FCC Small Cell Order – Timelines and Fees

Yesterday’s blog looked at the preemption issues in the FCC’s new ruling concerning small cell deployment on utility poles, light poles, buildings and other infrastructure. The order is WT Docket No. 17-79; WC Docket No. 17-84 and was approved on September 27. Today I’ll look at the rest of the order concerning timeline and fees.

The new rules establish a ‘shot clock’ for the local review of small cell deployments. The FCC established similar shot clocks in 2009 for the deployment of the traditional cell tower deployments. They said then that localities had to review an application for collocating cellular infrastructure within 90 days and gave localities 150 days to review an application for placing a new cellular tower. Cities were free to reject requests if an application failed to meet local regulations and the shot clock defined the time during which a locality had to provide a response to a cellular carrier.

The FCC just set a shorter shot clock for small cell deployment, and localities now have 60 days to process an application for collocation of small cell equipment on a facility that already has similar infrastructure and 90 days to review an application for a new placement. Interestingly, in the case of small cells, those time lines are likely reversed. Cities probably have more concerns about placing multiple small cells on the same pole, yet that situation has the shortest time frame for review.

Numerous cities intervened in the docket and argued that small cell devices are not necessarily ‘small’. While many devices are the size of a pizza box (the example used by the FCC), there have been requests to place cabinets nearly the size of refrigerators on poles. The FCC resolved these issues by defining devices covered by the new rules as ‘Small Wireless Facility’ that must meet the following parameters: the pole or structure can’t be greater than 50 feet tall; the small cell device can’t add more than 10% to the height of an existing structure; the equipment can’t be larger than 28 cubic feet (excluding antennas) and an antenna can’t be more than 3 cubic feet. This limits the devices to boxes that are just a hair larger than a 3 X 3 X 3 foot cube.

The FCC also suggested limits on the fees that a city can charge for access to rights-of-way. They suggest application fees be no more than $500 per application that can include up to five small cell devices, with an additional $100 per small cell after five. The FCC also suggested a fee limit of $270 per year per small cell to cover any recurring fees including rights-of-way. The new rules say that carriers can’t challenge rates at or below these suggested limits.

The FCC new rules would allow a city to charge fees greater than these suggested limits. However, this adds a burden on the city to demonstrate that the costs are reasonable and are a reasonable approximation of actual costs. The FCC says that it would expect only ‘limited circumstances’ under which a city could charge higher rules. Many cities filed in the docket that their costs to review an application is far greater than $100 per site since they usually do a field visit for each proposed site and often hire wireless engineers to make the review.

Many municipalities in the docket cited costs higher than these FCC limits and these low fee levels are why some are calling this a multi-billion dollar giveaway to the cellular carriers. They not only get small cells deployed more quickly, but they are paying a lot less for the applications and rights-of-way fees.

It’s clear that this docket gives 5G and other small cell providers everything on their wish list. It’s been rare in the past to see FCC orders that are so blatantly in favor of one side of an issue. As a regulator the FCC is supposed to weigh the views and needs of everyone involved in a given issue and try to compromise on common ground. However, this order is entirely one-sided in favor of wireless carriers.

Nobody doubts that 5G is an interesting new technology that will bring benefits to many. However, the recently announced Verizon 5G deployments are talking about bringing broadband speeds in the range of 200-300 Mbps. Everything I read predicts that the 5G improvements to cellular speeds will be incremental over a decade and bring speeds as fast as 100 Mbps for those in areas with multiple small cells. It’s clearly unprecedented for the FCC to come out so heavily in favor of a technology before it’s even been proven in field deployment. It’s still unusual for the FCC to protect a specific technology and it would still be nice to see them make it easier to deploy fiber.

The FCC has taken sides to protect new industries before, just not so early in the game. There were rules that fostered the deployment of cable TV, of cellphone and of landline broadband – but these rules generally were issued when it became clear that the new industry needed market protections to grow and thrive. I guess it’s due to the heavy lobbying that declares that 5G will solve all of our broadband problems – but we’re too early into the new technology to know yet if that’s true.

FCC Small Cell Order – Preemption

On September 27 the FCC adopted new rules that apply to the deployment of small cells on utility poles, light poles, buildings and other infrastructure. The order largely preempts state and local authority and today’s blog will focus on the preemption issue.

