Large as Life: How Fiber Will Turn the World Upside Down

Susan CrawfordNov. 19, 2015

fiber

Immerse yourself in the sun, sand, and secret journals of five twenty-somethings living under one roof.

What I learned• Many heroes• Getting anything done is really hard• “But phones are two-way!”• No path to a national upgrade to last-mile

fiber optic connections

Footprint Is DestinyWires in US households:

– AT&T 51 M– Comcast 41 M– New Charter 36.9 M

• [TWC, Charter, Brighthouse]– New VZ 22.4 M

• New FiOS 11.6 M• [No more CA, FL, TX]

– New Frontier 14.4 M– Windstream 3.2 M

Four Different Wires• FTTH – glass/lasers, potentially unlimited capacity, easily

symmetrical (up/down), future-proof, just upgrade electronics• Hybrid fiber-coaxial – cable plant, some portion of pipe

allocated to Internet access, high capacity download, cramped uploads absent expensive re-tooling

• FTTN – fiber to node, copper between neighborhood node and home, capacity dependent on distance to central office

• [DSL: “The New Dialup”]

2005 2006 2007 2008 2009 2010 2011 2012 20130.0%

10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

Share of High Speed Data Net Adds

Cable Telco

2010 2011 2012 2013

-35%-30%-25%-20%-15%-10%-5%0%5%

10%15%

Annual Percent Change in Wired High Speed Data Subscribers

ComcastTWCAT&T TotalVerizon TotalAT&T DSLVerizon DSL

Five Simple Principles1. Cable v. FiOS: FiOS usually wins (60-65% of the time)2. Cable v. all other telco: Cable usually wins3. Bigger cable co: Cable wins even more!4. Smaller telco: Telco loses even more!5. Major cable players never enter “rival” territories

Markets are divided“bounded competition”

More on Divided Markets• New Charter faces competition from FiOS in just 12% of its

territory• Comcast faces competition from FiOS in just 14% of its

territory• New Frontier faces New Charter: just 18%; faces Comcast: just

8%• CenturyLink has just 9% overlap with Charter, 18% with

Comcast• Windstream has just 3% overlap with NC, 1% with Comcast

Where Competitive Fiber Isn’t1. MN incumbents Comcast, New Frontier,

CenturyLink, and Windstream don’t face competition in their footprints

2. Complete pricing/service-level power

FiOS pre-sales to New Frontier

25Mbps problems

Google Fiber effect

Google Fiber1. Note that Google Fiber is avoiding Verizon FiOS markets2. Even if Google builds out all 40 cities it has already announced and the

six cities it is considering, it will pass just 4.3 million homes – small portion of the total market

3. Note public demand - take-up rates are very high: Bernstein Research estimates at least 40% of each market Google addresses in the coming years (very popular in Provo – note $30 installation fee)

Macon, GA

Miami, FL

Elimination of distance: Empathy– curiosity about strangers– looking at life through other eyes– the enemy of indifference and dehumanization– awareness of what is greater than ourselves

The killer app: economic development• Fiber networks enable hundreds of thousands of individuals

to work from home, adding tens of billions of dollars annually to the U.S. economy

• Fiber connectivity adds between $5,000 and $6,000 to the value of a $300,000 home in the United States

• New jobs, new businesses, talent attraction• Plus enormous healthcare & education benefits

• Change of mindset: fiber is basic infrastructure35

Cedar Falls, Iowa• Citywide all-fiber network – state’s first gigabit city as of 2014• Jim Krieg, general manager of Cedar Falls Utilities: “Twenty

years ago, [Cedar Falls] had 27 businesses and $5 million in taxable valuation; today, there are 160 businesses and $270 million in valuation.”

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Chattanooga, TN• FTTH network offers gigabit speeds throughout the city• Chattanooga has attracted several major companies, including

Volkswagen, which has already spent more than $1 billion building factories in the area and created 12,000 new jobs, as well as Homeserve USA and Amazon

• An entrepreneurial boom—new innovation district• NetBridge, a service that provides the municipal high-speed

Internet access to low-income residents at half price.

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Salisbury, NC• Fastest Internet access in the country: municipal network is

making 10 Gbps speeds available• Catawba College will use the ultra-fast connections for its new

Digital Media Creation and Collaboration labs• "The future is all about rich immersive digital media and being

able to communicate and collaborate with others in real-time regardless of where people are in time and space.”

• Confronted by TWC attacks and 2011 state law limiting expansion

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Minnesota: Much Good News• Many heroes• State infrastructure grants are important• Broad political support for those grants is

important• That’s all fine• Minnesota can do better

The Problem• Minnesota’s existing high speed Internet

access goals haven’t been met– Just 86% have access to 10/5– Not in top 5! 19th!

