A-CAM 101: federal funding for smaller broadband providers

Sometimes you just need a practitioner to give the 10,000 foot view of what’s going on when policy and technology combine. I’m thankful to Brent Christensen (from MTA) for his time today giving me the low down on A-CAM.

I’ve talked a lot about CAF 2 funding from the FCC – $85 million a year for 6 years going to Price Cap Carriers (big guys such as CenturyLink, Frontier and Windstream ).

For Rate of Return providers (mostly smaller providers, often in rural areas) the FCC has come up with another plan. Providers can choose to reduce their rate of return OR apply for A-CAM funding:

  • Reduce the rate of return means going from 10.25 percent to 9.75 percent over the next few years.
  • The A-CAM option is available for providers where less than 90 percent of their service can access broadband at 10 Mbps down and 1 Mbps up and/or receive less than $200 per loop. A-CAM funding is for 10 years.

For most folks it’s a numbers game – can you make more by applying for A-CAM funding or going with strict cut in rate? For some folks, it’s a stability issue. They’ll take a reduction in support for the certainty over 10 years.

The deadline to apply for A-CAM funding was November 1, 2016. They received $160 million more than they had budgeted; they had budgeted for just over $1 billion. So, the FCC is trying again with a round two of applications. In fact that application should be available soon. The providers will have 30 days to respond. The FCC is hoping to be done with the process by the end of the year – in part I’m sure due to political changes.

So many questions still remain.

Why are they funding 10/1 access when they define broadband as 25/3? The reason is to help the folks who have no service. But this stuff is difficult for community leaders, policy makers and really anyone outside the industry to understand without using multiple speed definitions for broadband (10/1 vs 25/3).

Why the continuation of uncertainty? We’re asking providers to continue to make long term investment – albeit with government support. But the uncertainty can be as difficult as the financial pinch.

The biggest question – what will be the impact of political change on this and other broadband funding and regulation?

FCC decision on Business Data Services impacts pricing for rural wireless

Sometimes rural broadband policy gets a little wonky. So I find it’s helpful to start with the consequences policy or the why should I care. Telecompetitor recently ran a story on the potential impact of the FCC’s ruling on business data services. Here’s a glimpse of why you might care based on comments from others…

  • The Ad Hoc Telecommunications Users Committee estimates that BDS prices would have been 22% lower in markets that were de-regulated prematurely if de-regulation had not occurred. A compromise proposal from Verizon and competitive carrier association Incompass calls for a 15% reduction in BDS costs in those areas.

  • Colleen Boothby, a representative for The Ad Hoc Telecommunications Users Committee, cited what she called a “stunning” study of the e-rate program that covers some of a school’s broadband costs. The study, conducted by an e-rate consulting firm, found that often schools received only one very high bid in response to broadband proposals and that those bids often came from competitive carriers. Digging into it, however, the study found that prices sometimes were high because the competitive carrier was buying the underlying access from the incumbent which represented 95% of the total price quoted.

And here’s a little bit on the question at hand…

The FCC is considering whether to impose price controls on BDS providers in areas that the commission previously deemed to be competitive, but which BDS purchasers say are not competitive. BDS purchasers include business and government users of data services, including schools and libraries, as well as carriers and others. The FCC business data services decision could call for decreasing BDS pricing in markets where costs have increased since the markets were deregulated.

And the details…

Although wireless carriers sometimes build their own backhaul networks, Katz estimates that at least 50% of the time they lease connectivity from another carrier – and in the majority of cases, it’s the incumbent local carrier. According to an analysis of BDS data collected by the FCC, 73% of locations are served by a monopoly BDS provider and 97% by no more than two providers, Katz said. When there are only two providers, the cost of BDS services drops only about 10%, according to Katz.

Backhaul costs represent almost 30% of a rural wireless carrier’s total network costs and 6% of a wireless carrier’s opex, according to the Telecom Advisory Services study. Analyzing historical data, the Telecom Advisory Services study found that 85% of regulator-mandated cost reduction in carrier operational expenditures (opex) could instead be used for capital expenditures (capex).

The study looked at the impact of various levels of price reduction under three different scenarios – one in which a carrier spends 2.25% of opex on backhaul, another in which that number is 4.3% and another in which that number is 6%. Levels of price reduction studied included 10%, 20% and 30%. Results showed that a carrier spending a relatively low 2.25% of its opex on backhaul and getting just a 10% reduction in BDS costs could have an additional $40,000 for its capex budget.

