Further expansion of Google Fiber appears to be on hold as the company contemplates moving away from fiber to the home service towards a wireless platform that could provide internet access in urban areas for less money.

The Wall Street Journal today reports Google parent Alphabet, Inc., is looking to cities to share more of the costs of building faster broadband networks or using cheaper wireless technology to reach customers instead.

Six years after Google first announced it would finance the construction of fiber to the home networks, the company has made progress in wiring just six communities, many incompletely. Progress has been hampered by infrastructure complications including pole access, permitting and zoning issues, unanticipated construction costs, and according to one Wall Street analyst, the possibility of lack of enthusiasm from potential subscribers.

Google’s recent acquisition of Webpass, a company specializing in beaming internet access over fiber-connected wireless antennas between large multi-dwelling units like apartments and condos appears to be a game-changer for Google. Webpass was designed mostly to service urban and population dense areas, not suburbs or neighborhoods of single-family dwellings. Webpass’ reliance on wireless signals that travel between buildings removes the cost and complexity of installing fiber optics, something that appears to be of great interest to Google.

Google Fiber is planning a system that would use fiber for its core network but rely on wireless antennas to connect each home to the network, according to a person familiar with the plans. Alphabet chairman Eric Schmidt said at the company’s shareholder meeting in June that wireless connections can be “cheaper than digging up your garden” to lay fiber. The only question is what kind of performance can users expect on a shared wireless network. Google’s plans reportedly do not involve 5G but something closer to fixed wireless or souped-up high-speed Wi-Fi. A web video on Webpass’ website seems to concede “you get best speeds with a wired connection.”

Even Google’s wireless technology solutions provider Webpass concedes that wired broadband is faster.

Former Webpass CEO Charles Barr, now an Alphabet employee, argues wireless solves a lot of problems that fiber can bring to the table.

“Everyone who has done fiber to the home has given up because it costs way too much money and takes way too much time,” Barr said.

Barr’s statements are factually inaccurate, however. Fiber to the home projects continue in many cities, but if they are run by private companies, chances are those rollouts are limited to areas where a proven rate of return is likely. Large incumbent phone and cable companies are also contemplating some fiber rollouts, at least to those who can afford it. Many of the best prospects for fiber to the home service are customers in under-competitive markets where the phone company offers slow speed DSL and cable broadband speeds are inadequate. Rural communities served by co-ops are also prospects for fiber upgrades because those operations answer to their members, not investors. Community broadband projects run by local government or public utilities have also proven successful in many areas.

But like all publicly traded companies, Google must answer to Wall Street and their investors and some are not happy with what they see from Google Fiber. Craig Moffett from Wall Street research firm MoffettNathanson has rarely been a fan of any broadband provider other than cable operators and Google Fiber is no different.

“One can’t help but feel that all of this has the flavor of a junior science fair,” Moffett said of Google Fiber, pointing out the service has managed to attract only 53,000 cable TV customers nationwide as of December. Moffett concedes there are significantly more broadband-only customers signed up for Google, but that didn’t stop him from suggesting Google Fiber has had very little impact on increasing broadband competition across the country.

Analysts suggest Google Fiber is spending about $500 per home passed by its new fiber network. But that is a fraction of the $3,000+ per customer often spent by cable operators buying one another.

Google’s wireless deployment will likely take place in Los Angeles, Dallas, and Chicago according to people familiar with the company’s plans. Less dense cities slated for Google Fiber including San Jose and Portland, Ore., may never get any service from Google at all, but they are likely to hear something after a six month wait.

Google is also reportedly asking cities if the company can lease access on existing fiber networks. Another tactic is requesting power companies or communities build fiber networks first and then turn them over to Google to administer. The latter seems less likely, considering there are successful public broadband networks operating on their own without Google’s help.

Wheeler

FCC chairman Thomas Wheeler today told an audience at the National Press Club that 5G — the next generation of wireless networks — “is a national priority, and why, this Thursday, I am circulating to my colleagues proposed new rules that will identify and open up vast amounts of spectrum for 5G applications.”

Wheeler’s proposal, dubbed “Spectrum Frontiers,” is supposed to deliver wireless connectivity as fast as fiber optic broadband, and in Wheeler’s view, will deliver competitive high-speed access for consumers.

