CBRS Auction Winners

The FCC held a recent auction for the  3.5GHz Citizens Band Radio Spectrum (CBRS). The auction went for 76 rounds and raised over $4.5 billion for the FCC. This auction was unique in that spectrum was licensed at the county-level awarding up to seven licensed 10 MHz channels in each county. Each PAL (Priority Access License) is good for 10 years.

CBRS spectrum can be used in several applications. The spectrum has good field operating parameters and falls in the middle between the two existing blocks of spectrum used for WiFi. This makes the spectrum ideal for rural point-to-multipoint fixed wireless broadband since it can carry a decent amount of bandwidth for a decent distance. The best aspect of this spectrum is that it’s licensed and will largely be free from interference. For the same reasons, this is also a good spectrum for cellular data.

The biggest winner in the auction was Verizon which spent $1.89 billion on the spectrum. The company landed 557 PALs licenses in 57 counties. The company needed this spectrum to fill-in mid-range spectrum for 5G. Verizon has also recently announced a fixed cellular broadband product for rural homes and this spectrum could provide an interference-free way to deliver that product from rural cell sites.

As expected, Dish networks was also a big winner and will be paying $913 million for CBRS spectrum. As the newest nationwide cellular carrier, the company needed this spectrum to fill in the holes in the cellular spectrum it already controls. The other traditional cellular companies were a no-show. AT&T didn’t buy any of the CBRS spectrum. T-Mobile only purchased 8 PALs licenses in six counties.

The largest cable companies scored big in the auction. Charter bought $464 million of spectrum, Comcast is paying $458 million for spectrum, and Cox purchased $212 million of spectrum. As the newest entrants in the cellular business, Comcast and Charter have been buying wholesale cellular broadband from Verizon – this spectrum will let them shift to their own cell sites for a lot of cellular traffic. There is also speculation that cable companies might be planning on using the new spectrum to launch a fixed-wireless product in the rural areas surrounding their cable properties. Both Charter and Cox have entered the upcoming RDOF auction that is awarding $16.4 billion for rural broadband and the companies might be planning on using this spectrum to cover any areas they can win in that reverse auction.

One of the smaller cable companies, Midcontinent Communications, spent over $8.8 million for PALs licenses. Midco already won sizable rural grants to deploy 100 Mbps broadband in Minnesota and the Dakotas. This spectrum will help the company meet those grant pledges and perhaps allow it to pursue RDOF grants.

There were a few other large bidders. One was Nextlink which provides fixed wireless broadband today in Texas, Oklahoma, Kansas, Nebraska, Iowa, and Illinois. Windstream purchased over 1,000 PALs and the traditional telco is likely going to replace aging rural copper with wireless service, while also possibly be expanding into new service territories with fixed wireless. SAL Spectrum LLC won 1,569 PALs. This company owns numerous other blocks of spectrum and it’s not clear who the user of this new spectrum might be.

The biggest news is that the auction allowed smaller bidders to win licensed spectrum. There were 228 different winners in the auction, most of which are small WISPs, telcos, and electric cooperatives. These entities benefited by the FCC’s willingness to auction the spectrum at the county level. Most previous wireless spectrum was allocated using much larger footprints, which kept small bidders from acquiring spectrum.

Loving to Hate Our Big ISPs

The American Customer Satisfaction Survey (ACSI) was released earlier this summer that ranks hundreds of companies that provide services for consumers. Historically cable companies and ISPs have fared poorly in these rankings compared to other businesses in the country. The running joke reported in numerous articles about this survey is that people like the IRS more than they like their cable company (and that is still true this year).

But something interesting happened in this year’s survey and the ranking for cable companies collectively improved by 3% and consumer confidence in ISPs climbed 5%. There is no easy way to understand a national satisfaction survey, but those trends are interesting to contemplate.

Let’s start by looking at the numbers. Consumers still rank cable TV providers as the least liked group of companies in the country across all industries, joined at the bottom by ISPs. The ACSI ranks each company and each industry segment on a scale of 1 to 100. The top-rated industries are breweries (84%), personal care and cleaning products (82), soft drinks (82), and food manufacturing (81).

By contrast, cable providers are ranked the lowest at 64 followed closely by ISPs at 65. Joining these companies at the bottom are local governments (65.5), video-on-demand providers (68), and the federal government (68.1).

The overall ranking for cable providers grew from a 62 in 2019 to a 64 in 2020. I can only speculate why people like cable companies a little more this year. This could be due in part to huge growth in cord-cutters who no longer watch traditional cable TV and who might perhaps no longer rate a product they don’t use. Or perhaps folks have come to appreciate the cable product more during the pandemic when people are going out less, and likely watching TV more.

