AT&T has secured support from the Federal Communications Commission for authority to deploy 4G LTE service within a 20MHz portion of the 2.3GHz WCS band after cutting a deal with a next door neighbor especially sensitive about potential interference.

WCS spectrum holders have fought for years to develop commercially viable wireless service, but faced regular opposition from the satellite radio industry concerned that interference problems would result from using the band for mobile data. Right in the middle of the WCS band is Sirius XM, which depends on sensitive receivers to pick up the company’s satellite signal.

But now AT&T and Sirius XM have worked out a compromise both companies believe will protect mobile data and satellite radio. AT&T has conceded 10MHz of its total WCS spectrum for two 5MHz guard bands, devoid of signals, around Sirius XM’s frequencies. Sirius XM signal engineers believe this, combined with power limits, will protect radio receivers from overloading whenever near AT&T’s ground-based LTE cell towers.

In August, AT&T announced its intention to acquire WCS spectrum from NextWave Wireless, a spectrum-squatting holding company, for $600 million. The phone company is also attempting to acquire the remainder of WCS spectrum from the last two significant holders — Comcast and Horizon Wi-Com, which both have between 10-25MHz of spectrum in 149 and 132 communities respectively.

When the acquisitions are complete, AT&T will have WCS spectrum covering virtually the entire nation.

Frequencies in the 2.3GHz band are best received outdoors. Signals crossing windows and walls lose potency. (Courtesy: Greenpacket)

AT&T says it needs the spectrum to further deploy 4G LTE data service across the country. But the company admits it will take up to five years before it can switch on the new frequencies — no current smartphones support the 2.3GHz WCS band.

AT&T has also included provisions to ensure fixed wireless base stations will be able to utilize AT&T’s WCS spectrum, within reasonable limits to protect Sirius XM radios from harmful interference. That has important implications for AT&T’s long-term view that rural landline and broadband service is best delivered over a wireless network.

A major limitation of spectrum in the 2GHz band is the quality of indoor coverage it can deliver. As many Clearwire customers can attest, these frequencies suffer from high transmission loss, poor ability for diffraction, and most importantly, poor building penetration — especially in urban and suburban areas. Tall nearby buildings, homes, and even trees all impede WCS reception. According to Andrea Goldsmith in her book Wireless Communications, there is also a 6dB penetration loss when 2.5GHz signals cross un-insulated glass windows and a 13dB loss for concrete walls, with wood falling somewhere in-between.

But rural areas do better, in part thanks to the higher likelihood of unimpeded line-of-sight access between a cell tower and receiver. AT&T’s fixed wireless solution would place a small antenna on the roof or side of a home, positioned for maximum reception from the nearest cell tower. The signal is then brought indoors through cabling (or in some cases Wi-Fi) and available to customers, comparable to a home broadband connection.

AT&T’s strong spectrum position in WCS gives the company an opportunity to construct a robust, near-nationwide wireless network suitable for rural wireless communications. In more urban areas, WCS could operate seamlessly with AT&T’s lower frequency holdings and offer an extension of its current LTE service.

AT&T’s acquisition of WCS has several important implications for the wireless marketplace:

2GHz signals travel the least distance in urban and suburban areas, often blocked or degraded by buildings or trees. But better results in rural areas suggest AT&T’s WCS spectrum could partly be deployed as a fixed wireless broadband solution, if enough towers are available to support it. (Courtesy: Greenpacket)

1. It proves AT&T never needed to acquire T-Mobile USA. Through spectrum acquisitions like WCS, AT&T can still find relatively inexpensive spectrum suitable for mobile broadband use, without spending tens of billions to acquire a competitor just to poach its spectrum and eliminate a competitor.

2. The Competitive Carriers Association worries AT&T’s acquisition of secondary spectrum holders is allowing the company to gather a massive amount of spectrum.

