THE INDEPENDENT FORUM

New FCC Rules On USF Will Trigger Economic Crisis In Rural America Putting Small Businesses And Jobs At Risk

2011-10-23T19:48:00.001-04:00

Rural Broadband Alliance Press Release October 19, 2011:

As President Barack Obama travels key battleground states with heavy concentrations of rural voters to bolster his chances for reelection in 2012, prospects for the economic recovery in rural America are set to go into a quick reverse if rumors of a Federal Communications Commission (FCC) ruling come to pass that would radically alter the nation’s universal service rules. Based on briefings of selected industry associations and parties conducted last week by staff for FCC Chairman Julius Genachowski, rumors are circulating that the agency will put in place new telecommunications policies that are inconsistent with current law and threaten the viability of small rural telecommunications businesses that have brought advanced services to the rural communities they serve.

The briefings provided by Genachowski’s office reportedly outlined the changes in the Universal Service Fund (USF) and intercarrier compensation policies that the FCC is expected to adopt at its October 27 meeting. The briefings have fed the concerns of small rural telecommunications businesses that the FCC’s new rules will make their operations more unstable and uncertain.

According to reports from the FCC Chairman’s briefings, the new rules will not only apply to future operations and investments, but also will apply retroactively and threaten carriers’ abilities to recover the investments they have made in reliance on the FCC’s existing rules and policies. Several rural associations that participated in the briefings have reported that the FCC plans to adopt rules that “fail to adhere to the statutory mandate for consumers to have access to reasonably comparable rates and services.”

In anticipation of the FCC action, small, rural and independent telecommunications companies (45 at last count) – many of which provide services in key battleground states across the country – have written directly to Genachowski to “reserve all legal rights and remedies, including, but not limited to, the right to recover our established operational costs and historic capital investments.” The concerns of the rural small telecommunications businesses were included in a formal series of ex parte filings made for the companies to the Commission recently by the Rural Broadband Alliance (RBA), a coalition of small, rural and independent telecommunications carriers formed to preserve universal telecommunications service for rural consumers.

These small businesses provide telecommunications services in rural areas in such key states as Illinois, Wisconsin, Virginia, Pennsylvania, Iowa, Michigan, and Maine – all states that political strategists say Obama must carry to win reelection next year. According to the rural carriers, these rules will discourage rural broadband deployment where it is most needed in these states; stifle new economic investments; and lead to more job losses in rural areas throughout the country.

“As President Obama often has said, broadband is the new engine of the American economy,” said Steve Kraskin, RBA counsel, who filed the ex partes on behalf of the group’s members. “If the rumors that emerged from the briefings by the FCC Chairman’s office are correct, the new FCC rules will turn back the clock on a commitment to rural Americans that they are entitled to receive a range of telecommunications services, including broadband, comparable to those available in urban areas. The impact of this policy change will be felt for years to come, but its immediate effect will be to freeze new investment and cut existing jobs.”

“President Obama is now travelling the country with a message that the federal government must do all it can to encourage job growth and bring about an economic recovery. But, there is a major disconnect between the President’s message and what our rural representatives have heard from the FCC Chairman’s office. Instead of stimulating the economy, these new rules will further frustrate the economic recovery in rural America and lead to even more job losses and missed economic opportunities.”

Kraskin added that members of the RBA have responded to the President’s call to deploy broadband infrastructure to stimulate rural and economic development and bring the technology of the 21st century to rural consumers and communities, but will now pay a heavy price for making that commitment.

“These small rural telecommunications businesses participated in good faith in the administration’s excellent Rural Utilities Service (RUS) finance programs and the broadband stimulus program included in the American Recovery and Reinvestment Act (ARRA),” he said. “They developed business plans in reliance on these programs and in conjunction with the FCC’s universal service program.”

“If the reports from those that were briefed by the Chairman’s office are correct, the new rules will not stifle new rural infrastructure investment and job creation, they will destabilize existing small businesses that have successfully met a commitment to carry out the nation’s universal service policy.”

“The idea that an appointee of this President – even an appointee to an Independent agency - would propose the retroactive application of new rules to deprive small businesses of an opportunity to recover investments made in reliance on existing government programs is remarkable and should be unthinkable,” Kraskin continued. “The result would not only be contrary to everything the President has said he stands for with regard to rural economic development and stability for rural small businesses, but it would be unfair and inequitable – a blatant example of what Americans are saying is wrong with government.

“I am hopeful that the rumors and reports that are being circulated about the briefings are inaccurate. But, the small rural businesses that are members of the RBA cannot run their businesses on hope. That’s why we recommended that our members individually write to Chairman Genachowski and contact their congressional delegations to share their concerns.”

The RBA members are concerned that the new USF rules that Genachowski plans to adopt will slow broadband deployment in rural areas; result in dramatic price increases for rural consumers; and further depress rural economies. The rural carriers also have asserted that the new rules must not sanction a slower broadband threshold speed for rural America. They believe that the failure to provide reasonably comparable services in rural areas as those available in urban areas of the nation will discourage economic development and job growth in already economically depressed parts of rural America.

“We believe that the establishment of any differential between urban and rural service standards is simply contrary to law,” the carriers state in their ex parte letters, “and deprives rural communities of the infrastructure most necessary for economic stability and advancement.”

The carriers warned that the FCC’s approach to formulating the new rules has “marginalized the operational impact on individual companies and, worse, ignored the consequences to consumers, businesses, and the economy in rural America.”

In their individual ex parte letters to Genachowski, the rural carriers also noted that they have built their companies and deployed services consistent with current laws and regulations. Changing those regulations will impact their ability to continue to deliver services to rural consumers at affordable prices.

“My company’s historic investment and operational structure has been based upon a specific statutory and regulatory framework,” the ex parte letters state. “Simply put, after-the-fact modifications to regulations cannot interfere with our company’s expectation and right to recover historic costs, or the public expectation and right to continued service at reasonable costs.

“Our resort to this formal reservation of rights is required because, in a rush to implement an industry-sponsored solution, the very purpose of Section 254 – the preservation and advancement of universal service – has been undermined, and we must preserve our legal rights as result.”

FCC Chairman Outlines USF And Intercarrier Comp Reform Proposal

2011-10-10T09:54:00.001-04:00

By Tom Smith, Editor, The Independent Telecom Report

FCC Chairman Julius Genachowski outlined a framework for USF reform in a hastily-scheduled speech last week at the FCC. The speech came amid growing opposition to a USF reform plan pushed by the industry’s price-cap carriers, the ABC Plan. Much of that opposition came from consumer and public interest groups and state commissioners, but also included extensive opposition from the wireless and cable industries, some mid-sized carriers, and many small rural carriers.

The speech by the FCC Chairman was long on rhetoric, but short on details. Yet, it capped an often-wild and furious lobbying effort at the FCC over the ABC Plan in recent weeks. The speech seemed to suggest that the plan put forward by the FCC Chairman will not be as comprehensive as first thought and will focus primarily on cost controls by capping USF and establishing a broadband speed threshold that, in effect, will limit the amount of funds spent to provide and maintain high-speed broadband services in rural areas. The proposal, if approved, could lead to two different broadband standards: one for urban communities and a slower speed standard for rural communities. Genachowski is now circulating his proposal for USF reform among his colleagues on the Commission. The FCC is tentatively set to take up the Chairman’s plan at its October 27 public meeting. (Click here to see this week's Report.)

Politics, AT&T Merger To Shape Telecom Agenda In U.S. Congress

2011-05-08T20:37:00.002-04:00

U.S. Congress Is Punting On USF, Spectrum, And Retransmission Policies

By Tom Smith, Editor, The Independent Telecom Report

Political partisanship and the proposed merger of AT&T and T-Mobile will both shape and dominate the telecommunications policy agenda in the U.S. Congress for the rest of this year. After last year’s Congressional elections, many political analysts predicted that a divided Congress – in which Republicans dominated the U.S. House of Representatives and Democrats dominated the U.S. Senate – would be deadlocked on most policy issues. As we reach the six month-mark in the life of the current Congress, gridlock does not describe the legislative environment. Dysfunction might be a better description. (Click here to read more of Tom Smith's Analysis in this week's Independent Telecom Report Special Edition.

Reflections From The Boxing Ring

2010-11-22T00:04:00.000-05:00

Last week was my "bout" with Broadband Plan architect Blair Levin at the Las Vegas joint meeting of RICA and RTG. I'll be writing more to you about this and the Rural Broadband Alliance efforts in upcoming Back Pages, but I thought I'd share some quick thoughts tied into this week's Report.

I have to begin by thanking Blair Levin for coming and joining me in the discussion.

I think that it was valuable for the companies in attendance to hear first-hand some of the challenges and issues we face. I think it was also helpful for our industry to have the opportunity to address some of Mr. Levin's thoughts and perceptions about the rural industry and today's cost recovery regulatory mechanisms.

The discussion was good, energetic and provocative - literally provocative! A few of Blair Levin's comments definitely provoked the audience! And, it was good for all of us to hear his comments in order both to gain a better understanding of the issues we face, and to identify the facts and political support we need to assemble to support our industry positions.

While both Mr. Levin and I became fiercely involved in our discussion/debate, I don't think either of us landed any death-blows. We listened to each other, but neither of us said, "I never heard it put that way - you changed my mind!" The fact is that we disagree on many issues. For example, we probably disagree on how to utilize USF most efficiently and effectively. One of our lead stories in this week's Report is about FCC Chairman Genachowski's speech to NARUC last week in which he stated that the FCC focus is now on infrastructure investment and job creation. Both Blair Levin and I would probably argue to the other that each of our proposals is better than the other's in terms of stimulating investment and job creation. Another example of our disagreement is Mr. Levin's proposed use of auctions to determine USF recipients.

