Tag Archives: Tom Wheeler

Protecting Broadband Customer Data

At the end of July, the FCC proposed a $20 million penalty against Q Link and Hello Mobile for not complying with the Customer Propriety Network Information (CPNI). The FCC concluded that the two companies violated the CPNI rules when they failed to protect confidential user data. The companies both had security flaws in their apps that allowed outside access to customer account information.

Today’s blog is not talking about these two carriers, but their security measures must be terrible to invite fines of that magnitude. Today’s blog will use these fines to highlight that there are still stringent privacy rules in place for voice providers, but nothing similar for broadband. Other than perhaps invoking an investigation from the Federal Trade Commission for allowing leaks of broadband customer information, there are no specific prohibitions in place to stop ISPs from misusing customer data.

There is an interesting history of regulations for the protection of broadband customer information. The FCC, under Chairman Tom Wheeler, had implemented CPNI rules for broadband in 2016 along with other broadband regulations like net neutrality. These regulations went into effect near the end of 2016 and included a provision to allow customers to opt in or out of allowing an ISP to use and share their personal data.

In 2017, Congress eliminated the CPNI protections for broadband in response to a request by FCC Chairman Ajit Pai. Pai argued that it wasn’t fair to enforce privacy rules on big ISPs that weren’t also required for web companies like Google and Facebook. He also argued that CPNI rules made no sense after the Pai FCC had eliminated Title II regulation, which had declared that broadband is considered to be an information service and not a telecommunications service. Congress passed the Congressional Rule Act that eliminated the CPNI requirement along with other broadband regulations, and the FCC implemented the change in September 2017.

This has resulted in an unusual regulatory environment where two cellular carriers can be heavily penalized for not protecting customer data while ISPs cannot.

Telephone companies routinely capture details of customer calling – who you call and who calls you. This is familiar to anybody who’s seen a TV crime show since one of the first things detectives routinely do is to ask to see telephone calling records for a suspect. Telephone companies can’t release this information without a warrant. CPNI rules also require phone companies to keep other customer data secure, such as billing records, credit card numbers, etc. Telephone companies are even prohibited from marketing their own products to customers if a customer opts out of such marketing.

The 2016 privacy rules that were in place for only a short time implemented the same sort of privacy rules as voice, but customers were also given the choice to allow or deny access to their records. ISPs gather a lot more data about customers than telephone companies. For example, an ISP knows every web page you have visited since they control the DNS routing that connects you to websites. There are numerous other things an ISP can know about a customer if they choose to look deeper into the packets between users and websites.

ISPs I know aren’t worried about these issues because they don’t share customer information. They don’t record details of customer broadband transactions, and they try hard to keep information like credit card numbers safe from hackers. But I don’t think anybody believes the largest ISPs when they say that they don’t monetize information from customer data, particularly since, with current rules, there is no restriction against them doing so. The big ISPs don’t want any restrictions on what they do with customer data and any revenue streams that might come from selling data, and in today’s regulatory world, they are largely getting what they want.

Partisanship and the FCC

The current FCC has a clear bias towards the big cable companies, telcos and cellular companies. There is nothing particularly wrong with that since this FCC represents an administration that also is big-business oriented. Past FCC’s have clearly favored policies that reflected the administration in charge. For instance, the prior FCC under Tom Wheeler was pro-consumer in many ways and pushed things like net neutrality and privacy – issues that had the support of the administration but not of the giant ISPs.

However, in the last few decades the FCC has gotten a lot more partisan. It’s becoming rare to see a policy vote that doesn’t follow party lines. This isn’t true of everything and we see unanimous FCC Commissioner support for things like providing more spectrum for broadband. But FCC voting on any topic that has political overtones now seem to follow party lines.

The most recent example of the increased partisanship is evident with the release of this year’s 2018 Broadband Deployment Report to Congress. In that report Chairman Pai decided to take the stance that the state of broadband in the country is fine and needs no FCC intervention. The FCC is required to determine the state of broadband annually and report the statistics and its conclusions to Congress. More importantly, Section 706 of the Telecommunications Act of 1996 requires that the FCC must take proactive steps to close any perceived gaps in broadband coverage.

In order to declare that the state of broadband in the country doesn’t require any further FCC action, Chairman Pai needed to come up with a narrative to support his conclusion. The argument he’s chosen to defend his position is a bit startling because by definition it can’t be true.

