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Wall Street Grumbling About Estimated $130 Billion Needed for National 5G Fiber Buildout

Wall Street analysts are warning investors that mobile providers like AT&T, Verizon, T-Mobile and Sprint will have to spend $130-150 billion on fiber optic cables alone to make 5G wireless broadband a reality in the next 5-7 years.

A new Deloitte study found providers will have to spend a lot of money to deploy next generation wireless service across the United States, money that many may be unwilling to spend.

“5G relies heavily on fiber and will likely fall far short of its potential unless the United States significantly increases its deep fiber investments,” the study notes. “Increased speed and capacity from 5G will rely on higher radio frequencies and greater network densification (i.e., increasing the number and concentration of cell sites and access points).”

Unlike earlier cellular technology, which worked from centralized cell towers that covered several miles in all directions, 5G technology is expected to be deployed through “small cell” antennas attached to utility and light poles with coverage limited to just 300-500 feet. To reach city residents, providers will need countless thousands of new antenna installations and a massive fiber network to connect each antenna to the provider.

Telecom providers seeking financing for such networks will face the same criticism Verizon Communications took from Wall Street over the expense of its FiOS fiber-to-the-home upgrade as well as doubts about the viability of other fiber projects like Google Fiber.

Goldman Sachs told its investors back in 2012 that throwing money at Google Fiber or Verizon FiOS was not going to give them a good return on their investment. That year, Goldman was “Still Bullish on Cable, But Not Blind to the Risks.” That report, written by analyst Jason Armstrong, noted Google’s fiber upgrades would cost billions and only further dilute industry profits from increasing competition.

Goldman Sachs steered investors back to the cable industry, which gets significant praise from Wall Street for its ability to repurpose 20-year-old wired infrastructure for enhanced broadband without having to spend huge sums on a complete system rebuild.

In 2013, Alliance Bernstein continued to slam Google Fiber’s buildout as an unwise business investment:

We remain skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the US, as costs would be substantial, regulatory and competitive barriers material, and in the end the effort would have limited impact on the global trajectory of the business.

For example, making the far from trivial assumption that Google can identify 20 million homes in relatively contiguous areas with (on average) similar characteristics as Kansas City when it comes to the most important drivers of network deployment cost, homes per mile of plant and the mix of aerial, buried and underground infrastructure, and that Google decides to build out a fiber network to serve them over a period of five years, we estimate the [total capital expenditure] investment required to be in the order of $11 billion to pass the homes, before acquiring or connecting a single customer.

Some analysts are even questioning the relevance of 5G when providers investing in the massive fiber expansion required for 5G wireless could simply extend fiber cables directly into homes, assuring customers of more bandwidth and reliability. In many cases, fiber to the home technology is actually cheaper than 5G deployment will be.

VantagePoint released a report in February that called a lot of the excitement surrounding 5G “hype” and cautioned it will not be the ultimate broadband solution:

Undoubtedly, 5G wireless technologies will result in better broadband performance than 4G wireless technologies and will offer much promise as a mobile complement to fixed services, but they still will not be the right choice for delivering the rapidly increasing broadband demanded by thousands or millions of households and businesses across America.

Previous analysis of 4th generation (4G) wireless networks clearly demonstrated how these networks, even with generous capacity assumptions for the future, will have limited broadband capabilities, and inevitably will fail to carry the fixed broadband experience that has been and will be demanded by subscribers accustomed to their wireline counterparts. Although there is understandably much anticipation today about phenomenal possible speeds for 5G wireless networks tomorrow, they will continue to have technical shortcomings that will, like their predecessor wireless networks, render them very useful complements but poor substitutes for wireline broadband. These technical challenges include:

  • Spectral limitations: 5G networks will require massive amounts of spectrum to accomplish their target speeds. At the lower frequencies traditionally used for wide area coverage, there is not enough spectrum. At the very high frequencies proposed for 5G where there may be enough spectrum, the RF signal does not propagate far enough to be practical for any wide area coverage. This is particularly important in rural areas where customer concentration is far, far less than what can be expected in densely populated urban areas where 5G may offer greater promise.
  • Access Network Sharing: This is not a good solution for continuous-bit-rate traffic such as video, which will make up 82% of Internet traffic by 2020.
  • Economics: When compared to a 5G network that can deliver significant bandwidth using very high, very short-haul frequencies, FTTP is often less expensive and will have lower operational costs. This is particularly true when one consider how much fiber deployment will be needed very close to each user even just to enable 5G.
  • Reliability: Wireless inherently is less reliable than wireline, with significantly increased potential for impairments with the very high frequencies required by 5G.

In 2014, PricewaterhouseCoopers LLP released a report urging telecom executives to shift their thinking about telecom capital spending away from one that focuses on upgrades to deal with increasing traffic and demand and move instead to a hardline view of only spending on projects that meet Return On Investment (ROI) objectives for investors.

