FCC Chair’s Digital Empowerment Agenda – does it empower rural areas?

Yesterday I wrote about new FCC Chair Ajit Pai’s actions since taking the helm at the FCC. Generally I don’t go into detail about federal broadband policy because it’s all I can do to keep up with Minnesota policies and progress! But changes at the FCC will have an impact on rural broadband in Minnesota so I think it’s worth talking about it.

Before he became Chair, Pai published a Digital Empowerment Agenda, which outlines his recommendations for

  1. Gigabit Opportunity Zones (bringing broadband and digital opportunity to economically challenged areas)
  2. Mobile Broadband for Rural America
  3. Remove Regulatory Barriers to Broadband Deployment
  4. Promote Entrepreneurship and Innovation

There are a couple of themes in his plans – and to be fair this is an outline not a detail strategy but I think the themes are worth consideration.

Theme: Lessen Government Restrictions

Pai suggests that state and local lawmakers must adopt streamlined, broadband deployment-friendly policies, FCC should reform its pole attachment rules to reduce the costs of deployment, Congress should give the agency additional authority over poles owned by governments and railroads and  federal government should speed the deployment of broadband on federal lands and the FCC should use its existing authority to remove state and local barriers to deployment, such as unfair and unreasonable fees.

Theme: Tax cuts for Businesses

Pai recommends significant tax incentives to spur private-sector gigabit broadband deployment, tax credits to offsets the employer’s share of payroll taxes, a “rural dividend” to supplement existing funding sources and  promoting entrepreneurs’ access to capital. I’d like to see greater detail on these incentives. Pai led the FCC to vote to provide $170 million in CAF 2 funding to NY. I applaud the funding but CAF 2 only requires a provider to build to 10 Mbps down and 1 up. It’s like giving a 10 speed bike to a 16 year old who really wants and needs a car. The bike is better than nothing but it will limit what they can do – like where they can work or go to college.

Minnesota Border to Border grants require that projects are “scalable to 100 Mbps” so improvement builds to more improvement. CAF 2 doesn’t require scalable improvements. For these reasons, many people argue that CAF 2 isn’t a good use of taxpayer funds.

Theme: Wireless is Good Enough for Rural

All of Pai’s upgrades for rural areas are based on mobile technology. I have said before there will always be a place for wireless. But mobile broadband is not a good permanent solution for rural areas. There are d Distance limitations and data caps make mobile unaffordable to the end user. Some wireless providers are talking about 5G as a solution but 5G is still an undefined standard with greater distance restrictions than 4G and it requires greater infrastructure.

There are some providers who have figured out how to serve the current and future needs of rural area. (Hiawatha Broadband and Paul Bunyan to name just two.) And they aren’t focusing on mobile. We need to find a way to get the right incentives to the folks who are deploying long term broadband solutions to rural areas.

Absent Theme: Public-Private Partnership

Bucking every trend and recommendation I’ve seen related to rural broadband – public-private partnership is not mentioned once in his agenda. His solution is provider driven. It requires motivated providers.  For communities where the provider is not interested they need better tools to make it happen than tax incentives and broadband-friendly policies.

What’s going on at the FCC? Lots of changes – new decreases and stops on past actions

Late last month, I mention that the FCC had a new chair – Ajit Pai. One of the interesting things he did almost immediately was announce a Broadband Deployment Advisory Committee. (Applications to join the committee are due today.) Since those posts (and even before them) he’s been busy. Here’s a timeline of things that have happened.

Sep 13, 2016 – Pai creates a Digital Empowerment Agenda – there is a push to increase access to broadband by “incentivizing providers” and “remove state and local barriers to deployment.” The proposal leave heavily on the private sector expanding broadband deployment.

Dec 8 (2016) – Pai talks about cutting down net neutrality

Federal Communications Commission member Ajit Pai yesterday vowed to take a “weed whacker” to FCC regulations after President-elect Donald Trump takes office, with net neutrality rules being among the first to be cut down.

Jan 24 – Pai gives a speech expressing an interest in closing the digital divide or at least supporting the private sector as they build networks…

“I believe one of our core priorities going forward should be to close that divide—to do what’s necessary to help the private sector build networks, send signals, and distribute information to American consumers, regardless of race, gender, religion, sexual orientation, or anything else.  We must work to bring the benefits of the digital age to all Americans.”

Jan 26 – FCC votes to provide up to $170 million from the Connect America Fund to expand broadband deployment in unserved rural areas of New York State…

The $170 million in federal funding will be coupled with at least $200 million in state funding and private investment to jump-start broadband deployment and close the digital divide in these unserved areas more quickly. This partnership with the state program will also result in more efficient and effective use of both state and federal funding.

Jan 27 – Decreases transparency for broadband providers

When the FCC passed its net neutrality rules in 2015, they included transparency measures for internet service providers. Big providers were required to submit information to regulators and consumers on data caps, fees, and speeds, but the order also included a temporary waiver for providers with less than 100,000 subscribers. After a re-extension, the transparency requirements would have gone into effect this month. …

Pai, who was just appointed to the new job this week, introduced a proposal that would not only extend that waiver for a full five years, but expand it. If passed by the rest of the agency’s commissioners, any service provider with fewer than 250,000 subscribers will not be bound by the transparency requirements.

