Local Connectivity

Currently the primary local broadband technologies use upgraded and modified copper wire conduits already installed by telephone and cable television companies. Incumbent carriers have determined that they first should “retrofit” existing wire-based technologies, because doing so conserves capital and extends the useable life of plant already installed. While replacing copper conduit with fiber optic cable offers consumers much faster bit transmission speed, incumbent carriers have determined that few localities currently have the population density and willingness to pay for a fiber optic broadband delivery networks to specific end users. In the interim, incumbent carriers have identified ways to reconfigure existing networks so that they can provide a combination of voice, data and video services. 

Telephone companies offer a transitional, copper-based technology that upgrades the available bandwidth sufficient to provide a carrier just barely wide enough to provide broadband, telephone and on-demand access to a single video channel. Cable television companies have more available bandwidth making it possible to reassign one or more television channels for broadband access. For many locations, broadband carriers eventually will replace the copper conduit with fiber optic cables, perhaps initially with a hybrid network that combines the two media. For example, the term Hybrid Fiber/Coax refers to the installation of new fiber optic cables from traffic management headquarters to a point closer to end users, whose access to that midway point continues to rely on existing copper lines.

Digital Subscriber Line Service

Telephone companies can provide broadbandDigital Subscriber Line (“DSL”) service by expanding the bandwidth available from the narrow gauge copper wires used to provide the first and last kilometer of telephone service. In essence DSL constitutes a transitional technology upgrade or retrofit using already installed copper wire.  This wire uses a narrowband carrier to deliver voice telephone calls. The bandwidth generated by the narrowband voice carrier is only 3000-4000 cycles per second, also known as Hertz. A 3-4 kiloHertz (“kHz”) channel can provide only a low fidelity signal, but that is sufficient for the transmission of voice conversations.

Broadband signal transmission requires more bandwidth so that the signal can carry the higher volume of information contained in the Internet cloud. Instead of narrowband delivery of a telephone call, broadband channels must offer both the capability of carrying lots more information, e.g., full motion video content, and to do so on a timely basis so that the content does not freeze, blur, or become unavailable. Put another way broadband networks need to have the bandwidth capacity capable of delivering high throughput, i.e., lots of information typically measured in bytes. Bandwidth intensive applications, like video, require fast, broadband networks having the capability of delivering content on an immediate, “real time” basis. 

Telephone companies can expand the bandwidth available from the narrow gauge, pair of twisted copper wire from 3-4 kHz to as much as 1500 kHz that also can be stated as 1.5 MegaHertz (“MHz”). With this expanded carrier, telephone companies can offer broadband service at much higher transmission speeds with the highest transmission speeds available to subscribers located near the telephony company switching facility. The highest transmission speed available, termed Very High DSL (“VDSL”) can offer speeds reaching 55 Mbps over a distance of 1000 feet from a telephone company switching office, or an Optical Network Unit installed to serve a specific neighborhood or real estate subdivision.

DSL subscribers located relatively close to a telephone company switching facility can receive higher bit transmission speeds, but subscribers located more than 5 kilometers typically cannot receive any DSL service at all.  Because telephone companies use unamplified copper wire as the medium for service, signals weaken (“attenuate”) as the distance increases between subscriber and telephone company switching office. 

DSL technology offers relatively slow bit transmission rates, compared to that available from cable television and fiber optic networks. To maximize the effectiveness of DSL networks, carriers configure the service to make more transmission capacity available for downloading than for uploading of content. This lack of symmetry between uploading and downloading responds to the fact that most broadband subscribers download more capacity than they upload. The term Asymmetric Digital Subscriber Line (“ADSL”) refers to a DSL service configured with more downloading capacity.  DSL service that has equal downloading and uploading capacity is called Symmetric DSL.

Telephone companies also have an operational reason to provide ADSL instead of symmetrical service that offers equal bandwidth for uploading and downloading. When subscribers upload content the most likely place where data traffic may interfere with voice traffic occurs at the telephone company switching facility handling both types of traffic in close proximity to each other. Uploaded data arrives at the telephone company switching facility with the weakest signal. Because data starting at the telephone company switching facility has the strongest signal the telephone company can spread the signal over wider bandwidth and thereby transmit content at a higher bit rate.

