Will FCC Title II rules provide relief for local officials besieged with chronic complaints over poor Internet access?

Say you're a local elected official. One of the biggest issues your constituents bring to your attention for assistance is poor Internet access. Those who held office before you fielded calls and emails on this subject for years, seeing them spike in 2020-22 during the COVID pandemic.

Flummoxed and frustrated constituents tell you they see homes and small businesses not far way or even just down the road being offered service, but none is available to them despite repeated requests. Often, they may live just outside of town limits in unincorporated county jurisdiction. They try to make do with hard to afford satellite service or smartphone hot spots. Or fixed wireless that offers minimal connectivity at a high price.

Since Internet access was only briefly regulated as a public utility between 2015 and 2018, referring your constituents to the state public utilities commission (PUC) or the FCC won’t be able help them other than recording their complaint and sending them to the same provider that has repeatedly declined their requests for service. 

That could potentially change this year if the FCC adopts regulations next week classifying Internet service as a telecommunications utility under Title II of the federal Communications Act. That would regulate Internet access like landline voice telephone service before it under a federal-state framework between the FCC and state PUCs. That means providers would be required to honor reasonable requests for service and would be prohibited from refusing service to a particular area.

This has significant implications since much of the nation’s existing landline deployment looks like a Swiss cheese with providers cherry picking higher density and income areas likelier to generate more revenues and greater profits for their investors. Homes and small businesses in the holes on the periphery are left without connections.

Assuming the FCC regulation becomes law, local elected officials should keep an eye on how it will be enforced when, for example, a constituent complains they have asked for service and been refused connectivity or told they’d have to come with thousands of dollars for a connection.

One of the main tasks that regulators will face is determining which provider must honor the request for service. While the language of the proposed regulation includes refers to where providers have built infrastructure and offer advanced telecommunications services which they refer to as their “footprint,” federal law (47 U.S.C. 214(e)(5)) affords state PUCs and the FCC authority to develop providers’ geographic parameters for the purpose of Title II’s universal service mandate requiring providers to offer service to all serviceable addresses within their service areas.

Additionally, the FCC regulation would give regulators authority to sanction discriminatory conduct under 47 U.S.C. 202 barring “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.” The statute allows for fines of $6,000 for each violation and $300 daily penalties for ongoing violations.

FCC reclassification of Internet access as Title II utility likely to have little impact on affordability

When the U.S. Federal Communications Commission votes to reclassify Internet access as a common carrier utility under Title II of the Communications Act of 1934 as expected April 25, it’s unlikely to increase affordable access. The primary reason is the FCC is forbearing rate filing and regulation in the joint federal-state framework with state public utility commissions that regulate rates for as they do for legacy voice telephone service under Title II authority.

While Title II would subject Internet service providers (ISPs) to Title II’s universal service and nondiscrimination provisions requiring reasonable requests for service be honored, without rate regulation ISPs could charge exorbitant rates difficult for households and small businesses to afford.

For example, an ISP could tell a group of households and small businesses that they’ll honor requests for fiber to the premises (FTTP) service. But given the area’s characteristics such as density of fewer than 15 premises per road mile, old utility poles in need of replacement and distance from middle mile backhaul, extending fiber connections would require a connection fee of $1,000 per prem and $250 per month for service.

With the FCC’s forbearance, these end users also would lack the ability to claim the rates constitute discriminatory conduct under 47 U.S.C. 202, titled Discrimination and Preferences. This provision makes it unlawful for common carriers engage in “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.” (Emphasis added)

An ISP could also contend that this pricing would not constitute a discriminatory practice per the FCC’s recently adopted Preventing Digital Discrimination rulemaking because those charges are needed for reasons of economic and technical feasibility in order to extend service. The abovementioned pricing could well become common for new FTTP service reflecting the growth in labor and material costs.

Consortium to bring fiber to every American doorstep

EMBARGOED UNTIL 4/1/2024

A consortium of fiber network and edge providers has announced a massive deal to rapidly build fiber to every American doorstep and acquire all existing fiber transmission and distribution infrastructure in the United States.

According to informed sources, the deal is being led by fiber infrastructure owners AT&T, Verizon, and Alphabet along with edge providers Meta and Amazon along with limited participation from Netflix.

Cable companies, publicly owned and coop networks and smaller fiber network owner/operators will be offered buy outs of their existing footprints on highly favorable but time limited acquisition terms, according to sources close to the negotiations leading up to the deal.

The consortium will finance fiber construction and operations with cash contributions and long term bonds backed by the consortium members along with participation private equity firms. State and local governments and railroads will be offered fiber connectivity at no cost in exchange for right of way access and waiver of all permitting.

To alleviate potential federal anti-trust concerns, the consortium will be organized into five independent regional companies closely aligned with the service territories of the Regional Bell Operating Companies (RBOCs) formed after the 1982 breakup of AT&T.

