The death of DSL?

If your local phone company does not offer fiber-to-the-home service, it risks seeing its market share as a broadband competitor drop to zero, according to new research from Wall Street analyst firm MoffettNathanson.

As the cable industry prepares to deploy DOCSIS 4.0, capable of much faster upload speeds in the gigabits and downloads as fast as 10 Gbps, the future of telephone companies that have under-invested in their networks for years is dire. The research firm’s “Equilibrium Forecast” sees DSL’s market share in areas where cable broadband is available dropping to zero. Phone companies that have invested in fiber half-measures, including fiber to the neighborhood, IP-DSLAM, and VDSL technology that traditionally delivers internet speed between 25-75 Mbps are not far behind. Only true fiber-to-the-home service stands a chance at protecting phone company broadband market share.

“DSL [and] mid-tier [fiber/copper combinations are both] obsolete,” researchers said in a private note to investors. “Broadband is increasingly a two-horse race between cable and telco fiber-to-the-home service, where it exists.”

The COVID-19 pandemic has only increased problems at the nation’s legacy phone companies, as customer losses accelerate in favor of cable company delivered internet. In the first quarter of 2020, cable company broadband sign-ups increased 122% compared to the same quarter last year, while phone companies said goodbye to at least 65,000 subscribers. Last year during the first quarter, telcos managed to add 20,000 customers.

Leichtman Research Group reports that most customers are looking for stable and reliably fast internet service, and phone company DSL delivers neither. Having a speedy and dependable connection has become crucial as tens of millions of Americans work from home to avoid contracting the illness. Sharing that internet connection with kids staying home from school quickly caused a spike in upgrade orders.

“The increased level of usage was enough to convince many customers that they needed higher speeds to handle the number of simultaneous users in their home,” MoffettNathanon wrote.

Many phone companies lacking fiber were unable to deliver on upgrades, and customers that could went shopping for alternatives. At the same time, large DSL providers like Frontier Communications and Windstream have become mired in bankruptcy and have been losing residential customers for years. MoffettNathanson told its investor subscribers it was time to declare DSL effectively dead as a competing technology, with fiber service variants like U-verse and other flavors of VDSL near-dead.

“As with legacy DSL, it is increasingly clear that this segment is simply not competitive anymore. Equilibrium market share in this cohort, if one looks out far enough, is 100/0.”

MoffettNathanson expects cable operators will achieve an 85% market share for broadband service in markets where their chief competitor is a phone company yet to provide fiber-to-the-home service. If phone companies do not embark on immediate fiber upgrades, the damage to their market share could be permanent, especially after DOCSIS 4 arrives, according to the researchers, because the newest cable broadband platform may be able to erase fiber’s speed advantage.

AT&T mobile customers can watch AT&T-owned HBO Max without fearing any impact on their data allowances, despite the fact competing services like Amazon Prime Video, Disney+, Hulu, and Netflix will not be given similar treatment.

The Verge confirmed with AT&T that customers with AT&T mobile service can watch an unlimited amount of HBO Max and not exceed data allowances or the soft cap of 22-50 GB a month that unlimited use plan customers have.

The practice of exempting some content from data caps is known as “zero rating” and critics of the practice contend it is an “end run” around net neutrality. AT&T defends itself claiming HBO Max is paying AT&T to sponsor customer usage.

“According to an AT&T executive familiar with the matter, HBO Max is using AT&T’s ‘sponsored data’ system, which technically allows any company to pay to excuse its services from data caps,” according to the story in The Verge. “But since AT&T owns HBO Max, it’s just paying itself: the data fee shows up on the HBO Max books as an expense and on the AT&T Mobility books as revenue. For AT&T as a whole, it zeroes out. Compare that to a competitor like Netflix, which could theoretically pay AT&T for sponsored data, but it would be a pure cost.”

In short, AT&T is moving money from one of its pockets to the other, which may tangentially benefit AT&T mobile customers, but will also leave competing streaming services at a disadvantage, allowing AT&T to give preferential treatment to its own streaming service, which may discourage subscriptions to other services.

Ars Technica confirmed AT&T is not extending the data cap exemption to customers with AT&T DSL or Fiber service.

Maryland-based Antietam Broadband has permanently shelved internet usage data caps, retroactive to mid-March, for all of its customers.

