USF/ICC Update: Changes in Carrier Reporting Requirements Effective May 8, 2012

In its sprawling Report and Order and Further Notice of Proposed Rulemaking on the Universal Service Fund (USF) and Intercarrier Compensation, released last November, the Commission adopted (among a lot of other things) a number of changes to the various reporting requirements. Those requirements affected certain carriers, including competitive eligible telecommunications carriers (ETCs) and incumbent local exchange carriers. (Last December we described how many, but not all, of the extensive changes would affect wireless providers.)

Because many of the modified reporting requirements involved “information collections” subject to the Paperwork Reduction Act, they could not take effect right away. Rather, they had to be reviewed and approved by the Office of Management and Budget. That process has now been completed, according to a notice published in the Federal Register. As a result, a number of the rule changes adopted last fall have now become effective or applicable as of May 8, 2012.

The rules that have become effective are: Sections 54.312(b)(3); 54.313(b); 54.313(h); 54.314; and 54.320(b). The rules that have become applicable are: Sections 54.305(f); 54.307(b) and (c); and 54.313 (a)(1)-(a)(6).

Additionally, the Federal Register notice provides official notification to ETCs and other unspecified stakeholders that information required to be filed pursuant to Section 54.313(a)(2)-(6) and (h) must be filed by July 2, 2012.  Section 54.313 sets out the annual reporting requirements for high cost recipients.

FCC's USF/ICC Order: How It Affects Wireless Providers

A semi-brief overview, from the wireless perspective, of the massive order overhauling the Universal Service Fund and Intercarrier Compensation system

The FCC released its historic 751-page Report and Order and Further Notice of Proposed Rulemaking on the Universal Service Fund (USF) and Intercarrier Compensation on November 18, providing a sumptuous repast for the communications industry to feast on over the Thanksgiving holiday.   It took many readers a few weeks to fully digest the vast smorgasbord of items resolved by the Commission in this one proceeding.   But having pushed ourselves away from the table at last, we can now comment on particulars of the Order that most affect wireless providers.   The Order also very radically affects the rules governing intercarrier compensation and USF for wireline service, but we are reporting on those developments separately out of compassion for our readers.

Definition of Supported Services. The first big step taken by the Commission was to bring broadband within the universe of services supported under the USF umbrella. The FCC chose not to simply define broadband as a supported service, but instead to expand its definition of supported “voice telephony” to include VoIP. At the same time, the FCC is requiring supported voice telephony providers to provide broadband.  

This awkward dance permits the Commission to continue ducking the issue of whether broadband should be re-classified as a “telecom” service regulated under the common carrier regime of the Communications Act or an “information” service regulated only under the FCC’s ancillary jurisdiction. But this dance creates problems of its own.

Because USF support is expressly targeted at “telecommunications services,” the FCC jeopardizes its whole scheme for supporting broadband. For example, the FCC relies on Section 706 of the Act as a source of authority to support broadband through the USF. That section directs the Commission to accelerate the deployment of advanced telecommunications capabilities regardless of whether they are strictly “telecom” services. However, the Commission then imposes on non-telecom service broadband providers the same requirements that apply to regular eligible telecommunications carriers (ETCs) who of course are telecom service providers. 

One of the requirements so imposed is that an ETC must provide stand-alone voice telephony throughout its “designated service area,” yet many non-telecom broadband providers will not have designated service areas. Similarly, many broadband providers simply offer a broadband data pipe and do not care what particular applications (such as a VoIP application) their customers use over the pipe. Although it would make sense for such service providers to qualify for USF support, the Commission’s scheme would exclude them.

Required service levelsUSF fixed service recipients must provide broadband at speeds of 4 Mbps downstream and 1 Mbps up. This represents a great leap upward in the minimum speed expected of a broadband provider. Latency of less than 100 milliseconds is expected and, while monthly capacity requirements are not specified, the FCC expects wireless broadband providers to offer capacity limits consistent with those offered in urban areas. 

Build-out areas and “unsubsidized competitors”. USF support will be offered for the build-out of areas now unserved by an unsubsidized competitor.  The definition of an “unsubsidized competitor” is critical here because there are many areas where mobile wireless providers offer service and landline providers do not. This would prevent landline providers from receiving build-out support in those areas. The Commission protected local exchange carriers (LECs), however, by defining an “unsubsidized competitor” as a “facilities-based provider of residential fixed voice and broadband services.” Fixed voice and broadband service is defined as service to end users primarily at fixed endpoints using stationary equipment. This limitation to fixed services is curious since so many people these days are now cutting the cord not only for voice service but for data service as well.

Broadband service to end users primarily using mobile stations would not qualify. However, the FCC did note that a mobile services provider could become an unsubsidized competitor by offering fixed service that guarantees that the speed, latency and capacity minima applicable to fixed providers will be met throughout the relevant area. 

Elimination of identical support rule. The FCC has done away with the identical support rule which subsidized multiple carriers in any given area. This action alone hacks several hundred million dollars in support away from competitive ETCs (CETCs) because they now no longer qualify for duplicate payments. 

Strangely, the FCC did not seem to even consider the possibility that a CETC, whether wired or wireless, should be the surviving single recipient of the funding instead of the LEC.  It simply provided for a phase-out of support to existing non-LEC recipients by mid-2016. In addition to retaining their current subsidies (as revised to cut out certain support mechanisms), LECs also get the privilege of offering to be the sole provider of basic services in currently unserved areas in each part of a state where they provide service. That is, an existing LEC ETC may propose to provide the full panoply of supported services everywhere – but not less than everywhere – in the state where it is the designated LEC. 

If the LEC picks up that option, obviously no other carrier would be designated to provide fixed service in those areas. If no LEC picks up the challenge, then there will be unserved areas in each state where USF support will be offered by a reverse auction mechanism. Build-out in these currently unserved areas will be supported by a one-time distribution of up to $300 million to price cap LECs.

Mobility Fund (Phase I). The FCC is also offering a one-time build-out subsidy to mobile services providers via a Mobility Fund (Phase I). Under this program, up to $300 million will be distributed to companies willing to provide service to areas currently without 3G or better wireless service. (An additional $50 million is made available for build-out of unserved tribal areas.)  These funds are expected to be up for grabs by a reverse auction to be conducted in the third quarter of 2012. Several components of participating in this auction involve considerable lead time.

  • Identifying unserved areas. The FCC has promised to identify, prior to the auction, the areas that are actually currently unserved. This is a big improvement over the 2009 federal stimulus plan process where each individual applicant had to figure out for itself whether an area was unserved or not. In determining whether an area is unserved, the FCC will take into account commitments to provide service in an area (including stimulus fund-based commitments) made prior to the end of 2012. 

Unserved areas will be determined on a census block basis using road miles as the marker of mobile service. A tentative map of unserved areas will be posted prior to the auction, with the public given an opportunity to point out that areas have not been accurately characterized. A final map of unserved areas will be posted prior to the auction (typically a couple of months before), but that poses an obvious logistical problem: most interested parties will not have enough time to apply for ETC designation in those unserved areas.

  • Auction eligibility requirements. To participate in the auction, an entity must: (1) be an ETC; (2) have access to spectrum by ownership or lease; and (3) be financially qualified to provide service after the build out takes place. This raises a host of chicken and egg problems that the FCC does not seem to have adequately considered.  

First, in some states the ETC designation process can take years. By imposing this hurdle, the FCC is precluding perfectly capable and willing carriers from participation. 

Second, in many instances it may be impossible to serve as an ETC unless one is receiving USF support. One would be loathe to take on ETC responsibilities without knowing beforehand that the support money will be available, but the rules are set up backwards. The Commission alludes cryptically at one point in the Order to a “conditional” ETC designation where one could be designated as an ETC conditioned on receipt of USF support. This process would partly solve the problem, if both the FCC and the states will grant provisional ETC designations – something that is far from clear. In any case, interested parties should start thinking about applying for ETC designation now if they hope to participate in the auction.

Third, a prospective service provider whose viability depends on whether it will be receiving USF money might not be want to buy or lease the necessary spectrum without that assurance. Yet the Commission’s rules require that the spectrum be in hand. The sole break here is that the spectrum acquisition or lease may be conditioned on receipt of Phase I USF support.    

And fourth, the auction participant must not only certify that it is financially capable of providing service in the area after the build-out is complete, but also secure its obligation by posting a letter of credit in favor of the FCC. This unusual arrangement might preclude all but very financially well-heeled companies from being able to participate.

  • Obligations of winners.   Winners in the reverse auction will have to provide either 3G service (200kbps down/50 kbps up) or 4G service. The service provided must be measured by drive tests and reported to the FCC. Winners must also: allow collocation at reasonable rates on towers constructed with USF money; allow voice and data roaming; and charge rates comparable to urban rates.   Winning bidders who fail to meet their build-out obligation will default on their Line of Credit to the FCC and be required to repay all monies received under the program.
  • Auction procedures. Most of the details of the reverse auction have been left to the FCC’s auction staff to hash out, but the FCC did express a preference for a single-round sealed bid auction, as distinct from its normal multiple round bid process. This would obviously require bidders to make their single best bid at the outset with no opportunity to drop the bid lower in reaction to other bids.

Mobility Fund (Phase II). In addition to the one-time Phase I funding opportunity, the FCC plans a Phase II program providing funds to cover on-going costs of providing mobile service to areas requiring subsidies. $500 million has been allocated for this purpose, of which up to $100 million is prioritized for tribal needs.   This money will be awarded by a reverse auction process similar to that used for Phase II.  

The specifics of which areas – unserved? underserved? high cost? – will qualify for such subsidies are not yet clearly defined. In particular, if Phase II support is limited to unserved areas, that would seem to preclude recipients of Phase I build-out funding from qualifying for Phase II operations funding, particularly since they would have been required as a Phase I condition to attest that they have the financial wherewithal to operate without such support. Phase II will be fleshed out by the further rulemaking portion of the FCC action.

Intercarrier compensation (wireless issues only).   The second major subject area of the FCC’s order is intercarrier compensation, a field which spans all exchange of traffic between carriers and, now, some non-carriers. Because of the sweeping extent of the changes regarding intercarrier compensation, we will limit this discussion to items particular affecting wireless interests.

The FCC’s Order here is a genuine and fundamental sea change in the way traffic exchanges have been handled for generations.   Specifically, the FCC has adopted as its root principle that “bill-and-keep” should be the basis for exchanges. This principle – that each carrier should charge its own customers for service provided to them and not be compensated by other carriers that interconnect with it – represents a repudiation of the previously prevailing concept that the calling party is the party who benefits by a communication. Instead, the FCC now recognizes that both the called and calling party benefit by connection to the network and that each party should bear its own costs for participating. 

This radical reform at one swoop would erase a myriad of complex payment structures that have governed intercarrier relationships for years. To minimize the trauma of this upheaval, the FCC has provided a six-to-ten year transition period for LECs who have depended on these intrinsic subsidies. The ultimate effect of this reform should be positive for wireless carriers, since various access charges will be reduced or eliminated over time.  To be sure, the FCC did confirm that non-access traffic exchanged between wireless carriers and LECs (typically intraMTA traffic) is to be exchanged on the basis of interconnection agreements between the parties. But with bill-and-keep as the default payment model, non-LECs have a significant leg up in such negotiations. A few other points to be aware of:

  • The Commission did not immediately impose the bill-and-keep regime on originating access charges, though it capped those charges and signaled that intends to move in that direction.
  • The Commission intends its bill-and-keep principle to apply to both intrastate and interstate communications, but the Commission’s authority to impose this rule on intrastate communications is questionable. This issue will certainly be hashed out in the appeals that have already been filed in court.
  • Reciprocal compensation rates between CMRS carriers must be consistent with the rate model adopted for price cap carriers.
  • The FCC decided to treat all VoIP-to-PSTN traffic similarly, regardless of whether it is fully interconnected on a two-way basis. Such VoIP traffic is subject, in the case of toll traffic, to the same rates applicable to non-VoIP traffic, and in the case of other traffic, to reciprocal compensation agreements. This reform is intended to eliminate the widely decried disparity in treatment between VoIP and non-VoIP traffic. Here again the Commission’s refusal to denominate VoIP traffic as telecommunications could undercut its regulatory effort.

We have gone on at greater length here than is our wont, but only because the scope of the FCC’s order is so vast. We expect to be providing further guidance on some of the elements of the USF/ICC Order in the weeks ahead. 

In the meantime, interested parties should be aware that, since FCC’s magnum opus was published in the Federal Register on November 29, the date for seeking reconsideration of any part of the FCC’s action is December 29. Comments on the rate represcription, Connect America Fund, ETC, and auction refinement elements of the Further Notice of Proposed Rulemaking are due by January 18, 2012, and reply comments by February 17. Comments on the intercarrier compensation portion of the rulemaking are due by February 24. with replies by March 30.  

Judicial appeals are due no later than January 30.  Anyone thinking about taking the new rules to court should be aware that a number of other parties have already headed down that path – and, thanks to the U.S. Judicial Panel on Multi-District Litigation, it has been decided that the U.S. Court of Appeals for the Tenth Circuit, headquartered in Denver, will be the court to hear all such appeals in a consolidated proceeding.

FCC Issues Behemoth USF Order

759-page tome hits the streets, with surprisingly brief comment periods

Call me Ishmael! 

That’s how the Commission might have opened its leviathan Report and Order and Further Notice of Proposed Rulemaking (R&O/FNPRM) in the proceeding to overhaul the Universal Service Fund.  Weighing in at a hefty 489 pages – with an additional 16 appendices and four separate Commissioners’ statements bringing the total package to a whopping 759 pages – the document is physically daunting.  And to be perfectly honest, we haven’t read it yet.  But we plan to, and we expect to get a summary of it posted as soon as possible.

However, in a time-honored Washington tradition, the Commission unleashed the R&O/FNPRM at about 6:00 p.m. on a Friday evening.  That would be the Friday before Thanksgiving.  So the prospects for getting a post up in the next couple of days are limited. 

But we have previously reported on an “executive summary” released by the Commission last month, describing the outlines of the ambitious R&O/FNPRM, so interested readers may use that as a sort of Cliff’s Notes intro to the full version for the time being.  And anyone interested in participating in the proposed rulemaking portion of the proceeding better get reading.  Comments on some aspects of the FNPRM are currently due to be filed by January 18, 2012, with replies by February 17.  Comments on other aspects aren’t due until February 24, with replies by March 30.  With Thanksgiving and the year-end holidays fast approaching, those deadlines will arrive sooner than you know it.

Check back here for updates and further information.

FCC Launches Historic Reform of USF and Intercarrier Compensation Regimes

After one of the most hotly and intensely lobbied proceedings in its history, the FCC has adopted a framework by which to (a) reform and re-purpose the distribution of billions of dollars in Universal Service Fund (USF) money and (b) revise the financial arrangements governing the exchange of traffic between all categories of carriers. The stakes in this game are huge, because the FCC’s action upsets, albeit gradually, a generation of expectations about who receives and who pays for hundreds of billions of dollars in telecommunications services -- and how they pay for it. The sweep of the FCC’s action is so broad that there is something almost every industry player will love and something they will hate just as much.

At this writing, the FCC has not yet issued its magnum opus, a tome likely to reach Moby Dick-like proportions. The FCC’s action included both a Report and Order (R&O) adopting many new rules that will go into effect after publication in the Federal Register, and a Further Notice of Proposed Rulemaking (FNPRM) seeking comment on some important loose ends left hanging by the Report and Order.   A myriad of the details of the plan will be known only when the full text of the R&O is released; in the meantime, however, the FCC has released a brief Executive Summary outlining the most important provisions of the new regime. These include:

  • Redistribution of USF funds.   Acting more like Congress than an administrative agency, the FCC is re-purposing what we have known as the USF. Till now, the USF was a vehicle used to subsidize voice service in high cost areas and to low income consumers which was funded by contributions from customers. The FCC has re-dubbed this $4.5 billion pool of cash as the Connect America Fund, with the mission of assuring universal reasonably priced services that include both voice and broadband, with broadband now at least as important as voice, if not more so.   The Commission attacks the problem of excessive growth in the Fund by capping it at 2011 levels for six years. Although Christmas and Hannukah are still months away, the FCC plans to dole out: $300 million in one-time grants to price cap carriers to subsidize broadband build-out in areas unserved by any unsubsidized carrier; $300 million in one-time grants to wireless carriers to provide mobile broadband in unserved areas; and $50 million in funding for mobile service to tribal lands. All of these build-outs, we are earnestly told, are going to be subject to strict deadlines and quality control. The Mobility Fund will in addition get $500 million per year in on-going support, including $100 million for tribal areas. Another $100 million will go for annual support for the most remote, high cost areas. A hundred million here, a hundred million there. . . .
  • Price cap carrier reform. Price cap carriers will have their current high cost support frozen; support levels will be reduced where price cap companies charge artificially low rates; a forward-looking cost model will be generated to establish reasonable levels of high cost support going forward; and price cap carriers will be encouraged to make a state-wide commitment to provide affordable broadband service in most of their high cost service areas in a state.
  • Rate of return carrier reform. The FCC will require rate of return carriers, like price cap carriers, to deliver broadband at actual speeds of 4 Mbps down and 1 Mbps up if they expect to continue receiving subsidies. The FCC will gradually eliminate numerous programs of existing high cost support that allegedly have encouraged inefficiency, gold-plating and redundant services.   The FCC will look at reducing the current 11.25% rate of return which these carriers enjoy, while observing that they will take a second hit through reduced current intercarrier compensation revenues.
  • Identical support rule.   As expected, the FCC is eliminating the identical support rule via a gradual five-year phase-out.
  • Snuffing traffic pumping and phantom traffic.   The FCC blocks these two abuses by requiring: (a) LECs to lower their access tariffs in circumstances where it is clear that traffic pumping is going on (presumed if inbound traffic is three times or more the outbound traffic, or there is revenue sharing with a customer); and (b) all carriers and interconnected VoIP providers to include calling party number info in the signaling stream.
  • Fundamental Intercarrier Compensation reform. Here the FCC acted very boldly by adopting a bill-and-keep framework for exchange of all traffic with LECs. This dramatic step will significantly simplify intercarrier relations, though some will raise questions because costs differ among carriers. Since this new policy can be imposed only on interstate traffic, it will be up to the states to follow the FCC’s lead on this for intrastate traffic – or not. The FCC will effect a multi-year transition by first capping ICC rates, then bringing interstate and intrastate terminating end office rates into parity, then going to bill-and-keep after six years (for price cap carriers) and nine years (for rate of return carriers). These generous transition periods should ease the blow considerably for the carriers involved.
  • New recovery mechanism. Having eliminated some forms of subsidy to carriers, the FCC now establishes a new one. It will permit carriers to charge an ARC (Access Recovery Charge) not to exceed $1.20 -$1.80 for consumers (not including revenue recovered by existing SLC charges) and $12.20 for multi-line businesses (including the existing SLC). These charges are to be phased out over time and not applied to Lifeline customers.
  • VoIP and CMRS traffic. Toll VoIP to PSTN traffic will be treated like non-VoIP traffic, and non-toll traffic will be handled on a reciprocal compensation basis, ending claims by some VoIP carriers that they are not obligated to pay carriers who deliver their traffic to end users.   CMRS-LEC traffic will be handled on a bill-and-keep basis.

We have been critical over the years of the Genachowski Commission’s failings, but in this instance we have to credit it with finally taking on a many-headed monster that had defied regulatory reform for years, even though everyone agreed reform was needed.   There will still be plenty of argument and a spate of appeals before any of this is finally settled, but the FCC has at last set a firm course for USF and ICC reform and gotten the ship underway.

Update: Reply Comment Deadline Extended In TV Spectrum Re-Purposing Proceeding

If you’ve been planning on filing reply comments in response to the FCC’s TV spectrum re-purposing NPRM but you haven’t gotten around to it yet, you’re in luck! Everybody’s been given an extra week, thanks to an extension that pushes the reply comment deadline to next Friday, April 25. The extension comes at the request of several broadcasters and state broadcast associations concerned that the original reply comment deadline fell immediately after the close of the NAB convention in Las Vegas. 

Spectrum auctions and repacking were among the biggest items on the convention agenda for all concerned – FCC staff, Commissioners and industry alike. As a result of that opportunity to share information and insights, many interested parties are now in a better position to formulate reply comments that can contribute significantly to the Commission’s on-going consideration of the complicated issues on the table.

The last chance to say your piece (at least at this stage of the proceeding) is now fast approaching.

The spectrum re-purposing NPRM, released last November, was the opening barrage in the FCC’s campaign for full implementation of the National Broadband Plan – a plan which calls for the “repurposing” of 120 MHz of prime spectrum real estate from television broadcasters to wireless broadband providers.  Among other things, the FCC is proposing to: (a) loosen service rules to permit wireless uses of broadcast spectrum on a co-primary basis with television stations; (b) establish a framework for two or more television stations to share a single six-megahertz channel; and (c) explore opportunities to increase the viability and attractiveness of VHF channels to folks might move on down the band. The FCC claims these steps are necessary to increase the efficient use of the TV spectrum (both UHF and VHF) and facilitate ongoing wireless innovation.

In their initial comments, as might be expected, many wireless providers and wireless equipment manufacturers have heartily agreed with the Commission’s plans. (They even hosted a pow-wow with FCC staffers at CTIA’s headquarters.) 

Broadcasters, on the other hand, have been less receptive to the FCC's ideas. They have questioned whether the incentive auction would truly be voluntary and expressed concern over the potential impact of repacking on a wide range of factors (e.g., service contours, availability of minority-focused programming, ownership limits, disruption of nascent mobile TV services).

Other commenters have urged the FCC to look beyond a strictly auction scenario. Perhaps, for one example, stations could be allowed to use their spectrum flexibly, providing both wireless broadband and over-the-air TV.  Or maybe broadcasters could be permitted to negotiate directly with broadband providers to lease/sell portions of their spectrum.   

If you have an interest in the outcome of this proceeding – and, frankly, who doesn’t? – you should take this opportunity to join the debate. Check out the comments that have been filed thus far in the docket and then take the time to let the FCC know your thoughts. Again, the reply comment deadline has been extended to that anyone looking to participate may submit their reply comments electronically by 11:59 p.m. on April 25, 2011.  If you have any questions about this or would like any help, feel free to let us know.

Spectrum Inventory Tools: Touts And Doubts

Mixed messages on means for determining spectrum availability

When the issue of spectrum re-purposing pops up, the related issue of spectrum inventory tends to pop up as well. Some members of Congress have been calling for the Commission to conduct such an inventory since 2009. The Commission has not initiated any formal proceedings along those lines, although it has repeatedly insisted that it has a good handle on the whole spectrum thing and that its assessment of the need for re-purposing is valid.

In February, 11 Members of Congress sent Chairman Genachowski a letter observing (again) that it would be a good idea to conduct an inventory so that we can all have “a complete picture of who is licensed to use what airwaves and how effectively they are being used”.

In a response dated March 18, Genachowski advised that the Commission has “inventoried the spectrum over which it has jurisdiction”, thereby producing “one of the most substantial and comprehensive reviews of spectrum in [the Commission’s] history”. He then waxed eloquent about two “tools” – “LicenseView” and “Spectrum Dashboard” – that “reflect our understanding of where the most significant spectrum opportunities lie”. I’ll let the Chairman describe those “tools”:

LicenseView is a comprehensive online portal to information about each spectrum license; it presents data from multiple FCC systems in a searchable, user-friendly manner. The Spectrum Dashboard, originally released last year, identifies how non-Federal spectrum is currently being used, who holds spectrum licenses and where spectrum is available.

I think it’s fair to conclude from this that the Chairman was telling the folks in Congress that if they want to see the FCC’s spectrum inventory, they need look no farther than LicenseView and Spectrum Dashboard. (Actually, there wasn’t anywhere else to look. While he provided website addresses for LicenseView and Spectrum Dashboard, Genachowski cited no other document or resource where any inventory-like undertaking might be found.)

In any event, curious about the long-sought and (apparently) now-realized spectrum inventory, I went to the two web addresses provided by Genachowski. When I got to the LicenseView page, I noticed a handy “learn more” button, so I clicked on it, only to find myself staring at a warning that LicenseView “is not intended for analysis of spectrum utilization or spectrum holdings of licensees.” 

Huh.

Looking further down the LicenseView page, I found (amid other disclaimers) the following:

The information contained [in LicenseView] has not been relied upon by the Commission to analyze the competitive marketplace or assessing [sic] the spectrum holdings of service providers in any particular geographic area.

More curious than before, I scampered over to the Spectrum Dashboard page and clicked on the “learn more” button, which took me to a second page (headline: “About Spectrum Dashboard”) advising me that:

[t] he Spectrum Dashboard does not constitute the official licensing records for the Commission. Specifically, the FCC makes no representations regarding the accuracy or completeness of the information maintained in the Spectrum Dashboard.

At the bottom of that second page, I found another “learn more” button, which took me to a page titled “Understanding Your Results”, which informed me that

[t]he data and analyses contained herein are not relied upon by the Commission in analyzing the competitive marketplace or assessing the spectrum holdings of wireless service providers in any particular geographic area.

Maybe I’m missing something here, but if LicenseView and Spectrum Dashboard don’t constitute complete or official FCC records, and if the FCC isn’t willing to vouch for the accuracy of either, and if the FCC itself doesn’t rely on either, then they don’t seem to be particularly good evidence of the existence of a reliable spectrum inventory. The Commission undoubtedly has access to the information necessary to assemble such an inventory, and some of that information may even be available through LicenseView and Spectrum Dashboard. But in their present forms, those “tools” don’t really seem to do the trick, as the FCC’s own disclaimers acknowledge.

But as I said, maybe I’m missing something . . .

Extreme Makeover - USF: Looking At Lifeline/Link Up

Sweeping NPRM proposes changes in implementation in low income programs, possible integration of broadband

As part of its ongoing effort to modernize (and rationalize) the various elements of the Universal Service Fund (USF), the FCC has now turned its attention to Lifeline and Link Up. These two programs make up USF’s Low Income component, which seeks to make telecommunications accessible to those with low incomes.  In a 98-page Notice of Proposed Rulemaking (NPRM) released March 4, the FCC has set out a number of proposals for possibly significant changes to its current approach. Many of those proposals implement recommendations from the Federal-State Joint Board on Universal Service (which we reported on here last fall), the Government Accountability Office, and the National Broadband Plan.

To get a better feel for the nature and extent of the proposed changes, it may be useful first to get a sense of the way the Lifeline and Link Up programs work.

The goal of the programs is to insure that “quality telecommunications services” are available to low-income customers at “reasonable and affordable” rates. To that end, the government does not reimburse the low-income customers directly; rather, it reimburses eligible telecommunications carriers (ETCs) who provide service to low-income customers. The ETCs submit quarterly forms reflecting the extent of low income support they have provided. In 2010, the cost of the Lifeline/Link Up programs was $1.3 billion (roughly five times its 2007 size) – in other words, there’s a serious pot of cash to dip into.

