BROADBAND BROADBAND

INFRASTRUINFRASTRUCTURE CTURE

PLAN FOR PLAN FOR

CHATHAM COUNTY, N.C.CHATHAM COUNTY, N.C.

submitted by submitted by

ACTION AUDITS, LLCACTION AUDITS, LLCCARY, N.C.CARY, N.C.

919-467-5392919-467-5392

AUGUST 24, 2011AUGUST 24, 2011

AUTHORS:AUTHORS:CYNTHIA M. POLSCYNTHIA M. POLS202-328-0654202-328-0654polscm@aol.compolscm@aol.comCATHARINE B. RICECATHARINE B. RICE919-439-9084919-439-9084ricecb@yahoo.comricecb@yahoo.com

TABLE OF CONTENTSEXECUTIVE SUMMARY

I. INTRODUCTION AND BACKGROUND ................................................................................ 1 A. BROADBAND AVAILABILITY IN CHATHAM COUNTY ........................................................ 1

B. IMPORTANCE OF BROADBAND FOR CHATHAM COUNTY .............................................. 8

II. BROADBAND INFRASTRUCTURE OPTIONS ................................................................. 12 A. WIRELINE BROADBAND OPTIONS ........................................................................................ 14

1. Telephone Technology (DSL) ........................................................................................................................ 14 2. Cable Technology (HFC) ................................................................................................................................ 22 3. Direct Fiber Optics Technology (FTTP) ........................................................................................................ 26

B. WIRELESS BROADBAND OPTIONS ......................................................................................... 30 1. Terrestrial Wireless ......................................................................................................................................... 30

a. Mobile Terrestrial Wireless (Conventional Cellular Service) .................................................................... 30 b. Fixed Terrestrial Wireless (Fixed Wireless Access (FWA) Networks) ..................................................... 36 c. Key Spectrum for Wireless Terrestrial Service .......................................................................................... 38

2. Satellites ......................................................................................................................................................... 39

C. MIDDLE-MILE CONNECTIONS ................................................................................................ 41

D. SUMMARY OF CAPACITY AND GEOGRAPHIC LIMITS OF KEY BROADBAND OP-TIONS ........................................................................................................................................... 43

III. CHATHAM COUNTY’S EXISTING BROADBAND INFRASTUCTURE ....................... 45 A. WIRELINE PROVIDERS .............................................................................................................. 45

1. Telephone Companies ..................................................................................................................................... 46 a. CENTURYLINK (DSL) ............................................................................................................................ 47 b. AT&T (FORMERLY BELLSOUTH) ........................................................................................................ 56 c. RANDOLPH TELEPHONE MEMBERSHIP CORP. AND RANDOLPH TELEPHONE COMPANY .. 59 d. WINDSTREAM (FORMERLY HEINS TELCO) ..................................................................................... 62 e. FRONTIER (VERIZON UNTIL 2010) ..................................................................................................... 64

2. Cable Companies ........................................................................................................................................... 66 a. TIME WARNER CABLE (TWC) ............................................................................................................. 66 b. CHARTER ................................................................................................................................................. 69

B. WIRELESS PROVIDERS .............................................................................................................. 71 1. Terrestrial Wireless Providers ......................................................................................................................... 71

a. Mobile Wireless Providers (Conventional Cell Service) ......................................................................... 72 i. Verizon Wireless .................................................................................................................................... 72 ii. AT&T Wireless ..................................................................................................................................... 74 iii. Sprint/Nextel ........................................................................................................................................ 76 iv. T-Mobile ............................................................................................................................................... 76 v. Other Wireless Carriers ......................................................................................................................... 77

b. Fixed Wireless Providers ........................................................................................................................... 79 2. Satellite ........................................................................................................................................................... 80

C. MIDDLE–MILE PROVIDERS ...................................................................................................... 80

D. SUMMARY OF CHATHAM COUNTY’S EXISTING BROADBAND PROVIDERS ............ 82

IV. BROADBAND APPLICATIONS AND USES ..................................................................... 84 A. ESTABLISHED BROADBAND USES ......................................................................................... 85

1. Education ........................................................................................................................................................ 85 2. Economic Development and Job Creation ..................................................................................................... 87 3. Personal Communications, Financial Transactions and Entertainment ......................................................... 87 4. Public Safety .................................................................................................................................................. 89 5. Government Services and Civic Engagement ................................................................................................ 91

B. EMERGING BROADBAND USES ............................................................................................... 91 1. Health Care ..................................................................................................................................................... 91

a. Electronic Health Records (her) ................................................................................................................. 92 b. Video Consultations ................................................................................................................................... 93 c. New Mobile Treatment Options ................................................................................................................ 93

2. Energy and Utility Use (Management and Control) ....................................................................................... 94 3. Transportation ................................................................................................................................................. 96 4. Smart Communities ........................................................................................................................................ 98

V. LEGAL BARRIERS TO COMPETITION AND INNOVATION .......................................... 99 A. LIMITS ON PUBLIC SECTOR ENTITIES ................................................................................ 99

1. County Authority ............................................................................................................................................ 99 2. Municipal Authority .................................................................................................................................... 100 3. Guidance for Counties .................................................................................................................................. 101 4. Authority of Telephone Cooperatives ........................................................................................................... 101 5. Authority of Electric Cooperatives ............................................................................................................... 102

B. LIMITS ON PRIVATE SECTOR PROVIDERS ........................................................................ 104 1. Service Territory Limits ................................................................................................................................ 104 2. Federal Subsidy Programs ............................................................................................................................ 104 3. Spectrum Allocations ................................................................................................................................... 105

VI. RECOMMENDATIONS ..................................................................................................... 106 A. OVERALL APPROACH .............................................................................................................. 106

B. LONG-TERM BROADBAND PLAN ......................................................................................... 106

C. SHORT-TERM PLANNING STEPS ........................................................................................... 109

APPENDIX

EXECUTIVE SUMMARYThis broadband infrastructure planning project is intended to provide Chatham County with a plan for improving broadband service, recognizing the central importance of an affordable, high-quality broadband infrastructure to the County’s future. The County’s broadband deficit is substantial and, if anything, is likely to widen in the future because of the private sector’s limited interest in investing in broadband infrastructure.

Our central recommendation is that the County develop a plan to reprogram existing County and other public resources currently devoted to broadband and telecommunications service and establish an independent fiber optic backbone network for the County through a public-private partnership. This fiber optic backbone will control and decrease the County’s communication costs over the long term. Perhaps more important, it will provide a central element of the infrastructure required for the 21st century and enable County residents to compete in the state, national, and global economy and keep up with future developments in the broadband world. Operationally, this new network will serve the County’s governmental and other public institutions while also establishing a platform for new commercial and other service providers to offer new state-of-the-art wireline and wireless service to Chatham residents.

INTRODUCTION AND BACKGROUND [§ I]

Broadband Availability in Chatham County [§ I.A]:

The broadband deficit in the County is the greatest in the western and southern parts of the County. The most disadvantaged areas are the two 2000 census tracts1 west and south of Siler City, with broadband subscription rates of zero to 20% (this area includes Harpers Crossroads, Bear Creek, Bonlee, and Mount Vernon Springs). Next in terms of limited access to broadband service are the 2000 census tracts for Siler City and Goldston at 20% to 40% subscription rates. The area with the highest subscription rate (and therefore the greatest access to the broadband world) is the 2000 census tract for the Chapel Hill area, with a 80% to 100% subscription rate. The other three 2000 census tracts (north of Siler City, Pittsboro, and east of Jordan Lake) fall in between the two extremes, with subscription rates of 60% to 80%.

Large swaths of the County have been left out of the broadband era for the first 10 or so years of its existence2 and are likely to continue to lag behind in the future. Problem areas go well beyond the western and southern parts of the County and include areas in the vicinity of Pittsboro, north of Siler City, and east of Lake Jordan. Service deficiencies are the most pronounced in the western and southern parts of the County, but even the more populated eastern areas are not immune to service quality problems and uneven access to service on a street-by-street basis.

1 This data was compiled by the Federal Communications Commission (FCC) in 2011 using 2000 census tracts.2 Cable modem service started to take off as a major business with serious penetration rates in 1999, with the tele-phone industry’s digital subscriber line (DSL) service following suit in 2000.

Also of concern is that even in areas characterized by government agencies as fully served, broadband service is not available or inadequate at a significant number of spots within those areas. Further, wireless broadband, as the industry is currently configured, is not much of an answer to the County’s broadband deficit due to spotty coverage and slow speeds.

The telecommunications industry, whether wireline or wireless, invests in infrastructure based primarily on population density and secondarily on economic and demographic characteristics. These investment practices make fashioning a permanent solution to the County’s broadband deficit a challenge as normal market mechanisms do not bring broadband service to the County in a timely or responsive fashion.

Importance of Broadband for Chatham County [§ I.B]:

Using 2001 as the starting date for the broadband era, parts of the County are at least 10 years off pace in terms of access to broadband technology (the more rural areas of western and southern Chatham County where there still is no broadband service). Others are 7 or 8 years off pace (Silk Hope area), some are 4 or 5 years off pace (Goldston, Bonlee), and still others are just 1 or 2 years off the pace (Pittsboro and Siler City). This pattern can be expected to repeat itself again and again in the future as new generations of broadband technologies emerge and are deployed. Each new generation of technology is unlikely to reach much of the County until the prior generation of technology is close to the end of its life cycle and the industry is in the process of moving on to the next generation of technology.

BROADBAND INFRASTRUCTURE OPTIONS [§ II]

In connection with preparing its 2010 National Broadband Plan, the Federal Communications Commission mapped out five major broadband infrastructure options. These five options consist of three wireline options (digital subscriber line telephone (DSL), hybrid fiber-coaxial cable (HFC), and fiber-to-the-premises (FTTP) systems) and two wireless options (terrestrial wireless systems (mobile and fixed) and satellites). All these options except the satellite option also re-quire middle-mile connections to the Internet to complete service delivery, making middle-mile pipelines a key part of broadband planning.

In connection with the National Broadband Plan process, the FCC also established affordable ac-cess for all American homes to broadband service at actual speeds of 4 megabits per second (MB/s) downstream and 1 MB/s upstream as national broadband availability targets. The FCC chose these speed levels as the minimum necessary to participate in contemporary society. To put these broadband speed targets in context, 1 MB/s speed in both directions is required to support a high-definition Skype video conference. The FCC also established more ambitious long-term goals for broadband access of actual speeds of 100 MB/s downstream and 50 MB/s upstream by 2020 for 100 million homes (roughly 80% to 85% of U.S. households), with interim goals of 50 Mb/s downstream and 20 MB/s upstream by 2015 for 100 million homes.

Each of the main broadband options is subject to technical limits and financial constraints but some are superior to others in performance and potential. Putting aside cost considerations, the most future-proofed and powerful technologies are advanced FTTP systems (gigabit passive op-tical network (G-PON) systems) and advanced DSL systems (VDSL2)3, with G-PON having a decided advantage over VDSL2 technology. Lagging far behind in performance characteristics and capabilities are the two technologies favored by Chatham County’s incumbent providers: the telephone industry’s ADSL24 technology and the cable industry’s HFC technology.

Wireline Broadband Options [§ II.A]:

ADSL2 technology and HFC systems have built-in weaknesses due to the fact that they were grafted onto older technologies that were developed for limited purposes (voice communications in the case of ADSL2 telephone technology and one-way video programming in the case of HFC cable technology). Incumbent telephone companies are unwilling to provide telephone techno-logy (DSL) [§ II.A.1] by installing DSL access multiplexers (DSLAM) in rural areas in the num-bers necessary to limit the signal loss associated with long copper runs to subscriber locations and to ensure high-speed broadband service. Cable technology (HFC) [§ II.A.2], which requires massive bandwidth sharing between optical nodes and subscriber locations, is perhaps even more flawed in design terms because of the congestion and other problems associated with bandwidth sharing. In contrast, direct fiber optics technology (FTTP) [§ II.A.3] was designed for broad-band service and, as a result, provides the most potential capacity and is the most future proofed of the main broadband technology options.

Wireless Broadband Options [§ II.B]:

In the wireless arena, terrestrial wireless [§ II.B.1] does not currently provide much of an altern-ative to wireline technology. Mobile terrestrial wireless [§ II.B.1.a] (e.g., conventional cellular service) is limited by the high-cost of antenna towers and the limited availability of spectrum. This technology will likely need to be overhauled or augmented by new technology such as much smaller and more versatile alternatives to the large towers in relatively short order just to keep up with current demand. Fixed terrestrial wireless [§ II.B.1.b], with the possibility of much smaller service areas (and therefore less bandwidth congestion) and ease of entry for new pro-viders (due to readier availability of spectrum) is promising but largely undeveloped.

See also Key Spectrum for Wireless Terrestrial Service [§ II.B.1.c] for further detail on the spectrum currently available for wireless service.

See also Satellites [§ II.B.2] for a discussion of the technical limits and high cost of satellite ser-vice.

3 VDSL stands for Very High Bit Rate DSL.4 ADSL stands for Asynchronous DSL service.

Middle-mile Connections [§ II.C]:

Middle-mile networks carry Internet traffic to and from local network aggregation points to In-ternet backbone connection points and are typically fiber optic networks. These middle-mile con-nections can add significantly to the cost of local broadband operations, adding anywhere from $2 to $12 per subscriber to the provider’s monthly costs. In rural and semi-rural areas, the essen-tial middle-mile market tends to be controlled by one or two incumbent providers who can and do pass along high middle-mile fees as part of broadband service fees to unknowing business and governmental customers.

Summary of Capacity and Geographic Limits of Key Broadband Options [§ II.D]:

The most future-proofed and powerful technologies are two technologies that rely heavily on fiber optic connections: G-PON FTTP technology and VDSL2, with G-PON being more fiber rich than VDSL2 and having a decided advantage over VDSL2. A close examination of other broadband options, whether wireless or wireline, reveals the intrinsic weaknesses of most com-monly available broadband technologies and suggests that Chatham County is not equipped to respond to continued growth in broadband demand over the long haul. The cost constraints of building a full G-PON FTTP system should not preclude deploying a fiber optic backbone net-work. Such a network could serve as the possible foundation for a future G-PON FTTP system while also providing a core network that would serve public and other institutions in the County and provide the superstructure for the next generation of wireless service whether or not a com-plete G-PON FTTP system is ever deployed.

CHATHAM COUNTY’S EXISTING BROADBAND I NFRASTRUCTURE [§ III]

Chatham County’s existing array of broadband providers consist of seven wireline providers and an equal number of wireless providers.

Wireline Providers [§ III.A]:

Chatham County’s seven wireline providers include five telephone companies and two cable companies. Each of the five telephone companies has its own service area and generally does not cross its service area boundaries to provide broadband service in adjacent service areas. The two cable companies compete with the local telephone company in their service territories but have limited service areas and no plans to expand those service areas.

The five telephone companies [§ III.A.1] are CenturyLink, AT&T, Randolph, Windstream, and Frontier (formerly Verizon). One of these five, CenturyLink, is the County’s dominant wireline provider. In terms of size and reach it is followed by another telephone company, AT&T, and then the County’s two cable companies (Time Warner Cable and Charter). Three other telephone

companies—Randolph, Windstream, and Frontier—claim small pieces of the County at its corners and southern edge.

The County’s two cable companies [§ III.A.2]—Charter Communications and Time Warner Cable—serve roughly 5,250 subscribers in unincorporated areas of the County and in the towns of Siler City and Pittsboro or about 20% of the 25,845 occupied housing units in the County. The two cable providers have focused primarily on two incorporated areas, Pittsboro and Siler City, with Time Warner Cable also venturing into several of the major new developments in the County’s Chapel Hill area. The current service areas of both cable companies are primarily defined and limited by corporate investment practices and business preferences. Neither com-pany has any real interest in going outside their existing limited footprints (except for “green-field” developments in the case of TWC).

CenturyLink [§ III.A.1.a] serves about 71.1% of the Chatham County’s geographic area and 68.7% of its homes, including the County’s three municipalities (Siler City, Pittsboro, and Gold-ston) and much of central and western Chatham County. CenturyLink’s primary focus is on the more densely populated municipalities and their immediate environs, leaving broad swaths of the County with either no broadband service or low-quality broadband service.

CenturyLink acknowledges employing density-related requirements and other investment-related calculations to determine whether to invest in broadband-related network improvements in Chatham County and the rest of its service area.

DSL was first deployed in Siler City and Pittsboro in 2002, Bonlee in 2005, Goldston in 2006, and Moncure in 2007. DSLAMs were installed even later in the Silk Hope area (2008 and 2009 time frame); Mt. Vernon Springs, south of Bonlee, and west of Pittsboro along US 64 (2010); and the Staley area (2011). These dates indicate that large parts of Chatham County lag behind the more urbanized areas of the state by six to ten years.

CenturyLink’s uneven performance has had, and will continue to have, adverse consequences for Chatham County, especially western Chatham County where CenturyLink is the only possible source of wireline broadband service for the vast majority of residents. CenturyLink provides better broadband service in the more densely populated areas of the County where it also faces cable competition (e.g., Pittsboro, Siler City).

Population density does not itself ensure high-quality broadband service as CenturyLink provides better service in Pittsboro than in Siler City although Siler City is more than twice as densely populated as Pittsboro. CenturyLink’s second-class treatment of different parts of the County is brought into sharp relief by its recent disclosure of plans to deploy new advanced broadband services (IPTV video services) in its Pittsboro exchange area but not in its Siler City, Bonlee, and Goldston exchange areas.

AT&T [§ III.A.1.b] (formerly BellSouth) serves about 16.4% of the Chatham County’s geo-

graphic area and 27.5% of its homes and covers about 110 square miles of the County. AT&T does not provide broadband service throughout its service area, leaving pockets of its service area, particularly low-income and minority communities, with no broadband service. In other areas, it provides low-quality broadband service due to poorly equipped DSLAM units and poorly maintained telephone lines.

AT&T states that it has begun to deploy its premier video service product (the U-verse package) in Chatham County. However, spot checks failed to turn up any evidence of U-verse availability so the number of U-verse customers in Chatham County is likely very small and limited to the Chapel Hill and Cary areas. U-verse technology requires installing a fiber-fed “Video Ready Ac-cess Device” or VRAD within no more than 3,000 feet or so of the customer’s home. AT&T’s VRAD technology is not compatible with its DSLAM technology, which means that the existing remote DSLAM units cannot be converted to U-verse use. This basic incompatibility between AT&T’s DSLAM and U-verse technology means that a substantial investment will be required to fully deploy U-verse technology throughout AT&T’s 110 square mile service area in Chatham County. Based on these underlying metrics, it is unlikely that AT&T will invest in U-verse tech-nology in the County in any area other than the most densely populated subdivisions directly within the orbit of Chapel Hill and Cary.

Randolph Telephone Membership Corp. [§ III.A.1.c] (RTMC) serves about 5.6% of Chatham County’s geographic area and 3.8% of its homes and covers about 38 square miles in the County. Its Bennett service area consists of the southwest corner of Chatham County while its Liberty service area occupies the County’s northwest corner.

RTMC makes broadband service available to all customers and has begun to deploy FTTP in new builds. RTMC offers video service (IPTV) to residents located within 9,000 feet of any of its 8 wire centers. RTMC is the most nimble and innovative and the most unconstrained by top-down corporate culture of Chatham County’s seven wireline providers. It is well equipped to play a role in helping to improve broadband in Chatham County but its first obligation is to serve its members (it is a non-profit organization), and it is constrained by its small size.

See also Windstream [§ III.A.1.d] and Frontier [§ III.A.1.e] for additional detail on two other telephone companies with small service areas in the County.

Time Warner Cable [§ III.A.2.a] is the larger of the two cable providers, with roughly 3,750 subscribers and franchises for the town of Pittsboro and unincorporated areas of the County. In venturing outside of Pittsboro, TWC has preferred greenfield developments and well-populated subdivisions, serving such developments as the Preserve, Fearrington Village, Governors Village, and Briar Chapel. TWC picks and chooses the locations to be served because TWC’s soon-to-ex-pire County franchise requires only that TWC provide service in areas with at least 30 homes per “cable mile.” TWC has relied on this provision to simply skip over entire subdivisions, streets, and roads on the way to provide service to other areas that have more attractive demographic or density characteristics. TWC provides no service in western or southern Chatham County al-

though it is entitled to operate throughout the County.

TWC is the slowest of the major cable providers to deploy state-of-the-art modem service, with DOCSIS 3.0 not reaching North Carolina (Charlotte) until 2010 and the Raleigh area until April of 2011.

Charter [§ III.A.2.b] holds a local cable franchise for the town of Siler City and a County fran-chise for the entire unincorporated area of the County and serves about 1,500 subscribers. Like TWC, Charter has staked out a small piece of the County—Siler City and its immediate environs—and has barely ventured outside of Siler City. It has no interest in serving Goldston although Charter’s plant passes directly by Goldston on US 421 and Goldston is fully wired for cable ser-vice.

Charter updated antiquated technology in the late 1990s after years of poor service by a prior provider and provides high-speed broadband service throughout its Siler City footprint but has not deployed state-of-the-art technology. Charter’s system carries about 20 fewer analog chan-nels than TWC’s Chatham system and is likely a 550 MHz cable system. The industry standard is 750 to 860 MHz, meaning that the Siler City system is substandard and probably will not be able to carry some of the new services expected to be deployed in the future.

Wireless Providers [III.B]:

A total of seven terrestrial wireless providers [§ III.B.1], including six mobile wireless pro-viders [§ III.B.1.a] (i.e., conventional cell service providers) and one fixed wireless provider [§ III.B.1.b], operate in the County. Only one of these seven providers, Verizon Wireless, provides close to countywide service and only one, Chatham Wireless, provides high-speed service that meets the minimum Internet speeds that the FCC has determined are necessary for participating in contemporary society: 4 MB/s downstream and 1 MB/s upstream.

Verizon Wireless [§ III.B.1.a.i] provides the most coverage in Chatham County but wireless broadband service generally is a hit-or-miss proposition and a slow proposition in many parts of the County. All but one of the six wireless carriers (with Verizon Wireless the exception) provide spotty and limited coverage, focusing primarily on four key transportation corridors (US 64 West, US 15/501, US 1, and NC 87 South).

Verizon Wireless provides the most ubiquitous service in the County and also has the strongest signal. This is likely due to the fact that it is the only major cell provider operating throughout the County with an older low-frequency license. These older cellular licenses for spectrum in the 800 MHz range provide major operational advantages. The lower frequencies associated with these older cell licenses reach further and penetrate foliage and walls more readily than do the higher frequencies associated with the broadband personal communications service (PCS) and advanced wireless service (AWS) licenses held by AT&T Wireless [§ III.B.1.a.ii], Sprint/Nextel [§ III.B.1.a.iii], T-Mobile [§ III.B.1.a.iv] , and Cricket (Leap). Other wireless carriers [§

III.B.1.a.v] serving the county in addition to Cricket include US Cellular. Other than Verizon Wireless, US Cellular is the only wireless carrier operating in the County that holds an 800 MHz license but its tower presence in the County is limited, making it a poor alternative to Verizon.

As with wireline broadband service, corporate decisions to invest in wireless infrastructure are based on density and demographic factors. For example, Verizon Wireless recently activated 4G service in the Raleigh area but 4G service basically stops at Chatham’s border, limiting the abil-ity of Chatham residents to obtain access to the latest advances in wireless technology. Cell carri-ers tend to share towers, with each tower holding antenna arrays for four to six different carriers. Even so, many of the wireless carriers have chosen not to install antennas as pervasively as they could in the county, simply leaving certain portions of the county unserved. Just as in the wire-line context, Chatham residents have only limited access to the benefits of competition as only Verizon can be counted on for anything close to countywide service.

Chatham Wireless [§ III.B.1.b], the only known operational fixed wireless provider in the County, operates in the Pittsboro area where a small number of customers have access to high-speed broadband service. It has about six transmitting sites located on a mixture of towers and rooftops in and around Pittsboro. It operates by shooting signals via 5 GHz connections to the six transmitting sites. From these six sites, Chatham Wireless transmits signals to fixed wireless an-tennas at customer locations, making the last-mile connections via 900 MHz and 2.4 GHz con-nections, but the 2.4 GHz signals reach only a short distance. These three wireless pathways—900 MHz, 2.4 GHz, and 5 GHz—are unlicensed pathways. Chatham Wireless’s basic broadband service is 4 MB/s downstream and 1 MB/s upstream although it is able to offer higher speeds at some locations that are close to its transmitting sites.

Chatham Wireless’s disadvantages include the high cost of middle-mile service and effective control of the middle-mile market in Chatham County by competing broadband providers, Cen-turyLink and TWC. Another barrier to entry is the need for a large numbers of towers and other high points for transmitting sites and the cost of acquiring the necessary transmitting sites at the right locations.

Satellite [§ III.B.2] service is also available in most parts of the County from HughesNet and Vi-aSat (WildBlue) but is a flawed, limited, and expensive option due to the intrinsic limits of geo-synchronous-orbiting satellites.

Middle-mile Providers [ see § III.C]:

Small service providers such as Chatham Wireless and other possible new entrants are captive customers of their competitors for middle-mile connections to the Internet (e.g., CenturyLink and Time Warner Cable). Alternative pathways to the Internet via independent middle-mile connec-tions such as the MCNC network will open new possibilities for the development of alternative wireless and wireline networks.

The federal government (with a hand from the Golden Leaf Foundation) is financing a publicly-controlled 1,800-mile fiber optic middle-mile network for both public and private providers. MCNC is a non-profit organization, designated by the state of North Carolina several years ago to help community colleges, local educational authorities, and other similar institutions obtain access to Internet service. When this $146 million project is complete, MCNC will go from be-ing an intermediary between public entities and the private sector (a sort of collective purchasing agent) to being an independent provider of middle-mile service.

This new network, when completed in 2013, will be a state-of-the-art high-capacity fiber optic middle-mile network with points of presence at strategic locations throughout the state. With this new middle-mile network, MCNC will, for the first time, provide open access to the Internet at affordable rates that will be accessible to not only school systems and community colleges but also municipalities, counties, and other broadband providers. The closest point of presence for connecting to this network will be in Sanford.

BROADBAND APPLICATIONS AND USES [§ IV]

Broadband has managed to become a central component of our basic infrastructure in roughly a 10-year time span and will assume an even larger and more central role over the next 10 years and beyond. Most Americans already cannot function in their daily lives without access to broadband. To fully and effectively participate in the economy and society of the future, all Chatham residents need to, at a minimum, have the option of access to an affordable, high-quality broadband infrastructure just as, for many decades, they have had access to roads, highways, and electricity.

Broadband has already assumed a central role in the daily lives of most Americans as is evident in the five areas of established broadband use [§ IV.A]:

Education [§ IV.A.1] Economic development and job creation [§ IV.A.2] Personal communications, financial transactions, and entertainment [§ IV.A.3] Public safety [§ IV.A.4] Government services and civic engagement [§ IV.A.5]

In other areas, broadband has just begun to scratch the surface, with the start of the widespread deployment of networked sensors and other devices like cameras. As more and more of these connected sensors and devices are deployed in our environment, broadband will likely contribute to radical changes in our lives in many areas, including in four areas of emerging broadband use [§ IV.B]:

Health care [§ IV.B.1] Energy and utility use (management and control) [§ IV.B.2]

Transportation [§ IV.B.3] Smart communities [§ IV.B.4]

LEGAL BARRIERS TO COMPETITION AND INNOV ATION [§ V]

North Carolina law imposes sharp limits on competition by public sector entities [§ V.A] in the broadband and telecommunications market. These strict limits, which apply to member-owned cooperatives as well as municipalities, require careful planning by public entities and tend to fa-vor collaborative arrangements with the private sector as a more pragmatic and realistic way to address community broadband deficits. North Carolina counties have largely been on the side lines in the broadband area and have not tested the limits of their authority, leaving leadership to municipalities, which had broad legal authority until the legislature intervened in May of 2011 to tear the broadband wings off cities and towns.

County Authority [§§ V.A.1 and V.A.3]

North Carolina law grants counties broad authority to own property and lease property to third parties. This authority opens the way for broadband partnerships as state law imposes no definit-ive limits on the type of property that counties may own. For example, state law does not appear to prevent a county from owning a portion of the local broadband infrastructure, using the infra-structure for governmental and related functions, and then leasing portions of the infrastructure to third parties to serve the residential market. Similarly, nothing in state law precludes a county from being the anchor tenant in a partnership with a private partner that would build and own the infrastructure to specifications designed by a county to protect its long-term needs.

North Carolina law does not grant counties authority to become direct, retail providers of broad-band service and is unlikely to do so in the foreseeable future. In view of the history of hostility in the state legislature to publicly-operated cable and broadband systems, the prudent and prac-tical course would be for the County to focus on a partnership approach.

See also Municipal Authority [§ V.A.2], Authority of Telephone Cooperatives [§ V.A.4], and Authority of Electric Cooperatives [§ V.A.5] for other limits applicable to public sector entities.

See also Limits on Private Sector Providers [§ V.B], including Service Territory Limits [§ V.B.1], Federal Subsidy Programs [§ V.B.2], and Spectrum Allocations [§ V.B.3].

RECOMMENDATIONS

Chatham County’s overall approach [§ VI.A] to addressing broadband-related needs should include: (1) improving access to service as a baseline matter (universal access to broadband service for all County residents); and (2) improving broadband speed and service quality both

now and in the future. Achieving the first goal (universal access) will have lasting value only if County residents are also able to obtain early access to advances in broadband technology on an ongoing basis in the future and are able to keep up with more urbanized areas of North Carolina and with other states.

In practical terms, meeting these needs requires that broadband service be available throughout the County and that it be updated to comply with the FCC’s new target for minimum broadband availability (4 MB/s downstream and 1 MB/s upstream). These FCC standards are interim standards and are likely to increase greatly in the future to accommodate new video intensive and other data-heavy applications as the FCC’s 2020 goal is for the vast majority of American homes to be served by broadband at speeds of 100 MB/s downstream and 50 MB/s upstream.

Long-term Broadband Plan [§ VI.B]:

Our central recommendation is to deploy a community-designed fiber optic backbone network:

The network should be ubiquitous, with as many laterals as possible into the County. Such a network would provide long-term cost controls and a future-proofed

broadband infrastructure. Fiber optics is the preferred transmission medium because of its almost unlimited

information-carrying capacity and the ease of upgrading.

The proposed network has three major goals:

It would take advantage of the collective buying power of area public institutions and more effectively deploy existing resources.

It would provide a bridge to affordable, scalable, and reliable middle-mile service (i.e., the MCNC network).

It would establish a pluggable, scalable, and expandable network that would provide a platform for development of new wireless and wireline networks.

The first step is to identify resources currently devoted to telecommunications and broadband by governmental entities and other public institutions:

These resources must be sufficient to cover the proposed network’s borrowing costs and operational costs for replacement services.

These resources should be deployed in a more targeted, planned, and effective way to develop a community-based broadband infrastructure.

The preliminary estimate of current direct expenditures (County and school district) is $625,000/year. This number is just the starting point and should be augmented by adding indirect expenditures on staff, vendors, and technical assistance to the mix.

Possible public sector partners include the towns of Siler City, Pittsboro, and

Goldston (they likely spend another $100,000 or so per year on broadband and telecommunications service).

Other possible public sector partners include: Central Carolina Community College and the new Chatham Hospital in Siler City.

The second step is to identify other project partners:

Possible partners that will need new wireless and wireline connections for smart grid include: Progress Energy, Central EMC, and Randolph EMC.

Chatham Park Investors will need an advanced broadband infrastructure for its new 30,000-person planned community in Pittsboro and south of Pittsboro (possible smart community).

Partnership opportunities should be looked at in terms of opportunities for the potential partner to become an anchor tenant for the proposed fiber backbone.

The third step is to rough out a basic technical design for the network. The network should be sufficiently versatile to support both wireless and wireline providers on a pluggable basis. The fourth step is to define cost parameters for network:

Basic assumptions about the network are that it would (1) connect key Chatham institutions and facilities together; and (2) provide the basic connections and platforms necessary to improve service in unserved and underserved areas to eventually support next-generation services throughout the County.

A feasibility study should be prepared by a third party who would develop a 10-year pro forma to establish the network’s financial viability.

The fifth step is to assess legal options as to ownership structure and identify the appropriate legal structure. The three main options are:

A public-private partnership between the County and an infrastructure provider: The County would own the infrastructure but a third party would construct and/or operate the network.

A public-private partnership between the County and an infrastructure provider: The provider would own the infrastructure, with the County centrally involved in developing the system.

A nonprofit or similar organization: This organization would develop and operate the infrastructure and would be governed by a representative cross-section of community interests and representatives.

Short-term Planning Steps [§ VI.C]:

First, the County should work with each of the seven existing wireline providers to look for

cooperative opportunities:

The major focus should be on CenturyLink as the County’s largest provider. Randolph TMC, with its advanced technology and new legal authority to “edge out”

into Chatham, and AT&T, with its big footprint in the County, should also be targeted. The two local cable providers, TWC and Charter, should also be approached but with

modest expectations due to their lack of interest in expanding their footprint in the County. But the “business group” divisions of both providers are more flexible and nimble and might be interested (Charter Business Group recently pulled together a tri-county network for Central Carolina Community College).

Second, the County should begin long-term planning discussions with possible smart grid providers, including:

The County’s three power companies (Progress Energy, Central EMC, and Randolph EMC)

Natural gas providers (PSNC Energy) Providers of water and sewer service (Chatham County, Siler City, Pittsboro); and Other pipeline providers

Third, the County should work with the Chatham Park Investors on their plans for new community to ensure a state-of-the-art broadband infrastructure such as a possible “smart community” and explore cooperative arrangements.

Fourth, the County should review its communications tower ordinance:

The current ordinance limits taller towers (300 feet) to US 64 West and US 421 and permits shorter towers (199 feet) on several other transportation corridors (US 1, US 15/501, NC 87, NC 751, NC 902) and may not work over the long haul.

In connection with this review, the County should develop a full inventory of other facilities and sites for transmitting sites for the next generation of wireless service.

Fifth, the County should update the inventory of County-owned fiber and other communications lines (Appendix D):

All other County facilities that should be connected together by a County network should be identified.

Facilities not currently connected to the County network that are candidates for connection include: waste management facilities on Landfill Road; sheriff’s substations in Goldston, Governors Village, and Moncure; County facilities in Siler City (sheriff’s substation, Health Department, Council on Aging); a possible 911 back-up facility in Siler City; water distribution facilities scattered around the

County; EOC towers; park and recreation facilities; the Goldston and Siler City libraries; and the seven fire departments (and their sixteen fire stations).

Sixth, the County should work with the towns of Pittsboro, Siler City, and Goldston to develop a list similar to the list of County facilities for town and related facilities.

Seventh, the County should compile a detailed list of all direct and indirect expenditures by County, governmental, and other public entities on telecommunications and broadband:

Direct expenditures by Chatham County Schools and Chatham County currently total $625,000 ($437,521 for Chatham County Schools; $187,812 or so for Chatham County).

All other direct and indirect expenditures should be identified.

Eighth, public agencies in the County should be required to coordinate to the extent possible regarding the purchase of communications services and equipment.

Ninth, the County should require all current broadband and cable providers to comply with their legal obligations, including:

Requiring Charter to comply with its existing County cable franchise (it runs until August of 2012) (requirements include connecting schools and public buildings in the Siler City area to Charter’s cable system)

Enforcing similar requirements that apply to all state cable franchisees (connect all public buildings to the cable system that are within 125 feet of the cable system)

Requiring compliance with PEG access requirements (the existing County franchises require Charter and TWC to carry the County’s channel and CCCC’s channel) (Charter and TWC recently came into partial compliance with these requirements for CCCC’s educational channel but are carrying it on the more expensive and less accessible digital tiers in violation of FCC policies)

Enforcing requirements that state cable franchisees carry PEG channels (monitor compliance by CenturyLink, AT&T, Randolph TMC, and TWC)

Tenth, the County should establish a simple complaint process for community feedback on broadband service problems and gaps in service that includes the following features:

Accessible both on-line and by telephone Simple and clear questions designed to collect information about provider name,

service availability, speed, affordability, reliability, and consistency Ability to document and map out (using the County’s GIS capabilities) service

patterns in the County and pinpoint serious service problems

Eleventh, the County should push for and seek proactive broadband advocacy programs at the

state and federal level:

These advocacy efforts should ensure recognition of broadband as a key infrastructure component of the future, especially for rural and semi-rural areas.

The County should work with the North Carolina Association of County Commissioners (NCACC) and the National Association of Counties (NACo) and through their policy processes to ensure that broadband receives priority attention on a going-forward basis.

I. INTRODUCTION AND BACKGROUND

This broadband infrastructure planning project is intended to provide a plan for improvements in broadband5 service in Chatham County, recognizing the central importance of an affordable, high-quality broadband infrastructure to the County’s future. Our research confirms that the County’s broadband deficit is substantial and also shows that it is likely to remain large and even widen in the future due to the private sector’s limited interest in investing in the County’s broadband infrastructure. Our central recommendation is that the County develop a plan to reprogram existing County and other public resources to establish an independent fiber optic backbone network for the County through a public-private partnership. This fiber optic backbone would serve the County’s governmental and other public institutions while also establishing a platform for new commercial and other providers to enter the market and offer wireline and wireless service to Chatham residents.

Getting from here to there will require additional planning by the County to flesh out the plan’s details, including its cost and the appropriate organizational structure for developing, owning, and operating the network, and to identify possible private partners for a public-private partnership.6

Core tasks in this project included securing data with regard to current broadband availability in the County, identifying broadband providers and their performance characteristics, identifying legal and other barriers affecting broadband providers, interviewing broadband providers, and identifying incentives and funding sources for broadband improvements.

