Commissioner Adelstein to Head RUS

Jonathan Adelstein, a two-term commissioner of the Federal Communications Commission, has been nominated by the White House to head the Agriculture Department's Rural Utilities Service, the agency that will be disbursing $2.5 billion in grants, loans or loan guarantees to further rural broadband deployment.

Keeping $7 billion in "Broadband Stimulus" in Perspective

AT&T is going to invest $17 billion to $18 billion in 2009. Verizon will invest somewhere between $16 billion and $17 billion. The U.S. cable industry spent about $14 billion in 2008. It is reasonable to expect cable companies to spend less than that in 2009. Add possibly $11 billion by all other U.S. telcos other than At&T and Verizon, for a total of about $59 billion in capital investment in 2009.

The point is that cable companies, AT&T and Verizon alone will spend about $48 billion in 2009, compared to perhaps $3.6 billion in combined National Telecommunications and Information Administration and Agriculture Department Rural Utilities Service "broadband stimulus" funds in 2009.

Just keep that in mind when gauging how much can be done, even adding $7 billion in "broadband stimulus" funds over two years. There are lots of needs. But something on the order of $3.5 billion a year for two years is not going to produce as much change as you might think.

The reason some potential broadband customers in America do not now have access to wired facilities is simply that it is so costly to build those facilities.

How Long to Disburse "Broadband Stimulus" $, Really?

The Congressional Budget Office’s original assessment of the House version of what ultimately became the The American Recovery and Reinvestment Act of 2009 was that it would take as long as seven years for the National Telecommunications and Information Administration to disburse $2.825 billion. 

NTIA currently distributes $17 million, so CBO obviously extrapolated from the workload in making its assessment. Of course, NTIA now has the taks of allocating nearly $5 billion. The statute, nevertheless, requires spending of all that amount by the end of 2010. You can make your own assessment of how thoughtful the disbursement process will be. 

Optimum Lightpath to Turn Up First Business Hosted VoIP Customer April 1

Optimum Lightpath is going live with hosted IP telephony services on April 1, a source says. Optimum will not sell to customers with fewer than 35 seats to support, as sister company CableVision Systems will be handling business customers up to about that range. The company is taking a really smart approach to pricing and packaging.

It has worked out agreements with one or more value-added resellers in its market to provide local area network assessments and remediation, installation and other support services. But those agreements are structured in a way that Optimum Lightpath can price its services on a really-simple per-seat-per month price, including any necessary LAN remediation. The whole idea is to simply pricing so that a 50-seat, 75-seat, 125-seat or perhaps 300 seats, for example, service can be sold at one uniform price, anywhere, anytime, without having to custom source assessment and remediation services every single time a new customer is to be added.

Think about that entails: VAR partners essentially have to agree, in advance, to a flat-fee payment for assessment or remediation services. In some cases, the partner will reap huge margin, because a given customer network is rock solid for voice. In other cases, the partner might actually lose money on a given job, because lots of work must be done to ready the LAN for voice services (essentially, creating a new voice virtual LAN). The idea is that, over a year's time, margins are healthy enough for a VAR to undertake the work on a flat-fee basis.

The hope that Optimum Lightpath is going to have robust sales obviously is enough of a carrot to entice one or more VAR partners to take the deal. For Optimum Lightpath, the advantages are equally great. It creates a simple and uniform per-set pricing model that is repeatable. It eliminates the extra charges that otherwise might be necessary if LAN assessments and remediation, installation and configuration, customer premises qualification and selection are "extra."

One would think Optimum Lightpath is going to do quite well with this sort of approach. Though some other providers also price per-seat, per-month, those prices do not typically include the virtual guarantee that customers "don't have worry about whether your LAN is ready now," how to source installation and configuration services, or the chores of figuring out which phones actually work with the hosted service.

Though supporting a service all the way to the desktop would not have been Lightpath's first choice, it seems to have realized that its "go to market" strategy must include lots of service elements and support that go beyond the router, if a hosted, business IP telephony service is to address key buyer concerns about simplicity and clarity of total costs. This is a big deal.

