USTelecom Claims Dropping Prices Again

This is a blog that I get to write every year – and each year, the claims get a little crazier. USTelecom recently issued its fourth annual Broadband Pricing Index and claims that broadband prices from the big ISPs are dropping. You’ll be glad to know that, according to the report, broadband prices dropped over 18% just in the last year for the most popular broadband tiers. Prices for the fastest tier of broadband dropped 6.5% last year. I’d love to hear from anybody who had their ISP cut their rate by 18% this year – that would have been a $12.60 price reduction for a $70 broadband bill.

This annual publication is so hilariously misleading that it’s hard for anybody in the industry to look at this as anything but a colossal joke. However, this report serves a purpose for the big ISPs. They can plant a seed with regulators and legislators that broadband prices are not only not increasing – but are getting cheaper. This also provides fodder for some of the unsavory folks in the broadband industry to publish articles repeating the point. This is also the kind of misinformation that will bounce around social media and confuse folks – because it’s hard to think of any examples where an ISP has ever reduced the price of basic broadband, like implied by this report.

The folks who wrote this report must have had a lot of fun finding ways to hide the facts because they came up with clever ways to produce statistics that don’t mean anything useful. A big part of the report compares the cost over time to buy a megabit of speed. Nobody would deny that speeds have increased tremendously over time, at a rate much faster than prices have increased. I was looking through some old Comcast pricing sheets. In 2009, Comcast had four broadband products that year that ranged from 12/2 Mbps for $42.95 to 50/10 Mbps for $149.95. The product that is most similar to Comcast’s current basic broadband delivered 16/2 Mbps for $52.95.  Since that time, Comcast has increased the speed of basic broadband four times – to 30 Mbps, then 60 Mbps, then 100 Mbps, and now 300 Mbps. Over fourteen years, download speeds are 19 times faster than in 2009. It’s a fact that broadband has gotten faster, but that is not the same thing as cheaper.

The report also plays a sleight of hand by comparing premium products from the past to non-premium products from today. Again, with Comcast, the basic 16/2 Mbps broadband in 2009 cost $52.95 and also required a $10 modem. Today, the basic price for 300 Mbps broadband is $93 with a $15 modem. That’s an increase since 2009 of $45, a 72% increase. The authors of the report would have instead pointed to the 50/10 Mbps product as the most comparable product – but in 2009, that was a premium product priced at $149.95 plus a $10 modem. The report would say that the price of broadband has dropped.

The report makes a lot of claims by mentioning costs of broadband over time, but it never identifies the ISP or the specific products. If prices had really dropped, USTelecom would be publishing tables of the prices charged by the big ISPs for each year.

I leave it to readers to read the report, and I won’t repeat the silly math that shows the big savings. This is the fourth year of the report, and the claims have gotten wilder each year. At the rate of accumulated savings claimed by the report, in another five years, broadband is going to be free. When that happens, I will admit I am wrong and will correct this blog as being too cynical.

Trade Associations

Anybody new to the broadband industry quickly finds out that the industry is full of trade associations. There are associations of service providers and other associations representing various segments of the industry, such as electronics manufacturers and construction contractors.

Trade associations play several roles for their members. Most trade associations lobby on behalf of their members, and some associations are primarily lobbyists. Trade associations routinely file position papers with federal and state regulatory agencies on behalf of members. Other trade associations concentrate on providing services to members. Perhaps one of the most useful functions of trade associations is holding conventions and meetings so that like-minded members can talk to their peers. Most of the trade associations that you’ll find quoted in the press are national associations, but there are also numerous regional and state-level trade associations.

Many trade associations are focused on a specific industry segment. CTIA largely represents cellular companies. NTCA is largely comprised of rural ISPs. But a few trade associations are interesting because they include members that seemingly compete against each other. For example, ACA Connects has a wide-ranging membership that includes cable, telco, and fiber companies under the same umbrella. One thing is for sure – an industry newcomer needs a lineup card to keep them all straight.

Viewed from inside the industry, it’s easy to think of trade associations as powerful entities since they can speak for an entire industry segment. But it’s interesting to look at the big picture. There are over 26,000 nationwide trade associations in the country – and every industry imaginable has them.

It’s been interesting to watch the evolution of industry trade associations during my career. When I first started in the 1970s, there were not many associations. But as the industry evolved, new trade associations came to life. The newest association, APPB, was formed in 2022 to represent the interests of municipal broadband providers. Existing trade associations sometimes splinter if the association starts taking positions that not all members endorse. One of the most common disagreements within trade associations is between large members and small members – it’s common for a trade association to adopt positions that favor its largest members.

