The FCC and the Digital Divide

The current FCC Chairman Ajit Pai talks a lot about his commitment to solving the digital divide and to bring broadband to everybody in the country. Chairman Pai has now made numerous visits to rural America and to poor communities and has repeatedly promised that this FCC is on board with finding broadband solutions for everyone. Yet there are numerous actions by this FCC that tell a different story.

Redefining Broadband. Last year the FCC considered changing the definition of broadband – a change which would have drastically lowered the count of households without good broadband The FCC suggested that 10/1 Mbps cellular broadband is equivalent to a 25/3 Mbps landline connection. This change would have reclassified millions of homes as having access to broadband and would have instantly ‘solved’ a huge portion of the digital divide without changing anybody’s broadband. The FCC is required by Congressional edict to set policies that bring broadband to all, and their solution was to unilaterally declare that millions of homes served with only cellular broadband needed no further FCC assistance.

The public and the industry rebelled against this suggestion and the FCC backed down. However, the FCC is required by Congress to examine the availability of broadband every year and they will have annual opportunities to redefine broadband and recalibrate the way we count those on the wrong side of the digital divide. One has to only talk to a rural household trying to run their home broadband from a tethered cellphone to understand the ridiculousness of this idea. The high cost, low data caps, slow speeds and high latency make cellular broadband an extremely expensive and unsatisfactory substitute for landline broadband. There are many people who elect to use only cellular data, but that’s not the same thing as assuming that a cellphone connection can provide enough broadband for the typical home.

Lifeline Program. This FCC seems to be trying to eliminate or greatly restrict the Lifeline program. It’s clear that Chairman Pai would like the program to go away completely and the FCC has been whittling away at the program.

First, they stopped accepting new applications for carriers that want to join the Lifeline program. I know of two municipalities that planned to expand their broadband networks to thousands of low-income homes and offer $10 – $20 broadband that would have been enabled by the $9.95 monthly Lifeline subsidy. They were dissuaded when the FCC made it clear they were not likely to approve new Lifeline providers.

The FCC also changed the rules making it hard or impossible for MVNOs (wireless resellers) from receiving the Lifeline subsidies. These companies were the primary proponents and sellers of low-cost cellular phones and data plans for low-income customers. For example, there are MVNOs that provide a low-function phone, and a limited amount of voice and data to the homeless for the $9.95 reimbursement from the Lifeline fund. There have been numerous testimonials how these phones have improved the quality of life for the homeless by providing them with access to social services and allowing them to make phone calls or texts. Blocking these carriers from Lifeline kills this kind of initiative.

The FCC also eliminated the additional $25 per month from the lifeline program that was available to low-income natives living on tribal land. Eliminating this subsidy and also restricting the Lifeline funds to only facility-based carriers is having the effect of making cellphones unaffordable in some of the poorest places in the country. Even the big cellular companies like AT&T and Verizon opposed this change to the Lifeline fund.

Eliminated Title II Regulation. Perhaps the most damaging change the FCC made was to eliminate all FCC regulation of broadband by eliminating Title II regulation. This FCC order is referred to as the net neutrality order, but there are a number of aspects of the order that have nothing to do with net neutrality.

The FCC removed itself as the watchdog on all aspects of broadband including pricing, data caps, disclosure of practices and policies, etc. The FCC instead shuttled broadband issues to the Federal Trade Commission – an agency that can punish companies which badly abuse the public, but which cannot set proactive policies.

We are poised to see big future increases in broadband prices. That’s the only way that the big monopoly ISPs can continue their historic revenue growth. The big ISPs have hit a wall with slowing numbers of new broadband customers and sinking cable TV and telephone revenues. Rising broadband prices will do more harm to universal service than any other policy. One Wall Street analyst last year suggested that Comcast’s basic broadband price ought to be $90 – something that would drive millions of homes from landline broadband. The FCC has removed themselves as broadband regulators, meaning that the big cable monopolies are going to be free to do what monopolies do and raise rates to maximize profits. Even if the FCC never directly regulates broadband prices they have many other ways to pressure big ISPs to act responsibly – but they’ve given away their regulatory authority and any regulatory leverage is gone.

Legislating Better Broadband

The Senate Commerce Committee recently passed the Rural Reasonable and Comparable Wireless Act if 2018. The bipartisan bill was co-sponsored by Senators Maggie Hassan (D NH) and Shelly Moore Capito (R WV).