An ongoing study of customer usage patterns during the early days of the COVID-19 pandemic by Antietam engineers showed data caps were no longer technically necessary. Antietam is one of dozens of telecom providers that temporarily shelved data caps under the FCC’s Keep Americans Connected Pledge, a voluntary effort to suspend data caps, late fees, and service disconnections. After three months of collecting data about customer usage patterns and upgrade activity, Antietam Broadband president Brian Lynch said there was no legitimate need to return to usage caps.

Antietam may be the first U.S. provider to drop usage based billing after the FCC’s pledge expires at the end of June.

Lynch said customers appropriately self-managed their accounts, with heavier users (such as those now working from home) moving towards more profitable, higher-speed internet packages on their own. Antietam has traditionally offered seven different speed tiers, each including its own (now defunct) usage allowance:

• Internet Starter: 5 Mbps down / 1 Mbps up, 500GB per month.
• Go Fast: 10 Mbps down / 1 Mbps up, 500GB per month.
• Ultra Fast 30:  30 Mbps down / 5 Mbps up, 600GB per month.
• Ultra Fast 50:  50 Mbps down / 5 Mbps up, 750GB per month.
• Ultra Fast 100:100 Mbps down / 5 Mbps up, 1,250GB per month.
• Ultra Fast 200: 200 Mbps down/ 10 Mbps up, 1,500GB per month.
• Flight Gigabit Fiber: 1,000 Mbps down/ 1,000 Mbps up, no usage limit.

“These are uncertain times,” said Lynch. “We felt a need to give customers as much certainty over their bill as possible. Eliminating data usage caps means that customers will know the exact amount of their broadband bill every month.”

It also reduces customer confusion by eliminating the need to factor in data usage when selecting the right broadband package. Now, Antietam customers buy based exclusively on speed needs.

The pandemic caused a significant increase in data usage, but Antietam’s network was capable of handling usage demands, Lynch added.

“Since the pandemic began, we have seen as much increase in broadband usage as we generally would see over the course of a year,” said Lynch.

Frontier Communications is seeking to slow or block rural broadband funding for tens of thousands of rural Americans that live inside Frontier service areas but cannot subscribe to broadband service because the company does not offer it.

Frontier is currently embroiled in a controversy over its regulatory filings with the FCC that sought to block or delay public funding of competing broadband projects in its territories by claiming such funding might be unfair and redundant, since Frontier is already supplying (or will supply) service in those communities.

The FCC’s Rural Digital Opportunity Fund (RDOF) will eventually spend $20.4 billion on rural broadband expansion, but the Commission is bending over backwards to protect incumbent cable, phone, and wireless companies from possible competition that potentially could be funded with public money. The Commission has invited providers to cross check “census blocks” — small geographic areas it has identified as eligible for rural broadband funding and report back if any should be excluded from the first phase of the program.

Incumbent phone and cable companies can protect their service areas from interlopers by claiming broadband service already exists in areas designated for rural broadband funding. Since the FCC continues to depend on voluntary disclosures of service areas by cable and phone companies, there is no immediate consequence if those providers take a more favorable view of what constitutes “service,” even if it ultimately results in long, further delays in rural broadband coverage for tens of thousands of Americans.

In early April, Frontier filed a lengthy submission objecting to the inclusion of 16,987 census blocks where it claims it already provides suitable broadband service. The majority of RDOF funding — $16 billion of the available $20.4 billion will be spent in the first funding phase, and only on census blocks where no provider offers high speed internet. If Frontier gets the FCC to block potential new entrants from qualifying for Phase One funding, it could spare the company from facing competition and leave a lot of homes with no internet service for years.

Immediate concerns were raised with the FCC regarding Frontier’s filing, including independent research that suggested Frontier was not being entirely honest about providing broadband at speeds at or exceeding 25 Mbps.

NTCA-The Rural Broadband Association:

Simply put, as the Wireless Internet Service Providers Association and the National Rural Electric Cooperative Association noted, “it is difficult to believe that Frontier was able to provide voice and 25/3 Mbps service in each of these 16,000 census blocks in just eight months.” Such incredulity is compounded by the fact that Frontier operated under the specter of a looming bankruptcy during this period, making it difficult to envision deployment to such a large number of locations within just several months’ time after years with little meaningful progress. Indeed, as WISPA and NRECA correctly point out, Frontier just four months ago alerted the Commission to the likelihood that it would be unable to meet its interim deployment milestones to which it was beholden pursuant to broadband commitments made in 2015. Moreover, Frontier’s financial disclosures, again as WIPSA and NRECA reference, showed an operator losing subscribers and working with a financial structure that would appear to have severely limited its ability to invest capital in broadband deployment.

