This week, the FCC announced bidding has finished for the latest Connect America Fund (CAF) broadband subsidies auction.

Once again, the FCC gave first priority to incumbent phone companies to bid for the subsidies, which defray the cost of expanding internet access to homes and businesses otherwise unprofitable to serve. Nearly $2 billion was left on the table by disinterested phone companies after the first round of bidding was complete, so the FCC’s second round opened up the leftover money to other telecom companies.

Winning bidders will receive their portion of $198 million annually in 120 monthly installments over the next ten years to build out rural networks. In return, providers must promise to deliver one broadband and voice service product at rates comparable to what urban residents pay for service. The winning bids, still to be publicly announced, will come from rural electric and phone cooperatives, satellite internet providers, fixed wireless companies, and possibly a handful of cable operators. But much of the money overall will be spent by independent phone companies rolling out slow, copper-based, DSL service.

Because the total committed will take a decade to reach providers, rural Americans will likely face a long wait before what purports to be “broadband” actually reaches their homes and businesses.

While many co-ops will spend the money to expand their own homegrown fiber-to-the-home services, most for-profit providers will rely on wireless or copper networks to deliver service.

Telefónica Spain

Overseas, broadband expansion is headed in another direction — expansion of fiber-to-the-home service, with little interest in investing significant sums on furthering old technology copper wire based DSL and fixed wireless services. The expansion is moving so quickly, Verizon made certain to sign long-term contracts with optical fiber suppliers like Corning in 2017 to guarantee they will not be affected by expected shortages in optical fiber some providers are already starting to experience.

Virtually everywhere in developed countries (except the United States), fiber broadband is quickly crowding out other technologies, despite the significant cost of replacing copper networks with new optical fiber cables. If a provider is brave enough to discount investor demand for quick returns and staying away from big budget upgrade efforts, the rewards include happier customers and a clear path to increased revenue and business success.

Not every Wall Street bank is reluctant to support fiber upgrades. Credit Suisse sees a need for optical fiber today, not tomorrow among incumbent phone and cable companies.

“The cost of building fiber is less than the cost of not building fiber,” the bank advised its clients. The reason is protecting market share and revenue. Phone companies that refuse to upgrade or move at a snail’s pace to improve their broadband product (typically DSL offering 2-12 Mbps) have lost significant market share, and those losses are accelerating. Ditching copper also saves companies millions in maintenance and repair costs.

Canada’s Telus is a case in point. Its CEO, Darren Entwistle, reports Telus’ effort to expand fiber optics across its western Canada service area is already paying off.

“We see churn rates on fiber that are 25% lower than copper,” Entwistle said. “35% lower in high-speed internet access, and 15% lower on TV — 25% lower on average. We’re seeing a reduction in repair volumes to the tune of 40%. We’re seeing a nice improvement in revenue per home of close to 10%.”

Telus promotes its fiber to the home initiative in western Canada as a boost to medical care, education, the economy, and the Canadian communities it serves. (1:31)

Telus’ chief competitor is Shaw Communications, western Canada’s largest cable company. Fiber optics allows Telus to vastly expand internet speeds and reliability, an improvement over distance sensitive DSL. Shaw Cable has boosted its own broadband speeds and offers product bundles that have been largely responsible for Telus’ lost customers, until its fiber network was switched on.

In economically challenged regions, fiber optic expansion is also growing, despite the cost. In Spain, Telefónica already provides service to 20 million Spaniards, roughly 70% of the country, and plans to continue reaching an additional two million homes and businesses a year until the country is completely wired with optical fiber. In Brazil, seven million customers will have access to fiber to the home service this year, expanding to ten million by 2020.

Verizon and AT&T regularly ring alarm bells in Congress that China is outpacing the United States in 5G wireless development, but are strangely silent about China’s vast and fast expansion into fiber optic broadband that companies like Verizon stopped significantly expanding almost a decade ago. China already has 328 million homes and businesses wired for fiber and added another five million homes in the month of June alone. AT&T will take a year to bring the same number of its own customers to its fiber to the home network.

The three countries that are most closely aligned with the mentality of most U.S. providers — the United Kingdom, Australia, and Germany — are changing their collective minds about past arguments that fiber to the home service is too costly and isn’t necessary.