At the telephone company offices closest to subscribers, certain upgrades are needed to provide DSL service. Carriers need to separate “legacy” voice telephone traffic from the new data traffic. They achieve this separation by using a frequency splitter to divide the frequencies used for voice service from the newly available bandwidth made available for DSL service. The voice traffic continues to route to the Central Office for the customary switching and routing along a hierarchy of facilities that multiplex traffic onto very high capacity, long haul transmission lines. Separately Central Offices, equipped to provide DSL service, receive the data traffic and route it to a separate traffic aggregator, commonly known as the Digital Subscriber Line Access Multiplexer (“DSLAM”). This device aggregates Internet traffic for onward delivery via long haul Internet traffic transmission lines and disaggregates it for delivery to the intended recipient. 

At residences DSL subscribers must use filters to block the data frequencies at jacks used for voice telephone service. DSL subscribers also need to install a device that modulates and demodulates Internet, data traffic thereby differentiating it from conventional voice traffic. This modem device or “splitter” connects to a conventional telephone service jack and also to a computer, or wireless router serving one or more portable devices.

DSL networks also have limitations, and actual speed are generally much slower than the technical or advertised maximum speed. Also, traffic disruption may occur due to a number of reasons, including contention on the network. Furthermore, the distance that the subscriber is from the broadband company’s exchange, and the age of the copper network, will also influence performance.

DSL service offers slow, but cheaper broadband service as compared to what cable television operators offer. Additionally the need for subscribers to be located no farther than 5 kilometers from a telephone company switching facility further reduces the market size of potential subscribers. Similarly telephone companies do not serve all locations within the 5 kilometer potential service area. Localities with the greatest population density and most favorable demographic characteristics, e.g, high income, typically attract the first company investment in the retrofitting needed to provide service.

Cable Modem Service

Cable television operators also can retrofit their existing networks to provide broadband service starting with the conversion of as little as one 6 MHz television channel into an Internet access link. By partitioning (“diplexing”) this bandwidth, cable operators can designate the frequencies represented by this channel as available only for uploading and downloading Internet traffic. A modem similar to that used for DSL service can tune solely to the bandwidth now designated for Internet access and modulate and demodulate data traffic through that channel.

Because the cable television distribution grid operates with amplifiers located throughout, cable modem service can be offered everywhere the company previously offered video service. Additionally cable modem service can operate at bit delivery speeds well in excess of what DSL can provide. Cable operators can further increase delivery speeds by adding more bandwidth in 6 MHz increments, a process known as cable bonding. 

Cable modem service represents a third major upgrade in service.  In the first generation cable television operators simply imported broadcast television signals to places too far away to receive signals “off air” using the two small telescoping antennas supplied with the set (“rabbit ears”) and possibly even if one installed a rooftop antenna. In the second generation, cable operators increased the inventory of content to include networks that did not broadcast their content.  Instead of serving as a community antenna for broadcast content only, cable television operators used satellites and microwave networks to distribute additional content. In this second generation cable operators expanded the available bandwidth for television and also created a small upstream link from subscribers so that they could be identified by address for billing and content delivery purposes.

In the third generation cable operators expand the range of service available to include telephone and Internet access in addition to video content.  The cable television distribution grid becomes the functional equivalent to a Local or Metropolitan Area Network (“LAN” or “MAN”) capable of providing high speed data transmissions both downstream and upstream to all subscribers. LANs initially provided data networking within an office building or throughout a college, or corporate campus. Now cable operators offer the same functionality in the third generation of cable television network development.

Broadband Over Powerline

The nearly ubiquitous electric power grid offers a potential third wire capable of providing broadband into residences and businesses.  Broadband over powerline (“BPL”) uses the transmission power of the electricity delivery to carry signals using much higher frequencies. While an electrical conduit generates a quite noisy and inhospitable environment for other types of transmissions, advances in digital signal processing makes it possible to differentiate a high frequency data signal from the predominant, lower frequency electrical current.   BPL uses lines in the electrical grid operating at several thousand volts instead of the highest powered lines that operate with tens of thousands of volts.

The greatest challenge in making BPL commercially viable lies in solving two problems: 1) ensuring that the data signal can pass through transformers near retail subscribers that lower (“step down”) the transmitted voltage to the 110-220 volt level used by consumers; and 2) convincing National Regulatory Authorities that the data signals, typically operating between 1.7 and 80 MHz,  will not leak out of the grid and interfere with wireless radio users.

