One Computer at a Time

We’ve been talking about the digital divide now for decades. There is still a big gulf in our society between homes with broadband, computers and the knowledge to use them and those without. In my view we are now in crisis mode – school children that don’t have computers and broadband are at a massive disadvantage compared to their peers and are nearly destined to fall behind and fail.

I recently ran across a group here in North Carolina that is taking big strides to solve the problem in the greater Charlotte area. The non-profit E2D (End the Digital Divide) has now given laptop computers to over 4,100 families with school kids and has made a serious dent in the digital divide in the area.

The organization has taken a several-prong approach to making this happen:

  • They are soliciting used laptops from businesses in the Charlotte area. Most big businesses replace laptops every few years and most of them have been ending up in the landfill. Now a number of businesses send all of their used laptops to E2D.
  • Used laptops need to be refurbished and E2D started several computer labs in area high schools where they hire students at a decent wage to refurbish the computers and install new software. The purpose of these labs is not only to get the laptops ready to distribute, but they are providing technical training for kids that is helping them move on towards college or a technical career.
  • Households that get a new computer also get a live tutorial and technical support to best take advantage of the new laptops.
  • Finally, the Charlotte area has a lot of homeless families and there are thousands of homeless kids in the area. E2D has partnered with Sprint to provide mobile hot spots and data plans that are providing broadband access to homeless students and others with no broadband.

I’d encourage you to browse their website.  It’s a great story and you ought to view the short video that’s on their home page.

The whole concept got started a few year ago when 12-year Franny Millen asked her father how kids without computers can keep up with schoolwork. She wanted to know what could be done about the problem and resolved to fix it. Her father, Pat Millen, founded E2D as a result of the challenge.

The program has already had great success. Students without computers and broadband are noticeably behind their peers and are far more likely to eventually drop out of school and to earn far less than those who finish high school or college. Early metrics show that kids receiving the E2D computers are catching back up and closing the gap – exactly the result you would hope to achieve.

But E2D knows they still have a long way to go. While they’ve distributed 4,100 computers they estimate there are still 20,000 more computers needed in the Charlotte area to get one to every student that needs one. And those computers must all be replaced every few years.

The organization gets funding from several sources. First are the ever-growing donations of used laptops from companies. They received a $218,000 grant in 2017 and receive donations from the local community. They also hold citywide lemonade sales to involve kids in fundraising. And finally, they ask for a payment from homes that get a computer.

Pat Millen believes that their effort ought to be duplicable in other parts of the country and he would like to see the model grow. Perhaps some other communities will read this blog and take the challenge. There are a lot of young students hoping for computers.

The FCC’s 2018 Broadband Report

The FCC has released a draft the key findings from the 2018 Broadband Deployment Report that will be officially released to Congress this week. This report is usually interesting, and this year’s report includes a few big surprises.

The 25/3 Mbps Speed Benchmark. The FCC announced that it is keeping the 25/3 Mbps definition of broadband that was established by the former Tom Wheeler FCC. This is a surprise because all three Republican commissioners have been writing and making speeches that said that this benchmark is too high. Their positions on the topic garnered a lot of political pressure and it looks like, for now, that they are choosing to leave that benchmark alone. But as you will see below, they have still found a way to dilute the importance of the benchmark.

Mobile Broadband not a Substitute for Landline Broadband. There had also been a lot of discussion by the Republican commissioners to count a cellular broadband connection the same as a landline connection. They have been making the argument that many people are satisfied by a cellular connection and that functionally both kinds of broadband connection can functionally be substituted. They had suggested last year that a customer that uses either of the two kinds of broadband But the new report makes the positive statement that the two kinds of broadband are different and that there are ‘salient differences between the two technologies”.

Continuing to Track Fixed Broadband. Since cellular broadband is not a substitute for landline broadband the FCC concludes that is obligated to continue to track the deployment of landline broadband as it has done in the past. If tracking had been changed to show households that have access to either landline broadband cellular broadband, then almost everybody in the country would have been considered to have broadband.

The FCC is Meeting its Statutory Mandate to Promote Broadband. This is the zinger finding from the FCC. Reminiscent of George W. Bush’s comment after hurricane Katrina of “Brownie, you’re doing a heck of a job”, the FCC has patted itself on the back and concluded that it has already done enough to satisfy the Congressional mandate that everybody in America has access to broadband.

