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Current News Regulation - What is it Good For?

Net Neutrality Enters the Twilight Zone

tzIn the telecom world we are not very used to our issues getting a lot of notice from the public. But it’s obvious that net neutrality has become a political issue as much as it is an industry issue. Compared to the normal way we do business as an industry the debate has entered the twilight zone. This all got started when new FCC Chairman Tom Wheeler said that he was proposing new rules that would allow for the creation of an Internet ‘fast lane’, By that he meant that the FCC is going to allow the large ISPs to charge large content providers for premium access to their networks.

Of course, Chairman Wheeler is not himself neutral in this decision having spent years as the head lobbyist for the cable industry and opposing net neutrality. It’s somewhat ironic that he made this new announcement at the annual cable show with his cable company peers. The headlines that day made it sound like the FCC was going to take a legitimate shot at maintaining net neutrality, but within days it became understood that the fast lane idea was just the opposite and that he was handing the cable companies exactly what they wanted.

What I don’t think that Wheeler expected was that the public would jump all over his idea. And so, before the proposal was even released the Internet companies like Google and NetFlix weighed in against it. A huge number of consumer groups and many citizens weighed in against it.

And so, quite unexpectedly, the Chairman announced yesterday that he is changing the proposed rule, one that hasn’t even been released yet. He said that the revised rules would allow for ISPs to charge companies like NetFlix and Amazon for faster access to customers, but that non-paying companies would not be put into the slow lane. This makes no sense and is political double-speak. From a network engineering perspective you either give priority to bits or you don’t. If some companies get priority routing, then all other traffic gets degraded. That is the only way it can work on a network and no amount of regulatory talks can change the way that bits operate.

The idea gets even more bizarre if you think it through. What happens if 20 companies pay Comcast for priority access? Does the one who pays the most get slightly more priority than number two, and so on? The fact is that networks can’t do that. Bits are either prioritized or they are not, and so if a lot of companies pay for priority access we end up back where we are today for those companies, while the rest of the Internet would get degraded service.

One thing that pushes this into the Twilight Zone is that Rasmussen did a push poll on the topic and concluded that only 21% of Americans are in favor of net neutrality. Push polls are generally only used for hot button political topics where somebody wants to prove the opposite of what’s true. In this case, the main question of the poll was, “Should the FCC regulate the Internet like it does radio and television”. None of the questions asked had anything to do with net neutrality and instead were designed to elicit a specific negative response. Obviously there are dozens of better ways to have asked the public about net neutrality, including actually asking about it.

I have not conducted a poll, but I traveled all last week and in conversation I asked a number of people what they thought about the idea that the ISPs could give some companies priority access, which implies that others would get something less. Nobody thought that was a good idea and the general consensus was to leave things working the way they are. I believe there will be a huge amount of public discontent should the ISPs be allowed to break the Internet.

I don’t think Chairman Wheeler has any comprehension how important the Internet is to most people. He is skirting with making a huge blunder if he allows the Internet to get screwed up. He is making himself the public face of how the Internet functions, and if he breaks it people will blame him personally. He has the chance to become the next infamous political appointee to get compared to Michael Brown who was running FEMA during Hurricane Katrina. But perhaps he won’t mind being vilified since he is handing the cable companies a billion dollar opportunity to charge more to Internet companies.

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Regulation - What is it Good For?

Why We Need Network Neutrality

While the FCC has been making noise about finding a way to beef up net neutrality, the fact is that the courts have gutted it and ISPs are more or less free today to do whatever they want. In March, Barbara van Schewick, a Stanford professor had several ex parte meetings with the FCC and left behind a great memo describing the current dilemma with trying to rein in network neutrality violations.

In this memo she describes some examples of bad behavior by US and British ISPs. While she highlights some well-known cases of overt discrimination by ISPs, she believes the fact that the FCC has actively intervened over the last decade in such cases has held the ISPs at bay. But now, unless the FCC can find some way to put the genie back into the bottle there are likely to be many more examples of ISPs discriminating against some portions of web traffic.

