Tag Archives: GAO

BEAD on Hold?

It appears that NTIA missed an important step when it generated the new BEAD rules in June in the BEAD Restructuring Policy Notice. That is the document that changed the scoring of BEAD grants from using a dozen different scoring criteria to choose grant winners to a new method that focused on the character of the proposed technology (priority or not) and the cost per passing.

On December 14, NTIA got a ruling from the GAO that the changes made by NTIA in the Policy Notice are outside of the scope of NTIA’s authority. According to the decision from the GAO, a major change like the one implemented by NTIA requires approval by both Congress and the Comptroller General.

Agencies like NTIA are subject to the Congressional Records Act (CRA), which defines the administrative process that government agencies must follow to change rules. The GAO says that NTIAs Policy Notice implements, interprets, and prescribes law or policy, which triggers provisions of the CRA. The Policy Notice not only affected changes within NTIA of how it administers the BEAD program, but it changed the process of how Eligible Entities (State Broadband Offices) go about seeking funding under the program.

The GAO letter lists the possible ways that NTIA could be exempt from seeking Congressional approval and concluded that none of the exemptions apply to NTIA’s Policy Notice changes. The key trigger for the GAO ruling was that the rule changes created a substantial effect on non-agency parties, meaning States and ISPs.

The conclusion of the GAO is as follows: “The Policy Notice is a rule for purposes of CRA because it meets the definition of a rule under APA and no CRA exception applies. Therefore, the Policy Notice is subject to CRA’s requirement that it be submitted to Congress and the Comptroller General before it can take effect.”

The bottom line of this ruling is that NTIA had no authority to unilaterally change the BEAD rules in such a drastic fashion. The BEAD rules in the IIJA legislation were specific, and the changes NTIA ordered with the Policy Notice were significant enough to require NTIA to seek Congressional approval before making the changes.

This is an interesting twist. In normal times, this would mean that NTIA would have to put BEAD on hold until this is resolved. NTIA would not be able to enforce the changes in the Policy Notice, and if Congress didn’t approve the NTIA changes, the BEAD program would probably reset to the status in June before the Policy Notice. It would mean that all of the changes to grant scoring and the requirements for States to determine priority technologies would be invalid. It would means all tentative grant awards made under the revised rules are invalid. States would probably have to re-score grant applications under the original BEAD rules for selecting winners.

But we don’t live in normal times, and this Administration is currently ignoring the rules of the Congressional Records Act in many other venues and programs. So what does this mean? It may mean nothing, and NTIA might just ignore this GAO decision. This might trigger action from Congress. There has been a lot of unhappiness that the amount of grant awards was trimmed so drastically. This decision certainly gives an actionable reason for anybody who wants to take NTIA to court to halt the BEAD process during litigation. Like everything associated with BEAD, awards made under the new rules are going to be under a cloud, and that makes everybody uncomfortable.

GAO Gives Passing Marks to USAC

USAC (the Universal Service Administration Company) was recently in the news when the U.S. Court of Appeals for the Fifth Circuit ruled that the FCC’s administration of the Universal Service Fund (USF), and particularly the use of USAC to be unconstitutional.

USAC is a non-profit corporation formed by the FCC when the Telecommunications Act of 1996 created the USF. The FCC decided to create USAC to administer the fund in order to shield the day-to-day operations of the USF process from politics and the changes that always with a change in administration. USAC has a single purpose, which is to operate the Universal Service Fund under guidelines established by the FCC.

The relationship between USAC and the FCC has been under fire many times over the years. In May 2023, Senator Ted Cruz asked the General Accountability Office (GAO) to examine if USAC is properly administering the $8 billion annual USF. The GAO recently issued a report that gave high grades to USAC.

The Universal Service Fund has been somewhat controversial since its formation. However, most of the controversy comes from the directions that the FCC gives to USAC. For example, USF is funded by fees levied against interstate revenues for voice services. Over the years, as the amount of voice services has dropped, the percentage of the fee levied against voice has increased. But this can’t be blamed on USAC since the FCC determines who should pay into the fund. There are many critics who don’t like the programs funded by the USF. In this blog I have leveled a lot of criticism against some aspects of the CAF II and RDOF programs that have provided subsidies to improve rural broadband. But again, these programs were established by the FCC and not by USAC.