The orders are in WT Docket No. 17-79; WC Docket No. 17-84 and comes in two parts. First is a Declaratory Ruling where the FCC examines and then claims authority to override local and state regulations on small cell deployment issues. The second portion of the order is a Third Report and Order that sets a new ‘shot clock’ for processing small cell applications and which sets caps on local fees for connecting small cell sites.

FCC orders often conflict with state and local regulations and the FCC always has to decide the extent to which they are willing to override state and local regulations. This is a particularly touchy topic for anything to do with pole attachments and rights-of-ways because the Telecommunications Act of 1996 explicitly gave states the right to establish their own rules governing pole attachments. Since that order 22 states have elected to establish their own rules for connecting to poles while the remaining states follow the FCC pole attachment rules. However, it’s never been clear to what extent the 1996 Act gave any rights to cities.

With that said, states are generally not allowed to establish rules that conflict with the intent of FCC rules. For example, the 1996 Act gave the rights for carriers to gain access to poles, ducts and conduits, but state regulation can’t get rid of that right. State pole attachment rules generally clarify the specific application of the FCC rules and in some cases are more stringent than the FCC rules. For examples, there are states that have shorter time lines for attaching fiber to poles than the FCC rules.

This particular order has more than the usual share of legalese, but my interpretation of this order is that it applies everywhere and that the FCC has largely preempted all state and local regulations related to small cells. For example, the order presumes that any local regulation that would cause a delay in new FCC’s expected timelines would constitute an ‘effective prohibition of service”. The FCC says explicitly that delays cause by any “state or local regulation of wireless infrastructure deployment constitutes an effective prohibition of service prohibited by Sections 253 or 332(c)(7) of the Communications Act.

In regulatory terms that’s strong language – for example, the order says that states can have rules covering issues like aesthetics or the undergrounding of utilities, but any such rules cannot delay the FCC timelines. That’s important because it provides a way for carriers to get a court injunction against any city that delays the small cell deployment process for any reason. I’ve read the order several times and my interpretation is that it’s nearly impossible for a municipality to say no to a small cell request. It looks like cities must meet the FCC timelines without exception or delay.

There was a concern by many cities that the FCC was going to end the municipal exemption for pole attachments that has excused municipally-owned poles from FCC pole attachment rules. The order doesn’t address that issue, so it doesn’t appear that these new rules would apply to utility poles owned by a municipal utility. It’s less clear to me if this order applies to light poles or other structures that don’t connect to wires. (See the first comment below – the FCC took the position in a footnote that the order applies to all municipally-owned assets in the public ROW, but is not so clear on assets outside the ROW).

There is also a practical issue that I don’t see addressed in the order. Not all parts of a small cell deployments are in the air and there can be cabinets and other devices at street level used to power the small cells. Since cities are not allowed to cause the delay of small cell deployment, that logically would preclude local that slow the ground-based part of such deployments. That is an expansion of FCC jurisdiction – they’ve never exerted jurisdiction over the placement of cabinets since those rules consider numerous local issues like safety, handicapped access and aesthetics.

This order is clearly tilted in favor of small cell carriers. The wording of the order reads like the industry wish list and even has some language suggested by the wireless carriers. The carriers want to be able to deploy small cells anywhere quickly, at a low cost, and this order grants them that right. I’ve seen articles that claim this is a billion-dollar giveaway to the carriers.

Since this order preempts local and state pole attachment authority I would expect a flood of lawsuits challenging the order. In this industry the best regulations have always been the ones that balance the needs of all parties. There are clearly local concerns about the proliferation of small cell devices and this ruling is deaf to local concerns. Interestingly the cellular carriers and a number of big cities have already negotiated solutions to deploying small cells – and in every case this ruling is more severe than arrangements the carriers have willingly agreed to. That is the best evidence that this order has gone too far in the favor of the carriers.

Broadband Redlining

The National Digital Inclusion Alliance (NDIA) recently asked the FCC to investigate the practice of digital redlining, where big ISPs only bring the best technology to more affluent neighborhoods while ignoring poor ones.

The NDIA has statistics to back up it’s claims. They used the FCC’s data in 2017 to look in detail at how AT&T had deployed DSL in Cleveland. Years ago, AT&T deployed the first generation of DSL almost everywhere in the market. However, the company became far more selective in where they upgraded to faster DSL.

