I’m Not a Fan of the 5G Hype

I read a lot of articles talking about what a huge deal 5G will be for the economy. The source of the excitement is the huge numbers being thrown around. For example, Qualcomm and IHS Technology issued a report in 2017 that estimated that 5G could enable $12 trillion in economic output around the world by 2035. That same report made the incredibly hyped claim that 5G could be as important to the world as the introduction of electricity. It’s no wonder that financial people are excited about the potential for 5G and why so many companies want to somehow grab a piece of this new market.

But I look around my own part of the world and I have a hard time seeing this kind of impact. I live in a town of 90,000 people. If we are like the average US market then roughly 85% of homes here already have landline broadband. Practically everybody here also has a cellphone, with the majority using smartphones.

People may read my blog and think I am not a fan of 5G – but that’s not true, I’m just not a fan of the hype. I would love for Verizon to offer me another choice of home broadband – I would consider changing to Verizon at the right price, as would many other households. My biggest question is how much value Verizon would create by introducing 5G in my town. Let’s say Verizon was to capture 30% of the broadband market here – that certainly creates an advantage to Verizon and gives them a significant new revenue stream. However, for every customer Verizon gains, Charter or AT&T would lose a customer, and overall that’s a zero-sum game. Further, if you assume that 5G competition would drive down prices a bit (it might not since oligopolies tend to not compete on price), then the overall spending on broadband in the town might actually decrease a bit.

The same thing would happen with cellular 5G. The big four cellular companies will have to spend a lot to upgrade all of the cell sites here to 5G. We’re a hilly and heavily wooded City and it will take a lot of small cell sites just to fill in the existing cellular holes. But unless they can find a way to charge more for 5G cellular broadband, then cellphone broadband is also a zero-sum game. Everybody in town already has a cellphone and a data plan, and the long-term trend is for cellular data prices to drop. I don’t see the new revenue stream from 5G cellular that will pay for the needed upgrades. Perhaps faster cellular data speeds will attract more people to drop landlines, but that’s also a zero-sum for the market as a whole.

There is one new aspect of 5G that the cellular carriers are counting on to create a new revenue stream. Once the 5G technology has been developed, the 5G standard calls for the ability of a cell site to communicate with as many as 100,000 devices – a huge increase over today’s capabilities. The cell carriers are clearly banking on IoT as the new revenue opportunity.

However, that kind of transition isn’t going to happen overnight. There are a whole lot of steps required before there is a huge cellular IoT revenue stream. First, the technology has to be developed that will handle that huge number of IoT devices. The 5G core standards were just developed last year and it will take years for vendors and labs to achieve the various goals for 5G. As those improvements are realized it will take a lot longer to introduce them into the cellular networks. We are just now finally seeing the deployment of 4G LTE – AT&T is just now deploying what they call 5G Evolution into any major markets, which is actually fully-compliant 4G LTE. The same slow roll-out will occur with 5G – we’ll advance through 4.1G, 4.2G, etc. until we see fully-compliant 5G network in a decade.

We’ll also have to wait for the rollout of IoT sensors that rely on a 5G network. It will be a bit of a chicken and egg situation because nobody will want to deploy devices that need 5G until 5G is active in a sufficient number of neighborhoods. But eventually this will come to pass – to a degree we can’t predict.

The question is if IoT usage is the trillion-dollar application. I certainly look forward to a time when I might have an embedded chip for 24/7 health monitoring using a 5G network – that’s a service that many people will be willing to pay for. But there is no guarantee that the revenue streams will materialize for IoT monitoring to the extent envisioned by AT&T and Verizon. I’ve done the math and the only way that the carriers can see a trillion-dollar benefits from IoT is if future homes have an IoT monitoring bill of the same magnitude as our current cellular or broadband bills – and that may never come to pass. I would love to see a concrete business plan that predicts where these huge new benefits come from, but I’ve seen nothing specific other than the big claims.

There is one aspect of the hype that I do buy. While I can’t see any way to equate the value of 5G to be as important as electricity, it is likely to share the same kind of introduction cycle that we saw with the electric grid. It took 25 years for electricity to spread to the majority of US cities and another 25 years until it was in most of rural America. New technologies today deploy faster than the deployment of electric grids – but this still can’t happen overnight and is at likely to be many years until rural America sees 5G cellular and a lot longer for 5G fixed broadband.

