Tag Archives: Broadband

Tennessee Broadband Study

TennesseeThe State of Tennessee recently undertook the biggest investigation into broadband that I’ve seen from any state. More than 23,000 homes and businesses participated in the study process. What the study found was very familiar to those of us who work every day with broadband issues.

The genesis of the report was from a number of meetings held around the state by Randy Boyd, the new state Commissioner of Economic and Community Development. He reported that during his numerous ‘listening’ sessions around the state that the issue raised the most was about lack of access to broadband. This showed him that the state has a big broadband problem and led to this report.

The report asked what the definition of broadband ought to be in the state. The settled on the 25 Mbps download and 3 Mbps upload used by the FCC. The study showed that 71% of homes with speeds at or above 25 Mbps said they had enough speed while only 48% of homes with 10 Mbps or less said they had enough speed. They discovered that upload speeds matter to businesses and that 3 Mbps seemed to be the minimum threshold for business-level service.  Possibly the most important finding in the study was a warning that the use of bandwidth continues to grow dramatically and that any definition of broadband will need to be continually increased in the future.

The study looked at actual broadband utilization in the state. They determined that 125,000 people in the state have no access to wireline broadband. The report also found that:

  • 69% of businesses and 76% of homes don’t have access to 25 Mbps broadband.
  • Competition means better speeds. For businesses, areas with only one facility-based ISP averaged 22.5 Mbps while areas with three ISPs averaged 43.8 Mbps.
  • 54% of households were connected with the slowest technologies – DSL, cellular wireless, satellite and dial-up.
  • They found that half of households that chose not to buy broadband cite the cost of broadband as their barrier to buying it.

The consultants hired by the state were asked to estimate how much it would cost to build broadband to all of those that didn’t have it. They estimated that it would cost $1.26 billion to build fiber to areas that today have broadband speeds less than 10/1 Mbps. They estimated it would cost $1.72 billion to build fiber to areas that don’t have 25/3 Mbps broadband.

They also looked at the cost of a fixed wireless network and those costs were $1 billion for places with less than 10/1 Mbps broadband and $1.36 billion for those without 25/3 broadband. Those estimates seem high to me. But they might include building a lot of backbone fiber to feed towers and also take into consideration the rugged terrain in much of the state.

The report is concluded by looking for solutions. The report recommended that the state has to get involved if it wants to help to bring broadband everywhere. And so it recommends the following as necessary for the state’s involvement:

  • Strong public leadership that champions broadband
  • Formation of a state broadband office or similar agency
  • Need to find ways to promote effective public-private partnerships
  • Public seed funding and grant programs to encourage investment in broadband
  • Transparency
  • Proper planning and due diligence

This study looked at broadband in Tennessee at a much more granular level than is done by various federal studies. Tennessee is a diverse state and is a mixture of big cities and rural back roads, much of it with rough terrain. But looking at 23,000 homes and businesses represents a big sample of the state and adds validity to the findings. Like a lot of Appalachia, Tennessee has more houses using older technologies for broadband than other parts of the country.

It will be interesting to see if the state acts on this report. Normally this kind of report is followed by a lot of lobbying by the big telcos and cable companies to discredit the results. The conclusions of the report are dead on. As much as governments might sit and hope that the commercial sector will somehow solve their broadband problems, we know in rural America that this will largely not happen. If a state wants to bring broadband to rural residents it must get involved – and the recommended solutions have proven to be effective in states like Minnesota.

The Increasing Importance of Broadband

4cb1f2dc96040Anybody who does what I do for a living has all sorts of evidence that the demand for broadband has been growing. For example, I have worked with rural communities without broadband for many years and have found that the number of people in those communities who say they will buy broadband is growing larger every year. I now have clients who have built rural networks and who have gotten 75% to 80% of the customers in the market footprint. These kinds of take rates would have been extraordinary five years ago but are now becoming the expected.

