October 22-28: Broadband, Broadband – How Do We get Broadband Everywhere?
This week, the United Nation’s Broadband Commission for Digital Development that to ensure that their citizens can be full participants in the increasingly broadband enabled "emerging knowledge societies," governments around the world should:
- Make broadband policy universal. By 2015, all countries should have a national broadband plan or strategy or include broadband in their Universal Access/Service Definitions.
- Make broadband affordable. By 2015, entry-level broadband services should be made affordable in developing countries through adequate regulation and market forces (for example, amount to less than 5% of average monthly income).
- Connecting homes to broadband. By 2015, 40% of households in developing countries should have Internet access.
- Getting people online. By 2015, Internet user penetration should reach 60% worldwide, 50% in developing countries and 15% in Least Developed Countries (LDCs).
The panel says that broadband technologies are fundamentally transforming the way we live. It is vital that no one be excluded from the new global knowledge societies we are building. The panel believes that communication is not just a human need – it is a right. The greater communication and understanding made possible through access to information and communication technologies (ICTs) can help us overcome the challenges in our complex and interdependent global society. The group noted broadband’s important role in economic growth; in opening up young minds to new horizons through educational technologies; in empowering women to expand their opportunities through genuine choices; in improving awareness of hygiene and healthcare; and in helping family breadwinners find work, a better salary or return on their goods.
The Commission issued the following Broadband Challenge calling on:
- World leaders to ensure that at least half the developing world’s population and 40% of households in developing countries are using broadband Internet by 2015. Consumers in all countries should have access to affordable broadband Internet services, including in developing countries.
- Industry to develop innovative business models needed to realize this vision.
- Governments to make broadband policy universal and to develop the enabling policy and regulatory frameworks to ensure that industry has a stable regulatory space in which to operate, flourish and harness broadband for sustainable human development.
- Governments to develop policies and targets for online health and education at the national level to stimulate demand for broadband services.
- Governments and civil society within a fully inclusive and consultative process to stimulate local content production as well as the development of local language services and applications for an inclusive digital world.
The FCC Creates the Connect America Fund
By way of comparison, on March 16, 2010, the Federal Communications Commission delivered "Connecting America: The National Broadband Plan" to Congress. The plan includes over 200 goals and recommendations to the Federal Communications Commission, Congress and the Administration. Goal #1 of the National Broadband Plan is:
“At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 Mbps and actual upload speeds of at least 50 Mbps by 2020. As a milestone, by 2015, 100 million U.S. homes should have affordable access to actual download speeds of 50 Mbps and actual upload speeds of 20 Mbps.”
This week, the FCC completed a major effort to implement the National Broadband Plan (NBP). At the heart of the NBP was a call to reform and modernize the Universal Service Fund (USF), a web of subsidies that traditionally made telephone service available and more affordable in rural and other areas that are costly for telephone companies to serve.
The FCC adopted support for broadband-capable networks as an express universal service principle under section 254(b) of the Communications Act, and, for the first time, set specific performance goals for the high-cost component of the USF:
- preserve and advance universal availability of voice service;
- ensure universal availability of modern networks capable of providing voice and broadband service to homes, businesses, and community anchor institutions;
- ensure universal availability of modern networks capable of providing advanced mobile voice and broadband service;
- ensure that rates for broadband services and rates for voice services are reasonably comparable in all regions of the nation; and
- minimize the universal service contribution burden on consumers and businesses.
The reforms adopted Oct 27 create a new Connect America Fund (CAF) with an annual budget of no more than $4.5 billion, which will extend broadband infrastructure to over 7 million Americans living in rural areas and who currently have no access to broadband. The CAF will ultimately replace all existing high-cost support mechanisms. Beginning in early 2012, all carriers who accept CAF support must provide broadband with actual speeds of at least 4 Mbps downstream and 1 Mbps upstream, with latency suitable for real-time applications and services such as VoIP, and with monthly usage capacity reasonably comparable to that of residential terrestrial fixed broadband offerings in urban areas.