It’s an innocuous bill that would have the FCC compare urban and rural pricing and availability of cellular voice service, cellular broadband service and broadband internet access services. Rather than do this nationwide the bill would gather data in and around the top twenty metropolitan markets. The sponsors of the bill say it will help to close the digital divide and will provide the extra tools the FCC needs to make sure that people in rural communities get a fair shake when with access to mobile broadband.

This sounds great, but the bill does nothing more than require gathering data to point out what we already know – that urban areas have better broadband of all types, landline and cellular. The bill won’t help to close the digital divide or fix any broadband problems because it doesn’t require the FCC to do anything other than gather more data – much of which it already gathers today.

The bill doesn’t require the FCC to take action should coverage gaps be identified (which will happen in every market), and so it’s another toothless broadband bill – it’s what I call addressing the broadband problem by press release. I don’t know anything about these two Senators, but I am sure that in the upcoming elections they, and other Senators who vote for this bill will point at this bill as proof that they are trying to help fix the rural broadband problem. Instead, this bill just spends money to create another big annual report from the FCC and will not try to fix any of the problems causing the rural broadband gap.

I really didn’t intend to bust on this bill when I started writing this blog. But this legislation is another example of the toothless telecom bills we’ve seen out of Congress over the last few decades. The FCC can only do those things that Congress authorizes and Congress could tackle the rural broadband issue. Prior FCC’s have tried to do so, but without a clear edict from Congress the FCC has been forced to concoct complicated legal authority, like Title II regulation to tackle broadband issues.

I’ve seen the public mood shift drastically in the last few years in rural America. People have gone from wanting better broadband to now demanding better broadband and politicians better start listening to their constituents if they want to keep their jobs. Broadband is a non-partisan issue and rural America is ready to listen to anybody who can bring them a broadband solution.

Rural America doesn’t need more reports from the FCC telling them what they don’t have – they need funding to build rural broadband infrastructure. I travel extensively in rural America and I’ve noticed that every rural household can identify the nearest place that has real broadband. They don’t need the FCC to tell them that broadband is better in the County seat or in the nearest big city – they are well aware of it.

We are badly in need of a new telecom bill. The current FCC is now chipping away at some of the last vestiges of the Telecom Act of 1996 by killing resale and the use of unbundled network elements. This Congress sat blithely by while the current FCC undid Title II regulation of broadband. The public and the press have been attacking Chairman Ajit Pai for killing net neutrality and Internet privacy – but at the end of the day this is all the fault of Congress.  Congress could give new instructions any day on these issues to the FCC, but they’ve punted on that responsibility.

Aside from the politicians running the current FCC, who are clearly in the pockets of the big ISPs, most reasonable people would agree that broadband should be regulated to some degree. We are nearing the time when the big cable companies will have a monopoly stranglehold over broadband in most US markets. And even where they don’t have a monopoly, where they compete against large fiber builders like AT&T the two sides cooperate to keep prices high – classic duopoly competition.

Monopolies must always be regulated. With Title II regulation now dead we are going to see the big ISPs aggressively monetizing customer data. We’ll see them raise broadband rates as the easiest way to meet Wall Street earnings expectations. We’ll see them tighten and enforce data caps and use every trick available to extract as much money as they can from customers. This is what big corporations do when they are free of regulation.

The current FCC has washed their hands of even trying to regulate the big ISPs, and only Congress can create the rules that can put some reasonable curbs on bad ISP behavior. I don’t hear even one member of Congress calling for Congressional responsibility – instead of solutions that can provide better rural broadband and that controls the worst impulses of the big ISPs we will get bills like this that creates a new annual report that reminds us that broadband is not as good in rural Maryland and Virginia as it is in Washington DC.

Tearing Down Rural Copper

In his FCC blog, FCC Chairman Ajit Pai is touting the June 7 open FCC meeting as his own version of “Avengers: Infinity War”. He says the FCC is taking on familiar headliners like “freeing up spectrum, removing barriers to infrastructure buildout, expanding satellite services, modernizing outdated rules, eliminating waste, improving accessibility, protecting consumers—and rolling them into one, super-sized meeting.”

