Tag: FCC

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The Industry

Court Jumps into OTT Fray

Fatty_watching_himself_on_TVIn a really surprising ruling, a federal judge has ruled that FilmOn X should be able to get access to local network programming like a cable TV company. US District Court judge George Wu ordered that FilmOn X be treated like a cable company and is entitled to retransmit broadcaster’s content.

For those not familiar with FilmOn X, check them out on the web. They have a huge amount of  on-line content that includes local TV from around the world as well as 600 other channels. There is a little bit of everything from non-traditional sports, music from around the world, and channels of almost any topic you can imagine. They also carry a mountain of for-pay video-on-demand content that ranges from music to major league baseball. All of the free content is ad-supported. Viewers can also create their own channels.

FilmOn X also had their own version of the Aereo model and they offered a premium subscription model in a few markets, which gave customers access to 120 HD channels on any computer or smartphone through the use of a dongle. Just like Aereo this was done from antenna farms.

The company has been in a battle with the major networks in the US since its inception. The company began carrying the local networks on the Internet in 2010. In 2011 they were ordered by a court to stop the practice. But in 2012, the local channels were all allowed back onto the system through a federal appeal and FilmOn X carried local content on its broadcast dongle product. But in 2013 the US District Court of the District of Columbia issued a nationwide injunction against the antenna service.

This latest ruling overturns that injunction and seemingly gives FilmOn X the same right to content as a cable company. Obviously this is going to be appealed further and one has to doubt that the networks are going to negotiate retransmission agreements with the company while the appeals are still being fought in court.

But the case raises serious questions. Although addressing a different set of issues than the Aereo case, it still sets up conflicting district court decisions. Aereo had taken the legal tactic of dancing around the issue of whether they were a cable company by concentrating on the issue of copyright infringement. FilmOn X took a more direct legal approach and argued that they had the rights to rebroadcast the content as a cable company. And apparently the court bought it.

Realistically nothing is going to happen in the area of on-line content until the FCC decides where it wants to go with this. Recall that in January of this year the FCC opened up a Notice for Proposed Rulemaking to look at the issue of on-line content. FilmOn X was mentioned several times in that document and the FCC is asking if on-line companies can have the same rights as cable companies to get content.

The FCC can put all of these lawsuits to rest by defining the rights, or lack of rights, of on-line providers. It’s fairly clear in reading the NPRM that the FCC has a bias towards allowing content on-line and is probably seeking a legal way to do that since they are required to follow the various cable laws that have been passed by Congress.

It’s hard to think that on-line content providers are ever going to be able to comply with all of the rules included in the current cable regulations. Those rules very rigidly define tiers of programming. They also define the retransmission process whereby cable companies can rebroadcast local content. But there are a ton of other requirements that range from closed captioning to emergency alert systems that also apply to cable companies. It’s going to be a challenge to give just a few of these rights to on-line providers while making cable providers continue to comply with all of the rules.

For now this ruling is just one more confusing court ruling that has defined the on-line broadcast industry so far. There have been several conflicting rulings as part of earlier cases with Aereo and FilmOn X that muddy the legal waters for the business model. But this is something that the general public very much wants and traditional cable will be in a lot of trouble if local content ends up on the Internet. It is that content along with sports that are the primary drivers behind maintaining the cable companies’ grips on customers.

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Regulation - What is it Good For? Technology

LTE-U

Recently, the NCTA asked the FCC to make sure that wireless carriers don’t interfere with WiFi spectrum. I wrote a blog a few weeks ago talking about all of the demands on WiFi, and the threat that the NCTA is warning about is another use of the already busy WiFi spectrum.

Cellular carriers are using LTE technology to deliver 4G data. Cellular carriers today deliver 4G data and voice using spectrum for which they have paid billions (at least in the US and Europe). But in urban areas the LTE spectrum is already stressed and the demand for the existing spectrum is growing far faster than the carriers can find new spectrum to offload the extra demand.

The cellular carriers have had their eye on the 5 GHz unlicensed band of spectrum that is used for WiFi. This is a big swatch of spectrum that in some markets is larger than the band that some carriers have for LTE. Recently, various carriers have been experimenting with using this public spectrum to deliver LTE. Huawei and NTT demonstrated this capability last August; Qualcomm showed this capability at the CES show earlier this year. It’s rumored that T-Mobile plans to run a trial of this technology this year.

