Tag: Lifeline program

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AT&T Argues for Broadband Reform

Ed Gillespie, the Senior Executive Vice President of External & Legislative Affairs at AT&T posted a policy position on the AT&T website that argues for major policy reform to better bring broadband to low-income homes and rural areas.

It’s hard for any broadband advocate to not agree with the suggestions Mr. Gillespie is making:

  • He wants Congress to finish funding the new FCC mapping program to identify homes without access to broadband.
  • He supports additional broadband grant funding for programs like the $20 billion RDOF grants.
  • He supports Lifeline reform and says that it should be as easy for low-income homes to apply a Lifeline discount as it is to use a card to buy food from the SNAP program.
  • He thinks funding should be increased for the Lifeline program and should be funded by Congress rather than funded through a 26% tax on interstate telephony.

I hope AT&T is serious about these proposals because having them lobby for these ideas would help to move the needle on digital inclusion. It’s just odd to see these positions from AT&T since they have spent a lot of effort and dollars arguing against some of these policies.

Mr. Gillespie complains that a lot of the current $9.25 Lifeline discount program is used by MVNOs and other carriers that have not built networks. That’s an ironic argument for AT&T to make since the company has done it’s best to walk away from the Lifeline program. AT&T no longer offers Lifeline in 14 states – AL, AR, FL, IN, KS, KY, LA, MS, NC, NV, SC, TN, and WI. AT&T still participates in Lifeline in 6 states, but only because those states refuse to allow the company to exit the Lifeline program.

Of course, this would not be an AT&T policy paper if the company didn’t pat itself on the back a bit. Mr. Gillespie brags that the ISP networks in the country weathered the big increase in web traffic due to the pandemic even though predictions were made that networks would collapse. He claims that AT&T made it through the pandemic due to light touch regulation. The fact is, once it was understood that the new traffic on the web was coming during the daytime when the network wasn’t busy, I don’t know any network engineer who thought that the web would collapse. I also wonder why AT&T would claim to have weathered the pandemic well – I would challenge AT&T to bring forth happy customers using AT&T DSL and ask for their testimonials on how the AT&T network enabled multiple people to work from home at the same time.

Mr. Gillespie is also calling for an expansion of the concepts used in the RDOF grants. Those grants provide funding for new broadband networks in rural areas that have the worse broadband. Before supporting an expansion of that grant program, I think many of us are holding judgment on the RDOF reverse auction process. While I think it’s likely that there will be beneficial grants given to those willing to build rural fiber networks, I also fear that a huge amount of these grants are going to be wasted on satellite broadband or other technologies that don’t bring rural broadband in line with urban broadband. I’m not ready to bless that grant program until we see how the reverse auction allocates money. I also can’t help being suspicious that AT&T’s position in favor of more grants reflects a hope to win billions of new grant dollars.

Interestingly, even though he never says it, the reforms that Mr. Gillespie is asking for require new broadband regulation. I’m sure that Mr. Gillespie must realize that bills needed from Congress for these reforms are not likely to stop with just AT&T’s wish list. We are long overdue for a new telecommunications act that brings broadband regulation in line with today’s reality. The last such law was passed at a time when people were flocking to AOL for dial-up access. It’s highly likely that new telecom legislation is going to go beyond what AT&T is calling for. It’s likely that new legislation will give some broadband regulating authority back to the FCC and will likely include some version of net neutrality. It’s ironic to see arguments for a stronger FCC when the FCC walked away from regulating broadband at the urging of AT&T and the other giant ISPs. Perhaps even AT&T knows it went too far with deregulation.

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Regulation - What is it Good For?

Funding the USF

The Universal Service Fund (USF) has a bleak future outlook if the FCC continues to ignore the funding crisis that supports the program. The fund continues to be funded with a fee levied against the combined Interstate and international portion of landlines, cellphones and certain kinds of traditional data connections sold by the big telcos. The ‘tax’ on Interstate services has grown to an indefensible 25% of the retail cost of the Interstate and international portion of these products.