CCA President & CEO Steven K. Berry said, “Allowing the largest carriers to obtain unlimited amounts of  spectrum on the secondary market raises serious competitive concerns.  The only way for the FCC to truly see the devastating consequences of further spectrum aggregation is by consolidating the proposed applications.  On their own, AT&T’s proposed license acquisitions may not seem significant, but when added together, it totals to a significant amount of spectrum.”

Berry continued, “Should the FCC decide to approve the transactions, it must impose conditions to ensure interoperability across the Lower 700 MHz band and to ensure data roaming – both are absolutely essential ingredients to a healthy, competitive marketplace.  Competitive carriers need access to usable spectrum, and I urge the Commission to carefully review the negative impact these transactions will have on the wireless marketplace.”

3. Clearwire’s 2.5GHz spectrum could become more valuable if AT&T can demonstrate its 2.3GHz service can deliver robust service, if provisioned adequately for customers. Clearwire’s capital investments and overall performance of its limited coverage WiMAX network have been deemed inadequate by its biggest partner Sprint, now constructing its own 4G LTE network to replace Clearwire’s WiMAX network.

4. Credit Suisse analyst Jonathan Chaplin notes Verizon will still have a better standing in spectrum even with AT&T WCS: “AT&T will have the following available for LTE: 20 MHz of 700 MHz nationwide; 20 MHz of WCS nationwide; a few AWS licenses (5 MHz on average). With Verizon’s deal with large cable companies, Verizon will have: 20 MHz of 700 MHz nationwide; 20 MHz of AWS nationwide; another 10 MHz of AWS in 60 percent of the country (13 MHz on average). In addition, Verizon’s spectrum is usable immediately, while AT&T’s WCS will take three to five years to deploy.”

AT&T and Verizon: The Doublemint Twins of Wireless

Wireless carriers other than AT&T and Verizon Wireless have joined forces asking federal regulators to help level the playing field in wireless competition.

At this week’s convention of the newly-relaunched Competitive Carrier Association (CCA), Sprint, T-Mobile USA, Clearwire, C Spire, and more than 100 other small regional rural carriers joined forces in Las Vegas to sound the alarm about a wireless duopoly restraining competition and raising prices for consumers.

“Humpty Dumpty has been put back together again,” said C Spire CEO Hu Meena. “And while the identical twins sometimes agree to meet and discuss industry issues with other industry players, they seldom, if ever, support action that might better the industry as a whole.”

C Spire should know. The company filed a lawsuit against AT&T earlier this year claiming the phone giant manipulated its 700MHz band allocation to lock C Spire customers out of getting access to the latest smartphones.

“At some point, and that time is coming, regulators and politicians are going to have to acknowledge they have a choice to make: they are going to have to decide whether the communications industry, the fundamental driver of the information economy, is going to be regulated by true, healthy competition or by the government,” Meena said.

In the last 20 years, rampant consolidation has reduced the number of national wireless carriers down to four — Verizon Wireless, AT&T, Sprint, and T-Mobile. Filling in the gaps are various regional providers, all who depend on one of the major four to provide reasonable roaming service for customers traveling beyond the service areas of smaller companies. Without reasonable roaming, competitors are left at a serious disadvantage.

Another major problem is access to the latest smartphones. Major manufacturers largely design and market cell phones for the largest four companies, often relegating smaller providers to sell older or less prominent phones to customers. When phones do not work on the spectrum acquired by smaller competitors, roaming becomes a problem.

But beyond those issues is the question of wireless spectrum. Traditionally sold in competitive auctions, the deepest pocketed companies traditionally win the bulk of frequencies, leaving competitors with less desirable spectrum that has difficulty penetrating buildings or requires a more robust cell tower network.

Meena

Members of the CCA recognize that mergers and consolidation can bring costs down through economy of scale, but in their eyes, AT&T and Verizon’s actions have promulgated a new paradigm for wireless on Wall Street: consolidation around a handful of wireless carriers is healthy; having too many competitors is inefficient.