One controversy that had legs for many years was that the Lifeline program, which provides a $9.25 monthly subsidy to low-income households to help cover telephone or broadband bills, was paying out a lot of fraudulent claims. USAC instituted a system that verifies each month if somebody is eligible for the discount, and the controversy largely melted away. There have been complaints that ISPs have jacked up the cost of broadband or equipment being provided to schools and libraries that is paid from the USF E-Rate subsidy.

GAO undertook a broadband audit of USAC. They looked to see if USAC was operating within the guidelines established by statutes or by FCC directives. GAO looked at USAC’s budgetary process that included looking at day-to-day operations of a wide range of processes like how USAC sets fees and how it operates the many different programs funded by the USF.

The GAO gave USAC a clean bill of health. The report says that the processes at USAC align with the directives and requirements imposed by the FCC and to external auditors who routinely audit USAC. The GAO approved the process for setting goals and for reporting the use of funds to the FCC. GAO found that USAC’s budgetary process and tracking expenditure followed FCC guidelines. GEO also said that USAC was following its ethics policies.

This should quiet criticism against USAC for a while. There will always be critics of some of the aspects of the Universal Service Fund – and that includes me from time to time. But that criticism shouldn’t spill over to attacks on USAC, which seems to be doing a good job of the daily work of making USF work.

GAO Supports Broadband to Students

In an interesting move, the General Accounting Office released a paper that suggests that the FCC should expand the use of E-Rate funding to allow wireless connections to student homes. The E-Rate program is one of the major components of the Universal Service Fund. Today the E-Rate program can be used to construct fiber assets to reach schools or to subsidize fast broadband connections to schools that demonstrate the financial need.

Specifically, the GAO “recommended that the FCC assess and report on the potential benefits, costs, and challenges of making wireless access off school grounds eligible for E-rate.” The GAO recommendation went on to discuss the impact of the homework gap that puts students without home broadband at risk for falling behind their peers.

I’m sure that every rural broadband advocate understands this issue and applauds the GAO for making this suggestion. However, this seems extraordinary coming from the GAO and seems outside of their stated scope and function. The GAO is the internal auditor of the US government and is often called the congressional watchdog agency that examines how taxpayer dollars are spent. The GAO routinely provides reports to Congress with ideas on how the government can save money and work more efficiently.

I may have missed it, but I can’t remember the agency ever making policy suggestions of this magnitude to the FCC in the past. This seems like a particularly puzzling recommendation because it’s a suggestion on how to spend existing E-Rate money in a different way rather than suggesting ways for the FCC to save money.

The GAO report does a great job of describing the homework gap. The report discusses challenges that school-age children face in doing homework without a computer. The GAO found that many homes without home broadband rely on cellular connectivity, which is largely inadequate for doing homework. The report points out the shortcoming and challenges on the following chart for the alternatives to home broadband such as libraries, community centers, coffee shops, and outdoor WiFi around schools.

The GAO looked into six pilot projects at schools that tried to alleviate the homework gap using wireless technology to connect to students. The GAO pointed out that in 2016 that two schools asked for FCC waivers in the E-Rate program to provide wireless connectivity to students, but the FCC never reacted to the waiver requests.

The GAO concludes the report by recommending that the FCC take steps to assess and publish the potential benefits, costs, and challenges of making off-premises wireless access eligible for E-rate support. The has already FCC agreed with GAO’s recommendation, so I’m sure there will be an assessment coming in the near-future.

The GAO Studies Data Caps

meter-hiThe General Accountability Office (GAO) issued a report near the end of last year that said that broadband customers don’t want caps on their data. That’s not a surprising finding. The report was generated in response to a request from Rep Ann Eshoo of California. So the GAO issued a survey and held focus groups looking into the issue. They also talked to the large ISPs and the wireless companies about their networks.

They concluded that there is no reason to have caps on landline bandwidth because networks generally do not experience congestion. The large ISPs used the congestion argument a number of years ago when they first experimented with data caps. But the large cable companies and telcos admit that congestion is no longer an issue.

