Another Spectrum Battle

Back in July the FCC issued a Notice of Proposed Rulemaking seeking comments for opening up spectrum from 3.7 GHz to 4.2 GHz, known as the C-Band. As is happening with every block of usable spectrum, there is a growing tug-of-war between using this spectrum for 5G or using it for rural broadband.

This C-Band spectrum has traditionally been used to transit signals from satellites back to earth stations. Today it’s in use by every cable company that receives cable TV signals at a ‘big-dish’ satellite farm. The spectrum had much wider use in the past when it was used to deliver signal directly to customers using the giant 7 – 10 foot dishes you used to see in rural backyards.

This spectrum is valuable for either cellular data or for point-to-multipoint rural radio broadband systems. The spectrum sits in the middle between the 2.4 GHz and the 5.8 GHz used today for delivering most rural broadband. The spectrum is particularly attractive because of the size of the block, at 500 megahertz.

When the FCC released the NPRM, the four big satellite companies – Intelsat, SES, Eutelsat and Telesat – created the C-Band Alliance. They’ve suggested that some of their current use of this spectrum could be moved elsewhere. But where it’s not easy to move the spectrum, the group volunteered to be the clearing house to coordinate the use of C-Band for other purposes so that it won’t interfere with satellite use. The Alliance suggests that this might require curtailing full use of the spectrum near some satellite farms, but largely they think the spectrum can be freed for full use in most places. Their offer is seen as a way to convince the FCC to not force satellite companies completely out of the spectrum block.

I note that we are nearing a day when the need for the big satellite earth stations to receive TV might become obsolete. For example, we see AT&T delivering TV signal nationwide on fiber using only two headends and satellite farms. If all TV stations and all satellite farm locations were connected by fiber these signals could be delivered terrestrially. I also note this is not the spectrum used by DirecTV and Dish networks to connect to subscribers – they use the K-band at 12-18 GHz.

A group calling itself the Broadband Access Coalition (BAC) is asking the FCC to set aside the upper 300 megahertz from the band for use for rural broadband. This group is comprised of advocates for rural wireless broadband, including Baicells Technologies, Cambium Networks, Rise Broadband, Public Knowledge, the Open Technology Institute at New America, and others. The BAC proposal asks for frequency sharing that would allow for the spectrum to be used for both 5G and also for rural broadband using smart radios and databases to coordinate use.

Both the satellite providers and the 5G companies oppose the BAC idea. The satellite providers argue that it’s too complicated to share bandwidth and they fear interference with satellite farms. The 5G companies want the whole band of spectrum and tout the advantages this will bring to 5G. They’d also like to see the spectrum go to auction and dangle the prospect for the FCC to collect $20 billion or more from an auction.

The FCC has it within their power to accommodate rural broadband as they deal with this block of spectrum. However, recent history with other spectrum bands shows the FCC to have a major bias towards the promise of 5G and towards raising money through auctions – which allocates frequency to a handful of the biggest names in the industry.

The BAC proposal is to set aside part of the spectrum for rural broadband while leaving the whole spectrum available to 5G on a shared and coordinated basis. We know that in real life the big majority of all ‘5G spectrum’ is not going to be deployed in rural America. The 5G providers legitimately need a huge amount of spectrum in urban areas if they are to accomplish everything they’ve touted for 5G. But in rural areas most bands of spectrum will sit idle because the spectrum owners won’t have an economic use for deploying in areas of low density.

The BAC proposal is an interesting mechanism that would free up C-Band in areas where there is no other use of the spectrum while still fully accommodating 5G where it’s deployed. That’s the kind of creating thinking we need to see implemented.

The FCC keeps publicly saying that one of its primary goals is to improve rural broadband – as I wrote in a blog last week, that’s part of their primary stated goals for the next five years. This spectrum could be of huge value for point-to-multipoint rural radio systems and would be another way to boost rural broadband speeds. The FCC has it within their power to use the C-Band spectrum for both 5G and for rural broadband – both uses can be accommodated. My bet, sadly, is that this will be another giveaway to the big cellular companies.

The New e-Connectivity Pilot Grants

In March Congress passed a new $600 million grant/loan program to build rural broadband. The project has been labeled as the e-Connectivity Pilot and it’s expected that the specific rules for seeking the funding will be released early on 2019. The USDA sought public comments on the program in September and is now working out the details of how the awards will be made.

