Broadband Deployment in California

California Public Utilities Commission

April 21, 2005

Chapter 1. Introduction

Telecommunications is in the midst of a revolution. Technology advances in recent years have changed the way we live, learn, communicate, and do business. Telecommunications has become central to the needs of families, the health of our economy and the vitality of our communities. Today, much of the information in the world is no more than a click away for those in even the most remote areas. Doctors can review medical test results in real time and diagnose patients from 100 miles away, bringing critically needed healthcare to rural communities. Students can take classes and earn degrees from universities on the other side of the continent. Whether you need the latest news or a business license, whether you are hiring a plumber or buying a car, sending family photos, text-messaging a friend or closing a business deal with a company on the other side of the world - advances in telecommunications technologies have brought limitless opportunities and benefits to our lives.

There is one catch. You need bandwidth to take advantage of these opportunities.

California leads the nation in broadband use, both in terms of total number of broadband lines and U.S. market share, and our growth rate continues to exceed the national average.

California's success to date is based on a wealth of early adopters and tech-savvy businesses. As the broadband market moves beyond its infancy, however, California is falling behind other states in developing policies to continue broadband growth and facilitate deployment of next generation technologies.

In a state-by-state analysis, Silicon Valley's respected coalition of technology company executives, known as TechNet, ranked California 14^th in the nation in developing policies that encourage broadband deployment.¹ For the state of California, home of Silicon Valley, to rank only 14^th in broadband policies is a serious concern.

If California is to maintain its lead in broadband usage, reach into lower-use communities and lead the way in next-generation technologies, we must adopt next-generation policies that match our quest for progress. Progress will come from relentless innovation not only in technology, but also in policymaking.

This report is the product of a continuing mandate by the California Legislature to identify and eliminate barriers to the ubiquitous availability of advanced telecommunications services in California.

1.1 Legislative Context: Senate Bill 1563

In Senate Bill (SB) 1563, the California Legislature directed the CPUC to develop a plan "for encouraging the widespread use of advanced communications infrastructure." SB 1563 states:

...the mission of the plan is to identify factors preventing the ubiquitous availability and use of advanced communications services, assess the consequences of, and develop strategies for, addressing these factors while encouraging the deployment of adequate investment for advanced communications infrastructure that serves the public good.²

SB 1563 advances California's long-standing view that the state will benefit from increased deployment, access and usage of broadband services. California Public Utilities Code Section 709 was subsequently modified to express the SB 1563 policy objectives:

· To continue our universal service commitment by assuring the continued affordability and widespread availability of high-quality telecommunications services to all Californians.

· To promote economic growth, job creation, and the substantial social benefits that will result from the rapid implementation of advanced information and communications technologies by adequate long-term investment in the necessary infrastructure.³

1.2 Public Comment Process: OIR 03-04-003

The California Public Utilities Commission (CPUC) opened an Order Initiating Rulemaking (OIR) identifying issues for study and examination consistent with the requirements of SB 1563. In pursuit of this inquiry, the CPUC has solicited written comments from parties and members of the public, conducted public participation workshops, prepared and analyzed results from two surveys on broadband use and related issues, conducted independent research, reviewed current literature and information, and met with affected individuals, community based organizations, businesses and policymakers.

1.3 Definition of Broadband

The first issue identified by the CPUC in its investigation is that there is no clear definition of the term "broadband." Many people associate the term "broadband" with a particular speed of transmission or a certain set of services, such as Digital Subscriber Line (DSL) or wireless local area networks (wLANs). However, the term broadband does not refer to a specific speed or service.

Broadband combines connection capacity (bandwidth) and speed. Twenty years ago, anything faster than primary rate Integrated Services Digital Network (ISDN) service, which offered speeds of up to 144 kilobits per second (Kbps), might have been considered broadband. Over the last six years, as broadband networks based on either DSL or cable modem technologies have been deployed, speeds of 200 Kbps and upward generally have been regarded as broadband.

Today's "broadband" will be considered narrowband when tomorrow's technologies are deployed and consumers increasingly demand greater bandwidth.

However, since broadband technologies are advancing rapidly and Internet access speeds are continuing to increase, the definition of broadband also continues to evolve. In the rapidly changing technology environment of the Internet, the definition of broadband is a moving target that is likely to mean something different next year, as well as the year after that. For purposes of this Report, therefore, we identify the "current" state of broadband. Today, the term broadband typically describes connections that range from a minimum of 384 Kbps to 10 megabits per second (Mbps) and higher.

1.3.1 Broadband As Initially Defined by the FCC

In response to congressional mandate,⁴ the Federal Communications Commission (FCC) initiated its first inquiry on the state of advanced telecommunications services in 1999 and filed the first Section 706 Report with Congress.⁵ In that first Section 706 Report, the FCC defined "broadband" as:

the capability of supporting, in both the provider-to-consumer (downstream) and the consumer-to-provider (upstream) directions, a speed (in technical terms, "bandwidth") in excess of 200 Kbps in the last mile. This rate is approximately four times faster than the Internet access received through a standard phone line at 56 Kbps.

The FCC chose 200 Kbps because "it is enough to provide the most popular forms of broadband -- to change web pages as fast as one can flip through the pages of a book and to transmit full-motion video."⁶ However, a 200 Kbps threshold will not support full-frame video and many other imaging and multi-media applications, regardless of the platform.

1.3.2 Other Definitions of Broadband

There are perhaps as many definitions of broadband as there are organizations and countries that have attempted to define it. The Committee on Broadband Last Mile Technology, an expert group assembled by the National Academy of Sciences, called 200 Kbps "at best, a lowest common denominator" and added that setting any minimum speed threshold is "unwise over the long run."⁷ The International Telecommunications Union, a global standards-setting body, defined broadband as a "transmission capacity that is faster than primary rate Integrated Services Digital Network (ISDN) at 1.5 or 2.0 Mbps.⁸ The Organisation for Economic Cooperation and Development, on the other hand, considers downstream access of 256 Kbps (with 128 Kbps upstream) as broadband.⁹

The Canadian National Broadband Task Force (CNBTF) in formulating its definition of the term "broadband," noted that among the 14 countries that were surveyed, national definitions of the term ranged from as low as 2 Mbps to high as 30 Mbps. Taking a more functional approach to definition, the CNBTF decided not to define broadband in terms of information transmission rates, but instead defined it as "a high capacity, two-way link between end users and access network suppliers capable of supporting full-motion interactive video applications to all Canadians on terms comparable to those available in urban markets."¹⁰ Based on the technology existing at the time, it concluded that a minimum two-way or symmetrical transmission speed of 1.5 Mbps per individual user was required to meet this standard. In the future, the CNBTF predicted, speeds of up to 4 to 6 Mbps would be required to handle emerging applications such as peer-to-peer video file sharing and video conferencing.¹¹

1.3.3 Why the Definition of Broadband Matters

The proliferation of bandwidth-intensive applications is the key driver of broadband adoption. Access to a "pipe" is merely a means of obtaining products and applications such as the Internet, video on demand, news services, interactive gaming, chatting, telephony and countless other services. Policies designed to promote broadband deployment and access to advanced services, therefore, must encourage a definition of broadband facilities that is robust enough to support emerging technologies and applications not yet developed. Policies that promote a limited definition of broadband ultimately discourage broadband adoption by supporting technologies that may limit the applications consumers can access.

The following graph provides a comparison of various Internet access speeds, from dial-up modem to high-speed broadband achieved by fiber optic cable.

Figure 1.1
Comparison of Internet Access Speeds in Million Bits Per Second



The following table illustrates the capabilities of Internet Access speeds, as well as various other communications delivery systems, to transmit a DVD¹² from New York to California.

