Super monopoly?

Some Wall Street analysts are pondering ideas on how to limit forthcoming 5G wireless home broadband, suggesting providers might want to set up local monopolies, keeping competition to a minimum and profits to a maximum.

Verizon’s presentation at its annual Analyst Day meeting drew little praise from analysts and investors in attendance, “landing like a thud” to quote one person at the event.

The issue concerning Wall Street is what impact 5G wireless broadband will have on the internet access marketplace, which is currently a comfortable monopoly or duopoly in most American cities. That may radically change if the country’s four wireless companies each launch their own 5G services, designed to replace wired home broadband services from the cable and phone companies.

This week Verizon formally announced Sacramento would be the first city in the country to get its forthcoming 5G service, with an additional four of five unnamed cities to follow sometime next year.

Verizon will advertise 1,000Mbps service that will be “priced competitively” with current internet providers in the market. But Verizon intends to market itself as “a premium provider,” which means pricing is likely to be higher than one might expect. Verizon claims they intend to roll out 5G service to 30 million households — 25-30% of the country, making Verizon a prominent provider of fixed wireless home broadband service.

But analysts panned Verizon’s presentation for raising more questions than the company was prepared to answer. Barron’s shared the views of several analysts who were underwhelmed.

Notably, Craig Moffett from Moffett-Nathanson was particularly concerned about how to rate 5G service for his investor clients, and more importantly to them, how to forecast revenue and profit.

Moffett

The biggest problem for Moffett is the prospect of additional competition, and what that will do to each current (and future) provider’s share of customers and its revenue. If every major wireless carrier enters the 5G home broadband business, that will raise the prospective number of ISPs available to consumers to six or more — four wireless carriers competing with the phone and cable company. That is potentially very dangerous to big profits, especially if a competitive price war emerges.

“Let’s assume that AT&T is just as aggressive about this opportunity as Verizon,” Moffett told his investor clients. “Will they enter the same markets as Verizon, or different ones? […] If multiple players enter each market, all targeting the same 25-30% [where 5G service will be sold]. Well, what then? Let’s suppose the 30% market share estimate is right. Wouldn’t it be now shared among two, three, or even four [5G fixed wireless broadband] providers?”

Moffett gently proposes a concept where this profit-bruising competition can be abated by following the cable television model — companies agree to stay out of each others’ markets, giving consumers a choice of just one 5G provider in each city instead of four.

“There’s a completely different future where each operator targets different markets […] Let’s say that AT&T decides to skip Sacramento. After all, Verizon will have gotten there first,” Moffett suggests. “If the required share of the [fixed wireless] market is close to Verizon’s estimated 30%, then there is only room for one provider. So AT&T decides to do Stockton, about 40 miles to the south. Verizon would then skip Stockton, but might do Modesto, twenty miles further south… and then AT&T would then skip Modesto and instead target Fresno… unless Sprint or T-Mobile got there first.”

But Moffett is thinking even further ahead, by suggesting wireless carriers might be able to stop spending billions on building and expanding their competing 4G LTE networks when they could all share a single provider’s network in each city. That idea could work if providers agreed to creating local monopolies.

“That would create a truly bizarre market dynamic that is almost unimaginable today, where each operator ‘owned’ different cities, not just for [5G] but also for 4G LTE. If this kind of patchwork were to come to pass, the only viable solution might then be for companies to reciprocally wholesale their networks. You can use mine in Modesto if I can use yours in Fresno. To state the obvious, there is almost no imaginable path to that kind of an outcome today.”

The reason providers have not attempted this kind of “one provider” model in the past is because former FCC commissioners would have never supported the idea of retiring wireless competition and creating a cable monopoly-like model for wireless service. But things have changed dramatically with the advent of Chairman Ajit Pai, who potentially could be sold on the idea of granting local monopolies on the theory it will “speed 5G deployment” to a large number of different cities. Just as independent wireless providers lease access on the four largest carriers today (MVNO agreements), AT&T, Verizon, T-Mobile and Sprint could sell wholesale access to their networks to each other, allowing massive cost savings, which may or may not be passed on to customers.

