For consumers, Title II common carrier universal service obligation far more important than net neutrality

U.S. Federal Communications Commission Chairman Tom Wheeler’s trial balloon proposing to place monopolistic Internet service providers under Title II of the Communications Act and subjecting them to common carrier utility regulation has generated considerable discussion and media coverage of net neutrality – the principle that all Internet traffic be handled equally by Internet Service Providers (ISPs). The net neutrality issue applies at the deeper layers of the Internet affecting business relationships between core content providers like Netflix and Yahoo and so-called “transport layer” players like Level 3 Communications, Verizon and AT&T. Wheeler proposes that Title II regulation would enable the FCC to place rules on these arrangements to ensure they are “just and reasonable” and prohibit blocking, throttling and paid prioritization.

All the discussion over net neutrality however has overshadowed a far more important element of Title II that would apply to common telecommunications carriers -- which ISPs would be deemed if the FCC ultimately adopts rules later this month placing ISPs under Title II. ISPs would no longer be able to serve only parts of communities and even portions of roads and streets, a problem the FCC recognizes leaves millions of Americans unserved by wireline Internet connections in a report issued last month. Like telephone providers currently subject to universal service mandates under Title II regulation, any premise would be able to order Internet service meeting specified standards. ISPs aren’t going to like the disruption that brings to their business models based on market segmentation and redlining less densely populated – and desirable -- neighborhoods. Even municipally-operated ISPs don’t relish the prospect, filing a letter this week with the FCC opposing a potential Title II rulemaking:

“[W]e fear that Title II regulation will undermine the business model that supports our network, raises our costs and hinders our ability to further deploy broadband…Our ability to repay current debt obligations and raise capital at attractive rates could well be adversely affected if we lose control over our retail rates or the use of and access to our networks.”

Some believe the universal service requirement will be applied only relative to eligibility for federal infrastructure subsidies for high cost areas offered through the FCC’s Connect America Fund (CAF). If that ends up being the case in whatever rules the FCC ultimately adopts, it won’t likely move the needle much to speed up infrastructure deployment to these areas since there is little business incentive for ISPs to tap into the grossly underfunded CAF as they concentrate on select wireline market segments and mobile wireless services.

It's a bird, it's a plane, it's the rebirth of satellite Internet | Network World

It's a bird, it's a plane, it's the rebirth of satellite Internet | Network World: There's a ton of room for providers who want to help people in remote or sparsely-populated areas get online, both at home and abroad, dovetailing nicely with the Obama administration's stated goal of getting more Americans online in service of furthering education and stimulating the economy.

The problem is there is also a ton of premises on satellite Internet that aren't in remote or sparsely populated areas of the United States. They're at the outer edges of metro areas, exurbs and semi-rural areas lying outside of the limited footprints of landline Internet infrastructure. While mainstream and tech media may hype a "rebirth," the fact is satellite sucks and is a national embarrassment that so many still rely on it in 2015.

No fast or slow lanes for Internet? New rules proposed | The Sacramento Bee

No fast or slow lanes for Internet? New rules proposed | The Sacramento Bee: "Net neutrality" means that whether you're trying to buy a necklace on Etsy, stream the season premiere of Netflix's "House of Cards" or watch a music video on Google's YouTube, your Internet service provider would have to load all of those websites equally quickly.

This is a much less important problem in the United States than inadequate Internet infrastructure that leaves millions of American homes and small businesses to substandard slow dialup, satellite or costly bandwidth rationed mobile wireless connections. The Federal Communications Commission recently reported that Internet infrastructure is not being deployed in a timely manner.

FCC Chair Wheeler may still be trying to split the baby on regulation of Internet as common carrier telecom service

U.S. Federal Communications Commission Chairman Tom Wheeler issued a fact sheet today summarizing a draft rulemaking the FCC will vote on this month to classify Internet service as a common carrier telecommunications utility under Title II of the Communications Act. It should be borne in mind this document represents a starting point in the FCC's deliberations preceding formal promulgation of proposed regulations and the public comment period before their final adoption.

