How will shifts in technology, and new government programs, impact consumer broadband? We’re getting some hints on what the US infrastructure bill could do, and we’re also seeing competitive and technology shifts in commercial consumer broadband. There could be some major changes in the works, but through it all is the thread of a core issue that still doesn’t get enough attention.
Consumer broadband, on the demand side, is being shaped by the increased interest in (well, maybe “demand for” is more accurate) streaming video. A family could well be streaming three or four video sessions at a time, each in 4K, and people could also be playing games, and all the while someone might be having a Zoom/Teams call. Certainly from an entertainment perspective, and with COVID often for work and education, broadband is a critical resource. That’s why many believe that if broadband availability is limited in some areas, those impacted are at a serious disadvantage.
All broadband isn’t up to the task at hand. From the first, the majority of broadband connections exploited existing facilities, which almost always meant either twisted-pair loop plant or CATV cable. Successive improvements to CATV via DOCSIS versions have enhanced the ability of cable to deliver broadband services, but the length and quality of the copper loop plant varies considerably, and DSL technology can’t keep up with modern competitive technologies.
Fiber is foremost among those, of course, but any new in-ground broadband delivery mechanism faces the problem of customer density, what I’ve called “demand density”. This is the problem that’s threaded its way through broadband from the first. Where demand density is high, a given deployment of media will serve a lot of users, and so offer a reasonable per-user cost. Where it’s lower, the cost of the media will either constrain operator profit and incentives to deploy, or price the service out of the market. The more rural an area, the lower the demand density, and the greater the chance that nobody will offer fiber broadband.
The “digital divide” is a name given to the phantom line that separates areas with lower and higher demand density. Rural users fall on the wrong side of it, and so there’s been continued public policy debate over what to do about that. Australia launched its NBN corporation to try to subsidize broadband and equalize services, and the US is now considering an infrastructure bill that has money in it to cover rural broadband costs, as well as policies to decide what “broadband” means. At the same time, operators (cable and telco alike, in the US) have been struggling with how to address the challenges, not only of the digital divide but for users who could be served, but perhaps with limited profit.
AT&T is a poster child for the latter. As I’ve pointed out in past blogs, AT&T has a demand density that’s much lower than rival Verizon, and so when Verizon launched its FiOS initiative, AT&T didn’t counter with its own push on fiber to the home. In fact, it’s been a bit negative on FTTH, and also negative on the use of 5G for residential/home broadband. Now, that seems to be changing.
Not surprisingly, AT&T is finding that it wins deals where it offers FTTH, and loses them where it offers DSL. It makes sense to tout a new emphasis on fiber for AT&T, but it’s important to understand that singing PR and trenching fiber are worlds apart. AT&T’s demand density challenges mean that while it can deploy fiber in areas where it does have dense opportunity, it will exacerbate the digital divide among its own customers by doing that.
One way those divided customers could be lost is for a competitor like Verizon or T-Mobile to rush in with a 5G millimeter-wave or 5G cellular-to-the-home solution, which you’ll recall AT&T has also dissed in the past. Thus, I don’t think there is much chance that AT&T will hold only to an FTTH response to broadband competition. They’re going to have to support 5G home broadband in one or both forms, period.
The most obvious reason is the current competitive trend. If AT&T loses enough broadband customers to cable, they’ll have to fight to get them back later on. That will almost certainly mean discounts, and that will further lower profits. AT&T is under a lot of investor scrutiny right now, and any announcements that seem to threaten future financial pressure on the company, particularly that might signal a cut in dividends, will put executives under significant pressure from the Street.
The other reason is the public policy push the infrastructure bill represents. If billions are allocated for rural broadband, it stands to reason that there will be service providers who swoop in to get some of the money. These providers will have even greater demand-density challenges than AT&T does as the incumbent, so they’ll need a technology that doesn’t have as high a cost. Like 5G home broadband. More competitors, cheaper technology option? What can AT&T do but follow the same path?
Here is where the goals of public policy can flounder on the rocks of bad legislative drafting and lobbying, though. The broadband part of the infrastructure bill isn’t necessarily going to promote something as truly useful as 5G. The current rumor is that the bill will mandate 100Mbps Internet access, and that is an invitation to strategies that throw public money away.
How do you measure broadband performance? Traditionally we use the “bandwidth” of the interface, which is the speed the digital channel that delivers or accepts data is clocking. That’s different from the speed of the interface, which is the data rate at which packets can be exchanged. A simple example will show why that is.
Suppose that you have one of those old-line AT&T DSL connections running at 8 Mbps. You integrate that with a WiFi router that’s capable of perhaps a gig. Does the fact that the interface is clocked at a gig mean you have gigabit Internet? Or suppose you have a mesh WiFi service, one with thousands of WiFi routers that connect through each other in a mesh back to a single feed with a hundred meg of capacity? Whatever the speed of the WiFi, your users are all sharing that 100 Mbps, and WiFi routers close to the feed point will have to carry traffic for all those outward toward the edge. Even cable broadband, which shares bandwidth among the 100-500 customers typically on a span connected to a fiber head end, has a difference between the connection bandwidth/clock speed and the data rate. Suppose you had thousands of users on a cable span. Would they have gigabit service, really?
The fact is that the source of the digital divide is what divides things in the first place, which is demand density and its impact on infrastructure cost, service cost, and operator profits. The only thing that’s going to make broadband services work for both buyer and seller, both urban and rural, is a technology set that can deliver quality service at reasonable cost. AT&T needs to face that fact, and the big news in the Light Reading piece is that they’re starting to do that. The potentially bad news is that there’s no way AT&T can or will offer FTTH to every customer, and so we need to know what happens to the rest.
The governments of the world need to face that fact too, and there’s not much indication that’s happening. Just mandating a broadband “speed” isn’t going to close the digital divide, it’s going to encourage gaming the system with broadband technologies that are cheap and so reap profit and offer a promise of coverage, but leave the underlying issue of quality of experience untouched. The broadband part of the infrastructure bill isn’t written (or at least released for review) yet, so I hope lawmakers in the US will take heed of this point. I also hope lawmakers in other countries will consider it as they face their own digital divide issues.