Goal No. 3: Every American should have affordable access to robust broadband service, and the means and skills to subscribe if they so choose.
I can already hear the commentary on this one. Of course every American should have affordable access to broadband. It’s similar to stating every American should have affordable access to robust, high quality health care. It’s the right ideal but the means by which the goal is implemented will ultimately define its success or failure.
Just as health care policy changes rises the ire of adversely affected consumers and businesses, this goal has the potential of dramatically changing the face of rural broadband. On the surface, there isn’t much substance to this goal. But closer inspection will reveal some controversial initiatives that are outlined within the NBP.
The supporting narrative behind this goal states: “Three requirements must be satisfied to ensure every American can take advantage of broadband. First, every American home must have access to network services. Second, every household should be able to afford that service. Third, every American should have the opportunity to develop digital skills.”
The second requirement of this goal is fairly straightforward. The FCC proposes extending the Lifeline and Link-Up programs to support broadband. The third requirement isn’t too controversial though funding of age-appropriate digital literacy education isn’t spelled out in this plan. In either case, the impact of these requirements is more targeted towards consumers and education. My personal belief is that competition has a bigger impact on broadband affordability (although it’s not unusual to see collusion to drive prices higher) and digital literacy is a somewhat understood issue (albeit not necessarily easily addressed).
The controversial requirement supporting this goal is the first one. Per the NBP: “The plan recommends reforming existing support mechanisms to foster deployment of broadband in high-cost areas: specifically, the Universal Service Fund and intercarrier compensation (ICC). The plan outlines a 10-year, three-stage course of action to transform these programs to connect those who do not have access to adequate broadband infrastructure. Rather than add new burdens to the already strained contribution base, we must make the tough choice to shift existing support that is not advancing public policy goals in order to directly focus those resources on communities unserved by broadband.”
From my read, I see goal #3 as having a significant impact on the rural broadband market. Today, most rural carriers rely on USF and ICC as a significant portion of their revenue base. By creating an environment that creates a digitally savvy consumer base with access to affordable broadband services, the belief is that demand will increase. With increased demand, the revenue mix of rural broadband providers will continue to evolve away from one heavily dependent on USF and ICC.
However, one key challenge remains. Will the rural market be able to offer more than the basic need of connectivity to the Internet? And if so, how will they monetize that broadband connection? Ultimately, to change the rural telco business model, operators must find alternative revenue sources. And with traditional voice revenues continuing to erode, the focus is (and in many cases already has) shifted to broadband. But as most industry observers will agree, rural broadband providers don’t have the economies of scale to develop market specific features such as those available through Verizon’s FiOS service and their widget applications.
This long term goal essentially provides a 10 year window for rural providers to evolve their business models away from voice, USF and ICC towards broadband and the newly proposed Connect America Fund (CAF). You can read more about the proposed CAF and its funding sources here.
Why is this controversial? There are hundreds of rural broadband providers who will be challenged to evolve as USF/ICC reform takes place over the next decade. Collectively, they represent between 12 and 19 million (depending on which operators are counted) access lines. And this number appears to be growing as large incumbents divest themselves of rural access lines (as Verizon has been doing for a few years now). The impact on these operators will range from somewhat disruptive to ‘game changing’ for those heavily dependent on today’s mode of operation.
What do you think? Is this good for the broadband industry? How will rural broadband providers evolve?
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( 3 / 64 )Continuing the series of blogs on the National Broadband Plan (NBP), today’s entry is focused on the second long term broadband goal as stated by the FCC. The goal is stated as follows:
Goal No. 2: The United States should lead the world in mobile innovation, with the fastest and most extensive wireless networks of any nation.
Citing the NBP language: “To achieve this goal of leading the world in mobile broadband, the plan recommends making 500 megahertz of spectrum newly available for broadband by 2020, with a benchmark of making 300 megahertz available by 2015. In addition, we should ensure greater transparency in spectrum allocation and utilization, reserve spectrum for unlicensed use and make more spectrum available for opportunistic and secondary uses.”
I’m sure you’ll agree this and each of the six long term broadband goals is a dubious undertaking. And while I’m sure there are challenges associated with making this spectrum available, I will focus my attention on the impacts to wireline broadband.
The availability of more spectrum for wireless broadband does have direct implications on wireline operators. First, keep in mind, wireless broadband is still a ‘last mile’ infrastructure. By increasing the capacity of the last mile spectrum, it is my belief that the FCC aims to drive the adoption of new mobile enabled devices, services and even business practices (more app stores?).
