AT&T to Rural America

While Verizon leverages its 4G LTE wireless network as a rural broadband solution, AT&T shows no signs of sharing Big Red’s enthusiasm (and investment).

In fact, while AT&T celebrates the end of its U-verse fiber-to-the-neighborhood expansion and admits it has no answer to America’s rural broadband problem, the always excellent DSL Prime by Dave Burstein reports AT&T is mulling a sale of its rural DSL operations to a third party provider, essentially letting the new owner(s) deal with the rural broadband problem:

[AT&T] is “doing a rapid tech evaluation” of whether they can upgrade their DSL + wireless to “a competitive broadband product.” But Randall “doesn’t see a solution.” If that’s confirmed, “we’re looking for others who might want the properties.” […] It’s unclear if any of the “rural carriers” – Century, Frontier, Windstream – have the financial ability to make an attractive offer. If operators can’t raise the money, [AT&T] would need to make a financial transaction.

Verizon has sold off its entire “wireline” (landline infrastructure and business) operation in smaller, rural states — often properties it acquired years earlier from GTE — to focus on more lucrative urban markets.  AT&T could either spinoff its broadband operation to a third party to run or follow Verizon and sell off entire rural service areas not already upgraded for AT&T’s more modern U-verse.

Likely buyers include FairPoint Communications, Frontier Communications, CenturyLink, and Windstream — all independent traditional landline operators trying to focus on less-competitive rural markets pitching DSL broadband service.

AT&T has shown little interest investing in rural service areas located primarily in the southern and central United States.  As Karl Bode writes on Broadband Reports, AT&T is on record stating that they can’t find an “economically viable” way to upgrade these users, despite a looming increase in faster and less expensive last mile DSL technologies.

As AT&T has sought to redefine itself as a wireless company, the buildout of its wireless network could bring AT&T to also eventually pitch 4G wireless Internet service to its former DSL customers.  But like Verizon, those plans would likely include severely usage-capped service, while leaving its traditional DSL product starved for investment.

Verizon Wireless today introduced HomeFusion Broadband: a new service that provides high-speed in-home Internet access using the company’s 4G LTE wireless network.

Designed primarily to reach households with limited broadband options, HomeFusion will deliver download speeds of 5-12Mbps and upload speeds of 2-5Mbps. While installation will come free of charge, a one-time equipment charge of $199.99 applies.  Pricing is nearly identical to Verizon’s mobile broadband service:

• Up to 10GB — $60/month
• Up to 20GB — $90/ month
• Up to 30GB — $120/month
• Overlimit fee: $10/GB

Verizon's 4G LTE antenna must be mounted on an outside wall of your home to assure good reception. (Picture: The Verge)

Verizon says HomeFusion is their broadband answer for rural America.

“HomeFusion Broadband is just one of the new products and services that is made possible with our 4G LTE network,” said Tami Erwin, vice president and chief marketing officer, Verizon Wireless. “Customers want to connect more and more devices in their homes to the Internet, and HomeFusion Broadband gives them a simple, fast and effective way to bring the most advanced wireless connection from Verizon into their homes.”

A third party company, Asurion, will handle installation of Verizon’s cylinder-shaped antenna, installed on the side of a customer’s home.  The antenna is designed to pick up the best possible signal from Verizon’s growing 4G network.  The antenna transmits the signal to a company supplied router capable of connecting up to four wired and 20 wireless devices.

HomeFusion Broadband will be available beginning later this month in Birmingham, Ala., Dallas and Nashville, Tenn., with additional markets to follow.

Verizon’s product is unlikely to attract substantial interest in more populated areas where a 10GB monthly usage cap would prove unacceptable in many homes where multimedia content is a growing part of the Internet experience.  But is could compete with satellite broadband, which also has low monthly usage caps.  Verizon may also win back customers in service areas it sold to independent providers like FairPoint and Frontier Communications, which have since saddled most of their rural customers with 1-3Mbps DSL service.  But Verizon’s pricing puts rural America at a usage disadvantage because of the low monthly limits and higher price tag.

The development of HomeFusion could reduce Verizon’s investment and interest in further expanding its traditional rural broadband product — DSL.  But Verizon will have to expand its still-urban focused LTE 4G network further into the countryside for HomeFusion to serve its intended market.

While incumbent phone and cable operators often try to directly block community broadband projects, sometimes politics and special insider interests also get in the way.  One of our loyal readers shared a piece with us published in Fierce Telecom that outlines the trouble spots:

Gov. Bobby Jindal Blows It for Louisiana; Wife’s Foundation Heavily Supported By AT&T

Jindal's wife's charity is a recipient of AT&T money.

The U.S. Dept. of Commerce awarded $80.5 million to help drain Louisiana’s broadband swamp with a new statewide fiber network linking the most rural and poor areas of the state, including schools, libraries, hospitals, and universities.  Users could have obtained service from 10Mbps-1Gbps, but not if Jindal had his way.  He preferred AT&T (and the state’s cable operators) handle everything the same way they have traditionally handled telecommunications in the state — service in big cities and next to nothing everywhere else.  In addition to directly supporting the governor, AT&T contributes substantially to a charitable foundation founded by Jindal’s wife.