One of the more provocative comments Mr. Levin made at last week's meeting relates to a story in this week's Report regarding the RUS filing of comments at the FCC expressing the need for the FCC to provide financial revenue predictability in order to support financing of rural infrastructure projects. Mr. Levin questioned whether the audience thought that the government owed anyone a guarantee of profitability, and indicated that the question extends to the RUS portfolio of loans to rural providers, suggesting that even the RUS should not look for rules that guarantee return.

On the other hand, Blair Levin, both in his presentation and in his most recent paper issued under the auspices of the Aspen Institute, clarified in a favorable way several of the concerns that I and others in our industry have raised about the Broadband Plan.

For example, he points out that the intent of the plan was never to leave rural "behind" urban. In his newest paper, he calls for regular review of service levels in urban and rural areas with resulting modification of the definition of universal service, as needed. With regard to our industry concern that the Plan would leave rural companies with no source of needed revenue recovery, Mr. Levin points out in his Aspen Institute paper that the the Plan anticipates that several billion dollars of today's USF will be retargeted for use to replace revenues lost as a result of a transition away from reliance on switched access revenues.

More to come on this and all in the coming weeks.

Best wishes to you and yours for a Happy Thanksgiving,

Steve Kraskin

THE FUTURE OF U.S. RURAL TELECOM POLICY AND THE 2010 ELECTIONS (“We Got Trouble!”)

2010-11-07T19:36:00.002-05:00

(Excerpt from October 14, 2010 "Back Page" by Tom Smith)

“I want all of them – Democrats and Republicans – to be voted out of office. All of them should go.”

This is one American’s hopes for the outcome of the November 2 congressional elections. The comment reflects a level of frustration experienced nationwide with Congress and politicians, in general, these days, if the public opinion polls are to be believed. These frustrations are helping to spur the growth of a national grassroots Tea Party movement among conservative-minded voters that has left some politicians quaking in their boots. But, these frustrations also are spurring a new level of activism among many others who are disappointed that a mostly liberal President Barack Obama and a Democratic Congress have not championed all of their causes or met the litmus test of the liberal-minded progressive policy agenda.

Why should small, rural and independent telecommunications companies care about the November 2 elections? Does it really matter whether Democrats or Republicans control the Congress in 2011-2012? Does it matter if the Congress is in control of conservatives or liberals? Are there any moderates left anymore anyway to worry about? (Click here to view the entire "Back Page")

It Takes More Than Words . . .

2010-08-11T01:12:00.002-04:00

On a hot, humid Washington, D.C. summer day last week, 35 rural company representatives representing 38 companies operating in 25 different states gathered for a meeting in response to an invitation issued by one of their colleagues.

The purpose of the meeting was to discuss the formation of an alliance of companies open to all small rural companies interested in working actively with their associations to bolster industry advocacy efforts and to reestablish the industry's grassroots support.

Only a day before this group gathered, Senator Jay Rockefeller, Chairman of the Senate Commerce Committee, sent a letter to FCC Chairman Genachoski that unfortunately provided yet another example of the very concerns and issues that brought the group together - as if meeting the challenges of the FCC Broadband Plan was not enough.

This week's Back Page is about industry unity and responding to the Rockefeller letter - it takes more than words. (Click here to view this week's Back Page.)

(The link to the "Rockefeller Letter" referenced in the Back Page may not work, depending on the program you utilize to open the pdf. You can view both the Senate Commerce Committee press release about the letter and the letter itself by clicking here: "Rockefeller Letter")

"Would you believe . . . ?"

2010-07-24T19:01:00.002-04:00

In this week's Back Page, our Congressional advisor Tom Smith evokes the memory of the 1960 TV series "Get Smart" and secret agent Maxwell Smart.

Difficult as it is to believe, administration political strategists apparently really do believe that the rhetoric surrounding the Broadband Plan and the Broadband stimulus program will buy them crucial votes in November. They are oblivious to reality and the growing criticism of both the fundamental flaws in the Broadband Plan and the stimulus program that has funded duplicative facilities instead of needed focus on broadband adoption and permanent job creation.

Yet, these strategists advised the President to show his "ownership" of the Broadband policies by taking the lead in making the announcement himself of the latest second round broadband stimulus funding. At the same time, Congressional members of the President's own party called for reductions in the broadband stimulus program funding.

Tom Smith's Back Page explains how this political environment can provide the rural telecommunications industry an opportunity to utilize a strategic grassroots effort to shape positive solutions and influence the outcome by rebuilding an effective Congressional rural farm team - an opportunity we can seize if we "Get Smart."
Click here to view this edition of the Back Page.

Senate Commerce Hearing On USF

2010-07-06T12:34:00.001-04:00

This week’s Report focuses on analysis of the Senate Commerce Committee June 24 hearing on USF. Beyond the written statements, the hearing provides insight into the direction of the USF reform debate not only on the basis of what was said at the hearing.
Who attended and who didn’t; who was initially invited and who wasn’t; and what was said outside the hearing room in addition to the hearing transcript provide valuable information. Click here to read the Report.

Mission Accomplished? I Don’t Think So.

2010-05-23T19:14:00.003-04:00

(Excerpt from May 4 "Back Page." Click here to view the entire "Back Page")

“Great job!” “They got the message!” “Thank you!”

Those comments summarize the numerous e-mails and phone calls I received last week from many of the Independent company representatives who had read the first two installments of this three-part series on finding, facing and fixing the challenges that the FCC’s Broadband “Plan” poses to the rural Independent industry.

Each of those who left voice mail and sent e-mail messages wanted me to know that they had received e-mail alerts from their associations that outlined the problems and challenges in the “Plan,” similar to those set out in part one of this series. Equally important, the alerts indicated that the associations plan to work together on a coordinated response.

While I appreciate the messages I received, the announced efforts of the associations are in no way attributable to me or to anything I wrote in the first two parts of this series. The association staffs are very able, and they are independently and appropriately responding to the challenges that were set forth in the notices of the new rulemaking proceedings that have followed the issuance of the “Plan.”

In fact, I have failed in my mission if I left you with the impression that my goal was simply to encourage united efforts by the associations or to make certain that the industry is engaged in meeting the challenges of the “Plan.” United and coordinated Independent industry association efforts are only a starting point....

I think that each of the associations plays an important and distinct role that enables both strong united advocacy efforts and individual group efforts and focus. I envision that a successful strategy for the Independent industry to meet the challenges of the Broadband “Plan” begins with a coordinated and united effort led by the industry’s associations.

The announced efforts of the associations to address the challenges of the “Plan” in a coordinated effort are laudable, but that is a beginning and not an end....

Here is the hard question. Even if we restore and maintain the unity of purpose and effort that once existed among the associations, do the associations have sufficient resources to meet the challenge alone?

I think that the answer is clear. We need reinforcements. This is not a criticism of the associations. It is a reality. Each of the rural associations has excellent and valuable staff resources, but their numbers are few, and are limited by available association resources.

The effort needed to meet the challenges of the Broadband “Plan” will require resources that the associations do not have. In the recent past, the Independent industry and its associations recognized the need for additional resources as reflected in the formation of the Keep America Connected and Rural Alliance efforts. Whatever you may think of those efforts, it is important to recognize that there is a new need for organized reinforcements to address the present danger....

Regardless of whether or not you agree with my proposal, I urge you to recognize the need for the industry to unite its advocacy effort behind an articulated objective with supporting principles that can ensure a coordinated industry effort that will also find support from potential allies who join with our industry to meet the challenges of the Broadband “Plan.”

Similarly, I recognize that someone may have a better idea than the RBI concept I have set out as a mechanism for the Independent industry to obtain the additional resources required to fix the problems that the “Plan” has created for the Independent industry. But, the clock is running.

I urge anyone with a better idea to come forward with it. And, I ask anyone who does not think the Independent industry needs the reinforcements that I have described to come forward and set out for the industry their plan to meet the challenge ahead.

Unintended Consequences? The Broadband "Plan" Undermines Universal Service

2010-04-27T19:59:00.003-04:00

“The Only Way To Deal With A Problem:

Find It, Face It, and Fix It . . .”

“Does anybody care?” That’s what I wondered initially.

The FCC’s Broadband Plan was issued nearly a month ago. I read it, and anticipated the calls and discussions that would follow. I expected the responses to range from thoughtful concern to unbridled rage. Either of those responses, and anything in between, would have been understandable.

After all, the “Plan” essentially guts and rebukes the foundations of universal service. The “Plan” displaces the very policies that have formed the basis for successful deployment of communications networks in the high cost areas of the nation served by rural Independent companies.

(Excerpt from the April 21, 2010 Back Page. Click here to read the full commentary).

The Broadband "Plan" - where's the beef or what's the beef

2010-03-26T19:30:00.004-04:00

Last week's Independent Report did a good job at setting out what the "Plan" would have in it before it was publicly presented. The "Plan" should be copyrighted with those quotes around the word "Plan" to indicate that there is not much of a"plan." More like a lengthy, pretty book report about broadband and a "wish-list" without much about how to reach objectives.

This "Plan" was supposed to be data driven; the FCC staff promised. The "Plan" talks about wholesale changes to USF, but where is the data that demonstrates why change is needed? Is it needed in areas served by rural incumbents where the rural incumbent USF program has successfully fostered the investment in networks that support the very objectives the "Plan" espouses? There is no recognition or acknowledgment in the "Plan" that there is a system in place that works.