Jan 31 – removes from consideration the option to allow non-broadband providers to make and sell cable boxes. (Reminds me of Caterfone decision.)

The FCC has good news this morning for cable and satellite companies, but bad news for their subscribers who hate the set-top boxes they usually must lease in order to watch TV.

The agency’s new chairman, Ajit Pai, has removed from its agenda consideration of a proposal that would have made it possible for independent manufacturers to sell boxes that could replace the ones providers supply. The FCC says that 99% of subscribers pay an average of $231 a year to lease the boxes, even well after they’ve covered the cost of the devices.

Feb 2 – Increases transparency for the FCC

So, in a first-ever pilot project, the Federal Communications Commission has begun publishing the full text of proposals and regulations that the public would otherwise never see until after they have been finalized and approved.

Feb 3 – Removes 9 companies from the Lifeline program.

The Federal Communications Commission dealt a blow to a program intended to provide subsidized internet to the poor, announcing that nine companies would no longer be able to participate in the plan. …

“By eliminating the designations of nine entities to provide Lifeline broadband service, the Bureau has substantially undermined businesses who had begun relying on those designations,” Clyburn said. “These providers include a minority-owned business, a provider enabling students to complete their homework online, and others serving Tribal lands.”

Feb 3 – Closes investigations into zero-rating by T-Mobile, AT&T, Verizon, and Comcast. Zero-rating is a practice of allowing customers to stream *some* music and video without it counting toward a data plan limit…

“Today, the Wireless Telecommunications Bureau is closing its investigation into wireless carriers’ free-data offerings,” FCC Chairman Ajit Pai said in a statement. “These free-data plans have proven to be popular among consumers, particularly low-income Americans, and have enhanced competition in the wireless marketplace. Going forward, the Federal Communications Commission will not focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings.”

It may be a popular choice but sounds a lot like what Net Neutrality marshaled against.

Feb 3 – the FCC retracts several reports released by the previous administration – released at the very end if their tenure and that is the reason Pai gave for revoking them. So what was revoked?

Spiking the investigation into zero-rating practices by telecoms is the most serious about-face, but it’s worth noting the other items going down the memory hole, unannounced, on a Friday afternoon. …

The Public Safety & Homeland Security Bureau issued a 56-page white paper entitled “Cybersecurity Risk Reduction” on January 18th that addressed issues from Internet of Things security to reporting outages in submarine cables. It now has “no legal or other effect or meaning.” …

A second paper filed on the 18th examines progress made in modernizing the E-rate program, which provides discounts to schools for internet connectivity, as a follow-up to orders filed by the FCC in 2014….

A third paper ordered removed is a report on security challenges that might be encountered during the rollout of 5G mobile networks and associated devices. …

A fourth, shorter report regarding methodology in improving broadband networks was ordered nullified. …

Last is the “reconsideration” of several companies that had petitioned to be part of the Lifeline low-income connectivity voucher program. Several companies granted permission to be providers in recent weeks had that permission snatched away.

Are you right for the FCC Broadband Deployment Advisory Committee? Deadline to apply is Feb 15.

According to an FCC press release

FCC Chairman Ajit Pai announced the formation of a new federal advisory committee to explore ways to accelerate deployment of high-speed Internet access (or “broadband”) nationwide and to close the digital divide.

Sounds like the work is already lining up…

The Committee will focus on developing specific recommendations on how the FCC can encourage broadband deployment across America. Issues the Committee will tackle include further reforms to the FCC’s pole attachment rules; identifying unreasonable regulatory barriers to broadband deployment; ways to encourage local governments to adopt deployment-friendly policies; and other reforms within the scope of the Commission’s authority.

In particular, one of the Committee’s first tasks will be drafting a model code covering local franchising, zoning, permitting, and rights-of-way regulations. Many localities may not currently have or be able to develop policies conducive to deployment. With a model code approved by the FCC, any city could build a better regulatory environment for deployment, and any provider would have a better case for installing infrastructure.

Now they just need a few good people…

Nominees for the newly formed Broadband Deployment Advisory Committee will be drawn from a diverse set of stakeholders to address specific regulatory barriers to broadband deployment in both urban and rural areas. Representatives of consumers and community groups, the communications industry, and federal, state, local, and Tribal officials are encouraged to apply.

Individuals or organizations interested in serving on the Committee should visit www.fcc.gov/broadband-deployment-advisory-committee for information on the nominating process. Please submit all nominations by e-mail to BDAC@fcc.gov. The FCC will accept nominations until February 15, 2017. The Commission expects to hold its first meeting of the new Committee during the spring of 2017.

It sure would be nice to have some Minnesota voices on the team!

