Will Congress Fund Rural Broadband?

Members of Congress seem to be competing to sponsor bills that will fund rural broadband. There are so many competing bills that it’s getting hard to keep track of them all. Hopefully, some effort will be made to consolidate the bills together into one coherent broadband funding bill.

The latest bill is the Accessible, Affordable Internet for All Act, introduced in the House of Representatives. This is part of a plan to provide $1.5 trillion of infrastructure funding that would include $100 billion for rural broadband. $80 billion of the funding would be used to directly construct rural broadband. It’s worth looking at the details of this bill since it’s similar to some of the other ideas floating around Congress.

The bill focuses on affordability. In addition to building broadband it would:

  • Require ISPs to offer an affordable service plan to every consumer
  • Provide a $50 monthly discount on internet plans for low-income households and $75 for those on tribal lands.
  • Gives a preference to networks that will offer open access to give more choice to consumers.
  • Direct the FCC to collect data on broadband prices and to make that data widely available to other Federal agencies, researchers, and public interest groups
  • Direct the Office of Internet Connectivity and Growth to conduct a biennial study to measure the extent to which cost remains a barrier to broadband adoption.
  • Provide over $1 billion to establish two new grant programs: the State Digital Equity Capacity Program, an annual grant program for states to create and implement comprehensive digital equity plans to help close gaps in broadband adoption and digital skills, and the Digital Equity Competitive Grant Program which will promote digital inclusion projects undertaken by individual organizations and local communities
  • Provide $5 billion for the rapid deployment of home internet service or mobile hotspots for students with a home Internet connection.

This bill also guarantees the right of local governments, public-private partnerships, and cooperatives to deliver broadband service – which would seemingly override the barriers in place today in 21 states that block municipal broadband and the remaining states that don’t allow electric cooperatives to be ISPs.

This and the other bills have some downsides. The biggest downside is the use of a reverse auction.  There are two big problems with reverse auctions that the FCC doesn’t seem to want to acknowledge. First, a reverse auction requires the FCC to predetermine the areas that are eligible for grants – and that means relying on their lousy data. Just this month I was working with three different rural counties where the FCC records show the entire county has good broadband because of over-reporting of speeds by a wireless ISP. In one county, a WISP claimed countywide availability of 300 Mbps broadband. In another county a WISP claimed countywide coverage of 100 Mbps symmetrical broadband coverage, when their closest transmitter was a county and several mountain ranges away. Until these kinds of mapping issues are fixed, any FCC auctions are going to leave out a lot of areas that should be eligible for grants. The people living in these areas should not suffer due to poor FCC data collection.

Second, there are not enough shovel ready projects ready to chase $80 billion in grant funding. If there is no decent ISP ready to build in a predetermined area, the funding is likely to revert to a satellite provider, like happened when Viasat was one of the largest winners in the CAF II reverse auction. The FCC also recently opened the door to allowing rural DSL into the upcoming RDOF grant – a likely giveaway to the big incumbent telcos.

This particular bill has a lot of focus on affordability, and I am a huge fan of getting broadband to everybody. But policymakers have to know that this comes at a cost. If a grant recipient is going to offer affordable prices and even lower prices for low-income households then the amount of grant funding for a given project has to be higher than what we saw with RDOF. There also has to be some kind of permanent funding in place if ISPs are to provide discounts of $50 to $75 for low-income households – that’s not sustainable out of an ISP revenue stream.

The idea of creating huge numbers of rural open-access networks is also an interesting one. The big problem with this concept is that there are many places in the country where there a few, or even no local ISPs. Is it an open-access network if only one, or even no ISPs show up to compete on a rural network?

Another problem with awarding this much money all at once is that there are not enough good construction companies to build this many broadband rural networks in a hurry. In today’s environment that kind of construction spending would superheat the market and would drive up the cost of construction labor by 30-50%. It would be just as hard to find good engineers and good construction managers in an overheated market – $80 billion is a lot of construction projects.

Don’t take my negative comments to mean I am against massive funding for rural broadband. But if we do it poorly a lot of the money might as well just be poured into a ditch. This much money used wisely could solve a giant portion of the rural broadband problem. But done poorly and many rural communities with poor broadband probably won’t get a solution. Congress has the right idea, but I hope that they don’t dictate how to disperse the money without talking first to rural industry experts, or this will be another federal program with huge amounts of wasted and poorly spent money.