If the authors of the "Plan" had fulfilled their promise, they would have presented hard data demonstrating where broadband has been deployed in rural America. Carriers filed in their broadband reports (Form 477). The FCC has the data; the FCC spent $20 million on the "Plan." But, there is no specific area deployment data reported much less a report that ties the level of deployment to the various regulatory frameworks applicable to rural and non-rural carriers serving rural areas. The FCC could easily have looked at the USF monies spent in rural incumbent areas over the past 10 years and quantified the resulting cost of government programs needed to deploy identifiable broadband networks in rural high-cost areas.

But, there is no report; there is no analysis. There is no rigorous look at a comparison of the significant advanced network deployment in rural areas served by rural incumbents contrasted to the antiquated networks and services available in rural areas served by the large, non-rural incumbents. Instead, there are broad-brush descriptions and conclusions.

Two of the conclusions of the "Plan" stand out as especially absurd.

First, the "Plan" establishes a goal of 4 mgb download speeds by 2020. That goal is already reached in many areas served by rural incumbents. That "goal" is nothing but cover for an apparent "plan" to divert USF funding from rural incumbent areas where it is required to build more robust networks that can deliver services that are truly comparable to those available in urban areas - the very goal of the universal service provisions of the Communications Act.

The second absurdity is the "Plan's" conclusion that the FCC should end rate-of-return regulation. Let's take another look at the data the authors of the "Plan" promised - oh, that's right - it's not there. If it was there, it would show that in high-cost-to-serve rural areas, it is those areas that are served by rural incumbents subject to rate of return regulation where the regulatory framework has succeeded in fostering advanced network infrastructure deployment. But, the "Plan" decides to throw that framework away!

For the authors of the "Plan," it's going to be difficult to answer the question: "Where's the beef?" For critics of the "Plan," it will be all too easy to answer the question: "What's your beef?"

The real challenge ahead is to build a plan to deal with this "Plan."

Details of Broadband Plan Begin To Emerge

2010-02-28T18:35:00.002-05:00

(Excerpt from this week's Independent Report)

As a result of a series of speeches and media interviews by FCC Chairman Julius Genachowski, some details of the National Broadband Plan are emerging. The FCC is expected to deliver the plan to the U.S. Congress on March 17 – thirty days past the deadline imposed by Congress in the American Recovery and Reinvestment Act (ARRA). The plan will be unveiled to the public at the March 16 FCC open meeting.

Reportedly, the FCC has completed briefing members of Congress and their staffs about the specifics of the plan.

The plan is expected to include a series of recommendations on the future of the Universal Service Fund. Most details about the USF recommendations have not yet been revealed. However, Genachowski indicated last week in a speech before the New America Foundation, a progressive non-profit public policy think tank, that the plan would propose the creation of a Mobility Fund as part of USF. (Click here to view this week’s Independent Report.)

The State Of The Union And The Politics Of USF

2010-02-14T15:20:00.002-05:00

Although Washington, D.C. was closed down this past week with over 40 inches of snow and Congress is in recess for the coming week, the inactivity here is in sharp contrast to what will be in the coming months after the FCC release of the Broadband Plan next month. In the latestBack Page, Tom Smith, our Congressional advisor and editor of the Independent Report, offers his thoughts on the changing political landscape and the November elections and the inevitable tie to change in USF. While public interest groups and large telecom companies position for the debate ahead, the Back Page raises both a question and a call for the rural independent industry to commit the resources needed to mount the grass roots response.

The politics of change in USF will undoubtedly be shaped not only by the FCC Broadband Policy when it is announced, but also by the results of the Broadband Stimulus program. Critics are unfairly swiping out at both RUS administrator Jonathan Adelstein and NTIA Administrator Larry Strickling, both of whom inherited the framework of a flawed program that Congress rushed into existence as part of last year's Recovery Act. Last week, the interest in the Broadband Stimulus program reached the popular press with an article in USA Today. (Stimulus funds for high-speed Internet access tangled up - USATODAY.com)

Unfortunately, the inevitable criticisms of waste in the Broadband Stimulus program will grow - I am hearing from a growing number of companies about how many of the broadband stimulus grants are directed to areas that are already well covered with high speed internet availability. And, it is likely that the criticism of waste will be piled on to the attacks by the adversaries of USF in the coming months.

The irony, of course, is that the real operational results of the expenditure of USF in rural incumbent areas, and the resulting build-out of rural networks that support high-speed broadband access, demonstrate that the USF program for rural incumbent local exchange carriers has not only been far from wasteful, but it has been one of the most successful regulatory programs. What's missing? As this week's attached Back Page suggests, all that is missing is an effective effort to tell the story - more to come and more specifics in coming Back Pages leading up to the FCC's Broadband Policy presentation. (To view the most recent Back Page, click here.)

House Communications SubCommittee Chair Calls Spectrum Legislation Top Priority

2010-02-01T06:51:00.003-05:00

(Excerpted from this week's Independent Report)

Representative Rick Boucher (D-VA), the chairman of the U.S. House of Representatives Energy and Commerce Subcommittee on Communications, Technology, and the Internet, outlined his legislative priorities for 2010 last week in a speech at the annual Congressional Internet Caucus’ State of the Net conference. High on Boucher’s agenda for this year are passage of spectrum inventory legislation, USF reform legislation, and broadband oversight.

“We have an active year ahead of us,” Boucher said. Saying that spectrum inventory legislation was his top priority, Boucher said the legislation will help to ensure more efficient uses of spectrum and help meet the growing demand for new wireless services.

“The spectrum crunch will come soon,” Boucher told the conference. “We are going to need new spectrum within a manner of just a few years.” (Click here to read more and view this week's Report.)

NTIA and RUS Explain Changes In Second Round of Broadband Stimulus Applications

2010-01-17T19:22:00.004-05:00

The following is from a January 15, 2010 joint release by the NTIA and RUS:

“Based on the feedback we received from stakeholders and our own experience in the
first funding round, we are making the application process more user-friendly,
sharpening our funding focus to make the biggest impact with this investment, and
streamlining our review process to increase efficiency,” said Lawrence E. Strickling,
Assistant Secretary for Communications and Information and Administrator of NTIA.

“In response to lessons learned from the first funding round, RUS is making important
changes that will make the process easier for applicants and target our resources
toward „last-mile‟ broadband connections to homes and businesses,” said Jonathan
Adelstein, Administrator, Rural Utilities Service, United States Department of
Agriculture. “This draws on our long experience in improving rural networks to the
most difficult-to-reach areas of our country that need it most. We‟ve streamlined the
application process, added support for satellite service for rural residents left unserved after other funds are awarded, and provided ourselves more flexibility to target areas of greatest need. We are going to stretch every last dime to maximize economic development in rural areas that currently lack adequate broadband service.”

The agencies announced the rules for this funding round in two separate but complementary Notices of Funds Availability (NOFAs) that promote each agency‟s distinct objectives.

NTIA’s Broadband Technology Opportunities Program (BTOP)

NTIA‟s NOFA allocates approximately $2.6 billion in this funding round of which
approximately $2.35 billion will be made available for infrastructure projects. In this round,NTIA is adopting a “comprehensive communities” approach as its top priority in awarding infrastructure grants, focusing on middle mile broadband projects that connect key community anchor institutions – such as libraries, hospitals, community colleges, universities, and public safety institutions. Comprehensive Community Infrastructure projects maximize the benefits of BTOP by leveraging resources, promoting sustainable community growth, and ultimately laying the foundation for reasonably priced broadband service to consumers and businesses.

In addition, NTIA plans to award at least $150 million of the funding for Public Computer Center projects, which will expand access to broadband service and enhance broadband capacity at public libraries, community colleges, and other institutions that service the general public. NTIA also plans to award at least $100 million for Sustainable Broadband Adoption projects, which include projects to provide broadband education, training, and equipment, particularly to vulnerable population groups where broadband technology has traditionally been underutilized.

RUS’s Broadband Initiatives Program (BIP)
RUS‟s NOFA allocates approximately $2.2 billion in this funding round for broadband
infrastructure projects. A second funding window will open later which will provide grants for satellite service for premises that remain unserved after all other Recovery Act broadband funding is awarded, make Technical Assistance grants for developing plans using broadband for regional economic development, and grants to provide broadband service to rural libraries funded by USDA under the Recovery Act.
RUS will focus this round on last mile projects, which are anticipated to receive the vast majority of funding. RUS will also fund middle mile projects involving current RUS program participants. The first NOFA had two funding options – grants up to 100 percent in remote rural areas, and 50/50 loan/grant combinations in non-remote rural areas. In the second NOFA, RUS has eliminated this distinction and adopted a base 75/25 grant/loan combination for all projects.

The new approach provides RUS with flexibility to seek a waiver if additional grant resources are needed for areas that are difficult to serve, and priority for those who seek lower grant levels. RUS believes this simplified and flexible funding strategy will promote rural economic development.

Separate NOFAs will allow applicants to apply directly to either program. RUS also eliminates the two-step process for BIP applicants to improve program efficiency. These changes will also add valuable time for applicants to focus on one specific program in preparing a more solid application.

Incorporated into the RUS NOFA is an opportunity for the reconsideration of BIP requests to provide viable applications with every chance for funding. There is also a second application review process during which RUS would allow an applicant to adjust its application to better meet program objectives and for the Administrator to provide discretionary points or to increase a grant component to meet rural economic objectives.

