NextGenCommunications

After a miserable five week “adventure” we are finally settled in. We have our home set up and while we are not totally unpacked (heck, we never fully unpacked from our previous move 12 years ago) we are comfortable.

I’d like to take the time to thank Tim Wolfe (and family) who put us up for a few days while we were trying to decide on where we wanted to settle.

I now return you to your regularly scheduled blog reading.

And in the words of the immortal Jackie Gleason, “And away we go…“

As with everything in this world, things change.

My wife and I have decided to leave our home of over a decade and move to a new area of the country. In all honesty, this is a little unnerving and somewhat frightening but we are also equally excited.

Unfortunately, this will cause a pause in my regular posts of a somewhat indeterminate length of time.

I look forward to a quick return and wish you all the best in our absence.

The dirty little secret in the ISP world is our ability to oversubscribe traffic on our networks. If we examine the typical WISP business model we find that quite a few concurrent users can be “pushed” down a single T1 line. If we then take into account that at no one period of the day will there ever be every single customer we have using the network we find that one T1 line (with a capacity of 1,54Mbps) can carry far more broadband users (broadband as defined by speeds of 200Kbps) than the straight math would lead you to suspect.

1554Kbps/200Kbps=7.77 concurrent users

Even if the numbers above were close to reality and we could count on a 10 to 1 over subscription rate we find that the maximum amount of customers per T1 would max out somewhere around seventy-seven! If we then assume that we are billing each customer at $39.95/month total gross revenue would come in at a little over $3K/month. Considering that in many parts of the country a T1 line is now well below $1K/month everything would look pretty rosy! Of course, there are other costs that would need to be accounted for, cost of equipment, payroll, insurance but no matter.

What happens when the oversubscription rate drops?

Two well documented trends we are seeing in the end users on-line usage is the length of time they are staying connected and the amount of bandwidth being consumed in a 24 hour period.

Among many of the contributing factors influencing bandwidth usage is streaming media as Internet radio moves into the mainstream but also as video advertisements soar to astronomical heights. Granted, the streaming music doesn’t take up an enormous amount of bandwidth even though as the push for increased quality becomes more mainstream we will see a rise in this rate, the amount of people using this technology is quickly growing. It isn’t unusual to see a large proportion of people in any given workplace using Internet radio and while each individual user is only consuming a very small amount of bandwidth relatively speaking, the entire organization is consuming a continuous stream of a 200Kbps on Internet radio traffic alone. Add VoIP calls (using a continuous stream of 100Kbps per call while rapidly being adopted by the business mainstream) along with the other day to day Internet traffic and you can easily see how a small to medium sized company will saturate a T1 line for an entire 10 to 12 hour workday.

But what happens when everyone goes home at night?

The study, conducted in partnership with Frank N. Magid Associates, surveyed 27,841 Internet aged 13 and over on 25 different publisher Web sites. It found 51 percent of respondents watch online video at least once a month; 27 percent watch Internet video at least once a week; and five percent watch it on a daily basis.

The full article this quotation is from can be found here:

This follows up on the reports that web pages themselves were becoming significantly larger in size, containing more graphics and advertisements per page which contributes to much longer load times.

I think we can clearly infer that the trend is towards using more bandwidth and using it in very different ways than we could count on in the past.

From a historical perspective we used to be able to account for a “burst and release” pattern where users might grab a web page or download a relatively speaking small file and then stop for a few minutes freeing us the portion of their connection for someone else to use. Those days are rapidly coming to a close.

What does this mean to an ISP or more importantly a WISP?

The immediate effect is that the infrastructure needs to be designed so as to make it easily scalable. This is critical to the continued growth while keeping the existing user base satisfied. The second variable is that the access point/base stations deployed MUST be able to handle a continuous stream of small packets – something that most equipment cannot handle.

Let’s take a look at some of the specifications WiMAX is planning to provide. According to this article from Daily Wireless Alvarion has officially released information about their WiMAX equipment.

As you can see from the chart below, this is going to be some pretty impressive equipment.

Chart courtesy of Daily Wireless

What I have a slight problem with is the claims as to how many users can be services from a single basestation. According to the chart above, within the four mile range limit we should be able to see an awesome 75Mbps of throughput. I am not sure how this would translate into 206 T1 class business users based on the subscription rates I see as rapidly approaching. In fact, if you are willing to believe that we are near a one to one subscription rate the best we could expect to see would be somewhere in the neighborhood of 50 T1 class users per basestation at the theoretical best.

Somehow I don’t think the equipment will be able to handle the flood of continuous packets these businesses will be expecting to be able to pass but I will say that Alvarion has surprised me on many occasions before and this might be one more time to add to my list. As far as the claim that one of these basestations will be capable of handling 1552 residential users (at 512Kbps service levels) that is something I find very hard to accept. I have no idea what oversubscription rates are being used to quote that but the term “optimistic” certainly comes to mind in much the same way 802.11b will deliver 11Mbps.

