I’m often asked questions by clients about specific federal or state regulations, and my clients often don’t understand how or why certain regulations apply to them. One of the things I’ve always relied on in understanding a specific regulation is something that I learned many years ago in a class on regulatory theory. Regulatory theory defines five different ways that the federal government and states can impose regulations. I often understand a regulation better when I understand how that regulation was created.

Sometimes federal regulations clearly preempt all state regulatory action. Such federal rules generally stem from a law passed by Congress that is interpreted by a regulatory agency like the FCC. A simple example is CALEA rules that allow federal law officials to wiretap or gain access to customer ISP data through a valid subpoena. Congress passed the Communications Assistance for Law Enforcement Act (CALEA) in 1994, with some modifications that can from the Patriot Act. The FCC followed Congressional action with a list of specific procedures that ISPs must follow to comply with the law. I’m not aware of any cases of state regulatory rules trying to modify the CALEA requirements, so this is a federal mandate that applies in all states, without question or challenge.

More common are federal mandates that preempt less stringent state laws but permit states to establish more stringent standards. A good example of this is pole attachment rules. There have been requirements since the Telecommunications Act of 1934 that pole owners must allow attachers onto poles. These rights were further reinforced by the Telecommunications Act of 1996. The FCC followed the 1996 Act with revised federal pole attachment standards and rules. Thirty states still follow those federal rules, but another twenty states have gone on to clarify and require even stricter pole attachment rules. All states are still governed by the general principles established in the federal rules, but the FCC explicitly invited states to get more specific as they see fit.

We are currently seeing the third example of federal regulation that comes in the form of rules included in federal grants or other forms of assistance. Every federal broadband grant program has included a different definition of broadband and the geographic areas that might be funded by that grant. This is confusing to most people because they want to know the federal definition for terms like unserved and underserved. The FCC has never set a definition of these terms, so there is no federal standard. The confusion comes since every grant program is free to redefine these terms. Sometimes grant programs have no choice – for example, many of the rules used by the USDA for the ReConnect grants were established when Congress provided the money for that program. But the rules used for Reconnect grants have no bearing on grants issued by other agencies. Even when there are Congressional rules for a given grant, the agency issuing the grant always has leeway in setting specific rules that were not mandated by Congress. Anybody who has ever applied for a federal grant knows that the grant rules are unique to each grant and also immutable – you either follow the rules or you don’t get the grant.

We sometimes see regulations established by a cooperative program in which voluntary national standards are formulated by federal and state officials working together. The best historical example of this in the telecom world has been the Federal-State Joint Board. The Joint Board is a cooperative effort by FCC and state regulators to create rules. When I first joined the industry, the Joint Board established many of the rules relevant to cost separations and settlements between carriers. In more recent years, the Joint Board has focused on Universal Service Fund issues.

Finally, some regulations are clearly in the state domain, either from common practice or because the federal government never chose to regulate an issue. There are a number of common state regulations that affect telecom carriers. Some common examples are the establishment of a state Universal Service Fund, annual reporting rules for carriers to a State Commission, state rules that might prohibit municipalities from becoming ISPs, and state rules for specific taxes and levies.

The RDOF reverse auction was completed in December 2020, and since then, the FCC has been silent about the disposition of any of the winning bidders. Part of the quiet period has been due to the FCC processing the long-form applications where grant winners demonstrate that they have the technical, managerial, and financial capability of fulfilling the RDOF buildouts. The FCC’s silence came to an end recently with several actions taken by the agency.

The FCC first published a list of almost 11,000 Census blocks where RDOF grant winners have elected to reject funding totaling over $78.5 million. The defaults came for a variety of reasons. For example, there are some cases where investigation showed that an ISP was already offering fast broadband in a grant area. Other defaults come from the bidders deciding they couldn’t make an economic case for the Census block clusters won in the auction. The FCC has the ability to fine grant winners that default on winning grants, and the agency will likely consider the fines on a case-by-case basis.

Next, the FCC sent letters to dozens of RDOF winners asking them to voluntarily give up the RDOF funding for specific Census blocks. These are places that should never have been included in the auction. The list included such places as large metropolitan airports and big parking lots. Starlink alone was asked to give up funding to 6,500 Census blocks.