No Signs of Video Substitution, Says Viacom

Viacom CEO Phillippe Dauman gets paid "by the subscriber" by distributors who carry Viacom programming, and he says his company is not seeing lower subscription rates, even if some observers think consumers are not, or might, abandon their cable or multi-channel video subscriptions in favor of online alternatives

"We're not seeing it," he says. "We know what the subscriber base is out there, because we receive affiliate fees based on subscribers. And the subscriber base is growing."

Just What We don"t Need: More Broadband Talk, Less Action

The broadband stimulus program, most of you would assume, is designed to get more people more broadband, not to study whether some potential users need broadband, or where those people are. Indeed, part of the broadband stimulus funding already is earmarked for mapping exercises. But that isn't going to prevent some applicants from "studying" rather than building.

The ConnectMe Authority, a Maine state agency, is planning to apply for federal economic stimulus money to pay for a study of the state's high-speed Internet network, AP reports.

Of all the things the need to be done, one would think yet another study is about the last thing we need. How about actually providing more broadband? http://tech.yahoo.com/news/ap/20090319/ap_on_hi_te/me_broadband_assessment

Broadband Stimulus: Who is "Unserved," and Why?

The National Telecommunications and Information Administration and Agriculture Department's Rural Utilities Service have gotten around to accepting public testimony about what an "unserved" or "underserved" community is.

That public input on this subject, which began in Las Vegas on March 17, continues today in Flagstaff, Ariz., and will continue on March 19 in Washington, D.C., already offers us a chance to make a few observations.

Though most of the meeting testimony was non-quantifiable, it is clear that there are "unserved" areas in the sense of places where the cost of wired networks is extraordinary, and many places where service might exist, but is "underserved" in the sense of not receiving speeds that now are increasingly common in urbanized areas with significant competition.

The moderator of the Las Vegas meeting thanked the presenters for illustrating that unmet demand exists. Anybody who has been in the communications business long enough, and especially those familiar with the broad expanse of the intermountain West and Great Plains, knows exactly what an "unserved" or "underserved" area looks like, and why those areas either are unserved or underserved by wired facilities. It's a bit like pornography: people tend to know, without a precise definition, what it is.

Almost as predictably, some observers are wagging their fingers about mean old greedy telephone companies that don't want to provide service. Typically, people who make those charges don't live in any parts of the non-urban intermountain West, the expanses of the Great Plains, up and down the Yukon River or the Alaska panhandle, for example.

People often assume that customer demand is unmet because service providers don't want to provide service. Nothing could be further from the truth. Most small, rural communications providers, some of which are cooperatives, suffer from a lack of customers. Of the 1,000 or so small, independent telcos or cooperatives in the United States, half to 70 percent (or more, in some cases) of total revenue comes from other telecom companies in the form of "access charges" (allowing customers to receive long distance calls) or from support mechanisms such as the Universal Service Fund.

That means half to 70 percent of revenues do not come directly from customers, in part because there are so few customers, and in part because those customers do not pay anything like a rate that would provide an actual financial return on providing service. Put another way, the most-important revenue sources are other telecom providers and taxpayer subsidies provided precisely because, in the absense of those subsidies, wired network service simply is not feasible.

At the same time, terrestrial wireless and satellite alternatives do exist, and may in many cases represent rational ways to deliver services fast, at reasonable cost. Nobody disagrees that rural users should have services comparable to those provided to urban customers, at equivalent rates. The problem is that the cost of providing such services, using wired facilities, in rural areas, is disproportionately, punishingly high. "Average" costs don't make sense where it comes to actual access facilities.

Wired providers have a key role to play, but will lose money for every new "unserved" customer they add. Asking them to do that without subsidies ensures they will not act. At the same time, mobile, satellite and other technologies now offer alternate ways to provide voice and bandwidth services very fast or relatively fast, with less investment. Only satellite actually is positioned to offer service on a continuing basis with any actual hope of making an actual profit, at prices equivalent with those paid by urban or suburban users. Terrestrial wireless might or might not offer a return, depending on "density," where there might be an average of half a person per square mile.

Access is a real issue. Ability to provide access without some sort of subsidy is questionable in many cases. All the more reason to be rational about getting investment to people who need it, in a rational way. In some cases, that will mean ensuring a wired networked alternative. In other cases wireless might make more sense. In lots of cases, only satellite makes genuine sense.

Hopefully rational investments is what we will get.