I can’t wait to see what kind of effect IPTV and devices like the SlingBox are going to have on this model but I can tell you that as we move forward our customers are going to demand more bandwidth and in a continuous mode.

This is what Lightreading has charted and is predicting for the future.

Will you be ready?

There is the one, single constant we can most assuredly count on – everything changes.

There was a time when we, as a nation, felt protected from most of the rest of the world by two oceans. This illusion was shattered sometime around World War II or shortly thereafter. History has shown that this change in the way we viewed ourselves took quite some time for us to adjust to – not that we would expect much more based on what we know about people in general.

Now, a very different dynamic is taking place, one that is outside the “real world” for all intensive purposes. The “virtual world” is now crossing into our reality with blinding ferocity and once again we seem ill-prepared to accept this. Accept? Heck, we don’t seem capable of adjusting the way we view everything to take this into account.

As an example, I would like to cite this story courtesy of the BBC. On-line gambling is illegal in this country. Incredibly, according to the article I linked to (above) this law is being ignored by a significant number of people and it appears the US government is powerless to do anything about it or has chosen not to.

Online gambling is banned in America, so Partygaming which was set up by an American is based in Gibraltar with no assets in the US.

Its prospectus concedes: “In many countries, including the United States, the group’s activities are considered to be illegal by the relevant authorities.”

But, it adds the crucial clause: “Partygaming and its directors rely on the apparent unwillingness or inability of regulators generally to bring actions against businesses with no physical presence in the country concerned”.

In other words, even if Partygaming were illegal, what could the authorities do?

Compulsive pleasure

Not that Americans are exactly shunning the website.

It’s estimated that nine out of every 10 of its dollars last year came from the US.

At $600m those revenues are hefty and generated a profit of $350m in 2004.

Talk about thumbing your nose at authority!

Next up, we have the recently “postponed” act titled 2257. While the law was passed to reduce the number if underaged models being recruited by the Adult Entertainment Industry the reality is that there was no practical way to enforce this legislation – especially as the reality is that many of these sites were simply planning to move their hosting facilities off-shore so as to skirt the law.

The third point I would like to bring up is the recent ruling by the Supreme Court regarding the Grokster case. I don’t want to enter into the debate on whether file sharing is right or wrong but instead focus on whether or not this ruling really has any effect in the greater scheme of things. Even if the entire Western World made this technology illegal with many of the servers located in countries we have little or no control over the net effect (pun intended) is we really can’t do anything meaningful to change this situation.

At this point I think it is safe to say that we will need to rethink what we can and cannot legislate. If we are to assume that we have some form of control over the Internet that doesn’t exist what does this get us? Do we not look like jackasses when we pass laws we cannot enforce? At what point does our inability to understand what we have control over and what we don’t dilute our authority over everything else?

Here’s the thing, if you try to put the fear of the law into people when you can’t enforce it, eventually there is no fear of the law. Whether or not you believe in legislating morality has no bearing on this discussion. The question is what we can exercise control over and what we cannot. The problem in that the line is now a changing boundary as opposed to the one that used to seem as though it was carved in stone.

We will learn and adapt to this new dynamic or lose control over our own destiny.

Om Malik has another excellent blog entry that discusses where Chairman Martin’s vision is taking us.

Parity is the new catch phrase, learn it, live it, love it and if you’re an independent ISP you are going to grow to hate it.

“What we have hear is a failure to communicate.”

It’s no secret that the United States has a serious deficiency when it comes to deploying broadband even though the extent of the problem is debatable. One thing that is clear is that a fair portion of this country has limited (if any) choice as far as broadband connectivity is concerned. In my last commentary I took a hard look at what our options are and made an attempt to show that we need a mix of connectivity specialties in order to ignite broadband deployment in this country. Instead, we now can look forward to a very different landscape.

Here’s the deal, line sharing is dead. Maybe not right this minute but take this to the bank, it will be. In this very short statement released on the FCC’s web site commenting on the decision made by the Supreme Court on the BrandX case FCC Chairman Kevin J. Martin said,

“This decision provides much-needed regulatory clarity and a framework for broadband that can be applied to all providers. We can now move forward quickly to finalize regulations that will spur the deployment of broadband services for all Americans.”

This is what you need to know, for quite some time now the lobbyists for the telecommunications industry have been consistently repeating the same message to the FCC. Reduced to its most simplistic the message is that competition, as it is mandated by the current interpretation of the Telecommunications Act of 1996 is causing the current problems the US is facing with respect to broadband deployment. The argument has some validity (all lies have a kernel of truth, right?) if we follow the logic.