Certainly ISPs have gotten a lot bolder lately. Comcast essentially held Level3 and Netflix hostage by degrading their product to point of barely working in order to extract payments out of them. And one can now imagine AT&T and Verizon doing the same thing to Netflix and all of the ISPs then turning to other big content providers like Amazon and Facebook and demanding the same kind of payments. It seems that we have now entered a period where it’s a pay-for-play network since the FCC did nothing about the issue.

The US is not the only place in the world that has this issue. We don’t have to look at the more extreme places like China to see how this might work here. Net neutrality violations are pretty common in Europe today. A report in 2012 estimated that one on five users there was affected by ISP blocking. The things that have been blocked in Europe are across the board and include not only streaming services, but voice services like Skype, peer-to-peer networks, Amazon cloud services, gaming, alternate email services and instant messaging.

If we don’t find a way to get net neutrality under control the Internet is going to become like the wild-west. ISPs will slow down large bandwidth users that won’t pay them. They will block anybody who is doing too good of a job of competing against them. The public will be the ones who suffer from this, but a lot of the time they won’t even know it’s being done to them.

I don’t know anybody who thinks the FCC has the courage to take the bold steps needed to fix this. The new Chairman talks all the right talk, but there has been zero action against Comcast for what they did to Netflix. I imagine that the ISPs are still taking it a little easy because they don’t want to force the FCC to act. But the FCC’s threats of coming down on violators are going to sound hollow as each day passes and nothing happens.

Professor van Schewick points out that absent strong rules from the FCC that there is no other way to police network neutrality. Some have argued that antitrust laws can be used against violators. But in the memo she demonstrates that this is not the case and that antitrust law is virtually worthless as a tool to curb ISP abuses.

It’s not just the big ISPs we have to worry about. There are a lot of smaller ISPs in the country in the form of telcos, cable companies, municipalities and WISPs. It’s not hard to picture some of the more zealous of these companies blocking things for political or religious reasons. One might assume that the market would act to stop such behavior, but in rural America there are a whole lot of people who only have one choice of ISP.

I hope that things don’t get as bad as I fear they might and that mostly common sense will rule. But as ISPs violate the no-longer functional net neutrality rules and nothing happens they are going to get bolder and bolder over time.

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Regulation - What is it Good For?

Telephone Deregulation Continues

There is a package of five bills before the legislature in Colorado that would deregulate telephone service there. If they pass, and it looks likely that they will, Colorado will become the 21st state where telephone deregulation has occurred to some extent.

I have been part of that regulatory process for years and I have mixed feelings about. One of the primary bulwarks of telecom policy in most states has been to hold the cost of residential telephone service as low as possible to make landlines affordable. I can remember many rates cases in various states where requests for rate increases in residential phones were either denied or highly curtailed. And the result of this persistent regulation over the years has been that in many states the prices for residential rates has been held below costs.

When I say that, I am referring to fully allocated costs where all of the costs of the business are spread across all of the products being sold. Regulators had many reasons for keeping costs low. One was public policy and the belief that all houses should be able to afford landlines. And back at the time when 98%+ of homes had landlines that probably was good policy. But over the years there also has grown the feeling that the large telcos have milked the profits out of the copper network and that almost anything they charge for them is excess profits.

One thing that is for sure is that after deregulation that the price for residential phones rises. The most extreme example was in California where the rates went up over a few years by 260%. But that is partially due to the rates there being help extraordinarily low for many years compared to other states.

But the current more towards deregulation is not about charging more for phone service, although that is a natural consequence. Instead, the phone companies are trying to create the mindset that copper is obsolete and needs to be phased out of service.