The agencies plan to accept applications from February 16, 2010, to March 15, 2010, and announce all awards by September 30, 2010."

Commentary: FCC Net Neutrality Proceeding Offers An Opportunity To Get It Right

2009-11-25T21:14:00.002-05:00

(Commentary by Paul Dauby, Vice President and COO, PSC, St. Meinrad, Indiana)

Tom and Steve,

I always look forward to reading this report.

I agree that the proposed Net Neutrality Principles could slow down
Broadband Deployment but.....

This NPRM is exactly what the doctor ordered. If the responses are honest
and thorough and if the FCC is really open to the comments filed then the
end result should be an acceleration of executing the National Broadband
Plan. The principles will have to come later. We don't have our house in
order yet to implement principles.

I know my friends in the industry would probably like to shoot me for my
thinking on this but first we have to know and understand the facts. We
haven't had the truth and nothing but truth. Our technical folks have been
asleep at the wheel too...or far too many have been. Anyway...

We network providers have an opportunity to sell the reasons for Broadband
USF which includes the middlemile. The FCC cannot escape the
inter-relationship of the two- Broadband USF and Net Neutrality.

If the FCC screws this up then many hard working politicians will have their
jobs in jeopardy. This is extremely business. There are traps set as for as
I am concerned.

I am in the process of preparing my comments to the NPRM. One side of me is
asking...Why do I think anyone will listen to me? My Christian answer
is....I am obligated to speak up. 35 years in the industry will not allow be
to get negative. After that my conscious is clear.

That's my sermon for today.

Thanks to both of you.

Paul

New Parallel Congressional and FCC Efforts To Change USF; This Time They Are Not Crying "Wolf"

2009-11-22T19:30:00.002-05:00

(Excerpts from this week's Independent Report)

The U.S. Congress and the FCC have now turned their attention on USF reform as part of two separate, but parallel tracks that may lead eventually to a major restructuring of USF.

Although USF reform has been on the agenda of the Congress and the FCC for many years now, it appears that the new focus on broadband may be the catalyst to make USF reform a reality.

The House Subcommittee on Communications, Technology and the Internet held a hearing last week on the “discussion” draft of new USF reform legislation authored by Representative Rick Boucher (D-VA), the subcommittee chairman, and Representative Lee Terry (R-NE). When they released the discussion draft just two weeks ago, both congressmen reported that the draft legislation was a “consensus” measure and enjoyed broad support. However, the subcommittee hearing produced no consensus despite Boucher’s best efforts to wrap his controversial legislation in the “consensus” label.
(Click here to read more and view this week's Report.)

NTIA And RUS Broadband Stimulus Programs Under Congressional Fire

2009-11-09T08:30:00.002-05:00

(Excerpt from this week's Independent Report)

Officials at the National Telecommunications and Information Administration (NTIA) and the Rural Utilities Service (RUS) took a beating recently before two congressional committees assessing the status of the broadband stimulus grant and loan programs funded last February as part of the American Recovery and Reinvestment Act (ARRA). Both the U.S. Senate Committee on Commerce and the U.S. House of Representatives Committee on Small Business subjected the agency heads to sharp scrutiny and prompted testimony that led some members of both committees to conclude that the grant and loan programs may be in disarray. Agency heads indicated that the evaluation of applications is taking longer than expected and that a second round of funding will be delayed.

Congressmen Boucher and Terry Introduce Latest Version Of USF Overhaul In "Discussion" Draft Legislation

2009-11-09T08:22:00.003-05:00

(Excerpted from this week's Independent Report)

Representatives Rick Boucher (D-VA), the chairman of the House Subcommittee on Communications, and Lee Terry (R-NE), a member of the subcommittee, have released a discussion draft of legislation they hope to introduce soon to reform USF. Boucher and Terry have said they were working on a draft of USF reform legislation earlier this year and pledged to move the bill through the subcommittee by the end of summer. However, their efforts have been stymied by a lack of support by Representative Henry Waxman (D-CA), the chairman of the House Committee on Energy and Commerce, and other members of the committee. The committee’s agenda has been dominated this year by energy, environment, and health care legislation.

Boucher, Terry, and only a handful of other committee members have embraced USF reform as a way to promote the interests of rural America.

The legislation would make broadband a universal service. Boucher said the legislation, if introduced and passed by Congress, would require USF recipients to offer high speed broadband services within five years of the date of enactment. The legislation specified that providers must offer a download receiving rate of 1.5 mbps or greater. He also noted the legislation will help control USF costs by directing the FCC to adopt a competitive bidding process to determine which wireless carriers will be eligible to receive USF service.

The measure also would cap the total amount of USF for telecommunications service providers. USF would be capped at its current level plus an amount resulting from the switch to wire center averaging and the elimination of the parent trap. The cap would be subject to an annual growth factor that would be based on the annual percentage change in the total number of rural ILEC working loops plus the annual percentage change in the GDP-CPI. The legislation also proposes a one-time permanent increase in the cap if the FCC revises the intercarrier compensation regime and shifts some or all of access charge recovery into the USF.

The legislation would require providers to pay into the fund if they currently pay into the fund; if they use telephone numbers or IP addresses to provide real time voice communications in which voice is the primary function; or if they offer a network connection to the public. The FCC would be authorized to determine if the contribution methodology should be based on revenues, numbers, or a combination of the two.

OBAMA, CONGRESS, AND TELECOM: PREPARING FOR THE STORM

2009-08-03T11:33:00.002-04:00

by Tom Smith, Editor of The Independent Telcom Report

It has been a little more than six months since then-Senator Barack Obama (D-IL) raised his right hand and was sworn into office as the 44th President of the United States. Ironically, this also marks the official beginning of the 2009 hurricane season. What do the two have in common?

Although telecommunications policy did not figure prominently in the 2008 presidential campaign, most political analysts thought the Obama administration would make telecommunications policy a high priority upon taking office. The Obama team has made a slow start on telecom, but the winds of policy change are blowing hard these days.

More importantly, the first six months of the Obama administration and the 111th Congress seem to have produced enough “worrisome conditions” to warrant the first storm warning of the political season for the rural and independent telecommunications industry. (Click here to read the entire Back Page and please add your response by clicking on Comment below)

Broadband Stimulus - All That Glitters Is Not A St. Patrick's Day Pot Of Gold

2009-03-17T00:41:00.004-04:00

Tom Smith, the Editor of the Independent Report and our Congressional/Government Affairs advisor, offers a timely Back Page for St. Patrick's Day, a commentary on the search for the "pot of gold" at the end of the Broadband Stimulus Package rainbow.

But, all that glitters may not be gold - has anyone thought about how the future of USF may be affected by the broadband stimulus package? Some members of Congress have.

To read the latest Back Page, click here, and add your own comment.

Broadband Stimulus - another "be careful of what you wish for" lesson in the making?

2009-01-12T10:22:00.005-05:00

Not everyone agrees that a "broadband stimulus" package is necessary. Take a look at this contrarian view posted today on Business Week's Tech Beat (click here)

I think the rural industry can benefit from a stimulus package, but I fear that will not be the result unless the industry works quickly to take a more critical look at what should be included in that package. I'm concerned that rural industry endorsement of the general stimulus idea in the absence of specifics that will benefit the rural industry will only end up fostering the efforts of competitors looking for new gaming opportunities.

It's easy to jump on a bandwagon. Murmurs of money for broadband investement? "Let's jump on it" is literally the knee-jerk reaction And, the normal course of action ensues. E-mail campaigns from the rural associations asking rural companies to endorse a proposal for Congress to provide billions for broadband, and to ask their Congressional representatives to support the proposal as much needed in their rural areas.

Any effort to shape a proposal to benefit rural telephone companies instead of their competitors? You can make a safe bet that the competitors are expending effort and dollars to make certain any broadband stimulus package will help them. What's being done on behalf of rural telephone companies? And, most importantly, what do rural telephone companies need in a stimulus package?

Most rural company service areas, in contrast to the rural areas served by larger incumbent carriers, already provide high speed internet to over 90% of their subscribers. If you're a rural incumbent carrier that is already providing high speed internet, a broadband "stimulus" package may only end up being another stimulating gaming opportunity for poetential competitors similar to USF "identical support. Does a rural incumbent carrier really want to give its blanket endorsement to providing other carriers with funding and tax credits to deploy more rural broadband? (And, can someone explain to me again how providing tax credits for infrastructure investment is helpful to non-taxable rural cooperatives?)

What is lacking in the discussion and debate are specifics that address the needs and issues of the rural industry. The irony is that the broadband deployment issue is an ideal opportunity for rural industry advocates to contrast the broadband situation in rural areas served by rural independent carriers to the status of broadband in rural areas served by other incumbent carriers. It's a great story: Bell Companies obtain regulatory "reform" and price cap regulation and fail to meet rural customer needs; and, in contrast, the rural telecom industry succeeds by prudently using effective government regulatory programs (USF and access charges) to recover costs and generate margins that have produced widespread broadband deployment.

The last thing the rural industry needs to do is to give a blank check endorsement to another "identical support" type money game. We don't need to endorse a program that provides infrastructure funds and tax credits for competitors to build broadband infrastructure where rural companies have already deployed high speed connectivity. We do need a program that helps defray the costs of transport to the internet portal which will lower costs and lead to lower more affordable rates that will, in turn, increase customer take rates. And, we need other directed funding in a stimulus package that helps customers with affordable access to computers and promotes job stimulation in rural areas (eg., tax credits for new jobs and businesses like bringing back customer service call centers from other nations to America's rural areas).

