Well, this week AT&T announced its CAPEX for 2015 will be around $21B total. That is a lot of money for anybody. I hope this makes people think about how much money large ISPs spend and how much we want them to spend. Our goal is that they spend that money wisely providing all of us more bandwidth. But numbers like that should give everyone pause. If they are spending that kind of money on their network, are we getting from it what we want?
Well, there is never going to be a perfect match on our desires and spending patterns at ISPs. A lot of this has to do with Return On Investment (ROI). Carriers don’t execute on every program that has a positive ROI. What they do is evaluate the ROI and see if it meets their criteria for investment. One of the problems is that we have not done very well with larger ISPs to take grants and loans to improve their ROI on those spots where their are holes in their Broadband deployment.
Because of this, I have advocated for a Broadband Universal Service. I want to define this for those that are not experts in Telecom Regulation. In the US, it is mandatory that the Carrier Of Last Resort (COLR) provide phone service to any home. This is not an optional situation. If you want a phone, they have to get you one. I have seen a phone line to a single residence of 80 miles to meet this requirement. You can imagine that the phone company makes a very poor ROI on that line. To make this service possible, we all pay a tax on our phone bills called the Universal Service Fund (USF). This fund goes to carriers who have a significant percentage of what are termed High Cost Loops (phone lines that cost a lot to maintain and install) to help defray these costs.
We could do something similar for Broadband service. Carriers (cable, phone, fiber) could apply to be the COLR and get support to provide 100% wireline Broadband coverage (today the current definition of Broadband is 25 Mb/s downstream service). The COLR could get support from a Broadband USF to help make the costs reasonable and the ROI acceptable. That would be the trade-off. We help the ISPs in places that are not profitable to serve and they provide 100% service. Seems like a reasonable deal right?
Well, the problem is that many ISPs don’t want to spend money in these areas at all or they want to spend them on other products and services. You may recall that Verizon has been dumping properties over the last 10 years primarily to Frontier and Fairpoint. They simply did not want to invest in residential service in Vermont (for example). They wanted to spend their money on more urban properties, business services, and wireless. All of that is fine, but didn’t help the folks that they just sold. The interesting case recently was the recent sale to Frontier. There were lots of FiOS lines in that sale. Interesting to see what Frontier does with Orange County, Texas and Florida. There are 100s of 1000s of FiOS homes in these properties. Unlikely that you will want to go backwards in service.
In any case, I believe we need to make this deal and find a way to get Broadband to everyone.
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