Here are some quick takes on some of the provisions mentioned in the FCC fact sheet:

Reasonable Network Management: For the purposes of the rules, other than paid prioritization, an ISP may engage in reasonable network management. This recognizes the need of broadband providers to manage the technical and engineering aspects of their networks.

This is a big loophole that will likely send net neutrality proponents up the wall. A major friction point between core content providers and ISPs is the edge ISPs won't upgrade their last mile networks to fiber to support higher throughput. "Reasonable network management" could thus mean core content will have to be throttled so as to not overwhelm their networks.
 

Some data services do not go over the public Internet, and therefore are not “broadband Internet access” services subject to Title II oversight (VoIP from a cable system is an example,

This carves out Internet voice service from Title II -- a major telecommunications service.

Bolsters universal service fund support for broadband service in the future through partial application of Section 254.

It will be interesting to see what exactly "partial" means. Section 254(b) of the Communications Act requires common carriers to provide access to advanced telecommunications and information services (i.e. Internet service) in all regions of the nation. Will the FCC provide waivers for some areas of the country even as it finds Internet infrastructure is not being timely deployed to all parts of the nation?

The proposed Order applies “core” provisions of Title II: Sections 201 and 202 (e.g., no
“unjust and unreasonable practices.”

Section 202 bars “discrimination in charges, practices, classifications, regulations, facilities, or services...” It also contains an anti-redlining provision barring providers from discriminating against localities in providing service. That means dominant providers would have to serve all premises in their service territories and not just selected neighborhoods, roads and streets as is current practice.

No last-mile unbundling.

This effectively neuters common carrier under Title II and protects the closed access monopoly incumbent providers enjoy over what services are sold to customers since they would continue to be able to bar access to ISPs offering competing content and services.

UTOPIA’S “fiber highway” offers roadmap to greater competition for premise telecommunications services

A major complaint about Internet service in the United States is legacy incumbent telephone and cable companies lack incentive to provide better value and customer service and to build out their networks to fully serve communities and neighborhoods and not just selected segments. Many believe the solution is introducing more competition.

But given that telecommunications infrastructure costs a lot to build and maintain, that circumstance creates high economic barriers to potential competitors. That leaves the incumbent telephone and cable companies firmly entrenched in a market that naturally tends to be monopolistic. It puts them in the dominant position and consumers in the weaker role, forced to be what economists call “price takers,” meaning they must pay whatever their ISP charges or go without service. 

Summed up, a market that’s naturally monopolistic can’t easily be transformed into a competitive one without a radical reordering. One such example is the Utah Telecommunication Open Infrastructure Agency (UTOPIA), which operates its regional fiber telecom infrastructure as public works -- like a road or highway. That introduces competition by giving consumers the choice of what Internet services they want to purchase and from which ISPs. “The value to users is generated through greater choice of providers that generates a shift in the balance of power from the ISPs to the user and the superior service that the new network will provide,” notes this recent update by Macquarie Capital on its public-private partnership venture with UTOPIA.

As the report notes, there has been some resistance to a key financing element: a proposed monthly utility fee. But as it also points out, the estimated $22.60 monthly utility fee is offset by better value consumers would receive than as price takers of the incumbent telephone and cable companies.

As the maxim holds, there’s no free lunch. But some lunch deals are better than others, particularly when they help fund fiber to all and not just some premises as with Google Fiber’s “fiberhoods.” UTOPIA’s open access model provides the additional advantage of ensuring everyone is connected regardless of where they live or operate their business. Applied on a regional basis as UTOPIA plans, the utility fee model is a particularly important financing mechanism in places like Bettendorf, Iowa and Danbury, New Hampshire -- small localities that would be challenged to fund Internet infrastructure construction without new revenue streams.

The Obama administration and the Federal Communications Commission – looking for ways to increase competition for premise telecommunications service amid a growing tide of consumer dissatisfaction – would be wise to look to UTOPIA’s open “fiber highway” model. And consider tax incentives such as making utility fees tax deductible for all taxpayers to make them more palatable.