Let’s face it, the copper networks are getting old. An AT&T spokesperson on Colorado has been quoted to say that landlines will be obsolete by 2020. Many of the copper networks still operating in big cities and older suburbs were built in the 1960s. And frankly the phone companies have cut back on maintenance of copper and the networks have deteriorated. Small town America understands this better than anybody since in many rural areas there are barely any technicians to be found to fix problems.

Replacing the copper is inevitable. The problem comes in that in many areas there are no alternatives. First is the issue of cost. In rural areas the only alternative to copper is wireless, and households would need to replace a $20 landline with one or more cell phone, which could easily cost $100 or even much more per month. And that is where cell phones work. No matter how pretty of a picture that AT&T and Verizon try to paint with their nationwide coverage maps, there are still plenty of places in the country where cell phone coverage is terrible. If you have even been in a town where you have to walk around outside to find that one magic spot where you can get a cell signal you will understand that cellular is not always an option. And you don’t have to go very far outside City limits in rural counties to find huge zones with no cellular coverage.

The Colorado bills don’t just deregulate the price of phone service. The bills go further and take away the complaint process for phone service away from the state Commission there. If a consumer wants to file a complaint they would have to go to the FCC. Another bill deregulates VoIP service, which is telephone service delivered over the Internet or over an IP connection on a cable network. When you see those kinds of provisions in laws you know they were written by the large phone companies who want a lot more than a plan to look at the end of copper.

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Regulation - What is it Good For?

Another Regulatory Gotcha

The FCC recently went through the process of eliciting stories about ideas for rural broadband. I had a bit of a problem with how they went about it because they made it sound like anybody who would tell them their story was eligible to be chosen to get funding for a rural broadband experiment. And this wasn’t true, and the FCC really was just gathering stories. The actual applications to get funded will come later this year.

There is another thing that the FCC didn’t make very obvious to possible applicants. Any entity that wants to get money out of the Connect America Fund must be an Eligible Telecommunications Carrier (ETC). To be fair, the FCC says that companies that request funding don’t have to be an ETC at the time of filing, but that they must achieve that status before they can actually receive funds. The FCC language makes it clear that it expects ETC status to be obtained rather quickly.

What the FCC doesn’t seem to understand is that it can be very time consuming to become an ETC and in some cases impossible for some of the entities who are interested in the broadband experiments.

In most states there is a two-step process to become an ETC. First you must be certified as a carrier in your home state. The type of certification required varies by state. In some states you would have to obtain a Certificate for Public Convenience and Necessity (CPCN) and in other state you would have to become a CLEC or some other form of carrier.

Getting that kind of certification is not a slam dunk for start-ups and municipalities. Generally somebody wanting to get these certifications needs to pass three tests – that they are financially capable, managerially capable and technically capable of being a carrier. A start-up trying to get the FCC funding might fail one of these tests. For instance, a City might not be able to demonstrate technical capability because that is something they were going to hire after they got the funding. And in some states start-ups have trouble meeting the financial capability test set by their state regulatory commission. The process of getting certified can take anywhere from 90 days to 180 days in most states assuming you can meet all of the requirements.

Then, after getting the certification as a carrier, an entity can file to become an ETC. There are some very specific requirements in becoming an ETC that are going to stop some filers. For instance, an ETC must be willing and able to serve everybody in an existing ‘exchange’. An exchange is the service areas of the incumbent telcos and most rural exchanges have a town in the center surrounded by a sizable rural area. So anybody who wants to be an ETC must agree to serve that whole area. In some states a municipality is prohibited from or has a very difficult time serving anybody outside their City borders. And let’s face it, serving broadband to farms is expensive, and so having to agree to serve those areas can break a start-up business plan. So even if a City or ISP gets certified, it’s no slam dunk that they will meet the requirements to become an ETC. And even if they can, I know that there are many states where the ETC process can take a year.