Pew Research Center has done a new survey that tries to quantify the importance that people place on broadband. They gave this same survey in 2010 and the new survey lets us see how the response to questions about broadband have changed over time. Here are a few of the new results:

  • 52% of people feel that those without the Internet are at a major disadvantage for finding out about job opportunities or obtaining new career skills. Only 25% thought that this is not a disadvantage.
  • 46% thought those without broadband are at a major disadvantage for learning about or accessing government services.
  • 44% think lack of broadband is a disadvantage for learning new things that will improve or enrich people’s lives.
  • And probably most significant, 69% of respondents in general felt that people without internet access have a major disadvantage.

We can also see how those same three responses have changed just since 2010.

  • Those that feel that the Internet is needed for job skills has grown from 43% to 52%.
  • Those that feel that the Internet is needed for access government services has grown from 29% to 46%.
  • Those that feel that access to broadband enriches people’s lives has grown from 41% to 44%.
  • In 2010 56% of people overall thought not having access to the Internet was a disadvantage, and that is now 69%.

For every question studied the percentage of African-Americans, Hispanics and young adults (ages 18-29) that thought the Internet was vital was higher than other groups.

Interestingly, those without home broadband access at home were slightly less likely to think that not having broadband is a major disadvantage. For example, in the recent poll 65% of them thought not having broadband was a major disadvantage compared to 69% of all respondents. But this is also the group that saw the biggest change since 2010 when only 35% of non-broadband households thought that was a disadvantage.

These kinds of surveys are interesting, but of course there are a hundred other questions you’d like to see asked. But sticking to the same questions that were asked in 2010 show how much the importance of broadband has grown in just five years.

I see this shift every day. I’ve been helping communities look for broadband solutions for nearly 15 years. Years ago when a community wanted to talk about broadband there were generally two reasons for it. First was economic development, meaning either attracting new jobs to a community or keeping the existing jobs from leaving. Secondly, communities wanted to get some price competition and thought that the incumbent providers didn’t care about their communities.

But today the demand for better broadband comes from citizens demanding a solution from local politicians. People hear of other communities that have found a way to bring broadband and they want the same. People without broadband are starting to feel like they are being left behind – and to a great extent they are. This kind of survey just reaffirms what we already know.

2015 Broadband Growth

S vurveOne of the things I’ve figured out about the telecom industry is that statistics are often used to tell very different stories. Consider this example regarding wireline broadband adoption:

In December Pew Research released the results of a survey that suggested that overall wireline broadband adoption had dropped to 67% in 2015, down from a high of 70% in 2013. This was the first time I had ever heard any suggestion that the total number of landline broadband connections have flattened out, let alone dropped.

Pew went on to say that main culprit for the drop in broadband adoption is broadband prices and that a lot of homes feel they cannot afford a broadband connection, and instead rely solely upon broadband from their smartphone. That sounds plausible, and Pew was comparing to a very similar survey they had given in 2013.

But the Leichtman Research Group just released a report saying that the big cable companies added 3.3 million broadband customers in 2015. They said that during the year that the large telcos lost 187,000 landline broadband connections, meaning an overall net increase of over 3.1 million new broadband connections for the year.

The Census estimates there were 124.6 million housing units in the country in 2015, so the big companies in total brought broadband to an additional 2.5% of the total market. That sure does not sound like a year in which broadband has declined as suggested by Pew. And Leichtman has shown total market growth for the last several years as well.

In this case you have to believe the Leichtman numbers. They gather total subscriber numbers from all of the large carriers – cable companies and telcos. Since almost all of these companies are publicly traded, and since Wall Street keeps a close eye on subscribers, one has to think that the Leichtman numbers are pretty accurate.

On the other hand the Pew numbers come from nationwide surveys. Pew did three surveys in 2015 with a total of 6,687 adult respondents. The 2013 numbers they are comparing to was based on surveys of 6,010 adults.

I have always been suspicious of nationwide surveys. Our firm gives surveys and I have found that local surveys can be very accurate and the results can often be correlated with externally collected facts. For instance, I’ve had clients do surveys to find out how many customers their competition has in a market, and these surveys often prove themselves to be valid by also accurately showing the market penetration of my clients. That makes it easy to believe that the numbers for the other competitors in the market are also accurate.