This new technology is being called LTE-U (for Unlicensed). NCTA filed at the FCC on behalf of their cable company members who use this WiFi spectrum to deliver WiFi for various uses such as distributing data wirelessly around a home or to bring data to settop boxes. They are worried that if the cellular companies start using the spectrum that they will swamp it and make WiFi useless for everybody else, particularly in urban areas where WiFi is under the most pressure.

That certainly is a valid concern. As my recent blog noted, the list of companies and technologies that are planning on using WiFi spectrum is large and growing. And there is already notable stress on WiFi around crowded places like large hotels, convention centers, and stadiums. The fear is that if cellular carriers start using the spectrum this same crowding will spread to more places, making the spectrum useless to everyone.

The cellular carriers argue that the swath of WiFi is large enough to allow them to use it without hurting other users. They argue that nobody can use all of the 400 MHz of spectrum in that band all at once. While that is true, it doesn’t take a huge pile of LTE-U customers at one time to locally overdraw the WiFi spectrum in the same manner that they are overloading the cellular spectrum today.

Engineers tell me that LTE uses the spectrum more efficiently today than does most WiFi technologies. This is due to the fact that the LTE specifications very neatly limit the bandwidth that any one customer can draw while most WiFi applications will let a user grab all of the bandwidth if it’s available. This means you can fit a lot more LTE customers into the spectrum that might be assigned to one WiFi customer.

There is a characteristic of WiFi that makes it incompatible with the way that LTE works. WiFi has been designed to share spectrum. When one customer is using WiFi they can grab a huge swath of spectrum. But when another customer demands bandwidth the system dynamically decreases the first connected customer to make room for the second one. This is very different than how LTE works. LTE works more like a telephone network and if there is enough bandwidth available to handle a customer it will assign a band to the customer or else deliver a ‘busy signal’ (no bars) if there us not enough bandwidth. The problem with these two different operating systems is that LTE would continually grab spectrum until it’s all used and the WiFi users are shut out, much like what you might get in a busy hotel in the evening.

The LTE providers say they have handled this by introducing a new protocol called LAA (Licensed Assisted Access) which introduces the idea of coexistence into the LTE network. If it works properly, LAA ought to be able to coexist with WiFi in the same manner that multiple WiFi customers coexist. Without this change in protocol LTE would quickly gobble all of the free WiFi spectrum.

But this still doesn’t answer the concern that even with LAA there could be a lot of people trying to grab bandwidth in environments where the WiFi is already stressed. Such a network never shuts anybody out like an LTE system will, but rather will just keep subdividing the bandwidth forever until the amount each customer gets is too small to use.

It will be interesting to see what the FCC says about this. This was discussed years ago and the FCC never intended to let licensed cellular holders snatch the public WiFi spectrum. I will also be curious to see if wireless carriers try to charge customers for data usage when that data is being delivered over a free, unlicensed swath of spectrum. And how will customers even know that is where they are getting their data?

I hope the FCC doesn’t let the wireless carriers run rampant with this, because I think it’s inevitable that this is going to cause huge problems. There are already places today where WiFi is overloaded, and this new kind of data traffic could swamp the spectrum in a lot more places. The wireless carriers can make promises all day about how this won’t cause problems, but it doesn’t take a huge number of LTE-U users at a cell site to start causing problems.

Categories
What Customers Want

One Way to Cut Cable Bills

I just read that retransmission fees may climb to $6 per network in the next few years. At a recent industry summit Randy Bongarten, the CEO of Bonten Media Group and the owner of a number of broadcast stations, said that he predicted cable systems would soon be paying as much as $6 for each of the major broadcast networks – ABC, NBC, CBS, and FOX.

