July 29 - August 5: USF Reform and Broadband Caps
July 29 - August 5: Universal Service Reform and Broadband Caps
Most of the air in Washington has been devoted of late to the debt ceiling deal and deciphering what it means. But that hasn't stopped major developments in how broadband networks will be deployed and used.
Universal Service Reform
At the heart of the National Broadband Plan are the recommendations targeted at modernizing and streamlining the federal Universal Service Fund (USF). Thirty-five recommendations -- approximately 16% of the plan's suggestions -- address this issue. The USF helps provide communities across the country with affordable telecommunications services. The USF has traditionally been focused on making telephone service more available and affordable, but the National Broadband Plan recommended that the Federal Communications Commission modernize the USF, focusing on broadband deployment and affordability.
On July 29, AT&T, Verizon, Frontier, CenturyLink, and FairPoint, and Windstream offered a joint proposal for USF reform. The companies' "America’s Broadband Connectivity Plan” recommends setting aside $2.2 billion annually for broadband deployment and subsidies in (mainly) rural areas, $2 billion annually for rate-of-return carriers (1), and $300 million annually for a mobility fund to support wireless services in rural areas.
To stay within the current fund size, the carriers' plan also recommends:
- a satellite broadband solution to bring broadband to the 750,000 unserved US homes that would be too costly to serve using a terrestrial solution, and
- the fund should support only a single carrier in an area and only in areas without competition.
The teleco's plan recommends a minimum broadband target speed of 4 Mb/s downstream and 768 kb/s upstream -- a target that is actually a bit lower than the 1 Mb/s downstream rate initially recommended by the FCC. Rural carriers, on the other hand, have recommended that speeds should be comparable with what is available in urban areas. At the present, perhaps that could be interpreted to mean 4 Mb/s- 768 kb/s speeds, but within a few years the rural carriers’ proposal could call for higher speeds.
Three associations representing small rural telcos -- Organization for the Promotion and Advancement of Small Telecommunications Companies, National Telecommunications Cooperative Association, and the Western Telecommunications Alliance -- indicated general agreement with aspects of the bigger companies' plan. The National Cable & Telecommunications Association also offered some tweaks.
In the wake of the proposal, on August 3, the FCC invited public comment on America’s Broadband Connectivity Plan and other proposals offered in the proceeding. The FCC is asking for public input by Wednesday, August 24 -- with another week for parties to reply to eachother. (So much for your planned break in August.)
Broadband Data Caps
AT&T announced this week that, starting October 1, it will curb browsing speeds for its heaviest users on unlimited wireless data plans to cope with surging data traffic. Customers on an unlimited plan whose monthly use puts them into the top 5 percent of data consumption may experience reduced speeds until the end of that billing cycle. Verizon Wireless made a similar announcement in early July.
The US already ranks highest in mobile Internet costs per month. US users pay more than $40 a month for 2GB of data (the going threshold for new capped data plans). On the other end of the scale, Japanese mobile phone callers pay just a touch over $10 a month for the same plan.
Since AT&T introduced usage-based pricing last year, it’s been gradually shifting smartphone customers to tiered plans, but AT&T grandfathered all of its previous unlimited customers under the new policy, allowing them to keep their restriction-less plans even if they signed new contracts or upgraded handsets. By defining a specific cap, AT&T would essentially be introducing another tier into its pricing plans, which would defeat the purpose of a supposedly unlimited plan. AT&T wants to keep that unlimited allure intact, while reserving the right to judge if that privilege is being abused. Think of like it an unlimited speed limit law: You can drive as fast as you want, but if a state trooper finds your speed to be reckless he can still ticket you.
Tony Bradley in PCWorld writes that the move may be more political than technical, but it also begs the question "who is going to keep any eye on AT&T to make sure they measure usage accurately and don't abuse the throttling?" AT&T plans to throttle the data speed for the top five percent of data consumers--with a few significant caveats. The throttling only impacts users still grandfathered on the extinct unlimited mobile data plan, and it doesn't count or throttle data over Wi-Fi, just the data consumed over AT&T's wireless data network. Something doesn't seem to add up, though. Either AT&T is exaggerating the impact of this five percent and making a spectacle out of the policy change as a political move to justify the case for why it "needs" the T-Mobile acquisition approved, or AT&T is not being completely honest with regard to how many users will be affected or what the impact will be.
Robert X. Cringely (aka Mark Stephens) argues that data caps are a ploy by Internet service providers to position themselves to increase their profits as data consumption explodes in the coming years. He concedes that bandwidth usage is certainly increasing, but at the same time "backbone costs [basically, what ISPs pay to hook themselves into the Internet] are going down and have been doing so for many years," he writes. In Tokyo, he says, the ISP Softbank BB charges its customers about half of what American ISPs charge, even while offering speeds four times faster. "Yet Softbank BB is profitable. Their backbone costs are inconsequential and to argue otherwise is probably a lie."
Art Brodsky at Public Knowledge noted two seemingly unrelated threads which in reality have more in common than might appear obvious. The "use it" thread comes from a vibrant, diverse group of companies, large and small, that are fulfilling their entrepreneurial visions in creating new businesses and new opportunities using broadband (think Amazon, iTunes, and Netflix). The "lose it" thread consists of some of the largest companies in the world, which offer, and control, the means by which all of those other services can be offered and the means by which they can be choked off and have their futures put in jeopardy. Rationing Internet services through a combination of caps and “throttling” for those who “use” more bandwidth, AT&T, Verizon and Comcast are making sure charges for consumers who use all those new devices to watch movies or TV or play games will go through the roof.
Public Knowledge released a report this week that finds that consumers should be wary of pitches by telecommunications companies for their newer, faster “4G” wireless service. Consumers will find their experiences with the faster services severely hampered by the rationing techniques the carriers impose on customers who use lots data. These data caps actively discourage the types of activities (watching movies or uploading video to the Internet, etc) that 4G enables. As a result most users will avoid taking advantage of these new services out of fear of incurring large overage fees. That makes capped 4G little more than a bait and switch. While the report notes that 4G can be a useful technology because it could provide faster and better service, the report concludes: “The imposition of data caps on 4G networks marks an unfortunate milestone in the history of network innovation. For the perhaps first time, the introduction of a generationally faster technology will not have a widespread impact on online behavior. As long as there are low data caps, most users will be better off staying with a (cheaper and slower) 3G connection than paying a premium for 4G. [For more on 4G networks, see Connect Planet's "4G Scorecard"]
As broadband providers scrap unlimited data plans in favor of pricing based on consumption, the Federal Communications Commission is under growing pressure to decipher whether Internet service providers are reasonably managing their networks — or snuffing out competitors like Netflix. It’s a problem partly of the FCC’s own making — and one lawmakers could soon hear about. When the FCC adopted network neutrality rules in December, FCC Chairman Julius Genachowski publicly embraced metered pricing. He was signaling his sincerity that ISPs should be allowed to manage their networks in a reasonable way, even as the FCC moved to impose network neutrality rules that would force providers to treat all traffic equally. But the rush by Internet providers in recent months to end all-you-can-eat data is producing a dangerous side effect, critics say: potentially crippling the booming market for so-called over-the-top video and other data-rich services from Netflix and other providers. Now consumer groups are calling on the FCC to investigate the practice of metered pricing, arguing that there isn't any justification for it.
(1) A rate-of-return (ROR) carrier is a carrier that is allowed to recover its revenue requirement by setting rates on its various products and services so that it earns no more than the rate-of-return authorized by the FCC. (Source: Universal Service Administrative Company)
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