The Lack of Broadband Competition

There is one statistic from the FCC annual report on the state of broadband that I’ve been meaning to write about. There is still a massive lack of broadband competition at speeds that most households are coming to think of as broadband.

Here are the key statistics from that report:

  • 13% of all households can’t get broadband that meets the FCC’s definition of 25/3 Mbps
  • 31% of homes have access to 25/3 Mbps, but not speeds of 100 Mbps
  • 15% have access to 100 Mbps from more than one provider
  • 41% have access to 100 Mbps from only one provider

It’s the last statistic that I find astounding. The current FCC declared with this report that the state of broadband in the country is healthy and that the market is taking care of the country’s broadband needs. I’ve written number blogs about the households in the bottom 13% that have little or no broadband, but I want to look closer at the top two categories.

Households in the 15% category are in markets where there is a fiber provider in addition to the incumbent cable company. The biggest fiber provider is still Verizon FiOS, but there are numerous others building fiber like AT&T, CenturyLink, Google Fiber, smaller telcos, small fiber overbuilders and municipalities.

This means that 41% of households (51 million homes) only have one option for fast broadband – the cable company. I see numerous problems related to this huge monopoly that has been won by the big cable companies. Consider the following:

  • The US already has some of the most expensive broadband in the developed world. The high prices are directly the result of the lack of competition.
  • This lack of competition is likely the driving factor for why most of the big ISPs in the US are rated at the bottom of all US corporations in terms of customer service. We know that customer service improves in markets where is broadband competition, but the big ISPs don’t make the same effort elsewhere.
  • We also know that competition between a cable company and a smaller fiber overbuilder lowers broadband prices. For example, there are markets where competitors like Google have set the price of a gigabit connection at $70, and the cable companies generally come close to matching the lower price. But preliminary pricing from Comcast and Charter for their new gigabit products where there are no competitors will be significantly north of $100 per month.
  • Even where there are competing networks, if both networks are owned by large ISPs we see duopoly competition where the big ISPs don’t push each other on price. For example, Comcast largely is able to offer the same prices when competing against Verizon FiOS as it does in markets where there is no fiber provider.
  • Industry analysts expect the big ISPs to start raising broadband rates for various reasons. The ISPs continue to lose telephone and cable customers and the national penetration rate for broadband is nearing a market saturation point. In order to satisfy Wall Street the big ISPs will have little choice other than raising broadband prices to maintain earnings growth.

I’m sure that the households in the bottom 13% of the market that can’t get good broadband are not sympathetic to those who can only buy fast broadband from one provider. But these statistics say that 41% of the whole market are dealing with a monopoly situation for fast broadband. Telecom is supposed to be a competitive business – but for the majority of the country the competitors have never showed up. For the FCC to declare that we have a healthy broadband market astounds me when so many households are hostage to a broadband monopoly.

There is always the chance that over the next decade that fixed 5G will bring more broadband competition. My guess, however, is that at least for a few years that this is going to be a lot more competition by press release than real competition. Deploying gigabit 5G like the big ISPs are all touting is going to require a lot more fiber than we have in place today. Deploying 5G without fiber backhaul might still result in decent broadband, but it’s not going to be the robust gigabit product that the ISPs are touting. But even poorly deployed 5G networks might bring 100+ Mbps broadband to a lot more homes after the technology gets a little more mature.

Unfortunately there is also the risk that 5G might just result in a lot more duopoly competition instead of real competition. If 5G is mostly deployed by big ISPs like Verizon and AT&T there is no reason to think that they will compete on price. Our only hope for real market competition is to see multiple non-traditional ISPs who will compete on price. However, it’s so tempting for ISPs to ride the coattails of the big ISPs in terms of pricing that 5G might bring more of the same high prices rather than real competition.

Setting the FCC Definition of Broadband

In the recently released 2018 Broadband Progress Report the FCC reluctantly kept the official definition of broadband at 25/3 Mbps. I say reluctantly because three of the Commissioners were on record for either eliminating the standard altogether or else reverting back to the older definition of 10/1 Mbps.