If you believe the hype in the press, we’ll start seeing big benefits from 5G in 2019 and 2020. I can promise you a blog at the end of next year that looks to see if any of this hype materialized – but I already suspect the answer will be no.

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.

The Challenges of 5G Deployment

The industry is full of hype right now about the impending roll-out of 5G cellular. This is largely driven by the equipment vendors who want to stir up excitement among their stockholders. But not everybody in the industry thinks that there will be a big rush to implement 5G. For example, a group called RAN Research issued a report last year that predicted a slow 5G implementation. They think that 4G will be the dominant wireless technology until at least 2030 and maybe longer.

They cite a number of reasons for this belief. First, 4G isn’t even fully developed yet and the standards and implementation coalition 3GPP plans to continue to develop 4G until at least 2020. There are almost no 4G deployments in the US that fully meet the 4G standards, and RAN Research expects the wireless carriers to continue to make incremental upgrades, as they have always done, to improve cellular along the 4G path.

They also point out that 5G is not intended as a forklift upgrade to 4G, but is instead intended to coexist alongside. This is going to allow a comfortable path for the carriers to implement 5G first in those places that most need it, but not rush to upgrade places that don’t. This doesn’t mean that the cellular carriers won’t be claiming 5G deployments sometime in the next few years, much in the way that they started using the name 4G LTE for minor improvements in 3G wireless. It took almost five years after the first marketing rollout of 4G to get to what is now considered 3.5G. We are just now finally seeing 4G that comes close to meeting the full standard.

But the main hurdle that RAN Research sees with a rapid 5G implementation is the cost. Any wireless technology requires a widespread and rapid deployment in order to achieve economy of scale savings. They predict that the cost of producing 5G-capable handsets is going to be a huge impediment to implementation. Very few people are going to be willing to pay a lot more for a 5G handset unless they can see an immediate benefit. And they think that is going to be the big industry hurdle to overcome.

Implementing 5G is going to require a significant expenditure in small dense cell-sites in order to realize the promised quality improvements. It turns out that implementing small cell sites is a lot costlier and lot more expensive than the cellular companies had hoped. It also turns out that the technology will only bring major advantages to those areas where there is the densest concentration of customers. That means big city business districts, stadiums, convention centers and hotel districts – but not many other places.

That’s the other side of the economy of scale implementation issue. If 5G is only initially implemented in these dense customer sites, then the vast majority of people will see zero benefit from 5G since they don’t go to these densely packed areas very often. And so there are going to be two economy of scale issues to overcome – making enough 5G equipment to keep the vendors solvent while also selling enough more-expensive phones to use the new 5G cell sites. And all of this will happen as 5G is rolled out in drabs and dribbles as happened with 4G.

The vendors are touting that software defined networking will lower the cost to implement 5G upgrades. That is likely to become true with the electronics after they are first implemented. It will be much easier to make the tiny incremental 5G improvements to cell sites after they have first been upgraded to 5G capability. But RAN Research thinks it’s that initial deployment that is going to be the hurdle. The wireless carriers are unlikely to rush to implement 5G in suburban and rural America until they see overwhelming demand for it – enough demand that justifies upgrading cell sites and deploying small cell sites.

There are a few trends that are going to affect the 5G deployment. The first is the IoT. The cellular industry is banking on cellular becoming the default way to communicate with IoT devices. Certainly that will be the way to communicate with things like smart cars that are mobile, but there will be a huge industry struggle to instead use WiFi, including the much-faster indoor millimeter wave radios for IoT. My first guess is that most IoT users are going to prefer to dump IoT traffic into their landline data pipe rather than buy separate cellular data plans. For now, residential IoT is skewing towards the WiFi and towards smart devices like the Amazon Echo which provide a voice interface for using the IoT.

Another trend that could help 5G would be some kind of government intervention to make it cheaper and easier to implement small cell sites. There are rule changes being considered at the FCC and in several state legislatures to find ways to speed up implementation of small wireless transmitters. But we know from experience that there is a long way to go after a regulatory rule change until we see change in the real world. It’s been twenty years now since the Telecommunications Act of 1996 required that pole owners make their poles available to fiber overbuilders – and yet the resistance of pole owners is still one of the biggest hurdles to fiber deployment. Changing the rules always sounds like a great idea, but it’s a lot harder to change the mindset and behavior of the electric companies that own most of the poles – the same poles that are going to be needed for 5G deployment.