Anyone else care or is everyone busy running with the herd and sending their letters to Congressmen seeking endorsement of a proposal they haven't read?

Steve Kraskin, January 12, 2009

"Change" or "Politics As Usual" At The FCC?

2008-12-15T10:20:00.003-05:00

by Steve Kraskin

What's really behind the Congressional Committee Report on the Chairman Martin and the FCC? What leads Congressional leaders who have been studying issues for over a year to issue a report in the closing weeks of the year and the closing weeks of an administration? Public Interest or private interests?

It seems incredible to me that in this critical economic environment, two Democratic leaders tell the FCC to "do nothing." Ironic and unfortunate for the independent telecommunications industry. Consensus of two Republican and two Democratic Commissioners (as reflected in their joint November 4 statement) on much needed change in intercarrier compensation and USF is in the works - but nothing is now likely to change for months while rural access lines and billable switched access minutes continue to fall.

Similarly, the FCC was about to act on two additional initiatives at its now canceled December 18 meeting. The first action focused on the beginning of reform in video programming practices, addressing the "tying and bundling" practices of large company video programmers that plague small carriers and independent programmers. The expectation - before the Congressional Report on Martin and the Rockefeller-Waxman letter telling the FCC to 'stand down' - was that Chairman Martin and the two Democratic Commissioners would joing together to vote for changes that the small and rural industry has urged. For obvious competitive reasons, the large cable and programming companies don't like these proposals which are now on hold.

Similarly, Matin, Adelstein and Copps were reportedly ready to vote on a controversial proposal for licensing the AWS-3 spectrum with rules that would require the licensee to provide a "free" sponsor based internet service to 95% of the nation's population. The proposal reportedly would include access for rural carriers to spectrum covering rural areas (the 5% of the population not covered by the licensee) and a "use or lose" policy that would ultimately lead to freeing unused spectrum held by large companies for use by small independent providers. For obvious competitive reasons, the four large wireless carriers don't like these spectrum proposals which are now on hold.

So, as some revel in the effects of the Congressional report and the Rockefeller-Waxman letter, let's do a quick review:

1. Reaching consensus on access and USF put off indefinitely while rural access minutes and lines diminish.

2. Reform of video programming policies and the impact on small cable operators put off indefinitely while small cable systems struggle with retransimission broadcast contracts.

3. Reform of spectrum policies put off indefinitely, allowing large carriers to continue to warehouse spectrum in rural areas regardless of willingness of rural companies to use the spectrum and to invest in infrastructure to bring new services to rural communities.

Who benefits from the inaction and the "politics as usual?" I can only see the benefit of status quo for the large carriers and programming providers.

And, there is one other aspect of the "do nothing" mandate to the FCC that could critically impact the rural telecom industry. The FCC faces statutory deadlines the third week in January on two forbearance petitions addressing the treatment of access charges on traffic that uses IP. One petition asks that the FCC clarify that access charges apply to IP and the other petition asks the FCC to clarify that IP does not apply to IP. The "do nothing" mandate is substantively inapplicable to forbearance petitions because, under the statute, a forbearance petition is granted if the Commission takes no action on the petition within the statutory deadline. If the FCC "stands down" on everything except the DTV transition, as Rockefeller and Waxman urged, we will have two contrary petition requests go into effect.

This is an interesting event for legal academics - what positive action comes out of two negative actions (i.e, two contradictory actions going into effect statutorily as the result of inaction? But, the industry does not have time to get lost in academic debates when their operations are under serious threat. More importantly, inaction on these petitions can further confuse an already confused access charge environment if carriers using IP are given further regulatory cover to avoid paying for the access they use.

The serious ramifications for rural carriers and the entire telecom industry require immediate and forceful response in order to avoid further disruption and instability at a critical time. A quick, substantive and unified effort is needed to be undertaken by the rural telecom industry and its associations to avoid this.

Calm Before The Storm

2008-12-02T11:00:00.002-05:00

A note from Tom Smith, editor of the Independent Report:

The telecommunications industry is preparing for the December 18 FCC public meeting when the Commissioners may take up intercarrier compensation and universal service reform. Industry representatives have been busy behind the scenes preparing comments, reply comments, and meeting with FCC staff. On the other hand, the U.S. Congress is out of session and may not return to work this year to do anything but adjourn. In the meantime, speculation continues to build over President-elect Barack Obama’s FCC appointments. (See this week's Independent Report for more.)

Martin Abandons, Then Revives Intercarrier Compensation Plan

2008-11-17T11:47:00.002-05:00

(From The Independent Report, November 17, 2008)

FCC Chairman Kevin Martin has given into criticism that he sought to fast-track a controversial and complex plan to reform the intercarrier compensation and universal service programs. After abandoning plans to push forward with a proposal this year in the face of mounting criticism, Martin has changed course and agreed to put the plan out for a short period of public comment and setting up the potential for action by the Commissioners when they meet on December 18.

The FCC was set to take up on Election Day a controversial
167-page plan pushed by FCC Chairman Kevin Martin that many people described as a revolutionary restructuring of the intercarrier compensation system and USF. According to many critics, the plan would radically alter how some carriers provide telecommunications services in rural America. Consumer groups criticized the plan saying it would result in unprecedented rate increases.

Martin’s plan has support from Verizon, AT&T, and Qwest. The plan was criticized in part also because it was seen as benefitting the large national carriers disproportionately.

But, Martin quickly abandoned his efforts to push the plan through the FCC when he was unable to line up any support from the other Commissioners. He issued a bitter statement suggesting he had given up his efforts to reform what he called the “inefficient and outmoded intercarrier compensation and universal service programs.” In turn, the other Commissioners released a statement saying they hoped the issue would be put on the Commission’s December 18 agenda instead.

Once Martin announced the controversial plan would be pulled from the Commission’s November 4 meeting, stock shares of telecom companies serving rural areas shot up and rallied.

Martin pulled the controversial item from the November 4 meeting after strong opposition had mounted among some carriers, state regulators, consumers, and members of Congress. Nearly 100 members of Congress are thought to have called on the Commission to delay consideration of the plan until it could be put out for public comment. Just before Martin yanked the item from the FCC’s agenda, his plan came in for a new round of criticism from another group of influential U.S. Senators, including Senators Chuck Hagel (R-NE); Patrick Leahy (D-VT); Bernard Sanders (I-VT); George Voinovich (R-OH); Byron Dorgan (D-ND); and Robert Casey (D-PA).

In a rare joint statement, Commissioners Michael Copps, Jonathan Adelstein, Robert McDowell, and Deborah Taylor Tate said Martin should have delayed to seek public comment on his proposal. They said a public review was especially important given the current state of the economy. They also noted in their joint statement that they had provided Martin with “bipartisan, constructive, and substantive” suggestions.

“It is important to ensure that any reform proposal receive the full benefit of public notice and comment, especially in light of the difficult economic circumstances currently facing our nation,” they wrote.

Martin responded by expressing his disappointment that his colleagues wanted additional public review of the proposal. He was harsh in his criticism of the other Commissioners accusing them of wanting to avoid a vote on the issue.

“I would like to be encouraged by my colleagues’ commitment that they will truly be ready to complete this much needed reform on December 18,” he said. “The nature of the questions they would like to include makes me doubt they will have found their answers with an additional seven weeks. I do not believe they will be prepared to address the most challenging issues and the Commission will be negotiating over what further questions to ask in December.

“I recognize that few other issues before the Commission are as technically complex and involved, with as many competing interests, as are reforming the Intercarrier Compensation and Universal Service programs,” Martin continued. “But neither of those two realities are an excuse for inaction. They will be true in one month, in one year, or as we have now seen at the Commission, in ten years.”

Martin gave every indication after the meeting that he would not move forward with his plan this year. In various media interviews, he said the FCC had missed an opportunity to bring about comprehensive reform.

At the time, he committed to issue a far narrower ruling to comply with a federal court deadline on rules related to dial-up Internet traffic. Martin expressed doubt that the court would find the new rules adequate. Additionally, the FCC was required to release an Order by November 20 on recommendations made by the Joint Board. Those recommendations include an overall freeze in USF and the elimination of the identical support rule.

However, Martin pulled a surprise just a few days after failing to take up the controversial intercarrier compensation and USF reform plans. The FCC released the Order on the internet traffic issue on November 5 concluding that the FCC has the authority to regulate ISP-bound traffic and maintained the $0.0007 rate for such traffic. It also addressed the Joint Board’s recommendation with a three sentence paragraph saying the Commission would not implement the recommendations at this time.

But, the FCC also adopted a Further Notice of Proposed Rulemaking which attached Martin’s original proposal, an alternative draft, and a draft USF Order – all coming to a whopping 499 pages. The notice has been published in the Federal Register and comments are due on November 26, the day before Thanksgiving, and reply comments are due December 3.

Martin’s willingness to put his proposal out for public comment, however, did not alter his frustration with other Commissioners or their objections to taking up the issue at the November 4 public meeting.

“I am disappointed by the Commission’s unwillingness to step up and make tough choices to modernize our intercarrier compensation and universal service programs,” Martin said in agreeing to support issuance of the Further Notice. “I am also doubtful that the Commission will find itself any better equipped to act in another six weeks. However, I vote to approve this item because this is the only path my colleagues could agree on.

“I question whether my colleagues will be any more willing to adopt comprehensive reform in December,” he continued. “I had proposed a comprehensive approach that would have transitioned all traffic to a final uniform rate regardless of the type of traffic or jurisdiction. I also view our failure to implement the Joint Board’s recommendations as a tremendous missed opportunity.

