Shame on the Regulators By Doug Dawson

10’s of millions of Americans have only second rate Internet because our regulators have no courage. The US Broadband Plan found 44/100ths of 1% have truly brutal costs, $10,000 or much more per home. Everyone assumed the last 1% would be served by satellite, although we couldn’t say that for political reasons. But all the others poorly served are a failure of the politicians. In the US, that’s 5-10 million homes who have no decent offering. Almost half the country has at most one decent choice, the cableco.  

The situation is the same or worse in countries like Germany, where DT offers only lousy service to about 20%. In Germany and the US, the most important reason for the lack of service is the possibility of getting government money, not high costs. In 2008, it became clear the government would pay for rural deployments in the US. Promptly, the telcos essentially cancelled their previous plans to cover most of the poorly and unserved homes. They weren’t stupid; if the government was going to pay for it, why spend the money? Result: the prospect of subsidies actually resulted in fewer unserved connected. Really.

Shame on the Regulators

By Doug Dawson

It’s clear that even before the turn of this century that the big telcos largely walked away from maintaining and improving residential service. The evidence for this is the huge numbers of neighborhoods that are stuck with older copper technologies that haven’t been upgraded. The telcos made huge profits over the decades in these neighborhoods and ideally should not have been allowed to walk away from their customers In the Cities. Many neighborhoods in urban areas still have first or second-generation DSL over copper with fastest speeds of 3 Mbps or 6 Mbps. That technology had a shelf-life of perhaps seven years and is now at least fifteen years old.

The companies that deployed the most DSL are AT&T and CenturyLink (formerly Quest). The DSL technology should have been upgraded over time by plowing profits back into the networks. This happened in some neighborhoods, but as has been shown in several detailed studies in cities like Cleveland and Dallas, the faster DSL was brought to more affluent neighborhoods, leaving poorer neighborhoods, even today, with the oldest DSL technology.

The neighborhoods that saw upgrades saw DSL speeds between 15 Mbps and 25 Mbps. Many of these neighborhoods eventually saw speeds as fast as 50 Mbps using a technology that bonded two 25 Mbps DSLs circuits. There are numerous examples of neighborhoods with 50 Mbps DSL sitting next to ones with 3 Mbps DSL.

Verizon used a different tactic and upgraded neighborhoods to FiOS fiber. But this was also done selectively although Verizon doesn’t seem to have redlined as much as AT&T, but instead built FiOS only where the construction cost was the lowest.

In Europe, the telcos decided to complete with the cable companies and have upgraded DSL over time, with the fastest DSL today offering speeds as fast as 300 Mbps. There is talk coming out of DSL vendors talking about ways to goose DSL up to gigabit speeds (but only for short distances). The telcos here basically stopped looking at better DSL technology after the introduction of VDSL2 at least fifteen years ago.

By now, the telcos should have been using profits to build fiber. AT&T has done this using the strategy of building little pockets of fiber in every community near to existing fiber splice points. However, the vast majority of rural households served by AT&T are not being offered fiber, and AT&T said recently that they have no plans to build more fiber. CenturyLink built fiber to past nearly 1 million homes a few years ago, but that also seems like a dead venture going forward. But now, in 2019, each of these telcos should have been deep into urban neighborhoods in their whole service area with fiber. Had they done so, they would not be getting clobbered so badly by the cable companies that are taking away millions of DSL customers every year.

Rural America. The big telcos started abandoning rural America as much as thirty years ago. They’ve stopped maintaining copper and have not voluntarily made any investments in rural America for a long time. There was a burst of rural construction recently when the FCC gave them $11 billion to improve rural broadband to 10/1 Mbps — but that doesn’t seem to be drawing many rural subscribers.

It’s always been a massive challenge to bring the same speeds to rural America that can be provided in urban America. This is particularly so with DSL since the speeds drop drastically with distance. DSL upgrades that could benefit urban neighborhoods don’t work well in farmland. But the telcos should have been expanding fiber deeper into the network over time to shorten loop lengths. Many independent telephone companies did this the right way, and they were able over time to goose rural DSL speeds up to 25 Mbps.

The big telcos should have been engaging in a long-term plan to shorten rural copper loop lengths continually. That meant building fiber, and while shortening loop lengths, they should have served households close to fiber routes with fiber. By now, all of the small towns in rural America should have gotten fiber.

This is what regulated telcos are supposed to do. The big telcos made vast fortunes in serving residential customers for many decades. Regulated entities are supposed to roll profits back into improving the networks as technology improves — that’s the whole point of regulating the carrier of last resort.

Rural America should never have been deregulated. Shame on every regulator in every state that voted to deregulate the big telcos in rural America. Shame on every regulator that allowed companies like Verizon palm off their rural copper to companies like Frontier — a company that cannot succeed, almost by definition.

By Doug Dawson, President at CCG Consulting

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