Figure 1.2

Speed and Bandwidth¹³

Delivery	Minutes	Hours	Days
UTOPIA Fiber (1 Gbps)	1 min
UTOPIA Fiber (100 Mbps)	10.4 min
PON (OC-12/32) (19.4 Mbps)	53.6 min
VDSL (8.5 Mbps)		2 h 12m
PON (OC-3/32) (4.84 Mbps)		3 h 36m
Cable Modem (3 Mbps)		5 h 18m
FedEx		10 h14
T-1 (1.54 Mbps)		11 h 12m
DSL (1 Mbps)		16 h 48m
ISDN (128 Kbps)			5 1/2 days
Pony Express			11 days15
Dial-up Modem (56 Kbps)			13 days

Chapter 2. The California Broadband Market

2.1 Broadband is Widely Deployed in California

The analysis that follows is based largely on data reported by carriers to the FCC's Form 477 survey for June 2004. We acknowledge the limitations on this Report's ability to more accurately assess the availability of broadband in California that are imposed by our reliance on the FCC Form 477 data. The FCC Local Competition and Broadband Form 477 data (collected semiannually in December and June) used to prepare the maps and tables presented here is based on the outmoded FCC definition of broadband, and is derived from responses from only those providers having 250 or more customers. In addition, all data is collected by zip code, and does not include the number of customers in each zip code. Accordingly, an entire zip code may be characterized as having broadband availability, even if only a part of that zip code has such availability.¹⁶

The FCC data was augmented by independent CPUC research,¹⁷ and has been compiled into a set of maps (see separate files for Maps 1 through 4).

Map 1 illustrates that broadband is available in every California zip code. All four broadband technologies surveyed in the FCC 477 report (Wireless, DSL, Cable and Satellite) are available in 26% of California zip codes, and 39% of California zip codes have DSL, Cable and Satellite broadband technologies available.

Figure 2.1

Broadband Availability in California Zip Codes¹⁸

Services	Percentage of Zip Codes
DSL, Cable Modem and Satellite	39
DSL, Cable Modem, Wireless and Satellite	26
DSL and Satellite	19
Cable Modem and Satellite	3
Satellite only	13
Total	100

Data on cable modem availability indicates that broadband service is much more widely available than is shown by the FCC data, however. According to the National Cable & Telecommunications Association, 12,440,053 California homes are passed by cable, a figure that represents approximately 97% of all homes with television service in the state. 11,960,046 of these homes, or approximately 96%, have broadband cable modem service available; 264,574 or approximately 2% do not have cable modem service; and data was not available for the remaining 215,433 homes, or 2%. However, a high percentage of these 2,753,687 homes are believed to have cable modem service.¹⁹ Of all homes passed by cable, it is estimated that at least 90% have broadband service available to them via cable modem.²⁰

Map 2 illustrates the wide choice of broadband service providers in California. Areas of the map that are shaded red, which are primarily located in major metropolitan areas, have access to at least 11 or more broadband service providers. As shown in Figure 2.2 below, two or more broadband providers serve almost every California zip code (93%). A majority of California zip codes are served by four or more broadband providers.

Figure 2.2

Broadband Service Providers in California Zip Codes

Number of Providers	Percentage of Zip Codes
1	7
2-3	35
4-5	10
6-10	17
11 +	31
Total	100

Map 3 illustrates population density in California, with the red areas being those with the most population (100,001 to 3,912,200 people) and green representing those with less than 5,000 people. Viewing this map in conjunction with the two other maps illustrates that multiple broadband providers service the major population areas in California, and that consumers within those zip code areas have multiple broadband providers available to them.

The last map, Map 4, depicts the most current information on WiFi hotspots in California. "WiFi" is the abbreviated term for wireless fidelity, and "WiFi hotspots" are physical locations such as cafes, hotels, and airports where wireless connections to the Internet are offered. Most public WiFi hotspots require paid subscriptions -- hourly, daily or monthly -- for access, although there are a growing number of free hotspots.

There are now more than 50,000 WiFi hotspots around the globe. The number of hotspots around the globe is believed to have increased more than 40% since July 2004 alone - from 35,000 locations just seven months ago²¹ - and new hotspots are being developed at a furious pace. The United States leads the world in hotspot availability, having more than 21,000 cities where WiFi hotspots can be found. California leads the country with 3,848 -- more than double New York's 1,546 hotspots. San Francisco ranked ninth among the top ten cities, with 382 hotspots. Other California areas with significant WiFi hotspots are Oakland, Los Angeles, San Jose, Orange County, and San Diego.

The number of hotspots in California and elsewhere will continue to increase at a rapid pace, as the number of consumers able to access them with their laptops grows. More than 30 million laptop computers with wireless broadband capability were sold in 2003, and experts predict that in less than two years, 100% of all laptop computers sold will be WiFi capable.²²

2.2 Broadband Access in California Leads the Nation

California leads the nation in the total number of broadband lines²³ as well as overall national broadband market share. Figure 2.3 below shows the number of broadband lines for the ten most populous states in the nation. As of June 2004, California had 4.69 million broadband lines, almost as many as New York and Florida combined. ²⁴

Figure 2.3

California Leads the Nation in Broadband Lines (in millions)



2.3 Rapid Growth In California Broadband Market

From June of 2000 to June of 2004, California's broadband market expanded by 516%, growing from 900,000 to just over 4.69 million broadband lines (See Figure 2.4 below).


Figure 2.4

Growth in Broadband Lines in California (in millions)



During the same 48-month period, the national broadband market grew by 751%, increasing from 4.3 million broadband lines in June 2000 to 32.4 million broadband lines in June 2004.

Figure 2.5

Growth in Broadband Lines Nationwide (in millions)



2.4 California Broadband Penetration Lead Continues to Grow

While the rate of growth of the U.S. broadband market exceeded that of the California market (751% vs. 516%), it is important to remember that California was well ahead of the rest of nation in its broadband penetration rate (3.1 vs. 1.46 broadband lines per 100 persons) in June 2000. California's early market maturation has resulted in a slightly lower rate of growth compared to other states. However, California's lead in broadband penetration compared to other states has continued to grow. In December 2000, California had 1.64 more broadband lines per 100 persons than the average of other states. By June 2004, California's lead had grown to 3.57 more broadband lines per 100 persons than the average of other states.

Figure 2.6

Broadband Lines Per 100 Persons



2.5 California's Share of National Broadband Market

California leads all other states in its share of the national broadband market as a percentage of population. The following figure illustrates that California's broadband market is 19% larger than its population would otherwise indicate, with 14% of the national broadband market and 12% of the nation's population. New York's broadband market share is 13% higher than its population share, while Florida's is 19% higher. On the other hand, the Texas and Illinois broadband markets are 5% and 10% smaller, respectively, than their shares of the U.S. population.

Figure 2.7

Share of Population vs. Share of Broadband Market



2.6 Is Broadband Reaching Everyone?

Despite California's success and national leadership on broadband penetration, not all of the state's residents have access to, or are using, broadband. Certain communities are lagging behind: low-income consumers, residents of rural areas, and persons with disabilities.

Disparity in the access to, and use of, broadband among certain communities is now commonly referred to as the "digital divide," much as that term was used in the past to describe the gap between those who owned computers and those who did not, and later to describe the gap between those who used the Internet and those who did not. Much of the information available on the digital divide still examines that issue in terms of access to the Internet or access to a personal computer. Although these studies and statistics do not directly address broadband deployment and use, we include examples of them here because we believe them to be of probative value in addressing the problem of unequal access to, and use of, broadband.

Much of the data found addresses the "digital divide" in the United States, not in California specifically, regardless of one's definition of that term.

As recently as September 2004, the United States Department of Commerce released data on the disparate rates of Internet usage among certain communities, shown in Figure 2.8 below.

Figure 2.8

Internet Usage: Percent of U.S. Population Online

U.S. Department of Commerce, "A Nation Online: Entering the Broadband Age," September 2004.

The data shows disabled populations being the least connected to the Internet (24% in 2001 and 26% in 2003), with the most connected being households with a family income of $75,000 and over (80% in 2001 and 83% in 2003). Other lower use groups include Hispanics of any race (33% in 2001 and 37% in 2003), low income persons (34% in 2001 and 38% in 2003), and Blacks (41% in 2001 and 46% in 2003).²⁵ The statistics revealed almost no difference among the total United States population online and the rural and urban populations online - all three were approximately 57% in 2003.²⁶

2.6.1. Disabled Community

Access to broadband, and the wealth of information and resources it provides, presents a critical opportunity for people living with disabilities to live fuller, more "connected" lives. Yet, a study entitled "Disability Watch: The Status of People with Disabilities in the United States," found in 2001 that 24% of disabled individuals had access to a personal computer (compared with 52% for non-disabled), and only 10% of disabled individuals had access to the Internet, either through a dial-up or broadband connection (compared with 38% for non-disabled).²⁷ This data appears to conflict with the U.S. Department of Commerce data showing disabled community Internet usage at over twice that level.