This presents an interesting dilemma for wireline broadband providers. Does this goal really translate to one of increasing broadband competition? Or is this simply a way of ensuring that all consumers – irrespective of location or population densities – have at least some basic form of broadband available to suit their needs? Perhaps it’s both. After all, none of the long term goals explicitly states any long term competitive initiatives even though there are numerous recommendations outlined in the broader NBP.
The second implication I can think of is adding more last mile capacity will ultimately drive the need for more capacity in the middle mile. In the case of wireless networks, the middle mile can be looked at as either mobile base station backhaul or the aggregation and transport network from the CO or POP towards the PSTN or Internet. Either way, wireline incumbents will see traffic increases directly resulting from the increases in wireless spectrum.
Third and perhaps most concerning to many wireline telecommunications companies is the implication off added wireless broadband capacity on wireline broadband networks. It’s somewhat counter intuitive but the advancements in wireless broadband will have a direct and dramatic impact on last mile wireline broadband. And I can summarize this statement with one word – femtocells.
Femtocells are now being touted by AT&T as a way to improve the wireless consumer broadband experience by offloading traffic from the mobile base station. But the traffic has to go somewhere and with femtocells, the traffic is backhauled to the Internet via the wireline broadband network. This is hugely beneficial to wireless providers but creates an added and in most cases unwelcome burden on wireline providers (including cable MSOs and rural telcos who don’t own wireless spectrum).
More wireless spectrum will surely lead to more services, devices and innovative business practices. And at first glance, one might conclude the benefits (or consequences) are primarily relegated to the wireless industry. But wireline broadband providers should pay close attention to the progress of the industry on this goal. It’s success will have a direct and long lasting impact on DSL, FTTP and even DOCSIS networks.
It’s fair to say that this long term goal is far reaching and has a direct impact on all forms of broadband. What do you think? Is the NBP goal #2 good for the broader US broadband health?
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( 3 / 77 )Now that the National Broadband Plan (NBP) is out, the industry is going to take some time to analyze, critique and posit alternatives to the plan as stated. It goes without saying that I will have my own opinions and they will be aired out in due course.
For now, I’d like to discuss the long term goals as stated in the NBP. This is the first of a series of blogs dedicated to the 6 goals outlined by the FCC as motivations behind the NBP. Each goal will be discussed on its merits and I’ll offer some opinions as to what it might mean to the industry.
Goal No. 1: At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second.
Broadbandtrends.com – a leading market analyst firm – recently published its global fixed broadband report which provides a North American breakout of broadband connections. At the end of 2009, the US, had 81.1 million total broadband subscribers and broadband penetration stands at nearly 68 percent of total households. This means there are approximately 119.3 million homes in the US that have access to broadband.
There are two ways to read the goal. First, 100 million homes should have access to the 100Mbps/50Mbps service which I take to mean the home is passed with the technology but may or may not consume the service. The second interpretation could mean that consumers actually buy the stated service at an affordable price. Call me a cynic but considering FTTH represents ~4.4% and cable represents 54.6% of all NA broadband subscribers (per the Broadbandtrends.com report), I think the goal should be read as homes passed.
The FCC adds: “As a milestone, by 2015, 100 million U.S. homes should have affordable access to actual download speeds of 50 Mbps and actual upload speeds of 20 Mbps.”
Considering DSL represents just shy of 40% of the market, I think its safe to say US wireline service providers would require significant investments in new technologies (VDSL2, FTTP) to achieve even the interim goal. Similarly, cable MSOs would need to step up their investments in DOCSIS 3.0.
Is this goal realistic? Given today’s investment profiles and the potential changes to the USF and ICC programs, it’s certainly not going to be easy. Verizon has been the most aggressive national carrier in terms of investments in FTTH. Recent news articles state Verizon is close to passing 18 million homes with its FiOS service representing about 56% of its current service footprint. On a smaller scale, rural service providers have also been investing in FTTH networks though accurate numbers are not readily available. Sufficed it to say, investments in new technologies will need to be made to achieve these goals.
From a technology perspective, FTTH is not the only way to skin this cat. DOCSIS 3.0 is capable of achieving these goals depending on the number of frequency channels bonded together. Of course, the FCC goal says nothing about traffic over-subscription so I’ll state the merits of the last mile infrastructure independent of traffic engineering practices.
