Fearing universal service mandate, price regulation small and medium size incumbents claim robust market competition makes Title II regulation unnecessary

ACA Connects, a trade association of small and medium sized telephone and cable companies, has issued a white paper titled Broadband Is Competition Thriving Across America. Anticipating ongoing policy debate on regulation of advanced telecommunications, it presents data it claims show the Federal Communications Commission need not readopt regulations that regard Internet protocol telecommunications as a common carrier utility regulated under Title II of the Communications Act as the Biden administration urged in a July 9, 2021 executive order.

The paper argues robust competitive market forces make regulation unnecessary because nearly nine out of 10 American homes have access to advanced telecommunications meeting the FCC’s throughput-based definition of “broadband.” Homes having access to that and higher bandwidth is likely to increase based on current trends, it adds.

The paper relies on Form 477 reports on their service availability that providers must file with the FCC. The data includes providers using cable, DSL, fiber or fixed wireless technologies but not satellite or other technologies “because capacity limitations may limit the competitive impact of providers using these technologies.”

The paper states common-carrier-style regulation would be “particularly problematic” because of “rapid technological change.” That’s been a consistent message from incumbent investor-owned companies wishing to defer capital investment in upgrading legacy metallic outside plant to fiber to the premise (FTTP) for as long as possible to protect their bottom lines.

That rationale is understandable, but based on a false premise. No new advanced telecommunications delivery infrastructure technologies have emerged that are superior to FTTP, which has been around for decades. Perhaps by the 23rd century, it will be obsoleted by a Star Trek-like quantum subspace channel. But not over the foreseeable future.

While not stated directly, the apparent purpose of the paper stems from concerns that readoption of the Title II regulatory scheme will subject the organization’s member companies to universal service mandates and state rate regulation through public utility commissions.

Framing advanced telecommunications service as a competitive market undercuts the regulatory rationale for Title II regulation because it is predicated on telecommunications as a natural monopoly market like other utilities that don’t lend themselves to meaningful market competition being claimed by ACA Connects. That requires prices to be regulated because market forces won't act to control them and protect affordability. Also, universal service/non-discrimination mandates since homes in areas deemed unprofitable to connect would go without.

Notably, the July 2021 Biden administration executive order was issued with the purpose of promoting competition in the U.S. economy, implicitly recognizing competition is negligible in advanced telecommunications that is dominated by large investor-owned corporations. ACA Connects urges if the Title II rules are readopted, they should apply only to these entities and exempt smaller players like its members. Additionally, its white paper points to the stated plans by large providers to deploy fiber to the premises (FTTP) as evidence of strong market competition making utility regulation unnecessary.

Third front opens in advanced telecommunications infrastructure subsidy wars

A third battlefront is opening between shareholders of big telephone and cable companies and the broader public interest over rules governing federal and state subsidies to boost access to affordable and reliable advanced telecommunications. It’s over so-called “technological neutrality” and specifically fiber to the premise (FTTP) versus wireless distribution infrastructure.

The other two likely points of contention are over the accuracy of the Federal Communications Commission’s forthcoming “broadband maps” to determine how much funding states will receive through the federal Infrastructure Bill’s Broadband Equity, Access, and Deployment (BEAD) Program (several states lack confidence in any federal maps, preferring their own maps that could them at odds with the federal government) and whether proposed BEAD infrastructure projects proposed by public and nonprofit fiber to the premise (FTTP) providers include sufficient “unserved” addresses not advertised reliable service with throughput of at least 20 Mbps down and 3 Mbps up.

The big investor owned, vertically integrated providers want the subsidies to go toward any technology that’s capable of meeting minimum throughput (100/20) and reliability. But at least some policymakers argue the best use of public dollars is to invest them in more durable FTTP infrastructure given its 30-50 year or longer lifespan and headroom to accommodate the well-established trend of increasingly bandwidth hungry end user device applications. They include the National Telecommunications and Information Administration, the federal agency administering the BEAD state grant funds and the California Public Utilities Commission (CPUC) at the state level.

On April 21, 2022, the CPUC issued a final decision adopting staff proposed rules for its Federal Funding (capital subsidy) Account (FFA) based on the grant rules promulgated by the U.S. Treasury Department for State and Local Government Capital Projects Fund contained in the American Rescue Plan Act (ARPA). For advanced telecommunications infrastructure, those rules limit funding eligibility to “reliable wireline broadband infrastructure.”

Similarly, the CPUC FFA decision favors FTTP, noting “fiber optic infrastructure is scalable and enables the next generation of application solutions for all communities.” That displeases large incumbent providers that regard fixed wireless as a “firewall” to protect their nominal service territories from government owned and nonprofit providers that would use the federal subsidies for their own fiber builds, according to Steve Blum of Tellus Venture Associates, a consultant to California cities and counties.

Large incumbents including AT&T, Consolidated Communications, Frontier and trade associations CTIA and US Telecom - the Broadband Association are backing an urgency measure pending in the California Legislature to counter the CPUC decision, expressly authorizing wireless internet service providers to receive CPUC infrastructure subsidy funding. It's opposed by an association of 39 California counties and the Electronic Frontier Foundation.

Current California law, Public Utilities Code Section 281(f)(1) requires the CPUC award infrastructure subsidies on a “technology-neutral basis, taking into account the useful economic life of capital investments, and including both wireline and wireless technology.” The CPUC FFA decision incentivizes fiber given its longer lifespan compared to fixed wireless infrastructure. “Our determination of what wireline technologies offer reliable service is consistent with the Final (U.S. Treasury Capital Projects) Rule, which found that these legacy technologies typically lag on speeds, latency, and other factors, as compared to more modern technologies like fiber," the CPUC decision states.