Figure 2.9

Computer Access and Internet Use




As the following chart illustrates, cost appears to be the primary barrier to bridging the technology gap between the disabled and non-disabled communities. With lower average incomes, 11% of low-income people with disabilities use computers, compared to 22% of other low-income persons .²⁸ Computer use increases at higher income levels for persons with and without disabilities.²⁹

Figure 2.10

Computer Use by Household Income



The rate of Internet use among low-income people with disabilities is only 5%, while the rate for those with higher incomes is more than three times higher, at 17%. Persons with no disability use the Internet at 19% and 45%, respectively, for low income and moderate or high income households.³⁰

Figure 2.11

Internet Use by Household Income



2.6.2 Rural Areas

Although the U.S. Commerce Department data cited in Figure 2.8 above fails to illustrate a significant difference in Internet use between rural and urban residents, other studies such as the Pew Internet & American Life Project's "Rural Areas and the Internet"³¹ do cite a significant difference, as shown in Figure 2.12 below.

Figure 2.12

Internet Penetration by Community Type³²

	2000	2003
Rural	41%	52%
Urban	51%	67%

While Internet access has grown in rural areas between 2000 and 2003, urban access has grown as well, with the disparity between the two increasing from 10% to 15% in those three years.

2.6.3 Lower Income Individuals

Despite the trend toward lower prices, computers and Internet access remain more expensive than many low-income individuals can afford. The following table shows Internet access by urban households with incomes of less than $30,000 to range between 38% and 54%, while urban households with incomes above $30,000 range from 70% to 93% Internet access. Internet access is lower for rural populations than urban populations at almost all income levels, with the difference being generally greater at lower income levels and fairly low at higher income levels.³³

Figure 2.13

Percentage Urban/Rural Internet Penetration by Household Income³⁴

	Under $10K	$10K -$20K	$20K -$30K	$30K -$40K	$40K -$50K	$50K -$75K	$75K -$100K	$100K and Greater
Urban	38%	52%	54%	70%	79%	83%	93%	90%
Rural	19%	35%	39%	66%	73%	76%	85%	89%
Difference: Urban vs. Rural	19%	17%	16%	4%	6%	7%	8%	1%

2.6.4 A California-specific Study

The Center for Justice, Tolerance and Community at the University of California Santa Cruz has worked to quantify and analyze the "digital divide" in California, and recently published its work in a report entitled "A Nation Offline? Research on the Digital Divide."³⁵

The report found that an increasing number of California households have computers, are accessing the internet, and are using broadband to access the internet. By 2003, over 66% of California households had computers, almost all households with computers had access to the internet, and close to half of all households with computers had access to broadband.³⁶

Figure 2.14



The report found a strong correlation between household income and broadband. In 2003, California households with annual income of over $75,000 were more than six times as likely to have broadband connectivity than households with annual income of less than $15,000.³⁷

Figure 2.15



The report also examined broadband penetration rates based on ethnicity, and found that Anglo and Asian households in California were more than twice as likely to have broadband than African-American and Latino households (as shown in Figure 2.16 below).³⁸

Figure 2.16



The report then examined the existence of broadband in California households in 2003 by both annual income and ethnicity. It found that households with annual incomes of over $50,000 were the most likely to have broadband connectivity, and households with annual incomes of less than $20,000 were the least likely to have broadband, regardless of ethnicity. The report did find, however, that disparities existed within the three household income groups based on ethnicity.³⁹

Figure 2.17



Chapter 3. Broadband Market Competitors

Broadband providers in California consist of traditional telecommunications companies - incumbent local exchange carriers (ILECs), competitive local exchange carriers (CLECs), wireless companies and cable operators - as well as relative newcomers to the market, such as satellite companies, developers of new wireline broadband technologies, and fiber deployment companies. As noted in Chapter 2, many parts of California benefit from a broadband market marked by competition among multiple providers and technology platforms. Additionally, some communities have built their own broadband networks.

3.1 Incumbent Local Exchange Carriers (ILECs)

ILECs are wireline telecommunications carriers that own the legacy telephone network within a geographic area. They offer local telephone service, local toll, long distance, international, Internet access and are now offering video services through co-marketing agreements with satellite television companies such as DISH Networks. Currently, two large ILECs (SBC and Verizon), two mid-sized ILECs (Citizens and SureWest), and eighteen small ILECs operate in California. A majority of the ILECs serving California offer broadband services through affiliates established for that purpose.⁴⁰

3.2 Competitive Local Exchange Carriers (CLECs)

CLECs are wireline carriers that are authorized under CPUC and FCC rules to compete with ILECs to provide local telephone services. They often package their local service offerings with local toll, long distance, international, Internet access, cable and/or video services. Under policies adopted by the CPUC, the FCC and the Telecommunications Act of 1996 (1996 Act), CLECs are not required to duplicate ILEC local service offerings. They can choose which customers to serve (business, residential or both) and what services to offer .⁴¹ CLECs provide telephone services in one of three ways, or a combination thereof:

(a) Building network facilities needed to connect themselves to their customers' premises;

(b) Purchasing telecommunications services from another carrier (typically an ILEC) at wholesale rates and reselling those services to their own customers at retail rates; and

(c) Leasing parts of the ILEC network, referred to as "unbundled network elements" (UNEs).

There are 332 CLECs operating in California. Some of the larger CLECs in the state are AT&T, WorldCom, Inc., Pac-West Telecommunications Inc., and Cox California Telecom, LLC. A limited number have reported offering broadband services through affiliates.⁴²

Some ILECs also operate as CLECs outside their original service territories. In California, for example, SBC and Verizon each have authority to operate as CLECs in the other's service areas.

Data Local Exchange Carriers (DLECs) are an ILEC and CLEC subset. DLECs deliver broadband services generally by purchasing unbundled local loops and providing their own electronics at each end to provide DSL service to customers. DLECs traditionally have not provided voice services, although some are now offering Voice over Internet Protocol (VoIP) telephony.⁴³ DLECs operating in California include Covad Communications Company and SBC-Advanced Solutions Inc.

3.3 Satellite Broadband Providers

Satellite providers can deploy broadband service to customers in almost any part of the United States. Customers must install a satellite dish with a clear line-of-sight view of the southern sky. It is a popular choice for customers in rural and other areas that lack an existing broadband infrastructure, where deployment costs are often too high for other broadband providers to enter the market. Deployment costs are substantial, as they involve placing a new satellite into orbit. Satellite providers often set limits on data downloads, with overage charges applied if a customer goes over his or her quota. Three prominent satellite broadband service providers serving residential customers in the U.S. are DirecWay, Echostar and StarBand. DirecWay and StarBand currently offer service in California.

Other providers are entering the market. Wild Blue's plans to provide satellite broadband service literally got off the ground in mid-2004 with the successful launch of the Anik F2 satellite. Wild Blue plans to begin offering service in the second quarter of 2005, focusing on rural areas yet unreached by DSL and cable providers. Wild Blue plans on offering 1.5 Mbps download and 256 Kbps upstream speeds for under $50 per month.

3.4 Wireless Broadband Providers

Wireless carriers provide broadband service using fixed or mobile wireless technology. Fixed wireless technology can offer services to large geographic areas with a modest investment. It is a particularly attractive form of broadband in rural areas, smaller towns, and suburbs. Sprint Broadband Direct and WorldCom are examples of fixed wireless providers serving customers in certain areas in California. Companies offering mobile broadband services, such as Verizon Wireless and its EvDO (Evolution Data Optimized) service, Cingular Wireless and its UMTS (Universal Mobile Telecommunications System), and Nextel and its planned OFDM (Orthogonal Frequency Divisional Multiplexing) service, are expected to play an increasingly prominent role as technologies like 3G, 4G, and WiMAX continue to develop.⁴⁴ Verizon Wireless currently offers EvDO service in San Diego, Los Angeles and Orange Counties, and is deploying the service to Ventura County in the near future. It is estimated that by the end of the year, EvDO service will be available to half of California's residents.⁴⁵ Cingular Wireless has launched its UMTS service in six markets, including San Francisco and San Diego, and intends to continue the roll-out of this service in 2005.⁴⁶ Nextel is in an earlier stage of developing its service offering, but is expected to begin competing with Verizon Wireless and Cingular in the near future.

