AT&T and Connected Vehicles

AT&T just released a blog talking about their connected vehicle product. This blog paints a picture of where AT&T is at today and where they hope to be headed into the future in this market niche.

For a company like AT&T, the only reason to be excited about a new market niche is the creation of a new revenue stream. AT&T claims to have 24 million connected cars on its network as of the end of 3Q 2018. They also claim 3 million additional connected fleet vehicles. They also have over 1 million customers who are buying mobile WiFi hotspots from AT&T.

What does that look like as a revenue stream? AT&T has relationships with 29 global car manufacturers. Most new cars today come with some kind of connectivity plan that’s free to a car buyer for a short time, usually 3 to 6 months. When the free trial is over consumers must subscribe in order to retain the connectivity service.

As an example of how this works, all new Buicks and Fiats come with AT&T’s UConnect Access for a 6-month free trial period. This service provides unlimited broadband to the vehicle for streaming video or for feeding the on-board mapping system. After the trial customers must subscribe to the service at a monthly rate of $14.99 per month – or they can buy a la carte for connectivity at $9.99 per day or $34.99 per month.

In the blog AT&T touts a relationship with Subaru. The company provides a trial subscription to Starlink that provides on-board navigation on a screen plus safety features like the ability to call for roadside assistance or to locate a stolen vehicle. Subaru offers different plans for different vehicles that range from a Starlink trial of between 4-months and 3-years. Once the trial is over the cost of extending Starlink is $49 for the first year and then $99 per year to extend just the security package or $149 per year to extend the whole service. Starlink is not part of AT&T, so only some portion of this revenue goes to the carrier.

I wonder how many people extend these free trials and become paying customers? I have to think that the majority of the AT&T connected vehicles are under the Starlink relationship which has been around for many years. Families that drive a lot and watch a lot of video in a vehicle might find the UConnect Access to be a much better alternative than using cellular data plans. People who want the feature of locating their car if stolen might like the Starlink. However, most drivers probably don’t see a value in these plans. Most of the features offered in these packages are available as part of everybody’s cellular data plans using the Bluetooth connectivity in these vehicles.

The vehicle fleet business, however, is intriguing. Companies can use this connectivity to keep drivers connected to the home office and core software systems. This can also be done with cellphones, but I can think of several benefits to building this directly into the vehicle.

The second half of their blog discusses the possibility for 5G and automated cars. That’s the future revenue stream the company is banking on, and probably one of their biggest hopes for 5G. They have two hopes for 5G vehicle connectivity:

  • They hope to provide the connectivity between vehicles using 5G and the cloud. They believe that cars will be connected to the 5G network in order to ‘learn’ from other vehicle’s driving experience in the immediate vicinity.
  • They also hope to eventually provide broadband to driverless cars where passengers will be interested in being connected while traveling.

The first application of connecting nearby vehicles is no guarantee. It all depends on the technology path chosen to power driverless vehicles. There is one school of thought that says that the majority of the brains and decision making will be done by on-board computers, and if cars connect to nearby vehicles it will be through the use of on-board wireless communication. AT&T is hoping for the alternate approach where that connectivity is done in the cloud – but that’s going to require a massive investment in small cell sites everywhere. If the cloud solution is not the preferred technology then companies like AT&T will have no incentive to place 5G cell sites along the millions of miles of roads.

This is one of those chicken and egg situations. I liken it to smart city technology. A decade ago many predicted that cities would need mountains of fiber to support smart cities – but today most such applications are being done wirelessly. Any company banking on a fiber-based solution got left behind. At this point, nobody can predict the technology that will ultimately be used by smart cars. However, since the 5G technology needs the deployment of a massive ubiquitous cellular network, the simpler solution is to do it some other way.

Where Will 5G Find Fiber?

I was talking to one of my clients about 5G. This particular client is a fiber-overbuilder and they verified something I’ve suspected – they don’t plan to ever make any of their fiber available for a 5G provider wanting to deploy 5G small cell sites. They reason that 5G point-to-point radios, like Verizon is now launching, would compete directly with their retail broadband products and they can’t think of a scenario where they would assist a competitor to poach their own retail customers.