A. BROADBAND AVAILABILITY IN CHATHAM COUNTY

We found existing data sources as to broadband availability in Chatham County (and elsewhere in the nation) to be flawed due to the providers’ consistent refusal to disclose most carrier-

5 In this context, broadband refers to a high-speed data connection to the Internet. Downstream or download broad-band speeds indicate how fast information can be delivered from the Internet to the customer while upstream or up-load broadband speeds refer to how fast information can be delivered from the customer to the Internet. Broadband speed is measured in “bits per second,” with a kilobit being one thousand bits and a megabit being a million bits. The Federal Communications Commission (FCC) initially defined broadband service in 1998 as any connection that delivered information at 200 kilobits per second (kb/s) in either direction or 3.5 times the speed of a standard dial-up connection of 56 kb/s. The FCC determined in 2010 that the minimum speed for adequate broadband service has ris-en to 4 megabits per second (MB/s) downstream and 1 MB/s upstream and will continue to rise in the future as new services are developed and adopted by consumers. 6 One project goal was to equip the County to apply for federal funds in the future in the event the federal govern-ment establishes a successor program to the broadband programs such as the Broadband Technologies Opportunity Program (BTOP) included in the 2009 American Recovery and Reinvestment Act (ARRA). In view of the stalemate in Congress on most spending matters and the close-to-nonexistent chance of renewal of the BTOP program in the foreseeable future, we ended up focusing on improving the County’s broadband infrastructure though a more creat-ive and aggressive use of the existing buying power of the County and other public institutions instead of seeking funds from third parties.

specific information as to numbers and locations of subscribers or solid information as to the carriers’ deployment of broadband technology in particular communities. This uncooperative attitude is aided and abetted by the alphabet soup of government agencies that have helped to wall

off basic information about network operations from the public by embracing expansive notions of what constitutes confidential information.

We started our data review by examining commercially available consumer data but found, because it was based on survey data, that it was unreliable due to consumer confusion about basic questions. For example, some survey respondents did not know the difference between broadband service delivered by a cable provider and broadband service delivered by a telephone company, resulting in data anomalies and inaccuracies. And of course, this consumer data was survey data, which is especially unreliable when the goal is to drill down to small, geographic areas and identify with precision the areas in the County where broadband coverage is non-existent or of unacceptably low quality.

Another possible data source was the E-NC-Authority, which has compiled broadband availability data for the County for both 2007 and 2010 and is the primary collector of broadband data for the state of North Carolina. Unfortunately, the E-NC Authority employed a flawed and limited methodology when it mapped out broadband availability in North Carolina on a county-by-county basis in both 2007 and its 2010 federally-funded effort7:

First, the E-NC Authority assumed that all residents of a census block have access to broadband service if a single broadband provider claims that even one household in a census block has access to broadband service.8 This technique greatly overstates the availability of broadband as, in a semi-rural county like Chatham, service is not delivered on a consistent or uniform basis throughout census blocks.

Second, the E-NC Authority did not disclose data on a provider-by-provider basis although it collected data on a provider basis. Due to confidentiality agreements it executed with the providers in both 2007 and 2010 (and permitted by the NTIA in 2010), it does not report such basic information as how many households in CenturyLink’s Chatham service territory have access to digital subscriber line (DSL) service and how many of them actually subscribe to that service.

Third, in both 2007 and 2010, the E-NC Authority allowed providers to report broadband availability based on advertised speeds even if that speed is not actually available at particular locations, greatly overstating both the availability of service and the speed with which it is delivered.

And fourth, the E-NC Authority did not report aggregate total numbers for broadband

7 Most of the flaws in the E-NC Authority’s collection methods for 2010 data are directly traceable to the adminis-tration of the federal data collection effort by the National Telecommunications and Information Administration (NTIA), which squandered about $350 million in federal funds by deeming virtually all important broadband in-formation collected through this program to be “confidential” and therefore not to be disclosed to the public (e.g., each provider’s footprint). State Broadband Data and Development Grant Program, Notice of Funds Availability and Solicitation of Applications, 74 Fed. Reg. 32,545-32,565, July 8, 2009. 8 The E-NC Authority’s 2007 methodology was slightly different but also flawed in that imputed broadband availab-ility to a wide geographic area (first to a three-mile radius circle around the wire center and then to the census tract(s) that contained any portion of the circle) regardless of whether broadband service was actually available.

customers in the County or any subset of the County in either 2007 or 2010. A user of the E-NC Authority website can obtain a list of available providers of broadband service and the advertised broadband speeds for each by County, address, and other geographical units but cannot map out the service territories of particular providers or obtain broadband subscribership numbers or penetration rate data for the County or other geographic units.

In view of the shortcomings of these data sources,9 we turned elsewhere and found data at the FCC and at an industry-financed non-profit organization (Connect North Carolina) that provides a clearer picture of the state of broadband in the County and more accurately tracks what we observed in the field and learned in consumer interviews.

FCC Data: The FCC collects extensive data twice a year from all broadband providers through FCC Form 477. In fact, the $350 million ARRA-funded NTIA data collection project more or less replicated the FCC’s existing data collection work only it did so less effectively and more clumsily by spreading data collection funds around to 51 or so state-based organizations like the E-NC Authority and by denying the public access to basic information. As with the NTIA, the FCC makes a commitment in the Form 477 process not to disclose carrier-specific data so the FCC’s publicly-released data is also far from complete. But the FCC did decide to release broadband penetration rate data on the basis of census tract for the first time in February of 2011, which provides important geographic detail as to access to broadband service in different parts of the County.

With the help of the County’s GIS Department, this FCC census tract data has been mapped out for this report. This map provides a clear picture of the areas where the broadband deficit in the County is the greatest in terms of home subscriptions, which are the western and southern parts of the County. The areas that are the most disadvantaged are the two 2000 census tracts west and south of Siler City, with broadband subscription rates of zero to 20% (this area includes Harpers Crossroads, Bear Creek, Bonlee, and Mount Vernon Springs). Next in terms of limited access to broadband service are the 2000 census tracts for Siler City and Goldston at 20% to 40% subscription rates. The area with the highest subscription rate (and therefore the greatest access to the broadband world) is the 2000 census tract for the Chapel Hill area, with a 80% to 100% subscription rate. The other three 2000 census tracts (north of Siler City, Pittsboro, and east of Jordan Lake) fall in between the two extremes, with subscription rates of 60% to 80%.

9 Through a series of statistical gimmicks and gyrations (detailed above), NTIA, working with the E-NC Authority, has generated data reporting that Chatham ranks 48th among North Carolina’s 100 counties in terms of broadband availability and that 83% of Chatham’s residents have access to DSL service, 59% have access to cable modem ser-vice, and 91% have access to wireless broadband service. See http://www.broadbandmap.gov/analyze for more de-tails. As will be documented later in this report, these numbers do not take into account service quality or speed or specify when broadband technology was deployed in the County in comparison to more urbanized areas.

BROADBAND SUBSCRIPTION RATES ON THE BASIS OF FCC CENSUS TRACT DATA FOR CHATHAM COUNTY

Connect North Carolina’s maps complement and explain this data by identifying with more precision the pockets of the County that lacked access to broadband service in August of 2009. The Connect North Carolina project was part of a national industry-financed data collection effort through an organization known as Connected Nation. It collected data from providers and released maps showing the many areas of the County that were unserved in August of 2009. Since this data was compiled, CenturyLink has extended service into some of these unserved areas. Nonetheless, this map provides stark evidence as to the areas that have lagged behind other areas of the County by a matter of years and, by the industry’s own admission as to its reliance on density and similar factors in making investment decisions, will likely lag behind in a similar fashion with the deployment of each new generation of broadband technology.

NORTH CAROLINA CONNECT MAP OF UNSERVED AREASOF CHATHAM COUNTY (AREAS NOT SERVED BY WIRELINE

BROADBAND ARE THE PALE BLUE AREAS)

Another North Carolina Connect map further fleshes out the broadband availability picture by showing the population density for each of the unserved areas:

NORTH CAROLINA CONNECT MAP OF UNSERVED AREAS OF CHATHAM COUNTY BY POPULATION DENSITY (AREAS NOT SERVED BY WIRELINE

BROADBAND ARE IN COLOR WITH DENSITY INCREASING WITH DARKNESS OF THE COLOR)

Collectively, these maps demonstrate rather starkly that large swaths of the County have been left out of the broadband era for the first 10 or so years of its existence,10 including entire census blocks with more than 100 homes, and are likely to continue to lag behind in the future. These problem areas go well beyond the western and southern parts of the County to include areas in the vicinity of Pittsboro, north of Siler City, and east of Lake Jordan.

As will be discussed in more detail below in § III.A, we also learned that, even in areas shown to be fully served, no broadband service is available or broadband service is inadequate at a significant number of spots within those areas that appear to be served by incumbent providers. Finally, we learned (see below in § III.B) that wireless broadband is currently not much of an answer to the County’s broadband deficit and does not provide much of an alternative to wireline 10 Cable modem service has been commercially available since about 1996 and DSL service since about 1998, with cable modem service taking off in serious numbers by 1999 and DSL by 2000.

service in the County’s unwired areas due to spotty coverage and slow speeds.

We interviewed seven broadband providers (AT&T, CenturyLink, Chatham Wireless, MCNC, Randolph Telephone Membership Corp, Time Warner Cable, and Windstream Communications) to obtain a fuller sense of past broadband investment practices in the County and likely future investment patterns. We interviewed six major broadband users (Chatham County government, Central Carolina Community College, Central Electric Membership Corp., Chatham County Libraries, Chatham County Schools, and Chatham’s Emergency Operations Center) to identify possible partners and potential users. We interviewed representatives of Cambria County, Pennsylvania, a county similar in size to Chatham County (but with more rolling terrain), to obtain a sense of the lessons learned in deploying a countywide broadband network through a public-private partnership. We also spent the better part of four days in the field (November 18 and 19 and December 14, 2010; February 3, 2011), examining existing equipment and obtaining a fuller sense of the design of existing wireline and wireless networks in the County, and interviewed broadband consumers living in various areas of the County to document their broadband experiences.

Some of the providers were helpful and cooperative (MCNC, Randolph TMC, and Chatham Wireless), while others were reluctant to share hard data about their Chatham operations but did meet with us and provide us with big picture information regarding their operations (AT&T, CenturyLink, and Time Warner Cable). Still others declined to meet with us despite repeated requests for a meeting (Charter and Windstream11).

Through this process, we confirmed, clarified, and fleshed out what the data told us about Chatham County. Parts of Chatham County suffer from a major broadband deficit and, in terms of service quality and speed, most of the County lags well behind more urbanized areas and even some more rural areas where years of federal subsidies have helped to bridge the digital divide. As noted above, the service deficiencies are the most serious in the western and southern parts of the County but even the more populated eastern areas are not immune to service quality problems and uneven access to service on a street-by-street basis.

The County’s broadband deficit is due to its population density and economic and demographic characteristics. The County’s wireless deficit is as serious as its wireline deficit for similar reasons. The telecommunications industry, whether wireline or wireless, invests in infrastructure based primarily on population density and secondarily on economic and demographic characteristics. These investment practices, which are not secrets and are candidly acknowledged by industry representatives, make fashioning a permanent solution to the County’s broadband deficit a challenge as normal market mechanisms do not work in a timely or responsive fashion.

11 We met with representatives of Windstream’s business group but representatives of the part of the company that actually provides service in the County—its residential division—declined to meet with us despite repeated requests.

B. IMPORTANCE OF BROADBAND FOR CHATHAM COUNTY

Broadband services and technology are not static but rather are constantly evolving in new and unpredictable ways. For Chatham County, this means that it cannot close the broadband gap today and rest on its laurels, assuming that the gap will remain forever closed, because new broadband applications and uses will arise every day and broadband demand will continue on its sharp upward trajectory. The Board of Commissioners experiences this phenomenon on a routine basis as the County has to make decisions with frequency through the budgeting process to upgrade the County’s little piece of the broadband world to keep pace with relentless change like suddenly having to expand and modify its data storage capabilities to cover the County’s exponential growth in data generation.

The snapshot this report provides as to the current state of broadband technology in the County is less meaningful than is its assessment of the pace of implementation of broadband technology in Chatham County. An assessment of the state of broadband deployment tells us how the County stacks up against the rest of the world, starting with urbanized neighbors in North Carolina, then comparing Chatham (and North Carolina) to other areas of the country (like more densely populated states), and finally looking at other parts of the world where advanced broadband technology is king.

Using 2001 as the starting data for the broadband era, parts of the County are at least 10 years off the pace in terms of access to broadband technology (the more rural areas of western and southern Chatham where there still is no broadband service). Others are 7 or 8 years off pace (Silk Hope area), some are 4 or 5 years off pace (Goldston, Bonlee), and still others are just a year or two off the pace (Pittsboro and Siler City). This pattern can be expected to repeat itself again and again in the future as new technologies emerge and are deployed and do not reach throughout the County until each generation of technology is close to the end of its life cycle and the industry is moving on to the next great thing.

In simple terms, the data shows that rural and semi-rural North Carolina communities like Chatham County lag behind more urbanized communities in the state while the state generally lags behind much of the rest of the nation, especially the more densely populated northeastern states. And of course, the United States does not stack up well against much of the rest of the industrialized world on basic broadband availability indicators. So in terms of competitiveness in the broadband world, Chatham is just barely in the game under most comparative analyses.

Broadly speaking, census data shows that rural counties like Chatham County typically lag urbanized areas like Wake County by about 15% in terms of home-based Internet access (66% to 51% in 2009 census survey).12 In all likelihood the actual gap between Wake and Chatham counties is greater, with FCC data showing zero to 20% access in western and southern parts of the county and 20% to 40% in the Siler City and Goldston areas. This deficit is generally due to 12 Economic and Statistics Administration and NTIA, U.S. Department of Commerce, Exploring the Digital Nation: Home Broadband Internet Adoption in the United States, Nov., 2010, 37 (t.24).

the higher cost of providing service in rural areas and the resulting lack of both investment and competition in rural areas. This shortfall is especially true for in-between counties like Chatham where local telephone companies do not qualify for the generous federal subsidies that were first provided to unserved areas like much of Randolph County in the 1950s. Those large subsidies continue to this day despite the fact that many of those more rural counties long ago caught up to the in-between counties and now have better service than less rural counties like Chatham.

The national picture shows major gaps between North Carolina and much of the rest of the nation with regard to service quality. For example, 2009 census data shows North Carolina standing 38th in the nation in terms of in-home broadband use. Of perhaps even greater importance, North Carolina ranks dead last in the nation in terms of access to broadband connections that meet the new FCC targets of broadband availability of 4 MB/s downstream and 1 MB/s upstream at a mere 10%. See § II.A.1 for additional detail. To put this number in context, more densely populated and urbanized states, with more competitive broadband environments like New Jersey and Massachusetts, clock in above 60% or more than six times the North Carolina rate under this FCC measurement.

The gap in access to quality broadband service gets a little worse when we move to the international arena and compare broadband availability in the United States with broadband in other nations. According to the Organization of Economic Co-operation and Development (OECD), the United States ranked 12th among the 33 industrialized nations rated in 2009 with regard to the percentage of households with broadband access at 63.5%. South Korea leads the world at 95.9%, followed by Iceland (86.7%), Sweden (78.5%), the United Kingdom, Canada, and Germany.13 Nations lagging behind the United States include Australia, Japan, France, Switzerland, and Italy.

So whether looking at competing in the North Carolina economy, the United States economy, or the world economy, Chatham residents are at a disadvantage when it comes to broadband tools, which we know already play an important role in shaping economic and educational opportunities and will likely play an even greater role in the future.

Broadband is already a central component of our basic infrastructure and will assume an even more central role in the future. We do not need studies to confirm that most of us could not function in our daily lives without broadband, whether it is for mundane matters like applying for jobs, communicating with family members and business associates, or implementing basic financial transactions. And now we see with the younger generation that it takes on an even larger role in their lives, for good or bad, as they use broadband to watch television (Hulu) and movies (Netflix)14 and to entertain themselves (the sprawling and growing worlds of video gaming and social media). And venture into the world of elementary school where engagement

13 See http://www.oecd.org/ at Statistics for additional detail.14 Netflix is not just popular with the younger set as all ages find it an attractive service. But the younger generation has fully embraced Netflix and has already transformed “netflix” into a verb just as “google” is now a common verb.

with broadband technology is even more intense as small children grab tablets like iPads and quickly enter a digital world of information and educational processes that was unknown to those of us in the adult world.

Areas where broadband already has an established role in our lives include the following five areas:

Education Economic development and job creation Personal communications, financial transactions, and entertainment Public safety Government services and civic engagement

Areas where broadband is poised to explode and is likely to re-shape much of our daily lives in-clude the following four areas of emerging broadband use:

Health care Energy and utility use (management and control) Transportation Smart communities

We already know that broadband technology has been incorporated into curriculums at all levels of the educational process. The Chatham County Schools have embraced broadband technology and computers throughout the school system, placing a laptop computer in the hands of every high school student. But many Chatham students are losing out on much that broadband has to offer in the educational environment and are unable to take full advantage of their laptops be-cause they cannot obtain access to the Internet at home.

Another area where Chatham County is especially vulnerable to being left behind is the next stage of energy management and control. Ambitious plans to maximize the value of energy through smart grid services are on the drawing boards and, in many areas, in the process of being implemented by utilities, including by Progress Energy. By embedding information technology throughout the power grid and in the homes of energy users, the nation’s energy providers expect to be able to reduce the use of energy, saving consumers, businesses, and institutions significant money and starting to reduce dependence on vulnerable and polluting sources of energy such as oil wells in the Mideast and coal mines in West Virginia.

These smart grid and metering systems depend upon ready access to affordable and reliable broadband service as communications lines are used to manage power distribution and consump-tion in a way that minimizes the use of energy. In the absence of ready access to fiber optic lines to transformers and substations and low-cost broadband connections to each home, business, and institution, it will be difficult for energy providers to deploy smart power systems in Chatham County, leaving Chatham residents with more expensive power than other better equipped

counties and the side effects such as depressed real estate values.

Chatham’s broadband-related basic needs include: (1) improving access to service as a baseline matter (i.e., providing all County residents with access to broadband service); and (2) improving broadband speed and service quality both now and in the future. Achieving the first goal (universal access) will have lasting value only if County residents are also able to obtain early access to advances in broadband technology on an ongoing basis in the future and are able to keep up with more urbanized areas of North Carolina and with other states and be competitive not only in the state and the nation but also in the world.

In practical terms, meeting these needs requires that broadband service be available throughout the County and that it be updated to comply with the FCC’s new target for measuring the minimum broadband speeds required to participate in contemporary society: access to broadband at speeds of 4 MB/s downstream and 1 MB/s upstream. These FCC standards are interim standards and represent the FCC’s first step in moving the United States onto stronger footing in the broadband world. These speed targets are likely to increase greatly in the future to accommodate new video intensive and other data-heavy applications as the FCC’s 2020 goal is for the vast majority of American homes to be served by broadband at speeds of 100 MB/s downstream and 50 MB/s upstream.

Chatham County faces special problems in developing a comprehensive broadband plan because it is chopped into five separate telephone company service areas and two cable company service areas for wireline service, with overlap between the service areas of the cable companies and telephone companies but generally no overlap between the service areas of telephone companies. Chatham County is served by six mobile wireless carriers and one fixed wireless provider but, in contrast to the wireline carriers, there is overlap among the service areas of virtually all the wireless providers and some competition among the wireless carriers. In the end, each broadband provider has its own service territory (Verizon Wireless comes the closest to serving the entire county) and its own business model and approach to technology, making it difficult to secure consistent levels of broadband service throughout the County.

The difficulty of fashioning a solution in this multi-provider environment, as well as large annual public sector expenditures on telecommunications and broadband service, call for establishing a county-wide fiber optic backbone network. This network would provide all governmental and public institutions with access to uniform and scalable broadband service and would be subject to County and public control to the extent necessary to close the broadband deficit and maximize the value of the network.

This network would be funded by reprogramming existing governmental and public resources that are already committed to broadband and telecommunications services but could be more efficiently spent through a collective, systematic effort. The network would establish scalable and affordable connections to the Internet via MCNC’s new fiber network and provide a platform for private partners to establish new and more powerful wireline and wireless connections by

springing off the County’s backbone to provide connections to Chatham homes. Incumbent providers and other private sector entities like power providers would be encouraged to participate in this venture, with new opportunities for lower cost service and public-private partnerships. See §VI for a detailed discussion of this report’s recommendations.

This report begins by providing a detailed review in § II of the main broadband options, includ-ing a discussion of wireless options, to provide a fuller sense of the available choices and the re-lationship between the technology currently available to Chatham residents and the technology that could be provided. The report then describes and assesses the capabilities and characteristics of Chatham County’s existing broadband infrastructure (seven wireline providers, seven wireless providers, one new, independent middle-mile service provider) in § III. Next, the report lays out some of the likely future broadband applications and uses in § IV and describes the legal barriers which limit the flexibility of existing and potential broadband providers in § V. Finally, the report lays out recommendations for improving the broadband infrastructure in § VI through a five-step long-term broadband plan and eleven short-term planning steps that are prerequisites to nailing down the details of a workable long-term plan for the County.

II. BROADBAND INFRASTRUCTURE OPTIONS

In connection with preparing the National Broadband Plan,15 the Federal Communications Com-mission mapped out in detail five major broadband infrastructure options. The five options for broadband subscriber service consist of three wireline options (digital subscriber line telephone, hybrid fiber-coaxial cable, and fiber-to-the-premises systems) and two wireless options (terrestri-al wireless systems (mobile and fixed) and satellites). All these options except the satellite option also require middle-mile connections to the Internet to complete service delivery. Ready and af-fordable access to quality middle-mile pipelines affects and defines the ability of new providers to enter a local market to provide improved broadband infrastructure.

While each of these five major broadband options includes various subcategories, this report fo-cuses broadly on the five main broadband options and defers making specific technical recom-mendations until a later stage in the planning process. This report treats middle-mile connections as a stand-alone item because the availability of middle-mile connections plays a critical role in defining and limiting a community’s broadband options.

In connection with the National Broadband Plan process, the FCC also established affordable ac-cess for all American homes to broadband service at actual speeds of 4 MB/s downstream and 1 MB/s upstream as national broadband availability targets.16 To put these broadband speed targets

15 Federal Communications Commission, Connecting America: The National Broadband Plan, March 16, 2010 (NBP) [http://www.broadband.gov/plan/]. See also, Federal Communications Commission, The Broadband Availab-ility Gap: OBI Technical Paper No. 1, April, 2010 (FCC’s 2010 Broadband Technical Report).16 Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996,

in context, 1 MB/s speed in both directions is required to support a high-definition Skype video conference.17 The FCC also established more ambitious long-term goals for broadband access of actual speeds of 100 MB/s downstream and 50 MB/s upstream by 2020 for 100 million homes,18

with interim goals of 50 Mb/s downstream and 20 MB/s upstream by 2015 for 100 million homes.19

as Amended by the Broadband Data Improvement Act, GN Docket Nos. 09-137, 09-51, Sixth Broadband Deploy-ment Report, FCC 10-129, July 20, 2010, ¶ 5.

17 FCC’s 2010 Broadband Technical Report at 123, n.4.18 According to the 2010 census, there are a total of 131.7 million homes in the United States, 116.7 million of which are currently occupied. See, e.g., http://factfinder2.census.gov. Thus, the FCC’s goals are to provide some 80% to 85% of American households with access to very high-speed broadband services within the next nine years.19 NBP at 9.

Four of the five major broadband infrastructure options are based on technologies that pre-date the Internet era by decades, resulting in constraints and anachronisms as these technologies are recycled and adapted for use in today’s broadband environment.

Digital subscriber line or DSL technology, the broadband technology favored by local telephone companies, is simply an upgraded version of very old technology. DSL technology was grafted onto telephone technology that was developed (and periodically improved) more than one hun-dred years ago for the limited purpose of delivering voice communications to homes and busi-nesses. Telephone networks are not optimal for broadband service because they were not de-signed for broadband traffic, which is adversely affected by traveling long distances over old copper telephone lines that, in many cases, provide low-quality connections.

Like DSL technology, the cable industry’s hybrid fiber-coaxial cable (HFC) technology is an up-dated version of an old technology. Coaxial cable systems were first deployed about 60 years ago for the one-way delivery of broadcast television programming in hilly areas where over-the-air reception was poor or non-existent. Starting in the 1990s, standard cable technology—all-coaxial cable technology—was modified to create HFC technology by replacing coaxial cable trunks with fiber optic trunk lines and adding two-way capabilities. These fiber optic trunk lines run from the cable system’s headend (or a local hub) to neighborhood nodes where optical signals are converted to electronic form (and vice versa), reducing line sharing (and thereby Internet traffic congestion) and increasing system capacity. This development followed rapidly on the heels of the deployment of two-way amplifiers in cable networks, which made two-way trans-missions like Internet service possible over cable systems. Because of this history, HFC techno-logy, like DSL telephone technology, also is not optimal for broadband service as transmission speeds and upstream capacity are ultimately limited by the network’s origins as crude and simple shared networks for the distribution of one-way video programming to homes.

Wireless technology has a similarly constrained history, having been initially developed some 35 years ago in the 1970s for the limited purpose of carrying voice communications and first com-mercially deployed starting in about 1983. Spectrum allocations, tower placement and height, and antenna configurations in the early years of the industry were largely shaped by the require-ments of low-volume voice traffic. It was not until the 1990s that the industry began to revamp and reconfigure these legacy cellular networks to carry broadband service but the industry re-mains constrained by the limited capabilities associated with its history as a simple voice net-work.

Finally, satellites were not designed for broadband traffic either although the history of the satel-lite industry is very different from those of the telephone, cable, and cell industries. Satellites were first launched in the 1960s for international communications, providing telephone circuits for international calls and carrying video signals for special events like the 1964 Tokyo Olympics and the 1969 moon landing. Satellites were launched in the United States for domestic commu-nications in the 1970s, starting with voice and data communications and moving quickly to the delivery of video signals to cable system headends. In recent years, a small satellite broadband

industry has emerged but it is subject to severe technical limits.

The fifth option—fiber-to-the-premises (FTTP) technology—is the only technology that was de-veloped primarily to deliver broadband services and therefore provides the best service quality in terms of speed, information capacity, reliability, versatility, and adaptability. Fiber optic distribu-tion systems were first deployed on an experimental basis in the 1970s. Fiber optic communica-tions lines were initially deployed in the 1990s but were limited to such uses as long-distance communications and trunk lines in cable and telephone systems for cost and technical reasons. Starting in the early 2000s, as the cost of fiber optic technology dropped precipitously, providers started to build future-proofed FTTP systems in Asia and parts of the United States.

A. WIRELINE BROADBAND OPTIONS

1. Telephone Technology (DSL)

As noted above, DSL technology is simply an add-on to existing telephone technology. Local telephone networks were developed more than one hundred years ago for the limited purpose of carrying voice communications between points. As limited purpose technology, telephone tech-nology was relatively simple, requiring very little information-carrying capacity for the first hun-dred years or so of its existence. Recognizing the opportunity to expand service offerings and compete with cable technology, the telephone industry began to update its old distribution facilit-ies in the 1990s by deploying “digital subscriber line access multiplexers” (DSLAM) in central office switches and next to telephone line aggregators or remote terminals in the field to carry In-ternet traffic to and from subscriber locations. With this network modification, local telephone companies were able to enter the Internet business, offering an entirely new service option to their customers and generating billions of dollars in new revenues.

DSLAMs manage voice traffic and data traffic running between the DSLAM and multiple sub-scriber locations on old copper telephone lines and provide telephone companies with the ability to provide broadband service. In unincorporated areas of Chatham County, DSLAM units are typically located by the side of the road in a metal cabinet next to an older metal cabinet that has long served as a line aggregator or remote terminal that brings together multiple telephone lines and concentrates telephone traffic. DSLAMs augment the remote terminal by separating voice traffic from data traffic, aggregating data traffic from multiple incoming line ports into a single data signal via multiplexing, and sending data signals to and from the Internet. A typical remote DSLAM unit is likely to support a maximum of 350 subscribers.20 The connection between DSLAM units in the field and the central office is known as the “second-mile” connection, with connections between the remote terminal and subscriber locations known as the “last mile” and connections between the central office and the Internet known as the “middle mile.”

20 FCC’s 2010 Broadband Technical Report at 123, n.2.

DSLAM UNIT (CENTER RIGHT) AND REMOTE TERMINAL (RIGHT) ON SILK HOPE ROAD (INSTALLED IN LATE 2009)

The following drawing depicts the key components of a typical DSLAM network, with DSLAM units located in both the field and in the central office (CO) as is the case in Chatham County:

As a general proposition, engineering a telephone network for data and Internet traffic is far more complex than engineering a telephone network for simple voice traffic.21 With telephone traffic, traffic is predictable and consistent based on past usage patterns, making it easy to figure out the number of trunks needed for a central office.22 Broadband Internet traffic, in contrast, is far more complex, uncertain, and dynamic, making network planning and engineering far more

21 FCC’s 2010 Broadband Technical Report at 109-111.22 FCC’s 2010 Broadband Technical Report at 109.

difficult, especially with the constant evolution of devices and applications and customer habits.23

The quality of broadband service provided to the home via DSL technology depends upon five key factors.

First, signal quality is affected in direct relationship to the distance between the subscriber location and the nearest DSLAM unit. Once a signal travels a certain distance from a DSLAM unit, it starts to quickly lose speed and quality. The FCC has found that signal quality starts to drop sharply at subscriber locations that are more than 12,000 feet from the DSLAM unit.24 It further concluded that deploying DSL over copper loops of 12,000 feet or less is a cost-effective solution for meeting the FCC’s short-term broadband availability targets of 4 MB/s downstream and 1 MB/s upstream in low-density areas.25 DSL loops of 15,000 feet, even if properly equipped, provide data rates of only 2.5 MB/s downstream and 600 kb/s upstream,26 which are well below the FCC’s broadband availability targets of 4 MB/s downstream and 1 MB’s up-stream, speeds which it has concluded are necessary to meet contemporary needs for Internet-re-lated services.

Performance standards can be dramatically increased and some future proofing built into the net-work by shortening these distances from 12,000 feet to 5,000 feet or even 3,000 feet.27 And ag-gressive improvement in performance in the coming years will be required as Americans contin-ue their rapid incorporation of broadband into more and more of their daily activities, making the FCC’s 12,000-foot recommendation likely little more than a short-term, interim fix. Shortening the distance between subscriber locations and DSLAM units is more costly than the 12,000-foot solution as it requires driving fiber optic lines deeper into the network and deploying more DSLAM units on a per-customer basis. On the other hand, shorter loops (and the associated high-er data rates) create many more service possibilities, particularly for video services, and therefore the ability to produce as much as three times the revenues produced by the longer 12,000-foot loops.28

AT&T has chosen the 3,000-foot standard for its U-verse package. U-verse is AT&T’s advanced video service product and provides video programming to customers over telephone lines using Internet Protocol (IP) standards. This service option is commonly referred to as Internet Protocol television or IPTV. It compresses video signals efficiently and delivers to the subscriber via IP transmissions only the video stream for the program selected by the customer.

U-verse technology requires reconfiguring the existing telephone network to install a fiber-fed

23 FCC’s 2010 Broadband Technical Report at 109.24 FCC’s 2010 Broadband Technical Report at 85.25 FCC’s 2010 Broadband Technical Report at 85.26 FCC’s 2010 Broadband Technical Report at 102.27 FCC’s 2010 Broadband Technical Report at 85, 99.28 FCC’s 2010 Broadband Technical Report at 101.

“Video Ready Access Device” (VRAD) within no more than 3,000 feet or so of the customer’s home. The VRADs, manufactured by Alcatel-Lucent, can be analogized to DSLAM units on steroids. They transfer signals from optical form to existing copper lines (and vice versa) and can deliver video and broadband service in IP form to anywhere from 200 to 400 households. Unfor-tunately, AT&T plans to offer its U-verse product to no more than 55% to 60% of its customers29

and is unlikely to offer this option in Chatham County except for in small pockets in the Chapel Hill and Cary areas.

The FCC postulates that the extra video revenues made possible by shorter loops would not cov-er the incremental cost of the shorter loops but does not provide specific revenue and cost num-bers to back up this conclusion.30 With the proper equipment, shorter runs of 3,000 or fewer feet translate into speeds of as much as 35 MB/s downstream and 6 MB/s upstream.31 As the distance increases beyond 3,000 feet to 5,000 feet, speed is lost, with downstream speeds of 20 MB/s and upstream speeds of 2 MB/s.32

Second, signal quality is directly affected by the quality of the telephone line that runs between the DSLAM unit and the subscriber location. In making the 12,000-foot recommendation, the FCC also recommends that the line not contain any “bridged taps”33 or “load coils”34 or have a wire gauge of more than 24 AWG.35 Without these and other fixes to existing copper lines, limit-ing the distance to the DSLAM unit to 12,000 feet is not sufficient in and of itself to ensure the delivery of service which meets that FCC’s broadband availability targets of 4 MB/s downstream and 1 MB/s upstream.

Third, broadband speed can be further enhanced by “pair bonding” copper loops running between the DSLAM unit and each subscriber location.36 Pair bonding can multiply data rates to subscriber locations to 30 MB/s or more but this technique is an option only if extra lines are available at the subscriber location for pair bonding.37 The telephone industry did not begin to in-

29 Dave Burstein, Broadband DSL Reports, AT&T’s Stankey: U-verse Build Virtually Over, May 18, 2011.30 FCC’s 2010 Broadband Technical Report at 101.31 FCC’s 2010 Broadband Technical Report at 99.32 FCC’s 2010 Broadband Technical Report at 99.33 FCC’s 2010 Broadband Technical Report at 100. A “bridged tap” is a piece of unterminated surplus wire that is left attached to the loop and can cause signal degradation. FCC’s 2010 Broadband Technical Report at 125, n.85.34 FCC’s 2010 Broadband Technical Report at 89. Load coils are in-line inductors used as filters on long loops and block the passage of DSL signals. FCC’s 2010 Broadband Technical Report at 125, n.84.35 FCC’s 2010 Broadband Technical Report at 85, 100. AWG is the abbreviation for American Wire Gauge and refers to the diameter of the wire, with the lower number representing a thicker wire that is capable of carrying high-er currencies and higher bit rates. FCC’s 2010 Broadband Technical Report at 130. 22 AWG wire is often used in rural areas and also qualifies under the FCC’s recommendations. FCC’s 2010 Broadband Technical Report at 85.36 FCC’s 2010 Broadband Technical Report at 85.37 FCC’s 2010 Broadband Technical Report at 85.

stall “twisted pairs” of copper lines to homes until about the 1970s38 so homes where new lines to the home have not been installed in the past 40 years or so likely do not have extra lines avail-able for pair bonding.

Fourth, signal quality is affected by the quality and capabilities of the equipment in the DSLAM unit. These include such things as the number of ports and cards in the DSLAM unit.39

The FCC has concluded that ADSL2+ technology40 (coupled with loops of no more than 12,000 feet and wire gauges of no more than 24) can provide DSL service at 6 MB/s downstream and 1 MB/s upstream.41

Much higher speeds than 6 MB/s downstream and 1 MB/s upstream are achievable with ADSL2+ if the loop is shorter than 12,000 feet.42 Even greater speeds are achievable with a shorter loop and the latest version of DSL technology, VDSL2, which is designed to support higher speeds over shorter loops.43

The performance of both ADSL2+ and VDSL2 technology can also be improved at the margins through “vectoring,” which involves the deployment of advanced network management software such as Level 1 dynamic spectrum management (DSM-1) and more recent versions of that soft-ware that are currently being lab tested.44

These improvements in equipment, when combined with other improvements like shortened loops and pair bonding, could greatly increase the speed of DSL service to perhaps as much as 300 MB/s45 so that it is faster than current generation FTTP technology (but not future generation FTTP technology) and cable modem service, including DOCSIS 3.0.

And fifth, signal quality is affected by whether the connection running from the DSLAM unit to the central office (the “second-mile” connection) is a fiber optic connection or a copper connection, and the extent to which this line is shared. It is in this “second-mile” connection where “line sharing” first kicks in for DSL and traffic congestion can slow down the speed of

38 AT&T, Interview, Dec. 11, 2010.39 A remote DSLAM unit typically serves anywhere from 24 to 384 subscribers. FCC’s 2010 Broadband Technical Report at 88.40 ADSL is the abbreviation for Asynchronous Digital Subscriber Line; ADSL2 technology was first standardized in 2005 and uses frequencies up to 2.2 MHz. FCC’s 2010 Broadband Technical Report at 85.41 FCC’s 2010 Broadband Technical Report at 85, 86.42 FCC’s 2010 Broadband Technical Report at 86, 124 (n.79).43 FCC’s 2010 Broadband Technical Report at 99. VDSL is the abbreviation for Very High Bit Rate DSL.44 E.g., Dynamic Spectrum Management level 3 (DSM-3). FCC’s 2010 Broadband Technical Report at 86, 100, 124 (n.77, 78), and 136.45 FCC’s 2010 Broadband Technical Report at 100.

DSL service.46 In the early years of DSL deployment, many telephone companies avoided capital expenditures by not replacing out-of-date copper connections such as DS3 (44.7 MB/s) circuits to the DSLAM units with new fiber optic lines.

But even with fiber optic connections that is not the end of the story as not all fiber optic connec-tions are created equal.47 The FCC recommends 100 MB/s second-mile connections, scalable to 1 GB/s,48 to accommodate future growth in capacity demand, for backhaul connections from the aggregation point between first-mile and second-mile connections as sufficient to support 4 MB/s downstream and 1 MB’s upstream to every home served by the DSLAM unit at the ag-gregation point.49

The following table summarizes the maximum broadband capacity available to DSL subscribers under three main DSL design options, with per-subscriber capacity capped by the weakest link in the network (i.e., the connection with the lowest capacity (the weakest link is shown by the shaded boxes)):

MAXIMUM PER-SUBSCRIBER BANDWIDTH CAPACITYFOR THREE MAIN DSL DESIGN OPTIONS

connection resource type & # of sub-

scribers

total capacity per connection

capacity per subscriber

ADSL with low-speed (DS3) second-mile connections:middle mile (both directions) shared (500) 1 GB/s 2 MB/ssecond mile (both directions) shared (96) 44.7 MB/s 0.466 MB/slast mile (downstream) dedicated (1) 6 MB/s 6 MB/slast mile (upstream) dedicated (1) 1 MB/s 1 MB/sdownstream capacity per subscriber 0.466 MB/supstream capacity per subscriber 0.466 MB/sADSL with high-speed (1 GB/s) fiber second-mile connections:middle mile (both directions) shared (500) 1 GB/s 2 MB/ssecond mile (both directions) shared (96) 1 GB/s 10.4 MB/slast mile (downstream) dedicated (1) 6 MB/s 6 MB/slast mile (upstream) dedicated (1) 1 MB/s 1 MB/sdownstream capacity per subscriber 2 MB/supstream capacity per subscriber 1 MB/s

46 FCC’s 2010 Broadband Technical Report at 86.47 A fiber optic line that was equipped for T-3 service (44 MB/s) could carry 7 simultaneous 1 MB/s video streams while a line equipped for Fast-E service (100 MB/s) could carry 26 simultaneous 1 MB/s video streams. FCC’s 2010 Broadband Technical Report at 87.48 GB/s is the abbreviation for gigabits per second (i.e., one billion bits per second)49 FCC’s 2010 Broadband Technical Report at 88.

connection resource type & # of sub-

scribers

total capacity per connection

capacity per subscriber

VDSL:middle mile (both directions) shared (500) 10 GB/s 20 MB/ssecond mile (both directions) shared (96) 1 GB/s 10.4 MB/slast mile (downstream) dedicated (1) 25 MB/s 25 MB/slast mile (upstream) dedicated (1) 4 MB/s 4 MB/sdownstream capacity per subscriber 10.4 MB/supstream capacity per subscriber 4 MB/sSource: ADTRAN, Defining Broadband Speeds: Estimating Capacity in Access Network Architectures (December 2009), GN Docket No. 09-51, filed with the FCC on Jan. 25, 2010 (ADTRAN Broadband Speed White Paper) at t.3.