The government of Martin Turnbull’s cost concerns forced a modification of the ambitious proposal by the previous government to deploy fiber to the home service to most homes and businesses in the country. That decision to spend less is coming back to haunt the country after Anne Hurley, a former chief executive of the Communications Alliance involved in the National Broadband Network (NBN), admitted the cheaper NBN will face an expensive, large-scale replacement within a decade.

ABC Australia reports on findings that the country’s slimmed-down National Broadband Network is inadequate, and parts will have to be scrapped within 5-10 years (1:37)

Turnbull’s government advocated for less expensive fiber to the neighborhood technology that would still rely on a significant amount of copper wiring installed decades ago. The result, according to figures provided to a Senate committee, found only a quarter of Australians will be able to get 100 Mbps service from the NBN, with most getting top speeds between 25-50 Mbps.

Despite claims of technical advancements in DSL technology which have claimed dramatic speed improvements, Hurley was unimpressed with performance tests in the field and declared large swaths of the remaining copper network will have to be ripped up and replaced with optical fiber in just 5-10 years.

“If you look around the world other nations are not embracing fiber-to-the-[neighborhood] and copper … so yes, it’s all going to have to go and have to be replaced,” she said.

In the United Kingdom, austerity measures from a Conservative government and a reluctant phone company proved ruinous to the government’s promise to deliver “superfast broadband” (at least 24 Mbps) over a fiber to the neighborhood network critics called inadequate from the moment it was switched on in 2012. The government had no interest in financing a fiber to the home network across the UK, and BT Openreach saw little upside from spending billions upgrading the nation’s phone lines it now was responsible for maintaining as a spun-off entity from BT. In 2015, BT Openreach’s chief technology officer called fiber to the home service in Britain “impossible” and too expensive.

Two years later, while the rest of Europe was accelerating deployment of fiber to the home service, the government was embarrassed to report its broadband initiative was a flop in comparison, and broke a key promise made in 2012 that the UK would have the fastest broadband in Europe by 2015. Instead, the UK has dropped in global speed rankings, and is now in mediocre 35th place, behind the United States and over a dozen poorer members of the EU.

What was “impossible” two years ago is now essential today. The latest government commitment is to promote optical fiber broadband using a mix of targeted direct funding, “incentives” for private companies to wire fiber without the government’s help, and a voucher program defraying costs for enterprising villages and communities that develop their own innovative broadband enhancements. The best the government is willing to promise is that by 2033 — 15 years from now — every home in the UK will have fiber broadband.

Deutsche Telekom echoed BT Openreach with claims it was impossible to deliver fiber optic broadband throughout an entire country.

Deutsche Telekom’s dependence on broadband-enhancements-on-the-cheap — namely speed improvements by using vectoring and bonded DSL are increasingly unpopular for offering too little, too late in the country. Deutsche Telekom applauded itself for supplying more than 2.5 million new households with VDSL service in 2017, bringing the total number served by copper wire DSL in Germany to around 30 million. The company, which handles landline, broadband and wireless phone services, is slowly being dragged into fiber broadband expansion, but on a much smaller scale.

In March, Telekom announced a fiber to the home project in north-east Germany’s Western Pomerania/Rügen district for 40,000 homes and businesses. The network will offer speeds up to 1 Gbps. In July, Telekom was back with another announcement it was building a fiber optic network for Stuttgart and five surrounding districts Böblingen, Esslingen, Göppingen, Ludwigsburg, and Rems-Murr, encompassing 179 cities and municipalities. But most of the work will focus on wiring business parks. Residents will have a 50% chance of getting fiber to the home service by 2025, with the rest by 2030.

In contrast, the chances of getting fiber optic broadband in the U.S. is largely dependent on which provider(s) offer service. In the northeast, Verizon and Altice/Cablevision will go head to head competing with all-fiber networks. Customers serviced by AT&T also have a good chance of getting fiber to the home service… eventually, if they live in an urban or suburban community. Overbuilders and community broadband networks generally offer fiber service as an alternative to incumbent phone and cable companies, but many consumers don’t know about these under-advertised competitors. The chances for fiber optic service are much lower if you live in an area served by a legacy independent phone company like Frontier, Consolidated, Windstream, or CenturyLink. Their cable competitors face little pressure to rush upgrades to compete with companies that still sell DSL service offering speeds below 6 Mbps.

