WHYDOM

Posted by Barlow Keener

Starting in 1996, the FCC began the work of moving TV broadcasters from analog to digital TV.   At the time it was anticipated that TV stations would use their spectrum to deliver additional, unspecified non-broadcast- type services.  In 1998, the FCC prescribed a rule (47 CFR 73.624(g )), following the 1996 Telecom Act, allowing TV stations to offer such supplementary and ancillary services, and requiring broadcasters to pay 5% of the revenues from these services to the Treasury, as compensation to the public for these additional uses.   Now, 15 years later, the FCC and Congress are proposing to re-locate the TV stations “repacking” them together on different channels preventing them from taking advantage of this flexible use specifically authorized by the 1996 Act, including using broadcast spectrum to provide broadband services. 

Last year, on November 30, 2010, the Commission issued a notice of proposed rulemaking to allow TV stations to voluntarily “repackage” to new channels, combining 2 TV stations onto a single channel. The order did not propose selling off White Spaces spectrum. But the order proposed selling the vacated TV spectrum using an incentive auction and delivering an unspecified amount from the auction proceeds to the TV stations that voluntarily move, with the balance to the Treasury. Marty Stern from K&L Gates discussed the order and the rights of TV broadcasters and White Space providers in detail at the 4GWE White Spaces session in Miami in February 2011.

FCC Chairman Genachowski described the value of the TV station spectrum that could be voluntarily returned by broadcasters and then resold to a cell phone provider:

The roughly 300 MHz of spectrum in the TV bands is among the most robust available.  Beachfront property.

The incentive auction, proposed by the FCC, is said to potentially make 84-120 MHz available for new broadband uses.  TV broadcasters worry that “voluntary” repacking will not be voluntary once it starts as Robert Good of WGAL-TV testified on April 12, 2011 at the House Energy and Commerce Committee.  See Broadcasting & Cable.   TV broadcasters that are repacked (2 stations into 1 6MHz channel) will lose their ability to sell or use their full 6MHz of beachfront spectrum for broadband services, a right they have now. 

In the last several weeks, multiple bills, substitutions, and amendments have been proposed both in the House and Senate regarding repacking:  Senators Lieberman-McCain, Senators Rockefeller-Hutchison (S.911), Sen. DeMint (R., S.C.),  Sen. Toomey (R., Pa.)  Sen.  Rubio (R., Fla.), Sen.  Blunt (R., Mo.) , Sen. Warner (D., Va.), Sen. Wicker (R., Miss.), and Sen. Klobuchar (D., Minn.).   And the House has jumped on this as well.  So there is lots of action happening in our nation’s capital with regard to moving TV stations again and selling off publically owned beach front property to the highest bidder.  

There have also been recent suggestions that giving the FCC incentive auction authority may be addressed in legislation to raise the debt ceiling.

Basically the Rockefeller-Hutchinson bill suggest that by selling off 84MHz to 120MHz of TV spectrum, $12 billion will be raised to give public safety funds for a public safety organization made up of leaders from cities, states, and federal agencies to build a nationwide public safety exclusive network.  The D Block network would use two 10MHz of nationwide spectrum (758MHz-763MHz, 788MHz-793MHz), one dedicated to public safety and one for commercial use (the D-Block was one of many blocks of spectrum set forth in the Telecom Act to be auctioned off in 2008 but failed for several reasons: a $1.3 billion minimum bid, the requirement that the winner pay an additional $500m over 10 years to the FCC, and onerous build out terms.  See posts by Susan Crawford and Harold Feld.  The cost to build a 1.2 Mbps nationwide broadband network is estimated by the FCC staff to cost $40 billion, not $14 billion originally envisioned.   Selling 120 MHz of TV and White Spaces spectrum will only generate $28 billion. (FCC June 2010 Public Safety Report, p. 14)

On June 8, 2011, the Rockefeller-Hutchison bill (S. 911) was approved  by the Senate Commerce Committee and is awaiting action by the full Senate. (Washington Post)

Risks of going forward with a TV repack and selling off beach front spectrum in an incentive auction are huge:

1) TV broadcasters will lose spectrum, never able to use their full 6 MHz again. Right now, TV stations are entitled under FCC rules and under the 1996 Telecom Act to use a portion of their full 6MHz channel for delivering broadband to consumers, and with minor tweaks to the FCC rules consistent with existing authority under the broadcast flexibility provision of the 1996 Act, broadcasters could also have the ability to sell rights to their spectrum to broadband providers.  TV stations will once again move from their designated channels.  Disruption with viewers will result as old viewers will have to hunt again for the station’s newest channel.  TV broadcasters will be giving up very valuable beach front property in the form of spectrum without any commitment on what they would receive in return.

2) Public safety will not receive from an incentive auction the estimated $40 billion required to build a 1.2Mbps+ broadband network.  See Public Safety Report p. 14 on the estimated $40 billion cost.   Public safety will not have an experienced wireless communications provider building, managing, running, and evolving a D-Block network.  Devices made for the D-Block network will not be numerous and will therefore be costly – these devices are smartphones the public has been using for years.  Rather than having a commercial provider running the network and paying for management, tower leases, back haul, and power, public safety, the tax payers will pay many, many millions of future operating expense dollars for the public network.  Where will this necessary future operating expense come from as it is not in the budgets of public safety today? What is the likelihood that a group of law enforcement leaders representing different political view points and from numerous geographies, governmental organizations (town, county, state and federal) be able to build such a network on time? 

3) Consumers will not be able to make use of the new “unlicensed” Super WiFI innovations or TV stations’ broadband services.   Chairman Genachowski projected that the new White Spaces would deliver “$7 billion in new economic value annually.”  This additional economic value will not be realized if a TV repack bill is passed.  The FCC’s White Spaces effort over the last 10 years and White Spaces innovations by U.S. businesses large and small would be also wasted.  And the U.S. would take a back seat to other countries now launching White Spaces trials.

4) U.S.A and the American public will give up the future rights to use public “beach front” spectrum in exchange for a few billion dollars.  To put the “billions” in perspective, the total U.S. government annual budget is $3,456 billion.   Spectrum, not roads and highways, will lead our economic and innovative growth in the future.  It should not be sold off without seriously considering the negative future ramifications.

