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Friday, 03 September 2010 15:44 |
Peter Pratt of Stimulating Broadband and Eric Torbenson of the Dallas News reported that Tier 1 Converged Networks faced SEC charges (below). RUS has now taken action, one of the few times any part of the $700B stimulus has done. Far too many parts of government - every government - prefer to sweep things like this under the rug at taxpayer expense. The story broke Friday afternoon. I confirmed it but don't yet have the details.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21510 / April 30, 2010
Securities and Exchange Commission v. TierOne Converged Networks, Inc., Kevin Mark Weaver, and Ronald Celmer,
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Saturday, 17 July 2010 13:00 |
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39 of the first 40 projects Larry Strickling approved at NTIA are not aimed at reaching people who can't get broadband. NTIA spent $1,759,530.79 of public funds per unserved home according to the spreadsheet I just obtained using the Freedom of Information Act. Yes, that's millions, although I'm sure the figure would be reduced to under $200,000/home and probably under $100,000/home if the agency carefully analyzed the projects funded for other reasons.
When I return from Washington and I will scan and post the data they sent me on many sheets of paper. Since NTIA is currently considering spending another $2B or so of public money -- much I believe wasteful -- I wanted to get the basic information out before I left. Maybe now that the information is public they will post it on their website as well.
The one out of forty projects actually designed for people without service is 682 homes near Williamstown, Kentucky. Some of the other projects cover areas where the broadband take rate is low, while many are for backhaul overbuilds or school connections where service is already widely available.
The Obama platform promises "We will ensure every American has access to highspeed broadband," which should have come first. A half dozen Congressmen of both parties at an oversight hearing castigated NTIA and RUS for not reaching the unserved which they affirmed was the primary goal of the $7B they allocated.
In May I wrote "Strickling amazed me by giving the House Committee a big 'eff you, saying he would use the money not for people without service but instead for faster connections to community colleges, etc. ... . Boucher and Markey have backed off criticizing NTIA because of the election. I struggled with whether to do similar, because I'm a strong Obama supporter. Larry has been very gracious and people I respect believe he's one of the best. But I'm seeing $billions mostly wasted and NTIA is stonewalling not just me but Congress on how the money is being spent."
I have three times asked Strickling "How many unserved have you reached and how many jobs directly created?" He always refused to answer, and I now have only a very partial answer a year later in response to my FOIA request. In addition, NTIA does not even have an estimate for "jobs directly created." They are apparently accepting figures of "indirect jobs." Those figures were seriously discredited by Raul Katz of Columbia as well as the work of the broadband plan.
The $7.2B could easily have brought megabits to 98-99% if the U.S. if spent well, but will only reach about 20% of what was practical. With hindsight it becomes apparent the program was based on a totally false premise: Julius Genachowski's belief that 20% or so of the U.S. could not get broadband. The real number is about 5%, most of them in such small groups they can't be reached economically by anyone without local facilities. In most places, only the local telco and cableco have facilities, but the program was built on an assumption there would be many bidders. It cost nothing to apply, so 2,200 applied. But nearly none of the proposals were to bring service to those without.
When the applications came in, nearly all the insiders knew the program was likely to fail. One top FCC official in August told me "I've given up on the broadband stimulus having any effect at all." Most of the money should have been frozen and everything rethought. Adelstein at RUS had the courage to say "I was wrong" and change the rules but NTIA didn't.
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Monday, 28 June 2010 17:47 |
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Windstream wants $238M from RUS for broadband, some of which will go to areas with cable service already. Windstream now tells me they will reach 160K-190K unserved, which means it's a reasonable project. Congress has said the stimulus should give priority to reaching the unserved, and RUS administrator Jonathan Adelstein echoes that sentiment (as I do.) When it became clear round 1 of the stimulus did very, very little for the unserved, Adelstein and Strickling of NTIA were castigated by the Congressional committee, both Democrats and Republicans.