Jindal never openly blocked the project.  Instead, his administration “dithered and bickered” over the fiber network and ran the clock out.  Last October, the Commerce Department revoked the grant, leaving Louisiana’s Broadband Alliance with little more than a plan they’ll never be able to implement as long as Jindal occupies the governor’s office.  Stop the Cap! covered the mess back in November.

Public Service Commissioner Foster Campbell:

“We want to know what the heck happened; we’re the only ones in the country that dropped the ball,” Campbell said. “I meet with people in every parish, and the number one priority by far is high-speed Internet, and how do you lose $80 million coming from the federal government to do that. How do you drop the ball, and if they did drop the ball was it because someone whispered in their ears, ‘it’s going interfere with big companies?’”

AT&T-Backed Astroturf Operation Scandalizes the Mayor’s Office and Ruins A High Tech Training Program

Marks

As Stop the Cap! wrote last fall, a scandal involving AT&T and the mayor of the state capital of Florida ultimately cost the city of Tallahassee a $1.6 million dollar federal broadband grant to expand Internet access to the urban poor and train disadvantaged citizens to navigate the online world.

Mayor John Marks never bothered to inform the city he had a direct conflict of interest with the group he strongly advocated as a participant in the grant project. The Alliance for Digital Equality (ADE) is little more than an AT&T astroturf effort — a front group that did almost nothing to bring Internet access to anyone. Mayor Marks was a paid adviser.

After the media got involved, the mayor’s office hoped the whole project would just go away. And it did, along with the $1.6 million.

Wisconsin Republicans <Heart> AT&T, Even When It Means Forfeiting $23 Million for Better Broadband

Wisconsin Gov. Scott Walker is a close friend of AT&T.  So close, when the phone company was threatened with the loss of revenue earned from the institutional broadband network it leases to the state, Walker and his Republican colleagues intervened, literally turning away $23 million in government stimulus funding.  Walker alone has accepted more than $20,000 in campaign contributions from AT&T.  Stop the Cap! covered this story in detail in February 2011.

Governor Walker (R-AT&T)

The decision to return the money had a direct impact on 380 Wisconsin communities, 385 libraries, 82 schools, and countless public safety offices across the state.  Namely, being stuck with AT&T’s outdated and expensive network the state leases in successive five year contracts.  Since broadband stimulus funding requires the construction of networks designed to last 20 years, not five, Walker’s insistence on sticking with AT&T made the stimulus funding off-limits.  But what are friends for?

AT&T has historically had no trouble getting its phone calls returned by Republican state lawmakers, who have cheered most of AT&T’s proposed legislation through the state legislature.  Today, Wisconsin takes a “hands off” approach with the state’s cable and phone companies, passed a statewide franchising bill that stripped oversight away from local communities, and AT&T’s landline network faces little scrutiny in the state, especially in rural communities.

The state university is now attempting to bypass Walker with its own $37 million project, but it will never serve Wisconsin consumers.  The institutional network will target schools, hospitals and first responders.

As Fierce Telecom notes, other communities could face the loss of their stimulus funding if they do not get busy building the projects they promised.  The Rural Utilities Service, part of the U.S. Dept. of Agriculture, has put several projects on notice they could forfeit broadband stimulus funding if they fail to meet project deadlines.

Bell this week brought out its saber collection for a little rattling in Ottawa over the Canadian government’s consideration of a plan to set aside certain mobile spectrum for new competitors.

A mobile spectrum auction, expected later this year, will increase the number of 700Mhz frequencies available for wireless communications.

Some of Canada’s largest cell phone companies are well-positioned to outbid the competition, but not if Industry Canada decides it needs to set aside some of the frequencies for an auction among smaller competitors.

BCE, Inc., the parent company of Bell, has little regard for that plan and has now joined Rogers in a lobbying effort for an “open and transparent” sale, which effectively means the highest bidder takes all.

If Canada doesn’t follow Bell’s advice, the company is threatening to withhold advanced mobile Internet services in Canada’s lesser-populated regions.

“An auction for this spectrum that isn’t open and transparent would limit the amount of spectrum available to Bell, forcing a focus on more densely populated centers in order for Bell to compete with new carriers,” the company said in a news release.

In response, Wind Mobile, one of the newest entrants in the Canadian mobile market, said it would sit out of a spectrum auction that favored deep-pocketed incumbents with winner-take-all rules.  In short, it could not afford the prices players like Rogers and Bell will be able to bid for the new frequencies.

Industry Minister Christian Paradis was unwilling to set an exact date or format for the 700MHz spectrum auctions.  Observers suspect if he waits much longer, the auction won’t take place until 2013.

Just three major wireless companies — Bell, Rogers, and Telus, control 94 percent of the Canadian wireless market.

This influential documentary explores the rural cooperative movement for electricity in the 1930s.

In 1935, just 5-10 percent of America’s family farms were wired for electricity.  The cities: lighted.  The rest of the country: in the dark.  It was the same old story then as it is today for rural broadband:

• There are two few customers for us to make a profit by bringing you service;
• The return on investment will take too long;
• You won’t use enough service to justify the expense of providing it;
• Okay, we’ll install service, if you pay thousands of dollars to cover the cost to bring it you.

