Broadband service subsidies not popular in rural areas

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“Local governments should be able to build their own high-speed networks if the service in their area is too expensive or not good enough”, say 70% of people in the U.S.. According to a survey done by Pew Research, the concept of municipal broadband gets overwhelming bipartisan support: 74% of people identifying themselves as democrats and 67% as republicans agreed with that statement.

Care should be taken not to read too much into this ringing endorsement, though. People’s opinions changed radically when asked about spending government money on broadband service and whether it, in fact, costs too much or runs too slowly…

Fewer than half of Americans (44%) think the government should provide subsidies to help lower-income Americans pay for high-speed internet at home. A larger share (54%) says high-speed home internet service is affordable enough that nearly every household should be able to buy service on its own…

Americans have different levels of support for broadband subsidies based on political affiliation. Six-in-ten Democrats and independents who lean Democratic say the government should help lower-income Americans purchase high-speed internet service, but that figure falls to just 24% among Republicans and Republican-leaning independents. These partisan differences stand in stark contrast to attitudes toward municipal broadband networks.

The divide is almost as stark between rural and urban residents. Half of people in urban areas think subsidising broadband service is okay and more than half think it’s not affordable for everyone. On the other hand, in rural areas, where broadband service tends to be slower and dearer than in cities, only 36% thought it should be subsidised and 63% think it’s fast and affordable enough for everyone.

Philosophically, Americans are comfortable with the idea of adding broadband to the list of services a city might or might not providing. In that respect, they seem to put it into the same bucket as water or electricity, which are delivered by both municipalities and private companies, depending on local circumstances and history. But the Pew study also indicates that it’s likely to be an uphill battle to convince them that their tax money should be spent on cheaper or faster Internet service. Particularly in communities most likely to lack it.

Subsidise what we’re already doing, telecoms companies tell CPUC

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Give me the money!

Big telecoms companies don’t want California broadband infrastructure subsidies to go to potential competitors, and they don’t want to be pushed into spending any more capital on upgrades than they’ve already budgeted. AT&T, Frontier Communications and the cable industry’s California lobbying front took a defensive posture in comments regarding broadband development priorities drafted by the California Public Utilities Commission. It was in response to a staff white paper that took a first shot at a quantitative analysis of how to get the greatest benefit out of the roughly $60 million still available for infrastructure grants in the California Advanced Services Fund.

AT&T wants the CPUC to put middle mile projects at the bottom of the list and to turn a blind eye to last mile technology. The former is not surprising, since last mile competition flows from middle mile projects, and competition is the last thing that AT&T wants in rural and inner city markets where it has monopoly control. With that kind of dominance in rural and inner city areas, AT&T plans to rip out copper networks and replace them with wireless systems, which is why it wants the CPUC to look kindly upon that kind of technology. If it loses its monopoly grip, though, competition would severely dent, if not kill, its wireless local loop business model.

Both Frontier and the cable industry’s Sacramento lobbyists also want the CPUC to back away from funding potentially competitive projects, although they express it in terms of avoiding areas where promises have been made to eventually upgrade service or where federal programs will subsidise broadband infrastructure. Substandard broadband service, it should be noted. The 10 Mbps download/1 Mbps upload speeds allowed under the Federal Communication Commission’s program are below the CPUC’s current minimum, and far less than the FCC’s own 25 Mbps down/3 Mbps up standard for advanced service. Which is what the, um, California Advanced Services Fund is supposed to be about.

Rural telephone companies, aka small LECs (local exchange carriers), take a warmer approach to the CASF program overall, and had generally good things to say about the criteria and methodology used in the white paper. Echoing others’ comments, including the response I wrote on behalf of the Central Coast Broadband Consortium, the small LECs asked the CPUC to apply any new criteria to future projects, and not toss out the current batch of proposals, most of which have been languishing for more than a year. They urged a more qualitative approach – not surprising since the quantitative, bang-for-the-buck analysis in the draft largely leaves out their sparsely populated service territories.

T-Mobile leads 600 MHz auction, DISH slips easily in behind

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T-Mobile is the big winner, or at least the big spender, in the Federal Communication Commission’s $20 billion incentive auction, walking away with more than half the 600 MHz band licenses up for grabs – 1,525 licenses, 55% of the total. Second place went to DISH, which paid $6.2 billion for 486 licenses, 18% of the total.

Who came in third depends on how you’re figuring it. Comcast bid the third most money – $1.7 billion – but ended up with only 73 licenses, a mere 3%. U.S. Cellular – the distant number five mobile carrier in the U.S. – was number three in the license race, paying $329 million for 188 licenses (7% of the total, but not prime real estate).