For those not familiar with the cable industry, every cable company must pay a retransmission consent fee to each of these major networks to compensate them for carrying their programming. This is a relatively new phenomenon in the industry and following is a brief history:

  • In 1972 the FCC said that cable systems must carry stations that are within 60 miles of their service area.
  • In 1992 the FCC ruled that station owners could negotiate compensation for carriage of their signals.
  • Not much was done with this until the early 2000s when small payments for network content were negotiated in a few major metropolitan markets.
  • But within a decade every cable system was paying for local content and the networks increased rates aggressively with each new two-year contract. Most network stations today charge between $2 and $4 per customer to cable companies for carrying their content.

And now the networks want to keep increasing the payments for local content to $6 per customer per month. That means that soon $24 out of every cable TV bill in the country will be sent back to the four primary networks. With roughly 100 million cable subscribers that is nearly $29 billion per year and $288 per household.

This situation is made worse by the fact that cable companies have little recourse but to carry this content. Customers would drop cable if they refused to carry the local stations. But cable companys’ hands are also tied because in order to carry advanced programming such as expanded basic or digital tiers they are required to carry the basic tiers – that tier that must be given to every customer. The other problem faced by cable companies is that there is little real negotiation on the retransmission rates – it’s generally a take-it-or-leave price demanded by the network affiliates.

The FCC could return some fairness to the process and also give a break to consumers with one simple change in the rules. The FCC could let customers opt out of buying the basic channels from the cable company. Anybody who lives in a metro area can already get all of these networks for free with a pair of rabbit ears. If customers had the option of opting out of these channels from cable, then they could cut their cable bill significantly while still being able to watch the channels for free from rabbit ears. It’s relatively easy to install rabbit ears to work alongside your cable system.

Of course, the cable companies have to ask for this kind of change and so far none of them have gone this far. And this is because, as much as they hate passing on the big fees from programmers, the big cable companies are also complicit in the process. When their programming costs go up $3 in a year they will raise rates $4, and so their profits keep climbing every year along with the programmers.

But we are finally starting to see cracks in the system. Most cord cutters are doing so to save money and I am positive that if people had the ability to opt out of paying for the local networks from the cable company that many of them would. Today if such programming costs $4 per network, then a customer could instantly cut their bill $16 per month or $192 per year.

So perhaps what we need is for individuals to start asking the FCC to allow them to opt out of paying for local channels that they could otherwise get with a cheap pair of rabbit ears. The cable companies might eventually come around to wanting this if cord cutting grows to be too significant, but right now they have no interest in looking out for the benefit of their customers.

I know many smaller cable operators who would love to have this option. They feel the local networks are holding them hostage by demanding bigger payment for local content every year. If a cable company was willing to work with their own customers to bypass the local stations this might bring some balance back to this process and turn it into the negotiation that the FCC originally envisioned in 1992. I know smaller companies who would gladly provide every customers with rabbit ears and help them integrate them into their TVs if that was allowed. But today a cable company could find themselves in hot water if they actively helped customers bypass the local networks.

The runaway greed of the networks and station owners is ruining the cable market. Cable rates continue to skyrocket much faster than the cost of inflation. Households really love their TV, but more and more households are finding cable to be unaffordable.

I hope the FCC wakes up to this and perhaps this blog can be the first tiny step towards planting this idea in people’s heads. Nobody really wants to pay $24 per month just to get ABC, CBS, NBC, and FOX. So let’s start asking the FCC to let us opt out of those payments.

Categories
Regulation - What is it Good For?

Lifeline Data and the Digital Divide

The FCC recently approved moving forward with the process of establishing a low-income subsidy for landline data service. The target subsidy they have set is payment of $9.25 per month towards the broadband bill of qualifying households. I’m really not sure how I feel about this.

Certainly we have a digital divide. While there are still many millions of rural homes that have no broadband alternative, there are even more urban households who can’t afford broadband. The numbers bear this out. A Pew Research survey earlier this year reported that the broadband penetration rate for homes that make less than $25,000 per year is 60% while 97% of homes that make more than $150,000 per year have broadband. The overall national average broadband penetration right now is at about 74% of households and it’s clear that poorer homes have a hard time affording broadband.

If you accept the premise that broadband is becoming a necessity to participate in our culture, and even more importantly that broadband is vital at home for school kids, then we do need a way to get broadband to people who need it.

