Rural Broadband Business Models

There have been many discussions and presentations about which access technology will provide a rural community the most efficient broadband services. But there has been relatively few discussions about which rural broadband business model is appropriate for a rural community. Prior to the deployment of a rural broadband network the rural community should have a complete understanding of the different rural broadband business models. The model selected will ensure the network is economically feasible over the long term. There are four business models that a rural community can adopt to fund a rural broadband network:

1. Non-Ownership Model
Using this model the rural municipality has no direct ownership of the rural broadband network. The municipality releases a Request For Proposal (RFP)giving precedence to one to three Internet Service Providers (ISPs) to provide broadband services to the community. The municipality may partially fund one or all of the Internet Service Providers. The advantage is that the municipality takes on no financial risk for the deployment of the network. The disadvantages are that the rural community has limited coverage (high density areas only) and no guarantees of service.

2. 100% Ownership Model
A municipality decides to implement, manage, and upgrade the rural network. The municipality establishes two departments:
a. Network Infrastructure
b. Internet Service Provider (ISP)
The municipality effectively becomes a communication provider very similar to either TELUS or Bell Canada. This model has a high financial risk because most municipalities underestimate the cost to operate and manage a rural broadband network. The disadvantages are that the rural subscribers can only use a single provider and the municipality must hire component personnel, to design, operate and maintain the network.

3. Single Partnership Model
The municipality uses the Request For Proposal process to select a single service provider. Their role to provide to the Internet Service Provider adequate funding to provide a specified coverage throughout the community. Public funds may also be used to fund all or part of the project. Using this model the municipality uses public funds to give a single ISP a significant advantage over other ISPs serving the community. Public funds should be directed to the creation of true public infrastructure that may be used by all rather than the provision of commercial/retail services that are best left to the competitive application services sector.

4. Open Access Model
An open access broadband network provides supports structural separation between the backbone provider and the retail suppliers. Such an approach ensures no conflict in the value chain and provides the best competition, choice and prices for the end customer. Traditionally it has been shown that public interest is best served when the same company that owns and manages the backbone does not also control the retail access market. Open access in a rural area means affordability, availability, and accessibility. Implementing a open access network will maintain competition in high density areas, ensure that medium to low density areas receive adequate service, will give residences and businesses a choice in broadband services, and will ensure that broadband access services are able to meet the community's coverage and capacity requirements. The advantages of the open access model are:
Public funds are spread throughout the community.
Municipality maintains control of backbone infrastructure

Market forces are maintained in the local access market

Local ISPs are able to compete equally based on cost and services.

In My Humble Opinion (IMHO)
Prior to implementing a rural broadband network rural muniplaities should closely examine which of the four models meets their financial requirements.

Last/First Mile 2008 Problems

A blog reader from Foremost Alberta sent me this e-mail this week asking why he can not get good quality broadband access when he lives only two blocks from a TELUS CO and four blocks from the SuperNet POP?

He asked: "Shouldn't I be be able to get broadband access from the Provider of Last Resort"?

This question illustrates that the last/first mile problems are not "Technical" but are either "Economical or Political".

Here is my list of last/first mile problems that must be resolved in 2009.

1. The GOA built a network that does not support rural broadband. The GOA should be actively looking at ways of funding the last mile. Other provinces have already made commitments. Why not Alberta?

2. Axia's business model is to compete with TELUS and Bell in the Enterprise connectivity market and clearly does not have a mandate to support rural broadband. By giving Axia an exclusive contract to manage the SuperNet the GOA effectively used tax money to fund the creation of a competitor to TELUS and BELL.

3. Bell used the Provider of Last Resort as a means to secure the SuperNet contract but had no intentions have supporting it after the network was complete. Information on POLR can be located at:
http://www.albertasupernet.ca/the+project/the+network/network+access+.htm

4. TELUS should review its social responsibility to the citizens of Alberta and start actively looking for funding and partnership opportunties to build the provider copper-based access in rural communities.

Questions:

"Can we as a rural broadband community work "Cooperatively" to resolve these and other problems in 2009?"

"In January of 2010 will we still be facing the same problems?"

Have a Happy Xmas and New Year!

Total Cost of Ownership (TCO)

The traditional business case to provide broadband breaks down in rural communities where the population densities are lower and the broadband costs exceed subscription revenues. To provide affordable broadband service in rural communities, it is necessary to develop a sustainable economic model that proves the business case for a three, five and ten year period.

