Biden administration’s delayed FCC appointments suggests telecom policy strategy overhaul in the works

Telecom policy wonks fretted and info tech press have scratched their heads for months over the Biden administration’s delay in fully staffing the Federal Communications Commission and naming a permanent chair. Affording the administration the benefit of the doubt, it’s likely the new administration has been taking its time developing a wholistic two-pronged telecommunications strategy.

Here’s how it might be playing out. The goal of the first part is to address the nation’s accumulated advanced telecommunications infrastructure deficits built up over the past two decades and bring robust connectivity to as many American doorsteps as quickly as possible. That element of the strategy is expressed in the administration’s “build back better” American Jobs Plan infrastructure initiative, now legislation pending in the House. It appropriates $42 billion to the states for advanced telecommunications infrastructure.

The second strategy prong would have a longer timeline with the goal of establishing a durable regulatory and subsidy regime to ensure Americans can get connectivity no matter where they live, with reliable service at affordable rates. It’s linked to the first prong: The infrastructure measure would require the FCC to conduct an inquiry on universal service and make policy recommendations to Congress.

Given the broad and long-term implications of that component, the administration would naturally want to move at a deliberate pace in nominating FCC members as well as naming a permanent chair. The administration would want to ensure its nominees are fully on board with its broader strategy and able to implement it.

It’s also possible the administration is mulling over the respective roles of the FCC and National Telecommunications and Information Administration relative to advanced telecommunications as part of a broader restructuring that could end up as a legislative proposal later in the administration. The NTIA will develop rules and oversee the telecom infrastructure funding allocated in the pending infrastructure bill.

Americans have a strong public interest group on advanced telecommunications policy: themselves. And they’ve been lobbying hard for two decades.

It has been postulated that America’s advanced telecommunications infrastructure deficits are largely attributable to the lack of public interest representation in public policymaking. There’s no equivalent of the Sierra Club for environmental policy in the case of telecommunications policy as Christopher Mitchell, Director of the Institute for Local Self Reliance’s Community Broadband Networks Initiative, observed in a recent Background Briefing with Ian Masters (@10:18).

That’s not entirely true. For years, Americans have been barraging their elected representatives at all levels of government with complaints and pleas for action to remedy lack of connectivity, high costs and poor customer service. When people are vexed to see neighbors just down the road or around the bend with landline connections but not available at their address and don’t get a satisfaction from providers, their next calls are often to their elected representatives and the news media. It’s been going on two decades now. It began in the early 2000s when DSL service didn’t quite extend to their homes and calls to telephone companies for connections were rebuffed or service promised “soon” that never arrived as the years crept by. Meanwhile, many were forced to turn to substandard, poor value wireless options.

During the COVID-19 pandemic and accompanying public health measures that turned homes into offices, classrooms and medical clinics, their predicament grew more dire and the calls to elected representatives for action more desperate as household members dealt with sluggish, unreliable and costly connectivity. In 2020, some elected representatives noted the subject had become the top issue in constituent communications with their offices.

When people don’t see their situations improving year after year despite their petitions to elected officials and only lip service from them, they naturally begin to wonder if they are really being heard. They grow disillusioned and angry and receptive to corrosive political messaging that the “system is rigged against them.”

A reinforcing perception that has become something of self-fulfilling prophecy is the big telephone and cable companies are the only voices that truly count. People can petition their elected representatives all they want, but their supplications don’t really mean anything in the end because the companies will always get their way and investors’ interests outweigh those of the public. It’s a variation on testimony by the then president of General Motors at a 1953 Senate hearing suggesting that what’s good for GM is good for America.

The comparison doesn’t apply to AT&T and Comcast today. While most Americans could buy an affordable car in the 1950s, many cannot get a landline advanced telecommunications connection at most any price or at an affordable monthly rate for those that can.

Federally backed credit facilities needed to fund fiber expansion

The Infrastructure Investment and Jobs Act passed by the Senate provides a strong infusion of grant funding for fiber advanced telecommunications infrastructure builds. Particularly for public and consumer cooperative owned fiber distribution infrastructure connecting homes, businesses and institutions. As President Biden suggested when he put forth his outline for the bill as the American Jobs Plan, building this critical infrastructure to reach all premises is more likely to occur when funding prioritizes networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives. Providers Biden noted, with “less pressure to turn profits and with a commitment to serving entire communities.” With that reduced financial burden and tax-exempt status, these entities can make funding go further than legacy telephone and cable companies.

Grant funding under the bill is a kick starter. More money will be needed given the high capital as well as operating costs involved. That’s where federal government-backed credit facilities could prove most useful while at the same time encouraging the use of fiber. It’s “future proof” technology as called for in the American Jobs Plan and has a life span of decades, corresponding to long term loan payback periods. The use of credit facilities is also more likely to appeal to fiscal conservatives than grant funding.