“The predominant task of management is to take a considered view of the future, allocate capital towards strategies that maximize value for the providers of that capital, and manage the execution of those strategies through to the delivery of returns for those investors,” wrote PricewaterhouseCoopers LLP. “For too long, telecoms have been on auto-drive for much of their capex. Departments assume if they had the money last year, they are going to get it again this year, under the premise of increasing traffic. But rarely do telecoms truly analyze that spending for its ROI or ask whether the investment should be made at all.”

In short, if a project is not certain to quickly deliver significant ROI, serious questions should be asked about whether that investment is appropriate to undertake. That reluctance is at the heart of Deloitte’s new study.

Deloitte notes if providers cannot overcome Wall Street’s reluctance to support major spending on fiber infrastructure, lack of investment will be even more costly.

It predicts falling short on fiber deployment will cause a dwindling number of broadband provider choices for consumers. Today, fewer than 33% of U.S. homes have access to fiber broadband and only 39% have the option of choosing more than one provider capable of meeting the FCC’s minimal definition of broadband – 25Mbps. As competition declines, the need to further expand is reduced while prices can freely rise.

PricewaterhouseCoopers LLP also recommends cable and phone companies partner with content providers like Netflix or Google, and let those companies take an ownership interest in return for capital investments for fiber upgrades. Those type of solutions also protect Wall Street from a feared price war should alternative providers launch in markets that are barely competitive, if at all.

Still No Fiber for Southern N.J.: State Settles with Verizon Over Poor Service

South Jersey: The worst broadband problems are in the southernmost counties closest to Delaware.

Customers hoping New Jersey’s telecom regulator would compel Verizon to expand fiber to the home service across southern New Jersey are out of luck.

The New Jersey Board of Public Utilities (BPU) approved a settlement between Verizon New Jersey, Inc., Cumberland County, and 18 southern New Jersey towns that alleged Verizon failed to properly maintain its wireline network in areas where it has chosen not to deploy FiOS — its fiber to the home service. But the settlement will only compel Verizon to maintain its existing copper network and offer token DSL and FiOS expansion in some unserved rural communities.

“We have heard our customers’ concerns in South Jersey and are pleased to have reached an agreement with the approval of all 17 towns on a maintenance plan going forward,” said Ray McConville, a Verizon spokesman. “We look forward to staying in regular communication with the towns to ensure our customers continue to receive the level of service they expect and deserve.”

“While the Board was fully prepared to proceed on this matter, the parties were able to reach a negotiated settlement which takes into consideration the needs of each community,” said Richard S. Mroz, president, N.J. Board of Public Utilities.

But some residents of those communities beg to differ.

“It’s another example of Chris Christie’s hand-picked regulators letting Verizon off the hook and sticking us in a digital divide,” complained Jeff Franklin, a Verizon DSL customer in Cumberland County. “Verizon should not be allowed to offer one half of the state modern broadband while sticking the rest of us with its slow DSL service.”

Franklin is upset that communities bypassed by Verizon’s FiOS network appear to have little chance of getting it in the future, now that regulators have agreed to allow Verizon to fix its own copper network.

“All the Board did was force Verizon to do what it should have been doing all along, taking care of its own network,” Franklin complained to Stop the Cap! 

Verizon did agree to expand its fiber network into the communities of Estell Manor, Weymouth Township, Corbin City, and Lower Alloways Creek Township, but only because of a 2014 agreement with Verizon compelling them to offer broadband to residents who read and complete a “Bona Fide Retail Request” (BFRR) form which stipulates homes and businesses in Verizon’s New Jersey territory can get broadband if they don’t have it now as long as these criteria are met:

  • Have no access to broadband service from a cable provider or Verizon;
  • Have no access to 4G-based wireless service; and
  • Sign a contract for at least one (1) year of broadband service and pay a $100 deposit.

“BFRR is a joke because it requires potential customers have no access to 4G wireless service,” claimed Franklin. “You have to go to the government’s National Broadband Map to determine eligibility, which is very tough because — surprise, surprise — Verizon itself contributed its 4G wireless coverage information for that map and as far as Verizon is concerned, their 4G coverage in New Jersey is beautiful, even though it really isn’t.”

If a single provider submits map data that shows a home address is already covered by 4G wireless service, even if that isn’t accurate on the ground, that customer is ineligible under the terms of BFRR. Even if they were able to subscribe to 4G broadband, most plans are strictly data capped or throttled.

Under the settlement, Verizon gets to choose what technology to deploy. Outside of the four communities getting FiOS, the rest of South Jersey will have to continue relying on Verizon’s DSL service. Verizon has agreed to extend DSL to 2,000 new residences and businesses in Upper Pittsgrove, Downe, Commercial, Mannington, Pilesgrove, and South Harrison. It will also fix some of its DSL speed congestion problems and monitor for future ones as part of the settlement.