“In 2005, then AT&T CEO Ed Whitacre said no one should ride the pipes for free. He’s right. That’s why we’re buying all the pipes and will bring long overdue fiber connections to most every American doorstep,” the consortium said in a statement. “Doing so is consistent with the public policy intent of 1996 Telecommunications Act to timely bring advanced telecommunications capability to all Americans.”

The consortium – called Fiber Everywhere -- noted that policy goal remains unrealized nearly three decades later. “We recognize the difficult incremental trajectory the nation has been on for the last two decades that is unlikely to attain this goal anytime soon and bring American households from 20th century copper and coax built for analog voice telephone and cable TV services to fiber for 21st century Internet protocol-based advanced telecommunications.” 

Fiber Everywhere will request Congress reallocate $42.5 billion appropriated in the Infrastructure Investment and Jobs Act of 2021 for advanced telecommunications infrastructure directly to the consortium regional operating companies to replace deteriorated utility pole infrastructure and install underground conduit.

The consortium said the deal obviates the need for an alphabet soup of dozens of federal and state subsidy programs and will bring an end to unproductive and fractious fighting over what constitutes “broadband” and where it’s available as plotted federal and state “broadband maps.”

“Maps are meant to serve as a road map to a destination,” Fiber Everywhere stated. “With this deal, the consortium offers the United States a true road map to a bright digital future.”

DISCLAIMER: The foregoing is occurring in a parallel universe under the multiverse concept of theoretical physics. Universal fiber service not available in all areas in the current universe.

Yesterday, today and tomorrow in FTTP

 2000-2020

• Incumbents slow walk, cherry pick FTTP buildout; business models cannot accommodate capex need.
• Publicly owned FTTP emerges as lower cost business model alternative, built by some municipalities in densely settled areas and handful of private operators and utility coops in rural areas.
• Some limited interest by private infrastructure funds (Macquarie) and Euro pension funds as sources of more patient capital to finance FTTP construction.

2020-2030

• COVID public health measures spotlight need for more FTTP as knowledge work, education, medicine and retail increasingly virtualize online. Investment community realizes incumbents unable to meet demand and seriously explore investment opportunities.
• Increased interest on part of private infrastructure funds (e.g. BlackRock joint venture with AT&T), private equity firms and Euro infrastructure funds in investing in privately held FTTP. They provide more patient and copious capital with 8-10 year time horizon than incumbent capex with ROI standard of 5-7 years. High existing debt loads also severely limit in house debt financing. These alternative investment sources have stronger motivation to invest vs. incumbents with risk premium payday opportunity at end of 8-10 year investment cycle when consolidator buys their stakes.
• Interest in public bond debt financing also growing with publicly owned regional FTTP players looking for bond capital to finance growth (i.e. UTOPIA, ECFiber and other Vermont CUDs, Golden State Connect Authority.)
• Both private and public investment will be limited to urban and suburban areas with some limited investment in exurban greenfields and PUDs. But more capital available for private investment, drawn by shorter investment cycle (10 vs. 20+ year public bond maturity).
• BEAD will facilitate some rural FTTP but will be largely limited to incremental edge outs by large telcos and cable companies.
• With limited FTTP investment in rural areas, LEOs will assume dominant position. WISPs will struggle to survive over next 8-10 years, unable to compete with LEOs.

Core issue before FCC's proposed Title II rules: regulating advanced telecom as a common carrier utility

Conventional economic theory distinguishes a public utility from a supplier of goods and services in a market by identifying whether the good in question is a monopoly. In many parts of urban and rural California, internet services are indeed a monopoly—or at best a duopoly.

The common policy response to the monopoly is to either place the service provider into public hands or use a regulatory framework to curtail the ability of the provider to exploit a monopoly position. Once in the public hands, the service provider can be compelled to prioritize social outcomes, such as equity of access, affordability, or similar—exactly from which our California communities stand to benefit since many currently lack equitable access to affordable, reliable broadband internet.

https://20mm.org/2024/03/19/over-100-years-after-electrification-will-california-lead-way-internet-as-a-public-utility/

While the context here is California, this is the core issue before the U.S. Federal Communications Commission with its proposed Safeguarding and Securing the Open Internet rulemaking that would reclassify IP telecom as a common carrier utility under Title II of the Communications Act.

It's controversial because some policymakers paradoxically regard this service as a competitive market of price tiered "broadband" bandwidth, in diametrical opposition to the public utility framework described above that does not. Hence, their rationale is the interests of market makers and those who invest in it should take priority over the broader public interest. It's a black and white debate that over the past three decades has favored the former over the latter, making the investors winners and the public losers. 

The fundamental challenge for public policymakers is to alter this win/lose dynamic and develop a scheme where all interests can win. It's politically possible given access to advanced telecommunications is a nonpartisan issue widely seen as broadly beneficial for all aspects of society.