Additionally, in both of these steps, the process can be further delayed if somebody intervenes in the regulatory process. The local telco or cable company can (and often does) intervene in the certification and/or ETC process as a delaying tactic to slow down potential competition. It’s not hard for the whole process end-to-end of becoming a carrier and then an ETC to take two years. And that will not work for the funding process. So many of those who are thinking about asking for this money have no idea that the regulatory cards are stacked against them.

At the end of the day, all that is proven by getting an ETC status is that you are good at the paperwork process of regulation. The status really has no other practical benefit. And I say this as somebody who gets paid to obtain these kinds of certifications. Some regulation is good, but I hate regulation for regulation’s sake. And this requirement of having to be an ETC to bring broadband to rural places is a stupid dinosaur kind of regulatory requirement.

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Regulation - What is it Good For?

Funding Faster Internet in Schools

The FCC announced this week that they will be providing an additional $750 million in the E-Rate program to promote high speed broadband to schools. This was mentioned in President Obama’s State of the Union address. And this is a follow-up to the announcement last year that the administration wants all schools to have access to 100 Mbps by 2015 and access to a gigabit by the end of the decade.

I want clarify that this does not increase the size of the Schools and Library Fund that is part of the Universal Service Fund. That fund is still at $2.4 billion per year and will stay at that level of funding. So this announcement, while sounding like a big increase, is really a reallocation of the existing fund.

More of the fund will help to pay for fast internet connections, but that means other things will no longer be funded. Many who are getting reimbursed from this fund today for older technologies are going to see their payments decrease or cease. Today this fund pays for a lot of old technologies, and so funding for things like voice lines, dial-up connections for faxes, paging services, and email programs will be eliminated or severely curtailed. For every school who gets more funding there will be another that gets less and this is a zero sum game.

For those who don’t follow this program, let me give you a short primer in how it work. Schools receive funding based upon the percentage of their students who are eligible for the school lunch program. Schools with the highest percentages of school lunches will get some or all of their communications costs for the schools covered by the fund. The lower the percentage of school lunch students, the smaller the amount that the fund will pay, as a percentage of the bill. The funds are awarded from neediest downward until all of the funds for a year are allocated.

The funds pay for a variety of different costs, and one assumes that the menu of things that can be compensated from the plan is going to change with this announcement. But today the fund will not only cover some monthly recurring costs, such as for an Internet connection, but it will pay for one-time costs like wiring a school for Internet.

Every school who gets funding must have an ISP partner who provides the services. Let’s use an example of a school that gets a 60% reimbursement to show how this works. The ISP will sell services to the school at competitive rates. In most places the ISPs are picked using state purchasing laws requiring the low cost bidder to win the job. The school will pay the ISP its unfunded percentage of the bill, in this case 40%. The ISP must be registered with the USF fund to get paid, and they would bill the fund for the remaining 60%. This means that the ISP gets full payment, but that the school in this example saved 60% on their bill.

One has to imagine that the fund is now going to have some sort of incentive to reimburse schools for connections that are at least 100 Mbps download. Connections that are slower than that are going to have to somehow be given a lower rating for the fund to help foster the goal of faster Internet.

I worry a bit in that revising the rules to promote fast Internet might inadvertently disadvantage those schools with the slowest Internet. There are schools that happen to be located in a broadband desert who have no access to fiber, and those schools might lose compensation that helps them to pay for the fastest speed they can get.

Many ISPs already take part in this program. But if you are in a position to sell a high-speed connection to a school or library you should get registered with the USF fund. It’s fairly easy to do and CCG can help you with the paperwork. This program is run well and ISPs report no problems getting reimbursed. There is no reason for ISPs and school partners who qualify to not get help from this fund.

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Regulation - What is it Good For? The Industry

Challenging CAF Funding

Last week the FCC accepted a challenge by OnlyInternet Broadband and Wireless that had been filed against Frontier Communications. Frontier had filed to get Connect America Funds (CAF) to spend capital to enhance broadband to some rural areas that were either unserved or underserved. The FCC agreed that OnlyInternet already served the area in question with broadband.

