95% Coverage and It's Free!Tuesday, June 03, 2008
A few weeks ago, I wrote about Representative Anna Eshoo's proposal for a nationwide free wireless broadband network to be built out on some spectrum in the 2100-MHz band. This Representative, an advocate of net neutrality and open access, wants the network to be open and free, but she wants it to be porn-free.
Now Chairman Martin of the Federal Communications Commission has decided that the FCC should auction the 2155-2180 MHz slice of spectrum known as the AWS III band (Advanced Wireless Services III). Okay, there's more spectrum to auction and more money to pay down a little bit of the national debt.
But there are a few twists in this new auction. The first is that the winning bidder will have to cover 50% of the U.S. population within four years and, get this, 95% of the population by the end of the license term! Oh, and it gets better. Not only does the winning bidder have to pay for the spectrum, it has to build it out and then offer at least one tier of free-yes, free-broadband service to the Internet at speeds of 786 Kbps (no mention of uplink and downlink differences).
Sounds ideal for a Google bid to me. Full open access and free, meaning the network provider cannot charge money for it but I didn't see anything that says it cannot make you slog through a bunch of ads to get to what you want, which means that while it doesn't cost money for the user it is not free at all. I am having a hard time with all of this. Muni-Wi-Fi, which has taken a turn for the worst, Wi-Fi finally getting back to the last few hundred feet, Clearwire with its full access to the Internet, nationwide network, Representative Eshoo and her free Internet access wireless broadband plan and now the Chairman of the FCC saying that the winning bidder has to cover 95% of the U.S. population at 2100 MHz and that there has to be free service as part of the deal? Oh, I almost forgot, Google and others want to make use of the TV white space for additional unlicensed wireless broadband access.
I am not sure of the numbers here, but to cover 75% of the U.S. population at 2.5 GHz I do know it will take 65,000 cell sites, so I would guess that to cover 95% of the population at 2.1 GHz it will take more than 82,000 sites. This sounds like a typical radio system. For example, when I was designing two-way radio systems for public safety, we could achieve about 80% coverage of an area, for example, for about $10 million dollars, the next 10% for another $10 million and that left us with 10% of the population not covered. Today's estimates for the 700-MHz D block by people who know what they are talking about are if they have to cover 95% of the U.S. population on 700 MHz, the network will cost somewhere around $20 billion to build.
Do we need to solve our rural America lack of broadband issues? Yes, of course we do. Do we need another broadband operator in San Francisco where the population already has a choice of fifteen broadband providers including DSL and cable? Probably not. In Japan, when you get a license, you are required to cover the entire country-urban, suburban and rural. The assumption is that you will have enough customers in major metro areas to enable you to afford to build out the rural areas, but Japan is a lot smaller than the United States. I have to wonder what people are thinking when they come up with these ideas. Who is going to bid for spectrum, build out a $20-billion network in less than ten years and give away one tier of service for free? The only answer I have for that is Google or some other company that believes it can make more than $20 billion in advertising revenue from the network.
Perhaps Congress should require any FCC Commissioner to have worked in wireless or at least the telecommunications industry, not as an attorney, before being appointed, and perhaps someone should open up a spreadsheet and run the numbers. I know, several companies including M2Z Networks offered to build such a network if the FCC would give it the spectrum, but the FCC turned down the offer. M2Z's webpage talks about the upcoming FCC meeting to discuss and perhaps approve this new auction and discusses its belief that using geo-tagged ads (location-based) it can pay for this network.
I ran through the cost of building out the network, but not the cost of operating it. Let's do a little math and say that it will take about 82,000 sites to cover 95% of the U.S. population. And let's say, just for fun, that each site costs about $800 per month in site rental plus another $500 per month in backhaul, and perhaps another $100 in maintenance. We all know these figures are very low, but this means the monthly opex cost of the network is $1,400 times 82,000 sites or $114 million, which is $1.37 Billion a year. Think you can do it for less? What if the average site cost was double? We still need to include insurance, electricity, back-up power, taxes, a billing system, a back-end system to make it work and other details. This would take opex to over $2 billion a year.
Okay, Google and M2Z, here are some numbers for you to crunch. Cost of the spectrum: a guess of $3 billion, cost of the network to cover 95% of the U.S. population $20 billion, normal monthly operating costs $2 billion per year or $20 billion over ten years for a total of $43 billion. That is a lot of ads to sell, and if the network is not built to 99.999% reliability, even if 786 Kbps is free, who is going to tolerate all those ads except those who cannot afford to pay for Internet services. And I doubt if these users would be a market advertisers would really want to address.
What is it about this country? We want great, reliable communications services, high-speed Internet access, and yet we are not willing to pay for it! Well, I believe that those who live in rural America and do not have access to the same data speed as the rest of us do will gladly pay for the service-it is better than doing without or paying for a two-way satellite connection with all its latency.
Muni-Wi-Fi was supposed to be about providing broadband to those who could not afford it, to help them connect to the Internet and improve their lives. The problem was not only did these systems not work, those who could not afford to pay for service could not afford the computer to use the free service.
What I have to say to the FCC Commissioners and companies that might be lusting after this spectrum even if they have to provide 95% coverage within ten years is "good luck!" I don't believe this idea has been thought through carefully enough. I am amazed at the companies that have invested in M2Z-big venture companies that expect a big payday. Please tell me how you expect to realize a big payday when you will have to spend $43 billion simply to provide free Internet services and those you can charge for the service already have five or more options available to them?
These are just my thoughts. They won't matter because the FCC Commissioners will move ahead anyway and five years from now they will be able to sell the spectrum all over again!
Andrew M. Seybold