AT&T plunked down nearly a gigabuck – $910 million – for 23 licenses, a 1% share. Verizon, on the other hand, was shut out, winning zero licenses but, on the other hand, paying zero dollars.

Sprint didn’t participate, or at least not under its own flag. There will certainly be further wheeling and dealing. Many of the winning bidders appear to be have transaction motives rather than action plans.

DISH is top of that list. Chairman Charlie Ergen made the leap from millionaire to billionaire after placing a low cost, high return bet on direct broadband satellite slots back in the 80s, and has been playing the spectrum sweepstakes ever since. He’ll light up frequencies himself when there’s an open field – as there was with DBS once it got going in 90s – but otherwise manages his licenses as an investment portfolio.

Don’t expect anything revolutionary from anyone in the near term. It’ll take a few years to move TV stations off of the frequencies they’re giving up in exchange for $10 billion. And which they, or at least the original license holders, paid exactly zilch to acquire.

Apple goes public with self-driving car plans. Sorta

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Apple has finally admitted that it has a self-driving car project in the works, but isn’t saying much else. It now has a permit from the California department of motor vehicles to test autonomous vehicles, which was issued, or at least posted, yesterday. According to the Wall Street Journal, its fleet consists of three Lexus SUVs which will be driven by six registered test drivers.

According to a story by Oscar Raymundo in Macworld, Apple’s business model might have shifted from making self-driving cars to developing software that’ll be offered to other manufacturers…

In 2016, however, Apple seemed to have pivoted the initiative, opting for creating just the self-driving software to license to established car-makers instead of assembling an entirely new Apple vehicle. This is a departure for Apple, which has created a legacy by developing both hardware and the software aspects of all its products.

He’s right, that would be a major strategic departure for Apple, which is why it would be a good idea not to bet the ranch that you won’t see an iCar, or whatever they’re going to call it, sometime in the future. Elon Musk expects Apple to get into the manufacturing game, and he has as much insight into what they’re doing as any outsider – in other words, no hard data but enough knowledge about the business to make an educated guess.

DMV registration carries with it an obligation to file public reports about any accidents, and to submit information once a year about whenever there a “disengagement of the autonomous mode caused by the failure of the technology or when the safe operation of the vehicle requires the test driver to take immediate manual control of the vehicle”. So we won’t have to wait too many months for a window into Apple’s development process.

In the meantime, if you’re cruising Cupertino, look for a tricked out Lexus.

California broadband subsidies should build, not follow, business case

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More than twenty companies and organisations offered their critiques of the first draft of a bang for the buck analysis of where the California Public Utilities Commission might focus its dwindling broadband infrastructure subsidy money. Many of the comments can be summed up as give me the money, with incumbent telcos and cable companies laying down defensive fire aimed at heading off potential competition – more about that on Monday.

Three of the commenters – the Karuk Tribe, and the CPUC’s office of ratepayer advocates and the consumer group TURN in a joint submission – made a fair point about the overall approach: by prioritising communities with bigger, denser populations, the analysis paralleled the sort of market evaluation done by Internet service providers when they decide whether or not to serve a particular area. As the ORA/TURN comments put it…

Taking a “think like an ISP” approach may duplicate efforts by ISPs that are already pursuing areas with their own capital expenditures. For example, at the [workshop held by the CPUC to discuss the draft], AT&T commented that it already deploys in areas where it sees population growth. Taking this approach may neglect areas which ISPs would not target and therefore are areas most in need of the CASF program’s funds.

A major reason CPUC analysts took that approach was to try to reach as many Californians as possible, partly because more people will benefit, but also because the California Advanced Services Fund – the source of the money – has a legislative mandate to bring sufficient broadband service to 98% of the state. You need to reach lots of people to do that.

Another reason to “think like an ISP” is to increase the likelihood that private sector companies will bear the financial and opportunity costs of applying for CASF money and, ultimately, build successful systems. The economic realities of building both broadband infrastructure and a sustainable business have to be considered.

But there’s more to the calculus than economic viability. As TURN, ORA and the Karuk Tribe correctly point out, broadband infrastructure subsidies should also be spent in a way that make bad business cases into good ones. That doesn’t mean ignoring more densely populated areas, but rather recognising that those are the cherries – if you want them, take the whole tree.

