Another Spectrum Battle

Back in July the FCC issued a Notice of Proposed Rulemaking seeking comments for opening up spectrum from 3.7 GHz to 4.2 GHz, known as the C-Band. As is happening with every block of usable spectrum, there is a growing tug-of-war between using this spectrum for 5G or using it for rural broadband.

This C-Band spectrum has traditionally been used to transit signals from satellites back to earth stations. Today it’s in use by every cable company that receives cable TV signals at a ‘big-dish’ satellite farm. The spectrum had much wider use in the past when it was used to deliver signal directly to customers using the giant 7 – 10 foot dishes you used to see in rural backyards.

This spectrum is valuable for either cellular data or for point-to-multipoint rural radio broadband systems. The spectrum sits in the middle between the 2.4 GHz and the 5.8 GHz used today for delivering most rural broadband. The spectrum is particularly attractive because of the size of the block, at 500 megahertz.

When the FCC released the NPRM, the four big satellite companies – Intelsat, SES, Eutelsat and Telesat – created the C-Band Alliance. They’ve suggested that some of their current use of this spectrum could be moved elsewhere. But where it’s not easy to move the spectrum, the group volunteered to be the clearing house to coordinate the use of C-Band for other purposes so that it won’t interfere with satellite use. The Alliance suggests that this might require curtailing full use of the spectrum near some satellite farms, but largely they think the spectrum can be freed for full use in most places. Their offer is seen as a way to convince the FCC to not force satellite companies completely out of the spectrum block.

I note that we are nearing a day when the need for the big satellite earth stations to receive TV might become obsolete. For example, we see AT&T delivering TV signal nationwide on fiber using only two headends and satellite farms. If all TV stations and all satellite farm locations were connected by fiber these signals could be delivered terrestrially. I also note this is not the spectrum used by DirecTV and Dish networks to connect to subscribers – they use the K-band at 12-18 GHz.

A group calling itself the Broadband Access Coalition (BAC) is asking the FCC to set aside the upper 300 megahertz from the band for use for rural broadband. This group is comprised of advocates for rural wireless broadband, including Baicells Technologies, Cambium Networks, Rise Broadband, Public Knowledge, the Open Technology Institute at New America, and others. The BAC proposal asks for frequency sharing that would allow for the spectrum to be used for both 5G and also for rural broadband using smart radios and databases to coordinate use.

Both the satellite providers and the 5G companies oppose the BAC idea. The satellite providers argue that it’s too complicated to share bandwidth and they fear interference with satellite farms. The 5G companies want the whole band of spectrum and tout the advantages this will bring to 5G. They’d also like to see the spectrum go to auction and dangle the prospect for the FCC to collect $20 billion or more from an auction.

The FCC has it within their power to accommodate rural broadband as they deal with this block of spectrum. However, recent history with other spectrum bands shows the FCC to have a major bias towards the promise of 5G and towards raising money through auctions – which allocates frequency to a handful of the biggest names in the industry.

The BAC proposal is to set aside part of the spectrum for rural broadband while leaving the whole spectrum available to 5G on a shared and coordinated basis. We know that in real life the big majority of all ‘5G spectrum’ is not going to be deployed in rural America. The 5G providers legitimately need a huge amount of spectrum in urban areas if they are to accomplish everything they’ve touted for 5G. But in rural areas most bands of spectrum will sit idle because the spectrum owners won’t have an economic use for deploying in areas of low density.

The BAC proposal is an interesting mechanism that would free up C-Band in areas where there is no other use of the spectrum while still fully accommodating 5G where it’s deployed. That’s the kind of creating thinking we need to see implemented.

The FCC keeps publicly saying that one of its primary goals is to improve rural broadband – as I wrote in a blog last week, that’s part of their primary stated goals for the next five years. This spectrum could be of huge value for point-to-multipoint rural radio systems and would be another way to boost rural broadband speeds. The FCC has it within their power to use the C-Band spectrum for both 5G and for rural broadband – both uses can be accommodated. My bet, sadly, is that this will be another giveaway to the big cellular companies.

Getting Militant for Broadband

My job takes me to many rural counties where huge geographic areas don’t have broadband. I’ve seen a big change over the last two years in the expectations of rural residents who are now demanding that somebody find them a broadband solution. There have been a number of rural residents calling for better broadband for a decade, but recently I’ve seen the cries for broadband grow into strident demands. As the title of this blog suggests, people are getting militant for broadband (but not carrying guns in doing so!)