One of the best examples of this is USTelecom – The Broadband Association. This is the oldest industry trade association that was first created as the Independent Telephone Association in 1897 by a group of non-Bell telephone companies. The first members were looking for a unified voice to lobby against the power of the Bell telephone companies that were running roughshod over regulators at the time.

Over time, the association rebranded as USTA (United States Telecom Association). After the divestiture of AT&T into regional Bell companies, USTA underwent a big change when it allowed former Bell companies to join. Over a few years, a lot of smaller members of the association went elsewhere as the association started to be dominated by the large companies. When I see a USTelecom position now, I always assume it is primarily speaking for AT&T, Verizon, Lumen, and the other large telcos.

USTelecom is also a good example of how trade associations change to reflect the evolution of the industry. The association rebranded to add on the “the Broadband Association” to recognize that telephone companies have morphed primarily into broadband companies. We see the same thing happening all over the industry. When I recently looked at the website for NCTA, the association representing the largest cable companies, one of the predominant articles talks about needing more balanced policies on spectrum – because cable companies are increasingly also becoming cellular companies. Evolution in the industry is inevitable and we’re seeing unprecedented convergence between the companies in the industry and the technologies and businesses they pursue. I have to wonder how convergence will affect trade associations. For example, what will eventually happen to an association like NCTA if cable companies all migrate to fiber – similar questions loom all around the industry.

An Odd Appeal to Rural America

USTelecom recently sent a letter to practically every politician who might have a hand in deciding how broadband grants are awarded – the White House and key Cabinet officials, the NTIA, the FCC, members of Congress, Governors, Mayors, other local officials, tribal leaders, and state broadband offices. That’s some mailing list!

The main thrust of the letter is that communities should only rely on experienced broadband partners to build and operate networks – obviously meaning the big ISPs. The letter reminds officials that building a network is only a part of the solution and that communities need partners that know how to operate the business over the long run. The letter specifically calls out municipalities and non-profits as not being good partners because of their “propensity to fail at building and maintaining complex networks over time.”

The letter asks Congress to modify the current grant rules to remove any preferences for municipalities, non-profits, and electric cooperatives. USTelecom wants the grant rules to be changed to favor ISPs with experience and financial wherewithal. The big ISPs also think that communities should only be able to spend grant money by giving it to an ISP partner.

USTelecom also uses the letter to ask for changes that will make it easier to build broadband networks. They ask the various governments to:

  • Eliminate permitting delays and fees.
  • Streamline rights-of-way acquisition.
  • Streamline easements for railroad and other complex situations.
  • Eliminate Title II regulation (which, by the way, was eliminated by the last FCC – they actually fear it coming back).
  • Change the contributions to the Universal Service Fund so that all players pay a fair share.
  • Use only the FCC’s new maps to determine grant eligibility.

This letter is perhaps the most succinct statement of the broadband wish list of the big ISPs that I’ve seen in many years. They have been lobbying for everything on this list, but I can’t recall them asking for everything at the same time.

From a strategic position, this letter is mostly aimed at local officials. It’s unlikely that Congress or the White House is going to change the trajectory of the current grants at this late date. To do so would start the grant clock all over and push grant funding a few more years into the future.

It’s an interesting appeal to make to local governments since city and county officials will have a big hand in determining who gets grant funding when they choose a grant partner. This wish list basically tells local officials that they should have no option other than to fork grant money over to the biggest ISPs. And while asking local officials to change local rules to make it easier to build broadband, the big ISPs don’t want local governments to be able to challenge the FCC maps that the ISPs create. My guess is that most local officials are going to be offended by this document, so I don’t think this is going to get the reaction that USTelecom is hoping for.

The other odd aspect of this appeal is that most current grant money is going to rural America. The letter asks to keep electric cooperatives out of the broadband business – but many rural people still remember how the electric cooperatives bailed them out when nobody else would bring electricity. It’s interesting to stress experience when electric cooperatives have been around a lot longer than ISPs like the cable companies.

The big telephone companies have been around the longest – but they have a very poor name in rural America. A century ago, the large Bell companies refused to build in rural America, just like the big electric companies. Thousands of small local telcos were formed to fill the void but most eventually got gobbled up by companies that morphed into CenturyLink, Frontier, and Windstream. The big telcos have largely abandoned rural America over the last few decades – and it is that neglect that is the primary reason why rural broadband is in such bad shape. I’m sure there are some communities that will partner with the big ISPs – but a lot of communities that I work with would hope to partner with almost anybody else. This letter is not going to change many minds.