“After a decade of comment on these issues, we begin again from square one. To be clear, this is not a targeted Further Notice on a specific reform proposal. We are putting out for comment several proposals that would lead to radically different outcomes.”

Martin took yet another shot at the other Commissioners in his statement of support for the Further Notice. “My colleagues invite comment on conflicting questions, which reveal that they have no fundamental proposal for reform,” he said. “These questions have been debated exhaustively in the record for years. I fail to see how further comment over the next six weeks will help us resolve these issues.”

The other Commissioners also issued a statement saying the Commission was reaching a consensus on many of the issues related to intercarrier compensation and universal service. They cited a list of issues on which they suggested there was agreement, including moving intrastate access rates to interstate access levels over a “reasonable” period of time, implementing an alternative cost recovery mechanism, and eliminating the identical support rule.

“This Further Notice reflects our commitment to comprehensive reform of the intercarrier compensation and universal service systems in an expedited fashion,” the other Commissioners said in a joint statement.

The FCC’s consideration of Martin’s proposal could be affected by the schedule of the lame duck session of the Congress. The U.S. Senate is expected to go into session today for a short lame duck session, possibly only until Thanksgiving. If the Senate ends its session completely and adjourns for the year, the FCC will be down to four members as Tate’s term on the FCC ends when the Senate goes out of session. If the Senate recesses but technically stays in session, Tate can continue to serve on the Commission through the end of the year.

Without Tate, Martin may find it difficult to get the three votes he needs to win passage of any proposal.

It is unclear also whether the Obama administration will weigh in indirectly on Martin’s proposal.

Meanwhile, the proposal also could represent a political mine field for the two current Democratic Commissioners. Both Copps and Adelstein are under consideration to become the next FCC Chairman. But, Obama may be reluctant to elevate either if they are associated with a decision that would result in new consumer rate increases.

Will The Congressional Elections Matter To Rural Telecom?

2008-10-07T00:31:00.002-04:00

Excerpt from Tom Smith's October 6, 2008 Back Page:

As the U.S. Congress has struggled over the last two weeks to finalize a “rescue” package for the financial services industry, the turmoil that we have seen may be a window into the future of the next Congressional session that begins in January, 2009. The next session of Congress may be a replay of the tumultuous days of the early 1990’s when congressional Democrats, also then in the majority, were so fractious and divided that they were unable to muster majorities to pass any legislation of importance.

In those days, the divisions between liberal Democrats and moderate Democrats gave Republicans added leverage in the congressional policymaking process. Eventually, this turmoil led to a Republican takeover of Congress led by then-Representative Newt Gingrich (R-GA) who would go on to weed out his moderate Republican rivals and become the Speaker of the House.

But, will a Congress in turmoil have any impact in 2009 on the telecommunications industry, especially rural and independent carriers? Would carriers simply be better off focusing on the business of telecommunications service delivery? Should the rural and independent telecommunications industry turn a blind eye to what some voters call the “shenanigans” on Capitol Hill or the deliberations at the FCC?

Ignore Congress at your own risk! That is the mantra usually reserved by members of Congress when they reach an impasse with a government agency or some out-of-favor industry group. Nevertheless, what happens in the Congress and at the FCC is important as long as the telecommunications sector is a regulated industry.

(The full text of the Back Page can be viewed by clicking here.)

The Elections and Rural Telecom

2008-09-30T08:56:00.002-04:00

Excerpt from Tom Smith's September 29, 2008 Back Page:

"No matter who wins the presidency, they will be relying on advisers who have had a history of working on telecommunications issues. They are likely to be names familiar to the industry. Nevertheless, both candidates are committed to change the FCC – perhaps in ways we cannot even anticipate at this point.

The next president, however, will not be the only change agent in the policymaking process. Although Democrats are expected to retain control of the U.S. Congress next year, there are likely to be many changes in Congress next year. These changes also are likely to have a significant impact on telecommunications policy and fuel a contentious debate about the future of USF – a debate on USF unlike any the rural and independent telecommunications industry has experienced in the past.

Do I have your interest, yet? Stay tuned for Part II"

(The full text of the Back Page can be viewed by clicking here.)

Lessons For Rural Industry From FCC Comcast Decision

2008-08-25T11:10:00.002-04:00

Initial Comments on the FCC’s Comcast Decision
by Robert H. Jackson, Esq.

The Rural Local Exchange Carrier (“RLEC”) industry should view the FCC’s August 1, 2008 decision against Comcast, the nation’s largest cable TV operator, as a strong signal for RLECs to become more involved in the Network Neutrality debate and to begin contemplating its potential impacts on their businesses.

The FCC, in a 3-2 vote that split party lines, concluded that Comcast had unlawfully impeded its customers’ ability to use third-party applications enabling file sharing. Many Comcast broadband customers use BitTorrent software to download and share movies, television shows, music and other software. BitTorrent software permits peer-to-peer transfers of large files more quickly than earlier technologies, through the downloading of content in parallel from multiple sources.

In response to this application that consumes significant bandwidth, Comcast apparently uses several network management techniques, including Deep Packet Inspection, to slow its customers’ file transfers. Deep Packet Inspection employs equipment to examine the contents of data packets in an attempt to determine the subject of the transmission. It examines a packet’s content against known patterns. Once an “undesirable” data pattern was indentified (e.g., a movie or television show), Comcast apparently operates other equipment to disrupt the communications at its endpoints.

The Commission concluded that this practice has anticompetitive aspects since the high-quality video files obtained with BitTorrent technology were a competitive alternative to Comcast’s video-on-demand product line. The FCC also determined that Comcast’s practices “substantially imped[ed] consumers’ ability to access the content and to use the applications of their choice.” The majority was also critical of Comcast’s failure to alert customers of its practice. Comcast had claimed that it was merely managing its network to ensure that all subscribers could have adequate network access. That claim was rejected by the Commission majority.

GOP Commissioners Tate and McDowell dissented. McDowell indicated his belief that the practice was a legitimate method of managing network capacity and not an attempt to disadvantage competitors. He also stated that, in his view, the FCC did not have the legal authority to take such action because it had never issued formal regulations on network neutrality.

Comcast was not fined, but was directed to: disclose the details of its “discriminatory network management practices”; submit a compliance plan to prevent future occurrences; and inform its customers and the FCC of the network management practices Comcast uses.

Comments

• While Comcast has not indicated whether it would appeal the FCC’s decision, it may well do so. Comcast would likely argue in favor of Commissioner McDowell’s dissenting position that the FCC cannot sanction a party for failing to follow a policy unless it has been adopted by the FCC as a formal rule. While that argument may seem attractive, courts have held that an agency’s policy statements, which announce its enforcement intentions for the future, need not be adopted in a rulemaking proceeding so long as the agency remains free to exercise informed discretion in deciding how to apply the policy. Iowa Power & Light Co. v. Burlington Northern Rwy, 647 F.2d 796 (8th Cir. 1981), cert. denied, 455 U.S. 917 (1982). See also, McKenzie v. Heckler, 602 F. Supp. 1150 (D.Minn. 1985). In other words, under this doctrine, the FCC would apparently have the power to announce its intention to enforce a network neutrality policy (assuming it was otherwise lawful) without first adopting rules to that effect, so long as the FCC did not automatically take enforcement action against a party based on the policy statement alone and without considering all of the implications and facts. How a court would apply the doctrine in the Comcast case is, of course, unknown at this time.

• This case is an enormous victory for network neutrality advocates, especially as it was achieved with votes from both political parties. Thus, supporters can be expected to take every action to preserve their win, whether in court, other FCC proceedings or through new legislation in Congress. Network neutrality opponents, such as AT&T, are likely to attempt to contain the decision to the Comcast facts. AT&T, for example, is now arguing that the Comcast decision proves the FCC’s network neutrality policies work, such that no further rules or laws are needed.

• The Comcast decision may spur the efforts of network neutrality supporters to push for legislation that would make network neutrality requirements a part of the Communications Act of 1934 and/or other federal statutes to protect against any appeals court overturning the Comcast decision.

• With the Comcast case decided, it is less likely that the FCC will adopt network neutrality rules now. However, in the event that network neutrality supporters fear their victory is in jeopardy from a successful court challenge by Comcast and, if Congress does not appear ready to pass legislation, supporters might push the FCC to adopt specific network neutrality rules. That effort would likely be a fairly slow process.

• VoIP providers and Internet-based video providers, may consider filing “network neutrality” complaints against those companies that use network management techniques and have competing service offerings. Those targets could include RLECs in appropriate cases.

• The biggest risk for RLECs s remains, however, becoming subject to network neutrality policies, however adopted, which are designed to address large service providers, such as the BOCs, Comcast and Time Warner, and which do not take account of differences in rural markets.

If you have any questions about this analysis, please feel free to contact me at 202-465-3290 or jacksonrh_wdc@yahoo.com.

Advocating Free Wireless Internet Service - What Was I Thinking?

2008-06-08T20:05:00.011-04:00

I received several e-mails last week from clients and friends who are concerned about the FCC’s proposal to license 25 MHz of spectrum called Advanced Wireless Services 3 (AWS-3). Under this proposal, the spectrum will be a national license. The licensee will be required to provide a basic speed internet connection to the public for “free” (it would be funded by ad revenues). The licensee will also have to build out spectrum to serve 95% of the population – guess who serves the 5% where the build-out won’t occur?