The perceived need for broadband has changed a lot since the turn of this new century. In 2000 only 43% of homes had a broadband connection – and in those days that meant they had a connection that was faster than dial-up. In 2000 DSL was king and a lot of homes had upgraded to speeds of 1 Mbps. There have always been homes that require broadband, and I’m a good example since I work from home, and when I moved fifteen years ago my offer on a new house was contingent on the home having broadband installed before closing. My real estate agent at the time said that was the first time she’d ever heard about broadband related to home ownership.

As I’ve cited many times, the need for broadband has continued to grow steadily and has been doubling every three years. By 2010 the number of homes with broadband grew to 71%, and by then the cable companies were beginning to dominate the market. By then DSL speeds had gotten better, with the average speeds at about 6 Mbps, but with some lucky customers seeing speeds of around 15 Mbps. But as DOCSIS 3.0 was implemented in cable networks we started seeing speeds up to 100 Mbps available on cable systems. It was a good time to be a cable company, because their rapid revenue growth was fueled almost entirely by adding broadband customers.

Broadband in urban areas has continued to improve. We’re now seeing Comcast, Charter, Cox and other cable company upgrade to DOCSIS 3.1 and offer speeds of up to 1 Gbps. DSL that can deliver 50 Mbps over two bonded copper lines is becoming old technology. Even urban cellular speeds are becoming decent with average speeds of 12 – 15 Mbps.

But during all of these upgrades to urban broadband, huge swaths of rural America is still stuck at 2000 or earlier. Some rural homes have had access to slow DSL of 1 – 2 Mbps at most. Rural cellular speeds are typically half of urban speeds and are incredibly expensive as a home broadband solution. Satellite broadband has been available the whole time, but the high prices, gigantic latency and stingy data caps have made most homes swear off satellite broadband.

Rural homes look with envy at their urban counterparts. They know urban homes who have seen half a dozen major speed upgrades over twenty years while they still have the same lousy choices of twenty years ago. Some rural homes are seeing an upgrade to DSL due to the CAF II program of speeds of perhaps 10 Mbps. While that will be a relief to a home that has had no broadband – it doesn’t let a home use broadband in the same way as the rest of the country.

To make matters feel worse, rural customers without broadband see some parts of rural America get fiber broadband being built by independent telephone companies, electric cooperatives or municipalities. It’s hard for them to understand why there is funding that can make fiber work in some places, but not where they live. The most strident rural residents these days are those who live in a county where other rural customers have fiber and they are being told they are likely to never see it.

This disparity between rural haves and have nots is all due to FCC policy. The FCC decided to make funds available to rural telcos to upgrade to better broadband, but at the same time copped out and handed billions to the giant telcos to instead upgrade to 10 Mbps DSL or wireless. To make matters worse, it’s becoming clear that AT&T and Verizon are intent in eventually tearing down rural copper, which will leave homes with poor cellular coverage without any connection to the outside world.

The FCC laments that they cannot possibly afford to fund fiber everywhere. But they missed a huge opportunity to bring fiber to millions when they caved to lobbyists and gave the CAF II funding to the big telcos. Recall that these funds were originally going to be awarded by a reverse auction and that numerous companies had plans to ask for the funding to build rural fiber.

It’s no wonder that rural areas are furious and desperate for better broadband. Their kids are at a big disadvantage to those living in towns with broadband. Farmers without broadband are competing with those using agricultural IoT. Realtors report that they are having a hard time selling homes with no broadband access. People without broadband can’t work from home. And rural America is being left behind from taking part in American culture without access to the huge amount of content now available on the web.

Buying a Home with No Broadband

A few weeks ago attended a public meeting at one of my clients and I met a guy there who recently purchased a house in the area that has no broadband. He was told by both customer service at bth the cable company and the local telco that broadband was available – but when he showed up they would not serve him.

It seems like everywhere I travel today I hear this or similar stories and it makes me realize the gigantic value difference between homes with and without broadband. This particular guy works from home and is now scratching his head looking for a solution. He’s not unique and most families with school kids and even most families without look at broadband today as a necessity. Buying a house without broadband is starting to feel a lot like buying a house without electricity or running water – it’s not a home that most people would willingly buy.

Unfortunately, people like this guy, who are not familiar with rural broadband are often told there is broadband when there isn’t. People who move from urban areas often have no clue about the atrocious state of broadband in rural America. They can’t imagine a world where there isn’t even DSL and where folks have to somehow get by on cellular data or satellite data to have connection to the outside world.

I purchased several homes over the last few decades and I’ve always made proof of broadband a contingency in my purchase offer. I then contacted the ISPs and placed an order to be sure that the broadband was real. Sadly, like the guy in this story, one often gets the wrong answer from a call to customer service and I’ve always gone a step further and placed an order. Even that is not always a great solution – when I moved to Florida I was in the house for over a month before Comcast finally connected my home – even though there was a Comcast pedestal at the end of my driveway!