But I wonder if this program is really going to make a difference and if it will get broadband into a whole lot more homes (versus giving payments to some of those 60% of low income homes that already have broadband). The dollar amount, at $9.25 doesn’t feel like a very big discount on broadband bills that are likely to be $40 or higher in most places. If a home is having trouble affording a $40 broadband bill, I wonder if reducing that to $30 is really going to make it affordable? I’m not sure that the policy makers who are deciding this really understand how little disposable income most working poor families have.

And paying for broadband isn’t the whole cost because homes that can’t afford broadband also have a hard time affording computers. It’s not like you can buy a computer once – I know I have rarely had a computer that lasts more than three years, with some of them dying earlier than that.

I know that many cities already have programs that tackle the computer issue. I know of programs that distribute refurbished computers to homes. And there are more and more school systems that are giving school kids an iPad or other computer so that they don’t have to worry about having a computer at home. For this federal program to be really successful is going to require more of those kinds of programs.

I also wonder how the FCC will cap the amount of money this is going to cost. It’s not going to take a whole lot of households to eat up any funds they set aside for this. The current Lifeline telephone subsidy cost $1.6B in 2014 and pays a $9.25 subsidy for a landline or a cellphone for homes that are below 135% of the poverty line established by the Department of Health and Human Services.

The revised plan is going to keep the $9.25 subsidy and somehow use it to cover both telephone and data connections. The exact details aren’t out, but it was said that no household could collect more than one $9.25 subsidy. If a home is already getting the phone subsidy then they wouldn’t get any additional break on their data connection.

I think every school kid ought to somehow have access to a computer and broadband. I just don’t know that this particular program is going to change the current situation a whole lot and I wonder if there ought to be a different approach. The digital divide is real and kids in poor families are the most affected by it. If this program doesn’t make a big difference I hope we are willing to try something else.

Categories
Regulation - What is it Good For?

Broadband CPNI

The FCC said before they passed the net neutrality rules that they were going to very lightly regulate broadband providers using Title II. And now, just a few weeks after the new net neutrality rules are in place, we already see the FCC wading into broadband CPNI (customer proprietary network information).

CPNI rules have been around for a few decades in the telephony world. These rules play a dual purpose of providing customer confidentiality (meaning that phone companies aren’t supposed to do things like sell lists of their customers). They also provide protection of customer calling information by requiring a customer’s explicit permission to use their data. Of course, we have to wonder if these rules ever had any teeth at all since the large telcos shared everything they had with the NSA. But I guess that is a different topic and it’s obvious that the Patriot Act trumps FCC rules.

The CPNI rules for telephone service are empowered by Section 222 of Title II. It turns out that this is one of the sections of Title II for which the FCC didn’t choose to forebear for broadband, and so now the FCC has opened an investigation into whether they should apply the same, or similar, rules for broadband customers.

It probably is necessary for them to do this, because once Title II went into effect for broadband this gave authority in this area to the FCC. Until now, customer protection for broadband has been under the jurisdiction of the Federal Trade Commission.

There clearly is some cost for complying with CPNI rules, and those costs are not insignificant, especially for smaller carriers. Today any company that sells voice service must maintain, and file with the FCC, a manual showing how they comply with CPNI rules. Further, they have to periodically show that their staff has been trained to protect customer data. If the FCC applies the same rules to ISPs, then every ISPs that sells data services is going to incur similar costs.

But one has to wonder if the FCC is going to go further with protecting customer data. In the telephone world usually the only information the carriers save is a record of long distance calls made from and to a given telephone number. Most phone companies don’t track local calls made or received. I also don’t know of any telcos that record the contents of calls, except in those circumstances when a law enforcement subpoena asks them to do so.

But ISPs know everything a customer does in the data world. They know every web site you have visited, every email you have written, everything that you do on line. They certainly know more about you than any other party on the web. And so the ISPs have possession of data about customers that most people would not want shared with anybody else. One might think that in the area of protecting customer confidentiality the FCC might make it illegal for an ISP to share this data with anybody else, or perhaps only allow sharing if a customer gives explicit permission.