There is no uniform, nation-wide set of standards and procedures by which ETCs identify eligible “low-income” customers. Standards and procedures vary among the various states. In many instances, verifying documentation is not required. The potential for innocent error or less innocent fraud is not insubstantial.

The focal points of the FCC’s Lifeline/Link Up reform efforts described in the NPRM are:

  • eliminating fraud, waste and abuse;
  • capping the Low Income Fund;
  • improving program administration; and
  • modernizing Lifeline and Link Up (including reimbursement for broadband, of course).

Out of the hundreds of discrete issues teed up for comment, we have selected a few highlights below.

Fraud, waste and abuse. The FCC is confident that it can reduce fraud, waste, and abuse in the Lifeline and Link Up programs. (It’s so confident, in fact, that it’s already planning a broadband adoption pilot program on which it can spend the money it’s going to save.  See below for more details). To do that, it proposes to eliminate a number of problem areas in the way the programs are implemented. For example, the following would be axed by the Commission:

  • Link Up (activation) reimbursement for carriers that do not routinely impose activation charges on all customers within a state;
  • Duplicate discounts going to the same household (under the rules, each household may only receive one telephone line, either wireline or wireless). To prevent duplication, the FCC proposes to require carriers to obtain a certification from consumers that there is only one Lifeline service per address;
  • Self-certifying for eligibility by consumers (instead, the FCC proposes to require carriers to demand documentation);
  • Inadequate verification sampling (the FCC may require larger sample groups or a census of all customers if an initial sample group reveals too many ineligible customers);
  • Reimbursement for services unused for 60 days (a particular concern for prepaid services);
  • Complete – as opposed to pro rata – reimbursement for subscribers who enroll or disconnect during the month; and
  • Toll limitation service reimbursement (obsolete and susceptible to over-reimbursement).

To ensure that eligible telecommunications carriers (ETCs) providing Lifeline are on board with these goals, the FCC proposes a “more rigorous” approach – including more, and more expanded, audits – to the management of the program.

Capping the Low Income Fund. The NPRM seeks comment on various issues relating to capping the size of the Low Income Fund, for example at the 2010 disbursement level.  It recognizes that the Fund already has an ultimate cap in the sense that only a defined population of eligible households may participate, and support is limited to $10 per month per household.

Program administration. The NRPM suggests various ways to improve program administration, such as: 

  • Adopting a one-per-residence (i.e., U.S. Postal Service address) eligibility rule;
  • Clarifying the eligibility rules for residents of Tribal lands  and proposing eligibility through participation in federal Tribal low income programs;
  • Imposing federal baseline eligibility criteria, including perhaps raising the cutoff from 135% of the Federal Poverty Guidelines to 150%;
  • Coordinating enrollment with other social service assistance programs;
  • Developing a national database to prevent duplicate claims and verify eligibility (anyone who has worked with the FCC’s CORES database will likely be amused at the idea of the FCC creating a database intended to eliminate duplication); and
  • Imposing mandatory outreach requirements.

Broadband.  In keeping with its conviction that broadband service should be universally available, the FCC also proposes to extend the Lifeline program to include broadband. It seeks comment on whether a Lifeline discount should be available for any plan that includes a local voice component, including bundled voice and broadband.  It queries further whether broadband itself should be eligible for Lifeline support (note that this is a separate query from whether broadband should be a required supported service) – and, if so, how can broadband costs be integrated into the program in a way that minimizes (if not avoids) additional waste, fraud or inefficiencies?

Demonstrating that even imaginary money can burn a real hole in a governmental pocket, the FCC already has plans for how to spend the cash that it will save. Of course, any actual savings will require, first, that the proposals be adopted and implemented and, second, that those proposals in fact be effective. Apparently taking for granted that all those pieces will fall happily into place, the Commission has its heart set on indulging its compulsion to pocket funds to feed its broadband habit: it plans to set aside its savings to create a pilot broadband program. The pilot program will test different approaches to providing support for broadband to low-income consumers across different geographic areas and demographics. In particular, the Commission is looking to test how much of a factor hardware is in broadband adoption.

Of particular interest to Lifeline carriers. Carriers considering the daunting prospect of applying for Lifeline-only ETC designation through the forbearance process will be cheered that the FCC is considering doing away with the own-facilities and rural areas redefinition requirements. These requirements are designed to prevent cream-skimming in a High Cost context and don’t make sense in a Low Income-only situation. The Commission is considering codifying the conditions that it has been applying to forbearance grants instead. Even more radical, but strangely sensible, is the Commission’s apparent interest in AT&T’s proposal to allow any carrier to provide Lifeline discounts at a flat rate.

However, the Commission somewhat grimly notes that the fact that “numerous carriers are seeking designation as Lifeline-only ETCs . . . suggests that the current structure of the program may present an attractive business opportunity for firms that employ different business models than traditional wireline carriers.” To prevent funds going to carriers rather consumers, the FCC seeks comment on whether there is a more appropriate reimbursement framework than the current four-tier system based on an ILEC’s subscriber line charge. Furthermore, to protect Low Income consumers from receiving less-than-adequate service, the FCC asks if there should be minimum service requirements for prepaid ETCs (or for other carriers), such as a minimum number of monthly minutes.

The design and implementation of modified Lifeline/Link Up programs present problems of immense complexity for the Commission. Besides the enormity of the project – the raw numbers of eligible customers, the multiple mechanisms for determining eligibility, the detailed auditing process already in place – the Commission must also deal with the concept of grafting a new service (broadband) onto the system. Additionally, the underlying business of delivering telecommunications services is itself developing rapidly, creating new and different business models that may or may not be easily integrated into the Commission’s approach either now or in the future. The preferences of the consuming public also come into play. And don’t forget that we’re talking about a pool of funds that already exceeds one billion dollars, a tempting target for less-than-honest entities.

The scope of the NPRM suggests that the Commission recognizes the daunting nature of the challenge it is undertaking. Whether – and if so, when – the Commission will ever be able to claim that it has met that challenge remains to be seen. But at least the FCC has made the first move in its quest.

The NPRM was published in the Federal Register on March 23. Comments on the proposals in the NPRM are currently due to be submitted by April 21, 2011; reply comments on Sections IV, V (Subsection A) and VII (Subsections B and D) are due by May10, 2011. Reply comments on the remaining sections are due by May 25, 2011.

A Look At The FCC's Proposed Overhaul Of USF And Intercarrier Compensation Regimes

Weighing in at 228 pages (not including an extra 61 pages of appendices and separate Commissioners’ statements), the NPRM illustrates the complexity of the problems facing the Commission.

A journey of a thousand miles begins with a single step. As reported here, last month the FCC began its own long, long march to the Promised Land of USF/ICC reform by issuing a massive 289-page tome that promises to revisit, reassess, restructure and revitalize virtually every aspect of universal service support and intercarrier compensation as we know it.  

The task is a daunting one. Perhaps for that reason, the Commission has been putting it off for more than a decade, tweaking this or that and putting out small brushfires as they’ve arisen, but never tackling the fundamental reform that virtually everyone agrees is desperately needed.   Complicating the task is the fact that USF reform and ICC reform are inextricably related – you can’t reform one without reforming the other.   So the FCC has correctly chosen to attack the two behemoths – each of which has proven remarkably impervious to reform – in a single charge.   This multiplies the complexity and size of the proceeding exponentially, but is the intellectually honest way to approach the matter.

In truth, just reading the Notice of Proposed Rulemaking (whose formal, if somewhat redundant, title is “Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking”) (NPRM) was a major undertaking. The document inquires into literally scores of existing policy issues, from questions as fundamental as the FCC’s jurisdiction to regulate VoIP to details as granular as benchmark rate levels. So far-reaching is the inquiry that we estimate that more than a thousand distinct questions or issues were posed for industry input.  Recognizing the logistical problem of arranging the myriad number of meetings necessary to garner the expected input from all parties, the Commission has taken the unusual step of establishing formal procedures for scheduling meetings with the staff.

On the other hand, the Commission has somewhat unrealistically allocated only 45 days for initial comments on the majority of the NPRM and 35 days thereafter for replies.  (Note: a separate abbreviated comment period was established for the part of the NPRM addressing pressing abuses of the existing system such as traffic pumping and phantom traffic.)  As we have previously reported, preliminary comment deadlines have already been established: April 18 for comments on all but Section XV; May 23 for reply comments.  Given the breadth of the inquiry and the years it took to bring this NPRM to term, the comment period strikes us as a bit stingy.   The FCC supposedly has this on a fast track, but there are simply too many moving parts in this vast proceeding for everyone to get their two cents worth in in this timeframe. Expect these dates to be extended

In approaching the reform effort, the Commission will be guided by four prinicples: (i) modernization of the USF and ICC for broadband, (ii) fiscal responsibility, (iii) accountability, and (iv) market-driven policies.   Turning these noble principles into concrete regulations is the hard part. As we’ve indicated, the scope of the proceeding is too all-encompassing to permit detailed treatment of every aspect of it here, but the highlights are outlined below.  

Short Term/Long Term Solutions: Recognizing that billions of dollars have been invested in, and depend on, the existing regulatory regime, the FCC proposes to adopt remedial measures for the most obvious abuses and inefficiencies in the short term, while putting in place long term permanent reforms that come into play gradually over a period of years. While it is understandable that the Commission might not want to upset settled investment expectations (particularly of ILECs), the Commission demonstrated precious little solicitude to CLECs in 2008 when it abruptly capped their access to USF funds in a single stroke, leaving them well short of the support presumptively necessary to meet their ETC obligations. Be that as it may, the FCC contemplates comfortable “glidepaths” and phased transitions to ease the pain of companies accustomed to feeding at the USF and ICC troughs.

Short Term Universal Service Solutions.  In the short term, the FCC proposes to:

  • circumscribe or eliminate several high-cost support programs which may have outlived or outspent their usefulness, including high-cost loop support, local switching support, interstate common line support, and interstate access support. The FCC asserts that these programs as currently structured reward inefficiency and actually discourage movement to more advanced technologies. 
  • not only develop benchmarks for capital and operating expenses fundable under the high-cost programs, but also cap the amount of support per line that can be received by any one carrier at $250. (There are horror stories of carriers receiving as much as $2,000 per month per line in support!) 
  • change its procedures to encourage rational consolidation of service areas eligible for support in order to reflect operational efficiencies rather than USF gaming.
  • eliminate the identical support rule. This rule, which somewhat nonsensically ascribes the same high-cost reimbursement to a CLEC as to the ILEC in the same market, has been long due for change.
  • stimulate broadband build-out by a one-time disbursement (between $500 million and one billion dollars) based on a reverse auction. The funds recipient in each area would be the carrier willing to build broadband facilities in unserved parts of the country at the lowest cost. Broadband service under this proposal could be provided by either wireline or wireless technology or even by satellite (on an ancillary basis) if that proved most efficient for remote areas. This program is apparently a complement to the Mobility Fund proposed last year to disburse $500 million via a reverse auction to construct mobile broadband facilities in needy areas.

Long Term Universal Service Solutions. The Commission’s long term vision for USF involves phasing out all of the existing support mechanisms entirely and replacing them with the Connect America Fund (CAF), a mechanism for supporting broadband in areas of the country where broadband is not economically sustainable without such support. Voice service would simply be a component of the larger broadband service. Support under the CAF regime would be determined in one of two ways.  

Under Plan A, there would be a reverse auction in which any carrier using any technology (wireline, wireless or satellite) could bid on the right to provide broadband (or voice only) service in given regions. A single low bidder would receive the funding and have the obligation to provide supported basic services. The Commission envisions satellite service as being a part of the mix since some areas are so remote as to be most economically servable only by satellite, while other areas are more conducive to terrestrial coverage. The most efficient plan would incorporate both technologies to reach everyone at the lowest overall price. The reverse bidding process should ensure that the level of support provided is directly related to the actual costs associated with providing service without the need for bureaucratic review of cost components to determine if the costs are justified or reasonable. This plan has immediate appeal since on its face it ensures that the basic telecom service needed by people in high-cost areas is delivered at the lowest price without redundancy.

No doubt to mollify ILECs concerned about the possible loss of support through such a process, the Commission also floated Plan B. Under this option, current carriers of last resort would have a right of first refusal to take on the obligation of providing broadband/voice service throughout their area.   While this would ensure that such carriers (invariably ILECs) continue to receive not just some but all of the subsidies available for their areas, it would also require the Commission to establish and administer a detailed cost recovery model and continuing oversight to preclude padding of expenses. In a highly competitive carrier environment, such cost recovery models seem antiquated. Moreover, this option seems like a step backward to what was essentially the monopoly subsidization system that existed prior to the introduction of competition into the USF scheme. So it’s hard to see this as a meaningful reform in any sense.  

Finally, the Commission mentions a third option for rate of return carriers only: maintaining the current system but capping elements such as ICLS in order to incentivize the carriers to reduce costs. It is unclear why this is even part of the long term reform vision since a reform like this could be imposed on rate of return carriers in the near term to good effect.

Short Term ICC Reform.  The FCC’s immediate reform of the Intercarrier Compensation regime would deal with what are recurring abuses of the system. The current regulatory scheme creates opportunities for arbitrage that have resulted in unnatural schemes of a different nature – phantom traffic, access stimulation, traffic pumping. When millions of dollars are to be had by simply structuring a phone call in one way rather than another, the human capacity for innovation and ingenuity is marvelous indeed.  The Commission proposes to forestall the access stimulation device by requiring rate of return carriers who enter into “revenue sharing” arrangements such as chat lines to modify their tariffs to account for the new traffic.  Competitive carriers would have to benchmark their rates to the largest ILEC in the state, thus ensuring a more normal rate. The problem of phantom traffic (traffic which is passed on to a connecting carrier without sufficient information to identify the party to be billed) would be addressed by requiring all calls, including VoIP calls, to carry the necessary identifying info.  

Long Term ICC Reform. The deeper problem of how to handle VoIP traffic (which now sometimes goes unbilled) is part of the FCC’s long-term solution. Clearly all traffic will eventually be IP and the current regulatory distinction between IP traffic and circuit-switched traffic will have to be erased. For more than a decade, the FCC has danced around the issue of whether VoIP should constitute a telecom service or an information service – a distinction that has enormous consequences for the regulatory treatment which it gets. The FCC has so far handled the problem by using its non-Title II authority (i.e., sources of jurisdiction not based on telecommunications carrier status) to make VoIP carriers comply with many of the same obligations as regular carriers.  This evasion of the issue continues, with the Commission concocting new ways of regulating broadband or IP traffic without actually denominating such traffic as telecommunications. 

Ultimately, this dance will have to come to an end. In the context of this overall reform effort, the Commission should certainly have teed up the issue for resolution. Its failure to do so (the Commission devotes a single paragraph out of 703 paragraphs to this fundamental question) unfortunately casts a shadow on all of its other more specific proposals to rationalize the treatment of VoIP traffic by treating such traffic the same as circuit-switched traffic.  Until the Commission bites the bullet and reclassifies VoIP, VoIP can’t be treated exactly the same as other traffic since it falls into a different regulatory peg hole.

Long term ICC reform also presents other fundamental jurisdictional problems, the foremost being the historical division of regulatory authority between interstate and intrastate traffic.   Those distinctions (which made sense back in 1934) make no sense at all today.   Without a single nationwide regulatory framework, possibilities for arbitrage and discriminatory intrastate rates continue. The FCC struggles with this problem by proposing different hooks on which it can hang a pre-emptive hat (such as its plenary authority over CMRS rates), but it also suggests ways in which it can induce states to toe the federal line by moving up subsidies or other means. Ultimately, this division of regulatory authority is an obstacle to a consistent nationwide regulatory framework that requires a fundamental change in the Act; in the meantime, the Commission can only do what its limited authority allows.

If it can find the jurisdictional ground to stand on, the FCC proposes to reduce access charges across the board by getting away from per minute charges. It could do so by simply mandating a bill-and-keep approach (where neither connecting carrier charges the other) or flat-rate connection not based on volume. It could also, either on an interim basis or permanently, establish rate benchmarks which would keep the size of access charges within reasonable bounds while also permitting carriers’ costs to be recovered. Shortfalls arising in high-cost areas would be dealt with through explicit subsidies from the CAF rather than through invisible overcharges for access.  

Given the combination of jurisdictional hurdles and billions of dollars that will move from one company’s pocket to another’s as a result of ICC reform, the likelihood of paralysis on this issue is high. Yet it is here that reform is most needed because the current market for telecommunications traffic is artificially distorted by the feudal system that still prevails.

We expect to be providing more targeted thoughts on some of the Commission’s specific proposals in the weeks ahead. In the meantime, interested parties are encouraged to weigh in at the Commission to make it aware of particular problems and abuses and to suggest possible alternatives.

Three Incentive Auction Bills Introduced In Congress

Proposals would authorize FCC to share auction proceeds with broadcasters as part of spectrum re-purposing process

It’s no secret that: (a) the FCC would like to re-purpose already-occupied broadcast TV spectrum for broadband use; (b) many (if not most) of the folks who currently occupy that spectrum are not particularly keen on the idea; and (c) the FCC figures that any broadcaster resistance to spectrum re-purposing might be softened by the siren song of a big payday, with the cash coming out of the proceeds of an auction of the re-purposed spectrum.

The FCC’s problem (also not a secret) is that the Commission doesn’t have the statutory authority to promise any auction proceeds to licensees who relinquish their spectrum.

It’s obviously time (with apologies to Stephen Sondheim) to . . . send in the legislators!

Already, three bills have been introduced this year that would allow the Commission to spread the spectrum wealth around; reports of still more bills in the works continue to surface. (This is in addition to several bills introduced last year.)

First into the mix this year was S.415 (a/k/a the Spectrum Optimization Act). A short and sweet four-page bill from Sen. Mark Warner (D-VA), it would give the FCC the authority to conduct auctions of spectrum that is “voluntarily relinquished by a licensee”, with “a portion” of the proceeds being shared with relinquishing licensees. 

Exactly what portion, you ask? The bill would simply leave it to the Commission to “establish a maximum revenue sharing threshold applicable to all licensees within any auction, unless the establishment of such threshold would increase the amount of spectrum cleared or would increase the net revenue from the auction of such spectrum”. Say what? The bill would also order the Commission to “minimize the cost to the taxpayer of the transition of the spectrum to be auctioned”. That provision could complicate the workability of a suggestion advanced recently by Media Bureau Chief William Lake that the government might also pay for the costs of repacking the spectrum. 

So the Warner bill would give the FCC a carrot (i.e., auction proceeds sharing) with which to induce broadcaster cooperation, even if the size and deliciousness of that carrot are still up in the air. By contrast, it has no provision for a stick with which broadcasters might be threatened into cooperating. Some of last year’s bills would have created a spectrum tax that could have done just that – but the Warner bill says nothing about such a tax.

On the House side, we have H.R.911 (dubbed the Spectrum Inventory and Auction Act of 2011) introduced by Rep. John Barrow (D-GA). This, too, would give the FCC the authority to conduct incentive auctions. But before such auctions could be conducted, the FCC and the NTIA would first have to complete an exhaustive broadband spectrum inventory report which would have to be made public and updated semi-annually. The report would be no walk in the park: it would have to detail federal and non-federal uses of the spectrum and describe (among other things) the types of receivers in use, the geographic distribution of the various uses, and the frequency of use.  

Only after this initial report is completed could the FCC move forward with incentive auctions. As with S.415, H.R.911 would leave the to-be-shared amount of auction proceeds up to the FCC’s discretion. The only guidance on that score is that the sharing should be “in an amount or percentage that the Commission considers appropriate and that is more than de minimis”. 

Importantly, the bill would expressly prohibit the Commission from reclaiming spectrum “directly or indirectly on an involuntary basis”. The bill is silent as to what would qualify as an “indirect” involuntary measure. Nevertheless, the fact that that language is included may comfort some skeptics who expect that the FCC might otherwise opt for non-voluntary strong-arm measures to persuade licensees to give up their spectrum. (Note: no reference to any spectrum tax here, either.)

Back on the Senate side, we have S.455, the Reforming Airwaves by Developing Incentives and Opportunistic Sharing Act – or “RADIOS Act” – co-sponsored by Sens. John Kerry (D-MA) and Olympia Snowe (R-ME). This bad boy weighs in at a much heftier 51 pages. It follows up on a similar bill these two senators co-sponsored last year.  According to Kerry’s website, this year’s edition is “comprehensive spectrum reform legislation to modernize our nation’s radio spectrum planning, management, and coordination activities.”

Much like Barrow’s bill, the RADIOS Act would permit the sharing of auction proceeds while requiring the FCC to complete a spectrum inventory and other similar exercises. However, here completion of the inventory does not appear to be a condition precedent to the incentive auction. The amount of auction proceeds available for sharing would be left to the Commission (“an amount or percentage determined in the discretion of the Commission”), and broadcaster participation would be strictly voluntary. And as with the two bills described above, the RADIOS Act says nothing about spectrum taxes. Interestingly, in the section about incentive auctions, the RADIOS Act requires that the Commission assure that there will be “adequate opportunity nationwide for unlicensed access to any spectrum that is the subject of such an auction.” This is intended to protect the continued availability of spectrum for white spaces devices.

(The RADIOS Act sprawls well beyond these narrow limits, but the description above should answer the immediate questions of folks concerned about the possibility of incentive auctions.)

The RADIOS Act, Warner’s Spectrum Optimization Act, and Barrow’s “Spectrum Inventory and Auction Act of 2011” are the first, but almost certainly not the last, pieces of legislation that have come out of the chute this year. Word is that several other legislators will likely get in the act over the next few months. We understand that at least one of bill will specifically direct that a portion of incentive auction proceeds will be set aside to assist broadcasters relocate to different channels as part of a repacking process.

None of these three bills provides any clear indication – or even basis for speculation – about the amount of auction proceeds that participating broadcasters might expect to get their hands on. Indeed, other than the impenetrably obfuscatory language in the Warner bill, the bills would give the FCC nearly unfettered discretion to make that call. That’s not necessarily good news, but it might be unrealistic to expect Congress to micromanage such things. On the other hand, the fact that none of the bills threatens imposition of a spectrum tax is a hopeful sign, since such a tax could easily be wielded as a threatening economic cudgel to encourage “voluntary” participation in the spectrum re-purposing process.

Of course, Congress’s seeming interest, just right now, in spectrum auction legislation must be counter-balanced against the undeniable fact that, by the end of this year, posturing for the 2012 elections will have begun. As a result, by then prospects for movement on most legislation of any sort will likely be slim. So if we’re going to see the enactment of any new legislation dealing with the overhaul of spectrum regulation, including incentive auctions, it will likely be sooner rather than later.   We’ll keep you updated on these bills, and any new ones that get added to the Incentive Auction Sweepstakes.

Update: Comment Deadlines Set In USF/ICC Rulemaking

Last month we reported on the FCC’s adoption of a “Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking” (NPRM/FNPRM) kicking off a proceeding which looks to overhaul, from top to bottom, both the Universal Service Fund and the Intercarrier Compensation system.  The NPRM/FNPRM has now been published in the Federal Register, which sets the deadlines for comments and reply comments.  Get out your pencils and papers -- there are more deadlines than usual (probably because of the vast scope of the proceeding). 

If you want to comment on Section XV ("Reducing Inefficiencies and Waste by Curbing Arbitrage Opportunities"), you have until April 1, 2011 to file comments and April 18, 2011 to file replies.  [Note: Section XV comprises Paragraphs 603-677 of the original NPRM/FNPRM.  The summary of the NPRM/FNPRM as it appears in the Federal Register does not contain the full text of the NPRM/FNPRM and does not include the same paragraph numbering or section labeling as the original.]

Comments on the remaining sections are due no later than April 18, 2011; reply comments are due no later than May 23, 2011.  There's also a separate comment date for State Members of the Federal-State Joint Board on Universal Service -- that would be May 2, 2011.  And finally, if you'd like to offer the FCC comments on the information collection aspects of the proposal (in connection with the Paperwork Reduction Act), you have until May 2, 2011.

To Serve Broadcasters*

Another peek at what spectrum re-purposing might look like

In what appears to be an ongoing effort by the Media Bureau to soften the ground on the spectrum re-purposing front in advance of an eventual all-out assault, Bureau Chief William Lake recently spoke to the National Alliance of State Broadcasters Associations, preaching the gospel of incentive auctions. His message: We come in peace, with broadcasters’ interests at heart. Submit to our plans and everything will work out for the best. Honest.                                                               

Maybe theirs is the path to the ultimate win-win-win situation. As we have previously urged, broadcasters should keep an open mind and give careful consideration to any final plan the Commission eventually comes up with.

But broadcasters might also be forgiven if, at least for now, they opt for skepticism over unquestioning acceptance.

In his speech (the text of which may be found here), Lake lays out five basic points. Let’s take a look at them.

Point 1: The need for more spectrum for wireless broadband is real.

We can all agree that the general public is relying increasingly on mobile devices, and that, to the extent that those devices require spectrum to do their job, the demand for wireless-friendly spectrum is growing correspondingly. No problem there.

But the existence of increased demand for spectrum does not necessarily support the FCC’s apparent conclusion that it is essential that TV broadcasters cough up their particular chunks of spectrum so that others might use it. Why, for instance, can’t the Commission simply modify the rules governing spectrum use to permit broadcasters to offer wireless services? If the need for spectrum is so dire, shouldn’t the Commission be doing everything it can to encourage innovations that could increase efficient spectrum use? (Apparently not, since the Bureau recently rejected a proposal for experimental authority to test an over-the-air broadband delivery service on TV channels.)

Point 2: All the good spectrum is already occupied, so somebody’s going to have to be relocated – and that somebody should be TV.

While it’s one thing to speak generally of total spectrum congestion, it’s another to provide a detailed inventory of precisely (a) who’s got what spectrum, (b) how long they’ve had it, and (c) what they’re currently doing with it. A number of senators submitted a bill two years ago that would have required the FCC and NTIA to assemble such an inventory. That bill went nowhere.

The Commission is apparently sensitive to criticism about the utilization of spectrum by non-broadcasters, as Lake (somewhat defensively, it seemed) alluded in his speech to the fact that Verizon and AT&T are in the process of building out the spectrum they bought three years ago. (According to Lake, Verizon expects to be serving nearly 300 million folks by the end of 2013; AT&T plans to be serving 75 million by mid-2011and “to expand rapidly after that”.) OK, that’s two spectrum holders. How about the rest, including the government itself? Does the Commission really have a solid, detailed grasp of actual spectrum usage? Shouldn’t it – at least before starting to herd an established industry off into more confined pastures?