This is a break with the past because this client today provides fiber to a number of the big cellular towers and hopes to continue those sales. These are good revenue and help to offset the cost of building fiber to the towers. This leads me to ask the title question of this blog – where are the 5G providers going to find the needed fiber? A lot of the rosy predictions I’ve read for widespread 5G deployment assume that 5G providers will be able to take advantage of the fiber that’s already been deployed by others, and I’m not so sure that’s true.

I have no doubt that big backhaul fiber providers like Level 3 or Zayo will sell 5G connectivity where they have the capacity. However, much of their fiber network is not strategically located for 5G. First, 5G networks are going to need to get to numerous poles, and that requires fiber with existing access point. Much of the fiber built by companies like Level 3 was built to get to specific buildings or big cellular towers that anticipate the need for other access points. These fiber companies are also leery about tapping into fibers feed their largest customers, who often pay extra for guaranteed service. A lot of their fiber is underground and not easy to get to the needed pole connections.

Of more relevance is that these carriers are not going to own a lot of fiber that goes deep into neighborhoods where the 5G providers want to deploy. Most of the fiber built deep into residential neighborhoods has been built by fiber-to-the-premise overbuilders or cable companies. These companies use their fiber to sell retail broadband to residents and businesses. Fiber overbuilders, from Google Fiber down to the smallest municipal fiber network are not likely to sell fiber to the pole in neighborhoods where they are already a retail ISP.

The cable companies are not going to make their fiber available for 5G – they’ve made it clear that their future path lies in the DOCSIS 3.1 upgrades, including upgrading beyond gigabit speeds as needed. All of the major cable companies have said that have the ultimate end-game of fiber-to-the-premise. They’ve all cited 5G as one of the reasons they are increasing speeds and are not likely to sell access to a major competitor.

AT&T is the only other carriers with an extensive fiber network that goes deep into many neighborhoods. However, AT&T has been building FTTP connections in neighborhoods where they have fiber. For now, they don’t intend to mimic Verizon and are going to stick with FTTP rather than 5G. It would be tactically smart for AT&T to refuse to sell 5G connections to others. But AT&T is the hardest company in the industry to predict because they wear so many hats, and their retail fiber ISP business is in a different business silo than their wholesale fiber connection business – so who knows what they will do.

I don’t see a glut of existing fiber sitting waiting to sell to 5G providers. That seems to be the major hurdle for the rapid 5G deployment that the FCC, the White House and the cellular carriers have all been loudly touting. How many 5G companies are going to want to make the gigantic needed investment in fiber to get deep into neighborhoods?

I think the folks in Washington DC have gotten a false sense of the potential for 5G by seeing what Verizon is doing. But Verizon is taking advantage of the many billions of dollars of fiber they have already built over the years, and their 5G network is going to follow that fiber footprint. There are not many other companies with a glut of fiber that can be leveraged it in the same manner as Verizon.

Verizon has already announced that they will be passing roughly 11 million homes with fiber. They can be that specific because they know what’s close to their existing fiber. I doubt that they are going to expand anywhere else, just like they didn’t expand FiOS where the construction costs weren’t low. If Verizon can’t afford to deploy 5G where they don’t already have fiber, then how can anybody else justify it? Deploying 5G is like deploying any new network – it is only going to make financial sense where deployment costs are reasonable – and for now that means where there is already easy access to fiber. I think the opportunities for rapid 5G deployment are a lot less than what policy-makers think.

Disasters and Regulation

Both Ajit Pai, the Chairman of the FCC and Governor Rick Scott of Florida have expressed frustration over the speed of recovery of communication in the Florida Panhandle following hurricane Michael. I don’t think anybody expects communications to be restored quickly in the neighborhood by the shore where even the houses are gone, and the frustration is more with lack of communications in areas that were damaged, but not totally devastated.

There are a number of issues to be considered when looking at the slow recovery – regulation, technology and the profitability of the telecom carriers.

The regulatory issues are pretty clear. Back when AT&T or some smaller independent telephone company would have served this area we would have seen the same sort of response from the telephone companies as we see today from the power companies. AT&T and other telcos from around the country would have mobilized swarms of technicians to replace fallen wires. The electronics vendors would have gone to extraordinary lengths to shuffle and direct all of their resources to the disaster areas.

We had plenty of hurricanes during the time when we had telephone monopolies and the telephone linemen were out working as furiously as the power companies to restore service. I remember from the time when I worked at Southwestern Bell that the company had disaster plans in place and routinely reviewed the plans with employees who might be activated during emergencies – the company made disaster a recovery an everyday part of operating the monopoly business.