“Consolidation can introduce business efficiencies,” said Michael Prior, CEO of Atlantic Tele-Network. “But government has a role in making sure that infrastructure is used in a way that works for the entire country. All we’re asking the FCC to do is to make sure there is a level playing field.”

Observers expect the CCA to ask the FCC to set aside spectrum in future wireless auctions exclusively for smaller carriers to help protect what competition still exists.

“There used to be dozens of railroad companies,” Prior noted. “But the government didn’t allow certain companies to develop rails that wouldn’t allow trains to interconnect to rails run by other companies.”

Meena warned the same thing could happen in the wireless industry.

“We know what happened in the first 20 years of the industry where we have had many healthy competitors,” Meena said. “There remains a false hope among too many carriers that the duopoly will one day become reasonable. But, we all know, whether we choose to admit it or not, that until all competitive carriers become fully committed to work together for open competition, the wireless industry playing field will remain harmfully tilted toward the duopoly. They will never give an inch unless and until they have to do so.”

Phillip “Tollbooths are not innovation” Dampier

Federal Communications Commission chairman Julius Genachowski last week wrote a guest editorial on TechCrunch espousing the benefits of faster broadband networks, but the advances he celebrates often come with innovation-killing usage caps and overlimit fees he continues to ignore.

We feel the need – the need for speed. As Tom Friedman and others have written, in this flat global economy a strategic bandwidth advantage will help keep the U.S. as the home and most desired destination for the world’s greatest innovators and entrepreneurs.

[…] But progress isn’t victory, particularly in this fast-moving sector. Challenges to U.S. leadership are real. This is a time to press harder on the gas pedal, not let up. The first challenge is the need for faster and more accessible broadband networks. We need to keep pushing because our global competitors aren’t slowing down. I’ve met with senior government officials and business leaders from every continent, and every one of them is focused on the broadband opportunity. If we in the U.S. don’t foster major investments to extend and expand our broadband infrastructure, somebody else will take the lead.

We need to keep pushing because innovators need next-generation bandwidth for next-generation innovations – genetic sequencing for cancer patients, immersive and creative software to help children learn, ways for small businesses to take advantage of Big Data, and speed- and capacity-heavy innovations we can’t yet imagine.

We need to remove bandwidth as a constraint on our innovators and entrepreneurs. In addition to steadily increasing broadband speed and capacity for consumers and businesses throughout the country, we need – as we said in our National Broadband Plan – “innovation hubs” with super-fast broadband, with speed measured in gigabits, not megabits.

[…]Some argue the private sector will solve these challenges itself, and that all government has to do is get out of the way. I disagree. The private sector must take the lead, but the public sector has a vital though limited role to play.

Among the policy levers government needs to use is the removal of barriers to broadband buildout, lowering the costs of infrastructure deployment with new policies like “Dig Once” that says you should lay fiber when you dig up roads. The President recently issued an Executive Order implementing this idea, suggested in our Broadband Plan. Government must promote competition, which drives innovation and network upgrades.

We must ensure the Internet remains an open platform that continues to enable innovation without permission.

Genachowski

Genachowski’s vision for faster broadband has the noble goal of maintaining competitiveness with the rest of the world and putting the United States back on top in broadband rankings and innovation. But while hobnobbing with his industry friends at recent industry conventions, he may have gotten too close to one of the biggest impediments holding us back — big cable and phone companies merrily working their magic to create a comfortable duopoly with pricing and service plans to match.

Back in the late 1990s, most cable operators thought of broadband as an ancillary service easy enough to operate, but probably hard to monetize. Just like digital cable radio services like Music Choice and DMX, “broadband” would likely appeal only to a tiny subset of customers.

“Back in the 1990s, Time Warner was primarily a TV company in a TV industry.  Broadband then was an innovating and radical thing, and a lot of people thought it was stupid and wouldn’t work,” Time Warner Cable CEO Glenn Britt said in April, 2009.

