This is the transcript for episode 444 of the Community Broadband Bits podcast. In this episode, Christopher Mitchell speaks with Larry Thompson about broadband funding programs like the USF, and what it means for getting access out to rural areas. Listen to the episode, or read the transcript below.
Larry Thompson: Even AT&T and CenturyLink and people like that actually draw from these funds as well. It's not just the small rural telephone companies. It's actually all companies that provide service to these rural areas. The reality is end-user revenues are not enough to be able to pay for that loop that goes out to that customer's home.
Ry Marcattilio-McCracken: Welcome to Episode 444 of the Community Broadband Bits Podcast. This is Ry Marcattilio-McCracken here at the Institute for Local Self-Reliance. Today, Christopher talks with Larry Thompson, CEO of Vantage Point Solutions, a South Dakota-based company which provides engineering, consulting, and regulatory services for ISPs of all sizes.
Ry Marcattilio-McCracken: The two talk about how the variety of subsidy and grant programs we've built to get broadband out into rural areas and make sure folks can afford Internet access came about, and the policy changes we're likely to see in the near future to make sure existing networks and new construction remains viable.
Ry Marcattilio-McCracken: In particular, Larry and Christopher spend time talking about the Universal Service Fund and the National Exchange Carrier Association, and how we come to terms with an increasing need for support in the face of a declining base from which to draw funds.
Ry Marcattilio-McCracken: Christopher and Larry discuss the USF's sustainability as the contribution level nears 30%, alternatives to existing models, and what it will take to commit to fast, affordable broadband for all Americans in the decades to come. Now, here's Christopher talking with Larry.
Christopher Mitchell: Welcome to another episode of the Community Broadband Bits Podcast. This is the first time I've said that in 2021. It feels good to be back. I'm back today with Larry Thompson, the CEO of Vantage Point. Welcome to Community Broadband Bits, Larry. Thank you for coming on.
Larry Thompson: Thanks, Christopher. I'm glad to be here. Hopefully, like you said, 2021 is going to be better than 2020 when it comes to getting out and meeting people and things like that. I'm looking forward to the new year as well.
Christopher Mitchell: It'll be terrific. I think, like me, you're in the great north. Many of us being inside is a little bit easier. It's very hard to visit people on the weekends when you can't just hang out outside with them.
Larry Thompson: We live in Mitchell, South Dakota. It's all snowy outside. We don't want to get outside anyway right now. [crosstalk 00:02:23].
Christopher Mitchell: I've been getting into the ice skating. I'm excited. I have some bruises on my knees and hips to prove it. Actually, I probably messed up the name of a Vantage Point. Is it Vantage Point Communications? Is it just straight Vantage Point?
Larry Thompson: It's actually Vantage Point Solutions. This is our official name. You see it abbreviated VPS. But most people refer to us as Vantage Point, just like you did. That's fine.
Christopher Mitchell: I should just note that we've done some interviews of Vantage Point folks over the years in part because Kevin Kloehn is one of the most infectiously likable people I've ever met. Always enjoy the opportunity to learn from and talk to folks from VPS. Just briefly, what do you do, for folks that aren't familiar with you?
Larry Thompson: We have around 400 employees. Our main headquarters is in Mitchell, South Dakota. Although, we have remote offices just outside Portland and San Antonio, Colorado Springs, Springfield, Illinois, South Carolina. We've got remote offices scattered around. Our main headquarters is here. We do broadband engineering and consulting for, probably, 4 or 500 companies across the United States, from small rural telephone companies, all the way up to Google or price cap carriers or cable TV companies, so a variety.
Larry Thompson: If you're into broadband, we do a lot with rural electric coops as well. If you're into broadband, we do a lot of the engineering and consulting work. We're also very involved on the regulatory side. I've been on the NECA Rate Development Task Force, for example, for over 20 years. NECA has a variety of committees that I've sat on. NTCA also. I'm on the Industry Committee For NTCA. Spent a lot of time going to DC and spending time with the FCC, lobbying for various broadband purposes.
