Cellphone Data Usage

I’ve never seen any detailed information about the amount of data that customers use on cellphones. We have the global statistics from Akamai and others that look at the big picture, but I’ve always wondered how much data the average cell phone user really uses. This is something that is important to understand for ISPs because cellphone usage on home WiFi can be a big chunk of bandwidth these days.

FierceWireless has now partnered with Strategic Analytics to look in more detail at how people use their cellphone data and how they pay for it. The data used in the analysis comes from 4,000 android phone users who agreed to allow their usage to be studied.

Following is a comparison on an average month for the amount of Cellular and WiFi bandwidth used by customers with different kinds of data plans:

‘                                                               Cellular             WiFi               Total

No Data Plan (pay-as-you-go)              0.9 GB              8.8 GB            9.7 GB

Monthly Data Cap                                 2.8 GB            14.0 GB          16.8 GB

Unlimited Data Plan                             5.3 GB            12.3 GB          17.8 GB

Interestingly, there is not that much difference in the total bandwidth used by customers with unlimited data plans versus those with caps. But the unlimited customers obviously feel freer to use data on the cellular network, using twice as much cellular data per month as those with monthly caps.

What is surprising to me is the small amount of data used by unlimited plan customers. There are truly unlimited plans like T-Mobile, but even the quasi-unlimited plans from AT&T and Verizon allow for over 20 Gigabytes of download per month on cellular. But these statistics show that customers, on average, are not using much of that data capability. It looks like many people are buying the unlimited plans for the peace-of-mind of not exceeding their data caps. This reminds me a lot of the days when telcos talked people into buying unlimited long distance plans, knowing that most of them would never use the minutes.

These statistics also show that unlimited data customers are not putting a lot of pressure on cellular networks, as the carriers would have you believe. They have always used the excuse of network congestion as the excuse for charging a lot for cellular data and for having stingy data caps. These statistics show just the opposite and show that, in aggregate that customers are not using cellular data at even a tiny fraction of the bandwidth they use on their home broadband connections.

These statistics also indicate that there are not a lot of people using cellphones to watch video. T-Mobile may give access to Netflix, but it looks like people are either watching the video on WiFi or on a device other than their cellphone. It doesn’t take much video to get to 5 GB per month in download.

To put the total usage numbers in perspective, the average landline broadband connection uses around 120 GB per month according to several ISPs. I’ve seen numerous articles over the last year talking about how cellular data use is exploding, but these numbers don’t back that up. This shows that consumers still go to landline data connections when they want to do something that is data intensive.

These numbers also counterbalance the predictions I keep reading that cellular data will eclipse landline data in a few years. That might true around the world since there are a number of places where almost all ISP connections are through cellphones. But in the US the landline data usage still dwarfs cellphone data usage and is itself still growing rapidly.

The usage by cellular carrier was also reported, as follows:

‘                                                          Cellular             WiFi                Total

AT&T                                                 2.4 GB            11.4 GB          13.6 GB

Sprint                                                4.4 GB            13.8 GB          18.2 GB

T-Mobile                                           5.3 GB            13.1 GB          18.4 GB

Verizon                                             3.6 GB            14.4 GB          18.0 GB

My one take-away from these numbers is that Sprint and T-Mobile customers feel freer to use their smartphone for video and data downloading – but even they mostly do this on WiFi. These numbers also show that the stingy monthly data caps from AT&T and Verizon have trained their customers to not use their cellphones – even after those companies have increased the monthly caps.

Big Telcos and Rural Customers

Recently, Sunit Patel, the CFO of CenturyLink, told investors that the company would be focusing on expanding their broadband networks only to the most densely populated parts of its footprint. Further, the company will now focus on opportunities that maximize both their retail operations as well as their new wholesale business that comes from the purchase of Level3. This is not surprising, and this has undoubtedly been the Company’s philosophy for many years. However, this is something that you rarely hear said publicly by the large telcos. And that’s because saying it so plainly also means that the company is admitting that they are not spending capital for the less dense parts of the footprint.

The large telcos like CenturyLink, Verizon and AT&T have been ignoring the rural parts of their network for literally decades. And yet they rarely talk about this – no doubt due to a public relations edict inside the companies. It’s refreshing to hear one of them spell it out.