Court of Appeals tells FCC they can’t open doors to municipal networks by preempting state laws

It’s a national decision that has an impact on Minnesota cities and counties go about encouraging better broadband. Here’s a quick breakdown on the action from Watch Dog

In a unanimous opinion issued Wednesday, the three-judge panel of the U.S. Court of Appeals for the Sixth Circuit ruled in favor of the attorneys general of Tennessee and North Carolina. Those states filed the case after the FCC voted in February 2015 to block laws that prevent municipal broadband networks from expanding outside their territories.

The FCC argued it had that authority because Congress told it to remove barriers that prevent telecommunications competition in Section 706 of the Telecommunications Act of 1996.

The appeals court disagreed.

Some folks are happy about the decision – such as the Watch Dog folks…

Berin Szoka, president of TechFreedom, said it “took enormous chutzpah” for the FCC to try to preempt those state broadband laws in the first place.

“This is a well-deserved rebuke for an agency run amuck,” he said. “It should have been obvious that the FCC would lose, since the Supreme Court rejected the idea that the FCC could preempt such laws over a decade ago — under far clearer statutory language. The court shredded the FCC’s claim that, while it could not require states to allow muni broadband, it could regulate the conditions under which they governed the networks that cities were allowed to build.”

FCC Chairman Tom Wheeler issued a statement on the ruling, noting that more than 50 communities have started developing their own broadband networks in the past 18 months. …

Szoka said the litigation distracts from the main broadband issues the FCC needs to address: how to make deployment easier.

“The agency is less interested in actual progress than in making headlines and stoking a small fringe of activists who prefer government-run networks over private provision of broadband for ideological reasons,” he said. “The greatest irony here is that the real barriers to deployment come from local governments themselves, and the FCC could help identify ways to cut red tape, lower fees, and build smarter infrastructure that can facilitate deployment. That could encourage both upgrades from incumbents and new entry from companies like Google Fiber. In short, government-run broadband should be a last resort, not a go-to solution.”

Some folks, such as the Institute for Local Self Reliance, are less happy…

A circuit court decision this week means the digital divide in Tennessee and North Carolina will be allowed to continue. This week, the 6th Circuit Court of appeals decided to dismiss the FCC’s decision to encourage Internet investment by restricting local authority to build competitive Internet networks. In February, ILSR and Next Century Cities filed an Amicus Brief in support of the FCC’s position. Here is a selection of media stories which cite ILSR.

The ILSR has compiled responses on their website, such as…

Cities looking to compete with large Internet providers just suffered a big defeat by Brian Fung: The Washington Post, August 10

There are signs, however, that municipal broadband proponents were anticipating Wednesday’s outcome — and are already moving to adapt. One approach? Focus on improving cities’ abilities to lay fiber optic cables that then any Internet provider can lease; so far, only one state, Nebraska, has banned this so-called “dark fiber” plan, said Christopher Mitchell, who directs the Institute for Local Self-Reliance’s Community Broadband Networks Initiative.

“We’re pursuing strategies that are harder for the cable and telephone companies to defeat,” said Mitchell.

FCC maps intersection of healthcare and broadband

GNC reports on intersection of healthcare and broadband as mapped by the FCC…

The connection between access to broadband and the availability of innovative health care may not be immediately apparent, but  a new web-based interactive mapping tool developed by the Federal Communications Commission’s Connect2Health Task Force make the correlations increasingly clear.

Mapping Broadband Health in America lets the public, health officials and government agencies find the intersection between broadband connectivity and health at the national, state and county levels.

“The reality of broadband is that everything it touches is transformative,” FCC Chairman Tom Wheeler said at the Aug. 2 launch event in Washington, D.C. “Yes, broadband is transformative for healthcare, but, no, broadband is not totally available.”

You can search and map data in many ways – by state and by county. Here is how Minnesota added up:

Broadband Accessbroadband healthcare

  • Number of Providers : 101
  • Fixed Broadband : 88.3%
  • Fixed Download : 89.3%
  • Fixed Upload : 91.7%
  • Most Common Download : 100 – 1,000 mbps
  • Most Common Upload : 15 – 25 mbps

Health Access

  • Primary Care Physicians : 4,834
  • Dental Providers : 3,544
  • Mental Health : 10,254
  • Health Measures
  • Poor/Fair Health : 573,003
  • Premature Death : 5,038 per 100,000
  • Preventable Hospitalization : 44.9 per 1,000
  • Injury Deaths : 55.9 per 100,000
  • Sick Days : 2.8 days per month

Health Behaviors

  • Obesity : 26%
  • Diabetes : 7.6%
  • Smoking : 16.2%
  • Excessive Drinking : 19.3%
  • Physical Inactivity: 19.3%
  • Severe Housing : 14.6%

The site includes a list of the 100 Priority Counties and another list of the 100 Priority Rural Counties. These are the counties that need the most help. Here’s the good news – no Minnesota Counties made the list!

