If Only

The cover of the CES 2012 Daily, featuring details of Wednesday’s interview of Federal Communications Commission (FCC) Chairman Julius Genachowski by Consumer Electronic Association president Gary Shapiro, and that of Ericsson president/CEO Hans Vestberg’s keynote the same day sums up things nicely.

The first headline: “FCC’s Genachowski:  ‘We Need Incentive Auction Law, Now;’ the second: “Ericsson’s Vestberg: Networked Society Not Far Away.”

If only.

FCC Chairman Genachowski, in his third CES, noted that the FCC has been sounding the alarm about the spectrum crunch for three years. He warned of not only slower speeds and higher prices for mobile broadband, but also that “’if we don’t create innovation zones based on massive broadband in the U.S, other countries surely will,’ and that capital and jobs will flow in that direction.”

Exactly. CES Daily’s lead story about the FCC chairman’s walking tour of the sprawling show floor captured his impressions that “the show presented more than 3,000 companies, with virtually every product on the floor fueled by wired and wireless broadband Internet.”

One such company is Ericsson, and in his keynote, president/CEO Vestberg said that “[a]nything that benefits from being connected will be connected in the future.”

What is not assured, however, is that this future happens here, in the U.S. The 3,000 exhibitor companies on the show floor, and the companies eager to to buy their products - and all the potential jobs created by these innovations – can just as easily as not go to another country willing to make this networked society a reality.

Growing Pains

Carriers find themselves in an unenviable position, facing soaring data demands driven by consumers using powerful and sophisticated wireless devices such as smartphones and tablets. Preparing to meet these demands requires extensive capital investment in their networks, including the transition to “4G” or 4^th generation wireless voice, data and video capabilities.

Witness Verizon’s recent growing pains with 4G. The carrier typically enjoys strong customer satisfaction ratings, but not so this time, having instead earned widespread customer complaints about service outages during the busy holiday season.

AT&T’s proposed merger with T-Mobile ran into a different sort of technical problem, that of the regulatory kind, and the carrier is scrambling to find new ways to acquire spectrum to meet today’s (and tomorrow’s) bandwidth demands.

Then there is the cool factor: Wall Street tends to dislike massive capital investments by carriers. Customers care more about the applications and devices introduced by the other duopoly, Apple and Google, and the social networking opportunities offered by Facebook and Twitter. The network is taken for granted.

Nowhere is this more on display than at the giant Consumer Electronics Show, which will be held this week in Las Vegas. Companies use the event to introduce their latest gee-whiz, interconnected devices that will put even greater burdens on carrier networks.

The carriers this year appear to be reducing their presence at the show, perhaps hoping the problem will just go away. It won’t, not anytime soon.

The show floor itself presents its own sort of future irony of bandwidth exhaust, with attendees all trying to do the same thing on their mobile devices, at the same time. Connectivity seems a dream, and one is lucky to squeeze out a cryptic text message or two.

US Ignite!

On Monday, December 19, 2011, the National Association of Telecommunications Officers and Advisors, or NATOA, will hold an “eNATOA” webinar featuring a panel discussion about US Ignite.

From NATOA: “US Ignite will interconnect hundreds of fiber networks throughout the United States over infrastructure provided by the National Science Foundation.  The interconnected ‘network of networks’ will then serve as a test-bed for innovators, researchers, and application developers to work to provide fiber-based next generation applications.”

The discussion will include participants from the White House Office of Science and Technology Policy, or OSTP, including White House Senior Advisor Nick Maynard, OSTP Deputy CTO Chris Vein, as well as participants in US Ignite, including Jim Ingraham, VP Strategic Planning, Chattanooga Electric Power Board.

Chattanooga, it should be remembered, received a $111 million stimulus grant from the U.S. Department of Energy to build a 1-Gig Smart Grid Fiber-to-the-Home (FTTH) network, using Alcatel-Lucent equipment in the access plant – the part of the network closest to the home.

Alcatel-Lucent featured a demonstration of the Chattanooga’s build at last year’s Consumer Electronics Show, or CES, and also had a booth at TIA 2011, Inside the Network, held May 18-20, 2011, in Dallas, Texas.

NATOA President Joanne Hovis will moderate the discussion.

Next up: Gig. U!

“The Last Pretty Girl in the Bar”

You have to hand it to Verizon, but it just “ran off with the last pretty girl in the bar,” according to a note from Craig Moffett, riffing on Verizon’s “transformative” deal to acquire $3.6 billion worth of spectrum from SpectrumCo LLC, which is a consortium of cable companies led by Comcast and includes Clearwire.

Then again, Verizon has been doing this for years.

I recall a conversation a number of years ago, with one of its top federal regulatory people, following the company’s announcement about its major investment in Fiber-to-the-Home (FTTH) technology. Verizon’s announcement came after a series of regulatory moves by the U.S. Federal Communications Commission (FCC), intended to increase investment in broadband by the telcos, so they could better compete with cable operators. Cable companies had no similar regulatory impediments and were clobbering the telcos in broadband deployment.

She and I were discussing comments about the company’s move into fiber, which naysayers were saying would not work, did not make sense, etc. She noted that they thought then-Verizon CEO Ivan Seidenberg was crazy to invest in FTTH on a massive scale, but the same naysayers thought he was crazy to invest so heavily in wireless. The most telling thing about our conversation was her belief in the wisdom of both of these then-risky investments.

Verizon’s announcement does a number of things, which other commenters have duly observed. One result is that spectrum just became more scarce, and more expensive, for other carriers, now at a premium over a large swath that Verizon picked up in 2006, following the FCC’s auction of the spectrum equivalent to “prime beachfront property” for wireless broadband deployment.

Another impact of Verizon’s announcement is that the cable companies, which have long been thought to be natural competitors of the telcos, now have an opportunity to resell wireless capacity from Verizon, so they become, in effect, allies. So it goes in telecom.