Point 3: The FCC has the broadcast industry’s interests at heart.

Lake says this point “deserves emphasis”, but then dedicates a grand total of two sentences to it. In the first sentence, he perfunctorily tips his hat to the “great service” TV provides to the public. The second (and last) sentence reads simply:

We firmly believe that an incentive auction can provide a financial shot in the arm for those broadcasters who choose to participate and can leave the remainder of the industry in an even strong position to carry on the important benefits of over-the-air television.

The Commission may in fact believe that – but you have to admit that the wholesale lack of detail there is a bit disquieting. It has the ring of an over-eager sales pitch, holding out the promise of pure upside and non-existent downside.

Point 4: “It is natural to fear the unknown.”

No kidding. Unfortunately, what is unknown to broadcasters is, at this point, also unknown to the Commission. That’s because the FCC’s preferred course – incentive auctions – isn’t currently available to the Commission, and won’t be unless and until Congress gives it the authority to offer such incentives.

But that doesn’t stop Lake from offering glimpses of an idyllic system in which broadcasters would basically name their own price (by setting, up front, a “reserve price” for their spectrum). Once the spectrum to be sold is identified, the Commission would auction it off, with the proceeds “being shared” by the Treasury and contributing broadcasters. Lake emphasizes that any participating broadcaster would “set its own price”.

That sounds great, but would it really be as simple as that? Who knows – since neither the precise auction mechanisms nor any possible limitations on the splitting of auction proceeds have even been proposed, much less adopted?

Point 5: Keep an open mind.

This one we can all agree on. It never does anybody any good to make prejudgments about unknowns, and at this point the incentive auction is just that, an unknown.

But because it is an unknown, it’s also important not to be lulled into a false sense of tranquility and acceptance. The Commission may, as Lake indicates, be totally committed to doing right by broadcasters. But even if that’s the case, the Commission may find those best wishes frustrated by whatever Congress does.

And then there’s the possibility that, while the Commission may talk a good game, its seemingly monomaniacal obsession to maximize the spread of wireless broadband is really the only thing that matters here – and if broadcasters get in the way of that goal, well, that’ll just be too bad.   (Indeed, according to a speech given by former Chairman Reed Hundt on the eve of the adoption of the National Broadband Plan last year, the weaning of the American public away from broadcasting and onto the Internet as the dominant “common medium” has apparently been a project on Chairman Genachowski’s to-do list since he served as Hundt’s Chief Counsel back in the mid-1990s.)

At this point, none of us can know for sure what’s going to happen – indeed, even the Commission can’t know, given its lack of statutory authority.  So while we should definitely maintain an open mind and a willingness to examine alternatives, we should also be mindful that the halcyon image Lake has described may not be anywhere close to the eventual reality.

*With acknowledgement to Rod Serling and Damon Knight.

Coming Attractions: FCC Webinars Touting Spectrum Re-Purposing

Announcement promotes series of webinars targeting TV broadcasters

As far as the Commission’s concerned, it’s apparently all systems go and full speed ahead with the effort to encourage TV broadcasters to relinquish their spectrum so that it can be used to further the National Broadband Plan. The latest evidence of this is the following announcement sent by Commission reps to state broadcast associations:

FCC Webinar for Television Broadcasters

Please join FCC Media Bureau Chief Bill Lake and Rebecca Hanson, Senior Advisor, Broadcast Spectrum, in a live webinar that describes the financial opportunities offered by voluntary incentive auctions, as proposed in the FCC’s National Broadband Plan.  Incentive auctions for TV spectrum seek to offer broadcasters new business model options involving their voluntary contribution of some or all of their licensed spectrum, including options that allow broadcasters to participate and continue to broadcast. This webinar will give an overview of those opportunities and will provide an opportunity for the FCC representatives to respond to questions, including questions about the need to repack the remaining television channels following the auction. Specific topics will include:

-- How would an incentive auction work?

-- Broadcaster Opportunities, channel-sharing, and

-- VHF Repacking Implications

Station owners, managers, key personnel, and station attorneys are invited to participate - so please forward this notice to others who have interest.  Stay tuned for details about registration for this event.

Thank you.

A total of 15 separate presentations have apparently been scheduled from March 10 – April 6. We don’t know if this is the final number. Nor have we yet gotten the scoop on how to access any of the webinars (URL’s, dial-in phone numbers, access codes, etc.), but when we do, we’ll be sure to pass along what we learn, so check back here for updates.

However one might feel about the re-purposing of TV spectrum, it would make sense to attend the webinar if only to get, straight from the horse’s mouth, any and all details of the plan that might be disclosed. For more than a year the Commission has demonstrated an overwhelming determination to use TV spectrum for broadband. The timing of these webinars may be somewhat premature – for instance, the spectrum at issue has still not been allocated for broadband use (although that’s in the works), and the FCC doesn’t have the authority to provide broadcasters “incentives” in the form of portions of auction proceeds – but the fact is that the Commission seems absolutely bound and determined to make the re-purposing happen. That being the case, it’s a good idea for all folks likely to be affected by the change – broadcasters being the most obvious example – to learn as much about the plan as possible as early as possible.

Of particular interest should be the “new business model options” the Commission has in mind for broadcasters. Helpful suggestions about new alternatives and opportunities are always welcome, even when the source is as unlikely as the federal government. It is unclear, however, whether the Commission’s list of “options” will be as broad as possible: in one recent decision, the Media Bureau displayed a curiously constricted approach to a possible alternative use of broadcast spectrum. The Bureau denied a request by an LPTV licensee to test an innovative technology that might have led to a “new business model option”. It was not an option, apparently, that the Commission wants to encourage. (Full disclosure: FHH member Peter Tannenwald represents the proponent in that case.)

It will also be intriguing to hear the Commission’s take on “how would an incentive auction work?” As noted, the agency still doesn’t have the authority to share its auction proceeds with private parties (like broadcasters seeking compensation for turning their spectrum in for auction). Nor has it been determined precisely – or even roughly – how any individual broadcaster’s share of those proceeds might be computed. As a result, we shouldn’t be surprised if this portion of the webinar tends to be longer on hopeful promotion than on useful practical detail.

Still, the fact that the Commission is sending its missionaries out to preach the gospel of spectrum re-purposing and, in the process, possibly convert non-believers is an important development for all concerned. It presents opportunities for all sides. Such opportunities should not be ignored.

Next Candidates For Extreme Make-Overs: USF And ICC

FCC proposes major overhaul of Universal Service Fund, Inter-Carrier Compensation Systems

Perhaps inspired by the protesters in Egypt demanding the end to an outdated, bloated, aging, inefficient, and economically unsustainable regime, the FCC has finally taken up the task of systemic reform of the Universal Service Fund (USF) and Inter-Carrier Compensation (ICC).    These two mechanisms – one a product of the 1996 Telecom Act and the other a result of the break-up of the Bell System back in the ‘80s – allocate billions of dollars in telecommunications charges and revenues among carriers.   As with many grand failures, these systems were well intended. They were designed to compensate carriers fairly for routing traffic to and from each other, while also providing transparent subsidies to carriers who provide service in “high cost” areas.

Virtually everyone agrees that the systems do not accomplish their intended purposes either fairly or efficiently. But because there are so many parties that benefit one way or another – to the tune of billions of dollars – from the existing system, the FCC has been paralyzed for over a decade in its efforts to effect meaningful reform.   Now, flying the pennant of the National Broadband Plan (NBP) in which reform of these mechanisms was called for, the FCC has launched a top- to- bottom overhaul of the two systems.   The Commission’s original NBP action agenda called for these reforms to be initiated by the fourth quarter of 2010, but in the glacial scheme of action in Washington, a three-month delay counts as on-time. 

The full text of the catchily-titled “Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking” has just been released. It weighs in at a hefty 289 pages – which explains why we haven’t sifted through it in detail yet. (We plan to do so shortly and will report on our findings, of course.)

But from what we have read already, the outlines of the proposal look very promising.

  • The current system permits redundancy by funding multiple providers of basic service when one provider would be enough. The reform would eventually eliminate that problem by designating, based on reverse auctions, a single recipient of the USF support in any particular geographic area. That process should encourage providers to ask for the least amount of support they need to actually provide the required services.
  • The current subsidy system does not establish incentives for some providers to operate efficiently.  The reform will impose limits on reimbursement to address that problem.
  • There will be a measured transition to the new scheme to avoid disruption of current structures. Expect major battles over how long the transition will be, since subsidy recipients will have to have the subsidies pried from their fingers.
  • The Universal Service Fund will be re-dubbed the Connect America Fund in keeping with its new role in achieving the universal availability of broadband. This will require defining broadband for the first time as a supported service and repurposing current funding mechanisms toward broadband rather than plain old voice.
  • Several of the different USF support programs will be consolidated or eliminated to reduce overlap.
  • The ICC scheme will be revised to eliminate incentives for carriers to game the system by artificial arbitrage arrangements such as traffic pumping and phantom traffic.
  • The new ICC regime will recognize IP-based telecommunications as the wave of the future and the system will recognize such traffic while eliminating artificial incentives to maintain legacy networks.
  • The interplay between state and federal regulation of ICC will have to be rationalized. Some federal pre-emption of the field may be called for where permitted by the Communications Act.
  • Workshops will be held to get input from the public on the issues.  (Workshops are for some reason beloved by the Democrats on the Commission, though to us they often seem like an extremely inefficient way to gather data.)

Make no mistake: the task ahead is truly herculean (and here we’re thinking in particular of the Augean Stables). All of the entrenched interests which have so far barricaded themselves against change will be stacking their sandbags and summoning legions of lobbyists to their aid. But at least the battle is now joined.

Comment Deadlines Set In TV Spectrum Re-Purposing Proceeding

Back in early December we reported on the release of the Notice of Proposed Rulemaking (NPRM) which kicked off the long-anticipated push to free up prime blocks of TV spectrum for broadband use. The NPRM has now been published in the Federal Register, which sets the comment and reply comment deadlines. Comments are currently due by March 18, 2011, and reply comments are due by April 18, 2011. Needless to say, this is a proceeding of major league significance to a wide array of current and potential spectrum users. Attention most certainly should be paid.

Effectively Ineffective Effective Date?

FCC either grabs or misses relinquished USF monies

As we reported here a few weeks ago, on December 30 the FCC adopted an Order that permits it to re-purpose the monies that are relinquished by carriers who are no longer ETCs in particular states. From the text of the Order, we thought the Commission wanted to make the Order “effective” as of December 30. Now we’re not so sure.

The back-story here starts in 2008. Under the Interim Cap Order adopted in May of that year, the FCC temporarily “froze” the amount of funds available for distribution to CETCs (including wireless carriers) at then-existing levels. The FCC emphasized at that time that the pool of funds would not change depending on the number of ETCs who were dipping into it – the FCC seems only to have been thinking about increases in the numbers of participants since it designated a lot of new ETCs at the same time as the Interim Cap Order, thus immediately reducing the pro rata funding available to participating ETCs.

In 2008, however, Sprint and Verizon both committed to relinquish their USF funds in certain states as a condition of getting mergers approved.   One would have thought that these funds would then have been available for re-distribution to the remaining ETCs since the amount of funding was to remain fixed. This would have relieved at least a portion of the hit that CETCs took when the combination of the cap and new ETC designations reduced their support well below authorized levels.

Instead, in response to a petition by Corr Wireless (full disclosure: Fletcher Heald represented Corr) complaining that the funds were not being correctly distributed, the FCC decided to just keep the money itself as a rainy day broadband fund. Presumably recognizing the legal infirmity of expropriating these funds in contravention of its own rules, the FCC quickly initiated a rulemaking proceeding which would authorize it to lawfully re-purpose such relinquished funds in the future.   The rulemaking was pushed through hastily, and on December 30, 2010, to no one’s surprise, the Commission adopted the Order. 

The Order included an odd proviso. Typically, FCC rulemaking decisions (like the vast majority of federal administrative actions) become effective 30 days after the new rule is published in the Federal Register. New rules can in rare cases be made effective earlier, but the agency must justify this extraordinary timing by showing that there is good cause for it. Here the FCC simply noted that Sprint had filed notices of its intent to relinquish its ETC designations in several states effective December 31, 2010, and unless the FCC got this new rule into place before December 31, those monies would have gone back into the pool for re-distribution.

Huh? When the earlier Verizon and Sprint monies were relinquished, the FCC had no qualms about stuffing the money into its own pocket, so why couldn’t it have done the same thing with the newly available Sprint money? Perhaps the FCC was candidly acknowledging that its earlier action was legally shaky. 

Unfortunately, the new action simply confuses things further.

First, the FCC's “good cause” showing for accelerating the effective date – that it wanted to prevent CETCs from getting funds that would otherwise be due to them under the rules – would hardly seem to qualify as a basis for deviating from the requirements of the Administrative Procedures Act. Second, although the Order released on December 30 expressly states that it is effective upon release, when the order was published in the Federal Register on January 27, the effective date was given as . . . January 27.   So if the Commission was trying to get things into effect before December 31, 2010, it seems to have stepped on its own foot. 

Finally, although Sprint had requested its relinquishment of ETC status to be effective as of December 31, 2010, the Wireline Competition Bureau waited until January 14, 2011 to approve that request, effective on that same day. If the Bureau could simply delay the effective date of relinquishment by delaying approval of Sprint's request, why did the Commission need to act hastily on December 30? And as long as it was delaying Sprint’s request anyway, why didn’t it just wait to approve relinquishment until 30 days after the December 30 Order had appeared in the Federal Register? That would have removed at least a couple of the legal challenges that are otherwise certain to be filed to this unusual legerdemain involving several hundred million dollars.

So is the Sprint money available for re-distribution to CETCs or not?   You make the call.

Update: Commission Sets Hooks Into USF Windfall

FCC acts quickly to facilitate re-purposing of USF payments left behind by Verizon Wireless and Sprint-Nextel

Last September we reported that the FCC had proposed to grab hold of certain Universal Support Fund (USF) moneys that would no longer be distributed to competitive eligible communications carriers (ETCs) when Verizon Wireless and Sprint-Nextel gave up their ETC status in certain markets (in fulfillment of conditions placed on approvals of their mergers).  And as we reported in October, the expectation is that the relinquished funds will be used for a new mobility broadband support fund.

The FCC has quickly adopted its proposal and made it effective immediately, to take advantage of anticipated relinquishment of ETC status in several markets by Sprint-Nextel on December 31, 2010.

Each state has a cap on ETC support from USF.  Historically, when a carrier gave up support, for whatever reason, the cap stayed unchanged.  With the same number of dollars available in the state, but fewer supported carriers, the remaining ETCs claimed the right to an increase in their own payments.  But the FCC had other ideas, seeing an opportunity to fund part of its planned mobile broadband support program.  It proposed not to allow the remaining ETCs to get any of the relinquished funds.

The new rule confirms that whenever a carrier relinquishes its ETC status and so gives up its USF financial support, the cap in that state will be reduced by the same amount the relinquishing ETCs used to receive, meaning that there will be no additional dollars to distribute to remaining ETCs.

What is not clear is how the new rule will provide funding for a broadband mobility fund, because slush money is available only if the public has to keep contributing at the old rate.  If the state ETC caps are reduced, it seems that the amount to be charged to the public should also go down.  That is obviously not what the FCC has in mind.  Rather, the Commission wants to keep collecting the money from consumers and repurposing it for mobile broadband studies.

Just a couple of weeks ago, the FCC announced that the consumer contribution factor for the first quarter of 2011 will be a whopping – and record-busting –15.5%.  We anticipate a fair amount of grousing from the public over a figure that will raise total taxes and fees on nearly all telephone bills to the 20-25% range.  That pushback may get the FCC to think twice about how far it can boost telephone taxes before the public brings down the building walls.

TV Spectrum Re-Purposing Out For Comment

Proposed changes would pave the way for broadband occupation of TV bands

That muffled sound you might have heard on November 30 was the opening barrage in the long-anticipated struggle to revamp the TV spectrum. More than a mere warning shot but still well short of a coup de grâce, the FCC’s Notice of Proposed Rulemaking (NPRM) is certain to shake the foundation of the television industry – an industry which is still re-building itself in the wake of the DTV Transition tsunami that crested in 2009.

The FCC’s goal in the NPRM is to “lay important groundwork” (in Chairman Genachowski’s words) toward the ultimate goal of permitting fixed and mobile broadband use in the TV band. Such use is thought by the Commission to be necessary to deal with the all-but-certain “spectrum crunch” which is expected to result from burgeoning mobile broadband demands. 

The FCC’s ultimate game plan appears to include coaxing existing TV broadcast licensees off their current channels in order to free up blocks of prime spectrum which would then be auctioned off for broadband use. While the Commission does not have the authority to “incentivize” broadcasters through, e.g., the sharing of the proceeds from such auctions, a couple of bills pending in Congress would provide such authority. The NPRM is intended to put the Commission in a position to move as quickly as possible toward effective spectrum repurposing if and when Congress gives it the power to share auction proceeds with displaced broadcasters.

The NPRM proposes three significant changes to the FCC’s rules.

First, the Commission is proposing to include fixed and mobile wireless services as potential uses in the VHF and UHF spectrum blocks currently reserved primarily for television. This involves a simple amendment to the Table of Frequency Allocations (the Table), which can be found at 47 C.F.R. §2.106. The Table is the official master list of authorized uses of the spectrum. Spread over more than 40 pages of the FCC rule book, it consists of a chart reflecting (a) all of the blocks into which the radio spectrum has been divided and (b) the specific permitted uses for each of those blocks. The Commission is proposing to include “Fixed" and "Mobile” as additional uses for the spectrum currently assigned for television services. 

This change by itself would not mean that broadband uses would automatically flood that spectrum. Rather, it would mean that the Commission could authorize such uses in that spectrum. Of course, the conventional wisdom is that the FCC will authorize such uses once it gets the rest of its ducks in a row. In order to facilitate that eventual process, the Commission is proposing to take this initial reallocation step now.

Second, the Commission is proposing rule changes to permit two television licensees in the same market to “share” one of their 6 MHz channels, thereby freeing the second channel for broadband uses. (Under such a sharing arrangement, two stations would share a single transmitting facility – although each station would be separately licensed and, in principle, independent of the other.) Historically, each TV station has had a full 6 MHz channel to use. Analog operation generally consumed the entire 6 MHz for a single program service, but the advent of DTV service has allowed multiple program streams by a single station over a single 6 MHz channel. The Commission apparently views this arrangement as inefficient. If every station were willing to share channels, that would free up 50% of the spectrum currently devoted to television – leaving that freed-up spectrum available for broadband.

Such channel-sharing would entail a number of complexities, many of which are addressed in the NPRM. Most obviously, the rules would have to be revised to permit such sharing in the first place. But beyond that, channel-sharing raises a host of questions. For example, as envisioned by the Commission, the proposed channel-sharing approach would provide TV licensees who agree to share channels the same MVPD carriage rights they currently hold. Licensees who agree to share channels would not be removed from cable, satellite, or other MVPD systems (e.g., FIOS) for helping out the government. 

The Commission is also seeking comment on other nitty-gritty details of sharing: Should commercial and noncommercial stations be permitted to share common facilities? Should a potential for loss of service by stations seeking to share transmission facilities be considered in determining whether that sharing proposal should be permitted? Ironically, on this last point the Commission suggests that its policy for dealing with service loss is one of flexibility, with the Commission happy to consider “any counterbalancing factors” a licensee might advance. But it doesn’t take a particularly long memory to recall a completely different Commission approach during the DTV Transition, when the Commission routinely denied minor changes to DTV facilities where more than 1% of the population would lose service.

Finally, the Commission is proposing rules to “maximize” the usage of the VHF spectrum. During the DTV Transition, many concluded that the VHF spectrum was not as well-suited for DTV use as UHF. As a result, most full-power stations elected to move to the UHF band to ensure uniform coverage within their service areas. But the UHF spectrum is particularly good for broadband operation, which means that the Commission would now like to wrangle as many TV stations back into the VHF band as possible.

To make such a move more palatable, the Commission is proposing VHF power increases and other revisions to improve the performance of indoor antennas. The goal is to try to offset any disadvantages, perceived or real, in VHF operation. In particular, the Commission is seeking comment on the adoption of the baseline standards for indoor antennas based on the 2009 ANSI/CEA-2032 standard, which establishes testing and measurement procedures for indoor antennas. By taking these steps, the Commission would squeeze more television stations back into the VHF spectrum bands, and free up a larger contiguous block of spectrum adjacent to the 700 MHz A Block which was previously auctioned for wireless uses.

The deadlines for comments and reply comments on the Commission’s various proposals will not be set until the NPRM is published in the Federal Register. Comments will be due 45 days after publication, reply comments will be due 75 days after publication.  Check back here for updates.

While the NPRM clearly sets the stage for TV re-purposing, it’s only the first step in what will likely be a complicated and contentious process. After all, the re-packing of large numbers of TV operations into a tighter chunk of the spectrum will present thorny issues, including the development of a New And Improved DTV Table of Allotments. 

Here again the recent DTV Transition experience provides a glimpse of things to come. Back in the early days of the DTV Transition, the adoption of the first DTV Table of Allotments led to many a battle over which channel would be assigned to which station. Such struggles will likely be even more problematic in a repacking process because that process contemplates a reduced number of channels overall. With fewer options from which to pick, we can expect considerable competition for channels which may be perceived as somehow “better”. How the Commission plans to manage, and resolve, such competition is still a mystery. 

Another concern about repacking: Thousands of Low Power TV stations, Class A TV stations, and television translators are operating on channels not included on the current DTV Table of Allotments. They will face certain displacement during this repacking effort.  While some of these stations may be able to take advantage of the proposed channel-sharing rules, or perhaps participate in the incentive auction, the devil will be in the details.

One thing that sticks in this author’s craw is the suggestion – expressly advanced by Chairman Genachowski and Commission Copps – that the television industry has been sloth-like in taking advantage of the digital spectrum.  Genachowski laments that some stations are not “seizing the opportunity to offer multicast streams or mobile TV”. Copps says that he “would have little interest” in a repacking process if only TV spectrum had been put to “positive use” through the provision of “public interest multi-casting”. 

Such perceptions conveniently miss several important points. 

First, the DTV Transition is still relatively recent. The transition required the acquisition of billions of dollars of new equipment by broadcasters, who also took extensive steps to educate the public on the new technology. They universally accepted, and rose to, that challenge. 

But to create a second or third program stream, a broadcaster has to create, in effect, a second or third station. To be sure, the transmission plant is already in place, but what about the studios, production facilities, staff – and advertising support – for the new program streams? These do not come pre-packaged, available for instant deployment. Quality programming requires extraordinary effort under any circumstance. That is even more the case here, where the new multi-cast streams would not be based on existing network fare (since most network programming is already committed and, thus, often not available for such additional streams).

Additionally, the development of such additional programming is expensive. Let’s not forget that the recession which has plagued the U.S. economy got its start in 2007 and hit hard in 2008, mere months before the government-mandated DTV Transition.

And if you’re talking about supposedly inefficient use of spectrum, what about the fact that other portions of the wireless spectrum for new wireless broadband services (700 MHz D block, for one) lay unused. The current state of multi-cast broadcast television may not meet the halcyon expectations of Copps, Genachowski and others, but at least the television industry built out a nationwide digital television service with the spectrum available to it.

To say that the television industry has somehow come up short and blown its chance is, in my own personal view, demonstrably wrong.   To rely on that misperception as justification for a new repacking initiative strikes me as regrettable.

Be that as it may, the battle call has sounded and the FCC has made its first move. It’s time to fall in and prepare for the long haul. This is likely to be an extended engagement.

Point-Counterpoint: Peter Tannenwald Responds To The Chairman

Another view on the FCC’s efforts to repurpose broadcast spectrum for broadband-only use

FCC Chairman Julius Genachowski’s Op-Ed piece in the Washington Post shows his exceptionally energetic devotion to making broadband available to all Americans. But his perceptions of the need for broadband and how to meet it are both misguided and backward-looking. 

No one disputes the importance and value of broadband in education, health care, and economic growth or the Chairman’s devotion to improving broadband access. But it does not follow that all broadband must be wireless or that TV services must be curtailed, stifling innovations like HD, multiple program channels, and 3D. On the contrary, if it will be possible at all to satisfy the seemingly insatiable public appetite for wireless services within a finite amount of spectrum, the best, if not the only, way to do it will be by marrying broadcasting and broadband into a combined service. 

That means promptly unleashing broadcasters from today’s TV technical standards, which the FCC can do on its own, with no Congressional action. Freeing broadcasters from technical constraints will produce a much faster and more effective broadband result than the Chairman’s spectrum “repurposing” plan. In other words, the question is not whether spectrum should be used for broadband OR broadcasting, but whether and when the FCC will allow it to be used for broadband AND broadcasting.

The FCC must plan for spectrum use based on the technology of the second decade of the 21st century, not the first decade. Let’s leave aside for now the question of whether most of the escalating demand for wireless capacity is driven by socially useful needs or by entertainment and gaming. Few would dispute that if the demand curve continues rising rapidly, and we stay with today’s technology, there is not enough spectrum to go around, even if we use all the spectrum in the universe for broadband. Wireless companies know this. They are building wi-fi into their new smartphones to drive as much traffic as possible off their cellular networks. Verizon has indicated that it will introduce a television broadcast component into its future LTE system, knowing that it cannot meet video programming demand on an individual session basis.

The principal cause of the shortage problem is the architecture of first-decade technology, where each user’s request for content generates a separate digital stream in response. One way to solve the capacity problem is to drive more traffic to wired systems, a seemingly unpopular option with the unwired generation. Another is to deliver frequently used content only a few times instead of every time viewing is requested. That is exactly what broadcasting does: it efficiently distributes content over a stream that occupies the same amount of spectrum no matter how many people use it. The only thing that is different about today’s demand for video content is the desire for time-shifting, which is becoming easy to accomplish, without using more spectrum, by storing and replaying content in the user’s device. That is what DVRs and advanced set-top boxes do today, with cellphones and portable tablets not far behind.

Each TV station has 19.4 megabits of digital capacity, which can be used to provide both broadcast and non-broadcast services under today’s FCC rules.  Moreover, broadcasters must pay the government 5% of their non-broadcast digital revenues, providing the public with an ongoing perpetual financial benefit instead of one-time auction revenue, which is a flash-in-the-pan. Some tens of billions of auction revenue dollars may make the government budget look nice for a year, but it will be worthless to future taxpayers and will mean that you and I will have to pay for the bids through higher priced wireless services.  Even a competitive marketplace does not sell services below cost for long.