The Infrastructure Investment and Jobs Act would give tax exempt status to state issued bonds used for telecom infrastructure. But the bill language limits their use to areas where more than half of addresses that would be served in a census block group lack access to throughput that later generation DSL or fixed terrestrial wireless can provide. That’s not fiber, potentially leaving some premises with outdated, inadequate and poor value options.

Separate legislation pending in the House but thus far not advancing, H.R. 7302, would provide for low cost loan term loan guarantees and lines of credit for advanced telecommunications infrastructure administered by the federal Department of Commerce. Long term loans could cover up to 49 percent of capital costs and lines of credit up to 33 percent. The Department of Commerce would select eligible projects in areas lacking access download speed of at least 100 megabits per second and upload speed of at least 20 megabits per second and with latency that is sufficiently low to allow real-time, interactive applications. That could potentially rule out areas served by existing cable TV providers. While open access networks are specifically preferred under the bill language, fiber is not per a “technology neutrality” provision.

Localities, consumer utility coops could take default lead role in future distribution fiber construction

The United States continues to lack a unified advanced telecommunications infrastructure policy framework 25 years after the enactment of the Telecommunications Act of 1996. The law did not set forth standards governing physical infrastructure deployment. It merely directed the Federal Communications Commission to monitor the progress of the availability of advanced telecommunications. The FCC opted to measure that progress based on a sampling of throughput – not by the infrastructure being built to deliver it -- as advertised by providers in a given ZIP Code or census block and reported annually to the FCC.

Throughout most of this period and currently, the FCC chose to treat Internet delivered services as optional information services like those that existed in 1996 -- e.g. CompuServe and America Online -- instead of a telecommunications utility with a universal service mandate. Consequently, there was no regulatory incentive for telephone companies to reach all addresses within their service territories or to upgrade their legacy copper cable plants. They instead opted to provide DSL delivered services over copper only to homes that were technically serviceable due to DSL’s limited range. Seeing opportunity with the slow walking of fiber by telephone companies, cable companies revamped their coax cable networks to deliver IP services within their limited franchise “footprints.”

While large legacy telephone and cable companies are now the dominant providers, they are constrained by business models averse to capital investments. They have loads of debt on their balance sheets and investors expecting short term gains and dividends incompatible with the high costs and long term horizon of infrastructure investments. All of these factors led to only about a third of all American homes having fiber connections as the third decade of the 21st century begins.

Several hundred local governments and electric cooperatives stepped into the gap and have and are building fiber infrastructure. The question going forward is how these relatively small scale, disparate deployments created out of necessity will fit into the larger scheme going forward and their role in bringing fiber to every American doorstep. It’s a policy question inherent in the Infrastructure Investment and Jobs Act passed by the Senate this month.

The legislation would allow states to make the initial determination by giving them jurisdiction over how $42 billion allocated in the bill for infrastructure grants is spent, with oversight by the National Telecommunications and Information Administration. Local governments and cooperatives would also help decide themselves since they would have to put up a 25 percent match for new infrastructure. With the structural business model challenges facing the large legacy telcos and cablecos, localities and cooperatives could move into a default leadership position. One off grants can’t remedy the incumbents’ ongoing structural limitations.

While the bill allows states to determine where the funding goes for distribution infrastructure, it authorizes states as well as a broad range of eligible entities to seek grants with a 30 percent match to construct critical transmission or “middle mile” infrastructure. That component of the nation’s advanced telecommunications infrastructure is growing increasingly crucial to support the growth of fiber distribution infrastructure and the resultant bandwidth demand the legislation will spur if enacted. Commercial entities that already own most transmission infrastructure would likely be the primary recipients.

Biden administration telecommunications policy could move U.S. toward universal fiber connectivity

The Biden administration’s telecommunications policy points toward the goal of bringing fiber connections to nearly every American home, recognizing policy put in place 25 years ago with the 1996 Telecommunications Act will not achieve that objective with two thirds of homes still served by obsolete copper telephone lines in 2021.

That goal is not explicitly stated in the Infrastructure Investment and Jobs Act passed by the Senate this month, calling into question the administration’s “build back better” pledge. Many observers including this one viewed that as a capitulation to incumbent telephone -- and particularly cable companies -- and their legacy metallic delivery infrastructures. However, as noted here, the legislation contains language favoring fiber that would be subsidized with $42 billion appropriated to the states should the measure become law. Additionally, the administration is on record as favoring “future proof” infrastructure – essentially fiber – along with universal service.

The infrastructure bill would direct the Federal Communications Commission to convene a proceeding to determine how to achieve universal service and to recommend Congress expand universal service “if the Commission believes such an expansion is in the public interest.”

However, the administration in a July 9, 2021 executive order encouraged the FCC to reinstate its 2015 Open Internet rulemaking that classified Internet protocol delivered services as telecommunications and subject to Title II of the Communications Act of 1934. As such, the services would be regulated as a common carrier utility and a universal service mandate placed on providers that would be required to honor reasonable requests for connections.

While the order is a strong suggestion and not administrative law at this point, the administration can almost certainly implement it when it nominates a candidate to fill the current vacancy on the FCC panel. The administration would most likely select a nominee inclined to implement the order and reinstate the Title II-based rulemaking.

