There is no fiber glut and those that ignore reality will find themselves on the outside looking in to the rest of the world that has made the proper plans and investment.

Every element of the fiber network globally needs a proper plan and investment. It is not just one country, or another – aside from those that already have a plan underway. It is not wireless verses wired, it is not just FTTP, FTTT, or fiber to the data center. It is a need for fiber everywhere.

Wired’s recent article ‘UK plans for superfast broadband neither super nor fast’ takes a look at the fiber need further. Here is the link to the complete story: http://www.wired.co.uk/news/archive/2012-03/22/uk-superfast-broadband-is-neither-super-nor-fast

This recent article from CNN Money is very curious. http://money.cnn.com/2012/02/21/technology/spectrum_crunch/

The issue with spectrum is that it has been misallocated and is therefore being inefficiently utilized. Yes, it is finite, but that is all the more reason to treat it carefully.

The thought that this somehow sunk up on us, has taken America by surprise and that no one anticipated it may be partially true, but is a “Chicken Little”, “sky is falling” attitude. With proper planning it can be managed.

What is ironic is that there is concept held by some of a fiber glut in the USA, but at the same time there is a wireless spectrum exhaust. Neither are accurate statements.

In reality there is plenty of spectrum, it is just being misused, and there is actually a scarcity of dark fiber available for lease by any and all network operators – including wireless carriers. Unlike spectrum, dark fiber cannot be created just by signing a license agreement, as it is for the airwaves. Spectrum is a Right of Way in the air just as a duct is in dirt Right of Way.

Wireless in the mobile device definition is obviously very convenient and desirable, but it requires fiber for backhaul in order for it to work. So again, the irony is that the article never mentions the need for fiber beyond getting the spectrum issue sorted out which is odd because if a national fiber plan for Fiber to the Tower existed it too would easy the pain of spectrum exhaust by making the spectrum more locally efficient. With more wireless access points fed by fiber there are less mobile users vying for airwave capacity on a long distance basis letting the fiber do that work.

The bottom line is that we need a real, national plan for spectrum as well as dark fiber and physical layer interconnection and colocation in order for the USA to effectively manage demand and its disparate need to add jobs, grow productivity and GDP to be competitive on the global stage. One without the other is not going to produce the results.

Cowen Group had a conference call to review the DOJ Antitrust Lawsuit against AT&T with Telecom lawyer, Andy Lipman of Bingham McCutchen. Below is the overview of this call as well as feedback from Hunter Newby, CEO of Allied Fiber.

Takeaways from DOJ Antitrust Lawsuit Review Call

Conclusion. Yesterday, we hosted a conference call with Andy Lipman who heads the telecom practice and Frank Lamancusa who specializes in enforcement at the law firm Bingham McCutchen. The purpose of the call was to discuss the announcement by the Department of Justice (DOJ) that it has decided to file an antitrust lawsuit to block AT&T’s proposed acquisition of T-Mobile USA (Tmo). The DOJ stated that it was concerned that approving the transaction would reduce competition resulting in higher prices, poorer quality services, and fewer choices/innovative products for consumers. Our key takeaways from the call are summarized below. While we continue to believe the fundamental outlook for standalone AT&T is improving and that its 6.2% dividend yield is highly attractive, we believe continued uncertainty surrounding the deal including potentially having to pay Tmo a sizable break-up fee (see below) will continue to weigh on the stock. Maintain Neutral rating.

Unlikely that lawsuit is being used as a bargaining chip. While some may view the lawsuit by the DOJ as a bargaining chip, Mr. Lipman believes this is unlikely for several reasons including 1) the DOJ is seeking a permanent injunction as opposed to a preliminary injunction, 2) the team that the DOJ has assembled to preside over the case includes top litigators as well as a trial specialist, and 3) in his opinion the complaint filed was well drafted, implying that the decision was well thought out. While AT&T has stated that it expects divestitures and has agreed that the $39B deal price would not change if divestitures were below $3.9B, and could not walk away if divestures were below $7.8B, it appears the DOJ did not feel divestures alone would be enough to maintain a competitive environment noting in the complaint that the Herfindahl-Hirschman Index (HHI) suggests that 96 of the top 100 markets were overly concentrated and in 15 markets the combined company would have >50% market share.

