Upgrades for FWA Cellular Wireless

In the recent third quarter earnings call, Verizon CEO Hans Vestberg expressed strong support and belief in the future of the company’s FWA wireless broadband product. This product provides home and business broadband that uses the same cellular spectrum used today to provide bandwidth for cellphones.

There is good reason for the company to be optimistic about the broadband product. In only a few short years the company has added almost 2.7 million FWA customers, and most of its broadband customer growth in the third quarter of this year came from FWA. As noted by Vestberg, rapid growth has continued even after the company increased the price of the product by $10 per month.

As I have addressed in several blogs, there are some limitations on the current FWA product. The biggest downside is that the fast speeds advertised for FWA by Verizon and T-Mobile are only available for customers that live within a mile or so of a cell tower. Speeds seem to cut in half in the second mile from a tower and drop significantly by the third mile.

Another drawback is that both Verizon and T-Mobile throttle the bandwidth for FWA any time that cellphone usage gets heavy. In scouring through multiple speed tests, we have found customers who vary between fast and extremely slow speeds – which might be evidence of this throttling.

But Vestberg mentioned a big technology boost that will be coming to the Verizon FWA product. Verizon purchased a lot of C-Band spectrum in an FCC auction in 2021. This is spectrum that sits between 3.7 GHz and 3.98 GHz. The licensed spectrum provides Verizon with anywhere from 140 MHz to 200 MHz of cellular bandwidth in markets across the country.

Vestberg says the company is starting to upgrade busy urban towers with the extra C-Band spectrum. He implied that the upgrades will be coming to other urban towers and some suburban towers in 2024.

He said the C-Band spectrum will double or triple the cellular bandwidth depth in most markets. He said that using the new spectrum for FWA could result in speeds as fast as 900 Mbps to 2.4 Gbps. Like all speed claims made by ISPs, those speeds are likely faster than anybody will see in real life and probably represent theoretical maximums. However, FWA users can expect a big boost in speeds, particularly those living near towers.

I have to assume that Verizon has already built C-Band capabilities into its home FWA receivers, so speed upgrades ought to be realized immediately after an upgrade. A lot of the newest cell phones also already include C-Band capabilities. Verizon seems to have the most aggressive plan for C-Band, but AT&T has started to deploy the spectrum in a few markets. T-Mobile owns C-Band spectrum, but still seems to be hanging on the sidelines for upgrades.

Significant speed increases to FWA can make the product into a potent competitor to cable companies, at least for customers within a close distance of a cellular tower. The FWA prices are far lower than the prices charged by the big cable companies for broadband, and fast speeds can make this a viable alternative.

The first generation of FWA has delivered speeds in the 100-300 Mbps range. That has been fast enough to attract millions of customers. But the first generation product has felt more like a big upgrade to DSL rather than a direct threat to cable companies. But if the current speeds are really doubled or tripled, many households are going to be attracted by the lower prices on FWA. It’s an interesting product to market since the attractiveness for customers is in a direct relationship to the strength of the cellular signal that reaches their home –  an extremely local situation.

Is Carrier of Last Resort Dead?

The concept of common carrier stretches back to the 14th century in English law, where businesses were granted the exclusive right to be in business as long as they were willing to serve everybody. The term common carrier came into use to describe the obligation of businesses like coaches, ferries, etc. that were required to serve anybody who asked to be transported. The concept was carried over to businesses that were given a franchise to serve a local area, and businesses like blacksmiths and innkeepers were required to serve anybody who wanted service. This concept still applies to businesses today, like railroads, which are not allowed to selectively refuse to carry freight.

Carrier of last resort (COLR) is a version of common carriage that has been applied to businesses that operate large networks like telephone companies, electric companies, water companies, and gas companies. Federal or State rules have always required such businesses to serve anybody inside of the franchise area who requests service.

In exchange for being granted a franchise area, COLR for telephone companies has always come with specific obligations. A COLR is expected to serve everybody in the franchise area, even if that means extending facilities. A COLR needs regulatory approval to withdraw from serving customers. A COLR is expected to operate the business with care, skill, and honesty and to charge fair and reasonable prices.