I want to focus on the agenda item “removing barriers to infrastructure buildout”. The Chairman goes on in his blog to say the following about that topic:

Removing regulatory barriers to encourage the deployment of next-generation networks and close the digital divide certainly fits that bill. That’s something that consumers strongly support; as I’ve traveled from the Mountain West to the Gulf Coast, I’ve heard many of them say that they want to benefit from modern, more resilient technologies like optical fiber instead of limping along with slower services like DSL provided over old, often-degraded copper. To respond to that desire, I’ve shared an order with my colleagues that would make it easier for companies to discontinue outdated, legacy services and transition to the networks of the future. These reforms would enable the private sector to stop spending scarce dollars propping up fading technologies of the past and promote investment in technologies of the future. They will also make it easier to restore service in the aftermath of natural disasters and other catastrophic and unforeseen events. 

The Chairman’s rhetoric sounds great and anybody in rural America would love for the FCC to help them “benefit from modern, more resilient technologies like optical fiber”. However, this is another false narrative coming from the Chairman. Rather than promoting fiber or fast broadband, the FCC will be voting on the attached order which authorizes the following:

  • Expedites the ability of telcos to discontinue broadband services slower than 25/3 Mbps;
  • Streamlines the process for discontinuing legacy voice services.
  • Eliminates the notice periods that telcos must give to customers before discontinuing legacy services or tearing down copper;
  • Extends streamlined notice period during force majeure events, meaning telcos can walk away from a legacy network that gets damaged from a natural disaster, like happened a few years ago on Fire Island after hurricane Sandy.

This order makes it a lot easier for AT&T and the other giant telcos to walk away from their copper technology, their DSL networks and their legacy copper services. This comes straight from the wish list of the big telcos and is another example of how this FCC is is handing the reins to the big ISPs.

The premise behind the Chairman’s rhetoric is that we must be able to discontinue the old copper networks if we are to make the investments in newer broadband technologies. This sounds like a reasonable premise except for one thing: the big telcos are not going to be bringing fiber or technologies like 5G to rural America today, tomorrow or ever.

This docket does nothing more than make it easier for the big telcos to kill copper and DSL networks and walk away from rural America. We all know those networks are dying and eventually have to come down. What bothers me about the Chairman’s rhetoric is that he is hiding the truth about this agenda item behind a lie – that tearing down the old networks somehow makes it easier to build new networks. There will be many rural households hurt by this docket. The farm with no broadband and no cellular coverage is going to see their copper lines torn down and will lose their landlines, their last remaining connection to the outside world, and the Chairman doesn’t want to publicly say that he thinks that is okay. The big telcos would like nothing more than to completely wash their hands of rural markets and this FCC is making it easier for them to walk away.

The Chairman is painting a picture that killing copper is the first step towards getting faster broadband in rural America and that’s the big lie. The FCC has it within their authority to force the big telcos invest some of their profits back into rural America, but they are instead letting them walk away. Once the copper lines are down there will be nothing to replace them and future regulators will have zero leverage over the telcos after the copper networks are gone.

I find it disturbing that we have regulators without the courage to tell the American public the truth. If this FCC believes that it’s time to start tearing down rural copper, then they should say so. They know there is nothing to replace rural copper and so they are sugarcoating the topic to avoid the wrath of angry citizens. It’s disingenuous to paint the picture that this FCC is going to bring better broadband to rural America when we all know that’s not true.

Telephone versus Broadband Privacy

We now have an unusual regulatory world where there is more privacy protection in place for telephone customers than there is for broadband customers. One of the many things done in the Congressional Review Act (CRA) for the new budget that went into effect on April 3 was to nullify the FCC’s privacy rules for ISPs. These rules were implemented in the fall of 2016 and prohibited ISPs from using customer data without customer consent.

There have been no equivalent changes in the rules for landlines, cellular phones and cable TV subscribers. The rules for telephone privacy were established by the Telecommunications Act of 1996 and are referred to as CPNI (Customer Proprietary Network Information). These rules prohibit phone companies from using calling records unless they have customer permission. There is a good summary of a customer’s rights on this FCC web page.

Telephone companies routinely capture details of customer calling – who you call and who calls you. This is familiar to anybody who’s seen a TV crime show since one of the first things detectives routinely do is to ask to see telephone calling records for a suspect. The telephone companies can’t release this information without a warrant if a customer has elected to keep their records private. In addition to calling records these rules also require phone companies to keep other customer data secure, such as billing records, credit card numbers etc. Telephone companies are even prohibited from marketing their own products to customers if the customers opt out.