The launch of “Road Runner” was not the most auspicious marketing effort undertaken by the cable operator. In fact, the service was rarely targeted for price adjustments, hovering at around $40 a month for a decade.

When the Great Recession hit the United States, something unexpected happened. Cable operators discovered people were willing to cancel their cable and phone services, but not their broadband. In fact, as high bandwidth online video became an increasing part of our lives, the cable industry realized they were in the catbird seat to deliver the best broadband experience, and be well-paid for it. With little competition, increasing prices brought little risk and, thanks to the insatiable drive to boost revenue and reduce costs, implementing usage caps to control “excess” usage and costs were within their grasp.

In 2008, when Stop the Cap! launched, only a handful of ISPs had usage caps. Now most providers, with the exception of Time Warner Cable, Verizon, Cablevision, and a handful of others, all have usage allowances and overlimit fee Internet Overcharging schemes to further pad their bottom lines.

Innovation: Rationing Your Internet Experience — Stick to e-mail and web pages.

Genachowski has completely ignored the growing pervasiveness of usage caps, and even excused them as an experiment in marketplace innovation. But limits on broadband usage will also limit the broadband innovation revolution he wants, especially when most Americans have just one or two realistic choices for broadband service:

1. Usage caps are the product of artificial scarcity. Rationing Internet usage, even with now-pervasive cost-effective upgrades like DOCSIS 3, simply does not make sense (but it will make dollars). Cable operators are switching off analog television service to free up bandwidth to provider faster Internet speed and fatten the pipeline that delivers it. They have plenty of capacity, but continue to proclaim they must limit usage for “fairness” reasons, without providing a single shred of evidence to prove the need for usage caps. Consumers will self-ration just to avoid the prospect of being cut off or handed a bill with overlimit fees.
2. Usage caps make faster speeds irrelevant. Selling customers premium-priced, super fast broadband speed is hardly compelling when accompanied by usage caps that constrain the benefits of buying. Why pay $20-50 more for faster speeds when customers cannot take practical advantage of them. Customers using their Internet service to browse web pages and read e-mail have no interest in upgrading to 30+Mbps. Customers streaming video or moving large files do.
3. Usage caps retard innovation. Google’s new 1Gbps fiber optic network was built on the premise that usage caps were unnecessary on a fiber-based network and would retard innovation. Developing the next generation of innovative apps that Genachowski celebrates will never happen if developers are discouraged by Internet usage toll booths and stop signs. The cost to provide the service is not largely dependent on customer usage. It is the initial price of last mile infrastructure that really matters. Both cable and phone companies have reduced their investments to upgrade their networks, and AT&T and Verizon both contemplate getting rid of their rural landlines. Most cable operators paid off their networks years ago.
4. Usage caps create a whole new digital divide.  Time Warner Cable’s discounted Internet Essentials program delivers only a $5 discount with a harsh 5GB usage cap. For an income-challenged home compelled to switch to a provider’s budget plan, the result is a different Internet experience than the rest of us enjoy. Imagine if your home broadband account was limited to 5GB a month. What online services would you have to avoid to stay under the provider’s limit? Traditionally, operators sell the lowest speed tiers with the lowest usage allowances. Slower speeds already offer a disincentive to use high bandwidth services, but many providers typically drive that disincentive home even harder with a paltry allowance that will cost plenty to exceed.
5. Usage caps harm our broadband standing. While Genachowski celebrates increasing broadband speeds, he ignores the fact the rest of the world is moving away from usage caps even as the United States moves towards them. Both Australia and New Zealand elected to construct their own national fiber networks in large part because the heavily usage-capped experience was holding both countries back. Usage caps are a product of a barely competitive market.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bandwidth Caps 7-2011.flv[/flv]

Tech News Today debunks providers’ claims that usage caps are fair and control those who “overuse” their networks, noting the same phone companies (AT&T) pushing for usage caps are also moving voice calling to unlimited service plans. (August, 2011) (4 minutes)

November 7 will be an important day if you are a rural AT&T landline customer. On that date, AT&T, in concert with Wall Street, plans to announce the future of its rural and “tier two-smaller city” landline business.

