Another Regulatory Gotcha

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

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

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

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

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

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

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

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