But the days of monopoly are long past. The phone company is now far from a monopoly and probably only serves a small percentage of the customers in any given area. The big telcos have had huge layoffs over the years and don’t have the staffs that can swarm the area. I wouldn’t be surprised if they don’t even have disaster plans.

Cable companies are the closest thing we have to monopolies and I expect them to put wires back in a reasonable time after a bad storm – but there are many parts of the hurricane-struck area that aren’t served by a cable company. A cable company is still not likely to get the same swarm of technicians like we saw in the regulated telco days.

As we saw with hurricane Sandy, the telcos no longer rushes to fix the damage. After that storm Verizon decided that they weren’t going to fix the copper and used the storm as an opportunity to switch customers to all-wireless cellular broadband. That’s not a change that can be implemented quickly and we saw some of the areas after Sandy without telecom for months. I expect AT&T is going through the same thought process for much of the area from hurricane Michael and is not going to put back copper wires.

There are also technical issues to consider. I’m willing to bet that the primary cause of frustration is the slow recovery of the cellular towers. Unlike the telephone network there is little redundancy built into the cellular networks. When the towers, antennae and equipment huts around a tower are damaged there is no quick fix, and replacements need to be shipped in. Unlike the major coordinated disaster plans of the old Ma Bell, I doubt that the cellular carriers have react-immediately disaster recovery plans. That kind of planning costs money. The companies would need to hold dozens of cell sites in place as spares that were ready to be shipped out on a moment’s notice. That’s not profitable and there is no regulatory agency insisting that the cellular companies have such plans in place.

As the technology at the edge increases, the time needed for recover from a disaster increases. I remember that this was a concern for telcos when they first placed DSL cabinets in neighborhoods – they knew it would take a lot longer to recover from destroyed electronics compared to the days when the outside network was most just copper wires. The cellular networks are the same, and we are about to enter a time when 5G and other new technologies will place electronics deep into neighborhoods. As slow as the recovery might be for hurricane Michael, it’s going to be worse when we are relying on dispersed 5G electronics deep in the field – it takes longer to fix the electronics and the backhaul networks than it is to put wires back on poles.

The issue that nobody wants to talk about is that all of the big companies in the telecom market are now publicly traded companies that exist to maximize quarterly earnings. Having disaster plans in place costs money – and the big companies these days don’t spend anything extra that’s not mandatory. Call it lack of regulation or call it an emphasis on the profit motive, but the big ISPs and cellular companies have no motivation or incentive to make extraordinary efforts after a disaster. I doubt that the existing regulatory powers even give the FCC any authority to impose such rules – particular with broadband, since the FCC says they are no longer regulating it.

False Advertising for 5G

As has been expected, the wireless carriers are now actively marketing 5G cellular even though there are no actual 5G deployments. The marketing folks are always far in front of the engineers and are proclaiming 5G today much in the same way that they proclaimed 4G long before it was available.

The perfect case in point is AT&T. The company announced the launch of what they are calling 5G Evolution in 239 markets. They are also claiming they will be launching what they are calling standards-based 5G in at least 19 cities in early 2019.

The 5G Evolution product doesn’t contain any part of the new 5G standards. Instead, 5G Evolution is AT&T’s deployment of 4G LTE-Advanced technology, which can be characterized as their first fully-compliant 4G product. This is a significant upgrade that they should be proud of, but I guess their marketing folks would rather call this an evolutionary step towards 5G rather than admit that they are finally bringing mature 4G to the market – a claim they’ve already been making for many years.

What I find most annoying about AT&T’s announcement is the claim that 5G Evolution will “enable peak theoretical wireless speeds for capable devices of at least 400 megabits per second”, although their footnote goes on to say that “actual speeds are lower and will vary”. The 4G standard has been theoretically capable of speeds of at least 300 Mbps in a lab setting since the standard was first announced – but that theoretical speed has no relevance to today’s 4G network that generally delivers an average 4G speed of less than 15 Mbps.

