IIJA provides opportunity for structural separation with state, regional wholesale open access fiber networks

With the enactment of the Infrastructure Investment and Jobs Act (IIJA), the federal government and the states have an opportunity to structurally separate advanced telecommunications infrastructure and Internet Protocol (IP) services delivered over it by funding state and regional government owned wholesale open access fiber networks. That would boost access and affordability, and by extension, support virtual knowledge work, learning and telemedicine -- all of which jumped amid public health measures put in place during the COVID-19 pandemic. These large scale entities would also enjoy vital purchasing power as demand for labor and materials to build fiber networks is taxing their availability.

The Telecommunications Act of 1996 contained a structural separation component, requiring telephone companies to offer wholesale access their network infrastructure to retail Internet Service Providers (ISPs) -- referred to as unbundled network elements (UNE). But this provision lacks regulatory incentive for telephone companies to modernize their legacy copper networks to fiber. They leased access to their central office switches and legacy twisted pair copper plant to ISPs via dialup and later, digital subscriber line (DSL) that due to technological limitations could not serve all customers. Moreover, the telephone companies lacked market incentive to upgrade to fiber since they could derive passive revenues by placing the copper in runoff mode without sacrificing profits and shareholder dividends to capital expenditures. Consequently, only about a third of U.S. homes are passed by fiber.

With the IIJA, the National Telecommunications and Information Administration and the states can utilize $43.45 billion in grants earmarked for advanced telecommunications infrastructure in the legislation to attain a superior form of structural separation that can yield far greater public benefit than the 1996 legislation. Unlike shareholder owned telephone and cable companies, government owned networks have incentive to pursue the positive externalities that come with increased access and affordability that don’t accrue to the balance sheets of investor-owned infrastructure. These broad-based benefits clearly outweigh more narrow interests of their shareholders. 

Policymakers should implement and if necessary, amend the IIJA to ensure the widest and most rapid deployment of state and regional government owned open access fiber networks.

States should use IIJA advanced telecommunications infrastructure funding for government owned networks

Starting in 2022, state governments are in line to receive $43.45 billion in grants earmarked for advanced telecommunications infrastructure appropriated under the Infrastructure Investment and Jobs Act (IIJA). As California recently opted to do by appropriating $2 billion for state-owned middle mile transmission infrastructure, states should use the funds to build their own projects with telecom authorities (instead of so-called "broadband offices.")

Doing so avoids a fundamental conflict of interest and gives states more control over what infrastructure gets built and how quickly. As experience over the past two decades has shown, investor-owned legacy telephone and cable companies must naturally place the interests of their investors first and ahead of the public interest. The result has been a Swiss cheese pattern of infrastructure deployment in cherry picked neighborhoods that meet the rapid return on investment their shareholders demand. That leaves many others without the possibility of being connected, particularly less densely developed areas.

State and local governments are far better situated to build advanced telecommunications infrastructure with the public benefit goal of increasing access and affordability. By virtue of their public service mission, they can focus on attaining these benefits as well as the concomitant positive externalities such as enabling virtual knowledge work, distance learning and telehealth visits. They can also make the federal dollars go farther since they don't need to produce profits for investors.

States should also fund public utility districts and consumer owned utility cooperatives. They too are free of the conflict of interest between shareholders and end users since the latter are also the former.

To speed advanced telecommunications infrastructure deployment, Congress should tweak infrastructure bill along lines of American Rescue Plan Act

When Congress returns from the year end holiday break next year, it should tweak the Infrastructure Investment and Jobs Act (IIJA) recently signed into law by President Biden as one of its first orders of business. As enacted, the statute’s provisions appropriating $42 billion in state grants for advanced telecommunications infrastructure set the stage for conflict and potential litigation that could add more years of delay to the already long overdue modernization of the nation’s telecommunications infrastructure.

Doug Dawson published a thought provoking blog post earlier this week laying out some of the potential pitfalls. The law needs immediate attention since the National Telecommunications and Information Administration (NTIA) is mandated by the IIJA to set up shop to disburse the funding during the first several months of 2022 as the ‘‘Broadband Equity, Access, and Deployment Program.”

