The End of Free Conference Calling

Like many of you reading this blog, I have been using the service Free ConferenceCall.com for many years. I got an email from them last week warning that their service will likely go dark, and they wanted users of the service to call Congress to help keep them in business.

Their issue stems back to an FCC order issued in September of last year that seeks to stop the practice of access arbitrage. This FCC summary of the order describes the situation well. Some small telcos have been making money by billing access on ‘free’ minutes generated by services like free conference calling. The process of making money from free calling services has been known in the industry as access arbitrage.

The FCC tried to stop access arbitrage in 2011. At that time, small rural telcos billed a rate of as much as a penny or two per minute to originate or terminate a long-distance call. Some telcos that were allowed to bill the high rates were making a lot of money by originating calls for free outgoing call center services or by terminating calls from 800 numbers, conference calling services, or free chat lines.

In the 2011 order, the FCC eliminated the access fees associated with terminating a call, migrating to what the FCC called ‘bill and keep’, and they hoped that eliminating the access revenues would kill the arbitrage practices. The FCC order was largely effective and chat lines and other free arbitrage services quickly disappeared.

However, the 2011 order didn’t kill all access charges, and over time the folks who make money with arbitrage found another way to make money with free calling. One of the few access charges left untouched in 2011 was transport, which compensates telcos for the use of fiber networks connecting telcos to the outside world. I’ve noticed that the caller ID for FreeConferenceCalling.com numbers is mostly from Iowa and South Dakota, and I have to assume those calls are being terminated at switches that are remote and that can still bill significant miles of transport.

The access fees billed to terminate calls are paid by the carrier that originates the call. This means that most remaining terminating access is paid today by long-distance carriers like AT&T, Sprint and CenturyLink, which together still sell the bulk of long-distance telephone services. The dollar magnitude of access arbitrage is much smaller than a decade ago. The FCC estimates arbitrage is currently a $40 – $60 million problem, whereas it was hundreds of millions before the FCC’s 2011 order. But those fees are being billed to the long-distance companies that get no benefit from the transaction (thus the term arbitrage – the companies are billing the fees because the rules allow a loophole to do so).

FreeConferenceCalling.com is not the only company doing this, and it’s likely that many conference calling services rely wholly or partially on the arbitrage. It’s worth noting that conference call services that use the Internet to place calls will not be affected by this change – because those calls don’t invoke access charges. The carriers billing for the access on the conference calling may or may not be sharing the revenues with companies like FreeConferenceCalling.com – in either case those carriers no longer have any financial reason to continue the practice.

Companies like FreeConferenceCalling.com don’t automatically have to go out of business, but the FCC order means a drastic change to the way they do business. For instance, the company could start charging a monthly fee for conference calling – likely forcing this particular company to change its name. They might sell advertisements for those sitting waiting for a conference call. They could charge for services like recording calls.

It’s more likely that companies like FreeConferenceCalling.com will quietly die or fade away. I tried using the service yesterday and it already seems to be broken. This latest FCC order probably puts the final nail into the coffin of access arbitrage – although I’ve learned to never say never. As long as there are any fees for calling based upon regulatory orders, there is a chance that somebody will find a way to generate lots of calls that fit the circumstance and get enriched by the arbitrage.

The RDOF Grants – The Good and Bad News

The FCC recently approved a Notice of Proposed Rulemaking that proposes how they will administer the $16 billion in RDOF grants that are going to awarded later this year. As you might imagine, there is both good news and bad news coming from the grant program.

It’s good news that this grant program ought to go a long way towards finally killing off large chunks of big telco rural copper. Almost every area covered by these grants is poorly served today by inadequate rural DSL.

The related bad news is that this grant award points out the huge failure of the FCC’s original CAF II program where the big telcos were given $11 billion to upgrade DSL to at least 10/1 speeds. The FCC is still funding this final year of construction of CAF II upgrades. The new grant money will cover much of the same geographic areas as the original CAF II deployment, meaning the FCC will spend over $27 billion to bring broadband to these rural areas. Even after the RDOF grants are built, many of these areas won’t have adequate broadband. Had the FCC administered both grant programs smartly, most of these areas could be getting fiber.

Perhaps the best good news is that a lot of rural households will get faster broadband. Ironically, since the grants cover rural areas, there will be cases where the RDOF grant brings faster broadband to farms than will be available in the county seat, where no grant money is available.