The FCC notes that it has taken sufficient steps to meet its regulatory mandate for improving broadband:

  • Has reduced regulatory barriers to the deployment of wireline and wireless broadband;
  • Created a Broadband Deployment Advisory Committee to make recommendations on how to better deploy broadband;
  • Instituted reforms to the high-cost universal service funds to ensure accountability;
  • Introduced a reverse auction to provide additional rural broadband funding;
  • Revised rules for special access to promote facility-based competition for business services.
  • Authorized new wireless spectrum for use for landline and satellite broadband;
  • Eliminated Title II regulation and returned to light-touch regulations.

I’m not going to pick apart all of the items on that list, and some of them, like releasing more spectrum are positive steps. However, even there this FCC seems to favor licensed spectrum for the large ISPs rather than more public bandwidth. It’s really hard to make the argument that reversing Title II regulation and network neutrality will improve broadband coverage in the country. The recommendations from the FCC’s BDAC sub-committees are nothing more than suggestions, and from what we’ve seen so far most of the recommendations from these groups are parroting the positions of the giant ISPs.

It’s too early to know if the CAF II reverse auction will prove beneficial. There is some speculation that these funds will largely be pocketed by the big cellular carriers as another subsidy to continue to replace rural copper with cellular service. This may just turn into more of the same disaster we’ve seen with the first CAF II subsidy for the big rural telcos.

When the numbers get released with the final report we’ll still see that more than 20 million Americans don’t have access to broadband. While many of these live in rural areas there are still huge pockets of unserved residents in urban areas as well.

It’s true that this FCC has been active in the last year and has made the decisions cited in this draft report. But it’s nearly impossible to see how they can conclude that America has the broadband they need and that they have satisfied the Congressional broadband mandate. I guess we’ll have to see if Congress takes exception with their declaration that the state of American broadband doesn’t need any more help.

FCC to Hide the Digital Divide?

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

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

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

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

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

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

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

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

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

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

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

Telecom Predictions for 2018

It’s that time of year to pause and look at what the next year might bring us. I see the following as the biggest telecom trends for 2018:

End of Net Neutrality Not a Big Deal. At least during 2018 we aren’t going to see the end of the Internet as predicted by many in the press and on social media. First, there are going to be a series of lawsuits challenging the FCC ruling, and ISPs are generally unwilling to do anything that might be changed by the courts. But I also think the big ISPs are unlikely to immediately do anything that will be unpopular with the general public. We might instead see subtle changes like more zero-rating that the public seems to favor. The big ISPs understand that this FCC ruling is immensely unpopular and they have to be worried about Congress or a new administration reversing a lot of the ruling. For now I think this means we won’t see any drastic changes in ISP behavior in the coming year. The big ISPs want the issue to quietly die away, and the best way for them to accomplish that is to not do anything unpopular right away.

Cable TV Declines Faster as a Product. We are seeing the perfect storm of events attacking the traditional cable market. First, programmers are raising programing rates to cable providers at historically high rates. It’s almost as if they want to get the last drop of profits out of the product before it wanes. This means another round of noticeably high cable rate increases – the primary reason that cord cutters cite for leaving traditional cable. We are also seeing a proliferation of alternate programming choices. The most popular cable networks are now available in lower-priced online alternatives. The growth in OTT alternatives has been significant in 2017 and in 2018 a lot more people are going to be lured into switching to one of the alternatives. The 3rd quarter of 2017 saw the cable providers lose a million customers and losses will accelerate in 2018.

Is 5G Hype or Real? In 2018 we are going to find out if the 5G hype is real. Verizon has been talking about rolling out a residential 5G broadband solution to 30 million homes, with a few specific markets identified in 2018. AT&T has been hyping the near-term roll-out of its AirGig 5G product. I think in 2018 we are going to get a look at how these technologies function in real neighborhoods and we’ll find out the real-life benefits and shortcomings of the technologies.

