Satellite Companies Fighting over RDOF

There has been an interesting public fight going on at the FCC as Viasat has been telling the FCC that Elon Musk’s Starlink should not be eligible for funding from the Rural Digital Opportunity Fund (RDOF). At stake is the $886 million that Starlink won in December’s RDOF auction that is still under review at the FCC.

Viasat had originally filed comments at the FCC stating that the company did not believe that Starlink could fulfill the RDOF requirements in some of the grant award areas. Viasat’s original filings listed several reasons why Starlink couldn’t meet its obligations, but the primary one was that Starlink technology was incapable of serving everybody in some of the more densely populated RDOF award areas. Viasat calculated the number of potential customers inside 22-kilometer diameter circles – the area that it says can be covered by one satellite. According to Viasat’s math, the most customers that could reasonably be served is 1,371 customers – and the company identified 17 RDOF areas with a greater number of households, with the maximum one having 4,126 locations.

There have been similar claims made by others in the industry who say that Starlink will be good for serving remote customers, but the technology is not capable of being the only ISPs in an area and serving most of the homes simultaneously.

Last month, Viasat made an additional claim that Starlink does not have sufficient backhaul bandwidth to serve a robust constellation. This stems from an ongoing tug-of-war at the FCC over 12 GHz spectrum. Starlink wants this spectrum to enable it to create more ground stations for transferring data to and from the satellite constellation. This is spectrum that Dish Networks owns that it wants to purpose for 5G. Dish Network has offered a spectrum-sharing plan that would greatly reduce Starlink’s use of the spectrum. The FCC filings on the topic are interesting reading, as wireless engineers on both sides of the issue essentially argue that everything the other side says is wrong. I’m not sure how the FCC ever decides which side is right.

The latest Viasat criticism of Starlink is based upon public statements made by Elon Musk at the Barcelona MWC conference, where he commented on how hard it is to fund the satellite business. Musk said that the business is likely to need between $20 billion and $30 billion in additional investment to reach the goal of over 11,000 satellites. Musk said his first priority is just to make sure that Starlink doesn’t go bankrupt. Viasat says that this is evidence that Starlink is a ‘risky venture’, something the FCC originally said should not be eligible for the federal RDOF subsidy.

Starlink recently asked the FCC to ignore everything that Viasat has filed and said that the Viasat comments are anti-competitive and are a ‘sideshow’. This has to be a huge puzzler for the FCC. We already see Starlink bringing good broadband to remote places that don’t have any broadband today. But the question in front of the FCC is not if Starlink can be a good ISP, but whether the company deserves a 10-year federal subsidy to support the business. Obviously, if Starlink needs at least $20 billion more to be viable, then getting or not getting the $886 million spread over ten years is not going to make a difference in whether Starlink makes it as a company.

The FCC is in a bind because many of these same issues were raised before the RDOF auction in an attempt by others to keep Starlink out of the auction. It wasn’t hard to predict that Starlink would win the subsidy in some of the most remote places in the country since it was willing to bid lower than other ISPs. The FCC voted to allow Starlink into RDOF just before the auction, and is now seeing that original decision challenged.

It’s also an interesting dilemma because of the possibility of an infrastructure plan by Congress that would fund fiber in most of the places won by Starlink. Would the FCC had allowed Starlink into the RDOF had it known about the possibility of such federal grants – I would have to guess not. The FCC is now faced with depriving areas from getting a permanent subsidy if they continue with the plan to give the RDOF to Starlink. That would just be bad policy.

Demystifying Oversubscription

I think the concept that I have to explain the most as a consultant is oversubscription, which is the way that ISPs share bandwidth between customers in a network.

Most broadband technologies distribute bandwidth to customers in nodes. ISPs using passive optical networks, cable DOCSIS systems, fixed wireless technology, and DSL all distribute bandwidth to a neighborhood device of some sort that then distributes the bandwidth to all of the customers in that neighborhood node.

The easiest technology to demonstrate this with is passive optical fiber since most ISPs deliver nodes of only 32 people or less. PON technology delivers 2.4 gigabits of download bandwidth to the neighborhood node to share with 32 households.