There is bad news on broadband speeds since the new grant program is only requiring download speeds of 25/3 Mbps. This means the FCC is repeating the same huge mistake they made with CAF II by allowing federal money to spend on broadband that will be obsolete before it’s even built. This grant program will be paid out of ten years and require deployment over six years – anybody paying attention to broadband understands that by six years from now a 25/3 Mbps broadband connection will feel glacial. There is grant weighting to promote faster data speeds, but due to the vagaries of a reverse auction, there will be plenty of funding given to networks that will have speeds close to 25/3 Mbps in performance.

There is further bad news since the FCC is basing the grants upon faulty broadband maps. Funding will only be made available to areas that don’t show 25/3 Mbps capability on the FCC maps. Everybody in the industry, including individual FCC Commissioners, agrees that the current maps based upon 477 data provided by ISPs are dreadful. In the last few months, I’ve worked with half a dozen counties where the FCC maps falsely show large swaths of 25/3 broadband coverage that isn’t there. It’s definitely bad news that the grant money won’t be made available in those areas where the maps overstate broadband coverage – folks in such areas will pay the penalty for inadequate broadband maps.

There is a glimmer of good news with mapping since the FCC will require the big ISPs to report broadband mapping data using polygons later this year. Theoretically, polygons will solve some of the mapping errors around the edges of towns served by cable TV companies. But there will only be time for one trial run of the new maps before the grants, and the big telcos have every incentive to exaggerate speeds in this first round of polygon mapping if it will keep this big pot of money from overbuilding their copper. I don’t expect the big telco mapping to be any better with the polygons.

Another area of good news is that there will be a lot of good done with these grants. There will be rural electric cooperatives, rural telcos, and fiber overbuilders that will use these grants as a down-payment to build rural fiber. These grants are not nearly large enough to pay for the full cost of rural fiber deployment, but these companies will borrow the rest with the faith that they can create a sustainable broadband business using fiber.

The bad news is that there will be plenty of grant money that will be used unwisely. Any money given to the traditional satellite providers might as well just be burned. Anybody living in an area where a satellite provider wins the grant funding won’t be getting better broadband or a new option. There is nothing to stop the big telcos from joining the auction and promising to upgrade to 25/3 Mbps on DSL – something they’ll promise but won’t deliver. There are likely to be a few grant recipients who will use the money to slap together a barely adequate network that won’t be fast and won’t be sustainable – there is a lot of lure in $16 billion of free federal money.

It’s dismaying that there should be so many potential downsides. A grant of this magnitude could be a huge boost to rural broadband. Many areas will be helped and there will be big success stories – but there is likely to be a lot of bad news about grant money spend unwisely.

Federal Subsidies for Satellite Broadband

In December, the FCC awarded $87 million from the CAF II Reverse auction held last summer for satellite broadband. The bulk of the satellite awards went to Viasat, which will supposedly use the money to bring broadband to 123,000 homes in seventeen states. The grant awards are meant to bring 25/3 Mbps broadband to areas that don’t have it today.

I have several problems with this award. First is that the satellite companies already cover these areas today and have been free to sell and market in these areas. The federal grant money doesn’t bring a new broadband alternative to anybody in rural America.

Second, the satellite companies aren’t required to connect any specific number of new customers as a result of the grant awards. They are largely free to just pocket the grants directly as profits. Even when they do connect a new customer, they don’t build any lasting broadband infrastructure, but only install an antenna at each new customer.

Third, rural residents don’t seem to want satellite broadband. In a large survey by the Census Bureau in 2017, 21% of people in the US described their neighborhood as rural (52% chose suburban and 27% said urban). In the quarter ending in June 2019, Viasat claimed 587,000 rural customers in the US, which represents only 2.2% of the 128 million households in the country.  If those customers are all in rural America, then the company has roughly a 10% market penetration.

CCG has been doing broadband surveys for twenty years and I don’t know that we’ve ever talked to a satellite customer who was happy with their broadband. In every survey, we seem to encounter more people who dropped satellite service than those that still have it. Customers complain that satellite costs too much – Viasat claimed in their most recent financial report that the average residential broadband bill is $84.26. Customers also hate the high latency, which can be 10 to 15 times higher than terrestrial broadband. The latency is due to the satellite which is parked almost 22,200 miles above earth – it takes a while for a round trip communication over that distance.

