No New Telecom Act

For years it’s been obvious that we need a new telecom act. The Telecommunications Act of 1996 was largely aimed at promoting telephone competition and is now quaintly outdated. Today, carriers that want to provide traditional voice services still have to jump through a gauntlet of regulatory requirements while ISPs providing VoIP or no voice product have almost no regulation.

The 1996 Act is dated and some of its provisions cause unneeded problems within the industry. A good example is Google Fiber’s struggle getting onto poles in various cities. Google has shunned taking the regulated path, but in doing so they have not been availed the protections of the 1996 Act that provides access to poles, conduits and ducts. Since most new fiber builders are not offering traditional voice, the distinctions between regulated and unregulated carriers is out of date. But unless Congress changes the rules established by the 1996 Act, the FCC and the courts have choice but to enforce any explicit regulations required by that Act.

It’s also easy to overlook that the 1996 Act rewrote many of the rules for the cable industry. For example, some of the rules covered by the Act still require traditional cable providers to provide several specific tiers of cable service. It’s obvious that these rules no longer make sense and are hindering traditional cable companies from offering competitive small packages and the a la carte programming that customers clearly want.

At the 2018 State of the Net conference held last week Rep. Greg Walden, the chair of the House Energy & Commerce Committee said that he did not foresee any major telecom legislation this year, but rather piecemeal tweaks of telecom law to fix obvious problems. This same sentiment has been expressed by Sen John Thune who has the same role on the Senate Committee on Commerce, Science and Transportation. These committees are where telecom legislation begins.

We see this piecemeal approach in Congress right now. There are nearly a dozen proposed bills floating around Congress right now that have an impact on telecom. For example:

  • There are several bills that would simplify the paperwork to get funding from the Universal Service fund and would make it easier to fix telecom infrastructure after a natural disaster.
  • There are also several bills that would loosen or exempt telecom projects that get federal funding from having to undertake environmental and historic preservation reviews if facilities are placed in existing rights-of-ways.
  • There is a bill to streamline the application for placing telecom facilities on federal land, including a one-year shot-clock forcing a yes or no answer to an application.
  • There is a proposed bill that would require the FCC to monitor and improve broadband availability in ‘urban broadband deserts”.

There is nothing wrong with any of these bills and they propose to make changes that make sense. For example, the requirement to undertake environmental and historic preservation studies when using federal grant money probably added 15% of cost to projects funded by the BTOP program a few years ago. It makes no sense to do these studies when new telecom facilities are to be placed on existing poles or within the existing shoulders of roads. Tweaking the rules will save unneeded expense for future fiber projects.

But these bills are all small in scope and ignore the big issues. The time has probably come to eliminate telephone regulations, other than perhaps the few rules that directly protect consumers. It’s also time to open up access to poles and conduits to everybody without making them jump through the hurdles created by the 1996 Act. It’s time to eliminate any federal rules that dictate how cable networks must package their programming. There are number of these big issues that cannot be easily fixed by small piecemeal bills.

There is an even bigger issue looming over the creation of a new telecom act. The FCC has basically written itself out of the picture for regulating broadband. There are some aspects of broadband that need to be regulated and Congress would have to drag the FCC back into this role.

A new telecom act could create a fresh start for the industry and the FCC. All of the drama concerning Title II regulation of broadband was due to the fact that Congress failed to provide any guidance for regulating broadband. The FCC struggled over the last decade trying to find a backdoor way to justify governing some aspects of broadband – something the Congress could have fixed at any time by giving explicit authority to the FCC.

Regulating broadband one small inch at a time is not good policy. Any ISP can rattle off a list of a dozen things that don’t work as well as they would like. The only way to get the fresh start we need is with a new telecom act aimed at the new world we really live in. We are no longer a world that needs heavy telephone regulations or that should tell cable TV providers what to put on the air. What we need is a new framework that would empower the FCC to make sure that we can affordably build the fiber and wireless networks that are vital to our future. We need rules that require that broadband stay within affordable reach of most households. We need rules that prohibit ISPs from spying on customers. We really need Congress to do their jobs and restart the industry on a regulatory path that fits our times.