The new broadband report, released on February 9 concludes that “advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion. . . This finding does not mean that all Americans now have broadband access. Rather, it means that we are back on the right track when it comes to deployment“. The kicker comes in when the report says that the FCC’s data from ISPs “does not yet reflect the beneficial effects of the Commission’s actions in 2017,” such as “ending the adverse impact on investment caused by the [2015 Net Neutrality] Order. . . For instance, several companies, including AT&T, Verizon, Frontier, and Alaska Communications either commenced or announced new deployments in 2017.”

In effect, the FCC now says that broadband deployment is back on track due to its December 2017 net neutrality repeal. But the ‘facts’ it cites don’t support its argument. First, any broadband improvements made by the cited telcos in 2017 would have been authorized and started in 2016 before this new FCC even was in place. Further, a big percentage of the recent broadband deployments of these particular telcos are due to earlier FCC decisions prior to the Pai FCC. For example, AT&T was required as a requirement of the purchase of DirectTV to pass 12 million new residences and businesses with fiber. A lot of the broadband spending made by AT&T, Frontier and Alaska Communications are using CAF II funds given to them by the Wheeler FCC and which the companies are required to spend. None of those expenditures have anything to do with the repeal of net neutrality. And since net neutrality was only reversed a few months ago, it’s impossible to believe that any of the broadband spending in 2017 was due to this FCC. It’s far too early to see if that order will have any impact on rural broadband expenditures (something no industry experts expect).

This FCC Broadband Report concludes that deployment of broadband in the country is on track and reasonable. Yet the numbers in the report show that there are still 19 million Americans in rural America without access to adequate broadband. There are 12 million school-aged children who are suffering from the homework gap because they don’t have broadband at home.

By declaring that broadband deployment is adequate, Chairman Pai has let his FCC off the hook for having to take any actions to address the issue. But his stated reasons are based upon an argument that is clearly not supported by any facts. This would seem to put the Chairman in violation of his Section 706 obligations, although that’s probably something only Congress can determine.

I’m saddened to see the FCC become so partisan. This is not a new phenomenon and we saw partisan voting under the last several FCCs. Before that we had pro-big business FCCs such as the one under Chairman Michael Powell. But that FCC was far less partisan and still basically used the facts at its disposal in making decisions and setting policy.

The FCC has a mandate to balance what’s good for both the public and the telecom companies. In an ideal world the FCC would be a neutral arbiter that listens to the facts and sides with the best arguments. This trend towards a partisan FCC is bad for the industry because it means that major policies will flip-flop when we change administrations – and that’s not good for ISPs or the public. Partisanship does not excuse this FCC from abrogating its responsibility and making specious arguments not supported by facts. This FCC has taken partisanship too far.

Is This an Activist FCC?

FCC_New_LogoSince I have been in the industry there have been fourteen different Chairmen at the FCC. And during that time those have been split pretty evenly between democrats and republicans. We had Chairmen who had the reputation of leaning towards the public such as Reed Hundt and those that have favored the large businesses in the industry like Michael Powell. But you can find FCC decisions under each of Chairman that are in favor of the public or in favor of carriers, radio and television stations that the FCC regulates.

When you read the press about the current FCC (the Tom Wheeler FCC) the public impression is that it is pro-competition and pro-public. And there are plenty of rulings that back that up such as:

  • Net neutrality that regulates broadband ISPs and stops them from various practices that would restrict internet choice.
  • The current proposal for privacy rules that would let people restrict how ISPs can use their personal data.
  • Opposed the Comcast / Time Warner merger.
  • Reset the definition of broadband to 25 Mbps down / 3 Mbps up.
  • The decision last year that said that restrictions on municipal broadband were anti-competitive.
  • Opposed the AT&T / T-Mobile merger.
  • Slashed prison calling rates to make it easier for families to stay in contact with those in prison.

Every one of these orders favors the public over the big companies that are regulated by the FCC. And there are other orders beyond this list.  It’s not hard to see why this FCC has built the reputation of being pro-competition and anti-big business. And yet there are some major decisions that have been clearly in favor of the big companies regulated by the FCC.