Independent ISPs are only interested in deploying in the areas that will make them money (DUH) and there is no parity (there’s that word again) to the mandate that universal coverage needs to be provided. Since the telecommunications world uses a model that utilizes the densely populated areas to subsidize the rural (read less profitable) areas if the independent ISPs are allowed to usurp the revenue the telecommunications industry needs to provide service universally.

Let me translate that for you in case you’re having trouble with the telecommunications industry’s ability to communicate.

We need the entire market all to ourselves in order to make our business model work.

Certainly, we can see that this is something that would be great for this country based on over a century’s worth of empirical data we have collected. After all, the American public was completely satisfied with the way we were all treated when we had a monopoly telephone company in the past.

(The sarcasm I felt when I typed those last two sentences was nothing short of scalding.)

Let’s not talk about the fact that the telecommunications industry wanted no part of this “Intraweb Thingy” when it was first announced. They completely ignored developing any business in this new experiment leaving it instead to the private sector. Let’s also not discuss that the deal that was struck when the Telecommunications Act of 1996 was formed was that the “Baby Bells” would be granted access to the revenue generated from Long Distance if they opened up their networks. We also need to forget the promises Verizon (then Bell Atlantic) made to deploy broadband in exchange for huge tax breaks in Pennsylvania that were never kept. As long as we can follow the above recommendations we can all go to bed and sleep comfortably knowing that our friends at the telephone company have everything in hand and under control.

What is the bottom line?

Here’s the scoop, the Internet is made up of quite literally millions of connections all exchanging information with each other. At the risk of stating the obvious, the more each one of these connections cost the more expensive it becomes for all of us.(DUH)

Any of us that have a long-term memory that stretches back to the telecom monopoly days can easily remember when $.25/minute was a “good price” for a long distance call. The reason all of us enjoy the inexpensive rates we do today is solely because the monopoly was broken up and competition was allowed to drive down the cost. Need further proof? When was the last time you received a notice from your friendly local telephone company informing you that your rates were going down? What? You can’t remember? That’s funny, I’m sure you can remember when the several increases in your phone bill, I certainly can. Now, anyone care to guess what might happen if the telephone company was to become the sole source of Internet connectivity at retail rates?

This is what line sharing is all about. The Telecommunications Act of 1996 allowed independent companies to get reduced (the term is wholesale) rates from the telephone company to provide services over the telephone network. The telephone companies were a little less than cooperative in this with numerous reports of all kinds from too many companies to count claiming “questionable” behavior on the part of the telephone company. Most recently, SBC has dropped rates on their DSL service in many of the markets they service but the cost of the wholesale line, as provided to independent providers, is billed at such a rate that independent ISPs are claiming that there is no way a wholesale provider can match that price. How can that be? Isn’t that the definition of Antitrust, you ask?

“U.S. legislation designed to prevent businesses from price-setting or other secret or illegal collaborations that circumvents the natural forces of a free market economy and gives those engaging in the anti-trust conduct a covert competitive edge.”

-Definition courtesy of Legal-Explanations.com

All that that is extraneous to this conversation and instead we should be looking at what this direction that Chairman Martin has declared might mean to us.

I would submit that we all benefit from the fact there is competition in this industry. It stands to reason that if there was no pressure created for the telecommunications industry we would expect to see their pricing structure rise – as history has repeatedly shown us. What happens if line sharing is taken away? Where is the competition going to come from? Certainly not the independent ISPs that provide service using the wholesale circuits.

What about wireless? Isn’t this a great thing for the WISP community? The short answer as I see it is NO!

Let’s take a look at that short-sighted answer, shall we?

Where do most WISPs get their connections from? The answer to that question is complicated because WISPs tend to get their connection from the least expensive source possible. This is usually not the telephone company as they are almost never the least expensive option.

If we eliminate the telephone company we have a list that is made up largely of CLECs (these are usually the very same people who purchase their connectivity and delivery from the telephone company at wholesale pricing) and the independent bandwidth providers like Cogent that have agreements to interconnect with the carriers.

Anyone else is irrelevant at this point because they probably connect to one or the other choice listed above.

What happens when the CLECs are legislated out of business by the removal of their ability to purchase services at wholesale rates? I think it is safe to assume the replacement cost to connect is not going to be as cheap as the one WISPs had. But that leaves the independent providers, right? It most certainly does! If you were one of these providers and a large portion of your competition was removed from your market, what would you do? If you answered that question honestly, you probably said you would raise your prices.

Yes, I do know that many of you have contracts and that affords you some protection, right? I’m sorry, you did read that contract right down to the very small print that allows your upstream provider to terminate your contract any time they choose. Every single one of the contracts I have ever read or heard about contains just such a clause. Add to that the reality that if the FCC removes your upstream provider’s ability to deliver connectivity then you are out of luck, period.

So, want to celebrate how good this decision is for you Mr. WISP?