I’m guessing the Commissioners gave in to a lot of public pressure to keep the 25/3 standard. Several Commissioners had also taken a public stance that they wanted to allow cellular data to count the same for a household as landline broadband – and that desire was a big factor in lowering the definition since cellphones rarely meet the 25/3 speed standard.

The deliberation on the topic this year raises the question if there is some way to create a rule that would better define the speed of needed broadband. It’s worth looking back to see how the Tom Wheeler FCC came up with the 25/3 definition. They created sample profiles of the way that households of various sizes are likely to want to use broadband. In doing so, they added together the bandwidth needed for various tasks such as watching a movie or supporting a cellphone.

But the FCC’s method was too simple and used the assumption that various simultaneous uses of broadband are additive. They added together the uses for a typical family of four which resulted in bandwidth needs greater than 20 Mbps download, and used that as the basis for setting the 25/3 standard. But that’s now home broadband works. There are several factors that affect the actual amount of bandwidth being used:

For example, doing simultaneous tasks on a broadband network increases the overhead on the home network. If you are watching a single Netflix stream, the amount of needed bandwidth is predictable and steady. But if three people in a home are each watching a different Netflix the amount of needed bandwidth is greater than adding together the three theoretical streams. When your ISP and your home router try to receive and untangle multiple simultaneous streams there are collisions of packets that get lost and which have to be retransmitted. This is described as adding ‘overhead’ to the transmission process. Depending on the nature of the data streams the amount of collision overhead can be significant.

Almost nobody directly wires the signal from their ISP directly too all of their devices. Instead we use WiFi to move data around to various devices in the home. A WiFi router has an overhead of its own that adds to the overall bandwidth requirement. As I’ve covered in other blogs, a WiFi network is not impacted only by the things you are trying to do in your home, but a WiFi network is slowed when it pauses to recognizes demands for connection from your neighbor’s WiFi network.

Any definition of home broadband needs should reflect these overheads. If a household actually tries to download 25 Mbps of usage from half a dozen sources at the same time on a 25 Mbps, the various overheads and collisions will nearly crash the system.

The FCC’s definition of broadband also needs to reflect the real world. For example, most of the unique programming created by Netflix and Amazon Prime are now available in 4K. I bought a large TV last year and we now watch 4K when it’s available. That means a stream of 15-20 Mbps download. That stream forced me to upgrade my home WiFi network to bring a router into the room with the TV.

The FCC’s speed definition finally needs to consider the busy hour of the day – the time when a household uses the most broadband. That’s the broadband speed that the home needs.

We know household bandwidth needs keep increasing. Ten years ago I was happy with a 5 Mbps broadband product. Today I have a 60 Mbps product that seems adequate, but I know from tests I did last year that I would be unhappy with a 25 Mbps connection.

The FCC needs a methodology that would somehow measure actual download speeds at a number of homes over time to understand what homes area really using for bandwidth. There are ways that this could be done. For example, the FCC could do something similar for broadband like what Nielsen does for cable TV. The FCC could engage one of the industry firms that monitor broadband usage such as Akamai to sample a large number of US homes. There could be sample voluntary homes that meet specific demographics that would allow monitoring of their bandwidth usage. The accumulated data from these sample homes would provide real-life bandwidth usage as a guide to setting the FCC’s definition of broadband. Rather than changing the official speed periodically, the FCC could change the definition as needed as dictated by the real-world data.

The FCC does some spot checking today of the broadband speeds as reported by the ISPs that feed the national broadband map. But that sampling is random and periodic and doesn’t provide the same kind of feedback that a formal ongoing measuring program would show. We have tools that could give the FCC the kind of feedback it needs. Of course, there are also political and other factors used in setting the official definition of broadband, and so perhaps the FCC doesn’t want real facts to get into the way.