A senior FCC official in August told me "I've given up on the stimulus having any effect." Adelstein responded by changing the rules to emphasize reaching the unserved, http://bit.ly/c0l2DI Strickling instead moved $3B into an amorphous pool called "middle mile" with rules so slack he could fund almost anything he pleases. I've looked at all the public application to Strickling and there simply aren't $3B in projects that are worth spending money on. I therefore applauded when Congress pulled back $800M from the broadband stimulus, although I continue to strongly support government funding where it's really needed.
39 companies, including Time Warner and Comcast, filed objections with RUS that they serve areas Windstream wanted subsidized. When I asked Windstream for how many "unserved" they reached, the answer was "We don't have a breakdown of how many unserved homes will be reached," and also refused to let me see anything in their application except an uninformative summary. When companies don't answer reasonable questions - like are you meeting the primary goal of your project? - I have to go with what I have.
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Tuesday, 04 May 2010 11:43 |
 Qwest is asking for RUS money to reach 526K homes at 12 megabits downstream or higher. (FTTN/DSL) The budget is $466M. While that's about 3 times the cost of AT&T's FTTN build with similar equipment, these are spread out much more widely and the cost is appropriate. That's particularly true because according to Tom McMahon of Qwest 173K of these homes are completely unserved, without either cable or DSL.
Running fiber costs something like $20K/mile and Qwest will need a lot of fiber for these remote terminals. I've reviewed some of the maps Qwest submitted and the budget they are proposing is not unreasonable for the territories they want to cover. Many of those "unserved" homes are so remote they will cost $2-5,000 to reach. McMahon also tells me that he knows of no overbuild of other carriers in their deployment, contrary to complaints I've been hearing from some rural carriers. The boundaries of some territories may overlap, but unless proven otherwise I'll believe those are exceptions.
Whether Qwest needs a 75% subsidy, as they request, or the build makes sense at a lower subsidy rate I'll leave to Jonathan Adelstein to negotiate. Remote territories are expensive to serve, so some subsidy is appropriate. I did some rough calculations of the NPV and it comes to $300-400M, or about two thirds of the investment. My instinct is that a 75% subsidy is too high, but I don't have all the details. Probably more than half the homes have cable alternatives and Qwest is probably losing over 13% of their lines/year in cable areas. They've been upgrading similar homes as rapidly as they can within the capital constraints they've faced. Qwest nearly went bankrupt a few years ago according to CFO Oren Schaffer and their capital budget has long been far under depreciation. Despite that, they've emphasized the upgrades, which have often returned their cost in less than a year.
It's been a long road to get a reasonable proposal from Qwest. Last year's original proposal asked nearly twice as much government money for far slower service. Qwest provided no reliable data on jobs directly created, the main stimulus goal, but neither have most other applicants.
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Monday, 03 May 2010 22:28 |
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The North Georgia project asks something like $300,000 per mile of fiber construction, about ten times as much as others which came in at less than $30,000 per mile. The money could be required for particularly difficult construction, or many other perfectly appropriate purposes, but I saw no evidence of any of that in the public summary nor did they tell me about any when I asked.
I wanted to check further before I made allegations of waste, so I asked for a copy of the application. The North Georgia Network is a co-operative, not a commercial business. I was amazed when Ms. Lee Ann Roy refused to release the actual application, even with confidential information deleted. Nor would she answer the simple questions of "how many "unserved" homes will be passed and how many jobs directly created.
In the summary, I also noticed an obvious distortion in their estimate of jobs directly created, the primary goal of the stimulus. My guess, based on the number of miles of fiber involved, is about 30-60 jobs for two years, but I really don't have the facts to be accurate. They claim the project will create 837 direct jobs and a totally unbelievable 21,000 indirect jobs over the construction period. The latter figure is probably just a typographical error.
Almost half the project - 125 of 260 fiber miles - is being bought as IRUs on existing fiber, and hence does not directly create jobs. Including that spending in their jobs directly created estimate is only a partial explanation of what went wrong. Because that estimate is so far from reality, I would also freeze any other applications from their consultants, Civitas, which bragged in a press release they have other clients pending NTIA funding. If Booz Allen as NTIA consultants didn't catch such an obvious error, I'd ask both for a refund of some charges and an upgrade of the staff they assign if they don't want to forfeit the contract.