How can rural broadband catch up when they keep moving the goalposts? Ask MN Counties who aren’t catching up.

According to the Rural Blog

The FCC’s 2016 Broadband Progress Report says 39 percent of rural areas lack access to the newly defined broadband, while only 4 percent of urban areas lack it, [it’s 41 percent on tribal lands!] Karsten notes, saying “This rural/urban ‘digital divide’ in access severely limits rural populations from taking advantage of a critical component of modern life. . . . Rural schools lack access to high-speed fiber and pay more than twice as much for bandwidth. In a growing world of personalized online curricula, internet-based research, and online testing, this severely restricts rural students from educational opportunities their urban counterparts may enjoy.”

The answer isn’t keep the goalposts low – the answer is find a way to improve access everywhere. The FCC report provides data on connectivity in each county, which is helpful. The first step is recognizing where there’s a problem.

Below is a chart of access by county – organized by percentage of rural population without access (third column) but includes total and urban percent of population without access. (There are three counties without numbers.) You can see the range is great – from 1 percent to 99 percent.

I know charts do not transfer well to the website. You can download the full table of FCC data and the Minnesota portion; both will be easier to read and provide more data (population, population density and per capita income) that what is shown here.


Data comes from the Commission’s Form 477 data, as of December 31, 2014.

Senator Klobuchar urges the FCC to expand broadband to rural areas

From Senator Klobuchar’s website

U.S. Senator Amy Klobuchar has urged the Federal Communications Commission (FCC) to expand access to reliable, high-speed mobile broadband in rural America. According to the FCC, 87 percent of rural Americans lack access to mobile broadband with minimum advertised speeds of 10 Mbps/1 Mbps, compared to 45 percent of those living in urban areas. Without the certainty that mobile broadband infrastructure will be deployed and maintained, investments in rural productivity could be delayed or bypassed altogether. In a letter to Chairman Tom Wheeler, Klobuchar and a bipartisan group of senators asked the FCC to retain and update the Universal Service Fund’s Mobility Fund to ensure that funding will promote new mobile broadband deployment in underserved rural and agricultural areas and preserve and upgrade mobile broadband where it is currently unavailable.

“Significant work remains to ensure that broadband services are available in rural America and reasonably comparable to services enjoyed in urban areas,” the lawmakers wrote. “Simply stated, broadband, particularly high-speed mobile broadband, is not readily available in many rural areas or could be at risk absent the right policies and support through the Universal Service Fund. [The Mobility Fund] should be retained and updated to ensure that funding will promote new mobile broadband deployment in unserved rural and agricultural areas and preserve and upgrade mobile broadband where it is currently available.”

Klobuchar, a member of the Senate Commerce Committee, is a leader in promoting widespread broadband access. She led a bipartisan letter with Senator John Thune (R-SD) and 59 other senators calling on the FCC to modernize rules intended to ensure that Americans in rural areas have access to affordable broadband services. She has introduced the bipartisan Rural Spectrum Accessibility Act with Senator Deb Fischer (R-NE) to increase wireless broadband access in rural communities by providing incentives for wireless carriers to lease unused spectrum to rural or smaller carriers. She authored the Broadband Conduit Deployment Act to require states to simultaneously install broadband conduits as part of certain federal transportation projects, including building a new highway or adding a new lane or shoulder to an existing highway. The president issued an executive order in 2012 that included an initiative known as “Dig Once” that was derived from this legislation. She also submitted comments to the federal Broadband Opportunity Council in June 2015.

In addition to Klobuchar, the letter was signed by Senators Roger Wicker (R-MS), Joe Manchin (D-WV), Tammy Baldwin (D-WI), Roy Blunt (R-MO), John Boozman (R-AR), Richard Burr (R-NC), Shelley Moore Capito, (R-WV), Thad Cochran (R-MS), Steve Daines (R-MT), Joni Ernst (R-IA), Deb Fischer (R-NE), Cory Gardner (R-CO), Heidi Heitkamp, (D-ND), Ron Johnson, (R-WI), Angus King (I-ME), Mark Kirk (R-IL), Claire McCaskill, (D-MO), Jerry Moran (R-KS), Gary Peters (D-MI), Pat Roberts (R-KS), Marco Rubio (R-FL), Thom Tillis (R-NC), David Vitter (R-LA), Mark Warner, (D-VA), and Ron Wyden (D-OR).