**White Spaces Trial on the Yurok Indian Reservation in Northern California Carlson Wireless Technologies equipment tested.

5. White Space Super WiFi Innovators. What was implemented last year by the FCC in the September 23, 2010 White Spaces order, will be taken away or significantly reduced.  White Space innovator companies, like Google, Microsoft, Carlson, Spectrum Bridge, and others, have been spending investor dollars to develop radio and database technologies for the new unlicensed spectrum based on the FCC’s orders.  Chairman Genachowski strongly supported White Spaces when it passed last September:

"Today’s focus is on unlicensed spectrum, which offers unique opportunities to innovators and entrepreneurs. … This new unlicensed spectrum will be a powerful platform for innovation. And as we’ve seen time and again, when we unleash American ingenuity, great things happen. … Today, Wi-Fi is a multi-billion industry and an essential part of the mobile ecosystem. As compared to the airwaves we released for unlicensed use in 1985, this “white spaces” spectrum is far more robust – traveling longer distances and through walls, making the potential for this unlicensed spectrum much greater. One analyst estimates white spaces applications could generate more than $7 billion in economic value annually.

What is the answer for meeting public safety’s need for a nationwide broadband network?   Re-auction the D-Block. The FCC already has the rules and process in place for immediately re-auctioning the D-Block to a private-public safety provider.

**D-Block Coverage for a public-private partnership covering 93% of the population

By lowering the minimum bid and removing the $50m annual fee and other onerous provisions, bidders should flock to gaining a nationwide spectrum.   The benefits are enormous: 

1. Public safety gets a a broadband, state-of-the-art, nationwide network at no cost; 
2. Treasury gets the money it lost when the D-Block failed;
3. Consumers get a new competitive, nation wide cellular provider;
4. TV stations can stay in place and start delivering broadband services under the FCC rules;
5. White Spaces is allowed to continue to innovate and deliver advanced wireless services over the unlicensed White Spaces spectrum; and,
6. The U.S. does not sell “invaluable” public beach front spectrum

Thoughtfulness is needed before selling off our public beach front spectrum. The simple, reasonable solution for public safety, for the future millions in operating expenses that will be required to be funded by Congress, for TV broadcasters losing their full assigned spectrum, for White Spaces innovators, for consumers, and for the future of U.S. spectrum, is to re-auction the D-Block.

The re-auction of the D Block will create the revenues needed by Treasury to make up for the failed 2008 auction. And the commercial-public requirements for the D Block will deliver a state of the art network, built on time, and build with private investment.

Posted by Barlow Keener

On April 18, 2011, comments were due for the USF Reform Notice of Proposed Rule Making and Further Notice of Proposed Rule Making.   Various parties filed 130+ comments.  Reply comments are due on May 23, 2011.    USF reform comments were filed by ILECs, RLECs, CLECs, state commissions, fiber providers, cable companies, mobile providers, associations, and VoIP providers.   The Rural Broadband Alliance, for example, recommended in comments basically leaving the USF subsidy as it is in place and providing a “glide path” to reform.   Rural LECs are completely dependent on the USF subsidy, paid for by every telecommunications customer, for their financial survival.  RBA suggested creating “Transitional Stability Plan” to insure that the rural LECs dependent on the USF subsidy recover increased operational costs and capital investments for delivering broadband service.  RBA is against reducing carrier access charged by LECs to IXCs and proposed a freeze on existing USF subsidies, unless a LEC shows that it expanded service or spent extra on maintenance.   

Tom Evslin wrote a good post about the rural USF subsidy issues not as an advocate of a carrier but as citizen and a leader in the rural state of Vermont (pop. 621,000):

It’s easy to envision a future — it’s almost here — when nobody is using copper landlines for plain old voice services except those rural pockets where both the erecting of poles and the original provision of telephone service was subsidized and where telephone service is still being subsidized today. … it isn’t economical to provide cable or cellular or broadband services where the population is thin.  …  there is also a huge threat to the existing subsidies for rural POTs. These subsidies are collected from other users of POTS; if we country people are the only remaining users of POTS, where’s the subsidy going to come from? 

Tom is correct that rural America has the most to risk from the loss of USF subsidies.  Rural America relies on subsidies for almost all of the rural infrastructure: electric, highways, agricultural, and telephone.

However, the subsidy payments for telecommunications made to rural America though are anything but simple and transparent.   The RBA comment for example refers to NECA “pooling” for the carrier access subsidy  – but the pooling methodology is not made public so access fee payers (the interexchange companies and ultimately every end-user customer) do not know which company and their customers receive how much or why. 

The other issue is that the “High Cost Fund” (HCF) portion of UFS (about 50% of the total 15.5% USF fee on interstate revenues) paid by consumers to rural America has almost tripled in 10 years from $1.7b to $4.3b.  The High Cost Fund is used to pay for the costs of reaching homes in very low density areas to provide telecommunications and information services.

However, over the same 10 year period, the number of traditional access lines (sometimes called POTS)  and interconnected VoIP access lines, now renamed by the FCC as “Service Connections,” have remained nearly stable at around 160 million.

This means that on average $9 per connection was paid to the High Cost Fund in 1999 but that this amount increased to $27 per connection by 2010.    One other take away, that could be assumed from these numbers, is the cost of providing service to rural consumers appears to have increased by 300% from 1999 to 2010.   More than likely, such a large cost increase did not occur but the large increase in the HCF fee collected from U.S. consumers to support rural American consumers should be questioned.   

The new FCC USF Reform goal is to provide broadband service to all American homes and businesses.  To achieve this goal, USF will need to be used for capital expenses such as fiber construction which costs between $30k to $65k per mile on poles.  One would think that HCF funds have been primarily used for such capital expenditures rather than for operational expenditures.  This is not the case and it should be changed by the Commission.  Even a recent court decision made the point that USF HCF goes to operational expenses, not capital expenses.  In a recent, January 2010 Fifth Circuit Court of Appeals decision determining the taxability of USF payments to recipients as income or capital contributions, AT&T argued that USF was a capital contribution for capital expenses but the court disagreed.  The court explained:

AT&T argues that the legislative and regulatory background for the payments indicates that they were intended to increase AT&T’s investment in capital assets.  However, universal service support did not provide money exclusively for the specific purpose of making capital improvements, such as building an airport or locating and constructing a plant.  Instead of providing the money only for that type of investment, the governments provided supplemental income so as to provide the telephone companies an enhanced return on their investment.   