Other providers in California include companies like SkyPilot and NextWeb, Inc..⁴⁷ NextWeb is California's largest and fastest growing wireless Internet service provider,⁴⁸ and is discussed as a Case Study in Section 8.1.4 of this report.

3.5 Cable Providers

Cable companies provide broadband services over their coaxial cable networks. Cable providers are generally granted exclusive franchises by the jurisdictions in which they operate. Cable broadband providers serve primarily residential customers, since many homes across the nation already subscribe to cable video. There are five major cable providers in California - Comcast, Cox, Time Warner, Adelphia, and Charter, which operate in exclusive franchise territories. In addition, there are a number of smaller cable providers operating in the state, including Brighthouse Networks, Mediacom California and NPG Cable.

3.6 Broadband Overbuilders

Broadband Overbuilders are a new type of telecommunications provider. Unlike local telephone and cable television companies, which have adapted their existing networks to provide broadband, these providers focus on a core business strategy of building new fiber-optic networks which they use to provide local telephone, cable television, and high-speed Internet services. Companies must first obtain a local franchise authorizing them to begin construction and must obtain the Rights of Way to build the network.

For example, Grande Communications has announced plans to deploy an FTTP network to over a million homes and businesses in Texas over the next seven to ten years.⁴⁹ Although Broadband Overbuilders have a limited presence in California, there are several currently offering service, including SureWest, RCN, Seren Innovations (doing business as Astound!), and Champion Broadband.

According to the General Accounting Office, once the Broadband Overbuilder begins building its network, construction usually takes between two to four years if the company has steady access to capital and has no difficulties in obtaining the necessary local government permits.⁵⁰ This same study compared six markets with a Broadband Overbuilder and six without, and found that those markets with a Broadband Overbuilder had lower local telephone, cable and high-speed Internet rates.⁵¹

3.7 Publicly Owned Broadband Networks

Some communities without commercial broadband providers have opted to build their own networks using public funds, or by establishing public-private partnerships. Examples of this form of broadband deployment include the Truckee-Donner project in Northern California and the City of Cerritos's project in Southern California, both of which are discussed in section 8.3.2 of this report.

Chapter 4. Broadband Technologies

Similar to the diversity found in the number and type of broadband providers, California is home to a number of different technology platforms that are used to deliver broadband to consumers.

4.1 Digital Subscriber Line (DSL)

Figure 4.1 DSL Characteristics
What is it?	Benefits	Limitations	Price52
Broadband service that uses the same phone line used for voice service	Widely available and relatively affordable; the leading platform used for broadband service in California	Limited bandwidth potential and transmission range (<18,000 ft.)	$14.95 | $79.95 per month

DSL runs on the traditional wireline network, utilizing the higher frequency spectrum available in a pair of copper telephone wires which is unused by analog telephone services. Upgrading copper loops for DSL services essentially involves installing a piece of new equipment⁵³ in the telephone company central office, and removing interference generating devices from the local loop.

Depending on a consumer's distance from the central office, DSL can achieve download speeds of up to 8 Mbps, although DSL service providers usually cap the maximum download speed at about 1.5 Mbps and only guarantee a minimum download speed of
384 Kbps.⁵⁴ DSL speeds are sufficient to bring streaming video into customer homes and for customers to send out basic information such as video selections.⁵⁵ DSL works well as a basic Internet connection, since most residential Internet consumers place greater emphasis on the download speeds needed for surfing the web, downloading files, and sending email messages. Since being introduced in the 1990s, DSL has become the leading broadband technology in California and the second leading broadband technology in the national market.

DSL has certain technical limitations. The most significant limitation is the transmission range. As a digital signal is transmitted through the copper loop, the signal suffers from greater distortion the farther it must travel from a provider's central office to the customer. Debilitating signal degradation generally occurs when the local loop length between customer premises and the central office is between 16,000 and 18,000 feet.

DSL had traditionally suffered from other technical limitations, that are now being addressed through technological advances. For example, DSL had previously been limited in its deployment due to the requirement that it operate only in a pure copper environment. However, telecommunications companies have overcome this technical limitation by installing DSLAMs inside remote terminals.⁵⁶

Also, DSL's bandwidth capacity has traditionally limited the ability of DSL providers to offer the same type of "triple play" package, including video, data and voice services, that can be delivered over cable or fiber facilities. However, new compression technologies are being developed that will allow high definition TV to be delivered over existing copper phone lines.⁵⁷ In addition, in order to compete effectively with companies offering bundled services, ILECs such as Verizon, SBC and BellSouth have partnered with satellite companies to add video to their bundled services.⁵⁸ For a more detailed discussion of the role of Convergence and Service Bundling, please see section 8.2.1 of the report.

4.2 Cable Modem

Figure 4.2 Cable Modem Characteristics
What is it?	Benefits	Limitations	Price
Broadband service that uses the same coaxial cable used for cable television service	Widely available and relatively affordable; the leading platform used for broadband service in the U.S.	Limited future bandwidth potential; not widely deployed to business customers	$19.95 | $49.95 per month

Internet service via coaxial cable became available with the cable television industry's migration from analog to digital TV.⁵⁹ In the early 1990s, most of the cable television infrastructure in the United States was incapable of carrying digital TV signals. Upgrades were needed to make coaxial networks capable of delivering digital TV, including a high capacity fiber-optic backbone to carry the increase in data, as well as the capability for two-way data transmission. The cable industry spent more than $65 billion dollars between 1996 and 2002 to upgrade its infrastructure.⁶⁰ This new cable TV network architecture, called a hybrid fiber-coaxial (HFC) network, allows high-capacity, digitized, two-way data transmission that is used for broadband Internet services today.

Because of the industry's head start in upgrading its network,⁶¹ cable modem has been the dominant national broadband technology since 2000.⁶² At the end of 2002, there were more than 65 million cable television customers in the United States, with more than 10 million of those customers subscribing to cable modem service. By September 2004, the number of cable modem subscribers had grown to more than 19.4 million.⁶³

The HFC network architecture consists of a fiber backbone linking the cable company headend to a local distribution node.⁶⁴  The local distribution node is where cable TV and cable modem data are converted from optical signals to radio frequency (RF) signals to be retransmitted through coaxial cable to a nearby customer's premise.  While the fiber backbone has a capacity of 5 Gbps, only 6 Mhz bandwidth is allocated for cable modem service from the node to the customer.  A theoretical 40 Mbps bandwidth is possible over the 6 Mhz bandwidth for each individual cable modem user.⁶⁵  This 40 Mbps is shared by all of the cable modem customers serviced by the distribution node, with the possible maximum of 30 Mbps of the 40 Mbps available to each cable modem user under the new cable modem standard.⁶⁶  A single node may serve hundreds of customers, so service degradation can occur if many users are connected to the internet simultaneously.⁶⁷ Today, most cable modem services promise customers a download speeds of between 1.5 Mbps and 3 Mbps.

4.3 Satellite

Figure 4.3 Satellite Broadband Characteristics
What is it?	Benefits	Limitations	Price
Broadband service delivered through geostationary satellites	Covers all areas with a direct view of the southern sky	Limited bandwidth; providers often limit amount of data downloaded per month; difficult and expensive to add capacity	$49.59 | $99.99 per month

Satellite broadband services utilize geo-synchronized satellites that stay in a fixed point in the southern sky to receive and transmit data to and from satellite broadband customers who must install a satellite dish. The primary advantage of satellite broadband technology is that it is available to customers located anywhere in the U.S. with a direct view of the southern sky. The availability of satellite broadband services makes it technically possible, albeit generally at higher cost ($60 - $80 per month) and lower speed (400 Kbps),⁶⁸ for virtually anyone living in the United States to obtain broadband service.

There are one-way and two-way satellite broadband services. One-way satellite broadband service requires a telephone line to send data upstream, while data is downloaded directly from the satellite. Initially, for satellite broadband service, only one-way service was available because satellites at that time were not designed to receive data from customers. Those satellites were designed to transmit TV signals back to earth rather than provide two-way communications required for broadband service. Two-way satellite broadband became possible when a new generation of satellites, designed with broadband service in mind, was placed into orbit in the mid-1990s.

