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AT&T Moves Dramatically Towards 'Internet Everywhere'

This article is more than 10 years old.

At a much-reported analyst conference yesterday, AT&T announced plans to accelerate upgrades to both its wired and mobile networks, pledging an additional $14 billion over the next three years, in addition to several billion already committed.

When completed in 2015, according to the company, the new infrastructure will offer AT&T customers faster and more reliable network facilities, which will operate natively in Internet Protocol (IP).  Text, voice, and data will begin life as packets, travel through the network as packets, and arrive on customer devices as packets.

The plan marks a dramatic step forward in a long move by AT&T and other carriers toward a 21st century network infrastructure, signaling the final stage of convergence for old proprietary voice, video, and data networks to the open standards of a single IP network.

Think of it as “Internet Everywhere.”

Specifically, AT&T plans to retire much of its legacy copper networks running obsolete Time-Division Multiplexing (TDM) technology, replacing it with fiber optics transmitting all content as IP packets.  DSL Internet service will be replaced with high-speed broadband.  Slow and inefficient 3G and lower mobile networks, at the same time, will be upgraded to 4G LTE, in large part by deploying new “small cell” technologies to better serve densely-populated areas.

In a related development, the company also filed a petition with the FCC asking the agency to relax legacy regulations the company argues are impeding even faster retirement of legacy networks.  This despite the agency’s own clarion call, in the 2010 National Broadband Plan (NBP), for carriers to quickly replace their aging copper physical plant with native IP running on fiber.

Skeptics and self-styled consumer advocates seemed determined to find storm clouds hanging around in front of these silver linings.  But there is no downside here.  Customers will see faster, more reliable service.  The company will reduce its maintenance costs for increasingly expensive dying technologies and better position itself to compete with cable, satellite, and other wired and mobile carriers.  And the FCC will see its vision of an all-IP network delivered well within the timeframe called for in the NBP.

For his part, FCC Chairman Julius Genachowski praised the announcement.  “Today’s announcement,” he said in a statement, “adds to nearly $200 billion of investment in wireless and wireline broadband networks since 2009, and powerful growth in the Internet economy.  As our National Broadband Plan said, extending wired and wireless broadband across America is the ‘great infrastructure challenge of the 21st century.’”

Critics Miss the Point…Actually, Several of Them

That great “infrastructure challenge” has so far been met almost entirely with private funds.  And while AT&T Chairman Randall Stephenson made clear in his remarks that the company’s overall goal was to improve shareholder value, critics who dismissed the $14 billion investment plan as anti-consumer simply miss the point.

The website GigaOM, for example, harshly criticized the proposal as one that would leave rural customers without affordable basic telephone service, let alone Internet Everywhere.  But rural customers will not be abandoned as part of the plan.  Rather, many more will now have access to high-speed wired networks that rely in large part on fiber, with short copper loops serving the last mile.

Instead of spinning off its rural customers, in fact, AT&T will spend billions bringing high-speed broadband to an additional 57 million customers through expansion of its U-verse technology.  For residents in areas where U-verse technologies will not be immediately deployed, the company has committed to providing an “economic path” to broadband through wireless services based on high-speed 4G LTE networks.

But in no case will residents in AT&T’s service area be left without affordable basic service.  Indeed, under existing federal and state regulation, the company must continue to offer any resident dial tone on demand, at prices often set by local regulatory agencies, even if that means serving those customers at a loss or continuing to maintain outmoded TDM networks.

(Oddly, GigaOM’s founder Om Malik later offered an opposing view, agreeing that “The puny Internet speeds [AT&T and Verizon] continued to offer via the old DSL has [sic] no part of this bandwidth-hungry future.”)

Other critics pointed to the $8 billion in additional investments in mobile network upgrades as proof that the “spectrum crunch” repeatedly warned of by the FCC and others has been resolved or perhaps never existed.  In the NBP, the Commission projected that explosive increases in mobile demand would require 300 Mhz. of new spectrum by 2015, and 500 Mhz. by 2020.  So far, almost no spectrum has been released by the agency, which continues to struggle in identifying public and private users from whom underutilized frequencies can be reclaimed.

In today’s announcement, AT&T indicated that it now has sufficient spectrum to take the company past the 2015 horizon.  In part this has come through an aggressive campaign of acquisition in secondary markets, including the $1.9 billion purchase of unused spectrum from Qualcomm approved by the FCC last year.  The company also recently resolved potential interference concerns with XM Sirius satellite radio that have kept it from making use of additional spectrum it held in the WCS band.

But these hard-won successes do not remove the real risk of spectrum depletion if the FCC does not move quickly to free more capacity.  In the company’s presentation, shareholders were warned that beyond 2017, AT&T’s mobile networks must rely on the FCC to free spectrum from federal users and to successfully complete “voluntary incentive auctions” aimed at encouraging over-the-air television broadcasters to return underutilized capacity in exchange for a share of auction proceeds.