The 2016 privacy rules for broadband had implemented the same sort of privacy rules. Customers were given the choice to allow or deny access to their records. This was a far more reaching protection due to the large volume of information that an ISP has about their customers. At a minimum an ISP knows every web page you have visited since they control the DNS routing that connects you to web sites. There are numerous other things an ISP can know about a customer should they choose to look deeper into the packets to and from customers.

The new FCC Chairman Ajit Pai led the charge to kill the 2016 ISP privacy rules. Those were put into place just before the 2016 election and he had voted against the rules then. His primary argument is that the protections put barriers onto ISPs while there was nothing similar to ‘edge providers’, that is web companies like Facebook or Google. Those companies have no restrictions on what they can collect from users of their software and platform. Chairman Pai argued that the privacy rules didn’t really protect customers and just ended up putting ISPs at a disadvantage compared to Google.

It’s a valid argument, but killing ISP privacy protection is not the only way to get more parity between web companies. The European Union has taken an opposite approach and has placed restrictions on what both ISPs and edge providers can collect without customer permission.

Regulations are often squirrely and it’s not hard to find regulatory rules that make no sense or that have lasted far past their usefulness. I find it particularly odd, though, that I can tell my cellular provider to keep details of my phone calls private, but I can’t stop them from recording all of the web sites I visit. I’m sure the average citizen is far more concerned about web usage records than they are about who called them.

People who are concerned about their web privacy are taking steps to protect their information. Many people have changed to VPNs to encrypt their web usage and keep the details away from the ISP. There are alternate providers that can do DNS searches so that you ISP doesn’t know the web sites you visit. People are using web browsers that don’t track their usage. Large numbers of people are reportedly dropping off Facebook and other platforms that routinely and openly benefit from their personal data.

What’s most disconcerting about all of this is that privacy is the kind of regulation that has now become partisan. It’s not hard to envision a future Democratic FCC putting the privacy rules back in place and we might see this and similar issues yo-yo with changes in the administration. Of course, the easiest way around that is to do what my smaller ISP clients do – they don’t record customer information, so they don’t really care what the FCC says about privacy – they just provide it as another aspect of good customer service.

Partisanship and the FCC

The current FCC has a clear bias towards the big cable companies, telcos and cellular companies. There is nothing particularly wrong with that since this FCC represents an administration that also is big-business oriented. Past FCC’s have clearly favored policies that reflected the administration in charge. For instance, the prior FCC under Tom Wheeler was pro-consumer in many ways and pushed things like net neutrality and privacy – issues that had the support of the administration but not of the giant ISPs.

However, in the last few decades the FCC has gotten a lot more partisan. It’s becoming rare to see a policy vote that doesn’t follow party lines. This isn’t true of everything and we see unanimous FCC Commissioner support for things like providing more spectrum for broadband. But FCC voting on any topic that has political overtones now seem to follow party lines.

The most recent example of the increased partisanship is evident with the release of this year’s 2018 Broadband Deployment Report to Congress. In that report Chairman Pai decided to take the stance that the state of broadband in the country is fine and needs no FCC intervention. The FCC is required to determine the state of broadband annually and report the statistics and its conclusions to Congress. More importantly, Section 706 of the Telecommunications Act of 1996 requires that the FCC must take proactive steps to close any perceived gaps in broadband coverage.

In order to declare that the state of broadband in the country doesn’t require any further FCC action, Chairman Pai needed to come up with a narrative to support his conclusion. The argument he’s chosen to defend his position is a bit startling because by definition it can’t be true.

The new broadband report, released on February 9 concludes that “advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion. . . This finding does not mean that all Americans now have broadband access. Rather, it means that we are back on the right track when it comes to deployment“. The kicker comes in when the report says that the FCC’s data from ISPs “does not yet reflect the beneficial effects of the Commission’s actions in 2017,” such as “ending the adverse impact on investment caused by the [2015 Net Neutrality] Order. . . For instance, several companies, including AT&T, Verizon, Frontier, and Alaska Communications either commenced or announced new deployments in 2017.

