Digging through my Archives, Thinking about the White Spaces

Over the last 4 years, I tended to save every single paper, homework assignment and notebook I amassed from 2 graduate programs, and sometimes I wondered why I saved all that stuff… But, every now and then, something pops up in the news and I remember “Oh, I wrote about that 3 years ago.” When I look back on my most notable graduate school papers, some of them still hold relevance today even with the fast paced telecommunications industry. The recent White Spaces progress is one such example. In 2008, I was really excited about the White Spaces. In my spectrum policy class at CU that year (taught in part by Dale Hatfield), I wrote a really detailed paper about rural spectrum policy, which was very well received by the distinguished professors. Here’s a quick introduction to how I was thinking about rural spectrum policy in 2008 (back when there were only 3 million iPhones in service):

Spectrum access is increasingly important for rural telecommunications providers as new advanced wireless technologies are developed and become available on the market.  Advanced wireless services can help increase connectivity to all Americans, and innovative wireless applications can improve quality of life for people in remote and rural areas. However, rural telecommunications providers must first have reliable means to access spectrum, or the communities that they serve will continue to wait for the deployment of advanced wireless services by spectrum licensees who focus network investments in more populated—and thus profitable—areas. The purpose of this report is to analyze the FCC’s spectrum policies pertaining to rural spectrum access, and to provide recommendations as to how the FCC—and rural providers themselves—may be able to increase access to spectrum in efficient and effective ways. On one hand, the FCC claims that they are trying hard to accommodate rural providers with much needed spectrum access, but on the other hand rural providers and advocacy groups argue that the FCC could do much more in rural providers’ benefit. In the current state of spectrum policy, regulatory barriers are too high for small rural providers to easily gain access to spectrum. Unless important changes are made to the current system, rural providers will continue to go without adequate spectrum access (licensed and unlicensed) which ultimately penalizes millions of Americans who live far outside metropolitan service area boundaries.  

– Rural Spectrum Access and Policy Analysis, August 2008

So has rural spectrum demand and policy changed much since 2008? No, not really—small rural providers still do not have easy access to spectrum. The wireless industry certainly has changed, which has put even more pressure on rural wireless carriers to get into the wireless broadband game or risk becoming obsolete. In 2008, I said “there are still considerable gaps where FCC policy falls short and the interests of rural providers and citizens go unattended.” That is certainly as true today as it was 3 years ago, in my opinion. I also said, “Increasing access to spectrum for rural telecom providers who care about offering quality service to all people is indeed the first step to bridging the digital divide and ensuring equal, quality service for all Americans… To remain competitively viable, rural providers must embrace new spectrum-based services, because ‘wireless technology, which poses the greatest peril to independent rural wireline telcos, may also become their salvation,’” Still true today, for sure.

In this project, I proposed 3 recommendations for increasing spectrum access for small rural telecom providers:

1.  Adopt a “keep what you use” approach (imagine how different AT&T’s footprint would look if that policy was strictly enforced)
2. Use the White Spaces for unlicensed spectrum in rural areas
3. Use Universal Service Fund subsidies “to pay rural wireline telcos to switch to wireless or other advanced services.” (No comment…) 

Anyway, at the time, I was really hopeful about the White Spaces: “Since the majority of White Spaces reside in rural areas, using them for unlicensed wireless service may successfully eliminate many of the regulatory barriers preventing rural providers from accessing licensed spectrum. White Space utilization also opens doors for incentives to innovate and deploy services over high-quality frequencies with optimal propagation characteristics for rural areas. Unlicensed wireless service could support interesting applications such as remote crop monitoring and irrigation control; local public safety and municipal networks; and distance education.” I don’t think I will ever forget the following data from a 2008 New America Foundation report, which illustrated how much White Space spectrum was available in certain rural-ish markets:  

When the FCC released the White Spaces Order almost exactly one year ago, I was still very hopeful about the possibilities for rural wireless developing in this spectrum… Then I completely forget about it, once the heat turned up on USF Reform. The White Spaces, unused TV frequencies between 50 and 700 MHz, promise specific propagation benefits ideal for rural areas—so much promise that they have been called “Super Wi-Fi.” The FCC’s September 23, 2010 Memorandum Opinion and Order was met with some resistance by country music festivals and sporting event coordinators who claimed White Space devices could interfere with their precious wireless microphones. Thankfully, the FCC did not find that country music festivals were more in the public interest than wireless broadband, but they did require spectrum sensing capabilities in the radios and strict power limitations. Since then, I’ve been waiting for cognitive radio technology and White Space testing to evolve. 

It was announced last week that the FCC would finally begin testing the White Spaces database operated by Spectrum Bridge, “which will allow devices to take advantage of the unused spectrum between television channels” (HilliconValley). According to a Sept. 14 FCC press release, “Unlocking this valuable spectrum will open the doors for new industries to arise, create American jobs, and spur new investment and innovation.” Interestingly, Obama also released the American Jobs Act draft legislation this past week, which also includes some hefty aspirations for wireless broadband innovation and deployment resulting from “voluntarily” released broadcaster spectrum. These two actions signal to me that the government s hedging its bets on wireless broadband, which can be seen as either good or bad, depending on what type of company you happen to own.  Anyway, the Spectrum Bridge database trial begins tomorrow (Sept. 19) and runs through November 2; after which Spectrum Bridge will provide a report to the Office of Engineering and Technology, which will be followed by a short comment cycle. If everything goes smoothly, “OET would grant final approval for Spectrum Bridge to operate its database system with certified TV band devices once it determines that the system compliant with all of the applicable rules and requirements” (FCC DA 11-1534). Then, hopefully, we will truly be ready to unleash the power of the White Spaces. 

What do the White Spaces mean for rural telecom providers? I think it is still too early to tell, but I have definitely been thinking about it for over 3 years now. White Space spectrum is most abundant in rural areas, which is definitely a good thing. It will be unlicensed, and I’m not sure how much success RLECs have had with unlicensed spectrum so far, but this is definitely the right time to start thinking about innovative business models and opportunities to take advantage of this spectrum.  One article this week explained, “technology used in these frequencies could go a long way toward helping expand broadband to all Americans, could be used to help corporate networks…to help deliver in-home applications including smart grid, and by wireless and wireline service providers that want to create or fill in existing broadband networks… the prospects of activities related to white spaces to create jobs and continue the wealth of our nation and world are significant” (Paula Bernier, The Dark Cloud Over White Spaces, TMCnet.com).

 

Two things from this passage stood out to me: the potential for smart grid innovations and for filling in gaps of existing broadband networks. I’m not saying that the White Space spectrum can replace FTTH, but I would bet that it is definitely better than, say, satellite broadband, which some parties in the USF Reform debate are hoping will be used to “fill in the gaps.” I am excited to see technological innovations in cognitive radios and how the White Spaces might help facilitate innovations in wireless technologies for farming, public safety, natural resource management, and industrial/commercial use. How White Space spectrum can be used for normal at-home and at-work broadband remains to be seen. I wouldn’t abandon wired network upgrade plans and put all the eggs in the White Space basket just yet, but I definitely think there will be opportunities for rural carriers in the next couple of years. 

It’s nice to see that one of my 2008 rural spectrum policy recommendations is slowly coming to fruition, and I hope that the White Spaces eventually live up to the “Super Wi-Fi” moniker and provide profitable opportunities for small rural telecom providers. Although I love wireless broadband as much as the next analyst, there are specific limitations that have always made me favor FTTH. Specifically, spectrum is a finite resource and glass is not. There is only so much that the FCC can do to increase spectrum access for rural carriers, which is why I have continued to argue that carriers should invest in FTTH even if the demand for 50 Mbps service isn’t widespread today. It will be. In the meantime, all options for expanding broadband in rural areas should be explored to the fullest extent, and that includes unlicensed wireless. 

What do you think—are there any opportunities for RLECs in the White Spaces? 

Cassandra Heyne

ruraltelecommentary@gmail.com

Could DIDO Revolutionize Rural Wireless Broadband?