The End of Data Privacy?

Congress just passed a law that reverses the privacy rules that were ordered by the prior FCC. Those rules were recently put on hold by the current FCC and this new laws makes sure the privacy rules never go into effect. Congress did this to ensure that a future FCC cannot implement privacy rules without Congressional approval. It’s important to note that this law applies equally to both terrestrial and cellular broadband.

On paper this law doesn’t change anything since the FCC privacy rules never went into effect. However, even before the prior FCC adopted the privacy rules they had been confronting ISPs over privacy issues which kept the biggest ISPs from going too far with using customer data. Just the threat of regulation has curbed the worst abuses.

How will the big ISPs be likely to now use customer data? We don’t have to speculate too hard because some of them have already used customer data in various ways in the recent past, all of which seem to be allowable under this new law.

Selling Data to Marketers. This is the number one opportunity for big ISPs. Companies like Facebook and Google have been mining customer data, but they can only do that when somebody is inside their platforms – they have no idea what else you do outside their domains. But your ISP can know every keystroke you make, every email your write, every website you visit, and with a cellphone, every place you’ve been. With deep data mining ISPs can know everything about your on-line life.

We know some of the big ISPs have already been mining customer data. For example, last year AT&T offered to sell connections that were not monitored for a premium price. AT&T also has a product that has been selling masses of customer phone and data usage to federal and local law enforcement. Probably other ISPs have been doing this as well, but this has been a well-guarded secret.

Inserting Ads. This is another big revenue opportunity for the ISPs. The companies will be able to create detailed profiles of customers and then sell targeted advertising to reach specific customers. Today Google and a few other large advertising companies dominate the online advertising business of inserting ads into web sites. With the constraints off, the big ISPs can enter this business since they will have better customer profiles than anybody else. We know that both AT&T and Charter have already been doing this.

Hijacking Customer Searches. Back in 2011 a bunch of large ISPs like Charter, Frontier and others were caught hijacking customer DNS searches. When customers would hit buttons on web sites or on embedded links in articles the ISPs would sometimes send users to a different web site than the one they thought they were selecting. The FCC told these companies to stop the practice then, but the new law probably allows the practice again.

Inserting Supercookies. Verizon Wireless inserted Supercookies on cellphones back in 2014. AT&T started to do this as well but quickly backed off when the FCC came down hard on Verizon. These were undetectable and undeletable cookies that allowed the company to track customer behavior. The advantage of the supercookies is that they bypass most security schemes since they grab customer info before it can be encrypted or sent through a secure connection. For example, this let the company easily track customers with iPhones.

Pre-installing Tracking Software on Cellphones. And even better than supercookies is putting software on all new phones that directly snags data before it can be encrypted. AT&T, T-Mobile and Sprint all did this in the past – just using a different approach than supercookies. The pre-installed software would log things like every website visited and sent the data back to the cellular carriers.

Time for a New Telecom Act, Part 1

capitalNothing is ever certain in the regulatory world, but it looks like there is a good chance that we will see a new telecom act this year. There are certainly parts of the old Telecommunications Act of 1996 that need to be refreshed and there are a lot of new topics like broadband, OTT and the IoT that need to be addressed by Congress. Today’s blog is going to review the old telecom act and tomorrow I will address the changes that I hope are included in any new act.

It’s hard to believe but the Telecommunications Act of 1996 was enacted 21 years ago. From a technological perspective that was almost the dark ages. 1996 was the year that AOL launched its unlimited dial-up product for $19.95 per month (before then subscribers paid by the minute). This drew millions of people to the Internet and convinced them to pay a monthly fee for access. DSL and cable modems were still in the lab and dial-up access ruled the world.