The pitfalls stem from the IIJA’s retention of a throughput versus infrastructure standard and its reliance on the Federal Communications Commission’s “broadband map” (currently being updated) detailing what throughput is available for a given location. The map is a critical measure because funding eligibility is primarily targeted for projects where at least 80 percent of premises are “unserved,” defined by the bill as those not having any providers offering service with throughput of at least 25 Mbps down and 3 Mbps up. The FCC mapping process has been fraught with controversy over its accuracy since the FCC’s National Broadband Map debuted more than a decade ago. Tied to this is distrust of incumbent legacy telephone companies suspected of overstating available throughput in order to disqualify potential subsidization of construction by other entities in their nominal service areas.

As Dawson notes, some states could rely on their own map data, setting states against the federal government’s maps. These states might also prefer to award IIJA funding to public sector and nonprofit owned fiber to the premise infrastructure after years of little infrastructure modernization by incumbents despite state subsidies and persistent neighborhood redlining that limits access and affordability. These states could also opt to cover the 25 percent cost match required by the IIJA with their own funds. States would be on solid public policy ground since the IIJA funding does not require incumbent telephone companies to offer advanced telecommunications service to any customer reasonably requesting it or at affordable rates, leaving longstanding gaps.

That could set the stage for lawsuits by investor-owned telephone, cable and fixed wireless incumbents contending states are unfairly disfavoring them in contravention of the IIJA’s provisions. They would likely exercise their right to challenge proposed build areas as allowed by the IIJA, fly specking them and arguing they are not “unserved” areas or that states are directing funding to “underserved” areas (where per the IIJA service isn’t available to 80 percent of locations at 100/20 Mbps) before ensuring there are no more “unserved” areas as required by the legislation.

To avoid these potential risks that could delay badly needed advanced telecommunications infrastructure, Congress should amend the IIJA’s advanced telecommunications infrastructure grant provisions along the lines of the American Rescue Plan Act (ARPA) enacted earlier this year. That measure appropriates $10 billion to state, local and tribal governments for capital projects including advanced telecommunications infrastructure.

The ARPA is more favorable to a fiber to the premises (FTTP) infrastructure modernization standard by specifying projects provide symmetrical throughput of 100/100 Mbps or be scalable to it. The ARPA also recognizes the need for rapid deployment by affording “significant discretion” to state, local and tribal governments to identify eligible projects without having to rely on federal “broadband maps” and not including a process for incumbents to challenge proposed projects as “overbuilding.”

Cable giants, electric co-ops battle over federal broadband dollars - Mississippi Today

But Mayo Flynt, president of AT&T Mississippi, told lawmakers: “We do think this is a job for the private sector and not the government sector to do … Scale is your friend, you’re going to get more return for your dollar, and this is a scale business … We believe that a competitive process or (requests for proposals) is going to help you get the best bang for your buck. Competition is a good thing. We are in the game and are competing.”

In 2019, the Mississippi Legislature passed a law allowing electric cooperatives to provide internet service — an effort to expand broadband access in a poor, rural state where an estimated 40% of the state lacked access. The effort has been likened to providing electricity to rural Mississippi in the 1930s. Proponents said large cable and telecom companies were failing to expand service into rural areas because it wasn’t profitable enough. But cable and telecom providers say they have spent millions in private funds expanding internet service in Mississippi, and that they shouldn’t be cut out of government funding for expansion.

 Source: Cable giants, Mississippi electric cooperatives battle over federal broadband dollars 

AT&T's Flynt is right. Telecommunications infrastructure like most infrastructure due to the high cost of constructing and maintaining it benefits from economies of scale. But that's not an argument against public ownership for which the American Rescue Plan Act targets funding. Rather, it helps make the case that the federal and state government should take a regional approach to ensuring fiber optic connections reach every home, school and small business to attain optimal economies of scale and purchasing power. Especially given constraints in the supply of materials and labor that can add further delay to badly overdue deployments.

There are roles for legacy telephone and cable companies in this important task. They have experience and expertise in designing, building, operating and maintaining telecommunications infrastructure. Since their business model constraints do not allow them to provide universal fiber to the premises service and instead build in areas where they can garner the most rapid return on investment, these functions rather than vertically integrated ownership of infrastructure and services is the best public policy here. These players can get some of the federal dollars but should do so as contractors on regional open access FTTP projects undertaken by the public sector and consumer utility cooperatives.

FCC set to move into key role on universal advanced telecommunications service

Within one month following the enactment of the Infrastructure Investment and Jobs Act President Biden will sign into law next week, the Federal Communications Commission must commence a proceeding to determine how the FCC should achieve universal advanced telecommunications service. The measure mandates the FCC report to Congress by next August options for “improving its effectiveness in achieving the universal service goals” taking into account the bill and other legislation addressing the goal of universal service. Universal service was attained for voice telephone service in the previous century. The report gives the FCC authority to make “recommendations for Congress on further actions the Commission and Congress could take to improve the ability of the Commission to achieve” universal service.