The implications for customers are enormous. AT&T could elect to exit and auction off its rural customers to companies like Windstream, Frontier Communications, CenturyLink, and FairPoint Communications. AT&T could also announce it will aggressively petition the Federal Communications Commission to decommission its copper landline facilities in favor of a new wireless IP network based largely on its national 4G LTE expansion, or it could be a combination of both: keeping existing landline facilities but transitioning them to Voice over IP technology with a gradual shift towards wireless.

AT&T CEO Randall Stephenson delivered important clues about the company’s direction in remarks at yesterday’s Goldman Sachs Communacopia Conference, attended primarily by Wall Street investors. Stephenson drew clear distinctions between valued customers in areas upgraded to AT&T’s U-verse platform and more problematic customers in smaller communities where AT&T refuses to invest in landline upgrades.

“Where you look at the footprint where we have deployed U-verse technology we do very well,” Stephenson said. “In fact we are the share leader in virtually all U-verse markets. Those markets grow nicely. Where we have not deployed fiber and U-verse technology, we are losing share and those markets are in decline and that is the whole reason behind this analysis and evaluation that we will be laying out Nov. 7. What do we do with those markets? Because we have demonstrated if you go invest you can grow the market.”

Stephenson

“We said coming into the year that we have to find a broadband solution for these assets that is cost-effective or we need to look at selling them,” Stephenson said. “I would just tell you at the 30,000 foot [line length] level we think we’re finding line of sight to some investment theses here. We can get a good competitive broadband product to a large portion of our footprint and would avoid us having to go through a number of regulatory approval processes to sell [landlines] across a large geography. There will probably be a mix of actions here, but the bottom line is we think we may have line of sight but we will flush that out on Nov. 7 in an analyst conference here in New York.”

Early indications suggest the company is considering deploying DSL extenders to reach a larger share of rural customers without a complete overhaul of its copper wire network. The upgrades could deliver results similar to what Frontier Communications has been doing in territories it acquired from Verizon Communications, which includes extending fiber optics further into neighborhoods and finding ways to reduce copper wire length to improve speeds. Frontier has set its sights on delivering up to 25Mbps over copper landlines, a speed it feels is competitive with cable broadband. AT&T could come close to these speeds without the amount of investment required in a typical U-verse deployment.

But just as likely is a largely wireless broadband solution to replace the company’s aging copper wire-based DSL service. Stephenson says he strongly believes that a wireless solution exists for rural America over the company’s new LTE 4G network.

“I don’t envision in major metropolitan dense population centers that LTE will serve as a broad-based fixed-line replacement or surrogate,” Stephenson said. “I do believe in less dense markets and especially when you begin to think about rural America and tier two towns, that LTE can become a fixed line replacement or even better than what you can get in fixed line out in those markets. This is one of the exciting things about the WCS spectrum [AT&T plans to acquire]. It allows you to truly begin to think about investing in and doing this.”

But AT&T’s solutions will come with strings attached: a lobbying effort to get the FCC to loosen up on regulations, acquire more wireless spectrum, and allow the company to dispose of its landline infrastructure.

“You don’t go out and put in LTE capability in rural America and leave up all your copper infrastructure in the long haul,” said Stephenson. “It just wouldn’t make sense to do both. So this is the big regulatory issue. The FCC would require us to leave that copper and TDM fixed-line infrastructure up by some mandated rules and you can’t do both. You can’t support both infrastructures. We have got to work through the regulatory implications of this, but I think LTE can prove over time to be a fixed line replacement in rural and less dense populations. I think in a five year time horizon that can become significant.”