Let’s suppose that every customer has subscribed to a 100 Mbps broadband service. Collectively, for the 32 households, that totals to 3.2 gigabits of demand – more than the 2.4 gigabits that is being supplied to the node. When people first hear about oversubscription, they think that ISPs are somehow cheating customers – how can an ISP sell more bandwidth than is available?

The answer is that the ISPs knows that it’s a statistical certainty that all 32 customers won’t use the full 100 Mbps download capacity at the same time. In fact, it’s rare for a household to ever use the full 100 Mbps capability – that’s not how the Internet works. Let’s say a given customer is downloading a huge file. Even if the ISP at the other end of that transaction has fast Internet, the signal doesn’t come pouring in from the Internet at a steady speed. Packets have to find a path between the sender and the receiver, and the packets come in unevenly, in fits and starts.

But that doesn’t fully explain why oversubscription works. It works because all of the customers in a node never use a lot of bandwidth at the same time. On a given evening, some of the people in the node aren’t at home. Some are browsing the web, which requires minimal download bandwidth. Many are streaming video, which requires a lot less than 100 Mbps. A few are using the bandwidth heavily, like a household with several gamers. But collectively, it’s nearly impossible for this particular node to use the full 2.4 gigabits of bandwidth.

Let’s instead suppose that everybody in this 32-home node has purchased a gigabit product, like is delivered by Google Fiber. Now, the collectively possible bandwidth demand is 32 gigabits, far greater than the 2.4 gigabits being delivered to the neighborhood node. This is starting to feel more like hocus pocus, because the ISP has sold 13 times the capacity that is available to the node. Has the ISP done something shady here?

The chances are extremely high that they have not. The reality is that the typical gigabit subscriber doesn’t use a lot more bandwidth than a typical 100 Mbps customer. And when the gigabit subscriber does download something, it does so quicker, meaning that the transaction has less of a chance of interfering with transactions from neighbors. Google fiber knows it can safely oversubscribe at thirteen to one because it knows from experience that there is rarely enough usage in the node to exceed the 2.4 gigabit download feed.

But it can happen. If this node is full of gamers, and perhaps a few super-heavy users like doctors that view bit medical files at home, this node could have problems at this level of oversubscription. ISPs have easy solutions for this rare event. The ISP can move some of the heavy users to a different node. Or the ISP can even split the node into two, with 16 homes on each node. This is why customers with a quality-conscious ISP rarely see any glitches in broadband speeds.

Unfortunately, this is not true with the other technologies. DSL nodes are overwhelmed almost by definition. Cable and fixed wireless networks have always been notorious for slowing down at peak usage times when all of the customers are using the network. Where a fiber ISP won’t put any more than 32 customers on a node, it’s not unusual for cable company to have a hundred customers.

Where the real oversubscription problems are seen today is on the upload link, where routine household demand can overwhelm the size of the upload link. Most households using DSL, cable, and fixed wireless technology during the pandemic have stories of times when they got booted from Zoom calls or couldn’t connect to a school server. These problems are fully due to the ISP badly oversubscribing the upload link.

Farm Fresh Broadband

I was lucky enough to get an advanced copy of Farm Fresh Broadband by University of Virginia professor Christopher Ali. It’s a great read for anybody interested in rural broadband. The book is published by MIT Press and is now available for pre-order on Amazon.

The first half of the book discusses the history and the policies that have shaped rural broadband, and my review of his book will focus on this early discussion, which is near and dear to my heart. Ali hit on the same topics that I have been writing about in this blog for years. Of particular interest was Ali’s section talking about the policy failures that have led to the poor state of rural broadband today. Ali correctly points out that “we have a series of policies and regulations aimed at serving the interests of monopoly capital rather than the public interest and the public good”. Ali highlights the following policy failures that have largely created the rural digital divide:

  • Definition-Based Policy. The FCC has been hiding since behind its 25/3 Mbps definition of broadband since 2015. We still see this today when current federal grants all begin with this massively outdated definition of broadband when defining what is eligible for grant funding. We recently passed a milestone where over 10% of all households in the country are subscribed to gigabit broadband, and yet we are still trying to define rural broadband using the 25/3 Mbps standard. Unfortunately, sticking with this policy crutch has led to disastrously poor allocation of subsidies.
  • Technology Neutrality. Ali points to regulators who refuse to acknowledge that there are technologies and carriers that should not be worthy of federal subsidies. This policy is largely driven by lobbying by the big ISPs in the industry. This led to the completely wasted $10 billion CAF II subsidy that was given to shore up DSL at a time when it was already clear that DSL was a failure as a rural technology. This same lack of regulator backbone has continued as we’ve seen federal subsidies given to Viasat in the CAF II reverse auction and Starlink in the RDOF. The money wasted on these technologies could have instead been invested in bringing permanent broadband solutions to rural areas. It looks like Congress is going to continue this bow the big ISPs by allowing grants to be awarded for any technology that can claim to deliver 100/20 Mbps.
  • Mapping. Ali highlights the problems with FCC mapping that disguises the real nature of rural broadband. He points to the example of Louisa County, Virginia, where the FCC maps consider the county to have 100% broadband coverage at 25/3 Mbps. It turns out that 40% of this coverage comes from satellite broadband. Much of the rest comes from overstatements by the telcos in the county of the actual speeds. M-Lab speed tests show the average speeds in the county as 3.91 Mbps download and 1.69 Mbps upload – something that was not considered as broadband a decade ago by the FCC. Unfortunately, Louisa County is not unique, and there are similar examples all over the country where poor mapping policies have deflected funding away from the places that need it the most.
  • Localism. There are hundreds of examples where small regional telephone companies and cooperatives have brought great broadband to pockets of rural America. We have made zero attempt to duplicate and spread these success stories. In the recent CAF II awards we saw just the opposite, with huge amounts of money given to companies that are not small and not local. We already know how to fix rural broadband – by duplicating the way we electrified America by loaning money to local cooperatives. But regulators would rather hand out huge grants to giant ISPs. When we look back in a few decades at the results of the current cycle of grant funding, does anybody really believe that a big ISP like Charter will bring the same quality of service to communities as rural cooperatives?

The second half of the book is the really interesting stuff, and all I supply for that are some teasers. Ali describes why farmers badly need broadband. He describes the giant bandwidth needed for precision agriculture, field mapping, crop and livestock monitoring, and overall management of farms to maximize yields. One of the statistics he cites is eye-opening. Fully-deployed smart agriculture could generate 15 gigabytes of data annually for every 1,000 acres of fields. With current land under cultivation, that equates to more than 1,300 terabytes of data per year. We have a long way to go to bring farms the broadband they need to move into the future.

I do have one criticism of the book, and it’s purely personal. Ali has a huge number of footnotes from studies, articles, and reports – and it’s going to kill many of my evenings as I slog through the fascinating references that I’ve not read before.

An Update on Telemedicine

I’ve been keeping tabs on the news about telemedicine since it is touted throughout the industry as one of the big benefits of having good broadband. One piece of news comes from a survey conducted by Nemours Children’s Health. This is a large pediatric health system with 95 locations in Delaware, Florida, New Jersey, and Pennsylvania. The company treats almost half a million children annually.

Nemours released a report on Telehealth in July. The report was based on a survey of 2,056 parents/guardians of children. The survey had some interesting results:

There is a Need for Telehealth. 48% of the survey respondents said that they had at least one recent experience where there was a hardship in getting a sick child to a live doctor visit. This included reasons such as living in an unsafe community or not having easy access to transportation. 28% of respondents reported two such occasions, and 15% reported three or more. These are the situations for which telehealth is an ideal solution to get a doctor to look at a sick child when care is needed rather than when the child can be transported to a doctor’s office.

Telehealth Good for Parents. Almost 90% of the respondents to the survey said that telehealth makes it easier for parents to take an active role in a child’s health care. A lot of parents said that somebody other than them takes sick children to see a doctor during the workday, and they love being able to participate first-hand in the discussion with a doctor.