A primary theme at “TIA 2011: Inside the Network,” held this past May 2011 in Dallas, was the notion that events in the Information and Computer Technologies industry are moving so fast that companies and industry segments – telcos, cable companies, handset vendors, and search engine companies that morphed into leading handset vendors, seemingly overnight – will be competitors on one issue, and allies on the other.

This point was underscored by AT&T CEO Randall Stephenson, who noted how companies, which had supported open access or net neutrality at the FCC for years, were also on record at the agency in support of the company’s proposed merger with T-Mobile. Now that the merger has been nixed, AT&T’s agreement to spend $8 billion on network investments, had the deal been approved, will be shelved, as well.

It doesn’t take a genius to figure out that the “virtuous cycle of innovation” — which encourages investment in the network, applications, services, and devices — is dependent upon every element within the cycle going full bore. Today’s mobile devices are more powerful than computers from just several years ago, but without a powerful network – or powerfully enticing applications for consumers on the go such as video streaming, for one – the result is stagnation, which doesn’t help anyone, anywhere.

The Verizon announcement illustrates this “try, try again” philosophy in telecom dealmaking at its best. SpectrumCo LLC was created to take advantage of Clearwire’s Wi-Max service, sort of a Wi-Fi on steroids, which, unfortunately, has not worked as planned. The cable companies behind that original venture now have another avenue for reaching consumers with wireless services – reselling a telco’s service – which reflects the positive market impact of wireless resellers.

So if the first venture doesn’t succeed, figure something else out that will, and get a move on.

FCC Commissioner McDowell Calls for “Spectral Efficiency”

Telecommunications Industry Association (TIA) President Grant Seiffert interviews Commissioner Robert McDowell from the U.S. Federal Communications Commission (FCC) about broadband deployment and innovation during his tenure at the telecommunications regulator.

Much has changed since Commissioner McDowell joined the agency – with smartphones barely on the horizon and a “tablet” considered a way to ingest medicine. Today, these widely used and increasingly powerful computing devices are responsible for much of the bandwidth congestion that is driving the agency to make more spectrum available for wireless broadband.

Echoing themes from his presentation at “TIA 2011: Inside the Network,” held this past May in Dallas, Commissioner McDowell expressed his belief that more spectrum must be accompanied by “spectral efficiency,” given that it will take the better part of a decade to get benefits from this spectrum into consumers’ hands.

At TIA 2011, Commissioner McDowell emphasized that every antenna should be connected to a piece of fiber to provide “spectral efficiency,” while in the current interview he describes Distributed Antenna Systems, or DAS – essentially a series of wireless antennas strung together on a length of fiber, for deployment inside buildings or along highway or rail lines, for example.

Other means for achieving spectral efficiency exist, but the Commissioner’s general point – that making spectrum available alone is not going to solve all of the congestion issues associated with widespread use of increasingly powerful wireless computing devices.

Also discussed in the interview: the FCC’s recent comprehensive transformation of the Universal Service Fund, or USF, which is a roughly $8 billion-a-year subsidy by which one set of consumers, typically in urban areas, pay into a fund to provide telephone service to another set of consumers, such as those in rural areas.

Commissioner McDowell noted that the FCC’s recent vote capped the size of the fund used for rural areas, and tried to provide incentives for companies to provide consumers with telecommunications services in the most efficient manner possible.

Breakin’ Up is Hard to Do (or is Very Expensive to Do)

In the “Unrequited Love Department,” AT&T bails on its proposed merger with T-Mobile, following the U.S. Federal Communications Commission’s entry into the fray earlier this week with a proposal of its own: schedule a hearing on the deal before an Administrative Law Judge. The rare move by the U.S. telecommunications regulator essentially presented AT&T with a “lose-lose” situation, given that the U.S. Department of Justice (DoJ) filed suit against the merger in August, which publicly committed to fighting the deal in court as recently as a couple of weeks ago.

Given the double-barreled opposition, the carrier is taking the only path out, given the potential for continued protracted litigation, even if it prevailed against DoJ, and the potential for having a dark cloud follow it in any other regulatory or legislative matter for some time to come.

This is not the same thing as “cloud computing,” but the math adds up to zero, which is the important point, and “Black Friday” may today mean something else, indeed in some quarters.

The move probably also comes as a relief to other carriers, worried from the beginning about the regulatory backlash from any concessions that AT&T might have made to secure the deal’s approval, which then could be applied industry-wide using the logic that “if they can do it, you shall too.”

This, however, is my own opinion.

According to the Barron’s blog linked above, AT&T may seek to acquire some of T-Mobile’s wireless assets. One of AT&T’s talking points on the merger was that it would spend $8 billion on network upgrades as a merger condition, if approved, that the deal would create thousands of U.S. jobs, and the carrier would bring 5,000 call center jobs back into the U.S.

These talking points resonated with the public – I even overheard some farmers at an auction discussing the pros and cons of these finer details before 7:15 AM this past Labor Day, while I was looking for things I really didn’t need to follow me home (as in “towed”) – but on we go to Plan B, while the overall network investment and job creation impact after the announcement is at this time unclear.

The Broadband Internet Marketplace

This past Monday, Nov. 14, 2011, the U.S. Chamber of Commerce hosted a panel discussion on the broadband ecosystem, entitled “The Broadband Internet Marketplace: Competition, Investment and Innovation,” with keynote speaker Deputy Chief Technology Officer for Internet Policy Daniel Weitzner, from the Office of Science and Technology Policy at the White House – right across the street from the Chamber’s Washington, D.C., headquarters.

Also appearing on the panel: Deloitte’s Dwight Allen, Director of Strategy Development, discussing the company’s very informative study on some potential outcomes of 4G deployment in the U.S. – and U.S. competitiveness – and myself, discussing the role of regulation on innovation and investment in the network.

