State of Vermont. Department of Public Service. Market Analysis Report

Transcription

1 State of Vermont Department of Public Service Market Analysis Report October 10, 2011

2 TABLE OF CONTENTS Vermont Telecommunications Market Analysis...6 Conclusions...6 Section 1.0 Overview...7 Project Focus...7 Report Outline...8 Information Resources...8 Report Limitations...8 Section 2.0 US Telecommunications US Telecommunications Competition US Telecommunications Overview Demographics and Telephone Penetration Revenue Distribution by Type of provider Internet Usage Cell Phone substitution Mobile Wireless Wireless Data Issues Wireless Competition at a National Level US Satellite Internet and Voice Overall US Broadband Coverage Section 3.0 Vermont Intrastate Analysis Overview of relevant Vermont Statistics Barriers to competition Vermont Telephone Penetration Rates CLECs within Fairpoint Territory Broadband Development in Vermont National Broadband Plan Northern New England Internet Access Services All Broadband Providers in Vermont Competition within Fairpoint Footprint - GIS Specific Vermont data Vermont Competition in Fairpoint Service Territory Summary of Methodology Competitors not considered in this analysis Competitors used for the Analysis Fairpoint Footprint The Analysis Table Interpretation Cable Cable by Wire Center Cable by Census Block Cellular A... 62

3 VERMONT - TELECOMMUNICATIONS MARKET ANALYSIS REPORT Cellular A by Wire Center Cellular A by Census Block Cellular B Discussion of what the maps contain Report Appendices DEFINITIONS October 10, 2011 Page 1

4 TABLES 1 Telephone Susbscribership in the US Telephone Penetration by State Telephone Penetration for Income Level Revenue by Type of Provider US Internet Users Household Internet Use by State Household Internet Use in the Home By State Household Internet Use Broadband in the Home by State Comparison of Wireless only Household by State Vermont Adults living in Wireless only households Total Mobile Wireless Subscribers and Connections Mobile Wireless Subscribers and Connections Mobile Wireless by Census Block 2010 Percent of Population Mobile Wireless Coverage by Census Block 2010 Percent US square miles WirelessBroadbank by Census Block Percent of US Population Wireless Broadband by Census Block Percent of US square miles G/4G Deployment by Selected Mobile Wireless Service Providers US Broadband Availability Cable Broadband Availability Fiber to End User Terrestrial Mobile Wireless Broadband from Available Technology October 10, 2011 Page 2

5 23 Areas of the US with 2 or more wireless providers Vermont Population and Population Density Vermont Population by County Households with Computer Internet or Broadband Vermont Households by Internet Connection Type US Household Internet Usage Telephone Penetration Rates Line Count for Verizon and Telephone Operating Company of VT Price of Selected UNEs by Exchange Density Suburban Density Wire Centers Connections over 200 kbps and Type of End User Suburban Density Wire Centers ASDL Connections Cable Modem Connections Connections by Technology Providers of Connections by Technology Percentage of Residential End User Premises with Access to Services over 200 kbps Vermont Cable Providers All Broadband Providers in Vermont Cable by County Cable by Wire Center Cable by Census Block Cable by County October 10, 2011 Page 3

6 46 Cable by Wire Center Cable by Census Block Cellular A by County Cellular A by Wire Center Cellular A by Census Block Cellular A by County Cellular A by Wire Center Cellular A by Census Bloc Cellular B by County Cellular B by Wire Center Cellular B by Census Block Cellular B by County Cellular B by Wire Center Cellular B by Census Block Cable or Cellular (A or B) Available By County Cable or Cellular (A or B) Available By W Cable or Cellular (A or B) Available By Census Block Aggregate A by County Aggregate A by Wire Center Aggregate A by Census Block Aggregate B by County Aggregate B by Wire Center Aggregate B by Census Block October 10, 2011 Page 4

7 69 Summary of Maps Summary of Maps Summary of Maps Aggregate A by SGAT Aggregate B by SGAT County Summaries Wire Center Summaries- Customers not Covered by Service GIS Methodology October 10, 2011 Page 5

8 VERMONT TELECOMMUNICATIONS MARKET ANALYSIS In May 2011, the Vermont Department of Public Service, which represents the public in utility cases before the Vermont Public Service Board (PSB), issued an RFP for a complete market analysis of telecommunications trends, including wireline and wireless, to include Vermont, Northern New England (further defined as Vermont, New Hampshire and Maine) and nationwide markets. Vantage Energy Consulting, LLC (VEC) was awarded the contract and undertook work in August. This report is the deliverable from this assignment. This report and testimony is related to the Petition of Telephone Operating Company of Vermont LLC, d/b/a FairPoint Communications ("FairPoint"), for approval of a Successor Incentive Regulation Plan, pursuant to 30 V.S.A. 226b. this is being addressed in Docket CONCLUSIONS Based upon our review of the data at national, regional and local levels, VEC reached the following conclusions: Competition exists within most of FairPoint s Vermont service territory. Competition from either mobile cellular or cable exists for most of the landline subscribers in FairPoint s service territory. Over 71 percent of the 249, 305 buildings throughout the service territory have access to cable. Almost 95 percent of buildings in Chittenden County have access to cable. Over 94 percent of customers have access to cellular wireless service as determined by the data provided by cellular companies with annual reports. Three counties, Chittenden, Rutland and Grand Isle have more than 99 percent cellular availability. Over 95 percent of buildings have access to either cable or cellular using cellular data provided by the cellular companies. 91 percent of buildings have access to cable or cellular when measured using drive test data. Using drive test data, 87.8 percent of buildings have access to cellular. A high level of competition exists in the wire centers classified as urban or suburban. Exchanges are categorized in the FairPoint Statement of Generally Accepted Terms and Conditions (SGAT). Urban and suburban exchanges have potentially more competition than rural exchanges in the form of Competitive Local Exchange Carriers (CLECS). October 10, 2011 Page 6

9 Points within urban and suburban exchanges without cable or cellular have a greater potential of acquiring service from a CLEC. Using cellular company data, only 640 customers in suburban exchanges do not have either cable or cellular. Using drive test data, only 1,682 customers in suburban exchanges do not have either cable or cellular alternatives. Under either method of calculating cellular coverage, 100 percent of the 24,385 buildings in the urban exchanges or Burlington and Winooski have either cable or cellular coverage. Certain areas of the state are lacking competition, most notably the sparsely populated Essex County. Exchanges categorized as rural have 91.8 percent coverage from cable or cellular using company data and 84.1 percent coverage using drive test data percent of Essex county buildings have access using company data. The next lowest county is Orange at 79.8 percent. No other county has less Orleans 87.8 percent availability. Using the drive test data, Essex county has only 39.1 percent availability of cable or cellular. Orange and Orleans counties are second and third lowest at 72.4 and 83.4 percent respectively. SECTION 1.0 OVERVIEW PROJECT FOCUS The focus of this market analysis is ultimately on the state of Vermont with Northern New England and national statistics utilized to provide perspective and comparisons. VEC has also tried to utilize our previous experience in telecommunications to add value to the raw statistics available. Of particular importance for this assignment in Vermont is the current state of competition. More specifically, the status of competition within the footprint of the Vermont ILEC, FairPoint Communications 1. Particular attention will be given to this topic in our analysis and report. 1 Previously operating as Verizon New England, Inc., d/b/a Verizon Vermont October 10, 2011 Page 7