This is like having a fiber-to-the-home provider advertise that their product is capable of speeds of 159 terabits per second, although actual speeds might be something less (that’s the current fastest speed achieved on fiber by scientists at the NICT Network System Research Institute in Japan). The intent of the statement on the AT&T website is clearly aimed at making people think they will soon be getting blazingly fast cellular data – which is not true. This is the kind of false advertising that is overstating the case for 5G (and in this case for 4G) that is confusing the public, politicians and regulators. You can’t really blame policy-makers for thinking that wireless will soon be the only technology we will need when the biggest wireless provider shamelessly claims speeds far in excess of what they will be ever be deploying.

AT&T’s second claim of launching standards-based mobile 5G in 19 markets is a little closer to the truth, but is still not 5G cellular. That service is going to deploy millimeter spectrum hotspots (a technology that is being referred to as Mi-Fi) in selected locations in 19 cities including Las Vegas, Los Angeles, Nashville, Orlando, etc.

These will be true hotspots, similar to what we see in Starbucks, meaning that users will have to be in the immediate vicinity of a hotspot to get the faster service. Millimeter wave hotspots have an even shorter propagation distance than normal WiFi hotspots and the signal will travel for a few hundred feet, at best. The hotspot data won’t roam and will only work for a user while they stay in range of a given hot spot.

AT&T hasn’t said where this will be deployed, but I have to imagine it will be in places like big business hotels, convention centers and indoor sports arenas. The deployment serves several purposes for AT&T. In those busy locations it will provide an alternate source of broadband for AT&T customers who have a phone capable of receiving the Mi-Fi signal. This will relieve the pressure on normal cellular data locally, while also providing a wow factor for AT&T customers that get the faster broadband.

However, again, AT&T’s advertising is deceptive. Their press releases make it sound like the general public in these cities will soon have much faster cellular data, and they will not. Those with the right phone that find themselves in one of the selected venues will see the faster speeds, but this technology will not be deployed to the wider market in these cities. Millimeter wave hotspots are an indoor technology and not of much practical use outside. The travel distances are so short that a millimeter wave hot spot loses a significant percentage of its strength in the short distance from a pole to the ground.

I can’t really blame the marketing folks at AT&T for touting imaginary 5G. It’s what’s hot in the marketplace today and what the public has been primed to expect. But just like the false hype when 4G was first introduced, cellular customers are not on the verge of seeing blazingly fast cellphone service in the places they live and work. This advertising seems to be intended to boost the AT&T brand, but it also might be defensive since other cellular carriers are making similar claims.

Unfortunately, this kind of false advertising plants the notion for politicians and policy-makers that cellular broadband will soon be all we will need. That’s an interesting corporate tactic to take by AT&T which is also building more fiber-to-the-premise right now than anybody else. These false claims seems to be most strongly competing with their own fiber broadband. But as I’ve always said, AT&T wears many hats and I imagine that their own fiber folks are as annoyed by this false advertising as the rest of us in the industry.

Broadband Redlining

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

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

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

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

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

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

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

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

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

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

The Zero-rating Strategy

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

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

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

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

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

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

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

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

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

More Crowding in the OTT Market

It seems like I’ve been seeing news almost weekly about new online video providers. This will put even more pressure on cable companies as more people find an online programming option to suit them. This also means that a likely shakeout of the OTT industry with such a crowded field of competitors all vying for the same pool of cord-cutters.

NewTV. This is an interesting new OTT venture that was founded by Jeffrey Katzenberg, former chairman of Walt Disney and headed by Meg Whitman, former CEO of Hewlett Packard Enterprise and also from Disney. The company has raised $1 billion in and has support from every major Hollywood studio including 21st Century Fox, Disney, NBCUniversal, Sony Pictures Entertainment, and Viacom.

Rather than take on Netflix and other OTT content directly the company plans to develop short 10-minute shows aimed exclusively at cellphone users. They plan both free content supported by advertising and a subscription plan that would use the ‘advertising-light’ option used by Hulu.

AT&T already owns a successful OTT product with HBO Now that has over 5 million customers. John Stankey, the head of WarnerMedia says the plan is to create additional bundles of content centered around HBO that bring in other WarnerMedia content and selected external content. He admits that HBO alone does not represent enough content to be a full-scale OTT alternative for customers.

AT&T’s goal is to take advantage of HBO’s current reputation and to position their content in the market as premium and high quality as a way to differentiate themselves from other OTT providers.