Probably the biggest of these was the decision to award over $6 billion to the largest telcos to upgrade rural broadband. In establishing the Connect America fund the FCC gave almost all of the money to AT&T, Frontier, and CenturyLink and is only requiring them to upgrade rural broadband over a six year period to speeds of 10 Mbps / 1 Mbps. Those speeds are already becoming obsolete today and are the equivalent of somebody still sitting on a 1 Mbps DSL connection in 2005. Those speeds will provide Internet access, but a household on those speeds can’t do the same things that those of us with faster connections can do. And by the end of the six years these speeds are going to be completely out of date and inadequate.

And just last week this FCC put a rule in its Lifeline order that can be seen as nothing but a giveaway to cellular companies. The FCC is going to allow the $10 per month Lifeline subsidy for low income households to go to a cellular plan operating on the 3G network and with a monthly data cap of only ½ gigabit. The stated purpose of the Lifeline plan is to close the ‘homework gap’ and yet this one provision will probably end up sending a billion dollars a year to the cellular providers to pay for data plans that won’t meet the stated goal of the Lifeline program.

I remember when Chairman Wheeler was announced that industry insiders assumed that he was going to be in favor of the large carriers and cable companies since he had spent his career representing them. But he immediately quieted this criticism by making a number of pro-competitive and anti-carrier rulings.

When I look at the whole record I have a hard time seeing this FCC as activist. They certainly lean towards promoting things that a democratic White House would favor, as you would expect from a democratic FCC Chairman. But at the same time this FCC has handed billions of dollars to big carriers, and in doing so has greatly harmed the public. One can just imagine how far the Connect America Funds could have gone if that money was instead given out over six years as matching funds to build rural fiber systems. That much seed money would have brought a fiber solution to millions rather than stick them with another decade of poor DSL.

But in retrospect, when I look back at all of the various FCC Chairmen I can see that they have presided over decisions on both ends of the spectrum, and that probably comes with the job. The FCC is in charge of regulating very complex industries that change rapidly and which are controlled by large and powerful companies. I’m glad it’s not me sitting in that chair.

Is the Internet a Necessity?

The InternetIn a speech recently made by FCC Commissioner Michael O’Rielly, he said that the Internet was “not a necessity in the day-to-day lives of Americans.” That’s a rather startling statement from somebody who seemingly has the job of making sure that the country has adequate broadband to meet its needs. But if we look at his statements in context, it raises some important policy issues that are worth public discussion.

O’Rielly made the comment as a counterargument to the spreading concept that access to the Internet has become a necessity, perhaps even a right. It’s also widely expressed today that broadband is now a utility, much like electricity and water.

It’s an interesting discussion. Several surveys in the last few years show that a significant majority of households rank Internet access as the most important service purchased at their homes. I certainly know that my daughter and all of her 16-year old friends would ‘die’ without the Internet and it seems like the younger you are, the more the Internet is an important component of daily life.

But O’Rielly’s comment was really a political and policy statement. There are certainly a lot of implications for governments if the country adopts the idea that having Internet access is a right. For instance, that would put a lot more pressure to bring Internet access to the places that don’t yet have it and to work hard to close the gap in the quality of the Internet between urban and rural places.

But it seems to me that the FCC has largely already bought into the argument that the Internet is a necessity. They are pouring billions of dollars into improving rural broadband. They are going to subsidize broadband access to low income households. They have adopted net neutrality as a policy which, to some degree, protects the ability of consumers to get what they pay for from an ISP. These all seem like the actions of an agency who thinks that everybody ought to have access to broadband.

FCC Commissioner Tom Wheeler responded to O’Rielly’s statement by saying that “broadband is the defining infrastructure of the 21st century. We should not and will not let up on our policies that make broadband more available.”

It’s obvious that Internet access is now a fundamental part of daily life for many people. I work from my home and I can’t imagine how I would function without it. Actually, I can imagine it, because after a hurricane and tornado hit me a few years ago I was without power and Internet access for 6 weeks. I basically regressed to what felt like the Stone Age. I essentially threw my hands up and gave up on work (and spent the time instead cleaning up the huge mess the storm left behind). I use the Internet almost continuously in making my living and as a society we have grown to a place where there is no realistic substitute for email and the ability to quickly exchange files and work products with others.

This is an issue that hundreds of municipalities are wrestling with. Communities look in envy at urban places that have great Internet bandwidth and they understand that if they don’t have adequate Internet in their community that they are liable to decline economically and fade away from relevance. Internet access is to cities today what the railroads were two centuries ago, and what electricity and Interstate highways were in the last century. Put into that context it starts feeling a lot like a necessity, at least at the community level.