Is Your Broadband Getting Cheaper?

Since the national dialog has suddenly fixated on inflation, the big ISPs decided to jump into the discussion by claiming that broadband prices are falling. You need to watch this short video from USTelecom to see the ridiculousness of their claim.

The big ISP industry has been trotting out this untruth for the last several years. This is the latest permutation of the claim that broadband prices are falling. What underlies this claim is that the cost per megabit of speed has been falling as ISPs increase speeds. By definition, when an ISP upgrades a customer from 100 Mbps to 200 Mbps, the cost per megabit drops. While the cable companies have been unilaterally increasing speeds, consumers have not seen the check they write each month drop. There is no consumer who wouldn’t think that “broadband prices are falling” to mean that monthly bills are dropping.

Just the opposite is true for most ISPs. The cable companies have been raising rates steadily for the past five years. Charter has raised broadband prices by $5 per month in each of the past three years. Those rate increases were far higher than the rate of inflation in each of the three years. Comcast seems to have slowed a bit on rate increases, but this is after many years of rate increases that have pushed the cost of basic broadband to around $90.

This assertion doesn’t even consider the quiet rate increases. Consider ISPs like Comcast that bill for overages on data caps. As recently as the beginning of 2018, OpenVault said that about 4% of all households used more than 1 terabyte of data per month. In the most recent report for the end of 2021, OpenVault says that 15.1% of households routinely use a terabyte of data per month and 2.5% now use more than two terabytes. That means a lot more customers than in the past are getting dinged for exceeding data caps.

However, this USTelecom claim is not aimed at consumers who would laugh at the idea that their bill for broadband has gone down. Recall that USTelecom is the lobbying arm of the big ISPs, and this claim is aimed at politicians and policymakers. Rolling out the cost-reduction canard coincided with a change of Chairman at the FCC. The big ISP quake at the idea of regulators ever considering any form of rate regulation. This misinformation campaign is mostly a strategy to plant the idea that broadband rates don’t need to be examined.

What might be the most ironic about this campaign is that prices really might start dropping. The big cable companies have been able to maintain high stock prices for a decade due to the incredible annual growth fueled by luring customers away from telephone company DSL. But we’re seeing broadband customer growth slow and stagnate for cable companies that are smaller than Comcast and Charter. Charter has adopted a strategy of passing millions of new homes with fiber as a way to try to keep growth going. Comcast just announced last week that it intends to edge out to at least 800,000 new passing this year – something it could have done any time over the last decade.

We are starting to see the beginning of real competition for urban broadband. T-Mobile says it expects to gain millions of customers this year for its FWA wireless broadband that uses cellular frequencies. Verizon is also starting to aggressively market its FWA product. Later this year, Dish will be hitting the market hard. AT&T says it will finally roll out its FWA product next year. While the low prices of FWA are aimed at luring remaining DSL customers, the speeds are good enough to be attractive to cable customers. Verizon is peddling FWA for as low as $25 per month for Verizon cellular customers. The regular price for all of the carriers selling the product is in the $50 to $60 range – far less than the cost of standalone cable company broadband.

If the big telcos stick to their business plans, millions of urban and suburban homes will be overbuilt with fiber in the next few years. So far, fiber prices have been lower than cable company broadband prices.

I’m really curious to see if the big ISPs stick with this story of falling broadband prices if their rates actually start dropping. That doesn’t seem like a story they will want to emphasize for Wall Street analysts.

U.S. Broadband Prices – High or Low?

Over the years, I’ve seen a number of studies that ask how U.S. broadband prices stack up against the rest of the world. Interestingly, in 2021 I saw reports at both ends of the spectrum. One report says that U.S. broadband prices are among the most expensive in the world. At the other extreme is a report that claims that U.S. broadband prices are low and that prices are falling.

Let’s start with the high price claim. The most recent look comes from CompareTheMarket that claims that the average U.S. residential price for broadband is $66.13 and is the ninth most expensive in the world. The study compares a broadband product in each country that offers unlimited bandwidth and that delivers speeds of at least 60 Mbps download. According to this report, the only places with higher prices than the U.S. are Ethiopia, UAE, Qatar, Zimbabwe, Oman, Honduras, Saudi Arabia, and Iceland.