Earlier this week, I came across a fascinating technical white paper by Steve Perlman (President and CEO, Rearden Companies) and Antonio Forenza (Principle Scientist, Rearden Companies), and I decided it would be the perfect opportunity to finally write about a technical subject on Rural TeleCommentary. Normally I don’t get especially excited about technical papers, but this one really blew my mind. Distributed-Input-Distributed-Output(DIDO) Wireless Technology: A New Approach to Multiuser Wireless literally turned upside-down almost everything I thought I knew about wireless limitations. Now, I don’t have enough “field expertise” to make a determination about whether or not DIDO is possible, but I am still fascinated with topic and I think there will be some interesting developments in the near future in terms of testing and early deployment. If the predictions in Perlman’s paper do come to fruition, there may be a complete transformation of the wireless industry, where wireless broadband could actually become an equal competitor to FTTH. 

This is important to me because I am constantly thinking about how the broadband ecosystem is going to look in 5, 10, 15 years. When I think back 5, 10, and 15 years and contemplate how far technology has come in just half of my lifetime, it really gets me excited about the future. I have firmly argued since the day the National Broadband Plan was released that the plan’s fundamental flaw is the 4/1 Mbps broadband definition (which the Gang of 6 ILECs is now hoping to reduce to 4 Mbps/768 kbps).  I totally understand that it costs a lot of money to deploy 100 Mbps broadband to everyone, but I do not think there should be a static definition for broadband because the principle of regulatory lag dictates that the FCC will never be able to keep up with consumers’ constantly evolving expectations and definitions of broadband. I also believe that a static regulatory definition of broadband will stifle innovation. I like to envision a future in 10 years or so where nobody is restricted to the unimaginable world of broadband-enabled content and applications by capacity and speed constraints. Could DIDO help achieve this “perfect world” of super-fast, high-capacity broadband? The authors of the paper seem to think so, and they “believe that DIDO wireless will completely transform the world of communications and far more.” What I found to be particularly interesting is that DIDO apparently works at distances up to 250 miles in rural areas.

According to the paper, “Distributed-Input-Distributed-Output (DIDO) wireless technology is a breakthrough approach that allows each user to use the full data rate of shared spectrum simultaneously with all other users, by eliminating interference between users sharing the same spectrum. With conventional wireless technologies the data rate available per user drops as more users share the same spectrum to avoid interference, but with DIDO, the data rate per user remains steady at the full data rate of the spectrum as more users are added” (pg. 1).

It took me awhile to wrap my brain around this concept. It was only a year ago that I took a wireless engineering class at CU, and at that time MIMO was all the rage and there was still an assumption that we had to behave by Shannon’s laws although I remember a discussion about how we are starting to test those theoretical boundaries. I definitely do not remember my teacher ever estimating that one day there may be a wireless technology that eliminates interference between users and allows multiple users to all utilize the full data rate of the spectrum. That is basically like a wireless optical fiber for each user. As many of you know, I am a dedicated member of Team FTTH, but DIDO could actually make me consider switching my allegiance. 

Perlman provides an interesting background about the evolution of wireless and the allocation of spectrum to meet constantly increasing numbers of users and high data rate requirements, but he seems to believe that even with all the technological advances in MIMO and beamforming, wireless is still not up to par for applications like video and gaming. There are simply too many wireless users trying to do too many things with not enough spectrum. Perlman explains, “As data capacity needs continue to grow exponentially, and applications like video and videogames require high reliability, it is unclear whether there will be enough usable spectrum to meet user needs. And, once all of the usable spectrum has been allocated to consumer devices, it is effectively impossible to recover that spectrum as new technologies evolve that can use it more efficiently. We run the risk of allocating all of the usable spectrum, but still not having enough” (pg. 3). Just look at broadcasting—the fight to get some of that spectrum released has no end in sight and is years overdue. I thought the point that once the spectrum is allocated, it may be impossible to recover it if a more efficient use comes along in the future is very reflective of today’s spectrum crisis. This is one of the main reasons why I have consistently been so hesitant to get on board with wireless broadband—spectrum is a limited resource that is tightly controlled and often controlled by the absolute least efficient user, and the amount of time and effort it takes to unravel that web could deter innovation. I had a lot of hope for the White Spaces a few years ago, and I’ve all but forgotten about them now.  One thing is for sure: consumers have an insatiable appetite for wireless broadband, and there must be some combination of new technology and effective and fast-moving spectrum policy to meet the explosive demands—if not, wireless broadband will be second chair to FTTH. 

Apparently, DIDO has been tested with 10 simultaneous users in the same area, but Perlman hopes to increase that number to 100 or even 1000—therefore achieving 100X and 1000X the Shannon Limit. I found the following description of DIDO to be very illustrative:

“Distributed-Input, Distributed-Output (DIDO) wireless technology is a new approach to multiuser wireless that allows the number and density of users in the same area to be steadily increased without additional users reducing the data rate of others. In other words, the shared spectrum capacity is not subject to Shannon’s Law: as more users in a given area share the same wireless spectrum, the data rate per user does not decline. As a result, regardless of how many users are in a given area, each user is able to use the entire Shannon Limit of the channel, despite sharing the same spectrum” (pg. 4). 

I recommend that you read the paper yourself to learn more about how DIDO actually works, as there are some interesting illustrations that accompany the description. Perlman compares DIDO to a simple Wi-Fi configuration, noting that in urban Wi-Fi networks it is not unusual for users to only get about 4% of the available data rate. Well, DIDO is here to save the day, if the Wi-Fi access points are replaced with DIDO access points in this hypothetical scenario. Unlike Wi-Fi, data is processed through a “DIDO Date Center,” which “processes the data, modulates it into a radio signal waveform and sends the waveform [to the access point], which simply sends the waveform to its antenna and transmits it as a radio signal” (pg. 9). From what I gather, the DIDO Data Center does all the heavy lifting as more users are added and there is no risk of a stronger signal overpowering a weaker signal when signals are transmitted at the same time. Perlman explains, “something rather remarkable happens: the sum of the radio signals at each computer’s location results in a clean modulated waveform carrying the data intended for that particular computer…And here’s the really amazing part: what each user receives is what they would have received if they had the channel to themselves, without another user sharing the same spectrum. There is no interference from the other user. Each user is able to utilize the full Shannon Limit of the channel” (pg. 10). Wow… Is he serious?! DIDO just sounds awesome. The authors call DIDO a “cloud wireless system,” which seems appropriate, as “all of the intelligence of the DIDO system is in a DIDO Data Center, which then communicates to all of the users at once through all of the APs at once” (pg. 12). 

The paper explains that DIDO is able to crush the limitations of Shannon’s Law because, “DIDO is a general solution that creates an independent channel for each user, even in densely-populated areas. Since each user has an independent channel, Shannon’s Law does not apply, despite the fact that all users are sharing the same spectrum” (pg. 13). The authors also provide the following effective visualization for DIDO: “A DIDO channel can be roughly visualized as a 3D sphere that surrounds the antenna of a user device. We call it ‘area of coherence.’ Within that sphere, the channel for that particular user exists. Outside of that sphere, it does not. So, if there are 10 users in a DIDO network, there are 10 spheres, one around each user device. As a user device moves, the sphere moves with it” (pg. 14).

So, what is the relationship between DIDO and rural wireless broadband? More importantly, are there any business opportunities for RLECs in DIDO? I think that the answer to both of these questions remains to be seen, depending on whether or not this product becomes available to the mass market (the authors explain that it was designed for the mass market, and DIDO was tested at frequencies from 1 MHz to 1GHz).  The authors also argue that DIDO systems are highly reliable and do not have the dreaded dead zones—something that is especially prolific in rural and rugged areas. I think the most important aspect of DIDO for rural broadband providers to consider is the potential range of 250 miles (“DIDO Rural,” pg. 15) if HF frequencies in 3-7 MHz are utilized. The authors note that the HF frequencies have the limitation of being very narrow, but “DIDO would be an ideal technology to overcome this limitation” (pg. 15).  The key point in the paper for rural broadband providers to pay attention to is: “DIDO-NVIS provides a very inexpensive and efficient way to deliver broadband to rural areas, or remote areas in the wilderness” (pg. 17).