• Gaps are widening– Top 6 counties have more than 99% coverage but bottom 13 have less

than 50% coverage– Prices are far too high

Minnesota!• Minnesota should be looking the rest of the

country in the rearview mirror• Time for some new recommendations from

the Governor’s Broadband Task Force

Fact One• Federal funding is not going to do it• Connect America Funding (CAF II) not enough

– Substandard: 10/1 – creates second-class citizens– Too slow – six years to build– Recipients Frontier, CenturyLink, Windstream,

Comcast won’t undermine their own roles– Provides no incentive to build the relevant

infrastructure: fiber/WiFi

Fact Two• Fiber is future-proof – warranted for decades• WiFi, YES – but needs fiber deep into

neighborhoods!

Fact Three• Wireless connection will never substitute for

fiber capacity• Interference• Narrow bandwidth

• Mobile wireless has data caps and overages

More on complementarity• When asked how likely it is that they would cancel a

home high-speed Internet access subscription and only rely on their smartphone to access the Internet, here is what people with both services said: – 63% Not likely at all – 29% Not too likely – 6% Somewhat likely– 1% Very likely

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Data caps and overage charges limitsmartphone substitutability

Don’t be fooled– 85% of people with smartphone also have

wire at home; 95% of wireless is a wire– WiFi becoming much larger portion of

wireless use than mobile– Cablecos on track to offer mobile wireless/

WiFi as well as cable

Comcast Data Caps on Wired Connections

"While we believe that 300GB is more than enough to meet your Internet usage needsif for any reason you exceed the 300GB included in your plan in a month, we will automatically add blocks of 50GB to your account for an additional fee of $10 each," Comcast wrote. "We’re also implementing a three-month courtesy program. That means you will not be billed for the first three times you exceed the 300 GB included in the monthly data plan."

Fact FourYou are all using gigabit connections

Fact Five• Lower-income Americans have far lower adoption

– Forty-nine percent of households making less than $25,000 used the Internet at home, compared to 96 percent of households making $100,000 or more.

– Common Sense Media this week: Only one-fourth of teenagers in households with less than $35,000 in annual income said they had their own laptops compared with 62 percent in households with annual incomes of $100,000 or more

– Price is the primary obstacle• Many helping hands needed: digital literacy/relevance/application thinking –

but lower prices would make the most difference

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Minnesota• RS Fiber – an inspiring story

– Very rural area in SW Minnesota– Collaboration includes support from

city/township, agricultural coop, electric coop– Ten cities, 17 townships collectively selling bond– Bank loans covering the rest– Has exceeded 45% breakeven take rate

One: Invest in Minnesota

• Put $100-200M into fiber infrastructure• Make this a priority• Free up private capital by using government

guarantees and loans

ROI• Returns will include dramatic healthcare and

education savings• Win competition for talent• Economic growth• Retain character of rural areas

Two: Set High Standards• Don’t pay for anything other than fiber

• Paying for copper is throwing money away• As much as possible, require installation of

dark fiber subject to public obligations

Stokab model– Telecom market deregulated in early 90s– Vertically integrated incumbents and little fiber– Great interest in higher capacity and greater competition– No interest in tearing up streets for multiple operators– Stokab, 1994, built out dark fiber– Passive dark fiber, duct, right of way managed by a publicly-

owned entity– Dark fiber leases available at set costs in defined areas

• Stokab sells one product and one product only: point-to-point dark fiber circuits.

• By not offering any form of lit services Stokab does not compete in the retail market.

($585M total)

$7.3M in dollars

"What I like in Sweden is the open fiber. My apartment is connected to open fiber, so when you move in you just plug your computer in and you get a splash page; on it you can just choose the operator you want and push a button, and 15 minutes later you have that operator delivering bits."

$25 for gigabit. Leading city for tech jobs in Europe.

Three: Sweat the Details– Map assets (many places don’t know what dark fiber they

already have, which makes investment decision difficult)– Dig once for efficient building– Require new buildings and retrofits of existing buildings to be

fiber-ready – require neutral internal meet-me points– Streamline permitting (CT “single pole administrator”)– For starters, self-provision fiber connecting municipal buildings– Move incrementally to businesses and then homes

Four: Cooperate• Minnesotan cooperative power is essential

– State grants PLUS guarantees/loans (and don’t rely on federal money)

– Widespread need for capacity/speed PLUS organizing

– Co-ops PLUS new private providers– Not-for-profit sector, Blandin and colleagues, PLUS

everyone else

Big Picture: Public Priorities– Economic growth– Lower barriers to healthcare and education, and reduce

costs– Public safety – increase order, increase trust of

community, deploy body cams and E911 systems– Reduce inequality– Enhance “brain gain” for rural areas– Use data to manage, visualize, engage, prevent

Moving ahead!• Overcoming asymmetry of information• Gathering assets

– Include possible role as ERATE provider– Access to Lifeline funding

• Financing– public-private partnerships– State funding for new co-ops

• Smoothing the way– pole attachments, rights of way, permitting

• Aggregating public support

Just three points• Because of policy decisions, US is experiencing digital divide

both among Americans and vis-à-vis other nations• Every Minnesotan needs an inexpensive, persistent, high-

capacity data connection to compete in the 21st century: fiber + WiFi– health, education, civic, collaboration, innovation

• Wholesale fiber networks are like street grids– retail competition, cloud of WiFi, improve local governance