BPL injects and extracts broadband data signals onto the electrical grid. An inductive coupler transfers the data signal onto the power line by wrapping around the line, without directly connecting to the line. The extraction process decouples the data signal and sends it to a on premises modem for demodulating inbound traffic and modulating outbound traffic in the same manner as DSL and cable modems.

For nations where a transformer provides individual premises with the final voltage conversion to 110-220 volts, the extraction process can fail, because the signal has become unrecoverable. A solution to this problem relies on a wireless router, operating on a pole or above a conduit, to handle the first and last few meters outside of the transformer.

Because many nations lack ubiquitous access to new or transitional broadband wireline technologies, wireless options can provide telecommunications access into remote localities. Developing countries typically have the most areas unserved, or underserved by incumbent carriers.  Ironically this lack of service can make it possible for the installation of cutting edge wireless broadband technologies that can help developing countries expedite broadband access even in remote areas.  Just as wireless technologies made it possible for developing nations to accelerate the availability of voice telephone services into even the most remote and sparsely populated areas, they also can help these nations accelerate broadband deployment, an outcome referred to as “leap forging.”

Wireless technologies have the potential to offer faster, cheaper and more widespread installation of broadband services. Using microwave frequencies and an antenna that transmits a 360 degree, “omnidirectional” signal, wireless carriers can cover a contour or circle of land area spanning over 100 kilometers. Wireless network operators do not have to install ducts, conduits and wires to serve each and every subscriber. Instead the omnidirectional signal from a single tower can deliver voice and data traffic to any user within the transmission contour and also any user can communicate with the tower using a small, lightweight handset. Wireless telecommunications technologies have significant initial costs, which are incurred before revenues accrue from service, but the incremental cost of adding a subscriber is low and ongoing operating expenses may be low as well. This means that even with substantial, startup costs, many types of telecommunications and information networks can succeed in the marketplace if additional subscribers do not trigger even higher capital investment and carriers incur relatively low costs in maintaining their network.

The economic term positive network externality refers to the ability of networks to increase in value as more subscribers join. With relatively low incremental costs, carriers and  service providers can offer free or inexpensive subscriptions that become more valuable as subscribership grows.  Positive  network externalities create incentives for more and more users to “join the bandwagon” as evidenced by the success of social networking, auction and ecommerce sites.

Wireless technologies can provide both mobile and fixed services. Cellphone users appreciate the benefits of thetherless mobility, i.e., the enhanced productivity and efficiency made possible by having telephone access anytime and almost anywhere. But for many broadband applications, much of the benefits accrue from access to the Internet cloud regardless whether the user is moving, or at a fixed location. Wireless services use leapfrogging technology in the sense that remote localities lacking any Internet access can secure roughly the same quality of service, previously available only to urban users.

Cellular Radiotelephone Service

Before we examine wireless broadband technologies, some fundamental aspects of how wireless technologies work can offer helpful perspective.  Wireless technology made a huge leap in the early 1980s with the introduction of cellular radiotelephone service. Before that time few users of wireless service existed, because the technology was quite expensive, capacity constrained and unable to provide uninterrupted service for more than a few minutes. Before carriers offered cellular service, they used single transmitters that did not connect with other towers to provide continuous service to users moving out of range from the first tower and into range of another one. This meant that a mobile user could only carry on a conversation for a few minutes before losing contact with the tower containing facilities for linking the user with the wireline telephone network. Carriers installed only a few towers operating with limited amount of bandwidth. User devices were so large they could only comfortably be used in vehicles.

Cellular radio uses more bandwidth and has the capability of reusing high frequencies to support many more simultaneous telephone calls. It also has the ability to hand off calls from one tower to another making it possible for a mobile subscriber to maintain a conversation as the call can be forwarded from tower to tower as the user moves out of range from one and into range of another. Frequency reuse and the ability of manage the hand off of calls from tower to tower makes it possible for cellphone networks to serve many more users, to offer vastly lower rates, given large scale operations, and the ability to provide reliable service for calls running more than a few minutes.

The use of the term cellular refers to the ability of wireless carriers to transmit from overlapping signal contours generated by transmitters on adjacent towers. Cellphone service has been visualized as using the tightly connected hexagonal honeycombs of a beehive to emphasize continuous service achieved through frequency reuse of overlapping cells. In reality the cell contours are circular, but the concept of signal contour integration offering continuous service constitutes an essential component to reliable mobile wireless service.