“If the Commission approves my proposal next month, the United States will be the first country in the world to open up high-band spectrum for 5G networks and applications,” said Wheeler. “And that’s damn important because it means U.S. companies will be first out of the gate.”

Central to Wheeler’s 5G proposal is opening up very high frequency millimeter wave spectrum — for unlicensed and licensed data communications. Wheeler named two in his speech: a “massive” 14GHz unlicensed band and a 28GHz “shared band” that will allow mobile and satellite operators to co-exist.

“Consider that – 14,000 megahertz of unlicensed spectrum, with the same flexible-use rules that has allowed unlicensed to become a breeding ground for innovation,” Wheeler said.

“Sharing is essential for the future of spectrum utilization. Many of the high-frequency bands we will make available for 5G currently have some satellite users, and some federal users, or at least the possibility of future satellite and federal users,” Wheeler noted. “This means sharing will be required between satellite and terrestrial wireless; an issue that is especially relevant in the 28GHz band. It is also a consideration in the additional bands we will identify for future exploration. We will strike a balance that offers flexibility for satellite users to expand, while providing terrestrial licensees with predictability about the areas in which satellite will locate.”

The CTIA – The Wireless Association, America’s largest mobile carrier lobbying and trade association, is all for opening up new spectrum for the use of their members — AT&T, Verizon Wireless, Sprint, T-Mobile, among others. They just don’t want to share it. Ironically, they are calling on the FCC to regulate who gets access to what frequencies and what services can use them. They’d also appreciate federal rules restricting or preempting local officials responsible for approving where new cell towers can be located, and some form of price regulation for backhaul services would also be nice:

First, we need the right rules for high-band spectrum based on a time-tested regulatory framework. It must strike a reasonable balance for licensed and unlicensed use while promoting investment with clear service and licensing rules. We should avoid experimenting with novel spectrum sharing regimes or new technology mandates.

Second, we need the right rules to help build our 5G infrastructure. Traditional spectrum travels many miles, depending on large cell towers to transmit signals. In contrast, high-band spectrum – capable of carrying greater amounts of data –travels meters, not miles and will require the deployment of thousands of new small cells the size of smoke alarms. This network evolution requires a new infrastructure approach, and Congress, the FCC and states must streamline and simplify local siting and rights of way rules.

Wheeler recognizes that 5G services will work very differently from the 3G and 4G networks we’ve used in the past.

CTIA is the wireless industry’s biggest lobbyist and trade association.

“5G will use much higher-frequency bands than previously thought viable for mobile broadband and other applications,” Wheeler said. “Such millimeter wave signals have physical properties that are both a limitation and a strength: they tend to travel best in narrow and straight lines, and do not go through physical obstacles very well. This means that very narrow signals in an urban environment tend to bounce around buildings and other obstacles making it difficult to connect to a moving point. But it also means that the spectrum can be reused over and over again.”

In other words, think about 5G as an initially limited range wireless network that may turn out to be best suited for fixed wireless service or limited range hotspots, especially before network densification helps make 5G service more ubiquitous. The wireless industry doesn’t think Wheeler’s vision will be enough to resolve capacity issues in the short term, and is calling on the FCC to release even more low and mid-band spectrum in the 600MHz range that can travel inside buildings and offer a wider coverage area.

Wheeler’s recognition that 5G’s shorter range signals will likely require a massive overlay of new infrastructure has also opened the door for the CTIA to call on the FCC to revisit local zoning and antenna placement rules and policies, with the likely goal of preempting or watering down local authority to accept or reject where cell phone companies want to place their next small cell or cell tower. Wireless companies are also expected to push for easy access to utility poles, time limits to approve new cell tower construction applications, and pricing regulation for fiber lines needed to connect 5G infrastructure to backhaul networks.

Cell tower camouflage failure.

On the issue of backhaul — the connection between a cell tower and the wireless carrier’s network, the FCC is planning a pro-regulatory “anchor pricing” approach to benefit wireless companies. Consumers can also relate to being overcharged for slow speed Internet access with little or no competition, but the FCC is only acting for the benefit of the wireless companies for now — the same companies that would undoubtedly complain loudly if anchor pricing was ever applied to them.

