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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.

• While commercial interests aren't building out towers everywhere, they are putting transmitters almost everywhere a tower exists. Verizon wants to put a radio on virtually any available tower with a reasonable price (including backhaul,) I hear from the field. It's their strategy to win customers by having the best coverage, and the other carriers don't want to be far behind. Verizon's announced plans for 92% LTE by 2013 confirm that, especially because they are already discussing how to go even further. On the other hand, I've found no evidence of a major commercial buildout of towers into the areas not covered. That suggests a strategy of focusing subsidies on building towers + backhaul while expecting the carriers will add the transmitters and service.
• While getting more spectrum will be a good thing, increasing the efficiency of spectrum use has a payoff that will be even larger. I'd guess some practical efforts can effectively raise efficiency in the available spectrum 5-10 times, although I don't have solid data behind to support that yet. <hr id="system-readmore" /> AT&T is ready to distribute 5-10M femtocells that will effectively almost double their capacity. Adelstein's "Use It or Lose It" rules on license renewal would effectively bring into use 10's of megahertz - or more - in urban areas and potentially hundreds in extreme rural areas. Without a penny of public money, wireless coverage can easily expanded to 98-99%. It's ridiculous that the carriers don't share buildouts, as Cingular and AT&T Wireless did. Bellsouth/Cingular VP Ron Dykes pointed out the cooperative build saved "hundreds of millions" in New York alone, and would also allow more intense use of the spectrum as the different carriers had different peak use patterns. Extending the "white space" rules into the remainder of the spectrum is natural; there's no reason a radar system near the Arctic needs to prohibit use of the same spectrum in Florida. Ultimately, except for the most crucial needs, we need to change the rules from "no interference ever" to "minimal interference," allowing cognitive radio and related technologies.

RAND and other cold warriors developed the Delphi method of asking experts for opinions, then recirculating the comments and asking the original panel to rethink. The goal is for the discussion to lead to a "carefully considered expert consensus." The result is what Herman Kahn called a "surprise-free" projection. No prediction is certain, of course; Herman's own work Towards The Year 2000 had some right and many wrong. With time and funding, I'd add a slew of scenarios. While a Delphi survey has the trappings of science, it's just an organized collection of opinion. The same is true of almost any social or policy prediction, of course. To respond http://bit.ly/uT2D1

1. Think like an engineer, not like a lawyer or a theoretical economist. Look at the facts on the ground and the homes to be reached. Identify the least expensive way to do that, then do it. There are about 4M homes that can get cable TV but not data that can be upgraded for less than $500/home to 10 and 50 megabit. That's $1.5B of the $7.2B to reach 3M homes, nearly half of the probable unserved. Some of the remaining territories can be reached with DSL or wireless at costs well under $1,000/home. Give those priority.

2. Get serious about not wasting money. Many of the projects coming in are asking are asking two to five times what they should cost

I wish him luck. AT&T just a few weeks ago refused to even reveal the total coverage across their network. This is BS - any substantial competitor can easily test for information and almost always can buy it commercially. AT&T simply doesn't want to reveal how little they have done to extend broadband to the millions in their terriory who remain "unserved."

Ryan Womack at Broadband Census reports Strickling said, “We need the data: I think it is a national imperative in which this data be collected. ... Once that is made clear to them, at the most senior levels, then this thing will work itself out.” I'm sending this to an AT&T spokesman in D.C., cc'd to Larry at NTIA. It's time for AT&T to stop hiding. I'm also sending it to Walt McCormick at USTA, who recently wrote "The nation’s broadband providers have long supported the FCC broadband principles. We embrace transparency."

Verizon Offices Equipped for High Speed Internet in Pennsylvania

"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.

2% of the stimulus, $100-150M, is enough to reach several hundred thousand "unserved" homes. The first $3B in spending that will start to go out in December probably won't connect that many. That's either a scandal or an opportunity. Charter passes 11,909,500 homes with video but only 11,292,800 of with cable modem service. Over 600,000 homes can't get cable modem, about 5%. That compares to less than 1% at both Comcast and Time Warner.

Some of these homes are served by wireless or DSL and others are prohibitively expensive to reach with backhaul. Probably 200-400K can be inexpensively covered. If 200,000 can be upgraded at $500/home (high estimate,) that’s $100M total. 300,000 would cost $150M. $500/home is 50-90% cheaper than most of the last mile stimulus proposals. The “middle mile” spending is even less sensible. Massachusetts is asking over $100M just for middle mile in an area with fewer than 3,000 "unserved" homes, an amazing $30,000/home for backhaul in an area that has already has fiber backhaul nearly throughout.