Thus far, AT&T has been unwilling to consider upgrading smaller communities to its U-verse platform, primarily because of the cost and return on investment. The company is content with its current U-verse footprint and has begun to enjoy increased wireline margins from a growing number of urban customers as programming costs decline.

LTE: AT&T’s wireless rural broadband solution?

“The U-verse margins continue to expand,” Stephenson noted. “U-verse is one of those where you go make a really significant capital investment and then you go in as a new entrant to do programming contracts and you’re paying multiples of what the big scale guys are paying and then as you scale that over time then margins really begin to expand. We’re riding that right now and we’re getting really good margin expansion just out out of scaling U-verse and getting better economics on content terms as well.”

Wall Street has been applying pressure to Stephenson to extract higher margins and cut costs from its traditional landline business. Stephenson sought to placate concerns about the cost profile of AT&T landlines before investors.

“We have done a nice job controlling our labor costs and that has been very helpful to continue to sustain margins in the fixed line business,” Stephenson said. “Those labor costs savings we take and reinvest back in the business in the form of U-verse and looking at some future investments as well.”

Stephenson hopes the FCC will eventually let AT&T abandon traditional landline service everywhere, which could also deliver serious cost savings for AT&T.

“I do believe if we can find a path to an all-IP infrastructure in not just your major metropolitan areas but your tier two markets there are significant cost savings in the five or six year time horizon that could come out of these businesses as well,” he noted.

AT&T CEO Randall Stephenson took questions at Goldman Sachs’ Communacopia Conference about its wireless network and the future of the rural landline business. (September 19, 2012) (41 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Free Press’ campaign against AT&T’s Net Neutrality violation (click image for further information)

When AT&T customers take delivery of their new iPhone 5 or install Apple’s latest iOS 6 software update, the popular video conferencing app FaceTime will become available to the company’s mobile broadband customers for the first time, if they agree to switch their service to one of AT&T’s new, often more-costly “Mobile Share” plans.

Until now, FaceTime has been limited to Wi-Fi use only, but objections from wireless carriers and some technical limitations kept the popular app from working over 3G or 4G wireless networks.

AT&T’s decision to block the FaceTime app unless a customer changes their current mobile plan has sparked a notification from three public interest groups that they intend to file a formal Net Neutrality complaint against AT&T.

“AT&T’s decision to block FaceTime unless a customer pays for voice and text minutes she doesn’t need is a clear violation of the FCC’s Open Internet rules,” said Free Press policy director Matt Wood. “It’s particularly outrageous that AT&T is requiring this for iPad users, given that this device isn’t even capable of making voice calls. AT&T’s actions are incredibly harmful to all of its customers, including the deaf, immigrant families and others with relatives overseas, who depend on mobile video apps to communicate with friends and family.”

Free Press is joined in the forthcoming complaint by Public Knowledge and the New America Foundation’s Open Technology Institute.

“AT&T’s decision to block mobile FaceTime on many data plans is a direct contradiction of the Commission’s Open Internet rules for mobile providers,” said Sarah Morris, policy counsel for the New America Foundation’s Open Technology Institute. “For those rules to actually protect consumers and allow them to choose the services they use, the Commission must act quickly in reviewing complaints before it.”

AT&T earlier responded claiming they still allow the app to work over Wi-Fi (yours or theirs), so it cannot be a Net Neutrality violation. The company has spent an increasing amount of energy trying to convince regulators that wireless networks, including Wi-Fi, are largely equivalent. So long as a customer can access an app on one of them, there is no violation according to AT&T.

The company also claimed that since FaceTime comes pre-installed on phones, it is exempted from Net Neutrality regulations.

Whether the FCC will believe arguments that access over Wi-Fi is suitable enough to escape scrutiny for blocking an app on AT&T’s own 3G and 4G networks is open to debate.

The Obama Administration’s FCC has taken a lukewarm approach on Net Neutrality, adopting a compromise that is being attacked in court by MetroPCS and Verizon Wireless and considered insufficient protection by most consumer groups.