I support the plan. I support it because it can be implemented in a way that stands to help every rural telephone company to participate in broadband wireless services. The plan will help the vast majority of small rural telephone companies that have no spectrum and no prospect to win at auctions. The plan will help the relatively few rural telephone companies that have cellular or PCS systems. And, the plan will help those relatively few rural telephone companies that have obtained spectrum for broadband services through the auction process.

The large national and wireless carriers don’t want this plan to succeed. They don’t want another competitor. But, what about the proposed FCC plan is bad for rural companies? The FCC proposal will mandate a national carrier that works with rurals. And, what have the existing national carriers done for you lately? The large national carriers have shown no willingness or interest to partner with rural companies to bring broadband services to rural areas. Even in those few instances where national carriers have partnering agreements with rural companies for wireless voice services, there is little interest in working with rural carriers on a broadband wireless data roaming mandate and revenue sharing on the media applications that require the broadband pipe.

No wonder the large wireless carriers want to block this plan – if it’s adopted, they would not only have a new national competitor, but the new national licensee would be required to work with rural telephone companies under the rules I and others have advocated.

The rules I have advocated at the FCC for this spectrum would require the licensee to provide a meaningful wholesale arrangement to rural telephone companies. The rules would encourage the licensee to partition spectrum to rural telephone and rural wireless carriers. And, the rules would mandate that rural companies be permitted to partition spectrum from the licensee if, after the prescribed build-out period, the spectrum was not used in an area served by the rural carrier.That concept isn’t new – it was ignored and the incumbent wireless industry doesn’t like to talk about it! It was developed during the days when rural cellular partnerships were put together. Working with rural companies on these partnerships, we wanted to provide for the opportunity for a rural company to serve in its own area. The concept was later incorporated into the FCC’s cellular rules and is known as the “fill-in” rules.

When the FCC established rules for PCS auctions, Congress mandated the FCC Congress to disseminate spectrum to rural telephone companies. The original idea was that rural companies should have spectrum available to use in conjunction with their wireline services in order to bring spectrum services to rural America. The idea hasn’t worked – it hasn’t been implemented – in fact, no one has really tried.

Well that’s not exactly right – some of us tried, but we got slammed. And, guess who slammed us? No – not the large wireless carriers. They didn’t need to. They got the small wireless carriers to do it for them. Several rural advocates tried to promote the inclusion of this “fill-in” concept in all spectrum licensing rules. The large carriers shot the proposal down, but they were careful not to hold the “gun” themselves.

They whispered to the small rural wireless carriers, “This fill-in idea is bad for both of us. We can’t let anyone take our spectrum just because the build-out period is over and we haven’t developed it. We met our minimum build-out requirements, and no one should be allowed to use the spectrum but us.” The large carriers made sure that they could warehouse their spectrum and they convinced small wireless carriers that they had the same interest.

I heard loud and clear from small wireless carriers: “Don’t pursue this.”

I always thought it odd that the small wireless carriers carried the water for the large wireless carriers. The fill-in plan would have helped rural wireless carriers. If a rural telephone company that obtained spectrum had not developed spectrum in part of its rural license area, what did they have to be afraid of? Who would come in to build a system where the rural carrier didn’t think it was worthwhile to build? But, the rural carriers could have used the fill-in right to “edge out” and fill-in unserved nearby rural areas where a large carrier had only put cell sites up to cover the roads. The result is the reality we see today: many rural communities remain without reliable wireless service and many rural telephone companies remain without an opportunity to participate in the provision of wireless.

I saw opposition to the FCC’s proposed AWS-3 rules last week filed by RTG and OPASTCO, and the opposition reminded me of the calls I got years ago from the few incumbent rural wireless carriers who said “Don’t pursue this” when I tried to obtain for each rural telephone company an opportunity to utilize spectrum in its service areas. I don’t doubt that the hearts of those involved in filing the oppositions are in the right place. They must really believe that if this spectrum is auctioned as small license areas instead of an auction for one national license, a large number of rural companies will succeed at the auction.

Unfortunately, that hope is in conflict with past results. Most recently, the FCC auctioned a block of 700 MHz spectrum as small cellular-like license areas and most of the spectrum was won by AT&T. If anyone thinks we have a chance of obtaining auction rules that only permit rural telephone companies to participate (or even help with the rules in terms of preferences), I’d like to know where they found their new political help to obtain this result!

Again, I don’t doubt that the rural opponents to the proposed AWS-3 rules have their hearts in the right place. I do wonder if they are aware of the efforts to incorporate into the rules the benefits for rural carriers I have described: 1) wholesale arrangements for all broadband services; 2) encouragement of voluntary partitioning to rural companies; and 3) mandatory partitioning to serve unserved areas.

I have worked on behalf of a small consortium of rural carriers over the past year to obtain meaningful partnering arrangements with national broadband carriers. The consortium members include rural companies with no spectrum, a few that have wireless systems and a few that have obtained AWS or 700 MHz spectrum. All of them are united by the common understanding that rural carriers will need meaningful partnering arrangements with national carriers.

Even if you have a wireless voice system, you will need access to more spectrum to provide broadband services, and history shows that it is unlikely that the auction route will be a successful path to more spectrum. And even if you obtain more spectrum, where do you think future revenues will come from? A rural industry that has learned the harsh realities of the cost of programming content in their cable endeavors should now understand the need to seek partnering arrangements with national providers who have the mass to negotiate media content revenue sharing arrangements for the content and media applications consumers will obtain through the broadband pipes.

On behalf of the Broadband Wireless Partners consortium, my colleague Gary Sugarman and I have persevered in our efforts on behalf of the consortium with the national carriers over the past year to work to forge partnering arrangements – most of the national carriers have no interest. The FCC’s AWS-3 proposal gives us the opportunity to implement rules that will help all rural carriers by mandating wholesale arrangements, partitioning and fill-in rights. I can see how the large wireless carriers benefit from stopping the FCC proposal. I can not see what the benefit of opposition is to the rural carriers. I can only see how all rural carriers, including rural telephone companies with spectrum, can gain. And, I hope that instead of simply joining the large wireless carriers in opposition those in the rural industry that voiced initial opposition will take a second look at the FCC’s AWS-3 proposal and work together to strengthen the aspects of the proposal intended to advance rural carrier interests.

BUT – as the e-mails I received last week asked - “How could you support a plan that will put us in competition with a free service!!!???”

Here’s how I responded:

"Your concerns are absolutely understandable - and, I think your concerns show the need for more time in this proceeding to be certain that all parties fully understand what is at stake. I have spent a lot of time working on trying to find wireless opportunities for rural companies, and that is a difficult task. The effort led me to the M2Z group and they have worked with me on crafting rules and commitments that I think will serve most, if not all, rural carriers - but, I don't think a good enough job has been done to get word out on this. In addition to the M2Z proposal, I continue actively in dialogue with other large carriers trying to forge partnering opportunities for rural carriers.

My goal has been multi-fold:

1. To find spectrum opportunities for those that do not have any spectrum.

2 To find additional spectrum opportunities for those that have PCS or Cellular, I think they will need more spectrum to provide broadband services that require more spectrum (the very reason ATT and Verizon have acquired so much spectrum).

3. To find national partnering opportunities for all. Even if a rural company has cellular, PCS, AWS and 700 MHz spectrum (as ATT and Verizon do), I still don't think they are safe. Revenues are moving away from voice and toward media and content applications. Even if we could get all the independents together, we don't have the mass to bargain for media and content applications. I think we need to be able to partner with national carriers in order to obtain revenues from media and content. For example. when Verizon provides a link to ESPN through a wireless device, they will obtain revenues - I think we need the same.

In order to achieve these three goals, I began approaching the national carriers - Verizon and ATT have no current interest or need to work with rurals. Sprint/Clearwire has indicated a potential future need. T-Mobile, I think, wants to work with some rurals that invest and build areas they are not interested in, but I don't think they will make commitments on the revenue sharing for media and content applications.

M2Z agreed to commit to wholesale arrangements for all. I think the FCC could give teeth to the commitment using the wholesale (avoided cost) standard from interconnection.

M2Z agreed that rules that encourage partitioning make sense.

And, M2Z agreed that restoring fill-in rights make sense where a rural carrier could take over in an area where they do not build out.

The license proposal I have backed is for the licensee to be required to build out to cover 95% of the population in 15 years. This point is often overlooked - the 5% they do not plan to cover is the same 5% where other large carriers have not been interested in investing - the very foundation and reason for the existence of the rural independent industry.

M2Z proposed a "free" basic service to be supported by ad revenues. M2Z views this as a good strategy and many others believe that competitive markets will migrate to an ad revenue-supported basic “free” internet service. Consistent with other comments I have heard, I also question whether this "free" service will work as a business plan. But, I don't think that is a question we need to answer. In your service area and the areas served by most rural companies, neither M2Z nor any other potential licensee will be providing this “free” service - not even in 15 years. The rural company areas are the areas with the 5% of the population they will not cover.

If a rural carrier is in a more competitive area where the AWs-3 licensee does provide this “free” service, you can be certain that other national carriers offering similar services competitively will be interested in marketing in the rural carrier’s area. This "free" concept is not new when you consider the convergence of telecom and media. Broadcast TV was offered as "free;" even where customers can pick up off the air signals, the customers migrate to cable - they pay for the "free" signals and are then upgraded to purchase more services.

My thinking is that the "free" part is not a worry for the mass of independents because the independents cover the areas of the 5% population where the licensee will not go. The M2Z negotiation, if adopted into the rules by the FCC, gives the rural answers to each of the three objectives I set out above.

