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Telecom Industry Lobbyist Gets Friendly Reception on C-SPAN

The cable industry’s public affairs network — C-SPAN, gave a friendly reception to a top telecom industry lobbyist over the weekend, responding to soft ball questions about rural broadband and telecommunications public policy debates.

Jonathan Spalter, president and CEO of USTelecom appeared on C-SPAN’s “The Communicators” to answer questions about broadband service in the era of COVID-19. USTelecom’s members, primarily telephone companies, have been strong proponents for government funding of rural broadband expansion, are opposed to telecom industry regulation and net neutrality policies, and argues that the more oversight and regulation the industry deals with, the less investment Wall Street will direct towards broadband networks.

Spalter was asked about how American broadband networks handled the work/learn-from-home requirements during the coronavirus pandemic. Spalter said networks handled the increased traffic well, but noted many rural Americans still lack access to high-speed internet. Some Democrats have proposed regulating broadband service as a utility to deal with issues of access and affordability, an idea that Spalter rejects.

“To wrap it in the red tape of regulatory strictures, the overhang of bureaucracy that would be required if we were to make it a utility, would take us backward,” Spalter said, adding he prefers “light touch” regulation. But Spalter had no objection to spending taxpayer dollars to pay for-profit telephone companies to expand broadband service in high-cost rural areas. Spalter called estimates that it would cost $100 billion to bring high speed internet service to all Americans “adequate.”

Jonathan Spalter, USTelecom’s president and CEO, talked about the coronavirus’s impact on telecommunications, regulatory issues, and solving the problems of rural internet access. (28:52)

AT&T Exempts Its Own HBO Max Service from AT&T Wireless Caps

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

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

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

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

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

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

Telecom Industry Slashes Investments for 2020-2021; Focus on Profit Margins New Priority

Telecom companies are cutting investment in their networks despite promises by Republican members of the FCC that repeal of net neutrality would inspire increased investment.

Charter, Comcast, AT&T, and Verizon have surprised Wall Street with dramatic cutbacks in spending and investment in their networks, with one provider admitting improving profit margins are now a bigger priority.

As a result, Wall Street analysts are revising down capital expenditure (Capex) estimates in reports to their investor clients.

“Comcast and Charter missed [third quarter] expectations for Capex and guided 2019 lower than previously planned,” reported Nomura in a note to investors. “We have lowered our combined 2019 Capex forecast for Comcast and Charter from $14.6 billion to $14.2 billion.”

AT&T’s drop in network spending was the most dramatic among the country’s top telecom companies. AT&T has declared an end to fiber broadband expansion and slashed spending forecasts from the $23 billion the company spent this year to as little as $20 billion next year, despite claiming it would dramatically expand its 5G service to over two dozen cities over the next 12 months.

In a recent conference call with investors, AT&T CEO Randall Stephenson said “now it’s time to reap the rewards of what we’ve been doing [and] begin to reward to shareholders these investments that we’ve been making over the last few years.”

Over the next three years, AT&T will pay shareholders $45 billion in dividends and spend $30 billion on buying back shares of AT&T stock to retire debt racked up buying Time Warner (Entertainment). In fact, AT&T will devote 50-75% of its free cash flow exclusively on retiring shares of AT&T stock, which is expected to benefit shareholders.

Verizon reported spending $4.4 billion in the third quarter on network upgrades, approximately $100 million less than expected. That is a concern because Verizon is trying to expand its costly 5G network, but is not devoting the investment dollars required to make such an upgrade happen without cutting investments elsewhere in the company. Verizon has told Wall Street analysts to expect stable Capex spending of $17-18 billion annually for 2019-2021. That will either mean Verizon’s 5G expansion will be modest or the phone company will have to slash investments in other areas, such as wireline, fiber to the home, or business services.

Many analysts expect 5G will be a top spending priority for AT&T and Verizon over the next several years, leaving little room in budgets for upkeep of the company’s legacy landline networks or its other products. Charter and Comcast have effectively stopped spending on large upgrade projects, also as part of improved profit-taking.

The spending realities are in direct conflict with the promises made by Republican members of the FCC. Trump-picked FCC Chairman Ajit Pai repeatedly claimed that banishing net neutrality would lead to significant increases in investment by the nation’s top telecom companies. In fact, the opposite has happened.

Trump Administration Can’t Stop States From Enacting Net Neutrality Protection, Court Rules

Phillip Dampier October 1, 2019 Net Neutrality, Public Policy & Gov't, Reuters 3 Comments

WASHINGTON (Reuters) – A U.S. appeals court on Tuesday rejected the decision of the Federal Communications Commission to declare that states cannot pass their own net neutrality laws and ordered the agency to review some key aspects of its 2017 repeal of rules set by the Obama administration.

The court, which upheld most of the FCC’s December 2017 order, said the agency “failed to examine the implications of its decisions for public safety” and must also review how its decision will impact a government subsidy program for low-income users.

The decision means the more than 10-year-old debate over net neutrality will continue to drag on for months or more likely years. The ruling is a setback to the Trump administration’s efforts to reverse rules adopted under former President Barack Obama in 2015 which barred internet service providers from blocking or throttling traffic, or offering paid fast lanes, also known as paid prioritization.

FCC Chairman Ajit Pai said the decision affirmed the FCC’s “decision to repeal 1930s utility-style regulation of the internet. A free and open internet is what we have today. A free and open internet is what we’ll continue to have going forward.”

Pai added that the FCC would address “the narrow issues that the court identified.”

