U.S. FCC Broadband Definition and Blog

The U.S. FCC is requesting comments on how to define what broadband is. It breaks the definition down into three categories:

• Form, Characteristics, and Performance Indicators
• Thresholds – typically minimums
• Updates that address the fact that a static definition will fail to address changing needs and habits

This part of the FCC's efforts to create a national broadband plan by February 17, 2010.

The FCC has started a blog called BlogBand discussing its broadband activities.

It appears that the FCC is putting needed attention on broadband in the U.S. It is about time. Broadband in the U.S. is behind leading European and Asian countries by every measure.

Ofcom UK Communications Report

Ofcom issued a 334 page Communications Report that discusses TV, Radio, Telecommunications, and convergence. It has a lot of interesting information. Several points that stuck out were:

• For the first time since Oftel started to collect market data in 1992/93, operator-reported
  revenues from telecoms services did not increase in 2008. Total revenues were
  unchanged at £39.5bn, with increasing retail revenues being offset by falling wholesale
  revenues.
• Telecoms services accounted for 3.2% of total household expenditure in 2008, down
  from 3.4% in 2007. Telecoms spend fell by 5.2% in real terms over the year, the largest
  annual decline since spend on telecoms services began to fall in 2006.
• Nearly two-thirds (65%) of UK households had a fixed-line broadband connection in Q1
  2009, up from 58% a year previously.
• BT’s share of retail fixed voice calls to UK geographic numbers fell to under 50% for the
  first time in 2008. Increasing use of wholesale line rental (WLR) and local loop
  unbundling (LLU) services contributed to the erosion of BT’s retail share
  

We should all thank Ofcom for continuing to publish these comprehensive reports that shed light on important trends.

U.S. Telecom Antitrust Investigation

The Wall Street Journal has published an article stating that the U.S. Department of Justice (DOJ) has begun reviewing if large U.S. telcos such as ATT and Verizon are abusing their market power. This review is not targeted at a specific company today. The review is expected to cover all areas from land-line voice and broadband service to wireless.

The article points to exclusive contracts with handset vendors such as ATT's iPhone contract with Apple as an example. It also points to traffic management such as ATT's suppression of peer to peer traffic on its mobile data network as another example.

It sounds like this review is much more wide ranging than these two examples. The DOJ forced the breakup of ATT in 1984. This has largely been undone through the mergers and acquisitions that Verizon and the current ATT have made. Maybe it is time to take them apart again. The level of competition in the U.S. is certainly much less than in France, and we Americans pay for it.

UK Digital Britain Report

The UK government has published its Digital Britain report along with an Impact Statement. These are extensive reports. The Executive Summary by itself makes 83 separate points. There are a couple of significant things that I saw:

• It wants to increase the households that can access broadband at 2 Mbps from under 90 percent to 100 percent. It expects that wireless will be important in accomplishing this. It expects to make 200 million pounds available to support this goal. It also encourages the allocation of new spectrum for this purpose.
• It encourages the deployment next generation fixed broadband, which it defines at 50 Mbps by example.

This is not an ambitious set of goals. A number of other European countries have much more aggressive programs, including France, Switzerland, and the Scandinavian countries. It does not come close to matching what is going on in Asia, especially Japan, Korea, and China.

Following this plan will keep the UK at the back of the pack. At least it will be in good company along with those of us in the U.S.

Broadband Providers "Not So Fair Use" Violates Net Neutrality

A couple of articles have been published recently describing how broadband providers are managing their traffic to their advantage and to the detriment of specific services. The BBC has published an article describing how BT throttles the bandwidth on its broadband service and degrades the quality of the BBC iPlayer at certain times of the day. The second is a Light Reading article describing the results of femto cell testing by Epitiro that shows that traffic management by broadand providers will negatively affect the performance of femto cells during peak traffic periods.

The BBC has identified a clause in BT's fair use policy that permits it to reduce the bandwidth on its broadband service to below 1 Mbps, which degrades the quality of the BBC iPlayer over the top IPTV service. The article cites an example of a user who has been affected by this policy.

The traffic analysis performed by Epitiro shows that some broadband providers are throttling IPSEC traffic so that it provides worse performance that best efforts Internet traffic at the same time.

These are the kind of situations that those promoting the Net Neutrality agenda are concerned about. In both cases the broadband providers are throttling the traffic of competitors. The BBC iPlayer competes with BT's BT Vision IPTV service. Femto cells will compete with the broadband provider's VoIP and POTS services. The broadband providers are building the case for Net Neutrality when they do this and will produce a regulatory reaction that they will not like at all.

Spain to Approach 50% FTTH by 2023

Spain's telecom regulator, Comisión del Mercado de las Telecomunicaciones (CMT), has published a study that states that 43 to 46 percent of Spain's households would have access to FTTH services by 2023. Competitive telcos would be able to use Telefonica's fiber ducts and trenches.