Anybody interested in these grants should get serious about it now, since it’s likely that the grant application window might not be any longer than 60 to 90 days. Getting ready means having a detailed and solid business plan as well as already having a source of funding for any parts of a project not covered by these grants. The grants are also likely to include provisions like getting a professional engineer to approve the network design – so designs need to be specific and not generic. It’s likely that the USDA will stick with their existing grant application process – and those forms have always been a bear to complete.

There is one huge hurdle to overcome for this program since an application can’t cover an area that has more than 10% of households with access to broadband speeds of at least 10/1 Mbps. Considering that the CAF II awards and more recent CAF II reverse auctions awards already will supposedly provide this kind of speed to huge swaths of the country, there are not a lot of areas left that will meet this requirement.

Claiming that an area meets the 90% unserved threshold will be also be difficult because grant applications can be challenged by carriers that serves the grant area today. I have to assume that CAF II reverse auction winners will also be able to challenge. The big rub is that the original CAF II award winners still have until 2020 to complete their build-out and they will certainly challenge awards for any CAF II area that has not yet been updated. The CAF II reverse auction winners have ten more years to complete their buildout. The USDA will likely be obligated to reject an application that encroaches on any of the CAF II footprint – even if those areas don’t have broadband today.

This gets even more complicated since the CAF II reverse auction awarded funding to fixed wireless and satellite providers. They were funded to serve specific little pockets of unserved homes, but it won’t be hard for them to claim that the CAF II award dollars will allow them to serve much larger areas than the tiny boundaries they bid on.

The process of proving a study area isn’t served will be further complicated by the USDA’s reliance on the FCC’s broadband maps, which we all know to be highly inaccurate in rural America. This all adds up to mean that an applicant needs to prove the area doesn’t have broadband today and will not be getting it over the next decade from one of the CAF winners. They will also need to overcome any errors in the FCC maps. This is going to be hard to prove. I expect the challenge process to be brutal.

From the instant I saw the 90% unserved test, I’ve assumed that the most likely candidates for these grants will be somebody that is already planning on building broadband across a large footprint. If such an applicant is careful to only identify the scattered homes that meet these grant rules, then this funding can help to pay for a project they were going to build anyway. The other natural set of applicants might be those companies that already took CAF II funding – they could use these grants to fill in unserved homes around those build-out areas. The industry is going to be in an uproar if a lot of this funding goes to the big incumbent telcos (who won’t challenge their own applications).

Another issue to consider is that the USDA can award funding as a combination of grants and loans. These awards will surely require matching funding from an applicant. Anybody that is already planning on funding that matching with bank or other financing might find it impossible to accept USDA loans for a portion of a project. USDA loan covenants are draconian – for example, USDA loans usually require first priority for a default, which will conflict with commercial lenders. It’s always been nearly impossible to marry USDA debt with other debt.

rant applicants should also be aware that the USDA is going to be highly leery of awarding money to start-ups or somebody that is not already an ISP. The agency got burned on such grants awarded with the stimulus grants and has indicated that they are looking for grant award winners to have a strong balance sheet and a track record of being an ISP. This will make it nearly impossible for local governments to go after the money on their own. Chances of winning will be greatly enhanced by public/private partnerships with an existing ISP.

I know my take on the grants sound highly pessimistic. Congress saddled these grants with the 90% unserved test at the coaxing of the big telcos who wanted to make sure these funds weren’t used to compete against them. Past USDA grants had the opposite requirement and could consider awards to areas that didn’t have more than 10% of houses with broadband. However, if you are able to identify a service area that can survive the challenge process, and if you have the matching funded lined up, these grants can provide some nice funding. I’m not taking any bets, though, on the USDA’s ability to award all of the money – there might not be enough grant applications that can make it through the gauntlet.

Fighting Spoofing

One of the biggest problems with the telephone network today is spoofing – where robocalls are generated using stolen numbers to mask the identity of the caller. Spoofing and robocalls are the biggest source of complaints to the FCC and NANC (the North American Numbering Council) reports that in 2016 there were 2.4 billion robocalls per month – a number that has surely grown. As recently as a year ago I rarely got robocalls on my cellphone but now get half a dozen per day.

The FCC called upon NANC to find a solution to the problem. NANC used the Call Authentication Trust Anchor Working Group to find a solution to the problem. In May of this year the FCC accepted the recommendations of this group to implement a ‘taken’ system to authenticate that calling numbers are authentic.  Last week Chairman Ajit Pai asked the industry to speed up implementation of the solution, warning that the FCC would issue an order to do so if the industry didn’t solve the problem quickly.

