Big incumbent providers oppose public ownership of advanced telecom infrastructure, but happily accept government subsidies.

For years cable operators such as Comcast, Charter and Cox have fought hard against municipal broadband projects, always crying that it’s wrong for taxpayer dollars to compete against their private investments. But now, the competitive landscape is shifting. There’s a lot of taxpayer money available through government programs such as ARPA and most significantly through the Broadband Equity, Access and Deployment (BEAD) program.

https://www.fierce-network.com/broadband/comcast-does-public-private-broadband-projects-across-footprint?utm_medium=email&utm_source=nl&utm_campaign=FT-NL-FierceTelecom&oly_enc_id=6444G7875712B4A

This story lacks so much context it's misleading. Giving money to large incumbent ISPs like Comcast isn't truly a public-private partnership as it's described here and in other media but rather a government subsidy. 

What large incumbent providers historically oppose is government ownership; they are more than happy to accept government subsidies. Especially when there's no quid pro quo that they provide connections to all premises within a given local jurisdiction. 

Also lacking is transparency in the use of public funds. The story notes Comcast declined to say how much the project cost in total and how much, if any, Comcast spent for the project.

End of ACP could bring modfication of FCC Title II rulemaking to allow regulation of residential Internet services

The end of the Affordable Connectivity Act (ACP) sets the stage for the potential modification of the Federal Communication Commission’s recently adopted rulemaking classifying Internet protocol-based services as a common carrier utility under Title II of the Communications Act of 1934. The Biden administration encouraged the FCC to adopt the rulemaking in July 9, 2021 executive order to reverse a 2017 FCC rulemaking that classified IP services as lightly regulated information services under Title I of the statute.

While terming rate regulation “a hallmark of utility regulation,” the FCC’s rulemaking adopted April 25 forbears from giving state public utility commissions authority to regulate rates as they currently do for legacy voice telephone service. But it left the door open to do so in the future. “Although we adopt firm forbearance from all direct rate regulation, with respect to other provisions we forbear from here, we note that it also is within the Commission’s discretion to proceed incrementally,” the rulemaking notes.

The FCC could come under pressure from the White House to regulate rates after Congress rejected the Biden administration’s request to provide additional funding to extend the ACP to provide a $30 monthly subsidy to low-income households and $75 for those on tribal lands. The modification might particularly apply to rates for residential landline delivered services over copper, coaxial cable and fiber in order to reduce low income households' reliance on costly mobile wireless services, referred to as "smartphone dependency."

Such a move might be aimed at scoring points with voters in this election year as President Biden faces a tough re-election bid. It could also occur early in a second Biden term if the president is re-elected in November. Politically, it would align with voter sentiment that their interests have been subordinated to shareholders and lobbyists of large corporations, a "system is rigged against you" theme that was prominent in the 2016 presidential campaigns of Donald Trump and Bernie Sanders.

Key opponent of ACP extension claims subsidy will inflate prices

A primary failure of U.S. advanced telecommunications policy and its fraught evolution is fostering a commodity market of “broadband” bandwidth. Its roots date back to the early 1990s and sluggish dialup connections over screeching modems. Faster, always on connections like DSL were dubbed “broadband” or “high speed Internet.” Going on three decades later, the terms are used to describe a commodity market of bandwidth sold in price tiers. Low “broadband speed” tiers are bargain basement offerings while the higher tiers offer luxury connectivity for those who can afford it.

This marketplace of broadband bandwidth developed due to the failure to timely modernize legacy twisted pair copper voice telephone delivery infrastructure to fiber. Legacy metallic delivery infrastructure like cooper and coaxial cable has far more limited carrying capacity and upgradability than fiber. Consequently, bandwidth per customer must be rationed. 

That drives what economists call price elasticity. Higher prices for higher bandwidth drives down bandwidth demand and vice versa, thus preserving limited bandwidth. This dynamic between price and demand is behind opposition to expanding the Affordable Connectivity Program (ACP), now expired temporary subsidy for low-income households:

Opponents remain unconvinced of the ACP’s benefits, however. In his opening statement before a Senate subcommittee last week, Republican Sen. Ted Cruz, the Senate Commerce Committee’s ranking member, criticized the FCC’s recent survey, which found that only 22% of households who have benefited from ACP did not have broadband. He argued, alongside witness Paul Winfree, the president and CEO of the Economic Policy Innovation Center, that the ACP has had an inflationary effect on internet prices.