The FCC is moving to preempt state broadband limits - The Washington Post

The FCC is moving to preempt state broadband limits - The Washington Post: Under Section 706 of the Communications Act, the FCC is authorized to promote the deployment of broadband in the United States. By ruling that the anti-municipal state laws constitute barriers to that mission, the FCC's draft order invokes Section 706 in preempting the laws.

But that theory has already been questioned by Republicans who believe private investment is a more effective tool for rolling out high-speed broadband. 

Private investment in theory might be effective -- if there was a lot more of it. The legacy, shareholder owned incumbent providers are constrained in their capital investment capacity by the demand for short term profits and high dividend obligations and debt loads. Witness Verizon, for example. The company stopped new build outs of its FiOS fiber to the premise infrastructure in response to shareholder concerns.

Private pension money might be brought into play as is the case with Australia-based Macquarie Capital, the financial partner of the Utah Telecommunication Open Infrastructure Agency (UTOPIA). But so far no other similar financiers with the billions that are needed have emerged.

In summary, there really isn't any point in debating what's the best source of U.S. fiber to the premise telecommunications infrastructure funding. What's truly important is that there be an adequate and viable funding source -- something the nation is currently lacking.

AT&T ramps North Carolina FTTP workforce to battle Google Fiber's impending entry - FierceTelecom

AT&T ramps North Carolina FTTP workforce to battle Google Fiber's impending entry - FierceTelecom: Just days after Google Fiber (NASDAQ: GOOG) announced it would bring its fiber-to-the-premises (FTTP) service to a number of major North Carolina towns and cities, including Charlotte and the Triangle area, AT&T (NYSE: T) is ramping up its workforce to support its own fiber network push in the state.

After launching its 1 Gbps FTTP GigaPower service in December in Carrboro, Cary, Chapel Hill, Raleigh and Winston-Salem, the service provider said it is committing capital dollars to hire nearly 100 new technician positions to support the service rollout. The service provider also is planning to bring the 1 Gbps service to Durham, Charlotte and Greensboro.

As Google Fiber and the legacy incumbents try to do each other in with duplicative and wasteful parallel fiber to the premise (FTTP) telecommunications infrastructure (like having a premise served with two power lines, two gas lines, and two water lines) in a few select metro areas, the bulk of the United States continues to lack a comprehensive plan to build FTTP. Does it make sense for some Americans to have multiple fiber connections while most others have none?

Where high hopes of fiber telecom infrastructure collide with weak federal funding

Changes to RUS Broadband Loan Program Include Rural Gigabit Pilot - Telecompetitor: When President Obama spoke last week about reforms to the USDA Rural Utilities Service broadband loan program, he was referencing changes adopted in the 2014 Farm Bill, a USDA official advised in an email to Telecompetitor.

Joan Engebretson's report illustrates the wide gulf between the Obama's administration's aspirations for fiber telecommunications infrastructure America needs for the 21st century and the stark paucity of available funding under current federal programs to help finance this high cost endeavor.

Casey Peck, General Manager of the Kalona Cooperative Telephone Co. of Kalona, Iowa pointed up the gap in this opinion piece appearing in the Kalona News:

It seems the President’s objective is to encourage municipal construction of broadband networks, which would compete with existing providers.  The push to allow municipalities to construct broadband networks, which is prohibited by state law in 19 states but not in Iowa, will do little or nothing for the actual rural customers for which Obama claims to be concerned.

The fact is that most companies want nothing more than to roll out the next generation of broadband services, but simply do not have the cash flow to do so.  The biggest hurdle facing those consumers without high-speed internet services is provider’s lack of funding to get these services to the most remote customer in their areas.

Common carrier utility regulation appears a near certainty in 2015

Legacy incumbent telephone and cable companies have threated to sue the U.S. Federal Communications Commission if as expected the FCC follows President Barack Obama’s call to classify Internet services as a common carrier utility under Title II of the Communications Act. The incumbents hope the specter of prolonged litigation and uncertainty will give the FCC pause before it acts next month.