Wireline telephone networks are not optimal for broadband service because telephone networks were not designed for broadband traffic, which is adversely affected by traveling long distances over copper telephone lines that, in many cases, provide low-quality connections. At the same time, telephone networks have one important advantage over other systems: telephone networks are ubiquitous due to carrier-of-last-resort obligations and other legal requirements that require the provision of access to telephone service for all residents of the telephone company’s service area.50 Carrier-of-last resort obligations do not apply to broadband service (and are unlikely to be extended to them in the foreseeable future) so telephone companies currently have discretion as to when, where, and how to deploy broadband service.

In the case of Chatham County, all residents have access to telephone service from at least one of the four local telephone companies—CenturyLink, AT&T, Randolph, and Windstream. The com-pany that serves the largest area of the County and the largest number of County residents—Cen-turyLink—has been the slowest to deploy DSL service and to respond to consumer needs.

Assuming the broadest possible definition of broadband service,51 the FCC reports that 30.8 mil-lion (and 37.7%) of the nation’s 81.7 million wireline broadband customers are DSL sub-

50 See, e.g., N.C. Gen. Stat. § 62-110(f1). The North Carolina has greatly weakened carrier-of-last-resort obligations through the recent enactment of N.C. Session Laws 2011-52, which gives companies such as CenturyLink and AT&T the ability to opt out of carrier-of-last-resort obligations and many other long-standing regulatory require-ments. 51 The FCC continues to allow service providers to use the FCC’s 1998 standards for defining broadband service and to count as a broadband customer any customer who receives service at speeds of 200 kb/s in either direction even though service at such speeds represents only a modest improvement over dial-up connections to the Internet. The FCC has launched a proceeding to update its broadband data collection systems. Modernizing the FCC Form 477 Data Program; Development of Nationwide Broadband Data to Evaluate Reasonable and Timely Deployment of Advanced Services to All Americans, Improvement of Wireless Broadband Subscribership Data, and Development of Data on Interconnected Voice over Internet Protocol (VoIP) Subscribership; Service Quality, Customer Satisfaction, Infrastructure and Operating Data Gathering; Review of Wireline Competition Bureau Data Practices, WC Docket Nos. 11-10, 07-38, 08-190, 10-132, Notice of Proposed Rulemaking, FCC 11-14, Feb. 8, 2011.

scribers.52 Those numbers drop to 6.3 million (and 15.2%) of the 41.4 million wireline broadband customers when a more accurate and up-to-date measurement approximating the FCC’s broad-band availability targets is used.53 Thus, while the telephone industry has the most ubiquitous plant and the greatest reach among the wireline providers, it is far less effective than either FTTP providers or cable operators in delivering high-speed data service to its customers.

The discrepancy among providers of broadband technology is somewhat less stark in North Car-olina but only because the cable industry has been exceedingly slow in deploying broadband ser-vice in the state. Using its obsolete 1998 definition of broadband (200 kb/s in either direction), the FCC reports that telephone companies serve 985,000 (or 39%) of North Carolina’s 2.521 mil-lion wireline broadband customers.54 The DSL numbers for North Carolina fall to 173,000 (or 40%) of the state’s 427,000 wireline broadband customers when a measurement approximating the FCC’s new and more accurate definition of broadband availability is used.55

To put these numbers in context, North Carolina has the worst broadband service in the country, with only 10% of North Carolina’s 3.7 million homes receiving broadband service that approx-imates the FCC’s new standard for measuring broadband availability.56 The next worst state is Mississippi at 11%, followed by Idaho at 12%, and Ohio at 13%.57 In contrast, residents of more urbanized states like New Jersey and Massachusetts are more than six times as likely to have broadband service that approximates the FCC’s new standards for measuring broadband availab-ility at 68% and 65% respectively.58 North Carolina stacks up better against other states only when all the underserved broadband customers (those whose service is slower than 3 MB/s downstream and 768 MB/s upstream) are counted, placing North Carolina in the middle of the pack, with a broadband subscription rate of 64%.59

Providers of broadband service such as telephone and cable companies are exempt from any ob-ligation to disclose to local governments or the public the number of broadband customers resid-ing in particular communities or jurisdictions or company-specific data, making it difficult to de-

52 Federal Communications Commission, Internet Access Services: Status as of June 20, 2010, March 18, 2011 (FCC Internet Access Data for 2010), at 23 (t.7).53 FCC Internet Access Data for 2010 at 25 (t.9). The FCC’s new broadband availability target is 4 MB/s down-stream and 1 MB/s upstream. The FCC has yet to collect data that meshes exactly with these new broadband avail-ability targets so it used the speed categories that came the closest to the new standards (3 MB/s downstream and 768 kb/s upstream).54 FCC Internet Access Data for 2010 at 38 (t.18) (these numbers include business as well as residential customers).55 FCC Internet Access Data for 2010 at 40 (t.19) (these numbers include business as well as residential customers).56 FCC Internet Access Data for 2010 at 34 (t.15) (these numbers include business as well as residential customers).57 FCC Internet Access Date for 2010 at 34 (t.15) (these numbers include business as well as residential customers).58 FCC Internet Access Data for 2010 at 34 (t.15) (these numbers include business as well as residential customers).59 FCC Internet Access Data for 2010 at 35 (t.16) (these numbers include business as well as residential customers).

termine exactly how many DSL customers reside in Chatham County.60 Similarly, they have suc-ceeded in exempting themselves from any obligation to disclose to local governments or the pub-lic the capabilities, characteristics, and locations of the technology deployed in a particular com-munity or jurisdiction by claiming that this data is confidential and could be used by their com-petitors to disadvantage them.

North Carolina data indicates that much of the telephone industry is a reluctant participant in building the state’s broadband infrastructure. This is true even though it already has connections to virtually every home in the state and, by driving fiber optic lines deeper into the existing tele-phone network and modifying its network in other ways, could be at the center of the broadband revolution instead of the Johnny-come-lately that it is. This dismal state of affairs is largely a res-ult of the laissez-faire state of the existing regulatory system and deficiencies in the existing sys-tem of federal subsidies. The existing federal subsidy programs largely bypass semi-rural areas such as Chatham County while sending massive subsidies61 to slightly more rural areas such as Randolph County and communities in other parts of the nation that once were rural but are now more suburban than rural.62

2. Cable Technology (HFC)

Like DSL technology, HFC cable technology is simply an add-on to existing cable technology, which was developed about 60 years ago for much simpler purposes. Cable systems were origin-

60 Each provider submits detailed broadband data to the FCC based on zipcode and census tract in biennial filings (FCC Form 477) but the FCC has adopted policies exempting company-specific data from disclosure. The E-NC Authority also collects data from broadband providers in connection with the National Telecommunications and In-formation Administration’s data collection program but has entered into confidentiality agreements with those pro-viders that restrict the disclosure of aggregated company-specific data.61 The federal government has established many subsidy programs over the years. For example, the federal Universal Service Fund (USF) distributes about $4.3 billion per year in fees collected from telephone customers throughout the nation to companies such as telephone cooperatives that serve sparsely populated “high cost” areas. Randolph Tele-phone Membership Corporation (and its affiliates), for example, received $1.8 million in 2010 in high-cost support payments for about 13,000 telephone lines. Federal-State Board on Universal Service, FCC, Universal Service Mon-itoring Report (2010), CC Docket No. 98-202, Dec., 2010 (FCC’s 2010 Universal Service Monitoring Report), at 3-131 (t.3.30) and 3-151 (t.3.31). This works out to almost 25% of Randolph’s $7.5 million in revenues and made it possible for Randolph to pay large refunds to its members in 2010. J.D. Walker, The Courier-Tribune (Asheboro, NC), RTC lobbies for a bigger piece of the broadband pie, Aug. 15, 2010. Other subsidy programs include loan pro-grams added to the Rural Electrification Act in 1949 for telecommunications, Through this program, the U.S. De-partment of Agriculture has provided billions of dollars in loans and loan guarantees to subsidize the deployment of telecommunications infrastructure in rural areas although, over the past 10 years, only 1 of USDA’s 181 loans went to a North Carolina telephone company ($23 million of the $2.4 billion in loans made during that period). 62 Areas that once were rural in the 1950s but no longer are due to urban sprawl continue to qualify for subsidies be-cause the laws establishing eligibility for subsidies are based on the premise that, once an entity becomes eligible, it should be permanently eligible regardless of changed circumstances. These heavily subsidized telecommunications entities, like their brethren in the electricity area, have their own lobbying organizations and are an entrenched Washington interest group with well-placed congressional allies, who have been fending off efforts to reform these subsidy programs for decades.

ally designed, starting in the 1950s and continuing into the 1980s with only minor modifications, for the one-way transmission of video programming in analog form from the cable system’s headend to multiple subscriber locations. Simply put, cable technology was a way to provide more television options and a higher quality television picture than over-the-air broadcast televi-sion. Seeing new business opportunities in the 1990s and prompted by the FCC’s “social con-tracts,” which required network upgrades in settlement agreements associated with improper rate increases, cable companies aggressively upgraded their networks by deploying HFC technology and reconditioning their networks to provide two-way capabilities for Internet service, greatly in-crease system channel capacity, and digitize large chunks of their operations.

The system architecture favored by the cable industry in the early years was a “tree and branch” configuration, with thicker coaxial cables serving as the trunks and thinner coaxial cables (re-ferred to as “feeder” lines) serving as the branches and with multiple video channels flowing in one direction from the headend to television sets in homes. Many amplifiers were installed throughout these older cable systems to boost signals and compensate for part of the signal loss associated with traveling some distance and over coaxial cables. The amplifiers in the older cable systems were not designed to pass signals in the upstream direction and were not spaced properly to support upstream transmissions.

Starting in the mid-1990s, the cable industry reconfigured most cable systems by replacing the old coaxial cable trunks with high-speed fiber optic lines and transforming them into “hybrid fiber-coaxial cable” (or HFC) systems. These fiber lines fed neighborhood nodes where signals were converted from optical to electronic form (and vice versa) and distributed between the nodes and customer locations. During the initial phase of HFC deployment in the late 1990s, these nodes tended to serve large areas, sometimes passing as many as 1,500 to 2,000 homes. In recent years, the cable industry has shrunk the size of these nodes to as few as 125 homes but generally refuses to disclose node size or locations for particular communities or jurisdictions. The coaxial lines running from these optical nodes to subscriber locations were reconditioned with new properly spaced two-way amplifiers to support communications from the subscriber to the headend and on to other locations via the Internet. The feeder lines into neighborhoods were replaced and updated as necessary to increase system capacity from the 330 to 440 MHz range to the 750 to 860 MHz range. And new equipment was deployed in cable headends and at sub-scriber locations to support the provision of on-demand, digital video, Internet, and telephone services.

Through these and other changes, cable systems went from being simple purveyors of broadcast television signals and satellite-delivered video programming to becoming full-service providers, including the triple play package of video programming, voice service, and Internet service. The cable industry says that it invested $172.5 billion in infrastructure in the 1996 to 2010 period63 al-though annual filings with the U.S. Securities and Exchange Commission (SEC) indicate that, in recent years, a substantial majority of this investment was in customer premises equipment

63 http://www.ncta.com/StatsGroup/Investments.aspx.

(CPE) such as cable modems and set top boxes rather than network improvements.64

Cable systems are not subject to the carrier-of-last-resort obligations applicable to local tele-phone companies and can pick and choose their customers and their service areas unless other-wise regulated by local cable franchises or state law. As a result of this gap in the legal rules, cable providers generally focus on densely populated areas (i.e., incorporated cities and towns and their immediate environments and new greenfield developments) and completely bypass a large percentage of the nation’s (and North Carolina’s) territory. North Carolina revoked the au-thority of local governments to require cable providers to extend service to unserved areas when it deregulated cable service in 2006 and transferred franchising authority to the state (the Secret-ary of State’s office) but prohibited the state from requiring build-outs to unserved areas.65

Cable relies on its own cable-based standards, reflected in industry-developed Data Over Cable Service Interface Specification (DOCSIS) standards, to deliver Internet service. CableLabs final-ized the first DOCSIS standard in 1997 and updated those standards in 2001 (DOCSIS 2.0) and in 2006 (DOCSIS 3.0).66 In theory, DOCSIS 2.0 supports up to 36 MB/s downstream speeds and 20 MB/s upstream speeds.67 These theoretical speeds are even higher in the just evolving DOC-SIS 3.0 world (perhaps as much as 152 MB/s downstream and 108 MB/s upstream (the latter speed is made possible only by bonding four channels)).68 DOCSIS’s speeds are strictly theoretical in the real world because HFC technology requires heavy bandwidth sharing in the last mile (between the node and subscriber locations), meaning that speed slows down with each additional broadband user. It is also limited by anachronistic spectrum allocation rules.69 Those spectrum allocation rules can be worked around through vari-ous techniques but these work-arounds all involve changes in the design and operation of cable systems to provide for a more flexible and dynamic use of the cable system’s spectrum. For ex-ample, switched digital video service (SDV), for a one-time cost of only about $12 to $16 per home passed, transmits only those digital channels to a node that are actually in use, thereby

64 For example, the nation’s largest cable provider, Comcast, invested $8.8 billion of a total of $15.4 billion in capital expenditures in CPE from 2008 through 2010. Comcast Corporation, SEC Form 10-K for 2010, Feb. 25, 2011, at 45.65 N.C. Session Laws 2006-151 (Video Services Competition Act (VSCA)); N.C. Gen Stat. §§ 66-350 – 66-360. Technically, the VSCA grandfathered existing franchises in non-competitive markets until their expiration date but rendered enforcement of those franchises very challenging because of the expansive definition of competition and removal of the franchising authority’s leverage from having the ability to deny renewal of the franchise for non-compliance with the franchise. 66 FCC’s 2010 Broadband Technical Report at 104.67 FCC’s 2010 Broadband Technical Report at 104.68 FCC’s 2010 Broadband Technical Report at 104.69 FCC rules require television broadcast channel 2 to be carried on channel 2 of a cable system’s analog spectrum (54 to 60 MHz), resulting in a de facto upper limit on HFC upstream transmissions of 52 MHz. FCC’s 2010 Broad-band Technical Report at 104. The FCC notes that this restriction, along with other problems with low frequency transmissions on HFC systems, imposes practical limits on upstream capacity on HFC systems unless major modi-fications in system operations are made. FCC’s 2010 Broadband Technical Report at 105.

freeing up additional bandwidth for broadband use.70 A slightly more expensive option, costing about $30 per home passed, is complete conversion to all-digital operations, which involves a much more efficient use of the cable system’s bandwidth. Finally, the return path could be con-verted to digital form.71

Node splitting so that each node serves a small number of subscribers is the simplest way to fu-ture proof HFC networks and reduce line sharing and broadband traffic congestion. Each node split costs roughly $15,00072 so, in the case of 1,000-home nodes that are split into 8 nodes of 125 homes passed, the cost would be $120,000 or $120 per home passed. With even more node splitting to 60 homes (or fewer in the case of sparsely populated areas), all electronics (e.g., amp-lifiers) could be removed from cable networks, creating “passive nodes” and making for a more efficient and robust network.73

The cable industry has begun to roll out DOCSIS 3.0, with Comcast taking the lead (DOCSIS 3.0 is available to 85% of its customers74), Charter following not too far behind,75 and TWC moving very slowly to deploy DOCSIS 3.0. The estimated cost of deploying DOCSIS 3.0 is, ac-cording to Cablevision, roughly $100 per customer.76

It has been estimated that the actual capacity available per subscriber with 125-home nodes and DOCSIS 3.0 (and two bonded channels) will be a mere 1.22 MB/s downstream and .432 MB/s in 2015.77 Of course, with major variations in subscriber patterns of Internet use as to volume of activity and time of day use, much more bandwidth will be available to subscribers on an indi-vidual basis but permissible oversubscription rates are likely to shrink to much lower levels over time as broadband usage continues its exponential growth.

DOCSIS is implemented through DOCSIS-equipped cable modems at subscriber locations and cable modem termination systems (CMTS) in the headend or hub. CMTSs are functionally equi-valent to DLSAM units in the telephone context, with a number of ports for upstream and down-70 FCC’s 2010 Broadband Technical Report at 105; see also Time Warner Cable, Inc., SEC Form 10-K for 2010, March 29, 2011, at 6 (SDV is available in all Time Warner Cable service areas); Charter Communications, Inc., SEC Form 10-K for 2010, March 1, 2011, at 7 (Charter’s Form 10-K for 2010) (63% of the homes passed by Charter re-ceive a portion of video services via SDV, with SDV deployment expected to be substantially complete for all of Charter’s service territory in 2011).71 http://www.fiercecable.com/story/digital-return-technology-tackling-docsis-30-return-path-conundrum/2011-01-19.72 Cisco Systems, Unicast Video without Breaking the Bank: Economics, Strategies, and Architecture, 2008, at 10.73 FCC’s 2010 Broadband Technical Report at 106.74 http://www.lightreading.com/document.asp?doc_id=206804&site=lr_cable. 75 Charter had deployed DOCSIS 3.0 technology for 57% of homes passed by the end of 2010 and expects to com-plete deployment of DOCSIS 3.0 throughout its systems in 2011. Charter’s Form 10-K for 2010 at 7.76 http://www.dslreports.com/shownews/Cablevision-Rolling-Out-DOCSIS-30-96608. 77 ADTRAN Broadband Speed White Paper at t.4.

stream transmissions and with more ports allocated for upstream communications due to noise problems on the upstream pathway.

The following drawing depicts the key broadband components of a typical HFC network:

As with DSL systems, the per-subscriber capacity of an HFC system is limited by the weakest link in the network (the link with the lowest capacity shown by the shaded boxes in the following table for two basic HFC design options):

MAXIMUM PER-SUBSCRIBER BANDWIDTH CAPACITYFOR TWO MAIN HFC DESIGN OPTIONS

connection resource type & # of sub-

scribers

total capacity per connec-

tion

capacity per subscriber

250-subscriber optical nodes:second mile (both directions) shared (500) 1 GB/s 2 MB/slast mile (downstream) shared (250) 76 MB/s 0.304 MB/slast mile (upstream) shared (250) 35 MB/s 0.140 MB/sdownstream capacity per subscriber 0.304 MB/supstream capacity per subscriber 0.140 MB/s125-subscriber optical nodes:second mile (both directions) shared (500) 1 GB/s 2 MB/slast mile (downstream) shared (125) 152 MB/s 1.22 MB/slast mile (upstream) shared (125) 54 MB/s 0.432 MB/sdownstream capacity per subscriber 1.22 MB/supstream capacity per subscriber 0.432 MB/sSource: ADTRAN Broadband Speed White Paper at t.4

As noted above, the cable industry has been exceedingly slow in deploying broadband service in

North Carolina. Using its obsolete 1998 definition of broadband (200 kb/s in either direction), the FCC reports that cable companies serve 1.513 million (or 60%) of North Carolina’s 2.521 million wireline broadband customers.78 The cable modem numbers for North Carolina fall to 237,000 (or 55%) of the state’s 427,000 wireline broadband customers when a measurement ap-proximating the FCC’s new and more accurate definition of broadband availability is used.79

The data for North Carolina indicates that the cable industry, like the telephone industry, is a re-luctant participant in building the state’s broadband infrastructure. It does not face the same level of competition that it faces in other states like the New England and Mid-Atlantic states where competition is king80 and has forced the cable industry to much more aggressively deploy DOC-SIS 3.0 and other technological innovations. The cable industry generally provides better broad-band speeds than does the telephone industry but the primitive nature of HFC technology raises serious questions whether it has the ability to keep pace with demand for broadband service in the future, especially in less densely populated areas. Further, unlike the telephone industry, the cable industry cherry picks in assembling service areas, does not provide service in large chunks of the County, and has shown no interest in expanding its footprint in the County. This unfortu-nate state of affairs is largely a result of the lack of either regulation or meaningful competition.

3. Direct Fiber Optics Technology (FTTP)

Unlike DSL and HFC technologies, FTTP was designed for broadband service and, as a result, provides the most potential capacity and is the most future proofed of the broadband technology options.81 According to the FCC, it is also the most capital intensive or expensive of the op-tions.82 This assumption is somewhat of a red herring since the primary reason other wire-based options (e.g., DSL, HFC) are less expensive is because the FCC based its cost estimates on adding new technology to existing telephone and cable systems rather than building a new sys-tem from scratch as happens with FTTP technology. The fact that it costs less to add new techno-logy to an existing telephone or cable system than to build an entirely new system is relevant only in those areas where existing providers are willing to improve their systems to extend ser-vice to unserved areas and to provide major service improvements to the underserved, a willing-ness which has almost never been displayed by incumbent providers.

The three main types of FTTP systems are point-to-point (P2P) networks,83 active Ethernet sys-78 FCC Internet Access Data for 2010 at 38 (t.18) (these numbers include business as well as residential customers).79 FCC Internet Access Data for 2010 at 40 (t.19) (these numbers include business as well as residential customers).80 Verizon has deployed an FTTP network (FiOS) in key areas of the Northeast in direct competition with the cable industry and now passes 15.6 million homes with its FTTP network and has 4.1 million FiOS broadband subscribers. Verizon Communications, Inc., 2010 Annual Report at 2, 3.81 FCC’s 2010 Broadband Technical Report at 94.82 FCC’s 2010 Broadband Technical Report at 94.83 A P2P network provides a dedicated fiber strand for each customer and does not require any sharing of capacity on that strand with any other customer.

tems,84 and passive optical networks (PON).85 The vast majority (94%) of FTTP systems in oper-ation in the United States are PON systems,86 which require the sharing of a fiber optic line between a neighborhood splitter and 32 or so subscriber locations.

Just as there are several main types of FTTP systems, there are also several types of PON sys-tems:

EXISTING PASSIVE OPTICAL NETWORK (PON) FTTP OPTIONSStandard speed (shared) source for standard

Broadband PON (B-PON) 622 MB/s downstream155 MB/s upstream

ITU-T G.983

Ethernet PON (E-PON) 1.25 GB/s downstream1.25 GB/s upstream

IEEE 802.3ah

Gigabit PON (G-PON) 2.5 GB/s downstream1.25 GB/s upstream

ITU-T G.984

10 Gigabit PON (10G-PON)

10 GB/s downstream2.5 GB/s upstream

ITU-T G.987

10 Gigabit EPON (10G-EPON)

10 GB/s symmetric (10 GB/s both downstream and upstream) or 10 GB/s downstream 1 GB/s upstream

IEEE 802.3av

Source: FCC’s 2010 Broadband Technical Report at 95 (Ex.4-AS and Ex. 4-AU).

The capacity of PON systems can be upgraded by replacing and rearranging splitters, with mul-tiple generations of GPON technology able to be installed on the same network.87

As with DSL and HFC systems, the per-subscriber capacity of an FTTP system is limited by the link with the lowest capacity (shown by the shaded boxes in the following table for two G-PON design options):

MAXIMUM PER-SUBSCRIBER BANDWIDTH CAPACITYFOR TWO G-PON DESIGN OPTIONS

84 An active Ethernet system provides Ethernet connections to each home (100 MB/s service) and does so through optical Ethernet switches that are located in neighborhood cabinets and typically serve about 400 customers. 85 PON systems are shared networks, meaning that a single fiber originating at a cabinet in the neighborhood is shared by as many as 32 (and sometimes more) customers. FCC’s 2010 Broadband Technical Report at 94. This sharing is made possible by deploying optical splitters in the cabinets.86 FCC’s 2010 Broadband Technical Report at 94.87 FCC’s 2010 Broadband Technical Report at 94-95.

connection resource type & # of sub-

scribers

total capacity per connection

capacity per subscriber

G-PON with 1 GB/s second mile:second mile (both directions) shared (512) 1 GB/s 1.95 MB/slast mile (downstream) shared (32) 2.5 MB/s 78.1 MB/slast mile (upstream) shared (32) 1.25 MB/s 39 MB/sdownstream capacity per subscriber 1.95 MB/supstream capacity per subscriber 1.95 MB/sG-PON with 10 GB/s second mile:second mile (both directions) shared (512) 10 GB/s 19.5 MB/slast mile (downstream) shared (32) 2.5 MB/s 78.1 MB/slast mile (upstream) shared (32) 1.25 MB/s 39 MB/sdownstream capacity per subscriber 19.5 MB/supstream capacity per subscriber 19.5 MB/sSource: ADTRAN Broadband Speed White Paper at t.5

The cost to connect a home to an FTTP system is roughly $650 to $750 per home,88 with much of the cost consisting of the optical network terminal (ONT) for the home and associated power supply equipment and labor costs. The ONT is the piece of equipment that converts signals from optical to electronic form for distribution over the home’s inside wires (and vice versa). The FCC estimates the cost to install fiber lines for an FTTP system to average slightly less than $1,600 per home (assuming 10 homes per square mile).89 These costs fall significantly when the FCC’s formula is applied to more densely populated communities, falling to $881 per home, for Chath-am County with its 37.84 homes per square mile of land surface.90

The ultimate cost parameters are determined by penetration rate. With conservative assumptions as to take rate (35% of those homes passed will subscribe), the cost of installing fiber lines per subscribing household will rise to $2,517. With the additional cost of the ONT and associated work and adding a $450 reserve to cover equipment costs associated with churn over the life of the network, the cost per subscribing home would total $3,667 ($2,517 for the fiber lines + $700 for the premises equipment + $450 for equipment churn).91 But with more optimistic assump-tions as to take rate (the FCC points out that the average take rate for municipalities and similar

88 FCC’s 2010 Broadband Technical Report at 96.89 FCC’s 2010 Broadband Technical Report at 96.90 This number is close to the $850/home passed provided by the FCC for communities with densities roughly equi-valent to Chatham’s. FCC’s 2010 Broadband Technical Report at 97.91 In one part of its report, the FCC overstated the cost of FTTP builds at $6,000 per subscriber by assuming only 10 homes per square mile and a penetration rate of 35%. It further increased costs by disregarding video-only and phone-only customers even though their payments will help defray the provider’s costs. FCC’s 2010 Broadband Technical Report at 96. In another part of its report, it provided per-subscriber cost estimates of $3,225 for more populated areas. FCC’s 2010 Broadband Technical Report at 97.

providers is 54%92), these per-subscriber costs fall to $2,781 ($1,631 for the fiber lines + $700 for the premises equipment + $450 for equipment churn).

The FCC acknowledges that, over the long haul, it is cheaper to service an FTTP customer than an HFC customer, with the aggregate costs of serving an HFC customer exceeding the aggregate costs of serving an FTTP customer in ten years.93 This is due to the fact that operational savings associated with running an all-passive system eventually outstrip savings from the lower initial capital investment associated with building an HFC system. The FCC further notes that this break even period will become shorter as FTTP technology is more widely deployed and the cap-ital costs of installing fiber drop lines fall further.94

Both the cable companies and the larger telephone companies (i.e., CenturyLink and AT&T) have stuck to their game plan and have not deployed FTTP technology in North Carolina, leav-ing that field to two municipal providers and a handful of small telephone companies. The two municipalities (Salisbury and Wilson) entered the field recently and are in the early stages of providing FTTP technology to their communities while six of the state’s smallest telephone com-panies have begun to venture into the FTTP field, focusing primarily on greenfield develop-ments. The FCC reports that 17,000 (or 4%) of North Carolina’s 427,000 wireline broadband customers receiving service that equals or exceeds an approximation of the FCC’s new broad-band availability targets are FTTP customers.95

It is clear that, based on the numbers and its technical characteristics, FTTP technology is the best wireline technology and is vastly superior to the dated DSL and HFC technologies favored by the telephone and cable industries. DSL and HFC technologies dominate the market primarily because industry has invested so much in these dated technologies and cannot afford to update these technologies to provide state-of-the-art delivery systems. Unfortunately for the consumer, much of the “investment” arises from the frequent buying and trading of cable and telephone companies, the consolidation of both industries, and the financing of the underlying transactions through massive borrowing.96

92 FCC’s 2010 Broadband Technical Report at 98.93 FCC’s 2010 Broadband Technical Report at 109.94 FCC’s 2010 Broadband Technical Report at 109.95 FCC Internet Access Data for 2010 at 40 (t.19) (these numbers include business as well as residential customers).96 To put the cost of financing transactions through debt in context, as of December 31, 2010, TWC’s debt had risen to $23.1 billion, AT&T’s had reached $66 billion, and CenturyLink’s debt stood at $7.3 billion and was about to more than triple. See, Time Warner Cable, Inc., SEC Form 10-K for 2010, March 9, 2011, at 54; AT&T, Inc., SEC Form 10-K for 2010, March 1, 2011, Selected Financial and Operating Data at 1; CenturyLink, Inc, SEC Form 10-K for 2010, at 54. With the acquisition of Savvis, CenturyLink’s debt will rise to about $24 billion. CenturyLink, SEC Form S-4 (acquisition of Qwest), June 4, 2010, at 11 (combined debt of Qwest and CenturyLink will total $22 bil-lion after the merger); CenturyLink, SEC Form S-4 (acquisition of Savvis), May 17, 2011, at 8 (CenturyLink plans to borrow $2 billion for the Savvis acquisition).

B. WIRELESS BROADBAND OPTIONS

1. Terrestrial Wireless

The wireless industry is dominated by a handful of large mobile wireless providers, which have acquired many licenses through corporate acquisitions and, in some cases, established close to a nation-wide coverage footprint. The future growth of this industry is sharply limited by severe spectrum limitations and tower siting problems. Fixed wireless, while promising due to its ability to use unregulated and lightly regulated spectrum and its more nimble characteristics, remains a tiny niche industry with very few customers in contrast to the millions served by the mobile wireless goliaths, Verizon and AT&T.

Wireless technology first became commercially available in the mid-1980s but was initially used primarily for voice communications and relied on analog transmissions. Wireless solutions, whether mobile or fixed, tend to be lower cost than wireline solutions and costs grow less quickly as density falls.97 A major obstacle to the deployment of both mobile and fixed wireless is the high cost of antenna towers, which makes the less densely populated areas less attractive to the wireless industry. The FCC has estimated the cost of constructing and maintaining an antenna tower over 20 years at $350,000 to $450,000, with that cost falling by 50% or more if antenna are co-located on existing towers.98

Using its obsolete 1998 definition of broadband (200 kb/s in either direction), the FCC reports that wireless providers serve 1.975 million (or 43%) of North Carolina’s 4.555 million broad-band customers.99 These North Carolina numbers tumble to 237,000 (or 37%) of the state’s 687,000 broadband customers when a measurement approximating the FCC’s new and more ac-curate definition of broadband availability is applied to measure the availability of mobile broad-band in North Carolina.100

a. Mobile Terrestrial Wireless (Conventional Cellular Service)

Mobile broadband, like DSL and cable modem service, is an add-on to an existing technology (cellular technology) that was originally designed for a limited purpose (the carriage of voice communications). Starting in about 1992, the cellular industry began to move away from its long-time focus on voice communications and to offer limited data capability and “second gener-ation” or 2G service. These early years of transition into the broadband arena were not easy as the providers deployed four different, competing technologies, leading to a lack of standardiza-

97 FCC’s 2010 Broadband Technical Report at 61.98 FCC’s 2010 Broadband Technical Report at 81.99 FCC Internet Access Data for 2010 at 38 (t.18) (these numbers include business as well as residential customers).100 FCC Internet Access Data for 2010 at 40 (t.19) (these numbers include business as well as residential customers).

tion.101 In 2003, the cell industry started to deploy “third generation” (3G) technology in the United States, which supports more robust (but still limited) data service, and to pare back on the number of competing technologies.

In 2010, the industry began to deploy 4G technology, which promises higher data speeds and the ability to deliver service at even higher speeds due to more efficient spectrum use and an all-IP architecture.102 4G technology allows for more efficient use of spectrum than do legacy technolo-gies such as 2G, which were designed for circuit-switched traffic and were more costly to con-struct and maintain due to their greater complexity. 4G technology, like prior generations of wireless technology, requires the installation of new antennas at each cell tower and other sup-porting equipment. Further, the adaptability of existing mobile wireless network to new techno-logies is limited by existing tower capacities and spacing.

4G technology relies on the Long Term Evolution (LTE) protocol and is a simpler and more cost-effective technology than either 2G or 3G. LTE is an evolution of the GSM family of standards103

and is the protocol of choice for major carriers like Verizon and AT&T. It is more versatile than the competing protocol, the Worldwide Interoperability for Microwave Access (WiMAX) pro-tocol, in that it can be used with a wide range of frequency bands, including the lower frequen-cies favored by the incumbent wireless carriers. WiMAX, like LTE, works with both fixed and mobile wireless but is finding more of a niche in the fixed wireless and the backhaul world than in the mobile world, in part due to the fact that it currently is designed only for upper frequencies (e.g., 2.3 GHz, 2.5 GHz, 3.5 GHz, 3.65 GHz) and not the lower frequencies favored by the major wireless carriers and compatible with LTE.

The transmissions from cell tower via the air waves to the customer’s mobile device are equival-ent to the “last mile” for telephone and cable distribution facilities. Because of the shared nature of this spectrum, this part of the communications pathway often becomes congested, resulting in slow and unreliable service. Wireless spectrum for mobile use is federally licensed and is sharply limited as to available bandwidth, further compounding the congestion and slow speed associ-ated with shared use of the spectrum.

According to the cell industry’s trade association, the average cell size for conventional cell ser-vice is about 1,196 subscribers.104 The FCC found that the optimal cell size for quality broadband service is much smaller: The FCC recommends about 650 homes per cell tower (or, since towers 101 Those four technologies were Code Division Multiple Access (CDMA), Time Division Multiple Access (TDMA). Global System for Multiple Communication (GSM), and Integrated Digital Enhanced Network (iDEN), with CDMA and GSM technologies eventually coming to dominate the market. FCC’s 2010 Broadband Technical Report at 62.102 Verizon Wireless claims that average 4G users will experience downlink speeds of 5-12 MB/s and uplink speeds of 2-5 MB/s. See, https://www.lte.vzw.com/AboutLTE/VerizonWirelessLTENetwork/tabid/6003/Default.aspx. 103 FCC’s 2010 Broadband Technical Report at 62. Verizon has chosen LTE while Sprint is deploying WiMax. FCC’s 2010 Broadband Technical Report at 123, n.11.104 http://www.ctia.org/advocacy/research/index.cfm/aid/10323.

are typically shared by four or more carriers, about 195 customers for the two largest carriers105) and the designation of 20 MHz for downstream transmissions and another 20 MHz for upstream transmissions.106 Reaching these goals will require much greater allocations of spectrum to cell service and the deployment of many more cell towers and other sites.

Alternatively, the industry could develop and deploy much more localized and efficient distribu-tion nodes, which could provide a way to work around the spectrum limitations and the high cost (and associated siting problems) of new cell towers. Alcatel-Lucent is hard at work on a new cube-like device called “lightRadio” and expects to deploy it on an experimental basis in September of 2011. These tiny cubes could be mounted on a utility pole or a building roof or sur-face and would contain transceivers to serve customers, replacing the antenna arrays now moun-ted on tall towers. Signal processing would be centralized and consolidated with each cube served by its own broadband connection.

The following is an example of a lightRadio cube (source Alcatel-Lucent):

This technology is at its infant stage and it may or may not take off but it provides evidence that eventually alternatives will emerge to the inefficient existing system of large, costly towers, with heavy-duty signal processing equipment at the base of each tower. However, it is not a magic bullet either in rural areas as it will require an investment in an extensive fiber network to deliver signals to the many spots where lightRadio cubes would be installed.

The severe limits on available spectrum for the existing distribution system make development of an alternative to the status quo imperative. The FCC had doled out radio spectrum to the cellu-

105 Each cell tower typically carries antenna arrays for at least four wireless carriers so, under the 650-home standard, cell size would work out to about 195 subscribers apiece for AT&T and Verizon, each of which has about a 30% share of the wireless market.106 FCC’s 2010 Broadband Technical Report at 61.

lar industry in small servings over time through competitive auctions due to the fact that, before the cell industry emerged, it had already given out most of the prime spectrum to television broadcast stations and a host of other users and licensees. Due the regulatory gridlock over spec-trum re-assignments, the federal spectrum allocation process has resulted in the designation of only tiny amounts of spectrum for cell service (and the now burgeoning broadband services be-ing delivered via cell systems), with each attempt to find new spectrum for mobile service taking many years and encountering stiff resistance from entrenched licensees and users.

The FCC first set aside spectrum for commercial cellular service in 1981, reserving 50 MHz (in 2 25 MHz blocks) for cellular service by FCC rule. This spectrum was in the 824-849 MHz and 869-894 MHz ranges. It was quickly gobbled up by the nascent cell industry, which had many players in the 1980s, and was initially used almost entirely for voice communications in analog form. This spectrum was prime spectrum but it was limited in amount and not sufficient to sup-port the many new applications that have emerged in recent years.

The FCC made available another 120 MHz of spectrum for cell service through 1994 rules for a service that it named Broadband Personal Communication Service (PCS). This bandwidth was reserved for digital services and was much higher frequency than the 50 MHz of spectrum first reserved for cell service in 1981. This 120 MHz of spectrum is in the 1850-1910 MHz and 1930-1990 MHz ranges and is divided up into several blocks for licensing purposes, including 3 30 MHz blocks and 3 10 MHz blocks, with one of the 30 MHz blocks (the C block) further sub-divided into blocks of 15 or 10 in some markets. This PCS spectrum was auctioned to providers in the late 1990s.

