Spectrum License–Just like Oceanfront Property–Going Fast
April 29, 2009
I have stumbled upon something. It’s so hideous we must protect our children from it.
One part of me says not to look at it again. The other side says to dig in so you can drive yourself crazy.
I have discovered a journal that I was not aware of over my vast and somewhat interesting career in telecommunications. Perhaps it was for the better, maybe God was trying to protect me. This Journal is called: Federal Communications Law Journal. This journal is a cesspool of legalese, theories and views of telecommunications not suitable for those under the age of 21. It is a Beltway Bible of sorts.
In the future, I just may find myself writing a blog comment or two on some article I happen to run across that totally contradicts common sense or demonstrates slight of hand maneuvering. Yes, it is possible, the typical article in this journal will more than likely have been written by a lawyer with a political bent. In essence, I will be reading the devil’s words!
Just happens to be, I read an article already. It was 36 pages long. It espoused a “vision” for a new Communications Policy in this new millennium. The author–I won’t share this person’s identity, but I will share this persons ideas on how the government should be managing licensed spectrum. The author has a deep, deep, deep Beltway history.
The author pretty much pooh-poohs the Communications Act of 1996, though the author played a significant role in its foundation, philosophy and design. The article is pure genius of hindsight Teflon and forward prose of a new communications era. The new Policy “vision” spoke about many, many aspects of Telecom – from access networks to real facilities competition to VOIP to spectrum licensing. The spectrum licensing idea, I mean “vision” is one aspect I found most interesting.
Remember not to long ago the spectrum auctions? This was when carriers or other interested parties would bid on spectrum licenses nationwide, regional or in pockets. If you received a license, you thought you bought some type of exclusive use of the spectrum frequency obtained. In aggregate, these licenses sold for billions of dollars. I would often hear, “… you can’t go wrong buying a spectrum license, it’s like ocean front property, they just don’t make it any more!”
Anyhow, the visionary in this article has a different interpretation of these licenses under a new Communications Policy. I will attempt to simplify things as not too many PhD’s read this blog nor should they!
Let’s say you bought a 700 MHz license. The signal reach, coverage, or broadcast distance falls within a certain band based upon linear amplitude. In simpler terms, for example, we have a 50,000 watt radio station in Rochester, New York that runs on the AM band at the 1180 MHz frequency. This wattage allows for extremely wide broadcast reach – it can cover 26 states and parts of Canada. The reason it can do this is that under Federal license it’s linear amplitude of 50,000 watts allows it to do so. The government licenses this as a part of the Emergency Broadcast System or EBS. Cincinnati, Ohio also has a 50,000 watt station likewise which serves a similar purpose. Such high-power stations are located across the United States for EBS situations stemming from the Cold War days. If you try to find another AM station close to a 50,000 watt behemoth on the dial, it is difficult to gain reception because the signal amplitude is overpowering.
From a commercial perspective, those holding these types of radio broadcast licenses have far greater broadcast reach–larger audiences than those running a 100 watt linear antenna, for example. A need to boost signals or repeat signals is non-existent.
So let’s say you bought a 700 MHz license and you believe you have bought some beach property. No one can block your view, it’s an exclusive. Well, according to the visionary in this article, new Telecom Policy should honor these licenses at their peak linear values. However, lower powered devices should also be able to operate within the band provided that they do not interfere and remain distant from the peak linear aspects of the original licensed owners. Thus, and subject to government regulation, a certified wireless device that can operate within our 700 Mhz spectrum example, may do so at no cost, provided the device does not go above a yet-to-be-determined linear range.
May I quote: “Licensees should be allowed to compete to provide whatever service they think will serve consumers’ demand, provided that they do not cause undue interference to other spectrum users.”
Take this a step further, if you can ride free at 700 MHz albeit over a shorter distance, the use of femtocells may certainly assist in broadening the capability. But that’s just me thinking out loud. If I were a cable company I would…
Talk about the large wireless carriers getting kicked in the wallet! Once again, this is a new Policy vision–not my vision. I will be watching as the new FCC and Administration start looking at revising telecom policy.
Another hypocritical thought I found amazing in this journal article was an idea that the FCC needs a makeover. May I quote: “To this end, the FCC should be about half the size, and about half the personnel should be engineers, economist, and other technical advisers, as opposed to lawyers. No other field offices or other industry support groups should exist.”
Talk about calling the kettle black! Talk about a new Policy of — Do As I Say, Not As I Did!
There’s a New Sheriff in Town…
April 27, 2009
…in a town that has never had a sheriff before: the Beltway.
The Obama administration has announced the appointment of Aneesh Chopra to the new post of US Chief Technology Officer (CTO). Prior to this appointment, Indian-American Mr. Chopra served as technology secretary for the state of Virginia.
What’s there not to like about him thus far? Not much.