In effect, the FCC now says that broadband deployment is back on track due to its December 2017 net neutrality repeal. But the ‘facts’ it cites don’t support its argument. First, any broadband improvements made by the cited telcos in 2017 would have been authorized and started in 2016 before this new FCC even was in place. Further, a big percentage of the recent broadband deployments of these particular telcos are due to earlier FCC decisions prior to the Pai FCC. For example, AT&T was required as a requirement of the purchase of DirectTV to pass 12 million new residences and businesses with fiber. A lot of the broadband spending made by AT&T, Frontier and Alaska Communications are using CAF II funds given to them by the Wheeler FCC and which the companies are required to spend. None of those expenditures have anything to do with the repeal of net neutrality. And since net neutrality was only reversed a few months ago, it’s impossible to believe that any of the broadband spending in 2017 was due to this FCC. It’s far too early to see if that order will have any impact on rural broadband expenditures (something no industry experts expect).

This FCC Broadband Report concludes that deployment of broadband in the country is on track and reasonable. Yet the numbers in the report show that there are still 19 million Americans in rural America without access to adequate broadband. There are 12 million school-aged children who are suffering from the homework gap because they don’t have broadband at home.

By declaring that broadband deployment is adequate, Chairman Pai has let his FCC off the hook for having to take any actions to address the issue. But his stated reasons are based upon an argument that is clearly not supported by any facts. This would seem to put the Chairman in violation of his Section 706 obligations, although that’s probably something only Congress can determine.

I’m saddened to see the FCC become so partisan. This is not a new phenomenon and we saw partisan voting under the last several FCCs. Before that we had pro-big business FCCs such as the one under Chairman Michael Powell. But that FCC was far less partisan and still basically used the facts at its disposal in making decisions and setting policy.

The FCC has a mandate to balance what’s good for both the public and the telecom companies. In an ideal world the FCC would be a neutral arbiter that listens to the facts and sides with the best arguments. This trend towards a partisan FCC is bad for the industry because it means that major policies will flip-flop when we change administrations – and that’s not good for ISPs or the public. Partisanship does not excuse this FCC from abrogating its responsibility and making specious arguments not supported by facts. This FCC has taken partisanship too far.

The Big ISPs and Regulation

FCC_New_LogoLast week Chairman Ajit Pai halted the impending implementation of the new privacy rules that were to stop the big ISPs from monetizing customer data without customer permission. The Chairman’s stated reason is that he didn’t want to see different rules applied to the big ISPs than to big web companies like Facebook and Google. That argument sounds like a valid reason, but as you will see below, there is no easy path towards treating all of these companies the same.

The stay applied to FCC rules covering a wide variety of privacy issues. The rules were to require the big ISPs to get customer permission to use their data. The rules also created specific security requirements at the ISPs defining how ISPs have to protect customer data and how and when they had to disclose data breaches to customers.

So here is where the confusion starts. The FCC clearly has no authority to regulate the web and what it calls edge-providers – companies like Facebook and Google. It would take an Act of Congress to give the FCC any authority to regulate the web – something that neither Democratic nor Republican administrations have had an appetite for.

Chairman Pai did suggest that perhaps the easiest solution is to hand ISP security issues to the Federal Trade Commission. But the new head of the FTC said this the agency would have no authority to regulate ISPs as long as Title II authority gives this authority to the FCC. So perhaps this action is an indicator that Chairman Pai intends to reverse Title II regulation. He’s said that he is against net neutrality and the FCC used the tool of Title II regulation to implement it. So killing Title II regulations would also get rid of net neutrality.

But what is not being talked about is that the FTC has never contemplated privacy rules as sweeping as the ones implemented by the FCC. The FTC already could impose these rules on Facebook, Google and everybody else on the web, but has never taken any serious steps towards doing so.

Because of that, halting the privacy rules feels like Chairman Pai is just letting the big ISPs off the hook. The big ISPs have been lobbying against these rules from the second they were passed. The ISPs are jealous of the giant revenues that the web companies are making from data mining of consumer data. And the ISPs want to protect what they’ve already been doing. It’s been well known, for example, that AT&T has been monetizing customer data. The leaks from Edward Snowden showed that AT&T has been supplying far more data to the NSA than is required by the Patriot Act. There are reports of a lucrative multi-billion dollar AT&T product line called ‘Hemisphere’ that has been selling customer phone and internet records to the federal government and to local law enforcement agencies.