10 REPORT OUTLINE The report is divided into two sections following this introduction. The first section describes the status of telecommunications from a national standpoint and draws comparisons between Vermont and Northern New England States. This section also considers economics, demography and geography, which are factors in the availability of telecommunications choices not only in Vermont but in the US as a whole. This first section determines if Vermont is noticeably lagging or exceeding the rest of the US and Northern New England. It also attempts to identify any reasons for the differences, if any. The second section of the report deals with competition and availability of alternatives within the state of Vermont. Particular attention is given to the competition within the footprint of the dominant Incumbent Local Exchange Carrier (ILEC), FairPoint. Our report is primarily concerned with whether alternative technologies exist which provide for potential competition. Specifically, whether current wireline customers have cellular and cable options available. INFORMATION RESOURCES There exists an extraordinary amount of secondary data on the US telecommunications industry. Telecommunications data resources vary significantly in terms of availability and quality depending upon the state and the industry component in question. A great deal of information is available nationally through the Federal Communications Commission and the US Census. This data is useful not only for its availability but also because it provides a reasonable degree of consistency across localities 2. The FCC data is also a widely accepted and objective resource. Vermont also has a number of very valuable information resources that we relied upon for secondary data. These include the Center for Rural Studies at the University of Vermont and DPS publications. For our analysis of competition within the state of Vermont, we not only utilized available data from the above resources but also conducted primary research based upon Geographical Information System (GIS) mapping data available for all providers within the state of Vermont. This research, the methodologies and the outcome are discussed in more detail in the GIS section. REPORT LIMITATIONS This report is not meant to be a detailed and exhaustive review of the current or future technology of telecommunications. We provide an overview of a technology in question where it adds to the discussion. We have also avoided detailing the myriad pricing 2 Data from the FCC surveys and the US census cannot be directly compared to one another as they use different sampling methodologies and survey techniques. October 10, 2011 Page 8

11 structures available from all carriers. The report is concerned with competing technologies, not pricing within a technology. As we discuss later in the report, one significant change in telecommunications over the last 20 years has been the proliferation of service bundling and special offers. These offers change frequently; vary by state and whether they are offered to existing or only new customers. Any discussion of detailed competitive pricing from all options is not practical within the scope of this report. The very nature of the industry itself produces difficulty in evaluating competition. As telecommunications has evolved, there is no longer a clear analytical path from facility or device to service. For example, coaxial cable (cable) can provide television service, data and voice service, although originally it was primarily considered a provider of television programming. Mobile phones formerly were strictly a voice service. With the advent of smart phones, mobile now provides voice, data and even video. With the expansion of cellular, a growing number of consumers are relying totally on mobile communications with no landline. Mobile phones can even replace a data link (aircard, cable, landline) for provision of computer internet access via tethering. As a result, voice can no longer be directly mapped to landline and wireless telephony alone and broadband can come from wireless, copper, fiber, coax or satellite. October 10, 2011 Page 9

12 SECTION 2.0 US TELECOMMUNICATIONS Changes in the telecommunications industry have dramatically altered the landscape in terms of market shares, players, technology and alternatives. Vantage consultants worked in the telecommunications industry prior to the landmark Telecommunications Act of 1996, and worked and testified in numerous cases during implementation of the Act. We continued our involvement as the industry split into interexchange carriers (IXC), Incumbent Local Exchange Carriers (ILEC) and Competitive Local Exchange Carriers (CLEC) and then morphed many of these components back together. Perhaps as important as the changes in industry has been the development of alternatives to traditional landline phone service. Cell phones, cable and Voice over Internet Protocol (VoIP) have totally changed the landscape of US telecommunications. This has had profound impacts on the management of the remaining landline businesses. As alternatives to landline service have developed, landline services see a shrinking customer base with a large embedded infrastructure. The challenge facing carriers is how to maintain service quality with an ever decreasing customer base, while remaining economically viable. The related challenge facing regulators is to ensure that customers, especially residential and small businesses, continue to receive adequate service and ideally have alternatives to their serving ILEC. These factors have direct implications on service standards that must be understood to competently analyze service results. US TELECOMMUNICATIONS COMPETITION Competition in telecommunications has taken a totally different form from the other regulated utility industries. While electric and gas have deregulated to various degrees in different states, there remains only one conduit of delivery for gas and electric customers. There are few if any service bundling options available other than perhaps appliance service, and even this is limited in scope. The telecommunications industry and its competition look totally different. The customer can access telecommunications service from multiple providers not only from traditional landline but also from cellular, cable, satellite and VoIP. At the same time some telecommunications services such as public pay phones, common even 20 years ago, have all but disappeared. US TELECOMMUNICATIONS OVERVIEW Based upon the most recent FCC statistics, as of July 2010, 96 percent of all households in the US have telephone service. This is a very slight increase over 2009 of only 0.3 October 10, 2011 Page 10

13 percent. However, the penetration rate has increased only 2 percent since July In 1980, the proportion of US households reporting that they had service was already 92.9 percent. The yearly increases in penetration have remained small and will likely slow further as the US market reaches near full market penetration. The Table below shows the trend graphically. Table 1 Telephone Subscribership in the US 3 Telephone Subscribership in the US, FCC. Release May October 10, 2011 Page 11

14 Vermont has remained above the national average throughout this time. In 1983, 92.7 percent of Vermont households had telephone service compared to the US average of 91.4 percent. In 2010, Vermont had 97.6 percent of households reporting telephone service compared to the national average of 96.0 percent. However, as shown in the table below, Vermont is slightly below the states of Maine and New Hampshire which both have a penetration rate of 98.3 percent. Table 2 Telephone Penetration by State Percentage of Household with Telephone Service US Average 96% Highest State - Minnesota 99% Lowest State - Tennessee 93% Vermont 97.6% Northern New England States New Hampshire 98.3% Maine 98.3% Source: FCC, Telephone Subscribership in the US, Table 2 As shown, telephone penetration rates at state levels vary from a low of 93 percent to as high as 99 percent. DEMOGRAPHICS AND TELEPHONE PENETRATION Telephone penetration rates also vary between household income levels. The variation in telephone penetration in 2010 continues but the difference between telephone penetration at the lowest income levels and the highest has narrowed considerably over the period as phone service has essentially become ubiquitous and available for almost anyone. The following table shows the narrowing gap between income levels. October 10, 2011 Page 12

15 Table 3 Telephone Penetration by Income Level (Not adjusted for inflation) Income Level Under $5, % 80.0 % 89.5% $50,000-59, % 98% 97.9% > $75,000* 99.4% 98.4% 98.5% > $150,000* NA NA 99.0% Difference Lowest to highest 21.4% 18.4% 9.5% In 1983 and 2000, >$75,000 was the highest category. In 2010 it was >$150,000 Source: FCC, Telephone Subscribership in the US, Table 4 In July 2010, penetration in households below $5,000 was only 89.5 percent. For those households at the poverty level it was 95.3 percent. 4 While telephone penetration rate disparity based on household income remains, the percent difference has been reduced by more than half. Interestingly, when combining state penetration with income data, the poorest states do not necessarily have the lowest statewide telephone penetration rates. Mississippi, Tennessee and Arkansas generally had the lowest median incomes in 2010 according to US Census data. Yet in 2010, Mississippi had a penetration rate of 96.0 percent in 2010 equaling the national average. But indeed Tennessee had the lowest rate at 93 percent and Arkansas penetration rate was 93.8 percent. New Hampshire had the median household income by state in 2010, and as noted in Table 2 was well above the US average penetration rate. Vermont had the twelfth highest median household income in 2010 and also a penetration rate above the national average. 5 REVENUE DISTRIBUTION BY TYPE OF PROVIDER In 2009, Mobile Service Providers had 42 percent of the total telecommunications industry revenues. The ILECs share was 29.6 percent and all CLECs make up only 10.1 percent of industry revenue. 4 Based on 2010 Health and Human Services October 10, 2011 Page 13