The proposed solution involves a new process used to authenticate the originating telephone number for calls. The concept is to issue ‘tokens’ to carriers that allow them to authenticate, in real-time, that the originating number of a telephone call is really from the party that owns the number. This will mean a whole new overlay on the PSTN to make this validation quickly before a call is terminated.

In addition to developing the specifications for how the process will work, the NANC working group recommended the following industry process for making this work:

  • The industry needs to select a governance authority to take ownership of the process so that it’s implemented uniformly across the industry;
  • The working group also recommended that a policy administrator be chosen that will administer the day-to-day implementation of the new process;
  • The working group also recommended specific roles and responsibilities for the governance authority and policy administrator;
  • Set the goal to have those two entities in place within a year. I think the FCC Chairman’s frustration is due to the fact that this was recommended in May 2018 and I don’t think that the governance authority or policy administrator have been chosen.

Of course, this means a new industry protocol and process and comes with a slew of new acronyms. Primary among this is SHAKEN which represents new SIP protocols used specifically for purpose of creating the all authentication tokens. Also used is STIR (secure telephone identity revisited) which is the IETF group that created the specific protocols for telephony. This leads to the cute acronym SHAKEN/STIR which is being used to describe the whole process (and which would definitely not be approved by James Bond).

The working specifications recognize that what is being prepared is just the first step in the process. They understand that as soon as they implement any solution that spammers will instantly begin looking for workarounds. The initial concept is to first begin be implementing this with the largest carriers and that will still leave a lot of holes with numbers assigned to smaller carriers, numbers deep inside PBX trunk groups, numbers used for Internet calling like Skype. However, the goal is to eventually cover the whole industry.

The concept is that this is going to have to be a dynamic process. I envision it much like the software companies that build spam filters. The group making this work will have to constantly create patches to fix vulnerabilities used by spammers. I have my doubts that anything like this will ever fully stop spoofing and that spammers will always be one step ahead of the spoofing police.

This is a concern for small carriers because it sounds like something new that a voice provider is going to have to pay for. It’s likely that there will be vendors that can do this for small carriers, but that sounds like another check to write to be able to provide voice service.

Can You Trust Your Small ISP?

FCC Commissioner Michael O’Rielly recently made a speech at the Media Institute “Free Speech America” Gala in which he made some serious allegations against municipal broadband. From that speech:

In addition to creating competitive distortions and misdirecting scarce resources that should go to bringing broadband to the truly unserved areas, municipal broadband networks have engaged in significant First Amendment mischief. As Professor Enrique Armijo of the Elon University School of Law has shown in his research, municipalities such as Chattanooga, Tennessee, and Wilson, North Carolina, have been notorious for their use of speech codes in the terms of service of state-owned networks, prohibiting users from transmitting content that falls into amorphous categories like “hateful” or “threatening.” These content-based restrictions, implicating protected categories of speech, would never pass muster under strict scrutiny. In addition to conditioning network use upon waiver of the user’s First Amendment rights, these terms are practically impossible to interpret objectively, and are inherently up to the whim of a bureaucrat’s discretion. How frightening.

Let me address the three allegations he’s made against municipal broadband:

Municipalities create competitive distortion. The fact is that most US markets have almost no real competition – they instead have weak competition between a cable company and telco. O’Rielly is repeating a familiar talking point of the big ISPs who don’t want any competition. Customers love real competition whether it comes from a municipal provider or from a fiber overbuilder.  Consumer Reports recently listed the Chattanooga municipal ISP cited by O’Rielly as the ISP with the highest customer satisfaction in the country. I think what O’Rielly and the big ISPs call market distortion, consumers would call real competition.

Municipalities misdirect needed investments from unserved areas.. This is a particularly ironic statement. Wilson, Greenlight used those ‘scarce resources’ to build fiber to the nearby tiny unserved town of Pinetops, NC. Anti-municipal legislation in in North Carolina first required that Wilson not bill outside of their city boundaries. That same legislation then forced Wilson to sell or abandon the network when Suddenlink decided by build in the town.

Anybody who knows the industry knows that the big ISPs are not investing a single nickel of their own money in rural broadband. The big ISPs have been willing to spend the FCC’s tax money to implement 10/1 Mbps broadband from the CAF II program, but otherwise they don’t care a whit about the unserved areas of the country. I’m really not sure who Commissioner O’Rielly thinks will invest in rural America if the FCC precludes rural towns, counties and townships from solving their local lack of broadband.