The concept of carrier of last resort for telephone companies started to weaken with the passage of the Telecommunications Act of 1996. This Act allowed for local telephone competition, and some legislators or regulators granted relief for telephone companies from some of the carrier of last resort obligations. For example, some states have eliminated COLR obligations as part of deregulation. Some regulators have eliminated most COLR obligations for specific telephone companies for the same reason. But even in most cases where the COLR obligations have been weakened, regulators still usually require a telco to ask for permission to withdraw from a market.

While some COLR obligations were weakened, others were expanded. For example, some states have required CLECs (competitive telephone companies) to accept COLR obligations in exchange for participating in subsidy programs. Cities have often only agreed to give a franchise agreement to CLEC or ISP that agrees to serve everybody. In many cases, this obligation is no longer explicitly called COLR, but uses terms like “duty to serve” or “obligation to serve” but refers to obligations similar to COLR.

The COLR issue has come to the forefront for broadband because of broadband grants and subsidies. Some state and local broadband grants have included an obligation to serve everybody in a grant area. The largest subsidy program to require 100% coverage is the Rural Digital Opportunity Fund (RDOF). ISPs that accept this funding are expected to offer service to 100% of homes and businesses in the covered Census blocks by the end of the six-year deployment period. It’s not entirely clear if the upcoming BEAD grants will require 100% coverage, and that final determination will likely be included in each State’s final grant rules.

Is the agreement to serve customers that is obligated through a grant or subsidy program the same as a carrier of last resort obligation? I expect not. For example, will an RDOF winner be expected in the future to extend the network to newly constructed homes?

There are clearly going to be households in RDOF areas that are not offered service. For example, many of the RDOF winners use fixed wireless technology, and there are always homes in any area that can’t be reached with the technology for some reason. In hilly and heavily wooded areas, this might be a large percentage of households.

Does a home that is not covered by RDOF have a reasonable remedy to get service? In the past, a customer could complain to State regulators if a telco was refusing to serve them. It’s hard to imagine an individual homeowner opening an expensive and complicated FCC proceeding to complain about being missed by RFOF.

Technology is also creating havoc in rural areas for traditional telephone company obligations. When I was recently upgrading my cellphone in an AT&T store, I overheard the AT&T representative tell a customer that they would soon be losing their telephone copper and would be moved to FWA cellular wireless.  My county is extremely hilly and wooded, and there is a major lack of rural cell towers. There is a good chance that this customer is not within reach of the offered cellular broadband. It sounds like the end of carrier of last resort obligations if a telco can cut the copper wires and move customers to a cellular service that doesn’t work at their home.

In circling back to the question asked at the beginning of this blog, are there many places left where a regulator will step in and demand that an ISP built infrastructure to reach an unserved household? I think the chances of that happening are getting increasingly remote.

Keeping Track of BEAD

The NTIA has a great dashboard for tracking the status of the last several steps needed before States can receive BEAD grant funds. The dashboard seems to be regularly updated to allow you to track the state or states you are interested in.

This dashboard tracks the progress of each state’s specific BEAD grant plans. The NTIA has split the BEAD action plan from states into two volumes that address specific issues.

BEAD Volume I covers the following issues:

  • Status of current grant funding that has already been used in a state to bring broadband to unserved and underserved locations.
  • A list identifying the remaining unserved and underserved locations.
  • A list of the community anchor institutions that don’t yet have good broadband
  • A description of the state’s final upcoming challenge process where local governments and ISPs will be able to challenge the accuracy of the broadband maps to define areas eligible for BEAD grants.

BEAD Volume II is the core of how the BEAD grants will work and covers the following topics:

  • The specific objectives of a state’s BEAD grant plan.
  • A description of how a state assisted local, tribal, and regional broadband planning efforts
  • A description of the local coordination process where a state was supposed to reach out to all corners of the state to get feedback on the BEAD grants.
  • The specific plan of how the BEAD grant process will be structured. This includes defining the grading scale that will be used to choose grant winners.
  • A description of how some BEAD funds will be used for non-deployment purposes, and how grant winners will be selected. Non-deployment uses of BEAD includes grants for activities like cybersecurity training, promoting telehealth, improving digital literacy skills, etc.
  • Description of how a state will monitor the implementation of grants.
  • Description of how a state will track the jobs created by the grants
  • Description of how the BEAD grants will be use a diverse and highly skilled workforce
  • Description of how the funding process will give priority to minority and women-owned businesses.
  • Description of the steps a state has taken to reduce the cost and the barriers to infrastructure construction and deployment.
  • Description of how a state will assess the impact on climate by the projects
  • Description of the requirements for ISPs to offer low-income rate plans
  • Description of how a state will make sure that ISP rates are affordable for the middle class.
  • Descriptions of how a state will use the first 20% of BEAD funding
  • Description of any waivers that a state plans to use for situations where state laws conflict with BEAD requirements, such as not allowing grants to be awarded to local governments.

