Claiming a monopolistic market is a competitive one doesn't make it so

Former Commish Michael Copps: ‘Maybe the Worst FCC I’ve Ever Seen’: In just a few short months, the Trump wrecking ball has pounded away at rules and regulations in virtually every government agency. The men and women the president has appointed to the Cabinet and to head those agencies are so far in sycophantic lockstep, engaged in dismantling years of protections in order to make real what White House strategist Steve Bannon infamously described as “the deconstruction of the administrative state.” The Federal Communications Commission is not immune. Its new chair, Republican Ajit Pai, embraces the Trump doctrine of regulatory devastation. “It’s basic economics,” he declared in an April 26 speech at Washington’s Newseum. “The more heavily you regulate something, the less of it you’re likely to get.”

The problem with Pai's assertion is not all markets are alike. While it may be true in a competitive market -- defined as one with many sellers and buyers -- it does not apply in a natural monopoly market like telecommunications infrastructure.

The FCC's existing Open Internet rules classifying IP-based telecommunications as a common carrier utility implicitly recognize that circumstance. They are predicted on a monopolistic and not a competitive market. Moreover, regulators aren't free to determine the microeconomics of the markets they regulate. Claiming a monopolistic market is a competitive one doesn't make it so. 

The incredibly misinformed "experts"

Lawmakers itching to advance high-speed Internet funding: Last month, the agency issued a notice of proposed rulemaking seeking comment on actions to remove regulatory barriers to infrastructure investment at all levels of government and to better enable broadband providers to build, maintain and upgrade their networks. "This is the kind of thing that is going to get more broadband into the hands of consumers," Joe Kane, a tech policy associate with the R Street Institute, told the Washington Examiner. "It's not a sexy political battle, but it's getting to the [question of] why is your computer really slow? A better example is people who don't currently have broadband. It's people in rural areas where it hasn't been profitable to build out there. Now that we have 5G on the horizon, it'll be more possible to reach those areas."

This except illustrates how misinformed even the experts are when it comes to modernizing  America’s telecommunications infrastructure. First of all, the U.S. Federal Communications Commission is focusing on the wrong issue. It isn’t regulatory barriers that inhibit investment in modern fiber telecommunications infrastructure that serves all premises. The main obstacle is the continued misguided reliance on vertically integrated, investor owned legacy telephone and cable companies to build it. Their business models are incompatible since they require a rapid return on investment. Infrastructure investment by comparison requires billions in patient capital they simply don’t have or cannot raise.

Second, 5G mobile wireless service doesn’t even exist yet. When it does, the same economic constraints that prevent the telcos and cablecos from connecting customer premises with fiber will be at work because all those 5G cell sites will require a lot of fiber to be built to serve them. Doug Dawson explains at his POTS and PANS blog.

Silicon Valley needs heartland help in net neutrality fight - Axios

Silicon Valley needs heartland help in net neutrality fight - Axios: The Bay Area has long been a bastion of support for strong net neutrality rules. Now supporters are looking somewhere else for backup: Trump country. Why it matters: With net neutrality rules under assault, proponents know they need to get the attention of policymakers with roots in the heartland to show support isn't isolated to the Silicon Valley bubble.

This is the crux of the problem defining the U.S. Federal Communications Commission 2015 Open Internet regulations as "net neutrality." It really doesn't mean much to the average telecommunications consumer. Moreover, in the heartland the real benefit of the regulations classifying Internet as a common carrier telecommunications utility service under Title II of the Communications Act is Title II's universal service and anti-redlining provisions. These are real world concerns in the heartland, where millions of Americans have been turned down for years by incumbent ISPs when they attempt to obtain landline Internet connections to their homes and small businesses.