The FCC maintains arcane rules to determine the interstate portion of things like a local phone bill or a cellular bill. There are only a tiny handful of consultants that specialize in ‘separations’ – meaning the separation of costs into jurisdictions – who understand the math behind the FCC’s determination of the base for assessing USF fees.

The USF has done a lot of good in the past and is poised to do even more. The segment of the program that brings affordable broadband to poor schools and libraries is a success in communities across the country. The USF is also used to subsidize broadband to non-profit rural health clinics and hospitals. I would argue that the Lifeline program that provides subsidized phone service has done a huge amount of good. The $9.25 per month savings on a phone or broadband bill isn’t as effective today as it once was because the subsidy isn’t pegged to inflation. But I’ve seen firsthand the benefits from this plan that provided low-cost cellphones to the homeless and connected them to the rest of society. There are numerous stories of how the subsidized cellphones helped homeless people find work and integrate back into society.

The biggest potential benefit of the fund is bringing broadband solutions to rural homes that still aren’t connected to workable broadband. We’ve gotten a hint of this potential in some recent grant programs, like the recent CAF II reverse auction. We’re ready to see the USF create huge benefits as the FCC starts awarding $20.4 billion in grants from the USF, to be dispersed starting in 2021. If that program is administered properly then huge numbers of homes are going to get real broadband.

This is not to say that the USF hasn’t had some problems. There are widespread stories about fraud in the Lifeline program, although many of those stories have been exaggerated in the press. A decent amount of what was called fraud was due to the ineptitude of the big phone companies that continued to collect USF funding for people who die or who are no longer eligible for the subsidy. The FCC has taken major steps to fix this problem by creating a national database of those who are eligible for the Lifeline program.

The biggest recent problem with the USF came when the FCC used the fund to award $11 billion to the big telcos in the CAF II program to upgrade rural broadband to speeds of at least 10/1 Mbps. I’ve heard credible rumors that some of the telcos pocketed much of that money and only made token efforts to tweak rural DSL speeds up to a level that households still don’t want to buy. It’s hard to find anybody in the country who will defend this colossal boondoggle.

However, we’ve learned that if used in a smart way that the USF can be used to bring permanent broadband to rural America. Every little pocket of customers that gets fiber due to this funding can be taken off the list of places with no broadband alternatives. Areas that get fixed wireless are probably good for a decade or more, and hopefully, those companies operating these networks will pour profits back into bringing fiber (which I know some USF fund recipients are doing).

But the USF is in real trouble if the FCC doesn’t fix the funding solution. As traditional telephone products with an interstate component continue to disappear the funds going into the USF will shrink. If the funding shrinks, the FCC is likely to respond by cutting awards. Somebody might win $1 million from the upcoming grant program but then collect something less as the fund decreases over time.

The fix for the USF is obvious and easy. If the FCC expands the funding base to include broadband products, the percentage contribution would drop significantly from the current 25% and the fund could begin growing again. The current FCC has resisted this idea vigorously and it’s hard to ascribe any motivation other than that they want to see the USF Fund shrink over time. This FCC hates the Lifeline program and would love to kill it. This FCC would prefer to not be in the business of handing out grants. At this point, I don’t think there is any alternative other than waiting for the day when there is a new FCC in place that embraces the good done by the USF rather than fight against it.

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Regulation - What is it Good For?

The FCC and the Digital Divide

The current FCC Chairman Ajit Pai talks a lot about his commitment to solving the digital divide and to bring broadband to everybody in the country. Chairman Pai has now made numerous visits to rural America and to poor communities and has repeatedly promised that this FCC is on board with finding broadband solutions for everyone. Yet there are numerous actions by this FCC that tell a different story.

Redefining Broadband. Last year the FCC considered changing the definition of broadband – a change which would have drastically lowered the count of households without good broadband The FCC suggested that 10/1 Mbps cellular broadband is equivalent to a 25/3 Mbps landline connection. This change would have reclassified millions of homes as having access to broadband and would have instantly ‘solved’ a huge portion of the digital divide without changing anybody’s broadband. The FCC is required by Congressional edict to set policies that bring broadband to all, and their solution was to unilaterally declare that millions of homes served with only cellular broadband needed no further FCC assistance.