I’ve spoken to a number of rural real estate agents over the last few years and they say almost universally that home broadband is now at or near to the top of homebuyer’s wish these days. They are often surprised by homebuyers who don’t understand the lack of rural broadband. They all have stories about buyers who quickly abandon searches in all parts of a county that don’t have broadband.

There have been numerous studies done that show that a home with broadband is worth more than one without. But I don’t buy the results of those studies any more. We are now at an overall 84% national penetration for broadband and a huge majority of people don’t want a home without broadband. Those studies show an increase of a few thousand dollars in value for home without broadband – but what is value of broadband if you are unable to find a buyer for a home that doesn’t have it? That’s the story that real estate agents tell me today – the inability to sell rural homes without broadband.

One of the interesting things about rural broadband is that the people in rural areas know exactly where the broadband line stops. They know the home closest to them with cable service, they know where DSL becomes too slow to be relevant, and they know where cell phones lose their bars for broadband connectivity. Many rural customers are irate because many of them live just past the broadband dividing line. I hear it all of the time, “The home two houses away has cable TV”, “I’m within a quarter of a mile of good DSL”, “The people on the other side of that hill have a good WISP”, “I can walk to the fiber”.

I remember when I was house-hunting here in Asheville. I live a mile from center city and I can look out my window and see homes with no broadband. My wife had assembled a list of homes to check out and I recall saying a lot, “This area has no broadband, turn the car around”. It is often surprising how close you can be to a town and have no broadband. I think this area is not untypical of a rural county seat where broadband extends only sporadically past the city limits. Folks who don’t know how to look at the wires on poles often don’t realize how broadband often ends at, or just past the city boundary.

This issue is going to get more severe over the next decade and I predict that we’ll start seeing people walk away from rural homes due to lack of willing buyers. I keep expecting to see a lawsuit from a homebuyer who sues a realtor for not telling them the truth about lack of broadband. Such a suit will inevitably bring another piece of paper into home disclosures – a broadband disclosure – which most people care more about than termites and the dozen other things we check off before buying a home.

The Big Telco Problem

A few weeks ago I made the observation in a blog that we don’t really have a rural broadband problem – we instead have a rural big telco problem. As I work around the country helping communities that are looking for broadband solutions it finally struck me that the telcos in almost all of these areas are the big companies – AT&T, CenturyLink, Verizon, Frontier, Windstream, etc.

I don’t see these same problems in areas served by smaller telephone companies. These smaller telcos have either upgraded networks to deliver faster broadband or have plans to do so over the next few years. I know of numerous rural telcos that are currently building fiber to rural areas, and those networks are going to serve those areas for many decades to come. There are undoubtably a few small telcos that are not making the needed upgrades, but for the most part the smaller telcos are doing the right thing – they are reinvesting into the rural areas and making the upgrades needed for the future.

The large telcos have done just the opposite. Most of them have been ignoring rural America for decades. They yanked customer service centers from smaller communities many years ago. They drastically cut back on rural technical staffs and it often takes weeks for customers to get repairs. They stopped investing in rural networks and have not upgraded electronics or networks for decades.

There is currently a burst of activity in these rural areas for those big telcos that accepted the billions of dollars of CAF II funding. This funding requires them to upgrade rural broadband to a measly and inadequate broadband speed of at least 10/1 Mbps. However, the rules in the CAF program are weak and there are no repercussions for not meeting the goals and I’ve always expected they will spend the FCC’s money until it’s gone, and then stop the upgrades. This means while some rural customers will get speeds even a little faster than 10 Mbps that there are likely to be many customers who will so no upgrades. I don’t expect the big telcos to spend a dime of their own in rural America once the CAF II upgrades are finished.

While I call this a big telco problem I might just as easily have called it a regulator problem. The FCC and the various state commissions largely deregulated telephone service, and the FCC recently washed their hands of broadband regulation. The big telcos have been milking big profits out of the rural copper networks for decades and have not reinvested any of those profits back into the networks. That’s how big companies act if regulators don’t require them to spend some of their profits on service and upgrades.

By contrast the smaller telcos were not required to upgrade networks, but they have done so anyway. The small companies got a big boost recently from the ACAM program – a different FCC plan that encourages building forward-looking broadband networks. Many of these companies had already upgraded to fiber before the FCC money was available. These smaller telcos are part of the rural community and feel an obligation to do the right thing – and the right thing is to find a way to bring broadband that rural customers need.