If anything, this list of requirements shows that states have more to do than just award grants. States must track a wide range of related issues and must satisfy the NTIA that the state will meet all of the obligations required in the NTIA BEAD rules.

There is a link at the end of the first paragraph of the dashboard that takes you to the Public Notice Posting of State and Territory BEAD and Digital Equity Plans/Proposals. This page includes the key documents that have been created by each State. This includes links to:

  • 5-Year Action Plans. Each state must file a plan to describe the goals and priorities for making sure that everybody gets access to broadband. It appears to me that in the haste to get BEAD grants awarded that the 5-year plans are not being given a lot of attention. It’s something that states need to complete, but the plans I’ve read so far are pretty generic.
  • Digital Equity Plans. These are plans to provide digital equity grants that are separate from the $42.5 billion allocated to last-mile broadband.
  • Volumes I and II of each state’s BEAD proposals.
  • The two NTIA NOFOs that describe the specific requirements for the digital equity and BEAD grants.

FCC Considers New Definition of Broadband

On November 1, the FCC released a Notice of Inquiry that asks about various topics related to broadband deployment. One of the first questions asked is if the definition of broadband should be increased to 100/20 Mbps. I’ve written about this topic so many times over the years that writing this blog almost feels like déjà vu. Suffice it to say that the current FCC with a newly installed fifth Commissioner finally wants to increase the definition of broadband to 100/20 Mbps.

The NOI asks if that definition is sufficient for the way people use broadband today. Of most interest to me is the discussion of the proposed 20 Mbps definition of upload speed. Anybody who follows the industry knows that the use of 20 Mbps to define upload speeds is a political compromise that is not based upon anything other than extreme lobbying by the cable industry to not set the number higher. The NOI cites studies that say that 20 Mbps is not sufficient for households with multiple broadband users, yet the FCC still proposes to set the definition at 20 Mbps.

There are some other interesting questions being asked by the NOI. The FCC asks if it should rely on its new BDC broadband maps to assess the state of broadband – as if they have an option. The answer to anybody who digs deep into the mapping data is a resounding no, since there are still huge numbers of locations where speeds claimed in the FCC mapping are a lot higher than what is being delivered. The decision by the FCC to allow ISPs to report marketing speeds doomed the maps to be an ISP marketing tool rather than any accurate way to measure broadband deployment. It’s not hard to predict a time in a few years when huge numbers of people start complaining about being missed by the BEAD grants because of the inaccurate maps. But the FCC has little choice but to stick with the maps it has heavily invested it.

The NOI asks if the FCC should set a longer-term goal for future broadband speeds, like 1 Gbps/500 Mbps. This ignores the more relevant question about the next change in definition that should come after 100/20 Mbps. According to OpenVault, over 80% of U.S. homes already subscribe to download speeds of 200 Mbps or faster, and that suggests that 100 Mbps download is already behind the market. The NOI should be discussing when the definition ought to be increased to 200 or 300 Mbps download instead of a theoretical future definition change.

Setting a future theoretical speed goal is a feel-good exercise to make it sound like FCC policy will somehow influence the forward march of technology upgrades. This is exactly the sort of thing that talking-head policy folks do when they create 5-year and 10-year broadband plans. But I find it impossible to contemplate that the FCC will change the definition of broadband to gigabit speeds in the next decade, because doing so would be saying that every home that doesn’t have a gigabit option would not have broadband. Without that possibility, setting a high target goal is largely meaningless.

The NOI also asks if the FCC should somehow consider latency and packet loss – and the answer is that of course they should. However, they can’t completely punt on the issue like they do today when FCC grants and subsidies only require a latency under 100 milliseconds and set no standards for packet loss. Setting latency requirements that everybody except high-orbit satellites can easily meet is like having no standard at all.

