Stop the internal wrangling over federal funding. Now!
With $ 20 billion already committed for deployments and customer subsidies, and another $ 45 billion quite possible, the broadband industry should be in boost mode. Broadband stakeholders need to stop arguing over which technologies and entities receive the most funding.
There is a lot of good news about federal broadband funding. But feuds within the broadband stakeholder community could turn off the faucet. At the end of June, the existing and possible size looked like this:
- Approximately $ 20 billion of existing, already earmarked and authorized funds in the USDA ReConnect Loan and Grant program, COVID-19 relief funds, and the next phase of FCC grants through the Rural Digital Opportunity Fund (RDOF)
- State initiatives that add state and local funds to COVID-19 relief funds. The total non-federal money looks like less than a billion dollars, but it is often tied to federal largesse.
- New $ 45 billion project in White House “bipartisan” infrastructure deal with five Republican senators
The White House calls this hefty package a “$ 65 billion broadband investment,” and it is – if no one looks too closely at it. The final infrastructure bill is unlikely to be ready for a Senate vote until September. But the amount initially proposed for broadband, around $ 100 billion in new money, has already been halved. The new money would be spent over time. The entire infrastructure bill has an eight-year time horizon. It is not clear whether broadband would have a shorter period for new deployments. Even $ 45 billion, given current low interest rates, easy access to cash, and several million remote locations served by low-earth orbit satellites, would go a long way to meeting the needs.
Members of the Senate charged with putting the details into law and their colleagues in the House are buzzing with the weirdness of responses from industry and interest groups. A few major carriers warn that they should not be left out of competition for funding. The Fiber Broadband Association says fiber should be the default technology choice. The Wireless Internet Service Providers Association says the rules for the project should not be written to exclude point-to-point wireless. The usual group of “independent” corporate think tanks are dismayed that the government should be involved.
Progressives say that municipalities and nonprofits should be given preference, and that “regionalization” – often cooperation with existing small carriers in a geographic area – should be a last resort. Small carriers are just beginning to realize the problem, but tend to interact with state governments when they want to lobby. This sometimes trickles down to local members of Congress, who rarely have an understanding of broadband issues.
All of this highlighted the obvious: that broadband is a rather open industry with many diverse interests and perspectives, operating in a nation with extremely diverse needs and population density. But it also obscures the community of interests that should be emphasized.
- Large carriers are taking the heat, but they are usually too busy to invest in new construction. Large telecom companies are even forgoing easy activities, such as providing services to multi-unit buildings and new planned unit developments. Indeed, they have so much debt on their balance sheets that in anticipation of the day when interest rates rise enough to be expensive, they are open to leasing backhaul and pole space from local operators for them. 5G mobile phone sites. Tip: They like carriers who have invested or will invest in fiber. Domestic operators focusing on particular circumstances, such as Hotwire and Pavlov, are filling some of the gaps.
- Operators who serve small communities but have avoided the cost of expanding to surrounding sparsely populated areas or the cost of improving bandwidth see a threat in federal money that would fund competitors, but do not see not much justification for diluting their profits by developing themselves. They doubt that a national program can be nimble enough to allow fair competition in all or most situations.
- Operators serving small towns are sometimes neglected fragments of national cable companies. They generally have a local competitive advantage, particularly in terms of interconnection tariffs with national networks. This, in turn, allows them to capture the activities of the E-Rate program, serving schools and local government facilities. National carriers devote little or no capital to improving or expanding services in these fragments.
- Local governments, non-profit organizations, and local for-profit but public service entities, such as electricity cooperatives, now serve around 500 communities. Broadband is generally a regulated industry, either a Title 2 “telecommunications” company or lightly regulated federally. But depending on how you count the scope of state regulation, 18 to 22 states restrict public broadband in one way or another. Washington state, the first to host large amounts of public fiber networks 20 years ago, has just passed conflicting laws expanding and restricting public broadband. These are interesting times.
- In many urban areas, broadband is available but too expensive for many families. Grants are available in COVID-19 relief (temporary!) And through the FCC (small!). However, as I detailed in this column almost a year ago showing a relationship between child poverty and broadband access, the benefits of solving this problem far outweigh the cost.
Looking at all these concerns and interests, some almost universal truths strike me. This magazine has always said that it makes sense that the entity with the lowest cost of capital would usually build the system. There should be no limit as to who can build a broadband system. I developed a “multi-neighborhood” financial model (available for free at www.bbcmag.com/tools-and-resources/ftth-financial-analyzers) six years ago because deployers were trying to build fiber networks with wireless in some difficult areas. Wireless actually enables fiber providing an economical, albeit temporary, solution. Converting from wireless to fiber is much easier than navigating the higher sunk costs of copper. This is especially true since most premises use a gigabit wireless gateway, usually 802.11ac or ax (also known as Wi-Fi 6).
Support for different models
Broadband communities support regionalization, in which multiple entities come together to manage a system but can remain independent. They could, for example, include a public-private partnership between a municipality and a local level 3 operator, as well as an electricity cooperative, a wireless Internet service provider (WISP) or a cable company, a private network designed to serve a commercial or industrial zone and another level 3 carrier.
The magazine supports 5G cell sites which can handle all available bands so spectrum can be recycled more efficiently and sites in a region can be more easily maintained or upgraded when needed. The magazine supports software solutions for the same reasons, especially at the edge of the network. Models of broadband communities suggest that collectively, service providers can save at least 20% on marketing and operating costs by cooperating, even if they increase their revenues with mobile backhaul and possibly with communications for autonomous vehicles.
Business models, with or without federal or state subsidies, can be chargeable, but can also be unlimited in use, such as a city’s local streets or a block payment agreement for broadband in an apartment building. Some money might come from general taxes, some might not – whatever works in a locality. Some communities tax broadband – something they want – because they are tax-addicted, unraveling an old approach would be too complicated, or (as is often the case in California, for example) communities do not. ‘have limited control over property taxation and need the income.
I expected that service providers that also own content (like Comcast, which owns NBC and other networks) would want underserved communities to be served well enough by other service providers to distribute that content. . But a big content owner, AT&T, is holding back its $ 80 billion purchase of HBO and related properties by merging them with the Discovery Channel. He gets cash back, but also keeps the content business off his books. We will see how the dynamics work.
A lot of people complain that carriers, especially large carriers, charge too much. This is not entirely true, so one cannot expect huge reductions in all areas. My cable company is reducing rates at customers’ request because a reputable wireless internet service provider (Starry) has moved into the neighborhood. Reading the annual reports suggests that telecommunications companies are profitable, but not excessively compared to other industries. Many complain that the FCC broadband cards, and even the new and improved broadband cards from the National Telecommunications and Information Administration, are not good enough. But better maps are available from independent vendors, and better maps are also on the way from the FCC, for early 2022.
The first two cycles of the USDA ReConnect Loans and Grants program, as detailed in this magazine, primarily funded fiber optic systems at a cost per room traversed between $ 4,000 and $ 6,000. That’s about the cost when Verizon started rolling out fiber in 2004. And it’s in rural areas, not the easy-to-choose urban and suburban areas, where Verizon started. But ReConnect has also funded excellent wireless networks.
The bottom line: the industry has a great story to tell. There is a huge amount of money on the table, with more chances of coming up with the infrastructure bill. Industry should team up to escalate the rise, tout the benefits and end infighting. And funding should indeed be technologically neutral, once a high level of performance and a solid growth path are defined. The country needs this.