NDIA mapped where AT&T had deployed VDSL and later DSL technologies in Cleveland and found that the company had deployed faster DSL mostly in affluent neighborhoods and in the suburbs while leaving older downtown neighborhoods with the older DSL. VDSL offers speeds of at least 18 Mbps, up to nearly 50 Mbps when deployed using two copper pairs. NDIA found that the 55% of the census blocks in downtown Cleveland still had DSL speeds of 6 Mbps or less while 22% had speeds below 3 Mbps, with some as slow as 768 Kbps. It’s likely that AT&T marketed all versions of DSL the same, advertising ‘up-to’ speeds that described the fastest product in the market.

The AT&T deployment in Cleveland is not an isolated incident and the same is true in communities across the country. It’s not just AT&T that’s done this and Verizon deployed its fiber FiOS product in a similar manner and largely ignored northeast downtowns in favor of serving suburbs. We also tend to think of cable company networks being deployed ubiquitously in cities, but there are pockets in every major city that don’t have cable broadband.

In the industry this practice is generally referred as cherry-picking. It means deploying a new network in the places where the costs are lower or the expected penetration rates are higher – and ignoring the parts of a market that don’t fit a desired financial profile.

Historically the big telcos weren’t allowed to cherry-pick or redline. AT&T was still largely a regulated company when the first DSL was deployed. But the trend over time to deregulate telephone providers has led to laxer regulation, and obviously in Ohio and many other states the telcos were not required to build later generations of DSL everywhere.

One of the reasons we see so much cherry-picking is that many states have adopted statewide cable franchising. Cable franchises were historically negotiated in each community, and cities insisted that a cable provider build to the whole community as a condition for getting a franchise. However, AT&T and other broadband companies lobbied hard for statewide franchising rules, using the storyline that they wanted to deploy fast DSL to bring cable service. The statewide franchises generally give a cable provide the ability to build anywhere in a state. The telcos argued that the cost of negotiating with every community was killing innovation and deployment of faster broadband. What these companies really wanted was the ability to cherry-pick with no obligation to serve whole communities.

The practice of cherry-picking is still common today and most commercial fiber overbuilders engage in it to some degree. Most overbuilders have limited financial resources and they deploy fiber or other broadband technologies in those places where they get the best return for their investment. Many communities have seen fiber built to businesses and to new subdivisions while ignoring the rest of the town.

It’s hard to fault s smaller fiber overbuilder for maximizing the return on their fiber investment. On the flip side, there are few communities that don’t want fiber everywhere. However, most communities are realistic and know that if they always insist on getting fiber everywhere they might not get it anywhere.

Communities that really care about good broadband everywhere are the ones that are building fiber themselves or trying to attract a partner that will build the whole community. However, there are numerous states that hinder or prohibit communities from building broadband networks, and many other cities find the costs to build new networks to be prohibitive. The majority of communities must rely on the good behavior of the incumbents, and unfortunately they don’t always do the right thing.

Tariffs and Broadband Deployment

A number of my clients are receiving letters from telecom supply houses and vendors warning them of price increases due to the tariffs recently imposed on trade with China. It’s no secret in the telecom world that much of the electronics and components used to build fiber or fixed wireless networks come from China.

The following list is from a letter sent from Power & Tel, a big telecom supply house to their customers. Other supply houses and vendors are sending similar notices. This notice lists examples of components that will receive the new tariff additives. As is usual in these situations there will be components that are in gray areas and it will take a while for the vendors to figure out the full tariff impact.

The new tariffs were imposed by the U.S. Trade Representatives (USTR) at the order of the President and are implemented by the U.S. Customs and Border Protection agencies. There have been multiple USTR lists of affected products, and following is Power & Tel’s take on the various tariff actions:

USTR Tariff List 1 – 25% tariff effective on July 6, 2018. Affects optical fiber cables, aluminum, copper, steel & iron.

USTR Tariff List 2 – 25% tariff effective on August 23, 2018. Affects fiber adapters, connectors, splice sleeves, grounding hardware.

USTR Tariff List 3 – 10% tariff effective on September 24, 2018. On January 1, 2019 the tariff increases to 25%. Affects electronics, power cables, active optical cable, direct attach cables, cable management and racks, batteries, power supplies, metal hand tools, power tools, hardware.

Included in this list are several major components that are part of every broadband deployment. This includes things like:

  • Core routers and switches for fiber and wireless networks
  • Core electronics and customer ONTs for FTTP
  • Core electronics and customer radios for fixed wireless
  • The core of central offices and huts including racks, batteries, power supplies, grounding hardware, cables, hardware, test equipment and other tools.
  • Cable settop boxes and WiFi routers
  • There are numerous sources of non-Chinese fiber optic cable, but many of the components for an outside plant network like fiber adapters, connectors, pre-connectorized drops, etc. will be affected.