16 Table Telecommunications Revenue by Type of Provider Type of Provider* Service Revenues Percent of Total $ Millions ILEC 83, Total Local Competitors 28, Mobile Service Providers 120, Toll Service Providers 48, Other Total 281, ** * Telecommunications Industry Revenues 2009, Table 8. FCC. Does not include Other Revenue ** Does not equal 100 percent due to rounding INTERNET USAGE The remarkable growth in internet usage has been a primary driver of the growth in demand for telecommunication services in terms of bandwidth availability and speed. In the period , the World Bank reports that internet users in the US went from only 3 million to almost 240 million. October 10, 2011 Page 14

17 Table 5 US Internet Users Vermont ranks among the highest states in the US in terms of total internet usage by state as shown in the following chart. Internet usage for this comparison includes the use of internet at any location including home, work or other location (i.e. WiFi, mobile broadband cards). October 10, 2011 Page 15

18 Table 6 Household Internet Use by State Vermont does not compare as favorably in the census data when viewing internet usage in the home but still exceeds the national average. The US Census reports that 74.7 percent of Vermont households use the internet at home compared to a national average of 71.1 percent. New Hampshire had the highest reported use of internet in the home at 90.0 percent. October 10, 2011 Page 16

19 Table 7 Household Internet Use in the Home By State Vermont is below the census average and below both Maine and New Hampshire in terms of broadband in the home. The US average is 63.5 percent of households with broadband internet in the home. Maine reported 61.3 percent while Vermont reported only 60.6 percent dcasting_and_internet_usage.html, Table 1155 October 10, 2011 Page 17

20 Table 8 Household Internet Use Broadband in the Home by State CELL PHONE SUBSTITUTION The National Center for Health Statistics Preliminary results from the July December 2009 National Health Interview Survey indicated that a remarkable one of every four American homes (24.5%) had only wireless telephones during the last half of This represents an increase of 1.8 percentage points since the first half of This is more than a threefold increase from 7.3 percent in the first half of Additionally, one of every seven American homes (14.9%) had a landline yet received all or almost all calls on wireless telephones. 7 The Economist reported in 2009 that US telecoms were losing landlines at a rate of 700,000 per month and at that rate of loss, the last landline would be cut in only Interestingly, The National Center For Health Statistics reported that for the period ending July 2010, Arkansas and Mississippi, traditionally among the poorest US states, have the highest rates for cellphone substitution at 35.1 and 35.2 respectively. New 7 Wireless Substitution: Early Release of Estimates From the National Health Interview Survey, July December 2009 by Stephen J. Blumberg, Ph.D., and Julian V. Luke Division of Health Interview Statistics, National Center for Health Statistics 8 The Economist, America loses its landlines, Cutting the cord, August 13 th,2009 October 10, 2011 Page 18

21 Jersey and Rhode Island have the lowest rates at 12.8 percent. Vermont s rate was 20.3 percent while New Hampshire and Maine and New Hampshire both reported 16.0 and 22.9 percent respectively. The wireless substitution rate across the US is shown below in graphical form. Table 9 Comparison of Wireless-only Households by State In Vermont, the wireless substitution rate has increased along with the US trend. October 10, 2011 Page 19

22 Table 10 Vermont Adults Living in Wireless-only Households 9 MOBILE WIRELESS Congress requires the Federal Communications Commission (FCC) under the Telecommunications Act of 1996 to produce an annual report on the state of competition in the mobile services marketplace. 10 Although considerable data is now collected, there is still no definitive answer from the FCC as to whether competition exists in the US mobile marketplace. Both the fourteenth and fifteenth reports both failed to make any finding as to competitiveness of the US mobile market as shown by the following quote. Thus, the Fifteenth Report makes no formal finding as to whether there is, or is not, effective competition in the industry. 11 Whether the FCC has concluded competition exists, mobile cellular has expanded at a tremendous pace in the US and the world. 9 Wireless Substitution: State-level Estimates From the National Health Interview Survey, January 2007 June 2010, National Health Statistics Reports, No. 39, April 20, U.S.C. Section 332(c) (1) (C) 11 Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, Released June 27, 2011 October 10, 2011 Page 20

23 As landlines continue their precipitous decline, mobile cellular subscriptions continue to rise just as sharply. The following table shows the increase in US Mobile subscriptions 12 from 1984 (essentially the commercial inception) until Subscriptions in virtually every other area of the world show similar or greater increases. The increase in world demand bodes well for continued innovations and cost decreases in equipment. Table 11 Total Mobile Wireless Subscribers and Connections 12 Including pre and post paid subscriptions. October 10, 2011 Page 21

24 Year Table 12 Mobile Wireless Subscribers and Connections Mobile Wireless Connections NRUF (millions) CTIA (millions) Mobile Telephone Subscribers Form 477* (millions) Mobile Internet Access Subscribers Form 477 (millions) Total Net Adds Total Net Adds Total Net Adds Total Net Adds n/a * Prior to December 2004, only facilities-based wireless carriers with at least 10,000 mobile telephone subscribers per state were required to report data. Starting with the 2005 data, all facilities-based wireless carriers are required to report. WIRELESS DATA ISSUES Subscribers, Connections, and Net Adds 13 The following is taken directly from the FCC s Annual Report of Competitive Market Conditions. The data source that the Commission has used for many years to estimate the number of mobile wireless subscribers, Numbering Report/Utilization Forecast (NRUF), tracks the number of phone numbers that have been assigned to mobile wireless devices. When all mobile wireless devices were assigned telephone numbers and subscribers generally carried one mobile device for making voice calls, NRUF provided reasonably accurate measures of subscribership. However, consumers are now more likely to use more than 13 Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, Released June 27, 2011 October 10, 2011 Page 22

25 one mobile device particularly non-voice devices, such as Internet access devices (e.g., wireless modem cards, netbooks, and mobile Wi-Fi hotspots), e-readers, tablets, and telematics systems that commonly are not assigned telephone numbers. In addition, certain mobile broadband providers do not assign telephone numbers to the devices on their networks. Therefore, NRUF is becoming increasingly less useful in measuring the number of individual subscribers but instead provides an estimate of the number of mobile wireless connections or connected devices. Based on NRUF data, the number of mobile wireless connections grew four percent from million at the end of 2008 to million at the end of CTIA also estimates the total number of mobile subscriber connections based on its industry survey and found that the number of connections grew six percent from million at the end of 2008 to million at the end of Industry-wide net new mobile wireless subscriber/connection additions (or net adds ) for 2009 totaled 11.1 million, based on NRUF data, and 15.3 million based on CTIA data. The Commission is also able to estimate the number of mobile voice subscribers and mobile Internet access subscribers using data reported by service providers on Form 477. Based on those data, at the end of 2009 there were million subscribers to mobile telephone, or voice, service, up nearly five percent from million at the end of At the same time, there were 55.8 million subscribers to mobile Internet access services at speeds exceeding 200 kbps in at least one direction which is more than double the number at the end of WIRELESS COMPETITION AT A NATIONAL LEVEL Statistics are available for competition at a national level but these are useful for only the broadest comparisons. The following charts were developed from data taken from the FCC s 15 th Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services. The wireless data was taken from American Roamer and while the mapping is current, the population data was still utilizing 2000 census data. 14 This figure is based on the Commission s Form 477 data, which collects subscribership and other data from providers of Internet access services at speeds exceeding 200 kbps in at least one direction. Only services provided using 3G or 4G mobile network technologies including HSPA, EV-DO, LTE, and mobile WiMAX would meet this speed threshold. In the Form 477 data, mobile telephone subscribers and mobile Internet access subscribers are not mutually exclusive. October 10, 2011 Page 23

26 Table 13 Mobile Wireless by Census Block 2010 Percent of Population October 10, 2011 Page 24

27 Table 14 Mobile Wireless Coverage by Census Block 2010 Percent US Square Miles October 10, 2011 Page 25

28 Table 15 Wireless Broadband 15 by Census Block Percent of US Population Wireless Broadband by Census Block Percent of US Population 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 or more 2 or more 3 or more 4 or more Number of Providers 15 For purposes of these graphs the term broadband when referring to mobile broadband networks, coverage, providers, or services includes the 3G and 4G network technologies: HSPA, EV-DO, LTE, and mobile WiMAX. October 10, 2011 Page 26