We’ve heard this same story from both AT&T and Verizon in the past, but couched in different language. They have tried to put a positive spin on their announcements about rural properties by framing them as upgrading customers to wireless instead of wireline. But this is just another way of saying that they want to tear down copper lines in rural areas and charge more to households that happen to live close enough to a cellular tower to serve them. What’s never said is that these rural transitions to wireless will leave a lot of homes that have poor cellular coverage with no broadband and no telephone coverage – a reversal of a hundred-year universal service effort to keep everybody in the country connected.

CenturyLink isn’t in the same position as the other two giant telcos in that they don’t have a cellular option for rural households. The company is in the process of making substantial upgrades to the rural copper network using money provided by the FCC as part of the CAF II program. This upgrade is intended to bring rural DSL speeds up to at least 10/1 Mbps. But this money isn’t covering everybody in rural areas and the company and the FCC excluded millions of the most rural homes from these upgrades. I’ve heard through the grapevine from technicians at some of the big companies that the telcos are using the FCC money to do their best effort and that not everybody will get the promised speeds. The telcos will do what they can with the FCC money until it is all spent.

What this means for rural customer of the big telcos is that good broadband is not coming. Many households are going to be offered somewhat faster DSL or else cellular broadband from the CAF II upgrades – but that’s a one-time upgrade and it’s unlikely that these companies are going to do any more upgrades beyond this one-time shot.

I find it unfortunate that rural households who don’t understand technology and don’t understand these big telcos probably think their broadband speeds will be improved. The press releases from these companies and even from the FCC make it sound like solutions are on the way.

I probably shouldn’t be so cynical, because for a home that doesn’t have any broadband today a 10/1 Mbps connection is going to be a welcome relief. But a connection at that speed is already inadequate today for any home that really wants to use broadband. That kind of speed is not going to easily let different family members use much broadband at the same time. And that speed will grow quickly obsolete as the amount of speed needed and the amount of total annual download for the average family continues to double every three years. Any connection that feels just barely adequate today is going to feel slow in five years and nearly non-functional in a decade.

I have to give credit to Mr. Patel for saying this so directly. There is no clearer signal to rural communities that they need to look for a broadband solution on their own. The big telcos will spend any money they get from the FCC on rural infrastructure, but otherwise the big companies are unlikely to devote any additional capital dollars towards improving rural networks. This is no change from the way it’s been for a long time, but finally we can point to somebody who said out loud what we’ve always known.

The Crowded MVPD Market

The virtual MVPD (Multichannel Video Programming Distributor) market is already full of providers and is going to become even more crowded this year. Already today there is a marketing war developing between DirecTV Now, Playstation Vue, Sling TV, Hulu Live, YouTube TV, CBS All Access, fuboTV and Layer3 TV. There are also now a lot of ad-supported networks offering free movies and programming such as Crackle and TubiTV. All of these services tout themselves as an alternative to traditional cable TV.

This year will see some new competitors in the market. ESPN is getting ready to launch its sports-oriented MVPD offering. The network has been steadily losing subscribers from cord cutting and cord shaving. While the company is gaining some customers from other MVPD platforms they believe they have a strong enough brand name to go it alone.

The ESPN offering is likely to eventually be augmented by the announcement that Disney, the ESPN parent company, is buying 21st Century Fox programming assets, including 22 regional sports networks. But this purchase won’t be implemented in time to influence the initial ESPN launch.

Another big player entering the game this year is Verizon which is going to launch a service to compete with the offerings of competitors like DirecTV Now and Sling TV. This product launch has been rumored since 2015 but the company now seems poised to finally launch. Speculation is the company will use the platform much like AT&T uses DirecTV Now – as an alternative to customers who want to cut the cord as well as a way to add new customers outside the traditional footprint.

There was also announcement last quarter by T-Mobile CEO John Legere that the company will be launching an MVPD product in early 2018. While aimed at video customers the product will be also marketed to cord cutters. The T-Mobile announcement has puzzled many industry analysts who are wondering if there is any room for a new provider in the now-crowded MVPD market. The MVPD market as a whole added almost a million customers in the third quarter of 2017. But the majority of those new customers went to a few of the largest providers and the big question now is if this market is already oversaturated.

On top of the proliferation of MVPD providers there are the other big players in the online industry to consider. Netflix has announced it is spending an astronomical $8 billion on new programming during the next year. While Amazon doesn’t announce their specific plans they are also spending a few billion dollars per year. Netflix alone now has more customers than the entire traditional US cable industry.

I would imagine that we haven’t seen the end of new entrants. Now that the programmers have accepted the idea of streaming their content online, anybody with deep enough pockets to work through the launch can become an MVPD. There have already been a few early failures in the field and we’ve seen Seeso and Fullscreen bow out of the market. The big question now is if all of the players in the crowded field can survive the competition. Everything I’ve read suggests that margins are tight for this sector as the providers hold down prices to build market share.