There have only been a few of these challenges, but there is going to be a lot more coming since the FCC is expected to expand possible recipients of the funds this month. In the past few years the major recipients of CAF funding for construction have been a handful of very large telephone companies like Frontier. However, the FCC is expected to broaden the list of recipients to include other companies like rural electric utilities.

Today a company must be certified as an Eligible Telecommunications Provider (ETC) by their state Commission to be eligible for CAF funding. But as the FCC expands the definition they also are thinking about changing this requirement.

The CAF funding is intended to provide support for constructing broadband facilities in unserved or underserved areas. An area either has to have no broadband today (unserved) or a majority of residents that can’t get broadband that meets the federal broadband definition of 3 Mbps  download / 768 Mbps upload (underserved). The FCC is expected to increase this threshold in the future, although they will probably never do anything so bold as to set the threshold to something that would be really considered as broadband. But I guess they think that if households have no broadband that they will be grateful to get 3 Mbps.

This FCC ruling is worth pointing out because other large companies are going to also be requesting CAF funding. For instance, Frontier has requested funding for huge rural swaths of its own service territory where it had never spent the money to put in DSL. This ruling shows that you need to be on the alert if the large companies are planning to use federal funds to bring broadband to an area where you have already made the investment. You can challenge such an attempt and win.

Interestingly, Frontier had previously challenged funding for OnlyInternet for not providing fast enough upload speeds for some other markets where they were providing broadband.

If your company is close to areas that are unserved or underserved you might want to consider applying for CAF funding. CCG has been successful in the past in getting numerous federal grant awards for clients. The CAF funding awards are going to require some capital from the grantee, and the more of your own money you are willing to put in, the higher the chance of getting a grant. But it should not be unreasonable to think that CAF funding could be used to finance a significant percentage of a network build-out, as long as you are building to unserved areas.

The bottom line is to keep your eye on the CAF funding requests. The large carriers are requesting funding for large areas and some of those areas are bound to already have broadband. Don’t let the big companies get a foothold in your area using free federal funds.

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Regulation - What is it Good For? The Industry

The Many Takes on the Network Neutrality Decision

Earlier this week the DC District Court of Appeals struck down most of the provisions of the FCC’s Net Neutrality rules. There are dozens of web articles and I am not going to repeat a detailed summary of what that decision said. In short, it said that the FCC messed up years ago when they decided that the Internet is an information service and that common carrier rules don’t apply. But the net neutrality rules relied on looking at the Internet as if it is a common carrier service. A lot of legal experts pointed this out when the net neutrality rules were issued and they were right.

What I find interesting is how the press has reacted to this ruling. I went to a Google search and I read dozens of articles about the ruling. There are not too many really controversial issues in the telecom industry and for the most part our press mostly looks at technical and business issues. But it seems that the net neutrality ruling hit people in a more visceral way. Since every article author relies on the Internet they all had a very personal reaction to the ruling and so the reactions to the ruling are all over the board. It is the range of reactions that I find so interesting:

  • The Court itself said that they agreed that their ruling could have a chilling effect on future innovation and if the carriers were to strike sweetheart deals with large content providers on the web it might disadvantage start-up companies who cannot afford to pay to get preferred access. Lots of articles took this perspective.
  • Public interest groups are massively alarmed over the ruling and one article went so far as to say that this ruling marks the first day of the end of the Internet. Most of these reactions were not quite so dire, but in general these groups assume that the ruling means that the large network providers like Verizon, AT&T and Comcast are going to use the Court’s ruling to quickly change how the Internet functions. They think that these large companies cannot resist the urge to monetize the ability to discriminate among content providers and that they will use this power to choke and slow down internet traffic providers that won’t pay them a toll.
  • Legal experts took a very different tact and most of them talked about ways that the FCC could fix what they have done. Almost universally they opined that they saw this coming (and most of them did). They say that the FCC screwed up years ago when they declared the Internet to be an information service and that the only way to fix this is to somehow get the Internet back under the common carrier rules. As a whole the legal opinions were pragmatic and not particularly politically biased or emotionally charged.
  • And there were political opinions. There are those who opined that the new FCC chairman Wheeler is not entirely thrilled with the idea of net neutrality and that he would put a brave face on the ruling but not fight hard enough to overturn the Court ruling. Others thought just the opposite and assumed that the FCC would fight this ruling to Supreme Court while working to craft a new approach to fix the problem.
  • And finally there were the business prognosticators who took at a shot at predicting what this would mean to the business world. These opinions varied widely. At one extreme was an opinion that the network owners would do almost nothing so as to not make the FCC enact a different set of more effective rules. On the other extreme were those business analysts who assumed that the carriers already have a list of changes they will make due to the ruling and that we will see a lot of announcements soon of deals between network owners and large content providers. I also saw a number of predictions that once the cat is out of the bag that the FCC is going to have a big practical challenge to undo the results of this ruling.

I don’t have any better crystal ball than anybody else. I have no idea how hard the FCC is going to fight this. I agree that the only practical solution is to somehow bring the Internet under the common carrier rules. But that is going to be a hard thing to do. I also think that the carriers will start implanting some arrangements that break the spirit of network neutrality. AT&T had announced a plan to do that just a few days before the court ruling. Comcast and Verizon had proposed arrangements in the past that went against the grain of network neutrality. But I can’t see this as the beginning of the end of the Internet. If the big companies abuse this too badly they will give consumers the impetus to look for providers who don’t screw them. So the big companies will find ways to make money off of this, but they won’t be the total demons that are feared by the public interest groups. It’s going to be interesting to watch and I will report back on this from time to time.

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Regulation - What is it Good For?

The Expanding Arm of Regulation

One would be expecting the regulation of telcos in this country to be decreasing. For the most part the various state regulatory commissions regulate two things – telephone service (and related TDM based data service) and companies that own physical networks. But residential landlines usage has been dropping drastically over the last five years and is now under 50% in some states (something I will talk about in Monday’s blog).

States generally have regulated a few different areas having to do with telephone service. Years ago they regulated prices for both residential and business telephone products. But business telephony has generally been competitive for over a decade and most commissions stopped regulating business services. Most states still regulate the price of a residential landline although some have given up on that as well. States have given up on regulating long distance rates as well. States have regulated customer service policies such as how a company can disconnect a non-paying customer. States still actively regulate 911 services and other safety-related issues.

But the amount of regulation of telephone service has decreased drastically. With business services deregulated or detariffed and with residential landlines disappearing quickly, it seems like there is little left to regulate. Further, there are whole new ways of delivering voice services using IP, and most states do not regulate VoIP providers, except maybe in areas like 911.

States still are involved in regulating physical networks. For physical networks states regulate things like pole attachments and rights-of-ways. And states are the arbiter of disputes between carriers. States don’t specifically regulate interconnection agreements, but they are often called on to settle disputes between carriers on these issues.

Overall would expect the activity at state commissions to have decreased. But from what I can tell it has not. States seem to be holding more hearings and opening dockets to regulate those areas that are still under control. I once said that I thought that with all of the changes in the industry that state commissions might largely fade away from the telco world from lack of things to regulate. But a wiser friend reminded me that regulators will regulate and that they will find ways to justify their existence.

Today I actually see several areas where commissions are expanding their regulatory reach. For example, the California Public Service Commission just issued a certificate of public convenience and necessity (CPNC) to Schat Communications. Schat is a classic ISP, and to any extent that they offer telephone service it’s through VoIP. Schat has never needed a license from the state to operate before (like most ISPs and WISPs).