The problem for the incumbents however is even if they make good on the threat, it may not buy them the degree of uncertainty and delay they would like. Any litigation arising from the expected regulatory action by the FCC would likely be disposed of in relatively short order. The courts operate under a doctrine of judicial deference to how regulators interpret and apply statutory law such as the Communications Act. They are loath to put themselves in the place of regulators and second guess administrative rulemaking, reasoning the regulators and not the courts hold the requisite expertise when it comes to figuring out how to apply the finer points of statutory law. 

Possibly realizing this, the incumbents’ lobbying corps is implementing a backup strategy in Congress to amend the Communications Act to carve out Internet service on the grounds that it doesn’t function as a market monopoly – the underlying rationale for classifying it as a common carrier utility like telephone service. Demerits of that legislative rationale aside, that nascent effort also isn’t likely to be productive since even if passed it would face a likely presidential veto.

The outlook for 2015 is common carrier utility regulation of the Internet is coming and isn’t likely to be derailed.

21st century needs new regulation for a new generation of telecommunications services

A major contributing factor to the current crisis over how to regulate Internet-based telecommunications is the passage of time. Lots of it. It's been more than four generations -- 80 years -- since the United States enacted the Communications Act of 1934 regulating telephone service as a common carrier utility.

A 1996 update of the statute incorporated Internet services. But they were so new then regulators -- the Federal Communications Commission -- didn't consider them as a common carrier telecommunications service. Internet was an optional additional service, accessed by special connections made over slow dial up modems to specialized information services such as CompuServe and America Online. Now two decades later, it serves as a all purpose telecommunications service providing data, voice and video over Internet protocol (IP).

In a little more than a month's time, the FCC will decide whether to regulate IP services as a common carrier utility under Title II of the Communications Act. Indications are it will do so -- most likely for landline delivered, premise Internet service. Along with the designation come rules designed to ease and promote the construction of infrastructure to serve all premises and not just selected ones as is the case under the present regulatory policy.

Twentieth century legacy telephone and cable companies have built their business models based on the current policy, models that will be disrupted with the shift toward regulating the Internet as a common carrier utility that must be offered to all and not just some Americans.

But out of disruption comes business opportunity for a generation of new providers. The federal government should put in place meaningful technical assistance and funding -- and not just "funding leads" given the importance of Internet infrastructure -- to help the new Internet telecommunications providers of the 21st century become established and financially viable for the long term.

U.S. needs complete telecom infrastructure construction strategy, not minimalist incrementalism

The United States needs a comprehensive, holistic approach to ensure the construction of fiber optic infrastructure to provide robust Internet enabled telecommunications services in the 21^st century on a par with universal telephone service in the 20^th. The nation won’t achieve that standard in a timely manner by relying on incremental, one off builds.

While it’s laudable that some local governments have built or are planning fiber infrastructure in response to private sector market failure on the supply side (as spotlighted this week in Cedar Falls, Iowa by President Obama), these builds without significant and sustainable funding support cannot cumulatively provide the telecommunications infrastructure the nation needs and should have been planning at least two decades ago. As Steven S. Ross notes in his article in the November-December, 2014 issue of Broadband Communities, Bandwidth: Good for Rural Residents, Good for the Country, these localities that have or are putting in place modern telecommunications infrastructure participate in the same economy as do others lacking it.

New York State’s initiative announced this week it would dedicate $500 million of a $4.5 billion windfall arising from the settlement last year of prosecutions of alleged misconduct by banks and insurance companies to subsidize fiber construction. That’s one time, opportunistic funding that will help construct fiber in areas where it doesn’t exist. But it addresses only a small fraction of the state’s significant need as shown by the accompanying map. The money will quickly be exhausted with no plan fiber up the rest of the Empire State, reinforcing existing disparities. Similar underfunded initiatives exist in other states. Incrementalism allows policymakers to claim small, short term victories but leaves incomplete networks in its wake over the longer term.