The calculated $66.13 price seems realistic to me and is similar to numbers I’ve been gathering all year through surveys. The CompareTheMarket price is only for broadband and doesn’t include a WiFi modem. I’ve been seeing average prices that include the WiFi modem generally range between $70 and $75 per month. It’s worth noting that the big ISPs have been quietly burying the cost of broadband in the modem fee, with one of the highest fees being the $14 monthly fee from Comcast.

There is another report that claims that U.S. Broadband prices are not only affordable but are falling from year to year. This comes from the 2021 Broadband Pricing Index Report published by USTelecom, the lobbying arm of the biggest ISPs in the country. That report makes some outrageous claims. For example, it claims that the price of the most popular tier of broadband declined by 7.5% between 2020 and 2021 – something that’s impossible to believe when Comcast and Charter, which together are half of the broadband industry, each had a significant rate increase during that period.

It’s impossible to understand what USTelecom is comparing since there are zero statistics cited to back up its numbers. It seems to be relying on the fact that the price per megabit has been decreasing – which I don’t think anybody disputes.  It’s clear that consumer broadband speeds have risen at a faster pace than prices. But that’s not what the report is implying – a casual reader would have to assume the report means that out-of-pocket prices to customers are dropping.

USTelecom puts out this report every year, and I always find it rankling. There is no consumer in the U.S. who thinks their ISP is cutting broadband prices. Some ISPs still negotiate with customers that ask for lower rates, but overall, broadband prices from the big cable companies that control most of the market keep rising year after year.

Comcast just announced an overall 3% price increase across the board for January 2022, but I haven’t yet seen this expressed in specific product prices. This comes on top of the basic broadband at Comcast that I calculate to cost $90. That’s $76 for the basic standalone broadband package (100 Mbps or 200 Mbps in most markets), plus $14 for the WiFi modem. The rate increase would put the new price at around $93.

I have to think that the USTelecom report is aimed at providing cover for politicians that support the big ISPs. There are no consumers who feel like broadband prices are dropping – unless perhaps they are in a market where a new competitor showed up during the last year. But USTelecom and the big ISPs want politicians to think the ISPs are looking out for the public during the pandemic.

I know I shouldn’t get worked up over these kinds of shenanigans from the big ISPs. But it’s aggravating to see them peddle such blather since the purpose behind these untruths is to lobby policymakers. This is a story the ISPs want legislators to hear to tell at a time when the big ISPs know that the FCC is likely to reintroduce broadband regulation. The message from the big ISPs is clear, “Why regulate us? Look how well we’re taking care of the public without regulation”. Tell that to the families paying $90 per month for Comcast broadband – assuming they don’t exceed Comcast’s data cap and pay even more.

Testing the FCC Maps

USTelecom has been advocating the use of geocoding to make broadband maps more accurate. As part of that advocacy, the association tested their idea by looking at the FCC mapping in parts of Virginia and Missouri.

What they found was not surprising, but still shocking. They found in those two states that as many as 38% of households in rural census blocks were classified as being served, when in fact they were unserved. In FCC-speak, served is a home that has broadband available of 25/3 Mbps or faster. Unserved means homes having either no broadband available or that can buy broadband slower than 10/1 Mbps.

This distinction has huge significance for the industry. First, it’s been clear that the FCC has been overcounting the number of homes that have broadband. But far worse, the FCC has been awarding grants to provide faster broadband in unserved areas and all of the places that have been misclassified have not been eligible for grants. We’re about to enter the biggest grant program ever that will award $20.4 billion, but only to places that don’t have 25/3 Mbps speeds – meaning these misclassified homes will be left out again if the maps aren’t fixed soon.

The USTelecom effort is not even complete since several cable companies in the state did not participate in the trial – and this might mean that the percentage of homes that are misclassified is even larger. The misclassified homes are likely going to be those in census blocks that also contain at least some homes with fast broadband. Homes just past where the cable company networks start might be listed as being capable of buying a gigabit, and yet have no broadband option.

The existing FCC maps use data that is reported by ISPs using the Form 477 process. In that process, ISPs report speed availability by census block. There are two huge flaws with this reporting method. First, if even one customer in the census block can get fast broadband, then the whole census block is assumed to have fast broadband. Second, many ISPs have been reporting marketing speeds instead of actual speeds, and so there are whole census blocks counted as served when nobody can get real broadband.

The trial also uncovered other problems. The ISPs have not been accurate in counting homes by census block. Many ISPs have never accurately mapped their customers, and so the test found numerous examples of customers reported in the wrong census blocks. Additionally, the counts of buildings by census block are often far off, due in part to the confusing nature of rural addresses.