Provider’s Play a Big Role in Enabling Telehealth. 28% of respondents to the survey said they have never been offered a telehealth visit. 12% said they had never heard of telehealth. Respondents who use telehealth said they were more likely to use the service when it is offered as an option by the health provider.

Reimbursement is Still a Barrier. Two-thirds of parents say that having telehealth visits covered by insurance is essential for them to consider using the service. There was a big push during the pandemic for insurance companies to cover telehealth visits. There is a concern at Nemours for this to continue when things return to normal.

As further evidence that reimbursement is a major issue, a recent article in KHN (Kaiser Health News) shows that there are surprising issues that are impacting telehealth. The article discusses insurance companies that don’t want to cover telehealth visits where the patent and doctor are in different states. This is based on laws in most states and also in Medicare and Medicaid rules that require a licensed clinician to hold a valid medical license in the state where a patient is located.

These laws don’t stop people from voluntarily visiting a doctor in another state, but the law is being raised for telemedicine. This is surfacing as an issue as states start rolling back special rules put in place during the early days of the pandemic.

Johns Hopkins Medicine in Baltimore recently had to cancel over 1,000 telehealth visits with patients in Virginia because such visits would not be covered by insurance. This left patients to find a way to make the physical trip to Johns Hopkins or find another health provider. As someone who has used John Hopkins, this is the place where people from the DC region look to when they need to see the best specialists.

When I first heard about telemedicine a decade ago, the ability to see specialists was one of the biggest cited benefits of telemedicine. These kinds of issues are always more complicated than they seem. For example, state medical boards don’t want to give up the authority to license and discipline doctors that treat patients in the state. Of course, money comes into play since medical licensing fees help to pay for the medical boards. When insurance companies find it too complicated to deal with a gray legal issue, they invariably take the safe path, which in this case is not covering cross-state telemedicine visits.

Probably the only way to guarantee that telemedicine will work would be with legislative action to clear up the gray areas. Add this to the list of broadband topics that need a solution from Congress.

The DOCSIS vs. Fiber Debate

In a recent article in FierceTelecom, Curtis Knittle, the VP of Wired Technologies at CableLabs, argues that the DOCSIS standard is far from over and that cable company coaxial cable will be able to compete with fiber for many years to come. It’s an interesting argument, and from a technical perspective, I’m sure Mr. Knittle is right. The big question will be if the big cable companies decide to take the DOCSIS path or bite the bullet and start the conversion to fiber.

CableLabs released the DOCSIS 4.0 standard in March 2020, and the technology is now being field tested in planned deployments through 2022. In the first lab deployment of the technology earlier this year, Comcast achieved a symmetrical 4 Gbps speed. Mr. Knittle claims that DOSIS 4.0 can outperform the XGS-PON we’re now seeing deployed. He claims that DOCSIS 4.0 will be able to produce a true 10-gigabit output while the XGS-PON actual output is closer to 8.7 Gbps downstream.

There are several issues that are going to drive the decision-making in cable company board rooms. The first is cost. An upgrade to DOCSIS 4.0 doesn’t sound cheap. The upgrade to DOCSIS 4.0 increases system bandwidth by working in higher frequencies – similar to G.Fast on telephone copper. A full upgrade to DOCSIS 4.0 will require ripping and replacing most network electronics. Coaxial copper networks are getting old and this probably also means replacing a lot of older coaxial cables in the network. It probably means replacing power taps and amplifiers throughout the outside network.

Building fiber is also expensive. However, the cable companies have surely learned the lesson from telcos like AT&T and Verizon that there is a huge saving in cost by overlashing fiber onto existing wires. The cable company can install fiber for a lot less than any competitor by overlashing onto existing coax.

There is also an issue of public perception. I think the public believes that fiber is the best broadband technology. Cable companies already see that they lose the competitive battle in any market where fiber is built. The big telcos all have aggressive plans to build fiber-to-the-premise, and there is a lot of fiber coming in the next five years. Other technologies like Starry wireless are also going to nibble away at the urban customer base. All of the alternative technologies to cable have faster upload speeds than the current DOCSIS technology. The cable industry has completely avoided talking about upload speeds because they know how cable subscribers struggled working and schooling from home during the pandemic. How many years can the cable company stave off competitors that offer a better experience?