Because they aren't willing to release the application, my gut is that something is rotten in the state of Georgia. I do not have proof. I've sent this to the Department of Commerce Inspector General. |
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Friday, 26 March 2010 18:21 |
 One Economy is D.C.'s favorite community outreach program, including a $1M check from the wireless carriers at CTIA delivered via the FCC Chairman. So I and many others were surprised they weren't announced for NTIA funding so far. I had thought was over since they promised the losers would have been notified. "Not so," the word came back, they are one of about a dozen "still pending." One Economy provide support to the folks who've put free wireless across much of Harlem and the Bronx, including the tower above. http://www.fastnetnews.com/a-wireless-cloud/61-w/2486-a-bronx-tale-the-amazing-unknown-free-wireless
Microsoft and Dell have been working with One Economy for a big pr campaign including computer discounts I expected to be announced as part of the plan. There could be a last minute glitch, but it's far more likely they are holding back for a publicity push. The cableco's A+ discount program is mostly a hollow publicity stunt designed to let Julius off the hook for not demanding real price cuts; I hope the Microsoft-Dell program is better, but they've provided no public details.
CLEC Allegiance has $31M pending as well as do the others below.
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Thursday, 05 November 2009 20:38 |
 "I urge you to reject any request for stimulus money unless the high‐value components are manufactured in the United States," powerful Senator Chuck Schumer writes to Stephen Chu, urging him to deny funds to a billion dollar wind farm in Texas because they are using Chinese turbines. Schumer told Tom Zeller he would "introduce legislation if such funding isn’t reconsidered." Larry Strickling dropped the "Buy American" requirements of the broadband stimulus after a massive lobbying campaign by Alcatel and Cisco, but the legislation might re-instate them. If this moves forward - politicians say a lot - stimulus applicants need to be ready with a U.S. made alternative.
"Buy domestic" rules have a mixed history, with clear benefits for "infant industries" and waste behind the protective wall for others. To get an exception for broadband, Alcatel argued "Buy American" was impractical because much of the equipment simply wasn't made in the U.S. Actually, Zhone and others manufacture commercially competitive gear of types Alcatel said were not made in the U.S. So does Alcatel, according to what they tell the RUS, including the 7300 that's the heart of their DSL and fiber lines. That is another story.
My guess is Schumer won't follow through, but the RUS has suggested that American manufacturing is a good idea for folks looking to get money from them.
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Thursday, 02 September 2010 18:53 |
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A regulator reached out to me about the Opticom build in Montana. I believe that when I say something that affects policy I should disclose that. Here's my response.
"MTOpticom is more likely to have taken advantage of a loophole than broken the law, but I don't know since I can't get the documents. Apparently, Adelstein (who is a good guy and been friendly to me) left open the possibility that if there are a handful of unserved farms and mountains near a well served town the whole project could qualify for a heck of a lot of public money.
My belief is this is too much public money to upgrade the towns from 10-50 meg cable to 200 meg fiber. Fiber is better, but my opinion is the difference doesn't justify spending that much public money.
People I respect believe everyone should get fiber at any plausible cost. It's an honest debate and you should make your own decision.
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Thursday, 08 July 2010 20:41 |
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Marquette-Adams Telephone Cooperative will get $20 million in grants and loans to run fiber to 4,600 unserved homes in Wisconsin, Rick Barrett of the Journal Sentinel reports. http://bit.ly/9SUvP4 New fiber will cover 498 route miles, most of which will be labor costs. The fiber will cost $10M at the typical $20K/mile, so the price is not out of line. Jobs and newly served homes are precisely what the stimulus is about, so this is on target. But is it right to spend $4K of public money for each home, or the $10K that RUS rules allow? The broadband plan suggests money should first be spent on those least expensive to reach, including over a million at less than $1K. That makes sense for me, and I believe there are some homes – maybe half of one percent – so expensive that 5 megabit satellite is the right answer. (The plan didn't say so explicitly, but assumes satellite for that 0.5% and the total cost of coverage at 4 megabits drops to $10B to $15B.) Reasonable people differ on whether the cutoff for subsidy should be $3K, $10K, or higher, but the question needs to be faced squarely.