But DSL won’t work if Verizon’s wireline network stays in poor shape. The company has agreed to deploy its “Proactive Preventative Maintenance Tool” (PPMT) to scan its copper network to identify and repair or replace defective cables. Verizon has also agreed to daily inspections of outside facilities and fix any detected problems within 30 days, as well as regularly reporting back on the condition of its infrastructure inside the towns affected under the settlement.

This agreement took a year and a half to reach and will keep the two parties out of court, but many are not satisfied being left with Verizon’s DSL service.

“Unfortunately, the BPU continues to allow Verizon to pick and choose which residents will receive modern telecommunications at an affordable cost,” Greg Facemyer, a Hopewell Township committeeman in Cumberland County, told NewsWorks. “The state legislature needs to recognize these inequities and step in and level the playing field for South Jersey. Otherwise, our region will continue to fall even farther behind and be less competitive.”

Comcast Introduces Gigabit DOCSIS 3.1 Broadband in 7 New Cities: $70-109.99/Month

Comcast may be undercutting its own fiber broadband aspirations by introducing a cheaper way for customers to get gigabit broadband service over their existing Comcast cable connection.

Customers in seven new areas, including most of Colorado, Oregon, southwest Washington State, and the cities of Houston, Kansas City, San Francisco and Seattle now have access to Comcast’s DOCSIS 3.1-powered gigabit downloads. (Upload speeds are limited to a much less impressive 35Mbps.)

Comcast announced the new communities as part of their gradual rollout of DOCSIS 3.1 — the standard that powers cable broadband — across their national footprint. These communities join Utah, Detroit, Tennessee, Chicago, Atlanta, and Miami where Comcast has already introduced the new speeds.

It is Comcast’s latest foray into gigabit speed broadband, and it is decidedly focused on the cities outside of the northeast (except Boston) where Comcast has not faced significant competition from Google Fiber or AT&T Fiber, both delivering gigabit speed internet access. Verizon FiOS, predominately in the northeast, only recently introduced gigabit speed options for its residential customers. Comcast continues to be among the most aggressive cable operators willing to boost broadband speeds for its customers, in direct contrast to Charter Communications, the second largest cable operator in the country that is predominately focused on selling 60-100Mbps internet packages to its customers.

Comcast sells multiple broadband speed tiers to its customers.

Comcast’s efforts may undercut its own fiber-on-demand project, which wires fiber to the home service for some Comcast customers seeking up to 2Gbps service. That plan comes with a steep installation fee and term commitment, making it a harder sell for customers. Comcast’s DOCSIS-powered gigabit will retail for $159.95 a month, but Comcast is offering pricing promotions ranging from $70-109.99 a month with a one-year term commitment in several cities. The more competition, the lower the price.

In Kansas City, where Google Fiber premiered and AT&T is wiring its own gigabit fiber, Comcast charges $70 a month, price-locked for two years with a one-year contract. Customers who don’t want a contract will pay dearly for that option — $160 a month, which is more than double the promotional price.

In Houston, where AT&T has not exactly blanketed the city with gigabit fiber service and Comcast has been the dominant cable operator for decades, gigabit speed will cost you $109.99 — almost $40 more a month because of the relative lack of competition. Customers who bundle other Comcast services will get a price break however. Upgrading to gigabit service will cost those customers an additional $50 to $70 a month, depending on their current package.

“Additional prices and promotions may be tested in the future,” the company said in a news release.

Comcast does not expect many customers will want to make the jump to gigabit speeds and a higher broadband bill. Rich Jennings, senior vice president of Comcast’s Western/Mountain region, told the Colorado Springs Gazette that gigabit service was a “niche product for people who want that kind of speed.”

Comcast does suspect a number of signups will be from broadband-only customers who don’t subscribe to cable television.

Mike Spaulding, Comcast’s vice president of engineering, thinks the service will appeal most to those who rely entirely on a broadband connection for entertainment and communications.

“There’s not a lot of need for gigabit service for one customer to do one thing,” Spaulding told the Denver Post. “But what it does is enable an even better experience as more devices in the home are streaming, whether it’s video or gaming or whatever they are doing in the home. Most of our customers subscribe to the 100Mbps package today. Less than 10 percent of our customers are in the 200-250Mbps. We’ll see where one gig takes us.”

One place a gig may take customers is perilously close to Comcast’s notorious 1TB usage cap, which is currently enforced in Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, New Mexico, Western Ohio, Oregon, Tennessee, Texas, South Carolina, Utah, Southwest Virginia, Washington, and Wisconsin, even for this premium-priced internet tier. Customers exceeding it will automatically pay a $10 overlimit fee for each 50GB of excess usage, up to a maximum of $200 a month. An unlimited ‘insurance plan’ is also available for $50 a month, which removes the 1TB cap.

Customers will have to use a new modem if they upgrade to gigabit service, either renting one from Comcast for around $10 a month or buying a compatible DOCSIS 3.1 modem. Two of the most recommended: the Arris Surfboard SB8200 ($189) or the Netgear CM1000 ($171.99) (prices subject to change).