It is more economical for AT&T to fight than to walk away. AT&T released a statement noting that it was surprised by the lawsuit and that it plans to ask for an expedited hearing and that the company intends to contest the matter in court. While Mr. Lipman noted that AT&T has not been formally served and has 21 days to respond he believes it will try to meet with the judge over the next several days. Considering the large break-up fee associated with the transaction which we estimate in total to be ~$6B we are not at all surprised that AT&T has chosen to go to trial. Recall, the break fee includes three parts including 1) AT&T would pay Deutsche Telekom $3B, 2) AT&T would transfer highly valuable AWS spectrum to Tmo that covers 110 markets, including 17 of the top 30, and 3) AT&T would sign an attractively priced wholesale 3G roaming contract with Tmo giving them coverage outside their current ~220 POPs.

A decision could still come in 1H12. While Mr. Lipman stated that the government has historically won the majority of cases that have gone to trial, he also referenced the Oracle/PeopeSoft (2005) and Whole Foods/Wild Oats (2007) mergers that ended up in court but were eventually approved. He believes that the trial will likely take an extensive amount of time especially when considering the amount of economic issues that will be heavily debated such as how to look at competition on either a local (AT&T) or national (DOJ) basis as well as how many providers are needed for a market to be considered competitive. Mr. Lipman also views the Oracle case which lasted about seven months from complaint filing to court decision as a decent estimate as to how long the trial could take. This would imply that the merger could still hypothetically be approved in 1H12, which would still be in-line with AT&T’s original time frame.

FCC is likely to reach same decision as DOJ. Yesterday, FCC Chairman Julius Genachowski released a statement noting that his agency also has serious concerns about the impact that the proposed transaction would have on competition although he also pointed out that the agency’s process is not complete. Mr. Lipman believes that the FCC was only recently made aware of the lawsuit. Mr. Lipman and Mr. Lamancusa also pointed out that while the DOJ largely focuses on whether or not competition would be harmed when deciding to approve a transaction the FCC is more open to negotiations since they look at variables beyond competition such as efficiencies created through the deal, public safety and broadband build-outs. That said Mr. Lipman believes that while the FCC may simply be at a different point it is likely that they are on the same path as the DOJ. We would point out that the FCC has always come to the same decision as the DOJ.

Hunter Newby Feedback: I have serious concerns about the impact that the litigation will have on infrastructure investment for 4G wireless in the USA, both the timing and scale of it.

I suppose it comes down to the same question, “How long is it supposed to take to do something right?”

The DOJ (and FCC) clearly sees the monopoly/control issue, but must balance that with the need for investment in a real 4G LTE network.

In South Africa there is FiberCo. They “get it” and are making it happen. Now BT wants in.

http://www.telegeography.com/products/commsupdate/articles/2011/07/28/bt-global-poised-to-link-up-with-sa-fibre-project

Open-access long haul fiber makes sense.

France –  ARCEP Asked to Step in as Fibre Disputes Escalate

http://www.telegeography.com/products/commsupdate/articles/2011/06/08/arcep-asked-to-step-in-as-fibre-disputes-escalate

It’s all about control. The control of fiber. The control of quality. The control of the underlying economics of “broadband” which in any segment if you have enough lit capacity you must control the fiber, or else you don’t have a business.

This applies in any country in the world. The larger the country, the more critical physical access is.

This is the new model, the logical and necessary approach to data center development and deployment. It is one that legacy brick and mortar designs and models do not and cannot have.

In addition, the need for distributed cloud computing is driving the need for distributed data centers for which this is perfectly suited – as long as there is direct access to power and dark fiber.

For more information on this topic, please see Data Center Knowledge’s recent article on Modular Data Center demand. http://www.datacenterknowledge.com/archives/2011/05/13/citing-modular-demand-io-continues-expansion/

If you connect this article to the Allied Fiber Container/Modular Data Center cartoon it is easy to see that these modular design sites can be shuttled along the Allied Fiber route to wherever the conditions are perfect for any application (inexpensive power, availability of power, tax incentives, state incentives, rebates, job creation, diversity, video distribution, mobile data distribution, peering, low latency, etc.). The power of modular data centers is unleashed through intermediate access to a flexible Nationwide dark fiber system. The combination of the two is unbeatable.

For the complete Data Center Boom article, click here.

For those that do not believe there is a real, immediate need for new dark fiber investment in every segment of the “global network” take a look at the latest news from TeleGeography in the link below.

The reality is well beyond the investment thesis for new fiber and now has reached a level for those “in the know” that their entire country’s economy is tied to the connectivity thus in addition to new fiber there are now new laws protecting that fiber.

The rest of the world can, should and hopefully will follow the lead of Uruguay.