The cable providers at the bottom of the rankings continue to get low satisfaction ratings, with Suddenlink (56), Frontier (58), and Mediacom (60). Just above these companies are two of the largest cable providers – Charter (60) and Cox (61). But all of these companies had a slightly improved satisfaction ranking over 2019. The highest-ranked cable providers continue to be Verizon FiOS (70) and AT&T U-verse (70), now relabeled as AT&T TV.

ISPs didn’t fare much better. It’s worth noting that this list contains many of the same companies on the cable provider list, but consumers are asked to rank cable services separately from broadband services. The overall satisfaction for ISPs grew from a 62 in 2019 to a 65 in 2020. The same three providers are at the bottom – Frontier (55), Suddenlink (57), and Mediacom (59). At the top are the same two providers – Verizon FiOS (73) and AT&T Internet (68).

Part of the explanation of the change in approval ratings for the industries might be little more than statistical variance within the range of sampling. The rankings of individual ISPs vary from year to year. Consider Charter, ranked as an ISP. The company was ranked highest in 2013 and 2017 at a 65 ranking and lowest in 2015 (57) and 2019 (59). This year’s increase might just be variance within the expected range of sampling results.

What matters a lot more is that our cable companies and ISPs are generally consumer’s least favorite companies. This has always benefited smaller ISPs that compete against the big companies. One of the most common forms of advertising for smaller ISPs is, “We are not them”.

People don’t rate cable companies and ISPs so low due because they deliver technical products. Other technology sectors have much higher satisfaction ratings such as landline telephones (70), cellphones (74), computer software (78), internet search engines (76), and social media (70). Consumers are also like electric utilities a lot more than cable companies and ISPs – electric coops (73), and investor-owned and muni electric companies (72).

It’s always been somewhat disheartening to work in an industry that folks love to hate. But I’ve always been comforted by the fact that my smaller ISP and cable clients generally fare extremely well when competing against the big ISPs and cable companies. I have to assume this means people like small ISPs more than the big ones – or perhaps hate them a little less. That’s something every small ISP should periodically consider.

Who’s Chasing RDOF Grants?

There is a veritable Who’s Who of big companies that have registered for the upcoming RDOF auction. All of the hundreds of small potential bidders to the auction have to be a bit nervous seeing the list of companies they could end up bidding against.

As a reminder, RDOF stands for Rural Digital Opportunity Fund and is an auction that starts in October that will award up to $16.4 billion in broadband funding. The money will be awarded by reverse auction in a process that favors faster technologies, but also favors those willing to take the lowest amount of grant per customer. The areas that are eligible for the funding are among the most remote places in the country, which is why the list of potential large bidders is puzzling.

There are some big cable companies on the list: Altice, Charter Communications, Cox Communications, Atlantic Broadband, Midco, and Mediacom Communications. These companies serve many of the county seats or other nearby towns to many of the RDOF areas. One has to wonder what these companies have in mind. The only one that has chased any significant federal grants in the past is Midco in Minnesota and North Dakota. Midco has been using grant money to extend fiber backhaul to connect its smallest markets, to build last-mile broadband in some tiny towns, and to build fixed wireless in rural areas surrounding its cable markets.

One has to wonder if the other cable companies have a similar plan. It’s incredibly inefficient to build traditional hybrid coaxial-fiber networks in rural areas, so it’s unlikely that the cable companies will be extending their existing networks. The RDOF auction is being done by Census blocks, which in rural areas can cover a large area. The winner of the auction for a given Census block must offer service to everybody in that block. I also have a hard time envisioning all of these big cable companies getting into the wireless business like Midco is doing, so their presence in the auction is a bit of a mystery.

Then there are the traditional large telcos including Frontier, Windstream, Consolidated Communications, and CenturyLink. These companies already serve many of the areas that are covered by the reverse auction. These are the rural areas where these companies have largely neglected the old copper wiring and either offer no broadband or dreadfully slow DSL. The minimum technology allowed to enter the auction must deliver 25/3 Mbps broadband. It’s almost painful to think that these companies would chase the funding and promise to upgrade DSL to 25/3 Mbps after these companies largely botched an upgrade to 10/1 Mbps DSL in the just-ending CAF II grants. The cynic in me says they are willing to pretend to upgrade DSL all over again if that means substantial grant money. I have to think that some of these companies are considering deploying fixed wireless. To the extent any of these companies is willing to take on new debt or use equity, they could also build fiber. None of these companies has built a substantial amount of fiber to truly rural places, but may these grants are the inducement they were waiting for.

Verizon and U.S. Cellular have registered for the auction. You have to think the cellular carriers will be deploying fixed cellular broadband like the 4G FWA product that Verizon just announced recently. These companies already have equipment on towers in many of the RDOF grant areas and would love to grab a subsidy to roll out a product they might be selling in these areas anyway.