As part of this reform, the FCC recognizes the growing importance of mobile broadband and makes it an independent universal service objective for the first time in history. Dedicated support to expand mobile broadband nationwide will be provided through a new Mobility Fund. The FCC will provide up to $300 million in one-time support to immediately accelerate deployment of networks for mobile voice and broadband services in unserved areas. This support will be awarded through a nationwide reverse auction, which the FCC expects to occur in third quarter 2012.
The FCC allocates at least $100 million per year to ensure that Americans living in the most remote areas in the nation, where the cost of deploying traditional terrestrial broadband networks is extremely high, can obtain affordable access through alternative technology platforms, including satellite and unlicensed wireless services. The FCC issued a request for public comment on a structure and operational details for that mechanism, including the form of support, eligible geographic areas and providers, and public interest obligations. The FCC expects to finalize the Remote Areas Fund in 2012 with implementation in 2013. The most remote areas represent less than 1% of the U.S. population.
While continuing to require that all eligible telecommunications carriers (ETCs) offer voice services, the FCC will now require that they also offer broadband services. The FCC updated the definition of voice services for universal service purposes, and declined to disrupt any state carrier of last resort (COLR) obligations that may exist. The also established specific and robust broadband performance requirements for funding recipients.
The overhaul could add as much as 50 cents a month to consumers’ phone bills immediately, which could rise to $2.50 a month in five years. But the FCC said that it expected a smaller increase, about 10 cents to 15 cents a month, or up to $1.80 a year.
POTS vs VOIP
Wired’s David Kravets notes that the move to modernize the USF really pitted traditional phone service providers like AT&T against Voice Over the Internet providers like Comcast. The process also exposed the FCC’s intellectual confusion over how to regulate communications in the Internet age. The FCC’s Order fails to address adequately the increasing popularity of Internet telephony, which is expected to expand even further under the program. That failure threatens the future of online phone calling services.
Given that the FCC is shifting subsidies from traditional phone carriers to high-speed broadband providers, it asked for public comments about its authority to regulate Voice-Over-Internet-Protocol (VOIP) calls, such as Comcast’s broadband-based phone service. That’s because it’s legally unclear whether the FCC has the authority to regulate VOIP calls. That puts into doubt a complicated system of FCC-required payments between phone carriers, who reimburse each other via “access charges” as calls move to and from one another’s lines.
AT&T is now seemingly threatening not to pay these fees or abide by rules that require them to let their customers call any number they like. AT&T says it is now clear that internet-based VOIP services are a Title II “telecommunications service” — a designation that comes with a complicated host of FCC common carrier regulations — not a Title I “information service,” which lives outside the FCC’s jurisdiction. And AT&T, ironically, is citing Comcast’s own arguments.
The FCC re-classified broadband access as a Title I service in the George W. Bush administration as a deregulation move, even though it’s tried to retain the right to regulate DSL and cable companies. Most recently, Comcast won a ruling from a federal appeals court that the FCC has no right to regulate Title I services as it fought off an FCC edict that Comcast abide by so-called net-neutrality principles that forbid ISPs from unfairly blocking certain kinds of internet traffic.
The FCC announced that both VOIP and traditional telephone services will be treated as if it was under Title II, although it did not resolve the legal conundrum. “All carriers originating and terminating VOIP calls will be on equal footing in their ability to obtain compensation for this traffic,” the FCC said.
The latest Title I versus Title II debate on VOIP, for the moment, is purely esoteric unless AT&T puts its money where its mouth is, by withholding payment and not allowing its customers to call people using Comcast and other VOIP providers.
Reaction
Reaction to the overhaul have been mostly positive, although many expressed reservations about the plan.
The funding switch is expected to bring high-speed Internet to the 6% of the population that has been saddled with slow or no Internet and is losing ground economically and academically as high-speed Internet have-nots. "This is definitely a step forward," IDC analyst Matt Davis says. "It will go a long way toward solving the digital divide in the United States."
House Communications and Technology Subcommittee Chairman Greg Walden (R-OR) said the FCC’s vote is a “major step toward fundamental reform” of the programs. He added that FCC Chairman Genachowski “ought to be congratulated” for securing final support from all the commissioners. “To get a 4-0 vote on an issue this complex and controversial is pretty impressive,” said Chairman Walden, whose panel began earlier this year to weigh reforms of how the FCC conducts its proceedings.