I do not recommend that RLECs abandon their FTTH projects and put all their bets on DIDO, but I do think this technology is worth keeping a close eye on while it continues to develop. I can see it being very useful in extremely rural areas, such as the areas slated for receiving satellite broadband within the new USF framework. Could DIDO eliminate the need for satellite broadband altogether? Are there any business opportunities for the RLECs who are lucky enough to hold spectrum assets to manage private DIDO networks for businesses, farmers and industries? With RUS’s Jonathan Adelstein’s visit to a rural Iowa farm last week, I started thinking about the agriculture possibilities enabled by high-speed broadband. I definitely see DIDO being really useful for “precision farming” and other high data-rate needs on the farm. It could enable innovations like remote crop video monitoring, so farmers could literally watch their corn grow from a beach in the Caribbean. 

I will definitely be keeping an eye on new developments in DIDO, and if anyone has any good resources about it, or any studies that refute these claims (I like to hear the other side of arguments too), please send them my way. This article by Dean Takahashi was also very interesting. 

I will be on vacation next week until the 16th, so I hope everyone keeps plugging away on USF Reform. The FCC released its Public Notice seeking comment on the ABC Plan, and comments are due August 24 with reply comments on August 31. This is the FCC being extremely aggressive about the expected October deadline, as expected. Good luck with your comments; I look forward to reading them!

Cassandra Heyne

ruraltelecommentary@gmail.com

Connecting the Dots between Smart Grid and Broadband Deployment Challenges

This morning I attended a smart grid briefing breakfast at the United States Telecom Association (USTelecom), "Promoting Investment & Innovating in Smart Grid." I've stepped away from smart grid issues for the last couple of months, since my class ended, in order to focus almost exclusively on USF Reform. However, I haven't abandoned my interest in the smart gird, so I was happy for the opportunity to attend another event featuring smart grid power players here in DC. The panelists at this event covered a wide variety of popular smart grid debate topics, from consumer perception to investment challenges to recent government initiatives. Throughout the conference, I continually drew connections between the telecom realm and the utility realm in deploying what are widely considered two of the greatest infrastructure challenges of our time: modernizing the utility grid and modernizing the telecom network. If you have read some of my previous posts on the smart grid, then you will know that I firmly believe that the telecom and electric utility industries are rapidly converging, and I also firmly believe that there are endless opportunities for telecom providers of all shapes and sizes to seize to help facilitate smart grid deployment. However, there are a lot of regulatory uncertainties in both industries, and there are many daunting challenges that both industries must overcome to not only converge, but to achieve their stand-alone goals of ubiquitous broadband and smart grid. It is also becoming clear to me that the smart grid will never achieve its full potential without cooperation from the telecom industry, and if the telecom industry does not play nice with the utility industry then there will be duplicate broadband networks where the utility provider becomes a competitor to the telecom provider—and who wants that to happen? Not me.

There is already some evidence of this phenomenon emerging in rural areas, as an electric cooperative in Missouri recently announced its intent to deploy FTTH to meet dual smart grid and broadband deployment goals. Ralls County Electric Cooperative received a $19.1m grant and matching loan from the Rural Utilities Service (RUS), and plans to complete the FTTH network, which will cover 4,500 homes and 300 businesses with 1,200 miles of fiber, by May 2013. Overall, I am very excited to see another example of a rural cooperative serving the double role of utility and broadband provider, but I also hope that more rural telecom cooperatives will follow in the footsteps of NineStar Connect in Indiana. Electric cooperatives entering the broadband market are a competitive threat for rural telecom cooperatives/companies, but not necessarily—there are opportunities to consolidate infrastructure and achieve broadband and smart grid deployment goals without one stepping on the toes of the other.

The panel at the USTelecom conference included Jeffrey Dygert (AT&T), Betty Ann Kane (Washington DC Public Service Commission), Mike Oldak (Utilities Telecommunications Council), Larry Plumb (Verizon), and Nick Sinai (White House Office of Science and Technology Policy). The panel was moderated by Robert Mayer from USTelecom. The session kicked off with a short presentation on a recent survey by Black & Veatch. The survey respondents included executives, managers, supervisory personnel, technical and support staff from many types of utility companies (integrated, generation only, etc.). The most interesting finding to me was that even the utility industry is having a hard time defining what the "smart grid" actually means. If the utility industry doesn't believe that the smart grid is well defined or understood, how on earth will consumers define and understand it? Do any of my telecom readers see a connection here with the challenges of defining "broadband?" Practically every corner of the telecom industry has a different definition—from 1.5 Mbps to 100 Mbps, technology-specific, technology-excluding, and so on—the only consensus on the definition of broadband is that there is no consensus on the definition of broadband. When you consider the role of the consumer in defining terms like "broadband" and "smart grid," precise definitions get even more incoherent and divided. Other interesting findings in the Black & Veatch survey included: utilities have a negative impression of the business case for the smart grid, and utilities widely believe that state regulators are not on the same page in terms of expectations and visions for the smart grid (30.6% of respondents reported that they perceive their visions/expectations and the visions/expectations of state regulators as "miles apart"). Doesn't this sound like the telecom industry too? Rural telecom providers and state utility boards are definitely not always on the same page in terms of broadband investment, deployment and adoption goals. I would bet that like the utility respondents, only about 0.5% of rural telecom industry players would report that they are "extremely in sync on vision and all critical issues" with their state regulators too.

The other corresponding challenge shared by the broadband and smart grid realms is return on investment. The Black & Veatch survey reported that only 9% of all utility respondents are "very confident" that they will be able to recover smart grid investments effectively and quickly. I would bet a similar percentage of rural telecom providers feels very confident that they will be able to recover major broadband infrastructure investments at a pace fast enough to justify the cost. With regulatory uncertainty over USF Reform, rural telecom providers who are very confident they will recover broadband investments quickly are undoubtedly becoming an endangered species. If sources of private investment are scared away as a result of the regulatory uncertainty over USF, how will any rural telecom provider justify the business case to invest in broadband in extremely high-cost areas? This is the fundamental challenge the rural telecom industry faces right now, and I find it really interesting that the utility industry is also uncertain about the return on investment for smart grid projects.

Take a look at the following chart, illustrating impediments to smart grid implementation (1 being lowest, 5 being highest impediment). How many of these impediments are shared by the rural telecom industry regarding broadband deployment? *Click image to enlarge.

I count at least 6 shared impediments to achieving smart grid and rural broadband ubiquity: the business case does not justify the investment; customer's lack of interest and knowledge (but to a lesser extent with broadband); it takes too large of an upfront investment; funding uncertainty after stimulus funds (or private investment, for telecom) are gone; commitment to manage, operate and upgrade is daunting; regulators will oppose/delay; and regulators will provide inadequate returns on investment. My question is: how can telecom and utility providers collaborate to overcome or at least mitigate some of these impediments, so that the smart grid and broadband goals can be achieved?

The panelists at the USTelecom conference discussed the challenge of regulatory uncertainty over cost recovery for utility providers, noting that some utility providers have been slow to invest in smart grid upgrades because of this challenge. If the government wants all Americans to have access to broadband and smart grid benefits, then something must be done about these cost recovery uncertainties—on the telecom side, the FCCs proposed USF reforms are certainly not helping. I think there is a lot more customer resistance to smart grid technologies than broadband, but we know that broadband adoption in the US is not a shining example of public policy. I thought about the differences and similarities between smart grid and broadband acceptance and adoption as the panelists described efforts to get consumers on board with the smart grid. I discussed this issue in my review of the UTC Smart Grid Policy Summit back in April, where panelists at that conference described how for the first time in the history of electricity, consumers are being asked to actively participate in the relationship between consumer and utility, rather than just writing a check each month in exchange for continuous service. Larry Plumb noted that when the telecom industry modernized 25-30 years ago, consumers were not involved in the process—telecom providers upgraded to digital switches and consumers were none the wiser, and their telephone habits did not have to change. With the smart grid, utilities are trying to get consumers to completely change their electricity consumption behavior, but unfortunately "most will never care," as Plumb said in the discussion this morning.