Private providers delivered electricity to big cities, but found the countryside not worthy of their time or investment.  Then, as now, rural America’s economy suffered for it.  Back in 1935, family farms coped with wood-fired stoves, school homework by kerosene lamp, discarding fresh farm products that could not be kept cool, no running water, no radio, and no appliances to make an already difficult life a bit easier to manage.  In 2012, an increasing amount of the rural economy is moving online, where raw materials and goods are bought and sold, where knowledge-based jobs require a dedicated broadband connection, and education means completing homework assignments and doing research on the Internet.

Same old problems cast in a different light to be sure, but borrowing from America’s past may put a down payment on our broadband future.

President Franklin D. Roosevelt had heard all of the excuses and seen private electric companies try to showcase their minor efforts to improve power in rural America. A series of small scale projects that looked good in the newspaper could not hide the more general attitude it was unprofitable to provide the service to family farms.  In 1935, Roosevelt signed an executive order establishing the Rural Electrification Administration (REA).  Although FDR’s contemporary critics like to consider him a socialist that interfered in the private economy, in fact Roosevelt’s REA spent the majority of its effort in areas commercial providers wouldn’t touch with a 25-foot power pole.

The idea was simple.  Rural American communities with limited or no electric service could reach out to the REA to obtain low interest loans to finance the infrastructure to construct rural electric service.  When loans were approved, a cooperative electric company was established, with each “customer” being a member and part-owner of the co-op.  Income earned from ratepayers would pay for the service and pay back the government loans.  When the federal government was paid in full, the cooperative owned the new utility company outright.

In practice, this was the only way rural Americans, especially farmers, could obtain electric service.  These cooperatives often found they could deliver the same service a private company could, and for much less money. Co-ops work for the benefit of their members, not for outside investors.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Power and the Land.flv[/flv]

In 1940, the federal government commissioned ‘Power and the Land’ through the United States Film Service.  This one film, showing life for a farm family in southeastern Ohio before and after electrification, helped drive the rural electrification movement forward in areas yet to be wired for service.  The first 17 minutes chronicles life on the powerless farm, while the second half explores the REA electrification program and the changes electricity brought to farming life. (38 minutes)

Belmont County, Ohio shows the legacy of the REA. Diagonal line-shaded sections illustrate the service areas of the original power co-op noted in the film 'Power and the Land.' The yellow shaded areas are served by Ohio Power, a subsidiary of American Electric Power, Inc., a commercial company.

The film’s impact was profound (the Village Voice called it “a little masterpiece”), and more than four million farmers were estimated to have seen it.  Eventually, more than 500 miles of electric lines were being strung by America’s co-ops every single day.  Additional documentaries about the film were made decades later, narrated by Walter Cronkite, to chronicle the cooperative electricity movement, the original film, and what happened to the family.

Private providers were, of course, horrified by the REA and other Roosevelt Administration public works projects.  Private companies railed they were being undermined by low interest government loans, government involvement, and fear new regulations would threaten their profitable business models.  Some of Roosevelt’s fiercest critics called the administration’s zeal for public-good spending anti-capitalist and anti-American.  For Roosevelt, it was often simply a matter of finding the fastest solution to a pervasive problem private companies seemed uninterested and unwilling to solve.

The legacy of the REA remains plainly visible today.  In Ohio, what started as the Belmont Power Cooperative is today part of the South Central Power Company, itself a co-op within the Touchstone Energy Cooperative.  Belmont County, Ohio’s power grid still reflects the work of the REA in the 1930s, with the county divided into regions served by the original REA co-op and Ohio Power.

While South Central Power hasn’t gotten into the broadband business, several other rural co-ops have, expanding their focus towards fiber to deliver cable TV, Internet, and phone service.

If the concept of the REA was adopted for broadband, the formula for success can remain the same.  Low interest loans to finance fiber telecommunications networks provide limitless expansion possibilities and a clear path to solving rural America’s broadband inferiority problem.  Interest rates have never been lower, and by gradually repaying the loans from income earned from subscribers, taxpayer dollars are not at risk.  The federal government’s only real involvement in guaranteeing loans and providing oversight that the money is spent appropriately.  The co-ops that result will govern themselves by and for their members.

Some will say electricity is more important than broadband, and for some families that may be as true as similar arguments were for and against REA electricity in the 1920s and 30s.  But take a week off from your broadband service.  Disconnect it, don’t read e-mail or visit websites, and then re-evaluate that statement.

More and more, broadband has become a firmly established part of our lives at work, school, and home. If private companies won’t step up, let others organize to provide it.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/North Carolina Farmers Utilizing the Internet America’s Heartland.flv[/flv]

Fast forward to December 2011, and watch how rural Rutherford County, N.C. farmers are adapting to the new digital economy with the use of broadband.  They are selling their crops online to eager restaurants, markets, and other buyers up to 70 miles away.  No broadband?  No deal.  (5 minutes)