Apple has been talking about getting into the content business for a decade, and they have finally pulled the trigger. The company invested $1 billion this year and now has 24 original series in production as the beginning of a new content platform. Among the new shows is a series about a morning TV show starring Reese Witherspoon and Jennifer Aniston.

The company hired Jamie Erlicht and Zack Van Amburg from Sony Pictures Television to operate the new business and has since hired other experienced television executives. They also are working on other new content and just signed a multiyear deal with Oprah Winfrey. The company has not announced any specific plans for airing and using the new content, but that will be coming soon since the first new series will probably be ready by March of 2019.

T-Mobile. As part of the proposed merger with Sprint, T-Mobile says they plan to launch a new ‘wireless first’ TV platform that will deliver 4K video using its cellular platform. On January T-Mobile purchased Layer3 which has been offering a 275 channel HD line-up in a few major markets.

The T-Mobile offering will be different than other OTT in that the company is shooting for what they call the quad play that bundles video, in-home broadband (delivered using cellular frequency), mobile broadband and voice. The company says that the content will only be made available to T-Mobile customers and they view it as a way to reduce churn and gain cellular market share.

The Layer 3 subsidiary will also continue to pursue partnerships to gain access to customers through fiber networks, such as the arrangement they currently have with the municipal fiber network in Longmont, Colorado.

Disney. Earlier this year the company announced the creation of a direct-to-consumer video service based upon the company’s huge library of popular content. Disney gained the needed technology by purchasing BAMTech, the company that supports Major League Baseball online. Disney also is bolstering its content portfolio through the purchase of Twenty-First Century Fox.

Disney plans to launch an ESPN-based sports bundle in early 2019. They have not announced specific plans on how and when to launch the rest of their content, but they canceled an agreement with Netflix for carrying Disney content.

Verizon’s Case for 5G, Part 4

Ronan Dunne, an EVP and President of Verizon Wireless recently made Verizon’s case for aggressively pursuing 5G. This last blog in the series looks at Verizon’s claim that they are going to use 5G to offer residential broadband. The company has tested the technology over the last year and announced plans to soon introduce the technology into a number of cities.

I’ve been reading everything I can about Verizon and I think I finally figured out what they are up to. They have been saying that within a few years that they will make fixed 5G broadband available to millions of homes. One of the first cities they will be building is Sacramento. It’s clear that in order to offer fast speeds that each 5G transmitter will have to be fiber fed. To cover all neighborhoods in Sacramento would require building a lot of new fiber. Building new fiber is both expensive and time-consuming. And it’s still a head scratcher about how this might work in neighborhoods without poles where other utilities are underground.

Last week I read of an announcement by Lee Hick’s of Verizon for a new initiative called One Fiber. Like many large telecoms Verizon has numerous divisions that own fiber assets like the FiOS group, the wireless group and the old MCI business CLEC group. The new policy will consolidate all of this fiber under into a centralized system, making existing and new fiber available to every part of the business. It might be hard for people to believe, but within Verizon each of these groups managed their own fiber separately. Anybody who has ever worked with the big telcos understands what a colossal undertaking it will be to consolidate this.

Sharing existing fiber and new fiber builds among its various business units is the change that will unleash the potential for 5G deployment. My guess is that Verizon has eyed AT&T’s fiber the strategy and is copying the best parts of it. AT&T has quietly been extending its fiber-to-the-premise (FTTP) network by extending fiber for short distances around the numerous existing fiber nodes in the AT&T network. A node on an AT&T fiber built to get to a cell tower or to a school is now also a candidate to function as a network node for FTTP. Using existing fiber wisely has allowed AT&T to claim they will soon be reaching over 12 million premises with fiber – without having to build a huge amount of new fiber.

Verizon’s One Fiber policy will enable them to emulate AT&T. Where AT&T has elected to build GPON fiber-to-the-premise, Verizon is going to try 5G wireless. They’ll deploy 5G cell sites at their existing fiber nodes where it makes financial sense. Verizon doesn’t have as extensive of a fiber network as AT&T and I’ve seen a few speculations that they might pass as many as 7 million premises with 5G within five years.

Verizon has been making claims about 5G that it can deliver gigabit speeds out to 3,000 feet. It might be able to do that in ideal conditions, but their technology is proprietary and nobody knows the real capabilities. One thing we know about all wireless technologies is that it’s temperamental and varies a lot by local conditions. The whole industry is waiting to the speeds and distances Verizon will really achieve with the first generation gear.