Then there are the satellite companies SpaceX, Hughes Network Systems, and Viasat. Viasat has won federal grant money before for selling broadband from its high-altitude satellites. SpaceX is the wildcard since nobody knows anything about the pricing or real speeds they can provide. We know that Elon Musk has been lobbying the FCC to let him have a shot at the billions up for grabs in this auction.

There is another interesting wildcard with Starry. Their business plan is currently selling fixed wireless to large apartment buildings in center cities and they’ve developed a proprietary technology that’s perfect for that application. They must have something else in mind in chasing grant money in remote areas that are 180 degrees different than their normal business model. Starry founder Chet Kanojia is incredibly creative, so he probably has a new technology in mind if he wins auction funding.

There may be other big players in the auction as well since many of the registered bidders are participating under partnerships or corporations that are disguising their identity for now. I think one thing is clear and some of the rural ISPs and cooperative who think nobody else is interested in their markets will get a surprise early in the auction. These big companies didn’t register for the grant auction to sit on the sidelines.

Walking Away from Copper

It’s been clear for many years that the big telcos are looking for ways to walk away from legacy copper networks. Big telco copper is getting old and most was built in the 1950s and 1960s. All of this copper is far past the 40-year expected lives that the telcos claimed when they built the networks. Even old copper can be made to work if it was well-maintained, but the big telcos stopped doing routine maintenance on copper decades ago. For years, the big telco maintenance policy has been to patch problems without improving or fixing network issues.

In some cases, the big telcos have gone through the formal FCC process of formally retiring copper. This requires giving customers a 90-day notice that copper will be deactivated and providing customers an alternative to copper.  For example, Verizon posts notices of copper retirement on this web site. There have been no announced retirements this year, likely due to the COVID-19 pandemic, but Verizon was active last year, like in this September notification for Massachusetts. CenturyLink has made similar notices in parts of Arizona, Colorado, Minnesota, Nebraska, Oregon, Utah, and Washington.

In all of these cases, Verizon and CenturyLink made the announcements in communities where the carriers can provide fiber-to-the-home. It’s a natural technological progression to replace old copper technology with new fiber, and customers who lose copper to move to fiber have little room to complain.

But what about all of the places where the telcos never plan to offer fiber? There are still huge areas, including big parts of major cities where the telcos have no plans of migrating to fiber. What will happen to folks in regions where the copper is rotting past the point of usefulness, like is described in this article from last year in Fauquier County, Virginia? In that county the copper barely works for voice, which is sadly becoming the norm and not the exception.

There is nothing the big telcos can do with copper that has gone past the point of no return. No telco is going to replace bad copper and none of the big telcos are going to extend fiber into rural America or into urban neighborhoods where construction is too expensive. Verizon might be replacing copper with fiber around Boston, as indicated by the above filing, but the telco has no plans for building fiber in western Massachusetts, Cape Cod, or the many other places in the state where it never built FiOS fiber.

We might have gotten a glimpse into Verizon’s strategy when the company recently unveiled a 4G fixed wireless product. This 4G Home product promises to deliver 25 Mbps broadband using the 4G cellular network and Verizon could point to this product as a justification to abandon DSL over copper.

On paper, the 4G Home product will outproduce rural DSL, which typically has speeds well under 10 Mbps. But the Fauquier County article pointed out another ugly truth – much of rural America has poor cellular coverage to go along with outdated copper. The 4G Home product is not going to work for homes that are more than a mile or two from a cell tower. 4G Home is not going to be a reasonable substitute for DSL in communities like the towns on Cape Cod where the density is too high to support a lot of subscribers using 4G data as a landline data substitute – even a small customer penetration would swamp the 4G LTE network in populated areas.

AT&T has a similar fixed wireless product it introduced during the past year as the solution for meeting the company’s rural CAF II requirements. I’ve been tracking this product on the web and still don’t see local articles or chatter from many folks who have changed to the wireless product. AT&T has implemented this product to satisfy the FCC (and to keep the CAF II grant funding), but for some reason the company doesn’t seem to be pushing the product very hard.

The bottom line is these telcos will have to walk away from copper at some point within the next decade for the simple reason that the networks will stop functioning. From what I can see, both the FCC and many state regulatory commissions refuse to acknowledge that copper is dying and keep pretending that the telcos can somehow make this work. These networks are dying. The telcos might toss a bone to regulators by halfheartedly offering a wireless substitute for DSL. But the telcos are under no obligation to offer a replacement if the copper dies. Sadly, we’re going to look up five years from now and find a lot of rural homes without a telephone line and a cellular connection. There was a time when that was unthinkable, but it’s the coming reality.

A New Rural Broadband Product?