Mr. Weitzner spoke at length about the urgent need to protect online privacy through an alternative regulatory approach to be overseen by the U.S. Federal Trade Commission, urging action on this issue now. Introducing the morning’s panel discussion, the U.S. Chamber’s Bill Kovacs noted his organization’s long support for the appropriate legislative and regulatory climate to foster innovation, and its activities to ensure that legacy policies were not applied to new networks, going back to 2002.

Mr. Allen observed that the U.S. government could play an extremely beneficial role in making more wireless spectrum available to carriers through an auctions process similar to those conducted in the past by the Federal Communications Commission, or F.C.C., and which played a key role in helping the United States to become a world leader in wireless voice technologies, as well as smartphones.

The Deloitte study notes that 3 of the 5 leading smartphone operating systems were designed by U.S. companies. This is the broadband ecosystem, where applications, devices, networks and services all combine, and continuously recombine in an effort to provide value for consumers. Cox today announced that it plans to discontinue offering wireless services, citing “several reasons, including the rapid shift to 4G and its inability to land ‘iconic devices.’”

These iconic devices possess the computing power several times greater than desktop computers from just several years ago, and this rapid shift in technology power, and fluidity of consumer choice, takes scale, as another article about Cox illustrates.

These rapid shifts put additional pressures on carriers to manage the exploding capacity demands on their networks – and by extension, on network equipment vendors. These vendors must address the challenges posed by scale in designing optical equipment that is priced in dollars, rather than tens of thousands of dollars, for the access plant, which must be amortized over dozens of consumers rather than thousands. This is what I spoke about.

Carriers support the development of an investment climate that encourages network enhancements to flow unimpeded by regulatory concerns over innovative technologies, and equipment vendors also need regulatory certainty to develop the technologies necessary for the future.

As the NTIA’s study on broadband adoption, released just last week, noted, there is good news and bad news in U.S. consumer habits. The good news is that 4 out of 5 Americans now use the Internet at home, using a variety of devices and access technologies. The bad news, however, is that 1 of 5 Americans do not. While the NTIA study did not delve into privacy, it remains a growing concern for many people and for many companies, too, unsure of how to protect consumers and what policies, or best practices, they should follow.

Mr. Weitzner also explained the cross-border concerns associated with privacy, to offer one example, whereby different states, and different countries or regions (he cited Europe on privacy), may apply standards more rigorous than applied elsewhere, effectively hindering the flow of commerce across the globe.

Equipment vendors face similar concerns that may slow or even prevent, outright, the development and sale of their technologies, either new or existing. I pointed out the role of uniform standards bodies in harmonizing, from a technical standpoint, the flow of trade and investment when and where it is needed most.

I’ll close now with an essential point about the potential adoption of 4G, from the Deloitte study, which observed that early predictions about consumer adoption patterns, for 3G wireless technologies, were not focused on multimedia capabilities, nor did the underlying studies mentions tablets, missing the potential for development of devices that would soon upend the market, and its enormous impact on network investment.

In short, the rapid deployment of enhanced technologies, such as 4G wireless, which offer broadband capacity many times greater than that of 3G, could very well usher in applications and services, even new industries, which we have seen follow in the wake of Apple’s introduction of the iPhone.

The NeverEnding Story

Wednesday’s Washington Examiner featured an Op Ed piece by Thomas Hazlett on the continuing saga of net neutrality. This discussion continues even today – if not every day, in some corner of the nation’s capitol – with a party line vote in the U.S. Senate of 52-46 declining to overturn the Federal Communications Commission’s (FCC’s) December 2010 ruling under the Congressional Review Act.

U.S. President Obama promised to veto the measure, had the Senate vote passed. Recall that a similar effort passed in the House to overturn the net neutrality, or “open Internet” order, which has also been appealed to federal courts, not once but twice, as Verizon’s previous appeal was turned down by the U.S. Court of Appeals for the D.C. Circuit on timeliness grounds.

This is timely, indeed, which is to say that the FCC’s open Internet order is part of a long struggle over how Internet traffic is delivered, and by which carriers and to whom, and what strings are attached. Mr. Hazlett’s opinion piece notes the decision made by successive FCC administrations in the earlier part of the last decade to resolve unbundling, or network sharing, obligations imposed on large incumbent telcos.  These telcos, at the time, were late to the game in delivering broadband to consumers in the form of DSL.

The cable industry, subject to a different regulatory regime under the Telecommunications Act of 1996, had no such unbundling, or network sharing obligations, with competitors. However, cable operators did have an overhang involving “open access” in the Brand X decision, which the U.S. Supreme Court rejected in 2005. This set up the FCC’s decision in August of that year declining to impose “net neutrality” obligations on broadband providers.

Mr. Hazlett’s piece notes the rapid investment by telcos in DSL following a 2003 decision on network sharing. This was borne out byWednesday’s release of data by NTIA on broadband adoption in the U.S., with the number of consumers receiving broadband from cable pegged at 32 percent, and DSL at 23 percent. As to the bigger picture, whether DSL would have experienced the same deployment and adoption trajectory that it does today is unknown, because things didn’t turn out that way.

A memorable cover story from Barron’s on August 20, 2001 entitled: “Game Over” described how the cable industry had clobbered the telcos in the race  to bring broadband to consumers; I recall executives from phone companies describe, at around the same time, the rapidly closing window of opportunity to provide broadband to consumers – the company I worked for at the time manufactured the equipment that would allow them to do so – but the telcos had regulatory concerns about deploying broadband in their networks.

What is known, however, is that consumer adoption, particularly on wireless devices including smartphones and tablets, has been nothing short of meteoric, as has been the rise of social networking and content sites. This is not just happening here, in the U.S., but on a global basis, as shown by China Daily USA’s article from the other day on the skyrocketing use of smartphones in that country by urban consumers, many of whom own more than one smartphone. (And these are not subsidized.)

The other piece in this puzzle involves ZTE’s plans on entering the tablet wars with a device of its own, challenging Apple and Amazon in the U.S. Other devices are manufactured overseas. Take a look at the back, or front, of your iPhone sometime (“Designed by Apple in California.  Assembled in China.”) HTC makes devices for Verizon and other carriers, and so forth and so on.