I work with dozens of rural communities that have limited or no Internet access today. It’s heart-wrenching to hear people talk about trying to maintain a household of teenagers with only a cellular wireless plan or to hear parents lament that their kids can’t keep up in school without access to the Internet. For the vast majority of us who have Internet access it’s really hard to imagine going without.

I understand where Commissioner O’Rielly is coming from. He was formerly a Republican congressional aide and the Republicans feel generally that there are few ‘rights’ that the Federal government is obligated to recognize. But on this specific topic he might be on the wrong side of history, because my guess is that the vast majority of people in this country have grown to believe that having Internet access is a right and is something they cannot live without.

Comments to the FCC on Data Speeds

FCC_New_LogoI’ve been reading through the comments in FCC Docket 14-126 that asks the question if the FCC should increase the definition of broadband. The comments are  sticking mostly to the expected script. It seems that all of the large incumbents think the current definition of 4 Mbps download and 1 Mbps upload are just fine. And just about everybody else thinks broadband should be something faster. In the Docket the FCC suggested that a low-use home today needs 4 Mbps download, a moderate-use home needs 7.9 Mbps and a high-use home needs 10 Mbps.

AT&T says that the current definition of 4 Mbps is adequate to define ‘advanced telecommunications capability’ per Section 706 of the FCC rules. They argue that customers don’t use as much bandwidth as the FCC is suggesting. For example, they argue that most of their customers who pay for 12 Mbps service rarely hit a maximum of 10 Mbps during a typical month. They argue that the FCC is trying to change the definition of broadband by only looking at what the heaviest users of broadband are using.

AT&T goes on to say that they and other companies like Google and the large cable companies are now deploying gigabit-capable technology and so the FCC has no reason to worry about data speeds since the industry will take care of the problem by increasing speeds. I obviously disagree with AT&T on this argument. They are using the red herring of what is happening in places like Austin Texas and extrapolating that to mean that the whole country is seeing huge broadband upgrades. As I have written many times, small town America is not getting any of the new broadband investment that AT&T touts in their comments. And rural America is still often stuck with dial-up, satellite or cellphone data. Further, AT&T has been actively saying elsewhere that they want to kick millions of customers off copper and get rid of their DSL option.

Verizon took a different tactic in their filing. They also don’t want the definition increased from 4 Mbps. They first argue that they have made a lot of investments in broadband, and they certainly have done so with their FiOS fiber network in cities and suburbs. But they then go on to argue that cellular data ought to be counted as broadband and that they are offering a great cellular alternative to people. They cite that 97.5% of people in the country have access to LTE with broadband speeds greater than 10 Mbps download and that this should be counted as broadband.

There are a few problems with their claim. First, Akamai collects the speeds from millions of cellular data downloads and they report that the average cellular data speed actually achieved in the country is 4.4 Mbps and not Verizon’s theoretical 10 Mbps. And cellular data is bursty, meaning that it’s designed to be fastest for the first few seconds of download and then normally slows down. More interestingly, a few months back Comcast citied Verizon and AT&T cellular data as evidence that Comcast has robust broadband competition. Verizon Wireless’s CEO countered the Comcast’s claim and said, “LTE certainly can compete with broadband, but if you look at the physics and the engineering of it, we don’t see LTE being as efficient as fiber coming into the home.” Finally, everybody is aware that cellular data plans include tiny data caps of only a few cumulative gigabits of download per month and cellphone users know that they must park on WiFi from landlines data sources as much as possible to make their cellphones usable for video and other heavy data usage.

Verizon goes on to cite the National Broadband Map several times as justification that there is already great broadband coverage in the US today. They say that 99% of households already have access to broadband according to the map. I have written several times about the massive inaccuracies in that map due to the fact that all of the data in it is self-reported by the carriers.

The big cable companies did not make comments in the docket, but there is a filing from the National Cable Telecommunications Association on behalf of all of them. NCTA says that the definition of broadband should not be increased. Their major argument is that the FCC is not measuring broadband deployment correctly and should measure it every year and report within six months of such measurements. They also say that the FCC should take more consideration of the availability of cellular and satellite data which they say are broadband. I haven’t commented on satellite data for a while. Some parts of the country can now get a satellite connection advertised with a maximum download speed of 15 Mbps. It’s been reported to be a little slower than that, but like cellular data a satellite connection has tiny data caps that make it nearly impossible for a family with a satellite connection to watch video.