Networked WiFi Goes Mainstream. Poorly configured home WiFi networks are one of the major culprit for poor broadband experiences. Many homes have decent broadband connections but then lose all of the power by using a poorly placed single WiFi router. Many ISPs are now offering managed WiFi as a way to solve this problem. But there are also numerous inexpensive solutions available directly to consumers. Word of mouth about the benefits of networked WiFi are making this into the preferred home solution.

Voice Controls Become Practical. Until now voice control devices like the Amazon Echo have been novelties. But there are now practical applications with these devices that will make them go mainstream in 2018. Functions like simple web searches, home intercom systems, initiating phone calls or texts, controlling TVs and other devices along with the ability to play music everywhere is going to make most houses try the technology. This will be the year when a lot of people accept the idea of a voice interface to technology as an alternative to computers or smart phones.

Real Cellular Competition. The entrance of Comcast and Charter into the cellular markets is going to be significant. We also see T-Mobile increasing competitive pressure by bundling video with cell service. It’s clear that the cellular market in the US is fully saturated and that everybody has a cell phone. This all adds up to another round of price wars between cellular providers. It also means that the ‘unlimited’ plans introduced by the cellular companies in 2017 will quickly move from a novelty to the become the expected norm.

Explosion in Rural Communities Looking for a Broadband Solution. The digital divide between towns and rural areas is now obvious to everybody. Broadband has grown to become a necessity rather than a nice-to-have commodity. Rural citizens are demanding that their local governments help them find a broadband alternative. This movement is accelerated by the numerous success stories from proactive communities that have found a broadband solution. The most common market solution I see is public-private partnerships, but communities are finding other creative solutions. I also see numerous rural communities willing to talk about bringing public financing to help solve the problem. Expect numerous rural communities to start looking for solutions in 2018.

Net Neutrality and the Digital Divide

There is an interesting idea floating around the industry that is bound to annoy fans of net neutrality. The idea comes from Roslyn Layton who does telecom research at Aalborg University in Denmark. She served on the FCC Transition team for the new administration.

She envisions zero-rating as the best way to solve the digital divide and to finally bring Internet access to everybody. She says that after decades of not finding any other solutions that this might the only reasonable path to get Internet access to people that can’t afford a monthly subscription.

The idea is simple – there are companies who will provide an advertising-driven broadband connection for free to customers, particularly on a cellphone. It’s not hard to envision big companies like Facebook or Google sponsoring cellphone connections and providing data access to customers who would be a captive audience for their ads and content.

This idea is already working elsewhere. Facebook offers this same service in other countries today under the brand name “Free Basics.’ While it certainly costs Facebook to buy the wholesale data connections they must have done the math and figured that having a new customer on their platform is worth more than the cost. Facebook’s stated goal is to serve most of the billions of people on earth and this is a good way to add a lot of customers. With Free basics customers get full use of the Facebook platform along with the basic ability to surf the web. However, the free basic service does not allow a user to freely watch streaming video or to do other data-intensive activities that are not part of the Facebook universe – it’s not an unlimited data plan. I can remember similar products in the US back in the dial-up days when several dial-up providers that gave free connections as long as the customers didn’t mind being bombarded by ads.

There are certainly upsides to this. Such a service would provide enough bandwidth for people to use the web for the basics like hunting for a job or doing school work. And users would get unlimited use of the Facebook platform for functions such as messaging or watching Facebook-sponsored video and content. There are still a substantial number of people in the US who can’t afford a broadband subscription and this would provide a basic level of broadband to anybody willing to deal with the ad-heavy environment.

But there are downsides. This idea violates net neutrality. Even if the current FCC does away with net neutrality one has to think that a future FCC will institute something similar. But even with net neutrality rules in place the FCC could make an exception for a service that tackles the digital divide.

The real downside is that this is not the same as the real internet access that others enjoy. Users would be largely trapped inside whatever platform sponsors their product. That could be Facebook or Google, but it could also be an organization with a social or political agenda. Anybody using this kind of free platform would have something less than unfettered Internet access, and they would be limited to whatever the platform sponsor allows them to see or do outside the base platform. At best this could be called curated Internet access, but realistically it’s a platform to give sponsors unlimited access to users.

But I think we have to be realistic that nobody has yet found a solution to the digital divide. The FCC’s Lifeline program barely makes a dent in it. And I’m not aware of any major ISP who has ever found any mechanism to solve the digital divide issue.

