Infrastructure measure pending in Senate would allow incumbents to challenge proposed projects

Similar to the Obama administration’s American Recovery and Reinvestment Act of 2009, the massive omnibus infrastructure pending in the Senate would allow incumbent providers to challenge the award of federal grant funds for advanced telecommunications infrastructure.

A provision of the bill requires states receiving the funding to establish procedures governing challenges by service providers as well as local governments and nonprofits. The challenges could be filed contending locations within a proposed project area fail to meet the project requirement of at least 80 percent of premises being “unserved” (“reliable” service with a minimum throughput of 25 Mbps/3Mbps (“unserved”) and 100 Mbps/20 Mbps (“underserved”) with latency sufficient to support real-time, interactive applications.

As a practical matter, the provision would also potentially allow wireless providers offering at least the “unserved” service level – regardless of end user cost -- to challenge a proposed project that would deliver service to prems over fiber or coaxial cable infrastructure where none presently exists.

The provision is apparently included to address concerns by incumbents that proposed projects would “overbuild” within their service areas – a key concern in heavy incumbent lobbying of the bill. The measure authorizes the National Telecommunications and Information Administration to reverse state determinations of challenges and to modify the challenge process.

Big cable’s influence, potential benefit reflected in infrastructure measure pending in Senate

The influence of big cable TV companies like Comcast and Charter Communications is reflected in the massive omnibus infrastructure bill pending before the U.S. Senate. A major indication is the proposed legislation’s requirement that some $42 billion in grant funding it would allocate to state governments be used to provide IP connectivity of at least 100 Mbps down and 20 Mbps up with latency that sufficient to allow “reasonably foreseeable, real-time, interactive applications.” That’s perfectly aligned with the current throughput offered by cable TV providers over hybrid coaxial copper and fiber cable and the Data Over Cable Service Interface Specification (DOCSIS).

The measure’s emphasis on prioritizing funds to high-cost areas with poor connectivity options points to largely benefit big cable. Consider cable TV’s history. It developed in the 1950s to serve rural areas too distant to reliably receive over the air signals from TV transmitters in cities, serving homes with cables distributed from signal amplifiers connected to large “community antenna” arrays to boost the signal.

If the bill becomes law, cable lobbyists could mount a full court press on statehouses like that of the mid-2000s when they worked to shift authority over their local municipal franchises to state public utility commissions in order to avoid universal service demands from the locals. The case they might present to policymakers: give us the funds to build out our footprints in our traditional rural areas without good connectivity just as they lacked access to urban TV signals in the past.

Cable would benefit by attaining a monopoly position in more sparsely populated rural and exurban areas where telephone companies have abandoned their legacy copper telephone lines and have not offered residential services delivered over fiber. There, cable would not have to share a duopoly market with telephone companies in more densely developed areas where the telcos are offering symmetric fiber services instead of cable’s asymmetric 100/20 Mbps throughput.

Infrastructure measure pending in Senate would condemn America to another generation of waiting for replacement of legacy copper telephone lines with fiber, universal service.

The U.S. Senate made public enabling legislation for the Biden administration’s American Jobs Plan infrastructure initiative this week, titled the ‘‘Infrastructure Investment and Jobs Act.” The bill is disappointing insofar as it fails to define a physical fiber standard for advanced telecommunications infrastructure. Instead, it prioritizes funding telecommunications infrastructure that “can easily scale speeds over time to meet the evolving connectivity needs of households and businesses.” That’s generally viewed as fiber – the “future proof” goal expressed in the American Jobs Plan. But it’s not explicitly referenced in the proposed legislation.

The measure continues the incrementalist doctrinaire view put in place by the 1996 Telecommunications Act that boosting throughput is the paramount policy goal. Furthered by the faulty economic reasoning that market competition despite telecommunications infrastructure being a natural monopoly like other utilities will help achieve that objective. The asymmetric throughput-based standard as stated in the measure retains the classic 1990s-era delineations of premises as being served, underserved and unserved relative to throughput offered by providers serving them. 

That reflects a collective cognitive bias known as anchoring. Dialup -- state of the art connectivity in the 1990s -- is the anchor. All progress is measured by improvements from the anchor as higher "broadband speeds." That cognitive bias has set the tone for the entire telecom policy debate rather than infrastructure. It's thus no surprise to see a nominal infrastructure bill frame the issue as one of supporting higher throughput in areas where it's lagging.

Should the bill become law as written, it will condemn the United States to another generation of waiting to modernize its legacy copper telephone lines built for analog voice telephone service in the 20th century to fiber to support internet protocol-based digital services in the 21st century.

These are some of the other major problems with the proposed bill language:

The proposed legislation does not affirmatively prioritize publicly and nonprofit owned infrastructure as originally envisioned in the American Jobs Plan, allowing investor-owned entities that operate with an inherent conflict of interest between investors and consumers to apply for infrastructure projects. The projects would be funded with $42 billion allocated to state governments with a 25 percent match.