I think RAN Research’s argument about achieving 5G economy of scale is convincing. Vendor excitement and hype aside, they estimated that it would cost $1,800 today to build a 5G capable handset, and the only way to get that price down would be to make hundreds of millions of 5G capable handsets. And getting enough 5G cell sites built to drive that demand is going to be a significant hurdle in the US.

Lies, Damned Lies and 5G

4g-antennaI’m not sure that there is a major industry that lies more to its customers than the cellular industry. The whole industry has spent the last decade touting its 4G LTE networks, when in fact the industry is just now installing the first cell sites that actually meet the 4G standard.

And now we are starting this cycle all over again with the industry buzz about how 5G is right around the corner. But it isn’t. And I will take bets that within the next year or so one of the cellular companies is going to tell their customers they now have a 5G network.

Every once in a while somebody in the industry tells a little bit of the truth. At a Qualcomm summit recently in Hong Kong, Roger Gurnani, the EVP and chief information and technology architect at Verizon said that 5G is not a replacement for 4G and that LTE will be around for many years. And he is right, because it’s going to be at least ten years until a customer anywhere is going to be able use a cellphone that meets the full 5G standard. But there is no way that anybody at one of the cellular companies is ever going to say that.

The 4G standard was established around 2008 and we are just now seeing US cell sites that are implementing what they are labeling as LTE-Advanced, which is the first deployment that meets the full 4G standard. I say ‘about 2008’ because the effort to create the new 4G standard took two different paths with WIMAX and LTE, with different timelines. The standards for 5G are still under development and probably aren’t going to be finalized until late 2019.

How have the cellular companies been able to claim 4G all these years with a straight face (and without getting shut down by the Federal Trade Commission or hit with class action lawsuits)? The answer lies in the fact that the specifications for a standard like 4G or 5G contains a lot of different components. To use a simple analogy, if there are ten technology improvements needed to migrate from 3G to 4G, then the cellular companies started touting they had 4G after only one or two of the upgrades. But until all of the improvements have been implemented a customer cannot receive the actual promised benefits of the 4G standard.

A lot of this has to do with marketing hype. Think back to a decade ago when there was an arms race to be the first cellular company to have 4G. All the cellular commercials made 4G claims and we were bombarded by maps showing who had the best 4G coverage. But these claims were made by the marketing folks at the wireless companies and the fact is that all of those maps were a lie and nobody had 4G. Even now most people can’t get full 4G.

The cellular companies are also egged on by the cellular vendors. Right now that is all that the companies that make wireless equipment want to talk about – how they will be the first to support 5G. And so if you go to an industry forum right now that is all you will hear. I’ve noticed numerous 5G summits being announced around the world, mostly led by vendors, to talk about the next generation of cellphones for which the standards are not even finished.

I see several problems with the inflated hype from the cellular companies. First is that customers don’t see much evidence of the upgrades from one technology to another because the upgrades are made incrementally in little steps. The first customers that bought a 4G cellphone didn’t get very much faster speeds than they had on 3G.

Today the average data speeds in the US on 4G connections are just over 7 Mbps. Some customers in some instances can do much better than that, but that is the average for the billions of connections made. When 4G is finally everywhere (and full 4G may never be put into more rural cell sites) that average speed ought to creep up to about 15 Mbps as long as cell sites aren’t overloaded. The first phones cited as 5G are probably not going to do much better than 4G, but as upgrades are implemented over time the 5G speeds are supposed to creep towards 50 Mbps.

And that is the second problem I see with the inflated claims of the cellular companies. By touting that much faster cellphones are right around the corner they are causing those who would build fiber landline networks to pause. I am sure that this is on purpose – one only has to read an AT&T or Verizon press release to see that is part of their motivation. But nobody would pause in building fiber if these companies were to tell the truth and say that 50 Mbps cellphone coverage might be possible in ten years. That is the real harm from these lies.

My Thoughts on AT&T AirGig

PoleBy now most of you have seen AT&T’s announcement of a new wireless technology they are calling AirGig. This is a technology that can bounce millimeter wave signals along a series of inexpensive plastic antennae perched at the top of utility poles.