Christopher Mitchell: You just mentioned NECA, which is NECA. But I can't remember what it stands for. I bet you can.
Larry Thompson: Yeah, National Exchange Carriers Association. If you're a small rural telephone company, of which there's about 1,000 or so in the United States, cover around 70% of the landmass or so, but about 1,000 small telephone companies. Most of them use NECA for their tariffing and various pooling functions and things like that.
Larry Thompson: They were created back at the vestiture in 1984 to handle things like cost studies and the pooling that helps make it possible for a lot of these rural telephone companies to provide services, broadband and voice. Back then, it was voice, but now, broadband, to these very rural areas where it's too expensive to serve just based on end-user revenues.
Christopher Mitchell: We're going to talk more about NECA, moving forward. I thought it might be easier for folks and a little more familiar to ease in with our two topics to talk with the Universal Service Fund. I really appreciate you sharing your expertise as someone who's been working on this, thinking about it, lobbying on it. I feel like a lot of people don't really have a sense of exactly how the Universal Service Fund works. Frankly, most of the time I'm explaining it to someone, in my back of my head, I'm wondering if I'm getting it right.
Christopher Mitchell: I'm hoping that we can have an easy-to-understand discussion about it. This is a fund that is designed broadly to solve the issue of making sure everyone across the United States has high-quality Internet access, high-quality telecommunications access before that. Let's just start with what exactly it is now. I think we can ignore some of the history to the extent we can. But we can simplify a little bit of the rougher edges. But it's four programs. Tell us a little bit about how it works.
Larry Thompson: Conceptually, it's fairly easy to understand. When you get down into the details and the nuts and bolts, there are a lot of rules and regulations, exactly, all the details we probably don't want to get lost in today. At a high level, the high cost support has several different pieces of it. Let's say the schools and libraries corporation that provides money for a broadband to schools and things like that are all part of this high cost to fund its Lifeline program and things like that.
Larry Thompson: The thing that we're probably most interested in is the High Cost Loop support. What the High Cost Loop support does is provides funding so that these rural telephone companies that provide support to very high cost areas. In fact, even AT&T and CenturyLink and people like that actually draw from these funds as well. It's not just the small rural telephone companies. It's actually all companies that provide service to these rural areas. The reality is end-user revenues are not enough to be able to pay for that loop that goes out to that customer's home.
Larry Thompson: If you think about, some of these places might be 15,000 or $20,000 to put that copper or fiber line out to a rural farm. You're getting $50 a month for their POTS line. You can realize pretty quickly, you're never going to get enough money off of that customer to be able to pay for all of the costs associated with installing and operating that loop.
Larry Thompson: Actually, this started back in 1934 with the original Telecom Act, when the policy was they wanted everybody to have a telephone line, that's what it was, a voice communications for 911 and other reasons. They realized that the person in New York's voice line just became more important when the guy in rural North Dakota could have one as well.
Larry Thompson: Everybody pitched in a little bit of extra. The guy in New York paid a little bit more than he needed to for his POTS line. Fortunately, there wasn't that many rural lines compared to the urban lines. So that helped support all of these rural lines, essentially, to buy them down to the cost of an urban line.
Christopher Mitchell: That's the high cost portion, which, if I understand correctly, I think it's worth noting. People who are familiar with Connect America Fund, with RDOF, with ACAM, which maybe fewer people are familiar with. These are different programs within that High Cost Fund, which is, I think, perhaps, the most interesting of the four parts of the Universal Service Fund. Is that a correct categorization?
Larry Thompson: Yes. They have now changed how they support these companies. Instead of calling it High Cost Fund, they usually refer to it as the Connect America Fund, CAF, nowadays. They've changed the methodology of how they draw the money out of this big pot of money that they have, which is $9 billion now per year. It used to be based on submitting cost studies and things like that, where a company would come in and say, "Here's all of my expenses. Here's how much I had to pay to provide service to all these high cost people in order to get a reasonable rate of return. This is how much I fell short. You're going to make up the difference."