The bottom line is that the FCC has been collecting and reporting highly inaccurate data concerning rural broadband. We’ve known this for a long time because there have been numerous efforts to test the maps in smaller geographic areas that have highlighted these same mistakes. We also have evidence from Microsoft that shows that a huge number of homes are not connected to the Internet at speeds of at least 25/3 Mbps. That’s not just a rural issue, and for the Microsoft numbers to be true there must be a massive number of urban homes that are getting speeds slower than what is being reported to the FCC.

As dramatic as this finding is from USTelecom, it doesn’t tell the whole story. Unfortunately, no mapping strategy is going to be able to truthfully report the broadband speeds for DSL and fixed wireless. The speed of these products varies by home. Further, there is no way to know if a given home can utilize these technologies until somebody tries to connect them. Perhaps this isn’t important for DSL since there is almost no rural DSL capable of delivering 25/3 Mbps broadband. But any mapping of the coverage area of fixed wireless is going to be suspect since many homes are impeded from seeing a tranmitting antenna or else receive slower speeds than their neighbors due to impediments. The USTelecom effort is mostly fixing the boundary issues where homes are assumed to have broadband today but don’t. The 38% misreporting would be much higher if we could somehow magically know the real capabilities of DSL and fixed wireless.

The current FCC didn’t create this problem – it goes back several FCCs ago to the start of the 477 reporting system. However, I have to wonder if this FCC will change its mind about the status of rural broadband in the country even with better maps. The current FCC released broadband data for 2016 that included a huge error. A new ISP, Barrier Free had reported serving 25/3 broadband in census blocks covering 62 million people, when in June of that year the company didn’t yet have any customers. The FCC gleefully reported that the number of homes without broadband had dropped by 25%, mostly due to this reporting error. Even after correcting the error the FCC still declared that broadband in rural America was on the right trajectory and didn’t need any extraordinary effort from the FCC. I’m sure they will decide that rural broadband is fine, even if the number of unserved homes jumps significantly due to better mapping.

Are Broadband Investments Increasing?

The largest ISPs and their lobbying arm USTelecom are still claiming that the level of industry capital spending has improved as a direct result of the end of Title II regulation. In a recent blog they argue that capital spending was up in 2018 due to the end of regulation – something they describe as a “forward-looking regulatory framework”. In reality, the new regulatory regime is now zero regulation since the FCC stripped themselves of the ability to change ISP behavior for broadband products and practices.

The big ISPs used this same argument for years leading up to deregulation. They claimed that ISPs held back on investments since they were hesitant to invest in a regulatory-heavy environment. This argument never held water for a few reasons. First, the FCC barely ever regulated broadband companies. Since the advent of DSL and cable modems in the late 1990s, each subsequent FCC has largely been hands-off with the ISP industry.

The one area where the last FCC added some regulations was with net neutrality. According to USTelecom that was crippling regulation. In reality, the CEO of every big telco and cable company has publicly stated that they could live with the basic principles of net neutrality. The one area of regulation that has always worried the big ISPs is some kind of price regulation. That’s really not been needed in the past, but all of the big companies look into the future and realize that the time will come when they will probably raise broadband rates every year. We are now seeing the beginnings of that trend, which is probably why USTelecom keeps beating this particular dead horse to death – the ISPs are petrified of rate regulation of any kind.

The argument that the big ISPs held back on investment due to heavy regulation has never had any semblance to reality. The fact is that the big ISPs make investments for the same reasons as any large corporation – to increase revenues, to reduce operating costs, or to protect markets.

As an example, AT&T has been required to build fiber past 12.5 million passings as part of the settlement reached that allowed them to buy DirecTV. AT&T grabbed that mandate with gusto and has been aggressively building fiber for the past several years and selling fiber broadband. Both AT&T and Verizon have also been building fiber to cut transport expense to cell sites – they are building where that transport is too costly, or where they know they want to install small cell sites. The large cable companies all spent capital on DOCSIS 3.1 for the last few years to boost broadband speeds to protect and nurture their growing monopoly of urban broadband. All of these investment decisions were made for strategic business reasons that didn’t consider the difference between light regulation and no regulation. Any big ISP that says they will forego a strategic investment due to regulation would probably see their stock price tumble.