But it would also bring an end to network redundancy, create capacity problems, and require every carrier to be certain their networks were interoperable with other wireless companies. The federal government’s emergency first responder program also increasingly depends on a wireless network AT&T is building that would give them first priority access to wireless services. How that would work in a city “designated” to get service from Verizon is unclear.

Restricting competition would protect profits and sharing networks would slash expenses. But such prospects were not enough to assuage Wall Street’s insatiable hunger for maximum profits. That is why analysts were unimpressed with Verizon’s presentation, which “lacked the financials” — precise numbers that explain how much the network will cost, how quickly it will be paid off, and how much revenue it can earn for investors.

A small cell attached to a light pole.

Verizon did sell investors on the idea 5G will put an end to having to wire fiber optics to every home. The service will also keep costs to a minimum by selling retail activation kits customers will install themselves — avoiding expensive truck rolls. Billing and account activation will also be self-service.

Verizon also announced a new compact 4G/5G combined antenna, which means 5G service can be supplied through existing macro/small cell 4G equipment. Verizon will be able to supplement that network by adding new 5G nodes where it becomes necessary.

Investor expectations are that 5G will cost substantially less than fiber to the home service, will not cost massive amounts of new investment dollars to deploy in addition to maintaining existing 4G services, will not substantially undercut existing providers, and will allow Verizon to market 21st century broadband speeds to its customers bypassed for FiOS fiber service. It will also threaten rural phone companies, where customers could easily replace slow speed DSL in favor of what Verizon claims will be “gigabit wireless.”

Despite that, Instinet’s Jeffrey Kvaal was not wowed by Verizon’s look to the future.

“Verizon’s initial fixed wireless implementation seems clunky and it withheld its pricing strategy,” Kvaal told his clients. He believes fixed wireless broadband will cost Verizon an enormous amount of money he feels would be better spent on Verizon’s mobile network. “Verizon glossed over 5-10x LTE upgrades that are already offering ~100Mbps of fully mobile service at current prices to current phones without line of sight. A better 5G story might be to free up sufficient LTE capacity to boost the unlimited cap from 25GB to 100GB for, say, a $25 premium. The ‘cut the cord’ concept was successful in voice, in video, and should be in broadband.”

Defenders of FCC Chairman Ajit Pai are rushing to defend the Republican majority’s likely support for an initiative to roll back the FCC’s 25/3Mbps speed standard embraced by his predecessor, Thomas Wheeler.

Johnny Kampis, writing for Watchdog.org, claims that broadband speed standard has had an adverse affect on solving America’s rural broadband gap.

After raising that standard, suddenly those areas with speeds below 10 mbps were lumped into the same group with those who could access speeds of 10-25 mbps, resulting in diminished focus on those areas where the broadband gap cut the deepest.

Raising the standard meant, too, that fans of big government could point to the suddenly higher percentage of the population that was “underserved” on internet speeds and call for more taxpayer money to solve that “problem.”

Kampis is relying on the talking points from the broadband industry, which also happens to support the same ideological interests of Watchdog.org’s benefactor, the corporate/foundation-funded Franklin Center for Government & Public Integrity. The argument suggests that if you raise broadband standards, that opens the door to more communities to claim they too are presently underserved, which then would qualify them for government-funded broadband improvements.

Kampis’ piece, like many of those published on Watchdog.org, distorts reality with suggestions that communities with 50Mbps broadband service will now be ripe for government handouts. He depends on an unnamed source from an article written on Townhall.com and also quotes the CEO of Freedom Foundation of Minnesota, which is closely associated with the same Franklin Center that hosts Watchdog.org. Kampis’ piece relies on sourcing that is directly tied to the organization hosting his article.

In reality, rural broadband funding has several mechanisms in place which heavily favor unserved, rural areas, not communities that already have 50Mbps internet access. ISPs also routinely object to projects proposed within their existing service areas, declaring them already served, and much of the funding doled out by the Connect America Fund (CAF) Kampis suggests is a government handout are being given to telephone companies, not municipalities.

Kampis

Kampis is satisfied free market capitalism will eventually solve the rural broadband problem, despite two decades of lackluster or non-existent service in areas deemed unprofitable to serve.