The full text of the letter is found below:

Dear Chairman Wheeler:

As representatives of states with significant agricultural activity, we share the goal of ensuring that access to high-quality communications networks in rural America remains a top priority for the Commission.

More than ever before, U.S. farmers and ranchers are demanding reliable, high-speed mobile broadband services. Mobility is essential for new precision agriculture technologies to deliver productivity gains and environmental sustainability. These technologies are transforming U.S. agriculture as American farmers and ranchers seek to feed, fuel, and clothe an ever-increasing global population using limited land, water, and other resources.
We applaud the Commission’s recent decision to allow rate-of-return carriers to access support for “standalone” broadband facilities. This step will help encourage carriers to deploy modern broadband-capable wireline networks in rural areas. Importantly, this is necessary as consumers increasingly rely on wireless services and are “cutting the cord” to shift away from wireline voice. Soaring mobile broadband relies on sufficient backhaul, often provided by these wireline networks. Going forward, sufficient support must also be available to preserve and expand mobile voice and broadband.

Significant work remains to ensure that broadband services are available in rural America and reasonably comparable to services enjoyed in urban areas. Simply stated, broadband, particularly high-speed mobile broadband, is not readily available in many rural areas or could be at risk absent the right policies and support through the Universal Service Fund (USF). While progress has been made in the deployment of broadband, significant portions of rural areas have been left behind. According to the FCC, 87 percent of rural Americans (52.2 million) lack access to mobile broadband with minimum advertised speeds of 10 Mbps/1 Mbps, compared to 45 percent of those living in urban areas.

Without the certainty that essential mobile broadband infrastructure will be deployed and maintained, investments in agricultural productivity will be delayed or bypassed altogether, and the potential efficiencies and benefits to rural communities will be lost. The extension of high-speed mobile and backhaul facilities to agricultural croplands and ranch lands must keep pace with the ongoing deployment of technology in the field. Increasing numbers of modems in the field means a growing demand for connectivity in the areas in which they operate.
The expansion of rural broadband should be a top priority of federal and state policymakers, as expanded de
ployment in rural areas will address important economic, educational, health care, and public safety goals. Ongoing USF reform can provide a mechanism for enabling mobile broadband access in rural communities where “people live, work, and travel” that is truly comparable to broadband services provided in urban and suburban areas. To accomplish this goal, USF should support mobile broadband at a minimum of today’s level to close the coverage gap while preserving existing service.

In this regard, we ask you to give special attention as you work to establish Phase II of the USF’s Mobility Fund (MF). Given the importance of mobile services today, the MF should be retained and updated to ensure that funding will promote new mobile broadband deployment in unserved rural and agricultural areas and preserve and upgrade mobile broadband where it is currently available. Importantly, the FCC must rely on realistic measurements of network experience on the ground to determine areas to support.

Croplands and ranch lands have lagged behind in adequate mobile coverage, even as demand for coverage has grown. To address this coverage gap, we urge you to consider a metric of broadband access in croplands (and farm buildings), or some other geographic measurement, in addition to road miles, to identify these areas of greatest need. “Cropland” coverage can be assessed using United States Department of Agriculture data for crop operations, the United States Geological Survey’s Land Use classification, or other databases.

Agriculture is a significant generator of economic activity in our states. We greatly appreciate your efforts to ensure that the latest mobile broadband services are provided to all Americans, including those in agriculture whose livelihoods depend on it.

How could the 2016 election impact Net Neutrality?

Last week I wrote about the latest Net Neutrality news – US Court of Appeals leaned toward Net Neutrality when they called broadband a utility. Some folks were happy. Some were not. Few folks thought this was the sound of the fat lady singing. Brookings recently published an article that draws out a few potential scenarios for what could happen next. The perspective I found most interesting was – how will the election this fall have an impact…

Electoral outcomes in November could change legislative prospects or further foreclose them, depending on how many House and Senate seats each party holds in the next Congress. Here, the best scenario for opponents of the new status quo would be the election of more Republicans to Congress and Donald Trump to the presidency. Unlike President Obama, President Trump might sign legislation modifying net neutrality rather than veto it with no possibility of having that veto overridden. President Trump could also appoint a new FCC Chairman, creating a Republican majority that could nullify the DC Circuit’s net neutrality decision.

But if Hillary Clinton emerges victorious instead, any legislative or FCC reversal becomes highly unlikely, since Secretary Clinton is on record as favoring the net neutrality approach of the current FCC. In turn, her election could raise the stakes for a final Supreme Court decision, which could occur two or three years from now if the appellate process runs its course and the Court returns to nine sitting justices.