Free the Fiber Now

A few blogs ago I mentioned that the FCC had taken away restrictions to allow broadband supplied by E-Rate funding to be used to provide free WiFi for the public. That’s a good idea that will provide some relief for areas with little or no other broadband. But the announcement raises a more fundamental question – why was such a restriction in place to begin with?

I see such restrictions all of the time where broadband infrastructure that is built with public dollars cannot be used for commercial purposes, or in the case of school bandwidth, can’t even be used to distribute broadband to the public for free.

The first time I ran across this was over twenty years ago when I was working with a city in Virginia that wanted to build a backbone fiber to connect city buildings, but also to connect to a few business districts that had lousy broadband. The city had a fairly robust fiber network that was used to control streetlights and there was enough spare fiber in this network to provide a significant portion of the needed solution. Upon investigation, it turns out that about one-fourth of that fiber had been funding through a grant from the state highway department that came with a clear prohibition from using the fiber for any other purpose other than traffic control. The city attorney read that grant prohibition to even mean the city couldn’t use the fiber to connect city buildings, let alone run the fiber to a business district. And this was after the city had paid for most of the fiber out of local tax dollars. The city would have been far better off financially had it never taken the highway grant.

This happens all of the time. I’ve seen similar restrictions on fiber networks built to reach schools. There are often similar restrictions on fiber built to connect public buildings. Some states have laws that prohibit fiber built by a municipal electric or water utility to be used for any other purposes.

There are other fibers funded 100% by taxpayer dollars that are also off-limits for other purposes. For example, there was a lot of middle-mile fiber built as part of the $11 billion CAF II program that was given to the large telcos. The fiber was built as middle-mile fiber to reach DSL huts and cellular towers. None of that fiber was made available to anybody else, although the fiber was funded by federal money and most of the fiber sits unused today.

There are a few reasons such restrictions exist. In the case of the Virginia city, after a lot of investigation, we figured out that Comcast and Verizon had lobbied to restrict the use of state-funded fiber. The restriction wasn’t from a specific law in this case but had been written into state grant awards. In some cases such restrictions are written in state law, which likely is also due to lobbying by the big telcos and cable companies. We’ve found a few restrictions against using government-funded fiber that seem to come from bureaucrats who simply invented the rules without understanding the long-term ramifications.

The COVID-19 pandemic has shown us that all of these restrictions must go. Government-funded fiber ought to be made available to ISPs, cities or others that want to use it to solve the digital divide. It’s ridiculous for the country to be sitting on huge amounts of empty fiber due to stupid political restrictions or boneheaded bureaucratic decisions at a time when people don’t have broadband in their homes.

The only way to fix this is in Congress. They could write and a pass a short simple bill that would remove all restrictions against using fiber funding by the government. The federal law should override contracts, state laws, and any restrictions created by state or federal agencies. The FCC sadly can’t consider this kind of ruling since they have written themselves almost completely out of the broadband regulation business. Since the FCC killed its own regulatory powers, a federal law should give the power to state regulatory commissions to work out any details.

I run into people all of the time who are upset because they live close to fiber but have no broadband. They get doubly mad when they find out that the fiber was funded by their tax dollars to provide broadband to highway signs or to serve a nearby school. A new law won’t automatically bring relief to everybody who lives near fiber because you shouldn’t cut into a long-haul fiber anywhere except existing access points. However, there is a huge amount of government-funded fiber in the world and this one simple change would unleash ISPs to find many more last-mile solutions.

The Government Needs to Address the Homework Gap

I’ve been at a bit of a loss over the last few days on what to write about, because suddenly newspapers, blogs, and social media are full of stories of how impossible it is for some students to work at home during the Covid-19 shutdowns. I’ve been writing this topic for years and there doesn’t seem to be a lot I can add right now – because the endless testimonials from students and families struggling with the issue speak louder than anything I can say.