The limitation of satellite broadband services is that its capacity, both in terms of total bandwidth and number of customers, cannot be readily or easily upgraded since it involves launching new satellites into orbit. The architecture of satellite broadband is similar to the architecture of the cable modem HFC network, except satellite uses radio waves instead of fiber and coaxial cable to connect to the node. As a result, satellite broadband service providers limit the amount of data their customers can download and upload each month, and charge additional fees to customers exceeding the monthly cap. Another limitation for satellite broadband service is that it is more susceptible to service interruptions from severe weather conditions.⁶⁹

4.4 Wireless

Figure 4.4 Wireless Broadband Characteristics
	What is it?	Benefits	Limitations	Price
WirelessLAN (Wi-Fi /UWB) Wireless MAN (WiMax) 2.5/3G Cellular	Broadband technology using licensed and/or unlicensed radio frequency spectrum for transmission	Low deployment costs and widespread access	Availability of spectrum; technical standards for higher bandwidth and longer range technologies still being developed; licensed spectrum for dedicated services is expensive	Free | $99.99 per month

Wireless communications are revolutionizing peoples' lives, enabling consumers to access a high-speed connection to the Internet using virtually any device, at any time, from any location. Wireless technologies being deployed today are as diverse as the ideas for how to use them, from Bluetooth, to hot spots, to wireless Internet backbones stretching hundreds of miles over mountain ranges.

There are four major categories of wireless technologies today that enable high speed connections to the Internet:


· Personal Area Networks (PANs) including Ultra-Wide Band (UWB);

· Local Area Networks (LANs) including Wireless Fidelity (WiFi);

· Metropolitan Area Networks (WANs) including the Worldwide Interoperability for Microwave Access standard known as "WiMAX;" and

· Next-generation cellular technologies also known as "3G" and "4G" such as Verizon Wireless's EvDO and Cingular Wireless's OFDM services.

Each provides a solution to access broadband Internet that varies based on distance, bandwidth and quality of service that can be tailored to meet the specific needs of consumers based on the price, quality and type of usage they need. Each technology is discussed below.

Figure 4.5

Types of Wireless Broadband Technologies



Source: Intel, Understanding Wi-Fi and Wi-MAX as Metro-Access Solutions

4.4.1 Wireless Personal Area Networks (WPAN) and Ultra-Wide Band

Wireless Personal Area Networks (WPANs) use two types of standards: 802.15.1 (also known as Bluetooth) and 802.15.3 (Ultra-Wide Band). Both are designed for very small networks within a confined space, such as a home office, desk, or car. Bluetooth is used primarily for communications and computing peripherals, such as computer to printer or handset to headset. Ultra-wide band provides higher bandwidth (over 400 Mbps) for small networks, which allow multimedia services such as DVD-quality video to be shared wirelessly throughout a home.

4.4.2 Wireless Local Area Networks (WLAN) and WiFi / Mesh-Networks

Wireless Local Area Networks (WLANs) have a broader range than WPANs (up to 100 meters) and are typically found in "hot spots," such as cafes, hotels, airports, offices and home networks. The wireless standard associated with WLANs is IEEE⁷⁰ 802.11. Three

versions of the 802.11 standard are commonly used and built into most laptops and mobile devices today:


· 802.11a supports bandwidth speeds up to 54 Mbps

· 802.11b supports bandwidth speeds up to 11 Mbps

· 802.11g supports bandwidth speeds up to 54 Mbps⁷¹

Wireless Internet Service Providers (WISPs) using directional antennas or implementing "mesh" network technologies have been able to increase WLAN performance beyond 54 Mbps and to cover wider areas (over 10 km) using the 802.11 standard. To extend wireless access nodes, providers still mostly rely on wires or fiber for long distance backhaul to the provider, and from the provider to the core network.

Directional Antennas

WiFi LANs (such as those at Starbuck's "hotspots") use omni-directional antennas that transmit radio frequency (RF) signals in all directions equally. Alternatively, high gain directional antennas can concentrate RF signals primarily in one direction like the beam of a spotlight. By extending the signal across longer distances, these directional antennas can serve as point-to-point links between buildings and access points. These line-of-sight links using directional antennas can be used to bridge last mile gaps, but are sensitive to interference from buildings, mountains and other obstacles.

Mesh Networking

Mesh-network technology extends the range of traditional WLANs by allowing a collection of 802.11 standard "nodes" (an individual laptop or fixed access point such as a hot spot) to interconnect and move data between nodes acting as one "shared" network. In a mesh network (sometimes referred to as "multi-hop" network) small nodes are installed throughout a large area, such as a neighborhood or school, and each acts as a router, transmitting data from one node to the next. One advantage of mesh networks is the use of dynamic path configuration that allows RF signals to navigate around large obstacles, such as mountains or buildings. If one path to the base station is blocked, a transmission using a mesh network will automatically find another path through another node. Another advantage is reliability. In a "single-hop" network, if one node goes down, the entire WiFi LAN network goes down. In a mesh-network architecture, if one node goes down, the network continues to operate by routing data through other nodes.

4.4.3 WMANs, WiMAX and WWANs

Wireless Metropolitan Area Networks (WMANs), also known as WiMAX, use the 802.16 standard and cover a much greater distance than WLANs - up to 50 km. This standard is also referred to as "fixed wireless" because it uses a mounted antenna at the subscriber's site to transmit the RF signal from point to point (or point to multi-point) over long distances. WiMAX uses more sophisticated transmission protocols than the 802.11 standards, which result in improved connectivity, network reliability and quality of service. WiMAX therefore serves as a carrier-class solution for the last mile problem - a wireless alternative to cable, DSL or fiber optics. For example, the 802.16 standard enables wireless Internet service providers to guarantee high bandwidth to business customers, and low latency for voice and video applications.

Figure 4.6

WiMAX Network Topology



Source: Intel, Understanding Wi-Fi and Wi-MAX as Metro-Access Solutions

WiMAX can also be used to aggregate WiFi networks (such as mesh-networks and hot spots) and provide long distance backhaul to a core network.

Wireless Wide-Area Networks (WWANs) aggregate WMANs over a large geographic area (over 50 km) using fiber optic or other wired links to connect to the core network, either using WiMAX point-to-point transmission for long distance backhaul or connecting directly to a fiber node.

4.5 Fiber-to-the-Premises

Figure 4.7 FTTP Characteristics
What is it?	Benefits	Limitations	Price
Broadband service delivered through fiber optic cable	Great bandwidth potential	Expensive to deploy, especially for laying underground lines	$34.95 | $49.95

Fiber-to-the-Premises (FTTP) is a telecommunications network architecture currently being developed by the ILECs and others (including Broadband Overbuilders), to be the next generation of broadband technology. FTTP takes advantage of the extensive fiber backbone network that ILECs have built out over the years and further extends it into customers' homes and businesses. Under the current FTTP architecture, B-PON (Broadband Passive Optical Network), up to 32 customers can be served by a single optical node with a minimum bandwidth of 19.4 Mbps per customer. However, depending on the number of others online at the time, each subscriber could access the entire fiber node's bandwidth of 622 Mbps.⁷²

Figure 4.8

FTTP Overlay & Greenfield Architectures



The present FTTP standard can be upgraded to 1.2 Gbps, and a new standard offering speeds 2.4 Gbps, called GPON (Gigabyte-Capable Passive Optical Network) is near adoption by the industry. One of the great advantages of fiber is that bandwidth upgrades are achieved simply by installing new equipment at the ends of the fiber facilities.

The primary barrier to deploying FTTP is cost. The per-unit cost of deploying FTTP has dropped from $7,500 per home in the mid-1990s to $1,600 in 2002, and to $1,350 in 2004. This is the main reason that SBC, Verizon, and BellSouth chose a set of common FTTP technical standards, hoping equipment standardization and the combined economy of scales would drive the deployment cost down even further. Verizon estimates that deploying FTTP to its customers in all of its 29-state territory will cost between $20 and $40 billion.⁷³ There is a significant cost difference between overhead and underground fiber deployment because of the additional costs associated with trenching and digging up streets to bury fiber underground.