Larry Thompson: The government came along and said, "Well, I'm going to give you some other options of how you can do that." Rather than going through all of that paperwork and accounting and things like that, they developed a model. It was actually Connect America Fund model, where they commissioned this company to go out and say, "Could you estimate for me how much it really is, based on lots of complex parameters on how dense it is, how much rock is in the ground to construct, how much people are willing to pay, and things like that," and say how much do you think it would cost to be able to provide service and how much support do they need to develop this complex model.
Larry Thompson: Then, they allowed the companies and said, "Instead of doing these complex cost studies, would you rather opt into this fixed amount that we're just going to give you every month for the next 10 years?" Right now, about 60% of the companies, these small rural companies, have actually opted into ACAM, which is Alternative Connect America Model. They had an ACAM I offering, and they had an ACAM II offering.
Larry Thompson: Between the two different offerings, about 60% of the companies now are getting their support through a fixed mechanism that has nothing to do with their investment anymore. It's just a fixed amount based on what the FCC thinks they should have. Then, the other 40% are still what they call legacy are still doing it the old way, doing it through a cost study process in determining how much they should get from NECA or USAC, Universal Services Access Corporation.
Christopher Mitchell: It's very helpful. There's a lot of people who would like us to go further into that, and pros and cons, but we're going to save that for another conversation. That's where a lot of the money goes in terms of the connections for residents across rural America. There's also programs we're not going to spend as much time talking about. One is Lifeline, which provides a $9.25 subsidy for a lot of folks. Then, additional money for folks living on tribal reservations.
Christopher Mitchell: There's the E-Rate program, which people have heard about, which is schools and libraries, mostly. Then, there's the telemedicine program that I know very little about. It is a rural telemedicine, but they're increasingly making it more urban as well. That's the components of the Universal Service Fund.
Larry Thompson: That's correct. All of the things that you just mentioned make up that $9 billion or so. About half of that is this High Cost Fund that I was just talking about. The other functions, like you said, Lifeline is really intended for people that can't afford a hotline. It actually helps offset some of those kinds of low-income kind of things. You're right, all of those make up that bigger pot of money. You're right.
Christopher Mitchell: Now, the part that we'll, perhaps, be talking a lot about over the next year, contribution. Where does the money come from?
Larry Thompson: When you look at your telephone bill, let's say you make a long-distance call, then you look at your telephone bill, anything that's interstate revenue associated when it comes to telecommunications has a fee that goes on to that. You'll see, you made $20 worth of long-distance calls. They'll name it different things, different companies on different bills, but there's something on there about universal service or high cost support or something like that.
Larry Thompson: Usually, nowadays, it's in the 20-some percent that you're going to be paying. In addition to whatever that interstate fee was, they add another 20-some percent on. That's the money that gets sent into fund. Eventually, it becomes billions and billions of dollars that they divvy out for these various programs you just mentioned. In most old telecommunications, if you're a wireless provider, if you're a landline provider, will pay into this High Cost Fund that eventually pays for these things.
Christopher Mitchell: Now, part of the challenge of this and the controversy is that there are technologies that, to an end-user, might seem very similar. Some of them may pay into the fund and some of them may not, which is you start dealing with distortions in the market, then, when you're talking about a 20%. I believe, we might be looking at 31%, moving forward now.
Larry Thompson: Yeah, recently now, they're projecting it to go over 30%. When we got to 10%, we thought we were at the tipping point that we had to do something. Part of the problem is a lot of these funds come from things like long distance. It's declining, people are not picking up their landline and making that long-distance call like they used to. The base that they've been charging this on is declining base.
Larry Thompson: What ends up happening is, if there's fewer minutes now to apply this fee on, the fee actually has to go up if you want to keep funding the pool at the same level. The percentage has been going up with time. We've been talking about contributions reform for more than 10 years, because the system we have is currently broken. As long distance minutes and things like that that we've typically used go away, we're going to have to figure out some other way to fund this pool.
Larry Thompson: Nobody, no FCC commissioner or chairman wants to be the one that brings along what they believe is a new tax. It's kind of been a hot potato for many years that nobody seems to want to tackle. I think, now that it's getting up in the range that it is, over 30%, it's probably getting the point where somebody's got to bite the bullet and do something.