I have already tried a number of the services including Sling TV, fuboTV, DirecTV Now and Playstation Vue. There honestly is not that much noticeable difference between the platforms. None of them have yet developed an easy-to-use channel guide and they feel like the way cable felt a decade ago. But each keeps adding features that is making them easier to use over time. While each has a slightly different channel line-up, there are many common networks carried on most of the platforms. I’m likely to try the other platforms during the coming year and it will be interesting to see if one of them finds a way to distinguish themselves from the pack.

This proliferation of online options spells increased pressure for traditional cable providers. With the normal January price increases now hitting there will be millions of homes considering the shift to online.


Verizon Announces Residential 5G Roll-out

Verizon recently announced that it will be rolling out residential 5G wireless in as many as five cities in 2018, with Sacramento being the first market. Matt Ellis, Verizon’s CFO says that the company is planning on targeting 30 million homes with the new technology. The company launched fixed wireless trials in eleven cities this year. The trials delivered broadband wirelessly to antennas mounted in windows. Ellis says that the trials using millimeter wave spectrum went better than expected. He says the technology can achieve gigabit speeds over distances as great as 2,000 feet. He also says the company has had some success in delivering broadband without a true line-of-sight.

The most visible analyst covering this market is Craig Moffett of Moffett-Nathanson. He calls Verizon’s announcement ‘rather squishy’ and notes that there are no discussions about broadband speeds, products to be offered or pricing. Verizon has said that they would not deliver traditional video over these connections, but would use over-the-top video. There have been no additional product descriptions beyond that.

This announcement raises a lot of other questions. First is the technology used. As I look around at the various wireless vendors I don’t see any equipment on the market that comes close to doing what Verizon claims. Most of the vendors are talking about having beta gear in perhaps 2019, and even then, vendors are not promising affordable delivery to single family homes. For Verizon to deliver what it’s announced obviously means that they have developed equipment themselves, or quietly partnered on a proprietary basis with one of the major vendors. But there is no other ISP talking about this kind of deployment next year and so the question is if Verizon really has that big of a lead over the rest of the industry.

The other big question is delivery distance. The quoted 2,000 feet distance is hard to buy with this spectrum and that is likely the distance that has been achieved in a test in perfect conditions. What everybody wants to understand is the realistic distance to be used in deployments in normal residential neighborhoods with the trees and many other impediments.

Perhaps the most perplexing question is how much this is going to cost and how Verizon is going to pay for it. The company recently told investors that it does not see capital expenditures increasing in the next few years and may even see a slight decline. That does not jive with what sounds like a major and costly customer expansion.

Verizon said they chose Sacramento because the City has shown a willingness to make light and utility poles available for the technology. But how many other cities are going to be this willing (assuming that Sacramento really will allow this)? It’s going to require a lot of pole attachments to cover 30 million homes.

But even in Sacramento one has to wonder where Verizon is going to get the fiber needed to support this kind of network? It seems unlikely that the three incumbent providers – Comcast, Frontier and Consolidated Communications – are going to supply fiber to assist Verizon to compete with them. Since Sacramento is not in the Verizon service footprint the company would have to go through the time-consuming process needed to build fiber on their own – a process that the whole industry is claiming is causing major delays in fiber deployment. One only has to look at the issues encountered recently by Google Fiber to see how badly incumbent providers can muck up the pole attachment process.

One possibility comes to mind, and perhaps Verizon is only going to deploy the technology in the neighborhoods where it already has fiber-fed cellular towers. That would be a cherry-picking strategy that is similar to the way that AT&T is deploying fiber-to-the-premise. AT&T seems to only be building where they already have a fiber network nearby that can make a build affordable. While Verizon has a lot of cell sites, it’s hard to envision that a cherry-picking strategy would gain access to 30 million homes. Cherry-picking like this would also make for difficult marketing since the network would be deployed in small non-contiguous pockets.

So perhaps what we will see in 2018 is a modest expansion of this year’s trials rather than a rapid expansion of Verizon’s wireless technology. But I’m only guessing, as is everybody else other than Verizon.

Title II Regulation and Investment

As the FCC continues its effort to reversing Title II regulation, I’ve seen the carriers renewing their argument that Title II regulation has reduced their willingness to invest in infrastructure. However, their numbers and other actions tell a different story.