A reader of Rick's article pointed out how broadband destroys jobs as well as creates them, as every print reporter or record executive knows. “The $20 million in grants & loans may have a negative affect on the Adult Video Stores. Will we now have to bail out the owners of Adult Stores?”
GTA TeleGuam has begun installing VDSL2 from Occam to speed up their network. When I interviewed Dan Moffat for the story about stimulus funded overbuilds, I urged him to fight back by delivering the best possible network. Glad to see some people on Guam will now have the choice of 50 megabits and higher.
For the record: Vermont Tel received a grant from NTIA. I didn't have anything to do with writing the proposal, but I previously worked on a statewide wireless project for them and they remain friends.
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Thursday, 24 June 2010 21:36 |
Dan Moffat at GTA TeleGuam just added the French channel Le Monde as well as a channel requested by U.S. soldiers on Guam: Al Jezeera. Neither is available on the local MCV cable system. Nearly no systems in the continental U.S. carry Al Jazeera.
I was recently asked "Can you explain net neutrality in 30 seconds?" Easily. "Net neutrality means that I, not the head of Time Warner Cable, decides what I watch and what I do on the Internet." If neither Dan nor his cable competition chooses to carry Ivy League football, Al Jezeera, or Jerusalem Post TV I want be able to watch over the net. No one gives a damn about whether the net is neutral, not even Tim Wu who coined the term. Neutrality is just a reasonable way to write a law that prevents Glenn Britt of Time Warner or Ivan Seidenberg of Verizon from limiting my choices. Freedom of speech is why people are so passionate about NN, not some payoff from Google.
ITE Guam's first round stimulus grant was probably a mistake because 95+% of Guam has two broadband carriers already
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Monday, 03 May 2010 23:25 |
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Jerry Fugit and Eric Greig, two University of Texas law students asked 67 companies for the basic information on "interconnection, terms of service, nondiscrimination, or network management." 61 refused to answer at all, and most of the rest didn't answer the basic questions. My reading of the stimulus rules suggests much of this information needs to be publicly disclosed.
In practice, government agencies usually ignore violations like this unless they have other problems with the grant. So the University has applied in round two for a grant to create a center to resolve these problems. Best of luck. db
Of the 67 companies we contacted, only six (6) were willing to share any information regarding interconnection, terms of service, nondiscrimination, or network management. Only one (1) of these applications, VTX Telecom, Inc., would share the names and geographic locations of the network’s anchor institutions and interconnection points, its terms of service, and its network management practices.
Jerry Fugit
Eric Greig
4/26/10
Final Thoughts on the BIP/BTOP Survey
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Friday, 16 April 2010 13:55 |
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 Network New Hampshire University of New Hampshire
"The fiber network will support extensions with access points at 1500 foot intervals. Huts and splice points will be placed in or near existing telephone Central Offices (CO)." Across the nation I've been hearing of locations with high speed fiber running through but useless because the nearest access point is tens of miles away. I don't know how much more it costs to have many local access points, but if it's not prohibitive this is a very good idea. NNHM should also be commended for being explicit about how much fiber they will run (450 miles) and provided a realistic estimate of the jobs directly created. Scott Valcourt. a project leader, has a decade of experience with DSL at the UNH Interoperability Lab and is respected on the industry. http://www.ntia.doc.gov/broadbandgrants/applications/summaries/4248.pdf
I'd welcome more examples of best practices to emulate either from pending or approved projects. |
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Wednesday, 20 January 2010 02:26 |
Things went horribly wrong with the first round of the U.S. stimulus. Amazingly few proposals came in that would reach the unserved at reasonable cost or create jobs effectively, the primary goals. The normal government response - including the past history of RUS - would be to give out the money anyway, put lipstick on the pig, and hope no one notices. At NTIA, the grants announced are mostly misdirected, and at least one smells like fraud. Congress was already roasting RUS for how long they were taking to spend the stimulus money, putting on pressure to "do something." Jonathan wisely resisted.