- As Virginia technology secretary he brought broadband–real broadband to remote areas of the most rural parts of Virginia. He did this by way of fiber optics! Hundreds of miles of rings and access–consumer triple play and businesses benefited and flourished. No retrofitting copper or wireless this or any of that… he delivered the ultimate solution in fiber optic networks with no band-aids.
- Given his results in rural Virginia, he just might understand that the entire U.S. of A. needs fiber access and the paltry speed numbers we use today for feel good penetration government measure are not globally competitive.
- He is not an engineer or a lawyer. He has a history of applying common sense to real broadband gaps.
- He has demonstrated by applying fiber rings, that he is not interested in revisiting things again later. Fiber optics future proofs the bandwidth demand growth debate. Light over glass can offer unlimited bandwidth– lets do it once, lets do it now, and lets do it right.
- He is supporting a proposal under the BTOP stimulus funds for $100 million in additional funding for more fiber optic loops in Virginia. Virginia understands and has experienced first hand the economic benefits of big, fat, bandwidth-spewing optical pipes.
The thing to watch will be this: Will the Beltway eventually dissipate all his previous commonsense and success in delivering “What was and is good for Virginia?” is also “Good for America?”
That Beltway is not a place for the logical.
From this American-Indian CEO to our Indian-American USA CTO, remain true to your roots. Pretty much all of America is underserved when it comes to real broadband speeds on a comparative global basis with advanced countries.
Get America its fiber.
A Week of Responses 4
April 24, 2009
The last in this week’s installment of response to readers–
Response to “Why I’m Bullish on Qwest”:
Dave,
Verizon was not forced to sell any of its rural properties – Hawaii, KY, or New England. It did it purely to get out of rural was the story. To get out from under the responsibility that Qwest, Windstream and Embarq have: how do I leverage my current aged copper plant in rural land to forestall declining revenue? In other words, I can’t or won’t roll out FTTx because there isn’t enough return.
–Reader
Dear Loyal Reader,
Verizon was smart, they purposely exited remote business areas in relative comparison to their footprint. They got out from underneath a lot of high maintenance network, limited copper infrastructure and a high cost per mile to serve. Verizon is smart. If you go back to the mid-1990’s, cable companies did something similar by swapping properties with each other to consolidate a footprint. Cable companies are not dumb either. As the saying goes inside the
beltway — never waste a good crisis — the monopolist, never waste a good opportunity to concentrate.
–Dave
Dave,
What does Qwest (or US West) do without a national fiber network? It loses all that IP and LD revenue as well as its long-haul wave revenue and probably its CyberCentre money.
–Reader
Dear Loyal Reader,
I don’t run Qwest, but I would sell off a few rural states (like Verizon did) — pare down some more debt. I would consolidate local fiber assets in more lucrative markets and become a consolidator and wholesale provider of local connectivity and IP. The business model is simpler and needed.
–Dave
Dave,
$2-3B against a debt of $14B. It would be better off spinning off the LH business like Alltel or Sprint did. IPO it and pay off that debt. Even in this market it would probably work.
–Peter
Peter,
There is no IPO market. Long haul was sexy in the 1990’s, that is long over.
–Dave
A Week of Responses 3
April 23, 2009
A third installment of responses to readers’ comments–
In response to “Fresh Squeezed in Florida”:
Dave,
It is interesting you bring up the differential treatment between Cable MSO and Telecom. We are working with the same issue regarding property taxation in relation to the Communications Industry. Telecommunication companies in most states are taxed Centrally at the State level and Cable MSO’s are taxed at the local level. Rather than create a 21st Century tax scheme for a 21st Century technology, some states are trying to pull the Cableco’s into Central Assessment. I don’t believe that is the answer.
–Brian
Dear Brian,
In relation to this, there are different cost rates for pole attachments if you are a utility, cable company, ILEC or CLEC … one would think a cable is a cable … how does the pole know any different …
–Dave
Response to “Skype Makes an Interesting Move”:
Dave,
I am very excited that this codec was released. However, I am really wondering how long until hardware devices start taking advantage of this? Will we start seeing a flood of firmware updates with SILK support?
–TJ
TJ,
To be honest, I have been around the software business a long time, it makes me think about bad things, really bad things. I don’t miss the software business.
–Dave
A Week of Responses II
April 22, 2009
The second installment of responses to readers:
In response to “Sorry Level 3–You’re Damned if You Do…and You’re Damned if You Don’t” and “Sorry Level 3–You’re Damned if You Do…and You’re Damned if You Don’t Part 2″:
Dave,
Does anyone know what these class action law suits about? How does it affect L3? I do believe the market is punishing L3 unfairly. Turn around may take some time as the economy is bad. But I guess if they do what they promised (cutting capEx, increase cash flow) , they will be able to sustain through this bad economy and come out big, when economy turns around.