29 Table 16 Wireless Broadband by Census Block Percent of US square miles October 10, 2011 Page 27

30 Service Provider Verizon Wireless AT&T Wireless Sprint Nextel Clearwire Table 17 3G/4G Deployment by Selected Mobile Wireless Service Providers HSPA and EV-DO Deployment As of September 2010, EV-DO Rev. A network covered 289 million POPs. As of early 2010, HSPA covered 230 million POPs. As of January 2011, entire HSPA network had been upgraded with HSPA+ (14.4 Mbps). As of August 2010, EV-DO Rev. A network was available in census blocks covering 239 million POPs. T-Mobile HSPA network covered 212 million POPs as of mid-2010 and HSPA+ (21 Mbps) network covered 200 million POPs in 100 cities as of year-end MetroPCS LTE and WiMAX Deployment In December 2010, launched LTE in 38 cities covering 110 million people. Plans to expand LTE to its entire EV-DO footprint (289 million people) by the end of Plans to launch LTE in areas covering around 75 million people by mid-2011 and to complete its LTE buildout by year-end Resells Clearwire s WiMAX service. As of year-end 2010, WiMAX network covered approximately 120 million people. No U.S.-specific plans. As of January 2011, launched LTE in 13 cities. Source: Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, Released June 27, 2011 US SATELLITE INTERNET AND VOICE Satellite companies such as DirecTV and Dish Network directly compete with cable and fiber for television subscribers even in densely populated urban areas. Satellite voice (VoIP) is possible but the delays caused by satellite transmission, weather interference and generally slower data speeds make this more an alternative for very specific applications rather than a competition for voice communications. As a result, voice telecommunications via satellite is not considered direct competition for purposes of this report. October 10, 2011 Page 28

31 Satellite internet service has generally been and continues to be primarily a rural alternative solution, and then primarily for internet use. Information on the satellite Internet industry is not as readily available as that for other telecommunications technologies or companies. In January 2010, Hughes Network Systems, LLC (HUGHES), the largest provider of broadband satellite networks and services announced that it has surpassed 500,000 North American subscribers to its HughesNet service. Approximately 433,000 of these were in the US as reported in This represented almost 50 percent of the US consumer satellite market as reported by HUGHES. 16 Satellite internet is often bundled with other services by different providers such as DirecTV and Dish Network. OVERALL US BROADBAND COVERAGE The following charts give a visual perspective on telecommunications deployment across the US pdf October 10, 2011 Page 29

32 Table 18 US Broadband Availability October 10, 2011 Page 30

33 Table 19 Cable Broadband Availability October 10, 2011 Page 31

34 Table 20 Fiber to End User October 10, 2011 Page 32

35 Table 21 Terrestrial Mobile Wireless October 10, 2011 Page 33

36 Table 22 Broadband from any Available Technology October 10, 2011 Page 34

37 Table 23 Areas of the US with 2 or More Wireless Providers October 10, 2011 Page 35

38 SECTION 3.0 VERMONT INTRASTATE ANALYSIS OVERVIEW OF RELEVANT VERMONT STATISTICS Telecommunications service competition is directly related to characteristics of the market being served. Most notably, absolute population and population density are two important characteristics. Not surprisingly, as seen in the previous section, urban population centers attract the greatest competition while rural areas have the least. Given the rural nature of Vermont this is especially relevant. Vermont Population and Population Density The State of Vermont has a total population of 625,741 and 322,741 housing units according to the 2010 US Census. The population density of Vermont is 67.9 people per square mile which places it 32 nd in population density among the 50 states, Puerto Rico and Washington DC. For comparison, the US has an overall population density of 87.4 people per square mile. 17 Even within Northern New England there is considerable variation in population density. New Hampshire has a 2010 population of 1,316,470 with a density of 147 people per square mile. Maine has a population of 1,328,361 people and a density of 43.1 people per square mile. This data is presented in Tabular form below. Table 24 Vermont Population and Population Density Population Population Density People/Sq Mi. Population Density US Ranking Vermont 625, New Hampshire 1,316, Maine 1,328, US* 308,745, NA * Includes Puerto Rico and Washington DC US Census, Resident Population Data, Population Density October 10, 2011 Page 36

39 The population of Vermont s counties varies greatly as shown in the following table. The small population of Essex County in particular will have significance later in this Section when we report on the findings from our GIS analysis. Table 25 Vermont Population by County Vermont Population by County County Population Change Vermont 621, % Addison County 36, % Bennington County 36, % Caledonia County 30, % Chittenden County 152, % Essex County 6, % Franklin County 48, % Grand Isle County 7, % Lamoille County 25, % Orange County 28, % Orleans County 27, % Rutland County 63, % Washington County 58, % October 10, 2011 Page 37

40 Windham County 43, % Windsor County 56, % Vermont Computer Ownership and Connectivity Vermont has experienced the same rapid growth in internet and especially broadband as the remainder of the US. Broadband has expanded from only 9 percent in 2001 to 69 percent in the latest Vermonter Poll. The Vermonter Poll is a survey conducted annually for the last 17 years by The Center for Rural Studies at The University of Vermont. The poll covers a number of topics including internet, broadband and computer use. Table 26 Households with Computer Internet or Broadband Selected Years Poll Year Computer 64% 76% 79% 80% 80% 83% 83% 83% Internet 50% 74% 75% 83% 83% 82% 81% Broadband 9% 16% 31% 63% 63% 67% 69% Source: University of Vermont Center for Rural Studies, Vermonter Poll. Interconnection Types The Vermonter Poll reports that DSL continues to be the most frequently used internet connection followed by cable. Both have now surpassed dial up. October 10, 2011 Page 38

41 Table 27 Vermont Households by Internet Connection Type (Source: University of Vermont Center for Rural Studies, Vermonter Poll ) The data from the Vermonter Poll is generally consistent with 2009 US Census data in which percent of Vermonters lack an internet connection or conversely 82.6 percent are in some way connected. This makes Vermont the sixth highest internet usage State in the US. The following tables give some perspective on Vermont s usage. October 10, 2011 Page 39

42 Table 28 US Household Internet Usage US Household Internet Usage US Average 76.7 % State with Highest 86.1 % Rate(Utah) State with Lowest Rate 62.6 % (Mississippi) FairPoint States Vermont 82.6 % New Hampshire 83.1 % Maine 77.3 % Source: US Census Bureau, 2011 Statistical Abstract, Table 1155 Vermont Household Income Characteristic Vermont has a population of 625,741 persons comprising 250,375 households. Vermont has 2.39 persons per households versus 2.60 in the US 18. Computer and internet usage are correlated with average household income. Vermont has an average household income of $51,219 which is above the US average of $50,221. Vermont has significantly fewer people below the poverty level than the US. Vermont has 11.5% of persons below the poverty level while the US has 14.3%. 19 BARRIERS TO COMPETITION Any discussion of market competitiveness must include a discussion of barriers that effectively preclude customers from changing from one available carrier to another. Most notable among these are the very hefty early termination charges, which are often applied by the wireless, DSL, cable and satellite telecommunications providers. The second and related barrier is the fact that voice services are often bundled with other products and cannot be separated and terminated without incurring early termination charges on the entire bundled service. 18 Inclusive of Vermont US Census, Resident Population Data October 10, 2011 Page 40