“So while Pai’s critics denigrate him because his FCC is considering lowering that broadband standard, he’s just correcting an earlier mistake, with the realization that the free market, not big government, will solve the rural broadband gap if given enough time,” Kampis writes. “And returning to the old standards will help ensure that the focus will be placed squarely on the areas that need the most help.”

Kampis suggests that free market solution might be 5G wireless broadband, which can potentially serve rural populations less expensively than traditional wired broadband service. Communities only need wait another 5-10 years for that to materialize, if it does at all.

Kampis claims to be an investigative reporter, but he didn’t venture too far beyond regurgitating press releases and talking points from big phone companies and opponents of municipal broadband. If he had spent time reviewing correspondence sent to the FCC in response to the question of easing broadband speed standards, he would have discovered the biggest advocates for that are large phone companies and wireless carriers that stand to benefit the most from the change.

Following the money usually delivers a clearer, more fact-based explanation for what motivates players in the broadband industry. In this case, the 25Mbps speed standard has regularly been attacked by phone and wireless companies hoping to tap into government funds to build out their networks. Traditional phone companies are upset that the 25Mbps requirement means their typical rural broadband solution – DSL, usually won’t cut it. Wireless companies have also had a hard time assuring the FCC of consistent 25Mbps speeds, making it difficult for them to qualify for grants. AT&T wasn’t happy with a 10Mbps standard for wireless service either.

Incidentally, these are the same companies that have failed to solve the rural broadband gap all along. Most will continue not serving rural areas unless the government covers part of their costs. AT&T illustrates that with its own fixed wireless rural broadband solution, which came about grudgingly with the availability of CAF funding.

The dark money ATM network hides corporate contributions funneled into advocacy groups.

The free market broadband solution is rooted in meeting Return On Investment metrics. In short, if a home costs more to serve that a company can recoup in a short amount of time, that home will not be served unless either the homeowner or someone else covers the costs of providing the service. By wiping out the Obama Administration’s FCC speed standard, more ratepayer dollars will be directed to phone and wireless companies that will build less expensive and less-capable DSL and wireless networks instead of investing in more modern technology like fiber optics.

Mr. Kampis, and others, through their advocacy, claim their motive is a reduction in government waste. But in reality, and not by coincidence, their brand of journalism hoodwinks readers into advocating against their best interests of getting fast, future-proofed broadband, and instead hand more money to companies like AT&T. The Franklin Center refuses to reveal its donor list, of course, but SourceWatch reported the Center is heavily dependent on funding from DonorsTrust, which cloaks the identity of its corporate donors. Mother Jones went further and called it “a dark money ATM.”

Companies like AT&T didn’t end up this lucky by accident. It donates to dark money groups that fund various sock puppet and astroturf operations that avoid revealing where the money comes from, while the groups get to claim they are advocating for taxpayers. By no coincidence, these groups frequently don’t attack corporate welfare, especially if the recipient is also a donor.

New York’s rural broadband initiative is on track to deliver near 100% broadband coverage to all New York homes and has speed requirements and a ban on hard data caps.

Raising speed standards does not harm rural broadband expansion. In New York, Gov. Andrew Cuomo’s broadband expansion campaign is on track to reach the remaining 150,000 homes still without broadband access by sometime next year. His program relies on broadband expansion funding that comes with requirements that insist providers offer internet access capable of at least 25Mbps (with a preference for 100Mbps) for $60 or less and a ban on hard usage caps. Kampis claims the 25Mbps speed standard hampers progress, yet New York is the first state in the nation moving towards 100% broadband availability for its residents at that speed or better.

Chairman Pai’s solution is little more than a gift to the country’s largest phone and wireless companies that would like to capture more CAF money for themselves while delivering the least amount of service possible (and keep money out of the hands of municipalities that want to build their own more capable networks). The evidence is quite clear — relying on the same companies that have allowed the rural broadband crisis to continue for more than 20 years is a stupendously bad idea that only sounds brilliant after some corporation writes a large check.

AT&T: Using taxpayer and ratepayer dollars to subsidize 4G LTE upgrades for its customers.

With taxpayer subsidies on the horizon, phone companies cut back investing their own money on rural broadband expansion hoping taxpayers would cover funding themselves.