Much of this is to Steve Jobs’ credit. Back in the day (2001 to 2002), I recall a comment at a coalition meeting about what kind of adoption numbers it would take to get Hollywood interested in broadband, and the suggestion offered was somewhere north of 25 million subscribers in the U.S. At the time, Napster effectively had been shut down, and the music industry was largely confused, and also reactive, about how to digitally package music so that it could be widely distributed, but also protected, for the benefit of copyright holders.

Enter the iPod, enter iTunes, the iPhone and iPad, and the rest is history, as they say. Which brings me to my final comment about the continuing influence of Mr. Jobs on these issues: Adobe has agreed to settle its long running dispute with Apple, over Flash, according to a piece in Thursday’s Wall Street Journal, with these comments by the late Mr. Jobs, about what was wrong with the picture:

The mobile era is about low-power devices, touch interfaces and open web standards—all areas where Flash falls short.’—Steve Jobs, April 2010

Connect to Compete

Today, Nov. 9, 2011, the National Information and Telecommunications Administration, or NTIA, in the U.S. Department of Commerce, released a report on broadband adoption in the United States, with some interesting statistics on why consumers choose not to use the Internet at home.

According to the report, entitled “Exploring the Digital Age: Computer and Internet Use at Home,” 47% of Americans not using broadband cite lack of need or interest for using broadband, while the second largest group, 24%, cited lack of affordability as the reason for not using broadband, and 15% cited lack of an adequate computer.

Also today, a group of cable companies, joined by Microsoft, announced a program called Connect to Compete to price broadband at $9.95 for lower income families – those with children eligible for free school lunches. This effort is aimed at spurring broadband adoption, with the minimum download speed to be offered at 1 megabit per second.

U.S. companies and the U.S. government view broadband as a necessary tool for competing in the 21st century’s information-based economy, and the global competition is fierce, as Federal Communications Chairman Julius Genochowski observed in his remarks today on U.S. broadband adoption.

Information about the state of the race for digital literacy is virtually constant: for example, China Daily reports increasingly rapid adoption of smartphones by urban consumers, the third highest in the world, at 35%, behind Singapore (62%) and Australia (37%).

Mobile Mania and Spectrum Solutions from All Quarters

In the midst of a protracted fight among carriers for more wireless spectrum, Fierce Telecom has some interesting stories about how usage patterns are changing. First, Fairpoint’s earnings show that broadband and wireless backhaul (wholesale services) are growing, while the landline voice business continues to slide.

Spectrum is part of the story, but without high-capacity backhaul to wireless towers or cells, carriers have to get very creative, and they are doing so. Witness another story from the same source about Verizon and Sprint doing what they do every day, which is managing bottlenecks in their mobile services using video optimization (Verizon), and their current expectations of how long they can hold things together without more spectrum (2015 and 2014, respectively).

There are other tricks, too, such as using Wi-Fi for wireless backbaul (T-Mobile started doing this years ago), which the Wall Street Journal’s Holman Jenkins pointed out several weeks ago (October 18, 2011) in a discussion of the proposed AT&T and T-Mobile merger.  Mr. Jenkins also tees up the Steve Jobs connection, which started the mobile data landslide several years ago, when Apple introduced the world’s first smartphone, the iPhone.

Much of today’s traffic comes from Smartphones and other mobile devices such as tablets, which reveal certain preferences for use when broken down by age group, according to Nielson (also in Fierce Telecom). This may explain why a group of people sitting around at a coffee shop are as likely to be communicating with someone else on the planet – that is, playing with their smartphones – as they are to be interacting with one another.

So what does wireless spectrum, whether a shortage exists or not, have to do with fiber deployment? As FCC Commissioner Robert McDowell observed in an address earlier this year at TIA 2011: Inside the Network Summit, in order to be utilized to maximum advantage, every antenna has to be connected to a piece of fiber to maximize backhaul backhaul. Thus, we end up with a mosaic of network solutions in the access plant to solve the capacity crunch from mobile broadband users who just can’t get enough.

Up

This is where bandwidth demands are going.

The fundamental question facing everyone right now is how consumers armed with multiple mobile devices access the information they want through “the cloud.” Apple joined this crowd last week when Steve Jobs introduced iCloud, which the Wall Street Journal’s Walter Mossberg discusses in an interview with Charlie Rose.

The June 14, 2011 issue of Bloomberg BusinessWeek also quotes Mr. Jobs of Apple as acknowledging “[w]e’re going to demote the PC and the Mac to be just another device… [w]e’re going to move the hub of your digital life to the cloud.” All of this, of course, requires a fiber infrastructure to handle the real-time, low-latency, high-bandwidth nature of cloud computing.

The Charlie Rose interview also conveniently mentions another interview involving Mr. Mossberg and Google’s Eric Schmidt at the All Things Digital conference three weeks ago, wherein Mr. Schmidt described the efforts of the “Gang of Four” – Amazon, Apple, Facebook and Google – to resolve the mobile device cloud access issue. This requires competition as well as collaboration on a grand scale, and which is driving a technology boom of enormous proportions.

Involved are carriers, content and applications providers, policy makers and consumers across a myriad of fronts. AT&T Chairman and CEO Randall Stephenson told the Telecommunications Industry Association (TIA) last month that traffic on AT&T’s network has risen 8,000 percent, with consumers using more and more mobile devices that are more powerful than desktop computers of a few years ago. His solution to this capacity crunch is to merge with T-Mobile. The merger application is before the U.S. Department of Justice and the FCC, while Congress has held a number of hearings on the subject.

The FCC’s National Broadband Plan predicted a looming spectrum shortage, which requires action today to prevent total network collapse in a few years. The agency needs authority from Congress allowing the FCC to hold “incentive auctions,” as anyone who has heard FCC Chairman Genachowski speak recently can attest. Chairman Genachowski also addressed the TIA last month at its Inside the Network Summit in Dallas. AT&T has thoughtfully pitched its merger proposal as a rapid means to alleviating the spectrum crisis.

