Former FCC Chair Pai urges states to direct BEAD funds to sparsely populated counties as countywide projects

The $42.45 billion BEAD program tasks each state with identifying unserved and underserved communities for funding. States have been thinking about the size of their project areas since they submitted their initial proposals in December 2023, but were not required to define the size of their project areas for sub-grant awards when they filed their initial proposals.

“Searchlight urged [states] to think about an entire county as the relevant project area, as opposed to say a service location or even a census block or census tract,” Pai said. This strategy is important to prevent "cherry picking" higher-value areas that are more densely populated, or have a higher per capita income, among those locations slated for funding, he said.

Former FCC Chairman Urges County-Level BEAD Project Areas

Pai’s suggestion would have states direct BEAD subgrants to large infrastructure projects in sparsely populated counties. The reason is BEAD program guidance would require 8 out of 10 prems in each county (or potentially regional projects involving multiple counties) to be currently unserved, meaning they cannot order Internet service with throughput of at least 25/3 Mbps and latency of 100ms or less or underserved, 100/20 Mbps or higher:

(t) Project—The term “project” means an undertaking by a subgrantee to construct and deploy infrastructure for the provision of broadband service. A “project” may constitute a single unserved or underserved broadband-serviceable location, or a grouping of broadband-serviceable locations in which not less than 80 percent of broadband-serviceable locations served by the project are unserved locations or underserved locations.

In the larger scheme, Pai's suggested allocation of BEAD dollars may be to help ensure projects they fund don't infringe upon the service area "footprints" of large incumbent investor owned telephone and cable companies by steering them away from more densely populated counties. Their footprints have been made by deployment "shoes" with holes in their soles -- creating unserved or underserved pockets -- that could be potentially funded as BEAD projects. Per the cited BEAD program guidance, these could be a small group of prems or even a single premise.

U.S. appellate court grants stay of FCC Title II reclassification of Internet as common carrier utility, citing lack of clear congressional authority

The Sixth District United States Court of Appeals has granted a stay of a rulemaking issued by the Federal Communications Commission that would regard Internet protocol services as a common carrier telecommunications utility under Title II of the Communications Act. The stay puts on the rulemaking on hold pending a hearing before the court later this year on the merits of a challenge against the reclassification brought by telecommunications industry interests.

In granting the stay, the court determined it was likely the challengers would prevail on the merits of the major questions doctrine, finding that the Congress failed to clearly authorize the FCC to classifying Internet Protocol as a common carrier telecom utility. The court signaled its decision on the merits will turn on interpreting Congress’s intent vis 47 USC § 153(51) and specifically whether internet service providers meet the definition of “telecommunications carrier” in the statute, enacted in the 1996 Telecom Act.

The law clearly defines telecommunications as “the transmission, between or among points specified by the user, of information of the user’s choosing without change in the form or content of the information as sent and received.”

However, the court found that “Nowhere does Congress clearly grant the Commission the discretion to classify broadband providers as common carriers. To the contrary, Congress specifically empowered the Commission to define certain categories of communications services and never did so with respect to broadband providers specifically or the internet more generally.”

“Absent a clear mandate to treat broadband as a common carrier, we cannot assume that Congress granted the Commission this sweeping power, and Petitioners have accordingly shown that they are likely to succeed on the merits.”

1996 Telecom Act affords FCC clear, unambiguous authority for Title II rulemaking

Investor owned telephone and cable companies and their trade associations hope the courts will put the U.S. Federal Communications Commission’s recently issued Open Internet rulemaking on ice, slated to become effective July 22. They believe their case has been strengthened by the U.S. Supreme Court’s recent ruling in Loper Bright Enterprises v. Raimondo that held the courts and not executive branch agencies must interpret the legislative intent of a statute when it’s unclear or ambiguous under the Administrative Procedures Act.

They hope to convince the courts the FCC lacked authority to issue the rulemaking classifying Internet protocol-based services -- advanced telecommunications – as a common carrier telecom utility service under Title II of the Communications Act. The rationale is the agency previously relied upon the now disapproved Chevron doctrine that accorded administrative agencies authority to issue rules based on their interpretation of the legislative intent of a statute that’s unclear or ambiguous. Or which fails to confer clear rulemaking authority to an agency.

That would conceivably bolster their case if the underlying statute here – the 1996 Telecom Act – was unclear or ambiguous or failed to grant the FCC authority for its rules. The problem is doesn't meet any of these tests. It clearly defines telecommunications as “the transmission, between or among points specified by the user, of information of the user’s choosing without change in the form or content of the information as sent and received.”

Sending an email certainly would meet the definition. So would posting to a website or social media site. The transmitted content isn’t changed; it’s communicated over the Internet to one or more parties.

In so providing this telecommunications service, the Act states providers “shall be treated as a common carrier” (i.e. a utility under Title II of the Communications Act) and further authorizes the FCC to “determine whether the provision of fixed and mobile satellite service shall be treated as common carriage.” That’s a pretty clear and unambiguous grant of authority for the FCC’s rulemaking.

The Act also clearly brings providers of advanced telecommunications providers within the scope of the Open Internet rulemaking, defining telecommunications service as “the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.’’

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.