That is the conclusion of Dave Burstein, a long-standing and well-respected industry observer and publisher of Net Policy News. Burstein is concerned the unintentional consequence of Obama and Trump Administration rural broadband funding programs has been fewer homes connected than what some carriers would have managed on their own without government subsidies.

“Since 2009, carrier investment in broadband in rural areas has gone down drastically,” Burstein wrote.

As a result, FCC Chairman Ajit Pai announced plans to spend $4.53 billion from a public-financed Mobility Fund over the next decade to advance 4G LTE service, primarily in rural areas that would not be served in the absence of government support. Burstein suspects much of that money could end up being unnecessarily wasted.

“Under current plans, most of the money is likely to go where telcos would build [4G] without a subsidy, [or will be used to] buy obsolete technology, or give the telcos two or three times what the job should cost,” Burstein wrote. “Any spending on wireless except where towers or backhaul is unavailable should be assumed wasteful until proven otherwise.  Realistic costs need to be developed and subsidies allocated on that basis.”

AT&T’s rural fixed wireless expansion program, funded substantially by U.S. taxpayers and ratepayers, is a case in point. AT&T is receiving almost $428 million a year in public funds to extend wireless access to 1.1 million customers in 18 states, the FCC says. Much of that investment is claimed to be spent retrofitting and upgrading existing cell towers to support 4G LTE service. But AT&T claims 98% of its customers already have access to 4G LTE service — more than any other carrier in the country, so AT&T is actually spending the money to bolster its existing 4G LTE network, something more likely to benefit its cell customers, not a few thousand fixed wireless customers.

(Source: AT&T)

“An AT&T exec in California said communities didn’t need to worry about the impact of the CAF-funded project, since it was almost all going to be on existing towers,” Burstein wrote, allaying fears among members of the public that money would be spent on lots of new cell towers. “I don’t know what loophole AT&T is using to get the money, but it’s a pretty safe guess they would have upgraded most of them without the government paying. 4G service now reaches all but 3-5 million of the 110-126 million U.S. households. Probably half [of the less than five million] targeted would soon be served without a subsidy – if the telcos knew no subsidy was likely. Before spending a penny on subsidies, the FCC needs to do a thorough assessment of what would be built without government money.”

Burstein

Wireless executives were delighted when the U.S. government in 2009 committed to spending $7 billion in taxpayer funds on broadband stimulus funding as part of a full-scale economic stimulus program to combat the Great Recession.

“Both George Bush in 2004 and Barack Obama in 2008 had promised to bring affordable broadband to all Americans,” Burstein noted. “The clamor to reach these last few million was so loud, telcos became confident the government would pay for it if they just stopped their own investment. They aren’t stupid and refused to spend their own money. Before 2009 and the expected huge stimulus program, most telcos expanded their networks each year, based on available capital funds.”

Burstein believes some phone companies became better experts at milking government money to pay for needed network upgrades than frugally spending public funds on rural broadband expansion. As a result, after eight years and massive spending, Burstein notes fewer than two million of the “unserved” six million homes were reached by wireline or wireless broadband service when the funding ran out.

Under Chairman Pai’s latest round of rural broadband funding, Burstein believes much of this new money is also at risk of being wasted.

“[Pai] needs to dig into the details of what he’s proposing,” Burstein wrote. “Nearly all cells with decent backhaul will be upgraded to 4G; Verizon and AT&T have already reached 98% of homes. Government money should go to building towers and backhaul where that’s missing, not filling in network holes the carriers would likely cover.”

Rural advocacy groups have been frustrated for years watching rural telephone companies deliver piecemeal upgrades and service expansion, often to only a few hundred customers at any one time. When they learn how much was spent to extend broadband service to a relatively few number of customers, they are confused because companies often spend much less when they budget and pay for projects on their own without government subsidies.

Gov. Andrew Cuomo announcing rural broadband initiatives in New York.

Burstein is currently suspicious about the $200 million approved in subsidy funding to extend rural broadband in parts of upstate New York. Burstein notes Pai is factually wrong about his claim that the hundreds of millions set aside for New York would be spent on “unserved areas of rural New York.”