CMT also estimates that Spain will have about 3 million IPTV subscribers by 2023, with Telefónica atb70 percent of that market, or 2.1 million subscribers. At those levels, IPTV would represent about 36 percent of Spain's digital pay TV market.

This is an aggressive prediction but one that points to where major telcos globally need to be at that time. There does not seem to be any plan for financing this project, which would probably cost about $10 billion.

FCC to Create U.S. to Create National Broadband Plan

The recent American Recovery and Reinvestment Act of 2009 also known as the stimulus act, charged the Department of Agriculture’s Rural Utilities Service (RUS) and the Department of Commerce’s National Telecommunications and Information Administration (NTIA) with making grants and loans to expand broadband deployment and for other important broadband projects. Congress provided $7.2 billion for this effort but is not insufficient to support nationwide broadband deployment. Consequently, the Recovery Act charges the FCC to create a national broadband plan by February 17, 2010, that will seek to ensure that every American has access to broadband capability and establishes clear benchmarks for meeting that goal.

This kind of comprehensive plan is over due. Europe and countries such as Japan, Korea, and Australia are well ahead of the U.S. in this effort.

The problem is that such a comprehensive view is very a very complex project. It will be difficult to bring focus to such a large effort that will make it effective. It could easily end up so general that it does not provide a useful perspective.

I think that the FCC should focus on creating an open environment that creates a competitive service environment based on fiber to the home and 4G wireless. The current approach that relies on competition between the telco and cable giants impedes competition. ADSL, VDSL, 2G, and 3G wireless are all technologies that are either now obsolete or rapidly approaching their obsolescence. Drawing such clear lines will help the FCC make this effort meaningful.

UK Ofcom Publishes Fiber Strategy

Ofcom, the UK telecom regulator, has published a report Delivering Super-Fast Broadband in the UK that outlines its policies for fiber deployment. Ofcom stated that it will:

• allow wholesale pricing flexibility to enable returns appropriate to the considerable risks of building new networks, but constrained by the market in the interests of customers
• ensure that any regulatory pricing allows investors the opportunity to earn a rate of return that genuinely reflects the cost of deployment and the associated level of risk
• minimise unnecessary inefficiencies in network design and build as a result of regulatory policies, while continuing to protect the consumer interest
• support the use of new, more flexible wholesale services by BT to offer super-fast services to other service providers and consumers at competitive prices
• safeguard the opportunity for further competition based on physical infrastructure, by facilitating fair opportunities for companies to synchronise their investments with BT’s deployments, should reasonable demand arise, and encouraging network design that takes future potential competition into account.

Ofcom will work with BT to resolve its concerns about generating a return from its intended investment in fiber to the home. It will be interesting to see how it maintains a balance through this process.

U.S. Federal Trade Commission Discusses Interactive Advertising

The U.S. Federal Trade Commission (FTC) has issued a new report titled "Self-Regulatory Principles For Online Behavioral Advertising" that describes its ongoing examination of online behavioral advertising and sets forth revisions to proposed principles to govern self-regulatory efforts in this area. The key issue concerns how online advertisers can best protect consumers’ privacy while collecting information about their online activities.

One of the FTC commissioners stated that the industry needs to do a better job of meaningful, rigorous self-regulation, or it will certainly invite legislation by Congress and a more regulatory approach by the FTC. This could be the last clear chance to show that self-regulation can – and will – effectively protect consumers’ privacy in a dynamic online marketplace.

This is a global problem that will be addressed in many countries. Regulation will be required. The recent financial crisis shows that the self discipline of many business wanes in the face of large potential gains.

Greece to Start $2B FTTH Rollout

Light Reading has published an article that discusses plans by the government of Greece to spend $2 billion to roll FTTH out in the country. The government intends to pass 2 million homes during the next seven years in Athens, Thessaloniki, and 50 other cities and towns across Greece, including some on the surrounding Mediterranean islands.

Greece is hoping that broadband services of at least 100 Mbps will attract at least 650,000 subscribers. The government stipulates an open network architecture that will be run by a separate entity from the companies that will sell the services and applications, such as Internet access, VoIP, and IPTV, that will run over the network.

This is an example of how government support is accelerating the availability of FTTH services. It also shows an useful approach to creating a competitive environment over this fiber infrastructure.

How Valuable is Broadband?

The Washington Post published an article discussing the value of supporting broadband in the stimulus legislation that is now before Congress in the U.S. The article discusses the fact that it is likely to be difficult to be difficult to get today's residual dial up users to convert to a broadband service. It also includes statements by people who are dubious about the indirect benefits of creating a "connected society".

