Legislation Proposal: Assignable tax credits for building gigabit broadband

After seeing SJR18, it makes it obvious that some kind of broadband bill is likely to come to fruition next session. While the current session isn’t even over, legislators can start submitting new bills on May 13 for the 2015 session. If we get in early, we could have a shot at influencing the debate for good. A local broadband expert clued me in on something he’s been working on at the federal level, and I think it would work at the state level: an assignable tax credit for building gigabit broadband.

Tax credits are nothing new when it comes to incentivizing broadband construction, but they often come with such weak conditions that they amount to nothing more than discounts on a system that’s barely a marginal improvement over what we already have. Without strong conditions, we end up with situations like the $300B+ scandal that is the Telecommunications Act of 1996. We can’t afford to flush tax money down the drain like that.

Here’s how we fix it. The first condition should be that tax credits will only be available for a service that delivers 1Gbps or better symmetric connections. This ensures that we aren’t dropping money on last-gen ADSL2+ or DOCSIS 3.0 systems. There should be an additional tax credit if the retail price is less than the average selling price for a current broadband connection. Based on data from SpeedTest.net (average download speed of 26.42Mbps at a cost of $3.62/Mbps), this would require gigabit service to be sold for under $95.64 per month including below-the-line fees. Finally, an additional tax credit should be offered if the infrastructure offers the choice of two or more retail service providers. This would encourage real competition rather than simply shuffling the deck on who the incumbent providers are.

This creates a very level playing field for all providers. If Comcast is serious about using the upcoming DOCSIS 3.1 standard to deliver gigabit service, they could get the tax credit. If CenturyLink is serious about building gigabit FTTH, they could get the tax credit. If Google is serious about expanding to Salt Lake City, they could get the tax credit. If Macquarie is serious about expanding UTOPIA across the entire state… well, you get the idea. Setting serious standards is what makes these tax credits actually worth something.

So what does this “assignable” bit mean and why does it matter? It means that the tax credit is applicable to the individuals served by the network, but the entity actually building the network would be eligible to claim it on your behalf and pass it on to you. This means consumers don’t have to front the money and get reimbursed, but rather companies with the money to invest will do it for you. That makes it much more likely that the infrastructure will actually get built.

Right now, I need to find a legislator willing to sponsor this kind of bill. You can help me find one. Write to your members of the House and Senate summarizing this proposal and copy me on it. We may have a shot at turning the tide for good in 2015.

Broadband Bytes for 2014-03-07

Bill Watch: SJR18 asks the governor to work on streamlining broadband construction

Sen. Howard Stephenson

Sen. Howard Stephenson

Wait, the legislature has a pro-broadband position in the works? I’m as shocked as you are. Best of all, it’s coming from Utah Taxpayers Association President Sen. Howard Stephenson. SJR18 encourages the Governor’s Office of Economic Development (GOED) to work with municipal governments to improve the process of building broadband infrastructure in our state. As a joint resolution, it doesn’t have any teeth, but I’ll take it.

There’s actually some decent ideas behind this one. Permitting processes for construction can vary pretty widely between cities, pole attachments are often messy, and Google has made these issues part of their chief criteria for determining which cities they want to expand to. I also like the idea of laying conduit while the city has an open trench for other purposes, often the most expensive part of any build.

Of course, we shouldn’t expect too much from the actual implementation. Given the source, the rhetoric matches up perfectly with the incumbent pattern of “give us tax breaks and less regulation so we can do what we already were going to do, just with higher profit margins”. I wouldn’t expect that higher standards will be imposed upon providers looking for a streamlined process, nor would I expect said streamlining to benefit anyone beyond those with existing networks or an expressed intent to build them. The fantasy that it would bring in additional overbuilders is just that.

See Sen. Stephenson explain it himself and watch carefully for the code words.

Hat tip to reader Chris for sending this my way.

Why can’t I get service when UTOPIA fiber is very close to my house?

utopia-logoA very common problem in UTOPIA cities is living near the fiber but being unable to get service. I’ve heard stories of having it stop 100 feet away, barely two lots. It’s pretty frustrating to be so close, and yet so far. So why does it happen? The answer lies in how fiber gets deployed.

You’re probably used to the idea of how copper plants get deployed. For DSL, all the phone company has to do is cut in a copper pair and call it good. That’s cheap and easy (especially since the infrastructure is already built), but it’s also a very different technology. Same deal with cable. Fiber requires a very specific build pattern with huts for the fiber and rings running through a deployed area. It doesn’t take kindly to trying to splice in a connection that wasn’t planned for.

Yes, this stinks if you’re right on the edge of a deployed footprint. But running fiber to include you wouldn’t work and would probably break the existing footprint.

We win: SB190 is dead this year

Sen John ValentineSB190 is no more. Sen. John Valentine made a motion to send SB190 to the rules committee to be studied in the interim which passed the Senate. This effectively ends consideration of SB190 this year, though it’s possible it may come up again next year. Short version: we win.