Through rules adopted in late 2003, the FCC set aside another 90 MHz of spectrum for Ad-vanced Wireless Service (AWS), with the expectation that this new spectrum would be used primarily for 3G service. This spectrum was in the 1710-1755 MHz and 2110-2155 MHz range and was auctioned off in late 2006.

In the National Broadband Plan, the FCC recommends that the federal government make avail-able another 300 MHz of spectrum for mobile broadband by 2015 and another 200 MHz for broadband uses by the year 2020.107 Other organizations have pegged the looming spectrum defi-cit at a much higher level, with the trade association for the wireless industry, CTIA-The Wire-less Association (CTIA), pegging the deficit at 800 MHz (and documenting the ongoing expo-nential growth in demand for broadband wireless capacity)108 and the International Telecommu-nications Union (ITU) estimating total spectrum needs for mobile broadband in the United States of 1300 MHz by 2015 and 1720 MHz by 2020.109

107 NBP at 84.108 CTIA-Wireless Association Reply Comments in re NBP PN # 6 (Comment Sought on Spectrum for Broadband—NBP Public Notice # 2, GN Docket Nos. 09-47, 09-51, 09-137), Nov. 13, 2009, at 2, 5-6, 12.109 NBP at 84.

According to the FCC, it has already licensed some 547 MHz in the bands below 3.7 GHz that are currently being used for mobile broadband or could be used for mobile broadband in the fu-ture through creative approaches.110 This 547 MHz total includes the 170 MHz allocated for cel-lular service and PCS service in the 1980s and 1990s and the 90 MHz that was recently auc-tioned off for AWS-1 use. The FCC assumes that another 287 MHz of spectrum that has been re-banded or is in the process of being rebanded since 2004 can somehow be made available for broadband use.

The severe limits on available spectrum for mobile broadband are manifest in AT&T’s decision to aggressively deploy Wi-Fi hotspots in urban areas and other areas like airports where broad-band traffic is heavy to supplement its standard cell service and siphon broadband traffic off its cell network. AT&T has more Wi-Fi hotspots than any other cell company, with more than 24,000 around the nation111 through partnerships with McDonald’s, Starbucks, FedEx, and others. Wi-Fi networks use unlicensed frequencies (e.g., 2.4 GHz, 5 GHz) to connect to a wireless ac-cess point, require their own broadband connections for each hotspot, and operate independently of cell networks.

The FCC’s assumptions on the future availability of spectrum for broadband use are, to a very significant extent, based on wishful thinking. Most of the spectrum eyed by the FCC for broad-band use is already in the hands of existing licensees or dedicated to purposes other than mobile broadband.112 Current licensees or designated users are likely to resist efforts to reprogram or reallocate that bandwidth. Particularly convoluted and unpromising is the FCC’s proposal to en-courage existing broadcast licensees to voluntarily relinquish some 120 MHz of their existing spectrum in the 572-698 MHz frequency range (UHF channels 31-51) by offering to share auc-tion proceeds with them and helping to relocate their signals to other spectrum locations.113

If this approach were successful, it would free up valuable low-frequency spectrum for mobile use. These low frequencies are particularly well suited for mobile broadband service because lower-frequency signals do not lose strength as quickly as higher-frequency signals and therefore can travel further without signal loss, allowing for larger cell sizes.114 Further, low-frequency sig-nals can more readily penetrate building walls than higher-frequency signals.115 However, the fu-ture of the FCC’s approach is uncertain at best as the broadcast industry is bitterly opposed to the establishment of a program of reverse auctions despite of the fact that the program would be vol-untary.

110 NBP at 84.111 AT&T, Inc., 2010 Annual Report at 3.112 NBP at 84 (see, e.g., Exhibit 5-E: 90 MHz has already been assigned to satellite interests and 120 MHz had been assigned to television broadcasters).113 NBP at 88-93.114 FCC’s 2010 Broadband Technical Report at 67.115 FCC’s 2010 Broadband Technical Report at 67.

Terrain also affects signal propagation for mobile wireless providers and has to be taken into ac-count in planning. The FCC has classified terrain into four main categories and recommended outside limits on cell size based on terrain type116 but these limits only apply if the provider is us-ing low frequencies such as frequencies in the 800 MHz range to transmit117:

terrain type standard elevation deviation maximum cell radius (miles)flat no more than 20 meters 8rolling hills 20 to 125 meters 5hilly 125 to 350 meters 3mountainous Greater than 350 meters 2

For Chatham County, with its rolling hills, these standards translate into a maximum cell radius of 5 miles. Compliance with this standard, along with equipment and operational enhancements, is required because signal quality diminishes in relationship to distance from the cell site, with speed dropping by as much as 60% at the edges of cells.118 Finally, it is important to keep in mind that reducing cell size will generally not improve signal quality unless it also reduces the number of subscribers and broadband traffic using the site.119 Thus, the five-mile limitation is only the starting point in terms of establishing appropriate technical configurations for each cell site.

The number of cell sites and the cost of building, operating, and maintaining each site determines the cost of a conventional cell network.120 These costs rise in sparsely populated areas on a per-customer basis as the number of potential subscribers shrink due to low population density. These cost considerations in part explain why the cell industry has not deployed sufficient tower capacity in Chatham County and why the size of the typical cell in the County is too large to provide consistent quality mobile services in the County. They also explain why the industry is unlikely to invest in broadband infrastructure in the County at the same level and pace as it in-vests in the broadband infrastructure for heavily populated, urbanized areas.

All but 1,000 of North Carolina’s 1.975 million wireless broadband customers are served by mo-bile broadband providers.121 This means that fixed wireless service, with all its promise, has barely dented the North Carolina market. The mobile wireless market is dominated by Verizon and AT&T, which each controlling about 30% of the national market at 88.4 million122 and 86.8

116 FCC’s 2010 Broadband Technical Report at 69.117 FCC’s 2010 Broadband Technical Report at 124 (n.65).118 FCC’s 2010 Broadband Technical Report at 66.119 FCC’s 2010 Broadband Technical Report at 73.120 FCC’s 2010 Broadband Technical Report at 66.121 FCC Internet Access Data for 2010 at 38 (t.18) (these numbers include business as well as residential customers).122 Verizon Communications, Inc., SEC Form 10-Q for the first quarter of 2011, April 28, 2011, at 24.

million retail subscribers,123 respectively. The remaining 40% of retail customers are served primarily by the following six national wireless carriers in descending order of size: Sprint Nex-tel (44.25 million),124 T-Mobile USA (33.6 million),125 TracFone Wireless (18 million),126 Met-roPCS (8.8 million),127 Cricket Communications (Leap) (5.8 million),128 and US Cellular (5.7 million).129

123 AT&T, Inc., SEC Form 10-Q for the first quarter of 2011, May 6, 2011, at 20.124 Sprint Nextel Corp., SEC Form 10-Q for the first quarter of 2011, May 5, 2011, at 24.125 T-Mobile USA, T-Mobile USA reports first quarter 2011 results, May 6, 2011, at 9. T-Mobile is a subsidiary of Deutsche Telekom (DT) but AT&T has entered into an agreement to acquire it from DT, which must be approved by the federal government before it can be implemented. 126 http://www.tracfone.com/about.jsp?nextPage=about.jsp&task=about. TracFone Wireless is a subsidiary of Mex-ico-based America Movil and is the largest “no contract” provider of cell service in the U.S.127 MetroPCS Communications, Inc., SEC Form 10-Q for the first quarter of 2011, May 6, 2011, at 27.128 Leap Wireless International, Inc., Corp., SEC Form 10-Q for the first quarter of 2011, May 6, 2011, at 32.129 United States Cellular Corp., SEC Form 10-Q for the first quarter of 2011, May 6, 2011, at 18.

cell carrier # of retail subscribers % of retail subscribers88,400,000 30.3%

AT&T 86,800,000 29.8%44,250,000 15.2%

T-Mobile 33,600,000 11.5%18,000,000 6.2%8,800,000 3.0%

Cricket (Leap) 5,800,000 2.0%US Cellular 5,700,000 2.0%

TOTALS 291,350,000 100.0%

Verizon

Sprint Nextel

TracFoneMetroPCS

NUMBER OF RETAIL SUBSCRIBERSFOR THE EIGHT LARGEST CELL CARRIERS

Even if the cost considerations associated with conventional cell service could be overcome, mo-bile broadband, as currently provided by any of the major national carriers, is a poor solution for Chatham County’s broadband deficit due to the severe limits on available spectrum.

b. Fixed Terrestrial Wireless (Fixed Wireless Access (FWA) Networks)

Fixed wireless access (FWA) technology is an emerging technology that is still in its infancy but shows promise as a way to fill in the major gaps in coverage created by the shortcomings in the business models of the major technology providers (i.e., the telephone industry (DSL), the cable industry (cable modems), and the cellular industry). FWA networks use fixed customer premises equipment (e.g., an external antenna) to receive and transmit wireless signals at the customer’s location instead of the mobile devices used by mobile customers. They generally operate on unli-censed frequencies (e.g., 900 MHz, 2.4 GHz) or higher licensed frequencies (e.g., 2.5 GHz, 3.65 GHz).

Fixed wireless can provide better performance than mobile wireless because the customer’s an-tenna can be higher powered than a battery-operated mobile device.130 Further, because antennas are externally mounted (and the signals do not need to penetrate building walls), signal loss is significantly reduced.131 With the exception of Clearwire’s WiMax product, this industry is dom-inated by tiny local companies and has encountered difficulties in becoming a major player in the wireless market.

FWA can be used in conjunction with licensed spectrum (e.g., spectrum in the 2.5 GHz or 3.65

130 FCC’s 2010 Broadband Technical Report at 66.131 FCC’s 2010 Broadband Technical Report at 66.

GHz range)132 or with unlicensed spectrum (e.g., 900 MHz, 2.4 GHz).133

Fixed directional antennas are significantly more effective in terms of spectrum efficiency than omni-directional antennas.134 For example, signal quality is noticeably better at the edges of cell sites if a directional antenna is used.135 As with mobile broadband, lower spectrum bands provide better coverage for FWA. On the other hand, much smaller antennas can be used with higher fre-quency spectrum, meaning that multiple antennas (which can greatly improve spectral effi-ciency) can be more easily incorporated into receiving and transmitting equipment.136

Like mobile wireless, FWA networks require point-to-point second-mile connections to carry traffic to aggregation points and then to the Internet via middle-mile connections. These second-mile connections can be provided by microwave links or fiber optic connections, with mi-crowave sometimes favored in unserved areas due to lower installation and construction costs.137

Microwave backhaul does have built-in limitations, including capacity limits and line-of-sight re-quirements, but it is an effective alternative in markets where one or two providers dominate the fiber market and charge excessive prices for fiber connections.138

Microwave connections can also be provided via Hybrid Fiber Microwave (HFM) architectures, with some cells being fiber fed and serving as aggregation points for traffic carried on mi-crowave links.139 This is the architecture favored by Clearwire, the only major FWA provider.140

The FCC recommends that the number of microwave hops in an HFM network be limited to a maximum of four but also makes clear that fiber backhaul connections are preferred to future proof the network.141

The FCC estimates huge cost savings in cases where the cell’s radius can be as large as 4.5 to 6.5

132 The FCC has assigned 2496-2502 MHz and 2602-2673.5 MHz to Broadband Radio Service (BRS) (this spectrum is available for commercial use through FCC licenses or leases from third parties). It has also assigned 2502-2602 MHz and 2673.5-2690 MHz to Educational Broadband Service (EBS), which is available to governmental entities as well as educational and other non-profit organizations and may be used by the licensee or leased to a third-party commercial licensee. Finally, it has assigned 3650-3700 MHz to fixed wireless service and fixed satellite service. 133 Chatham Wireless, Interview, Aug. 19, 2010. See also, Cambria County, Pennsylvania, Interview, Feb. 16, 2011.134 FCC’s 2010 Broadband Technical Report at 72.135 FCC’s 2010 Broadband Technical Report at 73.136 FCC’s 2010 Broadband Technical Report at 73.137 Microwave links can provide connections of 500 MB/s over as much as 20 miles for equipment costs of $50,000. In contrast, fiber connections run $11,000 to $24,000 per aerial mile and $25,000 to $165,000 per buried mile (the low side of these ranges is likely to apply in Chatham County due to low density, unpaved right-of-way, and other factors). FCC’s 2010 Broadband Technical Report at 75.138 FCC’s 2010 Broadband Technical Report at 76.139 FCC’s 2010 Broadband Technical Report at 75.140 FCC’s 2010 Broadband Technical Report at 75.141 FCC’s 2010 Broadband Technical Report at 76.

miles, with total investment estimated to be only $779 per housing unit for these large cells. Those costs soar as cell size shrinks (to $4,131 per housing unit).142 Smaller cell size is required for hilly terrain and with high-frequency systems. In fact, the FCC recommends a maximum ra-dius of 3 miles in hilly terrain with higher frequencies (instead of 5 miles for areas served by lower frequency wireless systems).143

Clearwire is the only national provider of FWA but has very few FWA retail customers and is ex-periencing major financial problems.144 FCC data shows that only 1,000 of North Carolina’s 1.975 million wireless broadband customers are served by FWA.145 The numbers are not much better nationally with the FCC reporting a grand total of 548,000 FWA customers146 and with only 91,000 receiving service of 3 MB/s or more downstream and 768 kb/s or more upstream.147

FWA technology is ideal on an interim basis for areas that are underserved for population density reasons. In these areas, lower frequencies can be used (the 900 MHz spectrum), allowing for lar-ger cells and reducing deployment costs. The 900 MHz spectrum, however, is unlicensed shared spectrum and is heavily used for consumer electronic devices like garage door openers and cord-less telephones, meaning that over the long term, this spectrum is likely to become congested, es-pecially in areas with any real population density. Over the long term, FWA systems that use spectrum in the 2.5 GHz or 3.65 GHz range may make more sense even though the initial costs of deployment will be higher due to the smaller radius of the cell site’s service area.

c. Key Spectrum for Wireless Terrestrial Service

Name bandwidth FCC rules otherESTABLISHED CELL CARRIERSCell 824-849 MHz

869-894 MHzlicensed (granted in the 1980s)

Broadband Personal Communications Ser-vice (PCS)

1850-1910 MHz1930-1990 MHz

licensed (auctioned in 1995-97)

Advanced Wireless Ser-vice (AWS)

1710-1755 MHz 2110-2155 MHz

licensed (auctioned in 2006)

142 FCC’s 2010 Broadband Technical Report at 78 (Ex. 4-X).143 FCC’s 2010 Broadband Technical Report at 79 and 124 (n. 65 (cell size can be as much as 57% greater in the 700 MHz band than in the 1900 MHz band).144 Clearwire has about 1.2 million retail customers. Clearwire, SEC Form 10-K for 2010, Feb. 22, 2011, at 50. Clearwire holds “legacy” cell licenses and serves many of those customers through a small conventional cell net-work. Its periodic disclosures of financial and operational information do not provide a breakdown of its FWA cus-tomers versus its mobile customers.145 FCC Internet Access Data for 2010 at 38 (t.18) (these numbers include business as well as residential customers).146 FCC Internet Access Data for 2010 at 23 (t.7) (these numbers include business as well as residential customers).147 FCC Internet Access Data for 2010 at 25 (t.9) (these numbers include business as well as residential customers).

Name bandwidth FCC rules otherEMERGING BROADBAND OPPORTUNITESBroadband Radio Ser-vice (BRS)

2496-2502 MHz2602-2673.5 MHz

licensed (auctioned in 1999 based on basic trad-ing areas)

formerly multipoint dis-tribution service (MDS); licenses may be freely traded

Educational Broadband Service (EBS)

2502-2602 MHz2673.5-2690 MHz

licensed to educational, governmental, and non-profit organizations

but licensee may lease unused capacity to third parties

Fixed Wireless Service (3.65 GHz)

3650-3700 MHz lightly licensed through an application process

spectrum is shared with fixed satellite service

2. Satellites

The final broadband option is satellite service. Satellite industry data suggests many possible satellite options but in reality the satellite option is very limited and makes sense only for sparsely populated areas that cannot be reached by wireline service or other wireless options. Satellite service is extremely costly and has built-in technical and capacity limits that make it a non-starter for an area like Chatham County.

At first glance, the satellite sector appears promising, with some 958 satellites currently in opera-tion, including 441 or about 46% owned by the United States government or companies.148 Some 253 commercial satellites operate in the geosynchronous orbit (GEO), about 100 of which belong to U.S. companies.149 But the vast majority of these satellites are not usable for subscriber broad-band service, with options for satellite broadband service for subscribers in the United States confined to just three satellites currently in service150 and two additional satellites planned for launch in the summer of 2011151 and early 2012.152 Due to these limitations, the total number of broadband subscribers served by satellite barely reaches one million.153

GEO satellites, the type of satellite used to deliver broadband service to individual consumers, are fixed at about 22,300 miles above the earth’s surface and rotate in orbital cycles that are syn-chronized with the earth’s orbit and, as a result, always deliver their signals to the same footprint on the earth’s surface. In the retail context, GEO satellites are used to deliver video programming (DirecTV has a fleet of 12 GEO satellites and Dish Network has 3 GEO satellites) as well as broadband service (ViaSat has 1 GEO satellite and leased capacity on a second and Hughes has 1 GEO satellite) to U.S. consumers.

Satellite technology is constrained by the very high frequency spectrum (the Ku-band for the older satellites (11.7 to 12.7 GHz for downlinks and 14 to 14.5 GHz for uplinks) and the Ka-148 Union of Concerned Scientists, UCS Satellites Database: Quick Facts and Analysis, Nov. 1, 2010; http://www.uc-susa.org/nuclear_weapons_and_global_security/space_weapons/technical_issues/ucs-satellite-database.html (UCS Satellites Database).149 UCS Satellites Database.150 ViaSat owns the WildBlue satellite, which was launched by WildBlue in March of 2007 and acquired by ViaSat when it purchased WildBlue on December 15, 2009. ViaSat also has a lifetime lease for Ka-band capacity on Telesat Canada’s Anik F2 satellite, which was placed in service in April of 2005. ViaSat, Inc., 2010 Annual Report at 19. Hughes Communications has a single satellite, SPACEWAY 3, which was launched in August of 2007. Hughes Communications, Inc., SEC Form 10-K for 2010, March 11, 2011 (Hughes’ Form 10-K for 2010), at 8.151 ViaSat plans to launch ViaSat-1 in the summer of 2011 with a capacity for U.S. customers of 130 GB/s. ViaSat, Inc., 2010 Annual Report at 19.152 Hughes has entered into a contract for the launch of a next-generation satellite, the Jupiter satellite, which is scheduled to be launched in the first half of 2012. Hughes’ Form 10-K for 2010 at 8.153 The total number of satellite broadband subscribers, is about 1,002,200. Hughes had 578,200 satellite broadband customers as of December 31, 2010 (Hughes’ Form 10-K for 2010 at 8), while ViaSat had 424,000 on April 2, 2010 (ViaSat, Inc., SEC Form 10-K for 2010, June 1, 2010, at 6).

band for the newer satellites (18.3 to 20.2 GHz for downlinks and 27.5 to 31 GHz for uplinks)) on which satellites operate under FCC’s spectrum allocation and licensing policies.154 High-fre-quency transmissions are particularly vulnerable to weather disruptions.155 Satellite technology is further constrained due to the long distances signals must travel through space (22,300 miles up and 22,300 back) and the resulting delays in signal transmissions of about a half a second.156

Broadband subscribers experience these slight delays in transmissions as signal “latency.” In ad-dition to those technical constraints, satellite technology is further limited by the high costs of satellite launches, spectrum limits, and the fixed nature of technology (equipment installed on the satellite cannot be readily modified or updated after launch).

The three existing satellites deliver a total capacity of only about 35 GB/s,157 which is why the number of customers is modest and the data rates low. The two planned next-generation satellites will increase this capacity to 165 GB/s and then 295 GB/s once the new Hughes’ satellite comes on-line in 2012.158

The two planned next-generation satellites—ViaSat-1 in the summer of 2011 and Hughes’ Jupiter satellite in the first half of 2012—will be high through-put satellites and will deliver broadband service at much higher speeds than current satellites: 2-10 MB/s downstream for the ViaSat satel-lite and even faster speeds (5-25 MB/s) for the new Hughes satellite but upstream speeds have not been announced.159 Each of these two new next-generation satellites should be able to serve about 1 million customers, with ViaSat claiming that it will be able to meet the FCC’s broadband availability targets of 4 MB/s downstream and 1 MB/s upstream.160 But the FCC points out that these two satellites do not offer a long-term solution to the broadband deficit because they are expected to be able to serve no more than 2 million customers in total. Further, even that modest number will decrease quickly because of projected growth in customer demand for speed and ca-pacity of as much as 30% per year (i.e., consumer demand is on a path to double every three years),161 with the FCC predicting that each satellite will only be able to serve about 440,000 cus-tomers by 2015.162

Satellites use multiple “spot beams” to provide nation-wide coverage. Through this technique, satellites are able to re-use the same spectrum over and over again in different geographic areas.

154 FCC’s 2010 Broadband Technical Report at 89.155 FCC’s 2010 Broadband Technical Report at 89.156 FCC’s 2010 Broadband Technical Report at 89.157 FCC’s 2010 Broadband Technical Report at 90 (Ex. 4-AM).158 FCC’s 2010 Broadband Technical Report at 90 (Ex. 4-AM).159 FCC’s 2010 Broadband Technical Report at 89.160 FCC’s 2010 Broadband Technical Report at 90.161 FCC’s 2010 Broadband Technical Report at 90.162 FCC’s 2010 Broadband Technical Report at 91.

This technique provides for more efficient use of the satellite’s limited spectrum and limited power but the bandwidth available to customers is limited by the bandwidth of the spot beam that has been assigned to cover the area where the customer is located and the satellite’s total band-width. Further, spot beams cannot be altered once they have been assigned to a particular geo-graphic area,163 making it difficult for satellite providers to adjust service delivery in response to changes in the geographic concentration of customer demand.164

Providing more satellite capacity involves launching more satellites that can provide more band-width and more effectively use spectrum allocations.165 Each launch of a next-generation satellite costs about $400 million,166 which is part of why there are only two planned new satellites for the foreseeable future. Each next-generation satellite requires a long lead time as it takes about three years to build one.167 Further, with high launch costs and the shrinking number of customers that each satellite will be able to serve, satellite providers will be required to more than double their currently monthly charges, which already range from $60 to $80 per month, in order to maintain current return rates.168

To protect “firm confidentiality,” the FCC does not disclose satellite broadband data on a state-by-state basis.169 The FCC reports a grand total of 1.1 million satellite broadband customers na-tionwide170 while also reporting that no satellite broadband customers receive service of 3 MB/s or more downstream and 768 kb/s or more upstream.171

C. MIDDLE-MILE CONNECTIONS

Middle-mile connections carry Internet traffic to and from local network aggregation points to Internet backbone connection points and are typically fiber optic networks. These middle-mile connections can add significantly to the cost of local network operations, adding anywhere from $2 to $12 per subscriber to monthly costs depending on arrangements for middle-mile connec-tions.172 In rural and semi-rural areas, the middle-mile market tends to be controlled by one or

163 FCC’s 2010 Broadband Technical Report at 89.164 FCC’s 2010 Broadband Technical Report at 125, n. 88, 89.165 FCC’s 2010 Broadband Technical Report at 61.166 FCC’s 2010 Broadband Technical Report at 92.167 FCC’s 2010 Broadband Technical Report at 92.168 FCC’s 2010 Broadband Technical Report at 92.169 FCC Internet Access Data for 2010 at 38 (t.18, n*).170 FCC Internet Access Data for 2010 at 23 (t.7) (these numbers include business as well as residential customers).171 FCC Internet Access Data for 2010 at 25 (t.9) (these numbers include business as well as residential customers).172 National Exchange Carrier Association Comments in re NBP PN # 11 (Comment Sought on Impact of Middle and Second Mile Access on Broadband Availability and Deployment—NBP Public Notice # 11, GN Docket Nos. 09-47, 09-51, 09-137) (NECA Middle-Mile Comments), Nov. 4, 2009, at t.1.

two incumbent providers who, as monopolies or duopolies, are in the position to pass along high middle-mile fees as part of broadband service fees to unknowing business and governmental cus-tomers.

The connection points to the Internet backbone are variously known by such names as “Internet gateways,” “network access points,” “points of presence,” or “co-location points.” Middle-mile connections ferry local Internet traffic back and forth between local networks and the Internet backbone. The Internet backbone then connects to main routing centers or “Internet exchange points” (IXP)173 and to the rest of the Internet world. Middle-mile and Internet backbone costs are typically buried in monthly broadband fees and are not broken out as separate charges al-though middle-mile and Internet backbone services can be purchased separately by large custom-ers.

According to the FCC, middle-mile costs tend to be higher in rural areas because of longer dis-tances and lower demand.174 At the same time, the FCC has raised questions as to whether there is actually a shortage of middle-mile capacity in rural areas,175 implying that established incum-bent providers are simply taking advantage of their monopoly or duopoly position in dealing with customers.

The location for the local network aggregation point where the middle-mile connection picks up traffic depends upon the type of provider providing the final connection to customers. It could be a cable headend, the central office for a local telephone company, or a wireless mobile switching center but the basic cost principles will be the same:

173 The nearest IXPs fed by the Internet backbone are located in Ashburn, Virginia, and Atlanta, Georgia.174 FCC’s 2010 Broadband Technical Report at 114.175 FCC’s 2010 Broadband Technical Report at 114.

Many of the larger local providers (e.g., cable operators like Time Warner Cable and Charter, local telephone companies like AT&T and CenturyLink) are self providers of middle-mile capa-city. They provide their own middle-mile connections for some or all of the route to the Internet backbone and do not pay third parties for this service. Smaller providers such as fixed wireless providers and business customers are more likely to be at the mercy of these larger providers for middle-mile service, which is why their baseline per-customer costs for providing service tend to be higher.

Middle-mile service is largely unregulated, with most service arrangements made by contract between the customer and the provider. As a general rule, fiber optic technology is required for middle-mile connections due to the volume of traffic.176 However, microwave connections are, on occasion, appropriate for shorter middle-mile connections.177

Aggregation of traffic for middle-mile purposes results in significant cost savings, with 1 GB/s Ethernet connections costing about $2 per customer while Ethernet connections of less than 10 MB/s cost slightly more than $5 per customer and non-Ethernet connections generally run more

176 FCC’s 2010 Broadband Technical Report at 114-115, 117.177 FCC’s 2010 Broadband Technical Report at 115.

than $6 per customer.178 The FCC also concluded that providers who rely on leased facilities for middle-mile service pay more for middle-mile costs than do providers that use their own facilit-ies.179 Finally, the FCC suggested that at least 1 MB/s of shared capacity on the middle-mile con-nection should be set aside for every 14.5 users.180 A review of the FCC’s data source—the Na-tional Exchange Carrier Association—suggests that this number is already much lower for some carriers, with data showing 4.1 users per megabit for carriers with 1 GB/s middle-mile connec-tions.181 And of course with the continuing growth in demand for speed, this ratio can be expec-ted to continue to fall, suggesting that access to fat middle-mile pipelines at affordable prices will be an important competitive consideration to rural and semi-rural areas in the emerging global broadband market.

Like middle-mile service, Internet backbone service is an unregulated service. There are a num-ber of “tier 1” backbone providers that compete with each other, giving policy makers the sense that government intervention is not warranted. The main tier 1 Internet backbone providers are: AT&T, CenturyLink (through its recent acquisition of backbone provider Qwest and its pending acquisition of Savvis), Level 3, Sprint, and Verizon. There are a number of other “tier 2” back-bone providers such as PCCW Global and tw telecom that rely on partnerships with tier I pro-viders to provide backbone service. In North Carolina, AT&T has 21 nodes for connecting to the Internet backbone, including nodes in Chatham County and Sanford; Qwest has two points of presence, including one in Raleigh; Level 3 has about eight network connection points, including points in Durham and Raleigh.

D. SUMMARY OF CAPACITY AND GEOGRAPHIC LIMITS OF KEY BROADBAND OPTIONS

Each of the main broadband options is subject to technical limits and financial constraints but some are superior to others in performance and potential. Putting aside cost considerations, the most future-proofed and powerful technologies are two technologies that rely heavily on fiber optic connections: G-PON FTTP technology and VDSL2, with G-PON being more fiber rich than VDSL2 and having a decided advantage over VDSL2. Lagging far behind are the telephone industry’s ADSL2 technology, the cable industry’s HFC technology, and wireless technologies.

The incumbents’ wireline technologies have real built-in weaknesses associated with the history of each technology. Incumbent telephone companies, for example, are unwilling to deploy DSLAM units in sufficient numbers in rural areas to limit the signal loss associated with long copper runs to subscriber locations. The cable industry’s HFC technology is even more flawed, requiring massive bandwidth sharing between optical nodes and subscriber locations.

178 NECA Middle-Mile Comments at t.1.179 FCC’s 2010 Broadband Technical Report at 120.180 FCC’s 2010 Broadband Technical Report at 121 and 125 at n.82.181 NECA Middle-Mile Comments at t.1

Existing wireless technology is similarly limited. Cellular service is subject to severe spectrum and other limits and likely will need to be overhauled or augmented by new technology in relat-ively short order just to keep up with current demand. Fixed wireless service, with the possibility of much smaller service areas (and therefore less bandwidth congestion) and ease of entry for new providers (due to the ready availability of spectrum licenses) is somewhat more promising but remains in its infancy and largely in the hands of small, creative entrepreneurs.

The following table shows the limited geographic reach and speed capabilities of several of the most talked-about technologies, with the reach of LTE and WiMAX severely limited in densely populated areas:

COMPARISON OF MAXIMUM DOWNSTREAM CAPACITY& GEOGRAPHIC REACH BY TECHNOLOGY

technology 19 subscribers/square mile: 190 subscribers/square mile:maximum ser-

vice area (square miles)

capacity/subscriber (MB/s)

maximum ser-vice area

(square miles)

capacity/subscriber (MB/s)

LTE 1.5 1.2 0.15 1.2WiMAX 2.7 1.23 0.27 1.23DOCSIS 3.0 5.8 1.38 5.8 1.22ADSL2+ 10.3 6 10.3 6VDSL2 1.1 25 1.1 25G-PON 309 78 309 78Note: These calculations assume that middle-mile and second-mile connections do not impose a cap on last-mile speeds.Source: ADTRAN Broadband Speed White Paper at t.9 This table demonstrates the technical superiority of G-PON FTTP technology while underscoring the intrinsic weaknesses of many of our standard technologies for the long haul as demand for broadband service continues its rapid growth. At the same time, building a G-PON FTTP system in a sparsely populated area like Chatham County would represent a financial challenge, which in part explains why the technology serving the County is so limited in its capabilities and ill equipped for the future. Nonetheless, the cost constraints of building a full G-PON FTTP system should not preclude deploying a fiber optic backbone network, which could serve as the possible foundation for a future G-PON FTTP system while also providing a core network that would serve public and other institutions in the County and provide the superstructure for the next gen-eration of wireless service.

III. CHATHAM COUNTY’S EXISTING BROADBAND IN-FRASTUCTURE

Chatham County’s existing broadband providers consist of seven wireline providers and an equal number of wireless providers.

These seven wireline providers include five telephone companies and two cable companies. Each of the five the telephone companies has its own service area and generally does not cross its ser-vice area boundaries to provide broadband market in adjacent service areas due to a tangled web of restrictive rules. The two cable companies—Time Warner Cable and Charter Communications—compete with the relevant local telephone company in their service territories but have limited service areas and no plans to expand those service areas.

Of the seven wireless carriers, Verizon Wireless provides the most coverage in Chatham County but, in general, wireless broadband service remains a hit-or-miss proposition and a slow proposi-tion in many parts of the County. Only one of these wireless providers, Chatham Wireless, is a fixed wireless provider. It operates in the Pittsboro area where a small number of customers have access to high-speed broadband service. Satellite service is also available in most parts of the County but is a flawed, limited, and expensive option.

A. WIRELINE PROVIDERS

The seven wireline companies include five telephone companies (CenturyLink, AT&T, Ran-dolph, Windstream, and Frontier (formerly Verizon)) and two cable companies (Time Warner Cable and Charter Communications). The dominant wireline provider in the County in terms of subscriber numbers and geographic reach is CenturyLink, followed by AT&T, Time Warner Cable, and Charter. Bringing up at the rear with smaller service territories and subscriber counts are three telephone companies—Randolph, Windstream, and Frontier, which each claim pieces of the County at its corners and southern edge.

1. Telephone Companies

The five telephone companies serving Chatham County in descending order of number of resid-ents served are: CenturyLink, AT&T, Randolph, Windstream, and Frontier (formerly Verizon). TELEPHONE COMPANIES SERVING CHATHAM COUNTY BY NUMBER OF RESID-

ENCES SERVED AND POPULATION DENSITY

The following is a map provided by the North Carolina Utilities Commission showing the ser-vice areas (“exchange areas”) for each telephone company operating in Chatham County, with the legal name each company uses (CenturyLink is the parent company of “Carolina,” which stands for Carolina Telephone and Telegraph; AT&T is the parent company of BellSouth) and the switch locations (indicated by place names):

TELEPHONE COMPANY EXCHANGE AREAS FOR CHATHAM COUNTY

provider# of resid-

ences% of resid-

ences square miles% of square

miles densityCenturyLink 20418 68.7% 479.57 71.2% 42.6AT&T 7647 25.7% 110.65 16.4% 69.1Randolph 838 2.8% 37.39 5.6% 22.4Windstream 529 1.8% 41.92 6.2% 12.6Frontier 272 0.9% 3.82 0.6% 71.2 TOTALS 29704 100% 673.35 100% 44.1

Note: # of residences includes unoccupied homes

a. CENTURYLINK (DSL)

CenturyLink serves about 71.1% of the Chatham County’s geographic area and 68.7% of its homes, including the County’s three municipalities (Siler City, Pittsboro, and Goldston) and much of central and western Chatham County. Density averages 42.6 homes per square mile in CenturyLink’s service area but falls to much lower levels in areas outside of the boundaries of the three municipalities. CenturyLink’s primary broadband focus is on the more densely popu-lated municipalities and their immediate environs, leaving broad swaths of the County with either no broadband service or low-quality broadband service. CenturyLink’s uneven perform-ance has had, and will continue to have, adverse consequences for Chatham County, especially western Chatham County where CenturyLink is the only possible source of wireline broadband service for the vast majority of residents.

CenturyLink provides better broadband service in the more densely populated areas of the County (typically areas where it also faces broadband competition from cable providers).182

These areas are chiefly Pittsboro and Siler City and their immediate environs. But on closer ex-amination, population density is not enough in and of itself to ensure high-quality broadband ser-vice from CenturyLink in Chatham County. CenturyLink adds to the socioeconomic divide in Chatham County by providing better service in Pittsboro than in Siler City although Siler City is more than twice as densely populated as Pittsboro.

CenturyLink’s second-class treatment of different parts of the County is brought into sharp relief by its recent disclosure of plans to deploy new advanced broadband services in its Pittsboro ex-change area but not in its other three Chatham County exchange areas (Siler City, Bonlee, and Goldston). Specifically, CenturyLink filed a state video franchise for the Pittsboro area (and many any other areas of the state, including service areas in Moore and Harnett counties) on November 17, 2010, and plans to deploy its advanced IP-based broadband video product, also known as Prism TV,183 in the Pittsboro area as early as the third quarter of 2011.184 This new ser-vice will be roughly comparable to AT&T’s U-verse product and will provide a full-blown al-ternative to all of Time Warner’s service offerings.

182 Siler City resident, Interview, Nov. 18, 2010.183 In addition to advanced digital television, Prism TV also supports whole-home DVR service (a single DVR ac-cessible from every TV set in the home). See the following website for a complete description of CenturyLink’s new Prism TV service: http://www.centurylink.com/prismtv/?pid=p_113511764&#index.html.184 CenturyLink, Interview, June 1, 2011.

MAP OF CENTURYLINK’S VIDEO FRANCHISE FOR CHATHAM COUNTY AND OTHER AREA COMMUNITIES

In the less densely populated areas of its Chatham service area (Goldston and much of the County’s unincorporated areas), the disparity in treatment at the hands of CenturyLink is even worse than in Siler City because CenturyLink is the sole option for wireline broadband service. At least the residents of Siler City have an alternative to CenturyLink in cable provider Charter Communications. Although it does not face cable competition and could have the broadband market to itself in these lightly populated areas, CenturyLink does not provide broadband service in as much as 30% to 35% of its service area,185 leaving residents of the more sparsely populated areas of the County with no real broadband option. In those parts of its service area where it does provide service, it has been very slow to deploy DSL technology and other innovations (e.g., IPTV) and, when it finally does so, reportedly often provides slow and unreliable service.186

CenturyLink provides telephone service throughout its entire service area, as it has been required by law to do for many years. It has chosen a different approach with regard to broadband service as similar legal obligations do not apply in the broadband context. Broadband service continues to be classified by federal and state regulators as a non-essential unregulated service, resulting in heavy reliance on the “market” to ensure the deployment of broadband service.

185 The E-NC Authority, working with CenturyLink and other providers, has overstated the availability of broadband service in Chatham County (and other areas of the state), reporting in 2007 that 62% of Chatham homes had access to DSL service. It overstated the availability of broadband in 2007 by imputing broadband availability to an entire census tract based on the possible availability of broadband service somewhere in that census tract and by collecting data based on advertised speeds rather than actual speeds. In any event, E-NC has not disclosed specific data for Chatham County by provider due to confidentiality agreements with the providers in either its 2007 data releases or its 2010 federally-financed data collection program. The FCC’s data collection efforts are similarly flawed, relying on advertised speeds and refusing to disclose company-specific data to the public.186 See, e.g., CenturyLink business customer, Interviews and e-mails, various dates in 2010.

Like virtually all private sector broadband providers, CenturyLink does in fact follow a market-based approach, which is the primary reason why so much of Chatham County is poorly served. Under this market-based approach, CenturyLink employs undisclosed density-related require-ments and other investment-related calculations to determine whether to invest in broadband-re-lated network improvements in Chatham County and the rest of its service area.187 Those metrics result in long delays in the deployment of new broadband technology. Further, they translate into an unwillingness to invest in the technology necessary to provide service equal in quality and speed to that provided in more densely populated areas.