Total Cost of Ownership (TCO) is used to measure the total costs of a project over a period of time. Total Cost of Ownership (TCO) can be used to determine the expected costs of a future broadband network over a period of time. The benefit of TCO is in providing an understanding of future broadband network costs that may not be apparent when first evaluating the implementation of a network. The lifecycle cost typically include direct costs such as amortized capital investment in hardware and software, implementation labor and services, training, support and maintenance contracts and facilities.

The sustainability of broadband in rural communities is based upon market forces and the potential need for government assistance.

For this reason, each county should develop a policy framework for broadband that determines:
1. Which areas can be, or are, served by market forces;
2. Which areas will need assistance with initial investment to become self-sustaining; and,
3. Which areas cannot become self-sustaining and will require ongoing funding.

Each area of the rural community may have different economic requirements. The requirement for government funding will be dependent upon lifecycle costs and market forces in each area.

In My Humble Opinion (IMHO)
Rural Communities begin the implementation of a wireless access network in areas within the county that have high population densities supporting a reasonable return. But areas with low population densities have a different economic models which may result in a signficant loss. Some low density areas will never be self sufficient and a service provider should expect to use revenues from high density areas to subsiduze low density areas.

Copper May be Buried But Ain't Dead (Part 2)

Who is the CRTC?
The CRTC is an independent, public authority that regulates and supervises broadcasting and telecommunications in Canada. The CRTC regulates two types of telecommunication services: Retail and Wholesale. As an example, wholesale services are divided into six categories: interconnection, public good, essential, conditional essential,conditional mandated non-essential, and non-essential subject to phase-out.

What is a Tariff?
An incumbent service provider is required to file a tariff with the CRTC for each of their regulated services. A tariff defines the service and the cost of the service, but does not necessarily define the underlaying access technology. A service may be provided using a variety of access technologies such as copper, fibre and wireless. Tariffs are periodically updated by the CRTC to meet the needs of the Canadian citizens.

In order to withdraw a tariffed service an incumbent must do the following: (1). Define the service proposed to be destandardized and/or withdrawn; (2). Proposed date for destandardization; (3). Proposed date for ultimate withdrawal of service; (4). Type of destandardization; (5). Rationale for the application; (6). Availability of a substitute, with rationale as to why it was reasonable in terms of equivalent functionality, availability in the same geographical area, and cost (including the initial outlay and ongoing costs to the customer); (7). Provide a transition plan; (8). Provide relevant information concerning existing customers, such as the number of customers affected; (9). Send a copy of the notice to affected customers; and (10). Provide any other information the applicant believed was relevant.

Local Loop Unbundling (LLU)
Local loop unbundling was introduced by the CRTC in 1997. Unbundling the local loop, as a policy, is built on the recognition that incumbent carriers have a dominant position in the provision of local access by virtue of their control over the local loop which can not be economically replicated by alternative providers. This position of dominance has resulted from many years during which incumbents had a monopoly in the provision of voice services in rural Alberta. The requirement of unbundling loops in lower cost areas, such as large urban areas, was put in place for a period of five years starting from May 1997. A decision was made in 2001 subjecting local loops in rural areas to unbundling requirements on an indefinite basis.

Local loop unbundling can be classified into two types: 1. Full unbundling. The copper pairs are leased by the new provider. The new provider takes complete control over the copper pair and can provide subscribers with services including voice and broadband. The incumbent owns and maintains the copper pair. 2. Line sharing. Line sharing allows the incumbent to maintain control of the copper pair and continue to provide some services to the subscriber such as voice services. The new provider leases part of the pair and provides broadband services. The CRTC has not mandated line sharing.

Collocation
In order to interconnect the copper pair to the new provider’s equipment the incumbent must provide access to a collocation facility. There are two ways to provide collocation: 1. Caged Collocation. A physically separate space from the rest of the incumbents exchange by a wire mesh or partition. 2. Co-Mingling. Cageless collocation where the new provider’s equipment is placed together with that of the incumbent.

Telecom Decision CRTC 97-8

Telecom Decision CRTC 97-8 requires that essentail facilities, functions, and services in the local loop be unbundled. The local loop must meet three criteria: (1) it is monopoly controlled; (2) a CLEC requires it as an input to provide services; and (3) a CLEC cannot duplicate it economically or technically. Telecom Decision CRTC 97-8 is available at: http://www.crtc.gc.ca/archive/eng/Decisions/1997/DT97-8.htm

TELUS's Application
The CRTC received an application from TELUS dated September 30, 2004 called: "Amalgamation of Analogue private line service". This application algamated many former general items. TELUS stated that the tariff would align and clarify the terms and conditions pertaining to the provision of analogue private line service in Alberta and British Columbia (B.C.). A brief is available at: http://www.crtc.gc.ca/archive/ENG/Orders/2004/o2004-329.htm

The CRTC considered that TELUS's proposal would simplify the application of the tariffs for Analog private lines service in Alberta and BC. The demand for analog private line services that TELUS proposed to grandfather had declined, alternatives to these services are available, and that it received no comments from TELUS's existing customers.