I will continue to look for ways in which telecom providers and electric utilities can collaborate on smart grid and broadband deployment goals, but at this point a high level of convergence between the two industries seems very far away. If neither electric utilities nor telecom providers can be assured that investments in smart grid and broadband infrastructure are worth the cost and headache, these critical infrastructure goals will not be achieved anytime soon.

The Black & Veatch survey, "Managing the Transition in the Electric Utility Industry," is available here—I recommend taking a look at it, there are some interesting findings.

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You may have noticed that Rural TeleCommentary got a new look—I want to thank Doug Pals and his marketing team at Re:Sourceful Communications for the awesome new logo!

I may be taking a short hiatus from USF Reform issues on this blog, but I am still analyzing reply comments, ex parte filings and other USF news for the JSI Capital Advisor's Blog, so be sure to check that site to get your USF fix.

Later this week, I will be returning to everyone's favorite topic—the AT&T-T-Mobile merger! I haven't written anything on the merger in the last month, because frankly, nothing has happened except a lot of complaining and the president of GLAAD resigned because he filed a letter in support of the merger which was written by AT&T, who donates money to the organization. I'm trying to come up with a fresh take on the topic—one that hasn't been beaten to death by every single telecom media channel.

Cassandra Heyne

ruraltelecommentary@gmail.com

Trying to Overcome Dark Forces in the Rural Telecom Industry

Minnesota rural telecom cooperatives attempt merger for the second time, and other news from this week.

This week has been quite interesting for me—there have been numerous articles and events which have caught my attention and kept me constantly thinking about how exactly the rural telecom industry is going to overcome the monumental challenges ahead with USF Reform, the National Broadband Plan, Net Neutrality, the AT&T-T-Mobile merger, and basically the list goes on for a while… Additionally, several media outlets have published interesting stories on the impact of broadband (or lack thereof) in rural areas. From my perspective, two things are clear: rural America needs broadband now, and barriers must be reduced so that rural telecom providers can provide said broadband in rural areas. Regulatory and financial barriers are not the only thorns for rural telecom providers right now, as we will see in the following story about two rural telecom cooperatives in MN who tried twice, and failed twice, to merge in order to have a better chance at navigating the perilous regulatory waters ahead.

Earlier this week, Blandin on Broadband and the Willmar, MN West Central Tribune reported on a proposed merger between Farmers Mutual Telephone Company (Bellingham, MN, 1.037 access lines) and Federated Telephone (Chokio, MN, 2,350 access lines). The two cooperatives hoped to create a merged cooperative called Advanced Communications in Rural America. According to the West Central Tribune and both cooperatives' General Manager Kevin Beyer, the company's bylaws called for members to vote in person, and the cooperatives failed to obtain a supermajority in favor of the merger in the first vote last November. The cooperatives then changed their bylaws to allow voting by mail-in ballot, in hopes that this would help them achieve the supermajority needed to approve the merger. Unfortunately, the results of Thursday's vote were strikingly similar to the previous vote: Federated Telephone Company members voted 90% in favor of approval in both votes, but only 57.5% of Farmers Mutual members approved the vote in the second round (a decrease from 59% approval obtained in the November vote).

I had a brief conversation with Kevin Beyer, where he expressed disappointment about the result. He said he had hoped the merger would create a stronger cooperative—a cooperative that would be better positioned to overcome the troubling regulatory challenges that the rural telecom industry knows all too well right now. I asked why the merger was not approved, and apparently there was a group of members who strongly opposed the merger who managed to sway enough power to prevent it from happening. However, Beyer added that this group of members never really explained their reasons for opposition, which leads me to the assumption that this is a bad case of small town politics interfering with a potentially valuable business decision, which could have passed benefits along to the community. According to the West Central Tribune, the opponents even placed radio advertisements, but they did not identify themselves.

What is interesting is that the two cooperatives share a general manager and switching and network facilities. My co-writer at JSI Capital Advisors, Richelle Elberg, shared that "the cooperatives had advertised that they could have saved $200,000 per year in expenses and that the uncertainty surrounding Universal Service Funding and other competitive concerns made the merger an important strategic move." Furthermore, no jobs would be lost and both cooperatives' head offices would remain open (JSI Capital Advisors article here).

So what went wrong? I suppose we will never know for sure, but I suspect the opposing members simply do not understand the telecommunications industry well enough to make an informed decision. This tends to be one of the pitfalls of rural cooperatives, where each customer is a voting member with power to drive major decisions. Something tells me that the opposing members did not sit down and read the FCC's 300 page NPRM on USF Reform, nor did they attend an NTCA or OPASTCO legislative conference and lobby Congress on rural telecom issues (but I could be wrong, who knows). However, the general manager and board members possibly did do these things to some extent, which led them to the conclusion that merging is the only way to strengthen the company to face these challenges. The fact that the opposing members did not identify themselves or offer an explanation for their opposition is a real red flag for me, and I can only speculate that small town politics killed this deal.

If you would have asked me a year ago about how I felt about small rural companies merging in order to try to reduce the negative impact of the National Broadband Plan, I would have probably gotten really defensive and angry—in fact, that actually happened at least once. However, my feelings about rural telecom consolidation are starting to change, and I now believe that if the conditions and motivation are right, some of the extremely small RLECs should certainly consider merging (I will most likely write about this topic in greater detail in the near future). It seems as though Federated and Farmers Mutual would have been a great match, and this merger could have possibly paved the way for other small rural cooperatives to take the plunge. Beyer told me that he does not see another vote in the future, and the two cooperatives will just have to do their best to survive. I wish them the best of luck.

Meanwhile, rural Americans are clamoring for broadband. There was a truly excellent two-part series this week on one of my favorite rural blogs, Daily Yonder, by Karl Stauber. Part 1, "Finding a New Rural America," takes a hard look at the disparity between "Old Rural," which is dominated by declining populations and last-century single-economy mentality, and "New Rural," which focuses on innovation, opportunity and a high quality of life. Stauber describes the duality, "Old Rural is often about very limited connectivity between urban and rural. New Rural is intentionally about broad connectivity.  New Rural is about helping regional efforts to build diverse, evolving competitive advantage that grows the amount and distribution of wealth." Part 2, "To Live or Die in Rural America," discusses the challenge that rural America faces in an increasingly urban-centric political environment. Stauber insists that new policies are necessary to ensure that rural communities, economies and cultures survive and thrive. Broadband is the key to the survival of rural communities, and Stauber comments:

"Rural communities have a double disadvantage in making high-speed access universally available.  The population in many rural areas tends to be older, poorer and less educated—all predictors of low utilization of the Internet, thus challenging the economics of traditional utility models. 

In addition, rural areas are often lumped in with urban areas when geography and bandwidth are allocated.  Most companies see more opportunity to make a return on their investment in higher density urban areas, leaving rural parts of their service areas with minimal or little access.

Federal policy should require that Internet access in rural areas be developed at the same rate as adjacent metropolitan regions or that rural utility cooperatives should be given priority when bidding occurs that includes rural regions."

I highly recommend reading Stauber's series if you have not done so already, if anything to gain a better understanding about rural areas in general.

What needs to happen in order for rural telecom providers to overcome the myriad challenges and negative forces facing the industry is facing? Unfortunately, I do not have all the answers to that question, but having good rural leaders and allies in Congress and at the FCC would definitely be a great start. Earlier this week, OPASTCO issues a press release recommending Brian Hendricks, Chief Counsel for the Senate Committee on Commerce, Science and Transportation, to take former Commissioner Baker's empty seat at the FCC. Naturally, I was curious about this individual, and I did a little investigating and he seemed like a great rural ally as he comes from rural Texas. I had no idea on Wednesday when I read the press release that I would actually end up meeting Mr. Hendricks on Thursday! Several distinguished faculty members from my school, University of Colorado, hosted a reception at the DC Disney headquarters to honor three students who were chosen to intern at the FCC and Senate. It turns out that Mr. Hendricks is a big fan of my graduate program at CU, and one of the interns (also a classmate of mine) happens to be working at his office for the summer. Anyway, when he introduced himself I was so excited and I actually said "are you the same Brian Hendricks that OPASTCO recommended for the FCC position?" I ended up having a really wonderful conversation with him, and I can say with certainty that he would make a fantastic FCC commissioner and I sincerely hope he is seriously considering the job. We discussed the importance of an interdisciplinary telecommunications education for telecom professionals, and of course we talked about USF Reform. He fears that the FCC's USF Reforms are misguided and hasty, and he shares practically all of my concerns about the finer points in the reforms. I am so honored to have had the opportunity to talk to him, and he is definitely my top "person of interest" in rural telecom right now.