VDSL2 is also capable of achieving this goal though to get to the long term goal of 100Mbps electronics must be within a very short distance of the consumer (100+ meters). Numerous wireline providers are looking at VDSL2 bonding to deliver higher bandwidths but it’s safe to say significant last mile network redesigns are needed to take advantage of the rates offered by VDSL2.
Can technology enable service providers to meet the long term goal of 100Mbps to 100 million homes by 2020? Absolutely. But the US has a long way to go towards meeting even the interim goal of 50Mbps to 100 million homes. As is the case with much of the NBP, much will depend on what the FCC does to help fund these investments. A redirect of existing funds may not be enough. But that’s subject for another day.
What do you think? Can the US broadband providers meet this long term goal?
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( 3 / 67 )Last week's announcement of the National Broadband Plan appears to have been well received by the telecom community. While the details still need to be worked to determine the policy's real impact, from the general support across the board, it appears that the Commission's working group has come up with a fairly well balanced proposal.
However, last week the Wall Street Journal pointed out an as yet under reported aspect of the Policy.
In an editorial entitled "Broadband Trojan Horse" (subscription required), the editors point out that today broadband services are classified as "information services" and therefore not under FCC jurisdiction. The WSJ points out that through the change of USF to CAP, the FCC would move into a new area of oversight over broadband.
This change would enable the FCC to regulate broadband with the potential that "net neutrality" and "open access" become written into law. The Journal goes on to state that neither Congress or the Courts have granted this capacity to date.
What do you think? Is subsidized broadband and the reformation of USF and ICC worth the cost of FCC regulation?
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( 2.9 / 71 )The recently released national broadband plan is a rather extensive document that reads more like a collection of recommendations rather than policy. Admittedly, I have not read through the entire document but what I believe after scanning over a few of the chapters is the FCC has served the first volley of what is sure to be an extensive debate of broadband competition, USF reform and even wireless spectrum auctions.
Chapter 8 (titled Availability) is of particular interest to rural broadband providers and of general interest to any contributor to the universal service fund (USF) or recipient of inter-carrier compensation (ICC). The chapter starts with what is somewhat of a modest minimum universal broadband service threshold of 4Mbps downstream and 1Mbps upstream. This is aligned with the service guidelines outlined in the recent broadband stimulus program NOFA 2 specifications (described as 5Mbps upstream and downstream combined). I call this modest because the first stated goal outlined by the FCC in this plan is for US broadband to reach 100M homes with 100Mbps downstream and 50Mbps upstream by 2020. But broadband rates are topic for another day.
Also somewhat modest is the FCC’s 3 stage process to reform the USF and ICC. At the risk of oversimplifying somewhat complex programs, the USF and ICC programs are vital to the delivery of basic services to hard to reach consumers and vital to a service provider’s business revenues. Any changes to either program will require changes in the way providers invest and maintain their networks.
At a very high level, reform of USF and ICC is outlined in a 3 stage process.
Stage One: Lay the foundation for reform (2010–2011)
Stage Two: Accelerate reform (2012–2016)
Stage Three: Complete the transition (2017–2020)
It’s a foregone conclusion that reform is coming in one form or another. Like any seemingly simple plan, the devil’s in the details. Of particular interest and on the minds of many is how does the FCC propose to fund the Connect America Fund (CAF)?
As stated by the FCC, a number of initiatives could potentially shift up to $15.5B from existing ‘High Cost’ programs into the proposed CAF. These initiatives include eliminating funding to Verizon & Sprint Wireless as agreed to in earlier merger decisions ($3.9B savings), moving rate-of-return carriers to incentive regulation ($1.8B savings), redirect Interstate Access Support (IAS) to broadband ($4B), phasing out High-Cost support for competitive carriers ($5.8B). These savings and fund redirects are realized over the course of the next 10 years per FCC math and scheduling.
Is this enough? Most observers think it’s too early to say but one thing is clear. Reform will not happen overnight. In fact, after reading through the chapter, it’s not a foregone conclusion that reform will happen as recommended by the FCC. As I stated earlier, this plan is a collection of recommendations and actual policy will take time to gel.
The ‘plan’ is going to take more time to fully digest but I’d like to hear what you think about the proposed CAF, the 3 stage process or plans to fund the CAF. Will this plan work?
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