I know that Pew is very careful about how they randomly choose survey subjects. For instance they will call people with cellphones as well as those with landline telephones. If you crunch through the statistical formulas that describe the predicted accuracy of a nationwide survey, then the Pew surveys should be very accurate.

The Liechtman numbers are not a 100% count of broadband customers and only count the customers of the biggest broadband providers – but those providers are something like 95% of the whole market. I know enough about a lot of companies in the rest of the market, the smaller carriers, to know that many of them are still seeing healthy broadband customer growth.

I have no way to explain this difference and I suspect that Pew can’t either. Their survey should be pretty accurate. Yet sometimes nationwide surveys just don’t give accurate results. This can often be seen with elections where different surveys given at almost the same time show fairly disparate predictions. The trouble is that surveys from groups like Pew influence decision makers and there are now going to be those who think that broadband growth has topped out. I was just on a call last week where somebody mentioned the Pew numbers. And while the Pew numbers of total broadband users might not be totally accurate, one can still believe that  their observation that some people are finding broadband increasingly expensive probably is valid. The problem is, you just can’t really know how many people that might be.

Another Municipal Model

Seal_of_San_FranciscoCity officials in San Francisco recently issued a report that takes a very different stance than most other cities that are looking at broadband issues. The city essentially rejects the normal demand-based commercial model for broadband and looks at a new structure that will bring broadband to everybody.

The report is authored by the office of supervisor Mark Farrell and reflects some of the recommendations from the San Francisco Municipal Fiber Advisory Panel. The report very correctly observes that today’s commercial broadband model leaves a lot of citizens without broadband. Numerous nationwide surveys have shown that the majority of households without broadband access today feel they cannot afford the market prices for service.

So the San Francisco report recommends that the City institute a $26 per month fee on all households – with a higher fee on businesses – to help pay for broadband to everyone. They further recommend a public private partnership model to operate the business and assume that tiered pricing will still allow for profitability for a commercial partner.

The numbers are based upon an estimate that it would cost $867.3 million to build a fiber network in the city and $231.7 million per year to maintain the network. In my experience in looking at other large cities, both numbers feel very high. One has to assume in an open access network where fiber was built to everybody that the ongoing maintenance expenses for a network would be far lower than that since much of those costs would accrue to the ISPs and not to the city.

The city is not the first place that has looked at paying for fiber using taxpayer money, but they are by far the largest. A few small communities like Leverett, Massachusetts have paid for fiber construction with tax levies. The city of North Kansas City built a network and essentially is giving free service to residents for the next ten years. And the Utopia system in Utah recently looked at the tax-payer funding model, although it looks like a lot of the communities involved are rejecting the idea.

It’s a very interesting concept that has a bunch of pros and cons. On the plus side this would certainly solve the digital divide if every household in a community had a fiber connection. There would still be the issue to solve of making sure that everybody has a computer, but that seems like an easier problem to solve than getting the fiber network built to everybody.

But I can foresee a few major hurdles in implementing such an idea in an NFL city, such as the following:

  • The City probably doesn’t have the right to insist that they can bring fiber into apartment buildings. The FCC has made it clear that building owners have the right to control the wiring and the access to services on their own property. Many of the apartment owners will already have made a long-term contractual arrangement and be doing revenue sharing with the local cable company or some other service provider.
  • One can envision multiple lawsuits from citizens and businesses that wouldn’t want the city solution or who won’t want to pay the fee. It’s one thing to do this in a tiny town like Leverett, MA where there was no existing broadband, but in a large city there are bound to be many who don’t want the city doing this.
  • This is such a drastic solution that it surely would invite legislative action and multiple lawsuits from the incumbent providers. California is one of the states that allows for municipal competition, but using direct tax revenues to compete against the existing broadband providers would raise legitimate concerns about unfair competition. One can envision attempts to pass state or national legislation that would outlaw the proposed business plan. ISPs would use every tool at their disposal to fight this for fear that it might work and could spread elsewhere.