Verizon announced a new wireless data product that raises a few questions for me. Verizon announced the ‘LTE Home Internet’ product on this web page. The product is easily explained. Verizon will be delivering unlimited data using the cellular 4G LTE network. Customers must buy a receiver from Verizon for $240, but the company is offering a $10 discount for 24-months which returns the cost of the box over two years. The product is $40 per month for a household that is buying a Verizon cellular product that costs at least $30 per month. Non-Verizon wireless customers pay $60 per month. There is free tech support for setup issues for 30-days, implying that tech support will entail a fee after that.

Verizon touts the product as delivering 25 Mbps download speeds, with bursts as high as 50 Mbps. Verizon is launching the product in three markets – Savannah, GA, Springfield, MO, and the Tri-cities area at the area near the borders of Tennessee, Virginia, and Kentucky.

The first question raised is if this product is intended to replace Verizon’s rural hotspot product, marketed as Verizon Jetpack. The Verizon announcement says, “Verizon will expand home Internet access to customers outside the Fios and 5G Home footprints, expanding home connectivity options to rural areas.”, which implies that this is a replacement for the current rural 4G hotspot product. If so, this would be a drastic repricing for rural LTE broadband.

The Jetpack hotspot is widely used in rural America where there are no other broadband alternatives. From what I can see, the Verizon hotspot is the most expensive broadband in the country and is billed at data rates similar to normal cellular plans. The Jetpack product has four available pricing tiers based upon the monthly data allowance. The 10 GB plan is $60, the 20 GB plan is $90, the 30 GB plan is $120, and the 40 GB plan is $150. The real price killer is that Verizon bills additional gigabytes at $10 each. I’ve talked to rural households that spend $500 or per month or more for the hotspot plan.

The release of the new product caught the industry by surprise and there was little or no buzz that this was coming. The big question that those living in rural America will have is if Verizon will offer this as an alternative to the Jetpack product. Is Verizon planning to move customers from plans that cost hundreds of dollars per month to a plan that offers unlimited data for $40 to $60? If so, then this is great news for rural America.

My second question concerns data speeds. Verizon advertises the existing Jetpack product as having from 5 to 12 Mbps download and 2 to 5 Mbps upload. However, the current plan comes with a warning that the product only works where Verizon has a ‘strong’ data signal. I’ve talked to a number of households that say that the Jetpack product is only delivering a few Mbps. Rural LTE data speeds are reliant upon two factors – how close a customer is to a cell tower, and the underlying strength of the broadband feeding the tower.

I wonder if the new product will be any faster? There is a chance that it can be faster if the new device utilizes more frequency bands than the old hotspot receiver. But cellular speeds, in general, get weaker with distance from a cellular tower, and folks that are more than a mile or two from a tower are not likely to get the touted 25 Mbps speeds on the new product.

The cynic in me suspects that Verizon will only activate this product near markets where they have faster broadband products. This would be a good fill-in product for low-bandwidth homes in neighborhoods served by FiOS or the new fiber-to-the-curb FWA product. This is not a bad broadband product for a home that only reads emails and watches a single stream of video – but this product would bog down quickly if used to support multiple simultaneous users.

I doubt that the average urban broadband customer appreciates the misery of homes using the Jetpack hotspot. Data use is metered and it cost $10 of broadband to watch a movie. Families with kids using the hotspot have a constant fight to keep them off the Internet. I hope my gut feeling is wrong and that Verizon will introduce this everywhere and toss out the hotspot product. Even if this product doesn’t bring faster data speeds to rural homes, the pricing and the ability to use unlimited data would be a welcome relief to homes using the Jetpack hotspot. It’s possible that this product is Verizon’s response to T-Mobile’s promised rural 5G product, but we’ll have to wait to see where this is made available before getting too excited about it.

Is the Line Between Wireless and Wireline Blurring?

In the Bernstein Strategic Conference in May, Ronan Dunne, Verizon CEO and EVP for Verizon Consumer talked about his vision for the future of 5G. During that presentation, he made a statement that has been bugging me for weeks, so I finally had to write about it. He said that he can foresee a day when consumers will purchase home broadband in the same way that they buy wireless service today. He said that will happen because the line between the wireless and wireline business are blurring.

Dunne is talking about a future when 5G is ubiquitous and where people won’t perceive a difference between landline broadband and 5G broadband. In a term used by an economist, Dunne foresees a day when wireless broadband is a pure substitute for landline broadband – where a customer won’t perceive a functional difference between the two products.

Verizon offers several wireless products, so let’s talk about them individually. The predominant Verizon product that is in every market is cellular broadband. This uses cell sites to beam voice and data traffic to cellphones or other devices that are connected to a cellular data plan. Those cellular plans are incredibly stingy in terms of the amount of broadband that can be used in a month, with the unlimited plans offering a little more than 20 gigabytes of data before a user has to pay more or become restricted. The specifications for 5G set a goal of 100 Mbps for cellular broadband speeds within a decade. That kind of speed might be a substitute for landline broadband today from a speed perspective. But networks are not likely to achieve these speeds for at least five more years, and by then I think cable companies will be considering increase urban broadband speeds to something like 250 Mbps. I have to question if cellular broadband speeds can keep up with the speeds provided by landline connections.