"Accomplishing this was not easy — each of the commissioners was forced to make tough choices and face criticism and potential challenges from stakeholders who would have preferred a different approach. But the FCC understands that in order to save this important program, it needs to be fundamentally reformed and directed towards the future," said House Commerce ranking member Henry Waxman (D-CA). Rep. Anna Eshoo (D-CA), ranking member on the telecom subcommittee, said the reforms “will have a meaningful impact on consumers across the nation” and said it will go down as “one of the most important infrastructure investments of our time.”
"For too long, this system has been focused on supporting the technology of the last generation -- basic voice telephone service," said Senate Commerce Committee Chair Jay Rockefeller (D-WV). "I am pleased it will now also tackle the challenge of the digital age -- bringing high-speed Internet and wireless service everywhere in this country. I recognize that reform means that some stakeholders will be unhappy because they prefer the status quo, but our Nation's communications infrastructure is too important to delay reform any longer. Our economy cannot afford missing out on the opportunities broadband enables, such as expanding business, fostering innovation, increasing access to education and healthcare, and even transforming entertainment. And consumers deserve more than a support system built only on the technology needs of the past. So I commend FCC Chairman Julius Genachowski and his colleagues for this effort, and I look forward to learning more about the details."
Sen. John Kerry (D-MA), chairman of the Senate Commerce Subcommittee on Communications, Technology and the Internet, praised the FCC reforms. Residents of his home state historically have paid more on their phone bills — nearly $1.5 billion between 2000 and 2009 — to subsidize telecom services in more rural states. “Now states like Massachusetts should get their fair share, and Universal Service Fund dollars should go where they’re needed most,” Sen Kerry said.
"These programs have needed to be updated for many years, and today’s action is a major step toward modernizing both regimes for the broadband era,” said Senate Commerce ranking member Kay Bailey Hutchison (R-Texas). “While I have not seen the order, I am glad to hear that it keeps the USF focused on bringing critical communication services to unserved parts of the nation. I also appreciate the FCC’s emphasis on halting the USF’s unsustainable growth."
The National Association of Regulatory Utility Commissioners issued this statement: "We are pleased with the proposals to prevent traffic pumping and eliminate inefficient fund disbursements, both of which are long overdue. We also appreciate that the agency recognizes the valuable and essential role Congress reserved to the States regarding carrier-of-last-report obligations and so-called ‘Eligible Telecommunications Carrier' designations...That said, we and many of our members have a number of concerns about preemption of State authority in other aspects of today's decisions. Some elements raise a host of unanswered legal and procedural questions but also the specter of unintended consequences for consumers. As we read through and digest the order, we will have more to say about these concerns. Overall, today's decisions appear to be a mixed bag. It is too early to tell just what the ramifications will be for consumers, but we will be reviewing these plans in short order."
“FCC Chairman Julius Genachowski and the members of the commission are to be commended for their leadership in undertaking reform of universal service and intercarrier compensation,” said USTelecom CEO Walter McCormick. “No previous commission proceeding has been more complex or challenging. For nearly a decade, regulatory uncertainty in this area has been an overhang on capital formation, job creation and economic growth. While we have not yet read the order, and are concerned by what we believe to be significant departures from the carefully balanced reform framework recommended by the companies that have long been dedicated to serving rural America, we are pleased that the commission’s USF reforms appear to remain appropriately focused on the priority objectives of accelerating broadband deployment to consumers in unserved areas of the nation, stimulating investment, and creating jobs. Similarly, the access reforms of today’s order will afford significant benefits to consumers. If implemented properly, they will reduce arbitrage, reward efficiency, and provide a manageable transition for rural carriers and the communities they serve from the voice world to the broadband world. We look forward to continuing to work with the commission in the weeks ahead as it seeks to achieve the delicate balance that is critical to full achievement of the National Broadband Plan’s public policy goals.”
"While we are disappointed in the Commission's apparent decision to ignore its longstanding principle of competitive neutrality and provide incumbent telephone companies an unwarranted advantage for broadband support," said National Cable & Telecommunications Association President Michael Powell, "we remain hopeful that the order otherwise reflects the pro-consumer principles of fiscal discipline and technological neutrality that will bring needed accountability and greater efficiency to the existing subsidy system. We are particularly heartened by the Commission's efforts to ensure that carriers are fairly compensated for completing VoIP calls."
