Public complaints on USDA’s Rural broadband plan

Investigate Midwest reports on public comment to proposed federal investment in rural broadband. The quick take on the action (or proposed action) in question: in January 2017, the President promised better broadband for rural areas. Following the promise, U.S. Department of Agriculture proposed the Rural Broadband Pilot Program. There was a budget (in 2018) of $600 million and a proposed budget in 2019 of $425 million BUT the Office of Management and Budget called out that amount given, the 2018 funds hadn’t been used.

That’s a very quick take because the real story is the comments on the action and proposed action. Investigate Midwest reports…

While nearly all the comments were in favor of the Rural Utilities Service’s efforts to expand broad internet, there were 3,659 references to the idea that the pilot program’s standards for speed were either not fast enough, they were focused on speed but not bandwidth, or the speed at which technology is advancing would leave those speeds obsolete in just a few years.

There were a few categories of complaints

  • Inadequate speed goals
  • Eligibility for funding (unserved vs served)
  • Accuracy of broadband maps
  • Cost

It sounds a lot like what I hear in Minnesota. One quick number I picked up in the article…

Rural Americans can pay as much as $155/month for service slower than the Federal Communications Commission classifies as “high speed internet.”

I have heard of people paying more – especially when they end up using a mobile hotspot for coverage. (Right now I have a college kid using a mobile hotspot for her broadband; I cringe with each text telling me about the $5 surcharge for additional coverage.)

US House Ag meeting on broadband Archive – rural areas need gig access

Earlier today the Subcommittee on Commodity Exchanges, Energy, and Credit (Committee on Agriculture) met to hear about: “Building Opportunity in Rural America through Affordable, Reliable and High-Speed Broadband“. I’m pleased to report that two Minnesotans were there to tell the story in our state – Neela Mollgaard at Red Wing Ignite and Dave Hengel at Greater Bemidji.

All of the speakers shed a light on what better broadband and supporting locals to better use that broadband make a difference in a rural community.

Here’s the meeting:

And access to Dave and Neela’s written testimony.

[Update July 15, 2019]

House Agriculture Subcommittee on Broadband July 11 in DC

The House Agriculture Committee is having a Subcommittee hearing this Thursday, July 11th on rural broadband: “Building Opportunity in Rural America through Affordable, Reliable and High-Speed Broadband.” Looks like the meeting starts at 9am (MN time) and there’s a link for the livestream

Thursday, July 11, 2019 – 10:00AM

1300 Longworth House Office Building

Washington, D.C.

Commodity Exchanges, Energy, and Credit Subcommittee Hearing

RE: “Building Opportunity in Rural America through Affordable, Reliable and High-Speed Broadband”

Senators Introduce American Broadband Buildout Act, A $5 Billion Plan for Rural Broadband Buildout

Benton Foundation reports…

Senators Susan Collins (R-ME) and Doug Jones (D-AL) introduced the American Broadband Buildout Act of 2019 (ABBA), a bipartisan bill to ensure that rural Americans have access to broadband services at speeds they need to fully participate in the modern society and economy by directing the Federal Communications Commission to provide up to $5 billion in matching grants to help states improve broadband infrastructure. The American Broadband Buildout Act of 2019 would:

  • Require that projects that receive funding must be located in “unserved” areas, where broadband is unavailable at speeds that meet the FCC’s standard. Narrowing the focus to these areas will ensure that the money goes where it is needed most, and will also protect against “over-building” where broadband infrastructure is already in place.
  • Require that this federal funding be matched through public-private partnerships between the broadband service provider and the state in which the infrastructure project will be built.
  • Require that projects be designed to be “future proof,” meaning that the infrastructure installed must be capable of delivering higher-speeds as broadband accelerates in the future.
  • Direct the FCC to prioritize the funding of projects in states that have traditionally lagged behind the national average in terms of broadband subscribers and are at risk of falling further behind as broadband speeds increase.
  • Provide grants to states and state-designated entities for digital literacy and public awareness campaigns highlighting the benefits and possibilities of broadband service.

Parts of this plan sound very much like the Minnesota Border to Border Broadband grant program.

How does MN broadband access by urban/rural status compare to other Midwest states?

I’m so glad you asked how Minnesota broadband access by urban/rural status compares to other Midwest states. It gives me a chance to dive into Roberto Gallardo’s recent article on broadband access in the Midwest. Also a quick caveat – broadband is defined here as 25 Mbps down and 3 up. That is the FCC definition of broadband; it’s also the 2022 speed goal for Minnesota. Minnesota has a secondary speed goal of 100/20 by 2026.

At first glance I was a little worried. We’re were number one (granted the data is from 2017) after a few years of attention on speed (statutory goals) and investment (broadband grants) …

Then I saw that Roberto was also looking at access to 25/25…

And symmetrical gig access

Especially looking at gig access, we are absolutely in leadership position. Undoubtedly the “Minnesota Model”  – speed goals, broadband grants, Office of Broadband Development located in Department of Employment and Economic Development and an active broadband community has played a part.

So I’m not so worried about not coming in first for the 25/3 access; in fact not coming in first helps us recognize the need to try harder and with broadband that means – ubiquitous coverage at high speeds.