Smart phone signaling is straining available network capacity, prompting France Telecom to work with Facebook to resolve the issue. This offers a good example of the type of collaboration noted by a number of speakers at the TIA conference, including Google’s Milo Medin, who heads up the company’s Fiber-to-the-Home network access project. Mr. Medin commented that vertically integrated entities that seek to corner today’s market for themselves are likely to find themselves missing the market of tomorrow, illustrated by the meteoric rise of companies such as Facebook, and Twitter – which didn’t even exist a few short years ago.

Public Knowledge, PK @ 10

Last night’s roast of Public Knowledge at Washington, D.C.’s Union Station provided a unique opportunity for understanding the ins and outs of public policy, and for giving credit where credit is due. Co-founded 10 years ago by Ms. Gigi Sohn, Public Knowledge seeks to make government more inclusive and transparent for the benefit of the people, and this provided one of the recurring themes of the evening.

Public Knowledge occupies an outsized place in telecom policy – another theme of the evening, deftly contrasted with the diminutive size of its co-founder, who also is PK’s “chief strategist, fundraiser, and public face” who just can’t seem to lose her distinctive northeast, now-you’re-really-in-trouble accent, despite spending 20 years in the U.S. Capitol, but hey, you work with what you have: and it works.

Why this matters: the constant drumbeat of bad economic news reveals how much the U.S. needs to reposition itself as a global leader, and particularly in the area of science and technology. This repositioning requires money, and a long term view, neither of which are easily found during this stretch of dreadful, short-term crises that have the smartest people in the room scratching their heads about what to do.

The extraordinary political partisanship in Washington, D.C., is felt everywhere “outside the Beltway,” and another roller coaster election season is now well underway. Meanwhile, public and private sector jobs disappear into the wind, lost overseas or lost for good. U.S. cities compete for jobs not only with other cities within their state, and with those in other states, but also with those from around the globe.

A large part of this competitive equation comes down to infrastructure, which means roads, sewers, bridges – all the usual suspects – but infrastructure now must also include universal access to high capacity broadband, whatever the technological flavor, be it wired or wireless in “the last mile,” or access plant. However, without fiber for high capacity backhaul to the network, these cities and their citizens are left as islands, unconnected to the global economy.

Other countries understand this, and this past week also featured a two-day presentation of broadband data and deployment statistics by the Organisation for Economic Cooperation and Development, or OECD, at the U.S. Federal Communications Commission (FCC). The OECD was created in 1960 by 18 European countries plus Canada and the US, and is dedicated to global development (and has expanded to 34 nations). Telecommunications is a primary concern, and some of the OECD members – Japan, Korea, for example, are world leaders in fiber deployment, while others, such as Australia and New Zealand – are pursuing aggressive policies to build nationwide fiber-to-the-home networks. 

Meanwhile, the FCC struggles to reconcile the incredibly arcane details of restructuring the Universal Service Fund, or USF, a decades-old subsidy by which urban areas helped pay for the wiring of rural areas with telephone service, seeking to transform the fund to for broadband deployment, and to balance the contribution and distribution mechanisms in an era of telecom service provider transition from narrowband to broadband networks, both wireless and wired.

Today, we need broadband, but transforming a decades-old subsidy program turned entitlement to address America’s telecom needs for the future, and have this program be flexible and actually benefit consumers, is another matter altogether. But wholesale changes are desperately needed and now, schools and libraries need high-capacity broadband for their citizens. Those cities not directly wired to the network need “middle mile” fiber links, so our smart phones and tablets and laptops, and other means for connectivity to the 21^st century global economy, go just a little bit faster. We’d all appreciate it.

If you talk with anyone outside the beltway, these things are common, or public knowledge, and we all hope that our policy leaders get it. I think they do, and they must. On Oct. 31, 2011, the 7 billionth person will be born into a world undergoing radical technological transformation, which has always been an undeniable bastion of strength of North America, and a source of pride. We need to shore up our role at this critical time and perfect the technologies used for smart energy distribution, distance learning, improvements in health and nutrition, monitoring of critical facilities, and so forth.

Others understand this, and so should we.

Light It Up

Please pardon my delay in posting this entry, reporting on a trade association’s annual convention in San Francisco, California, several weeks ago – typical Washington, D.C., stuff. Not so typical “Washington, D.C., stuff,” though, is that virtually all of the association’s members hail from “outside the Beltway,” the ring road (borrowing a Beijing term) that surrounds the United States’ national capital – and that an important theme of the conference was America’s competitive standing in the world today.

The National Association of Telecommunications Officers and Advisors, or NATOA, represents state and local officials charged with overseeing – you guessed it – telecommunications, for their local communities. These are boots-on-the-ground types, who deal with very real issues such as digging up their streets to do this and that, such as laying fiber, or how much to charge whom for stringing power, cable, or telephone lines that dot their local landscape.

Believe it or not, such issues generate a considerable amount of controversy and angst, so these local officials have a good idea of what is required to “get ‘r’ done.” They deal with the actual, rather than the theoretical, given their real-world experience. The federal government’s telecommunications regulator, the Federal Communications Commission, or FCC, wades into this arena every so often, such as in trying to bring some harmony to franchise fees and the conditions cable operators must comply with before serving a community. Or, as the FCC recently engaged, in Rights of Way (RoW) obligations that some telecommunications service providers – as well as industry observers – claim are slowing the deployment of high-capacity broadband across the US.

Google had an outsized role in the conference (Google has an outsized role in everything it does), with their local access guru, Milo Medin, keynoting the last day of the conference to address the company’s concern with the state of U.S. competitiveness, particularly when compared to what steps other countries around the world are taking to invest in state-of-the-art, 21^st century infrastructure: fiber optic connectivity to the rest of the world.