Other examples of incrementalism are the continuing circa 2002 debate over “broadband speeds” -- which grows increasingly irrelevant in an age of fiber optic-based telecommunications technology -- and “net neutrality.” Net neutrality – the principle that all Internet traffic be given equal priority – is meaningless without robust network service in the first place. A more important principle than net neutrality is Metcalfe’s Law. It holds that the value of a communications network increases as the number of connections to the network grows. With so many Americans not offered fiber Internet service, the U.S. has a long way to go to recognize the full value of Metcalfe’s Law. It won’t get there with piecemeal incrementalism.

Study finds relationship between recent U.S. settlement patterns and telecom services

The November-December 2014 issue of Broadband Communities includes primary research finding a correlation between population trends and the robustness of telecommunications services. The study covers the period of April 2010 to December 2013.

Editor-at-large Steve Ross, who conducted the research, notes his findings relate to a recent U.S. Commerce Department study showing the relative lack of robust Internet service in rural areas compared with urban areas. Examining census data, the Commerce Department study found for the first time in U.S. history, most rural counties lost population between 2010 and 2012.

Ross includes a couple of caveats on his research. He notes the broad urban/rural county classification used doesn't take into account that exurban counties often include some areas that are functionally urban and others that are functionally rural. He also cautions against drawing conclusions from the data as to whether the availability of strong telecommunications services attracts population and lack thereof drives out migration.

Given the relationship between robust telecommunications services and settlement patterns, Ross's research suggests that U.S. settlement patterns could strongly be influenced with the deployment of more robust telecommunications infrastructure in less populous areas of the nation. Especially given the fact that much of today's information and knowledge-based economic activity can take place most anywhere that infrastructure is available.

USTelecom makes case for Title II common carrier regulation of Internet

Consumers Continue Shift Away From Landline – Regulations Are Behind | USTelecom

This telecom industry article helps make the case for regulating consumer Internet services as common carrier telecommunications services under Title II of the Communications Act. As the article notes, the existing common carrier regulations are designed for a bygone era of analog voice telephone service delivered over copper that is becoming increasingly outdated as landline technology shifts to fiber optic that can deliver voice and other services using Internet transmission protocols.

Administration’s “broadband” push window dressing

Always something happening and nothing going on
There's always something cooking and nothing in the pot
-- John Lennon, Nobody Told Me

The Obama administration’s PR initiative this week on U.S. telecommunications infrastructure deficiencies is largely window dressing and will likely mean the wired network that Americans have today for their home and small business Internet connection is likely the same one they’ll have for the foreseeable. This prediction was made in 2012 by former U.S Federal Communications Commission official Blair Levin and continues to hold true in 2015:

"For the first time since American ingenuity birthed the commercial Internet, we do not have a single national wireline provider with plans (real plans, not “fiber to the press release”) to deploy a better network. For most Americans, five years from now, the best network available to them will be the same network they have today."

The reason is the same as in 2012: insufficient available capital. Building Internet infrastructure to serve homes and businesses is a high cost endeavor. Those high costs have produced market failure on the supply side as the administration acknowledges, noting in this fact sheet that three of four Americans lack networks providing a level of service increasingly required for many online services. “Rarely is the problem a lack of demand — too often, it is the capital costs of building out broadband infrastructure…”

The administration is correct that local governments will have to play a major role in meeting the Internet infrastructure needs of their residents, infrastructure many argue is as critical in the 21^st century as roads and highways were in the 20^th. But it has no meaningful plan to help these localities finance infrastructure construction beyond highly limited and restricted funding available through existing grant and loan programs directed to rural areas of the nation that are only a drop in the bucket relative to the many billions of dollars needed.