Championed by large tech companies and consumer groups, net neutrality was formally adopted by the FCC in 2015. Major telecommunications companies argued it limited their ability to offer new services to content providers, and under the Trump administration, the FCC overturned the policy.

California passed sweeping state net neutrality protections but agreed not to enforce the measure pending the court challenge.

The court threw out the part of the order that barred all states from setting net neutrality rules and argued that states were preempted by federal law.

“The commission lacked the legal authority to categorically abolish all 50 states statutorily conferred authority to regulate intrastate communications,” the court said.

The FCC could still make “provision-specific arguments” to seek to block individual aspects of state net neutrality rules.

Judge Stephen Williams wrote in his dissenting opinion that “On my colleagues’ view, state policy trumps federal; or, more precisely, the most draconian state policy trumps all else.”

The Trump administration rules were a win for internet providers like AT&T Inc, Comcast Corp and Verizon Communications Inc but opposed by companies such as Facebook Inc, Amazon.com Inc and Alphabet Inc.

Reporting by David Shepardson; Editing by Paul Simao and Lisa Shumaker

Cable Industry Spending Freeze Causes Cisco to Halt Investment in Full Duplex DOCSIS

Despite assurances from FCC Chairman Ajit Pai that the repeal of net neutrality would inspire cable operators to increase investment in broadband, a year-long virtual spending freeze by the nation’s top cable operators has resulted in a major vendor pulling out of the next generation cable broadband standard until there are signs cable companies are prepared to spend money on upgrades again.

Cisco Systems has confirmed to Light Reading it has ceased investment in Full Duplex DOCSIS technology that would allow cable customers to get the same upload speed as download speed.

“Cisco has internally communicated that we are suspending further investment in Full Duplex DOCSIS (FDX) until the market timing, ecosystem development and size of the opportunity can be quantified,” a Cisco spokesperson said in a statement to Light Reading.

The news is a significant blow to the cable industry’s plans to upgrade to 10 Gbps capacity and a growing desire by customers to get much faster upload speeds than are currently available.

Cisco blamed its pullback on the cable industry’s lack of investment in broadband upgrades and an uncertain timetable when major cable companies including Comcast, Charter, Cox, and others will announce specific plans for future upgrades.

FDX has already been the victim of delays. Originally planned as an incremental upgrade for DOCSIS 3.1, FDX is now scheduled to be included in CableLabs’ DOCSIS 4.0 specification, which is not expected to be released for a few years. FDX will be one of several new features incorporated into the next cable broadband standard, which will allow for low latency connections and an expanded amount of coaxial cable spectrum that can be devoted to broadband services.

The cable industry has been taking a sober look at the costs associated with adopting FDX, which includes scrapping a significant amount of coaxial cable and pushing fiber optic technology much closer to customers. Cable systems that want to move towards FDX will have to remove amplifiers that maintain signal strength between the fiber optic connection and the coaxial cable entering customers’ homes. In some cases, this will mean removing multiple amps from the cable system and stringing new fiber optic cables deep into neighborhoods. This is known as node+0 architecture. Moving towards node+0 is expected to be both costly and labor intensive, and some large cable systems and investors are balking.

“There are a lot of operators who have no intention of getting to a node+0 environment in next 10 years,” Tom Cloonan, chief technical officer of Arris’ Networks Solutions unit, told Multichannel News last fall. “It’s going to take a while to run fiber deep enough to get to node+0.”

To date, the only major cable operator that has definitively backed moving to node+0 is Comcast. Other cable companies, notably Cox Communications, are seeking a much cheaper solution to manage upgrades.

Extended Spectrum DOCSIS (ESD)
Image courtesy of: Huawei

An emerging alternative concept has emerged that can be implemented at a lower cost. Extended Spectrum DOCSIS (ESD) would essentially repurpose much of the bandwidth available over a coaxial cable solely to broadband service. DOCSIS 3.1 currently dedicates 1.2 GHz of spectrum for broadband. FDX would increase that to more than 1.8 GHz. ESD would devote as much as 3 (or possibly 6) GHz of spectrum for data transmissions. The cable system would devote as much as half of that spectrum for downstream traffic, the other half for upstream. Theoretical speeds in the future could be as high as 60 Gbps, and ESD will not require cable systems to ditch existing amplifiers. It will, however, force some cable systems to evaluate and replace at least part of their older coaxial cable network. ESD will be less forgiving of deteriorating cable than DOCSIS 3.1 is.

Unfortunately for Cisco, and other cable broadband equipment suppliers, ESD is still more theory than fact, and with cable operators demonstrating they are in no rush to move to either FDX or ESD, it will likely be several years before either technology becomes available to customers. Cloonan predicts ESD will not be implemented by cable systems until the mid-2020s.

The muddy waters over where the cable industry will ultimately plant the flag on next generation broadband upgrades means a lot of uncertainty for companies like Cisco, which has resulted in the company pulling out of developing FDX until there are assurances the cable industry has a timetable to implement it. The decision has also cost several Cisco employees their jobs. Multiple industry sources told Light Reading job cuts included 5-7 engineers dedicated to FDX, and some sources also report at least 40 employees in the cable access division of Cisco have also been let go.

If certainty does not return to the cable broadband market soon, Cisco could ultimately jettison much of its cable broadband technology division to focus on other technology growth areas.

The cable industry’s investment freeze is ironic because the Trump Administration’s FCC trumpeted its decision to repeal net neutrality, claiming it would inspire cable operators to accelerate investment in network upgrades. It appears the exact opposite has occurred.

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