Larry Thompson: There's been some proposals that have come out. For example, they have a joint board that they put together that has some FCC commissioners and some state regulatory utility commissioners that come up with proposals for things like this. There's also NARUC, which is a national association of regulators and things like that, that have all kind of weighed in on the subject.
Larry Thompson: It seems like the industry now is kind of, maybe, converging around not necessarily using interstate revenues as the base to be able to charge, but maybe do it like phone numbers, for example. If you have a phone number, you have a flat fee to access the network to be able to do it. They believe, if they would make a transition into something like that, that fee might be somewhere in that 60 to 80-cent range per number, is what they might have to assess. You have a lot more numbers to assess, so that the rate shock would probably go down to the consumer if they could potentially do something like that.
Christopher Mitchell: One of the things that I wanted to note, and I feel like I'll give you a chance to react in any way that you like, but I don't want to spiral into a long conversation about this because I really want to talk about NECA, everyone's dying for us to get to NECA. One of the things that is a challenge is I feel that people might say, "Why doesn't Congress just appropriate money for this?"
Christopher Mitchell: One of the reasons, I think, that we have the telecommunication system we do is that Congress hasn't played political games with this fund. This is a fund that the amount of money in it is kind of determined by the expected demand of it. There's some challenges to continuing to do that, one of which is now Congress has appropriated money for a significant broadband subsidy. If that were to continue and this money that's going to be spent on the three and a half billion dollars on the broadband subsidy will not be a part of Lifeline. But if they did, you would see Lifeline increasing by 30, 40%, which would be, perhaps, even more on a yearly basis.
Christopher Mitchell: There's significant challenges ahead. I feel like, for many of us, we would like to see this, because we think telecommunications is so important. We don't want it to turn into a political football on the hill where, every year, we don't know if Congress will fund enough money to make all these connections or not. That's one of the additional variables.
Larry Thompson: I think there is a benefit in the sense that, and I refer to it earlier loosely as a tax. No FCC commissioner wants to be the one with the new tax. In reality, it's not a tax. It's a self-funding system. The stuff that we're supporting with the fund, the services that are being delivered over that network, are really what's supporting it as well. It's really not a tax. You bring up some good points that you don't want to go year-to-year wondering where your funding is going to come from. It's kind of a self-funded, self-sustaining system that they put in place that just kind of shares the revenues amongst the places that need it.
Christopher Mitchell: Now, if you are a rural telephone company that is receiving funds from that, and it may actually depend on how you're getting it, whether it's from ACAM or RDOF or something else, you might be building a network that, again, to a resident, looks identical to, maybe, what a rural electric cooperative is building with money that they may have received from a different fund, such as ReConnect from the United States Department of Agriculture.
Christopher Mitchell: At that point, because you've received your money from a different bucket, you might have different regulations in terms of how you have to account and how you have to charge people for services, based on these NECA models, as I understand it. I have no idea how to dive into this. But I'm curious if, maybe, you can walk us through, if you take the perspective of a small local telecommunications company that's receiving money from ACAM, for instance, how do they have to price their services in ways that they're kind of in a straitjacket compared to an electric coop that doesn't have to worry about any of this?
Larry Thompson: Well, one thing I want to distinguish between is a grant in support. There's three basic ways that these companies will fund these very expensive networks. Just to kind of set the stages, in a town, if I go into a city, you can oftentimes build a full fiber to the home network from scratch, all electronics, all everything, engineering, materials, labor, and everything for, let's just say, $5,000 a location. Sometimes, it's cheaper, sometimes, a little more. But around that. If you go out into these rural areas where you're a mile between farmhouses, it could be 15 or $20,000 a location.
Larry Thompson: All of these things that we're talking about, kind of the goal is to try to get that rural guy to look like a town guy. If you can do it for 5,000, just like the cable TV company can do it with no support, they can go out and build the network and there's enough end-user revenues to make that network work. We're trying to get to the point where these rural ones are the same way. We buy it down to make them look like a town customer, so that now end-user revenues can make actually the network work.
