Regulation - What is it Good For?

An Effective Federal Broadband Program, Part 4

outdoor-indoor-cable-161This is the final in a series of ideas on establishing a federal broadband construction program. It is assumed in these comments that such a program would include some form of federal financial assistance to build fiber networks such as grants, loans or loan guarantees.

Fix the Pole Problem. One of the biggest impediments I see for building fiber is getting reasonable access to poles. The Telecommunications Act of 1996 established the right to get on commercially-owned utility poles. But that new set of rules excluded poles owned by municipalities and rural electric cooperatives. Those exclusions need to be ended.

But the biggest problem with pole access is that there is no remedy for dealing with pole owners that are uncooperative or that fight the connections. Recalcitrant pole owners can easily destroy a business plan through delays. There are states that have solved this issue by allowing a new connector to build without permission if a pole owner takes too long to respond to a request for connection – and the FCC should adopt something similar. In areas where it’s too expensive to bury fiber, access to poles is the only way to bring real broadband.

The Financing Dilemma. The stimulus grants and other grant and loan programs have generally required that an applicant has already lined up the rest of the financing required to complete the project. This is a great example of the chicken and the egg dilemma in that most financial institutions are not going to expend their resources to thoroughly review a loan applications until the applicant cam prove the remainder of the funding (the grant). This one requirement stopped a lot of good projects from asking for stimulus funding because they were stuck in financial limbo between bankers and the federal government that each wanted the other side to commit first. Obviously a grant can be paid until all of the funding is in place, but there must be a reasonable time allowed to secure financing after a grant award.

Don’t be Afraid to Impose Policy Objectives. The stimulus grants imposed a handful of rules that were meant to benefit the public good. For instance, they made middle-mile fiber builders serve ‘anchor institutions’ such as schools, city halls and other government institutions.

But if large amounts of federal monies are given for building last mile fiber then there should be some requirements imposed on funding recipients to meet important broadband social goals. This might include a few things like:

  • A Robust Low-Income Broadband Product. Anybody taking federal funding for fiber should be mandated to participate in the federal broadband Lifeline program to provide affordable broadband to low-income homes. Today carriers participating in the Lifeline program are allowed to offer horrendously slow speeds to customers – 10/1 Mbps for wireline connections. If somebody is taking federal money to build fiber, then Lifeline speeds ought to always at least be at whatever is determined by the FCC to be broadband, which is currently 25/3 Mbps.  Further, the current Lifeline products have FCC sanctioned small data caps that punish customers for using the Lifeline broadband. The monthly cap is 150 gigabits for landline, and an unbelievably small ½ gigabit for cellular. These stingy data caps invalidate the stated purpose of the Lifeline program which is to enable low-income households to benefit from a broadband connection. These caps ignore the basic cost drivers of the industry and there is virtually no cost difference between a household using 150 GB per month and one using 500 GB per month. These caps are social policy decisions, not ones based upon the economics of the industry.
  • No Data Caps. Again, if the federal government pays a significant portion of the cost to build a fiber network, then that network should impose no data caps on any customers at any speeds. Data caps are a way to say to customers – here is broadband, just don’t use it. Data caps are clearly a way to extract more money out of customers over and above the base broadband rates.

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