The primary complaints about satellite broadband are tiny monthly data caps. The company’s products that would satisfy the FCC grant speed requirements start with the Unlimited Silver 25 plan at $70 with speeds up to 25 Mbps with a monthly data cap of 60 gigabytes of data usage. The fastest plan is the Unlimited Platinum 100 plan for $150 with speeds up to 100 Mbps and a data cap if 150 gigabytes. Unlike cellular plans where a customer can buy more broadband, the Viasat plans throttle customers to speeds reported to be less than 1 Mbps once a customer reaches the data cap. To put those plans into perspective, OpenVault announced recently that the average US home uses 274 gigabytes of data per month. The average cord cutting home uses 520 gigabytes per month. The satellite broadband is impractical for anybody with school students in the home or for anybody that does even a modest amount of video streaming.

Viasat won the grant funding due to a loophole in the grant program. The program funding was available to anybody that offers broadband of at least 25 Mbps. The grant program intended to deliver a new broadband alternative to rural households – something that satellite broadband does not do. The funding was provided under a reverse auction, and the satellite companies likely placed bids for every eligible rural market – they would have been the default winner for any area that had no other bidder. Even where there was another bidder, a reverse auction goes to the lowest bidder and there is no amount that is too small for the satellite companies to accept. The satellite companies don’t have to make capital expenditures to satisfy the grants.

Giving money to satellite providers makes no sense as broadband policy. They don’t bring new broadband to anybody since the satellite plans are already available. The plans are expensive, have high latency and low monthly data caps.

The much larger RDOF grant program will award $16.4 billion in 2020 for rural broadband and the satellite companies must be ecstatic. If the FCC doesn’t find a way to keep the satellite companies out of this coming auction, the satellite companies could score a billion-dollar windfall. They can do so without offering any products that are not already available today.

To put these grants into perspective, the $87 million grant award is roughly the same size as the money that has been awarded over several years in the Minnesota Border-to-Border grant program. The Minnesota grants have helped funds dozens of projects, many of which built fiber in the state. There is no comparison between the benefits of the state grant program compared to the nearly total absence of benefit from handing federal money to the satellite companies.

Taking Advantage of the $9B 5G Fund

The FCC will be moving forward with the $9 billion 5G Fund – a new use of the Universal Service Fund – that will be providing money to expand cellular coverage to the many remote places in the US where 4G cell coverage is still spotty or nonexistent. There is a bit of urgency to this effort since the big cellular companies all want to shut down 3G within a year or two. This money will be made available to cellular carriers, but the funding still opens up possible benefits for other carriers and ISPs.

Some of this funding is likely to go towards extending fiber into rural places to reach cell towers, and that opens up the idea of fiber sharing. There are still a lot of places in the country that don’t have adequate fiber backhaul – the data pipes that bring traffic to and from the big hubs for the Internet. In the last six months alone I’ve worked with three different rural projects where lack of backhaul was a major issue. Nobody can consider building broadband networks in rural communities if the new networks can’t be connected to the web.

By definition, the 5G Fund is going to extend into rural places. If the FCC was maximizing the use of federal grant funds, they would demand that any fiber built with this new fund would be available to others at reasonable rates. This was one of the major provisions of the middle mile networks built a decade ago with stimulus funding. I know of many examples where those middle mile routes are providing backhaul today for rural fixed wireless and fiber networks. Unfortunately, I don’t see any such provisions being discussed in the 5G Fund – which is not surprising. I’m sure the big cellular companies have told the FCC that making them share fiber with others would be an inconvenience, so this idea doesn’t seem to be included in the 5G Fund plan.

I think there is a window of opportunity to partner with wireless carriers to build new fiber jointly. The cellular carriers can get their portion of new fiber funded from the 5G Fund and a partner can pick up new fiber at a fraction of the cost of building the route alone. This could be the simplest form of partnership where each party owns some pairs in a joint fiber.

This is worth considering for anybody already thinking about building rural fiber. The new routes don’t have to be backhaul fiber and could instead be a rural route that is part of a county-wide build-out or fiber being built by an electric cooperative. If somebody is considering building fiber into an area that has poor cellular coverage, the chances are that there will be 5G Fund money coming to that same area.

It has always been challenging to create these kinds of partnerships with AT&T and Verizon, although I am aware of some such partnerships. Both Sprint and T-Mobile have less rural coverage than the other carriers and might be more amenable to considering partnerships – but they might be consumed by the possibility of their merger.

There are a lot of other cellular carriers. The CTIA, the trade association for the larger cellular carriers, has thirty members that are facility-based cellular providers. The Competitive Carriers Association (CCA) has over one hundred members.