It turns out, though, that today’s ATSC digital TV standard is a poor choice for maximizing the use of digital capacity and is unsuitable for the two-way communication that broadband users expect to have available. Other technical systems, well known to engineers today, can do the job much better and will allow multiple TV broadcast channels streams to be offered for everyone to view along with broadband services that fill content requests from individual users.  Up-to-date digital standards will not render today’s digital consumer TV sets obsolete, the way the final DTV transition in 2009 rendered analog sets obsolete. When you start and end with digital content, translating one format into another is much easier and cheaper than translating a digital signal into something an analog set can use. 

A favorite mantra of government regulators when they do not want to do something is that they must be careful to avoid “unintended consequences.”  For all the good things broadband does, it also has been an enormous engine for pornography, fraud, privacy invasion, and many varieties of cyber-crime, to say nothing of turning our children into keyboard punchers who are not learning critical face-to-face interpersonal relationship skills.  But leaving aside whether the FCC should take responsibility for the sociological consequences of its actions, there are also important industry structural dangers in the FCC’s relentless drive to truncate television spectrum. 

The FCC has emphasized the benefits of broadband on the consumer side, but it has neglected the supplier side – participation in the provision of services rather than just using them. If some TV stations are shut down, the stations most likely to fall first will be small businesses, minority owners, and stations which program to other than the lowest common denominator mass audience. They may drop out because of the temptation of money from an incentive auction or because the FCC tightens the squeeze with new regulatory fees and other regulatory burdens and drives them out of business. Broadcast ownership will become more concentrated, notwithstanding concerns repeatedly voiced by FCC Commissioners about lack of diversity in today’s media marketplace.  

With over-the-air viewing options reduced, TV will become more and more an all-pay commodity, and everyone will have to pay the ever-increasing cost of cable or satellite services, including renting or buying set-top boxes for not just one but for every receiver in the home. Moreover, auctions will drive spectrum into the hands of the largest wireless companies, because they are the wealthiest, though they have already accelerated wireless ownership concentration during the past decade and have generated complaints from rural areas about poor service and lack of access to the newest handsets. 

In other words, although there is much professed concern about today’s ownership concentration levels, the real long-term legacy of the current FCC’s plan will be the greatest increase in concentration of ownership in both the media and wireless industries that the nation has ever seen.

Only the Chairman and the other Commissioners can provide the leadership needed to produce results that will truly increase spectrum efficiency. They should unleash free market forces and let you and me vote with our purchases to decide how and when spectrum will be repurposed instead of doing it by government fiat. Unfortunately, access to the ears of the Commissioners is dominated by the largest companies like Google, Microsoft, Comcast, Dell, Verizon, and AT&T. Those names appear almost every day on FCC-published lists of ex parte presentations. Their financial resources enable them to out-lobby potential market entrants with new ideas by 10 to 1 if not 100 to 1. That makes it very difficult for new start-up voices to be heard at the top level of the agency. 

The current FCC has said over and over again that it wants its decisions to be data-driven; yet the government’s spin machine is in full swing, through articles, speeches, and panel discussions with carefully chosen participants. The goal is clearly to persuade the public that TV spectrum reallocation is the only hope for the future of our society.  This premature announcement of the regulators’ conclusions, before a formal rulemaking has even been started, has already scared capital away from the development of new and better ways to use spectrum for both broadcasting and broadband at the same time. Once again, our future is being turned over to the largest corporations, vastly reducing the likelihood of competitive innovation by newcomers who might have the best chance of really unleashing the potential of radio spectrum.

It has always been difficult for the FCC to lead the way to truly new technology rather than adjusting regulations to accommodate what has already been developed. Today’s FCC shows no signs of breaking free from that history. It has already taken action that forced one innovative spectrum developer to suspend operations and seems determined to freeze the status quo and keep others out until its preconceived program can be implemented. 

The way to accelerate the availability of wireless broad service to the public, without the need for a long political process, is not to “unleash” inanimate spectrum as much as to unleash the companies that are now using spectrum by removing technological straightjackets. These diverse companies, including small and locally-owned businesses, are more likely to start broadband service sooner and provide more new jobs and new ideas than the FCC’s plan to allow the largest and wealthiest corporations to concentrate control over the spectrum resource that is supposed to belong to the American people.

NTIA Charts Ten-Year Plan/Five-Year "Fast Track" Jumpstart To Broadband Nirvana

Spectrum re-purposing process underway with release of Ten-Year Plan and Fast Track Evaluation

Those of you awaiting the FCC’s November 30 meeting (when the Commission is scheduled to unveil its plan for repurposing of TV spectrum) may want to get warmed up for that experience by leafing through two reports just issued by the National Telecommunications and Information Administration (NTIA). (Nit-picky observation: while the covers of both reports bear an “October 2010” date, both were first posted on the NTIA website on November 15.)

One – titled “Plan and Timetable to Make Available 500 Megahertz of Spectrum for Wireless Broadband” (Ten-Year Plan) – outlines in 23 pages of text (with some dazzling charts and tables) the overall process by which the government plans to jigger with existing spectrum usage in order to wring out 500 MHz for wireless broadband. 

The second – with a formal title even more prosaic than the Ten-Year Plan’s (we’ll just refer to it as the Fast Track Evaluation) – lays out over more than 250 pages of text, tables, lists (and a two-and-a-half page glossary of abbreviation and acronyms) the analytical process through which the Feds have identified 115 MHz of their own spectrum which they would like to feed to the Voracious Broadband Beast within five years. 

NTIA has also issued a more digestible five-page “fact sheet” summarizing the two longer items.

The Fast Track Evaluation illustrates a couple of things. 

First, it may be seen as a gesture of good faith, an effort by the government to assure wary private sector spectrum users that the federales are indeed committed to contributing their own spectrum to the effort. Yes, the government is planning a major league disruption to TV broadcasters’ spectrum for the second time in a decade, the report seems to say, but the government is sharing in the pain by coughing up a bunch of its own spectrum as well – up to 115 MHz in the short-term.

Second, the Fast Track Evaluation underscores the complexities of the spectrum re-purposing task. For instance, the government bands which are proposed to be “fast tracked” over to broadband include spectrum currently used for radio altimeters – which (among other things) guide aircraft and “tactical weapons (missiles)” – and “precision guided munitions”. Plainly, caution will need to be exercised when it comes to messing with this spectrum.

Of course, the ability of the government actually to realize the ambitious approach described in the Fast Track Evaluation depends on a number of unknowns – including, perhaps most importantly, the “timely allocation of funds”. But NTIA still seems to want us to know that its heart is in the right place.

The Ten-Year Plan lays out in considerable detail the bureaucratic mazes that will have to be negotiated to achieve the desired goal of freeing up 500 MHz over the next ten years. Anyone questioning the use of the term “maze” here should consider the following chart, taken from the Ten-Year Plan. It depicts on a single time-line the “Legislative, US Regulatory and International Actions” that will need to occur:

The only thing missing is the explanatory notation “And then a miracle occurs” somewhere toward the end. 

Or how about this chart, which depicts the process which would have to be followed if any spectrum re-purposing would necessitate changes in the international radio regs:

The message is that, even though the Feds are hell-bent to get this spectrum re-purposing process started, and even though they remain absolutely convinced that that process is essential to the future of civilization as we know it, there remain a boatload of possible pitfalls in the way.

None of this should surprise anybody here. We have seen much, if not all, of this coming since the drumbeat of the National Broadband Plan began its extended crescendo a year ago. The NTIA’s two recent releases merely underscore that we have a long, and likely hard, way to go before this is all over.

Comment Deadlines Set In Mobility Fund Rulemaking

Deadlines have been set for comments and reply comments in the proceeding aimed at devising a mechanism for distributing the “Mobility Fund” realized through the FCC’s re-direction of USF funds left on the table by Sprint and Verizon. We described the Notice of Proposed Rulemaking last week. Now the NPRM has been published in the Federal Register, which means that comments are due by December 16, 2010, and replies are due by January 18, 2011.

FCC Proposes Distribution Mechanism For USF Windfall

Proposal: Dole out up to $300 million through reverse auction to bring 3G to underserved areas

As we have reported, the FCC decided last month that, instead of re-distributing to CETC’s the $500 million or so in USF funds which Verizon and Sprint renounced as a condition of getting their mergers approved, it would keep the money in a rainy day fund to support broadband mobility. The FCC’s action in that regard was highly suspect on legal grounds (full disclosure: FHH represented the lead proponent of re-distribution of the money to CETCs). Nevertheless, the Commission initiated a rulemaking to try retroactively to justify its unprecedented action.   And now it has opened another rulemaking to determine where and how the so-called “Mobility Fund” will be distributed.  

This proceeding may be a classic case of pre-natal chicken enumeration, since the Commission’s original palming of the Verizon/Sprint funds remains very much in contest. A spate of petitions for reconsideration have been filed, and the matter is likely to go to the Court of Appeals if the FCC remains unmoved. That process could easily take two years, maybe longer.   So no matter what happens in the new rulemaking, Mobility Fund dollars are not going to be finding their way into anyone’s pockets soon, if ever.

That said, the Commission’s proposal for distributing the Mobility Fund is a solid step forward in tailoring the distribution of Universal Service Fund support to those precise areas that most need it without wasteful duplicative support payments. The FCC proposes to distribute $100-$300 million dollars from the Fund by conducting a reverse auction. Bidders would propose to offer 3G-level service in census tracts around the country that have been designated by the FCC as underserved.  The bidder who proposes to provide the service with the lowest amount of support from the Mobility Fund would be awarded the subsidy at that level. There would be only one recipient in each census tract. 

Some specifics from the Commission’s proposal:

  • Only Eligible Telecommunications Entities (ETC’s) or entities which have applied to be ETC’s could participate in the auction. Because this is a “mobility” project, participants would have to demonstrate that they have access to broadband spectrum (either owned or leased) in the areas where they propose to receive support. Before being awarded the grant, the proposed recipient would have to demonstrate its financial ability to construct the build-out necessary to deliver the 3G service.
  • Bidders would bid on a per unit basis and be compared against anybody else bidding for the same census tracts. For example, one bidder could bid to provide service with a subsidy of $50 per person over the underserved areas in the whole state of Nevada, while another bidder might propose to offer service to underserved areas of Washoe County for $55 per person. Someone else might propose service to underserved areas in all of the mountain states for $48 per person. The last bidder would get the nod in both the county and the state since he was the low bidder in census tracts where there was overlap with other bidders. This process nicely avoids the problem of trying to compare bids on differing geographic areas. The award would then be the winning bid ($48) times the number of people in the underserved census tracts covered by the bid.
  • Winning bidders will likely be required to demonstrate that they will provide the 3G service to a set percentage of the population by a set date (possibly two years), but the FCC seeks input on that. For this purpose, 3G-level service is deemed to be 200 kbps up and 768 kbps down while travelling at 70 MPH over 90% of the designated coverage area. The FCC considers these relatively slow rates to be comparable to HSPA and EV-DO. Both voice and data must be supported.
  • Interestingly, towers constructed with support money must be made available to competitors, and data roaming must be permitted at reasonable and non-discriminatory rates. These measures are designed to ensure that other carriers are not frozen out of the supported markets.
  • The actual money will be doled out in thirds – once right after your grant, once when you are 50% complete, and once when you are finished. Note that these funds are intended to be used for construction of infrastructure – not long-term support – so the award is a one-time thing.
  • As always, the FCC will require annual status reports and awardees will be subject to audits.

None of this is set in stone, since the FCC is just beginning the process and seems genuinely interested in getting input as to how to make this process work efficiently and effectively. Earlier efforts to use reverse auctions to award USF funds have always fallen flat, but because this effort leaves wireline LECs unaffected, it may stand a greater chance of success. We notice that in many ways the process mirrors last year’s stimulus money program which was designed to shovel out $7 billion to fund broadband in unserved and underserved areas. Surely the stimulus awards and the resulting build-outs should be taken into account in awarding these new funds. 

Despite the many uncertainties that still surround this Fund (and which may ultimately make it evaporate), this rulemaking merits the careful attention of low cost carriers who cannot otherwise make a business case for serving marginal areas.

Comments will be due 45 days after publication of the Notice of Proposed Rulemaking in the Federal Register; reply comments will be due 75 days after publication. Check back here for updates.

The Big Chill: LPTV Plunged Into Deep Freeze

FCC announces immediate freeze on applications for new/major change digital LPTV/TV translator permits

With no warning – as is almost invariably the case when it comes to freezes – the FCC has terminated acceptance of any applications for new low power TV or TV translator stations or major changes in existing stations in all areas, rural and non-rural alike. The freeze is effective immediately with the release of its October 28 Public Notice.

The imposition of this freeze marks an ominous reversal. After an earlier freeze of several years, the FCC began accepting LPTV/translator applications in rural areas only in August, 2009, with the further promise of an opportunity to file for non-rural areas within a matter of months.  Initially, that later opportunity was to open up in January, 2010, but it never materialized. The January date first got pushed back to July, and then was postponed indefinitely

The reason? The need to evaluate “reallocation and repacking” proposals and their impact on future licensing of low power television facilities. That, of course, refers to the Commission’s stated goal of re-purposing some 120 megahertz of TV spectrum for use as part of the National Broadband Plan.

The supposed dearth of broadband spectrum has been thought to be concentrated in urban areas – which would suggest that the Commission should have no problem leaving open the filing window for rural stations. But FCC staff have also suggested that wireless companies will not be satisfied unless they have a swath of clean spectrum that is available nationwide.  The fact that this latest freeze slams the window shut on rural applications, too – a fact which will paralyze the growth of rural translators to relay new full power digital program streams as well as new locally-oriented LPTV stations in small communities – suggests that the FCC is indeed working to keep the possibility of such a clean, nationwide swath in play.

There are a couple of narrow exceptions to the freeze: Applications for displacement relief will continue to be accepted from stations above Channel 51 or those who are truly forced off their channels; ditto for flash-cut and digital companion applications by existing LPTV stations.

Processing of previously filed applications is not mentioned in the FCC’s notice, so presumably  those applications will continue to move through the pipeline. Applicants already on file would do well to keep their fingers crossed.

Comment Deadlines Set On Proposed Re-Direction Of USF Funds

Deadlines have been set for comments and replies on the Commission’s proposal to amend certain aspects of the Universal Service Fund. As we reported last week, the FCC is proposing “to facilitate efficient use of reclaimed excess high-cost support” in the Universal Service Fund by “reclaim[ing]” cash that Verizon Wireless and Sprint-Nextel left on the table back in 2008. The Notice of Proposed Rulemaking has now been published in the Federal Register, which in turn establishes the participation deadlines. Comments are due by October 7, 2010 (i.e., 21 days after Federal Register publication); reply comments are due by October 21, 2010 (i.e., 35 days after publication).

联邦通信委员会, 在洛杉矶亚裔美国人和太平洋岛民的论坛会, 将公布全国宽带亚洲语言翻译计划概要.

Puzzled by the headline? So was I last month, when the Commission issued a public notice bearing the header “FCC TO RELEASE ASIAN LANGUAGE TRANSLATIONS OF NATIONAL BROADBAND PLAN SUMMARY AT LOS ANGELES FORUM FOR ASIAN AMERICAN AND PACIFIC ISLANDER COMMUNITIES”. The particular “communities” for which translations have now been issued are “Chinese (Simplified), Samoan, Tagalog, Korean, Thai, and Vietnamese”.

What puzzled me was not that the translations were being made available – that, after all, was consistent with the Commission’s full-court, no-holds-barred effort to “raise awareness of broadband”. 

No, what puzzled me was that the FCC’s public notice was issued only in English. 

Maybe I’m missing something, but if folks can’t understand English enough to read the National Broadband Plan in its original form, how are they going to understand an English language public notice alerting them to the availability of non-English versions? Wouldn’t it make more sense to issue the public notice in, say, Chinese (Simplified), or Samoan, or . . . well, you get the picture.

So as a public service, we here at CommLawBlog.com translated the FCC's headline into Chinese (Simplified), and have used it for the headline on this post.  That at least should clue some members of the FCC's target audience into the gist of the Commission’s public notice – assuming, that is, that they happen to be surfing the Internet and come across this post through a Google search. (All you English-reading surfers should feel free to pass the link along to appropriate friends and acquaintances.) 

And as a further public service, here are links to the various foreign language versions of the NBP:

简体中文翻译 (Chinese (Simplified))

Samoan

Tagalog

한국어번역(Korean)

ภาษาไทย การแปล (Thai)

Việt dịch thuật (Vietnamese)

(There’s also a Spanish-language version available at the NBP download site and a Braille version available for download from the FCC’s “accessibility” page.)

Now that we’ve done our share, how about somebody else coming up with Samoan, Tagalog, Korean, Thai and Vietnamese translations of the public notice’s headline, at least?

Something else puzzled me about the notice. How were these particular languages selected, and why were others not? According to the 2000 U.S. Census, of the main languages spoken by individuals older than five, French, German and Italian outrank Samoan, Thai and Korean. And yes, I understand (from a blog post by one of Chairman Genachowski’s Senior Advisors) that some Asian American and Pacific Islander (AAPI) populations “have lower-than-average median household incomes (Korean Americans)” or have members who “live in rural areas (Hmong Americans)”, but the same could presumably be said of a number of non-AAPI populations speaking other languages. Ditto for the notion that many AAPI populations may be “linguistically isolated”.

I’m not saying that providing translations of the NBP is necessarily a bad idea. But once the government starts down that road, it doesn’t take long for the slope to get steep and slippery. By offering translations into some languages but not into others, the government is, after all, engaging in a form of discrimination. It may be viewed as benign discrimination, but the exercise clearly involves selecting one or more nationalities for a particular beneficial treatment which is not provided to other nationalities – in other words, discrimination based on, well, nationality. And that’s the kind of thing that the government should ordinarily try to avoid.

So here’s hoping that the AAPI language versions just released are only the start of the project. Perhaps versions in French, Italian, German, Russian, Polish, Arabic, Japanese, Hindi, Persian or Urdu (all languages which ranked higher than Samoan or Thai in the 2000 Census) will be issued in the near future. What about versions in the various Native American languages? Or any African languages?

And ideally, when all those are ready to roll out, the public notices announcing their release will not be exclusively in English.

USF Bonanza Broadband-Bound?

FCC proposes to re-direct cash left behind by Verizon Wireless, Sprint-Nextel

If you managed to clear out of the office early for the Labor Day weekend, you may have been lucky enough to miss the release of the latest salvo in the FCC’s effort to reform the Universal Service Fund (USF). The Commission’s Order and Notice of Proposed Rulemaking (NPRM) hit the e-distribution system late on Friday afternoon, just as the local streets were clearing after an early rush hour and beach-bound traffic was slowing to a crawl.

The Commission’s new USF game plan involves the likely dedication of hundreds of millions of dollars to subsidize broadband in furtherance of the National Broadband Plan (NBP). (Many observers believe the NBP has replaced the Communications Act of 1934 as the FCC’s Prime Directive.) The cash would come from the existing USF pool of funds – although precisely how the Commission justifies its proposed approach may raise some eyebrows. Still, it seems that that approach may be a fait accompli: the Commission has allotted a mere 21 days for comments on its proposal (and another 14 days for replies).

The USF subsidizes affordable telecommunications services in certain circumstances. Each quarter the Universal Service Administrative Company (USAC), which oversees the USF, issues a projection of the support requirements for the various USF programs. USAC also collects quarterly revenue information from carriers and calculates anticipated revenues projections. From these data, the FCC derives a quarterly “contribution factor,” in the form of a percentage, from which carriers then determine how much they will owe to USF. The carriers then dutifully pass that burden along to their customers in a line item on their monthly bills.

The result is a $15 billion pool (more or less), collected from consumers by carriers and remitted to the USAC for distribution back out to carriers in furtherance of various USF programs.

One of those programs is the “high cost” program which ensures that consumers in all parts of the country have access to telecom services – and pay rates for those services – that are reasonably comparable to the services and rates available in urban areas. Subsidies are also available for low income consumers in both rural and urban areas,; the subsidies cover both hook-up and monthly charges. Estimated 2009 level of USF “high cost” support: $4.3 billion. Eligible Telecommunications Carriers ("ETCs") that can get USF distributions include incumbent local exchange carriers (referred to by the FCC as “ILECs”) and carriers who compete with them in offering local service, both wired and wireless (dubbed “competitive ETCs” or “CETCs”).

The FCC has two problems with the current system: (1) the support requirements (i.e., carriers and services entitled to USF funding) have ballooned in size, turning the line item surcharge on telephone bills into the equivalent of a rather nasty tax on consumers; and (2) USF subsidies tend to support 20th Century voice services, which the FCC thinks are old-and-in-the-way, as opposed to today’s-hot-and-happening 21st Century services like texting, tweeting, and on-the-go web browsing.

To address the nasty tax issue, the FCC put a lid on the total amount of support given to CETCs on a state-by-state basis in 2008. As a result, CETCs are limited in two ways. First, they can’t get more pay-out from the USF “high cost” program than the ILEC gets in the same service area. Second, as a group, they can’t collect more than the cap for their state – so that if more CETCs jump into the pool, the amount distributed to each CETC in the state is reduced to avoid exceeding the cap.

But what if a couple of CETCs were to get out of the pool? That’s when things get interesting.

In 2008, Verizon Wireless and Sprint-Nextel – both providing CETC wireless services even though their parent entities may also be wireline ILECs – needed FCC approval for big mergers. To help things along, both agreed to “surrender” their universal service support, giving it up in 20% increments over a five-year period ending in 2013. That is, they would gradually walk away from their share of the USF pool. And they were in the deep end of that pool: the FCC estimated their 2008 share to amount to about $530 million.

In 2009, it seemed to some carriers that they were being shorted by USAC in the funding they had expected to receive as high cost support. They asked, and sure enough, USAC acknowledged that it wasn’t actually redistributing the money that Verizon and Sprint had left on the table. 

Corr Wireless (an FHH client) promptly cried foul. It asked that the USF funds relinquished by Verizon and Sprint be redistributed to Corr and other CETCs, as the interim cap order required.   Corr pointed out that, in imposing the 2008 support cap, the Commission had indicated that the amount of the cap would remain unchanged regardless of the number of carriers making claims. With the departure of Verizon Wireless and Sprint from the pool, the money that otherwise would have gone to them should have been available to be divvied up among the remaining claimants. The basic premise of the cap was that the amount of funds remains constant but the percentage available to participants would go up or down as the number of participants increased or decreased. Once Corr got the ball rolling, a host of other wireless carriers joined in.

The FCC said no, that’s not going to happen. Even though the FCC acknowledged that the interim fund cap is a regulation that cannot be changed without a formal rulemaking proceeding, the Commission nevertheless held that USF payments will continue to be calculated as if Verizon and Sprint were still in the pool. The result, of course, is that as the universe of CTECs grows, the amounts available under the cap for each of them will continue to shrink. And, under the Commission’s proposal, any time in the future that a carrier exits the pool, we’ll just go ahead and pretend that they’re still there. Consumers will thus still have to pay the nasty tax as if the departing carriers were receiving support, but since those carriers are gone, they won’t really be receiving that support. Result:  the USF will have a bunch of money left over that it doesn’t have to dole out. 

Now here’s a surprise: The Commission has decided that that extra money should – and likely will – be placed in reserve for future broadband use.

The FCC is now proposing a permanent rule change that would allow excess USF funds to be reserved for all kinds of Good Things, like: enhancing broadband opportunities for children, teachers, schools, libraries; improving  rural health care by advancing telemedicine services in rural areas; supporting a Mobility Fund to improve 3G wireless broadband in states with the worst coverage; and “in the long term, directly support[ing] broadband Internet services for all Americans”. (By the way, the FCC says, we plan to propose this new Mobility Fund in a formal proceeding during the fourth quarter of 2010, so stay tuned.)

But a rulemaking proceeding is a prospective exercise. That is, whatever the results of the rulemaking may be, they would not ordinarily reach backward. What, then, to do about the excess funds that will pile up between now and then, funds which USAC would otherwise have to account for? No problem, says the Commission. We’ll waive the requirement that the USAC account for differences between its projections and its actual revenues. And we’ll also instruct the USAC to ignore any effect from the Verizon Wireless or Sprint-Nextel mergers in doing its calculations.

The FCC suggests the possibility that avoiding increasing support to ETCs remaining in the pool could facilitate a reduction in the nasty support tax; but with so many broadband ideas out there clamoring for support, it remains to be seen which will emerge as the ultimate victor: frugality, or watching-movies-on-the-bus-while-tweeting.

The deadlines for comments and replies won’t be set until the NPRM is published in the Federal Register. Check back here for updates.

From The Department Of Redundancy Department: Another Request For Broadband Deployment Data!

Congress wants annual reports. The FCC delivers. The rest of us yawn.

The Commission has released its Seventh Broadband Deployment Notice of Inquiry (7th NOI), the ostensible purpose of which is to determine whether broadband is being deployed to all Americans in a reasonable and timely fashion.

As we glance through it, our overriding question is: Why?

The simple answer is because Congress said so. In the Telecommunications Act of 1996, Congress required the Commission to crank out such reports on an annual basis. It’s that time of year again, for the seventh time.

But the FCC already has most of the answers to the questions it asks, answers which are, in fact, pretty obvious both historically and logically. The FCC could as easily have skipped over the subject matter of the 7th NOI and jumped right to the heart of the matter: namely, what can, or should, the FCC do about the unmistakable fact that some folks don’t have broadband service?

The starting point of the 7th NOI branches off from the previous year’s effort, which was completed only last month with the release of the 2010 Sixth Broadband Deployment Report (6th Report). As my colleague Mitchell Lazarus reported, in the 6th Report the Commission redefined broadband as “a transmission service that actually enables an end user to download content at speeds of at least 4 megabits per second (Mbps) and to upload content at speeds of at least 1 Mbps . . .”

The FCC already knows that, under this new definition, somewhere between 14 million and 24 million Americans are unserved by broadband. It also knows that areas of low population density and low income are often the last to receive service, whether it is cable or broadband or anything else. With that in mind, the crux of the 7th NOI lies in the FCC’s comment: “Should we consider affordability as a component of broadband availability?” The Commission appears to be asking whether broadband should still be deemed “available” if a provider offers it, but at too high a price for local residents to manage.

The 7th NOI also discusses the merits of maps that visually depict broadband availability, produced by both the FCC and NTIA.  The FCC maps are here. The NTIA maps, for which NTIA has awarded more than $100 million in grants toward state efforts, are still in progress. Confusingly, the NTIA work is based on a definition of broadband less demanding than the FCC’s: at least 768 kilobits per second (kbps) downstream and at least 200 kbps upstream to end users. (One might legitimately question why one agency is spending $100 million to generate maps based on a standard which another agency has already chosen to ignore, but we need not explore that issue here.)

The FCC finds a special need to focus on broadband service to Native Homeland areas. Among other sobering data, only 12.5% of households in Native American areas subscribe to a broadband service faster than dialup, compared to 56% of all households nationwide. 