There is finally the issue of speed to market. The first realistic date to start implementing DOCSIS 4.0 on a large scale is at least five years from now. That’s five long years to limp forward with underperforming upload speeds. Customers that become disappointed with an ISP are the ones that leap first when there is any alternative. Five years is a long time to cede the marketing advantage to fiber.

The big cable companies have a huge market advantage in urban markets – but they are not invulnerable. Comcast and Charter have both kept Wall Street happy by seeing continuous growth from the continuous capture of disaffected DSL customers. Wall Street is going to have a totally different view of the companies if that growth stops. The wheels likely come off stock prices if the two companies ever start losing customers.

I’ve always thought that the cable’s success for the last decade has been due more to having a lousy competitor in DSL than it has been by a great performance from the cable companies. Every national customer satisfaction poll continues to rank cable companies at the bottom behind even the IRS and funeral homes.

We know that fiber builders do well against cable companies. AT&T says that it gets a 30% market share in a relatively short time everywhere it builds fiber. Over time, AT&T thinks it will capture 50% of all subscribers with fiber, which means a 55% to 60% market share. The big decision for the cable companies to make is if they are willing to watch their market position start waning while waiting for DOCSIS 4.0. Are they going to bet another decade of success on aging copper networks? We’ve already seen Altice start the conversion to fiber. It’s going to be interesting to watch the other big cable companies wrestle with this decision.

Another Problem with RDOF

I have been critical of the RDOF awards for a number of reasons, but one of the worst problems isn’t being discussed. When the FCC picked the eligible areas for the RDOF awards, there was no thought about whether the grant award areas make any sense as a service area for an ISP. Instead, the FCC picked Census blocks that met a narrow definition of speed eligibility without any thought of the nearby Census blocks. The result is that RDOF serving areas can best be described as a checkerboard, with RDOF serving areas scattered in with non-RDOF areas.

The easiest way to show this is with an example. Consider the community of Bear Paw in western North Carolina. This is a community of 200 homes, 42 cottages, and 23 condominiums that sticks out on a peninsula in Lake Hiwassee. The community was founded to house the workers who originally built the Tennessee Valley Authority’s Nottley dam on the Hiwassee River. Today’s community has grown from the original cottages. As you might expect for a small town deep into Appalachia, the town has poor broadband, with the only option today being slow DSL offered by Frontier. Residents describe the DSL as barely functional. This is exactly the kind of area where the RDOF awards were supposed to improve broadband.

Below are two maps. The first is printed from the FCC’s RDOF maps – it’s a little hard to read because whoever created the map at the FCC chose a bizarre color combination. On the right is a more normal map of the same area. The red areas on the FCC map are the places where RDOF was claimed by an ISP. As you can see, in a community with only 265 households, the FCC awarded RDOF to some parts of the community and not to others.

 

 

 

 

 

 

The checkerboard RDOF award causes several problems. First, any ISP will tell you that the RDOF award areas are ludicrous – it’s impossible for an RDOF winner to build only to the red areas.

And that’s where the second problem kicks in. The RDOF award winner in Bear Paw is Starlink, the satellite company. Starlink is not going to be building any landline broadband. Unfortunately for Bear Paw, giving the award to Starlink makes no sense. All of the lots in Bear Paw are in the heavy woods – that’s one of the attractions for living in the community. Everything I’ve read say that satellite broadband from Starlink and others will be sketchy or even impossible in heavily wooded areas.

The obvious solution if Starlink doesn’t work well is for the community to try to find another ISP to build fiber to the community. But getting another ISP to build in Bear Paw won’t be easy. Other federal and state grant programs will not fund the red RDOF areas on the FCC map. Even should Congress pass the infrastructure bill, there might not be enough grant money made available to an ISP to make a coherent business case to build to Bear Paw. The FCC checkerboard awards significantly curtail any future grant funding available to serve the community.