The always entertaining Mr. Medin explained this by saying that Google employs literally hundreds of engineers to shave a millisecond off Internet search times. This is all well and good, but if the last portion of the network, which hands off the session to the end user is a twisted pair telephone line installed 40 or more years ago, then much of the company’s efficiency efforts come to naught. The bandwidth capacity delivered to the consumer slows to a crawl, which I called, in the panel on which I appeared, the “weak link in the chain.”

For the record, I may have been the weak link in the chain, as I was speaking about present and future technology trends to an audience made up largely of non-technologists, and I am not a technologist. The idea for the panel came from Ms. Joanne Hovis, now President of NATOA, and stemmed from numerous appearances made by industry experts about future technology trends to inform the U.S. National Broadband Plan, which the FCC delivered to Congress on Feb. 17, 2010. For example, also appearing on the technology panel was Mr. Dave Russell, from Calix, which provides equipment for many small and independent telecommunications companies in the U.S., and who appeared before the FCC a number of times during the formation of the National Broadband Plan.

We had a great time presenting, and held the attention of those in the room, not an easy task given the 3:45 p.m., PST, start time, with all that San Francisco, California, has to offer beckoning just outside the doors. I hope that we were able to convey to our very kind audience the importance of taking incremental steps, now, to prepare their communities for the future, despite the daily drubbing of dismal economic news. These officials’ communities will be competing with not only one another – in North America – to bring economic development to their citizens, but also will be (and are, in fact, today) locked in competition with communities around the globe seeking the same, to bring business and revenue and opportunities to benefit their citizens.

So these local officials, who handle arcane telecommunications issues, and who not only understand the ins and outs of “pole attachments” – a discussion guaranteed to kill a cocktail party – now also must understand the details of business development in a global economy. This is what sets Kansas City, Kansas, apart from the rest, according to Google’s Mr. Medin. The officials there understood the importance of bringing gigabit connectivity to their community, when a gigabit may not be needed now, but someday, surely will.

More about this in my next post, which I will try to post in gigabit, as opposed to kilobit, time.

Wumbgadoodle Pies

I never knew why farms could be so junky, but I think it’s beginning to dawn on me now. Over the weekend, and after a truly chaotic week, I traveled through parts of Amish Country, Pennsylvania, to buy and transport a used piece of farm equipment that has to be 25 years old: new ones run between $4,000 and $5,000. The three-point hitch “ditcher” attachment I picked up probably works. If not, I have the parts list and there’s not a whole lot to it: a 540 revolutions per minute (rpm) straight-shaft Power Take Off (PTO) that transfers power through a gear and a roller chain to another gear, which drives a shaft with a propeller-like cutter that looks like it would be good to slice pizza into quarters, only it channels sideways through the ground, not down. This cutter is used to cut drains in a field to allow water to run off, and it throws dirt everywhere: truly a delight for any kid who ever played with mud pies.

While travelling, I stopped at an Amish market and got lunch, which cost me $3.45 for two hot dogs and a thing that looked like a cannon ball made of chocolate cake, cut in half and filled with cream. One customer called it something that sounded like “wumbgadoodle pie,” but not only did I get the name wrong, I instantly forgot it after he said it was a “local specialty.” Wrapped tightly in plastic and obviously homemade, it was mine and I was on my way. The way in Amish Country is dotted with windmills that pump water, and people cut grass with horses attached to a self-powered rotary cutter; they have learned to adapt. They travel about in carriages and on bicycles on the paved roads; truly an anachronism, in every sense of the word: the local economy looks to be strong. They pay for things with cash in Amish country.

If you look closely, everything old is new again, and so, at the National Association of Telecommunications Officers and Advisors (NATOA) annual convention several weeks ago, I approached Craig Newmark of craigslist.com, who was one of the speakers, and, after introducing myself, told him that his Web site gets me in lots of trouble. (This comment produced no reaction.) I mentioned the “farm and garden” section – the conversation went downhill from the there – which section on craigslist is partly responsible for a growing collection of old equipment with uses I barely understood several years ago.

Everything old is new again: they use horses to lay fiber in Vermont. Anything mechanical breaks (I can break anything) across the rocky ground that is Vermont (and I don’t even have rocks). This is innovation, high tech meet low tech. High grain prices, driven by the world’s rapidly growing population, particularly in developing countries, and federally mandated requirements to combine ethanol in gasoline (in the U.S., much of ethanol production made today comes from corn) have encouraged farmers to upgrade their equipment. Thus, the used farm equipment market is flowing with lots of implements that do things to dirt, presenting an opportunity for someone like me, who is learning to farm, but competition for used implements is fierce, and if you see something think you might need, you buy it and then figure out whether you actually need it or not.

I buy junk. Then, using the power of the Internet to locate far flung and no longer made spare parts, I rebuild it and then learn how to use it. All of it is heavy, most of it dangerous and, therefore, scary, but only if I let it bother me. Paint on the equipment I buy is scarce, surface rust abounds, and so I get to work. It’s fun and I learn something. I think I have reached the 1960’s vintage for most of my planters, disk and field cultivators, various cutters, a tree spade and now the ditcher.

Farmers upgrading today purchase tractors and implements tethered to GPS and the Internet, loaded with electronics that help them wring out efficiencies in their growing operations. Also today, Lightsquared, a company seeking to provide broadband using a combination of terrestrial and satellite delivery is locked in a battle with those who rely upon GPS, including the military, the airline industry and even John Deere. I sat at the Lightsquared booth at the NATOA conference a couple of weeks ago because there literally was no other place in the room to sit – it was that well attended – and so I kind of feel like I have a front row seat at this fight.