I try not to be political in my blog – and it’s normally easy to do because broadband deployment is a topic that enjoys bipartisan support. I’ve always found in rural America that politicians from both parties support fiber and wireless network deployments because they understand that their local economy needs broadband to thrive and survive. I visited a number of rural counties in the last year where the elected officials say that lack of broadband access has become the number one issue of concern in their county.

However, I have no doubt when looking at the size and scope of these tariffs that the cost of building broadband just got more expensive. I won’t be surprised if this doesn’t kill or delay some pending construction projects, and it’s something that will have to be factored in to any future-looking business plans. I’m sure I share the sentiment of many in the industry and hope that these tariffs are temporary.

Regulating VoIP

The regulation of Voice over IP (VoIP) has been disputed since the late 1990s when Vonage and other VoIP providers burst onto the scenes. In the latest action, the Eighth Circuit Court of Appeals ruled that the Minnesota Public Utilities Commission cannot regulate the VoIP service offered by Charter Communications.

Before looking at that ruling, let me review the history of VoIP regulation. When Vonage and others first offered VoIP a number of states immediately sought to regulate the VoIP companies using what I would call the ‘quack like a duck’ argument that the function of VoIP was to complete telephone calls and that changing the underlying technology didn’t change the nature of the service.

After various regulatory rulings and the subsequent legal challenges it was finally determined that the VoIP offered by Vonage was not the same as regulated voice service because it wasn’t ‘interconnected’ voice. Interconnection is a term defined by the FCC meaning that a telephone call must be originated and terminated using the public switched telephone network (PSTN) established to trade calls between different phone companies. Vonage originated calls using the open Internet and only used the PSTN to terminate calls. This loophole, based upon the FCC definition of a phone call, eventually freed Vonage from most telco regulation, although VoIP providers were required to offer access to 911.

When cable companies started to offer telephone service they adopted the strategy of trying to get their telephone service also classified as VoIP to avoid regulation. They talked about offering VoIP before their voice product even hit the street. However, telephone service on a cable network is not the same as Vonage. Where Vonage customers bypass the PSTN on the originating side of the call, cable companies have always used the PSTN to originate and terminate calls, and from a functional perspective their networks and telco networks look identical.

Cable companies argued that they are VoIP because a customer called is converted to an IP format at the customer location and transmitted digitally across their networks. Their argument relied entirely on the fact that their technology used the ‘IP’ part of VoIP and that preempted them from regulation. Surprisingly, a lot of state regulators agreed with the cable companies and freed them from voice regulation, in what I would classify as regulatory rulings as a result of heavy lobbying. Cable company voice has never, to this day, passed the ‘quack like a duck’ test and they still use the PSTN in the same manner as telephone companies.

We ended up with a patchwork of VoIP regulation as different states took different positions on the issue. Cable companies eventually changed tactics and shot for a different regulatory loophole. They began to argue that VoIP is an information service and not a telecommunications service. They wanted this classification since the FCC had several rulings in other areas, not related to VoIP, that the agency isn’t authorized by Congress to regulate information services. I literally laughed out loud the first time I read this argument and I didn’t expect any regulator to ever accept it, because if making a telephone call isn’t a telecommunications service, then nothing is.

However, in the Minnesota case the cable companies finally talked a court into accepting the argument. The Minnesota case arose when Charter moved their VoIP product to a different subsidiary in an attempt to avoid the assessment of regulatory taxes and fees. The Minnesota PUC sought to impose the same taxes and fees on the new subsidiary, which prompted the lawsuit.

Charter still made the same technology argument that cable companies have used for years. They argued that their product isn’t a telecom service because telephone traffic on their network undergoes a ‘protocol conversion’ as the signal is transformed from analog to digital (for telephone folks, from TDM to IP). This is the decade-old argument that it’s VoIP if some portion of the call uses IP technology.

However, in this case Charter bolstered this argument by claiming that they offer features that prove that their VoIP is an information service. Charter cites as proof the use of features like offering a web portal to listen to voice mails, converting voice mails to text, and providing caller ID on a connected TV.

Technically, these are all ancillary services that have nothing to do with the direct delivery of a telephone call. Most telcos and cellular companies today offer these same features – and they all happen outside of the direct voice path. Recording a call to play back later doesn’t change the fact that a telephone call was made.