FCC records substantiate the extent to which the deployment of broadband technology in Chath-am County has been delayed. FCC filings by CenturyLink (and its predecessor companies) show that it first deployed DSL in Siler City and Pittsboro in 2002 but did not reach Bonlee until 2005, Goldston until 2006, and Moncure until 2007.188 These dates indicate that Chatham County lags behind the more urbanized areas of the state by as much as six years (and 10 years or more in those areas that continue to be unserved) with regard to the pace of deployment of broadband technology. Further, this established pattern of behavior portends the slow pace of deployment in the future for each new generation of technology.

Action Audits’ examination of 11 remote DSLAM units in Chatham County indicates that many of them were installed even more recently, placing these areas some 10 years behind more urban-ized areas. One of these DSLAM units was installed in 2011 (on Flint Ridge Road near to Silk Hope Liberty Road)189; two others were installed in late 2010 (one was on the Adolph Taylor Road and the other was at the intersection of Landfill Road and US 64).190 Other remote DSLAM units assessed by Action Audits also had telltale signs of relatively recent deployments. For ex-ample, the County’s inspection sticker on the power meter for the DSLAM unit on Silk Hope Lindley Mill Road (near Van Thomas Road) was dated July 17, 2008, meaning that unit was likely placed in service some time after that date.191 The cabinet for the DSLAM unit on Silk Hope Road had a manufacturer’s inspection stocker dated October 29, 2009.192 The DSLAM unit at the intersections of Siler City Glendon Road and the one at Mt. Vernon and Bonlee School Road and SR 902 both showed signs of having been very recently deployed.193

187 CenturyLink, Interviews, Aug. 27 and Sept. 24, 2010188 Sprint, Embarq, and CenturyLink, Public Notice of Network Changes under Rule 51.229 (a), submitted to the FCC on various dates (2002-07).189 Action Audits, Site Visit, Feb. 3, 2011.190 Action Audits, Site Visit, Dec. 14, 2010.191 Action Audits, Site Visit, Feb. 3, 2011.192 Action Audits, Site Visit, Feb. 3, 2011.193 Action Audits, Site Visit, Feb. 3, 2011.

EXAMPLE OF A CENTURYLINK DSLAM UNITON SILK HOPE ROAD (2009 INSTALLATION)

In the areas of the County where CenturyLink has deployed broadband service, its broadband service falls well below the FCC’s 4 MB/s downstream and 1 MB/s upstream broadband availab-ility targets although the FCC has not released company-specific data. Data compiled by Speed-matters.org shows that no part of the County served by CenturyLink has access to upload speeds of 1 MB/s or more, which is the speed set by the FCC as the target for measuring broadband availability.194 Consumer interviews show that service quality problems include basic reliability as well as low speeds.195 CenturyLink itself, in its most recent submissions to the E-NC Author-ity, states that the maximum download speed in the County is only 200 to 768 MB/s.

The bottom line is that CenturyLink is under serving County residents both as to availability and quality of broadband service. The quality and speed problems are due to the poor condition of the existing telephone network196 and CenturyLink’s slowness in investing in new fiber lines and 194 http://www.speedmatters.org/content/states/category/north_carolina. 195 E.g., CenturyLink customer residing about two miles south of Siler City, Interview, Nov. 11, 2010; Action Audits, Site Visit (business located less than three miles from the Pittsboro traffic circle on NC 87), Sept. 24, 2010.196 In areas where CenturyLink’s plant is aerial, Action Audits spotted many “bridge coils” or loops of unterminated copper lines (including areas close to downtown Pittsboro), which the FCC has found cause serious problems with broadband service. Action Audits, Site Visits, Nov. 18 and 19 and Dec. 14, 2010, and Feb. 3, 2011.

digital equipment for both the lightly populated and the low-income areas of the County.

As noted above, CenturyLink is legally obligated to provide voice service throughout its service territory but similar obligations do not apply with respect to broadband service. In connection with the FCC’s approval of the transfer of Embarq to CenturyTel in 2009 and the subsequent merger of Embarq and CenturyTel, CenturyLink assumed certain minimal obligations to make broadband service available to specific percentages of its national customer base by specified deadlines.197 These obligations include requirements to provide 90% of customers with access to service at 768 kb/s downstream service by July 1, 2012, 87% with access to 1.5 MB/s down-stream service by July 1, 2011, and 80% with access to 3 MB/s downstream service by July 1, 2012. While these requirements are legally binding, only the FCC has authority to enforce them and does not have a record of being aggressive and proactive in enforcing transfer-related obliga-tions of this sort. In any event, these benchmarks are already out of date as they fall well below the FCC’s current broadband availability targets of 4 MB/s downstream and 1 MB/s upstream.

CenturyLink’s broadband operations in Chatham County are also constrained and limited by its long history as a telephone company that entered the broadband business by gradually enhancing its telephone network in modest and limited ways in recent years to add broadband capability. It has done so by adding DSLAM equipment to its four central offices in Bonlee, Goldston, Pitts-boro, and Siler City and by deploying remote DSLAMs in cabinets in or near the public right-of-way to reach locations that cannot be directly served via central office DSLAMs.198

CenturyLink will not disclose how many remote DSLAMs it has deployed in Chatham County or provide much other information about its DSL operations in Chatham County.199 It has con-firmed, however, that it makes its decisions to invest in broadband technology based on its ex-pectation of return on that investment and that these hard calculations make it challenging to jus-tify investments in technology for residents of Chatham County.200

A recent experience with CenturyLink suggests that CenturyLink’s expectations as to take rate may be unreasonable and explain why it has been slow to deploy broadband technology in Chatham County. CenturyLink installed a new DSLAM unit on SR 1506 (in the area of the Jay Shambley Road) and started providing service on about May 26, 2011, after repeated complaints by area residents about the lack of access to broadband service. But, within about a mere week of 197 Applications Filed for the Transfer of Control of Embarq Corporation to CenturyTel, Inc., WC Docket No. 08-238, Memorandum Opinion and Order, June 24, 2009, 24 FCC Rcd 8741, ¶ 22 and Appendix C.198 Action Audits located a representative sample of 11 remote DSLAM units in Chatham County during field visits, each of which was fed by fiber lines. Action Audits, Site Visits, Nov. 18 and 19 and Dec. 14, 2010, and Feb. 3, 2011.199 CenturyLink representatives met with Action Audits representatives on two occasions (Aug. 27 and Sept. 24, 2010) and shared some information as to upcoming plans for the deployment of new DSLAM units in a handful of locations in the County. However, they were not willing to provide any detailed information about such matters as the condition and capabilities of its equipment in the County, the number of broadband subscribers in the County, or planned improvements in technology. 200 CenturyLink, Interviews, Aug. 27 and Sept. 24, 2010

service activation, CenturyLink complained that only 12 of 47 potential customers had signed up for service for a take rate of 26%.201 This 26% take rate matches up well with CenturyLink’s national take rate of 30%, which was reached only after years of marketing work. Further, it was achieved within the first week or so of the unit’s activation for service and is likely to rise as more area residents learn of the new ser-vice option. But, according to CenturyLink, this take rate falls well short of the much more ex-acting internal take rate standards of 60% to 75% that CenturyLink has established for a “rural node” (more than double CenturyLink’s standard take rate) and, according to CenturyLink, means that it will take 10 years for it to recover its investment.202 This back-and-forth with Cen-turyLink illustrates just how difficult it is to secure investment in broadband technology in the less densely populated areas of the County.

These investment calculations, in combination with the limited availability of subsidies for Cen-turyLink’s Chatham County operations (in comparison with other more rural areas) and the mis-fit between broadband technology and old telephone technology designed for very different pur-poses, explain why Chatham residents are short changed in terms of access to broadband service. They also explain why, in the absence of proactive action by the County, Chatham residents will continue to be short changed in the broadband area unless federal and state policy-makers make radical changes in regulation and policy. That would require, for example, jettisoning the market-based approach in favor of classifying broadband as a utility (or subjecting it to other new regu-latory requirements such as the separation of the pipeline and content) or establishing surprising new paradigms for serving underserved and unserved rural and semi-rural areas that are not presently on the drawing boards.

Based on reported broadband speeds at locations around the County and Action Audits’ examina-tion of network equipment in the field, the technical characteristics of CenturyLink’s broadband network in Chatham County fall short of the FCC’s recommended specifications for acceptable service. These include that all service locations be no further than 12,000 feet from a fiber-fed DSLAM unit and that the copper lines running from the DSLAM unit to subscriber locations be in tip-top shape.203

Some of the unwillingness to invest should also be attributed to CenturyLink’s crushing debt bur-den. This debt had already risen to $7.3 billion or more than $1,000 for each of its 6.5 million ac-cess lines on December 31, 2010.204 With the recent acquisition of Qwest, it has since mush-roomed to $22 billion (or about $1,300 for each of the combined companies’ 17 million access lines).205 It is expected to rise to $24 billion as soon as the planned acquisition of Savvis is con-201 CenturyLink, e-mail, June 3, 2011.202 CenturyLink, e-mail, June 6, 2011.203 FCC’s 2010 Broadband Technical Report at 86.204 CenturyLink, Inc, SEC Form 10-K for 2010, at 54. 205 CenturyLink, SEC Form S-4 (acquisition of Qwest), June 4, 2010, at 11 (combined debt of Qwest and Cen-turyLink will total $22 billion after the merger).

summated.206 CenturyLink, like many other U.S.-based telecommunications companies, is a product of the mergers-and-acquisitions mania that swept the telecommunications industry over the past 15 years. Over time, a telephone company that began in the early 1900s as a strictly local Siler City-based venture has passed through the hands of a series of companies, with new debt often assumed in connection with each transaction. What was once a small, local company now is part of a very large corporation that carried long-term debt that came close to the value of its physical assets ($7.3 billion in debt versus $8.8 billion in plant and equipment207) before the Qw-est acquisition was even closed and prioritizes growing in size over investing in plant and service upgrades.

CenturyLink’s Chatham Service Area: CenturyLink’s service area consists of four “exchange areas,” each of which is centered on “central office” switching facilities located in Goldston, Bonlee, Siler City, and Pittsboro. In terms of geography, the Pittsboro exchange area is the largest, followed closely by the Siler City exchange area while the Goldston and Bonlee ex-change areas are both much smaller. The main “host” switch for all four of CenturyLink’s Chath-am exchange areas is located in Siler City, which means that all CenturyLink voice and Internet traffic in the County could be flowing through Siler City.

In each of the four exchange areas, telecommunications lines start at the “central office” for the exchange and run to (or by) each home and business in the exchange area but generally do not cross exchange area boundaries to serve locations in adjacent exchange areas. This is the basic “hub-and-spoke” architecture of the telephone network that resulted in carving the nation into thousands of small exchange areas decades ago in the telephone context. This architecture was particular to the telephone business and, in some respects, hinders network modernization and evolution into the broadband arena.

The exchange boundary lines in Chatham County are generally fixed by both regulation and practice and constitute barriers to providing service across exchange boundary lines even in cases where the location to be served is closer to the central office for the adjacent exchange area. In fact, the exchange area boundaries in Chatham County (and most of North Carolina) are exactly the same today as they were in 1961 regardless of the changes in technology and popula-tion in the intervening years. For example, the boundary for the Bonlee exchange area is just slightly north of the central office switching facility (as it was in 1961), placing homes on the north side of the boundary for the Bonlee exchange in the Siler City exchange although they are at a much greater distance from the Siler City switch than from the Bonlee switch. This distance factor is problematic in the broadband context because the further a location is from its switching facility, the greater are requirements for investing in new fiber lines and digital equipment in the field and reconditioned copper telephone lines.

206 CenturyLink, SEC Form S-4 (acquisition of Savvis), May 17, 2011, at 8 (CenturyLink plans to borrow $2 billion for the Savvis acquisition). 207 CenturyLink, Inc, SEC Form 10-K for 2010, at 54.

MAP OF THE BONLEE AND GOLDSTON EXCHANGE AREAS AND PART OF SILER CITY EXCHANGE AREA (THE TRIANGLE MARKS THE LOCATION OF THE SWITCH FOR EACH EXCHANGE)

CenturyLink’s Chatham service area starts at Jordan Lake and runs west to the Randolph bound-ary, north to the Alamance boundary, and south to the Lee and Moore boundaries. The four ex-change areas included in the Chatham service area vary in size and shape with the Pittsboro and Siler City exchanges the largest and the Bonlee and Goldston exchanges the smallest. Further, four small areas of Chatham County west of Jordan Lake are not part of CenturyLink’s service area, making for more irregularities and variations in terms of service options for Chatham resid-ents, and are served by other providers: (1) Fearrington Village north to the Orange County boundary (served by AT&T); (2) the northwest corner (the Staley area) (served by Randolph Telephone Company); (3) the southwest corner (from Harpers Crossroads to the western and southern boundaries) (served by Randolph Telephone Membership Corp.); and (4) the Asbury and Farmville areas to the south bordering Lee County (served by Windstream).

MAP OF CENTURYLINK’S FOUR CHATHAM COUNTY EXCHANGE AREAS (BEIGE AREA)

History of the CenturyLink System in Chatham County: CenturyLink is the latest in a long line of owners of the telephone system that was first developed by Central Carolina Telephone Company (CCTC) more than 80 years ago. CCTC was a small independent telephone company that began to provide service in Chatham County some time in the early 1900s and also provided service to other nearby small communities in Guilford, Moore, Hartnett, and Wake counties. In the late 1950s, CCTC was acquired by United Utilities (UU) and became part of a much larger national company. UU was a Kansas-based holding company originally incorporated in 1935 as United Telephone and Electric Company and emerged from bankruptcy as UU in 1938.

In connection with the UU transaction, CCTC became a part of the United Telephone Company of the Carolinas (UTCC), a UU subsidiary that provided service in both South Carolina and North Carolina, and operated under the UTCC name in Chatham County from the late 1950s un-til 1978. Through this transaction and others like it, UU gradually built a small empire of inde-pendent telephone companies scattered around the United States over the years and became the third largest provider of local telephone service in the nation (after the mammoth Bell system and GTE) in the 1960s.

A decade or so after acquiring CCTC, UU greatly increased its presence in North Carolina in 1969 by acquiring Carolina Telephone and Telegraph (CT&T), a much larger independent tele-phone company that served most of North Carolina east of I-95. Shortly after that acquisition, UU changed its name to United Telecommunications (UT) in 1972 in recognition of the fact that telephone service had become its sole focus. In 1978, UTCC was merged into CT&T, and the UTCC brand name gave way to the CT&T name in Chatham County.

The parent company, UT, for the combined North Carolina operations began to move away from local telephone service in the 1980s. It did so by entering into the long-distance business through a long-distance joint venture established in 1983 with GTE under the name of US Sprint. In 1988, UT bought out GTE’s interest in US Sprint and became its sole owner. In 1992, UT pub-licly acknowledged the sea change that was taking place in its operations and focus and officially changed its name to Sprint.

Sprint accelerated the move away from local telephone service in the 1990s, first acquiring Cen-tel Corp (an Illinois-based company with cellular, cable, and local telephone operations) for $3 billion in Sprint stock in 1993 and then becoming a “Personal Communications Service” (PCS) licensee and moving into the wireless business. In 2005, Sprint, by then the third largest cell car-rier in the nation, merged with Nextel (the nation’s fifth largest cell carrier), forming Spring Nex-tel, in a $36 billion stock deal.

In 2006, Sprint Nextel became primarily a wireless company and completed its transition away from what had once been Sprint’s core business, local telephone service, spinning off its local operations into Embarq, a new stand-alone local company, at a cost to Embarq of about $7.2 bil-lion. Just three years later in 2009, a Louisiana-based telephone company (CenturyTel) acquired Embarq (and all its local telephone networks) in a $5.8 billion deal (plus assuming $5.8 billion of

associated debt), resulting in formation of a combined entity that is now known as CenturyLink, with about 6.9 million telephone access lines. On April 1, 2011, CenturyLink completed its ac-quisition of, and merger with, Qwest, the regional Bell operating company for the mountain and northwestern states, and its 9.6 million access lines in a $22.4 billion deal, including assuming $11.8 billion in Qwest debt, and became the nation’s third largest telephone company with about 17 million customers.

An examination of line and other equipment in the right-of-way in Chatham County tells the tale of the constantly changing identity of the local telephone company, with “United Telephone” marked on the oldest equipment, the name “Carolina Tel. & Tel.” appearing on some of the post-1978 equipment, “Sprint” imprinted on equipment installed between 1992 and 2006, “Embarq” marked on equipment deployed between 2006 and 2009, and “CenturyLink” emblazoned on the most recent installations.

The good news for Chatham County residents is that the CenturyLink-Qwest deal has created the third largest local carrier in the nation, with some 17 million telephone lines, 5 million broad-band connections and $19 billion in annual revenues, trailing only AT&T and Verizon in size. This size should bring quicker access to technical innovations and scale advantages in acquiring and deploying new technology such as IPTV. Also advantageous is that Qwest is the most rurally oriented of the former baby Bells so that the merged entity will be built for the more rural areas of America. The bad news is that, in connection with establishing the third largest local carrier, CenturyLink will be saddled with new debt that may further delay deployment of improvements in technology in rural areas.

AN ABBREVIATED HISTORY OF CENTURYLINK’S CHATHAM COUNTY TELEPHONE SYSTEM

date Eventearly 1900s Central Carolina Telephone Company is formed in Siler City1950s United Utilities acquires Central Carolina Telephone Company and makes it

part of United Telephone Company of the Carolinas1969 United Utilities acquires Carolina Telephone & Telegraph1978 United Utilities changes its name to United Telecommunications and merges

United Telephone Company of the Carolinas into Carolina Telephone & Tele-graph

1992 United Telecommunications changes its name to Sprint2005 Sprint and Nextel merge in a $36 billion stock deal and form Sprint Nextel2006 Sprint Nextel spins off Embarq as a stand-alone wireline company at a cost to

Embarq of $7 billion2009 Louisiana-based CenturyTel acquires Embarq and forms CenturyLink in a $5.8

billion deal2011 CenturyLink acquires and merges with Qwest in a $22.4 billion deal and be-

comes the nation’s third largest telephone company

b. AT&T (FORMERLY BELLSOUTH)

AT&T (formerly BellSouth) serves about 16.4% of the Chatham County’s geographic area and 27.5% of its homes and covers about 110 square miles of the County. Density averages 69.1 homes per square mile in AT&T’s service area but is higher in the Chapel Hill service area (121.7 homes per square mile) and much lower in the Apex service area (26.8 homes per square mile). AT&T does not provide broadband service throughout its service area, leaving pockets of its service area, particularly low-income and minority communities, with no broadband ser-vice.208 In other areas, it provides low-quality broadband service due to poorly equipped DSLAM units and poorly maintained telephone lines.

AT&T states that it has begun to deploy its premier video service product (the U-verse pack-age)209 in Chatham County. However, spot checks of Chatham County addresses failed to turn up any evidence of U-verse availability in several densely populated subdivisions in the Chapel Hill area so it is likely that the number of U-verse customers in Chatham County is very small and in areas close to the two nearby communities of Chapel Hill or Cary where AT&T has more ag-gressively deployed U-verse technology.

AT&T provides service east of Jordan Lake (served via a switch in Apex) and north of Fearring-ton Village (served via the Chapel Hill switch). It also serves the incorporated parts of Cary that reach into Chatham County through its Cary switch. As with CenturyLink, AT&T’s service area is not regular. The northeastern corner of the County has been carved out of the AT&T service area and is served by Frontier (a small area adjacent to, and north of, Cary’s Chatham territory) while the southeastern corner of the County is served by Windstream (in the Brickhaven and Corinth areas and bordering on Harnett and Lee counties).

MAP OF AT&T’S THREE CHATHAM COUNTY EXCHANGE AREAS (GREEN AREA)

208 Letter of Commissioner Sally Kost to Walter Wells (AT&T), re: unserved areas on New Hope Church Road, Nov. 21, 2010.209 AT&T, Interview, Dec. 17, 2010.

The area served by the Chapel Hill switch is the largest of AT&T’s three service areas in the County, with 6,005 homes served. The area served by the Apex switch is much smaller in popu-lation (1,642 homes) but slightly larger in square miles (61.3 for Apex v. 49.3 for Chapel Hill), which explains why the Chapel Hill is a much more attractive service area for AT&T. The area served by the Cary switch is tiny and barely reaches into Chatham County. In the areas of the County where AT&T has deployed broadband service, its broadband service sometimes falls below the FCC’s recently established broadband availability targets of actual speeds of 4 MB/s downstream and 1 MB/s upstream. Data compiled by Speedmatters.org shows that broadband downstream speeds tend to exceed the 4 MB/s standard in the Apex and Chapel Hill areas but fall well below the FCC’s 1 MB/s standard for upstream communications.210 Con-sumer interviews show that service quality problems go beyond speed to include basic reliabil-ity.211 Finally, AT&T acknowledges that some of the DSLAM units in the County are likely fed by old copper lines, which would explain why speed varies with the time of day in some areas of the County as congestion on that shared copper second-mile connection during busy times of the day would slow all users’ speeds down.212

AT&T secured a state video franchise for both the Chapel Hill and Apex service areas to provide U-verse service on November 10, 2008. Acton Audits has been unable to confirm the actual availability of U-verse service in Chatham County although this state-granted franchise has been 210 http://www.speedmatters.org/content/states/category/north_carolina.211 E.g., AT&T customer in AT&T’s Apex service area, Interview, Nov. 11, 2010.212 AT&T, Interview, Dec. 17, 2010.

in effect for more than two years and AT&T states that it has U-verse customers in Chatham County.213 Although AT&T’s video franchise covers its entire Chatham County service area, North Carolina law does not require it to provide video service throughout its franchise territory so, just like Time Warner Cable and Charter, it can pick and choose the areas in which it provides video service. As noted above, AT&T has completed virtually all its U-verse build out214 and therefore is unlikely to provide video service to County residents beyond the few tiny pockets that it apparently now serves.

U-verse provides video programming to customers over telephone lines using Internet Protocol standards. It compresses video signals efficiently and delivers to the subscriber via IP transmis-sions only the video stream for the program selected by the customer. Conventional cable televi-sion, in contrast, delivers the signals for all services to the customer’s set-top box or the televi-sion set and the customer then makes his or her program selection in the home from the full array of video offerings.215

U-verse technology requires installing a fiber-fed “Video Ready Access Device” or VRAD with-in no more than 3,000 feet or so of the customer’s home. These VRADs transfer signals back and forth between optical and electronic form and between existing copper lines and newer fiber op-tic lines. Each VRAD typically delivers video and broadband service in IP form to groups of 200 to 400 homes. AT&T also offers more advanced VRAD technology in greenfield developments and other new build projects that delivers service via fiber optic lines directly to the home. As of December 31, 2010, AT&T has about 3 million U-verse customers nationwide216 but has not dis-closed U-verse data specific to either North Carolina or Chatham County.

Although AT&T’s VRAD technology is like DSL on steroids, in an odd twist AT&T’s VRAD ar-chitecture is not compatible with its existing DSLAM technology, which means that the existing remote DSLAM units scattered throughout the AT&T service area in Chatham County cannot be converted to U-verse use.217 This basic incompatibility between AT&T’s DSLAM and U-verse technology means that a substantial investment will be required to fully deploy U-verse techno-logy throughout AT&T’s 110 square mile service area in Chatham County. It would require de-ployment of something like 85 VRADs even though there are only about 7,647 residences in AT&T’s Chatham service area, resulting in only about 90 homes per VRAD although each VRAD is actually built to serve at least 200 homes.

Based on these financial calculations (and AT&T’s existing stranded investment in DSLAM 213 An AT&T representative met with Action Audits representatives on December 17, 2010, but had been instructed not to disclose any details of AT&T’s operations in Chatham County. AT&T, Interview, Dec. 17, 2010. 214 Dave Burstein, Broadband DSL Reports, AT&T’s Stankey: U-verse Build Virtually Over, May 18, 2011.215 With the deployment of switched video service, the cable industry is starting to move away from this long-stand-ing practice, at least as relates to digital offerings.216 AT&T, Inc., SEC Form 10-K for 2010, Ex. 12, March 1, 2011, at 11.217 AT&T, Interview, Dec. 17, 2010.

technology) and AT&T’s public declarations with regard to completion of its U-verse build out, it is unlikely that AT&T will invest in U-verse technology in the County in any area other than densely populated subdivisions directly within the orbit of Chapel Hill and Cary. For Chatham residents, the fact that AT&T’s VRAD and DSLAM technologies are incompatible would appear to reduce the likelihood that AT&T will make significant new investments in DSLAM techno-logy in the County.

History: AT&T’s Chapel Hill exchange began life as a tiny locally-owned company some time before 1901 with a single 10-party line. The University of North Carolina (UNC) took over own-ership of the system in 1925 (after the small privately company was unable to repair a broken switchboard) and then expanded and upgraded the telephone system. UNC continued to operate the telephone system, along with water, sewer, and power utilities for UNC and the community, for more than 50 years. In the mid-1970s, the state ordered UNC to sell all its utilities, resulting in the sale of its electric utility to Duke Power in 1976, the telephone system to BellSouth in 1976, and the water and sewer utilities to the Orange Water and Sewer Authority in 1977.

The history of the Apex exchange, in contrast, is simpler. As best as can be determined, it has been part of the Bell System since the early years of the formation of Southern Bell Telephone and Telegraph Company in the late 1800s, likely due to its strategic location on the north-south railroad line and Apex’s origins as a railroad town.

c. RANDOLPH TELEPHONE MEMBERSHIP CORP. AND RAN-DOLPH TELEPHONE COMPANY

Randolph Telephone Membership Corp. (RTMC) serves about 5.6% of Chatham County’s geo-graphic area and 3.8% of its homes and covers about 38 square miles in the County. Density av-erages 22.4 homes per square mile in RTMC’s service area but is slightly higher in its Liberty service area (28.7) in the northwest corner of the County than in its Bennett service area (19.9). The Bennett service area consists of the southwest corner of Chatham County, running from Harpers Crossroads west to the Randolph boundary. The Liberty area in the northwest is served by RTMC’s wholly owned subsidiary, Randolph Telephone Company (RTC),218 and generally runs north of Staley and west of Staley Snow Camp Road.

MAPS OF RTMC’S TWO CHATHAM COUNTY EXCHANGE AREASBENNETT EXCHANGE AREA (SOUTHWEST)

218 RTMC acquired Randolph Telephone Company in 1994 when W. Morgan Fitzgerald, its president, retired.

LIBERTY EXCHANGE AREA (NORTHWEST)

RTMC makes broadband service available to all customers and has begun to deploy FTTP in new builds.219 In fact, RTMC was the only telephone company that reported to E-NC in 2007 that it offered broadband service to 100% of its Chatham County customers. Most RTMC customers are no further than 18,000 feet from one of RTMC’s 8 remote switching centers. 220 This design characteristic of the system means that a significant percentage of customers are receiving broad-band service via copper lines that exceed the FCC’s recommended outside limit of 12,000 feet for 4 MB/s downstream and 1 MB/s upstream service.

RTMC secured a state video service franchise for its entire service area on July 1, 2009, and has the right to provide video service to its Chatham customers.221 RTMC offers video service (IPTV) to residents located within 9,000 feet of any of its 8 wire centers but also warns of in-creasing service problems as that distance climbs toward 9,000 feet.222 Regardless of these prob-lems, RTMC’s early adoption of this advanced broadband technology places it in the vanguard of the ongoing broadband revolution.

In 2009, RTMC secured the right via state law to offer voice service, along with broadband ser-vice, when it “edges out” into areas that are contiguous to its existing service territories.223 This change in state law increased RTMC’s ability to expand its service area as its approach is to mar-ket both telephone and broadband service to customers, and it did not have much interest in ex-

219 RTMC, Interview, Aug. 20, 2010.220 RTMC, Interview, Aug. 20, 2010.221 http://www.secretary.state.nc.us/cable/Search.aspx.222 http://www.rtmc.net/video.html. 223 N.C. Gen. Stat. § 62-113.

tending lines outside of its service area if it could not also offer telephone service along with broadband service.224 RTMC also prefers to secure commitments from new customers before ex-tending plant into new service areas such as areas of Chatham County directly adjacent to its Bennett and Liberty service areas.225

RTMC’s service area is characterized by density that is about 50% of Chatham County’s density, containing only two small incorporated towns (Liberty and Staley) and about half as many cus-tomers (13,100) as there are homes in Chatham County. It also has a significant number of low-income residents although it is not possible to determine the average household income for its service area because the Census Bureau does not collect data on the basis of exchange areas.

Of the seven wireline providers operating in Chatham, RTMC is the most nimble and innovative and the most unconstrained by top-down corporate culture and is therefore well equipped to play a role in helping to improve broadband in Chatham County. At the same time, it is important to keep in mind that its first obligation is to serve its members (it is a non-profit organization and owned by its member customers), that it is a relatively small operation (with annual revenues of about $7.3 million), and that it is subject to significant regulatory restraints.

History: RTMC was formed in 1954 when, after larger area telephone companies declined to provide service to their communities, residents of Chatham, Randolph, and Moore counties joined together to obtain a charter as a cooperative and began operations in 1957 after securing financing via a federal loan from the Rural Electrification Administration (REA). RTMC’s first service area was Farmer in Randolph County where it provided service to 97 residents. It almost immediately extended service to Bennett in Chatham County and High Falls in Moore County. It eventually established a total of seven exchange areas in a scattered service area that reaches into seven counties (but is centered on Randolph County) and is characterized by low density and a history of no telephone service as recently as the 1950s.

In 1994, RTMC acquired RTC, giving RTMC an eighth exchange area (based in Liberty) and what was then 6,000 new customers.226 RTC has a much longer history than RTMC, commencing operations as Liberty Telephone Company in 1907 and being sold and renamed Randolph Tele-phone Company in 1950. With the addition of the RTC customers in 1994, RTMC now serves about 13,100 customers through eight service areas sprawling over seven counties.

d. WINDSTREAM (FORMERLY HEINS TELCO)

Windstream Corporation serves about 6.2% of the Chatham County’s geographic area but only 1.8% of its homes and covers about 42 square miles in the County. At 12.6 homes per square

224 RTMC, Interview, Aug. 20, 2010.225 RTMC, Interview, Aug. 20, 2010.226 Due to competition from Time Warner Cable in incorporated Liberty and from wireless providers, this number has fallen to about 4,300 in recent years.

mile in its Chatham service area, it has the lowest density of the seven wireline providers cur-rently providing service in the County. Like RTMC, it has two separate service areas in the County, with one located in the far southeast corner of the County in the Brickhaven and Corinth areas to the east of Moncure where density is only 6.2 homes per square mile. Its other service area is in the south-central area of the County in the Farmville and Asbury areas where the dens-ity is significantly higher at 23.8 homes per square mile. Both service areas are served by the same switch in Sanford and are part of the same exchange area.

MAP OF WINDSTREAM’S CHATHAM COUNTY EXCHANGE AREA

Other than Charter Communications, Windstream was the most uncooperative of the County’s seven wireline providers. Several Windstream Business representatives met with Action Audits and County officials to discuss Windstream’s interest in the County but were interested primarily in opportunities to serve large customers in the County such as the school system or large planned developments.227 Company representatives rebuffed repeated requests to meet with rep-resentatives of the company’s division (Windstream Residential) that currently operates in the County and actually serves County residents. As of 2007, Windstream reported to E-NC that it offered broadband service to 94% of its Chath-am customers, which placed it ahead of CenturyLink but behind RTMC in terms of deploying broadband service in the County. As of August of 2009, Connect North Carolina reported that the lightly populated areas just south of Shearon Harris Reservoir were largely unserved. Wind-stream secured some $200 million in federal ARRA funds in 2009 and 2010 to improve broad-band service for its most rural systems but in general seems to be more interested in large busi-ness and institutional customers, data hosting (e.g., cloud computing), and fiber back haul service and did not seek federal broadband funds to improve its North Carolina systems.

History: The Windstream telephone system serving much of Lee and Harnett counties and small 227 Windstream Communications (Business), Interview, Sept. 16, 2010.

parts of Chatham was originally developed by Heins Telephone Company some time early in the 20th century. The Heins family (the founder’s grandson was the president at the time) sold the company and its 30,000 or so customers to Arkansas-based AllTel in 1986. Alltel spun its wire-line business off in 2006 (just as Sprint Nextel spun off Embarq in the same year), merging it with Valor Telecom and forming Windstream to focus primarily on the landline business. Wind-stream is the second largest rural telephone company in the nation after Frontier, with 3.4 million access lines in 23 states. Windstream, through the work of its Business Division, would like to focus more on business customers and wholesale activities such as fiber optic backhaul service than on basic residential service.

After the spin-off, Alltel, just as Sprint did after its spin-off of Embarq, made itself into a wire-less company. Its focus was primarily on small and medium-sized communities (including Chatham County), relying heavily on roaming agreements with Verizon Wireless and Sprint, be-fore it eventually sold most of its wireless business to Verizon in 2009.

e. FRONTIER (VERIZON UNTIL 2010)

Frontier Communications Corp. (Frontier) serves a tiny portion of the County in the upper north-east corner near Cary. Frontier’s service area encompasses about 270 homes and 4 square miles, representing 0.9% of the homes and 0.6% of Chatham’s land area and with a density of about 71.2 homes per square mile. This area is served by a switch located in Durham that was, until July 1, 2010, part of the Verizon system.

MAP OF FRONTIER’S CHATHAM COUNTY EXHANGE AREA

Data compiled by Speedmatters.org shows broadband speeds in this area to average well in ex-

cess of both the FCC’s downstream and upstream targets of 4 MB/s and 1 MB/s for broadband speed. However, this data is not definitive as the data reflects Durham County experiences as well as Chatham County experiences.

History: Like the CenturyLink, AT&T, and Windstream telephone systems in the County, Fron-tier’s Durham-based system serving the northeast corner of the County has its roots in a small local company that eventually was swept up into a large national company by the tides of eco-nomic “progress” but with a couple of twists. The twists are that the system got its start in the Bell system but was quickly discarded and acquired by a small local company in the late 1800s; it eventually was re-acquired by a Bell operating company more than 100 years later, only to be unloaded by the Bell system a second time in 2010.

The telephone system serving Durham (and eventually the northeastern corner of Chatham County) was originally built by Southern Bell and began operations in 1888. The community al-most immediately tired of Southern Bell’s high rates and established a rival company, Interstate Telephone and Telegraph, which began operations in 1895. Just eight years later, Interstate pur-chased Southern Bell’s facilities and became the sole provider for Durham in 1903. Community dissatisfaction eventually arose with regard to the performance of the Bell system’s successor, in large part because Interstate failed to honor its commitment to bury its Durham lines under-ground.

Interstate then sold its system to Theodore Gary and Company in 1933, which operated the Durham telephone system as the Durham Telephone Company. Some 20 years later, Theodore Gary and Company merged with General Telephone Company, forming the largest independent telephone company in the United States with some 2.5 million lines in 1955. This combined tele-phone company eventually expanded internationally and into manufacturing and was renamed the General Telephone and Electronics Corp. (GTE) in 1959. In 2000, GTE (and its 28 million access lines in 28 states, including the Durham system) was merged into and subsumed by Bell Atlantic (now known as Verizon).

After the GTE acquisition, Verizon ended up with some 268,000 landline customers in North Carolina. However, these customers were not as attractive or valuable to Verizon as were cus-tomers in more urbanized, densely populated areas (e.g., the New York City region, the Phil-adelphia area, the Boston area, the Washington, D.C., region). As a result, Verizon did not deploy the advanced fiber-to-the-premises technology that it deployed in many of its mid-Atlantic and northeastern communities (i.e., the FiOS technology) and eventually decided to spin off tele-phone systems serving less attractive markets (i.e., less densely populated areas). It entered into deals to sell these smaller, more rural systems in 2009, with Frontier getting 4.8 million new cus-tomers in an $8.6 billion deal and Fairpoint Communications, Inc., getting Verizon’s remaining 1.5 million rural and small town customers. As a result of this deal, Frontier now owns telephone assets serving about 268,000 North Carolinians and 5.7 million access lines nationwide.228 It is the nation’s fifth largest carrier and the largest carrier focusing on the nation’s rural and small 228 Frontier Communications Corp, SEC Form 10-K for 2010, Feb. 25, 2011, at 40.

town market.

Frontier has a complicated and tangled history, having begun life more than 100 years ago in Rochester, New York, as an independent telephone company (the Rochester Telephone Com-pany), with operations generally confined to the Rochester area and limited to basic landline ser-vice. In 1995, the Rochester Telephone Company changed its name to Frontier Communications and ventured well beyond the Rochester area, entering the wireless business and building a na-tionwide fiber optic network. Global Crossing acquired Frontier and all is assets and operations in 1999 but quickly came unglued and was broken up in a bankruptcy proceeding, with Citizens Communications Co. (CCC) acquiring the Frontier assets (then just 1.1 million landlines) in 2001 for $3.6 billion. After the Frontier transaction in 2001, CCC had 2.5 million landlines in 24 states. CCC renamed itself a few years later, taking on the Frontier name in 2008, and, as noted above, becoming a large telephone company that now has 5.7 million landlines in 27 states. Frontier is now the third largest carrier in North Carolina (after AT&T and CenturyLink) and, as GTE’s successor, is headquartered in Connecticut just as GTE was.

2. Cable Companies

In addition to the five telephone companies operating in the County, two cable companies—Charter Communications and Time Warner Cable—provide service in the County, serving roughly 5,250 subscribers in unincorporated areas of the County and in the towns of Siler City and Pittsboro or about 20% of the 25,845 occupied housing units in the County. Time Warner Cable is the larger of the two providers, with roughly 3,750 subscribers, while Charter serves about 1,500 subscribers.