As the report points out, cities have a broadband dilemma today. Even where there is fiber or good broadband today there are a lot of households that can’t afford broadband. The report estimates there are over 100,000 people in San Francisco that can’t afford the market price for broadband and another 50,000 that still use dial-up.

There is also the issue of carriers building to just some parts of a city. One only has to look at all of the east coast cities that have Verizon FiOS to see the result of allowing commercial broadband providers to cherry-pick in markets. These cities have some neighborhoods with fast fiber broadband and competition between the telco and the cable company (which many observe is not real competition). But they have many neighborhoods without fiber and none of these cities can formulate a business plan that can justify bringing fiber to the neighborhoods that Verizon bypassed as too expensive to build.

The San Francisco report was a little fuzzy on a few of the details, which is natural since those details can only be made clear through negotiations with carriers willing to operate on such a network. You have to give the city kudos for creativity. But I foresee a big uphill battle if they try to implement this. But it’s an idea that should work if it can overcome the opponents that will spend huge money to try to prevent it.

The Arguments Against Building Fiber

Fiber CableAny time that there is talk of putting public money into broadband the same arguments against funding broadband are made. I’ve seen these claims made in survey responses, public meetings and in newspaper editorials. If your City is thinking about funding broadband or thinking about taking part in a public private partnership, you should be prepared to counter these typical arguments against your participation.

People Don’t Really Need Fast Speeds. This generally comes from folks who don’t use the Internet much and who just can’t imagine that others need or want a faster Internet. You will often see people cite the fact (for example) that Netflix suggests that you have 5 Mbps to comfortably use the service.

What these people fail to recognize is that there is video everywhere, not just on Netflix. It seems that every news page on the web and many advertisements are full of videos. Facebook and other social media sites are full of video and are going to be more video-intense in the near future. I know that my family starts crashing if our Internet slows down to about 25 Mbps.

And of course, this ignores the long-term trend we’ve seen where broadband consumption by households doubles about every three years. That was not so noticeable when the demand grew from 1 Mbps to 2 Mbps, but it is now starting to become very obvious. And nascent web services like 4K video (which needs a 25 Mbps stream) are going to really put the pressure on service providers.

Government Has No Business Competing with Commercial Companies. This has been the mantra of the fiscally conservative, and perhaps there are times and places where this might be a valid point. But in rural America – and even in cities under 100,000 – there are not many commercial companies out building broadband. There are independent telcos, electric cooperatives, and local governments building fiber, but all of these entities together are barely scratching the surface for the 34 million people that the FCC says don’t have access to broadband.

Communities are waking up to the realization that if they don’t find their own broadband solution that they are never going to get it. And that frankly scares a whole lot of communities that are afraid of becoming irrelevant and becoming a place where nobody wants to live. History has shown us that it doesn’t take a lot to send a community into a tailspin. There are a huge number of ghost towns around the country that were left behind by the railroads, the interstate highways or that lost their only major employer, and lack of broadband is going to create the next wave of abandoned communities.

Wireless is Going to be Fast in the Future. This myth is being fed by the constant hype that AT&T and Verizon put out about the coming 5G cellular with gigabit speeds. The expected specification for outdoor 5G cellular service is going to be aimed at ‘several tens of megabits’, or 20 – 30 Mbps. The 5G spectrum is going to be capable of supporting speeds up to a gigabit – within a room as a competitor to WiFi – but not for outdoor cellular service. 5G is going to increase cellular data speeds a few times faster than today in cities, but cellular performance in rural areas will still be as spotty as today due to the way that cellular bandwidth decreases with distance from a tower.

People Can Use Satellite Broadband. Anybody that says this ought to try using satellite broadband for a week and they would change their mind. It is better than dial-up, but not by a lot. There is a lot of latency, meaning that it’s nearly impossible to do something in real time like play a game or take part in distance learning. And most of the satellite services have draconian data caps that are even worse than cellular caps, because once you cross them you get cut off for the rest of the month.