“Lack of competition doesn’t just hurt the deployment of wireless networks today, it threatens as well to delay the buildout of 5G networks with its demand for many, many more backhaul connections to many, many more antennae,” complained Wheeler. “Before the end of this year the Commission will take up a reform proposal – supported by the nation’s leading wireless carriers, save one – that will encourage innovation and investment in Business Data Services while ensuring that lack of competition in some places cannot be used to hold 5G hostage.”

While Wheeler’s goals are laudable, there are stunning examples of hypocrisy and self-interest from the wireless industry. Yet again, the industry is seeking regulatory protection from having to share spectrum with unlicensed users, existing licensees, or competitors.  No letting the “free market” decide here. Second, there are absolutely no assurances the wireless industry will deliver substantial home broadband competition. Verizon and AT&T will be effectively competing with themselves in areas where they already offer wired broadband. Is there a willingness from AT&T and Verizon to sell unlimited broadband over 5G networks or will customers be expected to pay “usage pack”-prices as high as $10 per gigabyte, which doesn’t include the monthly cost of the service itself. Offering customers unlimited 5G could cannibalize the massive profits earned selling data plans to wireless customers.

Cactus or cell tower

Upgrading to 5G service will be expensive and take years to reach many neighborhoods. Verizon’s chief financial officer believes 5G wireless will be more cost-effective to deploy than its FiOS fiber to the home network, but considering Verizon largely ended its deployment of FiOS several years ago and has allowed its DSL customers to languish just as long, 5G will need to be far more profitable to stimulate Verizon’s interest in spending tens of billions on 5G infrastructure. It does not seem likely the result will be $25/month unlimited, fiber-like fast, Internet plans.

Although the mobile industry will argue its investment dollars should be reason enough to further deregulate and dis-empower local officials that oversee the placement of cellular infrastructure, it would be a tremendous mistake to allow wireless carriers to erect cell towers and small cells wherever they see fit. Most small cells aren’t much larger than a toaster and will probably fit easily on utility poles. But it will likely spark another wave of pole access controversies. The aesthetics of traditional cell tower placement, especially in historical districts, parks, and suburbs, almost always create controversy. The FCC should not tip the balance of authority for tower placement away from those that have to live with the results.

The mobile industry doesn’t make investments for free, and before we reward them for investing in their networks, let’s recall the United States pays some of the highest mobile service prices in the world. The industry argues what you get in return for that $100+ wireless bill is better than ever, an argument similarly used by the cable industry to justify charging $80 a month for hundreds of channels you don’t watch or want. Therefore, incentives offered to the wireless industry should be tied to permanent pro-consumer commitments, such as unlimited 5G broadband, better rural coverage, and the power to unbundle current wireless packages and ditch services like unlimited texting many customers don’t need. Otherwise, it’s just another one-sided corporate welfare plan we can’t afford.

Who needs FiOS when you can get 5G wireless service with a data plan?

Fran Shammo has a message for Verizon customers and investors: fiber optic broadband is so… yesterday. Your millennial kids aren’t interested in gigabit speed, unlimited use Internet in the home. They want to watch most of their content on a smartphone and spend more on usage-capped wireless plans.

Shammo is Verizon’s money man – the chief financial officer and prognosticator of the great Internet future.

Like his boss, CEO Lowell McAdam, Frammo has his feet firmly planted in the direction of Verizon Wireless, the phone company’s top moneymaker. If one ever wondered why Verizon Communications has let FiOS expansion wither on the vine, Mr. McAdam and Mr. Shammo would be the two to speak with.

This week, Shammo doubled down on his pro-wireless rhetoric while attending the Bank of America Merrill Lynch 2016 Media, Communications & Entertainment Conference — one of many regular gathering spots for Wall Street analysts and investors. He left little doubt about the direction Verizon was headed in.

Shammo

“As we look at the world if you will, and we look at our ecosystem, […] the world is moving to a broadband wireless world,” Shammo told the audience. “Now, I am really – when I say world, I am really talking the U.S., right. So, but I do think the world is moving to a wireless world.”

In Shammo’s view, the vast majority of people want to consume content, including entertainment, over a 4G LTE (or future 5G) wireless network on a portable device tied to a data plan. Shammo predicted wireless usage will surpass DSL, cable broadband, and even FiOS consumption in 3-5 years. If he’s right, that means a mountain of money for Verizon and its investors, as consumers will easily have to spend over $100 a month just on a data plan sufficient to cope with Shammo’s predicted usage curve. In fact, your future Verizon Wireless bill will likely rival what you pay for cable television, broadband, and phone service together.