Regulators have let us down by not forcing the big telcos to act responsibly. The big telcos now want to walk away from rural copper that they claim is obsolete and in bad shape. But that copper would be in much better shape had these telcos done routine maintenance for the last thirty years. We built a great nationwide copper network due to the simple regulatory principle of universal service. Regulators at both the state and local level believed that the role of government was to ensure that everybody got access to the communications networks that ties us together as a nation. They know that universal service was good for people, but also good for the economy and good for the country as a whole. It’s something that very few other countries did and set America apart from the rest of the world.

I worked at Southwestern Bell pre-divestiture and it was a source of company pride that the company served every customer to the best of our ability. But along came competition and any sense of obligation to the public went out the door and the big telcos instead concentrated on satisfying Wall Street’s demand for ever-higher profits. There have been big benefits from this competition that are hard to deny, but what was missed in the transition to a competitive telecom world was that competition was never going to benefit rural America in the same way it benefits urban areas. We should have foreseen this and kept the universal service policy in place for rural America.

I get angry when I hear politicians and regulators say that municipalities shouldn’t be in the broadband business because the commercial sector will take care of our broadband needs. That is obviously not true and one only has to look at the big telco networks ten miles outside any urban area to see how the big telcos have abandoned customers in higher cost areas.

The big telcos are still milking big profits out of rural America and are still not reinvesting any of their own capital there. I don’t know if there is a way to put the genie back into the bottle and reintroduce regulation for rural America. If we don’t then we are only a few years away from having third-world telecom networks in rural America that will be a major drag on our society and economy.

The White House Broadband Plan

The White House used a forum at the American Farm Bureau Federation to announce new policies affecting rural broadband. Unfortunately, similar to the policies of the last administration the announced plans seem to offer no useful remedies for the lack of rural broadband infrastructure.

The President’s new recommendations were captured in two executive orders:

  • The biggest thrust of the new policies is to make it easier to place cell towers on federal lands. The President said, “Those towers are gonna go up and you’re gonna have great broadband,”. But finding places to site rural cell towers has never been a real problem. There is not much cost difference between putting a tower for free on federal land versus finding a site on private land in rural America. The biggest issue with placing new rural cell towers is getting broadband backhaul to the tower. It’s hard to think that there will be more than a handful of instances where this new policy will make a difference.
  • The second executive order was aimed at streamlining and expediting requests for placement of broadband facilities on federal lands. Except for finding better routes for long-haul fiber this new policy also doesn’t seem to have much real-life market value, particularly for the needed last mile connections.

These new policies add to a few policies issued in October by the administration’s Task Force on Agriculture and Rural Prosperity. That report made a few recommendations that included having multiple government agencies concentrate on expanding e-connectivity (a new phrase used to describe higher bandwidth), attracting private capital investment through “free-market policies, laws and structures”, and reducing barriers to rural infrastructure deployment (which the new executive orders apparently address).

To be clear, I am not particularly criticizing this administration for these announcements because they are similar to the proposals of the past administrations. President Obama had announced rural broadband policies that included:

  • A dig once policy for any construction done on federal highways. The goal was to get conduit into the ground over time along Interstate highways. But the directive came with no additional funding and to the best of my knowledge has never been implemented;
  • The last administration also announced its intention to make it easier to place broadband infrastructure on federal lands in nearly the same language as the current executive orders. But one of the biggest characteristics of federal land is that it’s extremely rural and for the most part is not close to a lot of rural homes. The big issue with building rural broadband infrastructure is the cost of construction, and making it slightly easier to site facilities barely makes a dent in the total cost of building rural infrastructure

What was not put on the table by this and the last administration is any meaningful funding for rural broadband – the one thing the federal government could do that might make a real difference. There was talk at the beginning of this administration of creating some sort of grant program aimed at paying for part of the cost of rural broadband. From the beginning all of the administration’s infrastructure plans involved using seed money from federal grants to attract significant commercial investment. The President’s speech at the AFBF mentioned hopes for the administration to still find infrastructure for “roadways, railways and waterways”, but there was no longer any mention of broadband.

Presidential policies aimed at dig once policies or easier siting for rural cell towers aren’t going to have any practical impact on new rural broadband deployment. I’ve never really understood politics and I guess the temptation to sound like you are doing something to solve an issue is too tempting. But today’s announcements bring nothing new to the table. And in fact, by making it sound like the government is doing something about rural broadband it probably does more harm than good by holding out hope for those with no broadband without any solutions.

The Worst Broadband in America

I recently read an article by Clare Malone from fivethirtyeight titled, “The Worst Internet in America.” The article discussed Saguache County, Colorado, which was identified by researchers at the University of Iowa and Arizona State University as having the lowest broadband penetration in the US. Only 5.6% of households there have broadband that meets the FCC definition of 25 Mbps down / 3 Mbps up. It’s an article worth reading and highlights the problems caused by lack of broadband.