In one of the biggest missed opportunities for a massive infrastructure measure, the bill does not achieve advanced telecommunications universal service as was attained with landline voice telephone service. The bill would require the U.S. Federal Communications Commission to convene a proceeding to determine how to achieve universal service and to recommend to Congress expand the universal service “if the Commission believes such an expansion is in the public interest.”

Funding eligibility is prioritized to “unserved areas,” defined as those where at least 80 percent of premises are unserved – those not having any providers offering service with throughput of at least 25 Mbps down and 3 Mbps up. The offer of service is open to gaming by fixed wireless providers who could conceivably claim offers of service meeting or exceeding the throughput minimum but at exorbitant rates.

“Underserved” areas – defined those lacking access to “reliable broadband service” with no providers offering service with throughput of at least 100 Mbps down and 20 Mbps up are secondarily eligible. For both categories, funding eligibility is limited to areas where least 80 percent of premises are unserved or underserved. Neighborhoods failing to meet the 80 percent threshold would be out of luck and continue to potentially suffer redlining by incumbent providers.

The determination of whether an area is “underserved” is based on maps of throughput offered by providers maintained by the FCC. The maps have proven notoriously controversial and inscrutable and subject to provider abuse of overstating service offerings. The FCC is in the process of revising the methodology to improve them, but that process will likely generate further disagreement and delay that serves only the interests of legacy incumbent providers.

Telecom component of legislation implementing Biden administration's American Jobs Plan infrastructure initiative contains Title II-like universal service, anti-redlining provisions

Broadband internet is necessary for Americans to do their jobs, to participate equally in school learning, health care, and to stay connected. Yet, by one definition, more than 30 million Americans live in areas where there is no broadband infrastructure that provides minimally acceptable speeds – a particular problem in rural communities throughout the country. The deal’s $65 billion investment ensures every American has access to reliable high-speed internet with an historic investment in broadband infrastructure deployment, just as the federal government made a historic effort to provide electricity to every American nearly one hundred years ago.

The bill will also help lower prices for internet service by requiring funding recipients to offer a low-cost affordable plan, by creating price transparency and helping families comparison shop, and by boosting competition in areas where existing providers aren’t providing adequate service. It will also help close the digital divide by passing the Digital Equity Act, ending digital redlining, and creating a permanent program to help more low-income households access the internet.

The above is excerpted from a White House Fact Sheet issued today outlining the telecom infrastructure element of a legislative agreement with Congress to implement the Biden administration's American Jobs Plan. 

While the bill language hasn't been published, the fact sheet refers to a universal service nondiscrimination mandate like that contained in Title II of the Communications Act in the italicized portions. It also refers to what appears to be a separate bill -- The Digital Equity Act. The Act bars "digital redlining," defined as "discrimination by internet service providers in the deployment, maintenance, or upgrade of infrastructure or delivery of services. The denial of services has disparate impacts on people in certain areas of cities or regions, most frequently on the basis of income, race, and ethnicity." Title II requires providers honor all reasonable requests for service.

Noticeably absent from the fact sheet synopsis of the bill are references to nonprofit and publicly owned infrastructure, a stated preference expressed by the administration when the American Jobs Plan was unveiled earlier this year.

Report: Draft legislation implementing telecom component of Biden administration infrastructure initiative shuns fiber infra standard

 — The draft is likely to fuel renewed advocacy from consumer groups and anyone else hoping for ultra-fast fiber optic buildout, as it instead opts for lower minimum broadband speed thresholds (100 Megabits per second download over 20 Mbps upload would count as "underserved" for the $40 billion tentatively slated to go to the Commerce Department’s state grants, less than the fiber-focused minimums some Democrats wanted). 

https://www.politico.com/newsletters/morning-tech/2021/07/21/bidens-trustbuster-streak-continues-with-kanter-pick-796632?utm_source=sendgrid&utm_medium=email&utm_campaign=Newsletters

The asymmetrical 100/20 throughput vs. fiber distribution infrastructure standard is mirrored in a California budget bill enacted this week appropriating $2 billion in grant funding.

Purpose of public option advanced telecom infrastructure is to ensure access and affordability

The half a dozen or so large telecom companies that provide internet service to most homes and businesses in the U.S. today have for years “cherry-picked” neighborhoods to maximize their profits. Although they’re returning record dividends to investors, they’ve also been helping themselves to billions from the feds over the years. And what does the taxpayer get in return? The U.S. still lags behind other countries in Europe and Asia in broadband deployment. Talk about a “risky” investment of taxpayer dollars! This has led to market failure as most localities in the U.S. are served by monopolies or duopolies.

https://www.sltrib.com/opinion/commentary/2021/07/15/roger-timmerman-open/

Market failure in advanced telecom infrastructure is baked in because of high cost barriers to competitor entry and first mover advantage. As such, as Mr. Timmerman writes, it tends toward monopoly -- or duopoly at best. It's thus unreasonable to expect any meaningful degree of competition.