Ideally, a deal can be made to share fiber before the reverse auction for the 5G Fund. Any carrier that has a partner for a given route will have a bidding advantage since cost-sharing with a partner will lower the cost of building new fiber. It might be possible to find partnerships after the auction, but there could be restrictions on the newly built assets as part of the grants – we don’t know yet.

My recommendation is that if you are already planning to build rural fiber that you look around to see if one of the cellular carriers might be interested in serving the same area. Both parties can benefit through a cost-sharing partnership – but the real winners are rural customers that gain access to better cellular service and better broadband.

Spectrum and Weather Forecasting

There is currently a brewing controversy over the allocation of various radio frequencies for 5G that could have a negative impact on weather forecasting. Weather forecasting has become extremely sophisticated and relies on masses of data gathered from weather satellites and other data-gathering devices. The masses of data, along with modern supercomputers and data center computing have significantly improved the ability to predict future weather.

There are numerous bands of spectrum used in weather forecasting. For an in-depth look at the complexity of the spectrum needs, see this guide for spectrum used for meteorology from the World Meteorological Association and the ITU (warning: highly technical document). It goes into depth about the various bands of frequency that are used for various weather gathering purposes.

The current controversy involves the use of spectrum at 23.8 GHz. It turns out this frequency has the characteristic that it is absorbed by water vapor. This makes it valuable for meteorological purposes since it can be used by devices in satellites called sounders to measure the different levels of water vapor in the air. This is one of the most valuable tools in the weather data gathering system, particularly over oceans where there are few other measuring devices.

The sounders work by emitting the 23.8 GHz spectrum and measuring the return signals, working similarly to radar. The process of measuring water vapor is extremely sensitive to interference because the return signals to the sounders are extremely faint. The weather community is worried that even a little bit of interference will kill the utility of this valuable tool.

In May 2019 the FCC raised over $2.7 billion through the auction of spectrum in the 24 GHz and 28 GHz bands, including spectrum sitting directly adjacent to the 23.8 GHz band. Before the auction, the administrator of NASA warned the FCC that leakage from the newly auctioned spectrum could degrade the use of the 23.8 GHz spectrum. NOAA (the National Oceanic and Atmospheric Administration) told Congress the same thing. NOAA said that a 30% degradation in the accuracy of the sounders could worsen the ability to predict where hurricanes will land by two or three days – something that would have a huge negative dollar cost.

It’s a convenient fiction in the wireless world that radios stay within the exact frequency bands they are supposed to use. However, in real life radios often stray out-of-band for various reasons and cause interference in adjacent frequency bands. This happens up and down the radio spectrum, but in this case, scientists say that even a little interference could make it difficult or impossible to read the faint signals that are read by the sounders to measure water vapor.

Both NASA and NOAA have proposed that the FCC lower the chances of interference by lowering the power level and the ‘noise’ that comes from cross-band interference. They asked for a limit of -42 decibel watts of noise for nearby spectrum bands while the FCC is recommending -20 decibel watts. The lower the decibel watts number, the less the interference. The World Radiocommunications Conference has a current recommendation of -33 decibel watts, which is scheduled to lower to -39 decibel watts in 2027.

The carriers that bought the spectrum, through filings made by the CTIA, say that the frequencies would be a lot less valuable to them if they have to lower power to meet the noise levels recommended by NASA and NOAA, and the FCC is siding with the carriers.

This is just the first of many frequency battles we’re going to see as the thirst for more 5G spectrum invades spectrum that has been used for scientific or military purposes. The FCC often tries to mitigate interference by moving existing spectrum users to some different frequency band in order to accommodate the best use of spectrum. However, in this case, the weather satellites must use 23.8 GHz because that’s where nature has set the interference with water vapor.

It’s hard not to side with the weather scientists. Everybody, including the carriers, will suffer great harm if the ability to predict hurricanes is degraded. When it comes to something as vital as being able to predict hurricanes, we need to use common sense and caution rather than give the 5G companies every possible slice of available spectrum. It’s not hard to predict that the carriers will fight hard to keep this spectrum even if there is too much interference. Unfortunately, the current FCC is granting the carriers everything on their wish list – expect more of this in 2020.

Congress Mandates Cable TV Pricing Disclosure

In a surprise move by Congress, the recent appropriations bill that funds the government through September 2020 includes a new law that mandates that cable companies tell their customers the truth about cable pricing. Labeled as the Television Viewer Protection Act of 2019 the bipartisan law places new requirements on companies selling cable TV.