TELUS is positioning its Wholesale DSL service is an alternative. TELUS offers a full end-to-end solution to service providers as well as making available to competitive local exchange carriers (CLECs), Internet service providers (ISPs) and DSL service providers (DSLSPs) individual components of the service architecture. This service is intended for ISPs such as The Internet Centre that want to offer higher speed connections between the end-user device and their point of service. There are a couple of issues with this service: (1) The service is not universally available in Alberta and British Columbia, (2) TELUS is able to control and filter the traffic between the ISPs point-of-precense and the customer's premises.

The Internet Centre's Filing
The Internet Centre states that TELUS's wholesale services are NOT available in rural communities and is not a replacement for the analog private line service. In addition, they state that in its Analogue Private Line Services TELUS masked, under the objective of simplification, a restructuring of local channel services with the intent to prohibit any uses of local channels beyond voice-grade services.

In order for the The Internet Centre to collocate in a TELUS central office, they are required to carry a $68 million dollar insurance policy for each central office. This is not economically feasible when providing services to a rural small community. The Internet Centre is requesting that that their equipment (DSLAM) be located in the SuperNet POP vs the TELUS central office.


What this all mean to a rural community?
(1) TELUS's retail or wholesale ADSL service is probably not available in the rural community becuase the network has not been upgraded.

(2) TELUS is currently installing voice coils on the analogue private line service prohibiting the provisioning of broadband services such as ADSL, ADSL2+, SDSL, and VDSL.

(3) Collocation in a TELUS central office may not be economically feasible.

Current Status
On December 3rd the CRTC sent a letter to TELUS containing an number of interrogatories for TELUS to answer. TELUS has until December 17th to reply back to the CRTC. The Internet Centre will then have until January 6th to comment to TELUS's response. Then TELUS will have to respond by January 16th.

TELUS has submitted that the Internet Centre proposed use of unloaded copper would cause interference and crosstalk that "…can affect other copper facilities adjacent to the one used for xDSL service."

The CRTC wants TELUS to describe in detail the incidence of this interference and crosstalk and the impact it has on adjacent facilities. They want to be provided with specific incidences of such interferences and crosstalk and a description of how they were resolved.

The Commission is asking TELUS to provide details of its own use of unloaded copper and what services they provide now and how they resolve the matter of spectral interferences of crosstalk in those internal situations.

The Commission wants details of any and all unloaded copper access to private line services to any retail or wholesale customers and details on those services are provided.

Stay Tuned
Copper May be Buried but Ain't Dead posting #3 will be posted in either January or Feburary 2009.

Copper May be Buried But Ain't Dead (Part 1)

The Internet Centre (www.incentre.net) has a filed a complaint with the CRTC stating that TELUS is not complying with the local loop unbundling regulations. TELUS has refused to comply, and the Internet Centre states that this is a contravention of CRTC Tariff 522.2.

The complete filing can be reviewed at :http://www.crtc.gc.ca/PartVII/eng/2008/8622/t114_200809403.htm

The CRTC is expected to make a decision on this before December 31, 2008. This decision will impact the availablity of copper based broadband services in all rural communities.

My objective for this post is not to take a position, but rather educate the rural community on the impact this decision will have on their communities.

In order to understand the CRTC's decision, it will be necessary for the reader to understand the following:
1. Technical Issues
2. CRTC's Mandate
3. Requlatory Issues

For this reason, I have separated this post in three parts:
Part 1: Technical Issues (November 30, 2008)
Part 2: CRTC Mandate and Requlatory Issues (December 8, 2008)
Part 3: The CRTC's Decision (December 31, 2008)