"ACA is disappointed that the fund provides larger telephone carriers with a right of first refusal to provide broadband in high cost, unserved areas worth up to $1.8 billion annually — twice the amount of support these carriers receive under the existing USF program today. More than 500 smaller cable operators who are ACA members and were interested in having the same opportunity to participate in the Connect America Fund program know that consumers would have received better broadband services, such as higher speeds, if the FCC had opted for competitive bidding instead of the right of first refusal," said American Cable Association President and CEO Matthew Polka.
CTIA, the lobbying organization for the wireless industry, said that aiming only 11% of the fund at mobile does "not appear to fully take into account the significant consumer migration to mobile broadband services."
"While no one can say that it is thrilled with all aspects of what the FCC did today,” AT&T said in a statement, “we are cognizant that we shouldn't lose sight of the forest -- the significance of what this decision means to all Americans - through the trees. In the future, the basic level of service that United States policy will encourage and fund will be broadband and not simply voice service. This is a significant achievement worthy of congratulations and its impact on all Americans should not be minimized. With that said, we look forward to carefully reviewing the details of the FCC's order before we can fully understand all of its implications."
Verizon Communications said the agency's "overall approach" seems to put the subsidy fund "on a sustainable path and will enable millions of American households to connect to the high-speed broadband networks that are playing increasingly important roles in our nation's daily life."
"Today, the FCC has taken a historic step to reform intercarrier compensation and to redirect what can only be called a broken universal service system to a more targeted system that encourages broadband," said Jerry James, CEO of COMPTEL. "COMPTEL looks forward to reviewing the details of this order. All of this hard work will be meaningless; however, if the Commission does not maintain its focus on achieving a robust, competitive environment for IP-based services, and it will be from this perspective that COMPTEL will evaluate the FCC's decision."
Rural telephone companies said, “Positive aspects of today's FCC order appear to include the FCC's action to confirm that VoIP traffic falls within the ICC framework and to resolve long-standing concerns about so-called "phantom traffic" and other arbitrage schemes. The Rural Telecom Associations also are pleased that the FCC appears to have recognized the need for an ICC restructure mechanism to help carriers of last resort continue providing affordable services in rural America. They commend the FCC for its leadership and engagement in moving this process and these issues forward. "At the same time, the Rural Telecom Associations remain eager to push forward for a long-term USF reform plan that will provide greater certainty and sufficient support, and they remain concerned that parts of the current reform package will have substantial adverse impacts on rural consumers and the small, community-based carriers of last resort committed to serve them.”
"The Federal Communications Commission deserves kudos for keeping the public interest in mind in tackling the complex problem of intercarrier compensation and the high cost fund," said Consumer Federation of America (CFA) Research Director Mark Cooper. "It rejected the totally self-service industry proposal (the ABC Plan) and handled four of the five major challenges it confronted well." Cooper praised the fact that companies who get subsidies for broadband build-out must meet "clear public interest obligations" to provide "adequate facilities at reasonable charges" for all people of the United States. He says the five-year transition away from the current system to a bidding model -- incumbent telcos had wanted 10 years--was a "demanding but fair" adjustment period. "For the first time, public funds are being used to ensure that broadband is available at affordable rates," said Cooper, something CFA has been pushing for. He said the FCC's one failure was not to reduce subscriber line charges as part of its reform of intercarrier compensation. He pointed to the FCC's unwillingness to reduce the charges to cost, and said CFA would challenge that part of the order, either through a motion for reconsideration or a court challenge. "[T]he Commission cannot close the book on rate reform and the best way to protect consumers is to eliminate the excessive costs recovered through the SLC," he said.
Parul Desai, Policy Counsel for Consumers Union, said, “We share the FCC’s goal of expanding broadband service. We appreciate the Commission’s push to deliver the benefits of broadband to more people in unserved areas. Today’s vote points us in the direction of universal broadband service, but we remain concerned about the details that allow companies to increase consumer bills. We don’t want the burden to be placed squarely on the backs of consumers, especially when many of these companies are hauling in big revenues. We’re going to press the FCC to ensure that these are temporary increases, because history has shown that these types of costs tend to stick around and go on and on and on.”