Of interest to rural folks is a long discussion in the NOI about raising the definition of cellular broadband from today’s paltry 5/1 Mbps. Mobile speeds in most cities have download speeds today greater than 150 Mbps, often faster. The NOI suggests that a definition of mobile broadband ought to be something like 35/3 Mbps – something that is far slower than what a urban folks can already receive. But talking about a definition of mobile broadband ignores that any definition of mobile broadband is meaningless in the huge areas of the country where there is practically no mobile broadband coverage.

One of the questions I find most annoying asks if the FCC should measure broadband success by the number of ISPs available at a given location. This is the area where the FCC broadband maps are the most deficient. I wrote a recent blog that highlighted that seven or eight of the ten ISPs that claim coverage at my house aren’t real broadband options. Absolutely nobody is analyzing or challenging the maps for ISPs in cities that claim coverage that is either slower than claimed or doesn’t exist. But it’s good policy fodder for the FCC to claim that many folks in cities have a dozen broadband options. If it were only so.

Probably the most important question asked in the NOI is what the FCC should do about the millions of homes that can’t afford broadband. The FCC asks if it should adopt a universal service goal. This question has activated the lobbyists of the big ISPs who are shouting that the NOI is proof that the FCC wants to regulate and lower broadband rates. The big ISPs don’t even want the FCC to compile and publish data that compares broadband penetration rates to demographic data and household incomes. This NOI is probably not the right forum to ask that question – but solving the affordability gap affects far more households than the rural availability gap.

I think it’s a foregone conclusion that the FCC will use the NOI to adopt 100/20 Mbps as the definition of broadband. After all, the FCC is playing catchup to Congress, which essentially reset the definition of broadband to 100/20 Mbps two years ago in the BEAD grant legislation. The bigger question is if the FCC will do anything meaningful with the other questions asked in the NOI.

A Peek Inside the FCC

I write a lot about the FCC, but I would imagine that a lot of the folks who read this blog don’t realize the many functions handled by the agency. Like any regulatory agency, the FCC staff and Commissioners have been tasked by Congress with a wide range of responsibilities.

The public gets to formally hear from the FCC once each month when the agency has its public meeting. These meetings are where the Commissioners vote on various issues. The monthly meetings operate much like a city council meeting, with items on a public agenda coming up for discussion or a vote.

In the November open meeting, the FCC will be voting on a wide range of issues.

  • The Commissioners will vote on a proposal that is supposed to identify and prevent digital discrimination. The FCC was required to examine this issue by November 15 in the Infrastructure Investment and Jobs Act.
  • The Commission will consider rules to help victims of domestic violence by helping survivors separate service from their abusers and also protect the privacy of calls made to domestic abuse hotlines.
  • The FCC will debate opening an investigation into the threats posed by artificial intelligence in the generation of robocalls and robotexts.
  • They’ll be looking at rules to thwart cell phone fraud by scammers who take over victims’ cell phone accounts by covertly swapping SIM cards to a new device or porting phone numbers to a new carrier.
  • They will consider rules to modernize ham radio by allowing operators to use digital tools.
  • They will look at a specific case that will reduce regulation in the rural long-distance market.
  • And while not on the listed agenda, the FCC is looking at resetting the definition of broadband to 100/20 Mbps.

The public meetings are only one small piece of what the FCC routinely tackles. Here are a few of the other ongoing functions of the FCC:

  • Is in charge of spectrum policy and use. Decides exactly how each slice of spectrum can be used and who can use it. Was in charge of wireless spectrum auctions – but this is now on hold.
  • Issues licenses to users of services the agency regulates. This includes radio and TV stations. This includes spectrum licenses, such as microwave links. It includes authority for companies to engage in international long-distance.
  • Approves communications devices before they hit the U.S. market. This includes a long list of electronics like computers and peripherals, power adapters, Bluetooth devices, remote control devices, IT equipment, WiFi and other wireless equipment, cellphones and telephones, radio transmitters, garage door openers, etc.
  • Approves and regulates satellite companies that will engage in communications.
  • Oversees the Universal Service Fund through an arrangement with USAC.
  • Participates in a Joint Board with state regulators looking at universal service policies and regulations.
  • Tackles ad hoc issues, like the current push to try to control and eliminate robocalling and spam calls. Another interesting, current effort involves examining how to improve communications for precision agriculture.
  • Is in charge of issuing telephone numbers.
  • Makes certain that those with disabilities have access to communications systems.
  • Oversees disputes from companies that engage in areas the agency regulates. Courts often remand lawsuits filed in the court back to the FCC.
  • Issues fines to companies that break its regulatory rules.
  • Accepts and sometimes tries to mitigate consumer complaints about regulated companies.
  • Coordinates with regulators around the world on issues of common interest, like spectrum usage and device compatibility.