Part 1: Technical Issues
The Telecommunication industry originally installed copper access to support Plain Old Telephone Service (POTS). A separate copper pair was installed between the service provider's central office and each residence or business.
Ideally the service provider would build a central office in each area of the city or rural community. The central office would be strategically placed to ensure that all of the subscriber premises were within 18,000ft or 5.5Km from the central office. As example, Edmonton Telephones placed central offices in Norwood, Lendrum, Oliver, Millwoods, Westmount, Jasper Place, Strathcona, Londonderry, and downtown. So at one time the local access network was comprised of a single copper pair going from the central office to the premises. This access architecture has been evolving due to a couple of restraints: Developers were building subdivisions outside the 5.5Km distance limitation and businesses wanted to have more than one phone line. So the service providers began to install Digital Loop Carriers (DLCs). The DLC was strategically placed in an area or neighbourhood and the copper wire was installed between the DLC and the premises. The service provider then backhauled the voice traffic to the central office. This resolved a couple of issues: Voice services could now be provided to subscribers outside the 5.5Km limitation and the service provider no longer needed to run a separate copper pair to each premises.

The DLCs have since been replaced with DSLAMs (Digital Subscriber Line Access Multiplexer). The DSLAMs are strategically placed no greater than 3Km from the subscriber's premises. DSLAMs allow a service provider to provision different DSL (Digital Subscriber Line) services from the DSLAM to the premises. Broadband services such as ADSL, ADSL2+, SDSL, and VDSL. The traffic from each of the premises is then aggregated at the DSLAM and backhauled to the central office using fiber.

The Internet Centre filing implies that there is a single copper pair going from the central office to the premises. This is generally not the case in major metropolitan areas such as Edmonton and Calgary. But in most Alberta rural communities a central office was strategically placed so that all the subscribers were within the original 5.5Km distance limitation. There may or may not be either DLC or DSLAMs installed in some rural communities.

What are Voice Coils?
If a subscriber is outside the 5.5Km distance limitation then the service provider could extend the distance by installing voice coils. These coils allowed the service provider to support voice services up to 10Km from the central office to rural farms and communities. Voice coils are completely incompatible with the higher frequencies required for DSL services. The Internet Centre claims that TELUS is installing these loading coils even if the subscriber is less than 5.5Km prohibiting them from providing DSL services to the community.

Conditions That Must be Met
For the Internet Centre to provide DSL services to rural communities the following conditions must be met:

1. A dry copper pair must exist between the customer's premises and the central office.

2. The Internet Centre must co-locate their DSL equipment in one of TELUS's central offices.

3. No voice coils between the central office and premises.

4. Customer premises no greater than 3Km in distance from a TELUS central office.

Stay Tuned
CRTC's Mandate and Regulatory Issues will be posted on December 8, 2008.

Rural Broadband Funding

Over the past couple of months I have had the opportunity to visit several counties and municipalities in the province. At each of the meetings the subject of a government supported rural broadband funding is discussed.

In the past there has been two funds available for rural broadband capital projects: CSIF & CAMRIF.

There are two new funds that are currently available to assist Alberta's counties/municipalities to build the last mile infrastructure.

Here is a brief description of each of the funds:

1. Canada Strategic Infrastructure Fund (CSIF)
http://www.infrastructure.gc.ca/ip-pi/csif-fcis/csif-fcis-eng.html

The Canada Strategic Infrastructure Fund (CSIF) was designed to support large-scale projects of major federal and regional significance in areas that are vital to sustaining economic growth and enhancing the quality of life of Canadians. The CSIF supported broadband infrastructure projects.

A map showing the broadband projects is available at: http://www.infrastructure.gc.ca/ip-pi/csif-fcis/cartes-maps/band-bande-eng.html

2. Canada-Alberta Municipal Rural Infrastructure Fund (CAMRIF)
http://www.camrif.ca/en/

The federal and provincial governments each contributed $88 million to the Canada-Alberta Municipal Rural Infrastructure Fund (CAMRIF). Eighty per cent of CAMRIF investments were directed to projects that benefit municipalities with populations of less than 250,000, with the remaining 20 per cent earmarked for Calgary and Edmonton projects.

Eligible projects under the CAMRIF include water and sewage treatment, solid waste management, public transit and energy improvements to municipal buildings. The fund also supports better roads and bridges, cultural, recreational and tourism projects and improved broadband Internet access.

Projects were selected on a competitive basis from applications received from Alberta communities. A list of selected CAMRIF projects is available at: http://www.camrif.ca/en/news-events/

3. Building Canada Fund (BCF)
http://www.buildingcanada-chantierscanada.gc.ca/funprog-progfin/target-viser/bcf-fcc/bcf-fcc-eng.html

The Building Canada Fund (BCF) is the Government of Canada's new flagship infrastructure program. Funding will be allocated for projects in the provinces and territories based on their population and all major projects will be selected through federal-provincial/territorial negotiations.

