband coverage when it finally issues a report. I bet the FCC report say something along the same lines as mentioned in the U.S. News and Word Report survey – that the state of broadband is good and that almost all Americans have multiple choices for good broadband. But that would be political fantasy that ignores what most households know – most of us in cities have only one or two choices of quality broadband. Many folks in rural areas still don’t even have one.

USTelecom Claims Dropping Prices Again

This is a blog that I get to write every year – and each year, the claims get a little crazier. USTelecom recently issued its fourth annual Broadband Pricing Index and claims that broadband prices from the big ISPs are dropping. You’ll be glad to know that, according to the report, broadband prices dropped over 18% just in the last year for the most popular broadband tiers. Prices for the fastest tier of broadband dropped 6.5% last year. I’d love to hear from anybody who had their ISP cut their rate by 18% this year – that would have been a $12.60 price reduction for a $70 broadband bill.

This annual publication is so hilariously misleading that it’s hard for anybody in the industry to look at this as anything but a colossal joke. However, this report serves a purpose for the big ISPs. They can plant a seed with regulators and legislators that broadband prices are not only not increasing – but are getting cheaper. This also provides fodder for some of the unsavory folks in the broadband industry to publish articles repeating the point. This is also the kind of misinformation that will bounce around social media and confuse folks – because it’s hard to think of any examples where an ISP has ever reduced the price of basic broadband, like implied by this report.

The folks who wrote this report must have had a lot of fun finding ways to hide the facts because they came up with clever ways to produce statistics that don’t mean anything useful. A big part of the report compares the cost over time to buy a megabit of speed. Nobody would deny that speeds have increased tremendously over time, at a rate much faster than prices have increased. I was looking through some old Comcast pricing sheets. In 2009, Comcast had four broadband products that year that ranged from 12/2 Mbps for $42.95 to 50/10 Mbps for $149.95. The product that is most similar to Comcast’s current basic broadband delivered 16/2 Mbps for $52.95.  Since that time, Comcast has increased the speed of basic broadband four times – to 30 Mbps, then 60 Mbps, then 100 Mbps, and now 300 Mbps. Over fourteen years, download speeds are 19 times faster than in 2009. It’s a fact that broadband has gotten faster, but that is not the same thing as cheaper.

The report also plays a sleight of hand by comparing premium products from the past to non-premium products from today. Again, with Comcast, the basic 16/2 Mbps broadband in 2009 cost $52.95 and also required a $10 modem. Today, the basic price for 300 Mbps broadband is $93 with a $15 modem. That’s an increase since 2009 of $45, a 72% increase. The authors of the report would have instead pointed to the 50/10 Mbps product as the most comparable product – but in 2009, that was a premium product priced at $149.95 plus a $10 modem. The report would say that the price of broadband has dropped.

The report makes a lot of claims by mentioning costs of broadband over time, but it never identifies the ISP or the specific products. If prices had really dropped, USTelecom would be publishing tables of the prices charged by the big ISPs for each year.

I leave it to readers to read the report, and I won’t repeat the silly math that shows the big savings. This is the fourth year of the report, and the claims have gotten wilder each year. At the rate of accumulated savings claimed by the report, in another five years, broadband is going to be free. When that happens, I will admit I am wrong and will correct this blog as being too cynical.

Update on the Transport Market

I took a look recently at the big carrier transport market. These are the carriers that make money transporting data around the country. When people ask who runs the Internet, it is these companies that carry data from point A to point B.

There are two big categories of transport data sales – Ethernet services and wavelength services.

Ethernet service is transporting some fixed amount of bandwidth capacity. One of the primary products in this category is dedicated Internet access (DIA). Last-mile ISPs are familiar with this service because they all buy DIA Ethernet data pipes to reach the Internet. These are usually sold in increments of gigabit speeds. This category of transport also includes transport to support enterprise network transformations to SD-WAN/SASE, as well as for secure connections to cloud-based services.

The biggest seller of Ethernet services in 2022 was AT&T. The company took back the number one ranking after Lumen had held the top spot for the previous five years. Lumen fell to number two as a result of spinning off a part of its business to Brightspeed. There are four other carriers that had at least 4% of the U.S. market in 2022 – Spectrum Enterprise, Verizon, Comcast Business, and Cox Business. There were six other companies that held between 1% and 4% of the U.S. Market – Altice, Cogent, Frontier, GTT, Windstream, and Zayo.

The other category of bit transport sales is wavelength service. This is a layer 1 fiber service that uses an entire wavelength of light on a fiber to provide bidirectional multi-gigabit speeds. These are the sales made to the largest generators of data, including social media companies, large corporations, and the government. The most typical sales of bandwidth on this service are 10-gigabit and 100-gigabit service.

There were four carriers that held more than 4% of the wavelength market in 2022 – Lumen, Zayo, Verizon, and AT&T. There were four other companies that had between 1% and 4% of the market – Arelion, Cox Business, Crown Castle, and Windstream.

There is one final category of large carrier sales that is dominated by the big carriers, which measures the number of buildings lit with fiber on each company’s network.

The following carriers serve at least 15,000 lit buildings – AT&T, Spectrum Enterprise, Lumen, Comcast Enterprise, Cox Business, Zayo, Crown Castle, Frontier, Brightspeed, Breezeline, and Optimum. The following list serves between 5,000 and 15,000 buildings – Consolidated Communications, FirstLight, Great Plains Communications, Ritter Communications, Segra, Unite Private Fiber, Uniti Fiber, and Windstream.