The Incumbents are Going to Fix It. This is a relatively new argument that comes from the hype behind CAF II. The large telcos are getting federal grant money to expand rural broadband, but with speeds that only have to be 10 Mbps download. Anybody that gets this upgrade is going to be happy with it for a week or two until they realize that they still can’t do the things on broadband that people in cities can do. And within a decade, with the inevitable increase in demand it will feel as slow as dial-up.

Telecommuting and Broadband

BeetleI was looking into telecommuting and ran across a large survey done last year by FlexJobs that asked how people feel about telecommuting. As somebody who telecommutes (CCG is a virtual company and we all work at home) the results are not surprising.

The survey showed that over half of workers said that they could be most productive at home and this is where they would go to work on important projects. They cited the major reasons as fewer distractions, minimal office politics, reduced stress and a more comfortable environment.

Less than a quarter of employees thought they were most productive at an office. (When CCG went virtual we had one person who said they could not be productive in the home environment, and it’s important to recognize that telecommuting isn’t for everybody)

Interestingly, a third of the respondents thought that telecommuting was better for their health. Avoiding the stress of commuting, being able to eat their preferred diet and the flexibility to more easily make medical appointments all contribute to this.

OnlineMBA.com has put up some substantial information on telecommuting. Some of the more important points they make about the topic include:

  • A Stanford study shows that home-based customer service reps are 13% more efficient than those that work in a call center.
  • Another study by the University of Texas showed that telecommuters worked an average of 5 – 7 hours more per week than office-based employees.
  • Telecommuting can reduce turnover. 73% of telecommuters report being happy with their jobs as compared to 63% for office workers.
  • A Penn State study showed that telecommuters feel more valued. They feel less stress and they show gratitude for the flexibility they are given.
  • The Consumers Electronics Association calculated that telecommuting in 2013 saved enough energy to power one million homes. I’m always a bit leery of such calculations, but there is no doubt that saving on commuting is a huge benefit for society. And it’s also not bad for employees as can be witnessed by my two-and-a-half year old truck that has only 10,000 miles on the odometer.
  • Several studies have shown that employers save considerable money from allowing telecommuting and it’s been calculated in a few studies that the cost of housing an employee at the typical office costs between $10,000 and $15,000 per year. And employees who telecommute save on commuting costs, lunches and attire for the office.

Finally, Global Workplace Analytics analyzed over 4,000 studies on telecommuting and reported the following:

  • 2/3 of people would like to work at home.
  • 36% of employees would choose telecommuting over a pay raise.
  • A survey of 1,500 technology professionals showed that 37% would take a 10% pay cut to be able to work at home.
  • 14% of Americans have changed jobs to shorten commute times.
  • Almost half of employees feel that their commute is getting worse.
  • 78% of employees that call in sick really aren’t. Unscheduled absences cost employers $300 billion per year.
  • Sun Microsystems says that telecommuting employees spend 60% of the saved commuting time working for the company.
  • A number of companies report that telecommuting reduces discrimination and lets people be judged by what they do instead of what they look like.
  • And my favorite – telecommuting cuts down on wasted meetings. Web meetings tend to be better organized and shorter.

This is only a partial list of the benefits and there have been numerous studies from companies that have introduced telecommuting. But one thing is true for every telecommuter – they must have adequate home broadband. Communities without good broadband are missing out on the great benefits from telecommuting.

How Many Homes Can’t Get Broadband?

cheetah-993774The FCC periodically puts out some very high-level statistics that talk about the state of broadband in the US. They issued their annual broadband report in January and made the following high-level announcements:

  • 39% of rural households don’t have access to broadband that meets the FCC definition of 25 Mbps download and 3 Mbps upload.
  • 4% of urban households don’t have access to those speeds.
  • 41% of schools still do not have 100 Mbps download speeds.
  • Only 9% of schools have 1 Gbps broadband.

I looked deeper into how the FCC counts these various numbers to try to make some sense of them, and the following is what I discovered.

First, they followed the Census definition of urban and rural areas. The Census defines urban areas in one of two ways. One definition of an urban area is a defined geography with more than 50,000 people. It can also be a cluster of smaller towns in a fairly adjacent geographical area that has more than 2,500 people but less than 50,000. In the Census estimate for 2015 the urban areas include about 260 million people. Anything that is not urban is rural, which in 2015 is about 61.5 million people.