The agency has only just begun the process of designing these complex new auctions, and there is no precedent to suggest they will unleash any significant spectrum.  Meanwhile, federal users are continuing to stall in identifying warehoused and misused frequencies under their control, despite a 2010 Executive Order from President Obama ordering them to do so.  And the essential deployment of new cell towers, antennae, and other infrastructure remains dependent on notoriously unresponsive local zoning authorities.

Advocacy groups also crowed today that the announcement of $14 billion in additional investment proved that efforts by the FCC and other regulators to inject themselves into the broadband ecosystem not only haven’t slowed private investment, but in fact are somehow encouraging it.

But these self-serving claims are absurd on their face.  Indeed, AT&T made clear that it is targeting its investments to markets where it has seen clear signs of regulatory relief, and where the company can as a result expect to receive returns for its shareholders.  These include mobile networks, U-verse, and fiber deployments.

Relief Sought from Unintended Consequences of Legacy Regulation

Indeed, the filing yesterday of an FCC petition followed soon after the announced investments and is closely related.  In it, AT&T asked the FCC to open a proceeding that would consider retiring legacy regulations that are unintentionally slowing the build-out of “Internet Everywhere” networks.

This is a further step in an on-going process.  Since the publication of the NBP, which likewise proposed the immediate retirement of legacy copper networks and the regulations that have accelerated their obsolescence, the FCC has taken important steps at clearing some of the regulatory underbrush.

In particular, the agency substantially reformed the inefficient and often corrupt Universal Service Fund, shifting subsidies for rural and low-income consumers from supporting basic telephone to underwriting broadband Internet.  (The multi-billion dollar fund is paid by telephone consumers as part of their monthly phone bill.)  Inter-carrier compensation rules the FCC itself described as “byzantine” have also been simplified.

AT&T’s filing today called on the agency to continue its reform efforts, and in particular to look for legacy regulations that are inadvertently slowing the construction of all-IP networks.

As AT&T transitions its remaining copper-based TDM customers to IP networks that are technically superior and cheaper to operate, the company is looking to the FCC to develop rules that are more appropriate for the dynamic broadband market.  Today, former monopoly phone companies compete with cable and increasingly with mobile providers as 4G LTE deployments create true inter-modal competition.  Consumers are abandoning regulated copper networks at an accelerating rate.

At the same time, as USF reform has redeployed TDM subsidies to broadband, the cost of service has risen even higher for legacy copper.  Cable, VoIP and mobile service providers do not operate as so-called “common carriers,” creating competitive imbalance that exacerbates the technical limits of older TDM networks.

According to the company, traditional phone companies spend about half of their wired expenses on maintaining increasingly obsolete copper networks.  Doing so effectively benefits no one. “Customers are abandoning obsolescent TDM services,” the company said, “but AT&T and other incumbent carriers still must be prepared to serve every household in their service territories on demand.  Thus, the costs of maintaining those networks remain in place, and every loss of another customer increases the average cost per line of serving the customers that remain.”

In its FCC filing, AT&T identified some of the most glaring examples of legacy regulations that unintentionally slow the transition to IP technology, and asked the Commission to begin a proceeding that would develop a more complete list of such provisions and consider eliminating them.  Some go back before the 1984 Consent Decree in which the former AT&T was broken apart and local and long distance markets were opened to competition.

For example, one lingering provision of the Communications Act of 1934 requires common carriers to obtain FCC permission to “discontinue” service.  But does an upgrade from TDM to IP networks count as a discontinuation of service?  Common sense says no, but the FCC has not responded to a Feb., 2012 petition seeking confirmation that replacing old technology with new does not require the agency’s consent.

Rather than cataloging all of the legacy rules that are interfering with IP transition and asking the FCC to reform them, however, AT&T proposed a novel next step.  The legacy carriers could identify a few local areas in which to test transition to an all IP network free of outmoded regulations and see if doing so inadvertently interferes with normal market behavior.

The FCC has ample authority to conduct such experiments, under statutes that permit them to “forbear” from enforcing its own rules when appropriate.

But even that modest request raised alarms from those who believe the only way to achieve “Internet Everywhere” is for the federal government to nationalize the communications industry and have taxpayers rather than shareholders make the investments.

“Today,” one legal academic is reported to have said, “the general purpose network is a fiber-to-the-home (FTTH). That’s what’s going on in Europe and Asia, but we seem to be abandoning that concept. Instead, we’re allowing private carriers to choose who has to rely on wireless and who gets a wire and who gets what type of wire. The whole system has been turned upside down.”

I’ve just returned from ten days in geographically-compact Europe, where even in much of central London the best available network is still temperamental DSL from a former national carrier, and where WiFi service is nearly unusable due to congestion.  FTTH, while certainly in the EU’s plans, is almost non-existent.

Some people, it seems, look for clouds in front of silver linings.  Others simply imagine disasters.

Follow me on Twitter @LarryDownes.