43 VERMONT TELEPHONE PENETRATION RATES The May 2011 FCC report entitled Telephone Subscribership in the United States provides state comparisons of telephone penetration rates for The statistics presented there are based on the Current Population Survey conducted by the Census Bureau. The table below presents the results for the period for Vermont as well as Maine, New Hampshire and the United States. Table 29 Telephone Penetration Rates TELEPHONE PENETRATION RATES Selected States and US % Change Maine % New Hampshire % Vermont % United States % Vermont's 2010 penetration rate of 98.5% exceeds the national average of 96.6%. Vermont's penetration rate compares favorably to both Maine and New Hampshire although it is somewhat lower. Vermont's growth in penetration rate is the same as the growth in the national penetration rate. Relative to the other Northern New England states, New Hampshire's growth is the highest but its 1990 base is also lower than the other states. The penetration of landline telecommunications in the Northern New England area exceeds the national rate and has probably approached a maximum. Verizon/Fairpoint FairPoint (formerly Verizon) remains the largest carrier in the state. However, as shown in the following table, residential access continues to decline 20 Telephone Subscribership in the United States, Industry Analysis and Technical Division, Wireline Competition Bureau, Federal Communications Commission, released May October 10, 2011 Page 41

44 Table 30 Line Count for Verizon and Telephone Operating Company of VT (FairPoint) ( ) Business Access: Single Line Business Access: Multi Line Residential Access Lines Special Access Line (Non- Switched) Total Access Lines (Switched and Special) Verizon ,948 88, , , ,016 Verizon ,617 84, , , ,859 TOC of VT 8,236 79, , , , TOC of VT 18,179 62, , , , TOC of VT 12,854 59, , , , Source: Annual Reports Submitted to VPSC. CLECS WITHIN FAIRPOINT TERRITORY Competitive Local Exchange Carriers (CLEC) can theoretically provide service to any customer in any area for which they have been approved by acquiring unbundled network elements (UNE) from the Incumbent Local Exchange Carrier (ILEC), which in the case of Vermont is primarily FairPoint. CLECs providing service in this manner are often referred to as Resellers. Although this makes competition theoretically possible in multiple locations, pricing and cost structures make this a limited proposition. The following shows the rates for UNEs as published in the FairPoint SGAT. October 10, 2011 Page 42

45 Table 31 Price of Selected UNEs by Exchange Density UNE Urban Suburban Rural Analog Digital(Premium) Digital(ADSLor HDSL Qualified) High Capacity Links - Conditioned for 1.5 Mbps Conditioned for 4.5 Mbps** * Source: FairPoint Communications Statement of Generally Accepted Terms- Section 5. ** Plus a mileage charge of $9.18 per ¼ mile. Table 32 Fairpoint Urban Density Wire Centers (Exchanges) Burlington and Winooski Suburban Density Wire Centers Barre Essex Junction Newport St. Albans Bellows Falls Manchester Poultney St. Johnsbury Bennington Middelbury Proctor Stowe Brattleboro Milton Rutland Waterbury Derby Montpelier Shelburne White River Junction Windsor Another 59 Fairpoint exchanges are in the Rural Density Zone or have not been defined by Fairpoint in their SGAT. BROADBAND DEVELOPMENT IN VERMONT Availability of broadband also expands the spectrum of communication services that can be provided. The increased availability of broadband and competition from other communication service providers benefit of the citizens of Vermont. Some of the key initiatives are discussed below. October 10, 2011 Page 43

46 CONNECTVT In January 2011, Governor Peter Shumlin launched a specific initiative to achieve statewide connectivity called ConnectVT. Telecommunica tions infrastructure and services will support the State s economic viability with enhanced technological competitiveness, and greater efficiency and effectiveness in the delivery of services including education, healthcare and energy. When Connect VT is successful, we will have invested wisely and carefully to achieve universal availability of broadband connectivity and mobile service throughout the state by year end We will also work to Make Vermont the leading state in the nation for deployment and utilization of a wireless canopy and fiber infra structure. Vermont telecommunications and technological infrastruc ture will support our goal to be: the vanguard of innovative, cost effective administration and delivery of health care the model of forward-looking, life-long education for every Vermonter the most energy-efficient state in the nation the state where business and agricultural sectors locate, expand, and thrive in a global marketplace for goods and services It is not only the speed of connectivity; it is the quality of our telecommunications services that will be a differentiating factor for Vermont on a global landscape Vermont Telecommunications Authority The Vermont Telecommunications Authority (VTA) is involved in a set of projects to expand broadband and cellular service to underserved areas and prepare for the rising expectations of broadband speed identified by state and federal policymakers. VTA is not a retail service provider. It works by helping to finance and develop the infrastructure needed by the retail providers of broadband and cellular services. VTA has proposed a program of work over the next three years that has been supported by the Governor's FY 2012 budget request. The proposed program of work focuses new resources and new strategies on parts of established goals that have lagged. e-vermont Community Broadband Project In the spring of 2010, the Vermont Council on Rural Development, in partnership with nine organizations around the state, launched an ambitious project to help rural towns realize the full potential of the internet by working locally to ensure best use of online resources. It is funded through a federal program for Sustainable Broadband Adoption (SBA) and matching local support. This project was one of only two projects nationwide October 10, 2011 Page 44

47 to receive funding in the first round of NTIA SBA grants for a community-based approach to adoption. It is expected that this project will increase the interest in and demand for broadband internet in rural Vermont. The resulting expansion of broadband services can be expected to increase the availability of these services to the rural areas as well as make other communication services that can be provided over broadband possible in these areas. FairPoint Expansion of Broadband FairPoint recently announced that it met its regulatory broadband commitment in Vermont by the June 30, 2011 deadline. With this achievement, FairPoint announced it offers broadband service to more than 83 percent of its customers in Maine, more than 85 percent of its customers in New Hampshire and almost 90 percent of its customers in Vermont. In meeting its Vermont commitment, FairPoint expanded broadband access to approximately 140 communities and neighborhoods in the state. Act 172 and 2010 Vermont Telecommunications Plan: Broadband Vermont is committed, through law and policy, to the goal of providing ubiquitous broadband availability to Vermonters. During the Vermont legislative session Act 172 was passed. The legislation requires the DPS to provide recommendations for administrative and legislative actions that could stimulate further deployment of broadband services. Further evidence of Vermont's commitment to making broadband available across the state can be found in the 2010 Vermont Telecommunications Plan: Broadband. The Plan states the following at page vii: Vermont can and should pursue a path to achieve the following outcomes by year-end 2012: 1. Universal availability of mass-market broadband; 2. Universal availability of mobile service along roadways; 3. Universal first responder communications; 4. Fiber broadband connectivity to all anchor institutions and large businesses; 5. Ubiquitous adoption and use of broadband at home and work; 6. Speeds and pricing for residential broadband on par with national urban areas; and 7. All customer locations support smart electric meters. The Plan further acknowledges the challenges it confronts for developing a sustainable broadband infrastructure in Vermont. On the demand side, sparse population and slow October 10, 2011 Page 45

48 adoption in newly served areas provide lower incentive for private investment. On the supply side, Vermont s topography and the high costs of backhaul and tower construction are impediments to service deployment. The Plan recognizes that Vermont has a business-unfriendly reputation and is known as a place where it is difficult to get development permits. In spite of these challenges, the Plan identifies several strategies for the expansion of a sustainable broadband infrastructure. The strategies include: Leverage electric utility telecommunications infrastructure planned to lower cost of backhaul and increase geographic availability of broadband. Aggregate institutional demand and organize connections to institutions, broadband providers and cell sites. Subsidize construction of key telecom infrastructure when necessary. Continue expeditious permitting policies to improve affordability of broadband deployment and bolster the business atmosphere in Vermont. Accelerate adoption through state funding for ISPs in un-served areas, funding for sustainable broadband adoption and changes in Vermont universal service policy. NATIONAL BROADBAND PLAN Vermont's efforts to expand broadband service have been reinforced at the national level. The FCC recently issued its National Broadband Plan. In the report the FCC states that broadband is the great infrastructure challenge of the 21st century. The Plan suggests several strategies and actions that should be implemented to support a robust broadband ecosystem available to the maximum number of citizens regardless of income levels. NORTHERN NEW ENGLAND INTERNET ACCESS SERVICES This section examines the availability of access to internet services in Vermont relative to the other Northern New England states of Maine and New Hampshire as well as the entire United States. Table 33 provides a breakdown of residential and business customers that have internet service connections over 200 kbps. Vermont has fewer absolute connections than Maine and New Hampshire but is comparable to both these states and the United States over on a connection per household basis Internet Access Services: Status as of June 30, 2010, Industry Analysis and Technology Division, Wireless Competition Bureau, March 2011, Federal Communications Commission, Table 17, page 36. October 10, 2011 Page 46