The public and the industry rebelled against this suggestion and the FCC backed down. However, the FCC is required by Congress to examine the availability of broadband every year and they will have annual opportunities to redefine broadband and recalibrate the way we count those on the wrong side of the digital divide. One has to only talk to a rural household trying to run their home broadband from a tethered cellphone to understand the ridiculousness of this idea. The high cost, low data caps, slow speeds and high latency make cellular broadband an extremely expensive and unsatisfactory substitute for landline broadband. There are many people who elect to use only cellular data, but that’s not the same thing as assuming that a cellphone connection can provide enough broadband for the typical home.

Lifeline Program. This FCC seems to be trying to eliminate or greatly restrict the Lifeline program. It’s clear that Chairman Pai would like the program to go away completely and the FCC has been whittling away at the program.

First, they stopped accepting new applications for carriers that want to join the Lifeline program. I know of two municipalities that planned to expand their broadband networks to thousands of low-income homes and offer $10 – $20 broadband that would have been enabled by the $9.95 monthly Lifeline subsidy. They were dissuaded when the FCC made it clear they were not likely to approve new Lifeline providers.

The FCC also changed the rules making it hard or impossible for MVNOs (wireless resellers) from receiving the Lifeline subsidies. These companies were the primary proponents and sellers of low-cost cellular phones and data plans for low-income customers. For example, there are MVNOs that provide a low-function phone, and a limited amount of voice and data to the homeless for the $9.95 reimbursement from the Lifeline fund. There have been numerous testimonials how these phones have improved the quality of life for the homeless by providing them with access to social services and allowing them to make phone calls or texts. Blocking these carriers from Lifeline kills this kind of initiative.

The FCC also eliminated the additional $25 per month from the lifeline program that was available to low-income natives living on tribal land. Eliminating this subsidy and also restricting the Lifeline funds to only facility-based carriers is having the effect of making cellphones unaffordable in some of the poorest places in the country. Even the big cellular companies like AT&T and Verizon opposed this change to the Lifeline fund.

Eliminated Title II Regulation. Perhaps the most damaging change the FCC made was to eliminate all FCC regulation of broadband by eliminating Title II regulation. This FCC order is referred to as the net neutrality order, but there are a number of aspects of the order that have nothing to do with net neutrality.

The FCC removed itself as the watchdog on all aspects of broadband including pricing, data caps, disclosure of practices and policies, etc. The FCC instead shuttled broadband issues to the Federal Trade Commission – an agency that can punish companies which badly abuse the public, but which cannot set proactive policies.

We are poised to see big future increases in broadband prices. That’s the only way that the big monopoly ISPs can continue their historic revenue growth. The big ISPs have hit a wall with slowing numbers of new broadband customers and sinking cable TV and telephone revenues. Rising broadband prices will do more harm to universal service than any other policy. One Wall Street analyst last year suggested that Comcast’s basic broadband price ought to be $90 – something that would drive millions of homes from landline broadband. The FCC has removed themselves as broadband regulators, meaning that the big cable monopolies are going to be free to do what monopolies do and raise rates to maximize profits. Even if the FCC never directly regulates broadband prices they have many other ways to pressure big ISPs to act responsibly – but they’ve given away their regulatory authority and any regulatory leverage is gone.

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Regulation - What is it Good For?

FCC Whacking the Lifeline Program

A few weeks ago the FCC took steps a few weeks ago that are going to significantly cut back on the Lifeline program. This is a program that has historically provided a subsidy of $9.25 per month off phone service, but which was expanded under the Tom Wheeler FCC to to also be able to cover broadband.

We had a strong hint that this was coming when one of the first acts of new FCC Chairman Ajit Pai was to halt new carriers from becoming eligible to participate in the Lifeline program.

One of the primary stated reasons for the changes are that the Lifeline program is full of fraud and waste. This is something that was identified by the FCC over two years ago and they put in place a remedy to fix the fraud issues. Lifeline goes to households that qualify for various federal welfare programs. The main reasons for fraud was providing the subsidy to those that weren’t eligible or continuing eligibility after people no longer qualified for welfare.