While Facebook offers this in many countries around the globe they received massive pushback when they tried to bring this to India. The Indian government did not want a class of people given a clearly inferior class of Internet connectivity. But in India the government is working hard themselves to solve the digital divide. But there is nobody in the US giving the issue any more than lip service. The issue has been with us since the dial-up days and there has been little progress in the decades since then.

I read some persuasive articles a few years ago when the net neutrality debate was being discussed about this kind of product. There were arguments made that there would be long-term negative ramifications from having a second-class kind of Internet access. The articles worried about the underlying sponsors heavily influencing people with their particular agenda.

But on the flip side, somebody who doesn’t have broadband access probably thinks this is a great idea. It’s unrealistic to think that people have adequate broadband access when they can only get it at the library or a coffee shop. For broadband to benefit somebody it needs to be available when and where they need to use it.

I lean towards thinking this as an idea worth trying. I would hope that there would be more than one or two companies willing to sponsor this, in which case any provider who is too obnoxious or restrictive would not retain customers. People who go to sites like Facebook today are already voluntarily subjected to ads, so this doesn’t seem like too steep of a price to pay to get more people connected to the Internet.

The Vision of Next Century Cities

Next Century Cities is an organization comprised of 166 mayors of cities that have the mission statement to make sure that all of their citizens have access to fast, affordable and reliable Internet access. The members range from small towns to NFL cities. They recently published their 2017 Policy Agenda that highlights the issues that they think are the biggest impediments to meeting their broadband goals. These goals are worth some thought since they differ from the wish list of most other stakeholders in the industry.

Restore Local Authority. Cities want to have a hand in finding their own broadband solutions and they don’t want to be restricted by state or federal law from doing so. I would note that the vast majority of cities do not want to be a retail ISP, but they still want to have the ability to make the investments needed to meet their broadband goals. They want to be able to form meaningful public-private partnerships. And more than anything else they want the legal authority to find broadband solutions.

Competition in Multi-Dwelling Units (MDUs). Cities with any significant percentage of citizens living in MDUs are concerned that those citizens are often not getting the same quality broadband products or having the same array of choice as single family homes. For example, even where fiber has been built, overbuilders often skip MDUs that present construction or operational issues. Cities are also still concerned about the proliferation of exclusive contracts between MDU owners and ISPs.

Anti-Monopoly and Competition. Mayors are concerned by what they see as shrinking competition. In many cities the cable companies have won the broadband battle against the telco. Where there are no significant third-party fiber overbuilders the mayors see broadband becoming a monopoly product. The cities generally are against the mergers of gigantic ISPs.

High-Quality Low-Income Internet Access. Cities are still looking for ways to solve the digital divide. They understand that there is a significant percentage of the population that doesn’t have broadband because they can’t afford it. They are currently dismayed by what they perceive as the FCC walking away from the Lifeline program that can subsidize broadband service in low income households.

Small Cell/5G/DAS. Cities are grappling with how to best foster and physically accommodate the coming proliferation of wireless transmitters that will be spread through the community to distribute 5G and millimeter wave spectrum. They are anticipating a host of new wireless broadband products, but they have concerns about how to deal with numerous wireless providers wanting to utilize the same key locations.

One Touch Make Ready. Cities are in favor of regulatory changes that make it easier for fiber overbuilders to get onto poles or into existing conduits. The ‘one touch make ready’ concept would greatly speed up the process and reduce the costs of the pole attachment process. It would give a new fiber builder the ability to more easily move wires of existing carriers to speed up the construction process. In cities with numerous existing carriers on pole lines the cost and time involved in gaining approval and of implementing the changes needed to accommodate a new carrier can be numbingly slow.

Infrastructure Investment. Cities want to be included in broadband infrastructure spending that might come from any federal infrastructure plan. They fear that any broadband money will be aimed only at rural areas and the FCC still estimates that there are more than 10 million people in large urban areas that can’t buy bandwidth that meets the FCC’s 25/3 Mbps threshold. And while smaller rural towns and cities might have broadband that meets that test, they often have older networks that are far below the standards of metropolitan areas.