The press release is unclear about the speeds that might be delivered from the technology. The press release says it has the potential to deliver multi-gigabit speeds. But at the same time it talks about delivering 4G cellular as well as 5G cellular and fixed broadband. The 4G LTE cellular standard can deliver about 15 Mbps while the 5G cellular standard (which is still being developed) is expected to eventually increase cellular speeds to about 50 Mbps. So perhaps AT&T plans to use the technology to deploy micro cell sites while also being able to deliver millimeter wave wireless broadband loops. The link above includes a short video which doesn’t clarify this issue very well.

Like any new radio technology, there is bound to be a number of issues involved with moving the technology from the lab to the field. I can only speculate at this point, but I can foresee the following as potential issues with the millimeter wave part of the technology:

  • The video implies that the antennas will be used to deliver bandwidth using a broadcast hotspot. I’m not entirely sure that the FCC will even approve this spectrum to be used in this manner – this is the same spectrum used in microwave ovens. It can be dangerous to work around for linemen climbing poles and it can create all sorts of havoc by interfering with cable TV networks and TV reception.
  • Millimeter wave spectrum does not travel very far when used as a hot spot. This spectrum has high atmospheric attenuation and is absorbed by gases in the atmosphere. When focused in a point-to-point the spectrum can work well to about half a mile. But in a hot spot mode it’s good, at best, for a few hundred feet and loses bandwidth quickly with distance traveled. The bandwidth is only going to reach to homes that are close to the pole lines.
  • Millimeter wave spectrum suffers from rain fade and during a rain storm almost all of the spectrum is scattered.
  • The spectrum doesn’t penetrate foliage, or much of anything else. So there is going to have to be a clear path between the pole unit and the user. America is a land of residential trees and even in the open plains people plant trees closely around their house as a windbreak.
  • The millimeter wave spectrum won’t penetrate walls, so this will require some sort of outdoor receiver to catch millimeter wave signals.
  • I wonder how the units will handle icing. Where cables tend to shake ice off within a few days, hardware mounted on poles can be ice-covered for months.
  • The technology seems to depend on using multiple wireless hops to go from unit to unit. Wireless hops always introduce latency into the signal and it will be interesting to see how much latency is introduced along rural pole runs.
  • For any wireless network to deliver fast speeds it has to be connected somewhere to fiber backhaul. There are still many rural counties with little or no fiber.

We have always seen that every wireless technology has practical limitations that make it suitable for some situations and not others. This technology will be no different. In places where this can work it might be an incredible new broadband solution. But there are bound to be situations where the technology will have too many problems to be practical.

I’ve seen speculation that one of the major reasons for this press release is to cause a pause to anybody thinking of building fiber. After all, why should anybody build fiber if there is cheap multi-gigabit wireless coming to every utility pole? But with all of the possible limitations mentioned above (and others that are bound to pop up in the real world) this technology may only work in some places, or it might not work well at all. This could be the technology we have all been waiting for or it could be a flop. I guess we’ll have to wait and see.

Using Cellular for Home Broadband

slow-downFor some time both Verizon and AT&T have been telling the FCC and state Commissions that they want to replace rural telephone lines with cellular connections, which means bringing cellular data plans to rural areas. We’ve now finally seen Verizon’s plans for what rural cellular data plans will look like:

The headline on this Verizon web site is “use the power of the Verizon 4G LTE Network to give you a lightning-fast Internet connection in your home,” followed later on in the offer with the header “Ditch your Low-Speed Internet.”

Those phrases sound great until you then see the offered speeds: “Fast Internet access with average speeds of 5 – 12 Mbps download and 2 – 5 Mbps upload.” I guess for somebody who’s been on dial-up this might be lightning fast, but it’s awfully hard to call this broadband.

But then comes the real kicker when they list the price and the monthly data caps:

  • 10 GB monthly data cap $60
  • 20 GB monthly data cap $90
  • 30 GB monthly data cap $120
  • $10 per additional gigabit of usage.

Before I totally scoff at this, it’s important to realize that there are already many households trying to get by using today’s cellular plans for home data. Compared to those plans this new offer is a little better. But these new plans are not broadband and it displays the greed of the cellular companies that they can even put such a plan into the public with a straight face. What these plans say to anybody living in a rural Verizon or AT&T area is – you’re screwed.

It’s easy to put these plans into perspective. Just last week I was traveling in Minnesota and there was a day that I used my cellular data plan to power by laptop broadband. In just one day, doing only normal business things, I used over a gigabit of data. I didn’t watch video or do anything that was a blatant data hog. And so the $120 plan would not even power my one business laptop for a month and I’d be paying that much per month and facing $10 for every gigabit I went over 30 GB.

