Entries in FTTH (4)

Tuesday
Nov292011

Griswold IA Cooperative Looks Forward to $12.7m Broadband Loan

Much-Needed Funds will Help “Ramp up Speed and Bandwidth”

On November 14, JSI Capital Advisors reported that Agriculture Secretary Tom Vilsack announced the recipients of over $400m in USDA Rural Utilities Service broadband funding. 22 rural telecom providers in 15 states will receive broadband loans ranging from $3.7m to $32m “to build, expand and improve broadband in their rural service territories” (The Monitor: Vilsack Announces Additional Telco Funding to Expand Rural Broadband).

One company slated to receive funding immediately jumped out to me—Griswold Cooperative Telephone Company (Griswold, Iowa), which will receive $12,747,000 “to complete a system-wide FTTP network, enhancing broadband service to all subscribers.” I grew up about 20 miles away from Griswold, so I was naturally curious to check in with general manager Robert Drogo and learn more about his company’s plans to expand FTTH near my homeland in Southwest Iowa.

Drogo explained that the Griswold board of directors started discussing their options two years ago, and in order to be successful “we knew we had to look at fiber.” In addition to improving Internet speeds and capacity, the fiber will also support other capabilities like IPTV for all customers (which Griswold currently offers just in the towns it serves). Over the past 18 months, Griswold has been deploying middle-mile fiber and preparing for the end-goal of FTTH, “should we be fortunate enough to get the loan.” Griswold’s $12.7m good fortune will be used to take the company from its current 60% fiber deployment to FTTH for its entire customer base—1,700 lines in the communities of Griswold, Lewis, Elliot and Grant.

The company’s current DSL speeds go up to 3/1 Mbps tops, but with IPTV also running on the lines to the in-town customers, the bandwidth is getting crowded. Once the fiber is fully deployed, Drogo estimates that customers will experience 5/1 Mbps at the low end and 10/3 Mbps at the high end. He also commented that “now speed isn’t an option,” and it is absolutely necessary for the company to keep reaching for higher limits—hence the importance of the RUS loan.

Many RLECs surely hope that deploying high-speed FTTH will attract new businesses to their service areas, and a few new medium- or large-sized businesses would obviously be a real catch for a rural community like Griswold (located about mid-way between Des Moines and Omaha). Drogo wasn’t sure if the project would help attract any significant new businesses to the area. However, he explained, “I don’t see a big draw on the top end, but [the FTTH] will definitely be a benefit to home based, small and agricultural businesses.” As I grew up in this area, I can certainly see the appeal of being able to run a business from home—the hour plus drive to Omaha or Des Moines can get quite monotonous (especially every day for a job), and volatile Iowa winters definitely add an element of uncertainty to a long commute. Griswold’s FTTH may facilitate more teleworkers and home-based start-ups, and it will surely benefit the area’s important agricultural economy.

Companies eager to deploy FTTH are often quick to claim that the investment will bring new business to struggling rural economies, but it really might be just as important to focus on bolstering the community’s current small businesses. Hopefully Griswold’s broadband loan will help ensure that the local businesses (current and future) will have the tools to move forward at a pace that matches economic and business development in urban areas.

The fiber expansion should help Griswold become more competitive on the video front as well. IPTV will become available for the rural consumers, who currently can only receive pay TV from satellite providers. Of course, the FTTH will also give the rural consumers an opportunity to “cut the cord” on traditional video if they desire, since the FTTH connections will be able to handle plenty of Netflix. Drogo speculates that Mediacomm may come to the community in several years, but by that time Griswold could have a significant competitive advantage on video services. Drogo does not see wireless broadband as an immediate competitive threat, but he anticipates that 4G will eventually be available in the area—although that could also be years down the road too. Even so, it is likely that wireless broadband will complement, and not substitute, Griswold’s FTTH service offerings.

Griswold will probably not see the $12.7m RUS loan money for at least 18 months, but the company has been approved for interim investments such as ordering the fiber. Drogo believes that the $12.7m will be enough to complete the entire FTTH build out. He added that this amount is “very conservative” and was calculated to account for various regulatory, legislative and resource uncertainties. Drogo is “not concerned” about the bad publicity that has been hanging over USDA and BTOP broadband loans like a dark cloud in the past few months. For the most part, RLECs have been putting their broadband loans to good use and have not been caught up with any of the various failures or mismanagement catastrophes that some other  loan recipients have encountered.

