“A regulated (or deregulated) company will always renege on promises to provide public benefits tomorrow in exchange for regulatory and financial benefits today.”
History is a bitch. It can predict the future if one takes into account the behavior of the characters involved, in this case, AT&T and Verizon, and their goals — make more money, get rid of all regulations and use the promise of a new shiny bauble to get there — i.e., say anything.
5G wireless is just the latest iteration of this. We now have 5G because 5 comes after 4; this is more a matter of basic math than this new fabulous wireless service future we keep hearing about.
So far it’s all been mostly hype, even though there has been a wave of 5G state laws being passed (and used by the FCC for its 5G regulations). I’ll get to that in a moment.
Waiting for Godot?
On December 8, 2015, I quoted a Fierce Wireless interview of former Verizon CEO Lowell McAdam, where Verizon claimed it would deliver speeds of 1Gbps with a commercial launch in 2017.
“Verizon’s McAdam: 5G speeds will be up to 1 Gbps and will be live at Verizon HQ in January (2016).
“Verizon’s 5G service to go commercial in 2017 and beyond.”
That never happened, except for controlled test locations. Now, Verizon is claiming it will be in 30 cities by year end.
“The Midwestern metropolises are part of a Verizon roster that’s meant to include 30 markets by year-end.
“The rush to the market underscores the eagerness of the carriers to sign up early adopters of the next-generation wireless technology. The race has had some awkward steps.”
History is having déjà vu. AT&T, when it was still SBC, decided to merge with Ameritech. (At this time, SBC, which included Texas, Oklahoma, Arkansas, Kansas and Missouri, first bought Pacific Bell California and Nevada, then bought SNET, which controlled Connecticut.) And in every merger, SBC took a hatchet to all in progress fiber optic plans.
This merger would add Ameritech — Illinois, Indiana, Ohio, Michigan, and Wisconsin — and it required 30 out-of-region cities be added.
“Out-of-Region Competition: In accordance with this condition, we will offer local exchange services in 30 new markets across the country. We are required by the FCC to enter these 30 markets as a provider of local services to business and residential customers by April 2002.”
“This will ensure that residential consumers and business customers outside of SBC/Ameritech’s territory benefit from facilities-based competitive service by a major incumbent LEC (local exchange carrier). This condition effectively requires SBC and Ameritech to redeem their promise that their merger will form the basis for a new, powerful, truly nationwide multi-purpose competitive telecommunications carrier. We also anticipate that this condition will stimulate competitive entry into the SBC/Ameritech region by the affected incumbent LECs.”
Do not laugh when I give you the punchline: The sweetheart deal cut with the FCC had changed the fine print of the merger conditions so that only 3 unaffiliated customers were needed to make the entire city be covered — three.
“On March 28, 2001, the Company notified the Commission that it had installed local telephone exchange switching capacity and was providing facilities-based local exchange service to at least three unaffiliated customers in the following seven markets: Atlanta, Denver, Ft. Lauderdale, Minneapolis, New York, Philadelphia and Phoenix. On April 9, 2002, the Company notified the Commissioner that it had installed by April 8, 2001 local exchange switching capacity and was providing local exchange service to at least three unaffiliated customers in the following 10 markets: Baltimore, Bergen-Passaic, Middlesex, Nassau, Newark, Orlando, Salt Lake City, Tampa, Washington DC and West Palm Beach.”
You can get three customers by going to a bar and offering free beer. There was never any competition brought in with this ‘out-of-region’ wired services plan.
“30 cities” just sounds like a good number to pick if you’re going to make up a number to convince people you’re really serious.
What to expect in every announced city? Considering 5G requires a fiber optic wire every block or two, this is 5G-fiber-hype-to-the-press-release.
Others are pointing out the holes in deployment announcements. A recent report from MoffettNathanson claims that the economics of 5G are not going to work.
Just the headline from Multichannel News gives us the gist.
“Verizon’s Fixed 5G Economics are Flawed: Report
Cell radii appear smaller and penetration rates are lower than expected, MoffettNathanson concludes.”
Worse, AT&T’s recent move was to start labeling phones and services as 5G E.
Bloomberg explained that Sprint has taken AT&T to court over this.
“AT&T Inc. is calling its upgraded 4G service “5G E.” Sprint Corp. immediately challenged that in court, calling it fake and deceptive.”
SPEED? 1Gbps? Ars Technica reports that a recent OpenSignal study shows that AT&T’s 5E is slower than the existing 4G cell service.
“AT&T’s “5G E” is actually slower than Verizon and T-Mobile 4G, study finds”
The companies really don’t care about this tech as much as the value it gives them to announce something so that they can use it for other regulatory and financial moves.
But, in order to get early adopters, Verizon’s 5G deployment plans appears to be — We’ll give it away at first and then tell jokes about our other services. Make it sound like it is everywhere, when these are basically props to get regulatory favors, and have it be ‘touching’ a city but claim these are ‘robust deployments’.
Just look at this advertisement. The opening cost of Verizon’s 5G is $70.00 a month, with 3 months free, though there are caveats, if you can get it. However, what made me laugh was this:
“Cut everything you hate about cable.”
“No annual contracts.”
“No additional fees, increases or taxes.”
“No additional equipment charges.”
“Streaming speeds. Whole home coverage. Freedom from hidden fees.
You got to be kidding me.
Verizon Wireless and FiOS, as we discussed, are laden with all of the above, from hidden fees, and increases or taxes. But “Freedom from hidden fees means that they will give away the product and mislead about their own services.
Moreover, “streaming speeds” means — We ain’t about to push to 1Gbps speeds.
The Subplot: 5G Requires a Fiber Optic Wire Every Block or Two.