Municipalities restrict First Amendment rights of customers. This allegation is almost too ridiculous to respond to. Take the example of Wilson, North Carolina, who the Commissioner singled out. The wording of the Wilson terms of service are nearly identical to the terms of service from Charter, the largest ISP in the region. I’ve not done the same comparison for Chattanooga, but I’ve done so for around twenty other municipal ISPs and they all typically mimic the terms of service of their commercial competitors.

A have a lot of clients that are municipal fiber providers, fiber overbuilders and small telcos. I can’t think of one example over the last decade when one of my clients unilaterally shut down a customer for things they’ve said on the web. They mimic the terms of service from the big ISPs, because all ISPs are occasionally asked by law enforcement to shut down a user who is harassing somebody or otherwise engaging in nefarious, illegal or other bad practices on the web. The terms of service give the ISPs the cover to disconnect customers under such circumstances.

Commissioner O’Rielly has it backwards and it’s the big ISPs that daily violate the trust of their customers. Small ISPs don’t use deep packet inspection to read emails or messaging. Small ISPs don’t record and then sell or use customer web search history. Small ISPs don’t track what their customers do on the web. Smalll ISPs don’t monetize their customer’s data.

Commissioner O’Rielly ought to talk with some customers of the two ISPs he’s singled out. Those customers will tell them that they trust their local municipal ISP far more than they trust Comcast or Charter or AT&T. The Commissioner’s talking points come straight from the big ISP lobbyists and he further supports his position by citing a discredited whitepaper paid for by the big ISPs. If the Commissioner spent more time outside the Beltway he’d find out that people love and trust their small ISPs – be that a municipality, a fiber overbuilder or a small telco.

The FCC’s Strategic Plan

In one of those quiet things that the FCC does behind the scenes, the FCC has created a strategic plan for the four years from October 2018 to October 2022. This strategic plan represents their official goals that they report to Congress. This plan also supposedly is how they judge their performance internally. The Strategic Plan has four primary goals:

Strategic Goal 1: Closing the Digital Divide. Develop a regulatory environment to encourage the private sector to build, maintain, and upgrade next- generation networks so that the benefits of advanced communications services are available to all Americans. Where the business case for infrastructure investment doesn’t exist, employ effective and efficient means to facilitate deployment and access to affordable broadband in all areas of the country.

 Strategic Goal 2: Promoting Innovation. Foster a competitive, dynamic, and innovative market for communications services through policies that promote the introduction of new technologies and services. Ensure that the FCC’s actions and regulations reflect the realities of the current marketplace, promote entrepreneurship, expand economic opportunity, and remove barriers to entry and investment.

 Strategic Goal 3: Protecting Consumers & Public Safety. Develop policies that promote the public interest by providing consumers with freedom from unwanted and intrusive communications, improving the quality of communications services available to those with disabilities, and protecting public safety.

 Strategic Goal 4: Reforming the FCC’s Processes. Modernize and streamline the FCC’s operations and programs to increase transparency, improve decision-making, build consensus, reduce regulatory burdens, and simplify the public’s interactions with the agency.

Within each goal there are more specific targeted objectives. For example, the goal for Closing the Digital Divide includes more specific goals like: adopt pro-competitive rules that will expand facility-based competition; ensure that broadband is built everywhere; use reverse auctions to efficiently award USF grants; remove regulatory barriers to next generation technology; develop industry best practices; foster participation in the market by non-traditional participants; free up spectrum to help eliminate the digital divide; continue to free up spectrum in the 600 MHz band; and, conduct timely spectrum licensing.

The period covered by these goals is already barely underway, and yet it’s already interesting to see how the FCC is performing against some of these goals. For example, the first Digital Divide goal is to provide a regulatory environment to promote broadband. This FCC has already tried to walk completely away from regulating broadband, and I have to suppose that they believe the best way to meet this goal is to have no regulations. However, it’s sophistry to claim that lack of regulation is the same thing as a ‘regulatory environment’.

I can think of a number of regulations that would help to foster competition. For example, regulations that curtail monopoly abuses by big ISPs help smaller carriers. Allowing small ISPs to continue to use unbundled copper loops fosters competition (something the FCC wants to end). Making Lifeline funds available to all ISPs fosters competition. Allowing rural carriers to use idle spectrum would foster competition. Many of the actions taken or being considered by this FCC seem to favor large ISPs rather than foster competition. I’m guessing that the giveaways to the big ISPs are covered in the ‘promoting innovation’ goal.

You can make similar observations about many of their goals. For instance, this FCC seems to be antagonistic towards municipal broadband, which makes it hard to meet their goal of fostering participation by non-traditional participants.