“History has shown that when the federal government starts subsidizing demand in higher education and agriculture, the subsidy gets capitalized, and prices go up,” Cruz said. “After all, why would corporations ever leave free money on the table? Well, those who received the subsidy may realize that immediate cost reduction, the market prices rise for everybody else. This rising price creates a call for more subsidies and higher taxes to fund those additional higher subsidies and eventually a government takeover of the internet to provide it for free.”

https://www.route-fifty.com/infrastructure/2024/05/only-three-weeks-go-lawmakers-weigh-ways-save-federal-internet-subsidy/396339/

Cruz is essentially arguing subsidizing bandwidth as a commodity creates demand by lowering the price for bandwidth. Price elasticity holds that in turn will boost demand which Cruz says will encourage Internet Service Providers (ISPs) to increase rates for unsubsidized households in demand-pull inflation.

Publicly owned infrastructure: Lowering the cost bridge rather than raising the affordability river with household subsidies

Paul Winfree, president and CEO of the Economic Policy Innovation Center, an economic policy think tank, testified that the ACP monthly subsidies have led to increased costs for everyday consumers, as Internet service providers simply raise their rates to capture as much of the subsidy as possible. “Deregulation and competition have reduced [broadband] prices,” Winfree told the subcommittee, arguing for a more free market approach. “We have also learned that policies that subsidize demand, such as the Affordable Connectivity Program, tend to increase prices.”

But Jon Tester, a Democratic Senator from Montana, pushed back on this theory, saying broadband is not like groceries or other consumer goods where more supply brings down prices. “It is so damn expensive to lay broadband,” Tester remarked. “It’s just a different marketplace that somehow holds the consumer at a disadvantage.”

https://www.govtech.com/network/feds-discuss-acp-but-no-path-forward-emerges-from-hearing

Some distinguishing terminology needed here. Broadband is indeed marketed as a commodity service and sold by the bandwidth tier, even including federally mandated "nutrition labels." That's what's driving the calls for extending subsidies to low income households. 

What Sen. Tester is referring to is the capital and operating costs of advanced telecommunications infrastructure to deliver broadband services. All service providers need to cover those costs. Investor owned providers also need to price in profits and income taxes. Those are passed on to end users and can make service for lower income households difficult to balance tight household budgets. The ACP is essentially a means tested couponing program that supports the higher cost of investor owned delivery infrastructure.

Publicly owned infrastructure doesn't need profits nor is it subject to income taxation, providing a lower the cost bridge solution rather than raising the affordability river in the form of household subsidies.

Publicly owned FTTP deployment models: prioritizing low rural density versus favoring high suburban density

Among publicly owned fiber to the premise (FTTP) networks financed by public bonds, two opposite deployment strategies are emerging. One prioritizes low density rural areas where private market failure is deeply entrenched, making them unlikely to be fibered in the foreseeable future. The other prioritizes high density suburban areas where there’s presently a fiber gold rush on to gain the all-important first mover advantage.

It’s important because first to connect a premise with fiber creates an asset with long term value unlikely to be overbuilt later by a competing fiber network. That has generated political resistance and dark money PR campaigns likely funded by investor owned providers.

An example of the former is Vermont’s use of local government units known as communication union districts (CUDs) Click here for an excellent documentary on how they’ve been formed and their progress building fiber to residences that conventional wisdom holds FTTP is impossible.

Low density is prioritized in Vermont’s CUDs because nearly all settlement is rural. There’s no mindset among Vermonters in these CUDs that those who live in less settled areas should go to the back of the line (or move away as investor owned providers suggest) while those living in more densely settled areas should get connected first. Instead, a cooperative can do New England Yankee spirit prevails. We’re all rural and we’re all in this together recognizing investor owned providers are not going to meet our need for advanced telecommunications.

The latter example is represented by the Utah Telecommunication Open Infrastructure Agency (dba UTOPIA Fiber), owned by a consortium of 20 cities. UTOPIA is building FTTP in more densely developed suburban areas featuring gridline layouts rather than curvilinear, windy roads found in rural and exurban areas. (See recent UTOPIA “footprint” releases here and here).

The UTOPIA advised Golden State Connect Authority (GSCA) comprised of 40 nominally rural California counties plans to begin construction this year and is similarly prioritizing more densely settled areas of its member counties. It is doing so to accelerate network revenues needed for an aggressive financing schedule allowing servicing of bond debt soon after the fiber is built.

The takeaway here draws from history. Rural areas like those in Vermont’s CUDs formed electric utility cooperatives early in the 20th century when as with advanced telecommunications, it was apparent investor owned providers were not going to show up, favoring more profitable urban areas for their electrical infrastructure. That alters the density calculus and the motivation to connect premises least likely to be connected.

That history is absent in the case of Utah’s UTOPIA and California’s GSCA where residential settlement patterns are decidedly more mixed. While federal and state subsidies such as the Broadband Equity, Access, and Deployment (BEAD) Program target rural areas, areas too dense to be considered rural but too sparsely settled to be deemed suburban may potentially go unfibered as virtual knowledge workers move to these exurban metro fringes.

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. One possibility is states could utilize state video franchise areas to designate carriers of last resort.

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.