“It could be up to five years before customers in smaller cities like Fargo and Bismarck can expect to see 5G”

The Grand Forks Herald looks at wireless broadband in rural areas, recognizing that it may be five years before smaller cities like Bismark will get 5G. If we’re looking at five years for Bismark, it will likely be longer for the area two miles outside Bismark…

The telecommunications world is racing to deploy the next generation of wireless technology, called 5G, shorthand for fifth generation. The service is now available in some major cities, including Minneapolis.

The next-generation mobile network will provide dazzlingly fast internet access — with speeds of 300 mps or higher.

But experts say it could be up to five years before customers in smaller cities like Fargo and Bismarck can expect to see 5G wireless, and it likely will be available only in densely populated areas, such as the downtowns, the campus of North Dakota State University or state capitol complex.

That’s because 5G uses very high-frequency radio waves that travel very short distances, requiring a dense — and very expensive — network of transmitters that are cost-effective only in very urban environments.

MoffettNathanson says CenturyLink might as well keep residential customers

There’s a lot to unpack here. Back in May, CenturyLink said they were looking at their options for their consumer/residential service…

Could the CenturyLink consumer business be sold or spun off? CenturyLink CEO Jeff Storey said yesterday that CenturyLink has enlisted advisors to assist the company in a strategic review of the company’s consumer business. Although he emphasized that it is “really early in the process,” he noted on the company’s first-quarter earnings call that the company is “very open” in the options it would consider.

“Let me be clear, we’re early in what I expect to be a lengthy and complex process,” said Story, according to a SeekingAlpha transcript of the earnings call.

At that time, Storey elaborated:  “During our review, we will not modify our normal operations or our investment patterns. I can’t predict the outcome or the timing of this work or if any transactions will come from it at all. Our focus, though, is value maximization for shareholders. If there are better paths to create more value with these assets, we will pursue them.”

He added, though, that the company is doing a good job of growing broadband where it invests in improving the customer experience and profitably expanding the network.

The company’s consumer revenues were $1.4 billion in the first quarter of 2019. The consumer business saw a 1.3% year-over-year and a 2.7% increase over the previous quarter in broadband revenues. While the company lost subscribers purchasing speeds below 20 Mbps, it gained subscribers purchasing higher-speed services.

I’ve added the emphasis. Interesting that CEO Storey  revealed  that  while CenturyLink “grow[s] broadband” where they invest,  decisions about where to invest are driven by a focus on maximizing shareholder value, not community benefit.  Because they are a business, profitability, not community needs, drives CenturyLink’s investment decisions.

Fast forward a month and it looks like the analysis is in

CenturyLink wouldn’t gain much by spinning off its consumer business, argued telecom financial analysts MoffettNathanson in a research note issued today. The cost of a CenturyLink consumer spinoff would leave the company with little in the way of financial benefits, the analysts said.

Telecompetitor goes into detail…

Spinning off the CenturyLink consumer business would generate what the researchers refer to as “dis-synergies” that would result from the difficult task of dividing a network and other operations that serve both the consumer and business sides of the house. These dis-synergies would “simplistically imply roughly $300 million to $600 million in value destruction from separating the businesses,” the researchers argue.

Another concern about a spinoff is whether it would receive necessary approvals from state public utility commissions.

The analysts also question how much upside there is for CenturyLink’s consumer business. They argue, for example, that the company’s opportunity to provide connectivity for small cells is limited because small cells will be deployed only in densely populated areas and CenturyLink is the incumbent local carrier in only two of the nation’s 50 most densely populated cities.

Again, the emphasis is mine. The worry about value destruction is real for any business; you don’t want to lose value. BUT the worry for communities is that this isn’t really a rousing rationale for investing in upgrading  residential service, rather a recognition that the cost of disaggregating business customers is just too high.

Also of note in the analysis is recognition that small cell technology (necessary for 5G) will only be deployed in densely populated areas. This is not new news, but does reinforce the fact that 5G is not coming to  rural areas anytime soon.

Finally…

Not all of MoffettNathanson’s analysis of CenturyLink opportunities is so downbeat, however.  For example, the researchers see the recent news about FCC plans for a replacement for the Connect America Fund, due to expire in just a couple of years, as a positive, as CenturyLink was one of the largest recipients of CAF funding.

The “potential upside risk is what keeps us on the sidelines,” the researchers wrote.

The upshot is that MoffettNathanson sees CenturyLink’s consumer business remaining within the merged company, where it would be better off anyway.

Again, emphasis is mine. I have heard  industry insiders question the wisdom of CenturyLink accepting CAF funding. The main problem is that they didn’t receive enough funding to adequately cover upgrades to areas where the potential for ROI is slow or uncertain. And the required buildout speeds aren’t fast enough to satisfy all customers. It’s a lose-lose situation.

To create a win-win for both providers and communities, federal funding must be adequate to incent providers to invest in networks that meet consumer needs. The current CAF II requirements of a 10/1 network don’t meet community needs: economic development is in the upload speed. Minnesota state speed goals of 100 Mbps down and 20 Mbps up by 2026 seem much closer aligned to the community needs than the 10/1 speeds currently required by the Connect America Fund (CAFII).

The final line in the industry analysts’ research note reminds us that this is a look from and for the company of CenturyLink – not for the communities they serve…

The upshot is that MoffettNathanson sees CenturyLink’s consumer business remaining within the merged company, where it would be better off anyway.

Blandin released a report in 2017  that points out that industry ROI and community ROI are different. Households with broadband realize $1850 in economic benefits per year. So, the communities need better broadband. The gap is between that community need and the business needs of the provider to deliver profits to their shareholders.