In a speech last week FCC Chairman Tom Wheeler said that 10 Mbps is too low to be considered broadband and that federal funds like the Connect America Fund should not be funding the construction of any broadband with speeds lower than that. It’s going to be interesting to see where the FCC comes out on this. Because if they raise the threshold too much then a whole lot of households are going to be declared to no longer have true broadband, which is pretty much the truth.

Lifting the Ban on Municipal Competition

FCC_New_LogoFCC Chairman Tom Wheeler said a few weeks ago that the FCC was strongly considering lifting state barriers to municipal competition. His reasoning is that there is such a large need for broadband infrastructure that governments should not stand in the way of anybody who is willing to make the last mile investment. There are twenty-two states that have barriers that are significant enough to either ban or make it almost impossible for municipalities to compete with broadband.

There are a number of kinds of existing barriers to entry in State laws. First there are states like Texas that just have an outright ban on municipal competition. But there are also a few states that handled this a different way, like North Carolina, which instead created a list of barriers to entry that are impossible for any City to meet. North Carolina’s law is an effective ban, but it never explicitly bans municipal competition, but instead is written to sound like there might be a path to compete.

Utah has an unusual restriction in that Cities there are allowed to build fiber networks, but they can only operate them on a wholesale basis, meaning that some commercial provider must come in to provide the services. This same restriction is also in place in Washington where the Public Utility Districts (rural electric companies) have this same restriction. As it turns out it is very difficult, and maybe impossible over the long-run to make money with a wholesale network. This was the issue faced by Provo who finally gave up and sold their network to Google. And the problems faced by Utopia in Utah are well known.

Finally, there are states like Louisiana that create extra hurdles for a municipal provider. These restrictions are generally couched in language that creates a ‘level playing field’. That sounds good on paper, but the municipal provider ends up being regulated and having to comply with more rules than the incumbent. An example of this is the Fair Competition Act in Louisiana that places a lot of requirements in Lafayette, the only municipal provider there so far. But since that law has been written, AT&T has been effectively deregulated in the state but leaving Lafayette with significant and expensive regulation

What is interesting is that these bans are sponsored by the large incumbents like AT&T and Comcast. But for the most part the Cities that have decided to build fiber are small, rural and are in places that the incumbents have written off years ago. No large NFL City has ever given really serious consideration to building fiber. And only two Tier 3 Cities – Chattanooga and Lafayette have done so. Most of the places that want to get into the fiber business are towns that realize that no commercial company is going to make an investment in their community.

The cities that want fiber see that their kids leave town because there are no decent jobs in the local economy. With poor broadband the businesses that are there have trouble competing today and many of them will eventually relocate to where there is fiber. Most towns that decide to consider fiber feel they have been pushed into that decision. They generally have asked the incumbent providers to make the investments, but those big companies are not investing in small town America. In fact, just the opposite is happening and AT&T told the FCC that they would like to disconnect millions of rural landlines.

I don’t know a town that built fiber that didn’t do it reluctantly. But I think everybody is finally coming to understand that fiber has become basic infrastructure. It’s as essential to the well-being of a community as streets and sewers. Places without broadband are going to fade away over time and become irrelevant in economic terms. And towns get this. They want fiber as a way to make sure that their community is still here and still relevant twenty and thirty years from now.

It just seems incredibly selfish and greedy for the incumbents to work so hard to ban small towns from building fiber, when they themselves will never make any investment in those communities. I guess that is just in the nature of large corporations to generically fight against any competition if it can be legislated. They want to milk the last dollars out of their aging copper plant before they cut it down one day and leave these communities stranded.

Net Neutrality Enters the Twilight Zone

tzIn the telecom world we are not very used to our issues getting a lot of notice from the public. But it’s obvious that net neutrality has become a political issue as much as it is an industry issue. Compared to the normal way we do business as an industry the debate has entered the twilight zone. This all got started when new FCC Chairman Tom Wheeler said that he was proposing new rules that would allow for the creation of an Internet ‘fast lane’, By that he meant that the FCC is going to allow the large ISPs to charge large content providers for premium access to their networks.