As you might imagine it’s a rural farming community. Slow broadband has historically been offered by CenturyLink and Fairpoint, the two incumbent telcos serving the county. Like much of rural America the county now has a WISP offering fixed-wireless broadband. Ralph Abrams, the former mayor of Crestone, CO founded the WISP in 2011 as a reaction to the poor DSL service in the county.

My main takeaway from the article is that this same article could be written about almost any pocket of rural customers in the country. We are a nation of broadband haves and have-nots. In most of rural America there is a clear line that defines who has broadband. If a county is lucky enough to have a cable TV company in some of its towns there is always a place at the edge of the town where the coaxial cables stops. The dividing line with DSL is always a little fuzzier, but there is always some distance from town where the DSL is too slow to be of any use – and that’s not generally more than a mile or two from a town.

People that live outside the broadband boundary have three options – satellite broadband, cellular broadband or no broadband. I have never met anybody that was satisfied with satellite broadband. Some of the services today deliver speeds as fast as 17 Mbps. But the satellite plans are expensive and have two major drawbacks. First are small monthly data caps that average in the range of 10 gigabytes of downloaded data. Unlike cellphone plans where you pay more for extra data, most satellite plans kick you off for the rest of the month when you hit your cap. And satellites have dreadful latency that is as much as twenty times higher than on fiber. Latency is a measure of the time delay for a data packet to reach a customer. High latency means that real-time applications don’t work. With a high-latency connection you can’t make a phone call over the Internet. You can’t watch live-streaming video. You can’t connect to services that require real-time connections like online classes. You can’t hold a connection to a corporate server to work at home.

And cellular data is no better. Rural customers use their cellphones as hot spots. Since cellular data speeds decrease with distance from a cell tower, rural customers are likely to get poor speeds with their cellphones if they can find any broadband connection at all. And unlike satellite broadband the cellular companies will let you buy unlimited extra gigabytes of data – at a high price. I think US cellular data is probably the most expensive data in the developed world priced at $8 – $10 per gigabyte. I have talked to numerous rural households that pay $500 or more a month for cellphone data in order for their kids to do homework.

Rural customers are all highly aware of the hot spots in their region and it’s not unusual to see cars gathered around a library, restaurant or other place that offers public WiFi. Folks drive school kids into town regularly to sit in the car and do homework. People trying to work at home must drive to a hotspot to send or retrieve big data files.

The article asks the same question that I asked a few months ago – is broadband an American right? People have very strong opinions about this idea because of all the political overtones. But one has to only look back to our past to see other times when the US government thought that providing utilities in rural America was good for the country as a whole. There were major government programs to help push electricity into rural America, including cheap long-term loans for places that created local cooperatives to get this done. The same thing happened with rural telephone service and most of rural America got connected to the voice network.

And I ask myself why this is any different. We found ways to string poles and wires to farms for both electricity and telephone service. When you look at the cost of that effort adjusted for inflation it’s hard to think that it was any cheaper to do this back then than it is today to string fiber. As a country we found a way to get electricity and telephone everywhere for the simple reason that we knew it made the whole country better when we didn’t leave parts of the economy behind. I have no idea if there was debate a century ago asking if electricity to farms was a right. But it seems like it was obvious to the country that it was a necessity.

ATSC 3.0 – More Spectrum for Broadband?

This past February the FCC approved the voluntary adoption of the new over-the-air standard for ATSC 3.0. for television stations. There will be around twenty different standards included within the final protocol that will define such things as better video and audio compression, picture improvement using high dynamic range (HDR), a wider range of colors, the ability to use immersive sound, better closed captioning, an advanced emergency alert system, better security through watermarking and fingerprinting, and the ability to integrate IP delivery.

The most interesting new feature of the new standard is that it allows programmers to tailor their TV transmission signal in numerous ways. The one that is of the most interest to the telecom world is that the standard will allow a TV broadcaster to compress the existing TV transmission into a tiny slice of the spectrum which would free up about 25 Mbps of wireless bandwidth per TV channel.

A TV station could use that extra frequency themselves or could sell it to others. Broadcasters could use the extra bandwidth in a number of ways. For example, it’s enough bandwidth to transmit their signal in 4K. Stations could also transmit their signal directly to cellphones and other mobile devices. TV stations could instead the extra bandwidth to enhance their transmissions by the addition of immersive sound and virtual reality. They could also use the extra bandwidth to transmit additional digital channels inside one slice of spectrum.

But my guess is that a lot of TV stations are going to lease the spectrum to others. This is some of the most desirable spectrum available. The VHF bands range from 30 MHz to 300 MHz and the UHF bands from 300 MHz to 3 GHz. The spectrum has the desirable characteristics of being able to travel for long distances and of penetrating easily into buildings – two characteristics that benefit TV or broadband.