New Report Attacking Municipal Broadband Thin on Facts, Heavy on Hypocrisy

When the multibillion dollar telecom industry wants to push its narrative about telecom public policy, it employs an army of secretly funded astroturf groups, corporate-backed “policy institutes,” professional lobbyists, and ex-regulators and politicians that help move their agenda forward.

One of the latest methods to win influence is finding researchers willing to produce scholarly reports offering “independent” analyses of regulatory policies or telecom company business practices. It has now become a cottage industry, with the same select few authors regularly writing papers that align perfectly with the interests of cable and telephone companies that sponsor the groups, think tanks, or schools that employ them.

The blurred line between academic independence and “research-for-hire” has become increasingly indefensible at the nation’s think tanks, where politically motivated individuals and corporate donors funnel millions in funding with the expectation the think tank, its leadership and researchers will fall in line with the political views of the donor and act accordingly. When they don’t, the checks stop coming or a donor-led coup d’état similar to what happened in April at the Heritage Foundation can follow.

The idea that a think tank represents an independent body of researchers tackling random issues of the day without bias is quaint and often a thing of the past. These days, some think tanks and policy institutes dependent on corporate and big donor contributions are little more than willing corporate tools in policy and regulatory debates. Last month, this reached a new level of absurdity with the announcement that the MGM Resorts — a Las Vegas casino, was starting its own policy institute co-chaired by retired Sen. Harry Reid and former House Speaker John Boehner. Neither will be working for free. The stated purpose of the MGM think tank is to “concentrate on comprehensive, authentic and relevant national and international policy issues that impact the travel, tourism, hospitality and gaming industries and the global communities in which they operate.”

In short, it’s another way for the casino industry to lobby while operating under a veneer of independence at the University of Nevada, Las Vegas.

If a researcher cannot find work at a policy institute or think tank, they can always produce research papers under the auspices of a university or business school that welcomes corporate funding. These institutions assume they are protecting their credibility and reputation with claims of a firewall between industry money and research, yet too often the reports that result from this arrangement are embarrassingly industry-aligned. Questions of conflict of interest are also increasingly common when a researcher turns up at hearings to deliver ostensibly independent testimony on issues like regulation or their views about multi-billion dollar mergers and acquisitions that are in perfect alignment with the companies that donate to that researcher’s employer.

Yoo

Researchers like Christopher Yoo at the University of Pennsylvania Law School in Philadelphia bristle at the notion corporate dollars play any role in his research or findings, despite the fact he was accused of a major conflict of interest testifying strongly in favor of Comcast’s attempted merger with Time Warner Cable in 2014. Yoo defended the Comcast deal at every turn, telling Congress the merger would have little impact on consumer prices or competition, despite the fact ample antitrust concerns ultimately torpedoed the deal.

Yoo avoided disclosing the fact he had ties to Comcast’s chief lobbyist David Cohen, who sat five seats to his right at the hearing. Cohen served as chairman of the board of trustees at the University of Pennsylvania and Comcast is an extremely generous financial donor of the university — two obvious conflicts of interest that observers expressed shock were not disclosed in advance. Yoo focused instead on delivering testimony we characterized back in 2014 as “a nod in Cohen’s direction with an affirming, ‘whatever he said.'”

When the media called him out on the subject, Yoo downplayed any connection or conflict.

“The views of any other person in the university administration do not have any impact on my academic views or any public statements I make,” Yoo told the Washington Post. He added the Center for Technology, Innovation, and Competition that he founded was only “a tiny little bit” funded by the cable industry. We’ll fact check that claim shortly.

Like Harry Reid and John Boehner, Christopher Yoo does not work for free. Despite his claims that as a tenured professor, his academic freedom is protected, Mr. Yoo’s recent written work has been so closely aligned with the interests of the nation’s cable and phone companies, he comes alarmingly close to being an academic version of a corporate sock puppet.

Yoo is hardly the only researcher that has an amazing record of producing studies that coincidentally line up in perfect unison with the public policy interests of giant cable companies. Daniel Lyons of Boston College Law School prodigiously writes papers defending the cable industry’s practice of data caps. He’s been hard at work since 2012 trying to convince anyone that would listen that data caps are good for consumers, competition, and innovation. Like Yoo, Lyons was also a big supporter of Comcast’s attempted purchase of Time Warner Cable, “spontaneously” and “independently” penning long letters to the editor to newspapers all around the country defending the deal.

So what causes researchers to suddenly decide to write about some topics but not others? Random chance or money?

Last month, Yoo unveiled his latest paper, “Municipal Fiber in the United States: An Empirical Assessment of Financial Performance,” co-authored by Timothy Pfenninger.