The shame of all of this is that any other grant program would have brought a real solution for Bear Paw. With most grants, an ISP would have proposed to build fiber to the entire community and would have applied for the grant project to make that work. But the RDOF awards are going to make it hard, or impossible to ever find solutions for the parts of the checkerboard that the RDOF left behind.

By spraying RDOF awards willy-nilly across the landscape, the FCC has created hundreds of places with the same situation as Bear Paw. The FCC has harmed Bear Paw in several ways. It first allowed a company to win the RDOF using a technology that is not suited to the area. Why wasn’t Starlink banned from bidding in wooded parts of the country? (Or an even better question might be why Starlink was allowed into the RDOF process at all?)  Since no other grants can be given to cover the RDOF areas, there will probably not be enough grant money available from other sources for an ISP to bring fiber to the community. Even if the federal infrastructure funding is enacted and the federal government hands out billions in broadband grant money, towns like Bear Paw are likely going to get left behind. How do you explain to the residents of Bear Paw that the FCC gave out money in a way that might kill their once-in-a-generation chance to get good broadband?

The Migration to Faster Speeds

The OpenVault Broadband Insights Report for the 2nd quarter of 2021 highlights the strength of customer demand for broadband.

The most interesting statistic is the migration of customers to faster broadband tiers. The following table shows the percentage of households subscribed to various broadband speed plans in 2020 and 2021.

June 2020 June 2021
Under 50 Mbps 18.4% 10.5%
50 – 99 Mbps 20.4% 9.6%
100 – 199 Mbps 37.8% 47.5%
200 – 499 Mbps 13.5% 17.2%
500 – 999 Mbps 5.0% 4.7%
1 Gbps 4.9% 10.5%

In just the last year, the number of households subscribed to gigabit broadband has doubled, while the number subscribed to slower speeds nearly cut in half. Many millions of homes upgraded to faster broadband plans over the past year.

OpenVault provides some clues as to why homes are upgrading to faster broadband. Consider the following table that shows the percentage of households using different amounts of total monthly broadband.

June 2018 June 2019 June 2020 June 2021
Less than 100 GB 51.6% 42.7% 34.2% 29.5%
100 – 499 GB 37.7% 39.5% 37.6% 38.6%
500 – 999 GB 8.9% 13.7% 19.4% 21.1%
1 -2 TB 1.7% 3.7% 7.8% 9.3%
Greater than 2 TB 0.1% 0.4% 1.0% 1.5%

The percentage of homes using less than 100 gigabytes of broadband per month has dropped by 43% over three years. At the same time, the number of homes using more than a terabyte of data per month has grown by 500% over three years. While there may be no direct correlation between having a faster broadband plan and using more broadband, total broadband usage is likely one of the factors leading residential customers to upgrade. Another big factor pushing upgrades is customers looking for faster upload speeds to support working and schooling from home.

The average household broadband usage in June 2021 was 433 gigabytes – which is the combined upload and download usage for the average American home. (405 GB download and 28 GB upload). To put that number into perspective, look at how it fits into the past trend of average broadband usage.

1st quarter 2018           215 Gigabytes

1st quarter 2019           274 Gigabytes

1st quarter 2020           403 Gigabytes

2nd quarter 2020         380 Gigabytes

1st quarter 2021          462 Gigabytes

2nd quarter 2021         433 Gigabytes

The second quarter 2021 usage is up 14% over 2020, but down compared to the first quarter of this year. OpenVault observed that broadband usage seems to be returning to seasonal patterns, and in past years it’s been normal for broadband usage to decrease during the summer.

The continued increased household usage has to be good news for ISPs like Comcast that are enforcing monthly data caps. OpenVault shows 10.8% of homes are using more than a terabyte of data per month. However, OpenVault also shows that having data caps influences broadband customers to curtail usage. In June, the average usage for homes with no data caps was 451.6 GB and 421.1 GB for homes with data caps.