So what do we do now? Once the session is over, make sure you go to those interim meetings and write the committee members. I have no doubt that so many of you contacting legislators made a huge difference both in getting the bill amended and ultimately getting it shelved. Between this and HB60 appearing to rot on the vine, broadband advocates in Utah have scored major victories this year.

When I hear more about the movements on the committee and its proposals, I’ll be sure to pass them along.

Comcast has been holding out on us, but it’s out of tricks up its sleeve

Comcast-LogoWhen Google Fiber announced in Provo, it didn’t take long for Comcast to immediately whip out a new 250Mbps/50Mbps tier and match the announced price. The reaction isn’t all that surprising. They needed to look like they’re doing something to try and retain customers, and current modems meeting the DOCSIS 3.0 standard can max out at 343Mbps/122Mbps. Unfortunately, Comcast, in one move, almost entirely exhausted the available juice in its system without a massive overhaul of their operations. Could it be that they’re not going to be able to upgrade any further without a huge cash infusion?

Looking at the DOCSIS 3.0 standard, it allows for bonding up to 24 downstream and 8 upstream channels. This provides a peak theoretical bandwidth of 1029Mbps/245Mbps. Unfortunately, cable providers like Comcast have had trouble enough meeting the demand for 8 downstream and 4 upstream channels. With hundreds of channels (many now in HD), reclaiming spectrum has been very tricky. Despite tricks such as headend upgrades to H.264 (and, soon, H.265), using digital-to-analog adapters for customers who won’t upgrade to a digital package, and exploring IPTV, the system remains tapped out. The systems usually only support 6MHz channels across about 1GHz of total space or about 165 total channels. With nodes containing as many as 200 users, even a high 14:1 oversubscription ratio would mean dedicating at least 60% of the available channels just to broadband users, something that would crowd out their core TV product.

This is why Comcast has had to resort to very expensive FTTP upgrades to push their 505Mbps/65Mbps service in markets where Verizon’s FiOS has been chipping away at their market share. Even then, they want $500 to get service and charge a $1,000 ETF if you don’t stick with them for long enough. The hardware has also lagged behind with a limited number of modems that can push that kind of speed. Comcast also charges over $400/mo for the product, well out of reach of your typical user.

So where would Comcast do these kinds of upgrades? So far, it’s primarily in areas with only one wireline competitor that offers somewhat comparable speeds. To date, that means areas with Verizon FiOS. Tiers beyond 105Mbps haven’t shown up anywhere in Utah outside of Provo. Even there, Comcast won’t go beyond what their current 8-channel DOCSIS 3.0 deployment is capable of. Areas with CenturyLink DSL? No need to surpass 50Mbps at most. ADSL2+? 105Mbps is faster enough to keep their heads above water. Areas with gigabit fiber? Invest the bare minimum needed to get low-end users on the cheap because they know they can’t match the speeds.

What we’re seeing in Provo is all Comcast has got: pushing the system to and sometimes past its reasonable limits, and yet still falling woefully short. With a poor reputation for customer service and CenturyLink ceding markets, it seems obvious that Comcast is about to enter a slow bleed phase with very limited upgrades targeted at areas without gigabit fiber. Funny, that sounds a lot like what CenturyLink is now.

Was HB60 an inside play by the Utah Taxpayers Association? All signs point to yes

Utah Taxpayers AssociationOnce HB60 hit the wires, I was quick to file a GRAMA request to find out what kind of communication Rep. Curt Webb had been receiving on the bill. Most of it is angry emails from Utah residents, many of whom were not accepting Rep. Webb’s cut-and-paste boilerplate reply about “transparency”. Here’s what he wrote along with my comments on each part:

Somehow the bill has gotten mischaracterized in the public eye. I have met with lobbyists and industry people over the past few days. I believe that much of the misunderstanding has been cleared up, and you may see a few minor amendments to provide that clarification. If it did what is being said of the bill, it would violate all of my conservative free market principles and run contrary to my voting record.

Actually, Rep. Webb, we understand the restriction all too well. You’ve been had. Just own the turkey and move on.

The bill does not prohibit infrastructure expansion. In fact it addresses no other entity than UTOPIA. UTOPIA is government entity created by an interlocal agreement and the public asks for and deserves transparency and accountability of them. The bill requires that any city into which UTOPIA expands become a member city. HB60 is not designed to damage UTOPIA is any way, but rather to provide clarity and accountability to citizens who may be involved in that expansion.

When UTOPIA builds in a non-member city, it has to negotiate a franchise agreement with that city like any other telecom builder. It’s already on a level playing field. Non-member cities can enforce transparency and accountability via this agreement. The only distinction with a member city is that the franchise agreement has been negotiated in advance for the entire municipality. By prohibiting UTOPIA from negotiating franchise agreements except on a citywide basis, you’re making them play by a different set of rules. That is, at the very core, damaging.