As a numbers guy, I always become instantly suspicious of deceptive graphs. Consider the graph included in the latest USTelecom blog. It shows the levels of industry capital investments made between 2014 and 2018. The graph makes the swings of investment by year look big due to the graphing trick of starting the bottom of the graph at $66 billion instead of at zero. The fact is that 2018 capital investments are less than 3% higher than the investments made in 2014. This is an industry where the aggregate level of annual investment varies by only a few percent per year – the argument that the ISPs have been unleashed due to the end of Title II regulation is laughable and the numbers don’t show it.

There are always stories every year that can explain the annual fluctuation in industry spending. Here are just a few things that made an significant impact on the aggregate spending in the past few years:

  • Sprint had a cash crunch a few years ago and drastically cut capital spending. One of the primary reasons for the higher 2018 spending is that Sprint spent almost $2 billion more in 2018 than the year before as they try to catch up on neglected projects.
  • AT&T spent $2 billion in 2018 for FirstNet, the nationwide public safety network. But AT&T is not spending their own money – that project is being funded by the federal government and ought to be removed from these charts.
  • Another $3 billion of AT&T’s spending in 2018 was to beef up the 4G network in Mexico. I’m not sure how including that spending in the numbers has any relevance to US regulation.
  • AT&T has been on a tear building fiber for the past four years – but they announced last month that the big construction push is over, and they will see lower capital spending in future years. AT&T has the largest capital budget in the industry and spent 30% of the industry wide $75 billion in 2018 – how will USTelecom paint the picture next year after a sizable decrease in AT&T spending?

The fact that USTelecom keeps harping on this talking point means they must fear some return to regulation. We are seeing Congress seriously considering new consumer privacy rules that would restrict the ability of ISPs to monetize customer data. We know it’s likely that if the Democrats take back the White House and the Senate that net neutrality and the regulation of broadband will be reinstated. For now, the big ISPs have clearly and completely won the regulatory battle and broadband is as close to deregulated as any industry can be. Sticking with this false narrative can only mean that the big ISPs think their win is temporary.

The National Broadband Penetration Rate

My firm CCG Cinsulting recently completed residential surveys in three cities where I found broadband penetration rates of between 92% and 93%. Those are the highest broadband take rates I’ve ever seen. If I only encountered one city with a penetration rate that high, I would assume that there is some reason why more people in that city have broadband. But now that I’ve seen three cities with the same high penetration rate I started to ask myself different questions. How unusual is it for cities to have penetration rates at that level? What penetration rates should I expect to see today in cities?

I first thought through the survey process. I’ve always found a well-designed survey to produce reliable results for questions like quantifying the market share of the major ISPs. I’ve worked with a few cities that had detailed customer penetration data from franchise fee reporting and in those cities our surveys closely matched that data. I’ve also worked in a few cities where we’ve done several surveys in a relatively short period of time and got nearly the same results from multiple surveys. I’ve come to trust survey results – as long as you follow good practices to make sure the survey is conducted randomly the results seem to be reliable.

I then turned to published industry statistics on the number of broadband customers to see what those told me. The two most cited statistics come from USTelecom and Leichtman Research Group (LRG). As of the end of 2017 US Telecom claimed that 79% of homes had a wired broadband connection, defined as any connection that is faster than 200 kbps, which eliminates dial-up. Leichtman Research Group claimed that 84% of homes had a wired broadband connection at the end of 2017 based upon a nationwide survey. Those numbers are significantly different. Luckily both groups also publish counts of national broadband subscribers, providing a second way to compare the two.

In the USTelecom Industry Metrics and Trends report from March 2018, US Telecom said there was 100 million residential broadband ‘connections’ at the end of 2017. They claim total broadband connections of 109 million when adding businesses.

Leichtman Research Group counts broadband ‘subscribers’ every quarter by gathering the statistics from the financial reports from the largest ISPs. LRG includes all of the big ISPs from Comcast down to Cincinnati Bell with 300,000 broadband customers. LRG claims these large companies represent about 95% of the whole broadband market. LRG counted 95.8 million total broadband customers at the end of 2017 – a count that includes businesses. Adjusting to add the remaining 5% of the market, LRG shows 100.8 million total broadband subscribers, including businesses – over 8 million less than what USTelecom counts.

That’s an astounding difference, and it’s obvious the two groups aren’t counting broadband customers the same way. There must be a difference between ‘subscribers’ and ‘connections’.

I’ve only come up with one reason why the counts would be that different. A lot of apartment complexes and business high rises today are served by a big data pipe provided to the landlord, who then provides broadband to tenants. I’m guessing that the LRG numbers considers the big data pipe to be one broadband customer. In most cases the LRG numbers come from quarterly financial reports to shareholders, and my guess is that ISPs consider a subscriber to be an entity that recieves a bill for broadband service.