––Lawrence
Lawrence,
Any body can find a lawyer in this country at any time and try to game the system for some cash. I don’t see any criminal charges being bantered about, just another shakedown for cash.
–Dave
Telecom Straight Shooter,
Mr. Rusin is of course right in everything he says here. But when will the market reward Level3?
–Herbert
Herbert,
My wife does not think I am always right … the market for the most part is a bunch of lemmings. You want 10x EBITDA — just wait, all boats will rise. Level 3 was brilliant in scooping up the metro assets — this is where the growth and competitive advantage will; come from. I am not a psychic CEO – when will this pay out? No idea. But I have been called the Psycho CEO …
–Dave
Dave,
Impossible to reward a company not sustainable in the long term. Stock market is overall a measurement of confidence. And L3 has lost all confidence from the Wise Men after so many years of promising the moon. That’s why independently of what L3 does, they are punished. Well, the real punish people are those that bought L3 shares at 3-6-9 $. The CEO must sell the company quickly before it goes really bad. You cannot compete in the wholesale telco market without investment.
–John
John,
Just look at what is really going on with Wall Street. My opinion, Wall Street is a fixed game – it has less to do about confidence and more about a small subset of well healed getting richer. It is an insiders game.
–Dave
Dave,
Wall Street’s 250 mil sh short position in LVLT has dropped to 150 mil over the last 3 or 4 mo . As soon as that short position is gone, the Wall St ***agenda*** is gone . The brokerage houses,analysts,mkt makers & financial press , will suddenly see the light . The overblown complaints about substantial debt will subside . This is a ***CAPITAL INTENSIVE INDUSTRY*** & debt is a virtual necessity . The key is the ability to service that debt & as LVLT is about to prove , they can service that debt with substantial cash to spare . These same naysayers will be knocking down the doors to earn investment banking fees by refinancing or raising new money for LVLT .Full disclosure—- i am very long LVLT & follow it on a daily basis .With no offense to the blogger—-LVLT has the best management in telecom—–they have proved it by coming through the telecom depression of 2001 -2004 without a restructuring . Their current financial position has never been better . They have 768 mil in the bank to pay off 700 mil over the next 2 yrs . My guess is they will be F/C/F positive about 200 mil for 09 [ Q1 will be negative due to working capital needs which reverse as the yr goes forward] . PS: Mason Hawkins & Prem Watsa own about 48% of the cos stock .
–Morty
Morty,
This is not a stock blog. Level 3 made the right move by sucking up a bunch of metro assets two years ago — it is just now starting to pay off for them. Last I checked, no private investors are pouring oodles of cash into fiber builds since the crash of 2001-2003. There is a shortage of supply of metro and access networks. Level 3 always has an interesting story every quarter on “what’s coming” next over the years — I would like to see them a little more focused on the here and now and not what’s coming. That said, if the analysts and Board allow it, they are meeting the covenants – why throw stones. The metro move will prove historically smart and savvy as bandwidth demand continues to grow.
–Dave
A Week of Responses
April 21, 2009
I’d like to take this week to respond to some of my loyal readers’ recent comments.
In response to “Charts is Charts”:
Dave,
Where’d you get these charts? Startling. Why isn’t One Comm ($850Mn) on them, I wonder?
Where can I found how ‘rural’ is defined?
Thank you
–Bryan
Bryan,
On the charts — OneComm is not listed as it is not a public company.
I would like to see the same charts based upon quality of revenue and profitable growth… Everybody is in love with the top line, a.k.a. too big to fail.
On rural, my definition means nothing. Lobbyists inside the beltway play the definition game. In my world, rural is like northern Maine–that’s rural. Rural to me is some day living on a mountain range with my closest neighbor 10 miles away. I have solar cells to be off the grid and a satellite dish on the roof as a link to what’s going on. (Note: my wife and daughter won’t go for this thus it is a fantasy.)
–Dave
Rusin Ramblings IV
April 20, 2009
Just for fun…
A few excerpts from my reading pile last week:
“The Tasmanian Government today announced that Tasmania will be the launch state for the Commonwealth’s new super fast National Broadband Network.”
“The Tasmanian Government, in conjunction with Aurora Energy, will construct a fibre to the premises (FTTP) network which will deliver speeds of 100 Megabits per second.”
“The FTTP network will also extend to all hospitals and almost 90 percent of schools.”
“The Tasmanian Government will construct a wireless network and the Australian Government’s National Broadband Network satellite solution will service the remainder of the state with speeds of 12 megabit per second or more.”
“This announcement means Tasmanians will begin benefiting from broadband speeds up to 100 times faster than currently available … “
What is it that Tasmania knows that we don’t? The Tasmania project is an extension of a recent Australian government announcement to deliver a minimum 100 megabits per second to 90% of Australian residents and businesses within eight years through public/private partnerships. Moreover, the 10% that is not economical to reach by FTTP will be addressed wirelessly.