Surprisingly the courts agreed with Charter and declared that their VoIP product is an informational service. That exempts Charter from state regulation and the case is going to be used elsewhere by cable companies hoping to avoid regulation. You might want to read the ruling, but I’ll warn you that the circular logic will hurt your head. Apparently, if something now quacks like a duck it might really be a turkey.

Upgrading FCC Broadband Statistics

The NCTA – The Internet & Television Association that represents the large cable companies and telcos has filed a complaint with the FCC asserting that the agency is not updating broadband maps in a timely manner, and this is understating the amount of broadband deployed in the country.

They have a good point, in that the FCC recently released broadband data from 2016 while they already have received June 2017 data. The recently released data is now more than two years behind the actual broadband deployments in the country.

There may have been years in the past where this kind of time delay didn’t make that much difference, but we are now at a time when there are massive amounts of broadband upgrades happening across the country. The big telcos are well into the CAF II upgrades that are upgrading huge swaths of rural America to speeds of at least 10/1 Mbps. There is a lot of upgrades at smaller telcos that are implementing upgrades from the A-CAM program that requires upgrades to at least 25/3 Mbps – although many of them are upgrading to fiber with gigabit speeds. We now see cable companies starting to implement DOCSIS 3.01 upgrades that can increase their download speeds to a gigabit. And there are numerous overbuilders upgrading broadband all over the place by building fiber or fixed wireless technology. We will soon see the CAF II reverse auctions building yet more rural broadband, with a significant percentage of those upgrades being at 100 Mbps or faster.

This means that the FCC’s broadband maps and the underlying databases are far out of synch and provide the wrong narrative about broadband coverage. The members of NCTA want to get credit for the upgrades they are making, which means that numerous households are no longer considered as unserved, with many of them getting a broadband option for the first time.

There are practical and policy ramifications due to the delay in upgrading the maps. For example, some of the federal loan and grant programs score applicant projects according to whether they are upgrading rural areas that are unserved or underserved – and the FCC data overstates the households that are classified as unserved.

There are also real-life implications for communities. Consider Otter Tail County, Minnesota. Looking at the current FCC maps shows the County with a paltry 2% of households able to get download speeds of 100 Mbps. That is a truthful depiction just looking back a year or two. The cable companies serving the towns in the County have had maximum speeds of no more than 60 Mbps and the rural areas all have broadband using DSL, fixed wireless or satellite.

However, that map doesn’t reflect what’s happening in the County today and what will be happening there in the next few years. Charter has promised to upgrade to faster speeds nationwide and their customers in the County ought to be at speeds far above the 100 Mbps threshold. A lot of the rural areas are served by small telcos that are using A-CAM funding to build fiber. In this past summer alone there were dozens of construction crews building fiber around the County. There are also a few pockets of the County that have gotten upgrades to fiber that were assisted with broadband grants from the State of Minnesota. My quick assessment show that the County will soon have 100 Mbps broadband for 70% to 80% of households when the known upgrades are finished over the next few years. And even most of the areas not getting 100 Mbps broadband will still be seeing speed improvements. That facts on the ground in Otter Tail County paint a drastically different picture than what is shown by the current FCC maps. I have no doubt that this same thing is true in numerous other rural counties.

I understand that the FCC wants to use actual data to create their maps. But I’m mystified why they don’t want to brag about the programs they have sponsored that will improve broadband. It should be easy for them to overlay a map of the expected upgrades that will come from the CAF II and A-Cam programs. These future-looking maps are a better picture of the rural broadband situation.

There are obviously numerous upgrades happening that the FCC can’t know about – they have no way of knowing about upgrades being done with non-FCC funding. But there isn’t much excuse for the FCC to be issuing data and maps that are more than two years out of synch at the date of publication. It’s not a difficult  technical challenge to quickly map ISP broadband data as it’s submitted – numerous states already readily create their own versions of these maps. And it shouldn’t be hard for the FCC to create overlays showing the upcoming successes due to the upgrades they have fostered.

Taking Advantage of Rural Fiber

As I keep reading about Verizon’s residential 5G roll-out I can’t help but thinking about how 5G might benefit rural America. It’s clear that the 5G technology requires fiber that is close to customers – it uses wireless to deliver the broadband for the last thousand feet or so, but must be fed from fiber. This means that the biggest cost and biggest impediment to rural 5G deployment will be the cost of deploying fiber.