Christopher Mitchell: To be very clear, what you're talking about is a solution that I love, which is one in which we do the model right up front, and then, we don't have to cut an additional check every month. We've engineered it in such a way that it can just be self-financing moving forward. Then, none of us have to worry about this ever again.
Larry Thompson: There's some instances where that actually works. There's two things. One to think about is support. Support is exactly what you're saying. It's that monthly payment that usually helps offset capital and operational expenses. Or, you can give them one lump sum upfront and a grant or a loan or a combination of the two that says, "I'm going to pay you. Then, you figure out how to continue to operate it from here on out."
Larry Thompson: Oftentimes, when you look at where these rural telephone companies and serving these highly-rural areas, their expenses are about half and half. About half of it is made up of that capital expense and the depreciation stuff on the investment. Half of it is just the operational expense. Some of these companies, they might have two hours' worth of windshield time to get out to that farm to fix their phone or their broadband connection when it doesn't work. There's a lot of operational expenses as well.
Larry Thompson: If you can actually get the network paid for or largely paid for upfront and get enough end-user revenue to offset those operational expenses, then you're probably okay and you can operate long term in that way. Some of these other things that you mentioned, Christopher, like the ReConnect or some of these grant programs, we've seen a lot of money flowing in from CARES, for example.
Larry Thompson: A lot of states now have their own grant programs where, oftentimes, it's a match. It's not free money, but they'll come in and say, "If you put up 50%, we'll put up 50% to be able to make this work." They'll give you a lump sum to build the network. Then, you have to figure out how to continue to operate it over the life of that facility, which outside plant is usually 30 years or so. Those are kind of two different methodologies the government says, "I'm going to give you a much smaller amount," let's say an ACAM, "but I'm going to continue to give that to you for the next 10 years."
Larry Thompson: There's pros and cons, either way. If you look at the amount of money that they might give you on ACAM over that 10-year period, per location is probably smaller than some of these grant programs that give you that lump sum upfront for that same location. There's some pros and cons. It gives you with that 10 year a little bit more revenue structure, some predictability, and things like that on revenue flow as well. Some prefer one way and some prefer it the other way, not to say one is better or one is worse than the other.
Christopher Mitchell: If you are receiving certain kinds of support, as I understand it, for instance, and you want to offer a gigabit, you can't just set your pricing based on market reality, perhaps. As I understand it, there are certain guidelines you have to make in terms of how much you're pricing because of certain recovery tables and things like that. Is that right?
Larry Thompson: That is true. It's getting probably less restrictive with time than how it used to be. For example, in broadband, if we take that, for instance, anytime you take money from the federal government, it always comes with strings attached. All of these programs that we're talking about with Connect America Fund, for example, if this company takes money from the government, they're taking under certain terms and conditions that say, "Well, if you give me that money, I'm going to provide 25 meg down three meg up broadband," or, "I'm going to provide 250 meg or one gig, or whatever that speed might be."
Larry Thompson: The FCC actually enforces performance requirements on you as well that says, "Well, you're required to test that and prove to me you're giving me what you said you were going to do for this investment I'm making in you." Likewise, there's also, when it comes to pricing to your end-user, they put restrictions on you as well. Broadband, they actually come out annually with a new table that's developed by serving all carriers in the United States. If it's Comcast and Cox and AT&T and everybody else, they come up with what they believe is a typical price for the services. You have to, at least, in one of your tiers, be able to meet the prices of what they believe these benchmark rates are in the United States. Alaska has their own rates that they have to meet. The rest of the United States has a single unified rate. Then, you have to be at or below that rate in, at least, one of your broadband categories. They don't give you this money, and then, you price everything at $500 a month.
Christopher Mitchell: We're hearing the speed testing requirements that they check up on. Is that still mostly in the future? I think there's been multiple delays in rolling that out. I have no doubt that almost all the small companies will meet those. I have no doubt that they'll also be the ones that are almost entirely tested. Whereas, the largest corporations who probably will be the worst at meeting them may be the least tested, just based on, perhaps, my cynicism or experience, depending on your point of view.