I have no doubt that the FCC will claim that they are meeting every goal in the Strategic Plan. The goals are high-level and they are likely to be able to self-grade themselves as successfully meeting each goal. I coach clients on setting goals and I tell them they can’t have soft goals like “bring broadband to more customers in the coming year’. For a goal to have any meaning it has to be far more specific, such as “add 2,000 new broadband customers in the next calendar year”. The FCC’s goals are so nebulous that they can almost do the opposite of the goals and still claim to meet many of them.

About the FCC

I have probably averaged a blog a week over the years talking in some manner about the FCC. I thought today I’d discuss a few basic facts about the industry that might help a non-regulatory person understand how they operate.

The FCC’s mission statement is straightforward – the stated mission of the FCC is to ensure that the American people have available—at reasonable cost and without discrimination—rapid, efficient, nation- and worldwide communication services, whether by radio, television, wire, satellite, or cable.

The FCC is an independent agency, meaning it’s not under the direct control of either Congress or the White House. With that said, each new administration gets to select at least a few FCC commissioners, but can’t have more than three of the five commissioners from the same party as the president.

Since 2009 the FCC has been funded through regulatory fees it collects from various industry sources such as annual licenses on cable TV providers, long distance providers, or owners of spectrum. The budget for the year just started on October 1 is $322 million. Starting this year, none of the monies collected from spectrum auctions can count towards the FCC’s budget. The Ray Baum Act that authorized the FCC earlier this year is the first FCC reauthorization bill since 1990. The agency could theoretically operate indefinitely without reauthorization as long as it generates enough fees to cover its budget.

The FCC has a lot of flexibility in determining how it will regulate the various industry. Their authority is only limited by specific rules established by Congress, such as the Communications Act of 1934 that created the FCC or the Telecommunications Act of 1996. Congressional bills that change FCC regulations are somewhat rare, but Congress may pass a number of bills in any year that change some specific aspect of operating the agency. In this past year there were bills that did such things as change the reporting requirements by educational broadcast stations, eliminated some obsolete reports that were prepared for Congress, and established the office of Inspector General at the FCC.

The FCC can establish new rules for regulating the various industries as long as those rules don’t conflict with past Congressional mandate. Many of the challenges that are filed against new FCC decisions question if the FCC’s actions are in conflict with the authority granted to the agency by Congress. The extent and limitations of the FCC’s authority has been defined over the years by a series of court decisions.

The FCC’s rules are encapsulated into seven sections, called ‘Titles’. The FCC rules that govern the telecom industry are included in a few of the Titles:

  • Title II regulates Common Carriers that include telephone companies, CLECs, wireless providers and long-haul fiber networks. Some of the regulation in Title II must be coordinated with a Joint Board, that includes both FCC and state regulators.
  • Title III regulates broadcasting of radio and television.
  • Title VI regulates cable TV communications, including Video programming provided by telephone companies.

The day-to-day functions of the FCC are carried out by 7 bureaus – the Consumer and Governmental Affairs Bureau, the Enforcement Bureau, the International Bureau, the Media Bureau, the Public Safety and Homeland Security Bureau, the Wireless Telecommunications Bureau and the Wireline Competition Bureau.

Most FCC rules are adopted using a process known as ‘notice and comment’ that are defined in Title I. The FCC will issue various forms of proposed rules and anybody in the public can comment.

The public is also free to file complaints to the FCC about actions by regulated companies that have harmed them. The FCC has a defined process for handling such complaints, and most are referred back to the offending regulated party with instructions to explain their actions of make amends if they acted incorrectly.

There is also a more formal process for regulated companies to make complaints against each other, or which seek resolution of industry disputes and the FCC has Administrative Judges that hear such complaints and make rulings or assess fines. Many of the ‘orders’ we see from the FCC, such as a whole series of rulings over the last few years about access charges, are actually rulings from Administrative Judges and not from the FCC Commissioners.

The FCC also has an Engineering and Technology bureau that advises the FCC on technical issues such as spectrum allocations. This group also authorizes the use of equipment, and most telecom equipment must be approved by the FCC before it can be introduced into the public networks. This group also can grant the use of experimental licenses to test new ideas in the field.

The Millimeter Wave Auctions

The FCC will soon hold the auction for two bands of millimeter wave spectrum. The auction for the 28 GHz spectrum, referred to as Auction 101, will begin on November 14 and will offer 3,072 licenses in the 27.5 to 28.35 GHz band. The auction for 24 GHz, referred to as Auction 102, will follow at the end of Auction 101 and will offer 2,909 licenses in the 24.25 to 24.45 GHz and the 24.75 to 25.25 GHz bands.