The FCC put broadband under Title II regulation in February of 2015 and revised the net neutrality rules a few months later in April. So we’ve now had nearly three years to see the impact on the industry – and that impact is not what the carriers are saying it is.

First, we can look at annual infrastructure spending for the big ISPs. Comcast spent $7.6 billion upgrading its cable plant in 2016, its highest expenditure ever. Charter spent 15% more in 2016 compared to what was spent on it and the cable companies it purchased. Even Verizon’s spending was up in 2016 by 3% over 2015 even though the company had spun off large fiber properties in Florida, Texas, California and other states. AT&T spent virtually the same amount on capital on 2015 and 2016 as it had done in 2013 and 2014.

I’ve seen a number of articles that focus on the overall drop in investment from the cellular industry in 2015. But that drop is nearly 100% attributable to Sprint, which pulled back on new capital spending due to lack of cash. All of the big cellular companies are now crowing about how much they are going to spend in the next few years to roll-out 5G.

It’s important to remember that what the big ISPs tell their investors is often quite different than what they say when lobbying. As publicly traded companies the ISPs are required by law to provide accurate financial data including a requirement to warn stockholders about known risk factors that might impact stock prices. I’m one of those guys that actually reads financial statements and I’ve not seen a single warning about the impact of Title II regulation in the financial reporting or investor press releases of any of the big ISPs.

But the lobbying side of these businesses is a different story. The big ISPs started complaining about the risks of Title II regulations as far back as 2013 when it was first suggested. The big companies and their trade associations have written blogs warning about Title II regulation and predicted that it would stifle innovation and force them to invest less. And they’ve paid to have ‘scholarly’ articles written that come to the same conclusion. But these lobbying efforts are aimed mostly at the FCC and at legislators, not at stockholders.

The fact that big corporations can get away with having different public stories has always amazed me. One would think that something published on the AT&T or Comcast blog would be under the same rules as documents formally given to investors – but it’s obviously not. AT&T in particular tells multiple stories because the company wears so many different hats. In the last year the company has taken one position as an owner of poles that is diametrically opposed to the position it takes as a cellular company that wants to get onto somebody else’s poles. Working in policy for the big ISPs has to be a somewhat schizophrenic situation.

It seems almost certain that this FCC is going to reverse Title II regulation. The latest rumor floating around is that it will be on their agenda on the day before Thanksgiving. That may lead you to ask why the ISPs are still bothering cranking out the lobbying arguments against Title II if they have already won. I think they are still working hard to get a legislative solution through Congress to kill Title II regulation and net neutrality, even if the FCC kills it for now. I think they well understand that a future FCC under a different administration could easily reinstate Title II regulation – particularly now that it has passed muster through several court challenges. The ISPs understand that it will be a lot harder to get a future Congress to reverse course than it might be if Democrats are back in charge of the FCC.

Until recently I always wondered why the ISPs are fighting so hard against Title II regulation. All of the big companies like Comcast, AT&T and Verizon have told stockholders that their initial concerns about Title II regulation did not materialize. And it’s obvious that Title II hasn’t changed the way they invest in their own companies.

But recently I saw an article and wrote a blog about an analyst who thinks that the ISPs are going to drastically increases broadband prices once Title II regulation is gone. Title II is the only tool that the government can use to investigate and possibly act against the ISP for rate increases and for other practices like data caps. If true, and his arguments for this are good ones, then there is a huge motivation for the big ISPs to shed the only existing regulation of broadband.

Cellular WiFi Handoffs

If you use anybody except Verizon you may have noticed that your cellphone has become adept at handing your cellular connections to a local WiFi network. Like most people I keep my smartphone connected to WiFi when I’m at home to save from exhausting my cellular data cap. I have AT&T cellular service and I’ve noticed over the last year that when I’m out of the house that my phone often logs onto other WiFi networks. I can understand AT&T sending me to their own AT&T hotspots, but often I’m logged on to networks I can’t identify.

When I lived in Florida I was a Comcast customers and so when I was out of the house my phone logged onto Comcast hotspots. Even today my phone still does this, even though I’m no longer a Comcast customer and I assume there is a cookie on the phone that identifies me as a Comcast customer. I understand these logins, because after I the first time I logged onto a Comcast hotspot my phone assumed that any other Comcast hotspot is an acceptable network. This is something I voluntarily signed up for.