There have been some tiny reactions of the federal government to help solve the issue. For example, the FCC removed the E-Rate exemption that said that government-powered broadband couldn’t be used for the general public. This allowed schools and libraries to aim their broadband outside for the general public and for students trying to keep up with homework. This was always a stupid restriction and I hope whatever DC bureaucrat originally dreamed this up is forced to use satellite broadband for the next year.

I’ve also seen notices from small ISPs that are distributing WiFi hotspots to students that need them. That is a great idea and I totally support. What I haven’t seen is anybody talking about who is going to pay the cellular data bills on those hotspots when they come due. Verizon has halped a little by temporarily adding 15 GB of usage to its data plans, but it doesn’t take long to rack up a big cellular data bill working on a hotspot.

These fixes are temporary bandaids. I’m sure any students benefiting by these recent changes are grateful. But it’s still second-class broadband that makes families park in cars while kids do homework. And as much as cellular hotspots are a great solution that brings broadband to the home – it’s also a curse if this brings monthly broadband bills of hundreds of dollars per month just to do homework.

I’m sure that most school systems will somehow slog through the rest of this school year. However, I’ve talked to several rural school administrators in the last week who worry that half of the children working at home are learning little or nothing while at home. I’ve seen school systems already asking if they should push all students to the next grade this year, whether they are ready or not.

The big challenge is going to come if this crisis carries forward into the next school year starting this fall. I doubt that there are many school systems with rural students that are ready to face this for a whole school year. Let’s hope that doesn’t happen, but if it does then our lack of broadband for students becomes a national shame.

I don’t have many suggested quick solutions that will help the homework gap by the fall. It’s hard to even predict how much fiber construction will be done this summer due to social distancing – likely less than was planned.

One might hope that communities will install many more outdoor-facing hotspots. It would be nice to see these at every government building and at socially-minded businesses everywhere. This is a fix that is within the reach of every community. Any business that has broadband ought to consider sharing it during the times of the day or night when the business isn’t using it. Let’s turn all parking lots for towns of all sizes into WiFi zones.

It would also be nice if the FCC could somehow turn up the pressure on the wireless carriers to provide fixed cellular broadband. This is the technology used by AT&T that beams data using cellular frequencies from cell sites to small dishes at homes. This provides a better indoor signal than regular cellular service, and the cellular companies price this more like a broadband service than cellular service. AT&T has halfheartedly rolled out the product as a way to implement their CAF II obligations – but the word from rural areas is that it’s not marketed and nearly impossible for customers to buy. T-Mobile promised to roll this product out in every rural market as part of the agreement to merge with Sprint and the government needs to hold their feet to the fire to make this happen quickly this year.

Unfortunately, the FCC sabotaged their ability to push for better broadband solutions when they killed Title II authority and stopped regulating broadband. The solution we really need this year is for Congress to resolve the Title II issue once and for all and to make the FCC responsible for finding broadband solutions. Right now everything the FCC says on the topic is rhetoric because they have no power to compel ISPs to do anything. This is no time for politics and rhetoric, but a time for action.

Congress Ignores Rural Broadband

One of the biggest topics in rural America right now is the inability of employees to work from home and students to stay connected to schools from home due to the lack of broadband. Rural homes have struggled with poor broadband for many years, but the Covid-19 pandemic has brought the issue into a focus as rural residents are told to shelter in place, but don’t have the broadband needed to stay employed or to keep up with schoolwork.

I expected Congress to tackle this issue to some significant extent in the stimulus package that was just passed. However, the level of funding for broadband is disappointingly small in terms of finding any meaningful broadband solutions. The Senate bill contains the following:

  • $25 million to the RUS Distance Learning, Telemedicine & Broadband Program for the ‘‘Distance Learning, Telemedicine, and Broadband Program” (page 617).
  • $100 million for the USDA Reconnect program. This is a grant program administered by the USDA that provides grants and loans for bringing broadband to areas where at last 90% of households don’t have access to broadband of at least 10/1 Mbps. The money is to be prioritized to previous recipients of this grant (pages 622/623)
  • $50 million to the Institute of Museum and Library Services to prevent, prepare for, and respond to the coronavirus, including grants to States, territories, and tribes to expand digital network access (page 773).
  • Secretary of Veterans Affairs may enter into short-term agreements with telecommunications companies to provide temporary, fixed or mobile broadband service to provide mental health services to isolated veterans (page 807).