Summary. Of all of the various stakeholder groups involved in broadband infrastructure deployment, cities the most focus on getting quality broadband to everybody. That focus puts them into opposition with incumbent ISPs on some issues. Experience shows us that cities are often more aligned with new overbuilders, at least to the extent that those ISPs don’t want to only cherry-pick the most lucrative customers in the city. Because of various state restrictions, cities vary widely in how much influence they have over broadband. But cities everywhere are the ones that determine some of the key processes in broadband deployment such as permitting and local construction practices. And that means that their goals must be recognized by anybody wanting to deploy new broadband in cities.

Solving the Urban Digital Divide

old computerI can remember talking about the digital divide twenty years ago. At that time the main issue was to get computers to low income households so that they could buy DSL. There were some fairly successful programs around, mostly run by volunteers or with grant funding to try to make this work.

But now twenty years later most cities I visit are still trying to solve the digital divide. But today it’s a different divide and the urban divide is now mostly one of affordability. There are isolated pockets in many cities that don’t have broadband, but the vast majority of people in urban areas have physical access to broadband. But there are numerous surveys that show that somewhere between 10% and 20% of households in most cities say that they can’t afford broadband.

In the last twenty years broadband has gotten a lot more expensive. And I think we are headed for a time when it’s going to become even more expensive. The big telcos and cable companies are now looking for broadband to be their major source of revenue growth. The cable companies added over 3 million new broadband customers last year and are expected to do so again this year. But you don’t have to look very far into the future to foresee the time when growth will be slow for every ISP. They will be forced to raise broadband rates to meet Wall Street earnings expectations.

There are some cities that have built their own networks – cable HFC networks or fiber networks – but even these cities have not done a very good job of providing broadband to all of their low-income households. It’s expensive to build the last mile and particularly expensive to connect homes to a fiber system.

There are some solutions that can solve part of the problem:

  • There are a number of cities that have built to or purchase broadband for public housing projects. But generally this only covers a small percentage of the households that need broadband.
  • There are some large ISPs that bring broadband to public housing. I recall seeing announcements recently where both Google and AT&T have brought broadband to public housing in one or two cities, and of course they crowed loudly about it. And while these gestures are nice, they solve a tiny slice of the problem.
  • There are cities that have tried to build ubiquitous outdoor WiFi. But these networks are expensive to build and the technology doesn’t seem to last for many years. I know of a number of these networks that have been discontinued in the past.
  • There are also cities experimenting with trying to beam WiFi into low income homes, but this is even more expensive than building outdoor WiFi.
  • Communities everywhere have put broadband into libraries, figuring that having a place for people to get access to broadband is better than nothing at all.

But I see that the digital divide topic is back in vogue and a lot of cities are having the discussion again of how to bring broadband to where people need it. There was a time in the past where broadband was something that was nice to have, but today it is becoming a necessity for most people. And not having affordable broadband puts people at a major disadvantage. There are a lot of people today that use their smartphone for Internet access. This works for a lot of purposes, but it can quickly get dreadfully expensive if you actually use the broadband much.

I don’t have a solution. I was just in a city last week that owns their own cable network and I reminded them that using that network to solve the digital divide is by far the most cost effective way to do this. This city was extremely interested in the new federal lifeline program for data and that might be enough of an incentive for them to develop a lifeline product that can be afforded by a lot of the households in their city.

When I look around at the number of households that want broadband and the numbers that will be eligible for the federal program I wonder if the USF Lifeline Fund is large enough to help everybody who needs it. I saw that Congress is already trying to cap this fund, but if we want to get broadband everywhere then the USF fund might be a powerful tool for getting broadband into a lot more homes.

Paying for Rural Fiber

I am in an interesting place in the industry in that our firm works for both municipalities as well as lots of small commercial ISPs like telcos, cable companies and CLECs. One thing that I have noticed over the years is that there is a huge amount of distrust by commercial ISPs towards municipalities that explore building fiber optic networks.

And I think for the most part this distrust is misplaced. It’s been my experience that there are almost no cities that want to be an ISP. I think perhaps the idea that cities want to do this has been caused by the big telcos and cable companies spreading alarms about the cities that have done this. I think that most of the cities that have built fiber, except for a few like Chattanooga, would have much preferred to have a commercial company bring competitive broadband to their city.