Of more importance is that cellular speeds drop when entering a building. Anybody who has walked into a large building using their cellphone understands that cellular signals don’t perform as well indoors as outdoors. By the time I walk 100 feet into my neighborhood grocery store, I often have zero bars of data. While speeds don’t drop that drastically in most homes, when outdoor cellular speeds hit 100 Mbps, indoor speeds in most homes might hit half that number. With slower speeds and incredibly stingy data caps it’s hard to see cellular broadband as a pure substitute for a landline broadband connection.

I also don’t think that the gimmick product that Verizon and others are selling in urban city centers that offers gigabit speeds using millimeter wave spectrum is a landline substitute. The product requires closely spaced small cell sites fed by fiber – but the big gotcha is that the millimeter wave spectrum won’t penetrate a building and barely even make it through a pane of glass. This is an outdoor product for which I still struggle to understand a willing market. It’s certainly not a substitute for landline broadband, except perhaps for somebody who is always outdoors.

The newest wireless product is Verizon’s fixed wireless access (FWA) that beams a broadband signal into the home from a pole-mounted transmitter at the curb using millimeter wave spectrum. I have to suspect that this is the product Dunne is talking about. I would agree with him that this is a pure substitute for landline broadband. But that’s because this is just another variation of landline broadband. This technology has historically been referred to as fiber-to-the-curb. Verizon is using a wireless transmission instead of a fiber line for the last hundred feet to reach a home – but this technology requires building the same fiber into neighborhoods as fiber-to-the-home. This is not a wireless technology since 99% of the network is still comprised of fiber. Anybody using this service can walk to their curb to see the fiber that is carrying their broadband. This technology is a clear substitute for a landline fiber drop – but it’s not a wireless network other than for the last 100 feet to a home.

The other way to challenge Dunne’s vision is by comparing the volume of traffic used by landline and wireless networks. The vast majority of data traffic is still carried over wires and the gulf between the data carried by each technology is widening every year. Consider the following chart from Cisco from 2019 that shows the volumes of monthly data traffic in North America by type. This is expressed in exabytes (one billion gigabytes).

Monthly Exabytes 2017 2018 2019 2020 2021 2022
Homes 35 43 53 64 75 90
Cellular 1.3 1.8 2.5 3.4 4.5 5.9
Business 6.5 8.3 10.3 12.8 15.5 18.5
Total 43 53 66 80 95 114

Both home and business broadband are carried on wires. In 2020, only a little more than 4% of all of the data traffic in North America is carried wirelessly. For wireless technology to be a pure substitute for wireline data, wireless networks would have to be capable of carrying a much bigger share of data – many times what they carry today. The laws of physics argue against that, particularly since landline data usage is growing at an exponential rate. It’s hard to envision wireless networks in our lifetime that can handle the same volumes of data as fiber-based landline networks.

This is not intended as a major criticism of what Dunne said. The country will be better off if Verizon offers a competitive alternative to the cable companies. However, Verizon is like the other cellular companies and can’t talk about 5G without overstating the potential. I know has to keep hyping 5G for Wall Street and I sympathize with that need. But we are still very far from a day when the average household will view landline and wireless data to be pure substitutes.

Verizon Restarts Wireless Gigabit Broadband Roll-out

After a two-year pause, Verizon has launched a new version of its fixed wireless access (FWA) broadband, launching the service in Detroit. Two years ago, the company launched a trial version of the product in Sacramento and a few other cities and then went quiet about the product. The company is still touting this as a 5G product, but it’s not and using millimeter wave radios to replace the fiber drop in a fiber network. For some reason, Verizon is not touting this as fiber-to-the-curb, meaning the marketing folks at the company are electing to stress 5G rather than the fiber aspect of the technology.

Verizon has obviously been doing research and development work and the new wireless product looks and works differently than the first-generation product. The first product involved mounting an antenna on the outside of the home and then drilling a hole for fiber to enter the home. The new product has a receiver mounted inside a window that faces the street. This receiver connects wirelessly with a home router that looks a lot like an Amazon Echo which comes enabled with Alexa. Verizon is touting that the new product can be self-installed, as is demonstrated on the Verizon web page for the product.

Verizon says the FWA service delivers speeds up to a gigabit. Unlike with fiber, that speed is not guaranteed and is going to vary by home depending upon issues like distance from the transmitter, foliage, and other local issues. Verizon is still pricing this the same as two years ago – $50 per month for customers who buy Verizon wireless products and $70 per month for those who don’t. It doesn’t look like there are any additional or hidden fees, which is part of the new billing philosophy that Verizon announced in late 2019.

