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.