Regulating From Broadband Maps

One of the more bizarre things we do in the US is regulate broadband based upon broadband maps. There are numerous federal grant and subsidy programs that rely upon these maps (and the underlying databases that support them) as well as various state programs. The FCC also uses this same data when reporting broadband penetration in the country to Congress each year, as just occurred on February 9.

The maps are intended to show how many households can purchase broadband of various speeds. Currently the arbitrary speed thresholds tested are download speeds of 10 Mbps, 25 Mbps and 100 Mbps. These speeds are measured due to past decisions by the FCC. For example, the FCC chose a 10/1 Mbps speed goal for any company that accepted CAF II money to upgrade rural broadband. The FCC’s current definition of broadband is still set at 25/3 Mbps.

Anybody that understands broadband networks knows that much of the data included in the databases and the mapping is incorrect, and sometimes pure fantasy. That makes sense when you understand that the speeds in this mapping process are all self-reported by ISPs.

There are numerous reasons why the speeds in these databases are not an accurate reflection of the real world:

  • There are still ISPs that report advertised speeds rather than actual speeds received by customers.
  • Any speeds represented for a whole DSL network are inaccurate by definition. DSL speeds vary according to the size of the copper wires, the condition of the copper cable and the distance from the source of the DSL broadband signal. That means that in a DSL network the speeds available to customers vary street by street, and even house by house. We’ve always known that DSL reported in the mapping databases is overstated and that most telcos that report DSL speeds report theoretical speeds. I’m not sure I blame them, but the idea of any one speed being used to represent the performance of a DSL network is ludicrous.
  • The speeds in the database don’t recognize network congestion. There are still many broadband networks around that bog down under heavy usage, which means evenings in a residential neighborhood. Nobody wants to be told that their network is performing at 10 Mbps if the best speed they can ever get when they want to use it is a fraction of that.
  • The speeds don’t reflect that ISPs give some customers faster speeds. In networks where bandwidth is shared among all users on a neighborhood node, if a few customers are sold a faster-than-normal speed, then everybody else will suffer corresponding slower speeds. Network owners are able to force extra speed to customers that pay a premium for the service, but to the detriment of everybody else.
  • The maps don’t reflect the way networks were built. In most towns you will find homes and businesses that were somehow left out of the initial network construction. For example, when cable companies were first built they largely ignored business districts that didn’t want to buy cable TV. There are lots of cases of apartment and subdivision owners that didn’t allow in the incumbent telco or cable company. And there are a lot of homes that just got missed by the network. I was just talking to somebody in downtown Asheville where I live who is not connected to the cable network for some reason.
  • Not all ISPs care about updating the databases. There are many wireless and other small ISPs that don’t update the databases every time they make some network change that affects speeds. In fact, there are still some small ISPs that just ignore the FCC mapping requirement. At the other extreme there are small ISPs that overstate the speeds in the databases, hoping that it might drive customer requests to buy service.
  • One of the most insidious speed issues in networks are the data bursts that many ISPs frontload into their broadband products. They will send a fast burst of speed for the first minute or two for any demand for bandwidth. This improves the customer experience since a large percentage of requests to use bandwidth are for web searches or other short-term uses of bandwidth. Any customer using this feature will obtain much faster results from a speed test than their actual long-use data speeds since they are actually testing only the burst speed. A rural customer using burst might see 4 Mbps on a speed test and still find themselves unable to maintain a connection to Netflix.
  • Sometimes there are equipment issues. The best-known case of this is a widespread area of upstate New York where Charter has kept old DOCSIS 1.0 cable modems in homes that are not capable of receiving the faster data speeds the company is selling. It’s likely that the faster network speed is what is included in the database, not the speed that is choked by the old modems.
  • And finally, speed isn’t everything. Poor latency can ruin the utility of any broadband connection, to the point where the speed is not that important.