I have no idea if the larger telcos use or sell this data today. There is nothing currently stopping them from doing so, but I can’t ever recall hearing of companies like Comcast or AT&T selling raw customer data or even metadata. But it’s unnerving to think that they can, and so I personally hope that the FCC CPNI rules explicitly prohibit ISPs from using our data. I further hope that if they need a customer’s permission to use their data that this is not one of those things that can be buried on page 12 of the terms of service you are required to approve in order to use your data service.

What would be even more interesting is if the FCC takes this one step further and doesn’t allow any web company to use your data without getting explicit permission to do so. I don’t have idea if they even have that authority, but it sure would be a huge shock to the industry if they tried to impose it.

Categories
The Industry

The Cost of International Calling

We have gotten so used to the cost of long distance calls dropping in the US that many people don’t realize that it is still very expensive to call some other places in the world.

In the US we are now used to unlimited long distance plans, and so most of us don’t think about the cost of long distance. We all still pay for it—for example, that’s one of the costs built into your cellphone bill. I imagine that there are younger people who have no appreciation that we were once very careful about making long distance calls.

I remember in the early 80s when AT&T announced a ‘reduced’ long distance plan that had a flat rate of 12 cents per minute. Before that plan, costs varied by distance called and it was not unusual to call some places in the US that were as much as 50 cents per minute. Long distance rates also varied by time of day and people would wait until midnight to call relatives to get the nighttime rates.

But over the years the FCC has deliberately taken steps to reduce long distance rates since they figured that might be the one thing they could do that would most boost the US economy. And it worked.

At the same time that the US made a deliberate effort to reduce costs many other countries did the same. Thirty years ago it was almost universally expensive to call other countries. Part of this was due to lack of facilities; there were only a few trans-oceanic cables that were capable of carrying voice – and they were generally full all of the time with calls. But today it’s almost as cheap to call places like Canada and a lot of Europe as it is to call in the US. And there are now many calling plans that include a number of foreign countries.

But this is not true everywhere. There are still a lot of places around the world that are very expensive to call. The rates I quote are from Comcast’s latest international long distance rates, but the rates charged by others carriers are similar. Even today it costs $2.90 per minute to call Afghanistan. A few years ago that was over $5 per minute. Surprisingly, it’s less than half that rate at $1.20 per minute to call Antarctica.

It costs a lot more in general to call islands. Most of the Caribbean is between $0.40 and $1.20 per minute (although the US Virgin Islands are at US rates). The pacific islands in Micronesia are generally around $1 per minute.

In general there are two reasons why rates are so high in some places. For some islands, the cost of the calling reflects the expensive cost of the facilities needed to complete the calls. Such calls these days are often completed over satellite since there are still places not connected to the world by undersea fibers. But the other big cost component is government tariff rates, charged as a moneymaker for the local governments. This is why you see calls to North Korea costing $3.28 per minute, calls to Laos costing $2.43, and calls to Myanmar costing $2.17.

In most cases these expensive rates are bypassed using voice over IP across the Internet, and so people that live in places with expensive rates usually bypass those costs and use the Internet to talk to family overseas. In many countries that is a risk and you can be prosecuted for bypassing the tariff rates. I remember when VoIP was new there were entrepreneurs in Jamaica who set up calling over the Internet and then dumped the calls into the local network. It seemed that the Jamaican government would arrest a few VoIP vendors every week, but new ones always sprung up to take their places. Now only the most repressive countries still try to police this while most have bowed to the reality of VoIP.

I remember working with many clients in the 70s and 80s and one thing I always looked at was their long distance revenues. Even the smallest telcos would have a few residential customers that made over $1,000 per month in long distance calls and many others who spent hundreds of dollars per month. I remember when parents would groan if one of their kids got a boyfriend or girlfriend who was long distance. We’ve come a long way from those days, and unless you have a reason to call a handful of expensive countries or islands a lot, long distance is now one of those things that you don’t give a second thought about.

Categories
Regulation - What is it Good For?

Dropped Rural Calls

A lot of rural places in the country are having problems receiving calls. Calls will be placed to rural areas but are never completed. This is not a problem everywhere and it’s not a problem in urban areas, so most people have no idea this is happening.