The articles ends on a positive note with a statement from Cisco that infrastructure is no longer just about roads and bridges anymore.

Clearly I am a broadband booster. I am not sure of its current status, but the original proposal was to provide funding to rural areas that are under served. From what I have seen, rural telcos that have aggressively deployed broadband have achieved high penetrations. I think that people in these communities appreciate the ability of a high speed Internet connection to bring the wide world to them.

Amsterdam to Expand FTTH Deployment

Light Reading has published an article that describes its plans to expand its FTTH deployment from 43,000 homes to 100,000 homes. The city sees FTTH as a key service that needs to be provided like power and water. It believes that this network will be important to the development of the city. After this next deployment is complete, the city will consider expanding the network to the remaining 250,000 homes in Amsterdam.

This shows the important role that local governments can take in the deployment of fiber to homes. Amsterdam is insisting on an open network that will give its citizens a choice of service providers. This will provide a better range of services at lower prices than depending on a single service provider.

Korea Plans 1Gbps FTTH Network

An article in the JoongAng Daily states that the Korean government has a $25 billion plan to deploy wireline and wireless broadband services over the next five years. The government will contribute about $1 billion and the rest will come from industry. This project will deploy fiber wireline services of 1 Gbps to each home and wireless services of 10 Mbps.

This project defines the state of the art. I expect that 1 Gbps fiber services will be come the the standard level of service by 2020. Again, Korea is well ahead of the curve.

U.S. Delay in Analog Sunset

The U.S. will delay the completion of the conversion to digital broadcasting from February 17, 2009 to June 12, 2009. This will allow stations to continue their analog broadcasts until that date. There are more than 1,000 stations that have permission from the FCC to shut off their analog broadcasts on February 17. Nearly all stations will have to do it by June 12.

This shows what a mess the cessation of analog TV broadcasting can be. Frankly, I don't think it will be much better on June 12. This move is going to cause problems for a lot of people who have not prepared for themselves. I doubt three more months will change much.

This will delay the availability of 700 MHz spectrum for mobile applications. I expect that Verizon will use this as an opportunity to move its LTE trial to 2010 and commercial deployment to 2011.

Comcast Responds about VoIP Service

Comcast stated to the FCC that its own cable telephony VoIP service provides better service because it is carried separately from its Internet cable modem service. It believes that this answers the concerns raised in the FCC's letter on the subject.

This raises interesting issues about carriers using walled gardens to provide VoIP and IPTV services. These walled gardens clearly give the carriers a competitive advantage. I suspect that these walls will be broken down by changes in regulation over time as happened with long distance services in the past.

Ofcom Digital Britain Report

Ofcom the UK regulator has issued its Digital Britain report that discusses the importance of digital communications for a modern society. I makes the following points:

The first, crucial conclusion of the analysis we have done shows that, as
a country, we must ensure that our wired and wireless communications
and broadcasting networks can meet the demands of a modern knowledge-based
economy. Much work has already been undertaken, but over the next five
years we will need to upgrade these networks in order to maintain our
position and meet our ambitions.

This makes the need for an active and strategic approach from government indispensable if we are to close the gap. We need to plan now, identify the market failures that are standing in the way of a full roll out of digital infrastructure in the UK, and act swiftly in Government to help the market in the timely delivery of the
high-capability infrastructure we will need. This industrial activism from government will be critical to ensuring that the UK gets the most out of the digital economy.

This is an interesting analysis that applies globally. We all need to take its conclusions to heart.

FTTH Broadband Stimulus Proposals

The U.S. Fiber to the Home Council has published an economic analysis of its proposals for including broadband deployment as part of the stimulus package that the U.S. government is currently considering. These proposals include tax incentives to support fiber to the home in urban and suburban areas and DSL in rural areas.

Including FTTH as part of the stimulus package could bring the U.S. into the 21st century with respect to broadband. The problem will be competing with other kinds of projects, such such as roads and bridges. The second problem will be to keep the focus on FTTH and not have the funding and incentives diverted to VDSL and other short term technologies.

Creating a Competitive Fiber Market

Last week I posted an article about how Swisscom will support competitors in its FTTH deployment. Swisscom will deploy four fibers to each home and reserve one for itself and make the other three available to competitors. It pointed out that the cost of providing four fibers is only slightly higher than providing a single fiber.

This significantly helps Swisscom's business case because it will generate revenue from every FTTH home that it deploys. This will provide it with a return on the investment that it is making on deploying these fibers. Swisscom will also accept investment or trade fiber connections with its competitors that deploy their own fiber networks.

A similar facility sharing approach has been adopted in France and is likely to be adopted broadly in Europe.