Unfortunately, most of the errors in the broadband databases and maps overstate broadband speeds rather than under-report them. I’ve worked with numerous communities and talk to numerous people who are not able to get the broadband speeds suggested by the FCC databases for their neighborhoods. Many times the specific issue can be pinned down to one of the above causes. But that’s no consolation for somebody who is told by the FCC that they have broadband when they don’t.

FCC to Hide the Digital Divide?

The next big decision on the FCC’s agenda is to consider the agency’s definition of broadband and to also consider if cellular data should be considered as broadband as part of that definition. This is slated to come up for a vote on February 3. The FCC raised the issue back in August and asked for feedback on the two issues.

To put this discussion into context, the FCC previously defined the speed of broadband while issuing mandated reports to Congress about the national state of broadband. These mandated broadband reports are issued every year and discuss major broadband issues, as well as quantifying the number of households that are considered to have broadband.

The FCC used the annual broadband report in 2015 to increase the definition of landline broadband to 25 Mbps download and 3 Mbps upload. The FCC is thinking about using this year’s report to revise the definition of broadband lower again. At least two of the Commissioners are in favor of lowering the definition for landline broadband back to the old speed threshold of 10 Mbps download and 1 Mbps upload.

Further, the FCC is considering counting cellular data speeds as a substitute for landline broadband, using a 10/1 Mbps definition. This would mean that a customer who can receive either cellular data or landline data that meets the appropriate speed would be considered to have broadband available.

Even if the FCC doesn’t lower the landline definition of broadband, adding cellular broadband into the test will mean that millions of homes would now be considered to have adequate broadband. That is a significant change, because by law, the FCC is mandated to work towards bringing broadband to any parts of the US that don’t have it. In effect, by a definition change the FCC will have done away with a lot of the digital divide. And if they lower the definition of landline broadband they will categorize even more homes as having adequate broadband.

There are a lot problems with using cellular data speeds to define broadband.  Here are several major ones to consider:

Hard to Measure Cellular Speeds. In the real world cellular speeds are nearly impossible to accurately measure. First, speeds differ by distance from a cell site, much like DSL. Customers more than a few miles from a given cell site get significantly slower speeds. Cellular data speeds also suffer from the same kind of interference as any wireless technology. For instance, homes behind a hill or tall building won’t get speeds as fast as those with a clear line-of-sight. Cellular data speeds change with variations in temperature or with precipitation. And most cell sites are still capable of making both 4G and 3G connections – which obviously has a major impact on speed.

Broadband Speeds are Reported by the Carriers. The cellular carriers are likely to report speeds by cell site, meaning that they will ignore all of the variations of speeds listed above. Further, there is more than one way to measure broadband speeds, which I have discussed before in this blog. There is over a 100% difference in reported cellular broadband speeds between Ookla and Akamai, the two major entities tracking data speeds. The carriers typically use the higher Ookla numbers when bragging about their speeds.

Makes No Assessment of Affordability. There is a monstrous difference in price between landline and cellular data. A household using 100 gigabytes of cellular data in the month might pay nearly $1,000 per month. Most ISPs report that the average US household now uses between 150 and 200 gigabytes of broadband per month. It’s hard to think of cellular broadband as a substitute for landline broadband with such disparate pricing.

Ignores Latency. One of the problems with cellular broadband is latency. This is one of the major reasons that downloading a web site on a cellphone sometimes seems to take forever. (The other reason is that cellular operating systems aren’t really designed to maximize web browsing). The poorer latency means that a 10 Mbps landline connection will feel much faster than 10 Mbps cellular connection.

Takes the FCC Off the Hook. But the major reason that counting cellular data as equivalent to landline data is that it’s going to largely take the FCC off the hook for promoting broadband. They currently have directed billions from the Universal Service Fund to help build faster broadband networks, mostly in rural America. They can discontinue such programs and not expand their effort if most of rural America is considered to have broadband. With a simple vote a large percentage of rural homes on the wrong side of the digital divide will suddenly have broadband. That’s going to be big news to rural people who already understand that cellular broadband is not really broadband.