In other news this week, I had an informal meeting with a member of the FCC where we discussed FCC administrative procedures and I learned about the Wireline Competition Bureau and the Pricing Policy Division—as it was an informal meeting, we could not discuss things like USF Reform or the AT&T merger, but it was still a terrific opportunity for me to learn more about the FCC process. I was encouraged to get involved with filing comments and attending ex parte meetings in the future. Additionally, the Iowa Telecommunications Association hosted a Rural Telecom Forum on June 6, which I did not attend, but heard from attendees that it was a great event. Iowa farmers and Rep. Tom Latham (R-Fourth District) discussed the importance of broadband for Iowa's agricultural economy, and there is a video clip from the Forum here: http://www.whotv.com/news/agriculture/. To see the video, go to the "Afternoon Agribusiness Report (6/7/11)" clip under the video box, and the Rural Telecom Forum coverage is a few minutes in after the farm report.

I hope to complete my reply comment summaries this weekend, and I also added a new feature, "USF Reform Headquarters" at the top of the page where you can go to get the latest news on USF Reform, as well as a comprehensive list of all the blog posts I have written on the subject for both Rural TeleCommentary and JSI Capital Advisors Blog.

Have a great weekend!

Cassandra Heyne

ruraltelecommentary@gmail.com

Smart Grid Synergies for Rural Electric Co-ops and Telecom Providers

Two months ago, I first wrote about my growing interest in opportunities for rural telecom providers to serve electric utilities with communications networks for the Smart Grid. I was particularly interested in analyzing the overlays between rural electric cooperatives and rural telecom providers; because it seems to make perfect sense that these two entities collaborate in some way to achieve two of the most critical infrastructure goals for the 21^st century: broadband deployment in rural areas and modernizing the electric grid. I had a perfect opportunity to explore this opportunity in a project for my Energy Communications Networks class, and I am happy to report my research to my readers.

In my project, Smart Grid Synergies for Rural Electric Cooperatives and Rural Telecommunications Providers, I first looked at reasons why rural telecom providers and rural electric cooperatives would even consider merging or collaborating on smart grid projects—after all, this idea would have been extremely radical and unacceptable just a few years ago. I found that there is quite a bit of support for rural telco/utility collaboration by rural cooperative associations such as NTCA, NRECA and NRTC. NTCA reported that "For the smart grid to blossom, rural electric and broadband providers need a fresh start and a new, creative approach to mutually constructing and maintaining this foundational partnership…rural electric providers and rural telcos are ideal partners in smart grid ventures" (Ward, NTCA, 2010). For some background information, there are 260 rural telephone cooperatives and 930 rural electric cooperatives, but when you consider all of the small and family owned rural telecom companies, the numbers are pretty even. Both entities provide service to approximately 70% of the US geography, but only about 10% of the population—rural utility and telecom providers serve on average 10,000 or fewer customers and 10 or fewer customers per square mile. The both provide service to some of the most economically challenged rural areas in the country and to some of the most rural and hard-to-reach customers in the country. Broadband and electricity are the lifeblood for rural Americans, and rural telecom and utility providers have gone to tremendous efforts to ensure that their rural customers have state-of-the-art networks. In fact, rural telecom companies have been some of the most successful telecommunications providers in deploying broadband to rural areas, and rural utility cooperatives have also been tremendously successful in deploying smart grid technologies in rural areas. Finally, rural utility/telecom collaboration is consistent with several major U.S. government initiatives to bring broadband and the smart grid to all Americans. A collaborative effort by a rural utility and a rural telecom provider would help achieve goals of the American Recovery and Reinvestment Act of 2009 and the National Broadband Plan of 2010. Congress, the FCC and the Department of Energy are all pushing the convergence of telecom and electricity networks, and there is really no better place to make these breakthroughs than in rural areas.

For the next section in my project, I looked at a company that is a real trailblazer in rural utility + telecom collaboration: NineStar Connect in Indiana. At the beginning of 2011, Hancock Telecom and Central Indiana Power merged to become one of the first combined rural electric and telecom providers in the country. In this arrangement, the utility division uses the telecom division's FTTH network for smart grid applications like Advanced Meter Infrastructure (AMI) and Demand Response (DR), which will help consumers monitor and control their own energy consumption based on peak demand times and pricing. The companies will be able to leverage each other's business operations, such as billing, customer service, and call centers, to reduce operational expenses. As an added bonus, the telecom division gains access to the utility's right-of-ways and pole attachments. The benefits and synergies do not stop here—the telecom division will now be able to become a CLEC in communities that were previously only served by the utility provider, creating a significant sustainable competitive advantage. Furthermore, the threat of the utility provider becoming a direct competitor to the telecom provider is completely eliminated. NineStar Connect is using a Tantalus fiber-based technology platform, and the CEO of Tantalus (Eric Murry) seems to be really excited about the benefits and synergies from this merger: "It's natural for telecoms and utilities to work together…It's a logical next step that will accelerate smart grid roll out, avoids the costs and complexity of building and maintaining two separate communications networks, and consolidates billing, customer service, and many other business functions under one roof" (Tantalus, 2010). All eyes are on NineStar Connect right now as the company has truly formed a new breed of cooperative—I am hopeful that they realize great synergies and success from the merger and become a model for other rural telecom and utility providers to follow in their footsteps.

Next, I looked at ideal business and technology arrangements for rural utility and telecom collaboration. Unfortunately, this is such a new idea, so there aren't any prominent models at this time. From my own observation, I concluded that FTTH is the best type of technology to facilitate an effective collaboration because the capacity is virtually unlimited so it can easily support the data load from smart meters (which is very small) as well as the data load from broadband customers—with room for the loads to grow. However, FTTH has not been deployed completely in many areas, and there may be no broadband connections at all to some extremely remote areas. In these situations, wireless technology can effectively be used to fill in the gaps until fiber is deployed. Prior to making any agreements, the utility provider must conduct a Strategic Communications Plan, whereby they analyze their communications needs one-by-one for each component of their grid. It may be the case that a utility will want to maintain a private network for SCADA or substation automation, but would be completely willing to work with a commercial telecom provider for AMI and other smart grid applications closer to the customer. Finally, many business operations can be consolidated to achieve maximum synergies—call centers, service crews, even warehouses and office supplies.

Finally, and probably most importantly, I analyzed the challenges that utilities and telecom providers must overcome to collaborate on rural broadband and smart grid projects. The challenges are significant and will likely not be overcome easily or soon. The main challenges include:

• Regulatory uncertainty for rural telecom providers: I don't feel a need to go into detail here; we know how significant these challenges are! For more information, feel free to read my USF Reform NPRM comment summaries from the rural telecom industry.
  
• State laws: the laws in Indiana prevented utilities and telecom providers from merging; luckily the state recognized the benefits and opportunities of the NineStar Connect merger and changed the laws to allow the merger.
  
• Mismatched geography: Not all rural electric and telecom service territories align perfectly. In many cases, the utility may need to provide electricity to an extremely remote area where no telecom customer even exists—such as an irrigation control center in the middle of a 20,000 acre ranch. These are the situations where wireless becomes a great fill-in-the-gaps communications technology.
  
• Ensuring network reliability, security and priority for the utility: commercial telecom networks are not built for utility communication, and utilities will not tolerate many of the network weaknesses found in commercial networks. The FCC released a NOI last month inquiring about these issues, so hopefully we will see some telecom providers responding that their networks are suitable for smart grid communications.
  