I further postulate that USTelecom counts the number of tenants in those same buildings as ‘connections’. We know that big ISPs often do that. For example, AT&T agreed with regulators to pass 12.5 million new residences and businesses with fiber as part of their merger with DirecTV. It’s been clear that one of the big components of those new passings comes from units in apartment complexes. If AT&T was to build a fiber past an apartment complex they could count them as passings to satisfy the FCC without having had to get them as a customer.

The other component of the penetration rate equation is the number of US households. That number is just as confusing. I found a lot of different estimates of the number of US households. For example, the US Census says there was 137.4 million total living units at the end of 2017, with 118.8 million occupied living units. Statistica estimates 127.6 million households at the end of 2018. YCharts shows there are 122.6 million households at the end of 2018. That’s a wide range of ways to count potential residential customers in the country.

Finally, when trying to estimate the broadband penetration rates to be expected in cities, you have to back out the rural homes that can’t get broadband from the equation. That’s also a difficult number to pin down and I can find estimates that range from 6 million to 12 million homes with no broadband alternative.

The bottom line is that I don’t really know what I should expect as an urban broadband penetration rate. I can do math that supports a typical urban penetration rate of 92%. Mostly what I learned from this exercise is how careful I need to be when citing national broadband statistics – if you play it loose you can get almost any answer you want.

Please, Not Another Mapping Debacle

There are numerous parties making proposals to the FCC on how to fix the broken broadband mapping program. Today I want to look at the proposal made by USTelecom. On the surface the USTelecom proposal sounds reasonable. They want to geocode every home and business in the US to create a giant database and map of potential broadband customers. ISPs will then overlay speeds on the detailed maps, by address. USTelecom suggests that defining broadband by address will eliminate the problems of reporting broadband by Census block.

Their idea should work well for customers of fiber ISPs and cable companies. Customer addresses are either covered by those technologies or they’re not. But the proposed new maps won’t do much better than current maps for the other technologies used in rural America for a number of reasons:

  • Telcos that provide rural DSL aren’t going to tell the truth about the speeds being delivered. Does anybody honestly believe that after taking billions of dollars to improve rural DSL that Frontier and CenturyLink are going to admit on these maps that customers in areas covered by CAF II are getting less than 10 Mbps?
  • In the telcos favor, it’s not easy for them to define DSL speeds. We know that DSL speeds drop with distance from a DSLAM transmitting point, so the speed is different with each customer, even with ideal copper.
  • Rural copper is far from ideal, and DSL speeds vary widely by customer due to local conditions. The quality can vary between wires in the same sheathe due to damage or corrosion over time. The quality of the drop wires from the street to the house can drastically impact DSL speeds. Even the inside copper wiring at a home can have a big influence. We also know that in many networks that DSL bogs down in the evenings due to inadquate backhaul, so time of day impacts the speed.
  • What is never mentioned when talking about rural DSL is how many customers are simply told by a telco that DSL won’t work at their home because of one of these reasons. Telcos aren’t reporting these customers as unservable today and it’s unlikely that they’ll be properly reported in the future.
  • Rural fixed wireless has similar issues. The ideal wireless connection has an unimpeded line-of-sight, but many customers have less than an ideal situation. Even a little foliage can slow a connection. Further, every wireless coverage area has dead spots and many customers are blocked from receiving service. Like DSL, wireless speeds also weaken with distance – something a WISP is unlikely or unwilling to disclose by customer. Further, while WISPs can report on what they are delivering to current customers they have no way of knowing about other homes until they climb on the roof and test the line-of-sight.
  • It’s also going to be interesting to see if urban ISPs admit on maps to the redlining and other practices that have supposedly left millions of urban homes without broadband. Current maps ignore this issue.

USTelecom also wants to test-drive the idea of allowing individuals to provide feedback to the maps. Again, this sounds like a good idea. But in real life this is full of problems:

  • Homeowners often don’t know what speeds they are supposed to get, and ISPs often don’t list the speed on bills. The broadband map is supposed to measure the fastest speed available, and the feedback process will be a mess if customers purchasing slower products interject into the process.
  • There are also a lot of problems with home broadband caused by the customer. ISPs operating fiber networks say that customers claiming low speeds usually have a WiFi problem. Customers might be operating ancient WiFi routers or else are measuring speed after the signal has passed through inside multiple walls.