Frequency reuse makes it possible for carriers to have nearby towers operating on the same frequency without generating harmful interference that would prevent callers and call recipients from hearing each other. Because cellphone networks use very high microwave frequencies, the signals weaken (“attenuate”) very quickly and managers can track the geographical coverage of reliable service. At the point whether a single tower service contour starts to deteriorate rapidly a second tower is installed having a slightly overlapping signal contour. At a small distance from the first tower, the cellphone operator can install another tower using the very same frequencies as the first tower, but because of the sharp “rolloff” in signal the transmissions of the first tower do not interfere with a later built tower operating on the same frequencies.

Cellular networks can provide service continuity by using technologies that manage the conversion of frequencies when mobile users move from one tower signal contour to another. The Mobile Telephone Switching Office (“MTSO”) constantly monitors the strength of signals from towers to handsets and vice versa. When the signals start to attenuate, due to a user moving away from a tower, the MTSO orders the user’s handset to change to the transmitting and receiving frequencies of the adjacent tower. This handoff requires an immediate change in radio frequency and tower communication, sometimes resulting in a “dropped call” when the change does not take place on time.

Cellular networks can provide service to vastly more subscribers than previous technologies thanks to more available spectrum allocated by National Regulatory Authorities, frequency reuse and several types of spectrum conservation technologies that make it possible for several users to share the same channel.  Cellphone service initially used generously large channels of spectrum available for use by a single subscriber.  Over several generations of service cellular networks have increased spectrum efficiency by using transmission technologies that make it possible for multiple subscribers to share the same frequency channel. For example, Time Division Multiple Access (“TDMA”) allocates a shared channel among multiple users by assigning very short slots of time.  Code Division Multiple Access (“CDMA”) allocates a shared channel by assigning users different code sequences.  These technologies require handsets that not only can quickly change the frequencies they use (“frequency agility”), but also operate using complex transmission formats that require well calibrated synchronization of use within an assigned time slot, or code sequence.

Handsets have evolved from serving as a radio transmitter and receiver (“transceiver”) to the functional equivalent of a powerful, lightweight and radio equipped computer.  Smartphones offer a wide versatility of services including the ability to display video content, play music, take pictures and operate as an Internet browser.  These devices offer users the option to discontinue or not await wireline telephone service, as well as the opportunity to access most of the Internet cloud content previously available only to full sized computers.

Four Generations of Cellular Service

Since the middle 1980s, wireless radiotelephone service has evolved in four distinct generations. In the first generation, spanning the middle and late 1980s, cellular radio used analog transmission formats to provide wireless telephony only. Urban subscribers benefitted from efficiency and productivity enhancements, while subscribers in rural and remote areas, many not having any existing telephone service option, enjoyed the benefits of access to the Public Switched Telephone Network. 

Early generations of mobile cellular service used spectrum in the Ultra High Frequency (UHF) band (400-900 MHz), including frequencies previously allocated for television service. Handsets were heavy and service was expensive. Early adopters of cellular service included users with high incomes, such as doctors, attorneys and bankers, but also service technicians, such as plumbers and electricians who benefitted from the ability to schedule appointments and receive directions without having to stop and look for a wireline payphone.

The second generation of cellphone service (early 1990s) introduced digital transmission technologies and the first spectrum conservation techniques. In the second generation, new spectrum allocations increased available bandwidth in the 1-2 GigaHertz range. At these higher frequencies operators had to install more towers, because of shorter signal range, but the greater frequency reuse opportunities promoted scale in light of the ability to handle many more simultaneous telephone calls. 

In the second generation cellphone operators started to introduce new services, such as texting, which retrofitted the existing signal strength monitoring and handset polling function of the MTSO which tracks the location of every operational handset. Whenever a handset is on, it regularly sends a short sequence of numbers and letters to the nearest tower which forwards these identifying sequences to the MTSO so that it can route an inbound telephone call to the proper subscriber and also provide dial tone for one requesting service. Cellphone operators created an extremely low cost and vastly profitable texting service by providing subscribers with the opportunity to key in letters and numbers corresponding to a message instead of a cellphone identification sequence. Texting is limited to about 160 letters and numbers, because that corresponds to the amount of bandwidth and time allocated to each passing opportunity for a handset to send its identification code sequence.