49 Table 33 Connections over 200 kbps and Type of End User (000) State Residential Business Residential Business Total Connection Connection Percentage Percentage Maine New Hampshire Vermont TOTAL 130,513 22, ,920 Access to faster internet services has become particularly important. Table 34 compares the percentage of connections at various internet speeds for Vermont relative to Maine, New Hampshire and the United States. As demonstrated in the table, Vermont compares quite favorably to the Northern New England states and the United States with the exception of speeds over 10 mbps. The information in the table suggests that both Maine and Vermont lag considerably behind New Hampshire and the United States in that category. Table 34 Suburban Density Wire Centers Percentage of Connections over 200 kbps 22 State % over 200 kbps % at least 768 kbps % at least 3 mbps % at least 6 mbps % at least 10 mbps Maine New Hampshire Vermont TOTAL The table below reviews the growth in Asymmetric Digital Subscriber Line (ADSL) connections from 2006 to According to the FCC, ADSL is a digital local loop typically using copper facilities and providing greater bandwidth in one direction than the other. The number of ADSL connections in Vermont has grown faster during the last 5 years than the other Northern New England states and the United States. Part of the explanation is the lower base in 2006 for Vermont. The scarcity of cable modem connections in Vermont as shown below also contributes to explaining why the growth of ADSL connections in Vermont is larger. 22 Internet Access Services: Status as of June 30, 2010, Industry Analysis and Technology Division, Wireless Competition Bureau, March 2011, Federal Communications Commission, Table 20, pages October 10, 2011 Page 47

50 Table 35 ADSL Connections (in Thousands) State % Change Maine % New Hampshire % Vermont % TOTAL 22,584 27,793 29,964 30,618 30, % As indicated in the table below, the number of cable modem connections in Vermont trails Maine, New Hampshire and the United States by a considerable margin. Vermont's topography and relatively low population density may be contributing factors to its lower number of cable modem connections. Table 36 Cable Modem Connections (in Thousands) State % Change Maine % New Hampshire % Vermont * * * NA TOTAL 29,173 34,404 38,190 41,722 43, % October 10, 2011 Page 48

51 Table 37 Connections by Technology CONNECTIONS BY TECHNOLOGY 23 (in Thousands) State ADSL SDSL Other Cable Fiber Satellite Fixed Mobile Powerline Total Wireline Modem Wireless Wireless & Other Maine * * 597 New Hampshire * * Vermont 84 * * * TOTAL 30, ,924 4,436 1, , ,920 Table 38 Providers of Connections by Technology PROVIDERS OF CONNECTIONS BY TECHNOLOGY 24 (over 200 kbps) State ADSL SDSL Other Cable Fiber Satellite Fixed Mobile Powerline Total Wireline Modem Wireless Wireless & Other Maine * 4 5 * 32 New Hampshire * * Vermont * * TOTAL , Internet Access Services: Status as of June 30, 2010, Industry Analysis and Technology Division, Wireless Competition Bureau, March 2011, Federal Communications Commission, Table 18, pages Internet Access Services: Status as of June 30, 2010, Industry Analysis and Technology Division, Wireless Competition Bureau, March 2011, Federal Communications Commission, Table 23, pages October 10, 2011 Page 49

52 Table s 38 and 39 provide an understanding of the availability of internet technologies in Vermont. Generally, the technologies available in the other Northern New England states are also available in Vermont. Further, the number of providers of the various internet technologies is comparable in all of the Northern New England states including Vermont. Table 39 reinforces the information presented in Table s above. Although Vermont's residential end-users have a higher penetration of DSL connections, they lag both Maine and New Hampshire in terms of cable modem connections. The higher penetration of DSL connections implies that in Vermont there is a greater reliance on DSL connections due in part to the lack of cable modem services. 25 Table 39 Percentage of Residential End User Premises with Access to Services over 200 kbps 6/30/10 State DSL Cable Modem Maine 76% 96% New Hampshire 77% 98% Vermont 82% 71% TOTAL 84% 97% 25 Internet Access Services: Status as of June 30, 2010, Industry Analysis and Technology Division, Wireless Competition Bureau, March 2011, Federal Communications Commission, Table 24, page 49. October 10, 2011 Page 50

53 Table 40 Vermont Cable Providers 2010 Vermont Cable Providers Cable Company Communities Served Houses Passed Burlington Telecom 1 15,635 Burlington Charter Communications 1 27,830 Danville Comcast ,455 Jeffersonville Cable Jeffersonville, Cambridge Southern Cable 5 2,642 Dunnerston, Jamaica, Newfane, Putney, Townshend Stowe Cablevision 1 1,860 Trans Video 3 1,800 Berlin, Northfield Town, Northfield Village Waitsfield Fayston 6 Waitsfield, Warren, Moretown, Duxbury, Fayston, Bolton 5, Annual Reports 27 Communities served by Comcast: Arlington, Bennington, North Bennington, Old Bennington, Dorset, Jamaica, Manchester, Peru, Pownal, Rupert, Shaftsbury, Stratton, Sunderland, Winhall, Woodford, Athens, Bellows Falls, Brattleboro, Brookline, Grafton, Guilford, N. Westminister, Rockingham, Sextons River, Vernon, Westminister, Hartford, N. Hartford, Norwich, Pomfret, Thetford, Berlin, Bethel, Braintree, Brookfield, Calais, Duxbury, East Montpellier, Greensboro, Hardwick, Hyde Park, Johnson, Middlesex, Montpellier, Moretown, Morristown, Morrisville, Plainfield, Randolph, Rochester, Walden, Waterbury, Woodbury, Worcester, Bakersfield, Berton, Berkshire, Brighton, Brownington, Charleston, Coventry, Derby, Derby Center, Derby Line, Enosburgh, Fairfield, Glover, Holland, Irasburg, Jay, Montgomery, Morgan, Newport City, Newport Town, North Troy, Orleans, Richford, Troy, Westfield, Brandon, Castleton, Chittenden, Clarendon, Danby, Fair Haven, Hubbardton, Ira, Killington, Leicester, Mendon, Middleton Springs, Mt. Holly, Mt. Tabor, Pawlet, Pittsford, Poultney, Proctor, Rutland City, Rutland Town, Salisbury, Shrewsbury, Tinmouth, Wallingford, Wells, West Rutland, Andover, Bridgewater, Cavendish, Chester, Hartland, Landgrove, Londonderry, Ludlow, Perkinsville, Plymouth, Pomfret, Reading, Springfield, Weathersfield, West Windsor, Weston, Windsor, Woodstock, Bristol, Burlington, Charlotte, Colchester, Essex Town, Essex Junction, Fairfax, Ferrisburgh, Georgia, Grand Isle, Highgate, Hinesburgh, Huntington, Jericho, Lincoln, Middlebury, Milton, Monkton, New Haven, North Hero, Richmond, Shelburne, Sheldon, South Burlington, South Hero, St. Albans City, St. Albans Town, St. George, Starksboro, Swanton, Underhill, Vergennes, Waltham, Westford, Weybridge, Willistown, Winooski October 10, 2011 Page 51