I still like the idea of feedback. My preference would be to allow local governments to be the conduit for feedback to the maps. We saw that work well recently when communities intervened to fix the maps as part of the Mobility Fund Phase II grants that were intended to expand rural 4G coverage.

My real fear is that the effort to rework the maps is nothing more than a delaying tactic. If we start on a new mapping effort now the FCC can throw their hands up for the next three years and take no action on rural broadband. They’ll have the excuse that they shouldn’t make decision based on faulty maps. Sadly, after the three years my bet is that new maps will be just as bad as the current ones – at least in rural America.

I’m not busting on USTelecom’s proposal as much as I’m busting on all proposals. We should not be using maps to decide the allocation of subsidies and grants. It would be so much easier to apply a technology test – we don’t need maps to know that fiber is always better than DSL. The FCC can’t go wrong with a goal of supplanting big telco copper.

Streamlining Regulations

Jonathan Spalter of USTelecom wrote a recent blog calling on Congress to update regulations for the telecom industry. USTelecom is a lobbying arm representing the largest telcos, but which also still surprisingly has a few small telco members. I found the tone of the blog interesting, in that somebody who didn’t know our industry would read the blog and think that the big telcos are suffering under crushing regulation.

Nothing could be further from the truth. We currently have an FCC that seems to be completely in the pocket of the big ISPs. The current FCC walked in the door with the immediate goal to kill net neutrality, and in the process decided to completely deregulate the broadband industry. The American public hasn’t really grasped yet that ISPs are now unfettered to endlessly raise broadband prices and to engage in network practices that benefit the carriers instead of customers. Deregulation of broadband has to be the biggest regulatory giveaway in the history of the country.

Spalter goes on to praise the FCC for its recent order on poles that set extremely low rates for wireless pole connections and which lets wireless carriers place devices anywhere in the public rights-of-way. He says that order brought “fairness’ to the pole attachment process when in fact the order was massively unbalanced in favor of cellular companies and squashes any local input or authority over rights-of-ways – something that has always been a local prerogative. It’s ironic to see USTelecom praising fairness for pole attachments when their members have been vehemently trying to stop Google Fiber and others from gaining access to utility poles.

To be fair, Spalter isn’t completely wrong and there are regulations that are out of date. Our last major telecom legislation was in 1996, at a time when dial-up Internet access was spreading across the country. The FCC regulatory process relies on rules set by Congress, and since the FCC hasn’t acted since 1996, Spalter accuses Congress of having “a reckless abdication of government responsibility”.

I find it amusing that the number one regulation that USTelecom most dislikes is the requirement for the big telcos make their copper wires available to other carriers. That requirement of the Telecommunications Act of 1996 was probably the most important factor in encouraging other companies to compete against the monopoly telephone companies. In the years immediately after the 1996 Act, competitors ordered millions of wholesale unbundled network elements on the telco copper networks.

There are still competitors that using the telco copper to provide far better broadband than the telcos are willing to do, so we need to keep these regulations as long as copper remains hanging on poles. I would also venture a guess that the telcos are making more money selling this copper to the competitors than they would make if the competitors went away – the public is walking away from telco DSL in droves.

I find it curious that the telcos keep harping on this issue. In terms of the total telco market the sale of unbundled elements is a mere blip on the telco books. This is the equivalent to a whale complaining about a single barnacle on his belly. But the big telcos never miss an opportunty to harp about the issue and have been working hard to eliminate sale of copper to competitors since the passage of the 1996 Act. This is not a real issue for the telcos – they just have never gotten over the fact that they lost a regulatory battle in 1996 and they are still throwing a hissy fit over that loss.

The reality is that big telcos are less regulated than ever before. Most states have largely deregulated telephone service. The FCC completely obliterated broadband regulation. While there are still cable TV regulations, the big telcos like AT&T are bypassing those regulations by moving video online. The big telcos have already won the regulatory war.

There are always threats of new regulation – but the big telcos always lobby against new rules far in advance to weaken any new regulations. For example, they are currently supporting a watered-down set of privacy rules that won’t afford much protection of customer data. They have voiced support for a watered-down set of net neutrality rules that doesn’t obligate them to change their network practices.

It’s unseemly to see USTelecom railing against regulation after the telcos have already been so successful in shedding most regulations. I guess they want to strike while the iron is hot and are hoping to goad Congress and the FCC into finishing the job by killing all remaining regulation. The USTelcom blog is a repeat of the same song and dance they’ve been repeating since I’ve been in the industry – which boils down to, “regulation is bad”. I didn’t buy this story forty years ago and I still don’t buy it today.