Combine the above with Japan averaging 100 megabits per second and South Korea recently announcing a 5 year program to go from an average of 100 megabits per second to 1 gigabit per second leaves me scratching my head with Comptel. (A reminder: “… that speed should be no higher than 1.4mbps downstream and 768 kbps upstream.”)
Lastly, understanding some of the Federal Government history relative to the RUS loans and the duopoly and oligopolies I identified previously:. Why wouldn’t Comptel seek to have the same eligibility criteria applied to NTIA funds as they are with the RUS? That criterion is simple: if a carrier has a (line) market share of 2% or greater, that carrier is not eligible for government project funds. At least to me, the 2% market share screen fosters competition and funding eligibility to smaller non-ILEC, non-cable companies that make up the lions share of Comptel membership.
Maybe I am missing something…
Anyhow, I will once again leave you with one simple thought in defining and expanding “broadband” in the scheme of things: What is good for America is what needs to be done first, not what is in the interests of someone’s business model or lobbyists protecting duopoly/oligopoly competition.
So, what’s good for America?
I would like to hear your thoughts.
Rusin Ramblings III
April 17, 2009
The next filing I came across yesterday was from Comptel (www.comptel.org). Comptel is the last surviving industry association that allegedly represents competitive carriers on issues pertaining to competition and certain regulations inside the Beltway. There are many interesting thoughts in their filing, but I’ll discuss one in particular and one that is missing.
Comptel: “NTIA should afford grant applicants maximum flexibility in designing their networks and product offerings in ways that will be attractive to and affordable for customers. Therefore, regardless of how ‘broadband’ is otherwise defined, it should not be defined by reference to a minimum speed. Certainly, the Administration can and should consider speed as a factor (among others) when evaluating project applications, but speed should be the limitation on eligibility to apply for and receive funding in the first instance. If NTIA, nonetheless, decides to define broadband by a minimum speed, that speed should be no higher than 1.4mbps downstream and 768 kbps upstream.” (Editorial note: “no higher than 1.4mbps downstream and 768 kbps upstream” was not a typo.)
Let me first address the speed issue: Bandwidth is an economic enabler–locally, nationally and globally. Depending upon whose report you read when it comes to bandwidth speed, the US of A ranks around 15 or 17th globally. For an organization that allegedly represents competition, declaring broadband as perfectly acceptable at speeds no greater than 1.4 megabits as acceptable sure cuts out member eligibility for funding if you apply this rate to defining under-served and un-served.
By this definition, anyone that has a copper pair, cable copper coax or access to a satellite…is served!
Rusin Ramblings II
April 16, 2009
I want to briefly share with you, my loyal readers, two filings from Monday’s news.
Verizon believes “…the program should focus on two key objectives: extending broadband Internet connections to un-served areas, and addressing demand-side factors that hamper growth of broadband subscriptions, such as the lack of a computer in may households.”
Rusin translation: Verizon and other ILECs similarly situated are enjoying the economics of two network or “modal” competition with the cable companies. In essence, they’re saying: Please take your $7.6 billion, Mr. Government, and put it where no one is going to build another network to compete with our wire line duopolies or wireless oligopolies. Competition is good, Mr. Government, but not in my backyard. Steer the funds to the most rural locations such that you create “competition” in the smallest of rural markets…and throw in some computers for free.
After all, back in the early 1990’s, government-charged France Telecom gave every citizen a free computer and it failed. Why? The network was too slow and unreliable.
Of note, in what I’ve been reading, the effort is to disguise the fact that the USA is woefully inadequate in broadband speeds, and to manipulate by penetration rates. What good is having the equivalent of a tin cup and string serving America while trying to convince the Obama Administration we have a penetration and computer access problem?
Rusin Ramblings I
April 15, 2009
I’ve been traveling quite a bit over the last few weeks, and the air time has given me time to catch up on some reading. What can I say? There is just so much interesting material–and good comedic content–out there, I wish I could comment on all of it. Alas, my time to do so is limited.
Speaking of comedy theatrics, yesterday was the final day for interested parties to file comments with the National Telecommunications Information Administration (NTIA) and the Rural Utilities Service (RUS) in regards to Telecom funding of “shovel ready” “broadband” projects to be awarded later this year.
The Federal government requires input under the statute to seek definitions on such terms as broadband, under-served and un-served. Wouldn’t one think that, after 100 years of regulatory authority and the gobs of data available across the globe, that maybe someone earning a bureaucratic salary could conduct a proper analysis and define these terms?
Or am I being naive? After all, it is the lobbyists of Congress and the FCC that actually define such things through position papers.
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