Beyond Net Neutrality: The Importance of Title II for Broadband - Public Knowledge

Beyond Net Neutrality: The Importance of Title II for Broadband - Public Knowledge: Title II classification is critical for protecting an open internet, but it is also just as important for preserving our values of service to all Americans, including universal service and consumer protection. Broadband has the power to transform people’s everyday lives. Title II classification of broadband must remain in place to continue protecting the fundamental values of our communications systems.

H/T to Yosef Getachew of Public Knowledge for this item emphasizing the Federal Communications Commission's reclassification of Internet as a common carrier telecommunications utility under Title II of the U.S. Communications Act in its 2015 Open Internet Rulemaking. 

Title II's universal service provision has unfortunately been buried under the mainstream media "net neutrality" meme that is utterly meaningless from the perspective of the 34 million Americans the FCC found in 2016 lack access to advanced telecommunications infrastructure capable of delivering high quality voice, data, graphics and video. Here's what I wrote on the topic shortly before the rulemaking was adopted.

A universal service standard prevents all too common crazy quilt pattern of telecom infrastructure deployment such as this accompanying a post at Steve Blum's blog illustrating how legacy incumbent providers engage in neighborhood cherry picking and redlining.

FCC Chair Pai wrongly describes natural monopoly of telecom infrastructure as competitive market

FCC Chairman Ajit Pai on Why He's Rejecting Net Neutrality Rules - Reason.com: If left in place, however, the Title II rules could harm the commercial internet, which Pai described as "one of the most incredible free market innovations in history. Companies like Google and Facebook and Netflix became household names precisely because we didn't have the government micromanaging how the internet would operate," said Pai, who noted that the Clinton-era decision not to regulate the Internet like a phone utility or a broadcast network was one of the most important factors in the rise of our new economy.

Companies like Google (excepting Google Fiber's now defunct venture into fiber to the premise service), Facebook and Netflix aren't network providers. Consequently, they don't face the high costs associated with building and operating telecommunications infrastructure serving homes, businesses and institutions that deters market competition and promotes market failure.

Ajit Pai: The funny thing about that is because it's precisely because the phone company was a slow moving monopolist. That's exactly the point we're trying to make. These rules, Title II rules were designed to regulate Ma Bell, and the promise with Ma Bell, the deal with the government was, we'll give you a monopoly as long as you give universal service to the country. As a result, for decades, we didn't see innovation in the network we didn't see innovation in phones and it's when you have a competitive marketplace and you let go of that impulse to regulate everything preemptively, that you finally get to see more of a competitive environment.

Pai is engaging in the distortion of describing the natural monopoly market that telecommunications infrastructure is as a competitive market. Wishing it were competitive won't make it so. The cost barriers to entry are simply too high. Just ask Google Fiber. Or the 34 million Americans who have experienced sell side market failure, their homes and small business not offered landline connections capable of delivering high-quality voice, data, graphics and video, according to figures released by the U.S. Federal Communications Commission in 2016. Market failure is hardly an indicator of a robustly competitive market.

Pai's predecessor Tom Wheeler indulged in the misguided notion that telecom infrastructure could be competitive market, even though the FCC under his leadership adopted the 2015 Open Internet rulemaking predicated on regulating Internet service as a natural monopoly, classifying it as a common carrier telecommunications utility.

No FCC enforcement of universal service, anti-redlining provisions of Open Internet rulemaking

Cable, internet connection still not available for many: After 36 years of not being able to access standard internet and cable TV at their home in Deerfield, Gloria and Greg Kasprowicz recently had a Spectrum representative come to their door asking if they would like to have service. The couple, who live three miles from the local Spectrum headquarters on Firehouse Road, were excited when the representative told them they could get service through Spectrum, so they set up an appointment and waited anxiously.

But the date and time of the installment came and went, and no one showed up. So Gloria gave Spectrum a call to see what was going on and was told the company wasn’t able to service her house at this time. “What do you do at this point?” Gloria asked. “(Service) comes up from the bottom of the road, so the first couple of houses, I believe, have it. And it comes down the road to probably a half a mile up the road from us. There’s like a mile stretch — the last mile — for some reason they started from the top and came down and started from the bottom and came up.”