The real opposition to the proposal is from the large national players who are very smart. They know that their complaining about a potential competitor will not get much attention or play politically. We have seen the same tactic in the telephone world where the large carriers often try to get the small carriers to carry their water. I may be wrong, but that is what I think may be happening. Rural wireless carriers are being told "Look out! Someone is trying to steal your business - unite and stop this!" But, no large carrier is offering rural carriers anything.

If this proposal is really bad for existing rural wireless carriers, I very much want to learn more about what makes it bad. For example, if you don't think that the areas covered by your company and other rural telephone companies are the areas included in the 5% of the population that the licensee would not build out to (and, therefore, not subjected to the "free" competition), I'd be interested in understanding what you and others think those areas would be.

In addition to the "free service" aspect, I'd be interested in any other concerns you have or that you have heard. In order to address concerns, I'd like to also look at constructive remedies that would not throw out the good that could be achieved for many rurals from a proposal that mandates wholesale arrangements (that we do not have with any other national carrier), encourages partitioning and mandates fill-in rights for rurals.

I am also concerned that this issue may quickly erupt and divide the rurals between the relatively few that have spectrum services and the many that are looking for spectrum possibilities. I am hopeful that some of these thoughts will be useful for those that do have spectrum to think through whether the proposal is really more of a threat or an opportunity, as evolution of spectrum needs and the need to participate in revenues from media and other applications grows. I fully understand the initial reaction that this is a threat, and I will be very respectful of those that conclude that they still think it is more of a threat regardless of the considerations I set out above.

Thanks for considering all of this.

Steve Kraskin"

Importance Of Compromise May 1 FCC Interim USF CETC Cap Order May Be Surpassed By An FCC Press Release Issued The Next Day

2008-05-11T20:33:00.009-04:00

The FCC's May 1 decision to cap the competitive ETC USF fund has been widely reported in the trade press and the popular press - but, there has been little coverage or analysis of how Chairman Martin obtained the "third vote" for the cap in the face of the significant Congressional opposition mounted by the wireless industry and its national association, the CTIA. (See, "US Congress Stays Silent On USF Interim Cap" on page 1 of this week's Report.)

The day after the issuance of the USF cap order, the FCC took an unusual (in fact, we think, unique) action in the form of a press release titled "INTERIM CAP CLEARS PATH FOR COMPREHENSIVE REFORM." While the press release has not received significant attention in the press, the release may be more significant than the cap. This press release indicates the intent of the Chairman to move forward on twelve long-pending proceedings including intercarrier compensation. Of special interest to rural incumbent LECs is the Commission's recognition in this press release that reductions in rural carrier access charges will inevitably require "offsetting support payments" from the USF.

The FCC press release explains that the implementation of the cap was a necessary step to take prior to access reform because in the absence of the cap (and the continuation of ETC USF based on 'idnetical support'), "universal service support to competitive ETCs would increase dramatically in the event intercarrier compensation rates declined."

Click here to view the full text of this FCC press release.

"Be Careful Of What You Wish For ... Your Wishes May Come True." FCC Chairman Martin's Statement On CETC Cap Points To Auctions As Next Step

2008-05-02T09:12:00.012-04:00

From Chairman Martin's statement on the interim USF cap:
"Today, we act to stem the explosive growth of the Universal Service Fund (Fund) by capping total annual high-cost universal service support for competitive eligible telecommunications carriers (ETCs) at the level of support that they were eligible to receive in each state during March 2008. This action is essential to preserve and advance the benefits of the universal service program while we consider comprehensive reform...

A large and rapidly growing portion of the high-cost support program is now devoted to supporting multiple competitors to serve areas in which costs are prohibitively expensive for even one carrier. These competitive ETCs don’t receive support based on their own costs, but rather on the costs of the incumbent provider, even if their costs of providing service are lower.

Indeed, growth in required contributions to the Fund is largely attributable to these competitive ETCs. High-cost support to competitive ETCs has grown from approximately $1.5 million in 2000 to well over $1 billion in 2007. Left unchecked, this staggering growth threatens the sustainability of the Fund.

Today’s decision is not an end in itself, but a step on the path towards comprehensive reform. I continue to believe the long-term answer for comprehensive reform of high-cost universal service support is to move to a reverse auction methodology and to require that high-cost support be based on a carrier’s own costs. I’m supportive of these measures to contain the growth of universal service in order to preserve and advance the benefits of the Fund and protect the ability of people in rural areas to continue to be connected. I look forward to working with my colleagues as we consider comprehensive reform."

John McCain on USF . . . and he hasn't even lost his temper

2008-04-26T18:09:00.002-04:00

Anyone still doubting whether the rural telecom industry really needs to engage in an effective grassroots campaign? This is an excerpt from remarks made by U.S. Senator John McCain at a town hall meeting at the Old Martin County Courthouse, in Inez, Kentucky last Wednesday, April 23:

The modern economy offers new opportunities for communities like Inez. In particular, through access to high-speed Internet services that facilitate interstate commerce, drive innovation, and promote educational achievements, there is the potential to change lives. These kinds of transformations of our way of life require the infrastructure of modern communication, and government has a role to play in assuring every community in America can develop that infrastructure. This country has a long history of ensuring that rural areas have the same access to communication technology as other places. In 1934, Congress mandated that every American, regardless of where they lived, receive basic telephone service at approximately the same rate, and established the universal service fund to provide Americans with that service. Unfortunately, in a tale that is too familiar, the program became a breeding ground for waste, corruption, an d grossly inefficient spending.
We need to widely reform the way we do business in Washington; to end wasteful spending that does little if anything to meet government's obligations to the American people. Government should accurately identify areas where the market truly is not working and provide companies that are willing to build the information infrastructure to serve these areas incentives like tax reductions and more generous depreciation.
I think we should establish a "People Connect Program" that rewards companies that offer high-speed Internet access services to underserved, low-income customers by allowing these companies to write off the cost of this service. The government should enlist the help of private/public partnerships to devise creative and successful solutions to the lack of access to information technology. In many places, cities and towns are working with businesses that have experience providing high-speed Internet services to share the cost of building and improving that service. Where companies are unwilling to build information infrastructure, the federal government can support towns through government-backed loans or by issuing bonds with a low interest rate.
An aggressive effort to knit together all of the United States with 21st century information networks will make location less of a factor in the potential for economic success. Instead, the prime determinant will be the skills, energy, imagination, and persistence of Americans -- attributes that have traditionally been in great supply in America, and certainly exist here, where people have always prided themselves on hard work and self-reliance.

FRIDAY NIGHT FRIGHTS

2008-04-14T15:45:00.008-04:00

Late Friday Afternoon Surprises (aka “Friday Night Frights)

The FCC has an interesting public relations habit of releasing important decisions late on Friday afternoon or early Friday evening after most people have shut down for the week. Sometimes the decisions are very problematic – real Friday night “frights.” The Commission has also traditionally used the day before holidays for issuance of controversial decisions. The thought is, I think, that by the time people come back to work, they will have digested the decision and some of the initial negative reaction will be reduced by the interval of time that has passed. These decisions are often worth a close look.

FCC Enforcement Bureau Recommends Allowing LECs
To USE LNP LSRs To Trigger Win-Back Campaigns

Late Friday afternoon, the FCC released an order from its Enforcement Bureau basically recommending dismissal of a complaint filed by several cable/VoIP providers

against Verizon alleging unlawful marketing practices utilizing confidential carrier information.

The cable providers (and other competitive carriers) send Verizon (and other local exchange carriers) LSRs (“local service requests”) when they win a customer and initiate the local number portability (“LNP”) process. The cable providers complained that Verizon is using the LSR information to trigger a “win-back” campaign to convince customers to reverse their decision to cancel their Verizon service.

(Click here to read more. . .)

2008-03-10T15:41:00.013-04:00

This week's Back Page is the first of a four part series from Steve Kraskin.

Whether it's nationwide Presidential politics or the telecom industry, "Change" is the theme, but words alone don't suffice. (Click here to read the most recent Back Page.)

Steve suggests that it's time for specifics and he offers an analysis of why "status quo" is not an option for the rural telecom industry. He thinks that the old rural "three-legged stool" based on end user revenues, access charges and USF is wobbly and unreliable, and he offers a new "three-legged stool." Parts 2, 3, and 4 of this series will address specifics for each of these three "legs."

Editor's note: Warning! This Back Page is 10 pages long.

We try to keep the Back Page articles to fewer than 6 pages. My thought is that unless it’s really better than the Gettysburg Address, why does it need to be more than 3000 words? I couldn’t convince Kraskin, to comply. What’s really ironic is that in this Back Page, he complains about “squeaky wheels” in the industry that “wax poetic.”

I tried to convince him to cut out four pages and one or two legs of his new three-legged stool model, but he persisted. I promise I’ll work hard to limit him to no more than 5 or 6 pages on each of his follow-up Back Pages!

Responses to the Back Page are invited and welcome. Send your responses and comments to Administrator@Independent-Tel.com and they will be posted at The Independent Town Hall.

K.A.E., the Editor

Change Or Die

2007-12-31T10:50:00.002-05:00

As 2007 comes to an end, our most controversial Back Page of the year warrants a second look.

What future is there in a business plan totally dependent on government sympathy? Is your operation and business plan based on cashing checks in payment of access charges and USF?

Do you have a plan to move your customers to your broadband connection? This Back page suggests that the industry has 2 to 5 years to adjust. Will your company be relevant in 2010?

Click here to see the "Change or Die" Back Page.