Larry Thompson: You're right that, when it comes to testing, there's only a small cross-section of the small rural carriers that actually have to test and provide their information back to the FCC today. This year, though, in 2021, they have a pre-testing period for quite a few of the carriers like that receive CAF Phase II money, for example, where the FCC is requiring they actually perform the test, submit the results, but there's no penalty if you fail. There's only a penalty if you don't submit the results.
Larry Thompson: This is kind of a pre-testing period. Most of the testing really starts in earnest January of 2022, when actually, if you test and fail, there's financial penalties associated with that. Generally speaking, when they give out money, they give you a couple of years to meet some sort of build-out requirement, because it takes a couple years to build these networks. Usually, you're three or four years away before you have to actually start testing.
Larry Thompson: RDOF that's just going to be awarded this year, they don't have their build-out obligations start until next year. It'll be three years after that before they have to actually start testing and committing and submitting all of this to the FCC to prove that they're actually meeting their obligations. We're just on the early edges right now of testing in earnest for these companies. Anything, ACAM, if you're legacy, if you receive money in CAF Phase II, these new RDOF ones, if you're rural broadband experiment, all of those guys have some testing requirement that phases in over the next couple of years.
Christopher Mitchell: Thank you for that. The question I want to move on to work at with NECA, which I'm still a little bit hazy on, is this, which is, are there situations in which you have a rural telephone company that has built a fiber network and they feel that they are unable to offer a lower price than they would like to because they have certain obligations under NECA rates, for instance, I believe might be their way of phrasing it, in which they might say, "We'd love to do a gigabit at $100 a month, but we're required to charge more for that because of these conditions of the program under which we were funded?"
Larry Thompson: Part of what NECA does for these companies is provide tariffing functions. They could go to the NECA tariff and be part of that NECA tariff. Now, I would say your concern was a much bigger concern five and 10 years ago, where they were requiring that you would continue to have a POTS line and things like that all layered on top of your broadband, which did keep that price substantially higher.
Larry Thompson: One thing that's changed in the last couple of years is NECA has allowed a significant amount of pricing flexibility for these companies. In fact, to the extent that, if you don't like how NECA tariffs your DSL service, they let you actually opt out of the NECA DSL pool. That would allow you to opt out and do your own tariffing. In certain times of the year, you're actually able to opt out and do your own tariffing.
Larry Thompson: That definitely was a big issue a couple of years ago. I would say it's 20% of the issue, it was a few years ago. It's reducing with time. They're getting less and less regulated when it comes to how they're pricing their services to their end-user customers with time. I think they all realize that market conditions change throughout the US and they have to allow them a certain amount of flexibility to be able to do that as well.
Larry Thompson: They also monitor things. They don't want to be giving support out and you're only charging $5 for your POTS line when the national average is 25. They monitor things like that to make sure, not only are you not too high, but that you're not too low. Now, when it comes to broadband, specifically, we've made a move from POTS and data, that you had to get a POTS line, to this broadband-only service as well.
Larry Thompson: They call it CBOL. You might have heard that acronym before, Consumer Broadband-Only Loop, CBOL, which means, now they've come up with this new mechanism that allows you to be able to offer this service without a POTS line, so they've pulled away some of those regulatory constraints that they used to have. Small rural telephone companies like this get a higher percentage of their revenue from the FCC or USAC. Because of that, there tend to be higher regulated as well than when you compare them to a CenturyLink or an AT&T or Verizon or somebody like that.
Larry Thompson: There are more regulatory hoops that they have to jump through to be able to offer these. I would say that the regulatory hoops are getting better with time. They have a fair amount of flexibility now. Like I mentioned earlier with these broadband categories now, that you only have to have one of those speed tiers that meet that national threshold to be able to be considered good. Then, you can price the other ones however you want. Sometimes, we may feel they price them too high. Sometimes, they may price them too low. They have a lot of flexibility in how they do price those.
Christopher Mitchell: Well, I love to hear that things are getting better. It's a great way to round out a show. Is there anything else that we should just talk about before I get rid of you?