Then think of this…

Frank Muto, of the WBIA tells me that the FCC looks at it this way, the independent ISPs are one homogeneous group. We will stand together or fall together but we are one solidified group in their eyes.

We just watched the decimation of our larger, more established half and we are next in line.

We do live in interesting times.

This New York Times article (registration required) provides a short summary of this excellent article by Thomas Bleha published at Foreign Affairs.

BROADBAND NATION?

In the first three years of the Bush administration, the United States dropped from 4th to 13th place in global rankings of broadband Internet usage. Today, most U.S. homes can access only “basic” broadband, among the slowest, most expensive, and least reliable in the developed world, and the United States has fallen even further behind in mobile-phone-based Internet access. The lag is arguably the result of the Bush administration’s failure to make a priority of developing these networks. In fact, the United States is the only industrialized state without an explicit national policy for promoting broadband.

It did not have to be this way. Until recently, the United States led the world in Internet development. In the late 1960s and 1970s, the Department of Defense’s Advanced Research Projects Agency conceived of and then funded the Internet. In the 1980s, the National Science Foundation partially underwrote the university and college networks — and the high-speed lines supporting them — that extended the Internet across the nation. After the World Wide Web and mouse-driven browsers were developed in the early 1990s, the Internet was ready to take off. President Bill Clinton and Vice President Al Gore showed the way by promoting the Internet’s commercialization, the National Infrastructure Initiative, the Telecommunications Act of 1996, and remarkable e-commerce, e-government, and e-education programs. The private sector did the work, but the government offered a clear vision and strong leadership that created a competitive playing field for early broadband providers. Even though these policies had their share of detractors — who claimed that excessive hype was used to sell wasteful projects and even blamed the Clinton administration for the dot-com bust — they kept the United States in the forefront of Internet innovation and deployment through the 1990s.

As you know this is a subject I am seriously concerned about not do much from the standpoint of who is to blame but how we can change policy to deliver quality broadband to everywhere in our nation as quickly as possible.

From my perspective, there is no acceptable excuse we should accept to hold this deployment back. The rewards are far to great for us to even consider putting this off and the potential for economic devastation is far to great to ignore.

What has happened? Where did we divert our attention from this goal and become one of the worst connected countries in the world? Is this simply a matter of policy? Can anyone seriously believe that the administration created road blocks to impede the national deployment of broadband or is this simply a matter on not understanding the dynamics? Either way, the issue needs to be refocused from assessing blame to how we can not only fix the problem but also do it in a timely fashion before the damage becomes devastating.

To that end, let’s take a look at the potential alternatives.

The first and most obvious is the ILECs who have been lobbying for as close to complete control of this infrastructure for as long as anyone would care to remember. IF we wish to take this option seriously, we need to ask ourselves two serious questions. Do we have any faith that the ILECs could deploy a national network in a reasonable period of time? The second question (and one that is certainly more important) is do we honestly believe that the ILECs are a sustainable entity and are capable of being viable in the long term?

The past history of this industry seems to show that the ILECs have almost never met the projections that they have made in terms of not only cost but also timelines. This is a very seriously damning piece of evidence. While a case could be made that the ILECs were able to roll out a telecommunications network and keep it running for the better part of the century we must also say that if this solution had satisfied the majority of Americans there never would have been such a backlash as the one that forced the monopoly to be broken up and competition to be introduced. With the exceptions of the ILECs themselves I believe the opinion is nearly universal that this decision was the right move and when you stop to think about it whenever you get that many people to agree on anything one has to wonder if this shouldn’t be considered as a fact.

One more point to consider, how long would it take the ILECs to deploy complete broadband coverage over the entire US? I am not sure anyone could reliably provide us with a number. I can tell you that is this project were to be mandated the lead time it would take for the necessary hiring, equipment acquisition and the actual buildout would probably be measured in decades as opposed to years.

The next most viable candidate is the cable industry. If we take a look at the cable industry we find that they have many of the same challenges that the ILECs have. I don’t believe that even the most optimistic predictions would give this industry a reasonable time to connect the entire country. Let’s face it, there are simply too many miles of cable to be strung and too few customers to collect revenue for this industry to be able to succeed in this without an incredible amount of subsidization – something I am sure we would all like to avoid if possible. Please note – I cannot see how the ILECs would be able to deploy any kind of universal network with these levels of subsidization too.

Moving down the list, we have the satellite providers. As the technology sits we have an incredibly expensive investment with almost no return from a state of the art point of view. As long as satellites are stationed 22,000 miles out in orbit we will have to deal with a lag time that prevents the institution of many of the services the next generation of the net will need. Couple that with the bit caps all of the companies now put in place and the reality is that this is simply the choice of last resort – continuing the digital divide.