Millennials don’t want fiber, they want wireless data plans

Shammo argued millennials are driving the transition to wireless, claiming they already watch most of their entertainment over smartphones and tablets, not home broadband or linear TV. His view is the rest of us are soon to follow. Shammo claims those under 30 are turning down cable television and disconnecting their home broadband service because they prefer wireless. Others wonder if it is more a matter of being able to afford both. A 2013 survey by Pew data found 84% of households making more than $54,000 have broadband. That number drops to 54% when annual household incomes are lower than $30,000 per year. But those income-challenged millennials don’t always forego Internet access — some rely on their wireless smartphone to access online content instead.

A microcell

Verizon Wireless may be banking on the same kind of “hard choice” many made about their landline service. Pay for a landline and a mobile phone, or just keep mobile and disconnect the home phone to save money. Usage growth curves may soon force a choice about increasing your data plan or keeping broadband service at home. Shammo is betting most need Verizon Wireless more.

Verizon FiOS is really about network densification of our 4G LTE network

Shammo continued to frame its FiOS network as “east coast-centric” and almost a piece of nostalgia. The recent decision to expand FiOS in Boston is not based on a renewed belief in the future of fiber, Shammo admitted, it is being done primarily to lay the infrastructure needed to densify Verizon’s existing LTE wireless network in metro Boston to better manage increased wireless usage. Shammo’s spending priorities couldn’t be clearer.

“Obviously, we said, we would build up Boston now, because it makes sense from a LTE perspective,” Shammo said. “We can spend $300 million over the next three years to make that more palatable to expand FIOS. So we will continue to expand that broadband connection via fiber where it makes financial sense for us.”

In other words, it is much easier to justify capital expenses of $300 million on network expansion to Wall Street if you explain it’s primarily for the high-profit wireless side of the business, not to give customers an alternative to Time Warner Cable or Comcast. FiOS powers cell sites as well as much smaller microcells and short-distance antennas designed to manage usage in high traffic neighborhoods.

Shammo also believes Verizon must not just be a ‘dumb wireless’ connection. Controlling and distributing content is also critically important, and Shammo is still a big believer in Verizon’s ho-hum GO90 platform, which compared to Hulu and Netflix couldn’t draw flies.

Even Verizon CEO McAdam admitted a few weeks ago at another Wall Street conference GO90 was “a little bit overhyped.” Most of GO90’s content library is mostly short video clips targeted at millennials with short attention spans. The downside of making that your target audience is the rumor many who sampled the service early on have already forgotten about it and moved on.

Forget about congested home and on-the-go Wi-Fi and expensive fiber optics. Verizon will sell you 5G wireless (with a data plan) for everywhere.

Shammo believes the future isn’t good for Wi-Fi in the home and on-the-go. As data demands increase, he believes Wi-Fi will become slow and overcongested.

“There is a quality of service with our network that you can’t get with others,” Shammo said. “I mean, most people in this room would realize that when Wi-Fi gets clogged, quality of service goes significantly down. It’s an unmanaged network. You can’t manage that.”

Instead, Verizon will eventually deploy 5G wireless instead of FiOS in many areas without fiber optic service today. Frammo said 5G would cost Verizon a lot less than fiber, “because there is no labor to dig up your front lawn, lay in fiber, or be able to fix something.”

Shammo doesn’t believe 5G wireless will replace 4G LTE wireless, however.

“LTE will be here for a very long time and be the predominant voice, text, data platform for mobile,” Shammo said.

So instead of unlimited fiber optic broadband, Verizon plans to sell home broadband customers something closer to Wi-Fi, except with a data allowance. It’s a return to fixed wireless service.

Verizon Wireless’ existing fixed wireless service is heavily usage capped and not cheap.

Just a few short years ago, Verizon was looking to fixed wireless as a replacement for rural DSL and landline service. Now Shammo sees the economics as favorable to push a similar service on all of its customers, except those already fitted for FiOS. That changes the dynamics on usage as well, because Verizon Wireless ditched unlimited service several years ago except for a dwindling number of customer grandfathered in on its old unlimited plan.

