AT&T’s suggestion that edge content providers contribute to funding universal service calls for new paradigm of U.S. advanced telecom

AT&T wants to see edge content providers contribute to the cost of connecting all Americans to advanced telecommunications infrastructure. It’s a company cudgel first wielded two decades ago by then AT&T chief Ed Whitacre. Whitacre was famously quoted as saying these providers should not be able to “ride my pipes” for free.

“The seven largest and most profitable companies in the world built their franchises on the internet and the infrastructure we provide,” noted current AT&T CEO John Stankey in remarks this week to the USTelecom’s Leadership Summit posted at AT&T’s policy blog. “They stand to benefit handsomely from every home that is incrementally connected to our networks. I doubt there is anyone in this room who wouldn’t gladly swap places with the return profiles of Google, Meta, Apple and others.” Stankey continued:

“These companies make money offering today’s equivalent of yesterday’s universal voice service. Why shouldn’t they participate in ensuring affordable and equitable access to the services of today that are just as indispensable as the phone lines of yesteryear?”

Stankey however raises a broader policy issue of how universal service is to be attained and specifically the high cost of the ownership, financing, and operation of its infrastructure in the digital IP era as it was for copper cable delivered analog voice telephone service in the previous century. There is no clear, long term policy in place to do so. Policymakers have instead resorted an aspirational policy of throwing money at the challenge in a Pinata policy of competitive, one off grants, each with separate funding sources and eligibility rules, a situation decried by Stankey:

“By splitting the funding across many departments, we’ve got all these agencies examining the same problem… but they’re looking at it through the wrong end of the telescope. So what’s the solution? Streamline the design. Align agencies, widen the aperture, and focus on the larger problem we all want to solve.”

In his remarks, Stankey criticized policymakers who “have prioritized outcome-based regulatory approaches and political expedience at the expense of effective market-based capital allocation.” This goes the heart of public policy to attain universal service. By definition, universal service is a measurable outcome. Policymakers are thus right to set that as the public policy goal. But over the past three decades, the market-based scheme has been unable to reach it because the goal of universal service is misaligned with the needs of investor owned companies that own the great majority of advanced telecommunications infrastructure. 

Their mission is not to modernize the twisted pair copper that reached nearly every American doorstep in the 20th century to fiber. Rather, it’s to generate relatively rapid return on investment and generous utility dividends shareholders have received for many decades from the assured revenue stream of voice telephone service. Consequently, areas where population density and household income are not seen as good risks and sufficiently profitable are passed by. This despite billions in subsidies and trillions of dollars of investment by investor owned companies like AT&T, another long running company talking point.

Suggesting content providers contribute to the cost of creating near ubiquitous fiber as author Susan Crawford envisioned in her 2019 book Fiber: The Coming Tech Revolution—and Why America Might Miss It also suggests a wholesale reorganization is needed. One that recognizes that advanced telecommunications calls for a new paradigm providing more optimal alignment of goals, incentives, resources and rewards for Crawford’s vision to be realized.

The present misalignment generates way too much adversity, frictional costs, and posturing and protectionism instead of good public policy benefiting all Americans versus making winners of some and losers of others.

AT&T chief: BEAD goal should be universal service -- but not "devolve" to universal FTTP

AT&T CEO John Stankey said the goal of the Broadband Equity, Access, and Deployment (BEAD) Program should be universal service, leveraging $42.5 billion in tax dollar subsidies appropriated in the Infrastructure Investment and Jobs Act of 2021(IIJA) to attract private investment to attain it.

But while universal landline service was achieved for copper delivered voice telephone service in the 20th century, the program goal should not be to modernize it with fiber for the 21st as prioritized by the BEAD Notice Of Funding Opportunity (NOFO) as the best and highest use of public funds. “A project that will rely entirely on fiber-optic technology to each end-user premises will ensure that the network built by the project can easily scale speeds over time to meet the evolving connectivity needs of households and businesses and support the deployment of 5G, successor wireless technologies, and other advanced services,” a footnote in the NOFO states.

However in remarks delivered at the USTelecom’s Leadership Summit this week posted at AT&T’s policy blog, Stankey argues the program “shouldn’t devolve into building fiber to every home, which would exhaust funding before every American is connected.” Stankey also lamented the state of U.S. telecom policy. “I’ve probably been around too long, but in all my years I don’t know that I recall a time when we seemed more adrift confronting the big telecom policy issues.”