Despite the costs, fiber deployments are being made throughout the country. A recent survey indicated a significant increase in FTTP deployments in the United States, almost doubling in number in a six month period - from 78,000 homes in March 2004 to 146,500 homes in September 2004.⁷⁴ In California, Verizon has already begun FTTP deployment in the cities of Huntington Beach and Murrieta.⁷⁵ SBC developed one of the nation's first FTTP deployments in 2001 for the San Francisco Mission Bay community.⁷⁶ SureWest, recognized as one of the nation's leading independent providers of fiber, is deploying FTTP service in Sacramento in direct competition with SBC and the local cable company, and is estimated to be terminating fiber at approximately 30,000 homes.⁷⁷

4.6 Broadband Over Powerline

Figure 4.9 BPL Characteristics
What is it?	Benefits	Limitations	Price
Broadband service delivered through the electric distribution system.	Should have relatively low deployment cost and time since BPL utilizes the existing electric grid	Still in development/trial stage. Interferences to and generated from BPL is a potential hurdle	$27.00 | $49.95

Broadband over Powerline (BPL) is the provision of broadband service over existing electricity distribution wires using the higher frequency bandwidth of those wires. The BPL signal is separated from the electric transmission before it reaches the transformer located on the pole outside the customer premise. It is then sent directly through the customer's wall sockets to equipment located at the premise, allowing a customer to access the Internet by plugging a computer into any electrical socket. Alternatively, BPL can be used to transmit broadband through the power distribution poles, with a wireless connection between a transmitter on the pole and the customer's computer used to achieve the final connection. This is feasible since electric poles are usually no more than 100 feet from people's homes, which is suitable for present Wi-Fi technologies. BPL offers similar bandwidth as DSL and at comparable prices, based on information from the few communities where BPL is in operation. The full bandwidth potential of BPL is not known, however, since it is still early in its development and deployment when compared to other broadband platforms. It is reported that new technologies will permit BPL to provide broadband at bandwidths of up to 200 Mbps by the summer of 2005.⁷⁸

Figure 4.10⁷⁹

BPL Projects and Trials in the United States



The country's first city-wide commercial BPL deployment will be finished in April 2005 in the city of Manassas, Virginia. ComTek, the company offering the service received a license from the city and is providing BPL over power lines owned by the city Utilities Department.⁸⁰ ComTek has stated that more than 10% of the homes passed by its network have decided to take the 500 kpbs symmetrical service, which ComTek is offering for $29 per month. ComTek expects to achieve 20% to 30% pentration among the city's 12,500 homes and 2,500 businesses in the very near future.⁸¹ Cincinnati, Ohio is another city with an active BPL deployment. That project is a joint venture between Cinergy, the local electric utility, and Current Communications, a BPL service provider.⁸² Current Communications is also actively looking to commence a BPL project in California in the near future, although no specific plans have been announced.

About 100 residents of Menlo Park, California were to get 3Mbps BPL broadband and VoIP service as part of a trial co-sponsored by Pacific Gas and Electric Company (PG&E) and AT&T. AT&T dissolved the project in October 2004, four months after it was announced in July 2004.⁸³ PG&E has advised CPUC staff that it is still interested in exploring deployment of BPL technology but currently has no partner or active BPL project. At the Commission's Full Panel Hearing on this Report on February 8, 2005, San Diego Gas & Electric Company (SDG&E) publicly stated that it was moving forward with a BPL pilot project in its service territory in the near future.⁸⁴ The exact scope and nature of this pilot project is still being considered by SDG&E, but the service could potentially reach all 1.3 million customers in its service territory.⁸⁵

Chapter 5. Benefits

5.1 Economic Development

Advanced telecommunications is the key infrastructure for today's digital economy. The economies of California, the nation and the world are increasingly powered by the creation, use and transmission of information and entertainment content in digital format. Just as the telegraph transformed management of the far-ranging railroad networks of the 19^th century, and the telephone enabled coordination of businesses with widespread operations in the 20^th century, the digital communications infrastructure is transforming business activities on a global scale and in real-time in this century. The widespread deployment and use of broadband will spur the creation of entire new industries, transform existing ones and, like the automobile industry's impact on horse-drawn carriage manufacturers, displace others.

The deployment of broadband infrastructure impacts the economy both directly and indirectly. The cable industry alone has invested over $65 billion since 1996 upgrading its systems to provide digital content. Verizon is poised to spend up to $40 billion in the coming years to deploy a FTTP network.

Yet, the effects of broadband technology on the economy are much more far-reaching than the direct benefit created by capital investment in deployment and the manufacturing of the components such a network requires. The most significant economic benefits do not come from the deployment of broadband technology, but in its use. As broadband penetration increases, there will be resulting demand for computer and home network equipment, software applications, wireless devices and other equipment that utilize broadband. Like all infrastructure investment, the economic impacts of broadband will also include the increased productivity and innovation that it fosters. The full economic impact of widespread broadband deployment and adoption cannot be captured in even the most sophisticated econometric modeling.

5.2 Quantifying the Economic Benefits of Broadband Deployment

Several studies have attempted to quantify the economic impacts, particularly increases in employment and economic activity, that can either be directly or indirectly liked to increased deployment of broadband technologies. For example, one study sponsored by Cisco Systems, written by Hal Varian of the University of California and Robert Litan of the Brookings Institute, found that full implementation of currently underway or planned Internet business solutions could result in over $528 billion in cost savings to U.S. businesses though 2010.⁸⁶ Additionally, this study finds that these solutions could result in a cumulative increase of over $1.5 trillion in revenue to businesses resulting from implementation of Internet business solutions. While this study looked broadly at Internet based business solutions, and not just those enabled by broadband, this information is nevertheless illustrative of the significant benefits advanced telecommunications can have on business and on economic growth.

Figure 5.1

Broadband Investment Projections

Required Investment	Description
About $1300 per line, $270 billion total	Figures for DSL.; Reflects costs necessary to retrofit all US copper plant
About $1200 per line, $65 billion total	Figures for Cable-modem; Reflects past investment through 2002
More than $1250 per line, total investment would vary based on platforms used	Figures for "Ultraband" fiber connections; $1250 reflects customer expenses, not upstream capital and communication costs
About $700 per line, $63 billion total87	Figures for wiring additional 75% of US households with current technologies (cable or DSL)
About $900 per home passed and $2200 per home served by the technology, $93 billion total88	Weighted average calculated from 2003 to 2021, for investment in FTTP technology

The wide-ranging deployment of broadband infrastructure will have the direct effect of employing thousands of people: to manufacture, sell, purchase, install, manage, and maintain the equipment and facilities, as well as the resulting services.

Only a few studies have examined the issue of job development resulting from greater broadband investments, although many other publications and documents reference them.

Figure 5.2

Job Growth Due to Broadband Deployment

SOURCE U.S. JOBS CA JOBS

TeleNomic Research, 200289	1.2 million	100,000
Critereon Economics, 200390	1.2 million	N/A
CENIC/Gartner Consulting, 200391	N/A	2 million

5.2.1 The CENIC/Gartner Study

The Gartner Group, a technology and market research and consulting firm, was engaged by the Corporation for Education and Network Initiatives in California (CENIC) to evaluate the economic potential of accelerating next generation broadband deployment in California.

Gartner studied the impact that a 50% penetration by 2010, i.e. one broadband line for every two people in California, would have on economic activity and employment. ⁹² Gartner's modeling shows an increase of $376 Billion in incremental Gross State Product (GSP) over a ten-year period. This increase would result in a $5,500 increase in annual per capital GSP. Gartner then sought to quantify theses economic impacts by sector of the economy. The following chart illustrates the study's results.

Figure 5.3

Distribution of Gain in Gross State Product by Industry



Source:

CENIC's One Gigabit or Bust Initiative: A Broadband Vision for California Summary Report

http://www.cenic.org/gb/pubs/gartner/Gartner_Short.pdf

Retail trade, manufacturing, health and social assistance, and public education see the largest positive economic impacts of accelerated broadband deployment.

Gartner also studied the impacts such accelerated deployment would have on employment and found the potential to create two million additional jobs in California over the ten-year study period.