“Most of that money will not go to unserved areas,” Burstein reports. “Some grants are going to politically connected groups. I’ve read the rules and the approved proposals. The amounts look excessive based on the limited public details.”

Telephone companies have become skilled negotiators when it comes to wiring their rural service areas. Most want more money than the government has previously been willing to offer to help them meet their Return On Investment expectations. Burstein noted that under normal circumstances, a government program offering a 25% subsidy to extend rural broadband into areas considered unprofitable to serve would be enough in most cases to get approval from rural phone companies like CenturyLink and Frontier Communications. But many phone companies, including AT&T, Verizon, and Qwest (now a part of CenturyLink) did not even file applications to participate in early funding rounds. Qwest’s lack of interest was especially problematic, because the former Baby Bell served the Pacific Northwest and Rocky Mountain regions where some of the worst broadband accessibility problems persisted.

Burstein claims Jonathan Adelstein, then Rural Utilities Administrator, had to double his subsidy offer to get Qwest’s attention with a 50% subsidy.

Rural backhaul connectivity is often provided by fiber optic cabling.

“Qwest refused, demanding 75%,” Burstein noted. “That was probably twice the amount necessary and Adelstein rightly refused. They knew the government had few ways to reach those unserved without paying whatever the telcos demanded. A few years later, Qwest is part of Centurylink. Many of those lines are now upgrading under [public] Connect America Funds with what amounts to a greater than 100% subsidy.”

Net Neutrality appeared to have no impact on telephone company investment decisions, even in rural areas. The investment cuts followed a trend that began even before President Barack Obama took office. Wireless carriers slash investments in rural areas when management is confident the government is motivated to step in and offer taxpayer dollars to expand rural broadband service. When those funds do become available, a significant percentage of the money isn’t spent on constructing new infrastructure to extend the reach of wired and wireless networks into unserved rural areas. Instead, it pays for expanding existing infrastructure that may coincidentally reach some rural customers, but is still primarily used by existing cellular customers.

“In many extreme rural areas, only the local telco has the ability to deliver broadband at a reasonable cost,” noted Burstein. “You need to have affordable backhaul and a local staff for repairs. Because the ‘unserved’ are in very small clusters, often less than 100 homes, it’s usually impractical for a new entrant to bring in a backhaul connection.”

Instead, AT&T is attempting to fill some of the gaps with fixed wireless service from existing cell towers. While good news for customers without access to cable or DSL broadband but do have adequate cellular coverage to subscribe to AT&T’s Fixed Wireless service, that is not much help for those in deeply rural areas where AT&T isn’t investing in additional cell towers to extend coverage. In effect, AT&T enjoys a win-win for itself — adding taxpayer-funded capacity to their existing 4G LTE networks at the same time it markets data-cap free access to its bandwidth-heavy online video services like DirecTV Now. That frees up capital and reduces costs for AT&T’s investors. But it also alienates AT&T’s competitors that recognize the additional network capacity available to AT&T also allows it to offer steep discounts on its DirecTV Now service exclusively for its own wireless customers.

AT&T will spend $9.7 million in annual public subsidies to bolster its cell tower network in South Carolina in part to expand its rural wireless broadband program. Perhaps services like mobile tower lease would come in handy.

The Federal Communications Commission approved the funding, which is expected to cost Americans nearly $10 million annually until 2020 to boost wireless coverage in 20 mostly rural counties in South Carolina to reach an estimated 12,000 new homes and businesses by the end of this year. Nationwide, the company is getting almost $428 million a year to extend access to 1.1 million customers in 18 states, the FCC says.

AT&T plans to spend the money to improve cell towers it already has in place for its mobile phone customers. The company admitted it will rely on existing infrastructure and won’t lay a single new strand of fiber optics. Instead, wireless broadband customers will share space with AT&T’s existing mobile customers on AT&T’s backhaul network.

“Because of the wireless aspect of it and the greater ability to deliver that last-mile connection, it does help to overcome any obstacles that may be in the cost equation,” Hayes said. “This initial build, with it being infrastructure that we have in place with these towers, that comes from years of investment.”

AT&T will also be able to promote its own products and offer customers discounts and free installation when they agree to sign up for other AT&T services. Hayes said the service will cost $60 a month for everyone else, along with a one-time installation fee of $99.