Download the comments…

AT&T
Bolinas Fire
Bolinas Utilities
Caltel
CCBC
CCTA
CETF
Charter
Frontier
Greenfield Communications – sorry, secret
Humboldt County
Karuk Tribe
Las Cumbres
Marin County
Mendocino County
Office of Ratepayer Advocates/Toward Utility Rate Normalization
Race
Sierra Business Council
Small LECs
Surfnet

Broadband infrastructure follows roads and rails to West Sacramento

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The railroads and freeways that made West Sacramento a logistic hub brought robust fiber optic infrastructure with them. As a result, the city is criss-crossed by long haul and metro fiber lines and hosts two data centers. That’s the one of the top line results of a study completed by Tellus Venture Associates and presented to the West Sacramento city council last week. Other findings include…

  • Along with excellent industrial grade fiber networks and data centers, the City of West Sacramento owns a significant amount of telecommunications conduit that can be used to leverage those assets.
  • The primary broadband infrastructure in West Sacramento, which is owned by AT&T and Wave, is near average when compared to California as a whole, receiving a “C-” grade (1.9 out of 4.0). That’s on a par with many Silicon Valley communities.
  • Nevertheless, consumers and business people generally believe that the Internet service they receive is not fast enough or reliable enough for their needs.
  • Mobile broadband service varies by provider, with some offering citywide coverage and others showing significant gaps in availability and/or capacity.
  • A glaring digital divide exists, with half of households adopting broadband at a significantly lower rate than Californians overall. This split correlates to economic status. Households with lower broadband adoption rates have an average income of about $41,000 per year, while those with higher rates average $75,000 and up.

Top of the policy and project recommendation list is for West Sacramento to keep doing what it’s already doing right – installing conduit in public works projects and leasing it to telecoms companies, for example – and build on that base by looking at extending fiber and conduit to industrial areas that need it.

Addressing the digital divide is also needful, and the City will be doing targeted public outreach to identify specific broadband development targets. Recommended next steps also include advocating for residents with state and federal regulators and policy makers, including urging that temporary low income programs offered by broadband providers be made permanent.

City of West Sacramento Broadband Infrastructure Assessment and Action Plan, 30 March 2017
Presentation to the West Sacramento City Council, 5 April 2017

PG&E seeks to use its California fiber to compete as a telco

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A vast, competitive fiber network will soon open up in northern California, if the California Public Utilities approves Pacific Gas and Electric Company’s request to operate as a telephone company. PG&E applied for a telco-style certificate of public convenience and necessity (CPCN) so it could sell services on the fiber network it’s built throughout California. Currently, it only allows other certified telephone companies to use its fiber, which was mostly built to support its own operations.

According to PG&E’s application

Applicant intends to provide services to telecommunications carriers and business, government, and educational enterprises, and such services may include managed wavelength point-to-point connections, Ethernet services, private fiber networks, and wireless backhaul. Applicant intends to offer services that other telecommunications providers and large enterprise customers require as the overall demand for wireless and broadband services continues to grow. Applicant does not intend to provide residential local exchange services…

Competition in the telecommunications markets, and especially those markets with a limited number of providers, will benefit customers as they will ultimately enjoy competitive pricing and expanded product and service offerings. Where new entrants like Applicant enter the market, existing providers may react by extending different service offerings and/or decreasing prices. Increased choice among providers promotes competitively driven rates for telecommunications services.

Reading between the lines of the application, it seems that PG&E no longer intends to lease its dark fiber, as it currently does with licensed phone companies, and instead it will move up the value chain and sell lit services. It would be a shame if it eventually played out that way, since the list of companies willing to lease dark fiber is already shrinking.

PG&E won’t be the first privately owned electric company to add telecoms to its portfolio. Southern California Edison was granted telco status almost 20 years ago, and the revenue sharing deal it struck with the CPUC could be a template for PG&E as well. SCE gives 10% of its gross fiber revenue back to its electric customers, with the rest going to shareholders. PG&E is proposing to split its after tax profits 50/50 between shareholders and electric customers, which might net out somewhere in the same ballpark. That’ll be one of the issues the CPUC is certain to spend some time chewing through.

From the standpoint of broadband customers, its good news, the potential lack of dark fiber service nothwithstanding. Once PG&E has a CPUC-blessed pathway to telecoms profits, it should compete more vigorously against other wholesale fiber service providers, including big incumbents like AT&T, Comcast and Charter. PG&E’s fiber footprint isn’t nearly as wide, but it is significant and adding a robust competitor to the market will be good for everyone, except of course incumbents who extract lucrative rents from rural monopolies and cozy urban and suburban duopolies.