California legislation would adopt definition of digital discrimination

Proposed California legislation would codify in state law a definition of “digital discrimination of access.” AB 2239 would define it as “policies or practices, not justified by genuine issues of technical or economic feasibility, that differentially impact consumers’ access to broadband internet access service based on their income level, race, ethnicity, color, religion, or national origin, or that are intended to have a differential impact.”

That mirrors the Federal Communications Commission’s Preventing Digital Discrimination rulemaking adopted in November as mandated by section 60506 of the Infrastructure Investment and Jobs Act of 2021 (IIJA). Section 60506 defines equal access as “the equal opportunity to subscribe to an offered service that provides comparable speeds, capacities, latency, and other quality of service metrics in a given area, for comparable terms and conditions.”

The FCC’s Preventing Digital Discrimination rulemaking is predicated on the notion that business decisions on where to deploy infrastructure and offer advanced telecommunications services can disadvantage households based on these demographic factors, even if not intentional. But Section 60506 gives deployers the ability to defend their infrastructure and service offerings based on technical and economic feasibility. That can easily trump any claim of discriminatory impact -- intentional or not -- in the nation’s market-based and predominately investor owned advanced telecommunications infrastructure.

Since IP telecom is currently classified as lightly regulated optional information service under Title I of the Communications Act and not as a common carrier utility, providers are free to deploy delivery infrastructure wherever they wish and at rates of their choosing. Naturally, they are going to prefer denser, higher income neighborhoods that will produce faster return on capital investment (ROI) and where households are less price sensitive and more inclined to subscribe to higher priced services, thereby maximizing average revenue per unit (ARPU).

Notably, California’s Digital Equity Bill of Rights that took effect in January, states public policy that “to the extent technically feasible, broadband internet subscribers benefit from equal access to broadband internet service within the service area of a broadband provider.”(Emphasis added) Notably, that omits the economic feasibility defense of the FCC’s Preventing Digital Discrimination rulemaking and proposed by AB 2239. 

That's an important difference from AB 2239 because technical feasibility is a far broader term comparable to the federal government's definition of a "broadband serviceable location" as “a business or residential location in the United States at which fixed broadband Internet access service is, or can be, installed." That definition is used in the National Telecommunications and Information Administration's Broadband Equity, Access, and Deployment (BEAD) subsidy program. A location may be serviceable. But building infrastructure to serve it may not be economically feasible if the business case justifying deployment isn't present.

Like private investor owned providers, revenue bond financed publicly owned fiber networks seek urban and suburban density.

In Colorado, municipally-owned Pulse was able to fund its network through revenue bonds which were backed by the Loveland electric utilities enterprise fund. A revenue bond is a type of municipal bond typically used to fund projects that are expected to generate revenue, like public utilities. Unlike general obligation bonds, which are backed by the taxing power of the issuing government, revenue bonds are supported by the income generated from the project they are financing.

https://www.fiercetelecom.com/broadband/communities-gain-diy-network-guide-despite-public-broadband-skeptics

This type of financing is feasible when the d (density) factor is sufficient such that bond underwriters are willing to underwrite knowing the density equates with sufficient revenues to service the debt. A locality like Loveland offers that with a population of 2,219 per square mile according to 2020 U.S. Census data. As the linked blog post above notes, it’s difficult to meet that underwriting standard in less densely populated exurban areas. That’s where publicly owned fiber to the premise (FTTP) advanced telecommunications infrastructure is most needed since the return on investment isn’t there for investor owned companies.

The unrealized policy goal of universal internet access

2000 Democratic Party Platform on "Bridging the Digital Divide"

Democrats believe that every American - regardless of income, geography, race, or disability - should be able to reach across a computer keyboard, and reach the vast new worlds of knowledge, commerce, and communication that are available at the touch of a fingertip.

That is why Democrats fought for the e-rate to wire every classroom and library to the Internet. In the next four years, we must finish connecting the job and then go further.

We must launch a new crusade - calling on the resources of government, employers, the high-tech industry, community organizations, and unions - to move toward full Internet access in every home, for every family, all across the United States. We must make sure that no family or community is left out. We must not rest until Internet access is universal.

Bush calls for universal broadband by 2007

Reaching back to revive an idea promoted by the man he beat for the White House, President Bush urged Friday that affordable high-speed Internet access be available to all Americans by 2007, saying it was essential to the nation’s economic growth.

Bush traveled to the Southwest largely to promote home ownership but spoke briefly about Internet access in remarks reminiscent of 2000 Democratic presidential nominee Al Gore’s call for an “information superhighway” available to all Americans. 

State of the Union address, President Barack Obama, January 24, 2012

"We’ve got crumbling roads and bridges; a power grid that wastes too much energy; an incomplete high-speed broadband network that prevents a small business owner in rural America from selling her products all over the world.”