Notably, the infrastructure bill emphasizes the FCC report “may not in any way reduce the congressional mandate to achieve the universal service goals.” But it gives the FCC an opportunity to weigh in as to whether it “believes such an expansion is in the public interest.”

The infrastructure bill’s enactment comes as the administration looks to put its mark on the FCC by nominating FCC member Jessica Rosenworcel to serve as chair and Gigi Sohn as a member of the panel. In an executive order issued in July, President Biden called on the FCC to reinstate Obama administration regulations repealed during the Trump administration that would mandate universal service by classifying IP delivered services as common carrier telecommunications under Title II of the Communications Act of 1934.

Biden administration signals incumbents likely to be favored in challenges of proposed state FTTP builds under infrastructure bill

Federal grant money for advanced telecommunications infrastructure that would flow to states appropriated in the Infrastructure Investment and Jobs Act prioritizes projects in areas determined by maps under development by the Federal Communications Commission (FCC) that would serve premises where at least 8 of 10 prems cannot order advanced telecommunications service providing minimum throughput of 25/3 Mbps.

Under the bill expected to be signed into law next week, states receiving the funding can award up to 75 percent of the project’s capital cost as subgrants. The measure specifies states first fund builds that would serve these “unserved” premises. States can then award grant funds to projects where at least 80 percent of prems in a proposed project are “underserved,” which as defined in the bill means those that cannot order service providing minimum throughput of 100/20 Mbps and with latency sufficient to support real-time, interactive applications.

But in order to do so, states must first certify to the Department of Commerce’s National Telecommunications and Information Administration (NTIA) that the bill authorizes to oversee the grants there are no “unserved” premises in the state.

Combined, these provisions stringently proscribe the scope of state sponsored projects in most states.

However, the bill affords the NTIA a fair degree of discretion. It authorizes it to fund “priority broadband projects” that provide advanced telecommunications service that meets throughput and quality of service standards as determined by the NTIA. As well as those that would “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.” That could reasonably be interpreted as a fiber to the premises (FTTP) infrastructure standard.

A likely scenario is states and particularly those wishing to fund publicly and consumer cooperative owned FTTP projects will face push back from incumbent investor-owned telephone, cable and fixed wireless operators challenging their funding under the bill, contending they already provide 25/3 Mbps or 100/20 Mbps throughput to at least 80 percent of prems where FTTP is proposed to be built – what they term as “overbuilding.”

States must establish a “transparent, evidence-based, and expeditious challenge process” in which advanced telecommunications providers can contest a proposed project’s eligibility and whether a particular prem within the proposed project is unserved or underserved. States would have 60 days to resolve challenges. The bill authorizes the NTIA to modify the challenge process and overrule state determinations of challenges.

A question as the bill is implemented is to what extent the NTIA will exercise its discretion as permitted under the bill to favor publicly or cooperatively owned FTTP projects. Or side with commercial incumbents bringing challenges to proposed state projects. Department of Commerce Secretary Gina Raimondo offered a clue the Biden administration may be inclined to side with incumbents on challenges. "We have to make sure we don't spend this money overbuilding," Raimondo was quoted as saying in this November 9, 2021 Reuters story.

The Infrastructure Bill is About More than Money | Benton Institute for Broadband & Society

The Infrastructure Bill is About More than Money | Benton Institute for Broadband & Society: it is now the policy of the United States that: Subscribers should benefit from equal access to broadband internet access service within the service area of a provider of such service; "Equal access" means the equal opportunity to subscribe to a service that provides comparable speeds, capacities, latency, and other quality of service metrics in a given area, for comparable terms and conditions; and The FCC should take steps to ensure that all people of the United States benefit from equal access to broadband internet access service.

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The Benton Institute is right. While the billions appropriated to the states in the advanced telecommunications infrastructure component of Infrastructure Investment and Jobs Act headed to President Biden's desk gets most media attention, the measure contains important expressions of telecommunications policy. How they ultimately end up being implemented will be crucial headed into 2022 and beyond.

The Benton Institute's call that the U.S. Federal Communications Commission act to ensure the "equal access" provision sounds in the Title II universal service and anti-redlining requirements enacted in the FCC's 2015 Open Internet rulemaking reclassifying Internet Protocol delivered services as a common carrier telecommunications utility.