But today I find my phone automatically logged onto a number of hotspots in airports and hotels which I definitely have not authorized. I contrast this with using my laptop in an airport or hotel. With the laptop I always have to go through some sort of greeting screen, and even if it’s a free connection I usually have to sign on to some terms of service. But my phone just automatically grabs WiFi in many airports, even those I haven’t visited in many years. I have to assume that AT&T has some sort of arrangement with these WiFi networks.

I usually notice that I’m on WiFi when my phone gets so sluggish it barely works. WiFi is still notoriously slow in crowed public places. Once I realize I’m on a WiFi network I didn’t authorize I turn the WiFi off on my phone and revert to cellular data. Every security article I’ve ever read says to be cautious when using public WiFi and so I’d prefer not to use these connections unless I have no other option.

There was a major effort made a few years back to create a seamless WiFi network for just this purpose. The WiFi Alliance created a protocol called Hotspot 2.0 that is being marketed under the name of Passpoint. The purpose of this effort was to allow cellular users to automatically connect and roam between a wide variety of hotspots without having to ever log in. Their ultimate goal was to enable WiFi calling that could hand off between hotspots in the same way that cellular phones hand-off between cell sites.

It’s obvious that AT&T and other cellular carriers have implemented at least some aspects of Hotspot 2.0. In the original vision of Hotspot 2.0 customers were to be given the option of authorizing their participation in the Passpoint network. But AT&T has never asked my permission to log me onto WiFi hotspots (unless it was buried in my terms of service). AT&T has clearly decided that they want to use these WiFi handoffs in a busy environment like an airport to protect their cellular networks from being swamped.

It’s interesting that Verizon is not doing this. I think one reason for this is that they don’t want to give up control of their customers. Verizon foresees a huge future revenue stream from mining customer data and I’m guessing they don’t want their customer to be shuttled to a WiFi network controlled by somebody else, where they can’t track customer behavior. Verizon is instead pushing forward with the implementation of LTE-U where they can direct some data traffic into the WiFi bands, but all under their own control. While LTE-U uses WiFi frequency, it is not a hotspot technology and is as hard to intercept or hack as any other cellular traffic.

Most new cellphones now come with the Passpoint technology baked into the chipset. I think we can expect that more and more of our cellular data connections will be shuttled to hotspots without notifying us. Most people are not going to be bothered by this because it will reduce usage on their cellular data plans. I’m just not nuts about being handed off to networks without some sort of notification so that I can change my settings if I don’t want to use the selected network. I guess this is just another example of how cellular companies do what they want and don’t generally ask for customer permission.

Decommissioning Rural Copper, Part 2

In the last blog I wrote about my belief that AT&T and Verizon want out of the rural wireline business. They both have plans to largely walk away from their rural copper networks and replace landline copper services with cellular service. Today I want to talk about what regulators ought to do with those networks.

When these two giant telcos walk away from rural copper they will inevitably harm rural America. While many homes will get the ‘privilege’ of now buying highly-priced cellular-based broadband, other homes are going to find themselves without telephone service if they happen to live in one of the many cellular dead zones. Such homes will not only be unable to benefit from cellular broadband, but if they have poor cell service they will find themselves cut off from voice communications as well.

As somebody who has traveled extensively in rural America I can tell you that there are a lot more cellular dead zones than people realize. And it’s not only farms, and there are county seats in rural America where it’s difficult to get a working cellphone signal inside of buildings.

As part of this transition both companies are going to walk away from a huge amount of existing copper cable. I think this copper cable is an incredibly valuable asset and that regulators ought not to allow them to tear it down.

The copper wire network today goes almost everywhere in rural America. Congressional laws and FCC policies led to most homes in the country getting access the the copper network. These copper wires occupy a valuable space on existing telephone poles – on the majority of rural poles the only two wires are the power lines at the top and the telephone wires at the bottom.

If these copper wires are kept in place they could greatly reduce the cost of building rural fiber. It is far cheaper when building fiber to ‘lash’ the fiber onto an existing set of cables than to hang fiber from scratch. It was this construction technique that allowed Verizon to build a lot of its FiOS fiber network – they lashed fiber onto existing telephone wires. And my guess is that when Verizon decommissions urban copper they are still going to leave a lot of the copper wires in place as a guidewire for their fiber.

If these telcos are going to walk away from these copper wires, then they ought to be required to keep them in place for use by somebody else to hang fiber. Many states might force the big telcos to tear down the copper wires since they will eventually create safety hazards as they break away from poles if they aren’t maintained. But if somebody else is willing to take over that maintenance then it shouldn’t be an issue.