Telecom policy influencers like to talk about “the next Google” or the “two guys in a garage” who invent “the next big thing” to invoke the power of grass roots, which success happens, one hopes, before they blow up the garage. My garage tends to be a mess, with these multiple rebuild operations in process. Opposite the grass roots picture, though, is one of large corporations that spend tons of money on research and development (R&D) to invent the next big thing, and also innovative start-up outfits that are lean and mean and prove to be exciting places to work. There, you operate with no safety net, which is something I learned to do in the federal government, and come to think of it, I’m still doing now, using equipment with little or none of the safety devices commonly in use today.

What’s missing from this picture is the importance of government funding for R&D, though some state and even local governments “get it,” and which exists in pockets of the federal government and varies from area of study to the next. Other countries certainly understand this and want to be leaders in the 21st century. Korea may have missed the industrial revolution but is determined not to miss the information revolution. In a truly dynamic ecosystem, all of the above are needed to complete the cycle of innovation. Today, much of the venture capital money in the US is directed toward social networking, but a lot of money is still sitting on the sidelines, waiting for the big opportunity to change the game.

The meteoric rise of companies like Facebook and Twitter, and the market dominance of companies like Apple and Amazon are owed as much to what they make as to who they have working for them, and the visions laid out by their founders, like the late Steve Jobs. Last Friday’s sale of the iPhone 4s was as much about getting the latest and greatest smart phone as it was about paying homage to Mr. Jobs and his amazing impact on our world.

Remember what phones were like before the iPhone? Think about the dramatic difference between then and now, and today’s widespread use of streaming video and data available on the go. Think again, of how we connect with one another, seamlessly, immediately, incessantly, and then take that away. Lose your phone, lose your connectivity, or wait for that signal, those little bars that tell you whether you can connect with the global economy on your terms and on your time, or whether you will have to wait longer for that connection.

There will be more of this “Anywhere, Anytime, Access by Anyone, through Any device… Authorized” connectivity in the future, but it needs one more “A” to complete the picture: “Affordability.” And that’s what we are all about.

Postscript: there is one “A” missing from the above, and that is “Amish,” at least not now. But who are we to tell them what to do?

It’s a Gigabit, duh…

“Toto, I ‘ve a feeling we’re not in Kansas anymore.

Google’s first fiber-to-the-home (FTTH) deployment in Kansas City, Kansas, owes something to the son of a city official, who was at first skeptical of the need for that much bandwidth and, therefore, hesitant to apply for Google’s 1 Gigabit FTTH project (Kansas City, Kansas, was the first city selected for deployment from 1,100 applicants). But the son understood that today’s “excess” capacity is soon filled by someone who designs a new, bandwidth-hogging application, or simply by many people accessing applications available today – think mobile video streaming, for example – and so told his father: “It’s a gigabit, duh…”

Google’s Milo Medin, the company’s access guru, related this story several weeks ago at the National Association of Telecommunications Officers and Advisers 2011 Annual Convention in San Francisco, California, in his keynote address to the association’s members, comprised of state and local officials (and also utility operators), who deal with telecommunications matters for their communities. Others have made the same general point in numerous ways, and now the European Commission (EC) is jumping aboard. Of course, the European Union, or EU, is also home to many of the fiber leaders in the world today.

The European Commission has put forth proposals to invest €9 billion ($12.7 billion) in broadband infrastructure projects from 2014 to 2020. The EC will leverage public and private investments for consumers and small businesses, and it will make broadband investment attractive outside densely populated or urban areas. Another goal: encourage competition to incumbent broadband operators by making the investments attractive for new entrants, including water, sewage, electricity utilities, or construction firms. For more information about the EC’s proposals, see the Oct. 20, 2011 article in Lightwave Direct.

Dorothy’s iconic ruby slippers were NOT designed by Christian Louboutin, but certainly look the part.

And the Emerald City was NOT made of indium phosphide, but that’s another story.

JUST LOOK at that high capacity yellow brick road infrastructure!

It WORKED for Dorothy & Friends.

The Old Indium Phosphide Play

Indium phosphide and silicon… walk into a bar…

Let me start this over. Imagine, if you will, a single chip, about half the size of a grain of rice, grown from indium phosphide in a “monolithic” process – a continuous growth with no interruptions once begun, since interruptions have the potential to introduce unknowns in the growing process – and attach this chip to a length of fiber mounted on a silicon optical bench, which is about the size of a Chiclet and is grooved with an etching process such that the fiber aligns perfectly with the grain of rice, which is really a transmitter and receiver of voice, data and video communications.

Now this attachment of said components is performed, by design, using an automated manufacturing process with equipment available today, which means the transmitter and receiver and fiber pigtail can be manufactured anywhere an automated assembly line may be set up, and if you are still following me, you have some idea of what OneChip is creating for the fiber-to-the-home (FTTH), high-capacity broadband access market.

Said another way, OneChip has designed not only the chip that converts electrical to optical signals and back again on the ends of fiber deployed in the access network, the so-called “last mile” of telecommunications networks, but it also has designed the automated assembly and manufacturing process. Now, you have some idea how many angels it takes to dance on the head of a pin.

These dancing angels, it seems, do fine when given their own space, but jam them onto the head of a pin, and friction naturally breaks out, and they turn into little devils, in a manner of speaking. Which is another way of saying that those transmitters and receivers (which make up “transceivers”), along with the waveguides, amplifiers, photodiodes and “electronic fiddly bits” don’t really get along with one another when jammed onto  the head of a pin, or, in this case, into a transceiver half the size of a grain of rice.

To smooth things out, OneChip’s process introduces layers and layers of in-coatings, anti-reflective measures, filtering functions and whatnot, all charged with the good intentions of making sure that everyone gets along while the transceiver grain is laboring to deliver more bandwidth to the end user. This may sound like an expensive gizmo to make, but it can’t be, because, in the access market, the thousands or tens of thousands of network interface devices that comprise the last stop in the network before the end user must cost next to nothing. Otherwise, it’s time to introduce the next brilliant solution, because there will be no market for expensive components.