The bill was originally sponsored by Representative Mike Doyle (D-PA). In the original version of the bill, the cable providers had to advertise the full monthly cost of service. Full cost meant including such things as hidden fees, equipment charges, and any taxes or surcharges added to a cable bill. The bill also requires disclosure about the details of any promotional pricing and cable companies should make it clear when the promotion ends.

That final version of the law softened the disclosure requirement and cable companies can still promote deceptive special pricing. However, a cable provider must notify customers buying a new plan within 24-hours “by phone, in person, online, or by other reasonable means” of the full cost of buying the service. Customers then have 24-hours from the time the cable company sends the notice to cancel service with no penalty. The cynic in me believes that cable companies will find ways to meet the law and still be deceptive – such as putting the pricing notice at the end of a long email message that customers aren’t likely to read. However, if cable providers follow the spirit of the law, it should end the practice of customers seeing bills that are much higher than what they expect. Another provision of the new law is that cable providers can no longer charge for equipment they don’t provide – something that Frontier was accused of during the last year.

Interestingly, the law only affects cable TV pricing and not pricing for broadband or telephone service. I hope the cable companies don’t somehow shift hidden fees to these other services. The law also seems to ignore the fact that a majority of traditional cable customers buy a bundle of multiple services. The cable companies have never come clean with customers about how bundling discounts work, leaving the companies with the flexibility to penalize customers for withdrawing any one of the bundled services. I suspect the cable companies will somehow not come clean about bundling prices for cable TV, even with this new law.

The bill gives cable companies six months to implement the new practices. Oddly, the bill also allows the FCC to extend the starting date up to six additional months. It’s hard to picture any reason for the FCC to extend the deadline other than kowtowing to the cable companies.

From a consumer perspective, this law is long overdue. For the last five years, the cable companies have disguised much of their rate increases by folding them into hidden fees rather than into advertised rates. A few months ago, Consumer Reports reported that the hidden fees for the big cable companies range from $22.96 monthly for AT&T U-verse to $43.79 for Verizon FiOS.

The timing of this new law is interesting from a market perspective. We’re now seeing cord-cutting at a record pace, and forcing the cable companies to be honest with customers is likely to accelerate cord cutting even more.

Smaller cable providers that compete against the big companies have always been torn about how to advertise their prices. Some match the practices of the big cable companies and have hidden fees and advertise deceptively low prices. Others have taken the high road and advertise the full price of service while pointing out that their competitor’s pricing is deceptive. These new rules make it easier for smaller cable companies to disclose their full prices and to challenge the big cable companies to do the same.

The new law also includes several other changes for the cable industry. The law allows the 5-year sunset provision that has allowed satellite TV providers to import distant local network stations for rural customers. The companies have always argued that the cost of negotiating with every local station across the country is astronomical and that they would allow network channels to go dark rather than seek deals with every local network affiliate in the country. I guess we’ll soon find out if that’s true when the satellite providers can no longer bring in network stations from out of the market. I would hope that a satellite provider that decides not to deliver network affiliates like ABC, CBS, FOX, or NBC will lower the price of the cable package to reflect undelivered channels.

Finally, the bill includes a requirement that local stations and programmers negotiate programming contracts in good faith. That’s an idea that has been bouncing around for a while in response to local stations negotiating in large groups instead of individually. In the last year, we have seen programming go dark at a record pace when stations and programmers are deadlocked in negotiations. We’ll have to wait a while to see if this stronger language gives the FCC any real leverage to end retransmission disputes.

FCC Proposes New WiFi Spectrum

On December 17 the FCC issued a Notice of Proposed Rulemaking for the 5.9 GHz spectrum band that would create new public spectrum that can be used for WiFi or other purposes. The 5.9 GHz spectrum band was previously assigned in 2013 to support DSRC (Dedicated Short Range Communications), a technology to communicate between cars, and between cars and infrastructure. The spectrum band covered by the order is 75 megahertz wide. The FCC suggests that the lower 45 megahertz be made available to anybody as new public spectrum. They’ve assigned the highest 20 megahertz for a newer smart car technology called C-V2X. The FCC tentatively kept the remaining bandwidth for the older DSRC technology, dependent upon the users of that technology convincing the agency that it’s viable – otherwise, it also converts to C-V2X usage.