I can picture a regulatory process whereby some other carrier is allowed to come in and ‘claim’ the abandoned wires once they are empty of customers. That would provide fiber overbuilders or rural communities to claim this copper as an asset.

There is some salvage value to copper wires and and it’s possible, but not probable that the value of the copper could exceed the cost to tear it down. So I can see the telcos fighting such an idea as a confiscation of their assets. But these rural wires have been fully depreciated for decades and the telcos have earned back the cost of these copper lines many times over. I believe that by the act of abandoning the wires and depriving some homes of wireline service that the big telcos will have forfeited any rights they might have to the remaining assets.

Anybody claiming the abandoned copper could use it in two ways. First, in many cases there is still existing life left in the copper, as witnessed by Frontier and CenturyLink rehabbing old rural copper with upgraded DSL. Local communities or small carriers could use the copper to bring the better services that the big telcos have refused to do over the last few decades.

But more importantly these wires represent the cheapest path forward for building rural fiber. Anybody taking over the old copper can save a lot of fiber construction costs by lashing fiber onto the existing copper. If our nationwide goal is really to get better broadband to rural America, then offering abandoned copper to fiber builders might be one of the easiest tools available to help the process along.

The big telcos abandoned rural America dacades ago. They stopped doing routine maintenance on rural copper and slashed the number of rural technicians. They now want to walk away from that copper and instead force rural America to buy cellular services at inflated prices. We owe it to the folks who paid for this copper many times over to get some benefit from it and to offer an alternative to the new rural cellular monopolies.

Decommissioning Rural Copper

I’ve been watching AT&T and Verizon since I’ve been in the industry (including a short stint at Southwestern Bell in the early 80s). We are about to see both of these companies unravel their rural telco properties.

Verizon got ahead of the curve and has been selling off rural properties for a few decades, many of which ending up with Frontier. Verizon still serves some rural areas and probably has shed  half of their rural customers. But there are still big swaths or rural Verizon customers in Pennsylvania, New York, Maryland and other northeastern states. Verizon benefitted from these sell-offs by selling completely depreciated and poorly maintained networks at high prices – as can be evidenced by how much Frontier is struggling to cover their massive debts. AT&T has sold almost no rural properties and still serves gigantic rural areas in dozens of states.

Both companies are clearly on a path to tear down the remaining rural copper networks and replace them with cellular wireless networks. There are both pros and cons for these transitions for rural customers.

On the plus side, many of these rural areas have never had broadband since these big telcos never extended their DSL to their rural service areas. We know that they could have extended DSL, because we have hundreds of examples of independent telephone companies that brought DSL to all of their customers, no matter how remote. But the big companies stopped spending money on rural properties decades ago. The remaining copper is now in terrible shape and one has to imagine that cellular voice is probably often as good or better than voice over these old copper lines.

There will now many customers who can buy fixed cellular broadband. This uses the same frequencies as the broadband for smartphones, but the cellular companies are pricing it to be a little less expensive. For many households the fixed-cellular broadband will be the first real broadband alternative they have ever had.

But there are also big downsides to this shift from old copper to cellular networks. First, cellular networks are effective for only a few miles from any given cell site. Anybody who has driven in rural America knows that there are cellular dead spaces everywhere. Any customers living in the cellular dead spaces are going to be left with no communications to the outside world. They’ll lose their copper and they won’t have cellular voice or data. This will be a huge step backwards for many homes.

The big telcos will be taking advantage of the fact that, as a cellular provider, they have no obligations to try to serve everybody. One of the reasons that we had nearly ubiquitous telephone coverage in the country is that telcos were the carriers of last resort in their service areas. They were required by law to extend telephone service to all but extremely remote customers. But that obligation doesn’t apply to a cellular carrier. We already have tons of evidence that the cellular carriers make no apologies to homes that happen to live out of range of their cellular towers. With no copper landlines left we will now have rural communications dead zones. It will be hard for anybody living in these dead zones to stay there and certainly nobody is going to build new homes in a place that doesn’t have cellular service.

There is a downside even for those households that get fixed-cellular broadband. The speeds on this service are going to be slow by today’s standards, in the range of 10 – 15 Mbps for those that live relatively close to a cellular tower, but considerably slower for customers at greater distances. The real downside to getting cellular data is that the speeds are not likely to get better in rural America for many years, even decades. The whole industry is abuzz with talk about 5G cellular making a big difference, but it’s hard to see that technology making much impact in rural areas.

