FCC declines to forbear universal service requirement; AT&T complains

The FCC’s Half-Shoveled Sidewalk | AT&T Public Policy Blog

This blog post by AT&T notes that it wants the U.S. Federal Communications Commission to relieve it from the obligation to provide landline voice service to all premises in its service territory requesting it, even those in areas not eligible for subsidization through the FCC's universal service subsidy program, the Connect America Fund (CAF). While the subject of the requested relief is voice telephone service, it also extends to Internet service now that the FCC reclassified it as a common carrier telecommunications service subject to the Communication Act's universal service obligations under its 2015 Open Internet Order. 

Although not mentioned in AT&T's blog post, that's the real issue here. AT&T does not want to invest in upgrading and building out its infrastructure to bring landline Internet service to all premises in its service territory -- service that would also be capable of delivering voice service.

Germane to AT&T's complaint are those communities where the cost of deployment is relatively high, but not high enough to justify universal service fund subsidies intended for high cost rural regions. There are a lot of these neighborhoods in its vast service territory because AT&T continues to rely on limited range, obsolete (in its own words) DSL technology to deliver Internet service over aging copper plant that cannot reliably serve premises more than a couple of miles from its central offices or field distribution nodes.

The question going forward is whether the FCC pursuant to its Open Internet order will enforce the universal service obligation on AT&T when a consumer living in one of these unserved areas beyond the range of DSL technology requests Internet service. So far, the FCC has shown no inclination of doing so as AT&T allows its legacy copper plant to rot on the poles. Consumers in these redlined neighborhoods will continue to face the worst of all worlds: no service from their nominal ISP, nor meaningful regulatory action to remedy their plight.

FCC issues proposed order creating Connect America Fund

The U.S. Federal Communications Commission has released its proposed order revamping the Universal Service Fund (USF) that has for decades subsidized plain old telephone service (POTS) in high cost areas. The USF will now be directed to support Internet connectivity as the Connect America Fund (CAF). The CAF will instead subsidize telecommunications infrastructure to serve what the FCC estimates to be 18 million Americans who involuntarily remain off the Internet “grid” because it costs too much to connect them.

Whether the proposed order would achieve that and do so in a timely manner is an open question. The executive summary of the rather inscrutable 759-page document states that “[w]hile continuing to require that all eligible telecommunications carriers (ETCs) offer voice services, we now require that they also offer broadband services.” But a close reading of the order shows no indication the FCC will expand the telcos’ existing common carrier obligation to provide voice service to all (and not just some) premises in their service areas to encompass Internet. For example, paragraph 1090 on page 398 of the proposed order:

Under section 214 of the Act (the federal Communications Act of 1996), the states possess primary authority for designating ETCs and setting their “service area[s],” although the Commission may step in to the extent state commissions lack jurisdiction. Section 214(e)(1) provides that once designated, ETCs “shall be eligible to receive universal service support in accordance with section 254 and shall, throughout the service area for which the designation is received . . . offer the services that are supported by Federal universal service support mechanisms under section 254(c).” Although we require providers to offer broadband service as a condition of universal service support, under the legal framework we adopt today, the “services” referred to in section 254(e)(1) means voice service, either landline or mobile. (Emphasis added).

That sounds like POTS and not Internet. In addition, there is no reference in the proposed order to Title II Section 214(e)(3) of the Communications Act of 1996 that empowers the FCC to "determine which common carrier or carriers are best able to provide such service to the requesting unserved community or portion thereof and shall order such carrier or carriers to provide such service for that unserved community or portion thereof." So it appears that telcos could continue to not serve some areas even while accepting CAF subsidies to serve others -- thereby perpetuating the existing problem of broadband black holes.

It’s also unclear from the proposed order how unserved areas in states where the incumbent telco has relinquished its carrier of last resort status would be able to benefit since these carriers would appear to be ineligible for CAF subsidies. Or whether telcos, even if eligible for CAF subsidies, would accept them. In California, for example, telcos have generally shunned generous subsidies available through the California Public Utilities Commission to offset the cost of constructing infrastructure to provide Internet connections to premises in unserved and underserved areas of the state.

Finally and perhaps most importantly, given that many people have and continue to “cut the cord” to landline voice service, will there be enough money to be had from phone bill surcharges that have historically funded the USF to sustain the CAF?

Community networks should be eligible for CAF subsidies

U.S. Federal Communications Commission (FCC) is about to release details of its Connect America Fund (CAF) that will reform the current Universal Service Fund that subsidizes switched voice service to instead subsidize Internet connectivity in high cost areas.

The FCC faces a significant challenge in how it defines those areas eligible for CAF subsidies given that wireline Internet access is highly granular. Incumbent investor-owned cable and telephone companies parse their service areas very tightly when it comes to determining what is and what isn't a high cost area for providing Internet service. A given home or business may have access while another just down the road or street is deemed too costly to serve and is relegated to dialup or satellite. These premises can't be described as situated in remote, isolated areas since they are almost on top of areas that have wireline Internet access.

Targeting CAF subsidies to the most remote regions of the United States won't help these folks. They comprise many of the 24 million Americans that FCC Chairman Julius Genachowski noted in a February 7, 2011 speech "couldn’t get broadband today even if they wanted it. The infrastructure simply isn’t there." It's there for their neighbors -- but not for them.

Many communities have responded to this widespread problem by building their own fiber to the premises networks to fill in the gaps. These networks must necessarily overlap the footprints of the incumbent's incomplete, Swiss cheese infrastructures since telecommunications infrastructure like other utilities must cover sufficiently large geographical areas in order to be economically viable. The FCC should designate these community networks as eligible for CAF subsidies if they meet certain requirements such as providing voice and 911 emergency service at standards that meet or exceed those placed on existing wireline providers.

Rural electrification better model for driving expansion of next generation networks

Give a listen to Christopher Mitchell's interview on the public affairs radio program Minnesota This Week. Mitchell is director of the Telecommunications as Commons Initiative at the Institute for Local Self-Reliance.

Near the end of the interview, Mitchell advocated government loans and loan guarantees to telecom cooperatives similar to those made by the U.S. federal Rural Electrification Administration to electric power coops starting in the 1930s. Mitchell said this would be a better policy than subsidizing investor owned telcos.

Such subsidies, Mitchell suggested, don't provide sufficient incentive to and accountability of private providers to offer quality service and network upgrades. Since community based cooperatives don't have to earn a return for investors, they can concentrate solely on serving their members.

Qwest petitions FCC for $4.2B in USF funds to defray broadband infrastructure costs

The Denver Business Journal reports Denver-based telco Qwest has filed a petition with the Federal Communications Commission seeking $4.2 billion from the Universal Service Fund to defray the cost of deploying broadband infrastructure in its 14-state service area located in the western United States.

According to the newspaper, current FCC rules make the funds inaccessbile to Qwest.