But what about all of the fiber that already exists in rural America? I visit rural counties all of the time and there is usually a surprising amount of existing fiber. It’s used for purposes like connecting to electric substations, for connecting to schools, for connecting telco central offices and many other similar uses. How much benefit might rural America get if these fibers could be tapped for 5G?

One fiber provider that is often forgotten is the railroads. There are 233,000 miles of railroads in the US, and a decent percentage the tracks already has fiber. Union Pacific is the largest railroad with 32,000 miles of tracks, much of it with fiber. While many miles of track go through desolate places with no people, Union Pacific and the other railroads also pass numerous small rural towns and other pockets of rural households as well as portions of numerous larger towns and cities.

It’s not hard to picture a business case for somebody like Union Pacific to get into the 5G business. The company has toyed with the broadband idea for nearly twenty years and has done some trials as an ISP using the existing wireless technologies. If 5G works as promised they could have a robust wireless product that could deliver hundreds of Mbps to those living close enough to the railroad tracks. It’s a tricky business plan in that it probably requires door-do-door marketing to those within range of a 5G transmitter, but one has to think that Union Pacific alone might pass close to millions of homes. Just one railroad of their size could become a significant ISP if they are willing to leverage the fiber they have buried along their tracks.

The same goes with other fiber owners. Electric companies collectively own even more miles of rural fiber than the railroads. A number of electric companies have already become ISPs and are building fiber-to-the-premise. Tapping the 5G potential would be an interesting ISP model that provides broadband along narrow corridors – but that still could bring better broadband to millions of homes.

There are obviously numerous challenges to make this work. The technology is not here yet today to do this. Verizon developed their own 5G electronics and there is no commercially equivalent yet available to the average ISP. Fiber owners like a small electric cooperative or a school district might not own enough fiber to make a viable business plan. And even those with enough fiber need to fund and implement a new ISP business – which many fiber owners would consider as a distraction from their normal line of business.

But there is a lot of potential in existing rural fiber. Once the technology is reliable and cheap enough I can foresee ISPs willing to partner with or lease capacity from existing fiber owners. A 5G ISP could gain economy of scale if they can master the business plan of selling only to those who live within a thousand feet of an existing fiber. There will clearly be operational hurdles to overcome – because wireless is always trickier to operate than end-to-end fiber.

5G is not going to come close to solving the rural broadband problem because most rural homes are not close enough to existing fiber. Many owners of the existing rural fiber are not going to use it for this purpose or allow others to use it. There is still likely to be no business case for building new fiber to support rural 5G, and in fact, anybody doing that might still decide to go the whole way to the home with fiber.

But I can’t help envision how creative ISPs might be able to take advantage of the fiber that already exists along railroad lines or is used to reach schools. This might bring good broadband to a few million more rural homes, and that’s how we are going to solve the rural broadband dilemma – one home at a time.

The Zero-rating Strategy

The cable companies are increasingly likely to be take a page from the cellular carriers by offering zero-rating for video. That’s the practice of providing video content that doesn’t count against monthly data caps.

Zero-rating has been around for a while. T-Mobile first started using zero-rating in 2014 when it provided its ‘Music Freedom’ plan that provided free streaming music that didn’t count against cellular data caps. This highlights how fast broadband needs have grown in a short time – but when data caps were at 1 GB per month, music streaming mattered.

T-Mobile then expanded the zero-rating in November 2015 to include access to several popular video services like Netflix and Hulu. AT&T quickly followed with the first ‘for-pay’ zero-rating product, called FreeBee Data that let customers (or content providers) pay to zero-rate video traffic. The AT&T plan was prominent in the net neutrality discussions since it’s a textbook example of Internet fast lanes using sponsored data where some video traffic was given preferential treatment over other data.

A few of the largest cable companies have also introduced a form of zero-rating. Comcast started offering what it called Stream TV in late 2015. This service allowed customers to view video content that doesn’t count against the monthly data cap. This was a pretty big deal at the time because Comcast was in the process at the time of implementing a 300 GB monthly data cap and video can easily push households over that small cap limit. There was huge consumer pushback against the paltry data caps and Comcast quickly reset the data cap to 1 terabyte. But the Stream TV plan is still in effect today.

What’s interesting about the Comcast plan is that the company had agreed to not use zero-rating as part of the terms of its merger with NBC Universal in 2011. The company claims that the Stream TV plan is not zero-rating since it uses cable TV bandwidth instead of data bandwidth – but anybody who understands a cable hybrid-fiber coaxial network knows that this argument is slight-of-hand, since all data uses some portion of the Comcast data connection to customers. The prior FCC started to look into the issue, but it was dropped by the current FCC as they decided to eliminate net neutrality.