The Institute for Local Self-Reliance also shared its concerns with the FCC, reminding the agency of Frontier’s lengthy track record of misrepresenting its service performance:

Frontier’s record in recent years offers numerous warning flags that the Commission should consider before accepting its nearly 17,000 challenges. The company has been the subject of numerous official complaints and investigations in the states in which it operates and has settled investigations in several states after extremely lengthy records were compiled showing its inability to regularly provide basic services. Consider this nonexhaustive list in just recent years:

California
CPUC investigating Frontier outages after transfer from Verizon in 2016 (2020)
Connecticut
AG and Dept. of Consumer Protection investigating Frontier for bad quality and billing (2019)
Florida
AG sent letter to Frontier after hearing complaints after transfer from Verizon (2016) and collected complaints (2016)
Ohio
PUC filed complaint that Frontier didn’t maintain service quality (2019)
Minnesota
PUC organized public hearings (2018) and settled with Commerce Department (2019)
Commerce launched a second investigation into billing and customer service (2019)
New York
PSC requested review after complaints of poor quality and outages (2019)
Nevada
Cited by AG’s Bureau of Consumer protection for misrepresenting speeds and service quality (2019)
North Carolina
AG issued civil investigative demand (2019)
Pennsylvania
AG Bureau of Consumer Protection settled with Frontier after investigation into poor quality and speeds (2020)
Utah
PSC investigated telephone outages (2019)
West Virginia
Settlement with AG for misrepresenting speeds (2015)
PSC ordered independent audit after complaints of poor quality and outages (2018)

The Commission faces a crisis of credibility on matters of broadband and telecommunications data collection, with two significant scandals in just the past 6 months.

Frontier’s claimed DSL speeds compared with actual average speeds (Courtesy: Smith Bagley, Inc.)

One company, Smith Bagley, Inc., went even further, building a spreadsheet of several disputed census blocks in an independent investigation. The company called Frontier repeatedly, posing as potential new broadband customers to test Frontier’s claims it supplied 25/3 Mbps service in several rural census blocks in New Mexico and Arizona. It found no instance where Frontier was ready to sell 25 Mbps service to any of the locations requested.

“Frontier either does not offer broadband service, or offers service at below 25/3 Mbps, in every one of the 1,300 census blocks it challenged in Arizona and New Mexico,” Smith Bagely noted in its letter to the FCC, citing another third party broadband availability database.

In a haughty response to the FCC dated May 26, Frontier waved off the criticism, claiming it was based on “a scattershot challenge to one-off census blocks, ad hominem attacks, and irrelevant sources.”

But the company also made a crucial admission about the broadband speeds it claims to offer that is worthy of a closer look:

“Frontier does not claim it serves every location in each census block at 25/3 Mbps. Under the Commission’s rules, carriers report the fastest speed available for sale in that census block, even if it is only available in one or a handful of locations.”

In other words, if Frontier found in its own internal testing, unverified by an independent third party, that it managed to provide 25 Mbps to even one out of hundreds of households, it can ignore the rest of the area’s much slower DSL speeds and petition the FCC to exclude funding for a new, more capable service provider. In fact, it need not disclose the abysmal speeds other homes might be enduring from Frontier and declare that census block to be adequately served by broadband and unworthy of additional funding, at least during Phase One.

Frontier also suddenly announced on May 23 it was now open to RDOF Phase One funding in its contested census blocks, which appeared to be a significant concession. But the company also noted the FCC’s established rules are the rules, regardless of what Frontier thinks:

“But to the extent the Commission decides to maintain its decision to include partially served census blocks in RDOF Phase II, SBI, Frontier, and any other company will be able to bid on those locations after mapping is complete and Phase II is implemented.”

Rosenworcel

The end impact of that could be a concession without any meaningful change.

Frontier also asked the FCC to dismiss concerned public interest groups and consumer complaints about its service because they are anecdotal. Besides, Frontier argued, companies seeking to enter Frontier-served areas can always apply for Phase Two funding, which will only be a small fraction of the funding available in Phase One. Because Phase Two is designed to help providers pay for improving existing service, sizeable portions of that funding will likely be awarded to companies like Frontier.

That the FCC plans to spend billions on broadband improvements based on flawed broadband availability data and imprecise census block criteria has infuriated Democratic FCC Commissioner Jessica Rosenworcel.

