Susan Crawford paints a bleak picture of the state of U.S. broadband services in her book, "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." In it she argues that Internet access is slow and expensive. She is right, to a point. Up until now, the cost of deploying broadband, particularly given U.S. demographics, density, and reliance on private market forces, might have led to a natural monopoly or duopoly. On the landline side it is cable and FiOS winning the battle, and in wireless, Verizon and AT&T have some 75 percent of 4G subscribers.
Crawford does not believe this will change, maintaining that the "communications inequality" gap is widening. I believe that she ignores potentially powerful developments in technology, especially with regard to wireless infrastructure, that could alter the economics of broadband. She also dismisses the U.S. leadership position in the deployment of 4G, adoption of smartphones, and use of mobile data services.
Yes, with regard to fixed broadband, the United States is in the middle of the developed-country pack. In most of the country, broadband is often a monopoly, or a duopoly at best. Pricing over-indexes that of other OECD countries, especially on an un-bundled basis. Of the nearly 70 percent of households that have broadband, only about 20 percent have download speeds of greater than 10 Mbps, according to a 2012 report by Akamai. Verizon's state-of-the art FiOS network, which is the only true fiber-to-the-home (FTTH) service, will not expand beyond more than about 20 million households passed (there are about 5 million FiOS Internet customers today). Other FTTH initiatives, such as Google's Kansas City network and important work being done by people like Blair Levin and the Gig.U initiative, are admirable but these networks, whether in cities or at colleges, are being deployed a scattershot basis. We have a long way to go if we're going to realize the FCC's National Broadband Plan objective of 100 Mbps service to 100 million households by 2020.
Amidst a mixed broadband picture, wireless is the comparative bright spot. The U.S. leads the world with respect to 4G deployment, with more coming. It is true that today's wireless broadband services, which are priced at some $10-20 per GB, do not offer a viable alternative to fixed broadband. However, if we play our cards right, there is reason to believe that wireless is going to play an important role in our broadband future. There are five key catalysts.
1. Greater Competition
By the end of 2014, we will have four national, facilities-based LTE networks available to U.S. consumers, assuming current industry plans and structure with respect to Sprint and T-Mobile's plans. This will usher in a more competitive period in wireless pricing than we have had in some time. I also expect that the perambulations around Sprint/SoftBank/Dish/Clearwire will result in a robust wholesale LTE/LTE-A network open for MVNO business. This will invite important companies such as Google, Amazon, and others to offer cheaper wireless broadband services, with innovative, and disruptive business models.
LTE-Advanced is progressing rapidly, promising significant increases in network speed and spectral efficiency. There are two game-changing elements here: channel aggregation, which allows an operator to "pool" its holdings across various parts of the spectrum band to offer up to 100 MHz of capacity to consumers (assuming they have that much spectrum), which is up to 5x today's 20 MHz maximum; and up to 8x8 MIMO, which would allow at least 2x the downlink speeds compared to LTE. A home gateway/router could be among the first types of products to be able to accommodate that type of antenna configuration.
An active deal market and a more open FCC has resulted in a significant improvement of the spectrum position of major operators, as evidenced by AT&T WCS, Verizon-SpectrumCo, and Dish S-band. AT&T, Verizon, and Sprint are now each in a position to have at least 100 MHz of spectrum available in nearly all markets.
Things also appear to be on course for the FCC to make significant swaths of new spectrum available over the next few years:
- The incentive auction, likely in 2014, which will make available up to 120 MHz in the 600 MHz band.
- Possible expansion of the 3.5 GHz band for Wi-Fi, which will figure prominently in a HetNet world.
- Continued progress on the use of unlicensed TV white-spaces spectrum. Approved database providers such as Telcordia and SpectrumBridge, can now provide national service to unlicensed TV band devices. Google was approved earlier this week for a 45-day trial of its TVWS database.
Importantly for broadband, the 802.22 standard published by the IEEE will allow for the installation and deployment of wireless regional area networks (WRANs) using TVWS. This opens the possibility for WRANS to deliver 22 Mbps to 29 Mbps of data speed over a radius of 10-30 kilometers, without interfering with reception of existing TV broadcast stations, which will help facilitate the use of fixed wireless for broadband in un- and underserved rural areas.
4. Small Cells/Wi-Fi
In 2013, we will start seeing aggressive deployment of small cells (microcells and picocells), as part of a concerted effort by the wireless operators to densify wireless networks in order to improve coverage and increase spectrum efficiency. These HetNets, which are now economically viable for the operators to deploy, also result in a greater percentage of subscribers experiencing the higher end of promised LTE throughput.
Also, with planned incorporation of Wi-Fi into small cell deployments and progress being made on "Hot Spot 2.0," Wi-Fi will increasingly be seen as an extension of mobile networks, with improved roaming, hand-off, and authentication. We're also seeing an accelerated deployment of carrier-grade Wi-Fi networks, and deployment of public hotspots by operators and cable companies.
5. Government money
There are several large pools of federal dollars being made available to facilitate and accelerate broadband deployment: the wireless-centric $6.5 billion Connect America Fund; the Broadband Acceleration Initiative; the NTIA's Broadband Technology Opportunities Program; and the $7 billion First Responder Network being funded out of the upcoming incentive auction; and billions of dollars in grants and loans to states for rural broadband programs, where wireless/fixed wireless will play a prominent role.
The delta between fixed and mobile networks, in terms of capable throughput, capacity, and cost to deliver a GB of data, has narrowed substantially over the past five years. Significant improvements in wireless technology and economics, as described above, will narrow that gap still further, meaning that wireless networks could well figure in the development of more pervasive, competitive, and lower-cost broadband services over time. With small cells, carrier-grade Wi-Fi, and devices that can accommodate more antennas, the traditional distinction between fixed and wireless networks will continue to blur.
As wireless plays a larger part in the objective of providing ubiquitous high-speed broadband, I believe there will be instances where wireless will compete directly with established broadband providers. Just as some households have chosen to give up fixed landline in favor of wireless, we could see "broadband displacement" by wireless, too. A sweet spot here might be the price-sensitive household that consumes 20-30 GB per month and doesn't need the absolute upper tier of broadband speeds.
A combination of technology advancements, private market transactions and investment, and more aggressive public policy are all leading to what will be "a lot more network" in the aggregate, becoming available over the next few years. There will be much greater choice of service providers, more innovative business models, and significant price competition across the fixed and mobile broadband landscape. We don't have the population density or the industrial policy infrastructure to bring fiber to everyone a la South Korea and Japan. But with our lead in 4G wireless, climate of innovation, significant capex commitments among the major operators, and the likes of SoftBank, Google, Apple, Samsung, Amazon, Dish, and so on helping to accelerate the disruption in the near-to-medium term, the U.S. might become one of the most vigorously competitive broadband markets in the world. Wireless looks to figure prominently.
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.