How Much Speed Do We Really Need?

There is a lot of buzz floating around in the industry that the FCC might lower the official definition of broadband from 25 Mbps down and 3 Mbps up. Two of the current FCC commissioners including the chairman opposed setting that definition a few years back. Lowering the speeds would let the FCC off the hook for the requirement by law to make sure that the whole country can get broadband. If they lower the definition, then voila, millions more Americans would be declared to have adequate broadband.

So today I thought I’d take a look at the download speeds we really need at our homes. You may recall that back when the FCC set the 25/3 Mbps definition that they made a list of the broadband speed needed to do typical activities. And in doing so they tried to create profiles of some typical American households. That attempt was awkward, but it was a good starting point for examining household bandwidth needs. I’m updating their list a bit for things that people do today, which is already different than just a few years ago. Consider the following web activities:

  • Web Background 5 Mbps
  • Web Browsing 1 – 2 Mbps
  • Online Class 1 – 2 Mbps
  • Social Media 1 – 2 Mbps
  • Streaming Music 3 Mbps
  • Voice over IP 2 Mbps
  • SD Video stream 1 – 3 Mbps
  • HD Video Stream 4 – 6 Mbps
  • 4K Video Stream 15 – 20 Mbps
  • Gaming 1 – 3 Mbps
  • Skype / Video Conference 1 – 3 Mbps
  • Big File Downloader 50 Mbps

People don’t agree with all of these listed speeds because there are no standards for how the web works. For example, by using different compression schemes a video stream from Netflix is not identical to one from Amazon. And even from one source there is variation since an action move takes more bandwidth than something like a stand-up comedy routine.

It’s important to remember that broadband demand can come from any device in your house – desktop, laptop, smartphone, tablet, etc. It’s also important to note that these are speed requirements for a single user. If two people in the house are watching an separate video, then you have to double the above number.

What the FCC failed to consider back when they set the speed definition is that households need enough bandwidth to handle the busiest times of the day. What matters is the number of simultaneous activities a home can do at the same time on the web, with most families being busiest in the evenings. There might be somebody on social media, somebody watching an HD movie, while somebody else is doing homework while also using a smartphone to swap pictures.

There is another issue to consider when trying to do simultaneous tasks on the Internet – packet loss. The connection between the ISP and a customer gets more congested when it’s trying to process multiple data streams at the same time. Engineers describe this as packet collision – which sounds like some kind of bumper-car ride – but it’s an apt way to describe the phenomenon. Most home routers are not sophisticated enough to simultaneously handle too many multiple streams at once. Packets get misdirected or lost and the router requests the missing packets to be sent again from the originator. The busier the router, the more packet interference. This is also sometimes called ‘overhead’ in the industry and this overhead can easily grow to 15% or more of the total traffic on a busy connection, meaning it takes 15% more bandwidth to complete a task than if that task was the only thing occurring on the broadband connection.

There is another kind of interference that happens in homes that have a WiFi network. This is a different kind of interference that has to do with the way that WiFi works. When a WiFi network gets multiple requests for service, meaning that many devices in the home are asking for packets, the WiFi router gets overwhelmed easily and shuts down. It then reinitiates and sends packets to the first device that gets its attention. In a busy network environment the WiFi router will shut down and restart constantly as it tries to satisfy the many needed devices. This kind of interference was designed into the WiFi specification as a way to ensure that WiFi could satisfy the needs of multiple devices. This WiFi overhead can also easily add 15% or more to the network demand.

Anybody who lives in a home with active users understands how networks can get overwhelmed. How many of you have been frustrated trying to watch a movie when others in the house are using the Internet? Even big bandwidth can be overwhelmed. I have a friend who has a 100 Mbps fiber connection on Verizon FiOS. He went to watch a video and it wouldn’t stream. He found that his two teenage sons were each using half a dozen gaming streams at the same time and had basically exhausted his fast bandwidth pipe.