5.2.2 The TeleNomic Research Study⁹³

A study conducted by TeleNomic Research found substantial employment gains from increased broadband deployment. The major finding of this study is that building and using a robust, nationwide network will expand U.S. employment by an estimated 1.2 million new and permanent jobs. Specifically, TeleNomics found:


· 166,000 jobs would be created directly in the telecommunications sector;

· 72,000 manufacturing jobs would be generated by the direct purchase of network plant and equipment and customer premise equipment; and

· 974,000 indirect jobs would be created if a next generation network were built.⁹⁴

TeleNomic Research estimated that about 237,000 jobs nationwide would be created directly from broadband deployment. To this, the study adds jobs created indirectly from the deployment and use of broadband, such as content providers and software developers, who create new products that utilize the broadband networks. This indirect effect also includes jobs created by the increased spending of those whose jobs were directly linked to broadband deployment. The study finds that the effects of greater broadband deployment will ripple though the economy, increasing employment even more. TeleNomic estimates that over 4 indirect jobs will be created for every 1 new job directly resulting from the deployment of broadband.⁹⁵

5.2.3 The Criterion Economics Study⁹⁶

Robert Crandall and his associates at Criterion Economics completed a study in 2003 looking at the effects of ubiquitous broadband adoption on the U.S. economy. The study considers 95% penetration to be ubiquitous broadband adoption and assumes that this level of penetration is reached in 2021.⁹⁷ This study estimated that for every $1 million in capital investment in telecommunications networks, there are 18 jobs created. This leads the study to project that an average of 140,000 direct jobs would be created by the increase in capital investment engendered by widespread deployment of broadband. The indirect jobs created are estimated to be approximately 664,000, leading to a total of 804,000 new jobs. The study also concluded that widespread deployment of broadband technologies could result in increased economic activity of $414 billion in additional economic output for the nation.

This study also examined the impacts of an even more rapid deployment of broadband and finds that under a scenario where 95% penetration is reached in 2013 (rather than 2021) as many as 546,000 additional new jobs would be added.⁹⁸ This results in a total addition of 1.2 million jobs to the U.S. economy.

The Criterion Study also attempted to measure the additional benefits to consumers of broadband deployment by measuring consumer surplus. Consumer surplus is defined as the measure of the net benefit that new or improved goods and services bring to consumers. Given the tremendous value that broadband can provide to consumers, the study found significant gains in consumer benefit and found that the more ubiquitous the deployment the greater the consumer gains.

At 50% broadband penetration, the Criterion Economics study finds that additional value to consumers would rise to between $64.4 billion and $96.6 billion per year depending on price elasticity. If broadband service were to become truly ubiquitous, similar to ordinary telephone service at 95% penetration, this study concludes that the additional value to consumers - over and above their expenditures on the service - would be between $234 billion and $351 billion per year.

5.2.4 The Citizens for a Sound Economy Study


Citizens for a Sound Economy (CSE) published a study by Wayne T. Brough, Ph.D., which took the results of the Criterion study and sought to estimate the employment impact by state.⁹⁹ This study estimated that California would see an increase in employment of over 170,000 new jobs. The CSE study found that California would gain over 96,000 direct jobs. This would be expected given California's large information technology sector. For comparison, CSE estimates that Florida and New York would see gains of over 40,000 jobs as a direct result of broadband deployment. California would also see over 76,000 new jobs through the indirect impacts of broadband deployment, according to the study.

The findings of the study are illustrated in Figure 5.4 below.

Figure 5.4



The CSE study also calculates that widespread broadband deployment could add over $500 billion to the U.S. economy and calculates that California would add over $90 billion to its economic output due to increased broadband deployment. Given California's large information technology and entertainment industries, California gains from increased broadband deployment in other states, as well as the benefits it derives from deployment within California.

Figure 5.5

Economic Output Increases by State



5.3 New Products and Services

Broadband will provide consumers with significant bandwidth, that will in turn encourage the development of new services, applications and hardware for consumers. The range of new products and services will only be limited by the imagination of innovators and the interests and demands of consumers.

5.3.1 Telemedicine


Telemedicine and eHealth are broadly defined as the application of electronic communication technologies to the provision of healthcare, health education and health services.  The two terms are frequently used interchangeably.  Many, if not all, Telemedicine applications require access to broadband services.  A major goal of the delivery of Telemedicine and eHealth services is to eliminate barriers of time and distance to allow health service and education to reach individuals in their own communities, instead of the movement of people to centers of healthcare expertise.

Telemedicine applications will benefit from the proliferation of expanded broadband networks. Telemedicine applications can use broadband to transmit detailed medical images, as well as for videoconferencing to connect healthcare clinics in remote rural locations with experts and specialists located primarily in urban centers.  In this way, rural clinics and hospitals can have access to the same medical expertise that is available in the most sophisticated urban hospitals.  Telemedicine applications can allow health care professionals to monitor a patient's health remotely and, using videoconferencing technologies, can have access to critically needed specialists.

Over the past five years, California has become known as a telemedicine and eHealth leader. California was one of the first states to allow Medicaid reimbursement for telemedicine and eHealth services. The California Telemedicine and eHealth Center (CTEC)¹⁰⁰ funded by The California Endowment, is an example of one organization in the state committed to reducing health disparities through strategic application of telecommunications and eHealth technologies.

CTEC has made significant contributions toward increasing the technological expertise of California health care organizations through capacity building, training, education, and regranting. In particular, CTEC has emerged as the primary source for hospitals and clinics in promoting the use of telemedicine and eHealth within underserved communities. CTEC provides funding and resources to expand and develop regional eHealth networks throughout California using health technologies to improve the provision of health services to rural and underserved communities. 

Case Study: eMental Health - Enhancing Mental Health Services for the Underserved.  CTEC funded the UC Davis eMental Health Project. This project has been highly successful in demonstrating new and innovative ways to provide mental health care services to rural populations.  This project was developed to provide critically needed psychiatric services for ten rural community clinics that have a documented need for increased mental health care services and resources, where these services were not available.  The UC Davis multidisciplinary consultation-liaison team provides professional expertise (advice and consultations) via Telemedicine and other communication technologies on the management of patients who are seen at the selected rural sites, especially for complex and /or urgent mental health issues.  This project offers a choice of urgent and non-urgent consultations by phone, fax, email/internet, or videoconferencing.  The services administered to the rural sites include: triage consultation, clinical psychologist, psychiatric consultations, medication management, and counseling services. In just over six months, the project staff has seen over 150 clients, in which 50% of those clients have been children. 

 

Rural sites are provided with the most up-to-date information on best practices as well as easily accessible resources and professional expertise from the staff at the UC Davis Medical Center (UCDMC). Along with providing clinical services to the rural sites, the UCDMC faculty also provides a regular program of fully accredited continuing medical education lectures and seminars.  Over 100 rural providers have received education on the treatment of depression, anxiety, dementia and psychiatric illnesses in the medically ill.  The additional services made available through this unique project have aided in the acceptance, support, and overall success of the consultation-liaison model at the ten participating rural sites. 

5.3.2 VoIP


The most prominent example of how broadband has resulted in innovative new services is the development of VoIP (Voice over Internet Protocol). VoIP allows high quality two-way voice transmission over broadband connections, and is already revolutionizing the telecommunications industry.¹⁰¹ While the commercial deployment of VoIP is relatively new and there are still important public policy issues raised by its emergence such as e911 and support for Universal Service programs, analysts predict that between 2004 and 2008, the number of VoIP connections will increase from about 800,000 to 17 million.¹⁰²

Calls made using IP technology or over the public Internet provide significant cost savings to consumers by eliminating most per minute long distance and local toll charges. Many VoIP providers are offering unlimited local and long distance calling plans for as low as $19.95 per month.¹⁰³ In addition to significant cost savings, VoIP facilitates advanced applications and capabilities including mobility, location independence including choice of area code, integrated messaging applications, voice access to e-mail and a common mailbox for voice, e-mail and Instant Messaging.

5.3.3 Video on Demand


Cable companies and Broadband Overbuilders already offer television and video over their broadband networks. Telephone companies are seeking to offer similar services, delivering their own "triple play" to consumers. SBC and set-top box vendor 2Wire this year will offer TV, video on demand, digital video recording and Internet content over DSL and satellite service.¹⁰⁴ The increased capacity of these broadband networks combined with advances in data storage technology will spur increased Video on Demand applications.

5.3.4 Smart Homes


Homeowners can utilize broadband technologies to control the electronic devices in the home remotely. Lighting, heating and air conditioning, appliances, and home security and other systems can now be remotely monitored and controlled. In addition, advanced energy metering technology in the home will allow consumers to control their energy demand and respond to market signals.