54 ALL BROADBAND PROVIDERS IN VERMONT The website lists the following broadband providers for Vermont. The list identifies 36 broadband providers in Vermont and includes ILEC, CLEC, cable service providers, satellite providers, internet service providers and wireless providers. Table 41 All Broadband Providers in Vermont AT&T Mobility Charter Communications Comcast FairPoint Communications GlobalNet Green Mountain Access Waitsfield and Champlain Valley Telecom Kingdom Connection NCIC One Communications* Shoreham Telephone Company Southern Vermont Cable Company Sprint Nextel Stowe Cablevision TelJet* Trans-Video Cable Verizon Business* Vermont Telephone Company WildBlue Communications Burlington Telecom Cloud Alliance Duncan Cable Franklin Telephone Company, Inc. Great Auk Wireless, LLC HughesNet Satellite Level 3 Communications* North Branch Networks SegTel* Southern Vermont Broadband Cooperative Sovernet Communications Starband TDS Telecommunications Corp. Topsham Telephone Company and Topsham Communications U.S. Cellular Verizon Wireless WaveComm WirelessVT Solutions * Only serve business customers COMPETITION WITHIN FAIRPOINT FOOTPRINT - GIS SPECIFIC VERMONT DATA The second analytical technique used to determine competition within Vermont was performed using Vermont E911 point data available from the state administered database. In this analysis, VEC examined specifically the competition within the Fairpoint service footprint for cellular and cable. October 10, 2011 Page 52

55 VERMONT COMPETITION IN FAIRPOINT SERVICE TERRITORY A critical component of this report is to quantify the extent of competition within the service territory of FairPoint Communications which is the largest ILEC within the state of Vermont. For this report, competition was viewed as the ability to obtain service from an alternative provider of cable or cellular services in addition to traditional wireline service from the ILEC. This section details our findings and recommendations regarding this competition. SUMMARY OF METHODOLOGY The analysis uses GIS data points gathered from public sites and also from information provided by cable and cellular providers to the State of Vermont. The universe of customers was developed from the Vermont E911 database which was downloaded from the Vermont Center for Geographic Information (VCGI) xxviii. The FairPoint service territory was identified using the wire-center boundary GIS data from the VCGI website. This data is available to the public and includes the location of all facilities within the state. These were narrowed to only include those that would normally have telecommunications services. This data was then compared to GIS data provided to the State of Vermont by cable and cellular providers as part of their annual reports as described below. A detailed technical discussion of the GIS methodology employed for the report is provided as an Appendix. COMPETITORS NOT CONSIDERED IN THIS ANALYSIS The analysis considers only cellular and cable alternatives. Satellite and CLEC competition were not included. Satellite Satellite telecommunications were not considered a competitive choice for purposes of this GIS report. Satellite is theoretically available to any customer. However delays in transmission make voice communication difficult and reception is negatively influenced by sunspots and meteorological activity. Further, satellite requires a clear line of site between receiving dish and the satellite. It is beyond the scope of this review to determine the availability of line of site at each Vermont location E911 location. CLECs Competitive Local Exchange Carriers (CLECs) provide service to customers by acquiring components of the ILECs phone network. As such, CLEC service is technically available to any customer that can also be served by FairPoint. The competitiveness of this service is xxviii October 10, 2011 Page 53

56 determined by ILEC pricing of its own services and the CLEC costs of securing network elements and its own costs. This study was concerned with availability of alternatives to landline service, not with price competitiveness. COMPETITORS USED FOR THE ANALYSIS Cable Mode The Vermont Department of Public Service collects cable route maps in GIS format from cable operators with its annual reports. The Department provided this information for each provider in a single, aggregated shapefile, which consisted of a line-based shapefile that depicts those sections of roads where cable service is available. It was then estimated that service was available to specific addresses by identifying addresses that are within 500 feet of a road where cable service is available. Cellular Mode A (Cellular A) The Vermont Department of Public Service collects cellular coverage maps in GIS format from cellular operators with their annual reports. The Department of Public Service provided a single GIS shapefile that indicated aggregate coverage from Vermont cellular providers. This is the data depicted as Cellular A in the analysis. Cellular mapping is an inexact science. Wireless phones communicate using radio waves, their reliability is influenced by many factors, such as the proximity of the phone to the antenna with which it is communicating, physical obstacles, capacity and current demand and interference or electronic noise. Cellular phone calls can also be affected by severe weather, large buildings or other objects (such as Vermont s mountains) between a phone and the nearest antenna that your wireless service provider uses. As such, cellular maps are a best estimate and do not insure that all subscribers within the mapped area will always receive service. Cellular Mode B Pericle (Cellular B) The Vermont Transportation Authority (VTA) hired Pericle Communications Company under a propagation mapping contract to prepare an independent analysis of cellular coverage in the state. Using drive test data the company prepared propagation maps for each major cellular carrier in Vermont. The Department provided a single GIS shapefile that indicates aggregate coverage from Vermont cellular providers that was derived from this project. This is the data depicted as Cellular B in the analysis. Drive test data will generally produce lower results (less coverage) than that of obtained from aggregate coverage maps. This is especially true when geographic and or topographical features degrade cell signals. FAIRPOINT FOOTPRINT The analysis covered the FairPoint Communications service territory. This service territory was identified using the wire-center boundary GIS data available from the VCGI website. October 10, 2011 Page 54

57 THE ANALYSIS The following pages show the results of the GIS analysis in text, tabular and graphical form. As described, there are two primary modes of competition to the Incumbent Local Exchange Carrier, cable and cellular. The cellular mode is subdivided into two groups because there are two alternate cellular coverage estimates. These are identified as Cellular A and Cellular B. The analysis then looks at each of these coverage estimates singularly and in combination at different levels of geographic granularity within FairPoin'ts Service Territory. These levels are: County Wire Center Census Block Most importantly, an analysis was conducted that then aggregated the results. For example, it examined whether a customer has access to either cable or cellular. This analysis shows the number of customer who have zero access to either cable or cellular. Each of these is discussed and displayed in the following sections. TABLE INTERPRETATION Our analysis was concerned with identifying those customers which are not served by telecommunications options, namely cellular or cable. This drives the data presentations as explained below. County Coverage Tables Coverage or availability by county shows the number of datapoints within the FairPoint service territory that have that have the alternate service available. For example, in the table Cable Coverage by County, 17.2 percent of Essex county customers within the FairPoint service territory also have cable service available. Wire Center and Census Block Tables The analysis of wire centers and census blocks is too voluminous to show in raw data form. The tabular analysis results for these geographic areas is shown in percentage blocks, again with an emphasis on determining who does not have service. For example, the following shows that 15 wire centers had zero cable availability; meaning no customer in that FairPoint wire center also had access to cable. Continuing the example, 12 wire centers had greater than zero percent of customers with access to cable. Percent % No. of Wire Centers October 10, 2011 Page 55

58 For the 15,727 census blocks in the analysis, we expand the table one row further and show the population in each category. For example, in the following, 5,186 census blocks had zero percent of customers with access to cable and the number of people in those census blocks lacking cable access is 45,195. Percent 0.0% No Census Blocks 5,186 Population In Census Blocks 45,195 without Cable CABLE Cable by County There is considerable disparity in the percentage cable coverage in Vermont on a county basis. The following chart shows the percentage of customers by County who are served by FairPoint and that have cable availability. October 10, 2011 Page 56

59 Table 42 Cable by County Cable Coverage by County COUNTY Percent ESSEX 17.2% ORANGE 34.4% LAMOILLE 49.4% ORLEANS 50.1% CALEDONIA 55.1% WINDSOR 61.9% ADDISON 64.4% WINDHAM 69.9% FRANKLIN 70.0% BENNINGTON 78.4% WASHINGTON 79.9% RUTLAND 89.8% GRAND ISLE 93.6% CHITTENDEN 94.9% TOTAL 71.8% Although this disparity exists, it is not all that surprising. Essex County Vermont has only 9.7 persons per square mile compared to a Vermont average of 67.7 as reported by the US Census. xxix For comparison, this is a slightly lower density than North Dakota. The cost to provide cable service in areas that are so sparsely populated is prohibitive. xxix October 10, 2011 Page 57