• Utilities' age-old mistrust of telecom providers: utilities have simply mistrusted telecom providers for so long, that it will be hard to overcome this barrier to effective collaboration. However, I believe that rural communities are the ideal testbed to break this barrier because of the unique qualities of rural businesses, communities and relationships between these two entities. They both have and strive to achieve the goal of providing excellent, state-of-the-art services to rural communities that are often not considered profitable by larger companies.
  
• Utility regulation: utilities have an incentive to invest in their own networks and infrastructure as a result of their regulatory rate structure. They are not able to recover investments if they utilize commercial networks. In the National Broadband Plan, the FCC recommended that states take steps to reduce regulatory impediments for using commercial networks.

In conclusion, there are significant challenges for both utilities and telecom providers to overcome in order to effectively collaborate. However, if these challenges are reduced—or if companies follow the lead of NineStar Connect and just "go for it," there are great opportunities for business and technology synergies. Not only will the companies achieve many benefits, but customers will as well. I think there are some amazing opportunities here if rural utilities and telecom providers are willing to make the effort, initiate dialogue with each other, and strive to overcome the challenges to collaboration. I am really hoping that more rural utility and telecom providers start looking at these opportunities. There are several interesting direct analogies between rural electric cooperatives and rural telecom providers, and the two entities can successfully leverage their similarities to overcome their differences and reach an effective, profitable solution.


I would like to credit Jesse Ward from the National Telecommunications Cooperative Association and Joan Engebretson from Connected Planet for their articles and research on this topic—articles that largely inspired me to do this project. Just last week, the day after I finished my paper, Connected Planet released this article providing an update on how NineStar Connect is progressing since the merger.

If you are interested in reading my full report, I would be happy to e-mail it to you if requested.

Cassandra Heyne

ruraltelecommentary@gmail.com

Day 1 of UTC Smart Grid Policy Summit: Perspectives from a Utility Newcomer

The Utilities Telecom Council 2011 Smart Grid Policy Summit marked my first public foray on the utilities industry, and I am pleased to report that my interests in the Smart Grid are still very much alive and well. For some personal background, I became interested in the Smart Grid last summer when I was assigned to do some research at my previous job about claims that smart meters were causing harmful interference to wireless devices (security alarms, garage door openers, etc.). This took me on a whirlwind tour of smart meter controversies from the consumer perspective-- EMF safety concerns, personal energy usage information privacy threats, wireless interference in the unlicensed 900 MHz ISM band, fears that aliens would invade homes through smart meters... You get the idea--consumers have some wild imaginations! Anyway, some of my research in this project was focused on using licensed vs. unlicensed airwaves for smart meters, which brought me to my next smart grid project for my Wireless Communications class last fall. In this project, I continued to research issues surrounding private vs. commercial wireless networks and licensed vs. unlicensed spectrum for smart grid and smart meter networks. For the 2011 spring semester, University of Colorado started offering a new class on Energy Communications Networks, which I am now taking and really enjoying. This brings me to my current project, a research paper on the potential for rural electric cooperatives and rural telecom companies to collaborate on smart grid projects (which I have written about here). During my research I came across the UTC Smart Grid Policy Summit, which I noticed was 2 blocks from my house and at my favorite hotel in the city--so I just had to sign up! Anyway, on to the Summit. I was particularly interested in hearing and learning more about the following topics, which were basically all discussed during today's sessions:

• The licensed vs. unlicensed spectrum debate
• How to get utilities and telecom providers to collaborate effectively and with mutual trust
• Mitigating the often unreasonable consumer fears about smart meters to ensure a smooth transition to the utility industry of the future
• Any issues, challenges and accomplishments specific to rural smart grid deployment--and is this all important from a rural telecom perspective?

I hope my rural telecom industry readers find this information useful and interesting, even if you are not specifically involved in smart grid projects (I predict you will be soon, however, to some extent at least). I am going to do a detailed review of the first two sessions from today as I found them to be particularly relevant to rural telecom providers. 

Keynote Speaker: Joe Rigby, Pepco CEO
The Summit opened with an optimistic yet honest overview of Pepco's smart grid deployment efforts. Rigby emphasized the importance of taking a cautious, staged deployment of smart meter functionalities to prevent widespread misinformation about the transition from the utility of the last 100 years to the utility of the future. Rigby discussed the importance of collaborating with all stakeholders and taking advantage of all channels to engage and educate consumers on the value of the smart grid. So, what is the value of the smart grid anyway? The value proposition must be communicated in a way that engages consumers, and several clear smart grid values include: improved energy reliability, greater consumer understanding of energy usage, seamless integration of renewables and electric vehicles, and reduced operating costs that translate to customer savings. The challenges facing smart grid deployment are also significant: resetting consumer expectations, Cyber Security ("a war that will never be over"), data privacy, meter accuracy, perceived EMF/RF safety concerns, securing sufficient bandwidth for utilities, and forging relationships with new partners, suppliers and competitors. Overall, Rigby's speech was very informative and it set the tone for the day as many of these issues were discussed in greater detail by the panelists in the following sessions.


Session 1: What's Next in Smart Grid Policy: Leaders Forecast the Big Issues Ahead
Panelists: William Moroney (Moderator, UTC), Philip Moeller (FERC), Eddie Lazarus (FCC), Henry Kenchington (US Dept. of Energy), Tony Clark (NARUC and North Dakota PSC)
The purpose of this session was to identify key smart grid policy issues and discuss how policy decisions will impact different aspects of smart grid deployment and implementation.  From my telecom policy background perspective, this session was very valuable to me because I was able to learn about the utility policy process and pending issues directly from utility policymakers. The panelist from the FCC kept me in my comfort zone by discussing the smart grid initiative in the National Broadband Plan and a recent NOI about network reliability (which I plan to read and discuss soon)--adding that utilities have traditionally been reluctant to work with commercial telecom providers due to network reliability issues (a barrier that I hope to see broken by rural electric co-op/rural telecom provider collaboration). The DOE panelist discussed Recovery Act smart grid projects that are underway, saying that these initiatives will hopefully help remove some of the uncertainty about smart grid benefits, costs and risks. The remarks that really stuck with me were from Tony Clark of NARUC and North Dakota PSC (a rural perspective!), who emphasized that all utilities--telecom included--are converging, which will require major educational efforts for both consumers and regulators. He added that cost is the greatest challenge for states, and used the example of USF reform and its potential cost burden to states. The best question asked to the panel was "What problems does the smart grid really solve?" From the consumer perspective, there needs to be a clear answer to this question or consumers will not accept the smart grid. A great example is broadband--millions of Americans still do not adopt broadband even though they have access simply because they do not understand the relevance or value of broadband. Interestingly, the smart grid may actually help some broadband non-adopters to "see the light," and therefore help increase broadband adoption along the road to achieving broader smart grid goals--but it will require concentrated efforts by all smart grid stakeholders to educate consumers. Finally, the panelists discussed how important it is for consumers to educate themselves on the values of the smart grid, which requires specific, tailored information from reliable and trustworthy sources--in voices that are loud and reliable enough to overpower the widespread misinformation about the smart grid.