To ensure that USF HCF funds are properly used for extending fiber broadband connections to end-users and also are  taxed as capital contributions rather than income, the FCC could require that HCF USF funds be used for capital expenses only.  The FCC could even specify the types of capital the HCF funds should be used for such as outside plant and network equipment, just as the NTIA required with the Recovery Act grants.  This capEx only requirement would ensure that the funds are spent building fiber highways rather than merely subsidizing operating expenses of existing telephone networks. 

One other suggestion for USF reform is that the largest ILECs collect, pay to the USAC, and then receive back from USAC hundreds of millions of dollars of USF Funds.  The FCC could enable “bill and keep” for such companies paying and then receiving funds.  Using bill and keep would allow the LECs receiving the funds to use the cash immediately rather than having the cash move through the government (USAC) and then return months later.  In other words, put the money to work immediately to build broadband to rural America.

Jonathan Adelstein, USDA RUS

Finally, the smartest decision the FCC could make would be to recommend to Congress that legislation be enacted to transfer the $4.2 billion in USF HCF funds collected annually to the USDA’s RUS for distribution to rural providers.  RUS is now led by one of the most experienced former FCC Commissioners, Jonathan Adelstein.  Former Commission Adelstein’s RUS has the staff resources and years of experience in working with rural American to properly allocate the billions of dollars USF collections for the capital needed to build broadband in rural America.

Posted by Barlow Keener

On February 9, 2011, the FCC released a Notice of Proposed Rulemaking (“NPRM”) and Further Notice of Proposed Rulemaking seeking comment on numerous proposed changes to “fundamentally modernize” the USF (Universal Service Fund) and another subsidy program called the “intercarrier compensation system.” 

The USF “High Cost Fund” is a multibillion dollar annual subsidy created in 1996.  The High Cost Fund is a tangled web of caps, cost studies, and complex rules.  The USF High Cost Fund quietly transfers a significant amount of money – $4.8 billion every year – from urban telephone customers to rural telephone customers.  There is a “quiet transfer” because the typical customer paying the USF fee and the typical customer receiving the fee have no clue that the USF fee is supporting the telephone service for rural customers.  Other USF fees fund geo-neutral services: the  $1.2 billion Low Income fund and $2.7 billion Schools & Libraries E-rate fund.  A grand total of $8.7 billion per year is collected and distributed under the plan. To put this amount in perspective, two years of USF collections equals 12.5% of the total amount of $134 billion Recovery Act stimulus funds received during 2009 and 2010. 

The primary purpose for the federal government’s creating USF in 1996 was to ensure that rural America received the same telephone service “and information services” as urban America.   Rural customers, no matter how far “off the grid,” are entitled (one of our “entitlements”) to a) telephone service – known as “universal service” and b) prices for the telephone service in the ball park (“reasonably comparable”) to what customers in urban areas pay.   

The USF mechanisms for determining which company receives how much of this subsidy is exceedingly complex.  For those of you who wonder about the complexity, take a quick read of the 289 page FCC USF NPRM.  After reading the NPRM, try to explain the USF payment and contribution concepts current or proposed to an intelligent friend.  It is difficult for the average college educated person to understand how USF is charged and who receives the payments.

This complex USF fee/tax is costly to users.  The fee is now 15.5% of the interstate revenue. The FCC has been under pressure for years to reform USF to remove the complexity and perceived “unfairness.”  The FCC pointed out subsidy payment unfairness by illustrating it on a per line basis and suggested a cap on a “per line” basis:

“But some companies with fewer than 500 lines have received USF support … ranging between $8,000 to over $23,000 per year per line, which translates into subsidies for local phone service ranging from roughly $700 to nearly $2,000 per line per month.”

The FCC is also concerned that carriers are taking unfair advantage of USF and have no incentive to run an efficient operation:

“We are concerned that, absent some limit in federal support, carriers lack adequate incentives to curb costs.”

One of the primary proposals is to remove the complexity from the USF rules to make the subsidy payments more transparent which will assure that companies needing USF subsidies receive the payments and those companies taking unfair advantage of the USF program stop receiving the subsidies.  The other reason for reforming USF is to combine funds into a new Connect America Fund which will subsidize capital expenses and operating expenses to deploy broadband for rural America.   

There are three problems with USF: 1) calculating USF is complex, 2) determining who receives what is complex, and 3) it is not always achieving its purpose of being used for new capital expenditures (like fiber or wireless construction in rural areas).   One concept to solve problem #1 on the payment and collection side could help eliminate the complexity for the paying customers and companies:

Charge Customers A Simple Flat Rate USF Fee Similar to the 911 Fee.  Currently the USF “fee” – really a tax – is 15.5%.   It is on interstate revenues only.  For flat rate service where all calls in the US are included, as is often offered with VoIP service for example, a default rate of 64.9% of VoIP revenue is used to allocate the  interstate portion of the flat rate service.  It is difficult for customers – the ones paying the $8.7 billion fee – to calculate how the 15.5% is charged.   It would be much simpler to charge a flat fee per access line, Interconnected VoIP service, and mobile phone.   As of 2010, there were 151,171,000 wireline “service connections” consisting of 122,275,000 “access lines” and 28,895,000 “Interconnected VoIP.”  Also, cellular CMRS companies, which often benefit from the USF fees, could collect the fee from their 293 million customers. 

Fundamentally, USF is a tax that is used to support certain portions of the population for telephone and now broadband service.  There is no reason that the tax needs to be so complicated to calculate and so hidden from the American consumer.  The consumer’s bill should just show a flat rate USF fee.  A modest fee of $2.00 per month for wired “service connections” and a cell phone fee of $1.40 per month could generate $8.55 billion annually replacing the USF collections of $8.7 billion.

T

There may be some gamesmanship here as an “access line” is not easy to define these days – for example how many access lines are delivered with DS1 or DS3?  But 911 fees have been charged on a per line basis for many years and the 911 model could be used.    

Comments on Section XV of the USF NPRM were filed on April 1, 2011 with reply comments due on April 18, 2011.   The FCC is holding a day long USF workshop on April 6th.  Comments on the other sections are due on April 18, 2011, and reply comments on May 23, 2011. 