The average customer understands this as well. You don’t have to think back many years to a time when your home Internet would bog down every night after dinner when most homes jumped onto the Internet. But there have been big changes in the industry that have gotten rid of that congestion.

Probably foremost has been the cost to connect to the Internet backbone. Just five years ago I had many small ISP clients who were paying as much as $15 per dedicated megabit for raw bandwidth from the Internet. That has dropped significantly and the price varies from less than a dollar to a few dollars depending upon the size and the remoteness of the ISP.

During this same time there has been an explosion in customers watching video and video is by far the predominant use today of an ISP network. Video customers won’t tolerate congestion without yelling loudly because if the bandwidth drops too much, video won’t work. When Internet browsing consisted mostly of looking at web pages customers were less critical when their bandwidth slowed down.

So ISPs today mostly over-engineer their networks and they generally try to provide a cushion of 20% or more bandwidth than what customers normally need. This has also become easier for ISPs because of the way they now pay for bandwidth. Ten years ago an ISP paid for the peak usage their network hit during the month. They paid for the whole month at the bandwidth demand they experienced during their busiest hour of the month (or perhaps an average of a couple of the busiest hours). Slowing customers down during the busiest times under that pricing structure could save an ISP a lot of money. But now that bandwidth is cheap, ISPs routinely just buy data pipes that are larger than what they need to provide a bandwidth cushion. Because the ISP has already paid for the bandwidth to provide a cushion there is zero incremental cost for a customer to cross over some arbitrary bandwidth threshold. The ISP has paid for the bandwidth whether it’s used or not.

This is not to say that there is never congestion. Some rural networks, particularly those run by the largest companies are still poorly engineered and still have evening congestion. And there are always those extraordinary days when more people use the Internet than average, like when there is some big news event. But for the most part congestion is gone, and the ideas of data caps should have gone away with the end of congestion.

If the data caps aren’t about congestion then they can only be a way for ISPs to charge more money. There is no other explanation. ISPs with data caps are taking advantage of their biggest users to nail them for using the Internet in the way it was intended to be used.

Consider a cord cutter household. Derrel, my VP of Engineering has cut the cord and his family, including five kids, uses OTT services like Netflix as their only form of television viewing. The average streaming video in the US uses between 1 Gb and 2.3 GB per hour, depending upon the quality of the stream. For ease of calculation let’s call that 1.5 GB per hour. If Derrel’s family watches video for three hours per day he would use would use 135 GB in a month, and at six hours per day 270 GB. Plus he would still use bandwidth for other things like web browsing, emails with attachments, backing up data in the cloud, etc. Since Derrel works at home and I send him a lot of huge files, let’s say that he uses 100 GB a month for these functions.

And so Derrel might be using 370 GB a month if his family watches 6 hours of streaming video per day, and more if they watch TV more. How does this compare the data caps in the market?

  • Comcast had a data cap of 300 GB. They removed it after public outcry but are back testing it again in some southern markets. It just came back onto my bill in Florida.
  • AT&T Uverse customers have a monthly cap of 250 GB while AT&T DSL customers have a cap of 150 GB.
  • CenturyLink has a cap of 250 GB on any plan that delivers more than 1.5 Mbps.
  • Cox has caps that range between 50 GB and 400 GB depending upon the plan.
  • Charter has caps between 100 GB and 500 GB.
  • Suddenlink has caps between 150 GB and 350 GB.
  • MediaCOm has caps between 250 GB and 999GB.
  • Cable One has caps between 300 GB and 500 GB.

Derrel’s household, which is probably pretty representative of a cord cutter household would almost certainly  be over the monthly data cap for all of these providers. Note that there are plenty of providers that don’t have data caps. Companies like Verizon and Frontier don’t have them. But I feel certain that if data caps start producing a lot of revenue that you will see those companies look at data caps too.

Data caps on landline data really make me mad because I understand how networks are engineered and also how ISPs buy their underlying data. This is nothing more than trying to find a way to squeeze more money out of the data product. It lets ISPs advertise a low price but charge a lot of their customers more than that.