In the third generation (early 2000s) cellular networks acquired an initial ability to handle data traffic. Because all types of software, applications and content can get subdivided into small digital units of capacity, wireless networks became a slow speed option for accessing Internet –based content. In the third generation wireless operators retrofitted their networks to handle data traffic commingled with voice calls. Subscribers soon started to rely on so-called 3G networks for Internet access, but they often grew frustrated with the speed at which they could download and upload content that required high bandwidth, e.g., full motion video. 3G networks could readily handle the real time, “streaming” of music and the distribution of web pages, but not the streaming of full motion video and other more bandwidth intensive applications such as some forms of video gaming.

The fourth generation of wireless service has started to offer dedicated high speed data service at bit transmission speeds exceeding what terrestrial DSL offers and rivaling that from some cable modem services. 4G service makes it possible to consider wireless a competitive alternative to many terrestrial, wireline services. The proliferation of handsets, including tablets and lightweight computers, coupled with ever increasing content and software options has stimulated increasing demand for wireless spectrum. Opinions differ on whether 4G networks can handle all of the anticipated demand for service, particularly if wireline telephone companies opt to discontinue some or all terrestrial wireline services thereby migrating more and more subscribers to wireless options.

Most local connectivity projects present challenges in terms of coordination, logistics, access to capital and availability of necessary supporting components such as electricity. In developing nations the challenges may be more significant, because planners may seek to install broadband before other infrastructure projects such as electricity, sanitation and water. For wireless projects in remote locales, spectrum shortages may not present a problem, but the anticipated frequencies must be cleared with National Regulatory Authorities so that no potential interference will occur.

Local wired and wireless broadband project planners do not have to “reinvent the wheel.” The World Bank and other organizations have identified best practices with an eye toward providing a template for new projects. For example, in the Dominican Republic the national regulatory authority INDOTEL undertook a multi-phased implementation of broadband connectivity projects requiring first that administrative and legal underpinnings for the project, the nature of the license to be awarded and the contract to be signed are well understood.* It also required a number of practical steps be undertaken to ensure successful completion of the project, including assessing demand, running an economic model to determine the maximum subsidy to be offered, implementing a transparent and thorough tender procedure, close supervision of projects, development of dedicated web pages and raising awareness among prospective users.

The Dominican Republic already had enacted laws governing the basis by which INDOTEL would establish regulatory authority, transparent rules on government-sponsored procurements and a universal service funding program.  For each prospective project INDOTEL undertook economic analysis of broadband demand as well as a cash flow analysis to determine the net present value ("NPV") and the internal rate of return ("IRR") of the project.

INDOTEL’s demand analysis had four categories of review:

1. Collect and analyze secondary data and information such as demographics, the economic situation of households and individuals, geography, traffic and tariffs; 
2. Collect, compile and analyze primary micro‐economic data on individual customers, households, companies, institutions, and others by means of questionnaires, interviews and other information gathering tools;
3. Use econometric modeling techniques to determine the demand functions, establish the accuracy of the estimates, and calculate elasticity and other parameters needed to quantify demand. These techniques are used for each type of service, each geographic area, each period of time, for incoming and outgoing calls, payment types, and for different socioeconomic levels; and
4. Evaluate and present the results, including an assessment of their relevance for the aspirations and objectives of the companies and/or institutions that required the demand estimates.

INDOTEL also estimated the revenue generating potential of proposed broadband projects with an eye toward identifying how much of a subsidy the government should contribute to make the project viable in light of a projected negative net present value.* This process requires estimates of capital investments, recurring operating expenses and maintenance costs.  For each project INDOTEL calculated an output based aid (“OBA”) subsidy, a direct payment, “to support investments, for example, in rural areas where the cost of construction and service provision combined with limited revenue potential makes the project commercially unfeasible. A key requirement for a one‐time OBA‐type subsidy is that it results in the establishment of an operation and service provision that should ultimately be self‐sustaining and commercially viable.”*  

Governments can decide to provide subsidies based in part on an assessment whether a project only needs preliminary funding to become commercially viable, or whether recurring subsidies are needed.  In the latter case, governments typically establish service milestones and conduct audits of operators to ensure that a project meets specified benchmarks and will provide adequate service.*