Yoo claimed in his executive summary that the “current emphasis on infrastructure projects in the United States has intensified the debate over municipal broadband.” That’s news to us. In fact, the high water mark of the municipal broadband debate occurred in the last administration when FCC Chairman Thomas Wheeler sought to nullify corporate ghostwritten municipal broadband bans passed by several state legislatures.

Yoo decided he would be a “helper” for cities contemplating repeating the success of EPB, the municipal power company in Chattanooga, Tenn., that built a successful public gigabit fiber to the home broadband network for the city and nearby communities. The “widespread news coverage” of EPB that Yoo wrote about, without mentioning it was almost exclusively positive, has apparently inspired a number of other communities to contemplate repeating Chattanooga’s success story.

In what we like to call Yoo’s “Fear, Uncertainty and Doubt” opening, he warns “city leaders who turn to existing municipal fiber analyses for guidance will discover that these studies limit their focus to the supposed success stories instead of systematically analyzing these systems’ financial performance.”

So instead of those studies, Yoo offers his own, which he claims “fills the information gap” by creating a whole new systematic analysis, using Yoo’s own hand-crafted criteria, to judge the success or failure of municipal broadband.

He doesn’t waste any time hinting municipal broadband is a bad idea, puts cities at risk for defaults, bond rating reductions, and taxpayer bailouts. In fact, Yoo characterized municipal broadband as a mere distraction from more important priorities he claims communities have. And besides, there is evidence showing “little current need for [the] high broadband speeds” that community broadband networks offer that incumbent cable and phone companies won’t.

Yoo’s take is like bringing a boyfriend home to your parents who claim they support and love you no matter who you date but then spend the next two hours telling you why he’s all wrong for you.

Follow the Money

We thought it would be useful to look into Yoo’s claims and conclusions more carefully. As always, we focused on two things: fact-checking the evidence and following the money.

It took very little time to turn up more red flags than one would find at a May Day parade in Red Square.

Academics with conflicts of interest or uncomfortably close ties to the telecom industry and the reports they peddle often escape scrutiny, because their research can intimidate journalists unprepared to challenge their premise, research, or conclusions without a substantial investment of time and fact-checking. But as we’ve learned over the years, there are very clear warning signs when more investigation is necessary.

We’re not alone. This week National Public Radio updated its Ethics Handbook with “a cautionary tip sheet about relying on the work product of think tanks.

It is “our job to know about ‘experts’ conflicts of interest” and share that information with our audience (or not use experts whose conflicts are problematic).  As we’ve said, it’s not optional. Click here for related reading from JournalistsResource.org. It includes “some questions journalists should ask when researching think tanks.” Among them:

  • “Look at the think tank’s annual report. Who is on staff? On the board or advisory council? Search for these people. They have power over the think tank’s agenda; do they have conflicts of interest? Use OpenSecrets’ lobby search, a project of the nonpartisan Center for Responsive Politics, to see if any of these individuals are registered lobbyists and for whom.
  • “Does the organization focus on one issue alone? If so, look carefully at its funding.
  • “Does the organization clearly identify its political leanings or its neutrality?
  • “Does the annual report list donors and amounts? Are large donors anonymous? If the answer to the second question is yes, you should be concerned that big donors may be trying to hide their influence.
  • “Does it have a conflict of interest policy?”

The Shorenstein Center on Media, Politics, and Public Policy is even more frank in its warning to journalists who rely on think tanks and industry-based research:

[…] Entrenched conflicts of interest across the political spectrum, and pandering to donors, often raise questions about their independence and integrity. A few years ago, think tanks were seen as places for wonky scholars and former officials to bang out solutions to critical policy problems. But today, as the Boston Globe has written, many “are pursuing fiercely partisan agendas and are funded by undisclosed corporations, wealthy individuals, or both.”

Something smells funny.

Unsurprisingly, Yoo’s research was immediately distributed and promoted by a range of groups critical of public broadband to build what they believe to be an authoritative record against municipal broadband initiatives. In effect, ‘it isn’t just us saying public broadband is a bad idea, look at this ”independent” research.’

But exactly how independent is the research produced by Mr. Yoo and his Center for Technology, Innovation and Competition (CTIC)? Unfortunately, Yoo does not follow the common practice of disclosing the funding sources for his research and report. If it was funded through the Center, that should be disclosed. If a corporate donor provided funding or a stipend, that should be disclosed. If part or all of Mr. Yoo’s compensation comes from a bank account replenished in part or whole by an outside company, that should be disclosed. If he wrote the report in this spare time for fun, that should be disclosed as well.

Since Mr. Yoo doesn’t talk about the money, we will.

The CTIC’s website spends some time predicting the obvious conflicts of interest questions raised by its extensive corporate donor base.

“The Center for Technology, Innovation & Competition (CTIC) receives financial support from corporations, foundations, and other organizations that is vital to our continued growth and success,” the website states, which means without that support, there probably would be no CTIC.