“Because of the wireless aspect of it and the greater ability to deliver that last-mile connection, it does help to overcome any obstacles that may be in the cost equation,” spokesman Daniel Hayes told The Post and Courier. “This initial build, with it being infrastructure that we have in place with these towers, that comes from years of investment.”

AT&T is treating the fixed wireless program, which offers up to 10Mbps service, as an alternative to wiring fiber optics in outer suburban and rural areas.

With taxpayer/ratepayer dollars financing a significant part of the cost, AT&T will have a de facto monopoly in its rural service areas where it has traditionally declined to offer or maintain DSL service or consider fiber optic upgrades, leaving these areas without broadband service until the subsidy program began.

Microsoft is indirectly getting into the internet access business with its support for white-space wireless internet access for two million rural Americans by 2022.

The project will involve a partnership putting Microsoft’s financing together with rural telecommunications companies that want a rural broadband solution for their customers.

Microsoft has spent at least a decade promoting “white space” wireless broadband, which works over unused UHF TV channels. An internet provider markets the service as a next generation Wi-Fi network, capable of serving customers over a much larger distance than traditional in-home or business Wi-Fi. The service transmits from strategically placed antenna towers that are capable of delivering internet access to dozens of families in an immediate area.

Pilot projects not associated with Microsoft are already up and running in selected rural areas with mixed results. None of the projects have lived up to their pre-launch hype, but most have been a significant improvement over satellite internet access. Speed variability and capacity has proven difficult technical challenges, and finding ongoing financial resources to maintain the wireless network once constructed has also been a challenge.

Rural community politics is never too far away. Thurman, N.Y.’s white space broadband project Stop the Cap! wrote about two years ago has turned into a political football. Only about three dozen residents subscribe to the white space internet service and vocal opponents of the project and controversy over other spending initiatives caused the town’s CEO and one board member to resign. Town meetings have deteriorated into shouting matches as recriminations are fired back and forth. One of the project designers resigned after the town refused to honor an invoice for a cost overrun. The white space project was funded with a grant that required local matching funds. With only a few dozen customers using the service, some taxpayers object to underwriting its expenses.

The technology has not been a runaway success in the U.S., but Microsoft has had better luck funding internet access to 185,000 people in 20 wireless projects, many in the developing world.

Microsoft president and chief legal officer Brad Smith today introduced Microsoft’s plan to expand white space internet in the U.S., pointing to a white paper laying out Microsoft’s rural broadband strategy, which will leverage several wireless technologies.

A combination of technologies can substantially reduce the total cost of extending broadband coverage. Specifically, a technology model that uses a combination of the TV white spaces spectrum, fixed wireless, and satellite coverage can reduce the initial capital and operating costs by roughly 80 percent compared with the cost of using fiber cables alone, and by approximately 50 percent compared with the cost of current LTE fixed wireless technology.

One key to deploying this strategy successfully is to use the right technology in the right places. TV white spaces is expected to provide the best approach to reach approximately 80 percent of this underserved rural population, particularly in areas with a population density between two and 200 people per square mile. […] Satellite coverage is expected to be the most cost-effective solution for most areas with a population density of less than two people per square mile, and LTE fixed wireless for most areas with a density greater than 200 people per square mile. This mixed model for expanding broadband coverage will likely bring the total national cost of closing the rural broadband gap to roughly $10 billion.

To cover the costs, Microsoft has agreed to front its own money and recover it later. The Mid-Atlantic Broadband Communities Corp. received $250,000 from Microsoft. Another $500,000 originated with the Virginia Tobacco Region Revitalization Commission and another $250,000 came from the telecom company. Mid-Atlantic hopes to expand white space internet access to 1,000 local customers by the end of the year.

Mid-Atlantic today offers residents in Charlotte and Halifax counties, two rural regions in southern Virginia, free internet access to a limited number of education-related sites with speeds of 3-4Mbps. Customers can pay to access the entire web at those speeds for about $10 a month. A premium tier raises speeds to 8-10Mbps for $40 a month. About 90% of subscribers have chosen the free service, an alarming percentage for any company trying to sell internet access and recoup its investment. It currently costs around $1,000 to hook up each customer, a number local officials hope to reduce to $100 eventually.