Uruguay
Submarine cable risk from vessels given ‘das boot’ by new regs

http://www.telegeography.com/cu/article.php?article_id=36752&email=text

The Heartland Institute’s article titled “AT&T Acquisition of T-Mobile Seen As Boon for Customers, Competitors” by Phil Britt included comments I provided on the topic. This article can be found at the following link, http://www.heartland.org/full/29637/ATT_Acquisition_of_TMobile_Boon_for_Customers_and_Competitors.html Below is some additional feedback on AT&T’s acquisition of T-Mobile and the impact it will have on the United States.

I believe the AT&T/T-Mobile deal is good for the USA and good for consumers in the medium-long term.

Many individuals are focusing on the immediate impact of consumer mobile service. They are shortsighted. Yes, there will be one less choice for service (for now) which may lead to higher prices, etc, but the real issue is the challenge of justifying the CAPEX/OPEX to grow a proper 4G network in the geography of the USA. This is what we really need as opposed to being stuck at 3G service, but having lots of inexpensive offerings from several providers. We can’t have it both ways today. There is a price to pay.

The fact is that DT wasn’t spending/going to spend the CAPEX necessary to get to 4G LTE across the entire USA. They have no justification for it. They really only have mobile in the USA. T-Systems uses Type II for backhaul and really only for PoP-to-PoP (60-1 Wilshire) and large enterprise customer tails. They have no other business lines here unlike AT&T which has FTTH, wireline, video, mobile, data centers, etc. Therefore for every dollar DT spent for mobile backhaul in the USA was 100% allocated to that purpose. AT&T can spend $1 and allocate funds for transport across many business units by combining purposes and bringing down the effective cost. Also, with one less provider there is less churn, so they have a better chance of keeping their 40% mobile market share and getting a ROI.

Why would AT&T spend the non-recurring cost’s (CAPEX) to get FTTT only to have T-Mobile piggyback on that and get Ethernet backhaul without the upfront spend? It would mean that AT&T’s costs are higher, margins are lower and they have enabled a competitor that has no real fiber investment in the USA to trade. AT&T is much less concerned with Verizon Wireless as they cut deals for reciprocal backhaul in the incumbent markets (ie. Verizon Wireless just awarded AT&T the wireless backhaul contract for a 50 mile radius around Atlanta).

The gift for American consumers is that with this near term control AT&T will be able to justify the CAPEX/OPEX increase in spending to get a proper 4G backhaul network in place. This is sort of like “Broadband Relief” in 2003 where the RBOC’s received protection for their FTTH investments which led to FiOS, U-verse, only that ATT doesn’t build its own FTTT, they usually have a transport provider build it and they lease Ethernet circuits. That’s the gift. Once the CAPEX is spent to bring FTTT it is there. As the fiber penetration increases it seeds the towers for future mobile operator entrants that will not have the same mountain to climb. They will be able to enter the USA with only needing capital for the leased lit (OPEX) and not the capital for the builds to the towers (CAPEX). This is a huge savings and what mobile operators in “fiber-developed” countries around the world enjoy today.

Inside this deal is the secret that no one knows, or is willing to talk about – the USA’s position in the world for broadband is driven by the size and population of the country (population density) and the cost to build, maintain and operate the network which are directly related.

This is actually the exact formula for how to determine why every other country is where they are on the OECD list. In larger, more populated countries there are fewer providers, higher prices, lower levels of service speed and lower penetration levels as a result of the ratio.

I believe this deal is a necessary step in getting the USA to where it needs to be in the world – at the top.

Hunter Newby, CEO, Allied Fiber

Below is a link to an article from the online issue of the great AGL Magazine. It covers lightRadio, AlcatelLucent’s technology that is making waves with its form-factor design for the airwaves.

A section of the article…

“….lightRadio is somewhat of a DAS system implementation, seemingly protocol agnostic and connected by fiber back to the network smarts point.”

I like this point, “by fiber.” Reads like “buy fiber” to me, or “build fiber,” but for sure “access to fiber” is essential.

The point is that in order to get in to the fully meshed, fully redundant mobile cloud world there needs to be a very logical, systematic investment in real, physical infrastructure. These advances are a part of the natural evolutionary process that is always occurring.

The mention of fiber in a wireless context has been somewhat taboo – up until now. It seems as if the world is waking up to the reality that the two do and must co-exist in order for mobility to function properly end to end.

This is all good! Now let’s build something logical!

http://www.agl-mag.com/newsletter/AB_030211_Biby.htm