I wasn’t able to attend last week – but I just listened to two presentations made to the Minnesota Energy, Utilities and Telecommunications Committee Jan 31 meeting. I thought I’d share my notes. The meeting was unabashedly policy-focused – but the legislators really wanted to know what policy at the federal level meant for them, for the state and for customers so in some ways this meeting was a good look at what polices mean at the ground level.

Connect MN mapping

Bill Hoffman spoke on behalf of Connect Minnesota. (Special thanks to Bill for sharing his presentation!)

In 2008, Connected Nation started doing mapping in the state. Now they (Connect Minnesota) are the official designated mappers funded by the NTIA receiving $4.4 million; it will continue until December 2014. Our maps feed into the National Broadband Map, which is used for policy decisions –esp USF funding distribution. (http://broadbandmap.gov/)

We have three goals

1. Support economic development
2. Education and inform policy makers and stake holders
3. Look to partner with others to expand broadband

We offer four services:

1. Data collection on broadband access
2. Survey & Research on adoption & utilization
3. Provide planning support to Dep of Commerce and MN Task Force
4. Program development by partnering with others to find areas to enhance/build broadband adoption (including digital inclusion & computer ownerships)

Broadband Mapping available at http://www.connectmn.org  – we have downloadable maps and interactive maps. Our engineers provide ongoing validation of broadband access. We also encourage Minnesota residents to check out the maps and report back should they question the validity.

QUESTIONS:

Why are there such stark differences between counties that are next to each other in the maps?

Based on research – the providers offer different speeds. It’s a matter of market conditions and what’s available technology-wise. We should remember that our goals are statewide.

Some stats
72% of Minnesotans use broadband at home – that is above national average

We look at main barriers:
Nothing I want to do online
Cost
Not available.

We have 57.4% of the way to the MN Broadband Goals of 10-20Mbps downstream and 5-10Mbps upstream (57.4% of home have that access today).

Questions

Do you hope to increase broadband?

We want to provide the best data we can to help policymakers and other stakeholders make the best decisions they can.

Do you compare us to other states?

Yes we compare to our other 13 states and use federal data to compare to the rest of the country. We are doing above average, but we still have work to do.

How do you track new towers?

We work with providers. We have nondisclosure agreements and so we work closely with them. If we get a report, we check on it. We aren’t involved with the regulations.

Has anyone looked at availability vs access? (In terms of the natural adoption rate for technology.) When will use of broadband match computer use?

We could look into that more.

Do we need to do anything legislatively to help meet the MN Broadband goals?

That is probably an answer for the Department of Commerce.

Federal funding is $4.4 million – what is the state obligation?

There is none. Connect MN has an in kind match (20%) but no direct funding.

Will the $4.4 million allow us to make our goal of ubiquitous broadband?

It will help because we are providing information that is vital to decision makers – but we aren’t involved with building networks. But others in the state have received money to deploy networks.

Can you talk more about your broadband adoption efforts and partnerships?

There are many groups in MN working on broadband adoption. From PCs for People, the Blandin Foundation, providers themselves. We strive to work with them to promote their efforts. Adoption is a big issue.

Brent Christensen from MN Telecom Alliance http://www.mnta.org/ and Tom Farm – FCC order addressing Universal Service Funding and Intercarrier Compensation (Special thanks to Brent for sharing his presentation!)

Comments on Connect Minnesota – as a provider, we have worked with ConnectMN and they have done a great job. We’re trying to keep telcos to double check the maps. The definition of broadband has changed rapidly. In 1994 there was one 56K connection for the whole state. We’re made great strides. It’s growing by itself – we need to get the pipe out there and let is grow. Adoption is a big piece too.

Fees on telephone bills breakdown

• USF is 17.9%
• 911 is $.80 per line per month
• Telephone assistance is $06 per line
• Telephone access is $.06 per line.

Terms to Know:

• Price Cap Carriers – CenturyLink, Frontier and Windstream
• Rate of Return Carriers – everyone else
• USF (Universal Service Fund) – on your phone bill – paid by landline customers – paid into Universal Service Administrative Company. They have a range of programs – E-Rate, rural healthcare and high cost fund (bringing broadband to hard to reach areas) It’s part of your inter-state services.
• Intra-state – calls that start and end in Minnesota
• Inter-state – calls that start and end in different states
• ICC (Intercarrier Compensation) – money paid between companies to originate and terminate calls – generally long distance companies paying local telcos to terminate calls.
• Connect America Fund – what the FCC is building – it will replace the USF – it provides USF for broadband.