The big cable companies have to be concerned about the pending competition with last-mile 5G. Verizon will begin a slow roll-out of its new 5G technology in October in four markets, and T-Mobile has announced plans to begin offering it next year. Verizon has already announced that they will not have any data caps and T-Mobile is also unlikely to have them.

The pressure will be on the cable companies to not charge for exceeding data caps in competitive markets. Cable companies could do this by eliminating data caps or else by pushing more video through zero-rating plans. In the case of Comcast, they won’t want to eliminate the data caps for markets that are not competitive. They view data caps as a potential source of revenue. The company OpenVault says that 2.5% of home currently exceed 1 TB in monthly data usage, up from 1.5% in 2017 – and within a few years this could be a lucrative source of extra revenue.

Comcast and the other big cable companies are under tremendous pressure to maintain earnings and they are not likely to give up on data caps as a revenue source. They are also likely to pursue sponsored video plans where the video services pay them to provide video outside of data caps.

Zero-rating is the one net neutrality practice that many customers like. Even should net neutrality be imposed again – through something like the California legislation or by a future FCC – it will be interesting to see how firmly regulators are willing to clamp down on a practice that the public likes.

More FCC Mapping Woes

The FCC has another new billion dollar grant program, this one aimed to improve rural cellular coverage. Labeled as the Mobility Fund II the program will conduct a reverse auction sometime next year to give $4.53 billion to cellular carriers to extend wireless coverage to the most remote parts of the country. For taking the funding a cellular carrier must bring 4G LTE coverage to the funded areas and achieve cellular download speeds of at least 10 Mbps. Funding will be distributed over 10 years with build out requirements sooner than that.

Just like with the CAF II program, the areas eligible for funding are based upon the FCC’s broadband maps using data collected by the existing cellular carriers. As you might expect, the maps show that the parts of the country with the worst coverage – those eligible for funding – are mostly in the mountains and deserts of the west and in Appalachia.

The release of the Mobility Fund II maps instantly set off an uproar as citizens everywhere complained about lack of cellular coverage and politicians from all over the country asked the FCC why there wasn’t more funding coming to their states. The FCC received letters from senators in Mississippi, Missouri, Maine and a number of other states complaining that their states have areas with poor or non-existent cellular coverage that were not covered be the new fund.

If you’ve traveled anywhere in rural America you know that there are big cellular dead spots everywhere. I’ve been to dozens of rural counties all across America in the last few years and every one of them has parts of their counties without good cellular coverage. Everybody living in rural America can point to areas where cellphones don’t work.

The issue boils down to the FCC mapping used to define cellular and broadband coverage. The maps for this program were compiled from a one-time data request to the cellular carriers asking for existing 4G coverage. It’s obvious by the protests that the carriers claim cellular coverage where it doesn’t exist.

In August, the Rural Wireless Association (RWA) filed a complaint with the FCC claiming that Verizon lied about its cellular coverage by claiming coverage in many areas that don’t have it. This is the association of smaller wireless companies (they still exist!). They say that the Verizon’s exaggerated coverage claims will block the funding to many areas that should be eligible.

The Mobility Fund II program allows carriers to challenge the FCC’s maps by conducting tests to identify areas that don’t have good cellular coverage. The smaller carriers in the RWA have been filing these challenges and the FCC just added 90 additional days for the challenge process. Those challenges will surely add new eligible coverage areas for this program.

But the challenge program isn’t going to uncover many of these areas because there are large parts of the country that are not close to an RWA carrier, and which won’t be challenged. People with no cellular coverage that are not part of the this grant program might never get good cellular coverage – something that’s scary as the big telcos plan to tear down copper in rural America.

The extent of the challenges against the Verizon data are good evidence that Verizon overstated 4G LTE coverage. The RWA members I know think Verizon did this purposefully to either block others from expanding cellular networks into areas already served by Verizon or to perhaps direct more of this new fund to areas where Verizon might more easily claim some of the $4.5 billion.

To give Verizon a tiny amount of credit, knowing cellular coverage areas is hard. If you’ve ever seen a coverage map from a single cell tower you’ll instantly notice that it looks like a many-armed starfish. There are parts of the coverage area where good signal extends outward for many miles, but there are other areas where the signal is blocked by a hill or other impediments. You can’t draw circles on a map around a cell tower to show coverage because it only works that way on the Bonneville Salt Flats. There can be dead spots even near to the cell tower.