Cable Company Speed Claims

I don’t know if it’s just me, but my perception of ISP and cellular advertising is that the big ISPs and cellular carriers push the envelope more every year in trying to make claims that can give them a marketing edge over the competition.

The advertising for 5G cellular has repeatedly made claims over the years that are far in excess of the ability of the technology to deliver. If your only view of the state of broadband technology is ads seen on TV during sporting events, you would be fully convinced that we live in a completely wireless world and that 5G is the end-all-and-be-all of the broadband world.

What’s funny about many ads is that carriers try to differentiate themselves from their competitors, even though their peers are delivering essentially the same product to the market. There is not much difference in the cellular technology being delivered by AT&T, T-Mobile, and Verizon – although ads claim that each is by far the superior company. In real life, the biggest differentiator between the three carriers is the strength of their signal at your home, office, and other places you frequent – a strictly local difference based on the location of cell towers.

The competition between cable companies and fiber overbuilders is not based on equivalence. There is a clear technical advantage of a 300 Mbps broadband connection on fiber versus the same connection on a cable company. Fiber has a steadier signal throughout the day with lower latency and jitter, and any consumer comparing the two can quickly spot the difference. This puts cable companies in a tough spot. They know that fiber ISPs have a quality advantage for downloading and a huge advantage for upload speeds. Fiber networks tend to also have fewer glitches and outages.

Cable companies know when a fiber network shows up in a market that they will lose customers who care about signal quality. Since cable company prices are normally higher than the prices of fiber ISPs, the cable companies have to scramble and lower prices drastically with special prices to try to hang on to customers and lure new ones.

But cable company marketers never stop trying to make a pitch that makes them sound better than fiber. One of the latest examples comes from Comcast, which has started to advertise itself as the 10G ISP. The company now refers to its broadband network as the ‘Xfinity 10G Network’. This is based on the CableLabs 10G standard that lays out a future upgrade path for cable companies to eventually achieve an overall speed as fast as 10 Gbps download and 6 Mbps upload.

Verizon took exception to Comcast’s advertising and asked the National Advertising Division (NAD) of BBB National Programs to get Comcast to stop using the term 10G. The NAD program is something that many of the big ISPs voluntarily participate in to avoid expensive lawsuits between each other over advertising claims. NAD ruled that the 10G term was not factual and said Comcast should stop using it. The participants in the NAD generally comply with NAD rulings, but this time, Comcast is appealing the ruling. An interesting sidebar of the NAD ruling is that it also felt that consumers would interpret 10G as some advanced version of cellular 5G.

As an outsider, it’s pretty easy to agree with Verizon in this case. The 10G term was based on some theoretical future upgrade to meet the CableLabs 10G specifications, and Comcast’s coaxial networks today cannot achieve that speed. The only example of where Comcast has a 10 Gbps capability today is where it has upgraded to a 10 Gbps fiber platform – a tiny portion of the overall Comcast network. Comcast’s advertising implies to consumers that the future upgrades are already in place.

In a similar dispute, AT&T took exception to Cox ads that claim that Cox cable broadband is ‘powered by fiber’. NAD agreed with AT&T and ruled that Cox could not imply in advertising that its coaxial network is fiber-to-the-home. Again, it’s easy to agree with NAD on this ruling. Having fiber somewhere in a network does not mean that the network can deliver the same quality of broadband as an all-fiber network. Many DSL fiber nodes are fed with fiber, and I don’t recall any telcos making the claim that their DSL is “powered by fiber”.