The company certainly has some work in front of it to pursue this philosophy. Not all fiber is the same and their existing fiber network probably has fibers of many sizes, ages and conditions using a wide range of electronics. After inventorying and consolidating control over the fiber they will have to upgrade electronics and backbone networks to enable the kind of bandwidth needed for 5G.

The Verizon 5G network is likely to consist of a series of cell sites serving small neighborhood circles – the size of the circle depending upon topography. This means the Verizon networks will  not likely be ubiquitous in big cities – they will reach out to whatever is in range of 5G cell sites placed on existing Verizon fiber. After the initial deployment, which is likely to take a number of years, the company will have to assess if building additional fiber makes economic sense. That determination will consider all of the Verizon departments and not just 5G.

I expect the company to follow the same philosophy they did when they built FiOS. They were disciplined and only built in places that met certain cost criteria. This resulted in a network that, even today, bring fiber to one block but not the one next door. FiOS fiber was largely built where Verizon could overlash fiber onto their telephone wires or drag fiber through existing conduits – I expect their 5G expansion to be just as disciplined.

The whole industry is dying to see what Verizon can really deliver with 5G in the wild. Even if it’s 100 Mbps broadband they will be a competitive alternative to the cable companies. If they can really deliver gigabit speeds to entire neighborhoods then will have shaken the industry. But in the end, if they stick to the One Fiber model and only deploy 5G where it’s affordable they will be bringing a broadband alternative to those that happen to live near their fiber nodes – and that will mean passing millions of homes and tens of millions.

Big ISPs Fighting Privacy

Old padlock with the key in the keyhole lying on a wooden board

One of the quietest regulatory battles is happening at statehouses rather than with regulators. The large ISPs and big Silicon Valley companies have joined forces to kill any legislation that would create Internet privacy.

The privacy battle got started in 2016 when the FCC passed new privacy rules that required ISPs to get permission from customers before selling their personal data or browsing history. Those new rules would have gone into effect in April of 2017. But Congress intervened to kill the new privacy rules before they went into effect. In an effort led by Senator Jeff Flake, Congress added language to the Congressional Review Act, the bill used to approve the federal government budget, that rolled back the FCC’s new rules and that also prohibited the agency from introducing new rules that were ‘substantially similar’.

Since that time there have been numerous attempts in state legislatures to provide privacy rights for citizens. According to Michael Gaynor of Motherboard there have been over 70 bills in state legislatures in the last year that have attempted to introduce consumer privacy – and all have failed.

That’s an amazing statistic considering the public sentiment for putting curbs on ISPs being able to use customer data. A Pew Research poll from earlier this year showed that over two-thirds of people support stronger privacy rules.

The legislative failures have all come due to intense lobbying from ISPs. The big telcos and cable companies have always had a strong presence in statehouses and have contributed to campaign funds for key legislators for years. The lobbying effort has paid off many times in the past, but not always. The lobbying effort for the privacy issue has been particular effective since the big Silicon Valley companies like Google and Facebook have joined forces with the big ISPs.

Those two sets of companies are rarely on the same side on issues, but they all have a vested interest in monetizing customer data. The big web companies like Facebook and Google make most of their money by leveraging customer data. The big ISPs are newer to this business line, but they all have acquired data firms over the last two years to help them compete with Google for advertising dollars.

It’s not talked about a lot, but Silicon Valley firms now spend more money on lobbying in DC than the big ISPs. These companies are newer to lobbying at the state level, but the privacy issue has drawn them into local lobbying in a big way.

The privacy laws passed by the last FCC are similar to those in effect in Europe. Web users there get the choice to opt out of being tracked by online companies and ISPs. Interestingly, a lot of people in Europe elect to make their data available to the web companies. Many people like the personalized advertising and other benefits that comes along with the surveillance. It turns out that many people, particularly Millennials don’t mind being tracked, and are not opting out. Apparently, though, that’s not good enough for the big web companies who want to track everybody online.

There are still ways for consumers who don’t want to be tracked to reduce their web presence. People can use VPNs to bypass their ISP, although there is still a risk of the VPN provider harvesting their data. There are several companies working on creating an encrypted DNS service that hides web searches from ISPs. Numerous people (like me) have dropped services like Facebook that are openly tracking everything done inside the platform. Search engines like Duck Duck Go, which don’t record web searches are growing in popularity.