POTS, PSTN cannot afford to retire

Anybody not involved in the telephone business will probably be surprised to find that the old TDM telephone networks are still very much alive and in place. The old technologies were supposed to be phased out and replaced by digital technologies. The FCC started talking about this before 2010. In 2013, Tom Wheeler, the FCC Chairman at the time, announced an effort to force the needed changes, which was dubbed the IP Transition. The goal of the transition was to upgrade and replace the public switched telephone network that was used by every telco, CLEC, and cable company for exchanging voice traffic.

https://potsandpansbyccg.com/2024/06/27/can-we-please-kill-legacy-telephone-requirements/

Analog voice service over the legacy publicly switched telephone network (PSTN) was declared at end of life in 2009 -- around the same time the United States should have fully replaced it with Internet protocol (IP) delivered over fiber to the premise (FTTP). It wasn't because AT&T and Verizon couldn't afford to retire it as FTTP modernization lagged.

Industry opposition to FCC Title II rules could lead to state-based regulation

Advanced telecommunications providers favor a federal regulatory scheme over disparate state by state regulation, correctly arguing that telecommunications is essentially interstate. But in opposing the U.S. Federal Communication’s Commission’s adoption of its Open Internet rulemaking classifying Internet protocol telecommunications as common carrier utilities under Title II of the federal Communications Act, they are potentially setting themselves up for state-based regulation in the unlikely event they prevail in their judicial challenge to overturn the rules.

States could respond by enacting their own statutes treating advanced telecommunications as a common carrier utility, imposing universal service mandates barring neighborhood redlining and imposing rate regulation in order to ensure access and affordability and promote digital equity. While providers would claim universal service mandates impose cost burdens they cannot bear, states could point to state and federal subsidies they’ve received to build infrastructure in support of these goals.

Uncertainty and delay could also prompt states to act since litigation over the FCC Title II rules could take several years to be fully adjudicated up to the U.S. Supreme Court. The case would require the high court to review its 2005 ruling in Brand X Internet Services, et al. 545 US 967 (2005) wherein the court upheld the FCC's regulatory authority under the Chevron doctrine of judicial deference to administrative agency interpretation of statutory law. Brand X, however, could be undermined if the Supreme Court discards the Chevron doctrine in a case argued earlier this year, Loper Bright Enterprises v. Raimondo, bolstering the claim by providers that a Title II regulatory scheme making advanced telecommunications a common carrier utility is a major public policy issue within the purview of Congress and not administrative agencies.

ROI challenge delayed America’s modernization of copper to fiber in 1990s. It persists in the present as demand drives crisis of access and affordability.

While copper lines account for just 5 per cent of networks in the US, Sambar noted a single copper line must be maintained all the way out to a customer’s location. There could be thousands of copper lines sheathed at a central office, which need to be maintained to serve the customer who is miles away with the single line.

The copper lines also require massive switches in central offices to provide voice services, which Sambar explained use eight to ten times the amount of energy as a server. AT&T could replace the switches with two servers in a central office, which would cut down on the energy cost, but the servers will need software, installation and rewriting all the systems that were written in the 1960s or 1970s. All of which will cost more than keeping the switches.

“The payback period is 15, 16, 18 years long so it’s not economical to do it,” Sambar said.

https://www.mobileworldlive.com/att/att-makes-case-against-keeping-copper/

The long-term ROI issue AT&T’s network chief Chris Sambar raises was as relevant in the 1990s during the Clinton administration as it is today. Had telecom policymakers done a diligent job of assessing the costs and economics, they would have asked if investor owned telcos like AT&T that must generate returns on investment over relatively short periods were up to timely modernizing the legacy POTS copper outside plant to fiber and installing optical switches in COs and field distribution equipment. Timely as by the late 2000s.

And if it was determined telcos were not, then alternatives such as public and utility cooperative ownership -- that the Biden administration noted in its original 2021 infrastructure bill don’t face the additional cost burden of earning shareholder profits -- should have been developed. None were.

Telcos were left to deploying now obsolete DSL technology over decades old copper. Given the Biden administration’s recent assessment of the merits of the public and utility coop models and the ongoing ROI challenge facing investor-owned providers, the conditions for developing those alternatives remain in place today.

States must designate providers, service areas under FCC reclassification of Internet delivered services as telecommunications utility.

A key task facing states following the Federal Communication Commission’s adoption of its Open Internet rulemaking April 25 classifying Internet protocol communications as a telecommunications utility under Title II of the Communications Act is designating service areas of providers for the purpose of determining the law’s universal service obligations and support mechanisms. The relevant statute is at 47 USC § 214(e)(5):

(5) “Service area” defined: The term “service area” means a geographic area established by a State commission (or the Commission under paragraph (6)) for the purpose of determining universal service obligations and support mechanisms. In the case of an area served by a rural telephone company, “service area” means such company’s “study area” unless and until the Commission and the States, after taking into account recommendations of a Federal-State Joint Board instituted under section 410(c) of this title , establish a different definition of service area for such company.