More aggressive cable marketing is inevitable in a market where cable companies have stopped growing. There has to be a lot of angst in cable company board rooms about finding ways for the companies to claim fast broadband speeds and stop losing customers.

Bundling Cellular with Broadband

The biggest cable companies have been successful in recent years in bundling cellular service with broadband and cable TV. Comcast and Charter have been at this the longest, but most of the next tier of cable companies are also now offering cellular service.

The cable companies launched their cellular products by operating as an MVNO (Mobile Virtual Network Operator). That’s another industry acronym to remember that means that the cable companies purchase and resell cellular minutes, texts, and data from one of the big cellular carriers.

This MVNO business plan works for cable companies for two reasons. First, they know that a huge percentage of cellular usage is made from home. When  a customer is at home with a cellphone, the outgoing cellular calls, texts, and data can use the customer’s WiFi to connect to the cable company broadband – meaning the cable company doesn’t have to pay for the usage to the underlying cellular company.

The biggest cable companies have also selectively started to install their own cell sites in their busiest neighborhoods to totally bypass the cellular carriers. For example, Comcast purchased a lot of spectrum that can be used for its own cellular service. Over time, they will probably move a lot of cellular traffic directly to their own network – although they will always need the MVNO service to cover customers who make connections outside the reach of a cable company cell tower.

The cable companies have collectively been very successful. They are selling cellular service at a low price, with the primary advantage to use cellular bundling to reduce churn – a customer who wants to drop broadband also has to find a new cellular service.

Smaller ISPs are now being offered the same bundling opportunity. The National Content & Technology Cooperative (NCTC) has been offering white-label cellular service to members. This uses an MVNO arrangement that buys cellular minutes, text, and data from AT&T.

Small ISPs share the same primary advantage as cable companies in that they can hand a lot of cellular traffic through the landline network. However, smaller ISPs who buy this service are not likely to ever be able to find the spectrum needed to directly get into the cellular business with their own towers.

Today’s blog is to warn small ISPs about the risks of this business plan. One of the advantages of having been in the industry for a long time is that I have seen similar arrangements come and go several times over the years. Where the big cable companies probably have the economic power to keep these contractual arrangements for many years, smaller ISPs, even collectively, have no negotiating power with the big cellular carriers.

I refer to the MVNO business as arbitrage. This means that an ISP offering the resold cellular services has zero network to back up the business. The small ISP is completely at the mercy of the big cellular companies to continue the relationship – and that cannot be guaranteed.

I recall twenty five years ago that a lot of my clients had AT&T cellular stores and resold AT&T cellular service – until the day when AT&T decided to pull the plug on the business line and stranded my clients with a big inventory of cellphones. I recall numerous clients that had a similar arrangement with Sprint, and some of them went so far as to jointly build towers with Sprint. That relationship also came to an abrupt end. I recall that even before Spring pulled the plug on the MVNO business, it changed the profit-sharing arrangement to the point where small ISP partners made no profit.

My advice to an ISP that enters the MVNO business is to not make it central to your business plan. Use cellular as a bundling opportunity, but know that it’s almost inevitable that the relationship and product will end some day. It might be two years or ten years, but arbitrage opportunities inevitably come to an end – I can’t recall one with staying power. At some point an executive at the underlying cellular company will decide the profits from the arrangement don’t justify the cost and effort and will pull the plug.

Rural carriers should be particularly cautious about putting their name on a cellular network with poor coverage. In much of the country the cellular coverage in rural areas is abysmal. Putting your brand name on a lousy cellular network can hurt your brand name more than the benefit of picking up the cellular bundle.

I am not recommending that ISPs should avoid the cellular opportunity. If it makes money and helps to sell broadband then give it a hard look. My caution is that a small ISP in an arbitrage arrangement has zero market power, and that the arbitrage opportunity can stop abruptly at any time. The folks trying to talk you into the opportunity probably won’t mention this possibility.

Tackling Junk and Hidden Fees

The Federal Trade Commission recently proposed rules that would stop businesses from charging hidden fees. The agency estimates that junk fees cost consumers tens of billions of dollars per year.

The new rules would prohibit companies from jacking up bills with hidden and bogus fees and instead require that businesses clearly disclose their fees to customers. The new rules would also allow the FTC to order full refunds to consumers for any business that continues to bill the prohibited fees.