The new product eliminates one of the controversial aspects of the first-generation product. Verizon was asking customers to sign an agreement that they could not remove the external antenna even if they dropped the Verizon service. The company was using external antennas to bounce signals to reach additional homes that might have been out of sight of the transmitters on poles. With units mounted inside of homes that kind of secondary transmission path is not going to be possible. This should mean that the network won’t reach out to as many homes.

Verizon is using introductory pricing to push the product. Right now, the web is offering three months of free service. This also comes with a year of Disney+ for free, Stream TV for free, and a month of YouTube TV for free.

The router connects to everything in the home wirelessly. The wireless router comes with WiFi 6, which is not much of a selling point yet since there are practically no devices in homes that can yet use the new standard – but over time this will become the standard WiFi deployment. Customers can buy additional WiFi extenders for $200 if needed. It’s hard to tell from the pictures if the router unit has an Ethernet jack.

From a network perspective, this product still requires Verizon to build fiber in neighborhoods and install pole-mounted transmitters to beam the signal into homes. The wireless path to the home is going to require a good line-of-sight, but a customer only needs to find one window where this will work.

From a cost perspective, it’s hard to see how this network will cost less than a standard fiber-to-the-home network. Fiber is required on the street and then a series of transmitters must be installed on poles. For the long run operations of the network, it seems likely that the pole-mounted and home units will have to be periodically replaced, meaning perhaps a higher long-term operational cost than FTTH.

Interestingly, Verizon is not mentioning upload speeds. The pandemic has taught a lot of homes how important upload speeds are, Upload speed is currently one of the biggest vulnerabilities of cable broadband and I’m surprised to not see Verizon capitalize on this advantage for the product – that’s probably coming later.

Verizon says they still intend to use the technology to pass 30 million homes – the same goal they announced two years ago. Assuming they succeed, they will put a lot of pressure on the cable companies – particularly with pricing. The gigabit-range broadband products from Comcast and Charter cost $100 or more while the Verizon FWA product rivals the prices of the basic broadband products from the cable companies.

Verizon’s Network Performance

Verizon has been posting a weekly report of how COVID-19 has been impacting their network. The weekly blogs are rather short on facts and it’s clear that the intent of this weekly report is to put investors at ease that the company’s networks are coping with the burst of traffic that has come as a result of the pandemic. With that said, the facts that are discussed are interesting.

Verizon lead off the weekly entry for 5/21 saying that voice and text traffic are starting to return to pre-COVID levels. On the most recent Monday Verizon saw 776 million voice calls, down from 860 million calls at the peak of COVID-19. That falls under the category of interesting fact, but heavier telephone call volumes are not the cause of undue stress on the Verizon network. Telephone calls use tiny amounts of broadband – 64 kbps. Thirty telephone calls will fit into the same-size data path as one Netflix stream. Additionally, once voice calls reach a Verizon hub, telephone calls are routed using a separate public switched telephone network PSTN to transport calls across the country. Text messages use much less data than a telephone call and are barely noticed on telco networks.

The bigger news is that some other traffic is staying at elevated levels. Verizon reported for 5/21 that gaming is still up 82% over pre-pandemic levels and VPN connections used to connect to school and work servers are up 72%. The use of collaborative tools like Zoom and Go-to-Meeting are up ten times over pre-COVID levels (1,000%).

One of the more interesting statistics is that network mobility (people driving or walking and switching between cell towers) has increased in recent weeks and that one-third of states now have higher levels of mobility than pre-COVID. At first that’s a little hard to believe until you realize that in pre-COVID time students and employees were largely stationary at the school or office much of the day – any roaming by stay-at-home people is an increase.

Reading back through the weekly statistics shows that most web activities are at higher levels than pre-COVID. Fir example, in the 4/22 report the volumes of downloading, gaming, video usage, VPNs, and overall web traffic were higher than normal, with the only decrease being the volumes used for social media.

What none of these reports talk about is the stress put on the Verizon networks. It’s easy in reading these reports to forget that Verizon wears many hats and operates many networks. They are still a regulated telco in the northeast and still have a lot of telephone customers. That also means they still operate a sizable DSL network. The company, through Verizon FiOS is still the largest fiber-to-the-home provider. The company also owns and extensive enterprise and long-haul fiber network. Verizon also operates one of the largest cellular networks in the world.

When Verizon says all is well, they can’t mean that for each of these networks. The web is full right now of complaints from DSL customers (Verizon’s and other big telcos) complaining how inadequate DSL is for working at home. The Verizon DSL network was already overstressed in evenings and has to be near the point of collapse due to the big increases in VPNs and collaboration connections. Any Verizon DSL customer reading this Verizon blog that says everything is fine is probably spitting fire.