Session 2: Managing the Technology Mix: Building, Buying or Sharing Smarter Utility Communications Networks
Panelists: Mike Oldak (Moderator, UTC), Karl Nebbia (NTIA), Julius Knapp (FCC), Jeff Nichols (Sempra Energy Utilities), Mark Madden (Alcatel-Lucent), Rilck Noel (Verizon), Narasimha Chari (Tropos Networks)
Due to my past research projects about wireless networks and the smart grid, I was definitely very excited about this panel--and it did not disappoint. Basically, utilities need spectrum. There will be an estimated 1 billion "smart devices" in the near future that are all communicating with each other and the utility--if this doesn't convince you that utilities and telecom are converging, I don't know what will! The obvious question is: where will utilities get this spectrum? Wireless providers, the government and broadcasters are already fighting like rabid dogs over every last megahertz--everyone wants it, everyone has valid reasons to want it, and not everyone will end up with beachfront spectrum property. The FCC panelist added that there are no more "vacant lots," and difficult, comprehensive spectrum management efforts are definitely necessary. Like rural telecom providers, utilities are often disadvantaged in spectrum auctions, and sharing arrangements can be difficult to acquire and negotiate. Rural utilities are especially unlikely to get their own licensed spectrum. The Alcatel-Lucent panelist added that each utility faces specific geographic, demographic and infrastructure needs and challenges. Basically, ensuring that utilities have access to communication network assets will require creativity, imagination, money, and will include some conflict and drama (Rural telcos- how can you turn this into a profitable business opportunity? Think about it!) Some promising opportunities exist in both the TV White Spaces and the 700 MHz Public Safety spectrum, pending regulatory approval. Finally, I was intrigued by the comment that utilities should not "put all their eggs in one basket" in terms of communications networks--they need multiple types of network technologies with different levels of reliability and different options for redundancy. I see some real opportunities for rural telecom providers to step up with their reliable and high quality fiber networks to collaborate with utilities to meet some of these critical communications network needs. Rural electric co-ops probably cannot afford to build entire networks from scratch--with redundancy--in terms of both time and money. Ultimately, there is no single solution that will work everywhere and appeal to all utilities, but communications networks are literally the foundation for which the smart grid will grow and flourish--and they have to come from somewhere.

Lunch with Rep. Rick Boucher, and Afternoon Sessions on Building Customer Acceptance and Interoperability Standards
Following the two fascinating morning sessions was an equally fascinating lunchtime address by former Representative Boucher (D-VA), a true leader and expert on energy and technology. Boucher recalled a story that I either heard or read recently: what would Edison and Bell say if they saw the state of the energy and telecom industry today? Bell's mind would be blown by how telecom has evolved in the last 100 years, but Edison would find the energy industry basically the same as when he left it. Boucher emphasized the many benefits of the smart grid, from demand response to a burgeoning new home appliance market to the impact on the environment. He also highlighted the challenges--financial cost of upgrading the entire utility industry, consumer criticism of smart meters, finding adequate spectrum for networks, and developing interoperability standards. He discussed the controversial debate about the D Block and the potential for using the TV White Spaces in Rural Areas. As Vilsack's speech at the NTCA Legislative and Policy conference was empowering for rural telecom advocates, Boucher's speech was equally empowering for smart grid advocates.

The last two sessions of the day-- Building Consumer Acceptance and Interoperability Standards--were interesting as well and full of lively debate, but as I am pressed for time right now (and exhausted), I will end this post before it gets any longer. Tomorrow will be very exciting for me--most of the sessions are about Cyber Security, a topic that I am studying in my Energy Communications Network class at this very moment. Ever since I read Cyber War by Richard Clarke last summer, I have been pretty obsessed with Cyber Security, so I am sure to find tomorrow's sessions extremely valuable and informative.

One last thing--today was also my first public foray into the wonderful world of Twitter, and it was fun to share my thoughts about the conference via social media. I am still hoping that more of my readers will "follow" @RuralTelComment on Twitter!  

Cassandra Heyne
ruraltelecommentary@gmail.com

Rural Broadband Usage: To Cap or Not To Cap?

...The question is, should rural broadband providers start thinking about implementing monthly consumer data usage caps? Possibly... One thing is for sure, a new pricing model is necessary so that rural providers can increase revenue and return on investment, and possibly even reduce financial reliance on government subsidies (which might be gone soon anyway).

AT&T's big decision this week to start capping wireline broadband at 150 GB for DSL customers and 250 GB for premium U-verse customers is certainly worth a hearty debate between broadband customers and broadband providers. On one hand, customers have grown accustomed to unlimited broadband use from basically all providers, and it has really only been the wireless providers who have made headlines recently for taking away the precious unlimited plans--primarily in response to the explosive growth of smart phones and corresponding strains on network capacity. Wireless broadband is a relatively new technology for many consumers, so the "shock factor" of taking away unlimited plans is not as severe as it is with DSL, cable or fiber-based broadband, where consumers have never even considered anything less than unlimited use. On the other hand, there are no rules saying that broadband providers must provide unlimited broadband capacity to all consumers, and a company that invests millions (or billions) of dollars into state-of-the-art broadband infrastructure for the benefit of consumers has the right to recoup those costs and make a reasonable profit. Unlimited plans were a wonderful way to attract consumers and get people excited about using the Internet, but the business and technology cycle is at a point now where it is not practical or sustainable to continue unlimited plans indefinitely. There are very few practical businesses where customers can consume a product or service on an unlimited basis forever (example: utilities). Increasing broadband capacity is very expensive for providers, and continual capacity increases cannot go on indefinitely every few years without some significant changes in the pricing strategy.  The obvious solution is that the more you use, the more you pay (within reasonable limits of course).

One problem is that consumers and content sources are acting as though the transmission pipe in between is not as important as it actually is, and the content industry is going directly for the consumer's dollars and cutting the transmission provider out of the equation. Netflix is the obvious example--rural providers may experience nearly 1/4 of their peak time capacity going to consumers watching Netflix movies; yet the provider is not compensated proportionally by consumers nor content provider. Online video is only going to grow exponentially in the near future, so why can't broadband providers start reaping the benefits considering they enable the transaction between consumer and content to occur in the first place?

Consumers are going to be angry about data caps at first, but in reality caps probably won't even impact most consumers' bills at all. Internet capacity is not proportionally used by all customers; there are usually only a few percent that use a tremendously high volume of capacity on a regular basis. According to a FierceIPTV article, the AT&T caps will probably only impact about 2% of customers and most average customers only use about 18GB per month. Still, the idea of "unlimited" has a certain appeal and provides a sense of security and care-free attitude of entitlement for consumers. Providers may assume that implementing caps will cause churn, but this need not be the case.

There are also some key issues regarding customers' access to information and basic knowledge about broadband capacity and usage. There aren't any labels on websites saying "You are using X megabytes by looking at this website," like calorie and nutritional information on food and beverages. A consumer has to be fairly tech-savvy to even understand data usage and figure out how to monitor their own consumption, and then they have to actually care enough to make the effort to pay attention (also like food labels, you can put it there but ultimately it is up to the customer to read it, process the information, and make a good decision about consumption). I admittedly have a cynical attitude towards the "normal" Internet consumer. I literally would not expect a "normal" consumer to even know what a gigabyte means, or know the difference between DSL and cable Internet. The engineering behind telecommunications is mysterious and confusing even for me sometimes, and I'm supposedly getting a telecommunications engineering master's degree. By this logic, I would not expect the average consumer to have any clue how much data capacity they consume each month. I know my wireless data usage is usually around 150-300 MB per month, and I think I use my wireless data quite a bit. I actually don't know how much DSL data I use each month, but I am going to try to find out soon because I am curious to see if I would fall into the "over 150 GB per month" category. I watch my classes online, so I would bet my usage is high, although I don't think it is 150 GB. As pointed out in a FierceIPTV article, "You'd have to be rolling an HD movie a day, every day of the month, through Netflix to even tickle the 150 GB cap."

How does this impact rural broadband providers? .

I cannot stress how important it is for rural providers to start "thinking outside the box" for new sources of revenue with the impending threat of USF and access charges being taken away, as well as the inevitable transition away from per-minute voice pricing. It is a scary statistic that some rural providers receive over 50% of their annual revenue from subsidies, and it is a sad fact that some of these companies will not survive if those subsidies are taken away. This just illustrates how important it is to do some planning and experimenting now with new ways to generate income, before it is too late. Will customers like data usage caps? No, they will not. However, rural telecommunications providers have the unique benefit of being intimately involved in the lives of most of their consumers, where managers of rural telephone companies can take the time to sit down face-to-face and explain new pricing models to concerned customers. Rural providers can educate consumers about how they can monitor their broadband data usage, and notify consumers before the limit is reached to avoid those angry visits or phone calls from customers claiming they "didn't know." Due to the tight-knit provider-customer relationship in rural areas, rural customers may be likely to listen and ask questions, rather than just getting angry at a large faceless corporation and fleeing to a competitor. Finally, price differentiation can actually be a winning strategy for many companies who come up with new and creative ways to charge for services, so it is not unreasonable to think that some rural companies could even capitalize on a capped usage pricing strategy somehow and gain a strategic competitive advantage. 