“““

      *The telephone above was used for the railroad in the Mojave Desert in Kelso, California.

Posted by Barlow Keener

The December 23, 2010 Network Neutrality order, "Preserving the Open Internet," is the FCC’s attempt to regulate the problems created by the lack of broadband provider competition to the home. Commissioner Copps framed the problem in his statement:

Allowing … monopoly or duopoly broadband Internet access service providers ­to exercise unfettered control over Americans’ access to the Internet not only creates risks to technological innovation and economic growth, but it poses a real threat to freedom of speech and the future of our democracy.

If there were a sufficient number of broadband competitors, Commissioner Copps may have considered the network neutrality rules to be superfluous.

The alternatives to protecting consumers from the ability of monopoly/duopoly providers to "exercise unfettered control" are a) structural separation of the last mile similar to the structural separation Ofcom imposed on BT in the U.K., b) unraveling the 2003 FCC order bringing line sharing to an end, or c) reversing the FCC’s 2005 decision that effectively ended the requirement that ILECs sell facilities-based transmission to ISPs competing with the ILEC’s broadband Internet service offering.   The 2005 FCC order ended such competition. The 2005 order explained:

In contrast to the classification of wireline broadband Internet access service as an information service, there is considerable disagreement in the record as to the appropriate classification of the transmission component of such Internet access service. …  Specifically, if the transmission component is a telecommunications service under the Act, providers of that service are subject to common carrier regulation under Title II of the Act in their provision of that service. … based on the record, we decline to continue our reflexive application of the Computer Inquiry requirement, which compelled the offering of a telecommunications service to ISPs.   

The 2010 Network Neutrality order addresses the lack of last mile broadband competition as rationale for the rules mixed with other rationale like protecting innovation, infrastructure investment, and the Internet.   My reading of the order focuses on Copps’ understanding that the fundamental reason for the Network Neutrality order is to ensure that the limited number of competitors does not negatively effect the consumers. Typically, the FTC (Federal Trade Commission), the Antitrust Division, or a court (like Judge Green’s 1983 court) would address and solve anti-competitive issues presented by an industry dominated by one or two companies.  The FCC failed to address the competitive issue with statutory authority it has in Title II over transmission facilities.  Rather, the Commission took what could be, as Commissioner McDowell asserts it is in his comment, the beginning of the regulation of Internet content by the government, something I am sure the supporters of network neutrality did not intend.

The National Broadband Plan, cited in the Network Neutrality order, points out that 80% of the homes have no more than two wireline broadband providers. These two providers can be seen by looking up in the air at the two providers (typically 2 fibers (copper, glass, or HFC) on the poles outside every home. If there were multiple choices of providers (say six or more) for each home, providers could compete by delivering blocked service or non-blocking service depending on the customer’s tolerance. for blocking.  If a provider blocked Netflix, the consumers could vote with their feet and switch to one of many competing broadband providers.  But now, ten years after broadband took off, the reality delivered by the FCC’s regulatory strategy implemented in 2005, is extremely limited broadband competition for, most likely, the highest demand product of the decade: 70 million "units" of broadband sold. 

Imposing a regulatory scheme that would deliver multiple competitors is not politically feasible today in the U.S., although it seems to be in other countries where competing Internet service providers use incumbent local transmission facilities to deliver broadband.  So the alternative to creating a regulatory regime that delivers multiple broadband competitors is regulating the way the limited number of broadband competitors deliver the Internet.  The Network Neutrality order attempts with good intention, but without adequate statutory support, to solve the competitive broadband access problem by regulating the Internet itself which up until now has succeeded without regulation. 

The question all observers are asking is whether the 2010 Network Neutrality order will survive the recent January 20th Verizon "license modification" appeal to the D.C. Court of Appeals. The Network Neutrality order set forth a phalanx of statutory rationale not included in the 2005 policy order. Even though the Comcast D.C Court of Appeals order declared as nugatory the reliance of the Commission on Section 706 of 1996 Act (47 U.S.C. § 1302(a)), the Commission re-asserted that 706 was the principal support for the latest iteration of network neutrality. However, the Commission bolstered it’s potential to argue ancillary jurisdiction authority by citing other support as well including a creative concept that by blocking over the top VoIP, such as provided by Skype, the broadband provider would possibly be violating Title II (§ 201).  

The Commission has indirectly regulated over the top VoIP, declared an information service, by requiring that VoIP providers comply with 911 and USF regulations.  Such over the top VoIP regulation relied on the FCC’s ancillary jurisdiction from Title II authority.   The Network Neutrality Order rightly points out that the FCC has “not determined” whether over the top VoIP is a telecommunications service.    Without expressly asserting that Section 201 provides the necessary “ancillary” jurisdiction, as discussed at length in the Comcast D.C. Court of Appeals decision, the Network Neutrality order states that over the top VoIP "contribute[s] to the marketplace discipline of voice telecommunications services."  In addition, the Network Neutrality order relied on Title III and VI, again without expressly stating that such reliance is “ancillary authority,” by asserting that blocking certain video, like the video of local television stations, could interfere with the “orderly development . . . of local television broadcasting."

The order’s reliance on Title II, Title III, and Title VI and its arguments that the delivery of VoIP and video over broadband are tied to the Commission’s statutory mandate to regulate telephone service and cable service are interesting.  The obvious direction we are headed to is that all voice and video will be delivered through broadband in a few years.  Most, if not all, telephone calls will be over the top VoIP, and most, if not all, video will be viewed through TV everywhere services over broadband like Xfinity.  Even the average American citizen assumes that the FCC will be regulating VoIP and cable TV regardless of how it is transported.  The home owner will look up at the poles outside and see the fiber coming into their home and think, that it sure looks and walks like the same wire entering their home 10 years ago and the FCC must be regulating that wire.   But the answer will be “no” because the FCC abrogated the authority to regulate the transmission of broadband in 2005.

The issue being avoided by the FCC is that the last mile transmission facility carrying all the great “information services” known as the “Internet” has an underlying transmission component that should be “telecommunications”  and should be regulated by the FCC.  The transmission facility looks like, walks like, and quacks like “telecommunications” and but it is not regulated as “telecommunications.”  The result of FCC regulation that could ensure the Internet would be open to all is by opening the last mile transmission facility to ISP competitors.  Such regulation is needed where only two facilities competitors control the gateway for 70 million consumers. 