Larry Thompson: The other thing I would mention is there's still a lot of work left to be done when it comes to rural broadband. Depending upon who you listen to, somewhere between 20 and 40 million locations, probably, still in the United States don't have adequate broadband. A couple of things that are happening is, one is the FCC threshold is 25 meg down three meg up.
Larry Thompson: You look at Ookla, and the average speed test nowadays is around 170 meg. I think most people would say the FCC's definition of broadband is woefully inadequate. No commissioner really wants to increase that right now, because as soon as you increase it, there's going to be a whole lot more locations that don't have broadband. Politically, it's a tough thing to stand in front of Congress.
Larry Thompson: Usually, we have the opportunity to increase those kinds of things when we have a change of commissioners, chairman I should say. That will obviously happen here coming up on the 21st. I would expect that, in the near term, we're going to see the national broadband speed increase to something more, maybe 100 by 20 or something.
Larry Thompson: The other thing I think we're going to be seeing over the next year is going to be an increased emphasis on broadband spending. We already saw that with the Omnibus and the CARES Bill that was just passed December 21st, where there is quite a bit of money in there for these kinds of purposes. I do think we're going to see additional infrastructure bills, as well as from the federal and the state side to be able to get more broadband to these rural customers, as everybody realizes, to be competitive in the new world, we've got to have a society that has world class broadband. We've got ways to go to get there.
Christopher Mitchell: When I look at what the electric coops are doing, some of whom are your clients, when I look at what telephone companies are doing, some of whom are your clients, I'm just incredibly optimistic. I've been saying for years, I feel like the hard work of rural broadband has been done, in some sense, in that five, six years ago, we're like, "How are we ever going to do this?" Now, we're kind of like, "We just need the money." It's not the same sort of problem that I see in urban challenges, which is we don't really have a sense of what policy is actually going to solve this problem in urban areas that people who still can't connect.
Christopher Mitchell: In rural areas, I think we have a sense. We have a lot of entities that are willing to invest. There's a lot of enthusiasm. It's just a matter of getting the money to the right places, which is not easy. But it's very optimistic that we are going to solve this problem, and well before the decade ends, I think. Do you think I'm out on a limb there? Do you share that enthusiasm?
Larry Thompson: Before the end of the decade, I would say that's probably realistic. Most people believe that to really get fiber to the home, which is really the end goal for getting broadband out there, and it's the least expensive way to get broadband to these rural areas, it's going to be another 60 to $80 billion, they believe. There's still a large task ahead of us.
Larry Thompson: Five years ago, when I would sit down with my clients around the supper table and say, "What's keeping you up at night?" Oftentimes, it was things about the support mechanism we've been talking about had been declining and they were wondering how they're going to continue to survive and what expense they could possibly cut to make it through the next year.
Larry Thompson: I was just out with some clients just before the pandemic hit, back when we used to meet with clients. I ask them the same question, what keeps you up at night? Their response was trying to figure out which is the next best opportunity. You think about five years ago, going from how am I going to survive, to the opportunities are so great now, which, how do I pick amongst them, has been kind of transformational over the next five years.
Larry Thompson: I do believe over the next few years, I think one thing that is, regardless what aisle you're on in Congress, everybody agrees broadband is important. This pandemic has really brought that to light, from education, health care, entertainment, communication, everything relies on broadband. That's the underlying thing that everybody is going to need in the future. I think everybody's in agreement on it, and everybody wants to get that job finished. I think it's realistic to do it by the end of the decade, like you said.
Christopher Mitchell: I'm going to let you turn off the camera in a second, but you said something that I need to follow up on, or my WISP friends, they're probably going to be angry, anyway, frankly. You, Vantage Point, does a really good white papers as well. For folks that are interested, you've been very good at looking at wireless from an engineering point of view. I've no doubt that you work on wireless systems. I don't want to sort of get into a fiber versus wireless. You made the point that fiber is the least expensive option to connect these homes. I've been saying that. But tell me as a skeptical person, why is that the case?
