Internet/Broadband

The Federal Communications Commission’s Wireline Competition Bureau presents this report on voice services in the schools and libraries universal service support mechanism (more commonly known as the E-rate program), as directed by the FCC in its 2014 E-rate Order. During the phasedown of voice services which began in funding year 2015, fewer applicants have applied for voice services, though most of the applicants who no longer apply for voice services continue to seek E-rate support for other services. Further, the majority of the applicants who did not receive E-rate support for any service other than voice services in funding year 2014 now receive E-rate support for services other than voice.

US cable operators, led by the biggest one of all, Comcast, are about to make a lot more on residential and business broadband. That’s the conclusion of New Street Research, which just released a rather bullish report this morning on the cable industry.

Led by analyst Jonathan Chaplin, New Street concedes that the previously torrid pace of cable broadband marketshare growth has slowed a bit in recent quarters, due to factors such as aggressive triple-play promotions by AT&T. But those headwinds will soon clear, the investment research firm concludes, and with that will be increased ARPU for cable operators. “We have argued that broadband is underpriced, given that pricing has barely increased over the past decade while broadband utility has exploded,” New Street said. “Our analysis suggested a ‘utility-adjusted’ ARPU target of ~$90. Comcast recently increased standalone broadband to $90 (including modem), paving the way for faster ARPU growth as the mix shifts in favor of broadband-only households. Charter will likely follow, once they are through the integration of Time Warner Cable.” New Street added that “broadband pricing could double from current levels.”

Kentucky's plan to build one of the country's largest publicly owned broadband networks was touted as a cornerstone of the effort to save the Appalachian economy by bringing high-speed internet to some of the poorest counties in America. It was supposed to take a year to finish, but three years later only a fraction of the 3,000 mile network of fiber optic cables known as Kentucky Wired has been built.

Construction has been plagued by delays, forcing the state to pay $7 million in penalties to its private-sector partners with the potential of "tens of millions" more. State officials had been counting on public schools and libraries to help pay some of the bills but that plan has fallen through, and project officials plan to ask state lawmakers for millions of dollars in taxpayer money to make up the difference. Now, some of the state's most influential lawmakers want to pull the plug, and have asked project leaders how much that would cost.

[Commentary] Those against the Federal Communications Commission’s proposed rollback of network neutrality regulations fear that allowing Internet service providers to control internet speed based on ability-to-pay will lead to an internet tilted in favor of companies with deeper pockets, not necessarily better services. But according to the rollback’s supporters, the current net neutrality regulations put in place by the Obama administration are an egregious overstepping of power on the part of the federal government, and serve to stunt growth and innovation in the industry.

But both sides fail to realize there is a middle ground — one that benefits consumers, but still keeps control from being pushed too far in either direction. It does not have to be either the federal government in control or ISPs. It does not have to be one to the exclusion of the other. In fact, one could argue that a very workable compromise would be to move back to a regulatory regime — whether through FCC efforts, a narrowly focused legislative solution, or some combination of the two — in essence representing the original rules in the first Open Internet Order (no blocking, no throttling, etc.), but not including the current Title II classification.

[Doug Sicker is the Department head of Engineering and Public Policy at Carnegie Mellon. He is also the previous chief technology officer at the Department of Commerce and the chief technology officer at the Federal Communications Commission.]

[Commentary] Without legislating specific net neutrality rules, Congress could take three important steps to clear away irrelevant legal impediments and make the debate more productive for regulators and the public alike.
1) Separate classification from regulation: Congress could enact legislation that removed the distinction between “telecommunication” and “information” services. The economic case for whether and how a firm should be regulated has nothing to do with what service it provides.
2) Restore a focus on the ‘public interest’: The Federal Communications Commission made a mistake by treating net neutrality as a competition problem rather than as a tool to protect speech.
3) Restore the role of antitrust in telecommunications: Focusing the FCC on the public interest would be easier if the Department of Justice’s Antitrust Division or the Federal Trade Commission could guard against internet service providers engaging in monopolistic practices. At present, the antitrust agencies may not have that authority.

[Timothy Brennan is currently professor public policy and economics at the University of Maryland. He was chief economist at the Federal Communications Commission during 2014.]