The first broadcasters that have announced plans to implement ATSC 3.0 are Sinclair and Nexstar. Together they own stations in 97 markets, including 43 markets where both companies have stations. The two companies are also driving a consortium of broadcasters that includes Univision and Northwest Broadcasting. This spectrum consortium has the goal of being able to provide a nationwide bandwidth footprint, which they think is essential for maximizing the economic value of leasing the spectrum. But getting nationwide coverage is going to require adding a lot more TV stations to the consortium, which could be a big challenge.

All this new bandwidth is going to be attractive to wireless broadband providers. One has to think that the big cellular companies will be interested in the bandwidth. This also might be an opportunity for the new cellular players like Comcast and Charter to increase their spectrum footprint. But it could be used in other ways. For instance, this could be used by some new provider to communicate with vehicles or to monitor and interface with IoT devices.

The spectrum could provide a lot of additional bandwidth for rural broadband. It’s likely that in metropolitan areas that the extra bandwidth is going to get gobbled up to satisfy one or more of the uses listed above. But in rural areas this spectrum could be used to power point-to-multipoint radios and could add a huge amount of bandwidth to that effort. The channels are easily bonded together and it’s not hard to picture wireless broadband of a few hundred Mbps.

But this may never come to pass. Unlike WiFi, which is free, or 3.65 GHz, which can be cheaply licensed, this spectrum is likely to be costly. And one of the major benefits of the spectrum – the ability to travel for long distances – is also a detriment for many rural markets. Whoever is using this spectrum in urban areas is going to worry about interference from rural uses of the spectrum.

Of course, there are other long-term possibilities. As companies are able to upgrade to the new standard they will have essentially have reduced their need for spectrum. Since the TV stations were originally given this spectrum to transmit TV signals I can’t think of any reason that they should automatically be allowed to keep and financially benefit from the freed spectrum. They don’t really ‘own’ the spectrum – it was provided to them originally by the FCC to launch television technology. There are no other blocks or spectrum I can think of that are granted in perpetuity.

TV station owners like Sinclair and Nexstar are watering at the mouth over the huge potential windfall that has come their way. I hope, though that the FCC will eventually see this differently. One of the functions of the FCC is to equitably allocate spectrum to best meet the needs of all users of spectrum. If the TV stations keep the spectrum then the FCC will have ceded their spectrum management authority and it will be TV stations that determine the future spectrum winners and losers. That can’t be in the best interests of the country.

Municipal Broadband

One of the fights that I expect to see resurface this year is on the topic of whether local governments should be allowed to build fiber networks and become ISPs. The last FCC tackled this issue in a small way when they granted petitions by Chattanooga, TN and Wilson, NC to expand their broadband networks beyond their electric service territories and municipal boundaries. That ruling got reversed by a US district court and was not appealed by the FCC. But the ruling was of limited scope anyway and only addressed those two cities and didn’t set any precedent for other communities.

There are a lot of moving parts on this topic and it’s hard to know where this might go with the current FCC. This FCC is obviously pro-big ISP and companies like Comcast and AT&T have been staunch opponents of municipal broadband. But by the same token, this administration seems to lean towards states’ rights – and up until now municipal broadband has been regulated on a state-by-state basis.

Interestingly, at the local level municipal broadband has broad bipartisan support. In most communities almost all local politicians of both major parties support local broadband efforts. In my experience in working around the country, the only local political opponents of municipal broadband I have seen are those who are strong opponents of government spending money for anything but essential services. Generally local, state and even federal politicians support local broadband efforts in the communities they serve. I think the broad bipartisan appeal is due to politicians recognizing the strong public support for broadband and that almost every household wants broadband these days.

But there are 22 states with some restrictions on municipal broadband. These range from hurdles that can be overcome, like a referendum, up through states that have a total prohibition on municipal broadband. There has been a continual effort by ALEC (American Legislative Exchange Council) – funded by large corporations – to pass new state restrictions on broadband. But most recent efforts to increase prohibition of local broadband have been rebuffed, because few politicians want to go on the record against broadband. But I would not be surprised to see the big ISPs try to press their current advantage at the FCC and try to pass new national restrictions.

Today I see the municipal world dividing into two separate constituencies – urban and rural. Very few big cities have any desire to become an ISP. But they have legitimate concerns that urban broadband isn’t benefiting everybody. For example, San Francisco and some other cities are unhappy that apartment residents don’t have the same broadband opportunities and options as single family homes. And a lot of cities are still unhappy that after all of these years there is no solution for the digital divide. The FCC said last year that there are still around six million people in pockets of urban areas that don’t have access to broadband that meets the 25 Mbps download standard. But while these issues are viewed as a major problem in urban areas, I don’t see much appetite for big city governments tackling the cost of building broadband networks, which is particularly expensive in cities.