Revenues per line – for rural telcos

• 29% – end user fees (residential – local and extended areas)
• 31% – avg USF
• 6% – interstate
• 13% – Interstate service line charge

History of FCC order
National Broadband Plan Feb 2010 – lots of proposed rulemakings. It had one solution for transition without differentiating for different size providers.
Oct 27, 2011 – new plan comes out.
Jan 1, 2012 – new plan is deployed
As of today – there are 27 requests for reconsideration and 13 lawsuits. There may be some changes – although the bulk will probably remain the same.

The burden is now on end-user – CAF will cushion the transition in some ways. The impact on Rate of Return Carriers is still unknown

What can the state expect?
For the first time VOIP have to pay to use the network and vice versa. (Needed to find a way to get tariff between Nov 2011 and Jan 2012)
Reduced USF for carriers that maintain what the FCC calls artificially low rates. But they didn’t consider that in Madelia (for example) a customer can reach 900 people locally while in the Twin Cities a customer can reach millions of other customers locally. So companies with local access have to get to $10 by January 1 to get July 1 compensation. Then need to get to $14 by Jan 2013.
In order to collect CAF, they have some up with an access recovery charge – $.50 charge on consumer phone bill every 6 months until it gets to $3.

Questions – do people find this overwhelming?
We didn’t expect this rate floor. And we didn’t expect this kind of turn around.

Question – so this may cause many people to drop their landlines – except for elderly and poor?
Yes.

One problem is that the PUC doesn’t have jurisdiction over the VOIP carriers.

Telephone rates will probably ramp up to $30/month over the next couple of years, regardless of how many people you can call. Right now rates in Madelia are about $12.65/month.

The local areas aren’t forced to pass on these costs but they would not qualify for certain funding. The difficult thing is that at $30 per line they may also run short of customers.

Why is the FCC do this?

The plan is to transition for Public Switched Telephone Network to Broadband. They don’t mind raising the rates on the telephone service because they feel the service will go away anyways. But the CAF doesn’t provide any long term plans for the Rate of Return Carriers, which leads to a high degree of uncertainty.

This will transform the revenue streams that have kept phone calls prices low and high quality. Right now intra-state rates range from $.10 to $.3. And that’s just terminating calls.

The Reform Plan deals with CAF. The Price Cap Companies also transition.

Phase I: With revenues come obligations – frozen high cost support, it also deals with Competitive Eligible Telcom Carrier status. In 1996, they established ETC status for anyone who could serve whole area. This freezes that support. Also there’s a $750 limit per customer for Price Cap Companies. But that number is not based on any real numbers.

Phase II: Price Cap will have an opportunity to deploy broadband in new areas – it won’t do much for small provider who have already deployed broadband We have carriers who have done a good job – but they have slowed down in anticipation of issues from the unfolding of these decisions.

Question – Is this all done by the FCC? NO backstop from policymakers? This is crazy.

Out national organization is working on education at the federal level. The FCC is charged by Congress to set up the rules. There’s a process for reconsideration. There are lawsuits. We’re doing what we can.

There’s a process to award high cost areas that Price Cap Areas will be able bid upon. If they don’t the area opens up. Providers must offer 4Mbps (downstream) to at least 85% of the area. But our sources of revenue are up in the air. How that plan is implemented is still undecided. If you receive a reasonable request – you need to provide service yet this will have to happen with less money.

The National Broadband Plan set goals from 4Mbps – compared to the State goals (10-20Mbps). We need to get that in order. There is a waiver process but they intend to make it difficult.

Questions – are there areas where the state will lose power?
Yes the biggest change will be that the state will no longer set rates.

The PUC will deal with ETC status. They will certify high cost support. More will be involved at the Commission in terms of filing reports. Significantly more tariffs are required. But neither the PUC, nor vendor, will have a lot of control.

The Phase down of intra-state rates will need to happen. Tariffs will involve local rate increases. We’ve been trying to work through the process and everyone (PUC Dep of Commerce) has been understanding. There are lots of changes in ETC status. The PUC will probably be the point for wireless and wireline connections.

What can the state do? What can the legislature do?

They can look at Chapter 237 and make sure that they’re in line with what’s happening at the federal level. They are suggesting legislation – and we may need to get in line with federal legislation. State government can help boost broadband adoption.