Technically under the U.S. Federal Communications Commission's 2015 Open Internet rulemaking that classified Internet protocol-based telecommunications as a common carrier telecommunications service, Spectrum would have to honor the Kasprowiczs' request for service. That's because the reclassification under Title II of the federal Communications Act includes that requirement as part of Title II's universal service and anti-redlining provisions. But despite adopting the rule, The FCC has never enforced those requirements. The current FCC chairman, Ajit Pai, is reportedly preparing to reverse the rulemaking.

Net neutrality hurts health care and helps porn, Republican senator claims | Ars Technica

Net neutrality hurts health care and helps porn, Republican senator claims | Ars Technica: Sen. Ron Johnson (R-Wisc.) agreed that net neutrality rules harm ISP investment and offered a lengthy analogy to explain why. Johnson said he wants to cut through the “rhetoric, slogans, and buzzwords,” before saying that enforcing net neutrality rules is like letting too many people use a bridge and ruin people’s lawns. Net neutrality rules, he said, also give pornography the same level of network access as remote medical services.

This is an unfortunate outcome of the misplaced obsession with the "net neutrality" aspect of the U.S. Federal Communications Commission's 2015 Open Internet rulemaking that erased the line between legacy and advanced telecommunications services by reclassifying Internet service as a common carrier telecommunications utility under Title II of the Communications Act. The obsession with net neutrality is so exaggerated that the term has become synonymous with the rulemaking.

The Open Internet rulemaking does properly require ISPs to treat all telecommunications traffic equally and without preference as to content. But with millions of Americans left offline and many still using circa 1994 dialup access that was state of the art when Bill Clinton was serving his first term as president, the higher value of the rulemaking is bringing Internet service under the universal service and anti-redlining requirements of Title II that have governed telephone service for decades -- and not debating whether the network should give priority to porn or any other information. Those requirements also comport with Metcalfe's Law, which holds a network is only as valuable as the number of subscribers on it.

U.S. requires crash federal telecom infrastructure program

Like other forms of infrastructure that were largely built out in the 20th century – such as transportation, energy, water and sewage – broadband is a foundation for economic activity across many sectors. But, unlike other potential infrastructure priorities, the public benefits of broadband could grow exponentially in the coming decades, as the nation is just beginning to realize the potential innovation and productivity gains from combining high bandwidth, low-latency connectivity with massive sensor, computing, and storage capabilities.

Unlike most other types of infrastructure, the nation’s digital infrastructure is largely corporate owned and generates revenues from paying subscribers. However, the private carriers who invest in broadband capex do not, in general, capture the full benefits of those investments (e.g., the positive externalities of the internet economy and the multipliers from increasing innovation and efficiency in adjacent sectors), so their investment levels are lower and slower than would be optimal for the country. (Emphasis added). The public-policy challenge, therefore, is to increase largely private capital flows to levels consistent with the potential public benefits of abundant, ubiquitous broadband without crowding out existing private sector investment.

The above is excerpted from a white paper by Paul de Sa, who formerly headed the U.S. Federal Communications Commission's Office of Strategic Planning and Policy Analysis. The paper was published on the U.S. Federal Communications Commission website last month. de Sa's point on the larger benefits of ubiquitous modern telecommunications infrastructure and its economic stimulus and multiplier effect mirrors my own, discussed in my recent eBook, Service Unavailable: America's Telecommunications Infrastructure Crisis.

I fully agree with de Sa's assessment that relying on the current dominant model of privately owned infrastructure where Internet Service Providers own the connections to customer premises as well as the services offered over them cannot support rapid and robust infrastructure construction to catch the nation up to where it needs to accommodate exploding bandwidth demand today and in the future. It's naturally limited by investment risk that comes with selling and servicing monthly subscriptions one customer premise at a time that constrains access to the needed many billions of investment capital and is prone to market failure. Until the United States explicitly recognizes the limitations of this model and treats telecommunications as the national infrastructure asset that it is and launches a crash publicly-financed telecom infrastructure initiative, the nation will continue to rapidly fall further behind as the 21st century advances.