By contrast, Verizon’s FiOS networks are likely handing the pandemic traffic with ease. Verizon FTTH products have offered symmetrical data for years, with the upload data path was lightly utilized. The big uptick in VPN connections and collaboration connections ought to be handled well in that network. Any glitches might come from older FiOS neighborhoods where the backhaul oaths out of neighborhoods are too small.

What Verizon or AT&T haven’t talked about is the different impact on their various networks. For example, what’s the overall change in data usage on their cellular networks compared to other networks? The big telcos have been moot on this kind of detail, because admitting that some of the networks are handing the pandemic well might lead to an admission that other parts of the company are not doing so well. Instead we get the very generic story of how everything is fine with the company and their networks.

These companies probably do not have any obligations to report about their various networks in detail. Verizon DSL customers don’t need company pronouncements to know that their broadband experience has nearly collapsed since the pandemic. FiOS customers are likely happy that their broadband has weathered the storm. One of these days I’ll hopefully have a beer with some Verizon engineer who can tell me what really happened – both good and bad – behind the scenes.

Frontier’s Lack of Fiber

The primary reason that Frontier cites for going into bankruptcy is the lack of fiber. They are finally acknowledging that customers are bailing on them due to the poor broadband speeds on their copper networks. This is being presented as if this is a sudden revelation – as if the company woke up one day and realized that it’s selling services that nobody wants to buy. I must admit this gave me a chuckle and there are some giant flaws with this argument.

Rural customers don’t hate DSL – they hate DSL that doesn’t work. If Frontier had implemented the CAF II upgrades as had been promised, then rural customers would all be using the 10/1 Mbps or faster rural DSL that would have been created as a result of those upgrades. Instead, customers have gotten disgusted by overpriced DSL that is so slow that they can’t stream video or connect to a school or work server. We’ve been doing speed tests all over the country and it’s rare to find rural DSL in many markets that delivers even 5 Mbps download – much of it is far slower than that, some barely faster than dial-up. If Frontier had provided 10/1 Mbps DSL to millions of homes, those households would gratefully be buying that broadband during the COVID-19 crisis.

Frontier blames its woes on lack of fiber with no mention of their reputation for unconscionably bad customer service. I’ve talked to customers who talk about routine network outages that lasts for many days. Customers complain about losing broadband and having to wait weeks to get it repaired – or worse, are told that the electronics needed to replace a bad DSL modem are out of stock. This is a company that has trimmed, then trimmed again its maintenance staff to the bone. Talk to any rural Frontier technician and they’ll tell you that they don’t have the time or resources available to address routine customer problems.

Frontier complains about lack of fiber, but as recently as 2015 they purchased another huge pile or dilapidated Verizon copper networks as part of a $10.5 billion acquisition. While that acquisition came with some FiOS fiber networks, the company also doubled down on buying non-functional copper networks. The speculation in the industry was that Frontier continued to buy lousy properties because it created opportunities for huge management bonuses – the company never had any plans to make the purchased copper networks any better.

And that’s the real issue with Frontier’s claim – they have no fiber because they’ve made almost no effort to migrate to fiber. The company burned all of its cash on trying to service the debt for overpriced acquisitions rather than rolling cash back into its networks.

It’s interesting to compare Frontier to the many smaller independent telephone companies. The FCC brags about places like the Dakotas that have a huge amount of rural fiber to homes. But that rural fiber didn’t happen all at once. It happened over decades. Most rural telcos went through two rounds of investment where they invested to improve rural DSL. In doing so they built fiber to go deeper into the rural areas, the first build brought fiber within maybe ten miles of homes, the second got fiber to within 3 miles of most homes. When the rural telcos decided to take fiber the rest of the way, it was reasonably achievable because they already had fiber deep into rural neighborhoods.

Frontier has done very little of that kind of incremental improvements over the years. They found it more enticing to keep borrowing to buy new rural properties rather than roll cash back into the existing networks. It doesn’t even look like they did all of that much new fiber as part of the CAF II upgrades. I’m sure Frontier would refute that statement and say they are fully compliant with CAF II, but if they had built fiber deep into the network then rural DSL would have gotten better – and for the most part, it hasn’t.

I can’t how the bankruptcy will benefit frontier’s customers. The company will likely get to walk away from a lot of the debt that was provided for the last few acquisitions – and it’s hard to feel bad for lenders who thought it was a good idea in 2015 to lend to buy copper networks. But bankruptcy won’t fix any of the fundamental problems with the Frontier networks. Customers are going to continue to bail on inferior and nonfunctional broadband products. The upcoming RDOF auction is going to give a lot of money to ISPs that are going to overbuild Frontier copper with something better (even though Frontier made a last-minute filing at the FCC to block grant funding by claiming they had magically upgraded 16,000 rural census blocks).