[Commentary] Section 702 of the Foreign Intelligence Surveillance Act illustrates the value of sunsets. Its termination date is December 31, 2017, unless reauthorized by Congress. Experience since its enactment by in 2008 shows that section 702 has created a hole in the Fourth Amendment’s protection of privacy big enough to house the Pentagon.

Chairman of the House Judiciary Committee, Robert Goodlatte (R-VA), has an opportunity to become the James Otis of digital privacy by sponsoring legislation to cure section 702’s constitutional defects revealed by experience by requiring judicial warrants based on probable cause to justify invading the communications privacy of Americans.

[Bruce Fein is a constitutional scholar]

[Commentary] To get internet with adequate speed into more rural areas, you could offer incentives for companies to build lines in places where there would otherwise be too few customers, and you could offer subsidies to residents to make the customer base as large as possible. Or you could just change the definition of “adequate.” Unfortunately, the Federal Communications Commission is looking hard at the latter option, and that’s bad news for the thousands of Mainers living in parts of the state unserved by high-speed internet.

Maybe one day, wireless internet on par with fixed broadband will become a reality – but that day is not here yet. FCC rules now state that areas should have access to both wireless and fixed broadband internet, and that should not change. True high-speed internet is a necessity for an economy driven by the latest technology. The areas that lack it are already in trouble and are falling further behind, and that won’t stop unless the government does something more than change a definition.

[Commentary] Today’s privacy rules are anything but clear. Internet content providers like Google, Facebook and Amazon are regulated for privacy by the Federal Trade Commission, the historic internet-privacy protection body. Internet-service providers that link consumers to the network, such as Verizon, AT&T and Comcast, were also regulated for privacy by the FTC until 2015, when the Federal Communications Commission classified internet access as a telecommunications service, stripping the FTC of that authority. Privacy is too important to be left to the whims of regulatory agencies.

Instead, Congress should consider taking an approach akin to the Browser Act (HR 2520), sponsored by Rep Marsha Blackburn (R-TN), that would unify privacy rules across the internet under the FTC, from operating systems to browsers to ISPs to edge content providers.

[Rick Boucher was a Democratic member of the US House of Representatives from Virginia for 28 years and chaired the House Communications Subcommittee. He is honorary chairman of the Internet Innovation Alliance (IIA) and head of the government strategies practice at law firm Sidley Austin]

Mobile-only users are usually perceived as a consequence of fixed-mobile substitution. This study uses a unique dataset based on a survey in France, combined with interviewee's telecommunications billing data, to reveal heterogeneous consumer preferences for fixed services.

With the same mixed logit model we estimate the willingness to pay (WTP) for fixed communications services and fixed-mobile relationship. Results show a very large heterogeneity of WTP for fixed services among consumers. In addition, we show that fixed and mobile data are complement for all consumers. Mobile-only consumers have a much lower but non-zero WTP, and higher price sensitivity compared to fixed-mobile consumers. Consequently, an increase in the fixed offer price would reduce the demand for fixed service. Heterogeneous preferences for fixed services constitute an alternative explanation for the existence of mobile-only users, despite the complementary nature of fixed and mobile broadband. Counter-factual simulations show that the share of mobile-only could also be driven by the way to subsidize mobile handset. For instance, making the handset subsidy only available to fixed-mobile quadruple play subscribers could reduce the share of mobile-only by half.

Broadband industry lobby groups have appealed to the US Supreme Court in an attempt to kill the Federal Communications Commission's network neutrality rules. The groups want the Supreme Court to rule that the FCC exceeded its authority when it reclassified Internet providers in order to impose stricter regulations. Such a ruling could prevent future FCCs from implementing net neutrality rules as strict as the current ones, which outlaw blocking, throttling, and paid prioritization. A ruling for the industry could also prevent future FCCs from reviving other consumer protections that are likely to be overturned by the commission's current Republican majority.

Lobby groups also allege that the FCC didn't do enough to justify its decision and that it didn't follow the required administrative procedures. But for potential long-term impact, the question of whether the FCC has the authority to classify broadband as a common carrier service is probably more significant. Whether the Supreme Court will actually decide to hear the case is far from certain.