Microsoft argues the technology is still cheaper than the alternatives – 80 percent less costly than fiber to the home service and half the price of 4G LTE wireless.

To guarantee the technology will work, Microsoft wants to preserve unlicensed frequencies not currently in use by licensed television stations for “white space” broadband.

“The Incentive Auction reduced the number of available channels that can be used for TV white spaces technologies,” Microsoft noted in its white paper. The company is referring to the FCC’s auction of UHF TV licenses, freeing up channels to be repurposed for wireless data expansion by the country’s mobile phone operators. “To make the significant investments necessary to reach economies of scale, potential TV white spaces network operators and device and chip manufacturers have converged on the need for a minimum of three usable TV white spaces channels in every market, with additional TV white spaces available in smaller markets.”

In other words, Microsoft wants the FCC to ensure at least three unused UHF channels in each city in the country are kept available for unlicensed spectrum users, like white space internet. That brought a scathing response from the National Association of Broadcasters (NAB) who called Microsoft’s request “nonsense on its face”:

The proposal is either unnecessary, because there will be plenty of spectrum, or it is harmful, because there will not be enough. If you were playing musical chairs with someone and he told you, “you must reserve that chair for me, but don’t worry, there are plenty of chairs for everyone,” you would rightly be suspicious. The post-auction repack is essentially a game of musical chairs for displaced low power stations. Microsoft is telling the Commission: (1) it needs to have a chair reserved for unlicensed use, but that (2) there will be no effect from that reservation on anyone else. One of those assertions is untrue.

Microsoft also claims that only the reservation of spectrum can provide the regulatory certainty that Microsoft needs to increase investment in white space technology. But the truth is the Commission just held a lengthy auction of the very spectrum Microsoft claims it so urgently desires. If Microsoft were interested in increasing investment, it had an unprecedented opportunity to get guaranteed access to 600MHz spectrum with a nationwide footprint. Instead, Microsoft is trying to convince the Commission to give Microsoft a backdoor frequency allocation with exclusive access to that spectrum for free, and on better terms than winning auction bidders received.

Certain parts of the northeastern U.S. are signal-crowded, with no available white space channels.

The NAB objects to Microsoft requesting spectrum without directly paying for it, but Microsoft’s actual request is that those frequencies be reserved for unlicensed users of all kinds, not just for white space internet. The NAB accuses Microsoft of potentially increasing interference for licensed TV stations on a newly crowded, repacked UHF dial, a theory that seems unlikely in the most rural parts of the country where over the air television reception is problematic or non-existent. There are urban areas of the country, particularly in the Boston-New York-Washington corridor where open channel space is either not available or severely limited, but white space internet was designed to resolve rural broadband problems, not urban ones.

To find out what is true and what is theoretical Microsoft announced 12 new white space pilot projects in 12 U.S. states, including Arizona, Georgia, Kansas, Maine, Michigan, New York, North Dakota, South Dakota, Texas, Virginia, Washington, and Wisconsin that will be up and running over the next year. Few details are available about the specific communities involved or the types of access to be offered. Microsoft only said if it gets its way, it could be providing internet access to two million more Americans by July 4, 2022.

Most customers are likely not going to get the FCC’s definition of broadband (25Mbps) from the current generation of white space broadband technology. Speeds are often comparable to DSL and just as variable, depending on reception conditions. The NAB questions whether this technology will really make much difference.

“Microsoft has been making promises about white spaces technology for well over a decade,” the NAB wrote on a blog post, noting it estimates fewer than 300 customers are getting white space internet access in the U.S. “There remain few tangible consumer benefits associated with white spaces deployments across the U.S.”

For states like New York, embarked on their own efforts to achieve 100% broadband penetration, Microsoft’s project may be too little, too late. Governor Andrew M. Cuomo launched the final phase of the New NY Broadband Program in March, seeking to deliver a final round of funding to secure access to high-speed internet for all New Yorkers by the end of 2018, four years sooner than Microsoft’s target date for its project. New York’s rural broadband expansion program relies primarily on incumbent providers and helps subsidize expansion of their networks to reach customers deemed too expensive to serve without supplemental funding.