Specifically, the new rules ban the following practices by businesses:

  • Many companies advertise a low price and then spring hidden fees on customers at the time of purchase. Companies would be required to advertise the true cost of their products or services.
  • Companies would also be forbidden from using bogus fees, which are fees that seemingly have no purpose other than jacking up the price.

Hidden fees are a problem in numerous industries. Recently, several of the large ticket companies agreed to eliminate hidden fees after a loud public outcry after the sale of Taylor Swift tickets. Some hotel chains and airlines layer on extra fees that drive up the costs far above the advertised price.

Other federal agencies are joining the fight against these fees, including the FCC, The Consumer Financial Protection Bureau (CFPB), the Department of Housing and Urban Development (HUD), and the Department of Transportation (DOT).

The FCC proposed rules in June that would stop cable and satellite companies from charging hidden fees for cable TV service. The hidden fees for cable TV have grown so large that they sometimes exceed the advertised price of the cable product. Customers don’t generally find out about the hidden fees until they have signed a contract for the low advertised price and get the first bill. The FCC is tackling hidden fees for cable since it’s an industry that the agency still regulates. Hidden fees on cable have been outrageous for years, and it’s a fair question to ask why the FCC never addressed the issue in the past.

There are some hidden fees on broadband, but for now, the FCC can’t address these since broadband isn’t regulated – so I guess these fall under the FTC’s purview. The biggest such fees are mandatory modems, which some ISPs now charge as much as $15 per month. Another big hidden fee for some families is data caps that hit when customers use more than some arbitrary amount of broadband in a month. There are also smaller hidden fees like Frontier’s $1.99 fee for an Internet Infrastructure Charge – a bogus fee for which there is no specific underlying cost.

The initiative to eliminate hidden and bogus fees comes from prodding from the White House. President Biden made it clear to federal agencies a year ago that he expects them to tackle the issue.

This is something that has been badly needed for a long time. It’s too bad that the FTC is the agency doing this. The FTC typically only brings proceedings against specific companies, so compliance with this rule is going to be hit or miss. Smaller companies might continue to use the practice in the hope that they are small enough to stay under the FTC’s radar. But perhaps the FTC will levy large fines while also ordering full refunds against a few companies that don’t comply and scare most companies into compliance.

NTIA Modifies the Letter of Credit Requirements

For the first time in the BEAD process, the NTIA has bent to outside pressure and modified one of the grant rules. I almost labeled this blog as “NTIA Relaxes Letter of Credit Requirement,” but I still need to do more digging before I’m convinced that this makes a difference for smaller ISPs compared to the previous rules.

The specific modified  rules can be found here. Following is a summary of each change, shown in italics, followed by some of my continuing concerns.

A BEAD grant bidder can now obtain its Letter of Credit from a credit union that is insured by the National Credit Union Administration and has a credit union safety rating issued by Weiss of B- or better.

I am not sure of the genesis of this idea, but this opens the door to more financial institutions that can provide the Letter of Credit. There must be some subset of potential grant applicants that asked for this. A lot of the BEAD projects are going to be large, and I have to wonder how many credit unions will be willing to tie up cash reserves of many millions of dollars for a Letter of Credit. Financial institutions must keep any cash pledged to a Letter of Credit in reserve, meaning that money can’t be used to make other loans. That’s why the interest rate and the cost of a Letter of Credit are substantial – because money pledged to a Letter of Credit can’t be used to make other loans.

A grant bidder will not have to provide a bankruptcy opinion letter if they obtain a performance bond for 100% of the awarded grant amount.

One of the big gotchas for using a Letter of Credit is that a grant applicant must also obtain a legal opinion that the Letter of Credit will not be considered to be property if the grant applicant undergoes bankruptcy. That’s a hard legal opinion to obtain since bankruptcy courts tend to snag every asset with any perceived value. This is not a meaningless provision since large ISPs like Charter, Frontier, and Windstream have gone through bankruptcy.

The more important change is that a grant applicant can substitute a performance bond for a letter of credit. However, the performance bond is for the amount of the award. In the typical BEAD grant, the performance bond would have to cover the 75% grant, while the Letter of Credit covers only the 25% grant matching. I’m going to have to do some checking, but a performance bond that covers a larger dollar amount might not be much cheaper than a Letter of Credit that covers only the matching.