Why? Example: We must keep in mind that UTOPIA is an entity composed of member cities. If an expansion were installed in a non member city, and problems with the network arose; who would the citizens in that area turn to? That user is not a citizen of the proviing [sic] entity. Their own non member city could say “We are not UTOPIA.” If they turned to UTOPIA for help, those member cities could say “You are not our constituent”.

We’ve already established that the franchise agreement gives the non-member city power to establish and enforce terms with UTOPIA. It seems like Rep. Webb either doesn’t understand franchise agreements or is convinced that unless cities increase their involvement with UTOPIA, they won’t enforce the provisions of them. The former is most likely as the latter is simply outlandish. Unless, of course, he’s conceding that cities don’t properly enforce the terms of franchise agreements with operators like CenturyLink and Comcast. That, however, seems unlikely.

The bill only applies only [sic] to government entities as providers, (iProvo no longer applies), and requires as a matter of government accountability to users, that expansion areas become member cities. Some already have.

The cities are and have been accountable to their citizens, member or not.

Email between UTA and Curt Webb on HB60

Email between UTA and Curt Webb on HB60

So I find myself wondering how his confused logic spawned this bill in the first place. Then I came across the one email not between Rep. Webb and someone furious at this bill: an exchange between himself and none other than Royce Van Tassell of the Utah Taxpayers Association! Most telling, Rep. Webb emailed Van Tassell directly and out of the blue to solicit their talking points on the issue.

Unshockingly, the UTA has the same fundamental misunderstandings of how franchise agreements work as Rep. Webb expressed in his missive. Van Tassell also alluded to the push coming straight from UTA’s president, Sen. Howard Stephenson. Don’t take my word for it: read the email yourself.

This is just the latest in the long and disturbing trend of incumbent providers funneling money into a sitting senator’s company to influence the legislative process from the inside while keeping their hands “clean”. How the voters of Draper can tolerate it is beyond me. It’s my hope that they’ll wise up to it and send Stephenson packing.

Broadband Bytes for 2014-02-28

Sen Valentine waffles on Amendment 2 to SB190

Sen John ValentineNo sooner did Sen. John Valentine promise to UTOPIA and Macquarie to withdraw Amendment 2 to SB190 than he started telling constituents that he hasn’t made up his mind yet. As previously covered, this amendment would keep Macquarie from doing the same kind of utility fee deal in new cities that it’s currently arranging with UTOPIA. It seems now that Sen. Valentine is dealing with UTOPIA and Macquarie in bad faith, telling them one thing while he tries to do another.

This means we need to keep up the email campaign to oppose it. In addition to hitting the Senate body, you should also contact Rep. James Dunnigan, the House sponsor, to let him know that you don’t want to support Amendment 2. The only way this goes through in a way to benefit all Utahns, not just those in UTOPIA cities, is if the bill is preserved as amended in the Senate Business and Labor Committee.

There’s only 13 days left in the legislative session. Make them count!

PS Yes, I have a GRAMA request in to see who’s been talking to Sen. Valentine about this bill.

Is the Macquarie deal really going to be this good? The rumor mill drops tantalizing hints

macquarie_logo_2638While nothing has yet been inked, I’m hearing a lot of rumors from multiple sources about the kinds of terms being discussed with Macquarie. While none of them will be out in the open until Macquarie finishes estimating the cost of network completion, this may give us some hints as to what to expect in the final product. Here’s what I’ve been hearing so far.

No installation fee. The install fee is rumored to be history. The network construction cost will cover getting the fiber to the side of the house. At that point, you’ve got maybe $200-300 in install costs to get it in to the house. Word is that Macquarie may work out the numbers to eat that cost to get people signed up.

Credit for any install fees already paid. You heard that right. If you paid the install fee up-front, that money will reportedly be applied towards the utility fee. Those who paid the install won’t be left swinging.

Construction completed in two years… or less. This one really surprises me. The plan is to complete the build-out of all pledging member cities VERY quickly. That kind of build speed would be incredible.

A free tier of service faster than Google. The utility fee is going to include a baseline level of service. The rumored speed is 6Mbps/2Mbps, better than Google’s current 5Mbps/1Mbps service.

A full build-out of the entire state. I’ve said it before, but it bears repeating. I keep on hearing that Macquarie considers UTOPIA to be getting their foot into the door in the US. Their reported intent is to wire every home, urban and rural, to gigabit fiber. Utah could quickly become the first all-gigabit state and have dozens of providers to choose from.

The cities maintain ownership. Yes, you heard right. When the 30-year deal is done, the cities still own UTOPIA. This provision would supposedly also apply to new cities that join up and maybe even the cooperative I’m working on (which would be the only option in unincorporated areas). That’s a pretty amazing deal.

Some of this sounds like it’s in “too good to be true” territory. Even if half of it pans out, I’ll be pretty impressed.