Cellular data in this country is among the most expensive data used anywhere in the world. When you look at charts that are occasionally compiled of worldwide data prices per megabit the only places more expensive are Antarctica, some parts of Africa, and remote islands. And Verizon wants to take that ultra-expensive cellular data and extend it into rural homes.

This pricing by Verizon should end once-and-for-all the arguments that I hear all of the time that the future of rural broadband is wireless. Verizon has it within their means to offer an affordable alternative broadband product from rural cell towers – and this is not it.

I can fully understand why cellular companies don’t want to sell broadband connections in urban areas that are used to streaming Netflix – busy cell sites are really not made for that and such a connection ties up a valuable channel for a long time. But in rural areas where there are fewer people using cell towers the wireless carriers potentially could offer an affordable product with a much larger data cap. They fact that they are choosing to not do so says more about their greed than anything else.

I hope the FCC is paying attention to this. A copy of this web site need to be attached to any filing that the cellular carriers make at the FCC asking to tear down rural copper and replace it with cellular data. If the FCC supports such an idea, even in the slightest – this is what they are agreeing to.

Are You Ready for 5G?

Cell-TowerIn the last month I have seen several announcements of groups claiming they will be launching 5G cellular in the next few years. For example, both South Korea and Japan have announced plans to introduce 5G before they host the Olympics in 2018 and 2020. Three of the Chinese ministries have announced plans to jointly develop 5G. And the Isle of Man says they are going to have the first 5G network (and before you laugh, they had the second LTE network in the world).

I have written before about the inflation of claims in wireless technologies, and so I have to ask what these groups are talking about. There is nobody in the world today that is delivering wireless that comes close to meeting the 4G specification. That spec calls for the ability to deliver 100 Mbps to a moving vehicle and 1 Gbps to a stationary customer. What is being sold as 4G everywhere is significantly slower than those speeds.

For example, OpenSignal studies wireless speeds all over the world. In February 2014 they reported that the average speed of US 4G networks was only at 6.5 Mbps in the second half of 2013, down from 9.65 Mbps the year before. The US speeds have rebounded some in 2014, but even the fastest 4G networks, in Australia, average only 17 – 25 Mbps. That is a long way from 1 Gbps.

Moreover, there aren’t yet any specifications or standards for 5G, so these announcements mean nothing in since there is no 5G specification to shoot for. The process to create a worldwide 5G standard hasn’t even begun and the expectation is that a standard might be in place by 2020.

I am not even sure how much demand there is for faster wireless networks. It’s not coming from cellular data for smartphones. That business in the US has been growing about 20% per year, or doubling every five years and it’s expected to stay on that pace. New demand might come from the Internet of Things, from devices that want to use bandwidth from the cellular network. IoT usage of cellular networks is new and, for example, there are utilities now using cellular bandwidth to read meters. And while industry experts expect a huge increase in this machine-to-machine traffic by 2020 I’m not sure that it needs greater speeds.

The other thing we have to always remember with cellular traffic is that it handles only a tiny fraction of the total data used in the country today. Reports from Sandvine have shown that cellular traffic only carries about 1% of the total volume of data delivered to end users in the US today, and landline data usage is still growing faster than cellular data. This is probably due to the expensive data plans that cellular companies sell and which have taught customers to be frugal with smartphone data. But it’s also a function of the much slower speeds on 4G compared to many landline connections.

Another limiting factor on 4G, or 5G or any G getting faster is the way we allocate spectrum. In the US we dole out spectrum in tiny channels that were not designed to handle large data connections. Additionally, any given cell site is limited in the number of data connections that can be made at once.

So I am completely skeptical about these announcements of upcoming 5G networks. I am still waiting for a cellular company to actually meet the 4G standard – what we are calling 4G today is really a souped of version of 3G technology. It’s very hard to foresee any breakthroughs by 2020 that will let cell sites routinely deliver the 1 Gbps that is promised by 4G. My guess is by the time that somebody does deliver 1 Gbps to a cellphone that the breakthrough is going to be marketed as 10G.

I don’t think that any of the groups that are promising 5G by 2020 are anticipating any major breakthroughs in cellphone technology. Instead the industry is constantly making tweaks and adjustments that boost cell speeds a little more each time. All of these technology boosts are significant and we all benefit as the cellular network gets faster. But the constant little tweaks are playing hell with handset makers and with cellular companies trying to keep the fastest technology at all of their cell sites.