Senators Amy Klobuchar, Jon Tester, and Jeff Merley introduced a bill in the Senate aimed to fix the problem. A similar bill was introduced last year that died in committee. This is not a new issue and the FCC has taken several steps in the recent past to try to fix the problem. In 2011 the FCC placed 2,150 calls to rural areas and 344 of them never reached the called party. Another 172 calls were of very poor quality and almost impossible to hear. That’s an astounding one fourth of the calls placed and either failed or didn’t work.

In 2012, in Docket CC 01-92 the FCC prohibited several practices by carriers that were resulting in huge delays in completing calls, in lost calls and in the poor quality. For example, they made it illegal to place a ring onto the phone of the calling party until that call has reached the called party. People making calls heard a long ring and were giving up on calls they placed to rural areas before the call even reached the other end.

That order also put a limit on the number of times that a given call could be handed from one carrier to another. That is something that is common in the world of least-cost call routing. Carriers have tables that choose one of many possible different carriers to send a given call based upon the price that carrier is going to charge them. But then the carriers they hand the calls to do the same thing and it’s possible for calls to be handed between carriers multiple times during the process.

This is a problem for calls made to rural areas because the access charges in those areas are higher than the charges for calling urban places. Access charges are the fees that a local telephone company bill to long distance carriers for using their networks. In a world of least-cost routing, many carriers don’t want to pay the higher cost to complete a rural call. The FCC has taken steps to remove the price barrier by phasing the access charges for terminating calls to zero. But even that isn’t going to completely eliminate the problem because there is also a mileage charge component to access charges, and so places that are far outside of cities will continue to cost more than calls to urban areas.

The FCC further implemented new rules in 2013 (Docket WC 13-39) that give the FCC the ability to fine carriers who don’t properly complete calls to rural locations. But the problem still persists. The common belief in the industry now is that  some long distance carriers are just dumping rural calls and not handing them to anybody else. The proposed new laws would make it easier for the FCC to prosecute such carriers.

The problem that least-cost routing creates in the industry is that the margins on long distance calls are really slim for the intermediate carriers. For intermediate carriers that guarantee their rates to others, too many calls to rural places can put their profits underwater.

In the industry we call this sort of situation “arbitrage”. This arises when there are different costs for doing the same function in different ways. Arbitrage situations have always caused troubles. Carriers who can bill the higher prices in an arbitrage situation strive to bill for as many minutes as they can. And carriers who pay those higher prices look for alternatives to pay something less. A significant percentage of the carrier issues with long distance over the last few decades are the results of these arbitrage situations.

The problem the FCC faces is that it’s really hard to catch the carriers who are dropping calls. The whole phone network was established with an understanding that when a carriers is handed a call to that they always tried their best to complete it. That understanding is what made the US phone network the envy of the world. But generally there were not too many companies involved in a long distance call. Most calls years ago involved the local telco where the caller lived, one long distance carrier in the middle, and another local telco where the called party lived.

But today the least-cost routing tables and the fact that many calls are partially or totally VoIP calls makes it hard to even find out which carriers are in the middle of a given call. If a carrier is dumping rural calls, if they are smart enough to destroy any records that they ever received such calls, it’s very hard to definitely prove they are the culprit.

We are undergoing a transition over the next decade to an all-IP network between carriers. This might eliminate some of the problem if that reduces the need for intermediate least-cost carriers. But it also might not change anything, and as long as there is a price difference between completing a rural and an urban call, this problem is likely to remain.

Categories
The Industry

An All-IP Telephone Network?

The FCC posed a very interesting question to the industry. They asked if VoIP should become the only way of delivering voice service. This infers having an all-IP network that is extended out to every customer. The FCC asked this question as part of the IP trials that a few telcos are currently undertaking to see what an IP world looks like. While IP undoubtedly makes for the most efficient telco network, I think there many practical reasons why this can’t be implemented everywhere.

We can start with the FCC’s own estimate that there are something like 14 million rural homes without a broadband alternative. These are people who live in rural areas and are almost universally on old and sometimes very poor copper. These are people who can’t get DSL or cable modem and for whom VoIP would not work. There are also a ton of people in the country who are on marginal DSL service who also will have a hard time getting working VoIP. Most such people are also rural, but there are older urban networks with bad copper that also suffer from problems related to the condition of the copper.