This is the spectrum that will support 5G high-bandwidth products. The most unusual aspect of this auction is that the FCC is offering much wider channels than ever before, making the spectrum particularly useful for broadband deployment and also for the frequency slicing needed to serve multiple customers. The Auction 101 includes two blocks of 425 MHz and is being auctioned by County. Auction 102 will include seven blocks of 100 MHz and will be auctioned by Partial Economic Areas (PEA). PEAs divide the country into 416 zones, grouped by economic interest. They vary from the gigantic PEA that encompasses all of the New York City and the surrounding areas in Connecticut and New Jersey to PEAs that are almost entirely rural.

That means that every part of the country could see as many as seven different license holders, assuming that somebody pursues all of the spectrum. It’s likely, though, that there will be rural areas where nobody buys the spectrum. It will be interesting to look at the maps when the auctions are done.

This is the spectrum that can be used to support the fixed wireless broadband like Verizon is now deploying from poles. The spectrum has the capability of delivering big bandwidth, but for relatively short distances of 1,000 feet or more. The spectrum can also be used as a focused beam to deliver several gigabits of bandwidth for a mile to a single point, such as what Webpass is currently doing to serve downtown high-rise apartment buildings.

The industry consensus is that this spectrum will find limited use in rural areas for now since it’s hard, with existing technology, to deploy a 5G transmitter site that might only reach a few potential customers.

The FCC has released the names of the companies that will be bidding in the auction. As expected the big cellular companies are there and AT&T, Verizon and T-Mobile are bidding. Absent is Sprint, but the speculation is that they are relying on the merger with T-Mobile and have elected to sit out the auction.

The big telcos are also in the auctions with AT&T, Verizon, Frontier and Windstream all participating. Absent is CenturyLink, which further strengthens the belief that they are no longer pursuing residential broadband.

The only cable company of any size in the auction is Cox Communications. The other big companies like Comcast, Charter, Altice and many others are sitting out the auction. It doesn’t make sense for a cable company to deploy the spectrum where they are already the incumbent broadband provider. Wireless technology for end users would complete directly with their own networks. Since Cox is privately held it’s hard to know their plans, but one use of the spectrum would be to expand in the areas surrounding their current footprint or to move into new markets. It’s costly to expand their hybrid-fiber networks and 5G wireless might be a cheaper way to move into new markets.

There are some rural companies that are bidding for spectrum. It’s hard to know if the rural telcos and cooperatives on the list want to use the spectrum to enhance broadband in their own footprint or if they want to use the spectrum to expand into larger nearby markets. One of the most interesting companies taking part in both auctions is US Cellular. They are the fifth largest cellular company after the big four and serve mostly rural markets. They’ve already made public announcements about upgrading to the most current version of 4G LTE and it will be interesting to see how they use this spectrum.

What’s Next for Rural Broadband?

Now that most of the CAF II money and A-CAM money has been awarded, what’s next for rural broadband? If you ask the FCC that question they are likely to answer that there might yet be one more CAF II auction to fund the 261,000 homes that went unclaimed in the last auction. However, I think this is a much bigger question.

There are still tens of millions of homes that don’t have a broadband option that meets the FCC’s current definition of 25/3 Mbps. That includes all of the places that were funded by the CAF II funds provided to the big telcos and that were only required to provide broadband with speeds of 10/1 Mbps. It also includes numerous other homes that don’t have fast broadband and that are mis-categorized by the inadequate FCC broadband maps that are populated falsely by the big ISPs.

One of CCG’s products is performing surveys and related market research in rural areas. We’ve done a lot of surveys and also asked people to take speed tests in rural communities where the actual speeds at homes are significantly lower than the advertised speeds and the speeds shown on the FCC maps. I’m not just talking about rural farms, but also in sizable towns like county seats where the broadband is still pretty crappy.

It’s obvious that this FCC is working hard to be able to claim that they have taken care of the rural broadband problem. They want to say that they’ve funded broadband everywhere and that their job is done. What they are never going to admit is that the job will never be done until rural areas have the same kind of broadband infrastructure as cities.

This particular FCC is pretending that the need for broadband is sitting still, when in fact the demand for household broadband, both for speeds and for total download volumes keep doubling every three or four years. By the time the current FCC chairman has been in his seat for four years, the comparative quality of rural broadband will have halved due to this increase in demand.