The LEO (Low Earth Orbit) satellite technology is advertised to cure the latency issue (and should) but there is still the issue of total bandwidth available coupled with the total cost to deploy and maintain this type of system. Still, this might be a technology we will have to move forward with as an intermediate step for some of the most rural areas. If so, this will be one of the worst examples of a Band Aid solution I can think of. Hold you nose and put up with it if you must but the reality is I look at this technology as I used to look at AM radio – is it better to have an AM radio and leave it off or not have one to begin with?

For the sake of sanity I am going to lump some of the ideas for blimps and other continuous airborne aircraft in with the satellite technology. While I admit this is not fair as the latency issue and the issue of aggregate bandwidth isn’t as pronounced with this technology the cost to build and continually maintain this concept makes it one I have a hard time accepting. I am sure that at some point the total cost of operation crosses the line where a fiber deployment is a better investment.

Then we have the WISP industry – one that for the sake of fairness I will break up into two segments. Instead of the usual division of licensed and license exempt I am going to instead look at what I call the professional and amateur deployments.

For professional deployments I would like to use three very different companies as examples; Clearwire, Towerstream and Verizon.

The reality is that each one of the companies I mentioned above has some very interesting things going for them and also some serious deficiencies. However, since we are talking in terms of universal broadband coverage I believe it is safe to say that none of the companies listed above will be able to meet that requirement. In fact, all of them are more dependent on a minimum population density that would be forced to ignore most of the rural areas of this country

Let’s look at the amateur WISPs (as I have labeled them) in this respect. This is a very interesting group as they have already shown that they can effectively provide service to rural areas in a sustainable manner. However, the three things that are preventing this industry from moving forward in my opinion are the cost of upstream connectivity, the outright cost of equipment to build their networks and the fact WISPs are relegated to a few slices of near worthless spectrum cluttered with interference generated by all kinds of devices.

The good news is that the FCC has provided WISPs with a slice of spectrum (3650) that might finally allow them to actually deploy reliable infrastructure and provide service in these areas. The downside is that in order for this to be successful we need equipment that is very inexpensive. Since this band is not produced in the kinds of quantities that WiFI is the reality is that any kind of equipment that might be manufactured is probably going too expensive for WISPs to utilize. If the cost of the equipment can be dropped (the promise of WiMAX?) along with the cost to connect WISPs we might actually see a viable WISP industry start to answer the problem of providing real connectivity to the most rural areas of the country.

Is there one right technology that we should be counting on to make universal broadband access a reality in this country? I don’t believe so. If we are to move this goal into high gear we are probably going to need all of these technologies to work together.

Here is what I would suggest.

We change the priorities of the ILEC to middle mile (setting up ultra high capacity backbones) to everywhere in the country instead of their current focus of trying to own the customer right down to the last foot. We also encourage the cable industry to also build out high capacity pipes into rural areas. As these pipes are highly profitable I believe this is perhaps the best way for these companies to take advantage of the opportunities this kind of push for universal broadband might offer them. Once the entire country has the high capacity backbone in place we can then reinstitute the race for the last mile customer.

At the same time we also need to encourage the wireless providers to also deploy high capacity pipes to connect areas that otherwise would be left to last. This could be done with ease if the powers that be wanted to. Let’s manage to put together guaranteed funding for projects like this coupled with mandated connectivity to the first mile at subsidized prices. Let’s make the equipment less expensive by pushing the
demand through the roof so as to have the scale of economics kick in forcing competition up and prices down.

Finally, there is one more thing we need to do – get the idiots out of the decision making positions. I’m sorry to say this but if you don’t know what you’re talking about, you shouldn’t be part of this most critical decision process.

Yes, in case you had any doubts, I’m looking squarely at you over there!

This is not something you pick up in a fifteen minute lecture. This is a critical infrastructure and requires people who understand this complicated subject to be given the authority and freedom to do what is right. If you don’t know that you qualify for this, you most certainly don’t. If that is the case I respectfully ask that you give up any position of authority you may have and step aside, yielding to those of us that do.

This is our country, our future and probably the single biggest challenge we will face in this generation. This is no place for well-intentioned amateurs.

Yet another study has been released that seems to back up many of the earlier ones I have been reading. Emarketer’s study details several important trends and makes a number of predictions as to what we might expect in the coming three years.

Not surprisingly we find steady growth predicted in many of the important areas that we think of as broadband indicators including adoption of on-line banking, E-commerce, content purchases and VoIP adoption.

This is something we need to seriously consider from several standpoints probably the most important being the necessary infrastructure we will need to accommodate this forecast increase in traffic. From a Wireless perspective I see a developing problem as VoIP and on-line content become more popular. It is now (based on current year technology) a pretty widely accepted fact that individual access points can only handle a maximum of roughly 10 concurrent VoIP sessions before they max out. As we approach the maximum we find that two things occur, the Quality of Service degrades and finally the inability of the access point to distribute any additional information such as bandwidth intensive applications such as on-line multimedia content.