If a rural county has a county seat with more than 50,000 people, the county seat would counted as urban and the rest of the county would be rural. Otherwise the whole county is normally counted as rural. But in big urban areas, like the northeast corridor, many areas that you would consider as rural are included in the urban areas. So there is a significant amount of crossover at the edges of these two types of areas. For instance, for broadband purposes we know that somebody that lives 50 feet past where the cable company stops at a county seat might not be able to get broadband, but they might often still be counted as urban.

The raw data that backs up these statistics is still self-reported to the FCC by the ISPs annually on Form 477. On this form telcos and cable companies must report the speeds that they deliver to census blocks, which are census-defined areas of 500 to 900 homes. I looked through this mass of data and there are a huge number of census blocks that are reported at broadband speeds like 3 Mbps or 6 Mbps download. In most cases this is DSL, and our experience is that a whole lot of people in rural DSL areas can’t really get those speeds. That is the ‘advertised’ speed or the theoretical speed. This has always been an issue and I’ve always contended that there are far more homes that can’t get broadband than are reported by Form 477.

Using these FCC numbers means that there are about 24 million people (or 10 million homes) in the rural areas that can’t get the FCC’s defined broadband speeds. While the 4% of urban areas that can’t get fast broadband sounds small, it still equates to 10.4 million people or 4.3 million homes. So what the FCC numbers are really saying is that there are 34 million people and 14.7 million homes in the country that can’t get an FCC-define broadband connection.

I am positive that this number is conservatively low. Census blocks are not assigned by nice political boundaries and there are huge numbers of census blocks that cover both towns and country areas. There has to be many homes that are in census blocks where some of the people can get the speeds shown on Form 477 while others can’t. My guess is that there must be additional millions of people that supposedly can get broadband but that really can’t. Even in towns anybody that lives right past where the cable TV network stops is not going to get much broadband.

The FCC says that they are solving part of the rural broadband problem with CAF II funding which is supposed to bring faster connections to 3.6 million of these homes. But those funds only require upgrades to technology that will achieve 10 Mbps download and 1 Mbps upload. That program is not going to remove any homes from the list of those that can’t get broadband.

I really hate to see public announcements that talk in nationwide percentages instead of numbers. This always makes it feel like they are trying to pull something over on us. I had to dig really hard to go one level behind the one-page press release – and that doesn’t really help the public to understand the situation. Much more useful would have been detailed tables by geographic areas that let people see the state of broadband in their area. I suspect they don’t do that because then many of the problems with carrier self-reporting would be more obvious.

Senior Customers

elderly-people-crossingI have worked with a number of carriers who largely avoid building fiber or any new facilities to neighborhoods that have a larger than average share of senior households. And I think perhaps we are getting to a point in time where that is no longer the best strategy.

Pew Research Center just released a poll showing the change over time of the use of social media by various age groups. They have been asking this question for a number of years. Their polls show that back in 2006 around 40% of people under 29 used social media but barely anybody else. But over the years the usage has grown for each age group. As one would still expect, around 90% of those under 29 now use social media, but the percentage for those over 65 has grown to 35% and is growing quickly.

You don’t have to go back very many years to see a different story. As recently as 2012 only 20% of those over 65 used social media and in 2010 it was only 10%. But the older demographic is quickly catching up to those between 50 and 64, where, even now, only 50% use social media.

This survey didn’t give any reasons why the use of social media is growing so fast. But one easy explanation is that as the population ages, the younger groups of people become the next older group. I just read recently that there are now more millennials in the country than baby boomers. The baby boomers, along with everyone else, are aging and the first boomers are now 69.

Not all of my clients shy away from seniors. I have a few clients that for years have held training sessions to help seniors get over their fear of computers, and this has paid off. They tell me that once a senior gets on the Internet that they are some of their best customers. They pay on time and they are loyal.