Other companies marry similar elements of indium phosphide and silicon, or may even attempt a similar approach, but these devices tend to reside in the network core, where the return on investment per unit can be spread out or borne by many potential subscribers. Translation: these devices can cost thousands of dollars or more, and this sharing of the costs of deployment give the carriers some break in their struggle to bear – without going broke – the exploding data traffic demands from applications such as mobile video.

This cost-sharing of expensive network components simply evaporates on the network edge, where the costs of deploying high-capacity broadband must borne by tens of users, maybe, and where carriers face additional and expensive hurdles such as trenching, attaching fiber to poles, and complicated rights-of-way agreements that have to be negotiated from locality to locality, often with different entities.

Carriers have long sought to bundle multiple services for consumers and businesses, as the voice-only network evolved to handle data and then video and, increasingly, mobile video. However, the business case for offering bundles of services falls apart very quickly if potential customers opt to choose only one service offering from a bundle – which is their right to do as consumers – and, presto, no high-capacity broadband, because no business case means no deployment.

Carriers invested millions in long-haul fiber networks: at first hailed as visionaries, with skyrocketing stock prices to boot, some 10 or so years ago. Then, just as quickly, they were derided as fools stuck on an illusion best summed up as “build it and they will come.” The optical market and the optical components market still reels from the dot-com blowup that followed and, to some extent, the telecommunications sector never really fully recovered.

Pressed by declining margins and competition, optical component manufacturing went offshore, and the cost benefits from offshore manufacturing have long since been wrung out of the available, existing designs. Where manufacturing goes, however, design soon follows, because many breakthroughs in how something is made, or how inexpensively something can be made, take place in the close relationship between manufacturing and design.

Simply stated, a new approach was needed, and that’s what OneChip has pursued. OneChip’s breakthrough approach provides cost savings through breakthrough designs and manufacturing processes, while increasing the performance and reliability of optical transceivers. This will enable the widespread deployment of high-capacity broadband, to everyone.

Next up: where is the FTTH market today, and is it regulated?

Where is the market for Fiber-to-the-Home (FTTH) services?

Telecom network operators of all stripes face a very difficult challenge: upgrade their networks to address the exploding bandwidth demands from consumers, without spending a fortune doing so. Looking to get the biggest bang for their buck, carriers naturally turn to optical network components to facilitate the upgrade, particularly in the cost-sensitive access market.

So where is this market transformation taking place most rapidly? According to a presentation made by Ovum’s Darryl Inniss on Sept. 29, 2011, at the Broadband World Forum in Paris, Fiber-to-the-Home (FTTH) deployment is growing most rapidly in the Asia Pacific region, led by China, with that country’s subscriber base projected to grown from less than 10 million currently to more than 110 million in 2016.

That’s a decent growth spurt. Using the old adage “be careful what you wish for, it might come true,” such massive network investment in the always-price-sensitive residential market may be expected to put enormous pressure on the entire supply chain.

Thus, carriers will seek the lowest cost FTTH solution from system vendors, which in turn squeeze optical component vendors for cost reductions coupled with performance increases. Optical component vendors must develop new technologies to address these parallel challenges.

Consider that the U.S. today has a potential subscriber base of 22 million, with 7.6 million connected, according to Stephen Hardy, Editorial Director and Associate Publisher of Lightwave, in his Oct. 11, 2011, in his state-of-the-industry Webinar presentation, entitled “Where FTTH is Going: An FTTH Conference Wrap-Up.”

Most of these 22 million homes passed come courtesy of Verizon, which invested heavily in its “FiOS” Fiber-to-the-Home network, following a complex series of deregulatory decisions by the U.S. telecommunications regulator, the Federal Communications Commission, or FCC, from 2003 to 2005.

One may recall that the capital markets did not react kindly to Verizon’s massive network investment at the time, but that was yesterday (for a couple of years), and the high-end bandwidth capacity delivered by FTTH is now baked into Verizon’s network.

In terms of actual deployments in the U.S., however, the small and independent telcos have traditionally been leaders in FTTH, and continue to power along, some now armed with broadband stimulus grants or loans, and some not.

Numerous hurdles remain, however, some not without irony. A number of broadband stimulus award projects to deploy fiber in the network – and with it the untapped potential for Smart Grid, Health IT, distance learning and telecommuting, not to mention local economic development – have been stalled in some areas due to environmental concerns.

Up Next: At the FCC’s October 2011 Open Meeting, Meet the Connect America Fund

Connect America Fund

On Thursday, Oct. 27, 2011, the U.S. Federal Communications Commission (FCC) moved closer to its planned transformation of the decades-old Universal Service Fund (USF) and inter-carrier compensation mechanisms, to support broadband deployment and adoption, as the agency set forth in the National Broadband Plan.

FCC Chairman Julius Genachowski noted that broadband deployment and adoption is an essential element for competing in the 21^st century economy:

Recognizing this fact, for years, respected voices have called universal broadband an essential ingredient for American economic competitiveness and job creation. In its 2007 report, Rising Above the Gathering Storm, the National Academy of Sciences said that “accelerating progress toward making broadband connectivity available and affordable for all is critical” and urged government to “take the necessary steps to meet that goal.”

While the FCC’s vote passing the new Connect America Fund moves considerably beyond the piecemeal approach to needed fixes taken by previous Commissions, this is understandable given that intractable issues tend to have that way about them. As FCC Commissioner Robert McDowell observed in his separate statement, the agency’s job is far from done:

“In fact, despite all of the exhaustive efforts to get to this point, our work on comprehensive Universal Service reform is not even half finished. Equally important is the need to reform the contribution methodology, or how we are going to pay for all of this.”

Commissioner McDowell also observed that USF contributions, which are paid by consumers, have literally exploded from approximately 5.5 % in 1998 to approximately 15.3% in the last quarter, a trend which he called “unacceptable.”

In addition to moving the fund into the broadband age, the FCC action also makes mobile broadband an independent universal service objective and, in so doing, seeks to further bring broadband to millions more Americans, and to those in rural areas in particular.