It’s easy to forget about the fear and angst in rural America concerning broadband. Rural communities keep seeing other rural places that are getting gigabit broadband while they still have homes that don’t even have DSL. They look around and see little towns of their own size with broadband that are thriving and they realize that if their town stays on the wrong side of the digital divide that their long term viability is at risk.

Perhaps the best example of this that I’ve heard came from Hiawatha Broadband of Winona, Minnesota. This is a commercial overbuilder who built broadband networks to a number of small towns in their region. They have been at this for a while and what they observed in the last census is that every one of the towns with one of their broadband networks gained significant population while every town around them that doesn’t have broadband is losing population.

People need broadband and they are going to live where they can get it. New homes are going to be built where there is broadband. People want to work at home and can only do that where there is broadband. And people with kids want broadband so that their family is not at a disadvantage. Towns and rural areas without broadband understand these issues and they don’t want their area to dry up and disappear.

I remember a bunch of articles back in 2012 where somebody had estimated that it would cost $140 billion to build fiber everywhere in the country. I have no idea if that is a good estimate, but obviously it would cost a lot. What I think is important to understand is that even if all of the small telcos and cable companies and electric coops wanted to build fiber everywhere that the combined borrowing power of those companies in aggregate is not large enough to get the job done. As much as folks want to think that small carriers are the national solution, as a whole they could not borrow the needed billions.

What I am finding is that communities are starting to wake to the fact that they are going to have to contribute to financing fiber if they want broadband. The likelihood of an ISP just showing up and building fiber in most rural communities is very small. It’s hard to make a good business case with rural fiber, and even if you can make the case it’s exceedingly difficult to borrow the money.

So I think it’s time to get rid of the mistrust between municipalities and small ISPs and instead come together to get the job done. I’ve done a lot of financial analysis of rural America and fiber projects are a lot more feasible when part of the project is funded by municipal bonds and not just from bank debt.

I think the way to get this done is through the creation of public private partnerships (PPPs). There are already a number of examples of places where this has worked, but there needs to be a whole lot more PPPs created. If rural towns and counties really want to get broadband then they ought to be willing to put skin in the game to make it happen. It’s something that taxpayers want and rural surveys are generally overwhelmingly in favor of local government helping to solve their broadband problems.

There are some very specific steps that ought to be taken to put together a good PPP for rural fiber. It would probably take a dozen blogs to discuss this topic thoroughly. I may or may not do that, but meanwhile, if your community needs a broadband solution give me a yell. I can tell you how other communities have gotten this done and point you in the right direction towards finding a PPP broadband solution for your area.

The Birth of a New Digital Divide

eyeballPew Research Center released some interesting data a few weeks ago that suggest that cord cutting might be starting to affect broadband connections and not just cable connections. According to a recent Pew poll, 67% of households now have a landline broadband connection, down from a high in 2013 of 70%.

When you consider both landline broadband and cellular data products together you get a slightly different story and the combination of the two services was 80% of households in 2015, up from 78% in 2013. Pew draws the conclusion that there is now a migration from households with a wireline connection to households that only use cellphone data. Pew reports that 13% of households now rely on cellphone data as their only connection to the Internet.

Luckily the latest Pew poll dug into this phenomenon in more detail and what they found was that 59% of all of the households using only cellular data do not buy a landline data product due to price. This matches very well with the report put out by the Brookings Institute last month that shows that landline broadband adoption rates are very related to income.

But Pew is the first one to suggest that there is an overall drop in landline broadband adoption. For example, when the major ISPs release customer counts every quarter there has been a steady and noticeable overall growth in broadband customers. Within those statistics there has been a steady and noticeable drop in DSL customers and an increase in cable modem customers, but overall the trend has always been upward.

But if the Pew numbers hold up to be right over time, then this might suggest that we are going to reach a market cap on broadband customers that is lower than what the industry has been expecting. And this cap will be driven by the price of the products, not the desire of homes to have broadband.

I was just reminiscing about the changes in prices in the industry the other day. I can remember back to a time in the mid-90s when I paid $19.95 a month to AOL, something a little less than $30 for my landline from Verizon, and around $50 for a cable package that included some movie channels. That was the whole triple play for $100 per month.