Current 4G LTE fixed wireless customers can expect 5-12Mbps speeds with data plan options of $60 for 10GB, $90 for 20GB, or $120 for 30GB. The 5G service would be substantially faster than Verizon’s current fixed LTE wireless service, but the company’s philosophy favoring data caps for wireless services makes it likely customers will pay much higher prices for service, higher than Verizon charges for FiOS itself.

AT&T CEO Randall Stephenson’s public hissy fit against the Obama Administration’s sudden backbone on Net Neutrality may complicate AT&T’s plans to win approval of its merger with DirecTV. forcing AT&T to retract threats to suspend fiber buildouts if the administration moves forward with its efforts to ban Internet fast lanes.

Hours after Stephenson told investors AT&T wouldn’t continue with plans to bring U-verse with GigaPower fiber broadband to more cities as long as Net Neutrality was on the agenda, the FCC requested clarification about exactly what AT&T and its CEO was planning. More importantly, it noted responses would become part of the record in its consideration of AT&T’s proposed acquisition of the satellite television provider. The regulator could not send a clearer message that Stephenson’s statements could affect the company’s $48.5 billion merger deal.

AT&T responded – four days after the FCC’s deadline – in a three-page letter with a heavily redacted attachment that basically told the Commission it misunderstood AT&T’s true intentions:

The premise of the Commission’s November 14 Letter is incorrect. AT&T is not limiting our FTTP deployment to 2 million homes. To the contrary, AT&T still plans to complete the major initiative we announced in April to expand our ultra-fast GigaPower fiber network in 25 major metropolitan areas nationwide, including 21 new major metropolitan areas. In addition, as AT&T has described to the Commission in this proceeding, the synergies created by our DIRECTV transaction will allow us to extend our GigaPower service to at least 2 million additional customer locations, beyond those announced in April, within four years after close.

Although AT&T is willing to say it will deliver improved broadband to at least “15 million customer locations, mostly in rural areas,” it is also continuing its fiber shell game with the FCC by not specifying exactly how many of those customers will receive fiber broadband, how many will receive an incremental speed upgrade to their existing U-verse fiber/copper service, or not get fiber at all. AT&T routinely promises upgrades using a mix of technologies “such as” fiber to the home and fixed wireless, part of AT&T’s broader agenda to abandon its rural landline service and force customers to a much costlier and less reliable wireless data connection. It isn’t willing to tell the public who will win fiber upgrades and who will be forced off DSL in favor of AT&T’s enormously profitable wireless service.

Your right to know… undelivered. AT&T redacted information about its specific fiber plans.

Fun Fact: AT&T is cutting its investment in network upgrades by $3 billion in 2015 and plans a budget of $18 billion for capex investments across the entire company in 2015 — almost three times less than what AT&T is ready to spend just to acquire DirecTV.

The FCC was provided a market-by-market breakdown of how many customers currently get U-verse over AT&T’s fiber/copper “fiber to the neighborhood” network and those already getting fiber straight to the home. But this does not tell the FCC how many homes and businesses AT&T intends to wire for GigaPower — its gigabit speed network that requires fiber to the premises. Indeed, AT&T would only disclose how many homes and businesses it plans to provide with traditional U-verse using a combination of fiber and copper wiring — an inferior technology not capable of the speeds AT&T repeatedly touts in its press releases.

That has all the makings of an AT&T Fiber Snow Job only Buffalo could love.

AT&T also complained about the Obama Administration’s efforts to spoil AT&T’s fast lane Money Party:

At the same time, President Obama’s proposal in early November to regulate the entire Internet under rules from the 1930s injects significant uncertainty into the economics underlying our investment decisions. While we have reiterated that we will stand by the commitments described above, this uncertainty makes it prudent to pause consideration of any further investments – beyond those discussed above – to bring advanced broadband networks to even more customer locations, including additional upgrades of existing DSL and IPDSL lines, that might be feasible in the future under a more stable and predictable regulatory regime. To be clear, AT&T has not stated that the President’s proposal would render all of these locations unprofitable. Rather, AT&T simply cannot evaluate additional investment beyond its existing commitments until the regulatory treatment of broadband service is clarified.