But California has established the California Advanced Services Fund (CASF) which is providing some funding to companies who will build last mile in very rural areas. Schat and a number of other ISPs have found themselves having to become regulated in order to apply for these funds. Once they have a CPNC they are regulated in California in the same manner as other telephone companies.

And the same thing is happening elsewhere. The FCC rules for getting funding from the various programs that are part of the Connect America Fund (formerly the USF Fund) must obtain status as an Eligible Telecommunications Carrier (ETC). This was a certification that telephone companies have always needed to get federal USF funds, and now the FCC has extended that requirement to anybody who wants funding from the CAF to build or extend last mile facilities. In most states a carrier has to be certified (meaning regulated) in order for the state to grant them ETC status.

While we have less and less historic telephony happening we are seeing a new wave of companies being required to become certified as telephone companies. I think my friend was right and regulators will regulate.

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Regulation - What is it Good For?

Google and Regulation

Logo of the United States Federal Communications Commission, used on their website and some publications since the early 2000s. (Photo credit: Wikipedia)

AT&T said last week that they were not required to give access to Google Fiber to their poles in Austin Texas. AT&T owns about 20% of the poles there with the City owning the rest. And from what I can see, AT&T is right. This all comes down to various regulations, and it appears that Google is doing everything possible to not be regulated in any way. It seems they have set up a business plan that lets them claim to escape regulation. Let me look at the nuances of what they are doing.

There is a federal set of rules that say that pole owners must provide poles to any certified telecommunications provider. According to the Telecommunications Act of 1996, the states have the right to grant certifications to carriers. Every state provides at least two kinds of carrier certifications – CLEC and IXC. CLEC is the acronym for Competitive Local Exchange Carrier and is the federal term used to describe competitive telephone providers. IXC is the acronym for Interexchange Carrier and is the certification given to companies that only want to sell retail long distance.

Some states have other categories. Some states have a certification for a Competitive Access Provider (CAP) or for a Carrier’s Carrier, These two certifications are generally given to companies who only want to sell services to other carriers. They may sell transport, collocation or other services that only carriers can buy.

A company must obtain a CLEC or CAP certification if they want to gain all of the rights that come with such certification. This includes access to poles and conduits of other carriers, the ability to interconnect with other carriers, the ability to collocate equipment in the offices of other carriers. A CLEC certification also grants a company the right to bill ‘telecom’ products to customers, meaning traditional telephone or traditional TDM point-to-point data services. These are generally rights that anybody who is building a network or providing traditional telecom services must obtain before other carriers will talk to them. But along with those rights come some obligations. Certified carriers are subject to paying some regulatory fees and collecting other fees and taxes from their customers. Regulated companies have to follow rules that dictate how they can disconnect non-pay customers. Regulated companies in some states even have some light regulations concerning pricing, although there are very few rules anywhere dictating how a competitive carrier prices their services.

So strictly, AT&T is completely within their rights to not even talk to Google about pole attachments since Google does not have or plan to obtain a certification. As it turns out, AT&T reports that they are talking to Google anyway and are negotiating a deal to let them on the poles. And honestly, that steams me a bit, because this is how big companies treat each other. I am sure that there is enough business between AT&T and Google that AT&T doesn’t see any sense in going to war over this kind of issue. They would also be seen in Austin as holding up progress and further, Google could always get the certification if push came to shove. But if this was any company smaller than Google, then AT&T would be refusing to even open a discussion on pole attachments or any of the other issues associated with being certified. AT&T would insist that any other company jump through all of the regulatory hoops first. This I know because I have experienced it numerous times. I guess it pays to be as big as Google.

AT&T would also be required to provide access to the poles if Google was a cable TV company. This is a designation that is granted by the local community and the City of Austin could negotiate a cable franchise agreement with Google. But Google is taking the stance that they are not a cable TV company. They are claiming instead that they are a video service provider because they deliver two-way cable TV service, meaning that the customer’s settop box can talk back to Google since they offer IPTV. This is taking advantage of a loophole in the law because today every large-city cable system is two-way since customers in those systems have the ability to order Pay-per-view or video-on-demand from their settop boxes.