There is no such thing as bad grant money that brings better broadband, and all of the above allocations are welcome. However, none of this money is going to make more than a miniscule dent in the rural broadband issue. The only award that is likely to construct new broadband facilities is the $100 million for the ReConnect grant program. I’ve seen estimates over the years that it will take $100 billion to bring fiber to everybody in rural America. While a $100 million grant program might sound huge, if the need is $100 billion, then Congress just allocated one-tenths of one percent (0.1%) of the money needed to solve the rural broadband issue. It would take 1,000 years of grants at that level to bring fiber broadband to rural America.

Don’t get me wrong – the ReConnect grants have been going to independent telcos, electric cooperatives, and independent ISPs and any ISP that gets this extra money will be glad to get it. But when we map out the areas covered by this extra money you won’t be able to see it on a map of the US.

I think Congress is misreading rural America. My consulting firm does surveys and interviews in rural America and we have continued to do this during the pandemic. Rural America is pissed. They aren’t annoyed, they aren’t just sore – they are fuming mad that the government has been ignoring them for a decade by not bringing them broadband. They are mad at everybody – local politicians, state politicians, and federal politicians. Broadband isn’t a partisan issue, and I’m getting the sense that folks without broadband are ready to vote out anybody who is not bringing them a broadband solution, regardless of party.

You can’t blame them for being mad. One of the counties I’m working with right now is typical of much of rural America. We’ve done speed tests across the county and found almost nobody getting speeds faster than 5 Mbps, with many getting only a fraction of that. These homes mostly have DSL or fixed wireless broadband. These slow speeds are for the homes that can get at least some broadband – many homes have nothing. A large percentage of residents have tried satellite broadband and found it to be worthless. That’s understandable since we’re seeing latency of 700 to 900 milliseconds for satellite households – too much latency to connect to a corporate server or to connect to a school for remote classes or to do homework.

Almost every home we talk to has a story about how a lack of broadband costs them money when they have to drive 30 minutes each way to sit outside for a WiFi connection so their kids can complete their homework. Residents tell us of the inability to work from home or to start a home-based business. These folks are frantic and angry now that they are cut off from their jobs and schools.

It’s impossible not to sympathize with these rural residents. I am sitting in an office with good broadband. Sheltering in place is, at worst, a hassle for my wife and me. We’re able to work all day and we’re able to spend as much time on the Internet as we want when we’re not working. But what about people who have lost their paycheck because they are unable to work from home? What about students who feel they are losing a school year and are fearful they’ll have to repeat a grade? I find it impossible to believe that members of Congress aren’t hearing these same stories and I can’t understand how Congress ignored the millions of Americans without broadband in the stimulus plan.

Congress Mandates Cable TV Pricing Disclosure

In a surprise move by Congress, the recent appropriations bill that funds the government through September 2020 includes a new law that mandates that cable companies tell their customers the truth about cable pricing. Labeled as the Television Viewer Protection Act of 2019 the bipartisan law places new requirements on companies selling cable TV.

The bill was originally sponsored by Representative Mike Doyle (D-PA). In the original version of the bill, the cable providers had to advertise the full monthly cost of service. Full cost meant including such things as hidden fees, equipment charges, and any taxes or surcharges added to a cable bill. The bill also requires disclosure about the details of any promotional pricing and cable companies should make it clear when the promotion ends.

That final version of the law softened the disclosure requirement and cable companies can still promote deceptive special pricing. However, a cable provider must notify customers buying a new plan within 24-hours “by phone, in person, online, or by other reasonable means” of the full cost of buying the service. Customers then have 24-hours from the time the cable company sends the notice to cancel service with no penalty. The cynic in me believes that cable companies will find ways to meet the law and still be deceptive – such as putting the pricing notice at the end of a long email message that customers aren’t likely to read. However, if cable providers follow the spirit of the law, it should end the practice of customers seeing bills that are much higher than what they expect. Another provision of the new law is that cable providers can no longer charge for equipment they don’t provide – something that Frontier was accused of during the last year.