Which corporations donate money is important to consider. If a substantial amount of a researcher’s funding comes from telecom companies that are either on record opposing public broadband, or would be forced to compete with a municipal broadband provider, that would represent a very clear conflict of interest.

CTIC attempts to inoculate itself from accusations it has that inherent conflict of interest with this statement on its website:

“CTIC does not accept financial support that limits our ability to conduct independent research. This allows us to produce scholarship that is free from outside influence and consistent with Penn’s ethics and values. All corporate donors agree to provide funding free from restrictions and promised results or deliverables.”

But that is not adequate enough to protect readers from researcher bias introduced by the donor funding that CTIC admits is “vital” to their existence. Consider the example of the tobacco industry, one of the first to leverage researchers willing to write papers created to distort, downplay, or confuse the debate about the safety of tobacco products. There was no need for a tobacco company to limit researcher independence or demand a certain result. That allowed researchers to claim editorial independence, but they also understood that if their reports did not meet the expectations of the tobacco company that paid for them, they would never be made public and that researcher would never be used again.

A corporate donor is unlikely to continue funding an organization that issues reports it disagrees with or worse, publicly bolsters its competitors or criticizes its public policy agenda. Had Yoo concluded municipal broadband was an ideal solution for the rural broadband, internet speed, and competition problems in this country would AT&T, CTIA, Comcast, Charter/Time Warner Cable, NCTA and Verizon still send them checks?

While considering the veracity of Mr. Yoo’s research and conclusions, do you believe CTIC’s donors would be pleased or unhappy about the report? Here is the list of companies and groups that help keep the lights on at CTIC:

  • American Tower (owns cellular and broadcast transmission towers)
  • AT&T
  • Broadband for America (funded by the cable/telco industry)
  • Cellular Operators Association of India
  • Comcast-NBC Universal
  • CTIA (the cellular industry’s top lobbying trade association)
  • Facebook
  • Google
  • GSMA (Mobile industry trade association)
  • ICANN
  • Information Technology Industry Council
  • Intel
  • Internet Society
  • Microsoft
  • National Science Foundation
  • NCTA (cable industry’s top lobbying group)
  • New York Bar Foundation
  • Qualcomm
  • Time Warner Cable (now Charter Communications)
  • Verizon
  • Walt Disney Co.

It’s clear there are few friends of municipal broadband donating to the CTIC while we count about eight likely opponents.

Even the way Mr. Yoo introduced his municipal broadband report at a Wharton Business School “broadband breakfast discussion” opened the door to more questions. To suggest the panel was stacked against public broadband would be an understatement.

In addition to Mr. Yoo, the former mayor of Philadelphia and governor of Pennsylvania Ed Rendell — who was hired by Comcast-NBC Universal less than two months after coming out in strong support of the merger of Comcast and NBC-Universal, was tasked with keynote remarks. Joining both on the discussion panel was Frank Louthan, a Wall Street analyst for Raymond James who regularly covers big cable and telco companies for investors and wouldn’t appreciate giving the bad news to clients about municipal broadband’s profit-killing competition and Douglas Holtz-Eakin, president of the corporate dark money-backed American Action Forum who seemed enamored of all-things Comcast. In 2014, Holtz-Eakin went out of his way to write a long piece urging regulators to approve the Comcast-Time Warner Cable acquisition as soon as possible.

Anyone who wanted to hear a positive view of municipal broadband would have had to eat breakfast somewhere else.

Yoo’s “Evidence”

For the benefit of readers and local officials that want a more detailed refutation of Mr. Yoo’s study and his findings on the granular level, we point you to Community Broadband Networks’ excellent report debunking the obviously biased findings from Mr. Yoo, who appears to be working on behalf of some of America’s largest telecom companies. Mr. Yoo will claim those companies did not sponsor the study, but we remind readers that without the extensive donor support of Yoo’s group from the telecom industry, there would likely be no study.

But we found several red flags to share as well.

Red Flag #1: Changing the metrics.

Mr. Yoo hand-selects the metrics by which municipal network success or failure can be determined… by him. He relies on Net Present Value, a particularly complicated and not always accurate measurement of a network’s prospects for success or failure. Clearly, every municipal network will face some challenges. Many are in areas deemed unprofitable to serve by the commercial telecom industry. But then, municipal broadband is all about solving the problem of broadband accessibility that other ISPs won’t. These public networks don’t exist to make shareholders and executives rich, nor do they have to allocate money to pay shareholder dividends. Even commercial ISPs have their hands out looking for subsidies to wire rural areas they would otherwise never serve. There is more to the story of municipal broadband than profit and loss.

Red Flag #2: Financing concrete.

Mr. Yoo’s predictions that some networks may never pay off their debts or will take dozens of years or more doing so assumes almost nothing changes for those networks in the near or distant future. Broadband networks are constantly evolving, as are potential revenue sources. Imagine a cable company having to exclusively rely on cable TV revenue to pay down their debt. Then remember the day cable operators discovered they could use a portion of their existing network to sell something called “broadband” service for another $30 a month. Ancillary revenue from the introduction of innovative new products and services is precisely how the cable industry successfully boosted subscriber revenue even in mature markets where adding new customers was challenging. They followed the time-tested principle of selling more things to the customers they already have.