Don’t interpret what I just said to mean that I have disdain for the current FCC. The last FCC under Chairman Tom Wheeler was a huge contributor to the problem when they awarded billions of dollars to the big telcos to make broadband upgrades over seven years to 10/1 Mbps – at a time when 10/1 Mbps already didn’t meet the definition of broadband. That was obviously a political decision since the original plan was to award all of the CAF II funds by reverse auction – which would have helped to fund a lot of rural fiber.

Even if the FCC was highly motivated to solve the rural broadband gap they don’t have the tools to do so. The FCC’s only tool for funding more broadband is the Universal Service. I wrote a blog last week noting how this fund is already overcommitted. Since I wrote that blog I looked at my own cellphone bills and my family alone is contributing several hundred dollars per year towards the USF fund. We are not going to get the many billions we need to expand broadband by taxing landline and cellphone users.

The fix needs to come from Congress. That doesn’t seem likely from the current Congress that already approved a $600 million fund for rural broadband grants and then added on a provision that made the grants nearly impossible to implement. Clearly influenced by lobbyists, Congress added a provision that the grants couldn’t be used in areas where more than 10% of homes already have 10/1 Mbps broadband – and there are very few such areas.

I honestly have a hard time understanding Congress’s reluctance to address rural broadband. When I go to rural counties these days I’m told that getting better broadband has become the number one local issue. I know that rural folks and rural politicians are pleading with their state and national representatives to find broadband funding.

I also know that most politicians say they are in favor of rural broadband. I’ve only seen a handful of politicians in the last decade who told their constituents that they don’t support rural broadband funding. I’ve also found that rural broadband is a nonpartisan issue and at the local level politicians of both parties understand that communities need better broadband.

I wish I could end this blog by suggesting a solution for the problem, but there isn’t any unless the states and the federal government decide at some point to help. State broadband programs providing matching grants have seen some success. I’m sure that federal matching grants would also help as long as they weren’t structured to be giveaways to the big ISPs.

Is Broadband ‘Wildly Competitive’?

The FCC is in the process of creating its first report to Congress required by the Ray Baum Act, which is the bill that reauthorized the FCC spending for 2019 and 2020. That bill requires the FCC to create a report every two years that, among other things assesses the “state of competition in the communications marketplace, including competition to deliver voice, video, audio, and data services among providers of telecommunications, providers of commercial mobile service, multichannel video programming distributors, broadcast stations, providers of satellite communications, Internet service providers, and other providers of communications services”.

The FCC accepted comments about what should be included in its first report, and as you might imagine received a wide variety of comments from the industry and other interested parties.

In typical big carrier fashion, the NCTA – The Internet & Television Association, the lobbying group representing the largest ISPs filed with the FCC arguing that the broadband marketplace is already ‘wildly competitive’. The big ISPs have a vested interest in the FCC reaching such a conclusion, because that would mean that the FCC wouldn’t have to take actions to create more competition.

The reasoning the big carriers are using to make this claim is ironic. They argue that the FCC shouldn’t use its own 25/3 Mbps definition of broadband since the FCC is currently spending billions of dollars in the CAF II program to deploy broadband that meets a lower standard of 10/1 Mbps. They say that if US broadband is examined for the amount of competition at the lower 10/1 threshold that most markets in the US are competitive. That’s ironic because the FCC was pressured into giving all of the CAF II money to the big telcos after intense lobbying and the funds were originally intended to be awarded through a reverse auction where ISPs would have been rewarded for building broadband capable of delivering speeds up to 1 Gbps.

Further, if the FCC was to accept the idea that 10/1 Mbps is acceptable broadband then the FCC would probably be obligated to count cellular broadband as an economic substitute for landline broadband since it delivers speeds in the same range as the CAF II deployments.

However, making that same determination is impossible at faster speeds. Even the FCC’s own highly-skewed mapping data shows there are not many households in the country with two options for buying 100 Mbps service. Where households have two choices for buying 25/3 Mbps broadband the second option is almost always DSL, which the big telcos are letting die a natural technological death, and which often delivers speeds much slower than advertised. As I’ve written about in this blog, my firm has done surveys in numerous communities where the delivered speeds for both cable modems and DSL were significantly slower than the advertised speeds and certainly slower than the data in the FCC database that is collected from the big ISPs and used to create the FCC’s broadband coverage maps and other statistics.

The only way to claim that broadband is ‘wildly competitive’ is to count broadband speeds slower than the FCC’s 25/3 Mbps definition. If the FCC was to accept cellular broadband and satellite broadband as the equivalent of landline broadband, then a large majority of homes would be deemed to have access to multiple sources of broadband. I would restate the NCTA’s ‘wildly competitive’ claim to say that a majority of homes in the country today have access to multiple crappy sources of broadband.