In an executive order issued in July, President Biden called on the FCC to reinstate that rulemaking that was repealed in 2018 during the Trump administration that deemed IP services as optional information services under Title I of the Communications Act of 1934. The order also calls on the FCC to initiate a rulemaking to require service providers to regularly report price and subscription rates to the public in a useful manner to improve price transparency and market functioning. The infrastructure bill mandates the FCC convene a proceeding to determine how to achieve universal service and to recommend to Congress expand it “if the Commission believes such an expansion is in the public interest.”

Another key policy issue that will be addressed in the infrastructure bill's implementation is the role of public sector and nonprofit entities like consumer utility cooperatives. When the Biden administration issued its foundation for the infrastructure bill -- the American Jobs Plan -- it clearly favored them as more nimble and complete builders and operators of much needed infrastructure as shown in this paragraph from the plan:

Build high-speed broadband infrastructure to reach 100 percent coverage. The President’s plan prioritizes building “future proof” broadband infrastructure in unserved and underserved areas so that we finally reach 100 percent high-speed broadband coverage. It also prioritizes support for broadband networks owned, operated by, or affiliated with local governments, non-profits, and co-operatives—providers with less pressure to turn profits and with a commitment to serving entire communities.

The pressure private investor owned vertically integrated telephone and cable companies face to generate profits works against full deployment in their putative service territories. That has brought about longstanding, widespread gaps in landline connectivity to homes and small businesses, creating a pattern of Swiss cheese holes in delivery infrastructure in urban, suburban, exurban and rural areas with the latter two categories most severely affected.

Broadband mapping provision of House-passed infrastructure measure poses risk to timely disbursement of state funding

The Largest U.S. Investment in Broadband Deployment Ever | Benton Institute for Broadband & Society: Broadband Equity, Access, and Deployment Program (And the Need for Better Broadband Maps) The U.S. Department of Commerce's National Telecommunications and Information Administration (NTIA) has six months to create the Broadband Equity, Access, and Deployment Program to support projects to construct and deploy broadband networks. Congress has allocated $42.45 billion for the program which will prioritize expansion of broadband in rural areas and states that rank below other states on broadband access and deployment. A key element in the implementation of the program is broadband mapping taking place at the Federal Communications Commission. The FCC is in the process of updating its current broadband maps with more detailed and precise information on the availability of fixed and mobile broadband services.

The Broadband Deployment Accuracy and Technological Availability (DATA) Act, signed into law in March 2020, requires the FCC to change the way broadband data is collected, verified, and reported. Specifically, the FCC must collect and disseminate granular broadband service availability data (broadband maps) from wired, fixed-wireless, satellite, and mobile broadband providers. To do this, the FCC is required to establish the Broadband Serviceable Location Fabric (a dataset of geocoded information for all broadband service locations, atop which broadband maps are overlaid) as the vehicle for reporting broadband service availability data. Additionally, the FCC must put forth specified requirements for service availability data collected from broadband providers, and it must create a challenge process to enable the submission of independent data challenging the accuracy of FCC broadband maps.

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This provision of the Infrastructure Investment and Jobs Act that passed the U.S. House of Representatives late this week and expected to be quickly signed into law is the largest risk factor to the measure's timely implementation. 

Given the nation's fraught history of broadband mapping, that key provision of the funding eligibility formula and the development of procedures to challenge their accuracy is likely to set off time consuming controversy between investor owned providers, consumer interest and state and federal regulators, bogging down federal disbursements for months and possibly years. The billions of dollars at stake provide impetus for these groups to file challenges and raise questions over the accuracy of the maps, neighborhood by neighborhood.

Eligibility for up to 75 percent grant funding for advanced telecom infrastructure builds is prioritized to “unserved areas,” defined as those where at least 80 percent of premises are unserved – those not having any providers offering service with throughput of at least 25 Mbps down and 3 Mbps up. That's open to gaming by fixed wireless providers who could conceivably claim offers of service meeting or exceeding the throughput minimum but at exorbitant rates.

“Underserved” areas – defined those lacking access to “reliable broadband service” with no providers offering service with throughput of at least 100 Mbps down and 20 Mbps up are secondarily eligible. For both categories, funding eligibility is limited to areas where least 80 percent of premises are unserved or underserved. Neighborhoods failing to meet the 80 percent threshold would be out of luck and continue to potentially suffer redlining by incumbent providers serving only select parts of them.