The County’s two cable providers have focused primarily on the two incorporated areas, Pitts-boro and Siler City, with Time Warner Cable also venturing into several of the major new devel-opments in the County’s Chapel Hill area. For many years, both providers (and their prede-cessors) have had the legal right to provide service throughout the unincorporated areas of the County. Their current service areas are primarily defined and limited by corporate investment practices and business preferences rather than franchise boundaries or limits. Neither company has expressed any interest or willingness to go outside their existing footprint or to hook up new customers in unserved areas (except for “greenfield” developments in the case of TWC). The County has very few legal tools to require either incumbent cable provider to extend service into unserved areas or upgrade their technology, which, in combination with their well-established business practices of not expanding their service areas, means that neither provider is likely to play a significant role in filling the County’s major gaps in broadband coverage.

a. TIME WARNER CABLE (TWC)

Time Warner Cable has long held local franchises for the town of Pittsboro and for all unincor-porated areas of the County but largely has confined itself to Pittsboro and its immediate en-virons. TWC replaced Pittsboro’s local franchise with a state video franchise by filing a notice of state franchise on March 30, 2011. It jumped the gun and prematurely filed a notice of state fran-chise on May 6, 2011, for the unincorporated areas of the County. It then re-submitted the same paperwork on the actual expiration date of the local franchise (August 8, 2011) and no longer is subject to any real County regulation. State law places no obligations on state franchised cable providers to extend service to unserved areas or to provide particular levels of technology and is missing most other regulatory requirements.

As of 2004 (the last time TWC was legally required to disclose its subscriber counts), TWC had a total of 3,029 cable subscribers in the County (474 in Pittsboro and 2,555 in the unincorporated areas). TWC has since wired the Preserve, Briar Chapel, and several other planned developments and probably now has about 3,300 cable customers in the County and another 450 in Pittsboro for a total of about 3,750 subscribers.

TWC serves the eastern part of Baldwin Township, most of Williams Township north to Fear-rington Village, and parts of western New Hope Township. However, TWC has not fully wired any of these areas, cherry picking parts of Williams Township, wiring only main streets in west-

ern new Hope Township, and providing almost no service in Pittsboro’s ETJ. See Appendix A (Maps of TWC’s Chatham County Service Area).

In venturing outside of Pittsboro, TWC has preferred greenfield developments and well-popu-lated subdivisions. For example, it serves the densely populated “Preserve” off Big Woods Road but has declined to serve homes in nearby areas, telling 13 homeowners on the adjacent Windy Ridge Road that TWC will serve their homes only if they collectively pay TWC $50,000.229 Sim-ilarly, TWC pre-wired the Legacy development directly south of the Preserve (also on Big Woods Road) although that development is largely unbuilt (except for the basic infrastructure) and largely unoccupied. Other Chatham County developments wired by TWC include: Fearring-ton Village (east of US 15 and north of Mount Gilead Road); Governors Village (east of US 15 and north of Fearrington Village); and Briar Chapel (west of US 15 at Briar Chapel Parkway).

TWC is able to pick and choose the locations to be served because TWC’s recently-expired County franchise required only that TWC extend service to those areas with at least 30 homes per “cable mile” of plant.230 Residents of less densely populated areas were entitled to service but only if they were willing to pay their share of the “incremental” cost of extending service to their homes from the “nearest usable point of connection to the cable system.”231

TWC invoked this “incremental” cost provision to play a game of “gotcha” with unwitting Chatham residents and would-be TWC customers. Among other things, TWC interpreted the phrase “nearest usable point of connection” as referring to a point of its choosing, which can be at a significant distance from the homes of the requesting homeowners,232 thereby significantly increasing the costs to be borne by the homeowners for the extension. TWC also did not specify the items covered by its cost estimates, simply stating a bottom-line total and providing no break-out of costs. This practice gave rise to the sense that perhaps TWC was using the cost-allocation process to impose unnecessary or excessive costs on homeowners (e.g., making homeowners pay for the full cost of a new node even though TWC will also use the node to serve other customers). Finally, TWC engaged in creative counting of homes, often excluding homes from the count because they had long driveways or because they shared a private right-of-way,233

thereby reducing the number of homes to be served by the extension and increasing the remain-ing homeowners’ per-home cost for the extension.

TWC provides no service in western or southern Chatham County at all although it is entitled to operate throughout the County and was required under the now-expired County franchise for the past 10 years to provide service in any unincorporated area where density levels equaled or ex-229 TWC, e-mail to Windy Ridge Road resident, Oct. 22, 2010.230 TWC’s Cable Television Franchise for Chatham County, § 4.231 TWC’s Cable Television Franchise for Chatham County, § 4.232 See, e.g., TWC correspondence with a resident of Windy Ridge Road, Oct., 2010; Action Audits, Site Visit, Windy Ridge Road and Big Woods Road, Dec. 14, 2010.233 Action Audits, Site Visit, Windy Ridge Road and Big Woods Road, Dec. 14, 2010.

ceeded 30 homes per cable mile. Indeed, its state video franchise is for the entire County except for the incorporated communities of Cary (served by TWC under a separate franchise), Goldston (no cable provider), Pittsboro (served by TWC under a separate state video franchise), and Siler City (served by Charter).234

TWC’S STATE VIDEO FRANCHISE FOR CHATHAM COUNTY

TWC has a hub in Pittsboro but the system (like all TWC Raleigh area systems) is operated out if its Durham headend, with much of the staff for regional operations based in Morrisville in Wake County.

TWC’s lack of interest in expanding its footprint in Chatham County and elsewhere is under-scored by the company’s meager resources devoted nationally to plant improvements and expan-sions. TWC spent only $351 million on “line extensions” and $150 million on system upgrades and rebuilds in 2010 nationwide235 although TWC is the nation’s second largest cable provider

234 TWC has a separate state franchise for the town of Pittsboro that is dated March 30, 2011.

with $18.9 billion in annual revenues and 14.5 million customers.236 Instead, the vast majority of TWC’s capital expenditures were devoted to customer premises equipment such as modems and set to boxes ($1.136 billion) and headend equipment for video-on-demand, digital services, and cable modem service ($713 million).237

Extending existing plant represents a tiny portion of TWC’s current business plans, indicating that TWC is basically done building out its network (as is true for most of the nation’s other cable operators). Further, its basic business model is to squeeze as much as it can out of the cur-rent network by deploying new equipment in the headend and the home. TWC’s likely long-term plans are to deal with capacity limits and congestion problems associated with bandwidth sharing between the node and subscriber locations by “metering” or capping bandwidth use by charging more to heavy users of broadband.238

The condition of TWC’s cable plant in the County is mixed, with some of the plant in Pittsboro old and not in good condition while its newer plant in greenfield developments such as the Pre-serve is in excellent condition, with a centrally located fiber node and a separate fiber connection to the club house.239 TWC also committed scarce capital to pre-wiring with fiber optic lines and other costly equipment greenfield developments in Chatham County that remain nearly empty, incomplete, and in a state of limbo.240 TWC representatives declined to confirm the size of optic-al node service areas in Chatham County (or elsewhere). They do, however, say that TWC’s gen-eral practice is to be proactive and aggressive in monitoring node use and in splitting and aug-menting nodes.241 TWC has also represented, in discussions concerning extending service to the Vickers Road neighborhood in 2008, that its maximum node size for new construction is 125 homes passed.242

TWC is the slowest of the major cable providers to deploy state-of-the-art modem service, with DOCSIS 3.0 not reaching North Carolina (Charlotte) until 2010 and not reaching the Raleigh area until April of 2011. Comcast, in contrast, started deploying DOCSIS 3.0 in 2008 in part to combat Verizon’s FTTP FiOS product and has largely completed DOCSIS 3.0 deployment throughout its network.

As TWC deploys DOCSIS 3.0, it is provisioning the network for theoretical broadband speeds of 235 Time Warner Cable, Inc., SEC Form 10-K for 2010, March 29, 2011, at 58.236 Time Warner Cable, Inc., SEC Form 10-K for 2010, March 29, 2011, at 42-43.237 Time Warner Cable, Inc., SEC Form 10-K for 2010, March 29, 2011, at 58.238 http://www.bloomberg.com/news/2011-06-16/time-warner-cable-considering-billing-web-customers-by-usage-ceo-says.html.239 Action Audits, Site Visit, Preserve, Nov. 19 and Dec. 14, 2010.240 See, e.g., Action Audits, Site Visit, Legacy, Nov. 19, 2010.241 Time Warner Cable, Interview, Sept. 16, 2011.242 Time Warner Cable, Vickers Road meeting, Sept. 24, 2008.

50 MB/s downstream and 5 MB/s upstream. These speeds are theoretical because network con-gestion in the shared pipeline between homes and the local node will slow traffic and throttle this speed down to much lower levels. The service is costly at $99 a month as a stand-alone item. TWC has also devised a new marketing strategy that involves bundling DOCSIS 3.0 with a pack-age of high-end services for high-income customers as “SignatureHome” and selling it for $199 a month.243 This strategy adds to the sense that TWC is focusing on selling more service to exist-ing customers (and not on attracting new customers) and on serving members of high-end demo-graphic groups with the financial wherewithal to spend $200 on their monthly broadband and cable television bills.

b. CHARTER

Charter Communications (Charter) holds a local cable franchise for the town of Siler City and a County franchise for the entire unincorporated area of the County. Like TWC, Charter has staked out a small piece of the County—in Charter’s case, Siler City and its immediate environs—and has barely ventured outside of Siler City. For example, it has no interest in serving Goldston al-though Charter’s plant passes directly by Goldston on US 421 and Goldston is fully wired for cable service.244 Charter updated antiquated technology in the late 1990s after years of poor ser-vice by a prior provider and provides high-speed broadband service throughout its Siler City footprint but has not deployed state-of-the-art technology.

Based on adjusted 2004 data, Charter has about 1,500 Chatham subscribers, with 1,200 in Siler City and another 300 or so just outside of Siler City, with a compact service territory:

MAP OF CHARTER’S SILER CITY SERVICE AREA

243 http://www.timewarnercable.com/East/about/inthenewsdetails.ashx?PRID=3117&MarketID=144. This package includes such items as “whole home” DVR and “look back” DVR service. 244 A series of small cable operators have held Goldston’s cable franchise and once provided cable service to Gold-ston residents, apparently abandoning the system some time prior to 2008.

Charter’s Siler City system, because it carries about 20 fewer analog channels than TWC’s sys-tem, is likely a 550 MHz cable system.245 The cable industry standard is 750 MHz or greater (many cable systems are now 860 MHz), which means that the Siler City system is a low-capa-city system and probably will not be able to carry some of the new services expected to be de-ployed in the future. The County’s 1997 franchise with Charter required that the system be up-graded to at least 550 MHz246 and went into effect about two years before 750 MHz cable sys-tems became the industry standard. Charter’s most recent annual report confirms that 7% of the homes within its footprint are passed by systems that are 550 MHz or less.247

DOCSIS 3.0 is likely available in Siler City since Charter provides it to its Sanford subscribers and has done so since early 2010.248 The Siler City system is served by Charter’s Sanford headend (Charter consolidated headends in the early 2000s and shifted Siler City’s headend oper-ations to Sanford), making it likely that Siler City subscribers also have access to DOCSIS 3.0 service. Finally, a Siler City resident (and IT expert) confirmed that broadband service is avail-able from Charter in Siler City at some locations at speeds as fast as 60 MB/s downstream and 20 MB/s upstream.249

History: Charter acquired the Siler City system from Cencom Cable Income Partners II, LP (Cencom), when Charter purchased a cluster of four North Carolina cable systems based in, and operated out of, Sanford, N.C., from Cencom in about 1997. At the time of this transaction, key Cencom partners were also Charter executives. The four systems involved in this trade served Sanford, Siler City, Whispering Pines, and Troy and were technically backwards, with much of the plant being very low capacity at just 330 MHz.

Charter was formed in the early 1990s and grew primarily through debt-financed acquisitions of small cable companies, including the Cencom assets in 1997, and various system swaps and sales to create more efficient geographic clusters of cable systems. Microsoft co-founder Paul Allen acquired a controlling interest in Charter in 1998. Soon thereafter, Charter exploded in size, go-ing from 1 million subscribers in 1998 to 6.8 million in 2002 and becoming the nation’s fourth largest cable company. This aggressive growth was fueled by acquiring other cable companies, including: Marcus Cable, Intermedia Partners, Rifkin Acquisition Partners, Greater Media, Inc., Avalon Cable TV, Falcon Cable TV, Fanch Communications, Inc., and Bresnan Communica-tions, Inc. Struggling under the mountains of debt created by these transactions ($21.7 billion),

245 Charter refused to provide any information about the system to Action Audits despite repeated requests.246 Charter’s Cable Television Franchise for Chatham County, § 10.247 Charter Communications, Inc., SEC Form 10-K for 2010, March 1, 2011, at 7. 248 http://www.broadbandreports.com.249 Siler City resident, Interview, Nov. 18, 2010.

Charter filed for a prearranged chapter 11 bankruptcy in 2009. It emerged from bankruptcy later the same year, with debt holders becoming Charter’s new owners in exchange for shedding $8 billion in debt, leaving outstanding debt of $13 billion and removing controlling stockholder Paul Allen from the picture.

B. WIRELESS PROVIDERS

1. Terrestrial Wireless Providers

A total of seven wireless providers, including six conventional cell service providers and one fixed wireless provider, operate in the County. Of these seven providers, only one, Verizon Wire-less, provides close to countywide service and only one, Chatham Wireless, provides high-speed service that meets the FCC’s latest speed targets of 4 MB/s downstream and 1 MB/s upstream.

Chatham County enacted a communications tower ordinance in 1998 and has amended that or-dinance six times.250 The ordinance effectively restricts towers to the County’s main transporta-tion corridors, with 300-foot towers to be located along US 64 West and US 421 (except for a 199-foot height limit one mile in either direction of the intersection of US 64 West and Big Woods Road) and 199-foot towers to be located on US 15/501, NC 751, NC 87, NC 902, and US 1.251 It applies only to towers used for “PCS” and “cellular mobile services” 252 and, if read liter-ally, does not cover towers for fixed wireless service. Taller towers are permitted for government agencies and may be situated outside of the designated corridors if a “public benefit” is shown.253

The ordinance also establishes an annual planning process and requires approval of new tower locations as part of this annual “group” review process.254 The ordinance includes numerous oth-er provisions, including a preference for “stealth” and monopole towers255 and a requirement for towers generally to be located at least six miles a part.256

a. Mobile Wireless Providers (Conventional Cell Service)

Six wireless carriers provide cell service in the County but all except for Verizon Wireless provide spotty and limited coverage, focusing primarily on four key transportation corridors (US 64 West, US 15/501, US 1, and NC 87 South). As with wireline broadband service, corporate de-cisions to invest in wireless infrastructure are based on density and demographic factors. Just as in the wireline context, Chatham residents have only limited access to the benefits of competition as only Verizon can be counted on for something close to countywide service.

As a general (but not absolutely uniform) practice, cell carriers tend to share towers, with each tower holding antenna arrays for four to six different carriers. The towers themselves are typic-ally owned by either national tower companies or national carriers that lease space to multiple carriers. Major owners of towers in the County include: SBA Towers (10); Alltel (now Verizon) (8); U.S. Cellular (5); Sprint (4); American Tower (3); and General Tower (2). Public entities also own towers, with tower owners including the County, the town of Siler City, the North Car-olina Department of Transportation, and the U.S. Army Corps of Engineers. Virtually all of the cell towers in the County are fiber fed, with many of the fiber connections provided by Cen-turyLink.

i. Verizon Wireless

250 Communications Tower Ordinance, Chatham County (1998) (CT Ordinance).251 CT Ordinance, § 3-2.1.252 CT Ordinance, § 1-5 (definition of “telecommunication tower”).253 CT Ordinance, § 3-2.254 CT Ordinance, § 3-1.255 CT Ordinance, §§ 4-2.1 and .2.256 CT Ordinance, § 4-2.7.

Among all the cell carriers, Verizon Wireless provides the most ubiquitous service in the County and also has the strongest signal. This is likely due to the fact that it is the only major cell pro-vider operating throughout the County with a low-frequency license. As discussed above in Broadband Infrastructure Options (§ II.B.1.a), the older cellular licenses grant rights to operate using spectrum in the 800 MHz range. These “cell” service licenses provide major operational advantages. The lower frequencies associated with these licenses reach further and penetrate fo-liage and walls more readily than the higher frequencies associated with the PCS and AWS li-censes held by most of the County’s other wireless providers. According to the FCC license data-base, the only licenses originally allocated in the 1980s for “cell” service in Chatham County ended up in the hands of Verizon, Alltel, and US Cellular. Verizon has acquired Alltel and its li-censes and US Cellular’s tower presence in the County is limited, making Verizon the only pro-vider that occupies prime spectrum throughout the County.

Verizon also holds Broadband PCS and AWS licenses for the County. It is the only licensee which holds all three types of licenses. It is also the only licensee that serves the southwestern part of the county, having acquired Alltel’s rights to occupy a County-owned tower in the Harp-ers Crossroads area. Verizon’s coverage map shows almost complete 3G coverage of the County but even Verizon’s map show gaps in coverage.

MAP OF VERIZON’S WIRELESS COVERAGE IN CHATHAM COUNTY

Verizon recently introduced advanced 4G service in the Winston-Salem/Greensboro and Raleigh areas, after first deploying in the Charlotte and Fayetteville areas, but its Raleigh area 4G deploy-ment does not reach Chatham.

MAP OF VERIZON’S 3G (ORANGE) AND 4G (CRIMSON) COVERAGE IN THE REGION

ii. AT&T Wireless

AT&T, second in size nationally to Verizon in the wireless market, has a much more limited pres-ence in the County, likely due to the fact that its licenses for the County are high-frequency li-censes. On the surface, it appears to provide reasonably good coverage, with antennas installed at some 25 tower locations. Regardless of the extensive deployment of antennas throughout the County, AT&T’s coverage maps for the County show spotty and uneven coverage in the County, with good service only in close proximity to its 25 towers and signal quality dropping rapidly as the user moves away from the antenna.

MAP OF AT&T’S WIRELESS COVERAGE IN CHATHAM COUNTY

AT&T’s licenses for County include a broadband PCS license (in the 1850 to 2000 MHz range) and licenses for “wireless communications service” (very limited spectrum in the 2305 to 2310 MHz range). An examination of AT&T’s tower spacing in the County shows that, in a number of cases, the towers are within 5 or 6 miles of each other, making cell radii as small as 2.5 to 3 miles and well within recommended FCC parameters. However, the FCC has not provided clear-cut cell size recommendations for higher-frequency providers. Even with AT&T’s modest-sized cells in the County, signal strength tends to weaken significantly within a mile or so of the tower, suggesting that much smaller cells are required for high-frequency operations than the FCC re-commendations for lower-frequency operations. This need for smaller cell sizes pushes wireless deployment costs up dramatically unless new techniques such as Alcatel-Lucent’s lightRadio cube provide a more cost effective way to avoid the heavy capital expenditures associated with large, conventional cell towers.

Finally, AT&T has secured licenses for valuable “guard band” spectrum in the 700 MHz range for Chatham County but is apparently reserving this capacity for future deployment of LTE ser-vice.257 These licenses will likely come into play in Chatham County when AT&T decides to de-ploy 4G service in the County, which may be many years away.258

257 Wireless Strategy, 700 MHz Band Analysis, May 6, 2010, at 3-4.258 AT&T, Interview, Dec. 17, 2010.

iii. Sprint/Nextel

Sprint Nextel, the nation’s third-largest wireless carrier, provides service that is similar to AT&T’s in terms of its spottiness and unevenness. As is the case with AT&T, Sprint Nextel holds only high-frequency licenses for the County, which means that signal quality drops off quickly as the customer moves away from the nearest tower. Specifically, Sprint Nextel holds three broad-band PCS licenses for the County in the 1850 to 2000 MHz range. Unlike AT&T, Sprint does not have any 700 MHz licenses in reserve for the deployment of 4G LTE service in the area so its fu-ture is somewhat constrained.

Sprint’s coverage maps are not as clear as AT&T’s in that they do not show gradations in quality of service but they do make clear that Sprint’s service focus is on northeastern parts of the County and the County’s main transportation corridors (e.g., US 64 West, US 1, US 421, US 15/501).

MAP OF SPRINT’S 3G WIRELESS COVERAGE IN CHATHAM COUNTY

iv. T-Mobile

AT&T has entered into an agreement to purchase T-Mobile, the nation’s fourth largest wireless carrier and a subsidiary of the German telecommunications giant, Deutsche Telekom. If this ac-quisition is approved by federal authorities, it will create the nation’s largest wireless company, with a nationwide share of the market of about 40%. AT&T is interested primarily in acquiring T-Mobile’s wireless licenses so it can divide and subdivide existing cells and thereby more easily accommodate the mushrooming Internet traffic associated with the proliferation of smart

devices.

T-Mobile holds a total of three valuable licenses for Chatham County, with two being AWS li-censes and the third being a broadband PCS license. AT&T’s acquisition of these additional li-censes will not significantly improve AT&T’s ability to serve Chatham County as its greatest need is for many more antenna locations (or the development of alternative distribution methods like Alcatel-Lucent’s lightRadio cube). In a May 31, 2011, letter to FCC Chairman Julius Gen-achowski, North Carolina Governor Beverly Perdue endorsed the merger and requested FCC ap-proval of the proposed acquisition, making vague and unsupported claims that the acquisition will benefit the state of North Carolina.

A look at T-Mobile’s 3G map for the Chatham area shows that T-Mobile’s service area largely coincides with that of AT&T. In fact, it appears as though T-Mobile’s antenna arrays are gener-ally installed on the same towers as AT&T’s. The merger will probably provide for improve-ments in service in those small areas in the immediate area of each tower but it will not extend AT&T’s service reach into the many unserved and underserved areas of the County.

MAP OF T-MOBILE’S 3G COVERAGE IN CHATHAM COUNTY

v. Other Wireless Carriers

Two other carriers—Cricket (Leap) and US Cellular—also operate in the County but have lim-ited footprints and generally do not represent an effective solution to the County’s broadband de-

ficit. Of note, however, is that one of these providers—Cricket—focuses heavily on low-income markets and might be interested in working with the County to encourage broadband adoption in Siler City where high-density levels also make the community attractive to a niche provider like Cricket. Cricket holds both PCS and AWS licenses for the County. Also noteworthy is that US Cellular has two valuable licenses for low-frequency operations in Chatham County (original “cell” service licenses for 800 MHz service) but has a very limited footprint in the County and may be a take-over target because of its attractive inventory of wireless licenses.

MAP OF CRICKET’S COVERAGE IN CHATHAM COUNTY (DARK-COLORED AREAS ARE CRICKET’S SERVICE AREAS; LIGHT PURPLE INDICATES THAT

SERVICE IS AVAILABLE FROM PARTNERS)

MAP OF US CELLULAR’S COVERAGE IN CHATHAM COUNTY (HATCH MARKS INDICATE THAT SERVICE IS AVAILABLE ONLY FROM PARTNERS)

b. Fixed Wireless Providers

Chatham Wireless (CW) is the only source of fixed wireless access (FWA) service in the County, with about 100 customers. It is based in Pittsboro and has about six transmitting sites located on a mix of towers and rooftops in and around Pittsboro. It operates by shooting signals via 5 GHz connections to six transmitting sites (second-mile connections). From these six sites, CW trans-mits signals to fixed wireless antennas at customer locations, making the last-mile connections via 900 MHz and 2.4 GHz connections. These three wireless pathways—900 MHz, 2.4 GHz, and 5 GHz—are unlicensed pathways. Traffic is routed back and forth between CW’s point of pres-ence in Chapel Hill via middle-mile lines leased from TWC. CW’s basic broadband service is 4 MB/s downstream and 1 MB/s upstream although it is able to offer higher speeds at some loca-tions that are close to its transmitting sites.

MAP OF CHATHAM WIRELESS’S COVERAGE

In 2010, CW unsuccessfully sought $500,000 in federal ARRA funds to expand its network to Siler City and western Chatham County and to add 15 new tower sites, with the goal of adding 900 new broadband customers. It planned to add licensed spectrum in the 3.65 GHz range for last-mile connections. FCC licenses for 3.65 GHz spectrum may be easily obtained and do not involve auctions or requirements to pay spectrum fees. This spectrum, along with licensed 2.5 GHz spectrum, is the spectrum favored for WiMAX providers.

CW’s disadvantages in the broadband market include the high cost of middle-mile service to connect to the Internet and effective control of the middle-mile market in Chatham County by CW’s two primary competitors (CenturyLink and TWC). Another barrier to entry is the need for a large numbers of towers and other high points for transmitting sites and the cost of acquiring the necessary transmitting sites at the right locations. Other obstacles include the high initial cost of deploying fixed wireless equipment (costs can run as high as $500 per installation depending upon the bandwidth used for the last-mile connection) and the evolving nature of the equipment market.

One national company, Clearwire, has big plans to venture into this arena and even has secured multiple licenses to provide fixed wireless service in Chatham County. These licenses consist of some eight licenses for broadband radio service (these licenses can also be used to provide broadband service of all sorts to customers). These BRS licenses are high-frequency (2500 to 2655 MHz) licenses, meaning that providers need to make a major investment in infrastructure to establish relatively small cells. Clearwire has encountered financial problems and has yet to de-ploy the necessary infrastructure in Chatham County or anywhere else in the Raleigh-Durham area.

2. Satellite

Chatham residents currently have access to broadband service from two satellite providers—HughesNet and ViaSat (operating under the WildBlue name). The broadband service provided by these two providers is slow, is subject to delays or pauses in delivery (the latency factor), and is very expensive.

HughesNet’s prices range from monthly fees of $39.99 for service that is slightly better than dial-up (“up to” 1 MB/s downstream and 200 kb/s upstream) to $89.99 for the “Power 200 package” (“up to” 2 MB/s downstream and 300 kb/s upstream). WildBlue offers even more limited pack-ages that range in price from $49.95 a month (for “up to” 512 kb/s downstream and 128 kb/s up-stream) to $79.95 per month (1.5 MB/s downstream and 256 kb/s upstream).

For these and other reasons (see § II.B.2 for enumeration of the reasons why satellite is not a long-term solution), satellite service does not provide an effective solution to the County’s broad-band deficit except on an interim basis in those pockets of the County that have no wireline broadband service or terrestrial wireless broadband service.

C. MIDDLE–MILE PROVIDERS

Data is scarce on the availability and cost of middle-mile service in Chatham County due to the limited nature of current disclosure obligations. However, it is clear that small service providers such as Chatham Wireless are captive customers of their competitors and can only purchase con-nections to the Internet from direct competitors at high prices (e.g., CenturyLink and Time Warner Cable).259 There is no opportunity to purchase fiber connections to the Internet from an independent provider such as Level 3. Alternative pathways to the Internet via independent middle-mile connections such as the MCNC network will open new possibilities for the develop-ment of alternative wireline and wireless networks.

The federal government (with a hand from the Golden Leaf Foundation) is financing the deploy-ment of a publicly-controlled 1,800-mile fiber optic middle-mile network for both public and private providers. MCNC is a non-profit organization that was designated by the state of North Carolina several years ago to help community colleges, local educational authorities, and other similar institutions obtain access to Internet service through contracts with private sector pro-viders. When this $146 million project (financed primarily by a $102 million grant provided through the American Recovery and Reinvestment Act of 2009 (ARRA) and $24 million provided by the Golden Leaf Foundation) is complete, MCNC will go from being an intermedi-ary between public entities and the private sector (a sort of collective purchasing agent) to being an independent provider of broadband service.

This new network, when completed in 2013, will be a state-of-the-art high-capacity fiber optic middle-mile network with points of presence at strategic locations throughout the state. With this new middle-mile network, MCNC will, for the first time, provide open access to the Internet at affordable rates that will be accessible to not only school systems and community colleges but also municipalities, counties, and other broadband providers.260 The closest point of presence for connecting to this network (and its affordable middle-mile service) will be in Sanford.

The following is a map of MCNC’S planned network, with the red lines indicating new fiber op-tic lines and the green and yellow lines indicating lines owned by third parties to which MCNC has a right of use:

259 Chatham Wireless, Interview, Aug. 19, 2010. 260 MCNC, Interview, Aug. 26, 2010.

D. SUMMARY OF CHATHAM COUNTY’S EXISTING BROADBAND PROVIDERS

company/provider services service area/availability otherWIRELINE PROVIDERS1. Telephone CompaniesCenturyLink phone, broadband

(not all locations)west of Lake Jordan (except for north of Fearrington Village, the southwest & northwest corners, & a small south-central area bordering Lee County); in-cludes: Pittsboro, Siler City, Goldston, Bonlee, Gulf, Bear Creek, Mount Vernon Springs, Silk Hope, Crutch-field Crossroads, Bynum, Terralls, Griffins Cross-roads, Fearrington Village, Preserve

20,148 houses passed; 68.7% of pop.; 71.2% of land; 42.6 homes/square mile

AT&T phone, broadband, IPTV (just a few locations)

east of Lake Jordan (except for the northeast & south-east corners); north of Fear-rington Village on the west side of Lake Jordan; in-cludes: Governors Club, Haywood, Wilsonville, Bells, Seaforth

7,647 homes passed; 25.7% of pop.; 16.4% of land; 69.1 homes/square mile

Randolph TMC phone, broadband, IPTV (35% to 40% of locations)

lower southwest corner (in-cludes: Harpers Crossroads & Bennett); upper northw-est corner (Staley area)

838 homes passed; 2.8% of pop.; 5.6% of land; 22.4 homes/square mile

Windstream phone, broadband Asbury & Farmville (south central); Corinth, Brick-haven (southeast corner)

529 homes passed; 1.8% of pop.; 6.2% of land; 12.6 homes/square mile

Frontier phone, broadband upper northeast corner 272 homes passed; 0.9% of pop.; 0.6% of land; 71.2 homes/square mile

2. Cable OperatorsTime Warner Cable cable, broadband, Pittsboro & north to Orange 3,300 subs (est.) in

company/provider services service area/availability otherphone County border (west of

Lake Jordan); includes Chapel Ridge, Governors Club, Briar Chapel, Fear-rington Village, the Pre-serve

unincorp. areas; 450 subs (est.) in Pittsboro

Charter Commu-nications

cable, broadband, phone

Siler City and immediate environs

1,200 subs (est.) in Siler City; 300 subs (est.) in unincorp. areas

WIRELESS PROVIDERS1.Terrestrial Wirelessa. Mobile WirelessVerizon Wireless voice, data most of County “cell” (824-849 MHz

& 869-894 MHz) li-censee; also a PCS (1850-1910 MHz &1930-1990 MHz) & AWS (1710-1755 MHz & 2110-2155 MHz) licensee; about 30 tower locations

AT&T Wireless voice, data Siler City, Pittsboro, Gold-ston, northeast Chatham County, transportation cor-ridors (US 64 West, US 1, US 15/501, US 421, NC 751)

PCS (1850-1910 MHz & 1930-1990 MHz) & “wireless communica-tions service” (2305-2310 MHz) licensee; about 25 tower loca-tions

Sprint Nextel voice, data Siler City, Pittsboro, Gold-ston, northeast Chatham County, transportation cor-ridors (US 64 West, US 1, US 15/501, US 421, NC 87, NC 751)

PCS (1850-1910 MHz & 1930-1990 MHz) licensee; about 27 tower locations

T-Mobile voice, data Siler City, Pittsboro, Gold-ston, northeast Chatham County, transportation cor-ridors (US 64 West, US 1, US 15/501, US 421, NC 751)

PCS (1850-1910 MHz & 1930-1990 MHz) & AWS (1710-1755 MHz & 2110-2155 MHz) licensee; about 27 tower locations

company/provider services service area/availability otherCricket (Leap) voice, data Siler City, Pittsboro, Gold-

ston, transportation cor-ridors (US 64 West, US 1, SR 15 (part), US 421 (south of Siler City))

PCS (1850-1910 MHz & 1930-1990 MHz) & AWS (1710-1755 MHz & 2110-2155 MHz) licensee; lim-ited number of tower locations

US Cellular voice, data Siler City, Pittsboro, trans-portation corridors (US 64 West, US 1)

“cell” (824-849 MHz& 869-894 MHz) li-censee; limited num-ber of tower locations (less than 10)

b. Fixed WirelessChatham Wireless data Pittsboro, Bynum area,

south of Pittsboro toward Moncure

uses unlicensed spec-trum (900 MHz, 2.4 GHz, and 5 GHz); only wireless provider that provides high-speed service

2. SatelliteHughesNet data all houses in Chatham

County with an unobstruc-ted view of the southern sky

price for 2 MB/s downstream & 300 kb/s upstream: $89.99/month

ViaSat data all houses in Chatham County with an unobstruc-ted view of the southern sky

price for 1.5 MB/s downstream & 256 kb/s upstream: $79.95/month

MIDDLE-MILE PROVIDERSMCNC broadband nearest planned PoP is in

Sanfordunder construction; scheduled completion date for area link is July-Sept., 2012

CenturyLink broadband provides connections to the Internet for large institu-tions in the County, includ-ing the County and the Chatham County Schools

Time Warner Cable Broadband provides connections to the Internet for Carolina Com-munity College through

PoP is in Pittsboro

company/provider services service area/availability otherpartnership with Charter Communications

IV. BROADBAND APPLICATIONS AND USES

Broadband has managed to become a central component of our basic infrastructure in roughly a 10-year time span and will assume an even larger and more central role over the next 10 years and beyond. With astonishing rapidity, we have already reached the point where most Americans cannot function in their daily lives without access to broadband. To fully and effectively participate in the economy and society of the future, all Chatham residents need to, at a minimum, have the option of access to an affordable, high-quality broadband infrastructure just as, for many decades, they have had access to roads and highways and electricity. We use broadband for basic communications like communicating with family members and business associates or colleagues. Many of us use it to pay bills, apply to college or for jobs, buy goods and services, transfer funds, buy plane and train tickets, do research, and make investments. For the younger generation, broadband is assuming an even greater role in their daily lives as it is regularly used by many of them for television watching (Hulu) and movie watching (Netflix) and for basic entertainment (video gaming and social media). And a visit to an elementary school or a chat with a six-year-old quickly reveals that their future will be built around broadband.

Broadband has already assumed a central role in the daily lives of most Americans as is evident in the five areas where regular use of broadband is now well established:

Education Economic development and job creation Personal communications, financial transactions, and entertainment Public safety Government services and civic engagement

In other areas, broadband has just begun to scratch the surface, with the start of the widespread deployment of networked sensors and other devices like cameras. As more and more of these connected sensors and devices are deployed in our environment, broadband will likely contribute to radical changes in our lives in many areas, including in four areas of emerging broadband use:

Health care Energy and utility use (management and control) Transportation Smart communities

A. ESTABLISHED BROADBAND USES

1. Education

Broadband technology is rapidly being incorporated into all levels of the educational process in Chatham County and elsewhere. The Chatham County school system has embraced broadband technology throughout the school system, placing a laptop computer in the hands of every high school student and a computer for every other student or so in the elementary schools. Nonethe-less, many Chatham students are losing out on much that broadband has to offer and are unable to take full advantage of their computer and broadband skills because they cannot obtain access, or have low-quality access, to the Internet at home due to the County’s broadband deficit.

All Chatham County schools have access to broadband service but pay a high price for that ser-vice ($246,000 per year), do not control key pieces of network equipment (“edge routers”), and are subject to limits on available speed. The Chatham school system includes 17 schools, 2 ad-ministration buildings, and 8,000 or so students, with 7 schools having 100 MB/s service and 10 schools having 50 MB/s service.261 CenturyLink is the primary broadband provider for the school system, providing final connections to the Internet from the school system’s Pittsboro hub and connections to 13 of the system’s 17 schools. AT&T serves the 3 schools in its service territory (Harrison Elementary School, North Chatham Elementary School, and Margaret Pollard Middle School) while Randolph TMC serves the school in its service territory (Bennett Elementary School).

Only 4 of Chatham’s 17 schools have access to cable service (Pittsboro ES (TWC); North Chath-am ES (TWC); Perry ES (TWC); Sage Academy (Charter)), which means that the school system is heavily dependent on broadband for access to video materials.

The areas in which broadband can enhance the educational process are numerous and growing every day. This need requires school system access to a scalable fiber optic network that will provide the necessary speed for new educational services, access to a full array of video services, and the costs controls necessary to ensure the ready availability of higher and higher rates of speed as the demand for broadband continues its explosive growth in the school system.

Broadband can break down barriers to learning in rural areas by providing remote access to teachers at other locations in specialized areas and other specialized curricula. Interactive on-line tools like “smart boards” can be used to supplement standard teaching techniques and improve teaching. Broadband access can provide instant access for students and teachers to a rich world of videos and other media resources and equip students with full and immediate access to the

261 These speed commitments are “burstable” commitments, meaning that the provider does not guarantee the speed specified in the contract but rather will make it available if it is available on its network. Chatham County Schools, Interview, Oct. 28, 2010. See also Products and Services Agreement between Chatham County Schools and Carolina Telephone and Telegraph, LLC (first amendment), Nov. 10, 2010; Form 471 for Chatham County Schools (Cen-turyLink, AT&T, and Randolph TMC), Schools and Libraries Universal Service, March 18, 2011.

world’s greatest library. Broadband can be used as a tool to administer and grade tests, provide homework assignments to students, and submit reports and other assignments to teachers.

With real-time access to information about a student’s records and skill levels (electronic re-cords), teachers can more readily fashion programs suitable to a particular student’s needs and capabilities and better understand those needs and capabilities. Finally, full access to broadband tools in schools and homes is necessary to provide students with computer, software, and pro-gramming skills, equip them to compete in the digital world, and increase opportunities for par-ental involvement in a student’s education.

The final piece of the educational puzzle is universal in-home access throughout the County to quality broadband. With new in-home broadband tools, drop-outs can be reached and special ser-vices such as remedial help and language training can be provided to Chatham residents in the privacy of the home. And of course, teachers can be trained at home. With better in-home broad-band service (in terms of both access and speed), local community colleges and other educational institutions can greatly expand educational opportunities and make education a lifelong process. Broadband can reach into the home to provide interactive and on-line teaching and training and provide more flexibility to the working student who is seeking to improve his or her skills, ac-quire a new vocation, or simply explore new areas of learning.

See also Chapter 11 of the National Broadband Plan for additional information on federal policies that would improve education through broadband.

2. Economic Development and Job Creation

Universal access to affordable, high-quality broadband service is important for economic devel-opment and job creation in Chatham County. Chatham residents are no different from other Americans: perhaps as many as two-thirds of Americans already rely on the Internet to perform some or all of their work-related responsibilities.262 And, according to the U.S. Bureau of Labor Statistics, jobs depending on broadband and information technology are growing at a relatively rapid rate.263 In terms of entrepreneurship opportunities, access to quality broadband service is essential for small and home-based businesses to get off the ground and create and expand new economic opportunities in the County.