I happen to live in a community in Florida with a lot of seniors who love the Florida sun in the winter. I can tell you that, at least around here, the community itself is drawing seniors onto the Internet. It’s not unusual for community centers and other centers of senior of activity to prefer to communicate via the web. It’s also not unusual around here for doctors to want to do everything on the web. So people who might have had no other reason to get onto the Internet are getting drawn in by daily life.

I don’t think anybody should expect that seniors are going to pony up a high price for the fastest Internet connections, and so I would imagine that Google doesn’t do as well in this segment of the population as they probably do with families with kids at home. But that doesn’t mean that seniors want the slowest product either. My mother-in-law, who lives in Texas, had a 40 Mbps cable modem and was pleased last year when Time Warner increased her speed to 75 Mbps due to competition with Google.

We are also on the verge of a time when seniors will become very demanding broadband customers. There are over 100 tech companies reported to be looking at products that can help seniors stay in their homes longer. All of these products rely on video cameras and other monitors that are going to make seniors care about bandwidth. If buying bigger bandwidth can keep somebody in their home for an extra decade you are going to see the elderly shelling out for broadband and demanding that it is fast enough to satisfy their needs.

I still think the idea of carriers finding ways to reach out to senior can pay dividends. I have a very large extended family and every year I see a few more of my older cousins and relatives pop up on Facebook. And I am sad to report that it’s not just kids who take selfies! I think the older generation in my family has a lot more fun with the Internet these days than the kids.

Service Unavailable

51H2Ytxu9TL._SX361_BO1,204,203,200_I just finished reading Service Unavailable, a new book by Frederick L. Pilot. It’s a quick and easy read for anybody in the broadband industry and covers the rural broadband crisis we have in the US.

The first two-thirds of the book are a great history of how we got to where we are today. Pilot explains the decisions made by the FCC and by the large ISPs in the country that have brought us to today’s broadband network. In far too many places that network consists of old copper wires built to deliver voice; these have deteriorated with age and are wholly inadequate to deliver any meaningful broadband. The large ISPs have poured all of their money into urban networks and Pilot describes how the networks in the rest of the country have been allowed to slowly rot away from lack of maintenance.

It’s a shame that his book went to press right before the FCC took an action that would have been an exclamation point in Pilot’s story of broadband policies gone amuck. The FCC just gave away billions of dollars to the largest telcos to upgrade rural DSL to 10 Mbps download speeds – a speed that is already inadequate today and that will be a total joke by the time the last of the upgrades are done over a six year period. The FCC seems not to have grasped the exponential growth in consumer broadband demand that has doubled about every three years since the early 90s.

Pilot goes on to recommend a national broadband program that would direct many billions of dollars to build fiber everywhere, much in the same way that the federal government built the interstate highways. He says this is the only way that places outside of the urban areas will ever get adequate broadband.

I certainly share Pilot’s frustration and have had the same thought many times. We could probably build fiber everywhere for the price of building one or two aircraft carriers, and one has to wonder where our national priorities are. As Pilot points out, broadband everywhere would unleash a huge untapped source of creativity and income producing ability in the parts of the country that don’t have good broadband today. And as he points out, many of the places that barely squeak by with what is considered broadband today are going to find themselves on the wrong side of the digital divide within a few years.

But then I stop and consider how federal projects are run and I’m not so sure this is the right answer. I look back at how the stimulus grant programs were run. These grants shoveled large sums of money out the door to build a whole lot of fiber networks that barely brought broadband to anybody. And they did it very inefficiently by forcing fiber projects to pay urban wage rates for projects built in rural counties where the prevailing wages were much lower. And these projects required things like environmental and historical structure studies, things that I had never seen done before by any fiber project.

And then there is the question of who would run these networks? I sure wouldn’t want the feds as my ISP and I wonder how they would decide who would be the recipient of these huge expenditures of federal monies? Pilot proposes that such networks be operated as open access networks, a model that has not yet seen any success in the US. It’s a model that works great in Europe, where all of the largest ISPs jump onto any available network in order to get customers. But in this country the incumbents have largely agreed not to compete against each other in any meaningful way.