The main thrust of the 1996 Act was to create more competition with telephone service. Ma Bell had been broken up in 1984 which had resulted in long distance competition. Long distance rates dropped steadily over the years after divestiture. Congress decided that it was time to also create competition for dial tone. They recognized that the roadblock to competition was that the big telcos owned the vast majority of the copper lines going to homes and businesses and that nobody was likely to build a second telecom network.

So the Act implemented new rules to promote competition. Some of the changed mandated by the new Act were:

  • Creating a new regulatory category for telephone competitors that was labeled CLEC (Competitive Local Exchange Carrier).
  • Requiring the big telcos to ‘unbundle’ their copper network. This meant that they had to provide access to their copper plant to CLECs. To accomplish this the FCC mandated that CLECs had the right to interconnect to the big telco networks and to collocate in their central offices when necessary.
  • Mandating that the big telcos offer up telecom services for resale. They basically had to sell bulk services to competitors who could then sell them to customers.
  • Requiring that anybody that wanted to build new network be given access to poles and conduits and be allowed to connect to telco network at any reasonable place of their choosing.

The Act was immediately successful and unleashed a flurry of competitive activity. Giant new CLECs were formed that collocated in telco offices gained access to copper loops. The most popular product was the unbundled T1 that allowed new competitors to sell data and telephone services to businesses over one connection. There were also giant companies formed to tackle resale. I recall that one of my clients in those days, Talk America, got over one million residential customers by reselling local phone service along with cheap long distance. Many consultants were formed to help the new competitive companies including my company, CCG Consulting.

The Act also brought about many other changes, some of the most significant being:

  • The regional Bell companies were allowed to get into the long distance business and compete against AT&T.
  • The Act granted the FCC the right of preemption to allow it to override conflicting state rules.
  • The Act created intercarrier compensation for paying for the exchange of traffic between telcos and CLECs.
  • The Act also shook up the Universal Service Fund and made compensation more directly cost-based.
  • The Act also tackled a number of other regulatory issues such as preempting telecom services from franchise fees, establishing rules to define obscene programming, and enabling the over-the-air transmission of digital TV signals.

In many ways the 1996 Act was a big success. Prices for telecom services plummeted in subsequent years. But over time the effective lobbying of the large telcos reversed some of the aspects of the Act, like resale and the unbundling of dark fiber. The Act also did not foresee the explosion of cellphones and of landline broadband and those industries have never gotten the same level of regulatory scrutiny that applies to telephone service. There are still CLECs today making a living by providing DSL over telephone copper. But the increasing needs for faster broadband speeds is starting to make that technology irrelevant and it’s definitely time to consider a new Act to deal with today’s issues.

Reform at the FCC

FCC_New_LogoThe House recently passed by voice vote H.R 3675, the Federal Communications Commission Process (FCC) Reform Act of 2015. That’s a little surprising in that it often feels like this Congress never passes anything in recent years.

This act looks to improve the processes at the FCC. It should be noted that many of the items included in this act came from recommendations arising out of an internal self-assessment taken by the FCC on their own processes.

Over the years, like often happens at many regulatory agencies, processes get tweaked until they become somewhat dysfunctional. Little changes made each year are usually minor, but over the years these changes accumulate. In the FCC this has resulted in administrative rules that have been used to stretch out timelines and to delay decisions.

The Act would require the FCC to seek comments from the industry and then adopt rules that would:

  • set minimum comment periods for rulemaking proceedings,
  • allow time for public comment by eliminating the practice of placing large amounts of data into the record on the last day of the public comment period,
  • increase transparency regarding items before the commissioners,
  • require publication of the text of proposed rules, and
  • set timelines for FCC action on certain types of proceedings.

The bill would also require that the FCC:

  • Publish the text of items before they are voted on.
  • Create a searchable database for consumer complaints.
  • Publish more documents on the FCC’s website.
  • Potentially allow more than two commissioners to meet outside of the formal meetings without violating the Sunshine laws.