But Google does not want to be a cable provider, because there is one nuance of the FCC rules that say that anybody getting a franchise agreement would essentially have to sign onto the same rights and obligations as the incumbent cable company. The big catch in those rules is that Google would have coverage obligations to cover the whole City and they instead want to pick and choose the neighborhoods they serve. Google would also have to collect franchise fees from customers for their cable TV product, and such fees are around 3% of the cable bill in most places.

State regulators and cities are both willing to overlook these regulatory nuances for Google because they are so big and because they promise to bring gigabit data speeds. But these same rules never get overlooked for smaller companies, and so I guess regulations only really affect the small guys any more.

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Regulation - What is it Good For?

Proposed Changes in Telecom Law

Capital B (Photo credit: Wikipedia)

Two bills just made it out of the Communications and Technology subcommittee of the House of Representatives. There are so few bills making it to the floor these days that it’s interesting to see two telecom bills being moved forward. Especially since both are on a bipartisan basis.

The first bill is a revised version of the Federal Communications Commission Process Reform Act, H.R. 3675, which replaces an earlier version of the proposed law. This bill would make a number of changes at the FCC. The bill was heralded yesterday as bringing additional transparency to the workings of the FCC.

First it would change the rulemaking process. It would require all notices of proposed rulemaking (NPRMs) to allow 60 days for public comments before issuance. The FCC currently gives the public an opportunity to comment on the content and structure of an NPRM about one third of the time. Having followed FCC NPRM’s for years, this move seems aimed at slowing down the process. The FCC has generally asked for public input for major rule changes before issuing an NPRM. But the FCC also issues a number of NPRMs that are more procedural or which make minor amendments to rules and this new proposed process would slow down those more minor rule changes. Of course, it’s hard to argue about giving the public more input, but in this case the change gives them more input to the document that is asking for public input rather than to the actual factual proceeding. The public has always had the opportunity to respond to any NPRM once issued, but now they will get a chance to first comment on the format and questions asked by any NPRM before it is issued.

The bill also would require that there would have to be a broader review of any rule change that is expected to have an economic impact of $100M or more. This review would come from other government agencies who want to chime in on the change. This also will add time to the process of allowing the FCC to make major changes and my reading of this bill in general is that it sounds good in intent, but my gut tells me that this is a backdoor attempt to slow then FCC down from making any major changes. There are those in Congress who have been advocating removing most of the FCC’s responsibilities, and if you can’t stop the FCC, then I guess it’s okay to just slow them down.

The subcommittee also approved a bill H.R. 3674, the Federal Spectrum Incentive Act. This bill is aimed at freeing up more cellular frequency in the lower spectrum ranges. It provides both incentives and processes to move government and other users off of certain frequencies in order to provide more bandwidth for cellular telephone usage.

The main provision of the law is that it would allow government agencies that are currently using spectrum in certain ranges the ability to take a cut of any auction proceeds coming from the sale of that spectrum for commercial use.

There was a similar bill passed in 2012 which gave incentives for TV stations willing to give up their spectrum using a tool which is called a reverse auction. This bill would give about 1% of the proceeds of an auction sale to any agency that gave up the spectrum. The bill handles the mechanics by creating a new Federal Spectrum Incentive Fund which would hold auction proceeds until qualifying agencies could qualify for the funds.

These incentive funds are a good idea in that they free up frequency that is badly needed by cellular providers. Most of the frequencies involved are below 1 GHz, and these are the frequencies that can be used to carry a cellular signal for a long distance. These spectrums are necessary if the country wants to use cellular frequencies to bring more data to rural areas. In urban areas the carriers can use higher frequencies because the towers in those areas are already fairly close together. But it’s only economical to provide cell coverage in rural areas if the spectrum can carry for long distances from each transmitter.

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