Rural America is a totally different story. We have come to the point where communities without good broadband really suffer. Broadband is not just about Netflix but is necessary to take part in the modern world. Local governments are finding that nobody wants to buy homes without broadband if there is a nearby community with broadband. Worse, communities are seeing businesses move away or bypass them when considering new locations. Lack of broadband puts school kids at a definite disadvantage and there are still a lot of households that drive kids daily to public hotspots just to do homework. And lack of broadband takes away all the opportunities for working at home – probably the biggest area of job growth in rural America.

I see small communities – even down to really small sizes like townships with 700 residents – trying to find ways to build a broadband network. I’ve read a few hundred RFPs from rural communities over the last few years, and probably not more than 5% want to become an ISP. But they will do so if they can’t find a commercial company willing to do it. Rural communities largely favor of public-private partnerships. More and more of them are willing to kick money into a building a network if an ISP will invest in their community and operate a broadband network.

I believe that within a decade we are going to start seeing broadband ‘deserts’ where communities without broadband start withering – just as happened in the past to communities that didn’t get electricity, or that were bypassed by railroads or interstate highways. It’s hard to think that a community today can keep their kids at home without broadband – and this is starting to scare local governments.

I just hope that the FCC doesn’t wade into this battle on the side of the big ISPs. Those big companies are not spending money in rural America – or if they are, it’s only when handed to them by the federal government. And even then they are just putting band-aids on rural broadband rather than building fast new networks. I have a feeling that many of the states that have restrictions on rural broadband are going to start having second thoughts about those restrictions when they realize that broadband is at or near the top of concerns of most of rural America.

There are companies building great rural broadband networks. The small telcos are almost all expanding their service areas to build broadband networks. And many of them are working with or partnering with local governments. But all of these small companies collectively can only solve a relatively small percentage of the rural broadband gap – together they do not have the capacity to borrow anything close to the billions needed to build broadband everywhere. Many rural electric cooperatives are now looking hard at the issue, and they could satisfy another slice of the rural market. But that’s still going to leave millions of rural residents with no broadband on their horizon. And I predict these folks are going to become a vocal constituency that politicians will be unable to ignore.

Michael O’Rielly’s Vision of Broadband Expansion

FCC_New_LogoA whole lot of the telecom industry is anxiously watching the news to see if there will be a federal program to expand rural broadband. We’ve already had new FCC Chairman Pai come out in favor of closing the digital divide and bringing broadband to everyone. And there are those in Congress pushing for money to expand rural broadband.

Last week FCC member Michael O’Rielly entered the fray with a blog post about funding rural broadband expansion. There are things in that blog I heartily agree with, and others that I disagree with (as you might expect).

O’Rielly warns that the government should not shovel money at a rural solution in such a way as to drastically overspend to get a solution. I completely agree and I wrote a series of blogs last year (1, 2, 3, and 4) that make the same point. The government wasted a lot of money when handing out stimulus grants in the past and I’d hate to see them make the same mistakes again. There is a long list of things that were done poorly in that grant program, but a lot of this was because it was cobbled together quickly. Hopefully, if we give out new federal money to help deploy broadband we can take the time to get it right.

O’Rielly suggests that any rural broadband expansion program be handled through the Universal Service Fund. No matter which part of government tackles this there will be a need to staff up to implement a major broadband expansion program. But I agree it makes more sense to hand this to an existing program rather than to hand it to somebody like the NTIA again.

He stated one thing that has me scratching my head. He stated that he has heard of ‘countless’ examples of where stimulus middle-mile fiber routes hurt commercial providers. I have hundreds of clients, most of them commercial ISPs, and I have never once heard anyone complain about this. Many of my clients instead are enjoying lower-cost rural transport on the BTOP networks. These complaints have to be coming from AT&T and Verizon who don’t like lower-cost alternatives to their massively overpriced special access. Special access transport is one of the biggest killers of rural business plans.

It’s clear that O’Rielly has a bias towards having commercial solutions for broadband rather than government ones. I don’t know anybody that disagrees with that concept. But by now it’s pretty obvious that the big commercial ISPs are never going to invest in rural America and it’s disingenuous to keep pretending that if government funds rural broadband that it will somehow harm them. The big ISPs have been working hard to withdraw from rural America and the providers that are left – the independent telcos, cooperatives, and rural governments – are the ones we should trust to deploy the broadband we know is needed.