But aside from the rural issue, it’s an interesting question. Cable companies already all use VoIP for voice, as do fiber overbuilds. Urban telcos could also give everybody VoIP, but it would mean providing a DSL connection to everybody on copper. This would cause all sorts of network problems. We found out years ago that you can’t put too many DSL lines into the same large copper sheathe or you create interference problems, and universal VoIP would put DSL on just about every copper pair. I also can’t think of any financial benefit to the telco for spending the money to put voice on DSL if that is all a line is going to be used for.

All of these issues make it hard to imagine mandatory VoIP at the customer end of the network. I’ve always envisioned that the IP transition would mean an all-IP network between carriers, which would create the most efficient network. But forcing VoIP where it won’t work right sounds both expensive and impractical. And it would likely boot millions from access to the voice network.

But there are other parts of an all-IP network that could be interesting. For instance, if the whole network was IP from end-to-end you could do away with telephone numbers. In an all-IP network each customer would be associated with an IP address, and so keeping telephone numbers would be forcing a historical structure onto an all-IP network. While we all would probably still have phone numbers, it would be just as easy to just pick somebody out of a computer menu by name and connect with them without going through the fiction that a number is required.

There are a few situations where going all-digital is a bit of a concern. Take 911. The current 911 network is comprised of a redundant pair of special access circuits between each carrier and each local 911 center. This network layout was created to greatly increase the likelihood that a 911 call can be completed. But in an all-IP world 911 traffic would probably be routed with everything else, which is not an issue of itself. But we know that Internet pipes go down all of the time. So anytime there was an Internet outage in a town or a region, 911 would go down with the Internet.

Of course, the FCC didn’t suggest this in a vacuum. They are being prodded in the whole IP-transition by both AT&T and Verizon who would like to get out of maintaining rural copper lines. AT&T has said many times that they want to cut down millions of rural lines and convert them to cellular. And so any pretense that the carriers are interested in creating a rural all-IP network is a fiction, because these large carriers don’t want to own or operate a rural landline connection of any kind. As we recently saw with a large sale of Verizon FiOS lines to Frontier I’m not sure that the two big telcos want to maintain any landline connections at all. These telcos are now mostly cellular companies who are finding landlines to be a nuisance.

Categories
Current News Regulation - What is it Good For?

The Homework Gap

A newly released Pew Research Center poll looks at the impact of household income on the percentage of homes with Internet connectivity. The study shows that homes with children and with annual household incomes under $50,000 have significantly lower broadband penetration than higher income homes.

FCC Jessica Rosenworcel issued a statement after the release of the poll and called this phenomenon the ‘homework gap”. There have been discussions since the 1990s about the digital divide; this survey shows that the divide is still there and that it correlates with household income.

This finding comes at a time when computers are routinely integrated into schools. Most classrooms and schools now have computers. Also, though I was unable to tie down any precise statistic, what I’ve read suggests that a majority of teachers assign homework that requires a computer. There is also a new way of teaching becoming vogue. Referred to as the ‘flipped classroom’, this teaching philosophy requires students to watch videos and other online content at home and be prepared to discuss the materials in class (as opposed to the traditional way of showing content in class).

As somebody who has been helping carriers sell into different kinds of neighborhoods for years, the statistics are not surprising to me. The Pew study shows that over 31% of households with children do not have high-speed Internet at home. This low-income group makes up about 40% of all households with school age children. This contrasts to only 8% of homes with kids who make over $50,000 that lack Internet access.

The study looked at a wide range of incomes and is one of the more complete surveys I’ve seen showing broadband penetration rates. For example, it shows that all households under $25,000 per year have a 60% penetration of broadband while households making more than $150,000 per year have a penetration of 97%.

One thing this study didn’t consider was the other digital divide, which is the urban/rural one. According to the FCC statistics, there are at least 14 million homes in the country that don’t have physical access to broadband. And as I’ve written a number of times, I think that number is too low and skewed due to the underlying statistics being self-reported by the large carriers.

The FCC is considering if it should expand its Lifeline program to include broadband coverage for low-income households. Today that fund will chop a few dollars per month off of a phone for low-income families. The Universal Service Fund spends approximately $1.5 B per year for the program.