The FCC also sent a different letter to 197 RDOF grant winners asking them to reevaluate taking funding in specific blocks where the FCC now believes that one or more ISP already delivers speeds of 25/3 or faster. The FCC acknowledges that most of these areas were erroneously included in the action due to bad mapping data. These grant winners were warned that if they don’t relinquish these Census blocks that the FCC will look hard at blocking the funding for these areas – an action that could delay approval of overall funding for an ISP.

The FCC also announced that it was rejecting some of the claimed areas for LTD Broadband. The FCC killed funding for the company in California, Kansas, and Oklahoma due to the company not getting regulatory approval in those states to become an Eligible Telecommunications Carrier. This rejection killed $187.5 million in California to serve 76,856 locations, $81.1 million in Oklahoma to reach 39,889 locations, and $3.2 million in Kansas to reach 2,122 locations.

There has been some question of what happens to the Census blocks that are now back in play. Some have speculated that these areas would roll into the next RDOF auction. However, the FCC has no power to claim or reserve Census blocks, and any of the areas that fall out of RDOF becomes eligible for the many other grant programs now underway.

Finally, the FCC started making RDOF awards. It awarded $311 million to these companies that have made it successfully through the long-form review process. This will bring broadband to over 200,000 homes. This is only a small fraction of the $9 billion that was claimed in December. But for these companies and these Census blocks, the 10-year clock will soon be started to fulfill whatever technology was promised in the winning bid.

The FCC still has a long way to go. These actions clear up some of the messes caused by the FCC using bad mapping in setting grant areas. There are industry analysts that say that this effort is not complete and that additional areas are yet to be identified. But the FCC has disposed of less than $1 billion of the $9 billion in awards, so expect to hear periodic awards for more grant winners.

The FCC still has to wrestle with a few huge issues. There have been numerous complaints saying that grant winners like LTD Broadband should not have been allowed to participate in the auction in a big way. There are other grant winners that claimed the ability to deploy gigabit rural wireless – a technology that nobody I know thinks exists. There are likely ISPs that will not make it through the long-form review for some other reason, such as the inability to guarantee funding. The agency is likely a long way from resolving these many issues.

The California legislature unanimously passed legislation in both the Assembly and Senate to fund $3.2 billion for middle-mile fiber and another $2 billion for last-mile networks. It’s an interesting use of broadband money and recognizes something that we don’t talk about enough. There are currently huge federal grants aimed at bringing good last-mile broadband to rural areas, but many of the rural places in America still have inadequate backhaul to reach connectivity to the Internet.

The California legislation recognizes several things. First, there is a lot of federal money currently aimed at providing last-mile networks, but barely any grant funding currently for middle-mile fiber. Second, I imagine legislators in California have all heard stories about how rural communities today lose all Internet access for hours or days at a time when the single fiber reaching the community gets cut or has an electronics failure.

The best fiber last-mile network in the world can’t function if the fiber that routes traffic to and from the Internet goes out of service. The middle-mile fiber networks in rural America are often on the oldest fiber still operating in the country. Much of these routes were built years ago by the big incumbent telephone companies to provide a fiber path to support long-distance traffic. Most of these networks are configured like a wagon wheel where straight-line fiber paths are built from rural communities to a hub larger city in a region.

Like the rest of rural networks maintained by the big telcos, many of these fiber routes have been poorly maintained, and still likely are using electronics that are past the useful life. I wrote a blog last year about how the communities in northwest Colorado banded together to build an alternative for the inadequate middle-mile network still operated by CenturyLink. The existing fiber would maddingly go out of service, sometimes for days, and would leave communities and vital institutions like hospitals and public safety with no Internet access. The communities built a new middle-mile network they labeled as Project THOR, and almost immediately after activation, the new network saved communities from another big regional middle-mile outage.

https://potsandpansbyccg.com/2020/05/06/funding-middle-mile-fiber/

Rural communities not only need reliable middle-mile networks to deliver traffic to and from the Internet, but these networks must be redundant so that a single fiber cut doesn’t kill broadband for an entire community. That means building fiber rings. Too much of our daily lives now rely on broadband, and it is poisonous to a local economy when broadband access dies for an hour or a day.

The California middle-mile plan anticipates open-access where affordable transport can be provided to any ISP that wants to use the network. The legislation has a dual stated purpose – to first provide reliable broadband access to the rural parts of the state, but secondarily to make it easier for ISPs to serve in rural parts of the state. Buying connectivity on the traditional rural middle-mile networks is often unreasonably expensive and has been a barrier for serving pockets of rural customers.