60 CABLE BY WIRE CENTER Wire centers represent the primary geographic area for the telecommunications industry. They also provide additional granularity beyond the county view. Unfortunately wire centers and their names are mostly meaningless to the general public. For this reason we describe the results of our analysis here. The raw data is included in the Appendix of the report. VEC analyzed the results from 105 wire centers. Fifteen of these wire centers had zero customers with cable availability. Only one wire center had 100 percent availability. This is included in the following summary table. Table 43 Cable by Wire Center CABLE BY CENSUS BLOCK VEC also reviewed cable availability at the census block level. Census blocks allow for even further geographic granularity with the addition of population data. This provides greater visibility into the population density. VEC analyzed the data from 15,727 Vermont census blocks. Table 44 Cable by Census Block Census Blocks Percent of Customers with Cable Availability Wire Centers with percent of customers with Cable Availability Percent % 24.9% No of Wire Centers Percent 0.0% >0-25%- 50- >75%- >90%- 100% 24.9% % 89.9% 99.9 No Census 5, ,833 Blocks Population In Census Blocks without Cable 45,195 6,248 5,416 5,698 3,423 1,615 0 October 10, 2011 Page 58

61 Table 45 Cable by County October 10, 2011 Page 59

62 Table 46 Cable by Wire Center October 10, 2011 Page 60

63 Table 47 Cable by Census Block October 10, 2011 Page 61

64 CELLULAR A Cellular service A is generally available throughout Vermont. With the exception of three counties, the availability of cellular service exceeded 90 percent as Table ed in the following table. CELLULAR A BY WIRE CENTER Table 48 Cellular A by County COUNTY CellA_PCT ESSEX 74.7% ORANGE 77.2% ORLEANS 86.2% ADDISON 90.5% LAMOILLE 92.2% WINDSOR 92.4% BENNINGTON 94.0% WASHINGTON 94.5% CALEDONIA 94.8% WINDHAM 95.6% FRANKLIN 96.5% RUTLAND 99.6% CHITTENDEN 99.8% GRAND ISLE 100.0% TOTAL 94.1% When the availability of cellular A service is examined at the wire center level, a similar conclusion is reached. Seventy-two of the 105 wire centers have availability over 90 percent. Table 49 Cellular A by Wire Center Wire Centers with percent of customers with Cellular A Availability Percent % 24.9% No of Wire Centers CELLULAR A BY CENSUS BLOCK The availability of Cellular A service based on the census block data shows that 13,612 of the 15,727 census blocks reaches 100 percent. October 10, 2011 Page 62

65 Table 50 Cellular A by Census Block Census Blocks Percent of Customers with Cellular A Availability 0.0% >0-24.9% 25% % >75%- 89.9% >90% % Number of Census Blocks 1, ,612 Population In Census Blocks NOT Available for cellular A 5,658 2,819 1,882 2,294 1, Cellular A Maps The following maps contain the results of our analysis illustrated graphically. October 10, 2011 Page 63

66 Table 51 Cellular A by County October 10, 2011 Page 64

67 Table 52 Cellular A by Wire Center October 10, 2011 Page 65

68 Table 53 Cellular A by Census Block October 10, 2011 Page 66

69 CELLULAR B Cellular B by County The availability of cellular service was also examined based on the Cellular B data provided by Pericle Communications. The Cellular B data shows the availability of cell service is somewhat less than the analysis based on the Cellular A data. However, as indicated in the table below the availability exceeds 80 percent in all but 3 counties. Cellular B by Wire Center Table 54 Cellular B by County COUNTY CellB_PCT ESSEX 28.9% ORANGE 65.8% ORLEANS 79.3% WINDHAM 81.5% LAMOILLE 82.6% WINDSOR 82.9% BENNINGTON 88.2% ADDISON 90.1% WASHINGTON 91.4% CALEDONIA 93.2% FRANKLIN 93.4% RUTLAND 93.7% CHITTENDEN 99.4% GRAND ISLE 100.0% TOTAL 87.8% The wire center analysis of the Cellular B data also shows a lower availability than the Cellular A data had shown. However, the majority of the wire centers under the Cellular B analysis have availability greater than 75 percent. Table 55 Cellular B by Wire Center Wire Centers with percent of customers with Cellular B Availability Percent % 24.9% 49.9% 74.9% 89.9% 99.9% No of Wire Centers October 10, 2011 Page 67

70 Cellular B by Census Block The analysis of the Cellular B data based on census block also shows a lower availability than the analysis of the Cellular A data. However, 11,414 of the 15,727 census blocks have 100 percent availability. Table 56 Cellular B by Census Block Census Blocks with percent of customers with Cellular B Availability 0.0% >0-24.9% 25% % >75%- 89.9% > % Number of Census Blocks 2, ,41 4 Population In Census Blocks NOT Available for cellular 10,01 6 5,196 5,196 4,531 2, The following maps contain the results of our analysis illustrated graphically. October 10, 2011 Page 68

71 Table 57 Cellular B by County October 10, 2011 Page 69

72 Table 58 Cellular B by Wire Center October 10, 2011 Page 70

73 Table 59 Cellular B by Census Block October 10, 2011 Page 71

74 Cable or Cellular (A or B) Available The critical question addressed by this report is whether customers have access to at least one alternative to FairPoint wireline service. This is answered most clearly in the following section. This analysis combines the availability of Cable with Cellular A and then Cable with Cellular B. Cable or Cellular (A or B) Available By County County data is not displayed in a ranking format here so that the Cellular A and Cellular B data can be more easily compared. Table 60 Cable or Cellular (A or B) Available By County COUNTY Cable and Cell A % Cable and Cell B % ADDISON 90.5% 90.1% BENNINGTON 96.3% 90.6% CALEDONIA 95.7% 94.0% CHITTENDEN 99.9% 99.7% ESSEX 74.7% 39.1% FRANKLIN 97.5% 94.9% GRAND ISLE 100.0% 100.0% LAMOILLE 92.3% 83.9% ORANGE 79.8% 72.4% ORLEANS 87.8% 83.4% RUTLAND 99.7% 97.5% WASHINGTON 96.6% 94.9% WINDHAM 96.2% 90.4% WINDSOR 93.9% 87.4% TOTAL 95.1% 91.0% October 10, 2011 Page 72

75 Table 61 Cable or Cellular (A or B) Available By Wire Center Cable or Cellular (A or B) Available By Census Block Table 62 Cable or Cellular (A or B) Available By Census Block Cable or Cellular A Number of Census Blocks Population In Census Blocks NOT Available for cable or cellular Cable or Cellular B Number of Census Blocks Population In Census Blocks NOT Available for cable or cellular Wire Centers with percent of customers with Cellular or Cable Availability Percent % 24.9% 49.9% 74.9% 89.9% 99.9% No of Wire Centers Cellular A or Cable No of Wire Centers Cellular B or Cable % >0-24.9% 25% % >75%- 89.9% >90% % ,865 4,669 2,335 1,543 1,891 1, % >0-25%- 50- >75%- >90%- 100% 24.9% % 89.9% , ,259 7,546 4,651 3,267 3,719 1, October 10, 2011 Page 73

76 Table 63 Aggregate A by County October 10, 2011 Page 74

77 Table 64 Aggregate A by Wire Center October 10, 2011 Page 75

78 Table 65 Aggregate A by Census Block October 10, 2011 Page 76

79 Table 66 Aggregate B by County October 10, 2011 Page 77

80 Table 67 Aggregate B by Wire Center October 10, 2011 Page 78