The answer is not to attempt to regulate the transfer of content over the Internet, including over the top VoIP and TV everywhere services.  The Internet should be unfettered by government regulation.  The answer, rather, is to regulate the underlying transmission facilities to ensure healthy broadband competition.

Posted by Barlow Keener

Last month, Carl Ford of 4GWE fame, hosted a White Spaces session at his popular 4GWE LA West Coast conference.  The panel followed the release of the FCC’s September 23, 2010 white spaces order. There was great conversation on white spaces spectrum and regulatory issues.  I moderated the session.  Panelists included Brough Turner, CTO Netblazr (and former CTO & Founder of NMS), Fanny Mlinsarsky, CEO octoScope (Founder, & CTO, Azimuth), and Jack Unger, WiSPA.   

Brough had some great observations about the limits for white spaces both in terms of 1) the power and 2) the height limitations imposed by the FCC order and the physical limitations of the lower 56-806Mhz spectrum.  

What are White Spaces? White spaces are those white fuzzy channels on TV between the channels you watch.  With digital TV, the white spaces became available either for a) auction or b) “open commons” use, as some in the internet world may think of the final decision.  The FCC chose to open, somewhat, with a lot of restrictions, the use of white spaces to the public similar to how 2.4Ghz is open for use by Wi-Fi devices and microwave ovens or 900Mhz open for use by cordless telephones and baby monitors.   The power rand height restrictions were hotly contested by those wanting to build devices and use the spectrum.   Fred Goldstein, of Ionary Consulting, for example, suggested that the FCC height restriction of 75m over “average” terrain would prohibit those in mountain towns or other areas from receiving service.

Super Wi-Fi. Many, including the FCC, call white spaces “Super Wi-Fi.”   Chairman Genachowski explained that Super Wi-Fi is “Wi-Fi, but with longer range, faster speeds, and more reliable connections.”

The reason the FCC coined the term “Super Wi-Fi “ is because everyone has the image of TV channels 2-69 (54Mhz-806Mhz) going many miles and going through brick walls.    The idea or image that TV white space signals that operate similar to 2.4Ghz Wi-Fi will be able to go miles and miles and go through walls, unlike 2.4Ghz Wi-Fi which is blocked by walls, gets folks excited. 

But we need to stop, and think.   TV antennas are often around 1000 feet tall, sometimes taller.  The typical analog TV channel can blast 1350 kilowatts (that is “kilo” or 1,350,000 watts).  Even digital TV channels blast at 300kw. An example the power of a TV signal in Boston is from the FCC.gov DTV section:

The white spaces devices are a fraction of this TV power and are limited to 100 feet in height, for fixed radios.   White space signals will not go through building walls as many imagine.

Did TV Signals Blast Through Brick Walls? Recall that  in the days of old (1960-2000), TV signals did not “blast” through brick walls like Superman.   Every home in the country had the ubiquitous, huge TV antenna on the roof well above the walls.  Why was the antenna a) on the roof and b) huge?   The TV antenna was on the roof because the lower frequencies 50-806Mhz can not penetrate blocks, masonry, and other objects.   The VHF (Channels 2-13) TV antenna was big because the lower frequencies on which VHF operated — 50-216Mhz — have bigger wavelengths than 2.4Ghz and thus require larger antenna elements of the type that has virtually disappeared from our home roof.              

For white spaces, under the September 23, 2010 order, WISPs can use up to 4watts ERP for a fixed radio (not the power used by TV stations to blast through walls which is 1000kw or 1,000,000w) and for the portable device that we are going to carry around, the power limit is 40mw (milliwatts = 1000th of a watt, so 40mw = .04w) adjacent and 100mw (=.1w) when not adjacent to another to a protected TV channel.  This power restriction is only slightly more than the typical 250,000,000 Wi-Fi access points now typically generating 20 mw each with an average range of 300 sf.

The FCC September 23, 2010 order limits fixed white spaces antennas to a maximum height of 100 feet (30 meters) above ground level, not the 1000 feet height typically occupied by TV station antennas.

The Big Question. The limitations of height, power, and low spectrum will, if we are lucky, be equal to the delivery of service you now experience with Wi-Fi.  But it will not be better, it could be worse.  The requirement for larger antennas needed for 50Mhz-700Mhz in the personal devices may be tricky. 

I am not a technologist, but an attorney, so I am sure we will see some amazing innovation in this area.  The white spaces order is a great step forward to making efficient use of a public property, spectrum.  It is a great experiment towards determining if a new type of shared spectrum radio will work where the radio contacts a data base to determine if a channel is not occupied by another provider.  

The real question, however, is: if the lower spectrum 50Mhz to 700Mhz spectrum imitations (described above) combined with the FCC’s white spaces order restrictions on antenna height and radio power, will there be something far less than “Super Wi-Fi?”

Posted by Barlow Keener

The Recovery Act NTIA winners are waiting for millions of dollars of stimulus funding.   The NTIA winners receiving the largest grants will install fiber on thousands of miles of poles.  These NTIA fiber winners will be the new competitors to the ILECs who own the poles.  The FCC is trying to address the pole problem head on.  It will not be an easy problem to solve.

The NTIA fiber winners are anxiously waiting for the NTIA to issue the checks to start the three year race and hang their first mile of fiber.  Cellco’s and their backhaul partners are also looking to install DAS and fiber backhaul for new 4G LTE radios.  However, no fiber will be installed until pole attachment agreements are signed, pole surveys are conducted by pole owners determining make ready costs, make ready is completed requiring many new poles, and the utility pole owner permits the installation.   The pole attachment process is ripe for delay and overcharging.

The FCC and 21 states regulate pole attachments.  The Telecom Act of 96, 47 USC 224, addresses the pole attachment rates. So does FCC Rule Sec. 1.1401-1.1418 This is the FCC formula for determining the pole attachment rate:

Pole attachments are regulated because poles are a monopoly product. Only one company can own a pole in the same location.  There is no room in the public right of way for two or three poles in the same location.  There are 35 poles per mile typically.  Whoever owns the poles has control over new fiber entrants.  Once a pole is “full” there can be no more competitors hanging fiber on a pole.  Typically the limit is 3-4 providers on the pole.  The ILEC and the local cable company have been on the poles for years.  New comers are often not welcome.   Although the new fiber provider pays the regulated rate, which is different depending on the declared use of the fiber, the owner of the pole, if an ILEC, may have a strong incentive to delay or keep the cost high for new market entrants.   Make ready, for example, could range as high as $25,000 per mile and require replacing multiple poles.