I understand the sentiment behind this kind of assistance. But I would be surprised if a few dollars per month will make much impact on whether a household can afford to buy broadband. It’s going to take a whole lot more than $1.5 billion per year to solve the obviously large gap for student homes without broadband. And of course, such a program will do no good in those rural places where no broadband exists.

This is not going to be an easy issue to solve. To close this gap we have to find a way to get broadband into many millions more homes. But we also would need to make sure that those homes have working computers that are up to the tasks required by homework. I’ve seen numerous studies over the years that show that low-income households have an equally low penetration of home computers as they do broadband. There are many school systems today that give laptops to kids for the school year and perhaps that would at least solve half of the issue if this was more widespread. But until all kids in a school can use those laptops at home, the kids without internet access are going to fall behind those that have it.

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Regulation - What is it Good For?

Recovering Television Spectrum

Lately, the FCC finds itself in sales mode as it works to convince television station owners to sell their existing spectrum. For those not familiar with what the FCC is doing, this process is being referred to as an incentive auction for the 600 MHz band of spectrum. This spectrum today is owned by UHF TV stations.

This is spectacular spectrum and probably has the best characteristics for delivering wireless data. The spectrum easily carries to the horizon and it blasts through just about anything. I remember as a kid watching TV in a basement from a transmitter that was on a mountain on the far horizon. There is no better spectrum for the cellular companies than these bands.

This is called an incentive auction because TV stations are not being mandated to leave this spectrum. So the FCC is now engaged in a series of regional meetings to try to convince the stations to sell their spectrum. The auctions are expected to be lucrative, and station owners and the FCC will share the auction revenues. The AWS auction last November was wildly successful for the FCC. The FCC had set a minimum threshold on the spectrum at just over $10 billion and the final auction raised over $34 billion, and AWS spectrum is not even close to the great coverage characteristics of the 600 MHz spectrum. The TV spectrum should be far more lucrative since this is basically the holy grail of spectrum.

But many stations are hesitant to sell their spectrum, even at the billions they are likely to reap. The FCC has put together a complicated proposal to ‘repack’ the spectrum so that a station that sells its spectrum can stay on the air. But that is the part of the whole process that has stations nervous. It’s possible that a station could be given a slice of spectrum that is used by somebody else, such as sharing the space with wireless microphones. The repacked spectrum also doesn’t have as much of a cushion around each channel as exists today, which makes stations worried about out-of-band interference.

Having no interference is vital for television stations for several reasons. Historically, local stations got their revenues from advertising, and the rates they can charge are based upon how many theoretical eyeballs can watch them plus their rating in the local market. TV transmission is a tricky thing. For homes near the base transmitter, the power of most TV stations can overpower most interference. But, as you get to the further edges of the transmission path interference becomes a real issue. And in TV, interference is manifested by poor reception and pixelization. So TV stations are worried that their effective delivery circle will get smaller and that there will be significant interference in parts of that area.

The financial issue is further complicated by the fact that local stations (or their corporate owners) today make a lot of money from local transmission agreements. These are fees that are charged to cable providers that want to retransmit their station on cable systems. The fear here is the same in that they are worried that cities near the fringes of their service area might argue that they no longer owe retransmission fees due to degraded quality.

Unfortunately there is no way to pre-test the delivery in one of the repacked blocks. Spectrum engineering is really complicated stuff and the quality of a transmission will vary widely in different pockets of a spectrum delivery area based upon local conditions. The only way to test it is to send out the signal and see what kinds of complaints you get from viewers.

The FCC is putting everything they have into these meetings with Chairman Tom Wheeler attending most of these regional meetings to talk with television station owners. There are already a number of stations that have said that they are interested in joining the auction, but the FCC needs a significant number of them to join before the auction can proceed.

Big cellular companies won’t be the only ones to benefit from the spectrum; the FCC has promised that there will be slices of this spectrum set aside for WiFi and other public uses. So the whole country is on hold waiting to see if the FCC can convince enough stations to move. The billions that the stations can collect from the auction is certainly an incentive, but we are going to have to wait to see how many of them actually make the big leap. It ought to be an interesting summer.

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