Interestingly, the law only affects cable TV pricing and not pricing for broadband or telephone service. I hope the cable companies don’t somehow shift hidden fees to these other services. The law also seems to ignore the fact that a majority of traditional cable customers buy a bundle of multiple services. The cable companies have never come clean with customers about how bundling discounts work, leaving the companies with the flexibility to penalize customers for withdrawing any one of the bundled services. I suspect the cable companies will somehow not come clean about bundling prices for cable TV, even with this new law.

The bill gives cable companies six months to implement the new practices. Oddly, the bill also allows the FCC to extend the starting date up to six additional months. It’s hard to picture any reason for the FCC to extend the deadline other than kowtowing to the cable companies.

From a consumer perspective, this law is long overdue. For the last five years, the cable companies have disguised much of their rate increases by folding them into hidden fees rather than into advertised rates. A few months ago, Consumer Reports reported that the hidden fees for the big cable companies range from $22.96 monthly for AT&T U-verse to $43.79 for Verizon FiOS.

The timing of this new law is interesting from a market perspective. We’re now seeing cord-cutting at a record pace, and forcing the cable companies to be honest with customers is likely to accelerate cord cutting even more.

Smaller cable providers that compete against the big companies have always been torn about how to advertise their prices. Some match the practices of the big cable companies and have hidden fees and advertise deceptively low prices. Others have taken the high road and advertise the full price of service while pointing out that their competitor’s pricing is deceptive. These new rules make it easier for smaller cable companies to disclose their full prices and to challenge the big cable companies to do the same.

The new law also includes several other changes for the cable industry. The law allows the 5-year sunset provision that has allowed satellite TV providers to import distant local network stations for rural customers. The companies have always argued that the cost of negotiating with every local station across the country is astronomical and that they would allow network channels to go dark rather than seek deals with every local network affiliate in the country. I guess we’ll soon find out if that’s true when the satellite providers can no longer bring in network stations from out of the market. I would hope that a satellite provider that decides not to deliver network affiliates like ABC, CBS, FOX, or NBC will lower the price of the cable package to reflect undelivered channels.

Finally, the bill includes a requirement that local stations and programmers negotiate programming contracts in good faith. That’s an idea that has been bouncing around for a while in response to local stations negotiating in large groups instead of individually. In the last year, we have seen programming go dark at a record pace when stations and programmers are deadlocked in negotiations. We’ll have to wait a while to see if this stronger language gives the FCC any real leverage to end retransmission disputes.

A New National Broadband Plan?

Christopher Terry recently published an article for the Benton Institute that details how the National Broadband Plan has failed. This plan was initiated by Congress in 2009, which instructed the FCC to develop a plan to make sure that every American had access to broadband within a decade. The article details the many spectacular ways that the plan has failed.

In my opinion, the National Broadband Plan never had the slightest chance of success because it didn’t have any teeth. Congress authorized the creation of the plan as a way for politicians to show that they were pro-broadband. The plan wasn’t much more than a big showy public relations stunt. Congress makes symbolic votes all of the time and this was just another gesture that demonstrated that Congress cared about broadband and that also served to quiet broadband proponents for a few years. If Congress cared about broadband they would have followed up the plan with a vote to force the FCC to implement at least some aspects of the plan.

I have no doubt that those who worked to develop the plan are likely offended by my post-mortem of the effort. I know that several people who worked on the plan still prominently display that fact in their resume a decade later. I’m sure that working on the plan was an exhilarating process, but at the end of the day, the effort must be measured in terms of success. The folks that created the plan and the rest of the country were duped by the FCC.

The FCC never had the slightest interest in adopting the big recommendations of the plan. There is probably no better evidence of this when the Tom Wheeler FCC awarded $11 billion to the big telcos in the CAF II process – an award that couldn’t have been more antithetical to the National Broadband Plan. To those that follow FCC dockets, there are dozens of examples over the last decade where the FCC sided with big carriers instead of siding with better rural broadband.

The fact is that the US government doesn’t do well with grandiose plans and lofty long-term goals. Government agencies like the FCC mostly implement things that are mandated by Congress – and even then they often do the bare minimum. Even without the National Broadband Plan, the FCC already has a Congressional mandate to make certain that rural broadband is equivalent to urban broadband – and we annually see them do a song and dance to show how they are complying with this mandate while they instead largely ignore it.