“Time and again this agency has acknowledged the grave limitations of the data we collect to assess broadband deployment. If a service provider claims that they serve a single customer in a census block, our existing data practices assume that there is service throughout the census block. This is not right. It means the claim in this report that there are only 21 million people in the United States without broadband is fundamentally flawed. Consider that another recent analysis concluded that as many as 162 million people across the country do not use internet service at broadband speeds,” Rosenworcel said in 2019. “Adding insult to injury, the same flawed data we rely on here is used to populate FCC broadband maps. For those keeping track, one cabinet official has described those maps as ‘fake news’ and one Senator has suggested they be shredded and thrown into a lake.”

This year, her Democratic colleague Commissioner Geoffrey Starks added his own concerns.

“I have zero tolerance for continuing to spend precious universal service funds based on bad data,” Starks said. “There is bipartisan—and nearly universal—agreement that our existing broadband deployment data contains fundamental flaws. And yet today’s order presses ahead with funding decisions based on mapping data that doesn’t reflect reality.”

Only 40% of rural Canadians today have suitable internet access and a Canadian minister is now “open to the idea” of transforming broadband in the country into a universally available public utility.

Minister for Rural Economic Development Maryam Monsef admits that Canada’s current reliance on private cable and phone companies like Bell, Telus, and Rogers has kept large parts of Canada from getting affordable, 21st century internet access. Creating a public broadband utility that would provide universal access may be the best solution to reaching areas considered too unprofitable to serve by private companies.

The impetus to consider creating one of the world’s largest publicly owned broadband providers comes as a result of the COVID-19 pandemic, which has forced millions of Canadians to work from home. But with well under half of rural Canada lacking high speed internet service, educators, medical personnel, and business workers find themselves unable to connect.

Nancy and Jeff Boss of Flamborough, Ont., live 10 minutes outside of Hamilton. They are “off the grid” for high speed internet by just 100 meters. To bring cable broadband to their home, the local cable company quoted an installation price of $27,000. As a result, the Boss family relies on a cell phone data plan that costs $150 a month and offers 100 GB of usage on a 4G LTE network. The family often exceeds its usage allowance, and told CBC’s “The Current” their monthly bill has crept up to $500 in usage charges at times.

Nancy Boss is a school teacher, and life without internet in the COVID-19 era of online classes is difficult.

“I am struggling daily with my lessons, I can’t do live lessons as the minister of education is requiring us,” Boss told CBC Radio, adding that her own children’s education is being affected too. “It’s really hard for our kids to participate in their lessons [and] it’s sad, they can’t chat with their friends who they miss very much.”

Monsef

The Liberals promised $5-6 billion for rural internet expansion in the 2019 budget as part of a party pledge to get 100% of Canadians connected to high-speed internet by 2030. But that was before the pandemic struck, making internet connectivity more essential than ever before.

Broadband advocacy group OpenMedia’s Laura Tribe says the government’s promises are nice, but the target date remains 2030 — a decade away. She argues people need internet access today. Tribe says the weak link is relying on corporate cable and phone companies to do the work to reach rural Canada. Despite repeated funding efforts and ongoing lobbying, Tribe believes many of the country’s largest providers have dragged their feet on rural expansion for years, noting they operate in the interest of shareholders, not rural Canadians. Recently, Tribe believes many of Canada’s largest telecom companies have made rural Canadians “pawns” in a greater debate about deregulation and wireless spectrum for 5G. When providers see their business interests threatened, they warn lawmakers and regulators the result may be further delays in rural internet expansion.

That is why Tribe advocates declaring broadband service to be an essential public utility, putting the onus on the government to complete “last mile” buildouts to individual rural homes and businesses like the Boss family as quickly as possible. On that point, Monsef seemed to agree.

“One of the things that the federal government can do is to invest in that last mile, where the business case for the private providers is not the same,” Monsef, who also serves as the MP for Peterborough-Kawartha said. “Once you do connect Canadians, though, those investments will pay off because that connectivity leads to economic development and a higher quality of life.”

When pressed about her support for declaring broadband service a national public utility, Monsef said she was open to the idea and having a debate on what solution will work best for rural Canada.

“What COVID has done is create an opportunity for a resurgence of good ideas, and that’s a good idea that I’m open to,” Monsef said. “This is among the many good ideas that we are considering: What are the pros? What are the cons? How do we get it done? Who’s on board?”

CBC Radio One’s “The Current with Matt Galloway” spent a half hour exploring the plight of rural Canadians expected to work at home who lack suitable internet access. Is it time for Canada to make broadband service a public utility? (24:07)