Among other details, the 7th NOI asks:

  • Is the current definition of broadband service the correct one?
  • Should “broadband” and the statutory term “advanced telecommunications capacity” be treated synonymously?
  • How should the Commission interpret the word “available” for purposes of broadband service? Is affordability a component of broadband availability?
  • Should broadband data be analyzed on a census tract or county basis?
  • Should the Commission’s analysis of broadband availability take into account other ways in which it is available, such as through schools and Wi-Fi hotspots?

Obviously, many valid questions can be asked. But bear in mind that the Commission has already asked many broadband-related questions. In the last four months of 2009 alone, the FCC issued no fewer than 30 separate inquiries related to broadband. And that doesn’t count the proceedings that have been initiated in the wake of the adoption of the National Broadband Plan last March. (We described some of those here.) Many, if not most, of these inquiries tend to be wide-ranging. The net result is a flood of information already swamping the Commission. While information is essential to a healthy regulatory eco-system, too much information can overwhelm and ultimately prevent productive growth, much like floodwaters destroy crops.

For those inclined to carry more coal to Newcastle-on-the-Potomac, comments are due September 7, 2010, and reply comments on October 5.  The FCC is already planning yet another proceeding to collect and analyze more detailed and accurate industry-wide data on several key broadband metrics, including subscribership, actual availability, penetration, performance, prices, churn, and bundles, for both consumers and business customers. We can’t wait.

S. 3756: Another Thumbs Up For Auction Proceeds Sharing

No spectrum fees proposed in bill focused on establishment of first responder/public safety network

Another bill that would authorize the sharing of spectrum auction proceeds has popped up in Congress.  It seems like EVERYBODY’s got one these days. The latest clearly has legs, since its primary sponsor is none other than the Chair of the Senate Committee for Commerce, Science and Transportation, Senator Jay Rockefeller. Since that Committee happens to have primary say over the FCC’s operations, it’s a pretty good bet that attention will be paid to this bad boy.

The proceeds-sharing component of the bill is far from the focus of the proposal, which is dubbed the "Public Safety Spectrum and Wireless Innovation Act".. Rather, as its name implies, the bill’s primary goal is to provide first responders and public safety officials with additional wireless resources through the deployment of a “nationwide public safety interoperable broadband network in the 700 MHz band”. But in a brief section tucked away toward the back of the bill (on page 21 of the linked draft, if you’re looking), the drafters provide that

[i]f the Commission determines that it is consistent with the public interest in utilization of the spectrum for a licensee to  relinquish voluntarily some or all of its licensed spectrum usage rights in order to permit the assignment of new initial licenses subject to new service rules, the Commission may disburse to that licensee a portion of the auction proceeds related to the new use that the Commission determines, in its discretion, are attributable to the licensee’s relinquished spectrum usage.

And a couple of pages later, the drafters include this “rule of construction” to help us interpret the bill:

Nothing in this Act or in the amendments made by this Act shall be construed to permit the Commission to reclaim frequencies of broadcast television licensees or any other licensees directly or indirectly on an involuntary basis for the purpose that section.

In other words, there’s not much detail here. Like the Boucher-Terry bill recently introduced in the House, Rockefeller’s approach seems designed simply to make sure that the FCC can divvy up auction proceeds to incentivize broadcasters to give up their spectrum for auction – with the Commission enjoying broad discretion as to how that might be accomplished. The bill goes out of its way (like Boucher-Terry) to emphasize that any reclamation of broadcast spectrum must be voluntary on the part of the broadcaster. But while Rockefeller’s latest bill contains no provision for spectrum fees (unlike the Kerry-Snowe bill introduced last month), Rockefeller’s statement relative to the bill is silent on the spectrum fee question, unlike Rep. Boucher, who suggested that draconian spectrum fees might be deemed be deemed impermissible coercion on broadcasters.

From the recent flurry of Congressional proposals, it sure looks at this point like auction proceeds sharing is inevitable. When we may see it and what form it may take are obviously still to be determined. Check back here for updates.

H.R. 5947: Another Order Of Carrot, Please - This Time Hold The Stick

The race is apparently on down on Capitol Hill to make sure that the FCC has the authority to share spectrum auction proceeds with licensees who are willing to give up the spectrum to be sold off, presumably for broadband purposes. Late last month we reported on S. 6310, the Kerry-Snowe bill introduced in the Senate, which includes a provision for proceeds sharing. Now, Reps. Boucher (D-VA) and Stearns (R-FL) have tossed in the Voluntary Incentive Auctions Act of 2010 (H.R. 5947) which would accomplish the same purpose. But, unlike the Kerry-Snowe bill, the Boucher-Stearns bill contains nothing about spectrum fees.

To the contrary, H.R. 5947 is short, sweet and to the point. It would give the FCC the authority (which it currently lacks) to share spectrum auction proceeds with any licensee who agrees “to participate in relinquishing voluntarily” its rights to the spectrum. While the bill leaves the precise mechanism for the sharing (as well as the amount or percentage of auction proceeds to be shared) to the Commission’s discretion, the Boucher-Stearns proposal makes one thing clear: any relinquishment of spectrum must be voluntary. The bill includes “voluntary” in its title, and then again in the heading of the new one-paragraph section that would be inserted into the Communications Act. And that paragraph includes “voluntarily” not once, but twice. 

And just to make sure that there’s no doubt here, the bill contains a section that: (a) prohibits the FCC from “reclaiming” for auction purposes any TV spectrum “directly or indirectly on an involuntary basis” and (b) emphasizes that nothing in the bill “shall permit, or be construed as permitting” the FCC to do so.

Fleshing out just what he had in mind when he used the term “voluntary”, Rep. Boucher explained in his introductory statement that, in his view, imposition of “a spectrum fee that would make some licensees financially unable to keep their spectrum would make the spectrum surrender constructively involuntary and would be impermissible under the terms of our legislation.” 

So it’s apparently not far-fetched to figure that a spectrum fee (such as the one proposed in the Kerry-Snowe bill in the Senate) might be used to squeeze broadcasters into handing over their spectrum. All the more reason to keep a careful watch on what goes on down on Capitol Hill in coming months.

S. 3610: The Carrot And The Stick Make Their Appearance

Auction pay-outs for repurposed spectrum, annual spectrum fees enter the legislative debate in Kerry-Snowe bill

In March, 2009, we reported on S. 649, a Senate bill that would have required the FCC and NTIA to undertake a “radio spectrum inventory”. A year later that bill was reported out of the Senate Commerce Committee and placed on the Senate Legislative Calendar. And there it sits.

But wait! Its sponsor, Sen. John Kerry, and one of its co-sponsors, Sen. Olympia Snowe, have just introduced yet another bill along the same lines. S. 3610, the “Spectrum Measurement and Policy Reform Act” popped up on July 19. According to Kerry, the new bill “tasks the FCC and the National Telecommunications and Information Administration (NTIA) to perform much needed spectrum measurements to determine actual usage and occupancy rates” – in other words, pretty much what last year’s version did. 

But wait, there’s more! The new bill – which weighs in at a hefty 27 pages, as opposed to last year’s two or so – provides for lots more than just a spectrum inventory: among other things, it opens the door for (a) the sharing of spectrum auction proceeds – an ominous harbinger of broadband-induced spectrum repurposing – and (b) even more ominously, the specter of annual spectrum fees.

 Of course, to read the Kerry/Snowe press release, you might not realize that.

The release speaks in conventionally upbeat, BIG PICTURE, press-release jargon about “moderniz[ing] the nation’s radio spectrum planning, management, and coordination activities”, “laying the groundwork” for lots of stuff (Lower prices! More reliable service!), avoiding the “looming spectrum crisis”, “empower[ing] innovation”, “encourag[ing] competition”, “ensuring that the proper framework is in place” and so on and so on. 

It isn’t until the antepenultimate line that we learn that the bill would require “more market-based incentives to promote efficient spectrum use”. 

Incentives as in carrot and stick.

To get any idea of what they’re really talking about, you have to read the bill itself. On page 17, in Section 6(b)(2), you find that the bill would amend Section 309(j)(8) of the Communications Act to include the following provisions: 

 (F) AUCTION REVENUE SHARING PLAN.— Notwithstanding subparagraph (A), if the Commission determines that it is consistent with the public interest in utilization of the spectrum for a licensee to relinquish some or all of its licensed spectrum usage rights in order to permit the assignment of new initial licenses or the allocation of spectrum for unlicensed use subject to new service rules, the proceeds from the use of a competitive bidding system under this subsection may be shared, in an amount or percentage determined in the discretion of the Commission, with any licensee who agreed to participate in relinquishing such auction usage rights.

(G) SPECTRUM LICENSE FEE.—

(i) IN GENERAL.—The Commission shall have the authority to assess and collect from each licensee an annual fee for the spectrum assigned to such licensee that is based on the fair market commercial value of that spectrum and the public interest of the service the spectrum is being used for, using a methodology adopted by the Commission, after providing notice and opportunity for public comment.

* * *

And so the race toward the finish line of Repurposed Spectrum lines up in the starting blocks.

Readers will doubtless recall that, as part of the National Broadband Plan, the Commission has made clear that it would like to skim some 120 MHz of spectrum from TV and auction it off for use in mobile broadband. To cushion the blow for Eligible-for-Eviction broadcasters, the Commission suggested that it might be willing to throw them a few bucks out of the auction proceeds. OK, that sounds good – but, oops, the FCC doesn’t have the authority to dole out auction cash like that. To get that authority, the Communications Act would have to be amended.

Cue Senators Kerry and Snowe, who have now started that amendment process.

Of course, this is just the first step – the legislative process can be long and slow, and the end result may not look much like the initial bill. And that’s probably a good thing here. After all, the Kerry-Snowe bill is a tad thin on any significant details. In fact, there pretty much aren’t any details. Instead, the bill would give the FCC essentially complete discretion to dole out as much – or as little – of the auction proceeds as it feels like. And who would be getting those proceeds? “Any licensee who agreed to participate in relinquishing such auction usage rights” might get some, again if the FCC feels like it.

So the potential carrot of some payment in return for going along with the spectrum repurposing process is now at least a bit closer to reality than it was when the FCC first floated the idea.

What about the stick? That would be the annual spectrum fee. Unlike the annual regulatory fee which all FCC regulatees already pay – and which is based on covering the costs of the FCC’s operations – the spectrum fee would be calculated based on (a) the “fair market value” of the licensed spectrum as the FCC determines that value to be and (b) the “public interest of the service the spectrum is being used for”. Again, the FCC would be the one defining those crucial terms.

While broadcasters would be able to make a strong argument about the value of the public service they provide, their problem here is that the Commission is obviously smitten with mobile broadband as a panacea. So it would not be a huge surprise if the FCC were to conclude that, in the overall public interest balancing process, broadband might outweigh broadcast. And given the challenging economics of broadcasting just now versus the supposedly sky’s-the-limit prospects for broadband, the “fair market value” of the spectrum is likely to be set by the latter rather than the former. That would mean that broadcasters would likely be billed based on a value bearing little or no economic relation to their business. The potential for putting a heavy squeeze on broadcasters to “encourage” them to hop on the repurposing bandwagon would be substantial.

Again, we have a long way to go before all of this plays out. But it’s safe to say that the games have begun.

Nationwide LPTV/TV Translator Filing Opportunity Postponed, Again

New date: TBA

It’s like déjà vu all over again.  A year ago the Commission announced that it would be opening a first-come, first-served opportunity to file for digital LPTV/TV Translator authorizations in non-rural areas as of January 25, 2010.  But just a month before that start-date arrived, the Commission postponed it to July 26, 2010.

Fast forward six months.  Sure enough, with just a month to go before the door to the digital promised land for LPTV/TV Translators was supposed to swing open, the Commission has announced that the filing opportunity has been postponed again – this time until further notice.

Gentlemen, you may turn off your engines.

The reason for this latest postponement should come as no surprise to anyone who has been following the Commission’s activities for the last year or so.  Those activities have been dominated by the National Broadband Plan, which includes a proposal to move 120 megahertz from broadcast television over to the mobile broadband.  With that proposal on the table, the Media Bureau is not inclined to invite a boatload of new applications for use of the TV spectrum.  While some people think that the FCC’s idea of grabbing 10 TV channels is somewhat impractical, the FCC worries that any new applications for TV channels might put some grease on the spectrum and make it harder to grab no matter how sharp the regulatory talons.  So until the Commission has had a chance to evaluate the NBP channel reallocation/repacking proposals, the Media Bureau is going to keep the door closed to most – but not necessarily all – new LPTV/TV Translator applications in non-rural areas.

Some limited filing opportunities in the LPTV/TV Translator services remain.  For instance, the restriction on filing applications in rural areas, lifted on August 25, 2009, remains lifted, so applications may be filed at any time for new stations or any kind of changes in existing rural stations.  (“Rural areas” will continue to be defined as it was in the FCC’s June 29, 2009 public notice.)  Also, existing LPTV/TV Translator/Class A stations in urban areas may file at any time for on-channel digital flash cuts or displacement to new digital channels.  In a new development, existing urban area analog stations will be permitted for the first time to file for digital companion channels starting on July 26, 2010, so that they can operate one analog and one digital channel until the FCC finally shuts down all analog television.

Although the FCC’s public notice doesn’t say so, we also understand that if you have an unbuilt rural station at the fringe of an urban area, you may not file a minor change to go inside the urban area . . . BUT if you build the rural station, you may then move it with a minor change without geographic restriction.

FCC Amazed: Public Does Not Know Broadband Speeds

But the FCC wants to know, and is willing to put consumer privacy at risk to find out.

The FCC cares deeply about broadband. We know that because it released a 360-page report called The National Broadband Plan and set up a website called www.broadband.gov. Also, the Commissioners nowadays pepper their speeches with references to the importance of broadband.

Harder to find is evidence of similar interest outside the Beltway. Or even outside FCC headquarters. When the FCC went looking, it found mostly apathy.

The FCC conducted a survey of broadband service. Not of how many people receive broadband, or what speeds they get, these being issues the FCC has long tracked. Rather, it looked into whether people know their broadband speeds. In case the importance of this datum is not obvious (it wasn’t to us), FCC Chairman Julius Genachowski explains: “The more broadband subscribers know about what speeds they need and what speeds they get, the more they can make the market work and push faster speeds over broadband networks.”

If the Chairman is right, the market is not working. Eighty percent of U.S. broadband users do not know the speed of their Internet connections. We are shocked! Well, not really, but we might be shocked if were not part of the ignorant 80%.

With all the earnestness of a middle-school science fair project, the FCC breaks down these numbers by population groups. The results are about what you would expect. Most likely to know their broadband speeds are men, young people, whites, and people with higher incomes – the same groups, by and large, that show the most interest in technology generally. (Note to emailers: yes, we know there are many exceptions.)

But there is also good news. Even though many of us may not pay much attention to the details, we still know what we like. Ninety-one percent of users report being satisfied with their broadband speeds (whatever those are). This is a startling statistic. It is hard to imagine anything else that satisfies 91% of Americans. A person handing out free money on the street would not draw that high an approval rating. The broadband industry must be doing something right.

The not-so-satisfied nine percent are not further identified, but we think we know who they are:  namely, people with teenagers who incessantly download Facebook videos and watch TV over YouTube and Hulu. These are people who need twenty minutes to open an ordinary email. As to them, the FCC might as well give up. Teenagers can consume bandwidth as fast as providers can install it.

The data show an interesting anomaly. Seventy-one percent of respondents say they actually receive the speed their broadband provider promises, either “always” or “most of the time”. Combine this with the reported fact of 80% cluelessness as to speed. The result? Fully half the broadband-using population have no idea what their speed is, yet are confident that it equals the advertised speed!  How can that be? Maybe Americans just have implicit trust that their phone and cable companies always deliver what they promise. Or maybe, after long enough on the phone answering silly questions, people start giving the interviewer random answers out of sheer boredom.

At any rate, having found that unsuspected vein of ignorance, the FCC also has ideas to attack it.

For one thing, the FCC offers a website that blows back the curtains of darkness and reveals your own broadband speed. Just browse to this FCC-provided link and click a few buttons. When you do, the FCC will collect your address before it tests your speed. The FCC “may use this [address] data to analyze broadband availability on a geographic basis.” Not a systematic technique for gathering data, but harmless enough.

Harmless, that is, so long as the FCC does not use the information for anything else. But when we click through to the fine print, we find eight different situations in which the FCC can disclose your address. Read them here.  None requires a warrant, or even a subpoena. This is just one of them: “Where there is an indication of a violation or potential violation of a statute, regulation, rule, or order . . . .” That alone covers a lot of ground. Considering how hard it is to know exactly what on the Internet is legal, some people may not want the FCC to have their address on file along with their connection details. More cautious broadband users can bypass the FCC address screen and go directly to the identical speed test sites by clicking here and here. The Internet also offers many other free speed tests, including this one and this one. (Commlawblog does not endorse any of these.)

Alternatively, instead of just telling the FCC your address, you can invite them over to your house to install a box that monitors and reports your Internet activity.  

You think we’re kidding, right? We’re not.

The box – which the FCC refers to as the “SamKnows Whitebox” (seriously, we couldn’t make this stuff up) – will report data on your web surfing, peer-to-peer video download, video streaming, file download and upload, online gaming, and VoIP. The FCC emphasizes how secure the system is against outside hackers. But frankly, it’s not outside hackers that concern us most. The FCC has not yet told us how it will use the collected information, or when it might disclose the details to law enforcement. Presumably it will let us know before installation. We suspect the more sophisticated users will keep the FCC at a safe distance. In consequence, whatever data result from these boxes are not likely to be representative.

The FCC is also trying to figure out how to get comparable data from mobile broadband users. Among its questions: “Are there any legal, security, privacy or data sensitivity issues with collecting device level data? If so, how can these issues be addressed?” The simple answer is apparent: don’t collect any personal information on the person using the device.

When George Orwell published 1984, the most intrusive technology he could think of was a two-way TV that monitored citizens’ activities. Orwell would have loved (or hated) the Internet. Not that the FCC is in any danger of morphing into Big Brother. But it should be possible for the government to promote broadband, and even monitor its deployment, without gathering data on individual users. Or, if such data are essential to the FCC’s mission, it could ask Congress to authorize an absolutely airtight, no-exceptions privacy protection. The only alternative is to trust the Government’s competence and discretion. That has not always worked out so well in the past.

Spectrum Unleashed!

 The FCC settles a long-standing controversy between satellite radio and the 2.3 GHz Wireless Communications Service

After years of technical and legal wrangling among competing interests,  the FCC has dipped into its spectrum pool and generously doled out 25 MHz for mobile broadband service in the U. S.,  while protecting nearby satellite radio, aeronautical mobile telemetry operations, and deep space network operations from harmful interference. This action in the Wireless Communications Service (WCS) 2.3 GHz band  is a small start on the National Broadband Plan’s recommendation for 500 megahertz of additional spectrum for broadband use over the next ten years.

The previous WCS rules had very strict limits on out-of-band emissions, primarily to protect satellite radio in the adjacent band. Those limits effectively precluded mobile operation. The FCC has now relaxed the limits, permitting mobile use. At the same time, it gave Sirius XM, the sole remaining satellite radio licensee, permanent authority to operate from terrestrial towers, thus providing for better service in built-up areas (and also making satellite radio in those areas less susceptible to interference from WCS).

The FCC also enhanced the build-out requirements for WCS licensees. Some were running late under the previous schedule, but now have a fresh start.

Please contact an FHH attorney if you're interested in acquiring some of this spectrum.

The FCC Acts In Mysterious Way

Commissioners signal intent to impose modified Title II common carrier regulation on broadband Internet

This FCC is not letting any grass grow under its feet. Only a month ago, the U.S. Court of Appeals for the D.C. Circuit pulled the rug out from under the FCC's authority to regulate the Internet. In the intervening weeks, there was much speculation about what the Commission should or would do to bring the Good Ship Internet back on course.   Suggestions included turning the entire matter over to the Federal Trade Commission, seeking a change in the Communications Act to expressly grant the FCC the authority to regulate the Internet, appealing to the Circuit Court en banc or the Supreme Court to reverse the Comcast decision, or trying to more solidly justify its ancillary authority over the Internet.  

The most widely discussed option, however, was simply re-classifying broadband Internet access as a telecommunications service. 

While this would require some major backtracking by the Commission (it had previously solemnly declared broadband Internet access to be an “information service” and thus exempt from Title II regulation), it is not uncommon for administrative agencies to change their minds.   The re-classification would deposit broadband Internet access safely back in the nest of common carrier services which no one disputes the Commission has authority to regulate. The only question then would be whether to employ the heavy hammer of full Title II monopoly style regulation or the light feather of minimal regulation applied to wireless carriers, or something in between.

On May 6, the Commission telegraphed which way it’s going, but it did so not by an official order but by a flurry of battling press releases.

Chairman Genachowski began the process by issuing a press release indicating his intention to re-classify broadband Internet (or at least the so-called transport component) as a telecommunications service. This would establish the FCC’s authority to regulate under Title II of the Act. He also indicated that the regulation would be as light as possible – just enough to mandate net neutrality and curb abuses of the Internet. In other words, the FCC would forbear from most forms of common carrier regulation but would insist on certain basic principles. Those basic principles would include: reasonable and just interconnection; non-discriminatory terms and conditions of service; access to Universal Service Funds; protection of private customer information; and access by the disabled to telecommunications equipment and services.

The FCC’s General Counsel, Austin Schlick, then released a legal memo laying out the legal basis for the approach the Chairman had espoused. They both refer to this as a “third way” of regulating the Internet because only the “transport” component of Internet communications will be subject to Title II regulation; the information component will remain unregulated (or maybe still somehow subject to ancillary jurisdiction).   

Inquiring minds would love to know what elements of the Internet will be deemed “transport” and what “information” – that difficult line remains to be drawn. (Remember, the FCC itself had opined that broadband Internet was a single integrated unitary offering, so it will have some ’splainin’ to do when it now divides broadband into separate components.) The Schlick Memo pragmatically pointed out that one benefit of the “Third Way” is that it will require only one Court review – far more efficient than the dozens of case-by-case adjudication that would have been necessary if the Commission had tried to justify each regulatory provision under its limited ancillary authority.   Since everyone can agree that regulatory uncertainty is bad, any process that gets things settled quickly has at least one thing going for it.

Commissioner Copps quickly chimed in with a press release mostly supporting the Chairman’s Title II approach but, as always, wanting to know the details.   Hot on the heels of that release came a joint communiqué from Commissioners Baker and McDowell decrying the Chairman’s approach.  At this point the press release balloting was even. Much later in the afternoon, Commissioner Clyburn weighed in with her press release supporting the Title II approach of the Chairman.   By a 3-2 vote, the FCC’s policy is now set.

While governing by press release is unusual, it did have the salutary effect of calming everybody down, stopping the rampant speculation, and pointing the way that the FCC intends to go. The one small problem is that the Administrative Procedure Act requires the FCC to at least go through the motions of proposing rules and letting the public comment before it adopts a regulation. So we presume that the Commission will open a rulemaking proceeding post-haste using the framework set out in the Schlick Memo to justify re-classifying broadband Internet. 

Some important details will need to be filled in, and the rulemaking proceeding can serve that function.   And at some point the Commissioners need to go through the formality of actually voting one way or the other on the matter after having kept an open mind during the course of the proceeding.   Having been given a full, free and fair trial, ancillary jurisdiction will then be hanged.

Broadcasting In The Wake Of Comcast

The aftershocks of Comcast could reach well beyond broadband and net neutrality

While most attention on the aftermath of the Comcast decision has tended to focus on the decision’s impact on net neutrality and the implementation of the National Broadband Plan (NBP), the seismic wave from Comcast and its aftershocks could reach well beyond those obvious targets. Local TV broadcasters, in particular, might want to pay attention to how Comcast might play out in their corner of the regulatory universe.

 For example, the NBP contemplates that spectrum currently in use by TV stations might be re-purposed for broadband. To wrest that spectrum away from the television operators who now hold it, the Commission has suggested that it might work some kind of deal in which: (a) the spectrum would be “voluntarily” relinquished by the broadcasters; (b) the re-captured spectrum would then be auctioned off; and (c) the broadcaster would be entitled to a portion of the auction proceeds.

But the FCC’s authority to cut this kind of deal in any event is far from clear. While the Commission is unquestionably authorized to conduct spectrum auctions, that authority does not obviously extend to cutting deals to kick-back auction proceeds to private parties. And any hope that such deals might be seen as “ancillary” to other authority is dimmed by Comcast.   That in turn means that the FCC’s ability to secure spectrum commitments from broadcasters is likely diminished. Why, after all, would a broadcaster commit to turning in its spectrum if the FCC is not in a position to guarantee any repayment that might be part of the deal? As a result, the Commission should not expect much enthusiasm from broadcasters unless and until the Commission can demonstrate that it will be able to make good on any payment deals it may try to cut.

Another possible ripple effect of Comcast on the broadcasting terrain: let’s not forget that Comcast, the folks who landed the knock-out punch on the FCC in the eponymous Comcast case, are also the folks who are currently trying to get the FCC to approve a massive merger with NBC Universal. Now that Comcast’s ability to restrict, legally, Internet traffic contrary to the FCC’s preference has been established (thanks to the D.C. Circuit), the FCC (and other governmental authorities) may not be especially gung-ho about giving Comcast even greater control of more media than it already holds. If Comcast’s practice of jiggering with its subscribers’ Internet access is deemed potentially anti-competitive, the Feds might be expected to be reluctant to increase any perceived competitive advantages for Comcast.

Of course, in light of such concerns, the Powers That Be (whether that might be the FCC, DOJ or Congress) might attempt to extract “voluntary” commitments from Comcast and NBC, much as they did in connection with the Sirius/XM merger. Could the Commission then impose conditions that look remarkably like net neutrality requirements – even though the FCC might not have the authority to impose such requirements industry-wide? Conceivably, since the FCC’s clear authority to act on the merger request would arguably provide it the related authority to impose conditions on any grant of that request. Such conditions could have an impact on competition in both the online media and the cable industries, not to mention the broadcast business – in all of which Comcast plays a major role.

On the other hand, even if the Commission were to offer grant of the merger in return for concessions or commitments from Comcast, who’s to say that Comcast would accept the deal? Presumably, Comcast would not do so unless the deal made good business sense.

Another possible impact zone from Comcast: retransmission consent. As has been widely reported, the cable industry has filed a petition for rulemaking seeking overhaul of the current retransmission consent process. Thus far the FCC has appeared to be receptive to the idea. But a large number of fixed broadband service providers are cable companies, and those companies can now restrict internet traffic (thanks to Comcast), giving them a potential competitive advantage. How eager will (or should) the Commission be to give the cable industry a further leg up over competitors in the retrans consent process?