With this $12.7m broadband loan, it sounds like Griswold Cooperative Telephone Company will be in a position to achieve its strategic goals and bring benefits to the community. The FTTH deployment could solidify the company's competitive advantage if it is completed before cable and 4G competitors start knocking on the door.

Tuesday
Jul262011

Adelstein Talks Rural Broadband in Rudd, Iowa

“Recovery is Under Way,” Thanks to Rural Broadband

On Tuesday, July 26, Rural Utilities Service Administrator and long-time rural advocate Jonathan Adelstein visited the farm of Bill and Carol Schmidt in Rudd, Iowa, where he gave an enthusiastic speech about the vast benefits of broadband for rural farms, businesses, residents and communities. The Schmidt’s farm is located in North Central Iowa and served by OmniTel Communications, a recipient of RUS funding for rural broadband. According to Adelstein, OmniTel has become a model RUS recipient as the company is utilizing the funding, along with private capital, to deploy Fiber-to-the-Home (FTTH) capable of 20 Mbps in its service area. Adelstein noted that the residents and businesses in OmniTel’s North Central Iowa service area now have broadband speeds and quality on par with people who live in Washington, DC and New York City. I listened in on the speech from my home in DC, and I was really inspired by Adelstein’s dedication to ensuring that all rural areas have outstanding broadband service like the Schmidt farm in Rudd, IA has.

Adelstein particularly emphasized the benefits of broadband for agriculture, but he also argued that it is necessary for education and health care in rural areas. He described the benefits of distance learning for rural youth, warning that young people will not stay in (or return to) rural areas if there is no broadband. Today’s and tomorrow’s farmers need to be able to check and participate in real-time markets and utilize precision farming technologies to reduce waste and increase efficiency, and Adelstein argued that “we can’t do it without broadband.”

Adelstein credited OmniTel’s $35m rural FTTH project as a “platform for jobs” and “sustainable economic growth.” He argued that in order for this country to compete globally, we must invest in broadband infrastructure. He explained that RUS has invested over $3.5b for more than 300 rural broadband projects impacting 7 million Americans—Adelstein believes it is necessary to invest in “every corner” of America rather than just outsourcing jobs to other countries.

Despite the current economic difficulties, Adelstein seemed hopeful for the future for rural areas and even said that “recovery is under way.” He compared the current broadband challenged to the great rural electrification efforts in the last century, arguing that like electrification, broadband opens the doors for unlimited possibility in increasing agriculture efficiency. It will also help the US to better compete with growing global economies like China, for example.

During the Q&A session, Adelstein answered some questions about the FCC’s USF reform plans. He believes that it is time to upgrade USF for broadband, but that it can be done in ways that benefit rural America. He noted that some companies and components of the fund are not efficient, and support should be dedicated to places that have no broadband at all. He was asked about the problem of large carriers not providing broadband in rural areas, and he responded that the “rural-rural divide” is just one of the many things that the FCC is looking at in USF reform. He said that we should learn from the success of companies like OmniTel which has invested in fiber that will meet the needs of its rural customers for years to come. Adelstein also commended the Obama Administration for the recent creation of the White House Rural Council. He explained that the Rural Council is designed to bring attention to the unique needs of rural areas and coordinate rural policies.

Over the past few months I have heard inspiring and empowering speeches about the importance of rural broadband from a variety of political leaders, including Secretary of Agriculture Tom Vilsack, Senator Mark Begich (D-AK), Representative Lee Terry (R-NE), and even FCC Chairman Julius Genachowski, who visited a small rural community in Nebraska back in May for a hands-on view of how rural broadband has transformed an isolated rural area through new jobs and economic growth. I think it is clear that many decision makers understand the pressing need for ensuring ubiquitous rural broadband of equal speed and quality as urban/suburban broadband, but the challenge lies in figuring out how to ensure investment in broadband infrastructure in low-density, high-cost and allegedly “unprofitable” areas. I hope Adelstein’s visit to Rudd, Iowa draws attention to the significant progress that RLECs like OmniTel have made in tackling this great twenty-first century infrastructure challenge. I am definitely happy to have strong leaders like Adelstein fighting for rural America and rural broadband.  