Today’s spotty broadband service in many areas of the County, especially the southern and west-ern parts, leaves many County residents with limited opportunities to launch small businesses from their homes and neighborhoods. Examples of Internet-related tools that are necessary to build a small business from the ground up include robust and stable websites to market goods and services and reliable broadband connections for on-line transactions to complete sales and maintain an up-to-date inventory. In fact, reliable Internet service in sparsely populated areas of the County is increasingly a requirement for Chatham’s small farmers to market and sell their produce. In the future, broadband will become even more important for farming and other agri-cultural activity as more and more sensors are deployed on farm animals and in fields and linked wirelessly to connection points to the Internet. These networked sensors will provide farmers with the capacity to do such things as track the movement and health of farm animals and collect micro-detailed information on the condition of plants and their environment and the need for fer-tilizing and hydration.

At the most basic and simple level, access to Internet service is now required to search and apply for jobs as many employers no longer accept paper applications. Similarly, job training opportun-ities are likely to become increasingly Internet based in the future as employees acquire new skills to survive in a constantly evolving world economy. By increasing in-home work opportun-ities via the Internet, commuting costs will be reduced both in terms of energy and time loss and new employment opportunities will be created for the homebound such as disabled persons and persons with caregiver responsibilities.

See Chapter 13 of the National Broadband Plan for additional information on federal policies that would improve economic opportunity.

262 NBP at 265.263 NBP at 265.

3. Personal Communications, Financial Transactions and Entertainment

Chatham residents, like so many Americans, rely on broadband for personal communications and financial transactions and, increasingly, for entertainment. As a baseline matter, universal in-home access to broadband is increasingly a requirement for managing our everyday personal lives. Some do not participate in the Internet world for financial reasons or for capability or com-fort reasons associated with age or education. But the number of non-participants is shrinking every day as more and more people learn they have no choice but to become Internet savvy and dependent if they wish to do such basic things as communicate with friends and relatives and complete financial transactions without having to visit a bank.

In our daily lives, we use the Internet to exchange e-mails with friends and family members. We may attach videos and photos to our e-mails for even closer connections with distant relatives and friends. And those with camera-equipped computers even use Skype for in-person video conversations.

We use the Internet to shop for basic goods like furniture, clothing, medicine, household goods, computers, appliances, electronics, and so on. There is really no end to the amount of commerce done over the Internet, with UPS, Fedex, or USPS completing the transaction with a delivery to the home. Increasingly, in more urbanized areas, consumers use the Internet to buy groceries, which are then delivered via refrigerated trucks to their homes. Also in more urbanized areas, consumers can make instant reservations though car-sharing programs and then pick up a car at a parking spot in the neighborhood. The day when our brick-and-mortar shopping opportunities may start to shrink in the face of lower-cost and more efficient on-line shopping may not be far off. Many of us use the Internet to buy and sell stocks and bonds, pay bills, transfer funds between accounts, and pay taxes. We plan trips on the Internet, use on-line features to make re-servations and buy plane or rail tickets, and sometimes even use smart phones to show our tick-ets to ticket agents, completely removing paper from the transaction.

Finally, there is the burgeoning world of broadband-based entertainment that is used by large percentages of the younger population. This world includes broadband-delivered television ser-vice through Hulu and the many broadband television services now being offered by cable com-panies as a supplement to cable subscriptions (e.g., the ability to watch cable programming on an iPad). It includes Netflix for video streamed movies. (Netflix has more subscribers than the na-tion’s largest cable company, Comcast.264) It includes broadband-intensive video gaming and vir-tual life games such as Second Life involving avatars and other virtual reality creations. And, un-til the recent crackdown by the federal government, it included large numbers of on-line poker players and the like.

This list of personal uses of broadband barely scratches the surface as “app” developers are hard at work developing a million different ways to take advantage of the Internet via mobile broad-264 Ryan Lawler, Gigaom, Netflix now officially has more subscribers than Comcast, April 25, 2011. http://gigaom.-com/video/netflix-1q-2010-earnings/.

band connectivity. This is a process without end that, if anything, more rural communities like Chatham County, with their more dispersed population and more limited brick-and-mortar op-tions, should be at the forefront as adapters and users of new broadband options.

4. Public Safety

Like all public safety agencies, Chatham County’s Emergency Operations Center is a major user of broadband service and conventional wireless and telecommunications service for 911 service, emergency dispatching and first responder service, and routine patrol work. The County is highly dependent on a communications infrastructure to perform basic public safety functions but that infrastructure is not built for the long term and will eventually need a total overhaul in the not-too-distant future to keep up with developments in technology and provide Chatham with full ac-cess to public safety protections. To the extent the County invests in a robust wireline broadband infrastructure and takes steps to facilitate the deployment of major improvements in wireless ser-vice, it will greatly enhance the ability of the sheriff’s office and other local police agencies to meet their public safety responsibilities.

The County’s 911 system is largely provided via 911 trunk lines leased from CenturyLink. Like virtually all 911 systems in the country, the County’s system still operates through old circuit-switched telephone technology. With broadband-based 911 systems (also known as NG911 or “next generation” 911 systems), members of the public could transmit text, pictures, audios, and videos, which, with proper broadband wireless technology, could then be forwarded to emer-gency responders. NG911 systems are well down the road as the existing system for regulating and financing 911 systems is largely based on legacy telephone network technology and must be revamped before NG911 systems can be deployed but the County should position itself to foster eventual deployment of an NG911 system.

For dispatching and other emergency responder communications, the County relies on a patch-work of low-frequency and limited capacity wireless connections (pagers and other radio-based connections), using roughly six towers scattered around the County as transmitting points.265 This system works for now but is limited as to capability and is not designed to be interoperable with the emergency communications systems of other jurisdictions. For interoperability, the County relies on mobile equipment supplied through the state’s 800 MHz VIPER (Voice Interoperability Plan for Emergency Responders) system. The VIPER system consists of 171 equipped sites around the state and includes portable transmitting equipment that can be moved into place as needed in emergencies.266 Unlike many other North Carolina jurisdictions, the County is not a VIPER partner and is not using VIPER-based equipment for its regular emergency communica-tions.267

In the 1997 Budget Act, Congress reserved 24 MHz of spectrum in the 700 MHz range for public safety agencies. This spectrum is considered ideal for public safety uses because lower-frequency radio transmissions can more readily penetrate walls and reach longer distances. The purpose of

265 Chatham County Emergency Operations Center, Interview, Feb. 28, 2011; see also http://wireless.fcc.gov/uls/in-dex.htm?job=online_systems.266 http://www.nccrimecontrol.org/index2.cfm?a=000001,001148.267 Area VIPER partners include the counties of Wake, Lee, Orange, Alamance, Hartnett, and Durham

the 1997 requirement was to establish a framework for the construction of a nationwide, seam-less, interoperable public safety network where responders from multiple jurisdictions could eas-ily communicate with each other while dealing with the same emergency. This national network is expected to cost about $6.5 billion (in 2010 dollars) and to be built over a 10-year period, fin-anced primarily through federal grants.268

The FCC failed to implement the 1997 law properly, requiring partnerships between private pro-viders and public safety agencies but designing auction specifications for the private participants that failed to attract any qualified bidders in its 2008 auction. This process is now back on track but is still a work in process. This 24 MHz chunk of spectrum is a part of the 108 MHz that was reclaimed from television broadcasters as a result of the mandatory analog-to-digital conversion, finally completed on June 12, 2009, after years of delay. Examples of possible applications for this new public safety network identified by the FCC include269:

Remote access to criminal databases High-speed file downloads Distribution of surveillance video feeds to on-scene personnel Medical-quality video Multiple vital signs transmission Real-time resource tracking (e.g., ambulance tracking) Secure transmission of patient records Environmental monitoring Traffic management

The FCC approved North Carolina’s proposed regional plan for the public safety use of this 700 MHz spectrum on June 28, 2011. This plan includes specific spectrum allocations for Chatham County, which means that the County should include possible use of this interoperable spectrum in its long-term broadband plans.

Chatham County relies on Verizon Wireless for broadband service for its patrol cars.270 Broad-band service is delivered to patrol cars via small antennas and aircards. The County does not have any other commercially available options given the limited footprint of the other wireless carriers that serve the County and the high frequencies used by most of those carriers. In practic-al terms, depending on Verizon Wireless means that public safety operations are somewhat lim-ited by the slow speed of Internet connections for patrol cars on call. Action Audits confirmed the limited nature of this wireless connection via random test of Verizon Wireless’s service around the County: the Internet was accessible in most areas of the County via Verizon Wireless

268 NBP at 318.269 NBP at 319 (Ex. 16-C).270 Chatham County Emergency Operations Center, Interview, Feb. 28, 2011; see also http://wireless.fcc.gov/uls/in-dex.htm?job=online_systems.

but the connection was often very slow outside of the County’s incorporated areas.271

Other public safety systems that are expected to be developed in the future (and would benefit from universal access to broadband service) include advanced alerting systems to inform the public of emergencies.

See Chapter 16 of the National Broadband Plan for additional information on federal policies that would improve public safety operations.

5. Government Services and Civic Engagement

Chatham County has begun to take advantage of the opportunities provided by the Internet for improving access to government services and increasing opportunities for civic engagement. With universal access to affordable broadband throughout the County, these County-provided services will greatly increase in value once all County residents have the same ability to obtain access in their homes and businesses to these services.

Chatham uses the Internet to provide some government services but has yet to transfer all ser-vices to the Internet.272 Chatham’s website also provides community residents with access to a wide range of information, including detailed information about property transactions, property taxes, and Commission deliberations, but, as with most government websites, could provide even more information.

More government services could and should be moved to the Internet as broadband access is im-proved throughout the County. Examples of government services that could be transferred to the Internet include: applying for, and obtaining approval of, permits; paying taxes273; submitting bids for County contracts; paying County water and sewer bills; and submitting applications for Medicaid, food assistance, and social service programs. The Internet already also provides im-portant opportunities for civic engagement, but with broader access to broadband service, it could become a far more important avenue for civic engagement. An example of a way to im-prove civic engagement would be video streaming (live and archived) Commission meetings so that County residents who do not live in the Pittsboro area can more easily follow Commission deliberations.274

271 Action Audits, Site Visits, Nov. 18 and 19 and Dec. 14, 2010, and Feb. 3, 2011.272 See, e.g., http://www.chathamnc.org/Index.aspx?page=785.273 Chatham permits on-line payments of taxes but provides this option through a third party, which means that tax-payers who elect the on-line payment option pay a 3% premium.274 The County initiated video coverage of Commission meetings on May 16, 2011, using the video hosting service, Vimeo. This is an excellent start but live coverage is important and more can be done in terms of improving access and usability of these videos by using a commercially available service that can provide added value such as links items on the on-line agenda to web-based video coverage of the Commission’s consideration of the item. See, e.g., http://www.granicus.com/Streaming-Media-Government.aspx for an example of such a service.

B. EMERGING BROADBAND USES

1. Health Care

Broadband will be at the heart of the upcoming transformation of the health care world although the medical world is behind other sectors of the economy in harnessing the power of broadband technology. As with other broadband applications, Chatham will likely be left out and left behind if it fails to secure the broadband infrastructure that is required to support these new broadband-dependent medical services and capabilities. Broadband has the power to transform health care in many ways well beyond the obvious im-provements in billing and scheduling that have already been implemented by most providers.

First, broadband can revolutionize the exchange and storage of patient and treatment information by providing pathways for health care providers to obtain access to electronic health records (EHR) and transmit data-intensive images. Second, broadband can remove distance and time as barriers to treatment and care by enabling video consultations and remote monitoring, diagnosis, and treatment. And third, broadband will provide the foundation for a new generation of revolu-tionary mobile treatment options.

The NBP include estimates of minimum broadband connectivity requirements for health care providers to meet current and near-term broadband needs. These include the following minimum broadband connection requirements275:

100 MB/s for a hospital 25 MB/s for a mid-sized clinic (5 to 25 doctors) 10 MB/s for a nursing home or a rural health center (less than 5 doctors)

According to the NBP, a dedicated Internet access connection of 10 MB/s will cost $1,000 or more per month.276 Lower quality mass-market solutions are available and cheaper ($400/month) but provide less reliable and lower-quality service.277 These baseline broadband connectivity re-quirements will rise quickly as larger and larger files are transmitted by health care providers as things like 3D imaging become commonplace and overwhelm existing broadband connections:

HEALTH DATA FILES BY SIZEfile file size

X-ray 10 megabyteMRI 45 megabytesPET scan 100 megabytesMammography 160 megabytes275 NBP at 210 (Ex. 10C).276 NBP at 210.277 NBP at 210.

CT scan 3,000 megabytesCellular pathology study 25,000 megabytesData source: NBP at 210 (Ex. 10B)

a. Electronic Health Records (EHR)

Electronic health records or EHRs should become commonplace in the not-too-distant future due to major financial incentives included in the 2009 stimulus bill.278 An EHC is a digital record of patient information and may encompass any number of items, including the patient’s personal history, doctors’ notes, diagnoses, prescriptions, vital signs, medical history, immunization re-cords, test results, and radiology reports, and may be stored off-site at another facility or in a hos-ted location. In most cases, broadband connectivity will be required to obtain access to EHRs, which will become increasingly data intensive as items such as mammographies and CT scans are uploaded and added to, or associated with, the patient’s EHR.

Once EHR systems are in place, doctors will be able to treat patients without first requiring them to fill out lengthy forms as to their medical histories. Under current practices, each visit to a new doctor or a new specialist requires filling out long questionnaires, usually in paper form. Perhaps more important, health care providers will be able to treat patients who may be unable to com-municate their medical histories due to mental impairment or communications limitations. Fur-ther, more doctors will be able to transmit prescriptions electronically to pharmacies and co-ordinate medications and will make fewer errors in prescribing medications (drug interactions can be avoided, duplicate prescriptions can be identified, allergies will be known, etc.) because of complete access to the patient’s medical history.

b. Video Consultations

Video consultations—a doctor in a remote location observing and assessing the patient via a video link—can provide patients in rural areas with access to specialists at larger hospitals in more urban settings. According to the NBP, a video consultation requires a symmetric 2 MB/s connection279 but likely will require a much higher-speed connection so the consulting doctor can also obtain access to data-intensive images such as CT scans at the same time. Video consulta-tions, in combination with store-and-forward technologies for related images, could lead to signi-ficant cost savings associated with avoiding the cost of transporting patients from one facility to another and, perhaps more important, could provide quicker relief for a patient in need of spe-cialized care.

278 This $19 billion federal program is designed to incentivize the widespread deployment of EHR systems through increased Medicare and Medicaid payments to EHR adopters between 2011 and 2015. This program, the Health In-formation Technology for Economic and Clinical Health Act (HITECH), was included in the American Recovery and Reinvestment Act of 2009.279 NBP at 209.

c. New Mobile Treatment Options

Mobile health is the next big thing in the health care field, with great promise for innovations in diagnosis and treatment. Mobile health care will be provided through a combination of applica-tions and devices and ready access to high-speed wireless broadband connections and will enable medical professionals to provide care at any place and time. With mobile applications, doctors will be able to download patient and treatment histories, lab results, images, and other informa-tion to handheld devices such as personal digital assistants (PDA) and smart phones. Similarly, emergency responders will be able to upload new patient information and download patient his-tory and perhaps provide video links via PDAs for remote patient assessments. Perhaps most im-portant, remote monitoring via wireless connections and sensors allows for early detection of health problems and could produce major savings for the health care system in managing chronic conditions such as diabetes or heart conditions.

Mobile health solutions (e.g., networked implantable devices) are in the early stages of develop-ment and their eventual capabilities and characteristics are not yet known. Examples of possible mobile solutions provide insight into their potential as well as their dependence on sensors and a powerful, high-capacity broadband infrastructure. Sensors could be implanted on a patient and connected to health care providers via wireless mobile connections to provide access to real-time health data (e.g., vital signs, glucose levels, compliance with medication requirements). With a sensor-based system in place, senior citizens could live independently for much longer because remote monitoring systems would quickly pick up on changes in vital signs, irregularities in the patient’s movements, or failure to take medications. Further, with remote monitoring, patients’ hospital stays could be much shorter, reducing health care expenditures. Real-time glucose mon-itoring sensors could be implanted on diabetic patients, transmitting data to wearable insulin pumps and facilitating the flexible delivery of insulin on an as-needed basis. Even more dramat-ically, the strong possibility exists that networked implant devices could be used to restore sensa-tion and mobility to paralyzed body parts.

See Chapter 10 of the National Broadband Plan for additional information on federal policies that would improve health care delivery. 2. Energy and Utility Use (Management and Control)

Broadband technology holds great promise as a tool to manage and control the use of energy and utility services. In the absence of improvements in the broadband infrastructure, Chatham County could end up being left behind or even out as new broadband-based methods are de-veloped and deployed to manage and reduce energy and water use and provide a working and re-sponsive central nervous system for the dumb pipes that make up power grids, gas distribution systems, and water and sewer systems. Entities that could directly benefit from these new tech-nologies include the three power companies (Progress Energy, Central EMC, and Randolph EMC), natural gas providers (PSNC Energy), and water and sewer utilities (Chatham, Pittsboro, Siler City, and Goldston). Other possible beneficiaries include the pipeline providers that criss-cross the County on their way to other destinations (Williams (Cardinal) Pipeline, Colonial Pipeline, Dixie Pipeline, and even the town of Cary’s planned pipeline).

Electric utilities like Progress Energy have ambitious plans to maximize the value of energy through smart grid and metering and have actually begun to implement the necessary technology with the help of several billions of dollars in ARRA assistance. (The area’s other two power util-ities, Randolph EMC and Central EMC, did not obtain ARRA funds and are much further behind in the smart grid area.280) By embedding information technology throughout the power grid and in the homes of energy users, the nation’s energy providers expect to be able to reduce the use of energy, saving consumers, businesses, and institutions major costs and starting to reduce depend-ence on vulnerable and polluting sources of energy such as oil wells in the Mideast and coal mines in West Virginia. 280 See, e.g., Central EMC, Interviews, Jan. 17 and 19, 2011 (no current plans for smart grid; Central EMC did not apply for ARRA smart grid funds).

These smart grid systems depend upon ready access to affordable and reliable broadband service as communications connections are used to manage power distribution and consumption in a way that minimizes the use of energy and energy loss. Progress Energy has prepared a schematic drawing that shows the complex network of communications links that it expects will be required to run smart grid systems by the year 2030:

PROGRESS ENERGY’S PROJECTIONS AS TO ITS CONNECTIVITY NEEDS BY THE YEAR 2030

In the absence of ready access to fiber optic lines to transformers and substations and low-cost broadband connections to each home, business, and institution, it will be difficult for energy pro-viders to deploy smart power systems in Chatham County, leaving Chatham residents with more expensive power than other less sparsely populated areas and with lower real estate values than residents of areas with access to lower-cost power.

In technical terms, smart grid requires the deployment of two-way communications connections, sensors, other devices, and software throughout the electrical system, including both grid and in-home components of the system, and affects energy generation, transmission, distribution, and consumption. The volume of data traveling on smart grid networks is expected to rise to high levels as the number of connected devices and sensors, frequency of transmissions in both direc-tions, and the complexity of data-based instructions and feedback rise. Estimates of bandwidth requirements and the appropriate mixture of wireline and wireless connections for smart grid op-erations have not yet been established. In Chatham County, commercial wireless service, as presently configured, is not a real option due to spotty coverage and slow speeds. Further, exist-ing commercial wireless networks will likely become congested if smart grid were deployed in the County and are vulnerable to failure because of a lack of redundancy.

Smart grid services will transform existing one-way power systems into advanced two-way sys-tems. Homes, vehicles, and buildings will be able to alternately draw power from the grid and contribute power back to the grid, with time-based price variations to reflect time-based vari-ations in the cost of supplying power. A smart grid will be able to seamlessly manage these and countless other transactions. And once smart appliances are in place, smart grid technology will help consumers to manage their use of energy to fit with time-based variations in energy prices. With dynamic pricing (i.e., fluctuating rates that rise and fall in relationship to demand) and more effective management of demand, peak demand for energy could fall by perhaps as much as 20%.

Smart grid technology will also provide for countless applications in the generation, transmis-sion, and distribution parts of the electrical system. Examples of these applications include Su-pervisory Control and Data Acquisition or SCADA systems, outage management systems, en-ergy management systems, and new sensing technologies.281 These new smart systems enable grid operators to operate the grid more efficiently and safely.

Smart systems are also being developed to manage the distribution of natural gas and water ser-vices. For example, smart grid technology can greatly reduce water loss by water utilities. Re-gardless of the context in which deployed, smart systems require access to ubiquitous and reli-able broadband networks with both wireline and wireless capabilities.

See §12.1 (broadband and the smart grid) of the National Broadband Plan for additional informa-tion on federal policies that would improve smart grid.

3. Transportation

With broadband connectivity, new navigation, safety, entertainment, and efficiency applications

281 A synchrophasor, for example, measures voltage, current, and frequency 30 times or more per second in the transmission part of the grid. These advanced sensors can be connected together via fiber optic lines, providing grid operators with the tools to know what is going on throughout the network, spot emerging problems, and take action to protect system reliability. NBP at 249.

could reshape the American driving experience and reduce travel costs and our nation’s depend-ence on foreign oil. The visionaries imagine a day in the not-too-distant future when cars will drive themselves. The auto industry is moving to revamp the way we drive by building sensors and wireless connections into vehicles for navigation, safety, entertainment, and efficiency pur-poses and laying the groundwork for widespread in-vehicle broadband adoption. This is an im-portant development but it is too early to say with certainty how smart transportation technology will fit in Chatham County (or anywhere else).

New technology embedded in vehicles and road-related infrastructure could reduce the time spent on the road by adjusting and optimizing traffic routes and patterns based on a constant flow of information regarding traffic conditions. Taking matters a step further, this technology could also be used to implement more controversial transportation policies like congestion pricing (it has already been implemented in places like London, Stockholm, Singapore, and Milan) and per-formance-based mileage standards. Taking things even further, the day of self-driving cars may be much closer than we imagine. On a more mundane level, the same technology that could lead to self-driving cars can also support new safety applications that will, for example, alert drivers to dangers and help prevent accidents.

Self-driving cars depend upon a combination of artificial intelligence, sensors, broadband con-nections, voice technology, and cameras working together. Self-driving cars open the door to many intriguing possibilities although questions remain as to their viability. First, they will re-duce stress and save time for the millions of individuals who are today’s drivers and transform travel into a more relaxed, pleasant, and productive experience. Second, they will allow for more efficient use of parking space (a self-driving car can drop passengers off at their destination and then go park itself or maybe even go off somewhere eels to transport another person). Third, self-driving cars will greatly reduce the consumption of fuel because, with networking and sensors, cars will be able to drive bumper-to-bumper, reducing the loss of energy associated with over-coming the forces of wind friction. Fourth, self-driving cars will bring about radical improve-ments in efficiencies by greatly increasing the capacity of highways perhaps by a factor of as much as 20. And fifth, self-driving cars will provide the elderly, the young, and the disabled with new opportunities for independence and autonomy.

Google is a major developer of self-driving car and expects them to be fully operational by as soon as 2020. The state of Nevada recently enacted a law that smoothes the way for the eventual introduction of self-driving cars on Nevada roads.282

The ultimate success of smart transportation technology hinges on the development and deploy-ment of the necessary broadband and associated wireless networks to move data around the transportation world flawlessly and rapidly. In 1999, the FCC allocated 75 MHz of spectrum in the 5.850 to 5.925 GHz range for Intelligent Transportation Systems (ITS) applications for vehicle-to-vehicle and vehicle-to-infrastructure communications but little has been done to take advantage of this spectrum for ITS use. In fact, some of the more ambitious, new projects (like 282 http://www.smartplanet.com/blog/thinking-tech/googles-self-driving-car-gets-a-green-light-from-nevada/7505.

self-driving cars) have headed in a very different direction, assuming that everyday, standard wireless service (4G) will provide much of the connectivity for cars283 and suggesting that per-haps ubiquitous wireline and wireless broadband networks are the answer for smart transporta-tion technology rather than separate, specialized wireless networks.

See §12.4 (smart transportation) of the National Broadband Plan for additional information on federal policies that would foster development of smart transportation.

283 Jon Stokes, Ars Technica, Drive-by-wireless: why the future of cars is P2P mesh, 4G cellular, and the cloud, Feb. 3, 2011.

4. Smart Communities

“Smart city” projects are beginning to pop up all over the world. A smart community’s infra-structure is laced with integrated smart features that establish a system of systems or an Internet of things. The systems (energy, water, transportation, buildings, etc.) that comprise the integrated system are networked together by broadband and managed in a coordinated and interconnected way. These smart communities are generally also sustainable communities, with a heavy em-phasis on harnessing technology to greatly reduce energy consumption and emissions and pre-serving open space. Smart communities are off the drawing boards and well into the deployment stage in Asia as millions of people are migrating to urban areas, requiring the construction of many new communities. Once these new smart community technologies are more fully de-veloped and refined, Chatham County could easily be an attractive and natural site for new smart communities.

With its proximity to the Research Triangle Park (RTP), beautiful and open landscape, and mild climate, Chatham is a logical place for building new smart communities. The inherent desirabil-ity of the area is confirmed by Chatham Park Investors’ purchase of more than 6,000 acres in the Pittsboro area and running south toward Jordan Lake to build a new community of some 30,000 residents that will have both commercial and residential buildings and will be a logical candidate for smart community technology. Chatham Park Investors is a subsidiary of the Preston Develop-ment Company, which has developed other planned communities in the RTP area. Preston Devel-opment Company, in turn, is a Cary-based partnership formed in 1991 between two local de-velopers and Jim Goodnight, the co-founder of SAS and its CEO since 1976.

One of the distinguishing characteristics of a smart community is its reliance on analytics soft-ware, along with a broadband network connecting all parts of the system of systems together. Analytics software sifts through and processes large quantities of data such as data collected by smart systems via a network of sensors. The broadband network for a smart community consists of both wireline and wireless components, with the wireless connections serving the sensors that collect the data that runs the system. One of the world’s leading providers of analytics software is SAS, headquartered in nearby Cary, N.C. As noted above, SAS’s CEO, Jim Goodnight, is also a major investor in Chatham Park Investors through the Preston Development Company. These direct connections between SAS and the Chatham Park Investors group suggest that the new planned community may very well be a candidate for smart community technology and the asso-ciated broadband infrastructure.

U.S.-based and other high-tech companies are actively involved in the smart communities move-ment, working with Asian and European interests to refine and implement smart community technology and take advantage of this burgeoning new market. The high-tech companies in-volved in this industry include: IBM’s Smarter Planet284; Cisco’s Smart+Connected Communit-

284 http://www.ibm.com/smarterplanet/us/en/?re=CS1.

ies285; Hewlett-Packard286; Siemens287; and General Electric.288 The academic world has also em-braced the concept, with MIT leading the way through SENSEable City Laboratories.289 Ex-amples of pioneering new smart cities include: Songdo, South Korea290; Paredes (PlanIT Valley), Portugal291; Lavasa, India292; Masdar, United Arab Emirates293; Wuxi (New Taihu City), China; and Yokohama, Japan.294

V. LEGAL BARRIERS TO COMPETITION AND INNOVATION

North Carolina law includes various provisions that limit competition by the public sector in the broadband and telecommunications market. Strict limits, which apply to member-owned cooper-atives as well as municipalities, require careful planning by public entities and tend to favor col-laborative arrangements with the private sector as a more pragmatic and realistic way to address community broadband deficits. Federal limits and rules also apply to the private sector and limit competition and hinder innovation by private entities, making it difficult for private sector entit-ies to move quickly and aggressively in new directions in the broadband area. Finally, North Car-olina counties have largely been on the side lines in the broadband area and have not tested the limits of their authority, leaving leadership to municipalities, which had broad legal authority un-til the legislature intervened in May of 2011 to tear the broadband wings off cities and towns.

A. LIMITS ON PUBLIC SECTOR ENTITIES

1. County Authority

North Carolina law grants counties broad authority to own property and lease property to third parties.295 This authority opens the way for broadband partnerships as state law imposes no defin-itive limits on the type of property that counties may own. For example, state law does not ap-

285 http://www.cisco.com/web/strategy/smart_connected_communities.html; http://www.smartconnectedcommunit-ies.org/index.jspa. 286 http://www.hpl.hp.com/research/intelligent_infrastructure/.287 http://www.usa.siemens.com/sustainable-cities/index.html?stc=usccc025099.288 http://www.ge-cities.com/pages/sustainable_cities.289 http://senseable.mit.edu/. 290 http://www.songdo.com/#. 291 http://www.insideportugaltravel.com/blog/8379-portugals-city-of-the-future.html.292 http://lavasa.com/high/home.aspx.293 http://www.masdarcity.ae/en/.294 http://www.portugalglobal.pt/PT/geral/Documents/CityYokohama_Nakajima.pdf.295 N.C. Gen. Stat. §§ 153A-11 (broad authority to acquire, own, and dispose of property), 153A-158 (broad author-ity to acquire any interest in property),153A-4 (county authority is to be construed broadly).

pear to prevent a county from owning a portion of the local broadband infrastructure, using the infrastructure for governmental and related functions, and then leasing portions of the infrastruc-ture to third parties to serve the residential market. Looking at it from the other direction, nothing in state law would preclude a county from being the anchor tenant in a partnership with a private partner that would build and own the infrastructure to specifications designed to protect the county’s long-term needs.

Several counties, most notably Franklin and Nash counties, have engaged in extensive planning vis-à-vis broadband public-private partnerships. In fact, a partnership between Franklin County and CenturyLink to build a local fiber network was originally part of MCNC’s second round BTOP proposal but was removed from the project at the federal government’s request because of concerns about CenturyLink’s role in the project.

At the same time, it is important to keep in mind that North Carolina law does not grant counties authority to become direct, retail providers of broadband service and is unlikely to do so in the foreseeable future. In view of the history of hostility in the state legislature to publicly-operated cable and broadband systems, it would be prudent and practical for the County to focus on the partnership approach, which could be structured on various ways to protect the County’s interests and respond to community needs while limiting the County’s role.

2. Municipal Authority

Until very recently, North Carolina municipalities had broad authority under state law to provide and operate cable systems.296 That authority had been construed very broadly by the courts as in-cluding the authority to provide broadband and telecommunications services as well as cable television.297 The euphemistically entitled “Level Playing Field/Local Government Competition Act” became law on May 21, 2011,298 and will effectively preclude municipal provision of broad-band service (or any other communications service) in North Carolina except for in a handful of communities with grandfathered systems (e.g., Wilson, Salisbury, Morganton, the Mooresville-Davidson consortium, Pineville). The bill applies equally to wireless and wireline systems and applies to any communications service provided by a municipality to the public or any “sector of the public” for a “fee” (except for narrow exceptions).299

The bill was enacted without benefit of Governor Beverly Perdue’s signature, who noted in a statement explaining her reasons for not signing the bill that it was likely to adversely affect con-sumer choice in North Carolina. The chief proponents of this legislation were Time Warner Cable and CenturyLink. Other providers, like AT&T, the telephone cooperatives, and smaller 296 N.C. Gen. Stat. §§ 160A-311(7) (cable television system is defined as a “public enterprise” that can be provided and operated by a municipality), 160A-319 (broad definition of a cable system). 297 BellSouth Telecommunications v. City of Laurinburg, 168 N.C. App. 75, 606 S.E.2d 721 (2005).298 N.C. Session Laws 2011-84.299 N.C. Gen. Stat. § 160A-340(3).

telephone companies (e.g., Windstream, Frontier) stayed on the side lines and were not involved in the lobbying campaign to secure enactment of the bill.

The new law includes important exceptions to the bill’s restrictions for smart grid services for electricity, water, and sewer, energy demand reduction, and smart meter service for utilities and parking meter operations.300 It also includes exceptions for: (1) any communications service provided at no charge to the public or a subset of the public301; (2) the sharing of voice or data between governmental entities for internal governmental purposes302; and (3) communications systems or facilities operated within a municipality’s corporate limits for “internal governmental purposes” or within the corporate limits of another unit of local government for “internal govern-ment services” pursuant to an interlocal agreement.303 Finally, the 2011 law restricts the provision of service (in the retail context and probably the wholesale context) but does not expressly pro-hibit a municipality from building and owning a system as long as it turns the provision of ser-vice over to a third party.304

3. Guidance for Counties

Limits like those that apply to municipalities do not apply to county governments. In fact, state law does not restrict the authority of a county to provide communications facilities or services in connection with performing various authorized functions. At the same time, state law does not grant counties authority to provide broadband service on a retail basis, meaning that direct County provision of broadband service to County residents is probably off-limits. Based on this backdrop, a prudent county, to the extent it elects to venture into the broadband arena, should look to stay out of the retail broadband business and focus on those broadband areas that the state legislature chose to carve out as permissible municipal activities in establishing outside paramet-ers on broadband activities at the county level. Those include providing an infrastructure for a wide range of smart grid and metering applications, energy-related applications, and government uses (including public library and school uses),

4. Authority of Telephone Cooperatives

North Carolina laws effectively limits telephone cooperatives like Randolph TMC to their origin-al service areas by prohibiting them from building telephone plant in areas that are already served by the plant of another provider.305 Historically, telephone cooperatives were only allowed to be established to serve areas that the North Carolina Rural Electrification Authority found not 300 N.C. Gen. Stat. § 160A-340(3)b.301 N.C. Gen. Stat. § 160A-340(3)c.302 N.C. Gen. Stat. § 160A-340(3)a.303 N.C. Gen. Stat. § 160A-340.2(a).304 See N.C. Gen. Stat. §§ 160A-340, -340.1. See also N.C. Gen. Stat. § 160A-311(7) (designating cable systems as a “public enterprise” that may be provided by a municipality) (this authority was left intact by the Level Playing Field/Local Government Competition Act).

to be served by a telephone company and found not to be an area that the telephone company for the area was willing to serve.306 (This is why Randolph TMC’s service territory is irregular as it was generally authorized to provide service only in unincorporated areas.) In 2009, the North Carolina legislature established an important exception to the restriction on building plant in nearby areas already served by another provider by giving telephone cooperatives the right to “edge out” in contiguous areas and serve customers in areas where the incumbent provider provided telephone service but did not provide broadband service to the affected customers.307

305 N.C. Gen. Stat. § 117-30(a).306 N.C. Gen. Stat. § 117-30(a).307 N.C. Gen. Stat. § 62-113(c).

These restrictions likely apply only to the “incumbent local exchange carrier” or ILEC opera-tions of a telephone cooperative (i.e., telephone operations that are subject to the regulations that apply to a local telephone company that was in operation on February 8, 1996). Telephone co-operatives have broad authority to manage and structure themselves and to own property and en-gage in other corporate-like activities.308 For example, these restrictions would not apply to the activities of a “competitive local exchange carrier” or CLEC309 that is operated as a subsidiary of a telephone cooperative just as Randolph TMC was able to acquire an existing telephone com-pany, Randolph Telephone Company, in the 1990s.

In sum, Randolph TMC can help reduce the broadband deficit by edging out further into the County in the northwest and southwest corners of the County. It also could contribute technical and operational expertise in a partnership arrangement with the County in any number of areas but, as a membership organization, will be required to proceed conservatively and cautiously in any venture that takes it outside of its longstanding and well-established comfort zone.

5. Authority of Electric Cooperatives

The North Carolina legislature intervened to protect incumbent telecommunications providers from competition from electric cooperatives in 1999. With clairvoyance, the North Carolina le-gislature enacted legislation shackling any telecommunications activities by electric cooperatives well before the central importance of smart grid and metering to the industry’s future health was known.310

This 1999 law requires electric membership cooperatives to establish a separate subsidiary for the provision of telecommunications services and sharply limits the parent company’s ability to provide financial guarantees or contribute capital to the subsidiary (the parent company’s loans, guarantees, investments, etc., in the subsidiary may not exceed 10% of the parent company’s as-sets).311 The law includes other restrictions, including specifying that the subsidiary must be a corporation or a limited liability company (and therefore may not be a nonprofit organization or a cooperative),312 prohibiting the use of funds from the U.S. Department of Agriculture (including the Rural Utilities Service or RUS) for financing,313 and establishing strict and unreasonable cost allocation rules that also involve oversight by the North Carolina Utilities Commission

308 N.C. Gen. Stat. §§ 117-30(a), -17, -18.309 A CLEC is a lightly regulated telephone company that started operations after February 8, 1996, and is exempt from most state and federal regulation by federal law. It is essentially a creation of the Telecommunications Act of 1996 that restructured much of telephone regulation. CenturyLink, AT&T, and Windstream all own CLECs but vir-tually all their retail telephone service is provided by their long-established ILEC entities.310 N.C. Session Laws 1999-180.311 N.C. Gen. Stat. § 117-18.1(a).312 N.C. Gen. Stat. § 117-18.1(a)(4).313 N.C. Gen. Stat. § 117-18.1(a)(1).

(NCUC).314 Collectively, these restrictions appear to be designed to prevent electric cooperatives from entering the communications business in any meaningful way.

Two electric cooperatives—Central Electric Membership Corp. (CEMC) and Randolph Electric Membership Corp. (Randolph EMC)—are the primary providers of electricity in major chunks of the County. Randolph EMC’s service territory in Chatham County is not coterminous with Randolph TMC’s service territory and is also larger, reaching further east in the southwest corner (almost to Bear Creek (Randolph TMC stops at Harpers Crossroads)) and serving much of the area between Siler City and the Alamance border in CenturyLink territory. Central EMC serves Siler City and Pittsboro and areas in between and to the south. The rest of the County is served by Progress Energy.

MAP OF RANDOLPH EMC’S CHATHAM SERVICE AREA

MAP OF CENTRAL EMC’S CHATHAM SERVICE AREA

314 N.C. Gen. Stat. § 117-18.1(a)(3). NCUC does not have jurisdiction over electric membership corporations (N.C. Gen. Stat. § 62-3(23)d) so this measure would significantly alter the relationship between the coop and NCUC if a coop were to enter the telecommunications business.