At this point we can only guess about how any or all of this will shake out.  But it is important to recognize that the impact of Comcast is not likely to be limited to issues of net neutrality.  In any event, television broadcasters should keep a wary eye on their own situation.  They may still be looking at a decidedly unattractive future: packed tighter than ever in the broadcast band, stiffed by the FCC on any kick-back payments from spectrum auctions, and losing a steady source of revenue to the network, which just merged with the largest cable company.

Effective Date, Comment Dates Set For Roaming Rule Changes

A couple of days ago we reported on an FCC order which (a) made changes in the rules regarding “home roaming” and (b) solicited comments on whether automatic roaming for data services should be required. The order (broken out into two separate parts) has now been published in the Federal Register. That publication has two effects. First, it establishes the effective date of the change in the “home roaming” rule. Mark May 28, 2010, on your calendar for that.

And second, it sets the comment and reply comment dates with respect to the data roaming questions. Comments are due by June 14, replies by July 12.

A Lobbyist's Look At The Comcast Question

Looking for net neutrality authority at the FCC? You might be one letter off. 

[Blogmeister’s Note: CommLawBlog.com welcomes back guest blogger Catherine McCullough, principal of Meadowbrook Strategic Government Relations, a D.C. lobbying firm. We are pleased that Catherine has agreed to share with our readers her thoughts on how the Administration might deal with its Comcast problem.]

Across the post-Comcast playing field, the governmental players are staking out their positions on the question of who, if anybody, has the authority to enforce network neutrality. 

A recent hearing before the Senate Commerce Committee provided examples: Chairman Rockefeller, emotionally describing how lack of service affected his constituents during the recent West Virginia coal-mining disaster, said he will put his considerable power behind writing a bill to give the FCC unambiguous authority to protect consumers; Ranking Member Hutchison – who doesn’t have the final say over any majority bill now, but whose party could hold all the cards if elections go Republicans’ way in November – warned the FCC that there would be consequences if it acted to reclassify. 

And in an exercise I’ve seen repeated in that Committee room by other agency leaders, Chairman Genachowski stuck to his written testimony and gently tiptoed around the hard questions (like how the FCC might plan to make the National Broadband Plan a reality given the new hazy regulatory climate).

If you were Mr. Genachowski, how would you deal with the conundrum of network neutrality in the aftermath of Comcast?

You could take up Rockefeller’s suggestion and ask Congress to give the FCC express statutory authority. But there are downsides of going to Congress for a remedy: chairs could shift during the November elections, and besides – would you really want to risk opening the Communications Act to amendments (shot clock, anyone?) And let’s not forget about timing – you want the NBP to move ahead now, not at some indefinite future point, after the full range of Congressional process has managed to inch its way to some (unpredictable) conclusion at some point in the indefinite future.

Or you could take Hutchison up on her challenge and reclassify internet access as a Title II telecommunications service. But as many have observed, that would almost certainly lead back to court. 

Or maybe, as Fletcher, Heald’s own Mitchell Lazarus has suggested, the FCC could find a more tailored way out.

Both of the last two options, however, involve the FCC re-jiggering its own legal authority from within – which risks potential punishment from the minority party (not a purely hypothetical risk, as Hutchison’s comments, noted above, demonstrate).

So what’s the answer? 

If I were Mr. Genachowski, stuck between a legal rock and a political hard place, I might look for some other way out of the bind – a way that would permit regulation of net neutrality while keeping my agency both out of court and out of any politically costly cross-fire in Congress. If only I had a protector. Or in this case, a consumer protector. You see where I am going with this: I would consider handing off the net neutrality hot potato to my regulatory siblings at the Federal Trade Commission (FTC). 

The FTC can’t regulate common carriers. But so far ISPs aren’t common carriers, thanks to the FCC’s consistent reluctance thus far to so categorize them. And if ISPs aren’t common carriers, the FTC can step in. (See tech attorney Glenn Manishin’s analysis of Comcast on this point.) 

Section 5(a) of the FTC Act gives the agency jurisdiction over “unfair or deceptive acts or practices”, and FTC Chairman Leibowitz has been willing in the past to assert jurisdiction in order to protect consumers. 

Remember, dear Readers, Chairman Leibowitz has sunk significant political capital into asserting his agency’s power over online commerce issues and other consumer protection initiatives that are threatened if someone in the government can’t enforce net neutrality. So the FTC could be expected to welcome the authority to regulate ISPs and implement net neutrality.

And – just as politically important here – if the FTC were to be deemed the principal locus of control over the issue, Chairman Rockefeller and his Senate Commerce Committee – and their colleagues on the House side – would lose no power. The Commerce Committees have oversight authority over both the FCC and the FTC, so allowing one of the two agencies to take up regulation in an area – say, net neutrality – previously controlled by the other agency would not realign Congressional power in any way. All Chairman Rockefeller has to do is ask his Consumer Protection Subcommittee Counsels to join his meetings with his Communications Counsels. 

But even if the FTC is standing by, ready, willing and able to take over, and even if that approach would likely be acceptable to the powers-that-be on the Hill, there’s still one big question: would Mr. Genachowski voluntarily give up the power he believes his agency has? Jurisdiction does not switch hands easily or often in this town, but Mr. Genachowski’s boss, President Obama, might not care which of his agencies holds authority, as long as his National Broadband Plan’s infrastructure is protected.

One thing, I believe, is certain: net neutrality enforcement authority will be assigned eventually. Like a handful of chips thrown into the air on a casino floor, no part of government’s power will be left un-gathered and unused. The only question left is who will pick them up.

Roamin' Forum

FCC requires reasonable home roaming for voice services, invites comment on mandatory automatic roaming for data services

In an Order/Further Notice of Proposed Rulemaking adopted at its April 21 meeting, the FCC slightly modified its current rules on the obligation to provide automatic roaming to other CMRS carriers, while temporizing on the question of whether to extend automatic roaming privileges to data services.

The modest change concerns the elimination of “home roaming” as an exclusion from the usual automatic roaming rule applicable to voice, SMS and push-to-talk services. In 2007 when the FCC originally declared that the enabling of automatic roaming was a common carrier obligation, it carved out an exception for home roaming.  Home roaming, of course, refers to the situation where a carrier’s customers roam on another carrier’s network while they are in their home carrier’s licensed service area – not at all the circumstance that roaming is usually thought to apply. 

The exclusion of home roaming from the roaming mandate made a certain sense. If carriers could simply have their own customers roam on their competitors’ networks in markets where they themselves had licenses, there would be no incentive for them to build out the portions of the market that would be difficult or expensive to reach or serve. They could simply piggy-back on their competitor by having their subscribers roam in the remote parts of their service areas where the competitor had spent the time, money and effort to erect facilities. This seemed to run counter to the Commission’s policy of fostering facilities-based competition wherever possible.

Nevertheless, a gaggle of Tier II and Tier III carriers sought reversal of this decision, vigorously opposed by AT&T and Verizon. It seemed that the smaller carriers were licensed in many territories where it was infeasible to serve all or part of the territory, at least for the immediate future.  In the meantime, the home roaming exclusion gave AT&T and Verizon the right to forbid roaming altogether in those markets, putting the junior carriers at a significant competitive disadvantage.

It was a close case, with merit to both sides, but the FCC came down on the side of the smaller operators: it mandated home roaming upon request. The Commission eased the sting somewhat for AT&T and Verizon by permitting a carrier presented with a roaming request to rebut the presumption that such a request is reasonable.

With the announcement of the new National Broadband Plan last month, the table appeared set for the Commission to also act on the long-pending question of whether carriers should be required to offer automatic roaming for data, in addition to voice, services. The FCC had punted on this issue in 2007 by the time-honored dodge of seeking more information. Having sat on the facts it developed three years ago, it may now honestly claim that that record is stale and it must therefore delay action again by seeking new facts. 

(Blogger's observation: This is one of the tearing-one's-hair-out aspects of administrative law. An agency can procrastinate on an issue for years, and then, when it takes the matter up again, claim with a straight face that it now needs to gather more information because of the passage of time. Procrastination actually becomes a legal justification for more procrastination.)

In any case, the FCC is seeking further input on this issue, which has taken center stage now that broadband has become the golden idol which the FCC worships. Clearly, if mobile broadband is to become a reality, there will have to be some understanding about the availability of roaming to broadband subscribers who travel to non-home markets. Among the issues the FCC has teed up is the question of whether a non-home carrier can discriminate between its own subscribers and roamers by, e.g., placing limits on roaming access to its network that do not apply to its own subscribers.   Because bandwidth may be in short supply and some data applications are bandwidth-hungry, it might well make sense for carriers to favor their own subscribers over mere roamers – a situation which rarely arises in the pure voice context.  

Also of interest is the question of whether automatic roaming should be required where one or both of the providers involved are not actual CMRS providers, i.e., are not common carriers.   The assumption underlying the original automatic roaming proposal was that the participants in the roaming process would themselves be CMRS carriers.   But since wireless internet service is (at least for the moment) classified as an information service rather than a telecommunications service, there are many wireless data providers in the broadband landscape who would not be covered one way or another by a rule on automatic data roaming.   If automatic roaming for data providers is to be meaningful, the FCC’s inquiry needs to encompass those types of providers, too.

Comments on this aspect of the roaming proceeding are due 45 days after the item appears in the Federal Register, with Reply Comments due 30 days later.     Check back for updates on those deadlines.

FCC Proposes Tough Love For 2.3 GHz Licensees

FCC suggests, seeks comments on, harsh new standards for WCS licensees

Of the many, many tasks which the FCC has set for itself in its National Broadband Plan (NBP), attentive readers may have noted one in particular. At page 86 of the NBP, the FCC committed to “accelerat[ing] efforts to ensure that WCS [Wireless Communications Service] spectrum is used productively for the benefit of all Americans.” We had to smile at the use of the word “accelerate” in this context since the FCC has been doing precisely nothing for the last 13 years to bring this spectrum to productive use.   In fact, in contravention of its own rules it has been sitting on applications for almost three years which could already have been providing innovative WCS service. The NBP is striking in that regard, since it repeatedly fails to acknowledge how the Commission’s own inaction and irresolution have often stymied, thwarted or delayed the very objectives which the FCC now claims to be so urgently needed.

Be that as it may, the FCC – while still leaving incumbent WCS licensees and new applicants in limbo – has now requested comment on some very rigorous build-out standards for the 2.3 GHz WCS service.  

Currently, licensees in this service need demonstrate only that they have provided “substantial service” at the end of their ten-year license term.  The term “substantial service” has not been defined with any specificity; instead, the Commission has invoked the ancient formula of “service which is sound, favorable and substantially above a level of mediocre service that just might minimally warrant renewal”. Still, the FCC did deign to identify a few reasonably delineated safe harbors that licensees could rely on: for mobile and point-to-point uses, service to 20% of the population would be deemed “substantial”; for fixed point-to-point uses, service to four links per million of population would do the trick.

But now, apparently determined to bring WCS spectrum to productive use, the FCC is proposing to swing 180 degrees from those relatively liberal build-out requirements and instead impose requirements that are among the harshest ever.

Specifically, the FCC is proposing that licensees engaging in point-to-point or mobile uses must cover 40% of their licensed population in 30 months and 75% of the population in 60 months.   Point-to-point users would have to have 15 links per million of population in 30 months, 30 links per million of population in 60 months, and minimum but unspecified payloads.  

To tighten the requirement even further, the FCC suggests that all the defined markets which comprise each licensed area might also have to have 25% coverage in 30 months/50% coverage in 60 months. This latter requirement would ensure that service be provided broadly over a licensee's entire licensed territory rather than clumping around major population centers.   The penalty for failure to achieve these goals: death, or its regulatory equivalent, forfeiture of the entire license.

The new suggested requirements are extremely aggressive, exceeding any build out requirement ever imposed for geographic licenses that cover large expanses – so much so that it’s not even clear that there’s enough WCS equipment in the whole world to meet these standards if the FCC were to adopt them tomorrow.   Nor would most rational business plans call for building out on a scale this vast with no existing ecosystem whatsoever of customers or content  to provide the demand for which this extraordinary construction project would be the supply. Nevertheless, the FCC has put this proceeding on a super-fast track, allowing only 15 days (to April 21) for comments and 10 days (to May 3) for replies. (The public notice made it into the Federal Register on April 6. The comment track was so fast that the deadline for initial comments has already passed – but there’s still time for replies.)

The regulatory train appears to be pulling out the station and, although it may be headed in the wrong direction, no one can say it isn’t accelerating.

NBP Lift-Off!

FCC launches five – uh, make that six – NBP-related items in one day

If you thought the FCC might have been kidding around when it promised quick action on the National Broadband Plan (NBP) agenda items, the FCC is working hard to move you off that thought. In an impressive display of regulatory shock and awe, the FCC has put a substantial dent in its NBP to-do list by launching six separate proceedings covering five discrete subjects. The items include:

The six items top out at a total of just over 250 pages in all, so you might want to start reading now.  If you just want to get a quick sense of what each involves, you might want to check out the public notices which recap each: Universal Service Fund; Roaming Obligations; Survivability; Cyber Security Certification; and Set-top Boxes.

 Each of the six items invites comments and reply comments, but don’t get your calendars out yet. The comment deadlines won’t be set until the various notices are published in the Federal Register. And to make it even trickier to start planning your early summer get-away, the Commission appears to contemplate an oddly diverse set of deadlines. For example, comments and replies in response to the Set-top Box NOI will be due a scant 30 days and 45 days, respectively, after that notice makes it into the Federal Register.  By contrast, comments/replies in the Cyber Security Certification proceeding won’t be due until 60/120 days after publication. And in between you’ve got the Set-top Box NPRM and USF combo NOI/NPRM (60/90 days for each), and the Survivability NOI and Roaming NPRM (45/75 days for each).

With this barrage – or is it a salvo? – the Commission is clearly signaling its determination to move forward with the ambitious campaign mapped out in the NBP, despite the major questions which loom large in the wake of the FCC’s setback in the Comcast case.  And don’t get comfortable, because these are just the beginning.  The NBP envisions more than 60 proceedings in the months to come.  Stay tuned . . .

NBP: The FCC Springs Into Action

Implementation schedule for FCC actions released

The FCC has released its tentative calendar year 2010 schedule for implementing those aspects of the National Broadband Plan (NBP) that fall under its jurisdiction. We had complained when the NBP first came out that the FCC could usefully have identified those goals that it could achieve on its own and those objectives that require legislation or action by other administrative agencies to accomplish.  Now the FCC has thoughtfully and in detail resolved our complaint. 

The “2010 Broadband Action Agenda” lists more than 60 different rulemakings or other agency actions which are or will soon be in the pipeline in furtherance of the Broadband Plan.   The items are helpfully color-coded and related by cool icons to the FCC office that is responsible for the item.   We especially appreciate the blank box that sits next to each item waiting expectantly to be “checked off” when the item is completed. (For a less glitzy but more colorful PDF version of the agenda, click here.)

While it is wonderful to see the FCC moving aggressively to issue orders and initiate proceedings in furtherance of its Plan, we need to remind ourselves that launching a Notice of Proposed Rulemaking (NPRM) is a far cry from actually reaching a final decision. Some of the rulemakings on the agenda, such as USF Reform and Intercarrier Compensation, have stumped the FCC for nearly a decade. There is no reason to be particularly hopeful that placing them on an agenda – even a color-coded one with actual calendar quarters on it – will cause them to be resolved quickly.  Indeed, the very breadth of the NBP and the major across-the-board restructuring of the telecommunications landscape it contemplates may require starting over from scratch on some industry issues that have proven remarkably intractable in the past.  

It’s especially disheartening to see that some of the most difficult issues will not even be teed up as NPRMs until the 4th quarter of this year.   If it takes that long to get an NPRM out with a plan already in place to guide you, how much longer will it take to arrive at an actual final decision? Just checking the block on issuance of the NPRM may make people feel good, but nothing will have been accomplished.

Further, the Agenda comes with its own fine-print footnote that reads like a disclaimer for some new medicine. The footnote reminds us that the Agenda reflects “only proposed FCC actions, not those of other government agencies” – a major carve-out, given the significant elements of the NBP which are controlled completely by other government agencies. The footnote also cautions that the timelines described in the Agenda are merely “a series of targets that may be adjusted to respond to changing conditions as appropriate.” It goes on from there, but you get the picture.

So we wish the Commission Godspeed as it embarks on its implementation plan, and we earnestly hope that the effort does not get bogged down in the usual administrative inertia that so often sinks bold new initiatives in this town.

NBP And Energy: There's A Great Big Beautiful Tomorrow

FCC envisions broadband-based "Smart Grid" to facilitate energy conservation

Can’t make it out to Disneyland for the 2010 version of “Walt Disney’s Carousel of Progress”? No problem. Just take a quick gander at Chapter 12 of the National Broadband Plan (NBP). A Jetsons-like future is, apparently, just around the corner for all of us.

The NBP, of course, is touted as promoting a wide range of society-improving interpersonal communication uses – like telemedicine and long-distance education. But the elaborate broadband infrastructure necessary for those communications could also be harnessed with innovative technology to enhance energy efficiency and safe transportation. Hence, the “Smart Grid”.

In the NBP’s vision, a national broadband “Smart Grid” would connect to most energy-consuming devices. It would enable the reduction, or at least evening out, of their consumption, and inform consumers of the extent, and cost, of their energy use (thus, ideally, encouraging them to stop being energy hogs).

Smart homes and buildings are the starting point – buildings equipped with devices that provide their occupants with information about their energy consumption, allowing them to make real-time adjustments in consumption patterns. 

Traditionally, consumers have received information about energy consumption only after-the-fact, when they receive their monthly utility bills. The FCC envisions systems that could monitor and report on energy use on a real-time basis, with pricing information included, thereby enabling consumers to avoid or to reduce consumption during peak demand periods. Since a significant portion of energy production plant is needed only during peak hours, less plant would be needed if peaks were leveled out. For example, if the power grid were under strain at a particular time, and you happened to be cooling your home enough to wear a sweater, your TV might flash dollar signs before your eyes to warn you that it is time to let the place warm up a little if you don’t want a rude surprise when your electric bill comes. Or you might receive a warning from your smartphone, leading you to change your thermostat using – yes – your smartphone, even if that thermostat is in your home in Washington and you happen to be surfing in California.

Appliances are now being developed that can connect to a home network and gather and report information about community-wide power demand. Those appliances might discourage operation during peak periods, by sounding a warning or even refusing to function. Appliances with time flexibility might include washers and dryers and charging stations for future electric vehicles, which will tax the power grid significantly if charging is not confined to overnight hours. One manufacturer claims that all of its appliances will connect to the Smart Grid by 2015.

Telecommunications network sharing should be encouraged, the FCC says, to avoid construction and operation of duplicative energy-consuming systems. Sharing between public safety and commercial entities should also be encouraged. The FCC suggests that studies be undertaken of the reliability and resiliency of commercial broadband networks and recommends that the networks be hardened so that they are less likely to fail during a storm or other emergency. Cable TV, for example, is known in many areas as one of the earliest systems to go out during a storm. Obviously, utilities don’t want to rely on systems which fail when most needed. The more reliable commercial networks become, the more likely public safety agencies and utilities will become interested in sharing those networks. The FCC also suggests that privately owned utilities be qualified to share public safety wireless networks. Today, they usually do not qualify because they are not government entities.

Financial incentives are suggested to encourage utilities in turn to provide incentives to their customers to conserve energy. These incentives would be different from today’s incentives, which encourage building facilities and selling more power, especially for utilities which have a guaranteed rate of return on their plant investment.  The FCC suggests that utilities be rewarded for investing in ways to reduce consumption, not just investing in more generating plants.

Standardization is an important element in encouraging both the use and the usefulness of the Smart Grid. The FCC suggests mandatory open and interoperable standards, along with standardized access policies which would accord all customers access to the Smart Grid – and, thus, the ability to acquire and use information to reduce consumption wherever they may be physically located. The FCC suggests that if states do not require utilities to provide consumers with access to energy consumption information within the next 18 months, the federal government should step in with national pre-emptive legislation.

The NBP also encourages more efficient design and operation of telecommunications networks themselves, including deploying virtual servers which allow a single server to perform the function of multiple servers, as well as using energy-efficient components. 

Moving to the transportation side, the FCC extols the energy savings which would accrue if everyone had a communications link that knew where traffic were congested and suggested alternate routes in real time. So much for listening to your favorite radio station traffic personality.  And finally, a nod of the head is given to collision avoidance technologies, which require spectrum to operate but do not require a link to the Smart Grid except to report when they have failed and the vehicle has been smashed.

The FCC’s aspirations are ambitious. But few people dispute that the nation consumes more energy than it need consume, and most agree that we would be better off if we were less dependent on foreign oil. Thus, moving in the directions the FCC suggests should result in cleaner air and more economic freedom for the nation. There are obvious “Big Brother” issues with amassing and distributing too much information, but the FCC does recognize privacy concerns and recommends that while consumers should have access to full information about their consumption patterns, they should also be able to control who else has access to their individualized data.

To paraphrase the classic theme song of Walt Disney’s Carousel of Progress:

There’s a great big beautiful tomorrow, And tomorrow’s just an NBP away.

[Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

NBP And Infrastructure: Lots Of Questions, Not So Many Answers

FCC Plan offers bold suggestions, few details

The FCC's National Broadband Plan (NBP) correctly recognizes that improved broadband to the end-user cannot be achieved without significant changes to certain critical “behind the scenes” elements of the nation’s broadband “ecosystem” – including the resale of facilities to competitors; the cost of “backhaul” (i.e., the radio or wired paths between and among the cell towers and the cellular switching office); availability of “data roaming” (i.e., the ability of a mobile wireless user to receive and transmit data traffic when outside of the data service coverage of its own carrier); and transition of the telephone network away from copper to fiber. While short on details, the NBP (in particular the section titled “Competition in Wholesale Broadband Markets”, in the “Broadband Competition and Innovation Policy” chapter of the NBP) suggests a return to regulatory schemes that, in addition to being troublesome and cumbersome, simply haven’t ever worked in the past.  

Nevertheless, no one can accuse this FCC of lacking boldness.

Resale. Historically, the FCC has attempted to use competition to regulate markets in two ways: (a) by establishing a regulatory environment conducive to competitors who own their own facilities (so-called “facilities-based competition”); or (b) by forcing facilities-based carriers to make their facilities available to non-facilities-based companies at rates that will allow the latter to earn a reasonable profit (a “resale market” approach).  

Facilities-based competition tends to promote a wider diversity of consumer choices, greater responsiveness (in time and substance) to consumer desires, and lower service rates – while avoiding the various downsides of direct regulation. Still, the Commission sees a role for the resale market approach in promoting broadband because, in the agency’s view, “well-functioning wholesale markets can help foster retail competition”, particularly in view of both (a) the economies of scale, scope and density of telecom networks, and (b) the economic and practical infeasibility of building out competitive facilities in all geographic areas.

This may ultimately prove, like third marriages, a triumph of hope over experience.

The history of the resale approach is long and not especially happy. Beginning in the 1970s, the FCC embraced that approach, apparently convinced that forcing incumbent telcom companies to resell to competitors would serve as an effective alternative to rate and service regulation.  Resale was in such vogue that Congress incorporated it as a central feature of the competitive policies of the Telecom Act of 1996. (which relied upon the resale of network elements by incumbent telcos (ILECs) to competitive carriers (CLECs) at below-cost prices.)

Many, perhaps most, observers would agree that the government’s efforts along those lines have failed. Indeed, over the last 10 years the FCC itself has quietly, and gradually, dismantled the ILEC-to-CLEC resale program. For example, the FCC ended the right of resellers like Covad to gain unbundled access to the high frequency portion of the subscriber access line (that is, the twisted copper pair running from the telco switching office to your home), thus spelling the end to competition in the provision of Internet access via the subscriber access line (xDSL). While dismantling the resale regime, the FCC pursued a “hands-off” approach to broadband regulation.

But in the NBP the FCC now wants to resurrect its resale policies for broadband providers. Recognizing that it lacks coherent and tested resale policies geared to today’s IP world, the FCC acknowledges that careful evaluation of the data and the many complex related issues will be necessary. The Commission also admits that the pursuit of other policy goals, such as retiring the copper plant used for over 100 years by telcos, cannot be ignored in the analysis. So resuscitating the resale market approach for broadband will require consideration of a range of difficult issues over and above the fact that the resale approach historically hasn’t worked – making an already complex method of promoting competition even more difficult to implement. The FCC surely recognizes that there are legal and political tensions inherent in restoring resale as a competitive tool after having largely abandoned it.

Backhaul and other special access services. Wireless carriers need to connect their various facilities (cell sites, switching and router systems). For that purpose they use either microwave radio systems or LEC facilities. The latter are now referred to as “special access” services. (Think, for example, of a T-1 or an OC-3 line that is always on and not shared with other users.) But the need for wireless backhaul is old news – why should it be an NBP issue now?

Wireless carriers complain that the FCC’s microwave radio rules make radio-based backhaul too expensive. But the wireless carriers complain that the alternative – i.e., special access services – is also prohibitively expensive because the FCC’s deregulation (or non-regulation) of such services has allowed the incumbent, often monopolistic, telcos to charge sky-high rents for backhaul services. And exacerbating the burden of this cost factor is the brutal fact of increasing demand. With more and more cell phones using more broadband apps requiring higher data rates, the amount of wireless traffic is skyrocketing, which necessarily leads to dramatically increased backhaul volume – for which those sky-high rates will be charged, making the cost of backhaul an even larger issue.  This same complaint is made by (a) businesses who rely on special access services to get to the Internet and (b) Internet access providers who use special access services to connect their points of presence or extend their services to areas they cannot otherwise serve.

Given the FCC’s lackluster history with resale, we are not surprised that the NBP makes no concrete recommendations for regulating the special access through resale.    Instead, in a throwback to days of yesteryear, the FCC appears to be proposing old-style rate regulation. That’s right: tariffs, not competition.

Wireless data roaming. By wireless data, the FCC is referring to the use of the cell phone to access the Internet and use data applications – oh, and voice too, as it's all data now. The FCC has for years required wireless carriers to allow the customers of other carriers to roam on their networks (although that rule is limited to voice traffic). But while the FCC has been happy to impose that requirement, it has been loathe to regulate roaming rates charged between carriers (even though the FCC has the authority to do so). The FCC’s regulatory reluctance has opened a path for avoiding the roaming access mandate: if Carrier A does not want to let Carrier B’s subscribers roam on Carrier A’s system, Carrier A simply imposes rates that carrier B can’t afford to pay.

While the FCC seems more than happy to jump back into rate regulation of special access, it is still struggling with how to ensure universal data roaming on reasonable terms – a goal it never quite achieved with voice roaming. Perhaps that’s why the NBP proposes to encourage voluntary roaming agreements among carriers while continuing to study the issue of whether to make data roaming access mandatory. It makes no concrete recommendations for regulation.