DSRC technology has been around for twenty years. The goal of the technology is to allow cars to communicate with each other and to communicate with infrastructure like toll booths or traffic measuring sensors. One of the biggest benefits touted for DSRC is increased safety so that cars will know what’s going on around them, such as when a car ahead is braking suddenly.

For the new technology, the V2X stands for vehicle-to-everything. Earlier this year Ford broke from the rest of the industry and dropped research in DSRC communications in favor of C-V2X. Ford says they will introduce C-V2X into their whole fleet in 2022. Ford touts the technology as enabling cars to ‘see around corners’ due to the ability to gather data from other cars in the neighborhood. They believe the new technology will improve safety, reduce accidents, allow things like safely forming convoys of vehicles on open highways, and act as an important step towards autonomous cars. C-V2X uses the 3GPP standard and provides an easy interface between 5G and vehicles.

This decision was not without controversy. The Department of Transportation strenuously opposed the reduction of spectrum assigned for vehicle purposes. The DOT painted the picture of the spectrum providing a huge benefit for traffic safety in the future, while the FCC argued that the auto industry has done a poor job of developing applications to use the spectrum.

This is an NPRM, meaning that there will be a cycle of public comments before the FCC votes on the order. I think we can expect major filings by the transportation industry describing reasons why taking away most of this spectrum is a bad idea. On the day of the FCC vote, Elaine Chao, the Secretary of Transportation said that the FCC is valuing Netflix over public safety – so this could yet become an ugly fight.

Perhaps the biggest news from the announcement is the big slice of the spectrum that will be repositioned for public use – a decision praised by the WiFi Alliance. The FCC proposes to make this public spectrum that is open to everybody, not just specifically for WiFi. The order anticipates that 5G carriers might use the spectrum for cellular offload. If the cellular carriers heavily use the spectrum in urban areas, then the DOT might be right and this might be a giveaway of 5G spectrum without an auction.

There is no guarantee that the cellular carriers will heavily use the spectrum. Recall a few years ago there was the opportunity for the cellular carriers to dip into the existing WiFi spectrum using LTE-U to offload busy cellular networks. The carriers used LTE-U much less than anticipated by the WiFi industry, which had warned that cellular offload could overwhelm WiFi. It turns out the cellular carriers don’t like spectrum where they have to deal with unpredictable interference.

Even if the cellular carriers use the spectrum for cellular offload in urban areas, the new public block ought to be mostly empty in rural America. That will create an additional spectrum band to help boost point-to-multipoint radios.

Regardless of how the new spectrum might be used outdoors, it ought to provide a boost to indoor WiFi. The spectrum sits just a little higher than the current 5.4 GHz WiFi band and should significantly boost home WiFi speeds and volume capability. The new spectrum will provide an opportunity to reduce interference with existing WiFi networks by providing more channels for spread home use.

This particular docket shows why spectrum decisions at the FCC are so difficult. Every potential use for this mid-range spectrum creates significant public good. How do you weigh safer driving against better 5G or against better rural broadband?

FCC Proposes to Further Curtail UNEs

The FCC voted on November 22 to issue a Notice of Proposed Rulemaking that will largely eliminate the use of unbundled network elements (UNEs) by competitors. This was a surprise order because there was not the usual chain of aggrieved parties on the record asking for the docket – it seems to be unprompted and generated by the FCC directly. It’s been well known for decades that the large telcos have wanted to get rid of UNEs and they likely have been pushing for this behind the scenes and off the record.

UNEs are portions of the telcos copper and dark fiber networks that have been made available to competitors since the Telecommunications Act of 1996. There are two primary uses of UNEs today. First, competitors buy a copper UNE and deliver better DSL than the telcos using modern DSL technology. I know of cases where competitors are offering several hundred Mbps speeds to businesses by bonding multiple UNEs. Like every product that competes with cable broadband, the use of DSL UNEs has been declining, but there must still be hundreds of thousands, if not a few million homes and businesses in the country served by newer DSL technology on UNEs.

UNEs are also used by competitors to interconnect to the big telco networks. There was a movement a decade ago by the FCC to transition the telecom network to all-digital – but that never happened. Competitive carriers must buy still buy traditional T1 and T3 UNEs (28 T1s) to interface with the big telco networks. CLECs (Competitive Local Exchange Carriers) that offer voice services use these UNEs to connect to the public switched telephone network. I doubt the FCC understands the extent to which such connections are required by the big telcos – and the extent that there might not be alternatives available to CLECs. Eliminating these UNEs is particularly puzzling since the upcoming RDOF grants will require all grant recipients to offer voice services – it would be ironic if grant recipients are unable to connect voice from these new networks to the rest of the world.