As a footnote, de Sa's paper was retracted this week by his acting replacement, Wayne A. Leighton. (h/t to Steve Blum's blog).

FCC’s O’Reilly defends unacceptable status quo in U.S. telecom infrastructure

As federal policymakers consider addressing America’s telecommunications infrastructure deficit as part of a broad national infrastructure modernization plan, Federal Communications Commissioner Michael O’Reilly has written a blog post clearly intended to lower expectations and preserve an unacceptable status quo. It comes at a time when the United States by 2010 should have had modern, fiber optic-based telecommunications infrastructure deployed serving every home, small businesses and public institution instead of the legacy metallic telephone and cable company infrastructure he wants to preserve. Not to mention the national embarrassment of third world satellite Internet and dialup serving too many American homes where landline telecom connections – metallic or fiber – are nonexistent.

Instead of a robust federal telecommunications infrastructure program, O’Reilly seeks to protect the incumbent telephone and cable companies by preserving their emphasis on “broadband speeds” and the related and increasingly outdated, tail chasing debate over how much speed is sufficient. That fits nicely with the legacy incumbents’ outdated metal cable connections to premises since those lack the capacity of fiber to serve burgeoning bandwidth demand. In his points about geography and population density, O’Reilly also lends support to incumbents’ redlining market practices based on premise density in violation of the FCC’s 2015 Open Internet rulemaking making Internet a universally available common carrier telecommunications utility. That speed-based versus fiber to the premise (FTTP) metric comports with the FCC’s weak subsidy program that funds incumbents’ deployment of obsolete infrastructure on a par with circa 2005 DSL.

In sum, O’Reilly’s position is all about incrementalism and buying more time for these legacy incumbent providers. Public policymakers have already allowed them to buy a quarter century of delay as American has fallen ever further behind in the 21^st century, when modern telecommunications infrastructure is as critical as roads and highway were in the previous century. It’s time for that to end.

Finally, O’Reilly -- like former FCC Chairman Tom Wheeler before him --miscasts telecommunications infrastructure as a competitive market. If it were, there would be lots of service providers to choose from and sufficient capital to finance their ventures. The fact that there are not reflects simple microeconomics. High cost endeavors like infrastructure erect natural barriers to new providers. In telecommunications infrastructure, incumbents also exert a chilling effect with their natural monopolies since new providers are reluctant to take on the risk of overbuilding them – a primary reason for Google Fiber’s recent retrenchment.

AT&T official rejects comparison between today's telecom infrastructure gaps and electric power disparties of 1930s

Arkansas Cooperatives Apply Rural Electrification Model to Internet Access | Arkansas Business News | ArkansasBusiness.com: Cooperatives around the country, he said, are comparing providing broadband to bringing electricity to rural residents in the 1930s, calling it the next necessity for rural America. For-profit providers disagree with the rural electrification analogy. Ed Drilling, president of AT&T’s Arkansas Division, said internet is different because there was a guarantee in the 1930s that every resident would buy electricity and pay a usage-based price for it, while only 30 percent might buy broadband access and pay a fixed-rate price for it.

There is a clear parallel here to another failed market: individual health insurance. The Patient Protection and Affordable Care Act employs a similar guarantee -- the individual shared responsibility mandate that everyone have some form of health coverage -- in exchange for health plan issuers agreeing to provide coverage to whomever applies for it without medical underwriting. That is intended to remedy market failure on both the sell and buy sides by effectively forcing sellers and buyers together.