Additionally, a grant applicant must have proof of the performance bond before applying for the grant. This ignores the way that companies that give a performance bond operate. I have never worked with one who would give a bond for a theoretical project – only for an actual shovel-ready project that already has the funding and subcontractors under contract. It might be extremely difficult or impossible to get a performance bond for a theoretical grant project that might never come to fruition, or that might be materially different than what was contemplated when the performance bond was created.

A grant winner will be able to ratchet down the letter of credit as they meet specified buildout milestones. A grant winner using a performance bond will have the same option to reduce the size of the bond for meeting specific buildout requirements.

This sounds great in that the Letter of Credit or the performance bond can be reduced in size as the project gets constructed. However, this ignores the way that financial institutions work. Changing a Letter of Credit will likely be treated by a bank as a whole new transaction. They are going to do a complete new review of the borrower and the project and will charge a significant fee to make this change – much like having to undergo a credit check, pay for a new inspection, and pay points when you refinance a home loan. I’ve never been part of a project that reduced the amount of a performance bond, but I have to imagine the process is similar.

It is good to see the NTIA willing to make changes. They have been hounded by a wide range of industry folks and politicians to make changes to the Letter of Credit. Unfortunately, the change that was really needed was to get rid of the Letter of Credit requirement since it strongly favors big ISPs over small ones. I don’t want to sound skeptical, but I still see red flags in the practical application of the new rules that will be expensive and perhaps impossible for anybody but giant ISPs to meet. This feels more like a band-aid than a fix.

Farming Use of Broadband

The U.S. Department of Agriculture (USDA) released its 2023 report on Technology Use (Farm Computer Usage and Ownership). USDA has released this report every two years since 2005. This year’s report was completed by surveying over 14,000 farms across the country. There are just under 2 million farms nationwide in 2023, down 9,300 since 2021.

Every report since 2005 has shown growing computer usage on farms. Following are the key statistics from the latest report and some comparisons to the past.

69% of farms now have a computer or tablet, up from 67% in 2021. This has grown from 55% in 2005.

85% of farms have some form of Internet access in 2023, up from 82% in 2021. This is up from 55% in 2005. Following are the forms of access at farms in 2021 and 2023 – note that farms can have more than one type of access.

‘                                                            2021    2023

Dial-up                                                  2%       2%

Broadband                                          50%     51%

Cellular                                                70%     75%

Satellite                                               19%     23%

Other                                                     2%       2%

The broadband category includes DSL, cable broadband, and fiber. The report doesn’t mention if the cellular category includes the new FWA cellular broadband offered by big cellular companies like T-Mobile and Verizon. It likely does since an additional 5% of all farms nationwide claim to have cellular connections in 2023 compared to 2021. It’s also likely that the increase in satellite usage is from Starlink, with 4% of all farms adding a satellite connection from 2021 to 2023. It seems likely that the Other category is mostly fixed wireless, but the 2% penetration seems low to me – I encounter a lot of farms using the technology.

31% of farms used the Internet to buy farm inputs (raw materials) in 2023, up from 29% in 2021.

23% of farms use the Internet to market and sell agricultural activity, up from 21% in 2021.

27% of farms in 2023 use precision agriculture, up from 25% in 2021. In some midwestern states – Illinois, Nebraska, North Dakota, and South Dakota – the percentage of farms that use precision agriculture has grown to over 50% of all farms.

What this report doesn’t talk about is the percentage of farms that want broadband and can’t get it. A huge amount of the areas covered by BEAD grants are in agricultural areas. My consulting firm does surveys and interviews, and we’ve heard from a lot of farmers who would do more with broadband if they had a better broadband connection.

A report at this high level also doesn’t discuss the creativity that we see with farmers. Many farmers have used a landline broadband connection and have extended it using homemade wireless networks to reach barns, silos, and structures around the farm.

The report also doesn’t talk about the complex software being used by many farms. I’ve interviewed several farmers over the last year who say that. many days. they feel more like an IT professional than a farmer.

It’s going to be interesting in another four or five years to see how many farmers are using broadband after rural grant broadband networks have been constructed.