The task is complicated by a FCC rulemaking issued in 2019 (DA/FCC #: FCC-19-80) that bars states from regulating most non-cable services including Internet access service offered over a cable system by an incumbent cable operator. That FCC rulemaking concluded the federal Cable Communications Policy Act of 1984 preempts state and local governments from regulating Internet and VOIP services under their video franchising authority. The FCC’s reclassification of Internet delivered services as telecommunications services under its Open Internet rulemaking effectively abrogates this component of its 2019 rulemaking.

Cable TV franchises effectively became Internet service areas in the 2000s as cable companies began offering Internet connectivity and VOIP service in addition to video, putting them on a par with telephone companies’ Internet and VOIP services. That led a shift in regulatory policy, creating "video franchises."

A 2020 report prepared by the Congressional Research Service describes the history and rationale of the shift to states of local government video franchising authority in order to get out from under local government requirements that franchisees connect all addresses within their jurisdictions as constituent demand for Internet connectivity rose in the 2000s:

As the LECs (telephone companies) sought to enter the video distribution market, they pursued statewide reforms to speed their entry, rather than seeking franchises in individual municipalities. The LECs’ competitors, the incumbent cable operators, contended that state-level franchising would present new entrants with fewer obligations than cable companies had faced when they entered the market, specifically the obligation to build networks serving all parts of a community.  

Pending California legislation (AB 1826) demonstrates the need for common carrier utility regulation of IP services. It states legislative findings that despite 2006 legislation that shifted video franchising authority to the California Public Utilities Commission from local governments predicated on the questionable rationale it would increase competition to improve access and affordability, thousands of Golden State households lack access to video or broadband service, including households that are within the service territories of video franchise holders.

Utility coop exec, industry association leader warns of middle mile infrastructure deficits

As the United States is poised to begin subsidizing the capital cost of building last mile or distribution advanced telecommunications infrastructure targeting rural areas, it won’t be enough warns a utility cooperative executive and industry association leader. The reason according to Sachin Gupta is insufficient transmission infrastructure that connects end user premises to the Internet backbone, commonly known as middle mile since it connects these two parts of the larger network.

Gupta is director of government business and economic development at Centranet, a subsidiary of Central Rural Electric Cooperative. Gupta also serves as on the board and policy committee of the Fiber Broadband Association and represents the National Rural Electric Cooperatives Association (NRECA) on the Federal Communications Commission’s Technical Advisory Council.

The problem manifests in multiple ways, Gupta explained in a Fiber Broadband Association podcast. First is middle mile infrastructure largely connects cities and lacks points of presence along the way for less densely populated areas of the nation to connect.

Another main problem is edge content providers don’t have data centers near these areas. That leads to high latency since data must travel over hundreds of miles instead of tens of miles, producing delays that make low latency applications unusable.

Supply and demand also come into play, creating lack of affordable access. Last mile networks create demand, but where there’s too little middle mile points of presence to provide backhaul, investor owners can demand and get “an arm, leg and kidney and a liver” for access, Gupta explains.

The Infrastructure Investment and Jobs Act (IIJA) of 2021 contains findings by Congress that “Access to affordable, reliable, high-speed broadband is essential to full participation in modern life in the United States” and a “persistent ‘digital divide’ is “a barrier to the economic competitiveness of the United States and equitable distribution of essential public services, including health care and education.” 

Gupta said that divide will remain despite what he estimates will be $100 billion spent in rural areas over the next four years to reduce it. The IIJA appropriated only $1 billion for middle mile subsidies compared to $42.5 billion for last mile distribution infrastructure subsidies. 

Gupta noted many states are consequently looking to build their own organic middle mile networks. However, given the high cost, states may not be able to shoulder it including very large states with substantial economic resources. This week, California deferred $1.5 billion that had been allocated to that state’s middle mile network due to a large budget deficit.

While it’s essential infrastructure, middle mile has received less attention from policymakers. That reflects the nation's hyper localized focus on advanced telecommunications infrastructure deficits since Americans experience them at their homes, schools and businesses. Policymakers should view the entire infrastructure wholistically since all segments are interdependent.

Public ownership of all middle mile infrastructure could provide a rapid, long term solution to this imminent crisis. The root cause is structural: middle mile is essentially a collection of privately owned fiefdoms operating a series of toll roads, free to provide access to whomever they wish at prices of their choosing.

For example, the federal government could form 501(c)(1) government chartered and regionally administered nonprofit to acquire and build out the nation’s middle mile infrastructure and contract for design, construction and operational services and develop standards for redundancy, uptime, restoration, and network security.

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.