AT&T’s too-cute-by-half ‘1930s era regulation’ talking point, also echoed by its financially tethered minions in the dollar-a-holler sock-puppet sector, suggests the Obama Administration is seeking to regulate AT&T as a monopoly provider. Except the Obama Administration is proposing nothing of the sort. The FCC should give AT&T’s comments the same weight it should give its fiber commitments — treat them as suspect at best. As we’ve written repeatedly, AT&T’s fabulous fiber future looks splendid on paper, but without evidence of spending sufficient to pay for it, AT&T’s piece of work should be filed under fiction.

CenturyLink does not believe it will face much of a competitive threat from AT&T and Verizon’s plans to decommission rural landline service in favor of fixed wireless broadband because the two companies’ offers are too expensive, overly usage-capped and too slow.

Both AT&T and Verizon have proposed mothballing traditional landline service in rural areas because both companies claim wireline financial returns are too low and ongoing maintenance costs are too high. In its place, both companies are developing rural fixed wireless solutions for voice and broadband service that will rely on 4G LTE networks.

CenturyLink does not traditionally compete against either AT&T or Verizon because their landline service areas do not overlap. But as both AT&T and Verizon Wireless continue to emphasize their nationwide wireless networks, independent phone companies are likely to face increased competition from wireless phone and broadband services.

CenturyLink isn’t worried.

“About two-thirds of our customers can get access to 10Mbps or higher [from us and] that continues to increase year by year,” CenturyLink chief financial officer Stewart Ewing told attendees at Bank of America Merrill Lynch’s 2014 Global Telecom & Media Conference. “Our belief is that with the increasing demands customers have for bandwidth — the Netflix bandwidth requirement — just the increasing amount of video that customers are watching and downloading over their Internet pipes, we believe will drive customers to using a provider that basically has a wire in their home because we believe you will get generally higher bandwidth and a much better experience at lower cost.”

Ewing

CenturyLink customers consume an average of slightly less than 50GB of Internet usage per month, and that number is growing. Ewing said that CenturyLink has long believed that as bandwidth demand increases, wireless becomes less and less capable of providing a good customer experience.

“At this point, we don’t really have any concerns because people on the margin — the folks that don’t use much bandwidth — probably use a wireless connection today to download,” Ewing said. “But as the bandwidth demands grow, the wireless connection becomes more and more expensive and that could tend to drive people our way. So as long as we have 10Mbps or better to the customers, we don’t really think there is that much exposure.”

CenturyLink does not measure the difference in Internet usage between urban and rural residential customers, but the company suspects rural customers might naturally use more because alternative outlets are fewer in number outside of urban America.

“Folks in rural areas might actually can use Internet more for buying things that they can’t source [easily], but it’s hard to really count,” said Ewing. “I think our customers in the rural areas probably are not that much different from folks in urban areas.”

Prism is CenturyLink’s fiber to the neighborhood service, similar to AT&T U-verse. It is getting only a modest expansion in 2014.

CenturyLink’s largest competitor remains Comcast, which co-exists in about 40% of CenturyLink’s markets. The merger with Time Warner Cable won’t have much impact on CenturyLink, increasing Comcast’s footprint in CenturyLink territory by only about only 6-7%. CenturyLink believes most of any new competition will come in the small business market segment. Comcast’s residential pricing is unlikely to attract current CenturyLink customers in Time Warner Cable territory to consider a switch to Comcast if the merger is approved.

Ewing also shared his thinking about several other CenturyLink initiatives that customers might see sometime this year:

• Don’t expect CenturyLink to expand Wi-Fi hotspot networks. The company found they are difficult to monetize and is unlikely to expand them further;
• Any change in the FCC’s definition of minimum broadband speed to qualify for federal broadband expansion funds would slow rural broadband expansion. Ewing admitted a 10Mbps speed minimum is considerably more difficult to achieve over DSL than a 4 or 6Mbps minimum;
• Don’t expect any more merger/acquisition activity from CenturyLink in the Competitive Local Exchange Carrier business. CenturyLink shows no sign of pursuing Frontier, Windstream, FairPoint, or other independent phone companies. It is focused on expanding business services, where 60% of CenturyLink’s revenue now comes;
• CenturyLink fiber expansion will primarily be focused on reaching business offices and commercial customers in 2014;
• CenturyLink will only modestly expand PrismTV, its fiber-to-the-neighborhood service, to an additional 300,000 homes this year. The company now offers the service to two million of its customers, with 200,000 signed up nationwide. Last year, CenturyLink expanded PrismTV availability to 800,000 homes.