Japan is taking another approach. NTT is deploying all of the fiber; however NTT East and West (the two incumbents in Japan) can offer only the fiber connection. The subscriber gets the Internet service from an ISP. NTT operates two of these ISPs itself (OCN and Plala), but has to treat other ISPs on an equal basis. KDI and Softbank are major ISPs that use NTT fibers along with a number of smaller ISPs.

The U.S. FCC has given up on creating a competitive environment with FCC. It traded exclusive use of the fiber for the commitment to deploy fiber services. I think this was a bad bargain. Both Europe and Japan have shown that better approaches are available.

Swisscom to Deploy FTTH

Swisscom is building a fiber network for residential customers and SMEs. Work has already started in Zurich, Basel and Geneva, with the aim of connecting 100,000 households with fiber optic by the end of 2009. The plan is then to further extend the network to include residential premises in the cities of St. Gallen, Berne, Fribourg and Lausanne.

The first offerings for residential customers and SMEs will be launched in the first half of 2009. Over the next six years Swisscom is planning to invest $US2.3 billion in its fiber expansion.

To enable other companies to expand their own fiber infrastructure after the construction work has started, Swisscom will be laying several fibers per household in all areas. One fiber will be used by Swisscom, while the others will be made available to other companies. The multi-fibre model will prevent the creation of a new network monopoly in Switzerland and also meet competitors' requirements for full access to the local loop (copper pairs) as stipulated by the Telecommunications Act.

Swisscom offers other companies interested in collaborating on the construction and operation of the fiber network four different cooperation models:

• Construction partnership for other companies with their own ducts, such as electrical utilities or cable network providers. One of the partners takes on responsibility for building the fiber network in a region. Several fibres are laid, and when the network is completed each of the other partners is assigned one fibre. If all the partners network regions which are the same size and are to be shared, no compensatory payment is required.
• Investment partnership for companies without their own cable ducts. Network expansion is jointly financed by all the partners. One partner builds the entire network and grants the investor usage rights to the fibers laid.
• Rental of individual fibers for companies who do not wish to invest in network expansion but want to decide themselves on the preferred technical level for controlling the fiber network.
• Leasing of transmission services similar to established practices.
  

Swisscom presented its reseller offerings to all Internet service providers at the beginning of November. In the initial phase these offerings will cover bandwidths of 30 to 50 Mbps for download and up to 10 Mbps for upload.

During the pilot phase, which starts at the beginning of March and will become a commercial service in autumn 2009, the offerings will focus on the areas in Zurich, Basel and Geneva which are already equipped with fiber cables. Internet service providers, including VTX, green, netstream and init7, are free to design their own end customer and reseller offerings.

This is an interesting model for handling competition over fiber. It will produce a lot more competition than the U.S. approach that gives the carriers exclusive use of their fiber plants.

Is Google Paying its Fair Share?

The blog Internet Evolution published and article discussing comments by an analyst who says that Google is not paying its fair share of the Internet infrastructure.

This is an interesting issue. The core Internet network has a robust business model. As the ISPs and ASPs generate more traffic, for example, by providing more video and TV traffic, they need to increase the bandwidth that connects to them to the Internet backbone. They pay for every additional bit of bandwidth that they use. This means that the carriers revenues increase as the traffic increases, which is and has been a sustainable business model.

I think that the question that is raised in this article is if Google is using more bandwidth per dollar spent on backbone capacity than other companies. This may be assuming that Google distributes more videos than others.

The more interesting question is in the access network. The broadband access providers are stuck in the conundrum that customers expect more bandwidth over time but do not expect to pay more for it. This is most clearly demonstrated in countries in such as Japan and France where the price of a 100 Mbps FTTH connection is the same as a 10 Mbps DSL connection. Carriers in these countries are making huge investments to deploy fiber and are not getting significant revenue increases to support it.

I have wondered if Google and the other ASPs and ISPs should pay more for their backbone connections to support the deployment of FTTH. After all, these companies get tremendous benefit from the deployment of higher speed access networks. It only seems fair.

However, there are significant problems with this approach. One is that the combined profits of Google and the other ASPs and ISPs are not nearly enough to cover the cost of deploying fiber at a reasonable rate.

The second problem is that paying additional amounts to the backbone provider will not necessarily lead to a fair distribution of these funds to the access network providers. For example, if Google pays the premium to ATT, how does Verizon get support in its territory. Well, Google will probably by backbone services from Verizon also, so that there will probably be a reasonable allocation. But then, what about Surewest and the thousand or so small U.S. telcos that do not offer backbone services?

This could be handled by an extension of the Universal Services Fund, but then what about the broadband operators in other countries? Do we need to add in a UN Universal Fund charge as well?

None of this seems practical, which leaves the broadband providers without any way to monetize their investments in fiber. This will certainly discourage investment and delay the availability of fiber services That is too bad.