In fairness to the administration, even it if did have a plan, it would face difficult odds getting Congress to appropriate the necessary funding. That has left the administration with little to offer in the way of tangible economic assistance. The administration is relaunching its BroadbandUSA website, where among other things it will offer “funding leads” for financing infrastructure construction. Given the lack of needed dollars, the administration has also been reduced to talking points that unfortunately won’t do anything to build last mile fiber to the premise infrastructure including:

• Increasing “competition.” (Sounds great, but ignores the fact that telecommunications infrastructure is a natural monopoly, not a competitive consumer market like groceries, vehicles and air travel. It also undermines Obama's position that Internet should be regulated under Title II telecommunications common carrier rules that are predicated on a monopoly market.)
• Enforcing “net neutrality” rules on Internet service providers. (A wonky term that doesn’t mean anything to consumers with subpar or no wired Internet service options).

Obama administration seeks public option for Internet infrastructure - The Washington Post

Obama wants to help make your Internet faster and cheaper. This is his plan. - The Washington Post: Frustrated over the number of Internet providers that are available to you? If so, you're like many who are limited to just a handful of broadband companies. But now President Obama wants to change that, arguing that choice and competition are lacking in the U.S. broadband market. On Wednesday, Obama will unveil a series of measures aimed at making high-speed Web connections cheaper and more widely available to millions of Americans. The announcement will focus chiefly on efforts by cities to build their own alternatives to major Internet providers such as Comcast, Verizon or AT&T — a public option for Internet access, you could say.

The public option is certainly needed given Internet telecommunications infrastructure is to the 21st century what roads and highways were to the 20th. Relying totally on commercial, investor-owned providers won't build that needed infrastructure. There simply isn't enough investment capital to get it done. And to get the choice and competition for Internet services the administration seeks, that infrastructure must be open access fiber to the premise, selling access on a wholesale basis to service providers who compete to offer services to businesses and consumers.

Like building the highways of the 20th century, that infrastructure won't come cheap. For the public option to become a reality rather than aspirational rhetoric, it will have to be backed with billions of dollars in funding to help regions of the United States build fiber to the premise Internet infrastructure on a par with telephone lines in the last century that served all Americans no matter where they made their homes or operated a business.

Net neutrality takes new twist as Congress appears ready to step in - CNET

Net neutrality takes new twist as Congress appears ready to step in - CNET: Large broadband providers, such as AT&T and Verizon, say that reclassifying broadband as a utility will stifle innovation by imposing antiquated telecommunications regulations. 

The innovation argument is a canard. Fiber optic technology had been around for decades. The challenge isn't technological but rather one based in economics and policy so that fiber is as ubiquitous as copper telephone cable was in the pre-Internet era.

Some consumer advocates and content companies, such as Netflix, say reclassifying broadband services as utilities is the only way to ensure that the Internet will give equal treatment to content and sites.

Net neutrality alone won't ensure equal access to the Internet's core content. Title II classification of Internet services must also ensure all U.S. homes and businesses at the network edge have access to those services -- something they don't currently have given the nation's checkerboard of the limited "footprints" of incumbent telephone and cable providers that serve some areas but leave many others unserved.

The number of Americans lacking broadband could soon go up. That’s a good thing. - The Washington Post

The number of Americans lacking broadband could soon go up. That’s a good thing. - The Washington Post: Virtually overnight, nearly 1 in 5 Americans would no longer be served by what the government considers adequate Internet, according to the FCC. That's 55 million Americans, up from an estimated 13.8 million that lack access under the current definition of broadband, according to a forthcoming FCC report.

But that may be a good thing — a recognition of the way technology has improved over time and a sign the government is finally catching up.

Sorry Mr. Fung of The Washington Post. It's not a good thing. It's an embarrassment. The United States should have had plans and processes in place in the early 1990s to build fiber optic telecommunications infrastructure to serve all Americans regardless of where they make their homes, work or receive education and healthcare services. It was clear by then that telecommunications were going digital and that fiber would be the necessary delivery infrastructure.

Now in 2015 the U.S. and regulators are still using 1990s terms like "broadband" and engaged in a losing game of catch up, chasing after Internet bandwidth demand that's increasing so quickly that by the time regulators issue their latest definition of "broadband," it's already fast headed toward obsolescence.