The future of wireless is…fiber. That’s right, our mobile future depends not just on freeing up more spectrum and deploying more infrastructure, but also on the fiber-based networks that carry large amounts of data between wireless towers and the Internet backbone. Mobile operators rely heavily on high-capacity Ethernet backhaul services – and the fiber they are built on – to support rapidly growing customer demands for data and video services.
Those customers’ demands have exploded with the growth of wireless video and data. Consumers now access the Internet more on mobile devices than on PCs. The most recent data show that a full 60% of Internet usage overall is via mobile devices, and according to a recent Cisco report, last year’s mobile data traffic was nearly 30 times the size of the entire global Internet in 2000. Whether it’s a student downloading an educational video on a tablet, a parent using a smartphone to upload a video of a child’s first baseball game, or a veteran in a remote area using a mobile telehealth application to video chat with a medical specialist, consumers are using their wireless devices to generate more and more data traffic over the Internet. The same Cisco report predicts that in five years, 85 percent of Internet consumption in the United States will be from video, primarily over mobile devices. While freeing up more spectrum is critical to meet the demand for mobile Internet and video services, wireless infrastructure also requires backhaul networks with sufficient capacity to deliver these bits between a wireless tower and the Internet backbone.
The increase in usage means big changes for the wired network supporting our mobile ecosystem. In the past, when voice communication – the simple phone call – was the dominant use of 2G and even early 3G networks, copper-based T1 circuits were the typical technology used for wireless backhaul (complemented by microwave links when copper circuits were unavailable or too costly). As 4G has become the norm and video traffic surpasses other forms of data, the old T1 circuits (at an average of 1.5 Mbps) simply cannot get the job done. Wireless operators are increasingly looking at fiber-based Ethernet backhaul services capable of 50 times or greater the capacity of the legacy copper-based services. And the good news is that more and more providers are competing to provide backhaul service over their own fiber networks. Level 3, for example, is now the second largest Ethernet provider, ahead of both Verizon and CenturyLink. The fifth, sixth, and seventh largest Ethernet providers are all cable companies. A Time Warner Cable executive recently observed that “the competitive landscape [for mobile backhaul services] has widened considerably in the last five years. When five years ago there were four or five competitive threats bidding on an opportunity, in many cases today that has tripled, and I’ve even seen quadruple numbers in the market.” There is more competition today than ever to serve the growing backhaul capacity demands of wireless carriers.
This competition for Ethernet services has occurred in a deregulated marketplace. The FCC in 2007 and 2008 decided to forbear from regulating the Ethernet services companies like AT&T and CenturyLink provide, and it predicted competition would increase even further without heavy-handed regulation. Through its Enterprise Broadband Orders the FCC expressly concluded that the market for packet-switched broadband services was “highly competitive” and recognized that the demand for such services was sufficient to incentivize deployment and entry by competitors absent regulation. Since the Enterprise Broadband Orders, competitive intensity for Ethernet-bases special access services has skyrocketed. The FCC’s predictive judgment has proven correct, and the marketplace facts are the proof.
At a time when our government should be doing everything it can to continue to encourage investment in modern fiber infrastructure, including fiber-based Ethernet connections to cell towers, the FCC is looking backwards at ways to increase the regulatory burden of providing the older legacy copper-based special access circuits offered by incumbent telephone companies. Competition in the special access market has flourished due to the bipartisan hands-off approach taken by Chairmen of both parties for over a decade. It defies logic for the FCC to continue spending so much energy attempting to regulate legacy services like DS1 and DS3 special access connections provided by incumbent carriers. The Commission should accept the success of its deregulatory approach in which unregulated entities have stepped up, as expected, to create a highly competitive special access market. Rather than focusing on more regulation of the prices and terms of these legacy special access circuits, or worse yet, undoing forbearance granted on fiber-based Ethernet services almost a decade ago, policymakers should instead be pursuing smarter and more progressive ways to spur competition and investment in fiber-based IP networks that mobile consumers increasingly depend on. This includes such common sense steps as ensuring access to rights of way, and facilitating the retirement of legacy copper networks where replacement networks are being deployed.
Once again playing the refs, certain wireless carriers, led by Sprint, want to paint a picture that multi-billion dollar conglomerates are being held hostage by carriers (particularly AT&T, CenturyLink and Verizon) charging unfair prices for their legacy special access services. This is backwards thinking. Worse yet, it is not based in fact. First, these legacy services represent the past, not the fiber networks of the future – which are highly competitive primarily as a result of increasing demand and less regulation. Second, for all of their complaining that the government needs to intervene in the market and lower just their costs of doing business (a refrain these carriers bring to the spectrum set aside and roaming debates as well), national carriers like Sprint and T-Mobile, as well as smaller regional ones have managed to operate their networks and succeed in the marketplace over the past decade without greater government involvement, often as the low cost provider. There is no justification to increase regulation of legacy special access services when the backhaul marketplace is functioning perfectly well on its own, producing remarkable investment, a stream of new competitors and increasing consumer value.
Despite what some companies would have us believe, the market for special access is highly competitive. Now is not the time to look backwards and devote significant resources to regulate the services of the past. Now is not the time to consider regulating fiber-based Ethernet special access services under the guise of “facilitating technology transitions.” Rather, the FCC should acknowledge the success of its deregulatory approach to special access and focus on our mobile future.