The net effect of North Carolina law’s restrictions on the telecommunications activities of elec-tric cooperatives is to make it difficult for them to build their own communications infrastructure to deliver smart metering services to their customers. Less clear is whether these restrictions also curtail the use of telecommunications in connection with operation of the power distribution in-frastructure (e.g., supervisory control and data acquisition or SCADA systems to monitor and manage power distribution systems). Finally, these restrictions make it difficult for electric utilit-ies to enter the once promising but now flagging broadband-over-powerline (BPL) business.315

B. LIMITS ON PRIVATE SECTOR PROVIDERS

In addition to the various limits on public sector involvement in the communications arena, fed-eral law imposes important limits on private sector providers that affect the deployment of broad-band infrastructure in areas like Chatham County. First, 1984 FCC rules generally confine local telephone companies to their established service territories. Second, a maze of federal subsidy programs favor some areas over others and do not effectively target support to high-cost areas that are part of a large service area. Third, the allocation of scarce spectrum to areas of greatest need typically involves a protracted and unresponsive FCC process, hamstringing the develop-ment of the wireless industry in innumerable ways.

1. Service Territory Limits Local telephone companies—CenturyLink, AT&T, Randolph TMC, Windstream, and Frontier—are largely confined to their existing service territories for standard telephone operations (and as-sociated residential retail activities like the sale of broadband service). This limitation is due to an FCC rule adopted in 1984 that was intended to prevent local telephone companies from gam-ing the federal government’s elaborate system of subsidies.316

FCC waivers are available to modify “study area” boundaries for rural telephone companies but are available only in limited and narrow circumstances.317 Local telephone companies can estab-lish CLECs (as most of them have done) and operate outside of their existing service territories.

315 Amateur radio users have fought the deployment of BPL in every forum possible, claiming that BPL transmis-sions interfere with ham radio transmissions. 316 “Study area boundaries shall be frozen as they are on November 15, 1984.” 47 C.F.R. Part 36, App.317 47 C.F.R. § 54.207.

As a general proposition, evidence of extraterritorial activity in the residential market is limited although some providers have expressed an interested in serving large housing complexes and greenfield developments outside of their current service territories.318

2. Federal Subsidy Programs

The federal Universal Service Fund (USF) distributes more than $4 billion per year in subsidies to “high-cost” telephone companies. This program penalizes companies with large service territ-ories by requiring them to average their costs across their entire service territories within a state to determine eligibility. This policy is beneficial for the small Randolph TMC (about $139/access line per year) but much less so for the much larger Windstream (almost $21/access line per year).319 It is not at all helpful to CenturyLink, which has a large service territory, including many incorporated areas with high density, and received only $10.51/access line for the service territ-ory that includes Chatham County. And nothing in the federal rules requires the recipient of these USF high-cost payments to spend these funds on those areas like Chatham County that would likely qualify for higher levels of support if they were assessed on a stand-alone basis under the federal criteria.

The FCC is considering proposals to “modernize” the USF program and a related subsidy pro-gram, the Intercarrier Compensation program, and launched a rulemaking process in February of 2011.320 Among other things, these pending proposals include proposals to make broadband ser-vice directly eligible for subsidies (existing programs are limited to telephone service support al-though money is fungible and the telephone system’s infrastructure is used to deliver broadband service), with the long-term goal being to transform the entire network into an IP-based broad-band network, with telephone service being one of many applications that travel over ubiquitous broadband networks.

3. Spectrum Allocations

The process at the federal level for allocating spectrum to wireless users is drawn out and costly and is at odds with the dynamic nature of the wireless industry. Wireless service depends upon the allocation of spectrum by the FCC and Congress to particular categories of uses and users, then the allocation of licenses to particular users to use the allocated spectrum, and finally con-struction of the network to use the newly licensed spectrum. The allocation process for each chunk of spectrum tends to be protracted, with convoluted FCC proceedings and sometimes in-318 Windstream, Interview, Sept. 16, 2010.319 FCC’s 2010 Universal Service Monitoring Report at 3-130 - 3-131 (t.3-30) and 3-151 (t.3-31).320 In re: Connect America Fund, A National Broadband Plan doe Our Future, Establishing Just and Reasonable Rates for Local Exchange Carriers, High-Cost Universal Service Support, Developing an Unified Intercarrier Com-pensation Regime, Federal-State Joint Board on Universal Service Lifeline and Link-Up, WC Docket Nos. 10-90, 07-135, 05-337, 03-109, GN Docket No. 09-51, and CC Docket Nos. 01-92, 96-45, Notice of Proposed Rulemaking and Notice of Further Rulemaking, Feb. 8, 2011.

tervention by Congress, making it very difficult for industry to respond to consumer needs in a timely fashion.

Spectrum is one of the most hotly contested pieces of real estate in the world in spite of the fact that it is invisible. The federal government favors auctions for allocating spectrum and inserted an auction requirement for spectrum licenses into the Communications Act in 1993.321 Auctions suck up vast quantities of time as first the FCC has to develop rules for the auction (generally contested) and then conduct the auction, often in phases over several years. Only after this regu-latory process is concluded and the provider’s right to the spectrum is beyond legal dispute can new networks be built. In the case of broadband PCS, the FCC kicked off the rulemaking process in 1991 but the auctions did not take place until the 1995 through 1997 time frame. Thus, the simple process of assigning spectrum to particular users can take as long as six years and of course is then followed by a multi-year building process. History shows that getting particular chunks of broadband spectrum up and operating can take as long as eight years. As noted above in § II.B.1.a, the FCC documented major spectrum deficits for wireless service in the National Broadband Plan and proposed that another 500 MHz be allocated to wireless use between now and 2020 (with 300 MHz of that total to be made available by 2015). The FCC’s proposals to produce that additional spectrum to meet the looming national broadband deficit in the wireless area depend upon the cooperation of the broadcast industry, a dubious proposition, to voluntarily relinquish some of their existing UHF allocations through reverse auctions. The fact that the FCC has to require or incentivize existing licensees to give up some or all of their existing spectrum rights tells us just how challenging it will be to secure the necessary wireless spectrum to meet service demand in Chatham (or anywhere else in the United States).

VI. RECOMMENDATIONS

A. OVERALL APPROACH

Policy-makers in Raleigh, N.C., and Washington, D.C., have little-to-no interest in proactive measures to ensure that the broadband deficit in places like Chatham County is addressed and corrected. To be simple about it, Chatham County is in the worst place possible, with almost no help from the federal programs designed to compensate for market deficiencies in rural areas and lacking the density and other demographic characteristics that typically produce more responsive and up-to-date broadband service in urbanized areas from the private sector. Chatham County’s problems are further exacerbated by balkanized broadband operations are in the County, with seven different wireline providers (and three power providers).

The long-term plan for closing the County’s broadband deficit is laid out first in § VI.B of this report. This plan is set forth first in this report and precedes the recommendations for short-term action in order to provide overarching guidance for the County’s future broadband endeavors. This long-term plan should inform and guide implementation of the 11 short-term measures,

321 47 U.S.C. § 309(j).

which are spelled out in § VI.C. What is accomplished and learned in each short-term step should, in turn, help determine how the County’s long-term goals can best be achieved and how proactive the County must be to realize those goals.

B. LONG-TERM BROADBAND PLAN

The County’s long-term broadband plan should center on promoting deployment of a community-designed fiber optic backbone network as ubiquitously as possible in the County. This County-supported and –designed backbone network, with as many laterals as possible to extend the reach of the backbone deep into the County, is the most obvious and logical way to put in place long-term cost controls and a future-proofed broadband infrastructure and should provide the foundation for eventual eradication of the County’s growing broadband deficit. The starting place for developing and financing this infrastructure is identifying and eventually reprogramming existing County and other community resources, including direct expenditures on service and indirect expenditures on staff and vendors, to build a fiber backbone that connects together anchor institutions and key community routes and centers throughout the County.

Fiber optics is now the medium of choice for this network just as it is now the medium of choice in the telecommunications world. The reasons for choosing fiber optics include the almost unlimited information-carrying capacity of fiber optics, the ease of upgrading fiber optic networks by adding new equipment to further ramp up speed and capacity, and the stability and immunity to deterioration. This fiber optic backbone network would accomplish three major goals. First, it would take advantage of the collective buying power of the area’s major public institutions and more effectively deploy existing resources to secure low-cost, high-quality, future-proofed broadband and telecommunications service for each institution. Second, it would provide a bridge to affordable, scalable, and reliable middle-mile service to connect public institutions to the Internet such as the new MCNC network now under construction. Third, the proposed network would be pluggable, scalable, and expandable and would provide a platform for entrepreneurs and others to develop new wireless and wireline networks for Chatham residents and provide new options for broadband connectivity. The first step is to complete identification of the resources currently devoted to telecommunications and broadband by governmental entities and other public institutions in the County. See § VI.C below for more details. The County and its partners would then deploy these resources in a more targeted, planned, integrated, and effective way to develop a community-directed and higher-quality broadband infrastructure. This infrastructure will provide each participating entity with better service while also establishing long-term cost controls and future proofing the broadband infrastructure. Preliminary estimates of current direct expenditures by the County and school district on broadband and telecommunications total about $625,000 per year. This number represents a starting point. When indirect expenditures on staff, vendors, and technical assistance devoted to trying to make the current services work properly and the expenditures of other possible public participants are added to the mix, this number should rise

significantly.

The towns of Siler City, Pittsboro, and Goldston likely spend another $100,000 or so in direct expenditures on these services and should also be enlisted as possible public sector partners in this venture. Other anchor institutions that would be logical public sector partners for such a venture include Central Carolina Community College for its two campuses in Chatham and Chatham Hospital in Siler City.

The existing resources available for reprogramming to this endeavor must be sufficient to cover any borrowing costs associated with the project and the operational costs of providing replacement services to participants via the new infrastructure.

The second step is to identify other project partners that could benefit from a state-of-the-art broadband infrastructure and could help ensure its success by committing to some form of participation. These partners would be above and beyond the obvious governmental and other institutional partners that already have well-established relationships with the County. For example, a combination of new wireless and wireline connections could enable Progress Energy, Central EMC, and Randolph EMC to more effectively manage energy distribution and provide new ways for the residents of Chatham County to manage their use of energy. These smart grid services are at the early stages of development, with definitive determinations having not yet been made as to the proper and necessary supporting communications infrastructure for these services. See Appendix B (Potential Partners and Users).This phase of the process should also include working with the Chatham Park Investors with regard to the possible deployment of state-of-the-art smart community technology in the new 30,000-person community planned for south of Pittsboro. Similar overtures should be made with regard to other greenfield developments that may be proposed for the County. The issues to be addressed in these discussions should include examining partnership opportunities such as the partner becoming an anchor tenant for the proposed fiber backbone and developing a smart community, with a focus on using communications technology to reduce energy consumption and provide other opportunities for community residents.

Arrangements which could attract new partners to the venture should be examined and fleshed out. At the head of the list would be identifying possible sites for points of presence for private providers (these providers could be many small providers and/or a large provider or two) to connect to the backbone and deliver service to homes and businesses through subnetworks of their choosing and design. These partners could also include alternative entities like community-based cooperatives or small neighborhood groups that could emerge and take advantage of the new network to provide last-mile connections.

The third step is to rough out a basic technical design for the backbone that would support and foster scalability, adaptability, and flexibility. Scalability refers to the ease with which additional speed capabilities can be added to the network (e.g., the network could start out at 1 GB/s, but with the capability to being easily upgraded to 10 GB/s, then 100 GB/s, and so on). Ideally, the

network would be sufficiently versatile to support both wireless and wireline providers that could easily plug into the network with a minimum of preliminary work and develop small or large local distribution networks. These local distribution networks could be as small as a link to a single transmission tower for local wireless service or to local fiber connections for a small subdivision or as large as a network that serves the entire County.

The fourth step is mapping out and establishing cost parameters for a fiber optic backbone network that would:

Connect key Chatham institutions and facilities together (e.g., Chatham County Schools, CCCC, Chatham Hospital, the facilities of the County, municipalities, public safety agencies, and local fire departments); and

Provide the basic connections and platforms necessary to bring major service improvements to western and southern Chatham and other pockets of the County that have no service or low-quality service and eventually support deployment of next-generation services throughout the County.

This phase of the process would not include full engineering of the network as engineering work tends to be very costly and, under standard industry practices, should not be done until the project is fully defined and the final go-ahead given. However, it probably should include a feasibility study prepared by a third party who would develop a 10-year pro forma to establish the project’s financial viability.

The final and fifth step is reviewing legal options as to ownership structure (e.g., a public-private partnership) and examining the practical aspects and the strengths and weaknesses of each option. This phase of the process should conclude by identifying the best vehicle for developing a community-based broadband network that meets community and County needs while minimizing risk and cost. It will be the last step in the planning process because its final form will be driven by determinations and findings made in each of the first four steps.

The three main organizational options available under current law are:

Establishing a public-private partnership between the County and an infrastructure provider (or providers) in which the County owns the infrastructure but turns over construction and/or operation to a third party or parties;

Establishing a public-private partnership between the County and an infrastructure provider (or providers) in which the provider or providers owns the infrastructure, with the County (and its partners) playing a central role in developing and approving system design and establishing operational parameters that would ensure responsive, dynamic, and affordable operations but leaving construction and operation to a third party or parties; and

Forming a nonprofit or similar organization to be charged with developing and operating a broadband infrastructure (either on its own or through third parties) and to

be governed by a representative cross-section of community interests and representatives.

The selection of an appropriate ownership structure and organization should be made only after getting a sense of who the likely partners would be for such a venture. A part of this phase of the process would be determining whether other governmental entities are likely to join the County as either full or partial partners. If a determination is made to include other governmental entities in a partnership or other organization, then a framework for interlocal agreements should be developed as necessary between the County and some or all of the municipalities.

As discussed above in § V.A., North Carolina law imposes legal barriers (it does not authorize counties to serve as direct providers of residential broadband service) but does not preclude the County from serving itself (as it does now to some extent), building a distribution system and leasing some or all of the system to other providers and/or users, and entering into other partnership arrangements where the County is not the direct provider of service to customers. Thus, the County has significant flexibility as to how it proceeds but must be mindful of these outside limits, which do not sanction the direct provision by the County of broadband service to community residents.

C. SHORT-TERM PLANNING STEPS

The ability to clearly define and eventually implement the County’s long-term broadband plan will depend on, and flow from, eleven short-term planning steps to be taken by the County in the next phase of the planning process that will help to determine and shape that long-term plan. In a sense, the plan laid out in § VI.B is an ideal long-term plan that is subject to modification based on further information gleaned through the planning process. Systematically working through each of the eleven preliminary issues will reveal additional information and help determine the extent to which the County needs to be proactive and which is the most practical and effective solution to the County’s broadband deficit.

First, the County should work with each of the seven existing wireline providers on a one-on-one basis to look for mutually agreeable ways to improve each provider’s infrastructure in the County and the service options for County residents and businesses, building on the information compiled for this report with regard to each provider’s infrastructure, future plans, and willingness to work with the County. The County should focus in particular on CenturyLink and what is required for CenturyLink to improve service, especially in western and southern Chatham County, and keep pace on a permanent basis with future developments in technology. CenturyLink is the dominant provider in much of the County and does have a recent history of working with North Carolina counties to look for mutually acceptable solutions and has worked with the E-NC Authority to bring DSL service to unserved areas.

Other telephone companies to be approached as part of the short-term planning process include Randolph TMC, with its advanced technology and new-found legal ability to “edge out” further

into Chatham County, AT&T, and to a lesser extent, Windstream and Frontier, neither of which has much of a presence in the County. In having these discussions, it is important to be aware that four of the five telephone companies (all except for Randolph TMC) are part of large corporate entities that make investment decisions on a top-down basis and often do not give local decision-makers the leeway or flexibility to fashion local solutions that deviate from the company’s overall investment strategy and operational metrics.

The County should also approach the two local cable providers, TWC and Charter, although it should so with modest expectations based on their demonstrated lack of interest in expanding their footprint in the County. At the same time, it is worth approaching the “business group” divisions of both Charter and Time Warner Cable, each of which is more flexible and nimble than the residential division.322 In particular, Charter Business Group has been creative and responsive in pulling together a network for Central Carolina Community College that serves campus sites in three different counties (Lee, Hartnett, and Chatham counties), even entering into a partnership with TWC to uses its fiber lines to complete the network. While neither party is likely to be interested in, or able to enter into, the residential service business, both could be interested in playing a role in constructing and/or operating some or all of a new fiber backbone for Chatham County that could be developed and deployed through a public-private partnership.

Second, the County should begin long-term planning discussions with the three power companies that serve the County (Progress Energy (soon to be acquired by Duke Energy), Central EMC, and Randolph EMC) and other possible users of smart grid and metering service such as piped natural gas service providers (e.g., PSNC Energy) and providers of water and sewer service (e.g., the Public Works and Utilities Department for Chatham County and Siler City, Pittsboro’s Public Utilities Department). Each of these entities will eventually need a smart infrastructure to manage its distribution facilities in the County and give County customers the ability to mange and control their use of electric, gas, and water. These “smart” services are in their infancy as a technology so there is an excellent opportunity to be in on the ground floor of the planning process for the necessary supporting communications infrastructure.

Third, the County should work with Chatham Park Investors on its plans for a new community in and south of Pittsboro to ensure deployment of a state-of-the-art broadband infrastructure and consider the possible shared use of some broadband facilities or other cooperative arrangements. Again, this is a long-term project that is in the early stages of planning that provides an excellent opportunity for the County and the developer to work on compatible plans and mutually supportive arrangements.

Fourth, the County should review its communications tower ordinance, originally enacted in 1998 and amended six or so times since then, to determine whether modifications are necessary to help improve both conventional cell service and mobile broadband service. The current

322 Central Carolina Community College, Interview, Nov. 11, 2010 (discussing Charter Business Group’s willingness to devise a solution to CCCC’s need for a regional network interconnecting campus sites in three counties); Time Warner Cable, Interview, Sept. 16, 2010.

ordinance limits the taller towers (300 feet) to specific transportation corridors (US 64 West and US 421), permits shorter towers (199 feet) on several other transportation corridors (US 1, US 15/501, NC 87, NC 751, NC 902), and establishes other requirements designed to preserve the County’s rural character.

As part of this process, the County should also develop a full inventory of other facilities and sites323 that could be used as towers or transmitting sites for the next generation of wireless service, especially wireless service that can be transmitted via lower points and shorter hops. This list should include water towers, fire towers, grain silos, and similar facilities that are not currently being used for communications purposes but could be adapted to support wireless service.

Fifth, the County should review and update the inventory of County-owned fiber and other communications lines (see Appendix D (Inventory of Fiber Lines Connecting County Buildings). It should then identify all other County facilities that should be connected together via a common County network. Examples of such County (or County-related) facilities that are not currently connected to the County network include: waste management facilities on Landfill Road; sheriff’s substations in Goldston, Governors Village, and Moncure (the latter is shared with the fire department); multiple County facilities in Siler City (e.g., sheriff’s substation, Health Department, Council on Aging); a possible 911 back-up facility in Siler City; water distribution facilities scattered around the County; EOC towers; park and recreation facilities; the Goldston and Siler City libraries; and the 7 fire departments (and their 16 fire stations) serving the County.

Sixth, the County should work with the towns of Pittsboro, Siler City, and Goldston to develop a similar list of town and related facilities that could be served by a common network. It should review the list of school district facilities that are now served by a district-managed network (see Appendix E (Chatham Schools) for starting point) and update it to include possible or likely sites for future school facilities such as the possible new high school and new middle school in northeast Chatham County and to add any missing existing or planned administrative or support facilities. Seventh, the County should develop a complete and detailed list of all direct and indirect expenditures by County, governmental, and other public entities on telecommunications and broadband. This survey of expenditures should cover both direct payments and indirect payments for staff and outside contractors and consultants who assist or are involved in broadband or telecommunications operations.

Collectively, the Chatham County Schools and Chatham County are now spending $625,000 or so for broadband and telecommunications service. Public records show that $437,521 will be paid in 2011 for wireline service for the Chatham County Schools (see Appendix F (Estimated Payments for Broadband and Telecommunications Service for Chatham County Schools (2011-12)) while County records show that $187,812 or so is paid per year by Chatham County for 323 As part of its annual planning process, Chatham’s Planning Department maintains an inventory of existing towers. See Appendix C (Map of Chatham Cell Towers).

broadband and telecommunications.324 Other governmental entities to participate in this process should include the towns of Pittsboro, Siler City, and Goldston. Other public entities to be involved should include the seven fire departments in the County, Central Carolina Community College, and the Chatham Hospital.

Accuracy and completeness in these expenditure numbers are essential as these numbers show how much money is currently committed to the purchase of services and to staff325 and other technical support that could be more effectively deployed to obtain service via a community-designed and -supported network.

Eighth, the County should promote and, where necessary and appropriate, require coordination among public agencies in the County regarding the purchase and use of communications services and equipment (e.g., public libraries, school district, community college), starting as soon as possible.

For example, Chatham County plans to spend $330,000 to buy equipment for a new telephone system in 2016.326 Those resources should be deployed so as to produce the most bang for the buck in terms of service quality and options for the staff and enhanced ability for the County to reach community residents.

Budget documents indicate that Chatham County Schools recently spent $667,336 to buy new IP-based security cameras for all schools,327 which suggests that Internet connections should be established to each camera to maximize their effectiveness. The school district plans to spend $1.9 million over three years (2012 – 2014) to replace the laptop computers for Northwood High School and Chatham Central High School.328 The value of these laptops to these two schools and their students depends upon the extent to which Wi-Fi-based broadband connections or other wireless connections are available both in school and at home although the school district does not give much weight to in-home access to broadband or even after-school-hours access to broadband in its technology plans.329

Other expenditures that perhaps could have provided more for the County through coordinated planning include the County’s Emergency Operations Center’s recent expenditures of $365,000

324 October, 2010, invoices for CenturyLink, AT&T, Randolph TMC, Information Technology Services (state agency that purchases telephone service for the County), Charter, and Windstream.325 Current IT staff in the public sector is talented and creative in dealing with the limited choices currently provided by private providers and could make even greater contributions in the future. They know the current environment and have the ability and knowledge to play central roles in developing and operating a new, more advanced network. 326 Chatham County, Recommended FY 2012-2016 Capital Improvements Program, Jan. 3, 2011, at 93-94. 327 Chatham County Schools, Chatham County 2009-2013 Capital Improvement Program, at 51.328 Chatham County, Recommended FY 2012-2016 Capital Improvements Program, Jan. 3, 2011, at 65. 329 The school district does not take into account in-home access to broadband in developing broadband-based in-structional and education programs. Chatham County Schools, Interview, Oct. 28, 2010.

on new “narrowband” radio equipment, $563,735 for new radio dispatch equipment for workstations and related equipment, and $220,000 for a satellite back-up for the 911 system.330

Similarly, on March 21, 2011, the County approved a contract with Mueller Service Company for $395,815 for 2,061 new water meters with automatic meter reading (AMR) capabilities.331

Finally, the Chatham County Library has failed to apply for and obtain the large discount that is available to it under the federal e-rate program for broadband and telecommunications services provided to the system’s three library facilities.332 This oversight should be corrected immediately so that the County receives the benefit of these subsidies (likely to be equivalent to roughly 40% of costs) for which most other library systems routinely qualify.

Ninth, the County should require Charter to comply with its existing County cable franchise, which is not scheduled to expire until August of 2012. In particular, several school and public buildings in the Siler City area are not connected to Charter’s cable system despite longstanding requirements of the County cable franchise to connect them to the Charter cable system and provide basic cable service to them at no cost. Similar requirements apply to all state cable franchisees, requiring them to connect public buildings to the cable system in any case where the building is within 125 feet of the cable provider’s system.333 It is unknown (and difficult to determine) whether AT&T’s or Randolph TMC’s IPTV plant passes within 125 feet of any public building. Similar problems are likely to arise once CenturyLink launches its planned IPTV service in the County.

Similarly, the County should require compliance with applicable requirements for the carriage of public, educational, and government (PEG) access channels on cable systems. These requirements include requirements of the existing County franchises that require Charter and TWC to carry the County’s channel and CCCC’s channel. Charter and TWC recently came into partial compliance with these requirements for CCCC’s educational channel but, instead of carrying it on the more accessible basic analog tier, are carrying this channel on the more expensive and less accessible digital tiers in violation of FCC policies.

Requirements to carry PEG channels also apply to state cable franchisees. CenturyLink, AT&T, and Randolph TMC have secured state video franchises for parts of the County. TWC has secured state video franchises for both Pittsboro and unincorporated areas of the County. CenturyLink is subject to state PEG requirements that require it to carry the County’s channel and CCCC’s channel on its planned IPTV system. AT&T and Randolph TMC will be subject to similar requirements if and when the County and CCCC deliver the signals for their channels into the video service territories of each provider as specified in their video franchise submissions to the North Carolina Secretary of State.330 Chatham County, Recommended FY 2012-2016 Capital Improvements Program, Jan. 3, 2011, at 42-45. 331 Chatham County Board of Commissioners, Minutes, Regular Meeting, March 21, 2011.332 Chatham County Library (Pittsboro), Interview, Nov. 19, 2010.333 N.C. Gen. Stat. § 66-360.

Tenth, the County should establish a simple complaint process so that community residents can provide feedback on broadband service problems and gaps in service. The fact that E-NC Authority imputes broadband coverage to entire census blocks if one resident reports receiving broadband service renders its data close to meaningless. This feedback system should be accessible both on-line and via the telephone, with a series of simple and clear questions designed to collect information about provider identity, service availability, speed, affordability, reliability, and consistency. With such a system in place, the County can further document and map out (using its GIS capabilities) service patterns in the County and pinpoint serious service problems on the basis of carrier. It will also equip the County to provide objective information to agencies like E-NC Authority, governmental bodies like the North Carolina legislature, and existing and potential providers when incumbent providers misrepresent their performance characteristics to the County, state legislators, and other decision-makers.

And eleventh, the County should ask for and promote proactive advocacy programs at the state and federal level that ensure recognition of broadband as a key component of the infrastructure of the future that, just like highways, requires special attention from government to ensure that rural and underserved areas are fully and properly served. This undertaking would include working with the North Carolina Association of County Commissioners (NCACC) and the National Association of Counties (NACo) to support improvements in the Universal Service Fund and other subsidy programs to ensure that areas like Chatham County receive the support needed to compete with urbanized areas and much more rural areas. Similarly, the County should work with NCACC to seek changes in state law that grant counties authority to own and operate broadband systems and make other improvements in state law.

To date, broadband has been somewhat of an orphan for the national and state county associations, which have largely disregarded the issue based on the historically low profile of counties as broadband regulators. That approach is starting to change at the state level as NCACC has become more engaged now that North Carolina counties have started to focus on broadband as an important infrastructure issue. Further engagement with NCACC by individual counties is required to move the issue higher on the NCACC agenda. Similarly, NACo has had a low profile on broadband issues and needs to be pushed by its members to formulate policies and inject itself into the ongoing discussions in Washington, D.C., on such matters as reform and modernization of the Universal Service Fund and other federal subsidy programs.

APPENDIX

BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

APPENDIX A: MAPS OF TWC’S CHATHAM COUNTY SERVICE AREA

CENTER TOWNSHIP

NEW HOPE TOWNSHIP

1

BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

WILLIAMS & BALDWIN TOWNSHIPS

2

BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

3

BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

APPENDIX B: POTENTIAL PARTNERS & USERS

potential partner or

user

type geographic/service area

interest & legal authority/limits

Chatham County County several locations in Pittsboro & Siler City, other locations scattered around CC

spends about $187,000/year on Internet & telecom; relies on CL for Internet connection; provides water service in some areas (potential smart meter applications); NC counties have authority to own & lease property but no express authority to provide broadband, cable, or telecom service

Chatham County Schools

school dis-trict

17 schools (throughout County), 1 admin bldg & 1 bus garage (Pittsboro)

plans to spend $550,415 (32.8% of costs is paid via USF's schools & library fund) on Internet & telecom in 2011; relies on CL for Internet connections; plans to spend $1.9 million over three years (2012 – 2014) to replace laptop computers

Central Carolina Community Col-lege

community college

Pittsboro & Siler City cam-puses

main campus is in Sanford & serves 3 counties; relies on Charter/TWC to connect Pittsboro & SC campuses to Sanford hub; spends about $30,000/year for Siler City & Pittsboro broadband connections to Sanford hub

Randolph Elec-tric Membership Corp

electric utility (coop)

north of Siler City to Ala-mance border; northwestern corner; south if Staley & west of Siler City to Ran-dolph border; southwestern (Bennett) corner; larger & slightly different footprint in CC than RTMC’s

potential applications and use: smart grid & smart meters; REMC is in the process of installing smart meters; NC electric coops may provide telecom service only through a separate business entity; the separate entity may not obtain RUS finan-cing; elec coop may not lend, invest, or guarantee amounts to or for the entity in excess of 10% of the entity's assets (NC § 117-18.1)

Central Electric Membership Corp

electric utility (coop)

Pittsboro; Siler City; between Siler City & Pitts-boro; west of Siler City; south of Pittsboro, including Moncure, to Lee County border

potential applications and use: smart grid & smart meters; no plans to provide smart grid or meter service; uses primitive power line system for meter reading; NC electric coops may provide telecom service only through a separate business en-tity; the separate entity may not obtain RUS financing; elec coop may not lend, invest, or guarantee amounts to or for the entity in excess of 10% of the entity's assets (NC § 117-18.1)

Progress Energy electric utility (IO)

unincorporated areas of northern & eastern Chatham County; Goldston & imme-diate environs

potential applications and use: smart grid & smart meters; $150M in property (assessed value) in CC (# 1 property owner in CC); $200M in ARRA funds to deploy smart grid & meters in NC and part of SC for a total investment of $520M; major generation facilities in Cape Fear (multiple generators); major PE plans a phased shut down of these coal-fired plants but is also looking at converting them to biomass; new transmission lines (26 miles) planned for Moncure to a new Siler City sub-station

PSNC Energy natural gas (piped) (IO)

Siler City; Goldston; Pitts-boro; CC subdivisions, in-cluding Chapel Ridge, the Preserve, & Fearrington Vil-lage

potential applications and use: smart grid & smart meters; $22.3M in property (assessed value) in CC

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BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIXpoten-tial partner

or usertype geographic/service

area

interest & legal authority/limits

MCNC middle-mile provider

southern Chatham County (full-service PoP to be in-stalled in Sanford with fed-eral BTOP funds; also has PoP in Gulf for fiber lines running along the Norfolk Southern ROW)

MCNC has limited authority under state law to provide service to certain entities designated by law; not to be considered to be a common carrier or a public utility (NC § 147-33.92); BUT re-quired by BTOP grant conditions to provide open access net-work for its new middle-mile; Sanford portion of network will be completed by July-Sept., 2012

Pittsboro municipality Pittsboro + ETJ provides water & sewer service; new, sharp limits on retail broadband provisioning authority that are equivalent to a ban (NC §§ 160A-340 & 159-175.10)

Siler City municipality Siler City + ETJ provides water & sewer service; new, sharp limits on retail broadband provisioning authority that are equivalent to a ban (NC §§ 160A-340 & 159-175.10)

Goldston municipality Goldston new, sharp limits on retail broadband provisioning authority that are equivalent to a ban (NC §§ 160A-340 & 159-175.10)

Chatham Park Investors

planned com-munity

south of Pittsboro large planned community of about 30,000 to be built over an extended time period; SAS President Jim Goodnight is heavily involved in project; located primarily in Pittsboro's zoning jur-isdiction; likely to have concentrations of residential and com-mercial/business with open space; chance to develop a "smart community"

Williams (Car-dinal) Pipeline

pipeline

Colonial Pipeline pipelineDixie Pipeline pipelineChatham Hospit-al

hospital Siler City participates in the federally-subsidized North Carolina Tele-health Network (NCTN); MCNC serves as the purchasing agent for the network; CH is part of the UNC partnership

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BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

APPENDIX C: MAP OF CELL TOWERS

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BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

APPENDIX D: INVENTORY OF FIBER LINES CONNECTING COUNTY BUILDINGS

County building building address fiber? fiber type, capacity, & use description of fiber run County owned?

cost per month

Agriculture (AG) Building

45 South Street, Pittsboro

yes 6 pair, single mode fiber (use=2 for phone, 2 for data, 2 to EOC)

from AG/Dunlap Bldgs to Annex Bldg (aerial)

Yes none

Dunlap Building 80 East Street, Pittsboro

yes 4 pair, multi-mode fiber (use=2 for phone, 2 for data, 2 to EOC) (same connection as AG Bldg connection)

from AG/Dunlap Bldg to Annex Bldg (aerial)

Yes none

Performance Build-ing

964 East Street, Pittsboro

yes 6 pair, single mode fiber (use=2 for phone, 2 for data, 2 to EOC)

from Performance Bldg to Annex Bldg (under-ground)

Yes none

Old Library 204 West Street, Pittsboro

yes 6 pair, single mode fiber (use=2 for phone, 2 for data, 2 to EOC)

from Old Library Bldg to Annex Bldg (aerial)

Yes none

New Library 197 NC 87 North, Pittsboro

yes 6 pair, single mode fiber (use=2 for phone, 2 for data, 2 to EOC; phones, virtual desktop (Vmware, hosted vir-tual servers)

from New Library Bldg to Annex Bldg (aerial)

Yes none

Emergency Opera-tions Center

295 West Street, Pittsboro

yes 6 pair, single mode fiber (use=2 for phone, 2 for data, 2 to EOC)

from EOC to Annex Bldg (aerial)

Yes none

Economic Develop-ment Corporation

118 West Street, Pittsboro

yes 6 pair, single mode fiber (use=2 for phone, 2 for data, 2 to EOC)

from EDC to Annex Bldg (aerial)

Yes none

County Manager's Office/Annex Bldg

12 East Street, Pittsboro

D/K dedicated 10 MG circuit from Annex Bldg to Cen-turyLink hub

No $2,082

Performance Build-ing

964 East Street, Pittsboro

yes dedicated fiber for County PEG Channel

from Performance Bldg to TWC's hub on 15/501

No none (covered by 2008 franchise transfer agreem w/ TWC)

Social Services Building

103 Camp Drive, Pittsboro

yes 6 pair, single mode fiber (use=2 for phone, 2 for data, 2 to EOC)

from Social Services Bldg to Annex Bldg

yes none

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BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

APPENDIX E: CHATHAM SCHOOLS

school community street address zipcode school type grades # of stu-dents

student/PC

total # of PCs

Chatham Cent-ral HS

Bear Creek 14950 NC Hwy 902 West

27207 high school 9-12 468 0.7 669

Bennett ES Bennett 61 Randolph St 27208 elem/middle PK-8 291 1.64 177Bonlee ES Bonlee 153 Bonlee

School Rd27213 elem/middle K-8 400 1.91 209

Margaret Pol-lard MS

Chapel Hill 185 Granite Mill Blvd

27516 middle school 6-8 481

North Chatham ES

Chapel Hill 3380 Lystra Rd 27517 elem/middle PK-5 880 2.93 300

JS Waters ES Goldston 55 JS Waters School Rd

27252 elem/middle K-8 346 2.06 168

Moncure ES Moncure 600 Moncure School RD

27559 elem/middle PK-8 233 1.32 177

Horton MS Pittsboro 79 Horton Rd 27312 middle school 5-8 435 1.31 332Northwood HS Pittsboro 310 Northwood

High School Rd27312 high school 9-12 916 0.72 1272

Perry Harrison ES

Pittsboro 2655 Hamlet Chapel Rd

27312 elem/middle PK-5 701 2.97 236

Pittsboro ES Pittsboro 375 Pittsboro School Rd

27312 elementary PK-4 499 2.24 223

Chatham MS Siler City 2025 South 2nd Ave Ext

27344 middle school 6-8 416 1.19 350

Jordan Mat-thews HS

Siler City 910 East Cardin-al St

27344 high school 9-12 691 0.78 886

Sage Academy Siler City 501 Martin Luther King Jr Blvd

27344 alternative HS 8-12 66 0.35 189

Siler City ES Siler City 671 Ellington Rd

27344 elementary PK-5 615 1.89 325

Silk Hope ES Siler City 7945 Silk Hope Rd

27344 elem/middle PK-8 445 1.99 224

Virginia Cross ES

Siler City 234 Cross School Rd

27344 elementary PK-5 550 1.32 417

TOTALS 8433 6154

note: enrollment estimates are for 2011-12 and were included in Form 471 submitted by the Chatham school system to USAC

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BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

APPENDIX F: ESTIMATED PAYMENTS FOR BROADBAND AND TELECOMMUNICATIONS SERVICE FOR CHATHAM COUNTY

SCHOOLS (2011-12)

TOTAL PRE-DISCOUNT PAYMENTS TO CARRIERS VIA USACVerizon Wireless

AT&T Century-Link

Randolph TOTALS

AT&T-Internet (2062 students) $34,992 $34,992AT&T-telecom (local) (2062 students) $20,240 $20,240AT&T-telecom (LD) (2062 students) $4,739 $4,739AT&T-ITS (LD) (6371 students) $6,103 $6,103CL-WAN (6375 students) $241,431 $241,431CL-ITS (6371 students) $121,007 $121,007CL-telecom (Virginia Cross ES (550 students) & bus garage)

$4,524 $4,524

RTMC-telecom (291 students) $4,485 $4,485RTMC-telecom (LD) (291 students) $1,430cell service-voice (8433 students) $92,360 $92,360cell service-data (8433 students) $20,534 $20,534

TOTALS $112,894 $66,074 $366,962 $5,915 $550,415

COST TO CHATHAM COUNTY SCHOOLS AFTER E-RATE DISCOUNTVerizon Wireless

AT&T Century-Link

Randolph TOTALS

AT&T-Internet (2062 students) $17,496 $17,496AT&T-telecom (local) (2062 students) $10,120 $10,120AT&T-telecom (LD) (2062 students) $2,369 $2,369AT&T-ITS (LD) (6371 students) $4,333 $4,333CL-WAN (6375 students) $169,002 $169,002CL-ITS (6371 students) $85,986 $85,986CL-telecom (Virginia Cross ES (550 students) & bus garage)

$4,071 $4,071

RTMC-telecom (291 students) $2,242 $2,242RTMC-telecom (LD) (291 students) $715 $715cell service-voice (8433 students) $60,034 $60,034cell service-data (8433 students) $13,347 $13,347

TOTALS $73,381 $34,318 $259,059 $2,957 $369,715

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BROADBAND PLAN FOR CHATHAM COUNTY, N.C.: APPENDIX

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