The problem doesn’t stop there. The flood of packets will also wreak havoc on the backhaul equipment (assuming this is a pure wireless infrastructure) possibly degrading other WiPOPs in the process. In other words, as the technology stands at this moment we have to wonder at what point the entire technology ceases to be able to meet our needs.

To a certain extent the same holds true for the competing technologies (cable and DSL) as they are asymmetrical, limited in aggregate bandwidth and also have a point of saturation that needs to be looked at. Some of the providers are now looking to fiber as the technology of the future but I would question which will happen first, the widespread adoption of these newer services or the deployment of fiber infrastructure. I don’t think there is any doubt in even the most optimistic pundits that fiber will be 100% deployed in the US by the end of 2008 without the immediate institution of a “Manhattan Project” like initiative. The reality is that even if such an initiative were to be embarked on this morning, the delay in our legislative and regulatory process coupled with the necessary time for the industry to ramp up and their associated hardware manufacturers’ lead time would take most of the time we forecast as having left before these changes hit.

We can simply draw the conclusion that the consumer market will adopt these services at a rate that exceeds our ability to provide them. If that is the case it might be logical to assume that in many places we will have a situation where the Internet has services available where the local network cannot deliver them – regardless of demand. This is not substantially different from the situation many Americans find themselves in now in areas where dialup is the only realistic connection to the net.

This now creates a division that reminds me of the historic “wrong side of the tracks” description but one brought into today’s age as more of the “wrong side of the digital super highway” instead. Will this lead to emigration from many of the areas that do not have the necessary infrastructure? Will parents be forced to leave a geographic region to provide their children with the opportunities that will be required in the coming future? Will the value of a location now be determined by the quality of connectivity available? Will this happen? I submit it already is happening but that the effect will be significantly more pronounced in the next few years as the services that are offered become more valuable to our society.

During the last Presidential campaign both parties pledged to work on this problem with President Bush pledging to bring broadband to 100% of this country by the end of 2007.

“Bush said the entire country should have access to high speed Internet access by 2007. He has ordered federal agencies to make it easier for broadband providers to get access to federal land, and he supports banning any Internet taxes. Bush is also pushing for increasing spectrum for wireless broadband.”

As we cross the midpoint of 2005 (leaving a little more than 30 months before the end of 2007) how are we doing in real, measurable terms toward the goal of ubiquitous broadband throughout this country? Does anyone believe we will even come close to this campaign promise? With a huge portion of the country (geographically speaking) having next to no broadband connectivity how could this goal be realized? The answer is (as best I can figure) we will not be able to realize this goal and while the demand will be there the infrastructure most certainly will not.

There is several interesting unknowns that may help alleviate this problem, the 3650MHz band that was newly introduced, WiMAX (if the price and availability issues are dealt with in a timely fashion) the rise of independent fiber companies like Jaguar Communications and perhaps the biggest unknown, the ability of technology to innovate faster than many of us can predict.

I look forward to that possibility as the alternative seems rather bleak in contrast. We do, indeed, live in interesting times.

A pair of somewhat unrelated news articles caught my attention forcing me to look at what the near future might hold in store for us.

First, we have a quote from this press release,

“ResearchChannel, in partnership with the University of Washington and the Poznan Supercomputing and Networking Center (PSNC), demonstrated High Definition video transmitted across IP networks today at the TERENA 2005 conference in Poznan, Poland. Attendees observed HD programming transmitted from ResearchChannel’s DigitalWell digital asset management system over advanced networks from Seattle, Wash., to Poznan, Poland, at a rate of 270 megabits per second.

‘As a new member of the ResearchChannel consortium we are pleased to cooperate with the University of Washington to deliver high quality HD transmission and present it at the TERENA Conference. This enables us to showcase the demanding application which utilizes optical networking technologies to deliver HD quality streams over IP,’ said Maciej Stroinski, Ph.D., technical director of PSNC. ‘We expect a rapid growth of such services, enabled through developments in optical networking and IP, which will open new application possibilities in the multimedia industry. We are committed to cooperate with ResearchChannel in further research of this subject.’”

A 270Mbps video stream? What a technology like this hold for high definition video communications? If this service were inexpensive enough would Grammy subscribe to it so she could see her grandchildren in living color? Would this be a service that wide adoption could be expected? Would this kind of infrastructure finally make it possible for real telecommuting to take off? What kind of competitive advantages would this provide our country once this type of infrastructure was installed everywhere – like telephone service is now?

There is also this news story today discussing the inability of even our newest not yet ratified standard (802.11n) to meet our projected needs moving forward.