Of course, Chairman Wheeler is not himself neutral in this decision having spent years as the head lobbyist for the cable industry and opposing net neutrality. It’s somewhat ironic that he made this new announcement at the annual cable show with his cable company peers. The headlines that day made it sound like the FCC was going to take a legitimate shot at maintaining net neutrality, but within days it became understood that the fast lane idea was just the opposite and that he was handing the cable companies exactly what they wanted.

What I don’t think that Wheeler expected was that the public would jump all over his idea. And so, before the proposal was even released the Internet companies like Google and NetFlix weighed in against it. A huge number of consumer groups and many citizens weighed in against it.

And so, quite unexpectedly, the Chairman announced yesterday that he is changing the proposed rule, one that hasn’t even been released yet. He said that the revised rules would allow for ISPs to charge companies like NetFlix and Amazon for faster access to customers, but that non-paying companies would not be put into the slow lane. This makes no sense and is political double-speak. From a network engineering perspective you either give priority to bits or you don’t. If some companies get priority routing, then all other traffic gets degraded. That is the only way it can work on a network and no amount of regulatory talks can change the way that bits operate.

The idea gets even more bizarre if you think it through. What happens if 20 companies pay Comcast for priority access? Does the one who pays the most get slightly more priority than number two, and so on? The fact is that networks can’t do that. Bits are either prioritized or they are not, and so if a lot of companies pay for priority access we end up back where we are today for those companies, while the rest of the Internet would get degraded service.

One thing that pushes this into the Twilight Zone is that Rasmussen did a push poll on the topic and concluded that only 21% of Americans are in favor of net neutrality. Push polls are generally only used for hot button political topics where somebody wants to prove the opposite of what’s true. In this case, the main question of the poll was, “Should the FCC regulate the Internet like it does radio and television”. None of the questions asked had anything to do with net neutrality and instead were designed to elicit a specific negative response. Obviously there are dozens of better ways to have asked the public about net neutrality, including actually asking about it.

I have not conducted a poll, but I traveled all last week and in conversation I asked a number of people what they thought about the idea that the ISPs could give some companies priority access, which implies that others would get something less. Nobody thought that was a good idea and the general consensus was to leave things working the way they are. I believe there will be a huge amount of public discontent should the ISPs be allowed to break the Internet.

I don’t think Chairman Wheeler has any comprehension how important the Internet is to most people. He is skirting with making a huge blunder if he allows the Internet to get screwed up. He is making himself the public face of how the Internet functions, and if he breaks it people will blame him personally. He has the chance to become the next infamous political appointee to get compared to Michael Brown who was running FEMA during Hurricane Katrina. But perhaps he won’t mind being vilified since he is handing the cable companies a billion dollar opportunity to charge more to Internet companies.

The Future of Rural Broadband

Verizon Wireless "Rule the Air" Ad C...

Verizon Wireless “Rule the Air” Ad Campaign (Photo credit: Wikipedia)

There were several events this week that are telling rural subscribers the future of rural broadband. It is a bleak picture.

First, at a Goldman Sachs conference on Tuesday, the CEO of AT&T said that he hoped that the new FCC chairman Tom Wheeler would be receptive to AT&T’s desire to begin retiring its copper network in favor of its wireless network. At the end of last year AT&T had said in an FCC filing that they were going to be seeking to retire the copper plant from ‘millions of subscribers’.

In that filing AT&T had asked to move from the copper network to an all-wireless all-IP network. Stephenson said that cost savings from getting rid of the copper network would be dramatic.

On that same day, Verizon CEO Lowell McAdam said that the idea of offering unlimited data plans for wireless customers was not sustainable and defied the laws of physics. Earlier this year Verizon had ended all of its unlimited wireless data plans and now has caps on every plan.

Verizon already has a rural wireless-based landline surrogate product that it calls VzW. This uses the 4G network to deliver a landline phone and data anywhere that Verizon doesn’t have landline coverage. The base plan is $60 per month and includes voice and 10 gigabytes of data. Every extra gigabyte costs $10. There is an option to buy a $90 plan that includes 20 gigabytes or $120 for 30 gigabytes.

Finally, at the same Goldman Sachs conference mentioned above, the CFO of Time Warner said that they saw more room for increasing data rates.