That would set the stage for a policy debate on universal service in the Senate confirmation process. The nominee would conceivably be asked at their confirmation hearing where they stood on universal service considering the Senate’s version of the infrastructure bill would require the FCC to conduct an inquiry on universal service and policy recommendations to Congress.

If the administration is successful in seating a nominee inclined to reinstate the 2015 Open Internet rulemaking, the FCC could preempt Congress on the issue. That is unless Congress chooses to act expeditiously considering the FCC has been unable to conclusively determine whether IP-based services are telecommunications or information services as per their current classification under Title I of the Communications Act.

The significant funding that would be allocated to states by the infrastructure bill as well as that currently provided by the American Rescue Act would provide a sizable initial infusion to help cover capital costs in high-cost areas in order to help attain universal service. However, with a universal service requirement under a Title II regulatory scheme, there would need to be a viable ongoing high-cost area subsidy for both capital and operating costs that does not currently exist as it does for legacy voice telephone service. In the absence of a permanent high-cost subsidy mechanism, federal and state policymakers have defaulted to piecemeal one time grants.

Knowledge workers relocating to exurbs will encounter suboptimal advanced telecom infrastructure

Fringe outlying communities of major metropolitan regions were prized for their extreme privacy or more affordable housing before the pandemic, but were typically much less wealthy than the denser cities and affluent suburbs they surrounded.

The Great Reshuffling will likely make these far-flung exurbs richer and denser. The median household income across U.S. exurbs was $74,573 as of 2019, according to data from The American Communities Project. That likely ticked up over the last year as city dwellers in major job centers such as San Francisco and New York relocated to exurbs for the same or similar salaries.

The ‘Great Reshuffling’ Is Shifting Wealth to the Exurbs - WSJ

This population shift has implications for advanced telecommunications infrastructure that's often spotty in the exurbs. Knowledge workers relocating to the exurbs will often be in for a shock over the lack of fiber to the home connections where exurbanites are forced to get by with first generation DSL over aging copper phone lines or wireless connectivity.

“I’m done playing the game. It's time for blunt, factual reality. No more promises not kept."

In Clark County, in central Wisconsin, economic development director Sheila Nyberg has proposed a partnership with an electric cooperative to get broadband to the entire county. Revenue from the system would be used to pay off a startup loan, similar to the way electricity was brought to the countryside nearly a century ago. Clark County is one of the least connected counties in the state, and it showed when schools closed for COVID-19 and students didn’t have home internet access. 

For more than a decade, Nyberg said, federal money has gone to large internet service providers that have done little to improve coverage in areas where it's needed the most. 

"I'm tired of pretending that the big dog is the best dog in the room," she said. Nyberg said some type of local control, such as an electric cooperative, would be a better alternative. “I’m done playing the game," she said. "It's time for blunt, factual reality. No more promises not kept."

https://www.jsonline.com/in-depth/news/2021/08/12/u-s-needs-future-proof-approach-getting-high-speed-internet-all-broadband-wisconsin/7298391002/

Nyberg's comment raises an excellent point. Despite incumbents claiming to have invested upwards of $80 billion annually to improve America's advanced telecommunications infrastructure supplemented by billions in government grants and subsidies, it's still not enough to bring fiber connections to most every American doorstep. As Nyberg states, it's time for a new paradigm of publicly and consumer cooperative owned infrastructure. Investor owned providers have clearly shown they are not up to the task.

Explicit fiber to the prem FTTP telecom infrastructure standard absent in infrastructure measure. But it contains language favoring it.

The Infrastructure Investment and Jobs Act passed out of the Senate this week falls short of the Biden administration’s “build back better” pledge by failing to establish an explicit fiber to the premises FTTP advanced telecommunications infrastructure standard to replace outmoded 20th century copper telephone lines.

Instead, the bill establishes a throughput-based service level standard inconsistent with the administration’s goal of building “future proof” telecom infrastructure. It’s a much-needed objective. The past four decades have shown that throughput-based standards tend to become quickly outdated as end user bandwidth demand inexorably grows. Only fiber infrastructure has the headroom to accommodate that demand well into the future.

However, language in the legislation indirectly favors fiber. It requires the National Telecommunications and Information Administration prioritize infrastructure funded by $42 billion of grants to states to “ensure that the network built by the project can easily scale speeds over time to meet the evolving connectivity needs of households and businesses.” Not a direct fiber infrastructure specification. But a good operational definition that could influence the NTIA to promulgate rules on funding eligibility and awards that favor a de facto fiber standard.

Additionally, the measure defines a “reliable” service standard that fits well with fiber. It’s “service that meets performance criteria for service availability, adaptability to changing end-user requirements, length of serviceable life, or other criteria, other than upload and download speeds, as determined by the NTIA in coordination with the Federal Communications Commission. (Emphasis added) It would also require the NTIA to develop and incorporate best practices “for ensuring reliability and resilience” of the infrastructure funded by the measure.