Adelstein decided instead to take the heat for the delay and reboot. They just began a 60 day period for new applications. At RUS, they rededicated to the program's original goal, serving "rural areas that currently lack adequate broadband service." That won't be easy: it turns out reaching the unserved is far harder than any of us realized a year ago, There are fewer than expected - a good thing - and they are scattered in a way that makes it generally impractical for new entrants to serve them. Nearly none are in clusters of 500 or 5,000. That means generally only the local telco or cableco, with facilities in place, have obvious opportunities. Nearly none of the proposed "middle mile" builds make sense for public subsidy.
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Tuesday, 03 November 2009 23:08 |
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It's time to save money by giving everyone broadband + voice over broadband rather than PSTN voice, I learned five years ago from Matt Bross of BT, Bill Smith of BellSouth, Mark Wegleitner and other tech leaders. Now, D.C. regular John Rose, head of OPASTCO, the small carrier association, sees "turning off the PSTN" the smart move for his members. The future will see "the public switched telephone network fully converted to a broadband network."
"Rose doesn't look like a revolutionary, but suggesting "All intercarrier compensation (ICC) rates transition down to zero over seven years," is a major change in telco requests. The OPASTCO proposals (below) also include major subsidies. The revolutionary part is paying for the universal broadband by bringing down network costs, There are enormous savings because you can use cheap standard equipment; don't need large engineering staffs; can centrally upgrade customers, ... .
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Tuesday, 31 August 2010 15:50 |
 Montana Opticom was approved for a $32M RUS grant to build fiber to 7K+ homes in Gallatin County that were said to be "underserved." I have data from Opticom's web site, local governments for a majority of the population, local news reporting and their competitors that the area is well served. If so, the grant should be immediately frozen.
According to the map posted at Opticom's website the majority of homes they intend to cover can already get 10 megabit cable modem service from Bresnan. I checked this with Bresnan and with local officials for Belgrade, Montana; Manhattan, Montana and Four Corners, Montana. Those three contain a majority of the homes to be covered. They already have two broadband choices, at least one at 8-10 megabits. In addition, most of the additional area on the Opticom map has DSL service as well as a local WISP. I worked from a map on the Opticom site.
In addition, Opticom currently offers broadband to 300 homes at some of the highest prices in the world. Unless they firmly committed to offer honestly "affordable" prices, Julius Genachowski at the FCC should personally step in, review the situation with RUS, and make sure that this project will deliver his repeated promise of "affordable broadband."
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Sunday, 04 July 2010 18:48 |
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A few paragraphs that set the rules for $7B.
RURAL UTILITIES SERVICE
RURAL WATER AND WASTE DISPOSAL PROGRAM ACCOUNT
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Tuesday, 04 May 2010 18:11 |
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Democratic Senator Jeanne Shaheen is very reluctant to criticize the administration in a tough election year, but everyone in Congress is so discouraged by the results of the broadband stimulus she felt a need to speak out. As Congress Daily reports "A Democrat on the Senate Small Business Committee raised concerns on Tuesday that federal regulators are wasting taxpayer dollars by funding duplicate broadband infrastructure projects as part of the $7.2 billion broadband stimulus program."
Senator Shaheen went on to say "They have funded projects that are competing with providers that already are on the ground." That's not true everywhere, but there are so many examples of NTIA unneeded overbuilds that Larry Strickling was inaccurate saying "The idea of funding competitors though, that's not the business we're in." When Joe Biden went down to the North Georgia project and said "we're bringing broadband to an area that doesn't have any," he was speaking in a town where every home could get 6 megabits. A 45 megabit T-3 was just down the road, fast enough to transmit live 4 different HD camera angles of his speech.
Democrats joined the Republicans last September in demanding that RUS and NTIA refocus on using the money for what Congress intended: bring broadband to those without. Adelstein at RUS has since refocused "We very clearly distinguish between our program and the NTIA program .. We are very committed to going to the most unserved, remote parts of the country."