The FCC recognized the competitive problem the utility pole owners present to the new fiber providers and addressed the issue in the National Broadband Plan.  The FCC spent 15 pages in the National Broadband Plan discussing pole attachment issues. Then, on May 20, 2010, the FCC released a 99 page Further NPRM addressing pole attachments in detail: “A National Broadband Plan for Our Future Implementation of Section 224 of the Act.” The NPRM  recognized the importance of timely access to poles.  The May 20, 2010 FCC press release underscored the problem to be addressed:

Currently, access by service providers to poles can be slow, costly, and mired in long disputes.

The FCC staff sited a pole complaint where the company:

“…has been working since February 2008 to build the network necessary to provide a WAN network for a school district, and is still waiting for the pole owner to complete make ready work. As a result of this delay, the school district has not been able to conduct standardized testing online as it had hoped and planned to do.”

If this experience is the norm and not the exception, then more regulation smoothing the way for NTIA grant winners and 4G wireless backhaul is needed.

Under current regulation, cable companies pay a lower rate than telecommunications companies, and CLECs pay a lower rate that ILECs.  If a company is not a telecommunications, cable, or wireless company, like an ISP or broadband provider, the FCC pole attachment rules do not apply.   ISPs must file Form 477 and are subject to CALEA, but ISPs cannot get on the poles without being CLECs.

Because 78% of homes have only 2 broadband competitors, it is absolutely necessary for the FCC to carefully regulate the availability of access to the pole and speed of completing the fiber project.  You can see the competitive bottleneck problem by looking up at a pole outside your home and see the 2-3 providers. There is typically little room on the poles for another provider.  The FCC’s job is to encourage broadband competition, and pole regulation is the way to accomplish this task.  Comments to the NPRM on pole attachments are due on August 16, 2010.

To learn more, register for Carl Ford’s Pole Attachments 101: Even for Wireless we need them 4GWE webinar on pole attachments scheduled for August 18, 2010.   I will be the moderator and the panelists will include Marty Stern at K&LGates, Mike McNally, CEO, Maverick Construction, and Sandy Bendremer, VP Galaxy Internet.  Click here to register.

Posted by Barlow Keener

Universal Service Reform has been in the FCC “reform hopper” for more than 10 years.  Commissioner McDowell correctly labeled the USF program “antiquated, arcane, inefficient and just downright broken.” Fixing USF is anything but easy because while you can move USF money from one bucket to another, lowering the fee will take away government subsidies from ILECs and wireless companies receiving the subsidies.  Chairman Genachowski is rightly pushing and attempting to go where no Chairman has gone before, actually accomplishing USF reform.  On June 14, 2010, the Chairman announced the creation of the “Universal Service Working Group” that will provide a comprehensive, collaborative approach.  Sharon Gillett, Chief of the Wireline Competition Bureau, will lead the effort.  This announcement followed the March 16, 2010 National Broadband Plan that included a large section on USF reform and the FCC’s Joint Statement on the same day that USF reform was required and that USF funding should support broadband growth.  On April 21, 2010, the Commission released a Notice of Proposed Rulemaking (NPRM) opening a new docket for comprehensive USF reform.

After the announcements, Congress jumped into the fray.  There is a lot of money at stake, $8.7 billion every year.  On June 24, 2010, the Senate Commerce, Science, and Transportation Committee held a full committee hearing on USF reform.  The hearing was attended by three Commissioners.  The hearing was partially a forum for debating about the proposed Third Way and partially for getting commitments that USF reform would not result in harm to rural carriers.

The agreed consensus by Commissioners Copps, Clyburn, and Baker was the goal of delivering broadband to rural areas.  A large part of the hearings involved a back and forth on the Third Way being an acceptable mechanism for giving the FCC the legal authority to use USF High Cost Program ($4.6b) to support rural broadband.  Senator Ensign (R) emphasized that certain telecom companies’ internet businesses should be subject to “light touch” regulation (which is probably a reference to having no net neutrality obligations).  He argued that if “light touch” regulation was reversed, carriers would not invest in the rural areas.  Commissioner Copps said we have had 10 years of one regulatory question mark after the other but investment proceeded none the less. There was no mention of the ARRA NTIA’s $7.2 billion that is being targeted to solving rural broadband.  Also, there was no mention of the enormous amount of USF subsidies being paid to the largest wireline and wireless carriers.

What makes the USF 13.6% fee and $8.7b annual subsidy so controversial? The main issue, alluded to indirectly by almost everyone at the hearing, is the basic “taxation” conundrum.  If USF funding is decreased, then ILECs relying on USF will lose subsidies and could go out of business.  Also, in order to justify USF, the calculation of costs submitted by the ILECs to support the USF subsidy is so arcane and out of touch with reality that a Google cognitive computing engineer would struggle over how it is being calculated.  Straightening out the cost methodology will mean that some ILECs will receive less.  The USF dilemma is politically no different than those who attempt to decrease military spending, Medicare, welfare, or unemployment compensation.  If CABS is decreased, rural ILECs will suffer.  If USF is decreased, there will not be enough funds to subsidize the three largest ILECs and most of the wireless carriers.  Also, if USF is decreased, there will not be sufficient funds, from the point of view of some analysts at the FCC, to reach the last 250,000 homes without broadband.  A recent FCC study determined the average cost to reach the outlier homes would be around $60,000 per home.  While bringing broadband to rural towns is a goal that will serve the U.S. economy, reaching every outlier home may not be in our nation’s best interest.

                                                                  Nipton, CA (pop. 24) Served with DSL

Posted by Barlow Keener

The Comcast net neutrality order was rejected and returned to the FCC by the D.C. Court of Appeals in April 2010.  The order, as we all know, focuses on the FCC’s attempted regulation of a cable company’s Internet network management practice.  Comcast and cable providers were pleased with the outcome as these providers know just how difficult it is to manage the data passing through their routers and switches.  Fred Goldstein at Ionary.com has an excellent discussion on the Internet management issues (Layer 3) faced by the cable industry.  Regulating the flow of Internet data is regulating content.  However, regulating the competitive rights relating to the last mile wire, the wire which you can see on the pole outside your house and known as the "transmission" facility, is the job of the FCC.  The court told the FCC that it had no "express" statutory authority to regulate the Internet but that the FCC did have statutory authority to regulate the transmission facility.