CAF funding from the FCC offers some rural areas a practical path to upgrades with the help of public funding, but with limited funds, a significant amount will be spent on yesterday’s technology. In just a few short years, residents will be faced with a choice of costly upgrades or a dramatic increase in the number of underserved Americans stuck with inadequate broadband. Policymakers should not repeat the costly mistakes of the United Kingdom and Australia, which resulted in penny wise-pound foolish decisions that will cost taxpayers significant sums and further delay necessary upgrades for the 21st century digital economy. The time for fiber upgrades is now, not in the distant future.

AT&T does not expect to see much initial growth of FirstNet, the government-sponsored first responder wireless network built by AT&T with $6 billion in taxpayer dollars.

FirstNet relies on AT&T’s wireless network, bolstered by taxpayer-financed upgrades that will prioritize public safety users during emergencies, but allow any AT&T customer to use the enhanced network the rest of the time. FirstNet has just 110,000 subscribers as of this summer — about a year after launch. AT&T will be expanding FirstNet over the next four years, adding new cell towers, frequencies and bandwidth.

First envisioned after the events of Sept. 11, 2001, the network was designed to allow interoperability between all types of first responders, including law enforcement, fire departments, and ambulance crews. A major complaint after 9/11 was that different public safety agencies could not communicate with each other on the ground because of incompatible radio equipment. FirstNet allows agencies to deploy voice communications and data services on site, without the risk of congestion that occurs on publicly-available cell towers. All FirstNet users are given priority access, and during emergencies, the network will not allow public users to use FirstNet’s network resources.

Seventeen years later, the network is finally launching, but that is proving to be just the first hurdle. To use FirstNet, public safety agencies have to adopt AT&T as their communications provider, sign new contracts, and usually buy new equipment. A surprisingly large number of agencies are balking at changing providers, either because they dislike AT&T, its coverage, the cost, or require a rigorous bidding and procurement process.

AT&T FirstNet rate plans

Rural departments often favor Verizon Wireless, perceived to have better 4G LTE coverage and better performance in rural areas than AT&T. Ray Lehr, formerly with the Baltimore City Fire Department, is now a paid consultant for FirstNet, and admitted AT&T’s rural coverage isn’t as robust as it will be five years from now.

“Over the next five years, they have to have up to 99 percent rural coverage,” Lehr said. “There’s no reason why another carrier would do that. It just doesn’t make sense.”

For a lot of rural departments, there are coverage gaps with every wireless carrier and places where there is no coverage from any carrier. Those departments rely primarily on their existing radios for fireground communications and talking with dispatchers.

AT&T is relying on federal dollars to expand FirstNet in places where its own investment dollars are likely not being spent. AT&T also separately receives taxpayer support to build rural fixed wireless networks for consumers out of reach of traditional DSL and cable broadband.

Wall Street, which would ordinarily attack rural investment with no significant return on investment, has had little reaction to AT&T FirstNet, primarily because AT&T will be reimbursed by taxpayers for much of the construction costs, even though AT&T and its retail customers will benefit from the increased coverage and capacity FirstNet will offer most of the time.

“Investors aren’t expecting much, other than the reimbursement for the capital expenditure required to deploy the network,” Jonathan Chaplin, an analyst at New Street Research, told Communications Daily (sub. req’d.). “If public safety usage is low and AT&T can use the capacity for their core mobile users, that is probably fine.”

Other analysts agree, noting AT&T will get all the benefits offering government-paid FirstNet capacity to its retail customers, with none of the risk of losses if first responders do not flock to the new network, because it was not built with AT&T’s money.

Goei

While Wall Street and the tech media seems excited about the prospect of 5G and other fixed wireless home broadband services, Altice, which owns Cablevision and Suddenlink, dismissed wireless broadband as inadequate to meet rapidly growing broadband usage.

“In terms of usage patterns, our customers are taking an average download speed of 162 Mbps as of the second quarter of 2018, which is up 74% year-over-year,” Dexter Goei, CEO of Altice USA told investors on a recent conference call. “[Our customers now use] over 220 GB of data per month, which is up 20% year-over-year, with 10 in-home connected devices, on average. If you take the top 10% of our highest data consuming customers as a leading indicator, they are using, on average, almost 1 terabyte of data per month with 26 in-home connected devices. To support these usage patterns, which are mainly driven by video streaming and the proliferation of new over-the-top [streaming] services, it requires a high quality fixed network like ours. There is no substitute.”

Goei argued America’s wireless carriers are not positioned to offer a credible, serious home broadband alternative.