The total amount of funding available in Alberta will be $840.73 million over seven years, between 2007-08 and 2013-14. Additional information on the federal and Alberta agreement is available at: http://www.buildingcanada-chantierscanada.gc.ca/plandocs/agreements-ententes/ifa-eci-ab-eng.html

The BCF program will operate through two components:

1. The Major Infrastructure Component (MIC) will target larger, strategic projects of national and regional significance such as: Water Infrastructure, Waste water Infrastructure, Public Transit Infrastructure, Core National Highway System Infrastructure and Green Energy Infrastructure.

2. The Communities Component (CC) will focus on projects in communities with populations of less than 100,000. Projects such as: Disaster Mitigation Infrastructure, Solid Waste Management Infrastructure, Brownfield Redevelopment Infrastructure, Cultural Infrastructure, Sports Infrastructure, Connectivity and Broadband Infrastructure, Local Road Infrastructure, Short-line Rail Infrastructure, Short Sea Shipping Infrastructure, Tourism Infrastructure, and Regional and Local Airport Infrastructure.

The following are eligible recipients for the purposes of the Communities Component:

1. A local or regional government, established by or under provincial statute;

2. A provincial entity that provides municipal-type services to communities, as defined by provincial statute;

3. A public sector body that is established by or under provincial statute or by regulation or is wholly owned by Alberta or a municipality which provides municipal sector services in a given area; and,

4. A private sector body, whose application is supported by a municipal or regional government referred to above.

All projects under the Communities Component will be selected jointly by the Parties through a "competitive", application-based process.

4. Community Broadband Infrastructure Pilot Program
http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/csi12085

The Rural Connections: Community Broadband Infrastructure Pilot Program consists of a $9 million initiative to fund targeted rural communities for projects that enable access to reasonable high-speed service. This funding is part of the Government of Alberta Community Adaptation and Transition Initiative to help ecnomically vulnerable rural communities adapt by investing in investing in economic development and diversification initiatives.

In My Humble Opinion (IMHO)

Initial capital funding is required to provide broadband to underserved areas. All counties will require initial government funding to provide broadband services to high-cost areas.

I recommend that counties and muncipalities create partnerships with adjoining counties/muncipalities and local Hamlets/Villages when applying for these funds.

In addition, I predict that the Alberta Government will be creating and providing additional funding options in 2009.

Alberta Government's Social Responsibilities

The traditional business case to provide broadband breaks down in underserved areas where the population densities are lower and the broadband costs exceed subscription revenues. To provide affordable broadband service in rural communities, it is necessary to develop a sustainable economic model that proves the business case for a three, five and ten year period. If underserved areas do not have enablers such as local champions or public/private partnerships the digital divide will continue to exist until these economic gaps can be overcome.

The sustainability of broadband in an underserved area is based upon market forces and the potential need for government assistance. For this reason, the GOA must develop a policy framework for broadband that determines:

- Which areas can be, or are, served by market forces;

- Which areas will need assistance with initial investment to become self- sustaining; and,

- Which areas cannot become self-sustaining and will require ongoing funding.

Additionally, some or all of the initial capital investment may need to be funded until a sufficient ongoing revenue stream is created. In other cases ongoing funding is needed even with an initial investment for capital.

There are mutually reinforcing benefits between social and economic impacts from broadband. From a social services perspective, more and more government services, such as health, education, and governance, are being provided online.

If all citizens have rights to equal access to government services, then it is important to understand where market forces cannot be relied upon to provide affordable access to broadband services. In such cases there is not just an economic argument for government intervention, but also a social equity argument.

In My Humble Opinion (IMHO)
Why does the GOA not understand that they have to take an active role in funding underserved areas?

The GOA is actively funding projects that are migrating traditional government services such as Healthcare to online services and yet they are taking a "hands-off" approach to the economic problem in Alberta's underserved areas.

Their answer:
"We will allow colocation on the AFRRCS towers".
Let's be honest. Access to the AFRRCS towers will be dependent upon who wins the contract. This is not going to happen!

The GOA has identified five priorities. These can be reviewed at:
http://priorities.alberta.ca/

Shouldn't one of the priorities be to ensure that all citizens of Alberta have equal access to services such as Healthcare?

Other provincial governments such as Ontario and BC have a taken a leadership role in ensuring that all citizens have equal access to government services.

Instead the GOA funded the Alberta SuperNet which created another competitive backbone provider (Axia) in Alberta, which has effectively eliminated open competition for backbone connectivity in the Enterprise marketplace.