Unlike the cable industry, the FCC and network neutrality advocates were not so happy with the court’s decision.  Susan Crawford argued in a NYT Op-Ed  that the FCC "can regain its authority to pursue both network neutrality and widespread access to broadband by formally relabeling Internet access services as “telecommunications services,” rather than “information services,” as they are called now."   However, Tim Wu and Susan Crawford subsequently proposed in a recent letter that the FCC reclassify "the transmission portion of high-speed Internet access" and "simply state that transport services should be subject to non-discrimination and interconnection requirements."  As explained below, the requirement that transmission facilities be sold on a wholesale basis to ISPs should be restored but limited to the "last mile." The monopoly power of the transmission facility is primarily in the last mile to the consumer’s home.  Limitations on the wholesale requirements of the transmission facility should be limited in a similar fashion to how DSL line sharing of the copper loop was limited (Sec 251) or ISP use of aggregated DSL (Sec. 202).   Of course, providing a  wholesale service of last mile GPON fiber at Layer 1/2 using would be difficult but far from impossible.  

The Third Way. Shortly after the appeals court order, FCC Chairman Genachowski responded to the setback. He presented what some may view as a strange but creative regulatory method of addressing the loss which was labeled "The Third Way." Basically, The Third Way attempts to classify "Internet access service" as a regulated activity ("telecommunications") and then use "forbearance" as a legal device to carve out regulation for those matters like the Universal Service Fund. FCC General Counsel Austin Schlick provides a good discussion on what the Third Wave means in this recent BroadbandUS.tv video interview.   Many have warned, including Commissioner Copps with his "forbearance binge" statement, that the reclassification approach to simply to satisfy the D.C. appeals court’s need to tie Title I ancillary regulation to more than statutory "policy" contained in Title II (telecommunications) could lead to more trouble than expected.  

One might question, as we know the FCC has, the appeals court decision.  The Title II section cited by the FCC as "express" authority for network neutrality states that “[i]t is the policy of the United States . . . to promote the continued development of the Internet and other interactive computer services” and “to encourage the development of technologies which maximize user control over what information is received by individuals, families, and schools who use the Internet.”  The lawmaker who drafted the Title II section might disagree with the court and conclude that it was the court making law, not Congress.  If Section 230(b) does not provide the express link to statutory authority and "arguably delegate regulatory authority", then what new legislative language will work? Congress will be careful in the future to not include the word "policy" in the statute.  The FCC’s Brief, contrary to the Court’s decision, spoke to the common sense of the decision maker, stating: “The operative provisions of statutes are those which declare the legislative will.”

Limited Competitors in the Last Mile. Regardless of the legal arguments about ancillary authority being based on more "substantive" terms of Title II, the real substantive issue  behind the network neutrality is the FCC’s responsibility to ensure healthy competitive behaviors by cable and telecommunications providers. The Supreme Court in Trinko   (2004) explained that the FCC, not the courts imposing antitrust law, was responsible for ensuring that the industry is competitively healthy: "When there exists a regulatory structure designed to deter and remedy anticompetitive harm, the additional benefit to competition provided by [non-regulatory] antitrust enforcement will tend to be small, and it will be less plausible that the antitrust laws contemplate such additional scrutiny."   

One of the primary articulated reasons the FCC issued the 2005 network neutrality "policy" was that "consumers are entitled to competition among network providers." Yet the FCC’s contemporaneous policies served to dramatically reduce competition for ISP services. Ensuring competition is similar to the obligation to "remedy anticompetitive harm" which the Supreme Court required of the FCC in Trinko. resulting from the lack of competition by ISPs. Right now, according to the National Broadband Plan there are only one (13% of homes), two (78%), or, if one lives in the right neighborhood, three (4%) wireline  providers of Internet for consumers.  All you have to do is to look up on the pole outside your house to see two sets of cables – one from the cable company and one from your local ILEC.  You are not going to see more "competing" cables appearing on these poles anytime soon (unless a dramatic — or some would describe it as traumatic — regulatory change occurs).  The lack of a healthy number of competitors typical invokes regulation by the government. In Aspen Skiing v. Aspen Highlands, a snow ski company owning the majority of ski resorts in a ski territory was determined by the U.S. Supreme Court  to have abused its monopoly power by not opening up the all-mountain ski tickets to the smaller resort mountain competitor.  Thus, the issue faced by the FCC is basic "monopoly power" law well-defined for other industries that are outside of the FCC’s regulatory arena.  

The History. The 1996 Telecom Act was supposed to increase competition for local telephone service.   Internet at the time used the local telecommunications service through dial-up modems to connect the average consumer to the Internet.  By 1999, cable companies were providing broadband using their cables hanging on the pole outside your home and ILECs were providing DSL over their wires hanging on the pole.   From 2000 to 2004, there were in some areas one or two CLECs using the ILEC "UNE loops" or wires to provide homes with a broadband Internet choice.   In early 2005, the FCC majority decided that competition by only two wireline providers was healthy (not all agreed with this view) and brought an end to DSL line sharing.  Line sharing gave the very few ISPs and CLECs providing service to consumer homes the right to use the same ILEC wire providing telephone service for DSL. The 2005 Supreme Court Brand X decision brought an end to the hope of ISPs that they would be able to use the cable facility to reach consumers. 

Choice allowed consumers to switch from an ISP that was doing more or less blocking than acceptable by the consumer.   Without choice, the consumer is stuck with ISP provider number one or provider number two. This would be like consumers being stuck with 2 providers of bread, 2 providers of restaurants, or even 2 mobile providers.  This is not just a matter of the rights of the consumer, it is a basic problem of the lack of competition.  The FCC has no choice but to address the issue of the lack of ISP competition. The question is how to do this in the most effective way possible with the least amount of interference and harm. 

