The Industry

An Effective Federal Broadband Program, Part 1

eyeballThere are a lot of rumors flying around the industry that there is going to be a big nationwide federal program to fund rural broadband infrastructure. So I’ve been thinking about what such a program might look like. We have the experience a few years back of a few billion dollars being handed out for broadband by the stimulus plan. It’s vital to learn from past mistakes, and so today I look at lessons learned from earlier federal grant programs.

This is the first in a series of blogs that will look a how a federal broadband program could be done to get the most bang for the federal buck. We might only get one chance at this as a country, so I hope we can do this right.

So, in starting with lessons learned from the past, here are a few things that a nationwide federal broadband build-out should avoid:

Don’t Impose Unnecessary Restrictions. There were three rules associated with the stimulus grants that added a lot of cost and delay to projects. A federal project could get a lot more bang for its buck by eliminating the following:

  • Environmental Impact Studies. Telecom networks are built almost entirely in existing rights-of-ways within a few feet of paves roads. So there is no reason to impose a time-eating study to prove that a fiber cable won’t bother endangered plants or animals unless the fiber is being built outside of the existing rights-of-ways.
  • Historical Preservation Rules. Having to check that fiber is not going to somehow disturb historic sites is also silly unless the fiber is being built across open fields. There should be no requirement to do archeological studies for work done in the narrow shoulders of existing highways that have been dug up in the past.
  • Prevailing Wages. I saw projects where requiring prevailing wages added 20% to the cost of the whole project. Prevailing wages sounds like a good idea, but in practice what happens is that large city wages structures are imposed on construction companies that have been building in rural areas for decades. Making these companies pay much higher wages to employees who have worked for them for years is great for employees, but is a terrible waste of the federal dollars.

Don’t Overwhelm the Industry. A federal broadband buildout could be a magnitude larger than the stimulus program and even that program overwhelmed the industry. There are only a finite (and small) number of consultants, engineers and construction companies available in the market and if the government tries to build a lot of infrastructure in a hurry, then a lot of projects are going to be designed and built by companies with no experience.

The stimulus program also showed that it’s not hard to overwhelm the companies that make broadband products. The stimulus program caused a shortage of fiber and prices spiked. There was also a shortage of some kinds of common fiber electronics that delayed projects. It’s hard to imagine what would happen if we tried to build a lot faster than the stimulus program.

Don’t Give Money to Start-ups. The stimulus program gave a lot of money to start-up businesses and a number of these networks have not done well. There was unfortunately a lot of fiber built to nowhere with stimulus funds that even today is barely carrying any traffic. Existing carriers already have the underlying talents and systems in place that are needed to be a successful telecom company. It does not good to get the fiber built to people’s homes unless the company doing so is poised to be a long-term successful ISP.

Hire Experienced People to Review Applications. There was no existing pool of experienced people to review the stimulus grant applications, and so the agencies involved scurried to try to find bodies. I’ve written about this before, but to see if the process was as bad as I feared I encouraged a guy who did my landscaping to apply to be a reviewer. He had done some computer coding years earlier but otherwise had zero experience with telecom. To both of our astonishment he was offered a position as a grant reviewer. If there are a lot of grant funds available there will be a ton of unworthy and faulty applications and it takes seasoned industry veterans to be able to distinguish the good ones from the bad ones.

Take Only Real Matching Funds. The stimulus grants required a significant amount of matching for the federal grant dollars. Unfortunately not all of the matching was with cash and they accepted ‘in-kind’ matching. In-kind matchings were supposed to be an asset that had significant and quantifiable benefits to the project. I reviewed a number of successful grant applications and saw that many of them had made outlandish claims of in-kind matchings that the feds accepted. As an example, I saw one grant that claimed a huge dollar benefit for already having existing rights-of-ways on state highways. The fact is that these same rights-of-ways are available to anybody who meets the qualifications. But the in-kind matching meant that the applicant didn’t need to have any actual matching cash to get the grant.

Get the Industry to Design the Grant Forms. I’ve been doing telephone accounting since the 70’s and the stimulus grants asked for expenses and capital expenditures in a format that baffled me at times. Most telecom companies keep similar books and it’s not hard to ask for financial information in a way that everybody understands.

Regulation - What is it Good For?

Regulatory Shorts for September 2016

Today’s blog contains a few items that are cautionary tales of things not to do.

FCC Funding for Broadband. The FCC recently rejected three petitions for reconsideration filed by companies that had been awarded the experimental broadband grants last year, but then failed to meet the grant criteria. Two of the companies were start-ups and did not have audited financial statements. Another had an audit but filed it after the grant-specified deadline. The FCC refused to give the three companies the grants since they didn’t meet all of the requirements.

The cautionary tale here is that anybody filing for a grant should make certain ahead of time that they meet all of the requirements. There were a lot of applicants who received broadband grants out of the stimulus funding a few years ago that did not qualify, but for whom the government accepted waivers. However, that was an extraordinary circumstance due to the huge size of the grants and the desire of the government to use the funding. In more normal circumstances it’s exceedingly hard to get a waiver for a company that doesn’t meet all of the qualifications.

Fines for Unauthorized Wireless Connections. The FCC recently fined AT&T $450,000 for using licensed wireless connections that were made without FCC authorization or that had not been properly licensed. These were mostly fixed microwave connections, something that is relatively easy to get licensed.

The cautionary tale is to be sure to take care of the paperwork when deploying wireless systems. It’s becoming fairly routine for companies to deploy microwaves to provide wireless backhaul for point-to-multipoint wireless networks or for serving cellular sites. There are also now licensing requirements for anybody deploying subscriber radios that use the 3.65 GHz spectrum. Failure to obtain the microwave licenses could end up with fines like AT&T just paid. But since there are places in the country where it’s not legal to deploy the 3.65 GHz radios, failure to clear it first with the FCC could even end up in having your systems shut down.

Blocking WiFi. FCC Commissioner Jessica Rosenworcel has asked the agency to investigate a seeming restriction of WiFi for those attending the first presidential debate. Apparently, Hofstra University had blocked people from establishing WiFi hotspots from their cellphones and instead wanted journalists to buy a $200 connection for the evening. The FCC in the past has come down hard on this kind of blocking against Marriott hotels and others. The FCC has levied large fines in almost every such case brought to their attention.

The cautionary tale here is not to block WiFi. Companies and cities are often tempted to do this as a security measure and the technology to block WiFi is readily available. But WiFi is a public spectrum and it’s always against the law to block somebody from establishing their own hotspot.

Using E-Rate Broadband Off-Campus. Two school districts have petitioned the FCC to allow them to extend broadband that is subsidized by the E-Rate program to students and others living close to the campus. Under current rules, if an E-Rate network is used for applications other than the school, then the cost of the system has to be allocated between the school and other uses. These petitions ask that the FCC allow them to use the school broadband to serve students and other parties that can benefit from the broadband, without having to allocate the costs.

There is both a caution here as well as an opportunity. The caution is to beware if an E-Rate broadband connection is used by more than the school. For example, it’s not unusual (particularly with private schools) to have other organizations or entities collocated with the school. In such a case the E-Rate applicant needs to make sure to allocate the costs between the school and the other entities. Failure to do so could end up with a loss of the E-Rate subsidy. But the opportunity also exists with wireless networks to provide home broadband to students who live close to the school. If these petitions are successful it could open up many possibilities for schools to benefit nearby residents.

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