This is not to say that broadband plans are generically bad. For example, the state of Minnesota developed its own set of broadband goals, with the most prominent goal of defining broadband in the state as connections of at least 100 Mbps. The state has implemented that goal when awarding broadband grants, and unlike the FCC, the state has awarded grant funding to build real rural broadband solutions. They’ve refused to spend money on technologies that deliver speeds that the state doesn’t consider as broadband.

I fully expect to hear a plea to develop a new plan and I hope that most of the folks who are working for better broadband ignore any such effort. Compared to ten years ago there are now a lot of organizations working for better broadband. Hundreds of rural communities have created citizen broadband committees looking for a local solution. There are county governments all over the country making grants to help lure ISPs to serve their county. Statewide groups are working to solve the digital divide and the homework gap. There are a lot of people actively advocating for real broadband solutions.

These advocates don’t need a national goal document to tell them what they want. By now, communities understand good broadband in the simplest form – it’s something their community either has or doesn’t have. Communities now understand the digital divide and the homework gap. Wasting federal dollars to create a new National Broadband Plan wouldn’t move any community one inch closer to better broadband, and I hope we resist the temptation to go down that path.

Killing Net Neutrality Again?

The current FCC repealed the net neutrality rules earlier this year, with that repeal going into effect last month. In a move that is a head-scratcher, the Department of Justice recently filed a petition with the Supreme Court asking them to squash a lower court ruling in favor of net neutrality.

The original net neutrality rules were implemented by the FCC in 2015. The FCC’s order relied upon the use of Title II regulations as their authority to pass those rules. AT&T and other opponents of the ruling immediately appealed the FCC’s action, and in 2016 the DC Circuit Court of Appeals ruled that the FCC had the authority to invoke Title II. The same opponents of net neutrality appealed that decision to the whole Circuit Court, and in 2017 the court refused to take the case, thus upholding the 2016 decision.

The Department of Justice is now asking the Supreme Court to overturn the 2016 order that upheld net neutrality. It’s an unusual request because net neutrality has already been repealed by the FCC, so it seems like the issue is moot.

Nobody is sure about the reason for this filing, because neither action or inaction by the Supreme Court would realistically change anything. The Department of Justice argues that it is cleaning up loose legal ends. Proponents of net neutrality say that it’s an action to make it more difficult for a future FCC to reinstate net neutrality. They say that the administration is trying to kill a precedent that could be used by a future administration to reinstate net neutrality.

What’s most interesting about the whole net neutrality fight is that both the past and current FCC have had to get creative to first pass the net neutrality rules, and then to repeal them. What’s been missing in this fight is a Congress willing to vote on the issue, because legislation would put the issue to rest. The messy court battles over net neutrality for the last decade are all due to a Congress that won’t weigh in on the issue.

The FCC is mandated to follow the direction of Congress. It seems unlikely that net neutrality is ever going to come up for a vote in Congress. Polls have shown huge public support for net neutrality with various polls over the last few years showing support between 76% and 85%. Nobody in the GOP wants to go on record as opposing the issue.

We are badly in need of a new Telecom Act. Many of the rules that govern the FCC are far out of date. We need to fix cable rules that are massively out of synch with a world of on-line content. We need updated privacy laws that deal with current technology. And we need to know definitively if Congress thinks that we should or shouldn’t regulate some aspects of broadband.

But we’re not likely to get a new Telecom Act to a vote since net neutrality is going to get dragged into any discussion of new regulations. That means we’re likely to see the FCC continue to deal with current issues for which they have no direction of basis of action. That can only result in an FCC that grows gradually weaker and ineffective in its ability to tackle the communications issues that we need to face.

What we don’t need is a government that is looking backwards and wasting legal resources to kill a court order for an issue that has already been decided by the current FCC. This is one of the dumbest and most wasteful court actions I’ve ever seen in the industry. We don’t need to fill the over-busy courts with frivolous lawsuits – we need a Congress and an FCC to together tackle the current pressing issues in the industry.

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.