Charter is in bankruptcy and has faced financial problems for years, so it's no surprise they are far behind. Cable modems are an extremely profitable service - often 70-80% EBITDA margins - so most carriers have deployed to almost everyone. But Charter hasn't had ordinary access to capital. Most of the money can be offered as loans, not grants. The buildouts are profitable so the company can repay the loans. Paul Allen is continuing in effective control of the company, and news reports claim he is looking for a favorable tax outcome. Surely he can find a way to help the President bring broadband to all. (That's Paul, with Bill Gates and his other colleagues in the early days of Microsoft.)

4M homes with cable TV but not data are the key target for stimulus spending because most can be upgraded for between $100 & $500. In hindsight, requesting proposals from everywhere for the stimulus was a serious mistake that overwhelmed the system. Many of the 2200 applications are totally bogus, filed by people who hope to win a lottery. Instead, NTIA should have defined areas that need service and looked for the best way to provide it. I call that the engineer's approach: define the problem to be solved, and then find the best solution.

The Massachusetts proposal, at first glance, appears a typical example of how the system went wrong. In some cases, middle mile builds are crucial for broadband deployment because backhaul is unavailable or brutally expensive. Overbuilds rarely are the right choice where backhaul is in place, which applies to most of the Massachusetts proposal. They would have to offer a price so much lower than the existing service the numbers usually don't add up. There's a better way to help rural areas like this: narrowly-tailored "special access" rules that bring down monopoly-like prices. I need to look more closely at the Massachusetts application before I can say anything certain, however. It's likely to go through, because Sharon Gillett was in charge and she knew enough to write a proposal that fits the funding. Sharon is now the head of an FCC Bureau, so RUS/NTIA will want to approve the money.

Eliminating Internet backhaul ripoffs is by far the most effective step the FCC can take to increase broadband availability, it became obvious at the broadband hearings. Some other choices I think important, not in a strict order.

• Upgrade rural cablecos which offer TV but not data. About 4M U.S. households (SNL Kagan figure) can't get cable modems although they can get TV. Many, probably most, can be upgraded for less than $500. It's a major failure they weren't identified in the first funding wave. Upgrading 1M homes would cost less than $500M, 8% of the $7.2B in the stimulus. The whole $7B probably won't reach thet many if they don't get things together.
• Find the waste in the $20B ICC and USF programs, much of which is ill-spent. That will provide more than enough money to fund a further broadband buildout, subsidies for the poor, and the other priorities in the plan. I strongly believe in universal service, but not the level of subsidies that allow the RLECs to come to wall street and claim they are twice as profitable as the bells. They exagerrate, but much of the money is shoveled in the front door from the government and out the back door to certain "rural" telcos. Among other things, we still spend $hundreds of imllions every year for "high cost switches" when no one has bought a high cost switch for the better part of a decade.
• Make sure not to pay retail for any subsidies.
• Make far more spectrum effectively available. While opening more spectrum is a good thing, there's five or ten times as much potential for improving present uses. Mike Calabrese has some ideas here and I written how to create more spectrum.

AT&T is doing a technically similar build - fiber to a neighborhood DSL cabinet - for $300/home passed to 30M homes. FairPoint is using Occam remote terminals, which would be $2-6M in gear if the proposal is approved. They are similar to what Qwest is now using for deliver up to 20 megabits upstream and 40 megabits downstream. AT&T throttles that to lower speeds, perhaps to accommodate their TV package, but has talked of raising the speeds. Qwest's speeds are more appropriate with current technology.

FairPoint and other companies smaller than AT&T probably pay $50-$100 more per home than the giant telco because of smaller volumes of equipment purchases and construction contracting. Lower density, which means more cabinets and installations, also add costs. While some line-powered 24 port pizza-box size DSLAMs can be installed in a few days work, total, other units need power connections and everything need to be engineered. So assuming $7,000/cabinet is not out of line for a rural build, where an engineer has to travel to check the site, draw a work order, supervise the field crew, and test the installation.  RUS should be able to negotiate some savings, but these figures should be representative of costs for most of the "unserved" who can't be reached by cable TV.

These are the kind of costs we need to accept if we want to provide landline data to 98-99% of the U.S. Fortunately, almost half of the 5-10M "unserved" homes can get cable TV but not data, and can be upgraded for less than $500/home, an obvious first step in any broadband plan. But those that cannot typically are extremely remote and many will face costs like this. If the Fairpoint figures are representative, it will be easy and quick to get to 98-99% megabit coverage with the $7.2B in the stimulus. That's a separate article. I also believe that fiber all the way home would be even better anywhere that's affordable.

Quick tips to RUS to save public money:

• Broadband, once the equipment and backhaul are in place, is a very profitable service.