The obvious fix for this was for the FCC to maintain a database of those that are eligible and require providers to verify eligibility for each customer each month. That fix was started two years ago and is apparently still two years from being implemented. I find it astounding that it would take four years to put together what is basically a database lookup, especially for an industry that maintains numerous complex databases. This sounds like something a corporate IT team could implement in a few months and failure to make this work in a timely manner speaks mostly about the failure of government to be able to implement technical systems. Since the fix would largely eliminate the fraud I find it disingenuous for the FCC to still be looking for changes to the program due to fraud issues – this is something they should have fixed long ago.

There are a few changes to the program to be implemented immediately along with a list of proposed future changes. The immediate change to the Lifeline program include the following:

  • Limit Lifeline on Indian reservation to only carriers that are facility-based. This eliminates resellers, who are the primary providers of cellular service in rural areas and on tribal lands. Since AT&T and Verizon don’t actively promote Lifeline this likely means that many eligible customers will lose the subsidy. Even where a customer can change to a facility-based option, it’s often more expensive, which effectively would eliminate any savings from lifeline.
  • Eliminated Lifeline plans that rely on WiFi networks instead of cellular networks. In cities there a number of carriers today that sell WiFi only plans, which are affordable and effective where there is widespread WiFi. These phones use VoIP over WiFi instead of cellular and it seems odd to eliminate based upon the technology used.

The big changes are those proposed for the future. As we’ve seen often in the past, specific changes proposed by the FCC tend to get implemented unless there is big pushback by the industry. The proposed changes include:

  • Requiring people to pay a percentage of their phone bill. Today there are cellular carriers willing to only charge $9.95 for a barebones Lifeline plan that has limited minutes, and the FCC wants all Lifeline customers to pay a share of the cost of the service.
  • Extending the requirement that Lifeline is only available for facility-based carriers. In the cellular world that means AT&T, Verizon, T-Mobile and Sprint. It would eliminate the many cellular resellers from participating in the program. Today over 70% of Lifeline recipients are through resellers.
  • Setting some kind of cap on the whole Lifeline program to stop it from growing.

It seems clear to me that this FCC would eliminate Lifeline completely if they could. Since the program was created by Congress it would be impossible to eliminate it without additional Congressional action. But all of the FCC’s proposed changes will significantly cut back on eligibility and make it harder to households to take part in the program.

I will be honest in that I never gave Lifeline a lot of thought in the past. But a few years ago I was introduced to a program that supplied Lifeline phones to the homeless. The carriers provide the phone and the service for $9.25 per month with no cost to the homeless. These are not smart phones, but very basic older-technology phones. And the plans were not lavish, but provides users with some limited minutes during the month plus some basic texting and web connection. The homeless people participating in the program said that it was transformational in that it allowed them to use the phone to connect to social services, to search for work and to communicate with loved ones. The FCC’s proposal would largely eliminate programs like this one, to the benefit of nobody.

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The Industry

Solving the Urban Digital Divide

I can remember talking about the digital divide twenty years ago. At that time the main issue was to get computers to low income households so that they could buy DSL. There were some fairly successful programs around, mostly run by volunteers or with grant funding to try to make this work.

But now twenty years later most cities I visit are still trying to solve the digital divide. But today it’s a different divide and the urban divide is now mostly one of affordability. There are isolated pockets in many cities that don’t have broadband, but the vast majority of people in urban areas have physical access to broadband. But there are numerous surveys that show that somewhere between 10% and 20% of households in most cities say that they can’t afford broadband.

In the last twenty years broadband has gotten a lot more expensive. And I think we are headed for a time when it’s going to become even more expensive. The big telcos and cable companies are now looking for broadband to be their major source of revenue growth. The cable companies added over 3 million new broadband customers last year and are expected to do so again this year. But you don’t have to look very far into the future to foresee the time when growth will be slow for every ISP. They will be forced to raise broadband rates to meet Wall Street earnings expectations.

There are some cities that have built their own networks – cable HFC networks or fiber networks – but even these cities have not done a very good job of providing broadband to all of their low-income households. It’s expensive to build the last mile and particularly expensive to connect homes to a fiber system.