For further reading:
FierceIPTV: "AT&T Set to Roll Out Internet Usage Caps in May," Jim O'Neil
The Wall Street Journal: "AT&T Web Customers Face Data Caps," Roger Cheng
Connected Planet: "AT&T Set to Roll with DSL, U-verse Broadband Usage Caps," Dan O'Shea (Interestingly, if you look at the comments on this last article, you will see exactly how customers are reacting to the caps, with comments like "I will promptly cancel my AT&T service," and "If AT&T can't handle the bandwidth, then get out of the business." Unlimited broadband capacity is not a right, it is a priviledge that broadband providers have extended beyond its useful and profitable lifespan--so consumers: get used to changes in broadband pricing!)

Edit: There is a great post on the Innovation Policy Blog sponsored by the Information Technology & Innovation Foundation (ITIF) that really clearly explains how a consumer would literally have to watch Netflix online for 7 hours a day every day in order to exceed AT&T's cap, which makes the criticism about this pricing strategy seem really unnecessary and unwarranted. Additionally, I wrote last month about my disdain for digital piracy and the costs it imposes on broadband networks, and I believe that capped usage strategies will not only send a message that digital piracy will not be overlooked by network providers, but that consumers who engage in this behavior will pay for their actions. Since the appeal of digital piracy is free content, it is possible that some people may even abandon large scale digital piracy rather than pay overage charges to ISPs. Here's hoping anyway...

Cassandra Heyne
ruraltelecommentary@gmail.com

Business Opportunities Beyond Traditional Telecom Services: The Smart Grid

The Smart Grid is a hot topic right now, and I'm planning to write several articles about smart grid opportunities for rural telecom providers in the near future, focusing on different aspects of this idea. I have personally been interested in the Smart Grid for a year or so, and then I had the pleasure of doing several smart-grid related projects for my previous job and in the Wireless Communications engineering class I took last semester. My focus has primarily been on using wireless networks for smart grid components, and which type of wireless networks are most appropriate for different utility operations--from smart meters to SCADA to critical infrastructure communications (smart meters in particular). Naturally, I was very excited when a new class was added to the University of Colorado Interdisciplinary Telecommunications Program this semester: Energy Communications Networks, focusing on all different communications aspects of the Smart Grid. I did not actually need to take this class for the credit hours or as a requirement, but that did not stop me from registering anyway because I am so interested in the topic. I would actually like to become somewhat of an expert in Smart Grid communications, for reasons I will explain momentarily. So far the class has been very interesting and I have been gaining some valuable knowledge about utility systems in general, a topic that is relatively new to me. There are just so many interesting aspects of utility communications, and the convergence of digital data communications with something as "old fashioned" and entrenched as the utility grid promises literally unlimited possibilities for utility providers and consumers, and new business opportunities rural telecommunications providers.

Yes, and telecommunications providers. Traditionally, the utility industry has not been very trustworthy of commercial telecommunications network providers. Utility providers want communications networks that promise the highest levels of reliability, security and resiliency, and this usually means building their own private networks specifically tailored to specifications and strict requirements in these areas. Utility providers want to have priority use of the network if "something bad happens," and utility providers also need network coverage in the deepest, darkest, most rural corner of their service territory--places that even the best telecom network providers may not reach easily or profitably with broadband. Although not every type of commercial telecommunications network is an attractive option for utility providers, I do believe that rural telephone companies and rural utility cooperatives should break down some of the traditional barriers between these two critical industries. Rural telecom providers are the most likely type of commercial telecom company to have broadband service that reaches far and wide in rural areas that are not considered profitable for larger telecom providers. It is a well known fact among the rural telecom advocates that rural companies provide far better broadband service in rural areas than their larger competitors, which has been an issue of contention in may recent FCC proceedings and will surely be brought up again in the CAF/USF Reform comments coming out next month. I suspect, and would like to further investigate, that many rural utility cooperatives and rural telephone companies and cooperatives have very similar service areas, where some real exciting business opportunities could exist for network sharing and shared investment in broadband facilities.

It is also a well known fact in the rural telecom industry that rural companies need to start looking at ancillary businesses and considering new ways to utilize existing infrastructure to increase profitability. With USF funding and access charges facing a dark and uncertain future, there is going to be a "survival of the fittest" situation in the rural telecom industry. The "fittest" are going to be the ones who jump on new business opportunities, possibly outside the scope of normal telecom services. Applications and content, particularly in video and social networking, are two obvious choices for expanded business models in hot current markets, but may not be practical or ideal for small rural companies. There is considerable pressure for utility companies to upgrade to smart grid capability--afterall, a frightening percentage of technology in the utility grid is already years past its expected useful lifespan of 30-40 years. Similarly, there is a huge push for telecom providers to upgrade to 4G, FTTH, and other broadband-capable technologies. See where I am going here? Utilities need to upgrade communications networks to broadband + Telecom providers cannot survive unless they upgrade to broadband = Business Opportunity for both parties.

There are many challenges facing any type of collaboration between rural utility and rural telecom providers. The lack of trust that utilities harbor towards telecom is clearly an issue, but I think there would be more potential for mutual agreement in a rural area, where the manager of the rural utility co-op and the manager of the rural telecom operator are probably neighbors, have kids on the same football team, or at least run into each other on a regular basis. This is one of the benefits of keeping rural services (be it telecom, utility, or grocery stores) owned and operated by members of the community. The business culture itself is more appropriate for collaboration across lines that are traditionally not crossed in corporate America, and each provider has a significant stake in the future of the community as members of the community themselves. The other major challenge is technology. Utility providers are implementing any and all types of communications networks in the migration to the Smart Grid, and often there are different communications technologies used by one utility provider for different segments of the grid. In general, wireless seems to be one of the best options. In the project I did for my wireless class last semester, I looked at the benefits and drawbacks of using public vs. private and licensed vs. unlicensed wireless networks. In a "perfect world" scenario, utility providers would probably want private licensed spectrum for most Smart Grid applications, but in a realistic world, there are actually many possibilities for using commercial and/or unlicensed wireless in areas of the grid that require lower bandwidth, less security, and low priority data transmission. Smart meters (or Advanced Metering Infrastructure-AMI) are an attractive candidate for using commercial spectrum because of these factors (low bandwidth, etc.). One possibility for a rural utility-rural telco partnership is in wireless broadband. A rural telco who already has (or is planning to deploy) a local wireless network like WiFi or WiMax could work with a rural utility co-op on network planning and capacity requirements, and could possibly even share the capital cost of the investment.  Collaboration on network planning could be very beneficial to both sides, and it could ultimately allow the telecom provider to reach more customers with wireless broadband.

Basically, rural telecom providers need to start looking for new business opportunities in the face of adversity and a harsh regulatory regime. In an industry where the actual service providers are being shadowed by devices, applications and content, rural telecom providers need to be getting the most out of their infrastructure investments or risk an unprofitable future in terms of reduced long distance revenue and customer migration coupled with USF uncertainty. There may still be many challenges to overcome before commercial telecom providers and utility providers are best friends on a crusade to increase broadband availability in rural areas in a mutually beneficial way, but I think the time has come for these two industries to look into convergence possibilities wherever possible. I am planning to do more research on this topic soon and will add more information and ideas about smart grid business opportunities for rural telecom providers.

Edit 3/8/2011: I was so excited to see this article today in Connected Planet: NRTC Lands Two New Smart Grid Product Offerings, about some new technologies that will provide infrastructure synergies for rural utility cooperatives and rural telecommunications providers. I am planning to investigate the technologies mentioned in the article from Sensus and Efacec as well as the potential for rural utility-telecom collaboration for a project in my Energy Communications class. The article also mentions that one rural utlity and telco have merged some operations to achieve Smart Grid goals, and I am very curious to learn more about this partnership-- Who is it? Have they been successful? What challenges have they overcome?

Cassandra Heyne
ruraltelecommentary@gmail.com