The AT&T official stops short of suggesting a requirement that every premise take service in exchange for halting current market practice by AT&T and other investor-owned telecom providers that cherry picks some areas while redlining others within their nominal service territories -- market conduct that's now illegal under the U.S. Federal Communications Commission's 2015 Open Internet rulemaking.

AT&T is correct that the electrical distribution infrastructure deficits of the early 20th century differ from the telecommunications infrastructure gaps of 2016. Back then, electrical distribution infrastructure was largely concentrated in urban areas, leaving entire rural regions unserved and in the dark. A major difference is today's Internet-based telecommunications infrastructure is deployed in rural areas but in a very granular and arbitrary manner that leaves one neighborhood or even part of a road or street unserved or poorly served while an adjacent one has decent access.

Doug Dawson's policy Rx for telecom infrastructure

A couple of telecom policy prescriptions from fellow blogger Doug Dawson that make a lot of sense:

A New Telecom Act? | POTs and PANs: Fund Fiber Everywhere. There was recently a bill introduced in Congress to add $50M to the RUS for rural broadband grants. That makes such a tiny dent in the problem as to be embarrassing. If we believe as a country that broadband is essential for our economic future, then let’s do what other countries have done and start a federal program to build fiber everywhere, from rural America to inner cities. I could write a week’s worth of blogs about how this could be done, but it needs to be done. 

Dawson's spot on here. Under current public policy (the U.S. Federal Communications Commission's 2015 Open Internet regulations), Internet telecommunications is considered a common carrier public utility with a universal access mandate like Plain Old Telephone Service (POTS) for decades beforehand. But de facto policy is to grant an effective franchise to dominant legacy telephone and cable companies to operate in limited "footprints," negating universal service. Dawson's also right on in criticizing pathetically underfunded and largely symbolic efforts to create a "public option" for telecommunications infrastructure. The United States can't do the job by setting aside millions for infrastructure that costs billions to construct and operate.

Stop Subsidizing Non-Broadband. It should be impossible for the FCC to provide any funding or subsidies to broadband connections that don’t meet their own definition of what constitutes broadband speeds.

Again, Dawson hits on a huge disconnect between de jure and de facto public policy on telecom infrastructure. It makes no sense to waste money on technology that's obsolete the day it's deployed such as the FCC's 2015 high cost area subsidy program rules allowing funding of technology that was state of the art in 2005. I would go even further than Dawson's proposal in suggesting abandoning the fixation with "broadband speed" altogether and instead defining all premise telecom infrastructure as fiber optic technology.

FCC Commissioner Pai's deeply flawed "Digital Empowerment Agenda"

Ajit Pai, a member of the U.S. Federal Communications Commission, has proposed a "Digital Empowerment Agenda" relying on tax incentives to promote telecom infrastructure investment. Pai's proposal is deeply flawed because it:

• Assumes tax breaks combined with regulatory streamlining will eliminate the massive telecom infrastructure disparities in the United States. Pai need only ask legacy incumbent telephone and cable companies (and Google Fiber) why he's misguided. They will tell him the primary impediment is the return on infrastructure investment is too far in the future in certain areas and neighborhoods to justify investment. Net present value is zero or below. That's a fundamental challenge of the investor-owned, vertically integrated business model to when it comes to infrastructure capable of supporting modern advanced, telecom services. Tax incentives and regulatory streamlining may help the math, but aren't alone going to make the business case for investment and eliminate disparities.
• Reinforces existing infrastructure disparities by offering incentives for landline infrastructure in some areas of the nation but only mobile wireless in others that is inadequate for premise service.

Legacy telcos want out from under FCC's Title II universal service requirement -- for both voice phone and Internet

CenturyLink, heir to old Bell system, wants to be freed from state oversight - StarTribune.com: CenturyLink’s petition is a “first-of-its kind request in Minnesota to deregulate basic local phone service following legislation enacted by the Minnesota Legislature in 2016,” according to a PUC filing by the state attorney general’s office. “The company’s request is premised on the alleged existence of adequate alternative means of communication,” the filing said. “Significant questions remain as to the existence of those alternatives on a universal basis — e.g. in all homes, in all parts of the state, etc.” 