There are some solutions that can solve part of the problem:

  • There are a number of cities that have built to or purchase broadband for public housing projects. But generally this only covers a small percentage of the households that need broadband.
  • There are some large ISPs that bring broadband to public housing. I recall seeing announcements recently where both Google and AT&T have brought broadband to public housing in one or two cities, and of course they crowed loudly about it. And while these gestures are nice, they solve a tiny slice of the problem.
  • There are cities that have tried to build ubiquitous outdoor WiFi. But these networks are expensive to build and the technology doesn’t seem to last for many years. I know of a number of these networks that have been discontinued in the past.
  • There are also cities experimenting with trying to beam WiFi into low income homes, but this is even more expensive than building outdoor WiFi.
  • Communities everywhere have put broadband into libraries, figuring that having a place for people to get access to broadband is better than nothing at all.

But I see that the digital divide topic is back in vogue and a lot of cities are having the discussion again of how to bring broadband to where people need it. There was a time in the past where broadband was something that was nice to have, but today it is becoming a necessity for most people. And not having affordable broadband puts people at a major disadvantage. There are a lot of people today that use their smartphone for Internet access. This works for a lot of purposes, but it can quickly get dreadfully expensive if you actually use the broadband much.

I don’t have a solution. I was just in a city last week that owns their own cable network and I reminded them that using that network to solve the digital divide is by far the most cost effective way to do this. This city was extremely interested in the new federal lifeline program for data and that might be enough of an incentive for them to develop a lifeline product that can be afforded by a lot of the households in their city.

When I look around at the number of households that want broadband and the numbers that will be eligible for the federal program I wonder if the USF Lifeline Fund is large enough to help everybody who needs it. I saw that Congress is already trying to cap this fund, but if we want to get broadband everywhere then the USF fund might be a powerful tool for getting broadband into a lot more homes.

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Regulation - What is it Good For?

Lifeline and Rural America

Earlier this year Chairman Tom Wheeler of the FCC proposed to change the Lifeline program to support broadband in addition to voice. In that proposal he suggested that a household should get at least 10 Mbps download and 1 Mbps upload in order to qualify for a Lifeline subsidy.

Here is where it gets weird. Frontier has filed comments that the 10/1 Mbps threshold is too high and that using such a high standard will stop a lot of rural households from getting Lifeline assistance. They are right, of course, but their solution is to lower the Lifeline threshold to whatever level is necessary to meet actual speeds in a given rural market.

Meanwhile, Frontier has taken a huge amount of money recently from the Connect America Fund for the purpose of raising rural DSL up to the 10/1 Mbps level. But they have six years to get to those speeds, and most of us in the industry think that even after all of their upgrades a lot of the rural households in the upgraded areas still won’t get 10/1 speeds. It’s going to be very hard for Frontier to do that with DSL in a rural setting where people are on scattered farms or back long lanes. I find it unlikely that Frontier, or any of the big telcos, are going to put enough fiber in the rural areas to actually achieve that goal.

But far more importantly, 10/1 DSL is not broadband. It’s not broadband by today’s current FCC definition that says broadband must be at least 25/3 Mbps, and it’s not broadband for real life applications.

I use my own household as the first example. There are two adults and one teenager. We work at home and we are cord cutters and get all of our video online. We have a 50 Mbps cable modem, and as cable modems tend to do, sometimes it slows down. When our speed hits 25 Mbps we’re all asking what is wrong with the Internet. So our household needs something greater than 25 Mbps for normal functioning. If we get less than that we have to cut back on something.

I have a friend with two teenage boys who are both gamers. He has a 100 Mbps Verizon FiOS connection on fiber, and when there are multiple games running everything else in the house comes to a screeching halt. For his household even 100 Mbps is not enough speed to meet his normal expected usage.

And yet here we are having discussion at the federal level of setting up two major programs that are using 10/1 Mbps as the standard goal of Internet speed. As a nation we are pouring billions of dollars into a project to improve rural DSL up to a speed that is already inadequate and by the time it is finally finished in six years will be massively below standard. It won’t take very many years for the average household to need 100 Mbps and we are instead taking six years to bring a huge amount of the rural parts of American up to 10/1 DSL.