New FCC Chair – Ajit Pai: opposed Net Neutrality, former counsel to Verizon

Here’s a brief description of the new FCC Chairman from Telecompetitor

Pai has opposed Open Internet, also known as Net Neutrality regulation, suggesting the future of that regulation could be in peril – as could the decision to classify broadband as a Title II telecommunications service, which was coupled with the commission’s most recent moves on Net Neutrality. Pai also has opposed regulating broadband business services – a move that the commission under Wheeler had been poised to make. He has opposed efforts by the FCC that would make it easier for municipalities to build their own broadband networks.  And he has opposed broadband privacy regulation.

Issues on which Pai has found consensus with Democratic colleagues include universal service reform, spectrum allocation and others

Apparently he has demonstrated an interest in rural broadband…

Pai grew up in Kansas and on various occasions has demonstrated an interest in and understanding of rural telecom issues, as well as fiscal conservatism.

Several months ago, for example, Pai advocated giving tax breaks to network operators to deploy gigabit service in certain rural areas and using 10% of the money raised from spectrum auctions for the deployment of mobile broadband in rural America.

Digging deeper into Pai’s previous recommendations, it looks like he’s a proponent of mobile solutions…

The Pai Gigabit Opportunity Zones proposal also calls for the creation of a Mobility Fund Phase II as part of Universal Service reforms. The program would cover some of the costs of deploying mobile broadband in high-cost rural areas and would be funded – at least in part – through spectrum auctions. Pai’s speech notes that the proposed program would have raised $700 million annually if it had been in place over the last 10 years

The idea of dedicating 10% of spectrum auction proceeds to mobile broadband deployment could be a compelling one at a time when some people have questioned whether the current Universal Service budget is sufficient to support the cost of nationwide wired and wireless broadband deployments. Currently the Universal Service program is funded through the telecom industry as a percentage of voice revenues. But proposals to expand the contribution base to include broadband services have met with strong resistance, even as the program has been expanded to fund broadband deployments.

Strategies and Recommendations for Promoting Digital Inclusion

The FCC recently released their Strategies and Recommendations for Promoting Digital Inclusion. The report paints a picture of what the digital divide looks like today –

  • Americans with the lowest incomes are most likely to go without broadband at home.
  • Americans who are more likely to have low socioeconomic statuses due to historical and systemic barriers to education, opportunity, and adequate housing are least likely to have home broadband connectivity
  • African-Americans and 50 percent of Hispanics subscribe to a home broadband service, compared with 72 percent of White Americans
  • A rural-urban divide persists as well
  • People with disabilities and older adults are also more likely to go without a home broadband subscription
  • Perhaps one of the starkest divides in broadband access and adoption exists in Indian Country, where broadband is often unavailable

They also talk about national and local efforts to close the divide. It was nice to see the Blandin Foundation mentioned…

Example: The Blandin Foundation serves rural Minnesota by strategically allocating grants to organizations that support broadband access, adoption and digital literacy through its Community Broadband Resources Program. The foundation supports a number of community projects throughout the state. For instance, in Nobles County, grantees are working to establish Wi-Fi hotspots to provide access to unserved residents. In Chisago County, where broadband is expensive, slow, or unavailable, Blandin undertook a community survey to paint a picture of the divide that exists for lawmakers and providers. As a result, providers have expanded service and rolled out significant service improvements. In Stevens County, the foundation supported a consortium of school districts that developed a broadband-based system for providing specialized distance learning for students with disabilities. And in the Central Woodlands area of the state, a Blandin-funded pilot project assisted local businesses with adopting e-commerce and as a result, the program has expanded to help businesses in surrounding areas. All of these institutions, and the others that Blandin supports, have targeted-mission specific needs that are unique to their rural geography. As a community foundation, Blandin is uniquely situated to appreciate and assess those needs and support groups accordingly.

And they made recommendations. I’m going to try to shorthand them below (they are detailed in the report)..

Outreach & Education

  • Consider the creation of an online hub that catalogues digital inclusion resources by state
  • Consider convening a series of in-person and online National Digital Inclusion Summits across the country
  • Consider hosting a separate meeting to bring together representatives of Tribal libraries with representatives of non-tribal libraries and researchers
  • Consider increasing outreach to people with disabilities and their representatives

Partnerships

  • Commission, along with partners at the Department of Education and other interested federal agency stakeholders, may wish to explore ways to facilitate relationships in states between workforce development programs and community colleges
  • Bureau’s Office of Intergovernmental Affairs(IGA)may consider engaging and working with the National Association of Regulatory Utility Commissioners, the National Association of Utility Consumer Advocates, and local government representatives including the National Association of Counties and the U.S. Conference of Mayors to identify and connect community anchor institutions and grassroots organizations
  • IGA and the Office of Native Affairs and Policy could also liaise with state and local governments to explore partnerships between cities and/or states and nearby Tribal governments and Tribal libraries

Policy

  • Support Lifeline Aggregation Projects
  • Make Purchasing ISP Services Simpler and More Transparent
  • Support Using the Educational Broadband Service to Provide Service to Underserved Areas
  • Support Using Existing Federal Legislation to Promote Digital Inclusion.

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.