The FCC can tinker with the official definition of broadband since that is their prerogative. But what they can’t do is to define for any given home how much bandwidth they really need. The funny thing is that the big ISPs all understand this issue. The cable companies have unilaterally increased speeds across-the-board to urban customers several times in recent years and in most markets offer speeds considerably faster than the current FCC definition of broadband. These ISPs know that if they were only delivering 25 Mbps that they would be overwhelmed with customers complaining about the connection. Those complaints are the real proof of how much bandwidth many homes need. If the FCC lowers the definition of broadband then they have on blinders and are ignoring how homes really use broadband today. If they lower the speed definition it’s hard to see it as anything other than a political move.

A Regulatory Definition of Broadband

In one of the more bizarre filings I’ve seen at the FCC, the National Cable Television Association (NCTA) asked the FCC to abandon the two-year old definition of broadband set at 25 Mbps down and 3 Mbps up. NCTA is the lobbying and trade association of the largest cable companies like Comcast, Charter, Cox, Mediacom, Altice, etc. Smaller cable companies along with smaller telephone companies have a different trade association, the American Cable Association (ACA). This was a short filing that was a follow-up to an ex parte meeting, and rather than tell you what they said, the gist of the letter is as follows:

We urged the Commission to state clearly in the next report that “advanced telecommunications capability” simply denotes an “advanced” level of broadband, and that the previously adopted benchmark of 25 Mbps/3 Mbps is not the only valid or economically significant measure of broadband service. By the same token, we recommended that the next report should keep separate its discussion of whether “advanced telecommunications capability” is being deployed in a reasonable and timely manner, on the one hand, and any discussion of the state of the “broadband” marketplace on the other.  We noted that the next report presents an opportunity for the Commission to recognize that competition in the broadband marketplace is robust and rapidly evolving in most areas, while at the same time identifying opportunities to close the digital divide in unserved rural areas.

The reason I call it bizarre is that I can’t fathom the motivation behind this effort. Let me look at each of the different parts of this statement. First, they don’t think that the 25/3 threshold is the ‘only valid or economically significant measure of broadband service.’ I would think the 25/3 threshold would please these companies because these big cable companies almost universally already deploy networks capable of delivering speeds greater than that threshold. And in many markets their competition, mostly DSL, does not meet these speeds. So why are they complaining about a definition of broadband that they clearly meet?

They don’t offer an alternative standard and it’s hard to think there can be a standard other than broadband speed. It seems to me that eliminating the speed standard would help their competition and it would allow DSL and wireless WISPs to claim to have the same kind of broadband as a cable modem.

They then ask the FCC to not link discussions about broadband being deployed in a reasonable and timely manner with any actual state of the broadband marketplace. The FCC has been ordered by Congress to report on those two things and it’s hard to think of a way to discuss one without the other. I’m not sure how the FCC can talk about the state of the broadband industry without looking at the number of consumers buying broadband and showing the broadband speeds that are made available to them. Those FCC reports do a great job of highlighting the regional differences in broadband speeds, and more importantly the difference between urban and rural broadband speeds.

But again, why do the cable companies want to break that link in the way that the FCC reports broadband usage? The cable companies are at the top of the heap when it comes to broadband speeds. Comcast says they are going to have gigabit speeds available throughout their footprint within the next few years. Cox has announced major upgrades. Even smaller members like Altice say they are upgrading to all fiber (which might get them tossed out of NCTA). These FCC reports generally highlight the inadequacy of DSL outside of the cable company footprints and don’t show urban broadband in a bad light.

Finally, they want the FCC to recognize that there is robust competition in broadband. And maybe this is what is bothering them because more and more the cable companies are being referred to as monopolies. The fact is there is not robust competition for broadband. Verizon has FiOS in the northeast and a few other major cities have a fiber competitor in addition to the cable and telephone incumbents. But in other markets the cable companies are killing the telephone companies. Cable companies continue to add millions of new customers annually at the expense of DSL. AT&T and Verizon are currently working to tear down rural copper, and in another decade they will begin tearing down urban copper. At that point the cable companies will have won the landline broadband war completely unless there is a surprising upsurge in building urban fiber.