“For example, so-called unlimited data plans from the U.S. mobile operators start capping or significantly throttling customers at 20 GB of usage per month,” Goei said. “Over 60% of our customers are now using over 100 GB of data per month right now, which the mobile operators do not and will not have the capacity to match on a scaled basis unless they overbuild with a new dense fiber network.”

Altice just so happens to be building a dense fiber network, scrapping Cablevision’s remaining coaxial cable in New York, New Jersey, and Connecticut in favor of a fiber-to-the-home network that will eventually reach all of its customers.

For the last year and a half, while Charter/Spectrum has been accused of dragging its feet on rural broadband rollouts across New York State and is now threatened with franchise revocation, the company had plenty of time to spare waiting out the International Brotherhood of Electrical Workers Local 3, who have been on strike to protest a pay-and-benefits-race-to-the-bottom in the New York City.

The strike has attracted attention and support from many high-profile downstate politicians, particularly New York City Mayor Bill de Blasio and Gov. Andrew Cuomo, but so far the dramatically enlarged Charter Communications, which acquired Time Warner Cable in 2016, seems comfortable waiting out the union and hoping to force workers to give up and accept to the cable company’s less generous basic benefits package.

The cost of the strike has hurt average middle class Spectrum employees far more than Charter’s top executives — particularly CEO Thomas Rutledge, who had no objections to accepting a take-home bonus and pay package worth $98 million after overseeing the company’s merger. In contrast, many striking workers have depleted their family’s savings and have sold their homes to relocate to less expensive apartments as they struggle to holdout against the nation’s second largest cable company. A few others were reportedly homeless. The union’s emergency fund has been depleted.

The David vs. Goliath battle has also put enormous strain on some affected families. Some have quit the company and looked for employment elsewhere, some others have returned to work and abandoned the strike, leaving holdouts hoping for a breakthrough.

Instead, Charter appears to have won a mysterious ally in the form of a Spectrum employee hired after the strike began in 2017. Initially the worker  had a supervisory role in the company with a salary to match, but late last year strangely accepted an apparent demotion to a level three technician, while retaining his very generous managerial salary. That worker, on his own, managed to navigate a complicated procedure and cumbersome process to file a petition to decertify the union with the National Labor Relations Board. If his effort is successful, IBEW Local 3 would lose the right to negotiate for their members, which is another way of saying “break the union.”

“The guy was brought in – he’s a front, pretty much,” Staten Island mom Sanela Djencic told LaborPress. “He was brought in to bust the union.”

Not so, claims Charter.

“Charter had no involvement in the filing of the decertification petition,” Charter/Spectrum spokesperson John Bonomo flatly told LaborPress in an email. “We don’t have any further comment.”

The NLRB ruled the employee’s petition to decertify the union was valid, finding insufficient evidence to prove the worker was actually serving in a managerial capacity at the time.

In a June 27 letter to employees, John Quigley, Charter’s regional vice president of New York City field operations, was considerably less neutral about the union’s involvement in Charter’s business.

“This ruling clears another hurdle in the decertification process that will allow employees to determine their future,” Quigley wrote. “It is a common tactic for unions to delay and/or block decertification efforts as long as possible […] instead of allowing the voice of employees to be heard. We believe that employees should have the right to vote in a secret ballot election to determine their future. It is the fair and right thing to do.”

Quigley

Quigley did not comment on Charter’s own role erecting hurdles to settle the strike action, something that would also allow employees to determine their future. In fact, strikers complain companies like Charter often prefer to stall and block a fair settlement in hopes the union and its members will run out of funds before it is forced to the table to sign a new agreement.

The company’s efforts to reject union demands come at the same time it is under pressure to deliver the merger-related cost savings it promised shareholders and Wall Street as an outcome of the multibillion dollar merger deal. Cutting back on employee benefits is one way to manage that. Bringing in independent contractors, traditionally paid less and offered fewer benefits, is another. But Charter has consistently claimed it is not trying to hurt its workforce.

Scabby the Rat

“Charter did not want this strike and made multiple attempts to resolve it,” a company spokesman said. “But the union has not been a true partner in negotiations. With Local 3 refusing to even discuss the terms in Charter’s offer, we moved forward last summer and implemented wage increases and other worker benefits. Today we are putting more money into our employees’ pockets, providing them with excellent benefits, and making substantial investments to shore up their retirement benefits that are in jeopardy.”