The FCC fund is laudable in that it’s trying to bring cellular coverage to those areas that clearly don’t have it. But there are countless other holes in cellular coverage that cannot be solved with this kind of fund, and people living in the many smaller cellular holes won’t get any relief from this kind of funding mechanism. Oddly, this fund will bring cellular coverage to areas where almost nobody lives while not addressing cellular holes in more populated areas.

Verizon’s Residential 5G Broadband

We finally got a look at the detail of Verizon’s 5G residential wireless product. They’ve announced that it will be available to some customers in Houston, Indianapolis, Los Angeles and Sacramento starting on October 1.

Verizon promises average download data speeds of around 300 Mbps. Verizon has been touting a gigabit wireless product for the last year, but the realities of wireless in the wild seems to have made that unrealistic. However, 300 Mbps is a competitive broadband product and in many markets Verizon will become the fastest alternative competitor to the cable companies. As we’ve seen everywhere across the country, a decent competitor to the big cable companies is almost assured of a 20% or higher market penetration just for showing up.

The product will be $50 per month for customers who use Verizon wireless and $70 for those that don’t. These prices will supposedly include all taxes, fees and equipment – although it’s possible that there are add-ons like using a Verizon WiFi router. That pricing is going to be attractive to anybody that already has Verizon cellular – and I’m sure the company is hoping to use this to attract more cellular customers. This is the kind of bundle that can make cellular stickier and is exactly what the Comcast and Charter have in mind as they are also offering cellular. Verizon is offering marketing inducements for the roll-out and are offering 3 months free of YouTube TV or else a free Apple TV 4K or a Google Chromecast Ultra.

Theoretically this should set off a bit of a price war in cities where Comcast and Charter are the incumbent cable providers. It wouldn’t be hard for those companies to meet or beat the Verizon offer since they are already selling cellular at a discount. We’re going to get a fresh look at oligopoly competition – will the cable companies really battle it out? The cable companies have to be worried about losing significant market share in major urban markets.

We’re also going to have to wait a while to see the extent of the Verizon coverage areas. I’ve been speculating about this for a while and I suspect that Verizon is going to continue with their history of being conservative and disciplined. They will deploy 5G where there is fiber that can affordably support it – but they are unlikely to undertake any expensive fiber builds just for this product. Their recently announced ‘One Fiber’ policy says just that – the company wants to capitalize on the huge amount of network that they have already constructed for other purposes. This means it’s likely in any given market that coverage will depend upon a customer’s closeness to Verizon fiber.

There is one twist to this deployment that means Verizon might not be in a hurry to deploy this too quickly. The company has been working with Ericsson, Qualcomm, Intel and Samsung to create proprietary equipment based upon the 5GTF standard. But the rest of the industry has adopted the 3GPP standard for 5G and Verizon admits it will have to replace any equipment installed with their current standard.

Verizon also said over the last year that they wanted this to be self-installed by customers. At least for now the installations are going to require a truck roll, which will add to the cost and the rate of deployment of the new technology.

Interestingly, these first markets are outside of Verizon’s telco footprint. This means that Verizon will not only be taking on cable companies, but that they might be putting the final nail in the coffin of DSL offered by AT&T and other telcos in the new markets. Verizon is unlikely to roll this out to compete with their own FiOS product unless deployments are incredibly inexpensive. But this might finally bring a Verizon broadband product to neighborhoods in the northeast that never got FiOS.

It’s going to be a while under we understand the costs of this deployment. Verizon has been mum about the specific network elements and reliance on fiber needed to support the product. And they have been even quieter about the all-in cost of deployment.

Cities all over the country are going to get excited about this deployment in the hope of getting a second competitor to their cable company which are often a near-monopoly. It appears that the product is going to work best where there is already a fiber-rich environment. Most urban areas, while having little last mile-fiber, are crisscrossed with fiber used to get to large businesses, governments, schools, etc.

The same is not necessarily the same in suburbs and definitely not true of smaller communities and rural America. The technology depends upon local last-mile fiber backhaul. Verizon says that they believe their potential market will be to eventually pass 30 million households, or a little less than 25% of the US market. I’d have to think that the map for others, except perhaps for AT&T largely coincide with the Verizon map. It seems that Verizon wants to be the first to market to potentially dissuade other entrants. We’ll have to wait and see if a market can reasonably support more than one last-mile 5G provider – because companies like T-Mobile also have plans for wide deployment.