I think this transition away from copper is going to catch a lot of rural people by surprise. These two big telcos have already started the process of decommissioning copper and once that gets full FCC approval the speed of decommissioning copper is likely to soon accelerate. I think a lot of homes are going to be surprised when they find out that the telcos no longer have an obligation to serve them.

What’s the Next FTTP Technology?

There is a lot of debate within the industry about the direction of the next generation of last mile fiber technology. There are three possible technologies that might be adopted as the preferred next generation of electronics – NG-PON2, XGS-PON or active Ethernet. All of these technologies are capable of delivering 10 Gbps streams to customers.

Everybody agrees that the current widely deployed GPON is starting to get a little frayed around the edges. That technology delivers 2.4 Gbps downstream and 1 Gbps upstream for up to 32 customers, although most networks I work with are configured to serve 16 customers at most. All the engineers I talk to think this is still adequate technology for residential customers and I’ve never heard of a neighborhood PON being maxed out for bandwidth. But many ISPs already use something different for larger business customers that demand more bandwidth than a PON can deliver.

The GPON technology is over a decade old, which generally is a signal to the industry to look for the next generation replacement. This pressure usually starts with vendors who want to make money pushing the latest and greatest new technology – and this time it’s no different. But after taking all of the vendor hype out of the equation it’s always been the case that any new technology is only going to be accepted once that new technology achieves and industry-wide economy of scale. And that almost always means being accepted by at least one large ISP. There are a few exceptions to this, like what happened with the first generation of telephone smart switches that found success with small telcos and CLECs first – but most technologies go nowhere until a vendor is able to mass manufacture units to get the costs down.

The most talked about technology is NG-PON2 (next generation passive optical network). This technology works by having tunable lasers that can function at several different light frequencies. This would allow more than one PON to be transmitted simultaneously over the same fiber, but at different wavelengths. But that makes this a complex technology and the key issue is if this can ever be manufactured at price points that can match other alternatives.

The only major proponent of NG-PON2 today is Verizon which recently did a field trial to test the interoperability of several different vendors including Adtran, Calix, Broadcom, Cortina Access and Ericsson. Verizon seems to be touting the technology, but there is some doubt if they alone can drag the rest of the industry along. Verizon seems enamored with the idea of using the technology to provide bandwidth for the small cell sites needed for a 5G network. But the company is not building much new residential fiber. They announced they would be building a broadband network in Boston, which would be their first new construction in years, but there is speculation that a lot of that deployment will use wireless 60 GHz radios instead of fiber for the last mile.

The big question is if Verizon can create an economy of scale to get prices down for NG-PON2. The whole industry agrees that NG-PON2 is the best technical solution because it can deliver 40 Gbps to a PON while also allowing for great flexibility in assigning different customers to different wavelengths. But the best technological solution is not always the winning solution and the concern for most of the industry is cost. Today the early NG-PON2 electronics is being priced at 3 – 4 times the cost of GPON, due in part to the complexity of the technology, but also due to the lack of economy of scale without any major purchaser of the technology.

Some of the other big fiber ISPs like AT&T and Vodafone have been evaluating XGS-PON. This technology can deliver 10 Gbps downstream and 2.5 Gbps upstream – a big step up in bandwidth over GPON. The major advantage of the technology is that is uses a fixed laser which is far less complex and costly. And unlike Verizon, these two companies are building a lot more FTTH networks that Verizon.

And while all of this technology is being discussed, ISPs today are already delivering 10 Gbps data pipes to customers using active Ethernet (AON) technology. For example, US Internet in Minneapolis has been offering 10 Gbps residential service for several years. The active Ethernet technology uses lower cost electronics than most PON technologies, but still can have higher costs than GPON due to the fact that there is a dedicated pair of lasers – one at the core and one at the customer site – for each customer. A PON network instead uses one core laser to serve multiple customers.

It may be a number of years until this is resolved because most ISPs building FTTH networks are still happily buying and installing GPON. One ISP client told me that they are not worried about GPON becoming obsolete because they could double the capacity of their network at any time by simply cutting the number of customers on a neighborhood PON in half. That would mean installing more cards in the core without having to upgrade customer electronics.

From what everybody tells me GPON networks are not experiencing any serious problems. But it’s obvious as the household demand for broadband keeps doubling every three years that the day will come when these networks will experience blockages. But creative solutions like splitting the PON could keep GPON working great for a decade or two. And that might make GPON the preferred technology for a long time, regardless of the vendors strong desire to get everybody to pay to upgrade existing networks.