Public policymakers should think twice before describing public and consumer cooperative owned telecom infrastructure as envisioned in the Biden administration's American Jobs Plan as enhancing competition. Its essential purpose is to provide a public option to counter private market failure that exists in a natural monopoly market in order to ensure access and affordability.

Investor owned legacy telephone and cable companies complain public option infrastructure represents unfair competition. But as discussed, it is not intended to take market share from them. That's market competition. The better term is disruption of the status quo with only about a third of all American homes having access to modern fiber connections. And the disruptive goal is to ensure all Americans have affordable access when due to structural market issues that result in monopoly or duopoly, competitive market forces cannot.

Natural monopoly of telecom infrastructure fosters "capitalism without competition"

Biden added, “Let me be very clear: Capitalism without competition isn’t capitalism. It’s exploitation. Without healthy competition, big players can change and charge whatever they want and treat you however they want. And for too many Americans that means accepting a bad deal for things you can’t go without. So, we know we’ve got a problem, a major problem. But we also have an incredible opportunity.”

https://gizmodo.com/heres-whats-in-joe-bidens-sweeping-executive-order-on-c-1847262645

The problem is not all segments of the economy are competitive markets, defined as those having many sellers as well as many buyers with both sellers and buyers having relatively equal access to information on cost and quality. Telecommunications infrastructure because of its high costs of competitor entry, protracted return on investment and first mover advantage is one of those. It functions as a natural monopoly like other utilities. 

Many wish it to be a competitive market and offer more choices and lower costs. But that's unrealistic, wishful thinking. A presidential executive order cannot change the underlying economic structure. It won't end rent seeking market conduct by investor owned providers that tends to arise in natural monopolies -- capitalism without competition.

This is why fiber to the premise infrastructure owned by entities under less pressure to generate profits is needed as a public option since market forces cannot ensure it reaches every American doorstep at affordable costs -- a component of the Biden administration's proposed American Jobs Plan.  

Limiting publicly owned advanced telecom infrastructure to high cost areas isn't the answer to access and affordability challenges

Doug Brake and Alexandra Bruer of the Information Technology and Innovation Foundation write the excerpts below from an article contending local governments are ill suited to provide advanced telecommunications service.

However, municipal or otherwise nonprofit broadband should be limited to those areas that are legitimately high cost and do not support investment of more than one provider. Municipal broadband advocates often attempt to define broadband at unreasonably high speeds in an attempt to define away competition existing in the market. They know that many providers have no desire to provide broadband speeds far in excess of what the market actually demands, and so by providing networks with more capacity than is needed, they hope to make the case for municipal networks. While flat bans on any municipal broadband do not make sense, they should be reserved for narrow cases wherein market options are extremely limited and private providers are unwilling to provide service, even with subsidies offered.

Sounds sensible in theory. But advanced telecom infrastructure is very unevenly deployed and highly granular, making it difficult to define these high cost areas and attain the economies of scale the authors discuss with contiguous infrastructure. One need only glance at those crazy quilt, checkerboard "broadband maps" to see it graphically -- the accuracy of which are subject of continuous debate. 

High cost area subsidies proved effective for ensuring universal telephone service. However, high cost subsidies have historically not motivated investor owned providers to build advanced telecom infrastructure absent regulatory incentive to offer service to all premises requesting it (such as Title II of the U.S. Communications Act that governs voice telephone service) and better opportunities elsewhere that offer faster and higher return on investment such as mobile wireless.

Some neighborhoods deemed sufficiently profitable have fiber to the premises infrastructure while others adjacent do not. Or there may be fiber to the prem deployed for business customers but not for residential service. That's why publicly and consumer cooperative owned fiber passing every American doorstep is needed to ensure access and affordability.

There are variety of different models for what a municipality’s level of partnership with broadband providers can look like. If municipalities that believe they fit in that narrow category should generally avoid providing retail service, and instead provide an open-access fiber network wherein the retail service and the electronics are left to the private sector. In an open-access provider, municipalities offer the use of their broadband networks at wholesale for various providers to leverage in order to sell broadband services. In a retail provider model, a municipality both owns the broadband network and offers broadband services directly to customers. The government can take on the most static parts of the network—ideally providing just open conduit or dark fiber—and allow the private sector to continue to innovate with the electronics on either end.

This is clearly a superior role for the private sector instead of the current dominant model wherein investor owned providers own the infrastructure and must also regularly refresh the electronics that make it run. As the authors point it, the latter role is far more suited to the private versus public sector. The private sector can fulfill that function without having to own the infrastructure outright and battle continued public and regulatory pressure to build out fiber infrastructure to reach more homes and keep rates affordable.