The new networks will focus on reaching parts of the state where businesses and residents don’t have access to broadband faster than 25/3 Mbps. Almost invariably, in most states, these are the region that don’t have adequate middle-mile networks.

It’s always interesting to see any legislators pass something unanimously – it only happens when a topic is indisputably important. Once built, the new middle-mile fiber routes will serve rural California for many decades to come. There won’t be any headlines when this network is functioning and meeting its purpose – instead, there will no longer be news stories of small towns that lost broadband access for a few days.

There has been a huge battle going on behind the scenes in Washington as Congress wrestles with including broadband grants in the infrastructure bill. Every lobbyist in Washington has been working overtime to try to influence the process. We’ve now seen the Senate’s vision of legislation, but there will still be a big fight when it’s time to reconcile the Senate and House broadband grant rules. Here are some of the key issues being contested in creating final infrastructure legislation:

What is Grant Eligible? This is the biggest area of contention. The big cable companies and telcos only want to see grants being awarded to places that don’t have 25/3 Mbps broadband today. More importantly, they want to see the eligible areas defined by the FCC’s lousy mapping. The big ISPs don’t want to make it easy for communities to make claims that actual broadband speeds are far slower than what has been reported to the FCC.

What the big ISPs definitely don’t want to see is the definition of unserved and underserved to be updated to something closer to reality. They do not want to see grant funding available to areas that don’t have 100/20 Mbps speeds today.

The worst possible scenario for the big ISPs is that local communities get to decide what areas need better broadband like is happening with ARPA funding that’s been given to cities, counties, and states. They know that cities intend to build fiber to poor neighborhoods, or even to whole cities – and the ISPs want to maintain the monopoly in these areas.

Who Decides the Grant Rules? There is also a lot of arm wrestling about who gets to decide the rules for grants. The big ISPs are not happy that Treasury got to set the rules for ARPA grants because that was a new group of decision-makers who have never been lobbied before. Giving the rulemaking ability to Treasury also meant that the White House could provide input by making its wishes known.

There is no perfect answer to this question from the perspective of the big ISPs. They don’t want Treasury to set the rules again. There are several alternatives. One is to let the FCC award the funding through another reverse auction, the option with the highest chance of following the FCC mapping. The rules can be set by the NTIA – a group that lobbyists know well – but which is likely unpredictable if handed tens of billions of dollars. Grant money could be given to the USDA to administer through the ReConnect grant program and the arcane rules at the RUS. Or funding could be given to states to decide – but only of the rules are first restricted to limit states from using the money freely.

Interestingly, I’ve heard credible rumors over the last few months that each of these options has been considered during various permutations of writing the legislation. The key goal for the big ISPs is to be able to influence grant rules, regardless of who will dispense the money. If the rules are set tight enough, much of the grant money could be unusable – and nothing would please the big ISPs more. For example, if money is divvied up evenly by state, then there are many states that can’t spend a pro rata share of the billions. If the rules can strictly only be used in places that can’t get 25/3 Mbps, then it’s probably impossible to spend much of the infrastructure money.

Broadband Speeds for New Infrastructure. A fight over speeds is the same thing as a fight over the technologies that can be built with grant funds. It seems the Senate has accepted the goal for new infrastructure at 100/20 Mbps. This speed enables grant funding to go to cable companies, WISPs, and satellite broadband. If grants can only be used to fund 100 Mbps symmetrical speeds, those two technologies are largely eliminated. You may have noted a spate of opinion pieces lately throughout the industry claiming that we don’t need symmetrical speeds. This is what that argument is all about.

Summary. You can quickly see who is winning the lobbying war by skimming through proposed legislation for these critical elements. On one side of the battle are broadband and community advocates who think we should largely use grant money to build fiber. This side argues for symmetrical speeds. They want communities to decide the areas that need better broadband rather than stick with erroneous FCC maps.

On the other side are big ISPs that don’t want to see fiber everywhere. They are pushing for a strict definition of areas that are eligible for grants, and they want technologies that barely meet 100/20 Mbps to be grant eligible. They want the ability to influence the writing of the grant rules.

We are now deep into the sausage-making part of legislation, and all of these issues are still open for debate. The Senate legislation clearly favors the big ISP position. There is still work to be done to get a bill that reconciles the House and Senate plans – and much more infighting to come. But at this point, the big ISPs and their lobbyists are winning the fight – which likely means in ten years, we’ll still be wondering why many parts of the country didn’t get adequate broadband.