More Pressure on WiFi

As if we really needed more pressure put onto our public WiFi spectrum, both Verizon and AT&T are now launching Licensed Assisted Access (LAA) broadband for smartphones. This is the technology that allows cellular carriers to mix LTE spectrum with the unlicensed 5 GHz spectrum for providing cellular broadband. The LAA technology allows for the creation of ‘fatter’ data pipes by combining multiple frequencies, and the wider the data pipe the more data that makes it to the end-user customer.

When carriers combine frequencies using LAA they can theoretically create a data pipe as large as a gigabit while only using 20 MHz of licensed frequency. The extra bandwidth for this application comes mostly from the unlicensed 5 GHz band and is similar to the fastest speeds that we can experience at home using this same frequency with 802.11AC. However, such high-speed bandwidth is only useful for a short distance of perhaps 150 feet and the most practical use of LAA is to boost cellphone data signals for customers closest to a cell tower. That’s going to make LAA technology most beneficial in dense customer environments like busy downtown areas, stadiums, etc. LAA isn’t going to provide much benefit to rural cellphone towers or those along interstate highways.

Verizon recently did a demonstration of the LAA technology that achieved a data speed of 953 Mbps. They did this using three 5 GHz channels combined with one 20 megahertz channel of AWS spectrum. Verizon used a 4X4 MIMO (multiple input / multiple output) antenna array and 256 QAM modulation to achieve this speed. The industry has coined the new term of four-carrier aggregation for the technology since it combines 4 separate bands of bandwidth into one data pipe. A customer would need a specialized MIMO antenna to receive the signal and also would need to be close to the transmitter to receive this kind of speed.

Verizon is starting to update selected cell sites with the technology this month. AT&T has announced that they are going to start introducing LAA technology along with 4-way carrier aggregation by the end of this year. It’s important to note that there is a big difference between the Verizon test with 953 Mbps speeds and what customers will really achieve in the real world. There are numerous factors that will limit the benefits of the technology. First, there aren’t yet any handsets with the right antenna arrays and it’s going to take a while to introduce them. These antennas look like they will be big power eaters, meaning that handsets that try to use this bandwidth all of the time will have short battery lives. But there are more practical limitations. First is the distance limitation and many customers will be out of range of the strongest LAA signals. A cellular company is also not going to try to make this full data connection using all 4 channels to one customer for several reasons, the primary one being the availability of the 5 GHz frequency.

And that’s where the real rub comes in with this technology. The FCC approved the use of this new technology last year. They essentially gave the carriers access to the WiFi spectrum for free. The whole point of licensed spectrum is to provide data pipes for all of the many uses not made by licensed wireless carriers. WiFi is clearly the most successful achievement of the FCC over the last few decades and providing big data pipes for public use has spawned gigantic industries and it’s hard to find a house these days without a WiFi router.

The cellular carriers have paid billions of dollars for spectrum that only they can use. The rest of the public uses a few bands of ‘free’ spectrum, and uses it very effectively. To allow the cellular carriers to dip into the WiFi spectrum runs the risk of killing that spectrum for all of the other uses. The FCC supposedly is requiring that the cellular carriers not grab the 5 GHz spectrum when it’s already busy in use. But to anybody that understands how WiFi works that seems like an inadequate protection, because any of the use of this spectrum causes interference by definition.

In practical use if a user can see three or more WiFi networks they experience interference, meaning that more than one network is trying to use the same channel at the same time. It is the nature of this interference that causes the most problems with WiFi performance. When two signals are both trying to use the same channel, the WiFi standard causes all competing devices to go quiet for a short period of time, and then both restart and try to grab an open channel. If the two signals continue to interfere with each other, the delay time between restarts increases exponentially in a phenomenon called backoff. As there are more and more collisions between competing networks, the backoff increases and the performance of all devices trying to use the spectrum decays. In a network experiencing backoff the data is transmitted in short bursts between the times that the connection starts and stops from the interference.

And this means that when the cellular companies use the 5 GHz spectrum they will be interfering with the other users of that frequency. That’s what WiFi was designed to do and so the interference is unavoidable. This means other WiFi users in the immediate area around an LAA transmitter will experience more interference and it also means a degraded WiFi signal for the cellular users of the technology – and they reason they won’t get speeds even remotely close to Verizon’s demo speeds. But the spectrum is free for the cellular companies and they are going to use it, to the detriment of all of the other uses of the 5 GHz spectrum. With this decision the FCC might well have nullified the tremendous benefits that we’ve seen from the 5 GHz WiFi band.