But then Mr. Yoo agreed with this concept himself… when he was talking about the some of the same telecom companies that write his group checks. Municipal networks are somehow… different, however:

The development of the Internet has greatly increased the value of the services that can be provided by last-mile networks. The rollout of convergent technologies, such as Internet telephony and packet video, will break down the barriers that previously limited the revenues generated by any particular transmission technology. Cable is already able to provide voice through its coaxial network, and it is just a matter of time before telephone companies are able to provide video. Application-based distinctions between transmission media will completely collapse once all applications become packetized.

He also downplays the tool of refinancing. Altice turns that concept into a weekend hobby. This European cable conglomerate’s business plan leverages debt like no other cable operator. It manages that debt by regularly repackaging and refinancing debt at lower rates as it also works to pay it down. These same options are available to municipal providers.

Red Flag #3: Municipal broadband is too expensive, or is it?

There are massive start-up costs to build broadband networks, costs that might put a community’s finances at risk, Yoo’s report concludes. That leaves the obvious impression communities should avoid going there. But that wasn’t the attitude he had in 2006, when network costs were even higher than they are today.

“The economics of the last mile have changed radically in recent years,” Yoo said. “The fixed costs of establishing last-mile networks have dropped through the floor. Switching equipment that used to take up an entire building can now be housed in a box roughly the size of a personal computer. Copper wires have been replaced by a series of innovations, including terrestrial microwave, satellites, and fiber optics, which have greatly reduced the costs of transmission.”

When he is talking about municipal broadband, he seems to tell an entirely different story. Why might that be?

Red Flag #4: Yoo misrepresents the problem.

Mr. Yoo has reflexively defended his donor base for several years across a myriad of broadband public policy issues — data caps/zero rating, Net Neutrality, mergers and acquisitions, network costs, and more. The hypocrisy emerges when his entirely different standards for municipal broadband become clear.

The toll from “personal turmoil and distraction” Yoo worries about with municipal broadband projects ignores the real problem — the lack of suitable broadband in a community with no solution in sight. Just ask families that drive their kids to a fast food restaurant to borrow a Wi-Fi connection to complete homework assignments, or the difficulty getting broadband in a neighborhood bypassed by DSL or cable. If a community defines broadband as an essential utility, it provides it even if it doesn’t turn a profit. Public infrastructure projects are not unusual. The amount of money spent by an industry worried about losing its duopoly or monopoly profits to oppose such projects could have been spent on improving and expanding service.

If a local community wants a municipal solution, it is Mr. Yoo’s donors that create most of the turmoil by ghostwriting municipal broadband bans into state law and filing groundless stall tactic lawsuits designed to protect their markets or run up costs.

Red Flag #5: There is “little current need” for high broadband speed (unless Comcast offers it).

One of the best clues that Mr. Yoo’s research isn’t as “independent” as he implies is the fact his conclusions seem to change depending on whether he is referring to a corporate ISP or a municipal provider. For example, Yoo’s study downplays the importance of gigabit fiber speeds. In one highlighted statement, Yoo declares, “The U.S. take-up rate of gigabit service remains very low, and media outlets report that consumers are questioning if gigabit service is really necessary.”

“The media” in this case is Multichannel News, a cable industry trade publication that has changed its tune about that subject recently and now publishes stories regularly about ISPs across the country moving towards gigabit speeds. In the article noted by Yoo, the story quotes a single CenturyLink executive who claims customers can live with the slower speeds CenturyLink often provides, but also admits his company is working to deploy, wait for it, gigabit-capable networks. As Stop the Cap! has explained to readers for a decade, the companies that always claim consumers don’t need a gigabit are the same ones that do not offer it to a large percentage (or any) of their customers. Yoo fails to explain why so many ISPs are preoccupied with offering fast internet speeds that he declares are unwanted, especially when a municipal provider plans to offer them.

Yoo’s allegiance to the current big cable and phone company provider paradigm is revealed when you scrutinize his reasons why community fiber is unnecessary. Take this example from his report:

“Wireless technologies—such as 5G—and legacy copper technologies—such as G.fast—are also exploring ways to provide gigabit speeds without incurring the cost associated with FTTH.”

“Exploring” is very different from “delivering.” Let’s also not forget he held a very different view when he wasn’t slamming municipal broadband:

“On the one hand, the Bell System created a telephone network that was the envy of the world and pioneered Nobel Prize-winning breakthroughs such as the transistor. On the other hand, it was extremely slow to deploy innovative technologies like DSL.”

It’s also important to note a large percentage of community broadband networks are based on fiber optics while commercial wireless companies like AT&T and Verizon are among the few willing to deploy 5G and incumbent telephone companies show only limited interest in G.fast.