But beyond the operational issues, which surely could be figured out if we really wanted to do this, one has to ask if this idea can ever get traction with our current government? We have such a huge backlog of infrastructure projects for maintaining roads, bridges, and waterways that one has to wonder how broadband networks would get the needed priority. I have never understood the reluctance of Congress to tackle infrastructure because such expenditures mostly translate to wages, which means full employment, lots of taxes paid, and a humming economy. But we’ve just gone through over a decade of gridlock, and I have a hard time seeing anything but more of the same as we seem to grow more divided and partisan every year.

Still, Pilot is asking exactly the right questions. Unfortunately, I am not sure there can ever be that one big fix-it-all solution that will solve the broadband crisis. I completely agree with Pilot that there should be such a solution and I also agree that this is badly needed. We are quickly headed towards a day of urban America with gigabit speeds and the rest of the country with 10 Mbps DSL, a wider broadband gap than we have ever had. And all we have is an FCC that is shoveling money out the door for band-aid fixes to DSL networks on old copper.

So I’m not sure that the solution suggested by Pilot can be practically implemented in today’s political world, but it is one possible solution in a world where very few others are proposing a way to fix the problem. I would think that the industry could figure out a workable solution if there was any real inclination to do so. But instead, I fear we are left with a world of large corporations running our broadband infrastructure who are more interested in quarterly earnings than they are about reinvesting in the future. If I could, I would wish for a more utopian society where we could put Pilot and other thinkers into a room together until they worked out a solution to our looming broadband crisis.

Broadband Statistics for 2014

pie chartIn a blog last week I talked about how cable TV subscriptions in the US had dropped for the industry as a whole for the year ending in the first quarter of 2015. But Leichtman Research Group has published the statistics for US broadband for the end of 2014 and this shows a very different story.

It’s obvious that the improving economy has helped broadband sales and the largest cable companies and telcos added 3 million new broadband customers in 2014, up 114% over additions in 2013.

Following are the statistics for 2014 followed by a few observations:

Top Cable Companies                 Total               Added             %

Comcast                                     21,962,000        1,277,000          6.2%

Time Warner                              12,253,000           657,000          5.7%

Charter                                         5,072,000           432,000          9.3%

Cablevision                                   2,760,000           (20,000)        -0.7%

Suddenlink                                   1,149,100             78,800          7.4%

Mediacom                                    1,013,000             48,000          5.0%

WOW                                                727,800             19,600         2.8%

Cable ONE                                       488,454             15,823         3.3%

Other Cable Companies              6,525,000           150,000         2.4%

Total Top Cable                          51,960,354        2,658.223         5.4%

 

Top Telcos       

AT&T                                           16,028,000               1,000          0.0%

Verizon                                         9,205,000           190,000          2.1%

CenturyLink                                 6,082,000             91,000          1.5%

Frontier                                        2,342,500           108,500          4.9%

Windstream                                 1,131,600           (39,300)        -3.4%

FairPoint                                         321,624             (8,142)         -2.5%

Cincinnati Bell                                269,900               1,500          0.6%

Total Top Telcos                        35,380,624           344,558         1.0%

Total All                                      87,340,978        3,002,781         3.6%

A few notes on the numbers. ‘Other Cable Companies’ includes Cox and Bright House Networks. These numbers do not include smaller cable companies, smaller telcos, CLECs, fiber over-builders or municipalities. Just as a point of reference, it’s estimated that there were 123.2 million households in the US at the end of 2014, so these large companies sold broadband to 68.4% of them. Total US broadband penetration is currently estimated at around 73%, meaning the rest of the market is served by companies not on this list.

Some observations:

  • It’s obvious that large cable companies keep winning the battle for broadband and they captured 89% of the net additions for the year.
  • The cable company net additions are 123% more than this group saw in 2013.
  • Growth is slowing at the telcos  and the 2014 numbers are 72% of the growth seen by the group in 2013.
  • By adding almost 1.3 million broadband customers, Comcast now has more broadband customers than cable customers.
  • AT&T continues to add U-verse customers but has been losing older technology DSL customers.