I’ve written about this previously. 5G requires a fiber optic wire with a range of 1–2 city blocks.
How can we predict what will not be deployed? History, again. Over the last 20 years I have written a trilogy (including (FREE COPY) The Book of Broken Promises, published in 2015) that started in 1998. Verizon et al. have never fulfilled basic obligations to replace the copper wires with fiber optics in their state-based utilities — multiple times. And no one should think that this time this is different and this time the companies will be deploying new fiber optic roll outs for a wireless service with a range of 1–2 city blocks.
Cross-Subsidies, Not Paying Market Prices and it Makes Them More Money
But the real bait-and-switch is that the companies will be a) cross-subsidizing these wireless deployments with their wired networks, b) not pay back to the state utility for these wireless–fiber optic deployments, and also c) not pay market prices for the use of the networks.
We even wrote a report on some of the cross-subsidies that have let the wireless business get a free ride, (all at the customers’ expense).
At the Oppenheimer 19th Annual Technology Internet Communications Conference, August 9th, 2016, Timothy Horan, an analyst at Oppenheimer & Co., asked Verizon about their Boston deployment:
“So are you deploying fiber differently now in Boston than you’ve done for FiOS in the past? Does each small cell need like their own fiber home run to that small cell? Are you going to be deploying a lot more fiber than you have historically?”
David Small, Verizon, EVP responded that they were doing a few small ‘suburb’ areas, and beyond that it will be wireless.
“Yes, we will. And so, as it relates to FiOS, we’ve announced a few of the suburb areas, for lack of a better word, for cities, sub cities that we are going to be building into. But beyond that, if you think about the use case for small cells and the coordination elements of the radio access network that need to occur between its corresponding home macro and the small cell, that suggests that, as a general rule, you need home runs from that small cell directly back to that coordinating macro-level cell site. And that’s exactly what we are doing.”
Notice that Verizon claims that the areas being covered are ‘suburbs’. In fact, Roxbury and Dorchester are neighborhoods of Boston, not the burbs.
But most important, Verizon never mentions that it is cross-subsidizing the wireless deployment via the wireline construction budgets that were supposed to be used to upgrade the state utility, not have phone customers fund a wireless network.
Fran Shammo, Verizon’s former CFO, told investors in 2012 that the wireless company’s construction expenses have been charged to the wireline business.
“The fact of the matter is Wireline capital — and I won’t get the number but it’s pretty substantial — is being spent on the Wireline side of the house to support the Wireless growth. So the IP backbone, the data transmission, fiber to the cell, that is all on the Wireline books but it’s all being built for the Wireless Company.”
This is a Put-on ALEC Bill
Compounding the real insult here, the FCC has a series of interlocking proceedings to get rid of any remaining obligations and regulations — anything. In one FCC proceeding, the FCC decision is to let the telcos preempt states’ rights with 5G deployment.
But what is most telling is that the FCC’s new regulations are based on a modified bill by the American Legislative Exchange Council, it would appear. AT&T, Verizon and CenturyLink have funded model state legislation which is handed to politicians who are either members or get financial perks, including foundation grant money, to fund their pet projects.
And here we find that now-FCC Commissioner Brendan Carr (the former lawyer for the CTIA, the wireless association, as well as worked for Verizon and AT&T while at Wiley Rein) announced the FCC’s 5G plans in Indiana without mentioning that the FCC’s federal legislation is tied to the ALEC bills, much less that the wireless association, CTIA, was one of his previous clients or that AT&T and Verizon are the 2 largest CTIA members.
Commissioner Carr states:
“We do so by providing updated guidance on the types of local reviews that, in regulatory parlance, can materially inhibit or effectively prohibit small cell deployment. But by taking a balanced approach, we show respect for the work of state legislatures, including Indiana’s. We do not disturb nearly any of the provisions in the 20 state small cell bills that have been enacted.”
And Rep. Kathy Byron, State Representative, Virginia states:
“Your determination to come forward with a plan — modeled on the regulatory reforms enacted in 20 states, including Virginia– increasing access to 5G connectivity will positively affect the lives of people across our nation.”
This ALEC-FCC plan is, of course, part of the FCC-AT&T-Verizon plan to get rid of (preempt) states’ and cities’ rights.
History: If you want to understand the hype machine and what to expect from AT&T et al., in 1993–1995 there was a flurry of state-based broadband plans, one was called “Opportunity Indiana”. Written by Deloitte & Touche, (who also did major plans for NJ, PA, OH, and IL), it promised fiber optic broadband in rural areas. State laws were changed and there were rate increases to fund vaporware.
Do you think that 5G is not a piece of history called ‘They did it again’?
Click to see the actual excerpts from Deloitte’s Opportunity Indiana. They are almost identical to the current plans, just 2+ decades later.
Answer (From Excerpts)
- “Without the deployment of advanced services and capabilities rural areas may be less attractive to information incentive businesses.”
- “Rural America is following urban America into the information age, in which a wide variety of are critical factor of production to all businesses.”
- “A significant opportunity exists to advance the public agenda for excellence in education through the adoption and expansion and availability of advanced telecommunications capabilities… the most rural areas…”
- “Telecommunications could be especially useful in rural areas by helping organizations and communities to overcome barriers caused by inadequate information and distance to markets.”
The testimony laid out benefits of a fiber optic future for health care in Indiana — 25 years ago. And they’re still waiting.
Opportunity Indiana’s Impact on Health Care
- “Reduce the cost of health care through technology applications that improve hospital, clinical, administrative, and related insurance operations.
- Increase health care access for rural and less mobile citizens.
- Improve the quality and availability of health care education for practitioners.
- Send X-rays to experts real-time via broadband technology.
- Give improved health care for limited resources with telemedicine projects.”