Wednesday
Jun082011

USF Reform - Their Two Cents: FTTH Council 

Fiber-to-the-Home Council Recommends 25 Mbps for Rural Broadband

On May 23, 2011, The Fiber-to-the-Home Council (“FTTH Council”) filed reply comments in the Universal Service Fund Reform proceeding, where they expressed concern about the FCC’s proposal for a broadband speed target of 4 Mbps download, 1 Mbps upload (“4/1”) in rural and unserved areas. Although the FTTH Council agrees that a relatively low speed target may be sufficient in the immediate near term, it would ultimately “deprive rural residents and businesses of broadband performance comparable to that found in urban areas.” The FTTH Council recommends 25 Mbps (in both directions) by 2015, and argues that FTTH is the most efficient and financially prudent broadband technology for high-cost areas—therefore, the revamped High Cost Fund should ensure support for rural FTTH deployment.

The FTTH Council points to the rapidly growing demand for Internet content and applications, such as distance learning, enhanced video conferencing, and HD telemedicine, as evidence that high-performance broadband networks need to be supported by USF.  I believe that in rural and remote areas, high-bandwidth applications can literally mean the difference between life and death, business or no business, and education or no education. The FTTH Council clearly understands the importance of high speed broadband to rural residents, businesses and communities as broadband users increasingly require “Next-Generation Access” (NGA) broadband service.  The FTTH Council cites a report by consulting firm CSMG on consumer adoption of NGA broadband applications, which supports “the conclusion that consumer demand for symmetrical bandwidth is likely to exceed 25 Mbps by 2015.”

In addition to thinking about future demands for high-performance broadband, I believe it is also important to look to the past for examples of why broadband speeds must be forward-looking and well beyond the minimum requirement. Advocates of the 4/1 Mbps target claim that most broadband consumers do not actually need higher speeds because they primarily use broadband to check e-mail and browse the Web. However, this assumption does not consider the adoption and use of future broadband-enabled applications, and according to the FTTH Council, “it is highly likely that innovative applications development will lead to as-yet undefined applications with significant public benefit.” Now-common applications like YouTube, Netflix streaming video, Google maps, Skype and Apple iTunes skyrocketed in popularity as a result of increased broadband speeds over the last 10 years, but continued investment in high performance broadband is necessary so that consumers can continue to benefit from new applications. The FTTH Council provides an interesting infographic on page 14 of the reply comments to illustrate the relationship over time between broadband speeds and “killer apps.” Clearly, as the FCC moves towards reforming the Universal Service Fund to support broadband, the power of innovation must not be underestimated.

In the USF Reform docket, there is prevailing criticism that FTTH is not a financially viable solution for broadband deployment in rural and unserved areas, but the FTTH Council argues that rural FTTH is well worth the private and federal investment in the long term. The FTTH Council urges the FCC to “encourage the rapid deployment of FTTH because it will enable rural telephone companies to more expeditiously meet consumer needs and thereby receive higher revenues and lower operating costs, which then translates into an eventual reduction in universal service support.”  Not only does fiber enable “virtually unlimited throughput capabilities,” FTTH networks also offer “lifetime operating expenditure savings” of $100-$250, which makes the actual cost of FTTH on par with other technologies, savings included. 

The FTTH Council calculates the cost of deploying FTTH to the “last 5%” of rural households as $44b, nearly half of the total $94b cost to deploy FTTH to the last 20%. However, the cost to deploy fiber in the eightieth to ninetieth percentile is roughly $29b, and the FTTH Council urges rural telephone companies serving the that percentile of unserved households to upgrade to FTTH.

The financial aspects of FTTH are definitely attractive from an RLEC perspective, but will the FCC agree that FTTH is the best broadband technology for rural areas? Comments in the USF proceeding show that RLECs are extremely concerned about access to private capital right now, as regulatory uncertainty over USF hovers over lenders like a dark cloud. Private lenders have reservations about lending to companies that may not be able to repay loans if USF support is reduced or eliminated completely in some cases. The FTTH Council argues that the current High-Cost Support program significantly reduces the risks associated with private lending for broadband deployment in rural areas. If the FCC’s USF Reform proposals are adopted, the risk of investing in RLECs will increase, and “investors will demand a higher premium or higher interest rate on debt or loan,” and some investors may refuse capital to RLECs altogether. As a result, the “hurdle rate” for determining if an investment is viable will increase significantly, and some planned FTTH projects may not “get over the hurdle.”  The FTTH Council compares the stability of the current High-Cost USF system to a low-risk structured settlement, but the future CAF support model makes investing in RLEC FTTH projects more akin to a risky startup venture. 