This proposed order will eliminate the following kinds of UNEs:

  • DS1 (single lines) and DS3 (T1s) loops in counties previously deemed competitive by the FCC. The exception is that DS1 single line loops will still be available in rural areas – presumably using the flawed FCC maps that define areas without broadband. In North Carolina where I live, this would eliminate UNEs in 67 of the 100 counties. I’m familiar with many of the counties on the list and I think the folks in many of these counties like Moore and Stanley will be surprised to find that they are considered as competitive.
  • DS0 loops in urban census blocks. These loops are also used to provide DSL.
  • Subloops in the same areas that eliminate other kinds of loops. Subloops are connections to homes inside a subdivision if that subdivision is served by telco DSL from the entrance to the subdivision.
  • Dark fiber transport in wire centers within a half-mile of alternative fiber. Unless ‘alternative fiber’ is defined carefully, this could eliminate dark fiber when there is no actual alternative.

The NPRM would require a 3-year transition for anybody using the UNEs. I’m not sure what transition means since a carrier can either use a UNE or they can’t. It seems this would give competitors three more years to continue to serve customers before they lose the UNE connection.

The FCC is painting the NPRM as part of its ongoing effort to eliminate unneeded regulations. However, UNEs are not unneeded – there are competitive carriers using UNEs to deliver products that customers want to buy. This FCC has always said that the main thrust of eliminating regulations is to increase competition. This particular order will decrease broadband competition and will force a lot of customers to find a more costly broadband alternative. The FCC should not be actively trying to eliminate UNEs if homes are happy with 25 Mbps or 50 Mbps broadband delivered on copper UNEs.

The big telcos have been trying to eliminate the requirement to unbundle their network since the 1996 Act. The FCC eliminated some UNE requirements earlier this year, and in that docket, the FCC said they didn’t eliminate broadband UNEs because the market still valued them. Now, barely half a year later, the FCC has done an about-face and wants to throw DSL competitors out of urban and suburban markets.

It’s also an odd order from a financial perspective. The big telcos will lose the revenues if UNEs disappear – they are a significant source of revenue on old copper. Customers will be tossed off services they like. The real beneficiaries of the order are the cable companies that will pick up the displaced customers – which is an odd thing for the FCC to be pushing when the cable companies are inching towards monopoly.

FCC Modifies Lifeline Rules

The FCC released new rules for the Lifeline program in November. These rules will make it harder for some companies to participate in the program, but it opens up the door to many new participants.

The FCC has obsessed for years about fraud in the program. There are numerous cases over the years of the program providing Lifeline subsidies to people who are no longer eligible or who even died. However, a lot of that blame has to placed on the FCC. Carriers have never had any ways to know if Lifeline participant gets a job and is no longer were eligible, or even if the eligible family member dies and the subsidy continues to go to the household. The FCC has finally taken the steps to fix such problems through the creation of the National Lifeline Eligibility Verifier – a database updated monthly by government agencies that provide the support that makes participants eligible.

The following new rules are lifted directly from the FCC, which says the new rules will improve the program by:

  • Prohibiting participating carriers from paying commissions to employees or sales agents based on the number of consumers who apply for or are enrolled in the Lifeline program
  • Requiring participating carriers’ employees or sales agents involved in enrollment to register with the program administrator, the Universal Service Administrative Co. (USAC)
  • Strengthening prohibitions barring Lifeline providers from claiming “subscribers” that are deceased
  • Taking additional steps to better identify duplicate subscribers, prevent reimbursement for fictitious subscribers, and better target carrier audits to identify potential FCC rule violations
  • Increasing transparency by posting aggregate subscribership data, including data broken out at the county level, on USAC’s website
  • Increasing transparency with states by directing USAC to share information regarding suspicious activity with state officials
  • Restoring the states’ traditional role of designating carriers to participate in the Lifeline program.

One of the requirements is somewhat unusual in that ISPs need to identify those employees responsible for enrolling participants in the Lifeline plan. For most ISPs, that’s going to be the customer service staff. The requirement is a headscratcher because it’s hard to conceive of any possible good way that the FCC can use this information.

The last bullet point highlights an opportunity for ISPs that want to participate in the program. For the last several years it’s been exceedingly difficult for an ISP to enter the Lifeline program. During that same period, we’ve seen big telcos like AT&T withdraw from the plan in most of the states where they operate.