Transition from switched-based services to IP-based services. We are all familiar with regular telephone service. It is “switched”, meaning that a whole circuit is created for each call, and that call and that circuit are created by the switching process. The two common forms of call switching are analog and time division multiple access (TDMA). We are all familiar with voice over IP service (VoIP). This service uses IP and session initiated protocol, rather than switching, to move, send and receive voice calls.

Recently, AT&T proposed to transition from the twisted pair and circuit switched technology to fiber and IP technology. The FCC supports that transition, seeing the greater public and consumer benefits that will arise when we rely upon fiber rather than the twisted pair.

But the transition will cause dislocations, particularly to DSL providers (like Covad) who rely on access to the high frequency portion of the twisted pair. The NBP concedes that using copper to provide DSL can be beneficial. But the NBP appears to see a greater good in “copper retirement”, i.e., transitioning from the twisted pair to fiber-to-premises. While the NBP does not provide any final answer, it’s probably safe to say that copper-reliant competitive DSL providers should count their days.

Interconnection also is a problem. The FCC sees a need to clarify that the Telecom Act of 1996 requires rural ILECs to interconnect with CLECs. The Commission also plans to study the interconnection challenges and opportunities that the Nation will face as we transition to all IP networks.

[Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

NBP And Broadband Spectrum: Desperately Seeking 500 MHz

Candidate sources include TV and satellite frequencies

Everybody reading this on a wireless device, raise your hand. We thought so! Our readers are unusually up to date. Those old-style Ethernet cables into the wall are so Twentieth Century.

The FCC has noticed all of us using our phones like little laptops and TVs, and our wireless laptops for everything else we do online. All of that data has to ride on radio waves. Other things being equal, more data will require more radio spectrum. As part of its ambitious National Broadband Plan, the FCC is looking to find some.

The FCC will have to look hard, because we are going to need a lot of spectrum. Recent increases in demand are impressive. AT&T, with its ubiquitous iPhones, shows an annual growth in service of 268%. The other major carriers are close behind. Analysts expect continued sharp growth over the next several years.

What is driving the demand? The FCC politely calls it “users engag[ing] with data-intensive social networking applications and user-generated video content.” Judging from the people at Starbucks, we think it’s mostly Facebook videos of college kids horsing around. But if people are willing to pay for it, the carriers will try to deliver, and the FCC will work on helping them find enough spectrum.

The goal is 500 MHz, newly available, of which 300 MHz should be between 225 MHz and 3.7 GHz. The FCC does not explain these boundaries, but we will. Lower frequencies need bigger antennas; 225 MHz is around the lower limit for a hand-held device. And frequencies that are too high do not propagate well; anything much above 3.7 GHz is not practical for mobile applications.

The most-discussed proposal – and most reviled, in some circles – would convert 120 MHz of TV broadcast spectrum, 20 channels’ worth, to wireless broadband applications. After all, the FCC may have reasoned, auctioning just 52 MHz of the former 700 MHz TV spectrum brought in $19.6 billion. So let’s do it again, but more so. Only 10% of households still depend on over-the-air TV, so where’s the problem – especially since the broadcasters can all stay in business, once we arrange for them to share whatever channels remain. And those who give up spectrum voluntarily will be in for a cut of the auction revenues. Everybody wins, right?

Such is the gist of the FCC’s thinking.

Another 90 MHz would come from mobile satellite spectrum. Those licensees can offer terrestrial cellphone-like service on their frequencies, so long as they also provide service through satellites. The FCC could improve access to their spectrum by easing the satellite requirements. The traditional wireless providers, which have opposed similar moves in the past, might come around if they are allowed to participate in offering service.

Where it cannot displace incumbents by offering money (see broadcast spectrum, above), the FCC plans to try the opposite tactic: taking money away. The idea is to charge a “spectrum fee” for shared frequencies that are used for a single purpose. Those would include much two-way radio, most fixed microwave, and possibly satellite services. One proposal is to start with a low fee and gradually raise it until the fee is unaffordable for present uses, thus encouraging licensees to shift to other, presumably more valuable uses. No details on how this would work. Government spectrum users would be subject to a similar fee; no details on that, either. 

Nor has the FCC overlooked unlicensed applications, which now include Wi-Fi, Bluetooth, and a vast array of consumer, commercial, and industrial equipment. Goals include “free[ing] up a new, contiguous nationwide band” for unlicensed use – assuming such a swath can be found somewhere; encouraging spectrum-agile radios that can use temporarily empty spectrum; and finishing the long-running “white space” proceeding on unlicensed use of vacant TV spectrum (which may be in short supply, if the FCC auctions off large numbers of TV channels).

Finally, the FCC acknowledges the need for more “backhaul” spectrum to move broadband data between cell towers and network facilities. (Read more about that here.) It proposes some technical rule fixes that might help providers to backhaul services more efficiently.

The FCC’s calling this document a National Broadband “Plan” is a bit of stretch. On the spectrum issues, at least, it is more of a rough outline of how to develop a plan. The proposals are missing key details. Many will take years to work through; spectrum allocation proceedings are typically among the very slowest at the FCC. Some key steps will require action by Congress, which rarely comes swiftly.

We’ll check back on the outcomes later in the decade – with any luck, on our ultra-high-speed handheld using newly available spectrum. Or, if all else fails, we can always plug the Ethernet wire back in.

[Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

NBP and Education: Broadband Goes To School

FCC encourages use of broadband by schools and funding of broadband by government.

Among the array of ills which the FCC’s National Broadband Plan (NBP) addresses is the insufficiency of broadband in our schools.  The NBP therefore devotes considerable attention to Education. It begins by noting studies showing American students lagging far behind their counterparts in other advanced nations in math and science. The NBP’s solution, unsurprisingly, is more broadband. The NBP promotes the use of broadband-enabled resources for students, teachers and educational intuitions and proposes increased investment in broadband infrastructure. Specifically, the NBP recommends a collection of initiatives designed to: (1) support and promote online learning; (2) unlock the value of data and improve transparency; and (3) modernize educational broadband infrastructure.

The NBP strongly embraces online learning tools as both an in-class resource and a means of extending learning beyond the classroom. To promote online learning, the NBP’s recommendations include creating and implementing new standards and formats so that educational content can be more easily located and shared by educators. The plan also urges Congress to consider certain changes to copyright law to “encourage copyright holders to grant educational digital rights of use.” 

On the state and local level, the NBP recommends changes to accreditation programs to allow for more online instruction to count towards primary, secondary and post-secondary programs – allowing students in rural high schools, for instance, to take online AP courses from larger schools or even schools from other states. State and local school systems are also encouraged to include more “digital literacy” elements in their curricula. Finally, the NBP recommends increased funding from the U.S. Department of Education (DOE) and other federal agencies for research and development of online learning systems and teacher training in digital literacy.

The NBP notes that not only can information technology improve education but information about education can improve education. In that vein, it urges new and improved measures for capturing, storing and utilizing information about students, teachers, schools and educational resources. The NBP therefore recommends that DOE encourage the adoption of standards for electronic educational records, including standards for information sharing, privacy and data security. The NBP also recommends greater financial data transparency, with the goal of making educational spending and related data more publicly available to encourage analysis that may improve educational policy. 

Finally, the NBP includes a series of recommendations, many targeting the use of E-rate funding, to increase spending on educational broadband infrastructure. The E-rate program (or the Schools and Libraries universal service support program) allows schools and libraries to receive telecommunications services at discounted rates. Recommendations include:

  • Removing barriers to off-hours community use of E-rate funded resources.
  • Prioritizing E-rate support for broadband connectivity for schools and libraries.
  • Providing E-rate support for internal connections to schools and libraries.
  • Greater spending flexibility for E-rate applicants so that applicants can seek the lowest cost solutions.
  • Raising the cap on E-rate funding to account for inflation.
  • Streamlining the E-rate application process.
  • Collecting and publishing more information on E-rate spending.
  • Encouraging more cost-efficient broadband expenditures through the E-rate program by encouraging increased information sharing and collaboration among federal, state and local agencies.
  • Lowering barriers to E-rate eligibility for Tribal libraries.
  • Awarding E-rate funding to programs that incorporate broadband connectivity into the educational experience.
  • Using E-rate funding to support wireless connectivity to portable learning devices.
  • Congressional allocation of funds to provide and maintain broadband connections to public community colleges.

As with all elements of the NBP, the plan’s recommendations on education may see many changes as they proceed through the various rulemaking and legislative processes. Indeed, this may be even more true for education, which has a long history of local control and local policy taking precedence over federal plans and proposals.

[Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

The National Broadband Plan: An Overview

The FCC's much ballyhooed National Broadband Plan (NBP) was finally announced on March 16 after weeks of titillating leaks from the Commissioners and staff about what was in the plan. By any measure, the NBP is an ambitious and far-reaching initiative which places the advent of broadband somewhere between the invention of fire and the Second Coming on the scale of human historical importance. With the postings immediately below, we start a series of blogs on various aspects of American life which the FCC expects will be improved by broadband access.  (Check back for additional such posts in the future.)   With Commissioner Tate's departure from the Commission, there is, sadly, no analysis of how broadband can fight obesity, but that is about the only facet of life that is not potentially touched by broadband.   We address the various thematic elements of the Plan with a view toward assessing where there may be risks and opportunities for the constituencies involved.    

To be sure, the NBP was an enormous undertaking, and the FCC is justly to be commended for completing  it in record time – to the extent it has not already repeatedly commended itself.   The NBP makes findings and bold recommendations in such areas as jobs, telemedicine, healthcare, energy, public policy, and other areas of commerce that will be affected by broadband – with telecommunications being a means to those ends.   While this was all part of the FCC's broad commission from Congress, we and the Commission are now left to sort out how these worthy goals are to be accomplished.  

The NBP is not a proposal per se. It is not even a blueprint.   It is more of a "things to do" list. Scores of actual notices of proposed rulemaking are in the works to implement certain aspects of the plan are that are within the Commission's jurisdiction.   But many important aspects of the plan require new legislation to change existing law, action by other independent states or federal agencies, or even new treaties with foreign countries.   The FCC can only advise as to those actions. In this respect, it would have been very useful for the Commission to explicitly identify those elements which it plans to implement on its own authority and those which require action by others. An undertaking of this magnitude requires a clear division of labor, with all parties having clear marching orders. If the NBP is to have as dramatic an impact as it could, there must be buy-in to the Plan by a broad range of regulators and legislators.   Unfortunately, the Plan is a stirring call to action on pages 1-7, but by page 338, the reader is less likely to be aroused than to be asleep.

None of this is to disparage the Plan. It is full of useful insights and information, and we recommend it to everyone. We also recommend that interested readers review the topical treatments posted below.

[Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

NBP And Health Care: The FCC Plays Doctor

Need a comprehensive approach to broadband-based health care? Take two aspirin and call the FCC, or Congress, or the FDA, or HHS, or the States, or . . .

In the health care chapter of its National Broadband Plan (“NBP”), the FCC envisions nationwide availability and use of electronically gathered, exchanged, and archived medical information to improve individual and public health care. Getting there from here (noting that the United States is at the back of the pack within the developed world when it comes to electronic health care) will require a vast, coordinated effort on the part of many different players. Looking at the big picture, the NBP identifies three major gaps:  adoption, information utilization, and connectivity. It goes on to formulate a comprehensive plan to fix all three before apparently realizing that the FCC only has jurisdiction over one – connectivity.  Undeterred, the NBP creates a “honey do” list for Congress, the States, the Secretary of Health and Human Services, the Centers for Medicare & Medicaid Services, the Food and Drug Administration, and the Office of the National Coordinator for Health Information Technology.

Having put the rest of the government on the right track, the FCC also sets itself a few tasks:

  • Establish Health Care Broadband Access and Infrastructure Funds within the Rural Health Care Program. The FCC proposes to establish two health care broadband funds, a “Health Care Broadband Access Fund” and a “Health Care Broadband Infrastructure Fund.” The Health Care Broadband Access Fund would replace the existing Internet Access Fund, supporting bundles of services for eligible health care providers. It would be available to both rural and urban health care providers, based on need.  The Health Care Broadband Infrastructure Fund would subsidize network deployment to health care facilities where existing networks are insufficient. 
  • Allow broader participation in the Rural Health Care Program. The FCC plans to authorize participation in both funds by long-term care facilities, off-site administrative offices, data centers and other similar locations. To further expand the reach of the programs, the FCC recommends that Congress make funding accessible to private for-profit institutions that serve particularly vulnerable populations. The FCC also proposes to increase participation by increasing the amount of support and simplifying the application process.
  • Establish outcome-based performance measures.  To protect against fraud, waste, and abuse, the FCC proposes that participating institutions will have to meet outcome-based performance measures to qualify for the above funding, on the model of Health and Human Services’ “meaningful use” criteria.  
  • Publish a biennial Health Care Broadband Status Report. This report will discuss the state of health care broadband connectivity, review industry trends, describe government programs and make reform recommendations. The FCC will analyze the progress of its own programs and, we hypothesize, give Congress, the States, and other federal agencies letter grades for performance and effort.
  • Collaborate with the Food and Drug Administration on regulation for medical devices. The FCC seeks to address and clarify the regulatory approach in areas where communications and medicine converge, such as medical devices that use radio frequencies. Such devices might include wearable sensors for monitoring a patient or smartphone applications that give fetal heartbeat and contraction information to an obstetrician. The FCC proposes, within the 120 days following release of the NBP, to seek formal public input and conduct – wait for it – workshops.

In a similar vein, on Friday, March 19, 2010, the Rural Utilities Service of the Department of Agriculture released a Notice of Funds Availability and Grant Application Deadlines for its annual Distance Learning and Telemedicine grant program application window.  This program primarily funds end-user equipment used for distance learning and telemedicine, such as video conferencing or teleradiology equipment. Therefore, in NBP terms, it addresses the adoption gap.  (The deadline for applications for funding from this NOFA is May 18, 2010.)

[Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

NBP and Public Safety: Revamping the Public-Private Partnership

FCC vision stops short of specific reallocation of D Block for public safety broadband use

The National Broadband Plan (NBP) suggests some bold steps to develop a nationwide public safety broadband network. These include new federal grant programs, roaming and priority access on commercial broadband networks to add capacity, a common technology standard, a new federal office within the FCC to address interoperability issues, and incentives for public-private partnerships. However, to the great disappointment of those who have asked Congress to reallocate the 700 MHz D Block for public safety broadband use, the NBP suggests that the D Block auction proceed as required under current law.

The NBP does not recommend any fundamental changes to the current 10 MHz of spectrum in the 700 MHz band already allocated for public safety broadband. However, national public safety organizations and others have argued that additional spectrum (the adjacent D Block currently slated for auction) will also be needed to accommodate future public safety requirements, especially once first responders have the capability to stream live video to and from the field. The NBP suggests instead that public safety have priority access to commercial spectrum when dedicated public safety spectrum is unavailable, for example during a major emergency.

To make priority access and roaming work, the NBP recommends that the Commission mandate use of LTE as the broadband standard for both the D block and the adjacent public safety spectrum (LTE has already been selected by other 700 MHz commercial licensees such as Verizon and AT&T). This will allow devices to roam across the band and, pursuant to rules yet to be proposed, provide the mechanisms for priority access to be implemented. The big question for public safety, however, is whether commercial licensees would be willing to provide first responder agencies with seamless priority access to their networks, potentially disrupting (or at least slowing) their commercial customers’ communications. The NBP does propose that commercial providers be allowed to charge public safety for priority access, and some FCC staff have suggested that charges be limited to something like a “most favored customer” rate.

The federal grant programs are intended in part to provide funding for the deployment of the dedicated public safety spectrum, based on assumptions that existing public safety land mobile radio transmitter sites and, through partnership agreements, existing commercial cellular sites are used for the build-out.   Federal grants could also be used by public safety entities to “harden” shared commercial sites to meet public safety requirements (e.g., to add back-up power and reinforced towers). Part of the money for these grants could come from new commercial broadband fees proposed in the NBP, similar to the Universal Service Fund.

Tying all of this together will be the Emergency Response Interoperability Center (dubbed “ERIC”) that will reside with the FCC’s Public Safety & Homeland Security Bureau, but will also have input from DHS and other federal agencies. There will be some type of advisory body to ERIC consisting of public safety representatives, though its composition and exact role are yet to be defined. Similarly, the NBP does not address how ERIC will interface with the Public Safety Spectrum Trust, which holds the national license for dedicated public safety broadband spectrum.

Finally, the NBP contemplates that the FCC will soon address long-standing petitions for waivers from various state and local governments seeking authority for “early” deployments of 700 MHz public safety broadband systems. On March 17, the FCC issued a Public Notice seeking comment on a set of recommendations as to how to maintain interoperability among those systems and the yet-to-be deployed national broadband network.

As with other parts of the NBP, the public safety issues have already generated debate and will inevitably lead to contentious rulemaking proceedings and perhaps legislation in the months to come.

[Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

NBP And Privacy: Whose Job Is It Anyway?

NBP identifies on-line privacy as important – but questions abound as to what steps to take and who to take them

The FCC’s National Broadband Plan calls for the extension of broadband into virtually every facet of American life.  While ubiquitous connectivity has many benefits, it also raises questions about how to maintain the privacy of those who enter this brave new world.   The FCC astutely recognized that people’s concerns in this regard could be a significant barrier to adoption and utilization of on-line systems, and it has therefore offered some recommendations on how to create an on-line environment which will provide more consumer protections. But lest you think the FCC has suddenly gone soft and consumer-oriented, the National Broadband Plan (NBP) recommendations for on-line privacy place a hefty emphasis on the need to encourage commercial services which harness “digital identities” to provide customized services (and make a lot of money). These seemingly contradictory goals actually serve the same common purpose, according to the plan: firms with greater access to greater amounts of personal information can offer better targeted services, which in turn increase consumer use and utility.

So how do we reconcile these apparent cross-purposes to reach the FCC’s goal? Generally, the theme seems to hinge on two notions: (1) ensure competition and innovation in the data-collection and data-mining industry, and (2) ensure that individuals can manage their own “digital identities”.

Noting that the “existing regulatory frameworks provide only a partial solution to consumer concern and consist of a patchwork of potentially confusing regulations”, the NBP suggests, but does not outright recommend, that someone (Congress? It is unclear.) should sort out and clarify the roles of the FTC and FCC with respect to on-line privacy.  In a side-bar, the FCC tiptoes around asking Congress to help, but suggests that maybe the legislative branch ought to look into revision of the Privacy Act to, at the very least, grant consumers more control over their personal data.

Whichever branch of government or executive agency actually acts, the FCC makes recommendation is in the following areas:

Federal Framework – First, the FCC calls for laws or regulations that more specifically address the obligations data-collection and data-mining firms have to consumers with respect to use, sharing, collection, and storage of personal data. 

Second, the FCC thinks Congress should help develop trusted “identity providers” to assist consumers in managing their data. Apparently the FCC believes that Congress is the best vehicle for adopting a regime in which safe harbor provisions, guidelines and audits could permit companies to become “trusted” safe-guarders of personal information. The FCC feels that Congress should also ensure that such companies can get insurance for their trouble.

Finally, the FCC recommends that it work with the FTC to develop principles to require consent before broadband service providers share certain personal data with third parties. Why this concept falls under the rubric of “principles” rather than “rules” is not explained, nor are potential enforceability issues.

Identity Theft and Fraud – Given that the FTC is mandated by Congress to act as the identity theft complaint clearinghouse and consumer guidance counselor, the FCC is all too happy to let the FTC continue to bear that burden.  The NBP does recommend some changes: first, the FTC should be given additional resources to battle identity theft and fraud.  These efforts should include amping-up OnGuard Online (an FTC-administered website that provides practical tips to consumers on internet privacy), maintenance of a database sorting out which agency is responsible for what when it comes to consumer protection on-line (back to that hot potato problem), and greater education and outreach.  Finally, the FCC recommends that the FTC coordinate more closely with the national security apparatus.

Child Protection – Citing the lesson that the best way to make swimming pools less dangerous for children is to teach children how to swim, the FCC recommends that the federal government (presumably the White House) create an interagency working group to coordinate child on-line safety and literacy efforts, and to spearhead a national education campaign.

 [Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

NBP, USF and Intercarrier Compensation: Altering The Course Of The Money Flow

NBP envisions overhaul of compensation/distribution schemes to fund $24 billion to close broadband “gap”

One of the problems which has vexed the FCC for more than a decade is how to adapt the Universal Service Fund (USF) and Inter-Carrier Compensation (ICC) regime to the world of the internet.  The USF and ICC were 20th Century constructs which patched up subsidy and traffic exchange problems arising from the AT&T break-up.  The need for reform in these areas has been stymied by the inability of policy-makers to resolve the competing, but more or less legitimate, demands of all the players.  The advent of broadband offers the FCC an opportunity to break the logjam in the context of a migration to all-digital, all-IP networks.

In this cause, The FCC’s ambitious National Broadband Plan (NBP) to facilitate universal access to broadband is inspiring, but as Rod Tidwell and Jerry McGuire (portrayed by Cuba Gooding, Jr. and Tom Cruise, respectively) famously insisted: “Show me the money!” The NBP asserts that it will cost $24 billion to close the “broadband availability gap” and provide the targeted level of affordable broadband service to currently unserved areas.

Where will this money come from?

The FCC proposes to transform and re-purpose the major source of funding currently used to facilitate the provision of telephony in unserved areas, i.e., the USF, into a new Connect America Fund (CAF) to facilitate provision of broadband services. And because, for historical reasons, the USF programs are deeply connected to the way that telecommunications carriers make payments to each other for carrying telephone traffic, the NBP also proposes revisions to the ICC system. With broad proposals to “comprehensively reform” the complex mechanisms through which billions of dollars per year are collected and disbursed, revisions to USF/ICC will be a hotly contested process that will raise some difficult questions.

Currently, three out of the four federal USF programs are not designed to support broadband services directly, though some carriers that receive USF use that funding to construct facilities that can be used for broadband as well as tradition voice services.  In addition, the largest of the USF programs, the High Cost Fund (HCF), supports only certain components of a network, such as wires and switching equipment, but not other components necessary for broadband. Thus, rather than “tweaking” the existing USF programs, the NBP proposes that the FCC pull $15 billion out of the HCF over the next decade and re-purpose that money into the CAF to facilitate (wireline) broadband development. 

In addition, the FCC would create a Mobility Fund to facilitate the development of broadband mobile wireless networks where the market would not otherwise support such development.  Lastly, between 2012 and 2020, the FCC would beginning phasing down and ultimately eliminating the HCF – first by eliminating payments to competing providers in certain areas (primarily cellular companies) and then by phasing out payments incumbent telcos for traditional voice services. After 2020, the only voice services eligible for federal support would be broadband voice services.    

As noted above, the NBP also proposes broad reform of the ICC system. This is because prior to the deconstruction of the Bell System in 1984, universal service was largely funded by a complex set of internal AT&T price and cost cross-subsidies, shifting costs from rural to urban users, from residential to business users, and from local to long distance users. After the break-up of the Bell System, those cross subsidies were replaced with direct payments between phone companies, with rural and smaller phone companies charging ICC rates designed to reduce the cost of providing service to their residential customers.  

When the Telecommunications Act of 1996 was enacted, it mandated that federal subsidies for universal service be funded explicitly, through USF. Nevertheless, the business structures of many telephone companies still rely heavily on the profits received from ICC, and to the extent their ICC declines, those companies would either have to receive more USF, or raise fees on customers. Thus, ICC still plays an important role in making service affordable for customers, a key universal service policy goal. Nevertheless, the NBP recognizes that due to changes in technology (reduced costs of switching and transport of digital data) and increased competition, the existing ICC regulatory structure does not function well and leads to destructive market and behavioral distortions. Indeed, notwithstanding the huge growth of VoIP, many parties claim that the current ICC regulatory regime does not provide for payment of ICC for carriage of VoIP traffic, leading to extensive litigation and under-recovery of ICC by incumbent carriers.

Accordingly, the NBP proposes a staged transition of ICC between 2012 and 2020.

Initially, intrastate per-minute compensation rates would be reduced to the typically lower interstate levels. Then, set per-minute ICC rates for origination or termination of traffic would be completely phased out, leaving companies to negotiate “reciprocal compensation” agreements, where in many cases, no money would be paid between companies in either direction. If enacted, this would radically transform the economics of the telecommunications business.  In a related matter, the NBP also appears to endorse FCC action to ensure “fair and reasonable” (read “reduced”) “special access” charges, which are paid to local exchange carriers by large end users, ISPs, and competing carriers, for dedicated high-capacity transport. 

A number of big questions are raised by the above proposals. Here are some of them:

  1. Section 254(e) of the Communications Act states that USF payments can be made only to “telecommunications” carriers, and other provisions of that Section suggest that funding is primarily for the purpose of facilitating provision of “telecommunications” services, though there is some mention of “information services”. At this time, the FCC has ruled that broadband Internet services are not classified as “telecommunications” services, and it has refused to rule on the regulatory classification of VoIP. Does the FCC need to get Congress to revise the Act in order to defund USF and repurpose that money for provision of “broadband” services through the CAF? A good argument can be made that there is no need for any such legislation, and the NBP does not suggest any such need. But the answer is not 100% certain, and this issue could get caught up in the debate over whether the FCC should reclassify broadband Internet as a “telecommunications” service to facilitate its attempts to promote an “open” Internet. Alternatively, will Congress step in and address the matter? 
  2. Does the FCC need legislation in order to set up the Mobility Fund?
  3. The NBP proposes that the CAF would support only one provider in any particular geographic area, and the use of “market-based” mechanisms (read “reverse” auctions) to determine the one recipient of support. While such approaches have been discussed for some time, they have not been enacted. Would such approaches survive an attack by proponents of funding multiple providers (primarily wireless carriers) and opponents of the auctioning of federal support (primarily wireline carriers)? 
  4. While the current ICC system is clearly dysfunctional, previous attempts by the FCC to enact the changes proposed here ground to a halt after years of FCC proceedings and industry negotiations, though a negotiated solution was apparently undercut by the actions of former FCC Chairman Kevin Martin. In the previous rounds of proceedings and negotiations, it was widely supposed that USF disbursement would increase in order to cover the reduction of ICC income by smaller carriers. Yet in the NBP, the FCC proposes not only to eliminate ICC per-minute payments, but also to reduce (and ultimately eliminate) the HCF at the same time. Is this approach wise or even workable? What can the FCC do at this time that would make this version of ICC reform more palatable to all major industry segments than it has been in the past? In addition, the NBP proposes to reduce the level of intrastate access charges, a matter that state commissions are likely to claim is in their sole jurisdiction. What, other than holding out “incentives” to carriers and state commissions, can the FCC do to address intrastate rates?