The Cable Market Continues to Erode 2Q 2021

The largest traditional cable providers collectively lost almost 1.3 million customers in the first quarter of 2021 – an overall loss of 1.8% of customers. To put the quarter’s loss into perspective, the big cable providers lost over 14 thousand cable customers per day throughout the quarter. The losses for the quarter were lower than the first quarter that had a net loss of 1.6 million customers. The industry is still on pace to lose roughly 6 million customers for the year.

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

Following are first quarter subscriber numbers compared to the end of the first quarter of 2021:

2Q 2021 Change % Change
Comcast 18,956,000 (399,000) -2.1%
Charter 16,012,000 (50,000) -0.3%
AT&T 15,412,000 (473,000) -3.0%
Dish TV 8,554,000 (132,000) -1.5%
Verizon 3,782,000 (63,000) -1.6%
Cox 3,530,000 (60,000) -1.7%
Altice 2,870,500 (48,300) -1.7%
Mediacom 611,000 (15,000) -2.4%
Frontier 423,000 (30,000) -6.6%
Atlantic Broadband 309,242 (4,349) -1.4%
Cable One 287,000 (11,000) -3.7%
   
Total 70,746,742 (1,285,649) -1.8%
Total Cable 42,575,742 (587,649) -1.4%
Total Other 28,171,000 (698,000) -2.4%

Some observations about the numbers:

  • The big loser continued to be AT&T, which lost a net of 473,000 traditional video customers between DirecTV and AT&T TV. During this quarter the company spun its cable business off to a new company, but are still reported here as AT&T.
  • The big percentage loser continues to be Frontier which lost 6.6% of its cable customers for the second quarter in a row.
  • After staving off big losses in 2020, Comcast has lost almost 900,000 cable customers this year.
  • Charter continues to lose cable customers at a slower pace than the rest of the industry. I’ve searched by can’t find any explanation for this.
  • This is the tenth consecutive quarter that the industry has lost over one million cable subscribers.

To put these losses into perspective, these same companies had over 85.4 million cable customers at the end of 2018, and 79.5 million at the end of 2019. That equates to a net loss if 14.7 million customers (17% of customers) since the end of 2018.

The big losses in cable subscribers is happening at the same time that the biggest ISPs are adding a lot of broadband customers. The biggest ISPs added almost 900,000 new broadband subscribers in the second quarter of 2021.

In 2020, we saw that a lot of customers dropping traditional video were switching to online versions of the full cable line-up. That didn’t carry into the second quarter of 2021 where the combination of Hulu plus Live TV, Sling TV, and FuboTV collectively gained only 56,000 customers.

It’s Time for Collaboration

There has never been a better time for communities to collaborate to fund better broadband solutions. It almost seems like it’s raining grant money this year, and there is likely a lot more in grants coming over the next few years.

Communities are going to get the biggest bang for the buck with a collaborative effort. If each stakeholder in a community seeks its own solution, the community will see a wasteful overlap of broadband construction instead of seeing money spent wisely to make sure that everybody gets the broadband solution they want.

What do I mean by collaboration? I mean coordinating funding efforts to take the best advantage of grant monies that available to different community stakeholders right now. Consider the following sources of funding available today:

  • In the most unexpected grants of all, local counties, cities, towns, and townships got a share of the $350 billion Coronavirus State and Local Fiscal Recovery Fund that can be used for broadband.
  • Schools can fund some fiber infrastructure through the E-Rate capital program.
  • Libraries have more grants headed their way than ever before.
  • Rural health care grants through the Universal Service Fund are higher than ever.
  • A $1 billion grant program for tribes is just now closing, but more will be on the way.
  • States have announced huge amounts of state grants, with funding from the ARPA being added to existing state broadband grants.

There are also huge amounts of more traditional broadband grant funds to consider:

  • Many rural communities have areas that will hopefully get broadband through the RDOF awards. But these awards rarely cover everything in an area and are often a strange checkerboard of RDOF and non-RDOF Census Blocks. The FCC is still wading through the long forms for the RDOF winners, and once funds are released, the winners will have four years to build infrastructure.
  • A $288 million grant program with the NTIA just closed.
  • There is a $3 billion grant program that will be coming from the EDA later this year.
  • There is a second round of ReConnect grants that will likely commence before the end of the year.
  • Some areas saw awards made in last year’s CAF II reverse auction. If these areas are not already under construction, they will be within the next year or two.