An ISP that wants to offer a low-price broadband product for low-income households can collect the Lifeline subsidy to offset price discounts. For example, an ISP could offer a low-income broadband connection and collect $20 from a customer and also collect the $9.25 Lifeline subsidy from the Universal Service Fund. The Lifeline funds are paid directly to the ISP from the Universal Service Fund.

More importantly, ISPs now can apply to become eligible for Lifeline with state regulators rather than from the FCC – which has been blocking new applications for several years. There is a particularly good opportunity for tribal ISPs since the Lifeline subsidy on tribal lands can be as high as $34.25 per qualified recipient.

Enrolling in the Lifeline program is another tool to help ISPs attack the homework gap. ISPs can use the subsidy to provide lower price broadband to qualifying homes with school students. If an ISP serves customers that qualify for a discount, it’s hard to justify not joining the program and giving such customers a break on rates.

FCC to Create 5G Fund

On December 4, FCC Chairman Ajit Pai announced a plan to create what he is calling the 5G Fund. This new fund will replace the already planned $4.5 billion Mobility Fund Phase II Fund and adds another $4.5 billion. The fund has been renamed to suggest that 5G will bring faster broadband to rural America.

The original goal of the Mobility Fund II was to expand 4G LTE coverage to the most rural parts of the country where there is no cellular coverage today. While preparing to award that fund, the FCC figured out that the 4G coverage maps for the biggest cellular companies were significantly overstated. This caused the FCC to pause the Mobility Fund Phase II awards, and they are now rolling that money into this larger new fund. There are things to both love and hate about this announcement.

Some of the Things to Hate:

I hate that the 5G hype got rolled into this announcement. Consider the following from Pai’s announcement:

5G has the potential to bring many benefits to American consumers and businesses, including wireless networks that are more responsive, more secure, and up to 100 times faster than today’s 4G LTE networks. . . . We want to make sure that rural Americans enjoy these benefits, just as residents of large urban areas will. In order to do that, the Universal Service Fund must be forward-looking and support the networks of tomorrow.

That statement is incredibly misleading. The only new technology that is 100 times faster than 4G LTE is the use of millimeter wave spectrum. Millimeter wave spectrum is only faster when the transmitters are fiber-fed. This fund is not going to be used to build the fiber needed to bring millimeter wave hot spots to the most rural parts of America. That technology only broadcasts fast broadband for less than 1,000 feet, so it’s likely to never be economically viable to bring this technology to remote places. Unfortunately, the Chairman’s statement is going to make rural people think they might be getting broadband that is 100 times faster.

I also hate that Chairman Pai used this same announcement to announce that AT&T and Verizon have massively overstated their 4G coverage maps. One would expect there to be some sort of regulatory repercussion for those companies exaggerating their coverage areas. The big carriers have been accused of overstating coverage to limit how much of the Mobility Fund Phase II went to smaller carriers. Instead of punishing the big carriers, this announcement glossed over the bad behavior and instead rewards them by doubling the size of the fund. I’m guessing that the fund doubled in size to cover the areas that the carriers had erroneously claimed as having cell coverage. At the end of the day, this fund is another big dollar giveaway to the biggest carriers in the country. I know this money should greatly improve rural cellular coverage – it’s just getting a bit tiresome watching this FCC hand everything imaginable to the biggest carriers.

I also hate that this order is not likely going to require that any new fiber built using federal money be made available to others. These billions will be used to construct a lot of fiber to rural cell towers and that fiber would be a great launching point for competitiors that want to bring better broadband to rural areas. You might recall that the broadband grants that came from the stimulus program required all fiber constructed with federal funds be made available to ISPs at affordable rates. However, when money is given to the big carriers – in this program and in the CAF II program – there is no such requirement.

Some of the Things to Like:

This reconstituted fund still keeps the primary goal of the original Mobility Fund Phase II, which is to bring better cellular coverage to areas that don’t have it today. I visit rural America regularly and it’s not hard in rural places to drive out of cellular coverage. Hopefully, this fund fills many of those coverage gaps. I’m always amazed when I come upon a small community in an area with zero cellphone coverage. We talk all of the time about the broadband gap, but for many folks, there is a more fundamental connectivity gap.

I also like that some of this money will go to the smaller cellular carriers that already serve in rural America. I have faith that they’ll use the money more wisely than the big carriers. The fund will operate as a reverse auction, and I hope that the many smaller cellular carriers can win the money in places where they already have better networks than the big carriers.