The dominant telephone and cable companies dislike the U.S. Federal Communications Commission's Open Internet rules issued in 2015 that reclassified Internet as a telecommunications utility subject to universal service and anti-redlining requirements under Title II of the Communications Act of 1934. For now, however, it appears they have little to complain about in practical terms given the FCC's lack of enforcement of the regulation. The regulatory agency's posture is if a customer orders Internet service and is denied it and complains, we'll just look the other way.

An emerging question is whether the FCC and state public utility commissions will take the same position on telephone service. Legacy telephone companies like CenturyLink also don't want to comply with the longstanding Title II universal service mandate requiring voice telephone service be provided to all customer premises in their service territories that order it.

For both voice and Internet service, the reason for the resistance is the same. It would require investing billions of dollars on fiber to the premise infrastructure to replace old metallic outside plant -- billions the legacy providers lack. Ditto newcomers like Google Fiber. There just isn't adequate economic capacity among investor owned providers to address America's telecommunications infrastructure deficit.

Yet another silly "broadband mapping" project

FCC Plans to Map Broadband Access to Aid Chronic Disease Care: The new mapping tool aims to continue this mission by identifying gaps in connectivity at the neighborhood level, highlighting opportunities for improvement, and giving community coalitions the data they need to form new partnerships and tailor their activities to their unique needs. (Emphasis added).

Yet another useless, going though the motions "broadband mapping" project. The United States would have had fiber connecting every home, business and institution in place by 2010 had it done the proper planning and construction starting a generation ago. Today, very few areas of the nation are fully fibered. The opportunity for improvement is most everywhere. A map isn't needed to illustrate that.

Political talking points can't trump the microeconomics of residential telecom market

Tennessee Study Shows State Remains A Broadband Backwater Thanks To AT&T Lobbyists, Clueless Politicians, And Protectionist State Law | Techdirt: "Norris, who said he remains wary about municipal broadband based on the failure of Networx in his district near Memphis, said he hopes the push for more broadband is not an excuse for bigger government. Sen. Mark Green, R-Clarksville, vice chairman of the Senate Commerce Committee, also expressed concern about allowing government-owned utilities like EPB to compete with private firms such as AT&T or Comcast. "We want to look closely at this study, but in general, I am not for government and business competing in the marketplace," he said.

Carrying the water of the legacy telephone companies, Green is painting a false dichotomy that went by the wayside in 2015. That's when the U.S. Federal Communications Commission adopted its Open Internet rulemaking classifying Internet as a common carrier utility under Title II of the Communications Act.

Those rules implicitly recognize residential premise telecommunications service due to the high cost of building and maintaining infrastructure tends towards a monopoly market. By definition, competitive market forces are absent in such a market. It's another example of a politician trying in vain to trump microeconomic fundamentals with political talking points.

U.S. telecom infrastructure also needs a "public option"

Market forces have rendered telecommunications infrastructure in the United States a balkanized, crazy quilt patchwork. Investor-owned internet service providers naturally gravitate toward locations where there are high concentrations of households with healthy incomes that can afford their service offerings. Since those services are typically vertically integrated wherein the ISPs own the infrastructure, infrastructure is built only where it can generate robust profits over the short term. Everyplace else is left to twist in the wind, redlined off the internet because there is no infrastructure to deliver telecommunications services.

That has led to a deepening crisis as telecommunications continues its rapid shift to internet-based services as legacy telephone companies abandon their copper cable plants constructed many decades ago to support voice phone service.

A similar market dynamic exists in the payer side of health care. Like telecommunications infrastructure, it takes lots of capital to enter the market. Health plan issuers must have millions of dollars set aside to cover the cost of care of their members, particularly if costs exceed projections. They naturally will offer coverage in areas where there are plenty of premium paying members to generate those dollars. In less densely populated areas, those with fewer health care providers and lower population health status, health plan issuers have less incentive to offer a greater variety of plans.