It is far too early to know how all of this will play out, but here are some potential winners and losers if USF/ICC reform proceeds as set out in the NBP:

Losers

Rural and small/mid-size telephone companies (and their customers) that do not or cannot move to all-broadband networks by 2020. ICC revenues get zeroed-out, as does the HCF. Will CAF provide sufficient funding for these companies to move to all-broadband networks, and to survive after that transition? Will revenues from providing multichannel video services make up the difference?

Winners:

AT&T and Verizon radically reduce their ICC payments and their contribution to the USF. Furthermore, they may receive more CAF funding than the USF funding that they currently receive.

Winners and/or Losers: 

Cellular Companies (including Verizon and AT&T) will lose some of their current funding if USF only funds one entity per area, and in order to obtain new USF funding, they may have to be the lowest bidder in an auction. But they will be the primary beneficiaries of the proposed Mobility Fund (though it is unclear how much funding this would provide, in what locations, and for how long). More important, they will likely benefit greatly from reduced “special access” payments. 

Internet Content, Application and Service Providers:   If the NBP accomplishes the proposed goals, ubiquitous high-speed broadband will likely greatly enhance the development and profitability of on-line providers. But there is also a possibility that some of these providers could be dragged into making large contributions to the USF and/or CAF funds. 

Wireline competitive local exchange carriers (CLECs) could greatly benefit from suggestions in the NBP regarding the unbundling of incumbent LEC broadband fiber facilities and reduction of special access charges. It is harder to see whether CLECs will win or lose in ICC reform.

Execution of the USF/ICC proposals will generate a large number of extensive and hard-fought battles at the FCC and perhaps in Congress. Put on your helmets.

[Blogmeister note: This is one in a series of posts describing the range of regulatory and societal areas in which the National Broadband Plan could, and likely will, affect us all. Click here to find other posts in this series.]

Microwave Group Muscles In On U.S. Spectrum

Coalition seeks to share federal frequencies for mobile broadband backhaul

The Fixed Wireless Communications Coalition (FWCC), on the same day that the FCC released its new National Broadband Plan, offers to solve one of the problems identified in the Plan.

We all know about the growth in mobile broadband, driven largely by people watching Internet TV and videos on their phones and laptops. The FCC’s efforts to find more spectrum for these applications – efforts that might involve even auctioning off TV channels – are getting a lot of attention. Less conspicuous is the parallel problem of “backhaul”: moving data back and forth between the network and the cell towers that communicate with all those mobile devices. Today most cell towers connect with copper wire that Alexander Graham Bell would recognize. It works fine for voice calls, but lacks sufficient capacity for broadband. At some locations optic fibers are an option. Other cell towers, though, especially at remote locations or in rugged terrain, are best reached by microwave radio links. And that requires . . . Raise your hands, class . . . anyone? Yes! More spectrum!

Fortunately backhaul signals ride best on higher frequencies than mobile broadband, so the two need not compete. The 4-10 GHz range is the backhaul sweet spot. Below that the antennas are too big; above, radio waves are impeded by rain.

The “fixed service” – an FCC category that includes backhaul – has allocations at 4 and 6 GHz. But their use is severely limited by satellite operations in the same bands, except for a satellite-free slice at 6 GHz. The only other “fixed” allocation below 10 GHz is a huge Government-only swath at 7125-8500 MHz.

With nowhere else to go, the FWCC has now asked the FCC to let non-Government users, including backhaul providers, share the 7125-8500 MHz band with the Government. Also involved in the decision will be the National Telecommunications and Information Administration (NTIA), a part of the Department of Commerce that manages spectrum for all U.S. Government agencies.

There is precedent for the idea. The fixed service band at 21.2-23.6 GHz has been shared between Government and private users for many years, with great success. The one problem, from the private users’ standpoint, is the delay in licensing on most frequencies due to the need for coordination with NTIA. To avert that delay in the 7125-8500 MHz band, the FWCC proposes a database of both Government and private usage so that private frequency coordinators can determine quickly whether a given link can be safely constructed.

It remains to be seen whether NTIA will go along. We all share so much with the Government, it seems only fair to ask the Government to share a little back. Except, of course, for the frequencies that control the Black Helicopters. They can keep those.

Going Mobile

Chairman confirms upcoming effort to re-purpose TV spectrum for mobile broadband

For several months now the question on many TV broadcasters’ minds has been: will they or won’t they take away my spectrum and turn it over to smartphones? And while various FCC higher-ups have dropped conflicting hints about what the answer might be, the fact is that no one has expected to know for sure until the release (currently set for March 16) of the FCC’s National Broadband Plan (NBP).   But late this month Chairman Genachowski tipped the Commission’s hand, albeit without adding much practical detail. 

The FCC’s answer appears to be: TV spectrum is not being used efficiently, and would be better allocated to mobile broadband use, so the FCC plans to devise some mechanism to encourage TV licensees to cough up some or all of their spectrum in return for the prospect of taking home some portion of the proceeds when their spectrum is auctioned off for broadband.

According to the Chairman, the NBP will call for the “freeing up” of 500 MHz of spectrum over the next decade.  And one way the FCC hopes to achieve that, at least in part, will involve “establish[ing] market-based mechanisms that enable spectrum intended for the commercial marketplace to flow to the uses the market values most.” 

Can you spell “a-u-c-t-i-o-n”?

Sure enough, that fin de siècle panacea is going to be the go-to device again in the 21st Century.  As described by the Chairman, the NBP will propose a “Mobile Future Auction” – unclear whether the “mobile” there modifies “future” or “auction” – which will “permit[ ] existing spectrum licensees, such as television broadcasters in spectrum-starved markets, to voluntarily relinquish spectrum in exchange for a share of auction proceeds”. 

Precisely how such an auction would work has yet to be disclosed – indeed, it may not even have been determined yet.  But it is apparent that the Commission has thoroughly embraced the notion that television spectrum is a resource that can and should be re-purposed for mobile broadband use.  While Genachowski’s speech shed no light on the anticipated auction mechanism, it did offer something in the nature of a rationale as to why TV spectrum is being singled out.

For openers, there is a “massive amount of unlocked value” in TV spectrum – maybe even $50 billion, according to “one study” – and from this, the Commission has ineluctably concluded that there are “inefficiencies in the current allocation”.  Who says there’s $50B, give or take, in “unlocked value” there?  Why, “a broad range of analysts, companies and trade associations participating” in the FCC’s nearly infinite range of broadband-related inquiries.  Which analysts, companies and associations?  Well, the Chairman didn’t say.  How might the inherent “value” get “unlocked” (and how did it get “locked” in the first place)?  That’s another explanation which is left for a later day.

Another reason for grabbing TV spectrum: according to the Chairman, TV “spectrum is not being used efficiently – indeed, much is not being used at all”.  In support of this claim Genachowski cited some vague and general claims along the lines of “Even in our very largest cities, at most only about 150 megahertz out of 300 megahertz [of TV spectrum] are used.”

While a speech is probably not the forum in which to lay all one’s cards out on the table, the Chairman might still have offered just a tad more support for the decision to go after TV spectrum.  After all, estimates of “unlocked value” are not really something you can take to the bank, particularly if those estimates were propounded by folks who might be in a position to rake in some of that “unlocked value” if things go the right way.  And it’s difficult to credit claims of efficiency of spectrum use when the TV industry, and the viewing public, are less than nine months into the DTV era.  Certainly there may be substantial spectrum potential yet to be tapped, but why must we assume that the best (maybe even the only) way to tap it is through mobile broadband services to be provided by somebody other than broadcasters? (In fact, FHH has a client who has a technology that will allow TV stations to use any digital bits they don’t need for television programming to provide broadband – something they can do today under present rules and so can do a lot faster than navigating through the political reallocation and auction thickets.)

Perhaps recognizing that his rationale was not all that compelling, Genachowski shifted gears into huckster mode:  “the Mobile Future Auction is a win-win proposal: for broadcasters, who win more flexibility to pursue business models to serve their local communities; and for the public, which wins more innovation in mobile broadband services, continued free, over-the-air television, and the benefits of the proceeds of new and substantial auction revenues.”  Often when you hear the term “win-win”, it’s a safe bet that somebody’s trying to sell you something that you might neither want nor need. In this case, for example, we don’t know what “flexibility” broadcasters might gain that they don’t have now.

The Chairman did emphasize that the “Mobile Future Auction” is currently envisioned as a voluntary program. Voluntary?  Perhaps, but maybe only in the same way that a businessman “voluntarily” decides to buy insurance from the guy who says “nice little business you got here – it’d be a shame if something happened to it.”

In any event, while we may not know all the details, we at least know the direction in which the Commission’s heading.  Ideally more details will be available on March 16, the day on which the NBP is currently set to be revealed.  But even that will mark, at most, the starting point of what is likely to be a difficult struggle.

Interestingly, it’s not at all clear what difference (if any) the FCC’s views will make.   The statute requiring the NBP doesn’t say who is in charge of adopting it, or whether it even needs to be adopted by the Commissioners as the formal recommendation of the agency to Congress. The law simply directs the FCC to do its due diligence to come up with a plan, then tell Congress about it.  Other than that, the FCC appears to have no independent authority to jumpstart or otherwise implement the NBP; the only entity explicitly granted authority by Congress to adopt regulations related to the broadband initiative is the Assistant Secretary of Commerce in charge of NTIA, not the FCC.  Moreover, the FCC’s statutory auction authority doesn’t say anything about turning over any proceeds to incumbent licensees or anyone else but the U.S. Treasury.

Given the uncertainty about the follow-through, we are cautiously advising broadcasters to view the NBP as the FCC’s recommendation to Congress, and not a final decree.  It is also appropriate to bear in mind that the folks in Congress may be reluctant to turn their backs on broadcasters, particularly if broadcasters increase the intensity of use of their spectrum by introducing more multi-channel broadcast or non-broadcast services.  Notwithstanding social media and Internet advertising campaigns, etc., candidates continue to flock to broadcasters at election time to reach for voters.  And broadcasters’ ability to deliver voters’ eyes and ears may constitute an “unlocked value” of its own.

We will, of course, have to wait and see.

National Broadband Plan Deadline Moved Back Four Weeks

Congress consents to roll the NBP deadline back from February 17 to March 17.

Maybe now the FCC will look at requests for extensions of deadlines more sympathetically.

The Commission has been working at breakneck speed for months in an effort to meet the February 17 deadline which Congress imposed for the delivery of the National Broadband Plan. It’s a huge undertaking, as our readers have probably figured out from our efforts to chronicle the FCC’s myriad inquiries, notices, etc.

But despite an “all hands on deck” total immersion approach involving pretty much every warm body on the Commission’s staff, it became apparent to the FCC higher-ups that they won’t be able to make the February 17 deadline. Since that deadline was set by Congress, the FCC couldn’t just ignore it. Rather, the Commission had to ask for an extension from the Senate and House Commerce Committees – just like so many of us have to ask the FCC for extensions every now and then. So Chairman Genachowski went to Congress and asked for four more weeks.

At least one published report indicates that, fortunately for the Commission, Congress was feeling charitable: word is that the NBP deadline has officially been shifted four weeks, to March 17.

Nationwide LPTV/TV Translator Filing Opportunity Postponed

New date: July 26, 2010

If you’ve been counting the days until the January 25, 2010 opportunity to file for new digital-only LPTV/TV translator stations (and major mods for existing analog and digital LPTV/translator stations) in non-rural areas, it’s time to re-set the calendar. The FCC has announced that that January 25 date is slipping by six months. Mark your calendars: the new date is July 26, 2010.

We reported last July when the Commission, in a flush of optimism, flung open its doors to welcome LPTV/translator applications in “rural” areas as of August 25 – with the promise that applications for all areas could be filed as of January 25. Apparently, that initial “rural” window brought in enough applications to keep the processing staff busy: according to the FCC, the postponement of the nationwide window “is necessary to complete the processing” of rural applications filed since August.

Perhaps more ominously, the FCC advises that the postponement will also “permit Commission staff to dedicate additional time and resources for consideration of the Broadband Plan.” As concern mounts that the Commission may be determined to “re-purpose” broadcast television spectrum for broadband use, the postponement of the nation-wide LPTV/translator should send more than a frisson down broadcasters’ spines. While the FCC’s stated purpose – to free up staff – may be completely accurate, it’s hard to avoid the suspicion that an underlying purpose could be that the FCC does not want to get broadcasters’ hopes up relative to the availability of TV spectrum if that spectrum is going to be “re-purposed” out from under them even before their applications are processed. The FCC’s thinking might be that it’s better to keep potential applicants on the outside looking in for the time being, rather than to accept applications that could somehow gum up the works if the Commission eventually decides to yank TV spectrum away from broadcasters for the Greater Good of broadband.

Interestingly, the public notice makes no mention of the pending proposal by a number of public interest groups hoping to have Channels 5 and 6 re-purposed for radio use.

For the time being, “rural” applications and others permitted under the rules will continue to be accepted. But all you non-rural applicants will have to sit on the sidelines until mid-summer, if not longer.

Broadband And Education - FCC Asks: What's The Scoop?

FCC solicits comments, information on interplay of broadband deployment and education at all levels

As part of its ongoing efforts to get a handle on All Things Broadband before the FCC’s homework (i.e., the National Broadband Plan, a/k/a the NBP) is due in February, the Commission has released yet another Public Notice, this time seeking comments on issues relating to the educational use of broadband. 

To ensure that the information is thoughtfully prepared and presented in a manner that will maximally assist the Commission to draft the NBP in the next three months, the Commission generously gave parties 17 days to prepare their submissions. Initial comments are due to be filed by November 20, so you can get that project off your desk before Thanksgiving. No such luck with reply comments: they’re due by December 11.

The latest Public Notice invites comments on virtually every aspect of the educational use of broadband technology.  By “educational”, it means everything from pre-K to grad school, including both institutions and students. The kind of input it’s looking for? Pretty much anything and everything, including “implementation strategies, budgets/expenses, financing strategies, programmatic goals, measured outcomes, and other detailed operational and strategic information about the programs using broadband for educational purposes.” Again, this information is to be presented by November 20.

As far as nitty-gritty factual information goes, the Commission is interested in the current availability and implementation of broadband services within schools and school districts. Where broadband services have been implemented, how are they being used for online learning systems, backroom data reporting systems and the like? Have various communications systems (instant messaging, online video conferencing and such) assisted in the introduction of new learning opportunities that were not otherwise available?

On a more conceptual level, the Commission is asking about the role of government in supporting the introduction and development of broadband use in schools and school districts, and what specific steps the Commission could or should be taking along those lines (including the setting of technology standards and the support of technology literacy programs).

The E-Rate program is yet another focus of the FCC’s interest: what modifications to that program might “stimulate the adoption of broadband throughout communities”?   How do current participants use the program, and should the program be expanded (through Congressional action, of course) to include additional educational programs such as Head Start? Also, how about maybe modifying the distribution of E-Rate funds – would that assist broadband deployment? And might changes to the E-Rate program affect the expansion of broadband deployment, and what might the impact of such expansion be on the level of E-Rate Funding? (The Commission is particularly concerned that the current limit on funding – $2.25 billion – may prevent further expansion of broadband deployment. But if that limit were to be upped, what types of services could be provided?)

It’s not exactly clear how such a vast amount of information covering a vast number of subjects might be compiled and usefully presented in a mere 16 days – let alone thoughtfully digested and analyzed by the Commission in the next three months. Why the FCC waited until this late date to initiate a soup-to-nuts review of the use of “broadband for educational purposes” is unclear, but it reminds us of a frantic midnight call to a fellow student for their notes to prepare for the big calculus test the next day. While the goals of the Commission are obviously worthwhile and could lead to the development of important policies, the rushed nature of the agency’s efforts does nothing to dampen skepticism as to whether a tsunami of information submitted in the next 16 days can or will be put to good use. Only time will tell.

Congressional Update: Online Consumer Privacy Laws In The Works

[Blogmeister’s Note: CommLawBlog.com welcomes guest blogger Catherine McCullough, principal of Meadowbrook Strategic Government Relations, a D.C. lobbying firm. We are pleased that Catherine has agreed to share with our readers some insight into communications-related issues pending before Congress.]

Does your business gather data about your audience – especially online? If you are thinking of engaging in behavioral advertising – widely considered the future of the industry – you should know about two new pieces of legislation in Congress that would affect the way you gather, store, and utilize the consumer data that advertisers so desire. 

Yes, the long-anticipated online consumer privacy laws are coming.

Congress has repeatedly considered new consumer privacy bills for much of the last decade. But only since the 111th Congress began have all political elements necessary for passage existed at the same time: Democratic control of both houses of Congress; a supportive White House; and a new Chairman of the Senate Commerce Committee who is not afraid to make his voice heard on consumer protection. 

And thanks to a new technology on the scene, there is an additional element essential to all political dramas: a bad guy. Public, meet your new enemy: Deep Packet Inspection.

(At the risk of getting too technical: Deep Packet Inspection is the process by which Internet service providers can probe around in the contents of data packets passing through their systems.  When a file – whether it’s a web page, or an email, or a video, or whatever – is sent from Point A to Point B on the Internet, it first gets organized into “packets” which are then sent on their way to their common destination.  Those packets don’t necessarily all travel the same path through the myriad interlinked computer systems which comprise the Internet.  For purposes of getting them all to the same place, the intervening systems need to know only the intended destination and a few other factoids relating to routing.  The particular contents of the packets ordinarily do not come into play in the transmission.  Deep Packet Inspection, however, permits detailed analysis of those contents, thus affording inquiring minds access to information which would ordinarily be thought to be private.)

There is concern that this technology is too much of a temptation for those who gather and utilize consumer data. But the bills being written don’t restrict themselves to dealing only with this “extreme” type of tracking. They apply to most companies that store and use data. Here is how the legislation breaks down:

Two online privacy bills are now in different stages of development in the House. The first is being written by Rep. Rick Boucher (D-VA-9th), Chairman of the Energy and Commerce Subcommittee on Communications, Technology and the Internet, one of two House subcommittees with jurisdiction over the issue.  Boucher reportedly is working with his Republican counterpart, Cliff Stearns (R-FL-6th), on language that would: (a) allow Internet sites routinely to collect benign information from consumers unless the consumers affirmatively “opt-out” of such collection; but (b) prohibit the collection of sensitive personal information unless the consumer expressly agreed to such collection by affirmatively “opting-in”. The objective of this approach seems to be to force people to jump through hoops before releasing tracking rights to their sensitive information, because it takes more effort to opt-in than out. In theory, people will therefore make informed choices about who collects the sensitive details of their lives and how they use that information. (But how do we define sensitive, you ask? We’ll have to wait until the bill is introduced to see.)

The second bill has been introduced by Rep. Bobby Rush (D-IL-1st), Chairman of Energy and Commerce’s Subcommittee on Commerce, Trade and Consumer Protection – the other House subcommittee of jurisdiction. Rush’s bill, H.R. 2221, would require the Federal Trade Commission (FTC) to promulgate regulations to secure computerized data containing personal information.   (See the subcommittee hearing on the bill here.) It would be no surprise if the two subcommittees’ bills were to be merged into one piece of legislation regulating online privacy.

If an online privacy bill passes the House, the torch will be passed to the Senate, where Senate Commerce Committee Chairman Rockefeller has made no secret of his consumer-oriented focus. On the one hand, Senator Rockefeller acknowledges the reliance of the news industry on new technology. On the other hand, his Committee position makes him responsible for drafting a law restricting how media profit from the same advertising that supports their news-gathering operations. It is unclear how Senator Rockefeller and others of like mind will resolve this tension. 

While the bills will determine the principles of privacy policy, Congress will likely rely on the executive branch to determine important detail. The FCC is already shaping the online landscape as it writes its National Broadband Plan and takes its public stand on “network neutrality.” The Federal Trade Commission is deeply involved in behavioral advertising and is beginning to share its thoughts with the FCC as well.  Whether involved in writing online privacy law or executing and enforcing online privacy regulations, all government entities involved are now deciding how they will allow much-needed innovative online-related business to flourish while keeping consumer trust.

"Contrarian"? Au Contraire!

We posted a blog by Paul Feldman last week, describing an FCC workshop on the relationship between economic growth and broadband deployment. Paul was surprised that four of the six presenters – primarily economists from respected academic institutions – advanced positions at odds with the Conventional Wisdom. That is, while just about everybody in Washington seems to believe that More Broadband in Rural Areas necessarily equals Greater Economic Growth, the economists’ studies indicate that the available evidence, when analyzed critically, does not completely support that belief.

Think of the economists as the kid in “The Emperor’s New Clothes”.

As Blogmeister, I get to come up with many of the headlines here. For example, the headline for Paul’s post: “Broadband Workshop: Contrarians at the Gate”. I thought it captured the essence of Paul’s observations in an attention-getting way.

Well, it did manage to get the attention of Northwestern University’s Shane Greenstein, who (with colleague Ryan McDevitt) was responsible for one of the workshop presentations.

Prof. Greenstein has posted a comment on Paul’s blog (check it out here) and has separately blogged on his own space (titled “Virulent Word of Mouse” – an excellent name, IMHO) – each time taking issue with the use of the term “contrarian”. (Happily, Prof. Greenstein approves of the substance of Paul’s description of the workshop. Thanks to Prof. Greenstein – and props to Paul – for that.)

If I’m reading Prof. Greenstein’s posts right, though, I suspect that he and I are really on the same page. His concern about “contrarian” appears to be that that term suggests that anyone branded as a “contrarian” is something of a knee-jerk nay-sayer, bucking against the majority view simply for the sake of being, well, contrary. As he carefully explains, that does not reflect his attitude at all.

Rather, he insists on using actual data, subjecting those data to rigorous analysis, and only then formulating public policy based on the results of such analysis. It’s hard to argue rationally against such an approach.

The problem, of course, is that that is often not the way of Washington. Those in government – whether elected or appointed or just plain hired – often find it necessary or convenient to ignore the facts, to go all fuzzy Big Picture when the nitty-gritty details don’t happen to point in the preferred direction. And often when confronted by some calamitous situation – like a major-league economic meltdown – the Washington establishment’s willingness and ability to focus on any detail at all (much less unpleasant detail) tend to be even more, er, impaired – kind of like a thoroughbred horse trapped in a burning barn. 

So it shouldn’t be surprising that the Conventional Wisdom around Washington seems already to have reached conclusions at odds with his (and his colleagues’) analyses in the broadband area, as Prof. Greenstein acknowledges (“conventional wisdom has settled on a view that just ain’t so”). From a Washington-centric perspective, anyone questioning those conclusions may be seen as “contrarian”. That doesn’t make the questioners wrong – just contrary to the prevailing perceptions. But, as Prof. Greenstein’s workshop presentation and blog properly remind us, just because the Washington establishment has reached a conclusion, that doesn’t mean that that conclusion is necessarily correct.

We can only hope that rigorous and thoughtful analysis is brought to bear on the appropriate data before final policies are etched in stone and billions of federal dollars have been irretrievably doled out. On that I’m guessing Prof. Greenstein and I are in agreement.

Broadband Workshop: Contrarians At The Gate

Everyone knows at this point about Congress’s decision to defibrillate the economy (at least for the short term) by making billions of dollars available for broadband deployment through the much-vaunted Stimulus legislation.  But in passing the Stimulus legislation, Congress also perceived a need for long-term broadband planning, and thus required the FCC to create (by February 17, 2010) a National Broadband Plan that seeks to ensure that every American has access to broadband capability. As part of the process for creating that Plan, the FCC has been holding workshops with various interested parties to seek data and ideas.

On July 26, I attended the webcast of one of those workshops. From its title (“Economic Growth, Job Creation, and Private Investment”), I expected the workshop’s participants to repeat what has been the conventional wisdom about broadband, i.e., that expansion of broadband is core to economic growth and job creation. 

I was in for a surprise.

While two of the six speakers did stick to the CW, the others offered a far more analytical – and far less positive – view. The four were academics (economists) whose message was that, at best, there are not enough good data to make a strong connection between broadband and economic growth, and at worst, that there isn’t even a particularly strong connection between the two. 

You can find links to a recording of the entire workshop, as well as the individual presentations, here. Here’s a big picture summary:

James Prieger (Pepperdine University School of Public Policy) stated that it is difficult to measure the economic impact of broadband. Still, he asserted that there are certainly contexts in which adding broadband would not make a significant positive impact. For example, user entities whose staff lack the training to maximize use of broadband, or whose management/production style are not likely to lead to maximized broadband use. He cited schools in particular as a prime example of this. As to employment, he noted the mixed results of broadband implementation: workers may become more productive and work can be more easily out-sourced, which can lead to reduction in the number of necessary employees in a company.

Chris Forman offered complex analyses showing that the relationship between broadband use and growth in personal income is strongest in areas with the highest income, skills, education and IT production – in other words, a “rich get richer” scenario not necessarily consistent with the concept of broadband-as-panacea. He stated that there appears to be little impact outside of urban areas, and that there is little evidence of growth in employment as a result of broadband.

Ryan McDevitt (Northwestern University) noted that pure economic growth can’t be determined solely from calculation of increases in revenue and/or available services attributable to broadband. Rather, opportunity costs and reduction of revenue from dial-up services must also be considered. McDevitt also asserted that implementation of broadband in rural areas is particularly expensive, when compared with the associated benefits over use of dial-up services.

Brent Goldfarb (University of Maryland, Robert H. Smith School of Business) focused on the uses to which broadband is currently put. He noted that the largest current consumption of broadband is for P2P file sharing, much of which is illegal (not to mention potentially harmful to the recording industry).

In contrast to this salvo of academic realism, Ralph Everett (Joint Center for Political and Economic Studies) relied on the standard statistics for the assertion that broadband has a huge positive impact on the economy and employment. And the presentation by venture capitalist Tom Wheeler (Core Capital Partners, LLC) involved no statistics at all, but rather was a gut-level emotional plea for greater broadband development, based largely on analogies to the social and economic impact of the trans-continental railroads. Hmmmmm…… 

It will be interesting to see what the FCC does with this.   We still believe that they will go with the idea that increased broadband growth is necessary or good for economic growth. Everybody seems to be saying it, including the President, the Congress, and the FCC Chairman. That must make it true, right? 

To be sure, the received truth does have an appealing credibility, supported by studies that, for whatever reason, were largely MIA at the workshop. But the workshop’s presentations should still give everyone involved in the process cause for reflection. 

The FCC’s staff must have known that the majority of presenters would present contrarian – or, at least, not entirely upbeat – approaches. Which leads us to wonder: did the staff line up this group of contrarians in an effort to create some appearance of balance on the issue? Or perhaps the workshop’s organizers were affirmatively trying to attune the public to the notion that, as the government flings billions of dollars out the door at broadband development, it could use much more information – so please recommend to Congress that that information be obtained through the Census or other means.

Stay tuned for more developments in this evolving drama.