“‘There is a common opinion throughout academia, industry and business that the current wireless technology fulfills neither current nor future demands,’” according to those behind the Wireless Gigabit with Advanced Multimedia (WIGWAM) project. This German-led consortium of corporate and university researchers says 100Mbps is the bare minimum needed for the future of wireless. It is using the 108Mbps 802.11n and MIMO technology as the starting point for bringing 1Gbps wireless into offices and homes.”

Yes, I know that the article is talking about indoor LANs but the reality is that we are only an extension of that technology. I also know that people who have real high speed LANs in their office would never go back to a 10baseT network or an original Token Ring network.

Like it or not we are moving towards connecting everywhere into a worldwide LAN (oxymorons anyone?) where data (of any kind, voice, video, etc,) can be exchanged at the blink of an eye.

To me, the question isn’t if this will find its way into the mainstream but when.
Will wireless be able to handle this kind of extremes?
Only if we demand it.

What an opportunity!

In the never ending battle to spark high speed Internet deployment in the United States a new piece of legislation has been introduced. Senate Bill (S. 1147) that was introduced by Senators John D. Rockefeller IV (D-W.V.) and Olympia J. Snowe (R-Maine) provides for companies that deploy broadband infrastructure to expense 50 percent of their investments on current-generation technology and 100 percent on next-generation technology. Here is the exact text of the proposed legislation for anyone who would like to examine it closely.

The overall impact of this bill is probably not easily comprehensible at first glance. Yes, this does motivate ISP/WISPs to deploy equipment but in a significantly more subtle way it provides substantial incentive for broadband providers to roll out Next Generation infrastructure. This, of course, has an upward spiraling effect as it puts pressure on manufacturers to develop realistic equipment that would meet whatever definition this bill outlines “Next Generation” to be. Another added benefit that this piece of legislation brings to the table is the effect it will have on the investment community.

This legislation is near brilliant, in my opinion as it manages to accomplish several necessary things while avoiding the pitfalls of doling out grant monies with questionable results.

There is one slight problem (and this is where you come in) – this is proposed legislation – not law.

This is something you need to know. In this one case it doesn’t matter whether you are a huge ILEC, a large ISP, a WISP or simply someone who wants to see affordable broadband everywhere in the US, the benefit to us all is equal. Since the cost of hardware would be reduced for the infrastructure providers, the cost to the end user would also come down, we would like to think. In short, if you are reading this, you should be enthusiastically supporting this bill. I mean it, you need to let your legislators know that this bill in a real Win/Win situation for everyone.

In an attempt to make your interaction a little easier, I am providing this link to assist anyone who needs the direct contact information for their Senator.

One thing you should be aware of, any action you take is not wasted. For every single letter, email, fax or telephone call you make the interpretation is that there are many more people that support the same viewpoint but did not take the time to voice their opinions. This IS a numbers game and the action you take will have a far greater effect than casting one vote.

For the purpose of this discussion I have created an overly simplified business model to describe how the numbers look based on several assumptions.

First off, let’s take a look at what the pricing looks like as it sits currently.

$25.00/month – telephone – This does not include long distance or optional services.
$15.00/month – Dialup Internet – no allowance for a second line or services like CallWave
$30.00/month – Satellite or Cable TV – admittedly this provides for more than basic service.

$70.00/month – Total for all of the above services.

If we include Broadband in the above equation the numbers would be increased by approximately $20.00/month bringing the monthly total to roughly $90.00/month.

In Vermont our typical population pattern is dispersed in the following manner. We have a small town with a number of homes clustered together in the center and then roughly 10 miles of very few homes per mile until we hit the next town. For the purpose of this explanation I will assume that each town has a population of 200 homes (average) and for every 10 average sized towns we have one “city” with a total population of 1,000 homes/businesses. I beg your indulgence, I know this is not accurate but it does give us a framework to base this business model on. We will also stipulate that in every community this service is deployed in there is very close to a 100% service adoption rate. Considering that Adelphia charges up just under $60/month for high speed Internet access only I can tell you without reservation that I would take this service in a heartbeat if it was available to me.

So, starting in the “city” we connect 1,000 homes/businesses to our fiber at an internal cost of $11,000/mile plus $1,800 per individual building. We will also have to make the assumption that in this city we have a density that equals 20 homes per mile (average) and that this would give us a figure of 50 wireline miles inside the city borders. (Please note – I have assigned these numbers as estimates and are for illustrative purposes only. Since every area will be different I have based these numbers on a worst case scenario, within reason.)

$ 550,000 – fiber backbone for the entire city (50 miles at $11,000/mile)
$1,800,000 – total install cost for last mile (1,000 buildings at $1,800/building)
$2,350,000 – total investment to connect the city

Let’s look at those numbers, shall we?