The only other reason the cable companies might be asking for this is that both Comcast and Charter are talking about getting into the wireless business. As such they could begin selling rural LTE broadband – a product that does not meet the FCC’s definition of broadband. I can’t think of any other reason, because for the most part the big cable companies have won the broadband wars in their markets. This filing would have been business as usual coming from the telcos, but it’s a surprising request from the cable companies.

Improving Our Digital Infrastructure, Part 1

FCC_New_LogoLast week the FCC published a document that is their vision of a roadmap to improve the nation’s digital infrastructure. Today’s blog is going to look at the positive aspects of that roadmap and tomorrow I will look at some of the FCC’s ideas that I find to be troublesome.

I find this to be an interesting document for several reasons. First, it was published on Ajai Pai’s first day as FCC Chairman. It’s obvious that this paper has been under development for a while, but it clearly reflects the new Chairman’s views of the industry.

This paper is not so much a complete broadband plan as it is a roadmap of principles that the FCC supports to get broadband to rural areas. The FCC recognizes that they only have the power today to institute a few of the goals of this plan and that Congress would need to act to implement most of the suggestions in the plan.

The obviously good news about this document is that it clearly lays forward the principle that rural America deserves to have real broadband that meets or exceeds the FCC’s definition of 25 Mbps. This is a clear break from the FCC’s decision just a few years ago to fund the CAF II program which is spending $19 billion to fund rural broadband that only has to meet a 10/1 Mbps standard. One of my first thoughts in reading this document is that it seems likely that if this new roadmap is implemented that the FCC would have to cancel the remainder of the CAF II deployment. It’s really too bad the that FCC didn’t support real bandwidth for rural America before tossing away money on the CAF II plan.

The FCC plan looks at bringing broadband to the 14% of the households in the country that don’t have broadband today capable of delivering 25/3 Mbps. The FCC estimates that it will cost roughly $80 billion to bring broadband to these areas. Interestingly, they estimate that it would take only $40 billion to reach 12 out of the 14%, and that the last little sliver of the country would cost the remaining $40 billion. But the FCCs goal is to find a way to get broadband to all of these places (except I’m sure for the most remote of the remote places).

The paper calls for aggressive federal assistance in funding the rural broadband. They recognize that there has not been commercial deployment in these areas because commercial providers can’t justify the investments due to the high cost of deployment. And so they suggest that the government should provide grants, loans and loan guarantees that are aggressive enough to improve the returns for private investment. They suggest that grants could be as high as 80% of the cost of deployment in the most remote places.

The paper suggests that most of the areas will have enough customer revenue to support the properties without further federal support. In looking at some of the business plans I have built for rural counties I think that they are probably right. What sinks most rural business plans is not the ongoing maintenance costs, but rather the heavy burden of debt and a return on equity during the first 10 years of deployment. Rural fiber deployment will look like better financial opportunity if the government can find a way to provide enough up-front funding support. The FCC does recognize that most rural markets in the country will require ongoing federal support to be viable. They suggest it will require about $2 billion per year in ongoing support that will probably be similar to how the Universal Service Fund works today.

The roadmap document also suggests other financial incentives to fiber builders such as faster depreciation, tax credits, and changes to the IRS rules which require today that grant funding be considered as income. That provision stopped a number of companies from accepting the stimulus funding a few years ago and is a definite roadblock to accepting grant funding.

Overall these are great goals. It’s going to require significant fiber in rural areas to meet the stated speed goals. It’s great to see the FCC change direction and suggest that rural America deserves real broadband. I just wish they had adopted this policy a few years ago rather than supporting the CAF II program that is throwing money at propping up rural DSL.