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Monday, 03 May 2010 22:30 |
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Several of the "middle mile" fiber builds should not have been funded. At least one, based on the publicly available data, is being funded at several times what the job should cost.
If there there isn't any fiber or capacity is inadequate and not inexpensively upgraded, the test should be whether enough people will be served to justify the expense. That's a judgment call without an easy answer. At $200 per unserved home passed, it makes sense. At $20,000 per home passed, it doesn't. At $4,000/home, it's a tough call. Satellite is about to increase speeds to 5 and 10 megabits, but has latency and other disadvantages. Microwave is getting better and cheaper, and often can deliver 100 megabits for $15K-$50K.
Populated areas without fiber backhaul are surprisingly rare. There are very, very few places in the developed world that don't already have enough fiber. Close to 100% of local telco exchanges are fiber fed and can be inexpensively upgraded when more capacity is needed. The actual fiber is cheap but construction expensive, so typically there there are extras run but not used (dark fiber.) In general, relatively inexpensive gear can "light" this fiber. You can also expand the capacity of existing fiber through "wave division multiplexing." That's not as cheap but usually not close to the cost of running new fiber.
If there's plenty of fiber in place, it's only right to overbuild if the new fiber will be sufficiently cheaper than what's in place. If the local market price is $40/megabit in moderate quantity and the proposed fee of the new provider is $20/megabit, then one can measure the likely saving by taking an estimate of demand and multiplying it by the price difference. The market prices need to be surveyed and compared with the prices proposed by the new carrier. The answer won't be exact, but I believe some of the funded projects are an order of magnitude more expensive than the likely savings. That's wasting taxpayer money when the budget deficit is at historic levels.
In some parts of the U.S., the telco has the only fiber and uses that market power to charge extortionate prices. Bandwidth costs $5-$15/megabit in hundreds of cities/ Many examples came up at the broadband workshops of prices of $100 and even $200/megabit despite minimal cost to provide the service.
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Thursday, 15 April 2010 20:17 |
95% of homes in Guam can receive DSL and most can get cable as well. There's 3G coverage across the entire island from several carriers, and the cell phone penetration is over 100%. GTA is delivering fiber to the home in three areas and intends to expand it. Guam has huge military bases and a thriving tourist trade with Japan, so is doing well economically. So why the heck did Larry give them broadband money? It's supposed to help people who can't get broadband.
Was Island Telephone and Engineering's $8M grant influenced by their employment of the Governor's brother, Carlos Camacho, and the chief of staff's son, Brian Bamba? I have no evidence. Local politicians provided strong support for the grant and the even more outrageous $80M requested in round two. It could have simply been incompetent staff work.
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Tuesday, 08 December 2009 23:02 |
 There's a bombshell buried on FCC broadband slide 47: three companies are responsible for the bulk of the problem. People gasped in D.C. when I said the Bells had been treating much of rural America “like the Romans treated the Sabine Women” but even I didn't realize the percentage was that high. Bell rural coverage is often 50-60%, far lower than other U.S. rural carriers or the rural coverage of any Western European telco.
Any U.S. broadband program will therefore fail – badly – unless there's a strategy to reach the homes unserved in Bell territory. Working with the companies is ideal, but if they won't co-operate Larry, Jonathan, and Blair need to find an alternative.
The Bell boycott of the $7.2B the government wants to give away kills the results of the program. From a senior source on the telco side last year, I learned the carriers are asking for $30-60B in subsidies.
That's a remarkable sum, given that the FCC study concludes the country can reach every home at good speed for subsidies of $5-25B (article to follow. Total in FCC slides for 100% up to 3 meg $20B, 10 meg $35B, 30 meg $50B. Required subsidy is 25-50%, I believe, hence $5-25B, probably below $15B. Reducing monopoly rural backhaul rates through “special access” also required.)
I believe there are three strategies: “Bum a billion”, “Teddy Roosevelt's Big Stick,”and “Timms' 99.6% solution”
“Bum a billion” Pay off the bells as requested, because the political price of doing anything else is too high.
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