Is Frontier going to somehow start investing in rural fiber? My best guess is that they won’t even after bankruptcy. If they can raise any money for new capital spending they’ll likely try to salvage some of the county seats and other markets where there is a mass of customers. However, in many of those markets they’ve already lost the battle to the cable companies.

Frontier is right in that they are failing from lack of fiber. But that statement doesn’t tell the full story. They are failing because the company decided decades ago to not invest capital into their own networks – and now they are paying the price.

Can LTE Fixed Wireless Solve the Rural Digital Divide?

I’ve been working in rural counties all over the US and have found that a lot of rural homes are using a fixed 4G LTE wireless product for home broadband. All three big cellular companies have a fixed LTE product for the home. The product typically involves installing a small dish outside of a home that receives broadband using 4G LTE broadband from a nearby cell tower.

The big cellular companies have bombarded the press for the last several years touting how 5G cellular might solve rural broadband gaps. The way the wireless companies price and market these products is a precursor for what they will likely do with 5G (assuming 5G even comes to rural places). I haven’t looked into the LTE products in a while and so I researched the LTE broadband products intended as home broadband. I knew these products were expensive, but I had forgotten how stingy these plans are with broadband.

Verizon. Verizon’s hotspot product has four available pricing tiers based upon the monthly data allowance. The 10 GB plan is $60, the 20 GB plan is $90, the 30 GB plan is $120, and the 40 GB plan is $150. The real cost killer is that Verizon bills additional gigabits for $10 each.

Verizon says that broadband speeds average from 5 – 12 Mbps download and 2 – 5 Mbps upload. I recently talked to a customer using this plan who told me that when a customer doesn’t agree to pay the overage charges that Verizon throttles speeds to a crawl once the monthly data limit has been reached.

T-Mobile. T-Mobile has six hotspot pricing plans based upon the monthly data usage. The 2 GB plan is $10. The 6 GB plan is $25, the 10 GB plan is $40, the 14 GB plan is $55, the 18 GB plan is $70, and the 22 GB plan is $85. Each plan offers a $5 discount for customers who authorize autopay. The killer with this plan is that speeds revert to 3G speeds when the cap has been met. The plans also include unlimited texting.

It’s worth noting that T-Mobile will offer a plan that provides 100 GB of monthly data to qualified students for the next 5 years as one of the promises made to merge with Sprint. I haven’t seen the definition of eligible households, but the company estimated 10 million homes would be eligible.

AT&T. AT&T has two plans. In areas where AT&T is the incumbent telephone provider and accepted CAF II funding, the company decided to provide 4G LTE fixed cellular broadband to satisfy their CAF II requirements. The company had accepted $2.56 billion from the FCC’s Universal Service fund with payments spread over six years. That funding covered 1,117,806 rural homes, providing AT&T with a subsidy of $2,296 per home.

That CAF II product is priced at $50 per month and comes with a 250 GB data cap. AT&T says that speeds are at least 10/1 Mbps (since that was the FCC requirement). The killer with this plan is that customers pay $10 for each additional 50 GB block of data, and payments aren’t capped until a customer spends $200 extra.

Outside of the CAF II areas, AT&T has three hotspot plans. That includes 3 GB of data for $25, 10 GB of data for $50, and 18 GB of data for $75. Extra data ranges from $10 for 1 GB with the $25-dollar plan to $10 for 2 extra GBs with the $72 plan.

Do These Products Solve the Rural Digital Divide? I think not – the core hotspot products define the digital divide. Rural customers who have no other options are paying for some of the most expensive broadband in the world. You have to look at distressed third world countries to see similarly high prices per gigabyte. Recall in looking at these prices that these products are for home broadband – not for cellphones.

  • Verizon’s plans range from $3.75 to $6.00 per gigabyte. Additional gigabytes are $10 each.
  • T-Mobile data prices range from $3.86 to $5 per gigabyte. After hitting the data cap, the company throttles customers rather than provide more expensive data.
  • AT&T hotspots are the most expensive and range from $4.16 to $8.22 per gigabyte. Extra gigabytes on AT&T range between $5 and $10 per gigabyte.
  • AT&T’s CAF II product is much more affordable. However, customers can still spend up to $250 per month. Additionally, AT&T charges $100 for installation, which is outrageous considering the company collected $2,296 from the FCC for each of the 1.1 million potential customers. The CAF II money had to have gone almost entirely to AT&T’s bottom line.

What is somewhat ironic is that the cellular companies don’t aggressively advertise the product in rural America, even at these incredibly high prices. I guess that the cellular carriers don’t want to sink any money into rural cell sites or pay for more backhaul, so they are reluctant to sell very much of these products in any one location.