But today the cost of telecom products is much higher and has grown much faster than inflation. We now have households where most of the family pays at least $50 each for a cellular line (not including the cost of the phone). While there are still some inexpensive DSL plans available in some places, it costs at least $50 per month to get a decent data speed. And the big cable companies all report the average revenue from all of their cable plans is more than $70 per month. Only about half of households still have landlines and those can vary anywhere from $20 to $40 per month. And the costs don’t stop there. Most people are paying for settop boxes and cable modems, the prices on both have crept up to $7 – $8 each. And all ISPs now have a range of ‘fees’ that many people assume are taxes but which go straight into the ISP’s pockets.

And then there are the new services that weren’t around in 1995: a lot of houses now pay for Netflix and possibly for music services like Spotify, people must now buy cellphones that are generally obsolete every two years, and on top of those prices the carriers want to tack on handset insurance and other fees to cellular bills. Finally, there are data overages. Today that mostly affects cellphone users but, as seen by the rash of complaints against Comcast, is likely to start affecting landline data bills as well.

While it’s possible to work hard and find bundles to try to hold these costs down, without bundles these equate to telecom bills north of $300 per month. And even those that bundle would have a hard time buying these all of these things for under $200 per month.

So it’s not hard understand why households find they can’t afford all of these things. It’s hard to imagine any household that wants to partake in modern services like Netflix being satisfied with only cellular data and its tiny caps. But if you are on a budget something has to give and it’s pretty easy to understand that somebody is going to value a smartphone over a home Internet connection if you can only afford to buy one of them.

When you consider that the ISPs all intend to start increasing the cost of broadband annually like they have always done with cable then one can expect this situation to get worse over time. This means there will be a whole new digital divide defined strictly by income. People will want the products in the market but will be unable to afford them.

Broadband Adoption and Income

eyeballThe Brookings Institute just released a report, Broadband Adoption Rates and Gaps in U.S. Metropolitan Areas, that looks at metropolitan broadband rates around the country. The report uses a broad definition of broadband that includes cable modem, DSL, fiber, cellular data, satellite, and fixed wireless service.

The report acknowledges that broadband is still growing and the country saw 2.6 million households add broadband from 2013 to 2014, bringing the overall national penetration rate to 75.1%. But Brookings found that there is a lot of variance in the penetration rates in different parts of the country.

There are metropolitan areas like San Jose where the broadband penetration rate is greater than 88%. The top ten metro markets for broadband has Washington DC in tenth place at 84.7%. But there are a number of other cities that lag behind these national statistics. At the bottom is Laredo, TX at 56.2%, joined at the bottom of the list with places like McAllen, TX, Visalia, CA, Dothan, AL, and Beaumont, TX.

Brookings looked at a number of different factors that affect broadband usage for households. It’s not surprising that household income is a factor. Households with an annual income greater than $50,000 have an 88.8% broadband penetration rate while those with less than $20,000 income are only at 46.8%. Education also seems to be an influence and 91.5% of households with somebody with a bachelor’s degree have broadband while households where nobody finished high school are at 54.1%.

The report did not find a big correlation between race and broadband adoption. While there were cities where blacks or Hispanics have low broadband adoption rates, there were others where they did not. The report concludes that the determining factor is household income and not race.

The report also found some correlation with age and households that have a family member under 18 had a penetration rate of 81.9% while those with everybody over 65 were at 64.5%. But the correlation with age did not hold across all markets and the places where the elderly have lower broadband acceptance seems to be where their income is the lowest. So again, income seems like a more important factor than age.

The report found a few correlations that make a lot of sense. For instance, it found that almost all homes that include a telecommuter have broadband.

Overall the report concludes that metropolitan areas with the highest incomes, with the highest percentage of tech workers, and with the highest average education also have the highest broadband penetration rates.

The report observes that households widely value broadband and that the rate of broadband subscriptions continues to climb. But they conclude that we cannot make the transition to an all-digital society until broadband penetration rate is as ubiquitous as the rates for water and electricity. They conclude that it is going to take targeted assistance programs to get broadband into more homes. While they point to the federal Lifeline and the newly named ConnectHome programs as being a needed part of the solution, they don’t see these kind of programs closing the digital divide. They recommend many more local initiatives, including programs by carriers, to try to get broadband into more households.