I find the bill interesting because there has been a quiet war between Congress and the FCC for a decade. Some congressmen have tried to largely defund the FCC several times due to not liking the policy positions they have taken on things like net neutrality. And more globally, the current pro-big business congress generally dislikes federal regulatory agencies of any kind.

But to someone who follows the FCC the proposed changes look very reasonable. I’ve always found it troublesome that the FCC could start major inquiries or rulemakings and then could conceivably never make a decision on a topic. So requiring firm timelines is probably good for the industry and good for the country. The major complaint that carriers have about regulators is the uncertainty that hangs over them whenever major changes are being contemplated.

And as someone who writes an industry blog, opening up the FCC complaints to the public sounds like a treasure trove. I am imagining the big piles of stories sitting there about carriers’ bad behavior just waiting to be turned into juicy headlines. And as somebody who occasionally makes an FCC complaint there now might be the chance that somebody might read one of them. I do have to wonder how they are going to stop parties from filing comments on the last day of a public comment period – the tool of procrastinators everywhere.

There are already some processes at the FCC that work pretty well. I love that the FCC must publish the minutes and show the public any documents that were given to them in ex parte meetings. But it would be even better if more of the process of deliberating big topics was made public. The big carriers all have swarms of lobbyists who know about everything going on at the FCC. But my smaller clients are often caught by surprise by FCC rulings and they’ve often wished that they would have had more of a chance to provide input to the deliberation process.

Overall this looks like a positive change, assuming that Congress actually gives the FCC enough money to do what they are being told to do.

 

Congress Considering Mandate for Conduit

innerduraFuturePathGroupThere is a bill making its way through Congress that ought to be of interest to the carrier community. It’s called the Broadband Conduit Deployment Act of 2015. It’s a bipartisan bill being sponsored by Rep. Anna Eshoo (D-CA) and Greg Walden (R-OR).

In a nutshell this requires that all federally funded highway construction projects include the installation of empty fiber conduits in cases where it is determined that an area has a need for broadband in the fifteen years after the construction. I have no idea who makes this determination.

There are a number of cities and counties around the country that have had this policy in place and it works, albeit slowly. People don’t realize it, but most local roads get rebuilt to some degree every thirty years, and so every year about 3% to 4% of roads in an area ought to be getting rebuilt. That number varies according to weather conditions in different parts of the country and according to how heavily a road is used. Roads that carry a lot of overweight loads wear out a lot faster. But federal interstate highways are built to a higher standard and are expected in many parts of the country to last up to forty years. And there are now some stretches of interstate highways that are fifty years old.

One has to wonder about how quickly there might be benefit from such a policy. Certainly any conduit put into urban stretches of highway would probably be grabbed up. But in a lot of places it might be a decade or more until the new conduit provides any real benefit. Once you get out of urban areas conduit is mostly used for long haul fiber, and so have having a patchwork of conduits here and there isn’t going to get many carriers excited.

But over time such a system will provide benefits as more and more stretches of a highway get empty conduits. The same thing has happened in the cities that have this policy. They hoped for a quick benefit for broadband when they introduced this kind of ordinance, but it often takes many years until there is enough conduit available to get any fiber provider excited. The place where almost any empty conduit is of immediate interest is if it runs through neighborhoods, because saving any construction costs on the last mile matters to a fiber builder.

The law is silent on how this conduit would be made available. I’ve worked with getting rights to government-owned fiber before and it has always been difficult. The government owner of a conduit doesn’t have the same sense of urgency as a carrier who is trying to build a fiber route. If you have to wait too long to get access to conduit you’re probably better off finding a different solution.

But it’s step in the right direction and over time this will produce benefits in some places. I also don’t know exactly what kind of roads qualify as receiving federal highway funding assistance. Obviously all interstate highways meet that test. But I’ve sat through many city council meetings where I’ve heard that state highway projects sometime get some federal funding assistance. If so, then this greatly expands the scope and potential of the law.