Private lending and USF support go hand-in-hand for RLECs, and are clearly representing a double-edged sword as the USF Reform rulemaking nears decision time. Without continued USF support, private lenders may shy away from RLECs. Without private lending for broadband and FTTH deployment, rural communities will either continue to fall behind in broadband development, or they will lose their broadband provider altogether. The FTTH Council recommends that the FCC combine the current High-Cost Fund with the proposed Connect America Fund to achieve ubiquitous broadband. According to the FTTH Council, the FCC should “preserve and build upon the success of the High-Cost fund and meld the aim of this fund with CAF’s new objective to reach unserved areas.”

The FTTH Council’s reply comments are available to read here.

Monday
May312010

Some Random Thoughts..........

Small wireless carriers chalked up a victory recently when the FCC struck down the home roaming exclusion that allowed wireless carriers to decline roaming requests from other operators if the requesting operator offered voice services in the market it was requesting voice services.  Congrats!  Now its time to “focus like a laser” on handset exclusivity and data roaming……….The FCC’s National Broadband Plan proposes the creation of a national framework for the taxation of goods and services provided over the Internet and imposing a fee to establish and maintain a national public safety wireless network.  Predictably, the proposals are raising the ire of anti-tax types including Timothy Lee, vice president of legal and public affairs for the Center for Individual Freedom, who recently wrote in the Washington Times that the FCC’s logic echoes Ronald Reagan’s portrayal of government logic: “If it moves, tax it.  If it keeps moving, regulate it.  If it stops moving, subsidize it.”  Reportedly the proposed public safety network would cost between $12b and $16b and be constructed over 10 years.  No big deal according to the FCC – fees charged to support the public safety network would amount to less than one dollar per month…….That brings us to the FCC’s recent survey that indicated that 30m Americans – or one in six mobile users – have experienced “bill shock,” a sudden increase in their monthly bill that is not caused by a change in service plan.  Steve Largent, former Seattle Seahawk wide receiver, NFL Hall of Famer, former Congressman from Oklahoma’s 1st District, and the current president and ceo of CTIA-The Wireless Association, struck back saying, “If the FCC is interested in controlling ‘shock’ on consumer bills, they should address the most egregious part of the consumer’ bill, which is the almost 16% rate of taxes and fees imposed by federal, state and local governments on wireless consumers.”  No big deal Steve!  Those fees are only about $7.50 per month!....We’re starting to see some cracks form in Clearwire’s (Nasdaq:CLWR) commitment to the WiMax 4G standard.  During CLWR’s 1Q10 earnings call, the company said that it had renegotiated its contract with Intel, one of its principal investors and a WiMax supporter.  CLWR had committed to WiMax until February 2012, but can now terminate that agreement with no more than a 30 day notice.  All part of the plan says Mike Sievert, CLWR’s chief commercial officer. “We have been saying for some time that we are a technology-agnostic company that is focused on rolling out WiMax 4G services to 120 million people this year.  But we are open minded, and we are studying and watching them.  We’ve built an all IP-based network, so we could do it for a modest cost…It’s prudent to take steps so we can execute.  Should we need it, it’s there.”……..Comcast (Nasdaq:CMCSA) chief technology officer Tony Werner was recently quoted by Broadband DSLReports.com’s Karl Bode as saying he doesn’t think CMCSA will be embracing FTTH any time soon.  Werner believes there’s “lots of gas left in DOCSIS.”  CMCSA’s DOCSIS 3.0 upgrades have already increased speeds up to 50 Mbps for 90% of the company’s markets and 100 Mbps speeds should be available to 20% of the company’s markets by the end of 2010.  According to Bode, at least one analyst has noted, “Why deploy fiber when you can just run ads pretending you do.”