What I think all of this means is that we have seen the end, for a while of any government agency trying to provide privacy protection for customers. This mainly bothers me as a consumer more than as a consultant. I work entirely with smaller ISPs and none of them have the ability to use customer data in the same way that the big companies do. This latest FCC action only immediately affects perhaps the dozen largest ISPs.

There is a big functional different between ISPs and edge-providers like Facebook. An ISP can see every keystroke a customer makes on the web, except for those that are made inside some encrypted program. But almost nobody uses encryption and so your ISP knows every web site you visit, the contents of every email you write, and every query you make to a search engine. And they know even more about you from your cellphone records – where you traveled and when.

But the difference between Facebook and the ISPs is that nobody makes you use Facebook. I really hate the way that the big companies like Facebook and Google track everything you do inside their platforms. I dropped off Facebook last year partly for this reason.  I also rarely use Google as a search engine and don’t use Gmail or Google’s Chrome web browser. I can largely avoid the big web companies, but I can’t avoid my ISP. And like most Americans I don’t have any real option but to use a big ISP for broadband access.

I’m probably like most Americans and don’t feel like I have a lot to hide. But that still does not mean that I want big companies following my every movement, my every purchase, my every email and every web site I visit. That has far too much “big brother” about it for my liking. I know today that this data is mostly being used to develop targeted marketing, but this information could also easily be used for nefarious purposes, and some of that is starting to happen.

As much as this reversal of the privacy rules bothers me as a consumer, the big picture here is that, for now, the big ISPs finally have the FCC they want. This FCC has already said it’s going to reverse or gut net neutrality. This FCC just said they aren’t going to review the AT&T and Time Warner merger. Killing the privacy rules is final proof, only a month after the new Chairman has been in charge, that the big ISPs are likely to get everything they want. And I don’t think that is a healthy thing for the industry or for consumers.

Putting the Lifeline Program on Hold

FCC_New_LogoEarlier this month the FCC under new Chairman Ajit Pai reversed earlier FCC approval for nine Lifeline providers who had been granted the ability to provide either wireline or wireless Lifeline broadband service. The Lifeline program grants a subsidy of $9.25 per month for low-income customers.

These were the first nine companies that had filed for the new Lifeline Broadband Provider designation to provide the subsidy for broadband connections. The Lifeline program for 32 years has provided this same subsidy to telephone service, but last year the program was extended also to data services – with the caveat that a given household is only eligible for one monthly subsidy.

The nine providers are Spot On, Boomerang Wireless, KonaTel, FreedomPop, AR Designs, Kajeet, Liberty, Northland Cable, and Wabash Independent Networks. Four of the providers had obtained their new Lifeline status on December 1 with the others being granted in January. Boomerang Wireless had already started to serve lifeline-eligible customers and the FCC ordered them to notify their customers and to cancel all lifeline subsidies within 60 days of the new order.

The stated reason for the reversals was that the FCC wanted to “promote program integrity by providing the Bureau with additional time to consider measures that might be necessary to prevent further waste, fraud, and abuse in the Lifeline program.” None of these companies has been accused of fraud but rather were the first nine companies to be granted the status of Lifeline Broadband Provider with the ability to sell a subsidized data product.

The fraud issue is an interesting one because the FCC had already overhauled the Lifeline processes to protect against fraud. For years carriers were allowed to self-certify that customers met at least one of several qualifications that made them eligible for Lifeline. But the FCC eliminated self-certification by publishing a national list of eligible customers – the list provided by and updated by other federal agencies overseeing eligible programs.

The FCC had also done compliance audits over the last several years looking for Lifeline fraud and didn’t find much of it. The new FCC order cited a $30 million settlement from Total Call Mobile that had been found to be seeking reimbursement for duplicate and ineligible customers. But the vast majority of the lifeline providers were found to have few or no issues.

Customers may have other options because the 800 carriers that already provide a Lifeline voice subsidy are now also allowed to provide a data subsidy. But nobody knows how many of these existing providers plan to offer subsidized data, and in fact over 80 Lifeline-eligible carriers recently asked to be excused from the program. This includes most of the biggest carriers in the country including AT&T, Verizon, CenturyLink, Charter, Cox, Frontier, Fairpoint, Windstream and Cincinnati Bell. There were also a lot of wireless carriers asking to be excused from the program.