Jerry Ellig, a senior research fellow at the Mercatus Center said the key would be for the FCC to monitor the subsidies to make sure they were accomplishing their goal, including "clear measures of outcomes." Another goal for the reforms is to better protect against waste fraud and abuse.
John Windhausen, director of the Schools, Health and Libraries Broadband Coalition (SHLB), was pleased that the FCC had made serving anchor institutions one of the public interest conditions to receiving broadband build-out funds. "The SHLB Coalition applauds the FCC for following the recommendations of Representatives Matsui, Markey, Eshoo and Doyle to ensure that recipients of USF support must serve the broadband needs of community anchor institutions in rural America. We are particularly pleased that anchor institutions are given an opportunity to participate in the design of the broadband networks serving their areas and that the recipients of USF funding must include the anchor institutions served in their annual reports. Providing rural schools, libraries, healthcare providers and other community anchors with affordable, high-capacity broadband will go a long way toward improving educational opportunities, medical care and economic growth in rural America."
“We appreciate the effort and commitment the Federal Communications Commission dedicated to tackling the universal service system, which is in need of serious reform,” said Public Knowledge President Gigi Sohn. “We also appreciate that the Commission recognizes the importance of non-traditional broadband providers, such as community-based institutions, and will seek comment on how to enhance the ability of these entities to serve their local communities. At the same time, however, we share the concerns of other consumer organizations that the Commission's actions will lead to higher prices at a time when the average American is watching every penny. We hope that the mechanisms adopted by the Commission to prevent this prove adequate, and that this and future Commissions will have the political will to address problems that may arise. We are deeply disappointed that the Commission has once again evaded the central problem which threatens to bring down the entire plan -- that of resolving the Commission's authority over interconnected Voice Over Internet Protocol (VOIP) and broadband services generally. The Commission requested comments on the authority issue, but declined to deal with it. VoIP services are becoming an integral part of the telecommunications network, serving millions of consumers. By declining to address this issue, the Commission is condemning the industry to more years of uncertainty, consumers and others will be powerless to complain about industry practices and the future of the network is left in limbo."
Free Press Political Advisor Joel Kelsey said, “An order of this magnitude surely has important pieces buried in the text, so we will reserve final judgment until we've had time to analyze the full item. We’re glad the Commission didn’t rubber-stamp the industry-authored ABC plan, but the agency missed a historic opportunity to bring pro-consumer reform to a system that has been plagued with waste and abuse for decades. The Commission should have used this rule-making to establish meaningful oversight mechanisms to ensure subsidies are being directed to places they are truly needed, and aren’t being used to pad industry profits. Despite a lack of meaningful evidence to justify a rate increase, the Commission’s move will allow carriers to impose new charges on local phone subscribers. The Commission did take steps to narrow the scope of these rate increases, but asking consumers to pay more into a broken system and letting the industry divvy up the pot will not increase broadband adoption. If the goal is to increase broadband adoption, prices should be going down, not up.”
Genachowski’s Legacy?
Politico notes that FCC Chairman Julius Genachowski succeeded where his predecessors failed in taking on the telecom industry’s 800-pound gorilla: an $8 billion telephone subsidy program written in the dial-up era. Past chairmen have been unsuccessful in their attempts to revamp the antiquated subsidies. In 2008, Republican FCC Chairman Kevin Martin came close to reaching an order but industry support for his proposal fell apart at the last minute.
Chairman Genachowski called the decision a “once-in-a-generation” overhaul that will help carry out President Barack Obama’s vision for a hyperconnected nation. It may also to halt some grumblings that Chairman Genachowski hasn’t done enough in his term. He’s been criticized in the past, from the right and the left, for either throttling industry with regulations like last year’s net neutrality rules or shying away from more controversial pro-consumer decisions by being more of a peacemaker than a regulator. Instead, Genachowski’s political victory in overhauling the largest part of the USF most likely will become his legacy.
“This is something the FCC has been trying to do for years,” said Anna-Maria Kovacs, a telecom expert and visiting senior policy scholar at the Georgetown University Center for Business and Public Policy. “Getting it done is an enormous accomplishment.”