I know that the FCC is trying to help. But it’s sad to see them crowing about having ‘fixed’ the rural broadband problem when instead they are condemning millions of households to have nearly worthless broadband for the next couple of decades. Imagine if they had instead allowed those billions of dollars to become matching funds for communities willing to invest in real broadband? Communities wanting to do this are out there and many of them were hoping to get some federal help to bring broadband to their areas. Building rural fiber is expensive, and even a little federal help would be enough to allow many rural areas to find the rest of the funding needed to build their own solutions.

And the problems are going to get worse, not better. Verizon didn’t even bother to take the federal subsidies to improve DSL because they don’t want to invest anything in rural copper. AT&T has told the FCC repeatedly that they want to tear down copper to millions of households and put rural households on cellular data. And while Frontier is going to try to make their rural copper plant better, how much can they realistically accomplish with 50–70 year-old copper that was neglected for decades before they bought it?

I just shake my head when I see that Frontier and the FCC are going to be wrangling about households getting Lifeline subsidies for speeds slower than 10/1 Mbps. The FCC has already decided that they are going to throw billions at rural copper and call it job done. It’s about time that we instead start having a conversation about bringing real broadband to rural America.

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Current News Regulation - What is it Good For?

The Homework Gap

A newly released Pew Research Center poll looks at the impact of household income on the percentage of homes with Internet connectivity. The study shows that homes with children and with annual household incomes under $50,000 have significantly lower broadband penetration than higher income homes.

FCC Jessica Rosenworcel issued a statement after the release of the poll and called this phenomenon the ‘homework gap”. There have been discussions since the 1990s about the digital divide; this survey shows that the divide is still there and that it correlates with household income.

This finding comes at a time when computers are routinely integrated into schools. Most classrooms and schools now have computers. Also, though I was unable to tie down any precise statistic, what I’ve read suggests that a majority of teachers assign homework that requires a computer. There is also a new way of teaching becoming vogue. Referred to as the ‘flipped classroom’, this teaching philosophy requires students to watch videos and other online content at home and be prepared to discuss the materials in class (as opposed to the traditional way of showing content in class).

As somebody who has been helping carriers sell into different kinds of neighborhoods for years, the statistics are not surprising to me. The Pew study shows that over 31% of households with children do not have high-speed Internet at home. This low-income group makes up about 40% of all households with school age children. This contrasts to only 8% of homes with kids who make over $50,000 that lack Internet access.

The study looked at a wide range of incomes and is one of the more complete surveys I’ve seen showing broadband penetration rates. For example, it shows that all households under $25,000 per year have a 60% penetration of broadband while households making more than $150,000 per year have a penetration of 97%.

One thing this study didn’t consider was the other digital divide, which is the urban/rural one. According to the FCC statistics, there are at least 14 million homes in the country that don’t have physical access to broadband. And as I’ve written a number of times, I think that number is too low and skewed due to the underlying statistics being self-reported by the large carriers.

The FCC is considering if it should expand its Lifeline program to include broadband coverage for low-income households. Today that fund will chop a few dollars per month off of a phone for low-income families. The Universal Service Fund spends approximately $1.5 B per year for the program.

I understand the sentiment behind this kind of assistance. But I would be surprised if a few dollars per month will make much impact on whether a household can afford to buy broadband. It’s going to take a whole lot more than $1.5 billion per year to solve the obviously large gap for student homes without broadband. And of course, such a program will do no good in those rural places where no broadband exists.

This is not going to be an easy issue to solve. To close this gap we have to find a way to get broadband into many millions more homes. But we also would need to make sure that those homes have working computers that are up to the tasks required by homework. I’ve seen numerous studies over the years that show that low-income households have an equally low penetration of home computers as they do broadband. There are many school systems today that give laptops to kids for the school year and perhaps that would at least solve half of the issue if this was more widespread. But until all kids in a school can use those laptops at home, the kids without internet access are going to fall behind those that have it.

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