So what does all of this mean for rural subscribers? First, it means that if you are served by a large incumbent like AT&T that they are going to be working hard to retire your copper and force you onto wireless. And we all know that the wireless data coverage in rural America is not particular fast when you can even get data. The data speeds delivered from a cell tower drop drastically with distance. In urban areas where towers are only a mile or less apart this doesn’t have much practical effect. But in a rural environment a mile is nothing and homes might be a mile apart. People lucky enough to live near to a cell tower can probably get okay data speeds, but those further away will not.

And even if you can get wireless data your usage is going to be capped. Rural landline data usage today may be slow, but it is unlimited. Customers have learned that if they put in WiFi routers that they can channel all of the data usage on their cell phones and tablets to their unlimited landline data connections. But once those connections are wireless, then every byte of data leaving your home, whether directly from a device or though the WiFi router, is going to count against the data caps. So rural America can expect a future where they will have data caps while people in urban areas will not.

Finally, one can expect the price of data to keep climbing. I have been predicting this for a decade. The large telcos and cable companies are facing a future where the old revenues streams of voice and cable TV are starting to decline. The only sustainable product they have is data. And so as voice and cable continue to tumble, expect incumbents to get into the habit of raising data prices every year to make up for those declines. Competition won’t help because the cell company data is already expensive, and both the incumbent cable and telcos will be raising data rates together.

This is not a pretty picture for a rural subscriber. Customers will be forced from copper to wireless. Speeds are not likely to get much faster. Data is going to be capped and prices will probably be increased year after year.

Diminished Clout for Rural Telcos

FCC Open Meeting - Broadband Plan

There were two recent announcements in the industry that has to have the rural telephone industry shaking their heads a little. The announcements are not specifically negative, but they are indicative of the fact that the industry has lost a lot of influence in Washington.

First, the president has announced the nomination of Tom Wheeler as the new head of the FCC. His background is as a high-powered lobbyist, and he was the head of both the National Cable Television Association (NCTA) from 1979 to 1984 and CTIA – the Wireless Association from 1992 to 2004.

His nomination has come with mixed reviews from the industry with many fearing that he will favor issues that promote the wireless industry. But there have been others who know him who think he will be a fair arbiter and will step up to the position. As someone in the industry I obviously share the trepidation that he would prefer one industry over another, and I would have the same concern regardless of which industry he formerly lobbied for. I’m not a big fan of putting lobbyists into powerful government positions overseeing the industry they once represented. That just seems to be asking for trouble and at the very best adds complication to every decision they make in their new role. I can certainly see how small telcos in particular could feel uneasy about this nomination.

The other news I saw was that Representatives Peter Welch (D-Vermont) and Bob Latta (R-Ohio) announced the formation of a bipartisan working group as part of the Energy and Commerce Committee that was going to focus on rural telecommunications issues. The group will be known as the Rural Telecommunications Working Group.

This new group is going to focus on a range of issues including call completion (meaning making sure that everybody can call everybody), broadband access and speeds, and wireless spectrum.

Other members of the Rural Telecommunications Working Group include: John Barrow (D-GA), Bruce Braley (D-IA), G.K. Butterfield (D-NC), Lois Capps (D-CA), Bill Cassidy (R-LA), Renee Ellmers (R-NC), Corey Gardner (R-CO), H. Morgan Griffith (R-VA), Brett Guthrie (R-KY), Adam Kinzinger (R-IL), Billy Long (R-MO), Ben Ray Lujan (D-NM), Doris Matsui (D-CA), Jerry McNerney (D-CA), Lee Terry (R-NE), and Paul Tonko (D-NY).

It is certainly good that Congress started this working group, because having anybody look at rural issues is a positive. But I did notice that there are more representatives in the group from large urban states than there are from truly rural areas. Any old-timer (like me) with a rural telco background will remember that there used to be a strong coalition in Congress who fostered rural telephony issues. But in recent years the rural telecom support in Congress largely faded away, due in part to retirements of Congressmen who supported rural telephony and due to other factors like the growth of the wireless industry. I appreciate that this new group has been formed, but it makes me remember a day when rural companies could depend on the support of Congress.

These two announcements made me realize that the political world has changed as much as the technological world for the rural telco industry. When I got into the telecom world there was no such thing as a cell phone, and now somebody who was the head lobbyist for that industry might be the next head of the FCC. Who woulda thunk it?