We are not really going to get a handle on this until we have fully implemented software defined networking. That is going to happen when the large cell companies migrate all of the brains in their networks to a few hub cell sites that will service all of the cellular transmitters in their network. This means putting the brains of the cellphone network into the cloud so that making an update to the hub will update all of the cell sites in the network. AT&T and Verizon are both moving in that direction, but it might be a decade until we see a fully cloud-based cellular network.

Living Within Our Data Caps

Cell-TowerAn interesting thing happened to the wireless carriers on their trip to bring us 4G. They warned us repeatedly that we could expect issues as they upgraded their networks, and they forced us onto skinny data plans of a few gigabits of data so that most of us have learned to use WiFi with our cellphones rather than spend a fortune with the cellphone provider.

But maybe the wireless carriers have gone too far. Adobe Systems reported last week that that more than half of all data from cell phones is now using WiFi instead of 3G or 4G. Total WiFi traffic from mobile passed data directly on the wireless networks more than a year ago. This has to be troubling to AT&T and Verizon because their business plans rely on consumers using the faster 4G LTE networks. They have made huge investments over the last few years in increasing data speeds and that is the basis of all of their advertising.

So perhaps the tactic of imposing small data caps has backfired on them. They are not seeing their new expensive networks used nearly as much as they counted on, and this is limiting their ability to monetize the expensive upgrades. I know that I personally am very happy buying a 2 gigabit monthly cap and I only use cellphones data for directions while driving or when I have no other choice when traveling. I would never consider watching a video on my phone when I’m not at home. Apparently there are a lot of people like me in the world.

When AT&T and Verizon realized that people weren’t using as much data as they had hoped for they both got into the tablet business hoping that it would boost the use of their 4G LTE data. They have been bundling tablets into plans and even selling them below cost as a way to drive more data usage on their networks. But that move has also backfired and I saw a report that estimated that 93% of tablet data usage is using WiFi instead of the LTE network.

The WiFi trend is only going to get worse for the carriers as Hotspot 2.0 rolls out. That is the new WiFi standard that is going to let cellphones and other devices easily and automatically log into public hotspots without going through today’s annoying process of having to log onto each new network. With Hotspot 2.0 you can be pre-certified to join any WiFi router that is part of that network. So as you walk down the street in a business district you might long onto numerous different WiFi routers as you walk by them – while staying off the LTE network.

The precursors for Hotspot 2.0 are already in the market today. I know that once I have logged in once with my cellphone to any AT&T or Comcast hotspot that my phone doesn’t ask my permission whenever I come into range of another of their hotspots and just automatically connects me.

It’s been reported that the wireless carriers have had pretty good success getting families to upgrade to monthly 10 GB deluxe plans. But what they didn’t count on is how so many people are being careful to stay within their plan to avoid getting hit with charges for extra data.

It’s been reported that both AT&T and Verizon have invested heavily in the Internet of Things and they are touting 4G connectivity as the best way to connect for a wide range of devices from wireless utility meters to animal-tracking collars. But a lot of the IoT devices in the world are going to be inside of homes and businesses where an LTE connection is often not as good as a signal from an inside-the-home WiFi router. The fact is that any outdoor radio broadcast signal is going to vary with factors like weather, temperature and the amount of the spectrum being used by others. This often makes LTE less reliable locally than a solid WiFi signal.

It will be interesting to see how the wireless carriers react to this. They have spent many billions upgrading their wireless networks and are not seeing the kind of revenue they expected from that effort. This might make them more cautious about leaping in to make the next big network upgrade, which seems to be needed every few years. It’s possible that they will expand their network more through mini-cell sites to make their signal stronger where people live as a way to make it more usable. The one thing they are unlikely to do, at least for a while is to give customers more data in the base wireless plans. They are likely to stick with the incremental data usage plans in place today.

One place the wireless carriers are counting on is in the connected car industry since that is one market where WiFi is not a real alternative. It is expected that every new car will come with data connectivity and that the amount of data used by each car will climb over time as more and more apps are included with cars. Expect them to be selling tens of millions of small monthly data plans to car owners as a way to make up for us all avoiding their expensive data on our cellphones. But even in that market they are competing against the smartphone which can handle all of the functions promised for the 4G functionality that is part of the smart car. I know I would rather get driving directions as part of my existing cellphone plan than buy a second data plan for my car.