One thing is obvious in looking at all three lists – the big telephone companies still collectively hold the lion’s share of the market for large business sales. Right in the mix are also the big cable companies. There are only a handful of independent companies on these lists that are not owned by telcos or cable companies.

U.S News and World Report Broadband Survey

U.S. News and World Report recently conducted a nationwide survey on broadband usage and pricing. The survey captures a lot of statistics about broadband usage and creates a good snapshot of broadband usage in the summer of 2023. The survey talked to people in every state and has a statistical margin of error of 2%.

There are some interesting statistics on broadband usage.

  • 85% of survey respondents go online every day.
  • 31% of respondents say they are online almost constantly.
  • 8% of respondents don’t have home broadband access.
  • 20% of respondents have either one or no other choice of ISP.

As part of the survey, respondents took a speed test:

  • 64% are receiving download speeds faster than 100 Mbps or faster. According to the latest OpenVault report
  • 8% are receiving download speeds under 25 Mbps, which by the FCC’s definition, means they don’t have broadband.
  • 25% of respondents have upload speeds of 10 Mbps or slower.

This shows a disconnect between subscription speeds and actual speeds. The report from OpenVault from June 2023 showed that less than 11% of homes are now subscribed to speeds of 100 Mbps or less, but 36% of homes are not getting that speed.

The survey looked at a variety of issues related to broadband pricing.

  • Over half of respondents said that they paid between $20 and $60 when they first subscribed to their current ISP but that they are now paying between $41 and $80 for service from the same ISP.
  • 39% of respondents say that they have to cut other personal expenditures in order to afford to pay for their broadband bill.
  • 61% say that inflation is making it difficult to pay for their monthly broadband bill.
  • Only 45% of respondents think the speed they receive justifies the price they pay. 28% are unhappy with the speed they get for the price they pay.

These survey results should be a wake-up call to ISPs. ISPs have gotten complacent that broadband has become such a necessity that people will pay the bill at any price. But inflation is changing that situation, and the industry should take heed that 61% of broadband customers say that they struggle to pay their broadband bill.

I think price is a big factor in the amazing success of FWA cellular home broadband from T-Mobile and Verizon. Customers can buy FWA for prices from $50 to $70 depending on the specific situation, which is  now a lot cheaper than buying from any of the big cable companies that have starting prices of $85 and higher.

The survey also points out what speed tests have been showing. A lot of broadband customers are not receiving the speeds that ISPs claim to be receiving in marketing literature. In this particular survey, only 64% of respondents had a speed test of greater than 100 Mbps download – far fewer than would have been accepted according to what ISPs claim to be selling. It’s going to get interesting really quickly if the FCC under Jessica Rosenworcel increases the definition of broadband to 100/20 Mbps. According to this survey and according to the detailed speed test results I’ve been seeing, a significant number of homes are not receiving those speeds and fail the 100 Mbps download test, the 20 Mbps upload test, or both.

Satellite Broadband Competitors

Starlink gets almost all of the satellite press in the U.S., which is fair since the company now serves a lot of homes and RVs with broadband. The company now has over 4,600 active satellites in orbit, and if it sticks with its original business plan it will eventually have 30,000. But there are a few other satellite companies working in the broadband space that don’t get the press.

Not all competitors want to chase the residential market that is the bread and butter for Starlink. OneWeb went through start-up pains and came out of bankruptcy in 2020. Since then, the company was reorganized to include ownership from the British government and a few other large carrier investors. OneWeb now has 634 satellites in space parked at about 1,200 miles above Earth – twice the height of Starlink. The company is still in the process of constructing the ground stations needed to be able to provide broadband connections around the world.

OneWeb recently announced a successful test of using satellite broadband to connect to Britain’s Royal Fleet Auxiliary ship, Argus. This is the first successful test for the company with a mobile military application, and OneWeb intends to emphasize using its satellites to support governments and militaries around the world.

The U.S. military recently inked an arrangement with Starlink to provide basic broadband, but the military is not comfortable using Starlink satellite broadband for mission-critical applications. There are valid concerns by the military of relying on broadband connections for active troops with an ISP that could refuse service in times of conflict.

The ability of OneWeb to support military operations will be enhanced with the pending merger with the French company Eutelsat, which operates geostationary satellites parked at 22,000 miles above Earth. The combination of the two satellite fleets should be able to guarantee the connections that the military demands. OneWeb is already in the process of upgrading its satellites to support military applications. It’s planning to start replacing existing satellites with ones that contain two separate platforms for military and commercial applications. The company is focusing the rest of its business on bringing broadband to governments, telecommunications carriers, and energy companies.

Another company that is enhancing its satellite fleet to remain relevant is Intelsat. The company has been signing contracts with the militaries of smaller countries who want to make sure that troops always have connectivity. Intelsat can provide reliable broadband to militaries but is also working with countries that want to put up their own military and government satellites.

Intelsat is also exploring the expansion of its fleet by using Medium-Earth-Orbit (MEO) satellites that are parked at between 6,000 and 13,000 miles above Earth. There are a few applications like GPS today that use MEO satellites, and Intelsat thinks there are a lot of advantages to having satellites that have less latency than the higher orbit geostationary satellites.

There still is not a lot of news from Amazon’s Project Kuiper. The company has been trying for several years to launch its first test satellites and has been plagued by problems with the planned use of the RS1 rocket from ABL Space Systems. Amazon now plans to use rocket launches from the United Launch Alliance and others to start getting its fleet into space. Amazon has supposedly made great progress in the design of its satellites and still has plans to launch over 3.200 satellites to compete with Starlink.

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