And again, Yoo should take a bit of his own advice on picking or discouraging technology or municipal broadband provider winners and losers:

“At this point, it is impossible to foresee which architecture will ultimately represent the best approach. When it is impossible to tell whether a practice would promote or hinder competition, the accepted policy response is to permit the practice to go forward until actual harm to consumers can be proven. This restraint provides the room for experimentation upon which normal competitive processes depend. It also shows appropriate humility about our ability to predict the technological future.”

Red Flag #6: Innovation is in the eye of the beholder. (Subject to change on a whim).

Yoo also distorts a 2014 New York Times article by focusing on the lack of applications available to take advantage of gigabit speeds. But he ignores the fact that customers and entrepreneurs are delighted that speed is available, and offers the potential of significant innovation including very high quality video and enough bandwidth to power the explosion of connected devices in the home. Every major ISP in the country reports consumers are upgrading to faster internet packages, and some customers remain dissatisfied those speeds are still not fast enough.

Again, Yoo is suspiciously inconsistent. When major ISPs sought permission to develop faster traffic lanes for brand new services, Yoo was one of the biggest supporters of the innovation opportunities of that concept:

He hopes that the FCC’s easing restrictions on broadband providers’ ability to charge different prices for delivering different Internet content could spur innovation by allowing both established companies and startups to offer new online services tailored for the Internet “fast lane” delivery. For instance, Yoo pointed to the differentiation between standard U.S. first class postal service with overnight FedEx mail and noted how new businesses have grown around the overnight delivery option.

Apparently the distinction is that companies like Comcast have to be the mail carrier for that to be any good. If a community does it, that means it is unwanted, unnecessary, and bad.

We could go on and on, but we assume most readers get the point. Fixing facts around a narrative has been a part of the telecom industry’s cynical lobbying for decades. Let’s face facts. Yoo’s donors don’t want the competition and don’t want to be forced to invest in upgrades they should have completed long ago. Yoo’s report is part of the campaign to stop municipal broadband before it gets off the ground.

Where did we learn this? From Yoo himself, who wrote the best way to improve broadband is remove barriers that keep new providers, including municipal ones if he wants to be consistent, from launching service:

“Competition policy thus teaches us that any vertical chain of production will only be as efficient as its least competitive link. The proper focus of broadband policy is to identify the level of production that is the most concentrated and the most protected by entry barriers and to try to make it more competitive.”

“Furthermore, large, established players have more resources and experience with which to influence the regulatory process.”

Those are two things we can agree on.

Verizon Commits to Spend $1 Billion on New Fiber Buildout for Its 5G Network

Verizon Communications announced a deal Tuesday with a leading optical fiber manufacturer to supply up to 12.4 million miles of fiber cable annually for a large buildout of Verizon’s fiber network to power its forthcoming 5G wireless service.

Verizon’s $1.05 billion agreement with Corning, Inc., of Corning N.Y., will guarantee Verizon will have an ample supply of optical fiber available from 2018-2020 at a time when the company noticed a fiber cable shortage was causing problems for its current FiOS/5G fiber buildout now underway in Boston.

“This new architecture is designed to improve Verizon’s 4G LTE coverage, speed the deployment of 5G, and deliver high-speed broadband to homes and businesses of all sizes,” Verizon said in a statement. But Verizon did not make it very clear the expansion will primarily benefit Verizon Wireless, not Verizon Communications’ FiOS fiber to the home service.

Verizon CEO Lowell McAdam, appearing exclusively on CNBC this morning, rejected the notion that the fiber buildout would represent a restart of Verizon’s long-suspended expansion of its FiOS fiber to the home service.

“When we deployed FiOS we would run a fiber cable into a neighborhood with six or eight strands in it,” McAdam said. “Now we’re going to drop off six or eight strands to every street light in every neighborhood so that allows you to deliver a gigabit of thruput into the home and allows you to do things like intelligent transportation, electric grid management, and water system management. You hear a lot about autonomous cars and things like that today that don’t work without 5G.”

Verizon’s Boston project represents the current CEO’s vision: a wireless-based network supported by an extensive fiber network. But instead of connecting fiber to homes, McAdam’s network connects fiber to tens of thousands of palm-sized “small cells” and other wireless infrastructure that will deliver services to individual neighborhoods instead of individual homes.

Critics still question whether Verizon’s 5G network will be able to sustain its speed and capacity claims outside of testing labs, especially as shared wireless network infrastructure faces future usage demands. Fiber to the home service does not require customers to share bandwidth the same way a wireless connection would and can manage much higher capacity.

Verizon CEO Lowell McAdam and Corning chairman and CEO Wendel Weeks appeared jointly on CNBC to discuss Verizon’s $1.05 billion agreement with Corning to guarantee up to 12.4 million miles of optical fiber a year from 2018-2020. (11:24)

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