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Big Telcos Go From 2M to 4.8M
Friday, 21 October 2011 23:00
If delivered ~60-80% of unserved will get 4 megabit DSL. Two days before the Sunshine deadline, ten top telco lawyers met with the top ten FCC officials offering a deal: actually bringing DSL to many of the unserved. Their previous “ABC” plan discussed virtually nothing at AT&T or Verizon except for LTE that already was planned. The earlier proposal only projected 2M lines, less than half the figure now on the table. The difference appears to be many “unserved” homes that are less expensive to reach.          
      This is essentially the build recommended by the Broadband Plan analysis. In some of the most careful work ever done, Steve Rosenberg and Rob Curtis discovered that only a small fraction of the “unserved” - about half of one percent of total homes - were brutally expensive to reach because of distance/density/other problems. Most unserved homes could be reached with 4 megabits for under $3,000.
      My guess is that the cost to reach half of the 4.8M will be closer to $500/home than $1,500/home. The total cost for 4.8M will almost certainly be closer to $6B than to $16B if the government watches costs effectively. The Broadband plan data confirm that. It will be a tough challenge to make sure the subsidies correspond to the real costs.
      Everyone knows that current USF system far too often amounted to handing out blank checks. Some companies took advantage. There’s a seriously uninformed view in D.C. that auctions are a solution.Perhaps 80-90% of the time auctions are helpful but they will do little for most of the unserved territories. Unfortunately, the 5% or so unserved homes are in territories where no one but the incumbent has facilities. Most unserved homes are in clusters of a few dozen or few hundred at most, too few for anyone without local facilities to make an attractive bid. Result: for most of the unserved, there are only one or two logical bidders and auctions will totally fail at getting a good price. Direct cost controls - based on an accurate model of the actual costs for large carriers with fiber and facilities in place - are absolutely required.
     Apportioning the 4.8M roughly by market share, AT&T would have to reach 2M unserved homes; Verizon, 1.3M; Century-Qwest .9M; and Frontier 200K. I wouldn’t sign off on any deal without a map of homes to be newly served and a firm schedule. There’s no reason this should take longer than 2-3 years. It’s all standard equipment in good supply and there are a surfeit of contractors looking for this work.
     The data in the filing suggests the companies put engineering teams to work to find the least expensive way to get 4 megabit service widely available. AT&T’s “fiber to the node/DSL” is designed for nearly all homes to be within 5,000 feet and get 25 megabits (with bonding if necessary.) This proposal puts only 34% within 6,000 feet and the majority will get less than 6 megabits. It’s almost certainly the slightly cheaper ADSL rather the VDSL in AT&T U-verse. That’s a false economy.

Ms. Marlene Dortch
Federal Communications Commission
445 12th Street, S.W.
Washington, D.C. 20554
Re: WC Docket No. 10-90; GN Docket No. 09-51; WC Docket
No. 07-135; WC Docket No. 05-337; CC Docket No. 01-92;
CC Docket No. 96-45; WC Docket No. 04-36
Dear Ms. Dortch:
On October 17, 2011, Mike Rhoda and Eric Einhorn (Windstream), Hank Hultquist, Joel Lubin and Mike Lieberman (AT&T), Mike Saperstein (Frontier), Kathy Grillo (Verizon), Melissa Newman and Jeff Lanning (CenturyLink) and the undersigned met with Sharon Gillett, Patrick Halley, Rebekah Goodheart, Victoria Schelg, Amy Bender, Steve Rosenberg, Carol Mattey, Brad Gillen (WCB), Michael Steffen (OGC) and Zac Katz (Office of Chairman Genachowski) to discuss universal service and intercarrier compensation reform.
We discussed a number of issues concerning intercarrier compensation reform and the opportunity to recover revenue lost through mandated reductions in intercarrier rates. We discussed the ABC Plan’s proposed reduction in recovery from an access recovery mechanism of ten percent and that applying that same percentage reduction to the entire access shift from mandated reductions would not be consistent with the careful transition incorporated into the ABC Plan’s proposal for intercarrier compensation reform. We also discussed that multi-line business SLCs were unlikely to provide a real opportunity to recover revenue lost to mandated intercarrier rate reductions. We further discussed limiting recovery from potential increases in access recovery charges to the actual access shift from mandated rate reductions over the period of intercarrier reform. In addition, we discussed a potential end state for intercarrier reform of bill-and-keep, and the importance of establishing ground rules before any final step to bill-and-keep occurred. Regarding the operation of an access recovery mechanism, we discussed associating any recovery from that mechanism with investment in broadband networks, including broadband networks in high cost, rural or unserved areas.
In the area of universal service reform, we began by discussing the time period for which CAF support would likely be awarded and tailoring CAF support to obligations. We emphasized the importance of synchronizing the period of funding support with the time that full CAF funding begins.
Regarding the operation of the CAF, we also discussed the type of network build that should be modeled using a forward-looking cost model. The ABC Coalition modeled a fiber-to-the-DSLAM (FTTd) build based on the assumption that such a build would represent the most efficient use of existing network facilities combined with incremental investments where
Ms. Marlene Dortch
October 17, 2011
Page 2 of 2
needed to support the level of service proposed by the ABC Plan. At the request of FCC staff, we investigated the number of unserved locations that would receive service as a consequence of such a network build, as well as the distribution of loop lengths and associated performance. One of the benefits of an FTTd build, as opposed to an FTTP build, is that it would bring broadband to unserved homes in all census blocks served by remote terminals used to reach the funded census blocks.
While real world results may vary from the modeled outcomes, we provided the Commission with the following information. First, an FTTd build would bring broadband to more than 2 million previously unserved locations in the census blocks funded under the ABC Plan. In addition, it would also bring broadband to nearly 2.8 million previously unserved locations in unfunded census blocks. For all locations with no prior broadband service from the telephone company, approximately 34% would have loop lengths less than six-thousand feet, and approximately 18% would have loop lengths less than four-thousand feet. We indicated that loop lengths of less than six-thousand feet would support a minimum of 6 Mbps downstream speeds, and that loop lengths of less than four-thousand feet would support a minimum of 12 Mbps downstream speeds.
Regarding the operation of the first phase of CAF support, we discussed approaches to defining broadband commitments that would attach to any incremental funding that flows to a particular carrier, including types of service that would be supported, the appropriate definition of unserved for phase I purposes, that the obligations should apply at the holding company level and possible broadband buildout milestones. We emphasized that the calculation of incremental funding should be done at the holding company level. We also cautioned against any immediate and mandatory conversion of rate-of-return areas served by companies affiliated with price cap carriers to price cap status as inconsistent with careful transitions. Finally, we discussed the importance of the proposal in the ABC Plan that links legacy obligations with legacy support. The Plan proposes to ramp down and eliminate legacy support at which legacy obligations would no longer be funded, and should similarly end.
Pursuant to Commission rules, please include a copy of this filing in each of the above-referenced dockets.
Jonathan Banks
c: Sharon Gillett
Patrick Halley
Rebekah Goodheart
Victoria Schelg
Amy Bender
Steve Rosenberg
Carol Mattey
Brad Gillen
Michael Steffen
Zac Katz


Last Updated on Saturday, 22 October 2011 17:22