San Francisco ban on exclusive ISP deals goes to FCC

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San Francisco’s open broadband access rule for apartments and condominiums will be tested at the Federal Communications Commission. As adopted by the San Francisco board of supervisors, the ordinance allows any resident of a multi-dwelling unit (MDU) to buy Internet service from any provider. The landlord or homeowner’s association has to allow access to both the building and the existing wiring inside of it. A lobbying front for companies that make a living providing exclusive broadband service to MDUs is asking the FCC to overturn the ruleArticle 52, for short – because, they say, it will result in less competition and fewer choices…

Though styled as a vehicle for promoting consumer “choice” among communications services, Article 52 in fact offers a de facto sweetheart deal to large, well-financed entities by overriding voluntary, contractual arrangements that are preconditions to the financing required for buildout by small, entrepreneurial start-ups. Typically, such providers must give their lenders indicators of likely success, such as an agreement granting the provider undisturbed use of inside wiring owned by the property owners, or a bulk billing arrangement under which the property owner purchases service and provides it as an amenity for all tenants at a steep discount off of regular retail pricing. Article 52 would effectively nullify such arrangements and afford an undue advantage to larger providers who do not need financing particularly Google, whose subsidiary Webpass was, not coincidentally, Article 52’s primary proponent—and consequently can afford to extend service to a building within Article 52’s constraints.

The FCC put the case on a fast track last week, giving the City and County of San Francisco – and anyone else who might be interested – a month to rebut (or support) the arguments made by the trade group, which is called the Multifamily Broadband Council. San Francisco’s initial response was to say that it’s exclusive deals that prevent new companies from competing and then to ask the FCC for an extra two weeks to respond.

Gigabit fiber in San Bernardino County heads for CPUC vote

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A fiber to the premise project for San Bernardino County – largest yet – is scheduled to go in front of the California Public Utilities Commission in May. A draft resolution was published on Friday, which proposes to award $29 million to Race Telecommunications from the California Advanced Services Fund (CASF) to build an FTTP system in and around the San Bernardino County communities of Phelan, Piñon Hills, Oak Hills and Hesperia.

As designed, it would pass 8,400 homes, which is “the most households ever given access by a CASF-subsidized last-mile project”, according to the draft. Race is projecting a 68% take rate, which amounts to 5,700 subscribers. Another 85 potential business and institutional customers will also be reachable via the system. The subsidy comes out to $3,400 per premise, which is in line with past CASF-funded FTTP projects. In the past two years, the CPUC has approved $48 million for eleven FTTP proposals totalling 12,400 homes, a $3,900 average all up. On a project basis, the median subsidy $7,000.

As with its past CASF-subsidised projects – Race has received eight CASF grants and completed work on four – its plan calls for offering symmetrical gigabit service for $60 a month to residences. Businesses would pay $200 for 100 Mbps service. There’s no mention of data caps for either.

The Phelan project also marked another first for the CASF project. After Race submitted its initial application for a $48 million subsidy, Ultimate Internet Access – another ISP with a CASF track record – submitted a competing proposal, which would have cost less than half that. During the ensuing months of back and forth discussions, the project area was adjusted and costs were trimmed. Race came back initially with a $23 million subsidy request, but after further changes to project plans and service area the final tab ended up at $29 million.

Net neutrality pinky swear from ISPs is good enough, says FCC chair

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Network neutrality rules that prohibit Internet service providers from speeding up or slowing down subscriber’s traffic based on what it is or whether or not it’s profitable appear to be on the way out. Federal Communications Commission chairman Ajit Pai reportedly met with lobbyists last week and floated the idea of a voluntary system that would have ISPs write net neutrality commitments into their terms of service, which in turn would be overseen by the Federal Trade Commission, and not the FCC.

According to a Reuters story by David Shepardson, under Pai’s plan broadband would no longer be considered a common carrier service…

The rules approved by the FCC under Democratic President Barack Obama in early 2015 prohibited broadband providers from giving or selling access to speedy internet, essentially a “fast lane”, to certain internet services over others. As part of that change, the FCC reclassified internet service providers much like utilities.

Pai wants to overturn that reclassification, but wants internet providers to voluntarily agree to not obstruct or slow consumer access to web content, two officials said late Tuesday…

Three sources said Pai plans to unveil his proposal to overturn the rules as early as late April and it could face an initial vote in May or June.

Politico.com reports that Pai’s closed door meeting included lobbyists from trade groups that front for wireline telcos, mobile carriers, cable companies and fixed wireless operators.

A completely voluntary system would be meaningless. Without the common carrier classification, there would be no direct regulatory oversight of broadband service practices and individual providers could change their terms at will. A possible middle ground could be to have companies agree contractually to common standards, perhaps through their respective trade associations, but that could trigger anti-trust problems. And in any event, there’s nothing to prevent them from adopting symbolic but ineffective standards or from reversing course later on.