President Barack Obama called out this circumstance in a recent article published in The Journal of the American Medicine Association (JAMA). The president noted that 12 percent of enrollees in states where the federal government operates state health benefit exchanges live in areas where they can choose from among only one or two health plan issuers. For such areas, Obama suggests policymakers revisit the concept of a government operated health plan – the so-called “public option” – that was jettisoned leading up to the enactment of the Patient Protection and Affordable Care Act in 2010. Obama’s call for taking another look at government-operated health plans serving the individual and small group markets comes as one of the law’s mechanisms designed to ensure greater access to coverage -- consumer operated and oriented (CO-OP) health plans – is faltering with most co-ops undercapitalized and deemed insolvent. 

Given that some 34 million Americans are unserved by modern, internet-based telecommunications infrastructure capable of delivering high-quality voice, data, graphics and video to their homes and small businesses  according to figures released by the U.S. Federal Communications Commission in early 2016, it’s also time for policymakers to seriously consider a public option for telecom infrastructure.

In my recent eBook, Service Unavailable: america’s Telecommunications Infrastructure Crisis, I propose the formation of a government chartered 501(c)(1) nonprofit, the National Telecommunications Infrastructure Agency, to engage in a crash program to build modern fiber to the premise telecommunications infrastructure connecting all American homes and businesses. That’s where America needs to be in the 21^st century. Market forces are not up to fully accomplishing the job or as rapidly as needed.

Obama administration plays up mobile wireless, ignores 34 million Americans lacking modern landline premise telecom service

As the Obama administration winds down, it is declaring a hollow victory on telecommunications infrastructure, playing up mobile wireless technology while ignoring the plight of some 34 million Americans whose homes and small business that lack service capable of delivering high-quality voice, data, graphics and video, according to figures released by the U.S. Federal Communications Commission earlier this year.

Mobile wireless is also being termed by incumbent telephone companies as a technological transition from non-IP based services that supported legacy telephone, cable TV and early mobile wireless services to Internet protocol-based services. Problem is many of those aforementioned 34 million Americans are being left out of the transition since landline infrastructure isn't being modernized and built out to serve them. And as many observers have pointed out including here, mobile wireless service alone cannot meet the needs of homes and small businesses due to technological constraints and high cost.

Lacking specific sum, does Hillary Clinton's infrastructure modernization plan dedicate enough for telecom?

Connect allAmericans to the digital economy with 21st century Internet access.
Clinton believes that high-speed Internet access is not a luxury; it is a necessity for equal opportunity and social mobility in a 21st century economy. That’s why she will finish the job of connecting America’s households to the Internet, committing that by 2020, 100 percent of households in America will have access to affordable broadband that delivers world-class speeds sufficient to meet families’ needs.

Hillary Clinton's Infrastructure Plan: Building Tomorrow's Economy Today

Per the above item from her campaign website, presumptive Democratic presidential nominee Hillary Clinton is proposing universal Internet access that's currently required under the U.S. Federal Communications Commission's 2015 Open Internet rulemaking classifying Internet as a common carrier telecommunications (versus information) service.

What's new is Clinton's proposed federal funding programs to help finance the necessary infrastructure to make universal service a reality that would dedicate $275 billion over five years for infrastructure investment. A national infrastructure bank seeded with $25 billion would leverage private capital to generate an additional $225 billion in direct loans, loan guarantees, and other forms of credit enhancement along the lines of what Susan Crawford suggested earlier this year, renewing and expanding the Obama administration's Build America Bonds program. Crawford correctly asserts that there are boatloads of private capital sitting on the sidelines seeking better returns that could be leveraged to undertake the long delayed task of modernizing America's telecommunications infrastructure with fiber to the premise for the Internet age.