Larry Thompson: When I say that, you're looking at a rural area, for example. We've done a lot of analysis on this. We do wireless and wireline engineering. I'm actually just in the middle of writing another technology paper on wireless that I hope to submit to the FCC here in a couple of weeks. If you look at over a 30-year life of a cable plant, that cable plant, even though it's expensive, you'll look at doing the same thing with wireless and replacing the electronics every five to seven years, like you normally do, the additional op-ex associated with the windstorm that just misaligned your antennas and things like that, it's not uncommon for that fiber to the home to end up being less expensive when you're looking at it over a longer horizon.
Larry Thompson: If I'm living it to the life of seven years, let's say, to the life of the wireless electronics, usually, the fiber to the home is more expensive. It usually becomes cheaper when I take a longer-term view and a longer horizon. The other thing I'll mention is it tends to favor fiber as the speeds increase. If all I'm talking about is 10 meg or 25 meg or something like that, where I can put up a wireless tower and go out eight or 10 miles and be able to serve 25 meg. Sometimes, I can probably do wireless links extensively.
Larry Thompson: Now, with the speeds that I'm talking about, and almost every expert will tell you that before the end of the decade, gigabit Internet is going to be the standard. There's just not enough low-band spectrum that's going to go up 10 miles to be able to offer that on a wide-scale basis with the wireless solution. You're now looking at things where a lot of the spectrum is in the millimeter wave, where I measure my distances in hundreds, or maybe, 1,000 feet. When you have to put a tower up for every farmer because they're more than 1,000 feet apart, it does get somewhat expensive.
Larry Thompson: I believe that, as time goes on over this next decade, even though wireless is going to get better, it's not going to get better fast enough to meet the rapidly increase user demand that's really going to be provided by fiber. I will mention one other thing before we leave here today, that most networks are kind of converging to look alike with time. You think about a fiber to the home network, I run fiber to the side of the house, and I'm Wi-Fi inside of the house. Really, my end-user customer is connected to a wireless network. This just happens to be in the home.
Larry Thompson: If you'll look at 5G and some of these new technologies that are based on millimeter wave, instead of that last 100 feet, now, maybe on the last 500 feet that's wireless, it's still fiber to that tower. Every provider, if you're wireless or wireline, realizes that the ultimate bandwidth comes by pushing fiber closer to the customer. We're really arguing over that last few 100 feet is how big should that last wireless link be.
Christopher Mitchell: That's very clear. I appreciate that. The one thing that I would say that, for anyone who was going to immediately oversimplify what you just said to say wireless can't do better, is that, if the FCC cleared up a lot more spectrum with some of the spectrum sharing, then we could see some differences. I don't want people to come away and think that any of this stuff is certain. There's always multiple variables that can get involved.
Christopher Mitchell: I think we'd all like to see our spectrum used more efficiently, so that we can make sure everyone has high-quality access. I don't want anyone to walk away from this thinking that wireless is not good. That's not what you said. There's ways that we can make it a lot better, too.
Larry Thompson: Let me make sure it's clear that I don't think wireless is going to go away. We need it for mobility. Wireless and wireline networks are going to happily live together for years and years and years to come. One's not going to displace the other. One's good at one thing, the other thing is good at the other. If you need fixed broadband at a location, fiber can't be beat. The closer the fiber is to your home, the more broadband you're going to get. But we're always going to need a wireless network for our mobility and all of those kinds of things.
Christopher Mitchell: Thank you so much, Larry. I've really enjoyed this conversation, in part, because I now know that I have a resource I can just point people to when they want to know any of this stuff. It's very clear. Thank you so much.
Larry Thompson: It's great talking to you, Christopher.
Ry Marcattilio-McCracken: That was Christopher talking with Larry Thompson. We have transcripts for this and other podcasts available at muninetworks.org/broadbandbits. Email us at email@example.com with your ideas for the show. Follow Chris on Twitter. His handle is @communitynets. Follow muninetworks.org stories on Twitter. The handle is @MuniNetworks. Subscribe to this and other podcasts from ILSR, including building local power, local energy rules, and the composting for community podcast.
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