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September 2016

Incentive Auction Second Stage: Same as the First? Not Exactly.

On September 13 at 10:00 AM ET bidding resumes in the Incentive Auction with the opening of Stage 2. We wanted to take a moment to preview what happens next and describe how this stage will be different from Stage 1. For Stage 2, the Auction System set the clearing target at 114 megahertz, the next-highest target that meets the Commission’s standards for setting a clearing target in a stage (explained in the Bidding Procedures Public Notice). Compared to the 126 megahertz clearing target, the 114 megahertz clearing target generally clears nine blocks of spectrum in each partial economic area (PEA) instead of 10 blocks and adds two additional channels to the TV band. Adding more channels to the TV band allows more stations to be repacked in their pre-auction band. Thus, some stations that were provisionally winning after Stage 1 will become “unfrozen” in Stage 2 and will be presented decreasing price offers during the bidding rounds. This process will result in lowering the overall costs of clearing spectrum for wireless use.

Proposed Fourth Quarter 2016 Universal Service Contribution Factor is 17.4 Percent

In this Public Notice, the Office of Managing Director (OMD) announces that the proposed universal service contribution factor for the fourth quarter of 2016 will be 0.174 or 17.4 percent. Contributions to the federal universal service support mechanisms are determined using a quarterly contribution factor calculated by the Federal Communications Commission (Commission). The Commission calculates the quarterly contribution factor based on the ratio of total projected quarterly costs of the universal service support mechanisms to contributors’ total projected collected end-user interstate and international telecommunications revenues, net of projected contributions. USAC submitted projected collected end-user telecommunications revenues for October through December 2016 based on information contained in the Fourth Quarter 2016 Telecommunications Reporting Worksheet (FCC Form 499-Q).

The amount is as follows: Total Projected Collected Interstate and International End-User Telecommunications Revenues for Fourth Quarter 2016: $14.215126 billion. To determine the quarterly contribution base, we decrease the fourth quarter 2016 estimate of projected collected interstate and international end-user telecommunications revenues by the projected revenue requirement to account for circularity, and decrease the result by one percent to account for uncollectible contributions. Accordingly, the quarterly contribution base for the fourth quarter of 2016 is as follows: Adjusted Quarterly Contribution Base for Universal Service Support Mechanism Fourth Quarter 2016 Revenues - Projected Revenue Requirement - 1% ($14.218126 billion – $2.083590 billion) * 0.99 $12.013191 billion.

Modernizing the E-rate Program for Schools and Libraries

In this Order, the Wireline Competition Bureau adopts the proposals we made in the ESL Public Notice and releases the eligible services list (ESL) for funding year 2017 for the schools and libraries universal service support program (more commonly referred to as the E-rate program). We also authorize the Universal Service Administrative Company (USAC) to open the annual application filing window no earlier than 60 days after release of this Order.

The Highways of Tomorrow

[Commentary] In the first of three blogs this week that will feature some of the expert insights from the forthcoming 2016 State of Broadband Commission Report, Sunil Bharti Mittal, the founder and chairman of Bharti Enterprises, describes how his company, Bharti Airtel Limited, is building a network to bring broadband connectivity to a billion people in India and contributing exceptionally to using information communication technology (ICT) to achieving Sustainable Development Goal 1 (no poverty).

Broadband networks are the highways of tomorrow. In India, they also constitute a critical driver of economic growth and inclusion. These networks not only bring the government to the citizens’ doors through e-governance modules but help link producers and consumers to the marketplace as well. Banking, education and healthcare can ride networks to reach citizens in the most remote regions. India’s Broadband Dream – ‘Extending access to the next billion’ – will be driven primarily by growth in wireless, requiring both massive investment by operators but a supportive regulatory environment as well. The Government needs to address relevant policy and operational issues proactively (such as Right of Way) and, most importantly, to keep in perspective the long-term financial health of the sector while deciding on pricing of spectrum, the lifeblood of mobility.

[Sunil Bharti Mittal is the founder and chairman of Bharti Enterprises.]

A virtual reality future means changing broadband reality today

[Commentary] In August, a ripple traversed the Internet when the White House posted an Instagram picture of our commander in chief just outside the Oval Office wearing a pair of virtual reality glasses. In the photo, President Barack Obama is trying out a virtual reality experience captured during his trip to Yosemite National Park and created by National Geographic, Felix & Paul Studios and Oculus, while an aide continues to work at her desk oblivious to the strange scene.

The striking image of the Leader of the Free World transporting himself to another corner of the country brought nearly 600,000 views of the 360-degree video tour, and captivated many more people with this amazing technology — but that virtual experience is just the tip of the iceberg for VR. Putting on a virtual reality helmet or visor unlocks new impactful ways to tell stories, play games, and educate children and adults. While the equipment is costly and clunky today, in a few years, a pair of glasses and headphones will more than suffice for a VR experience. Virtual reality has the power to transform every form of video media consumption, as long as policymakers enable high-speed broadband networks to keep pace; a sensible regulatory environment that helps investment and innovation flourish is crucial.

[Larry Irving served for almost seven years as assistant secretary of commerce for communications and information during the Clinton Administration and is president and CEO of the Irving Group. Jamal Simmons is co-chairman of the Washington, DC-based Internet Innovation Alliance (IIA).]

FCC Business Data Services Decision Could Determine Viability of Rural 5G

The impact of the impending Federal Communications Commission business data services (BDS) decision could be critical for rural wireless carriers, argued Raul Katz, president of telecommunication policy consulting firm Telecom Advisory Services, LLC, at a Washington DC event. The BDS decision will impact carriers’ ability to provide sufficient network capacity and to deploy next-generation 5G wireless services, said Katz, who based his remarks on a Telecom Advisory Services study on the impact of rural wireless carrier backhaul costs on network investment.

The Federal Communications Commission 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. Backhaul costs will become even more critical for 5G, which will use high-frequency spectrum that can support higher bandwidth but less range in comparison with today’s technology. In surveying rural wireless carriers for the Telecom Advisory Services study, Katz noted that “every carrier said 5G is nowhere near our short-term or long-term plans because backhaul is so expensive."

Lies, Damn Lies, and Statistics

Over the past several months, the Federal Communications Commission – first through its hired economist, and later through Staff – has released over 100 regressions that purport to analyze the data the Commission has collected about the Business Data Services market. Each time, the FCC announced that the regressions show that incumbant local exchange carriers (ILECs) retain market power for legacy DS1 and DS3 services. Each time, economists, including those the FCC asked to conduct peer reviews of the FCC regressions, observed that the regressions suffer from significant flaws that render them unreliable, including the severe correlation/causation problem that economists refer to as “endogeneity,” incomplete and incorrect data on pricing and the number of competitors, mismatches in the pricing and competitor data, and incorrect methods for computing the statistical significance of the results. And each time, we noted that some of the most significant of these flaws are not fixable because of the limitations of the data available to the FCC’s economists.

Without reliable evidence of significant market power, there is simply no data-driven basis for new heavy-handed rate regulation of BDS services. Chairman Wheeler astutely declared soon after joining the FCC that “[i]ncentivizing competition is a job for governments at every level. We must build on and expand the creative thinking that has gone into facilitating advanced broadband builds around the country…Working together, we can implement policies at the federal, state, and local level that serve consumers by facilitating construction and encouraging competition in the broadband marketplace.” But, as the record in this proceeding makes clear, government rate regulation will not “facilitate advanced broadband builds around the country.” Instead, it will do exactly the opposite – discourage facilities-based entry by limiting the returns, particularly in rural areas, available to those willing to risk investing and punishing those that already have taken that risk.

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