Smart communities are going to organize the many stakeholders to take the best advantage of this funding. There are a number of ways that collaboration can make for the best broadband result:

  • Communities need to make sure that somebody is going to somehow fill in the checkerboard of grant areas awarded in the RDOF and the CAF II reverse auction. Those two grants relied on faulty FCC mapping data, and there are huge swaths of equally needy areas nearby to most of these grant areas. Areas that don’t get covered by good broadband in the next few years could be left behind for a long time.
  • There is a huge opportunity for anchor institutions to get a long-term facility-based fiber solution. If all of the anchor institutions in an area join together, they can collectively negotiate for long-term IRUs for a private fiber network that can connect schools, libraries, health care facilities, city and town anchor institutions, non-profits, rural electric substations, and tribal facilities together. A collaborative network is the ultimate way to cut long-term costs through the collective purchase of transport and broadband. Such collaboratives will be even stronger if they stretch across multiple counties. These collaboratives will be great for the companies building RDOF or other grant-funded networks – they get a large long-term revenue stream.

This is the time for communities to have these discussions. The big grant monies are going to be awarded over the next few years – so it’s not too late to figure this out. I think communities will be surprised to find out how much buying power all of the anchor institutions and other stakeholder have when they combine forces.

A Chance to Tackle the Urban Digital Divide

For the first time in my career, we face the possibility of some big changes for broadband in low-income neighborhoods in cities. The recent American Rescue Plan Act (ARPA) gave cities significant funding that can be used for various kinds of infrastructure, including broadband.

Cities have been handed a once-in-a-lifetime chance to fix some of the broadband deserts that have grown in poor neighborhoods. I’m already working with several cities that are taking this opportunity seriously. I think everybody in the industry understands the issues. The big ISPs have redlined poor neighborhoods for many decades. These are the places where you can still find ancient DSL technology that has a maximum speed of 6 Mbps if it performs perfectly (which it never does). Cable companies have not been as blatant as the telcos, but they still largely ignore neighborhoods that they don’t think contribute to the bottom line.

The household broadband penetration rate in some urban neighborhoods is dreadful, often with less than half of the homes having broadband. Numerous studies have shown that students without home broadband and computers underperform other students. A study by the Quello Center of Michigan State last year showed that an eleventh-grader without home broadband has the same digital literacy skills as an eighth-grader with home broadband. This is a deficit that rarely gets closed.

The ARPA funding can let cities construct fiber to bring broadband to the poorest neighborhoods. This might mean fiber to public housing or fiber to neighborhoods that have been neglected for decades. The funding also can be used to provide computers. There is a lot of other grant funding available for digital literacy training.

If a city builds and owns fiber, it can sell broadband in these neighborhoods at marginal cost. Homes that find it impossible to pay for Comcast broadband at $90 might instead get gigabit broadband at $35.

Many critics will say that cities shouldn’t do this because the federal government has solved the problem with the EBB low-income program that gives a $50 discount for qualifying low-income households. This program is temporary and won’t last more than another year. There is the hope of a follow-on program funded by the recent Senate broadband bill that would extend the life of EBB while lowering the discount to $30 per month.

The EBB program is not a great long-term solution for poor neighborhoods. Comcast and Charter are headed for $100 basic broadband rates, so a $30 discount a few years from now is still going to mean $70 monthly fees for low-income households. It’s also likely that a controversial program like EBB could be killed by a future Senate as easily as it was created. The worst scenario imaginable is that the EBB program functions well for many years but then disappears overnight due to a change in Administration.

Very few cities are willing to be an ISP – it’s one more challenging task to lay onto staff that likely is already overworked. But there are other options. There are already a few examples around the country of non-profit ISPs bringing better broadband to public housing. I’ve always thought that a broadband cooperative could do well in a city, with the customers owning the business. I think that if cities get creative, that workable solutions can be found. It’s not an easy task, but we already know the consequences of letting neighborhoods continue without adequate broadband.