5.3.5 Gaming


Online interactive video and computer gaming is increasingly a leading driver of broadband deployment and use. It is forecast that the worldwide market for online games will reach $9.8 billion in 2009, a 410% increase over 2003 revenue of $1.9 billion.¹⁰⁵  Broadband applications can provide gamers with the ability to connect directly with interactive, multi person, high-resolution, fast action, and complex online games. Broadband gaming technologies that create virtual-reality environments could be a precursor to sophisticated training and simulation applications with a myriad of uses in industrial, entertainment, military, and commercial settings.

5.4 Teleworking and Telecommuting

In 2004, a report sponsored by the International Telework Association and Council found that the number of Americans who worked at least part time from home increased 7.5% from 2003, to a total of 44.4 million workers. The report also found that during that same one year period, the number of teleworkers using broadband soared 84%, from 4.4 million to 8.1 million employees.¹⁰⁶ Companies can use broadband to enable employees scattered around the globe to communicate and share information in real-time. Employees working from home or in branch offices are able to work with colleagues in other offices as easily as if they sitting in adjacent cubicles. Broadband allows telecommuting to serve as a practical alternative to office-based employment. In addition to the efficiencies realized by employers from lower overhead costs, telecommuting results in significant benefits to the environment,¹⁰⁷ results in greater worker productivity and job satisfaction, as well as the expansion of employment opportunities to those with disabilities. ¹⁰⁸

California was a pioneer in exploration and adoption of telecommuting by state employees. In 2003, the state published a guide to assist agencies plan and implement teleworking/telecommuting programs.¹⁰⁹

5.5 Benefits to Public Agencies and E-Government

Government can increase the number and level of public services available to citizens by putting new and existing services online.¹¹⁰ Union City, California has announced that it is replacing the telephone crime reporting system now in use with a system that will allow residents to file certain crime reports from their homes through the Internet. The new system will be less stressful for victims, eliminating games of "phone tag," while it eases the workload on community service aides and police officers. The $20,000 cost is projected to save the city $85,000 in salary and benefits annually.¹¹¹

As broadband becomes more widespread, public safety authorities will be able to develop systems for providing public safety alerts via the Internet. For example, the town of Herndon, Virginia is using its VOIP-based network to broadcast Amber Alerts to the IP based phones in local government offices.

Broadband allows local government jurisdictions to host Internet community forums and provide multimedia communication services on websites. Additional benefits of such e-government include eliminating the time and transportation costs involved with visiting local government offices.

Similar to the benefits realized by private companies, broadband is also helping to reduce paperwork and cut costs for government. California State Controller Steve Westly has advanced a wide-ranging set of e-government proposals designed to save as much as $37.5 million annually by making the state more efficient at handling everything from tax returns to travel vouchers. Electronic filing of tax returns and refunds alone are expected to save up to $7.5 million each year. On-line processing of travel claims, payroll and benefits for state workers will bring additional savings of up to $29 million each year.¹¹²

Increased deployment of advanced telecommunications services including broadband will also have a positive impact on revenues to state and local government. Increased employment will generate higher income tax revenues, and increased economic activity will create additional sales tax revenues. Furthermore, the capital expenditures to deploy broadband networks will increase the property tax base.

5.6 Benefits for the Disabled Community

Broadband services are particularly beneficial to the disabled community. For example, video phones with closed caption technology can greatly increase the ability to communicate for those within the deaf community. High-resolution computer screens and voice-activated programs can aid the visually impaired, and with software such as eBooks, everything from novels to textbooks can be downloaded. For the physically disabled and the elderly, the Internet, especially with a broadband connection, provides a means for them to connect and communicate with the world.

Wireless broadband offers another opportunity for the disabled. Rather than using a desktop computer, a wheelchair bound consumer with a mounted notebook computer can access the Internet from anywhere in his/her home. With voice-activated dialing, a physically disabled or visually impaired consumer can communicate more effectively and easily using VoIP over a wireless broadband connection.

5.7 Benefits for Rural Areas

Broadband infrastructure can be a critical element in assisting a rural community to compete economically within the overall global business climate.¹¹³ Broadband infrastructure assists rural communities in attracting businesses, providing health care to residents and accessing government services. Broadband can serve as a critical link to information and news for communities that have limited newspaper, radio and television station choices. Access to broadband infrastructure can also improve the quality of education available to small population communities. For, example the California Mother Lode region - including Amador, Mariposa, Tuolumne, Calaveras, Inyo and Mono counties - has no state college or university and only one community college within the area's 18,546 square miles. High-speed Internet connections allow Mother Lode residents to access technology training and educational opportunities provided through the Golden Gate University's Cyber Campus. Students can remain in their communities, receive Bachelors and Master degrees online and with their advanced education, contribute to the economic vitality of the region.¹¹⁴

5.8 Benefits for Low Income Consumers

Increasingly, access to computers and the Internet are necessary for academic success and better-paying jobs . Broadband offers access to training, services and educational advancement that allows low-income consumers to improve their skills, access critical services such as health care, and actively participate in the new digital economy

There are surprisingly few studies measuring the benefits of broadband to lower income consumers.¹¹⁵

Case Studies: Reaching out to Low Income Consumers

The Eastmont Computing Center (ECC) in Oakland, California. provides broadband Internet access, computer courses and job placement services to approximately 500 people per week..¹¹⁶ The Latino Issues Forum conducts computer technology and Internet literacy projects in low-income urban and rural schools.¹¹⁷ The Signature Learning Project (SLP) and the Rural Technology and Information Project (R-TIP) are model public, private and nonprofit partnerships created to develop comprehensive technology learning environments for low income and minority communities. ¹¹⁸

Chapter 6. Barriers

Many of the barriers to greater broadband deployment relate to the "last mile" problem. The "last mile" refers to the connection between the broadband infrastructure and the consumer at the neighborhood level. For many communities, connecting the last mile represents the single greatest challenge to delivering broadband to consumers. Last mile hurdles include such issues as difficult topography, problems with government permitting and licensing, as well as the economic and technical challenges caused by low population density and distance from major population centers.

6.1 Access to Non-Telecommunications Utility Property and Facilities

Municipal and utility resistance to placement of wireless antennas and other telecommunications equipment on existing utility poles and structures or in utility Rights of Way is a barrier to broadband deployment. Notwithstanding that both state law¹¹⁹ and federal law¹²⁰ mandate non-discriminatory access to utility Rights of Way, local governments have been slow to grant the necessary permits.  For example, the cities of San Francisco, Walnut Creek, Santa Monica, Napa and Calabasas have either refused to grant access to wireless providers or have imposed extraordinary requirements on the applicants that have had the effect of indefinitely delaying deployment. These cities and utilities have offered various reasons for denying wireless broadband providers access to existing right-of-way including the desire to develop city-owned broadband facilities, aesthetics, worker safety and deference to the wishes of utility pole owners.¹²¹

6.1.1 Section 851


Public Utilities Code Section 851 requires a utility to obtain prior CPUC approval before selling or leasing property that is necessary or useful in the utility's performance of its duties to the public. This arises as a barrier to broadband deployment because it can prevent a utility from leasing access to existing utility property, such as electricity distribution poles, to a company seeking to use those poles to carry broadband infrastructure such as wires or antennae. Even when the CPUC approves a Section 851 application, the delay in receiving CPUC approval is often so long as to effectively deter broadband projects. In recent years, the average time for the CPUC to act on a Section 851 application has decreased from more than a year to approximately six months. However, the CPUC has been sharply divided on interpretation of the standards necessary for Section 851 approval (whether the proposed transaction must provide a public "benefit" or must simply have no negative impact). Many routine applications can remain pending at the CPUC for nine months or longer with no indication that approval is assured. The result is significant regulatory uncertainty, which can disrupt financing and planning of broadband projects.

6.1.2 California Environmental Quality Act (CEQA)

In the case of broadband deployment over existing utility Rights of Way, the application of Section 851 also triggers CPUC review under the California Environmental Quality Act (CEQA) for any such proposed build-out.¹²² For example, if Southern California Edison were to lease power lines for broadband deployment, CPUC approval including a favorable CEQA review would be required even though the physical changes to existing power lines would be minimal and would result in no discernable environmental effects. The CPUC has the power to grant categorical exemptions from Section 851 requirements to certain types of projects, however inconsistent interpretation of the relevant exemption standard has limited the use of that mechanism.¹²³