Charter’s declarations of what is ‘fair and right’ have irritated some members of New York City government.

“Charter Communications has betrayed the public trust and is not deserving of the right to do business with our City,” said Councilman I. Daneek Miller (D-St. Albans). “Charter has an established pattern of deceit against its own workers and consumers in the name of boosting its profit margin, and it must be held accountable for its deception. Well-paying middle class jobs, healthcare and the generational security that is best achieved through union membership are core principles of our city, for which the company has demonstrated no appreciation. If Charter continues to engage in bad faith negotiations with Local 3 or sponsors any attempts to break the union, it’ll be hard pressed to persuade the council to renew its franchise agreement.”

In June, Councilman Rory Lancman (D-Hillcrest) told The Tribune, “Charter Communications has spent the past 15 months doing everything in its power to break Local 3 and boost its own bottom line. Charter’s complete disregard for its own workers and unwillingness to negotiate in good faith are beyond shameful and will not be tolerated in New York City.”

21st Century Fox has accepted an improved $71.3 billion bid from Walt Disney Co. to acquire its entertainment division, outbidding Comcast’s all-cash $65 billion bid for Fox’s content companies.

Rupert Murdoch and shareholders will walk away from the majority of Fox’s media empire well compensated from a short-term bidding war between Disney and Comcast, which has raised the acquisition price substantially above Disney’s original offer in December.

Disney CEO Bob Iger’s current offer is being seen as “very aggressive” by Wall Street and designed to deter Comcast from responding with a better bid of its own. Comcast was already planning to load up on debt to finance the deal, and was unwilling to include shares of its stock as part of the transaction. Disney itself is putting a huge amount of money on the line to acquire Fox. After including Fox’s current debt load, Disney’s latest offer means the total transaction is expected to exceed $85 billion.

Disney’s decision to postpone an important meeting to discuss Comcast’s bid could be a signal Comcast is preparing a counteroffer.

Whatever company ultimately wins control of Fox will own and control the majority, but not all of Fox’s media assets.

21st Century Fox Assets to be Acquired by Disney (or Comcast if it returns with an even higher bid):

Fox Entertainment Group:

20th Century Fox
Fox Searchlight Pictures
Blue Sky Studios
Fox Star Studios
Fox Networks Group
Fox Sports Networks

FX Cable Networks
National Geographic Partners (Nat Geo suite of cable networks and National Geographic Films) (73%)
Star TV (Asian satellite TV service)
Hulu (United States) (Fox’s 30% stake, giving either buyer 60% ownership and control of the service)
Sky (39.14%) (United Kingdom satellite TV service and content producer)
Endemol Shine Group (50%) (Producer of reality TV shows including Big Brother, MasterChef, The Biggest Loser and Hunted.)

21st Century Fox Assets to Be Spun Off to “New Fox” — an independent company owned by current 21st Century Fox shareholders

Fox Broadcasting Company – The Fox Television Network
Fox Television Stations Group (28 local TV stations)
Fox Television Station Productions
Movies! (a digital subchannel network run as a joint venture with Weigel Broadcasting and seen on around 75 local stations around the country)
MyNetworkTV
Fox News Channel and Fox Business Network
Fox Sports:

Big Ten Network (51% owned in joint venture with Big Ten Conference)
Fox Deportes
Fox Sports 1
Fox Sports 2
Fox Soccer Plus
Fox College Sports
Fox Sports International

The 20th Century Fox studio lot (to be leased by Disney)

A battle is still raging for control of Sky, the United Kingdom’s biggest satellite TV provider. Fox originally sought to acquire the portion of Sky it did not already own, but was derailed by a sweeping 2011 phone hacking scandal after news emerged Murdoch-employed reporters illegally hacked into the private voicemail boxes of celebrities to help fuel new story ideas and substantiate personal scandals. When it was revealed reporters listened to the messages of a murdered schoolgirl, allowing her parents to mistakenly believe she was still alive, the scandal went viral and prompted both criminal and regulatory probes of Murdoch’s operations in the United Kingdom. It also led to the closure of the country’s largest tabloid newspaper, the Murdoch-owned News of the World. The scandal has been widely blamed for Murdoch’s inability to convince regulators to approve his bid for full ownership of Sky Television. Murdoch is now cutting his losses and selling the entire operation to either Disney or Comcast.