Transmission Facility Open for Competing ISPs. Many appear confused about the transmission facility competitive issue and "Internet access service."   Network neutrality is not a technically workable solution for solving the bottleneck at the transmission level. An ISP should have the right to block for traffic management and to provide its own services as it deems in the best interest of the company and its customers. The FCC proposed in 2009 to issue an order allowing network management issues but such an exception would still allow consumers to bring complaints and require ISPs defend their actions.  Network management is not a black and white "you’ll know it when you see it" issue.  The better and simpler approach would be to  prevent "anticompetitive harm" by opening up the gateway at the lowest and most practical Layer 1 or 2 – the transmission layers, not the Internet Layer 3.  The FCC should keep their hands off the Internet and not have FCC engineers examining packet traffic in routers.  The result could be accomplished by building a regulatory framework that would allow ISPs to purchase limited transport on a wholesale basis for the "last mile" to the home under Section 202.   Consumers would then have a choice of ISPs.  And the local, last mile transmission facilities would be more efficiently deployed with more wholesale buyers reaching more total consumers than the monopoly owner, and, thus providing more revenues to the monopoly owner.

Posted by Barlow Keener

On Friday, July 26, 2009, the NTIA (National Telecommunications and Information Administration) granted a “limited waiver” for the Buy America restriction in the  Recovery Act covering certain types of equipment that may be required for broadband projects.  The NTIA is responsible for overseeing the process of delivering $4.7 billion in stimulus funding for broadband projects and is administrating the broadband grants through the BTOP (Broadband Technology Opportunities Program).   One of the general requirements of the Recovery Act was the “Buy America” provision requiring grant recipients to purchase “manufactured goods” used in the product from approved U.S. vendors.  The Buy America provision gave the agencies broad authority to waive the requirement if certain conditions were met, one of which is if the Buy America requirement is not in the “public interest” in a particular industry.

The Buy America provision was opposed by the two of largest internet and telecommunications equipment vendors, Cisco and Alcatel-Lucent, and supported by the Communications Workers of America (CWA).  See a discussion at in this post.   Bloomberg News reported on the Buy America dispute on June 15, 2009.

The July 26, 2009 NTIA public announcement explained that the limited waiver would be granted based on the “public interest” exception.  The NTIA waiver explained:

[I]t would be difficult, if not impossible, for a BTOP applicant to have certain knowledge of the manufacturing origins of each component of a broadband network and the requirement to do so would be so overwhelmingly burdensome as to deter participation in the program. Requiring a BTOP applicant to request a waiver on a case-by-case basis also would be such an administrative burden on the applicant as to discourage participation in the program and would increase the agency’s time and costs for processing BTOP applications for broadband infrastructure projects.

The NTIA, however, did not grant a complete waiver. The Buy America provision will continue to apply to “fiber optic cables, coaxial cables, cell towers, and other facilities” that are produced in the United States in sufficient quantities to be reasonably available as end products.  The list excluded from the Buy America requirement includes equipment for “Broadband Switching,” “Broadband Routing,” “Broadband Transport,” “Broadband Access” for last mile connections, “Broadband Customer Premises Equipment and End-User Devices,” and “Billing/Operations Systems.” There are many equipment vendors that produce telecom equipment in the United States such as Adtran. These U.S. companies will not now, after the NTIA limited waiver, have an advantage over companies manufacturing their equipment outside the United States.

What is interesting about the NTIA limited waiver is that it did not discuss the Buy America OMB (Office of Management and Budget) guidelines which provided that as long as the equipment was “manufactured” in one of 51 allowed countries, the subcomponents were not subject to the Buy America limitations.   The April 3, 2009 OMB Buy America guidelines stated:

There is no requirement with regard to the origin of components or subcomponents in manufactured goods used in the project, as long as the manufacturing occurs in the United States.  (page 136)

By addressing the Buy America provision, it appears that the NTIA is on schedule to deliver its Notice of Availability of Funds by the end of June (tomorrow).  The Recovery Act schedule, found at Recovery.gov indicates that NTIA stimulus funds will begin stimulating recovery starting in January 2010. Checks for the first round of grant proposals will be issued on December 31, 2009.

Posted by Barlow Keener

Obama was voted in with lots of talk about reform.  Democrats could not wait to make change.  However, with other priorities like the economy teetering on the edge of the cliff and GM filing for bankruptcy and the $787 billion Recovery Act, more was on the agenda plate that could be handled in one walk through the change buffet.   No doubt, wheeling and dealing at the Senate led to the FCC’s changing of the guard being put on hold by concerned opposition.  Julius Genachowski was designated as the new FCC Chairman as early as January 13, 2009.  Obama officially named Genachowski to the position on March 3, 2009, and submitted the position to the Senate Commerce Committee, Chaired by Jay Rockefeller (D-WV), on March 25, 2009 for approval.  First the hearings were scheduled for after Memorial Day and now they have moved to June 16, tomorrow.  It is possible, some pundits claim, that the hearings may not be concluded until after the August recess.  The stated  reason for the delay is that the Committee is seeking to approve all the candidates — two Democrats  (Mignon Clyburn) and two Republicans (McDowell and, as yet to be nominated, Meredith Attwell Baker, formerly at the NTIA) — at one time.

Certainly, there are some industry leaders that will not be happy with the new chairman.  Politics may seem to be a strange beast but politics are simple at the heart of the matter.   Senators work to serve their supporters and constituents.   It is unusual for a newly nominated chairman from a change of guard political party to wait so long to begin initiating change.  Republican Michael Powell, for example, who was already serving as an FCC commissioner, was nominated for the chairmanship on January 21, 2001 by Bush and within days was serving as Chairman.  

Genachowski has a long history of supporting competition and is a strong backer of network neutrality (See Huffington Post article).  He served as General Counsel at the FCC until 1996 under for former Chairman Reed Hundt.  Hundt as we all know was responsible for architecting and delivering UNE-P, which did not make many of the incumbent local exchange carriers happy and was subsequently removed by the Republican FCC.   It is highly likely, therefore, that Genachowski will bring back support for more “choice” for the consumer and more competition as well as pushing for network neutrality.  There are certain local exchange companies that may not favor such a policies.   Even though almost all carriers have publically spoken in favor the nomination, it is conceivable that some may be working to slow it down.  However, with so much else on Obama’s plate like the Recovery Act and banking reform, moving the nomination quickly through the Senate may be a lower priority.   In the meantime, the hearings will begin and these issues will be explored by the Senators.