It’s possible that politics has something to do with this order. The FCC under past Chairman Wheeler had reset the Lifeline program’s annual budget to $2.25 billion a year, indexed to inflation. There are Republicans in Congress who have called for the program to be capped instead at $1.75 billion annually. Stopping these new providers is one way to stop the program from growing. One would think that the withdrawal of the biggest carriers from the program will also greatly shrink the fund.

The most interesting thing about this order to me is that it seems to conflict with statements made by new Chairman Pai. On his first day as Chairman he addressed FCC employees and told them that one of his top goals was to bring broadband to all Americans. But this reversal of Lifeline status came just three days later and seems contrary to that goal.

It’s certainly possible that after more internal review that these companies might still be granted Lifeline status. But this also might instead be an indicator that the new Chairman wants to curb the Lifeline program, or maybe even eliminate it. I guess we are going to have to wait a while to see what this all means, including the Chairman’s statements about expanding broadband to all.

2017 Regulatory Trends

FCC_New_LogoNow that we are at the end of the year I’m going to spend a few blogs looking forward into 2017 from the perspective of small carriers. Predictions about the direction of regulation is perhaps the easiest trend to write about since it looks like the trend for 2017 will be to undo many of the things done by the FCC over the last few years. So here are the regulatory trends I think will be most important to small carriers.

Net Neutrality Will be Reversed. It’s pretty obvious that the FCC’s current net neutrality rules will be reversed in short order in the new year. We already have Commissioners Ajit Pai and Mike O’Rielly strongly on the record opposing the FCC’s prior actions. This could be done in two ways. First could be a direct reversal of the net neutrality ruling. But another tactic might be to reverse Title II regulation but allow the net neutrality principles to stay in place – basically to acknowledge the net neutrality principles that the public clearly likes but to remove the ability to enforce those rules.

Interestingly, net neutrality hasn’t had much direct impact on small carriers since none of them have the market power to violate it. The one impact of this reversal for small carriers is that it will unfetter Comcast, Charter, Verizon and AT&T from most regulations and will give them greater market power and the ability to more aggressively squash smaller competitors.

One benefit of net neutrality was that it gave the general public some comfort that they couldn’t be preyed upon by large ISPs. So small carriers might want to periodically remind your customers that you will still be adhering to the principles of net neutrality even though this might not still be a formal requirement.

Reversal of New Privacy Rules. It’s also clear that the FCC is going to reverse most or all of the new privacy rules. These rules stopped ISPs from using customer data without explicit permission. There were parts of these rule that small carriers didn’t like. But for the most part small ISPs don’t use customer data for marketing purposes and don’t sell customer data to marketers. I think small carriers should periodically remind your customers that you don’t misuse or sell their data, but that your big competitors do.

Lifeline Changes. I think it’s likely that the new FCC will change the data lifeline program that pays $9.25 per month towards the data bill for qualifying families. At a minimum they might curtail this for cellular data plans, but there is even the possibility that they will eliminate it.

There is also talk of going back to a numbers-based method to fund the Universal Service Fund. This would impose a tax of around $1 on every telephone number. This is supported by the big telcos since they no longer control the majority of telephone numbers, but even more so because this would remove USF assessments on special access circuits.

A New Telecom Act. I expect Congress to enact a new telecom act. There are certainly parts of the Telecommunications Act of 1996 that are way out of date. That Act concentrated on copper telco networks and on traditional large cable line-ups and we need to now acknowledge that copper telco networks are quickly disappearing and that the public wants non-traditional cable packages.

But I also expect that any new act is going to drastically change the role of the FCC. My guess is that Congress wants to throttle the FCC’s power so that the agency won’t have much power if there is another change in administration. There have been threats from Congressmen in the past year to abolish the FCC altogether, but I think once they look at all of the things the agency does that cooler heads will prevail. But we might be seeing permanently reduced federal regulatory oversight of the industry.

Resurgence of State Regulation. If the FCC delivers on the stated goal of the new administration to whack FCC regulations, I expect that some state regulators will step in to fill the regulatory gap. After all, regulators like to regulate! It would not be surprising to see the most active state regulatory commissions like California, New York, Texas and Illinois tackle topics that the FCC might drop. And that would undoubtedly mean a string of states-rights lawsuits.