The Future According to CenturyLink

telephone cablesRecently the CFO of CenturyLink, Stewart Ewing, spoke at the Bank of America / Merrill Lynch 2014 Global Telecom and Media Conference. He had some interesting things to say about the future of CenturyLink that contrasts with some of the things that other large carriers like AT&T and Verizon have been saying.

The most interesting thing he had to say is that CenturyLink sees the future of broadband in the landline link to a home. He cannot foresee 4G wireless as a substitute for a landline wireless connection. He doesn’t see wireless delivering enough bandwidth in coming years as demand at homes keeps growing. Already today the average CenturyLink residence uses slightly less than 50 Gigabits of data per month and that is far above the data caps for 4G plans. He doesn’t think cellular can deliver the needed speeds, and unless the cellular model is drastically changed, it’s too expensive and capped at really low levels.

So CenturyLink plans to continue to upgrade its rural plant. About two thirds of CenturyLink’s customers can get 10 Mbps or higher today and the company is working to make that available everywhere. Contrast this to AT&T and Verizon. They have both told the FCC that they have plans to convert millions of rural lines to 4G LTE. I have written about this many times and see it as one of the biggest threats on the horizon to rural broadband. LTE is a great product when you want a burst of fast data to your cell phone. But the LTE network is not designed to serve multiple video streams to large numbers of households. 4G is also capable of some fairly impressive speeds that are significantly in excess of 10 Mbps, but those speeds drop quickly as you move away from a cell site.

It’s fairly obvious that AT&T and Verizon favor LTE since it is their own best economic benefit – their wireless operations dwarf their landline businesses. Nobody can argue with a straight face that LTE is the best way to provide data for customers from either a a performance or a cost basis. Cellular coverage is still poor in a lot of rural America and so forcing people off of copper and onto wireless will  degrade the ability of many rural households to get broadband. But these two companies have a big financial incentive to move people from low-priced landlines to expensive cellular connections. It makes me think that if the FCC really cares about rural America that they ought to be divesting the landline business from AT&T and Verizon to remove the wireless bias.

CenturyLink says they are worried about the FCC changing the definition of rural broadband to be higher than 10 Mbps. They say that speed is difficult to achieve in their DSL plant and that they are far more comfortable with a definition of around 6 Mbps. It’s honestly refreshing to hear a telco executive tell people the truth for a change. The other big telcos spew a lot of rhetoric to sway the FCC or to assuage the public and it’s unusual to hear somebody tell the unvarnished truth to the public.

Those who follow my blog know that I promote a high definition of broadband. Households want the ability to stream multiple videos simultaneously. And you can expect in just a few years for there to be a much greater demand for HD quality video and a climbing demand for 4K video. The average urban household that has choice is already finding 10 Mbps to be far too slow. Just this week Verizon increased its minimum FiOS speeds to a symmetrical 35 Mbps. I know this is a really big technological expectation for CenturyLink and other rural telcos still using copper, but the definition of broadband needs to keep pace with what the normal household wants to buy, and that number is going to keep climbing year after year. If we don’t set the bar high then rural places are going to fall further behind the speeds available in cities.

CenturyLink does expect to continue to expand the footprint of its Prism TV product. This is a paired and bonded DSL product that can deliver up to 50 Mbps for customers somewhat close to a central office. CenturyLink has made this available to over 2 million customers and plans to make it available to 300,000 more in 2015.

Interestingly, CenturyLink does not plan to expand WiFi hotspots. Some other carriers seem to be in a race to put in hot spots but CenturyLink cannot see a way to monetize the effort. Of course, CenturyLink will put a hotspot in for a business that asks for one, but they don’t intend to build hotspots of their own. I have also written about this topic several times. Nobody who is not serving a captive audience like at an airport or in an airplane has been able to get much money from selling Internet by the hour. And while the giant cellular carriers benefit greatly by more WiFi, I have yet to hear of a deal where they are paying somebody to install public hot spots. Comcast says they have installed hundreds of thousands of hot spots and they recently announced that they are turning the wireless modems of all of their residential customers into hot spots. But to me that seems more like a move that is going to antagonize the public greatly with little obvious monetary benefit. I think CenturyLink is being prudent to stay away from this business until somebody shows a way to make money with it.