Where high hopes of fiber telecom infrastructure collide with weak federal funding

Changes to RUS Broadband Loan Program Include Rural Gigabit Pilot - Telecompetitor: When President Obama spoke last week about reforms to the USDA Rural Utilities Service broadband loan program, he was referencing changes adopted in the 2014 Farm Bill, a USDA official advised in an email to Telecompetitor.

Joan Engebretson's report illustrates the wide gulf between the Obama's administration's aspirations for fiber telecommunications infrastructure America needs for the 21st century and the stark paucity of available funding under current federal programs to help finance this high cost endeavor.

Casey Peck, General Manager of the Kalona Cooperative Telephone Co. of Kalona, Iowa pointed up the gap in this opinion piece appearing in the Kalona News:

It seems the President’s objective is to encourage municipal construction of broadband networks, which would compete with existing providers.  The push to allow municipalities to construct broadband networks, which is prohibited by state law in 19 states but not in Iowa, will do little or nothing for the actual rural customers for which Obama claims to be concerned.

The fact is that most companies want nothing more than to roll out the next generation of broadband services, but simply do not have the cash flow to do so.  The biggest hurdle facing those consumers without high-speed internet services is provider’s lack of funding to get these services to the most remote customer in their areas.

Common carrier utility regulation appears a near certainty in 2015

Legacy incumbent telephone and cable companies have threated to sue the U.S. Federal Communications Commission if as expected the FCC follows President Barack Obama’s call to classify Internet services as a common carrier utility under Title II of the Communications Act. The incumbents hope the specter of prolonged litigation and uncertainty will give the FCC pause before it acts next month.

The problem for the incumbents however is even if they make good on the threat, it may not buy them the degree of uncertainty and delay they would like. Any litigation arising from the expected regulatory action by the FCC would likely be disposed of in relatively short order. The courts operate under a doctrine of judicial deference to how regulators interpret and apply statutory law such as the Communications Act. They are loath to put themselves in the place of regulators and second guess administrative rulemaking, reasoning the regulators and not the courts hold the requisite expertise when it comes to figuring out how to apply the finer points of statutory law. 

Possibly realizing this, the incumbents’ lobbying corps is implementing a backup strategy in Congress to amend the Communications Act to carve out Internet service on the grounds that it doesn’t function as a market monopoly – the underlying rationale for classifying it as a common carrier utility like telephone service. Demerits of that legislative rationale aside, that nascent effort also isn’t likely to be productive since even if passed it would face a likely presidential veto.

The outlook for 2015 is common carrier utility regulation of the Internet is coming and isn’t likely to be derailed.

21st century needs new regulation for a new generation of telecommunications services

A major contributing factor to the current crisis over how to regulate Internet-based telecommunications is the passage of time. Lots of it. It's been more than four generations -- 80 years -- since the United States enacted the Communications Act of 1934 regulating telephone service as a common carrier utility.

A 1996 update of the statute incorporated Internet services. But they were so new then regulators -- the Federal Communications Commission -- didn't consider them as a common carrier telecommunications service. Internet was an optional additional service, accessed by special connections made over slow dial up modems to specialized information services such as CompuServe and America Online. Now two decades later, it serves as a all purpose telecommunications service providing data, voice and video over Internet protocol (IP).

In a little more than a month's time, the FCC will decide whether to regulate IP services as a common carrier utility under Title II of the Communications Act. Indications are it will do so -- most likely for landline delivered, premise Internet service. Along with the designation come rules designed to ease and promote the construction of infrastructure to serve all premises and not just selected ones as is the case under the present regulatory policy.

Twentieth century legacy telephone and cable companies have built their business models based on the current policy, models that will be disrupted with the shift toward regulating the Internet as a common carrier utility that must be offered to all and not just some Americans.

But out of disruption comes business opportunity for a generation of new providers. The federal government should put in place meaningful technical assistance and funding -- and not just "funding leads" given the importance of Internet infrastructure -- to help the new Internet telecommunications providers of the 21st century become established and financially viable for the long term.

U.S. needs complete telecom infrastructure construction strategy, not minimalist incrementalism

The United States needs a comprehensive, holistic approach to ensure the construction of fiber optic infrastructure to provide robust Internet enabled telecommunications services in the 21^st century on a par with universal telephone service in the 20^th. The nation won’t achieve that standard in a timely manner by relying on incremental, one off builds.

While it’s laudable that some local governments have built or are planning fiber infrastructure in response to private sector market failure on the supply side (as spotlighted this week in Cedar Falls, Iowa by President Obama), these builds without significant and sustainable funding support cannot cumulatively provide the telecommunications infrastructure the nation needs and should have been planning at least two decades ago. As Steven S. Ross notes in his article in the November-December, 2014 issue of Broadband Communities, Bandwidth: Good for Rural Residents, Good for the Country, these localities that have or are putting in place modern telecommunications infrastructure participate in the same economy as do others lacking it.

New York State’s initiative announced this week it would dedicate $500 million of a $4.5 billion windfall arising from the settlement last year of prosecutions of alleged misconduct by banks and insurance companies to subsidize fiber construction. That’s one time, opportunistic funding that will help construct fiber in areas where it doesn’t exist. But it addresses only a small fraction of the state’s significant need as shown by the accompanying map. The money will quickly be exhausted with no plan fiber up the rest of the Empire State, reinforcing existing disparities. Similar underfunded initiatives exist in other states. Incrementalism allows policymakers to claim small, short term victories but leaves incomplete networks in its wake over the longer term.

Other examples of incrementalism are the continuing circa 2002 debate over “broadband speeds” -- which grows increasingly irrelevant in an age of fiber optic-based telecommunications technology -- and “net neutrality.” Net neutrality – the principle that all Internet traffic be given equal priority – is meaningless without robust network service in the first place. A more important principle than net neutrality is Metcalfe’s Law. It holds that the value of a communications network increases as the number of connections to the network grows. With so many Americans not offered fiber Internet service, the U.S. has a long way to go to recognize the full value of Metcalfe’s Law. It won’t get there with piecemeal incrementalism.

Study finds relationship between recent U.S. settlement patterns and telecom services

The November-December 2014 issue of Broadband Communities includes primary research finding a correlation between population trends and the robustness of telecommunications services. The study covers the period of April 2010 to December 2013.

Editor-at-large Steve Ross, who conducted the research, notes his findings relate to a recent U.S. Commerce Department study showing the relative lack of robust Internet service in rural areas compared with urban areas. Examining census data, the Commerce Department study found for the first time in U.S. history, most rural counties lost population between 2010 and 2012.

Ross includes a couple of caveats on his research. He notes the broad urban/rural county classification used doesn't take into account that exurban counties often include some areas that are functionally urban and others that are functionally rural. He also cautions against drawing conclusions from the data as to whether the availability of strong telecommunications services attracts population and lack thereof drives out migration.

Given the relationship between robust telecommunications services and settlement patterns, Ross's research suggests that U.S. settlement patterns could strongly be influenced with the deployment of more robust telecommunications infrastructure in less populous areas of the nation. Especially given the fact that much of today's information and knowledge-based economic activity can take place most anywhere that infrastructure is available.

USTelecom makes case for Title II common carrier regulation of Internet

Consumers Continue Shift Away From Landline – Regulations Are Behind | USTelecom

This telecom industry article helps make the case for regulating consumer Internet services as common carrier telecommunications services under Title II of the Communications Act. As the article notes, the existing common carrier regulations are designed for a bygone era of analog voice telephone service delivered over copper that is becoming increasingly outdated as landline technology shifts to fiber optic that can deliver voice and other services using Internet transmission protocols.