Using a mortgage calculator based on a 6 percent loan on a 20 year amortization schedule we find the total monthly payment (including interest) works out of be $16,836.13/month or $16.84/month per subscriber to pay off the loan. If we assume that VoIP (not unlimited calling) has a cost factor of $10/month and base Internet has an additional cost of $5/month in bandwidth costs based on a massive oversubscription rate we then have to add in television. I am going to assign a cost for basic television that adds in $10/month but this number is dependent on a number of variables including what we include in the basic service package. If you are willing to accept the numbers I provided, this is what everything now looks like.

$16.84 – debt service.
$10.00 – VoIP costs
$10.00 – Television
$ 5.00 – Internet bandwidth costs.
$41.84 – total monthly cost on basic package.

$59.99 – basic package retail price
$41.84 – monthly cost to provide services

$18.15 – net – however, there is overhead and additional expenses which need to be accounted for. Let’s not forget there are businesses that will be charged a higher monthly fee while the costs will stay close to the same and that a fair portion of residents will also opt for premium services and we can now offer additional services (security, remote backup/data storage, 4.9MHz public safety, advertising supported Hot Spots, VoIP over WiFi, etc.) that will generate additional revenue streams. We also can leverage the ability to supply one $1,800 Customer Premise Equipment for Multiple Tenant Units – where more than one customer is connected using one device because they share the same building. This also changes the numbers in our favor.

Now, let’s look at the numbers when we factor in the smaller towns.

As we defined earlier, each small community is 10 miles away from the next or the city to keep this example simple.

So this would mean we have 10 miles times $11,000 per mile or $110,000 to run the backbone from the city into this smaller town. Additionally, we will set a constant of 5 homes per mile along the way that need to be connected.

This is what the breakdown looks like in this case.

$110,000 – fiber backbone (10 miles at $11,000/mile)
$110,000 – run fiber through 10 miles of the town based on 20 homes per mile.
$360,000 – 200 homes connected last mile
$ 90,000 – 50 homes connected along the 10 mile backbone
$670,000 – total cost to connect this small town

$4,800.00 – total monthly payment for infrastructure based on 20 years at 6%

$19.20/month debt service per customer figured on 250 homes.

Now the model looks more like this in this case.

$19.20 – debt service.
$10.00 – VoIP costs
$10.00 – Television
$ 5.00 – Internet costs.
$44.20 – total monthly cost on basic package.

$59.99 – basic package retail price
$44.20 – monthly cost to provide services

$15.79 – net – with additional expenses not accounted for.

Looking at the totals I have provided here (who knows if this is reality) this is how I see a very small network of one “city” and ten “towns” adding up.

$18,150 – monthly from the city.
$39,475 – monthly from 10 towns

$57,625/month revenue – with some but not all expenses accounted for.

Please keep in mind there is no charge included for installation in this model and I would think this is something that should be factored in – even if the installation fee is financed over several months or years. I can also see a minimal monthly rental for the set top box and the SIP router or outright sale of these items that would add to the bottom line.

Let’s look at some of the specific options and discuss the relative value.

In the above model we allow for each service to be added in as necessary and we will assign a retail pricing for each of the following services at the following rates.

$35.00/month – Broadband Internet service – entry level tier (5 Mbps symmetrical).
$15.00/month – Telephone service – unlimited in-state but limited long distance calling.
$10.00/month – Basic television package to be determined.

Upgrades would be available for services as the customer wishes.

For example, should a customer wish they can decide to drop the telephone service included in this package ($15.00/month) and opt for Packet8 (or a competing company) they would now be able to make unlimited calling anywhere in the US or Canada for $20.00/month (only raising their total monthly bill by $5.00/month) as opposed to Verizon’s Freedom package which costs $59.95/month for roughly the same level of service.

A customer could choose to opt out of the television package and save another $10/month on their monthly service bill allowing them to receive Broadband as a platform to take advantage of competing services at a price that is competitive with industry standards.

However, this would be selling the infrastructure short and ignoring many of the services that might be provided including telecommuting, video conferencing, streaming video, Video on Demand, distance learning, remote medical diagnostics, remote security along with many services that will soon become available if the necessary infrastructure is in place.

Please note- I readily admit that this model is not complete but rather built to demonstrate the validity of the concept. I have tried to present what I see as the underlying financial model that allows this project to work. I also carefully omitted any monies that might be made available through RUS grants or the impact that private investment would bring to this model.

I would like to clearly state for the record that I believe the dynamics of this deployment could be dramatically changed if a hybrid fiber backbone/wireless last foot delivery system was employed. If, for example, we were to employ the newly FCC approved 3650 band for last foot delivery a significant reduction in the investment necessary to connect the end user could be realized where we might be able to drop the installation cost per building connected from $1,800/unit to well below $600/unit.

One final thought, this is not something that I conceived of or invented. This is a business model that is currently in operation and can be duplicated with very well understood cost factors. The business that I “borrowed” this plan from has constructed it in such a way that the company was “Cash Flow Positive” within 90 days insuring that this business is sustainable.