Regulation - What is it Good For? The Industry

Time for a New Telecom Act, Part 2

FCC_New_LogoYesterday’s blog postulated that we would see a new telecom act this year from Congress. That blog looked at what was accomplished by the last Telecommunications Act of 1996. Today I’m looking ahead at the issues that a new Act needs to address.

Last week we learned more about how the process will probably work. A new telecom act would likely be spearheaded by the Energy and Commerce Subcommittee on Communications and Technology. Last week Rep. Marsha Blackburn, head of that committee, told the press that she favored giving the new FCC a shot at fixing the things under its purview before the House would tackle a new Act. The FCC doesn’t have the authority to make many of the needed changes in telecom regulation, but it does have considerable power. Anyway, this probably means a new act is at least a year away.

Here are some of the things that I think the FCC and Congress need to address to modernize telecom:

Need for More Spectrum. It’s becoming clear that a lot of big ISPs are thinking of deploying 5Gn and various other millimeter wave technologies. The FCC needs to continue to open up more spectrum for broadband. There is still a lot of spectrum has been reserved for government use and there needs to be more attempts to share frequency when possible. There also needs to be a fresh look taken at how frequency is used. Historically many bands of frequency had narrow channels aimed at accommodating voice traffic or a single channel of television. From an engineering perspective we can get a lot more out of spectrum if we can make wider channels in the spectrum bands that are already in use.

Tackling Cybersecurity. 2016 was a year when security breaches led the industry news weekly. There is no easy fix for security issues, but there are big steps that can be taken. For example, we are flooding the world with IoT devices that are easily hacked and which can now be used to launch coordinated denial of service attacks. With Congressional backing the FCC could create standards to make IoT devices more secure. The government will never make us free from hacking, but there are a lot of sensible standards and fixes needed for IoT devices.

Expanding Access to Fast Broadband. As somebody who works regularly in rural America I know that lack of broadband there is now one of the biggest problems identified by rural households. We need to find ways to get good broadband to more places, and we have to do this smartly by building infrastructure that will last for decades. We’ve already seen how not to do this with the CAF II program that is being used to expand DSL and LTE wireless – two technologies that are already inadequate today.

Unless we see that fiber is built everywhere this is going to be an ongoing major issue. For example, if we fix broadband for those that have none but ignore the bigger swathe of the country that has only marginally acceptable broadband today, we will be back in a decade looking at how to fix broadband in those places.

We also need rules that unleashes anybody willing to spend money on fiber. I see numerous rural counties and towns that are ready to spring for bond issues to get fiber. We need rules that allow anybody willing to invest in fiber be able to do so – be that local governments, electric cooperatives, rural telcos or anybody else.

Infrastructure Issues. There are still a lot of infrastructure roadblocks to deploying fiber. We have never done a good job of fulfilling the mandate from the 1996 Act to provide access to poles and conduit. And we are now looking at deploying a fiber-fed wireless network that is going to mean bringing both fiber and power to buildings, rooftops, poles and other infrastructure. We need to find a way to get this done without also trampling over the legitimate concerns of local jurisdictions. For example, the FCC can’t just demand that cities allow free and quick fiber construction if that means digging up newly paved streets or overburdening poles – we need to find rules that work. And we need to do a much better job of this than we have done so far.

Programming. It’s now clear that online video content is competitive alternative to traditional cable TV. We need rules that unleash cable companies and anybody else to sell programming that people really want to buy. That means stepping away from the current rigid cable rules that mandate the giant channel lineups. Companies need to be free to create programming bundles that people want to buy. This might mean allowing a la carte programming. And there must be rules that require content providers to sell to everybody in an unbiased manner.

I don’t know how many of these big issues the current FCC is going to be willing to tackle. It seems like a lot of their agenda for the first six months will be to undo things ordered by the previous FCC. While I understand the desire to mold the FCC to the political persuasion of whatever party is in power, most of the issues on my list above are not partisan. They are just things that we all need to solve if we are to have a telecom infrastructure that serves us all well.

Regulation - What is it Good For?

An Effective Federal Broadband Program, Part 4

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

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

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

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

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

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

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

Getting Access to Poles

Google Fiber is having problems getting onto poles in many parts of the Bay Area and the issues they are having make for a good primer on the very confusing rules for regulating different kinds of entities.

Google Fiber has only publicly announced that they are bringing service to parts of San Francisco. But they have also been talking to Palo Alto, Santa Clara, San Jose, Mountain View and Sunnyvale. Google has no significant pole issues in Palo Alto where the poles are owned by the City, nor in Santa Clara where the poles are mostly owned by the City and a few by AT&T.

The problems come in the other cities. In California a lot of poles are owned by what is called the Northern California Joint Pole Association which is owned by Comcast, Time Warner and AT&T. That group is disputing Google’s right to get on their poles.

The issue is purely a regulatory one. Google claims they are a cable TV company. The kind of company you are matters when it comes to poles. Many years ago the FCC and the industry worked out very specific rules for attachments to poles. Poles are divided into specific zones where various kinds of companies can place cables. The telephone incumbent has the lowest space. At the top is the power company, and historically the cable company fit between telco and power lines. Anybody else who gets on a pole has to fit somewhere in the middle, and in different parts of the country this is sometimes between the cable company and the power company and sometimes between the telco and the cable company.

The first problem Google faces is that by declaring themselves as a cable company, the pole rules only assume that there is one such company. So they can’t claim the ability to get into the cable space, which in all of these cities is already taken by an incumbent cable provider.

Google has always said that they don’t want to register as a CLEC, or competitive telephone company. And until the company announced a trial for voice service a few weeks ago they didn’t offer voice anywhere. But from a regulatory perspective, if Google was a CLEC they would have the right under law to connect to poles, which was guaranteed in the Telecommunications Act of 1996. But I don’t believe there is any similar law that would provide a second cable company the same right, and that has to be the basis for the pole owners to deny access to Google.

Of course, the companies in the association have a very vested interest in delaying Google Fiber from getting into their markets, so it’s only natural they would fight this. It’s actually somewhat rare for cable companies to own any substantial number of poles, but in this consortium two of the owners are cable companies.

AT&T has argued to the California PUC that they don’t believe that Google Fiber qualifies as a cable company and is using that distinction to deny Google access to these poles. There are generally two ways for a company to become certified as a cable company. They have to register with the FCC, which is a very rubber-stamp process, or they have to get a local cable TV franchise from the city where they want to provide service.

But California added a twist to that process. In 2006 the legislature passed a bill that allows companies to get a statewide cable franchise, which is the reason that the California PUC is involved in this dispute. That original law was passed for the benefit of Verizon and AT&T, so that they could provide a competitive cable TV alternative to the incumbents. Under the statewide rules a company only needs to notify a city 10 days before they first are going to offer cable TV service and there are no more regulatory requirements at the city level. A competitive cable TV provider has no obligation to serve an entire community and can serve only where they choose.

Early indications are that the California PUC is siding with the pole owners and might not be buying Google Fiber as a cable company. But even if they are a cable company I don’t know that this gets them access to poles. When AT&T and Verizon became statewide cable providers they already had access to poles. If Google Fiber was a CLEC they would automatically have the right to pole access, but Google apparently doesn’t want to take on the other obligations that come with being a CLEC. The dispute is going to be resolved in one of two ways – either a court will decide this if Google wants to pursue it, or Google will just walk away from those markets and pursue some of the other hundreds of markets that want their fiber.

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