I take major exception to his contention that “ultra-fast residential service is a novelty and good for marketing, but the tiny percentage of people using it cannot drive our policy decisions.” This statement has two glaring omissions. First, there are many households that need fast speeds today for home-based businesses, education, and reasons beyond just watching videos or playing games. When 10% of homes in the US don’t have broadband those homes are excluded from participating in the benefits of the digital economy. It’s hard to put a dollar value on what that is costing our economy – but it’s huge.

But second – and more importantly – this ignores the inevitable increase in demand over time. US households have been doubling their need for speed and the amount of total download every three years since 1980 – and there is no sign that growth in demand is over. This means any network that is just adequate today is going to feel obsolete within a decade – and this also means you don’t make policy for today’s demands, but for demands that we already know will be here in another decade. This is why there has to continue to be a focus on fiber first. As much as O’Rielly might hate some of the worst practices of the stimulus grants, his FCC approved the disastrous giveaway of billions to the big telcos to expand rural DSL in the CAF II program. We can’t take that path again.

Finally, O’Rielly says that the government should not be picking broadband winners and losers. That sounds like a great political sentiment, but if the government is going to supply funding to promote rural broadband that money has to go to somebody – and by definition that is picking winners. But O’Rielly does temper this statement by saying that funding shouldn’t just go to the ‘well-connected’. I hope he really means that and gets behind a plan that doesn’t just hand federal broadband funding to AT&T, Verizon and CenturyLink.

Improving Our Digital Infrastructure, Part 1

FCC_New_LogoLast week the FCC published a document that is their vision of a roadmap to improve the nation’s digital infrastructure. Today’s blog is going to look at the positive aspects of that roadmap and tomorrow I will look at some of the FCC’s ideas that I find to be troublesome.

I find this to be an interesting document for several reasons. First, it was published on Ajai Pai’s first day as FCC Chairman. It’s obvious that this paper has been under development for a while, but it clearly reflects the new Chairman’s views of the industry.

This paper is not so much a complete broadband plan as it is a roadmap of principles that the FCC supports to get broadband to rural areas. The FCC recognizes that they only have the power today to institute a few of the goals of this plan and that Congress would need to act to implement most of the suggestions in the plan.

The obviously good news about this document is that it clearly lays forward the principle that rural America deserves to have real broadband that meets or exceeds the FCC’s definition of 25 Mbps. This is a clear break from the FCC’s decision just a few years ago to fund the CAF II program which is spending $19 billion to fund rural broadband that only has to meet a 10/1 Mbps standard. One of my first thoughts in reading this document is that it seems likely that if this new roadmap is implemented that the FCC would have to cancel the remainder of the CAF II deployment. It’s really too bad the that FCC didn’t support real bandwidth for rural America before tossing away money on the CAF II plan.

The FCC plan looks at bringing broadband to the 14% of the households in the country that don’t have broadband today capable of delivering 25/3 Mbps. The FCC estimates that it will cost roughly $80 billion to bring broadband to these areas. Interestingly, they estimate that it would take only $40 billion to reach 12 out of the 14%, and that the last little sliver of the country would cost the remaining $40 billion. But the FCCs goal is to find a way to get broadband to all of these places (except I’m sure for the most remote of the remote places).

The paper calls for aggressive federal assistance in funding the rural broadband. They recognize that there has not been commercial deployment in these areas because commercial providers can’t justify the investments due to the high cost of deployment. And so they suggest that the government should provide grants, loans and loan guarantees that are aggressive enough to improve the returns for private investment. They suggest that grants could be as high as 80% of the cost of deployment in the most remote places.

The paper suggests that most of the areas will have enough customer revenue to support the properties without further federal support. In looking at some of the business plans I have built for rural counties I think that they are probably right. What sinks most rural business plans is not the ongoing maintenance costs, but rather the heavy burden of debt and a return on equity during the first 10 years of deployment. Rural fiber deployment will look like better financial opportunity if the government can find a way to provide enough up-front funding support. The FCC does recognize that most rural markets in the country will require ongoing federal support to be viable. They suggest it will require about $2 billion per year in ongoing support that will probably be similar to how the Universal Service Fund works today.

The roadmap document also suggests other financial incentives to fiber builders such as faster depreciation, tax credits, and changes to the IRS rules which require today that grant funding be considered as income. That provision stopped a number of companies from accepting the stimulus funding a few years ago and is a definite roadblock to accepting grant funding.

Overall these are great goals. It’s going to require significant fiber in rural areas to meet the stated speed goals. It’s great to see the FCC change direction and suggest that rural America deserves real broadband. I just wish they had adopted this policy a few years ago rather than supporting the CAF II program that is throwing money at propping up rural DSL.