We’ll have to see what the FCC tells Congress in their first report. I suspect their story is going to be closer to what the big ISPs are suggesting than to the reality of the broadband marketplace. This FCC already seriously considered accepting cellular and satellite broadband as an equivalent substitute for landline broadband because doing so would mean that there are not many places left where they need to ‘solve’ the lack of broadband.

The FCC finds itself in an unusual position. It gave up regulation of broadband when it killed Title II regulation. Yet the agency is still tasked with tracking broadband, and they are still required by law to make sure that everybody in the country has access to broadband. Let’s just hope that the agency doesn’t go so far as to tell Congress that their job is done since broadband is already ‘wildly competitive’.

Funding the USF Broadband Programs

A number of telecom advocacy groups came together recently to ask the FCC to increase the budget for the high-cost portion of the Universal Service Fund to at least $2.4 billion for the next fiscal year just begun on October 1. The joint filing was by ITTA – The Voice of America’s Broadband Providers, USTelecom – The Broadband Association, NTCA – The Rural Broadband Association and WTA – Advocates for Rural Broadband.

Small telcos are specifically asking that the FCC fully fund the commitments made to them in 2016 for the A-CAM program. This is the fund that is providing money to rural telcos to upgrade their networks to at last 25/3 Mbps – although it seems like most companies are using the money to upgrade to fiber. That program is bringing a permanent broadband solution to numerous rural communities.

The A-CAM and other high-cost support programs are not currently fully funded. This is due to several factors. First, more small telcos accepted A-CAM funding than the FCC anticipated, creating a bigger financial commitment than was expected. But more importantly, the FCC has been tapping the Universal Service Fund for other broadband commitments such as the CAF II program that gave billions to the large telcos to upgrade to only 10 Mbps. This same fund is also used to provide e-rate funding for schools to get affordable broadband, to support libraries, to support rural healthcare and to provide the lifeline program to make telephone and broadband more affordable for low-income households.

It would be a challenge for the FCC to meet the request and I’m not sure there is an easy way for them to do so. The Universal Service Fund is funded by fees assessed against landline telephone service, cellphone service and against broadband connections that are deemed to be interstate in nature – these are generally broadband connections sold by regulated telcos using the soon-to-be-obsolete TDM technology.

This fee is an additive to these services and the rate being charged has climbed over the years as the number of both landline telephones and special access transport circuits has dropped. In the last quarter the assessment topped 20% for the first time and has climbed over the years. I can recall when the assessment was under 5%.

This all creates a dilemma for the FCC. The revenues against which USF can be assessed are shrinking. Landline use continues to plummet; cellphone prices are trending downward and special access is being displaced by other kinds of transport. As much as the FCC might want to fully fund rural broadband, it has numerous other obligations to meet from the same pile of money like the e-rate program and rural healthcare broadband.

There has been talk for years of expanding the USF base. If the USF fee was assessed against home and business broadband the overall percentage would plummet from today’s 20% rate. However, Congress nixed the idea of assessing USF against broadband by sticking to the philosophy that we should not tax the Internet. This was a concept that was introduced when broadband was a fledgling industry, which somehow became a mantra that is outdated. Broadband revenues dwarf the fees for products like landline telephone service.

The FCC’s hands are tied from assessing USF against broadband by Congress. But even if Congress changed their mind, the FCC has now given up regulation of broadband and they might not have the authority to assess a fee on a product they declare they don’t regulate.

It’s to everybody’s benefit that the FCC finds a way to fund commitments they made for rural broadband just a few years ago. The FCC has some latitude and they could probably apply all fund shortfalls against another program like CAF II – but with the lobbying power of the big telcos that’s unlikely.

The FCC also has another huge source of revenue they could tap. The agency has been collecting gigantic fees for the auction of spectrum in recent years and there is no reason that all or part of this money couldn’t be diverted to rural broadband. However, this also would require action by Congress, which directly diverted auction fees to the US treasury earlier this year when they enacted the Ray Baum bill.

The funding shortfalls are mostly the result of the FCC committing more funds than are available in the fund. Since the USF is funded by fees on services, the fund can’t have cost overruns and spend more money than it has – unlike many other government programs. Every time I hear the FCC announce a new initiative out of the Universal Service Fund I always wonder which other parts of the fund will be raided. I think we now know that it’s funding for rural broadband.