Of course, one of the best ways to cut down on surveillance is to change service to a small ISP. Small telcos, WISPs, fiber overbuilders and municipal ISPs don’t track and monetize customer data. Unfortunately, most people don’t have an option other than a big ISP. I always advice my clients, who are all small ISPs to emphasize that they don’t spy on their customers – it’s a strong selling point to people who care about privacy.

Technology Promises

I was talking to one of my buddies the other day and he asked what happened to the promise made fifteen years ago that we’d be able to walk up to vending machines and buy products without having to use cash or a credit card. The promise that this technology was coming was based upon a widespread technology already in use at the time in Japan. Japan has vending machines for everything and Japanese consumers had WiFi-based HandiPhones that were tied into many vending machines.

However, this technology never made it to the US, and in fact largely disappeared in Japan. Everybody there, and here converted to smartphones and the technology that used WiFi phones faded away. As with many technologies, the ability to do something like this requires a whole ecosystem of meshing parts – in this case it requires vending machines able to communicate with the customer device, apps on the consumer device able to make purchases, and a banking system ready to accept the payments. We know that smartphones can be made to do this, and in fact there has been several attempts to do so.

But the other two parts of the ecosystem are problems. First, we’ve never equipped vending machines to be able to communicate using cellular spectrum. The holdup is not the technology, but rather the fear of hacking. In today’s world we are leery about installing unmanned edge devices that are linked to the banking system for fear that such devices can become entry points for hackers. This same fear has throttled the introduction of any new financial technology and is why the US was years behind Europe in implementing the credit card readers that accept chips.

The biggest reason we don’t have cellular vending machines is that the US banking system has never gotten behind the idea of micropayments, which means accepting small cash transactions – for example, charging a nickel every time somebody reads a news article. Much of the online world is begging for a micropayment system, but the banking fee structure is unfriendly to the idea of processing small payments – even if there will be a lot of them. The security and micropayment issues have largely been responsible for the slow rollout of ApplePay and other smartphone cash payment systems.

This is a perfect example of an unfulfilled technology. One of the most common original claims for the benefits of ubiquitous cellular was a cashless society where we could wave our phone to buy things – but the entrenched old-technology banking system effectively squashed the technology, although people still want it.

I look now at the many promises being made for 5G and I already see technology promises that are not likely to be delivered. I have read hundreds of articles that are promising that 5G is going to completely transform our world. It’s supposed tp provide gigabit cellular service that will make landline connections obsolete. It will enable fleets of autonomous vehicles sitting ready to take us anywhere at a moment’s notice. It will provide the way to communicate with hordes of sensors around us that will make us safer and our world smarter.

As somebody who understands the current telecom infrastructure I can’t help but be skeptical about most of these claims. 5G technology can be made to fulfill the many promises – but the ecosystem of all of the components needed to make these things happen will create roadblocks to that future. It would take two pages just to list all of the technological hurdles that must be overcome to deliver ubiquitous gigabit cellular service. But perhaps more importantly, as somebody who understands the money side of the telecom industry, I can’t imagine who is going to pay for these promised innovations. I’ve not seen anybody promising gigabit cellular predicting that monthly cellphone rates will double to pay for the new network. In fact, the industry is instead talking about how the long-range outlook for cellular pricing is a continued drop in prices. It’s hard to imagine a motivation for the cellular companies to invest huge dollars for faster speeds for no additional revenue.

This is not to say that 5G won’t be introduced and that it won’t bring improvements to cellular service. But I believe that a decade from now that if we pull out some of the current articles written about 5G that we’ll see that most of the promised benefits were never delivered. If I’m still writing a blog I can promise this retrospective!

 

p.s – I can’t ignore that sometimes the big technology promises come to pass. Some of you remember the series of AT&T ads that talked about the future. One of my favorite AT&T ads asked the question “Have you ever watched the movie you wanted to the minute you wanted to?”. This ad was from 1993 and promised a future where content would be at our finger tips. That was an amazing prediction for a time when dial-up was still a new industry. Any engineer at that time would have been skeptical about our ability to deliver large bandwidth to everybody – something that is still a work in process. Of course, that same ad also promised video phone booths, a concept that is quaint in a world full of smartphones.