Similar bills have been bouncing around in congress since 2006 and never passed for one reason or the other. The White House is in favor of this bill as one more piece of the puzzle in promoting more broadband. The White House tried to implement an abbreviated version of this idea a few years ago through executive order, but apparently the implementation of that has been very spotty.

Like many good ideas that work their way up to Congress, this bill is probably twenty years too late. If this had been implemented at the time of the Telecommunications Act of 1996 then we would already have conduit all over the country that would provide cheaper transport. But I guess you have to start somewhere, so I hope this bill becomes law.

Congress and Net Neutrality

Capitol_domeNet neutrality is going to be in limbo for the next few years as the myriad of lawsuits make their way through the courts. I’ve written other blogs looking at this issue and, at least in my opinion, it’s unlikely that the FCC ruling will make it through the courts unscathed. Not only is there a question about if they have the authority to order what they did (I happen to think they do), but the whole process included irregularities compared to the normal FCC process. This was not one of those dockets where the FCC issued an idea, got comments, and then made a decision. There were numerous twists and turns during the process and some changes in thinking at the FCC. The irregularities of the process make the ruling vulnerable to court challenges.

If we had a functional Congress this could all be fixed with a very simple new bill. At the end of the day the FCC’s net neutrality decision boils down to three basic tenets that can all be captured in just over a page of text. It would be easy for Congress to pass a bill that laid forth those same principles and then concluded by giving the FCC the authority to enforce them.

Such a decision would cut through all of the red tape, and a Congressional order doing this would establish the FCC’s clear authority to keep the Internet open. Such a law would avoid the whole mess of Title II and forbearance from old rules that don’t really have anything to do with the Internet. Such a Congressional law could avoid the whole issue of treating ISPs and broadband as a utility.

There were several laws floating around Congress last year that did half of what was needed. They basically said that the Internet needs to be open and that nobody should be able to do things that endanger that openness. But every one of these draft bills had the fatal flaw of not giving the FCC the authority to enforce the net neutrality concept.

The bills that I’ve seen are just window dressing. They would let Congress go on the record as being in favor of net neutrality, without actually having done anything to make net neutrality the law of the land. The net neutrality bills I saw didn’t have any more practical application than the laws that Congress is always passing to celebrate things on a given day. We need net neutrality to be more important than National Friendship Day (August 2).

I don’t normally get too political in the blog, but this is not really a partisan issue. Congress as a whole, both parties, has increasingly gotten in bed with corporations, and those corporations that fund the incredibly expensive process of getting elected and staying in office now have most of the influence on what laws get passed.

And so Congress is loathe to pass a net neutrality bill that is not favored by the large cable companies and telcos that contribute to them. The carriers don’t want to be regulated in any manner (as is probably true of all large companies), and so it’s incredibly unlikely that our Congress, in this current environment, is ever going to establish telecom laws with the teeth needed to make them effective.

There has been talk over the last few years that Congress is working on a new telecom reform law. It certainly is time for one. The last Act was passed in 1996. While that doesn’t sound like very long ago, the telecom world has changed in drastic ways since then. 1996 was the height of AOL being the predominant broadband provider in the country. The broadband technologies of DSL and cable modems were just hitting the markets and there were no broadband customers using them at the time. Businesses thought that a T1 was blazingly fast access to the burgeoning Internet.

So the rules created then could use a fresh look, because many of them are already obsolete. But it seems doubtful that a similar kind of law can be passed today. The Telecommunications Act of 1996 opened up the large telephone companies to competition and they absolutely hated everything about the bill. The 1996 Act also changed a number of rules for cable companies that they did not like.

Today there really isn’t much practical difference between large cable and telephone companies, but we treat them very differently. And now that wireless data is growing, wireless providers should be considered in any new rules. One has to wonder if Congress has the gumption to rein in all of these companies under one set of sensible regulations. My fear is that any new telecom law would do just the opposite and that they would mostly relieve all large companies from being regulated – because corporations seem to be far more in favor right now than people.