The caveat here is Clinton's funding proposals cover all infrastructure modernization needs, including transportation, energy and water systems, constituting an "infrastructure gap" that her campaign notes runs in the trillions of dollars. No specific sum is earmarked for telecom infrastructure. Without that specific dollar amount, the question is will there be enough for it?

Also concerning is Clinton defines telecom infrastructure not in terms of the infrastructure itself, but rather in vague terms of "world class" connection speeds. Connection speed is how the legacy telephone and cable companies define their Internet-based telecom services. It's a backward rather than forward-looking perspective and is central maintaining a paradigm of constrained "broadband" bandwidth that in turn supports high prices and minimal investment in modern infrastructure such as fiber to the premise (FTTP).

Kovacs is right: FCC reclassification of Internet as telecommunications service creates uncertainty. And it's about time.

Kovacs: D.C. Circuit's net neutrality ruling poses danger to edge providers - FierceTelecom: The D.C. Circuit's affirmation of the FCC's Open Internet Order creates enormous uncertainty for companies in all parts of the internet, not just for access providers. It invites edge providers to contort their services to attempt to evade classification under Title II. Thus, it threatens innovation and investment throughout the internet ecosystem.

So writes Anna-Maria Kovacs, a financial analyst and consultant affiliated with the Georgetown Center for Business and Public Policy. Kovacs has a valid point. Classifying Internet as a telecommunications service under Title II of the Communications Act is a major shift in regulatory policy. But the real uncertainty was sown by the FCC in 2002 when as then-FCC Commissioner Michael Copps recently noted, the FCC chose to classify Internet service as an information rather than telecommunication service.

How so? At that point in time, the Internet was well along the way toward becoming a de facto telecommunications service and on a global scale. Yet the 2002 FCC turned rolled the calendar of progress back a decade and kept it there for 13 years until the FCC reclassified in 2015. That created a enormous collision between the natural progression of telecommunications and federal regulatory policy.

Of course that's going to foster uncertainty for legacy telephone and cable providers and disrupt their business models based on the 1990s strategy of selling "broadband" as a premium add on to legacy voice telephone and cable service. That strategy can still be seen in 2016 as they and other ISPs continue to market "broadband" rather than telecommunications service with price tiers tied to bandwidth.

FCC brings Internet under Lifeline program – but without universal service obligation

The U.S. Federal Communications Commission has issued a final rulemaking bringing Internet service under the Lifeline program established in 1985 requiring discounted telephone service for qualifying low-income households.

However, under the final rule, incumbent telephone companies are not required to offer discounted Internet service to a Lifeline eligible low-income household requesting service in areas where the companies have not modernized and built out their plants to provide Internet service. That contravenes the FCC’s Open Internet rulemaking adopted in 2015 classifying Internet as a common carrier telecommunications utility under Title II of the Communications Act. Title II requires Internet service be provided upon reasonable request. The final rule also exempts telephone companies receiving FCC subsidies for universal service support in high cost areas from having to provide Lifeline Internet service.

We are sympathetic to ILECs’ (Incumbent Local Exchange Carrier) concerns about requiring them to offer broadband in Census blocks within their ETC designated service areas …where broadband services are not commercially available,” the final rule states. “In addition, for recipients of high-cost support, in those areas where the provider receives high-cost support but has not yet deployed a broadband network consistent with the provider’s high-cost public interest obligation to offer broadband, the obligation to provide Lifeline broadband services does not begin until such time as the provider has deployed a broadband network and is commercially offering service to that area.”

Despite the final rule’s contravention of the FCC’s 2015 Open Internet Rulemaking, the FCC employs Orwellian doublespeak in insisting it does not:

“Our actions today are consistent with the universal service goals promulgated by Congress. Congress articulated national goals in Section 254 of the Act that services should be available at “affordable” rates and that “consumers in all regions of the nation, including low-income consumers . . . should have access to telecommunications and information services.”