Regional open access fiber as the telecom regional airports of the 21st century

As the U.S. continues to debate the role of public and private ownership and operation of advanced telecommunications infrastructure, a California local government official offers simple aeronautical analogy to progress beyond the debate and bring ubiquitous connectivity to nearly every American doorstep.

Just as local governments own and operate regional airports, regional open access fiber infrastructure can serve as the airports for internet service providers operating as the airlines. Like airlines that rent terminal space at airports, the ISPs would rent access to the infrastructure to deliver service to their customers.

Calaveras County, California Supervisor Jack Garamendi’s concept makes a lot of sense. Investor owned vertically integrated providers cannot afford to bring fiber connections serve all homes, businesses and institutions in their nominal service areas. That’s because their investors expect relatively short term returns on capital investments incompatible with the long term investment horizon for infrastructure. Hence, the nation is handicapped with partially deployed infrastructure with only about a third of all homes having access to fiber connections that should have reached nearly all of them by 2010 with better policy and planning.

Now Garamendi is working to build what amounts to a regional airport system serving 38 California counties as president of the Golden State Connect Authority (GSCA). As a joint powers authority and governmental entity, the GSCA plans to access the public bond markets to finance the fiber. That’s more patient capital that’s compatible with fiber infrastructure serviceable for decades – much like airports. California legislation enacted in 2021 appropriates continuous funding to help secure the bond debt.

The GSCA is modeling itself on and working with the State of Utah’s Telecommunication Open Infrastructure Agency (UTOPIA), a group of 11 Utah cities that joined together in 2004 to build, deploy, and operate fiber infrastructure connecting all homes and businesses.

According to Garamendi, the GSCA plans to ramp up deployment of fiber rapidly, starting with more densely settled areas. “We’ll go fast and we’ll pick up speed,” he said at an Electronic Frontier Foundation event this week.

Let’s hope so. The GSCA must avoid only partially deploying like the large corporate investor-owned telephone companies that serve limited, more densely developed areas. Great numbers of residents and small businesses in GSCA counties have coped with lack of landline connections for many years – even in not so thinly populated exurban areas at the outlying edges of metro counties, forced to rely on high cost, low value wireless services.

The GSCA won’t be able to bring fiber to every location, Garamendi noted, given some are in very remote rural areas of the Golden State. But access to patient capital will allow it to go much farther than the far less patient capital of investor-owned providers that naturally cherry pick areas conforming to their stringent rate of return and profitability standards. 

State and regional public telecom entities like UTOPIA and the GSCA offer the nation a badly needed self sustaining model to build and operate fiber networks to provide near universal service and affordable access. Such self sustaining business structures are particularly needed in the absence of coordinated, sustained federal policy and funding designed to ensure fiber connections reach all American homes and small businesses.

Regionalism isn't new for telecom infrastructure. Telephone companies were structured as interstate regional bell operating companies formed upon the divestiture of AT&T in 1982.

Just a few miles outside of town: Falling through the cracks with outdated 1950 view of U.S. residential settlement

A good problem to have: Managing the ARPA windfall in a small NC county - Carolina Public Press:

Having more GREAT grant money to expand broadband is a point of interest for Madison County, where census data shows 72.4% of residents have a broadband internet connection — significantly less than the state’s 83.4% average.

“The grants that have been awarded — other grants not connected to this — over the years have been to reach the far outstretched parts of rural counties,” Young said. “What’s left is the people close to town that weren’t close enough. The outskirts of the county have some internet, but those a few miles outside of town are still living in 1991.”

This is a basic problem in how the U.S. subsidizes advanced telecom infrastructure. It takes a binary view of residential settlement patterns as if it were still 1950 and people either lived in town or on farms while overlooking the edges of metro areas and exurbs. Housing density in these areas is higher than rural but lower than the suburbs. But it's too low for investor owned infrastructure to be profitably built and operated. As a result, they fall through the cracks and are overlooked by both the private and public sectors.

U.S. telecom subsidy policy reliant on one off grants for "broadband" bandwidth without universal service mandate

Baltimore Eyes Federal Funds for Municipal Broadband - Bloomberg:

For decades, the phone carriers and cable companies have collected billions in fees and federal funds aimed at subsidizing service to underserved areas like Johnston Square. And yet, the mission has fallen short of the goals, said Ali.“Will we be seeing the largest incumbents swoop down on state broadband offices and simply gobble up the money?” Ali said. “This is the one big shot. We cannot let history repeat itself. Otherwise we’re going to need another $65 billion in 10 years.

That would be Christopher Ali, associate professor of media studies at the University of Virginia. Ali adroitly points up a major flaw in U.S. telecommunications policy of heavily relying on one off grants to subsidize "broadband" bandwidth instead of a coordinated, unified subsidy program combined with a universal service mandate as with voice telephone service. Updated to specify a fiber to the premises (FTTP) infrastructure standard.

Lacking fiber to the prem #FTTP infrastructure standard, report highlights folly of U.S. grant funding policy to boost broadband speed

GAO calls for cohesive federal strategy to curb fragmented broadband funding | Fierce Telecom:

The GAO further added minimum required broadband deployment speeds vary among programs and continue to change. In 2016 for instance, recipients of USDA’s Rural Utilities Service (RUS) Community Connect program were required to deploy broadband speeds of at least 10/1 Mbps. That required speed increased to 25/3 Mbps by 2018.

Meanwhile, the FCC’s High Cost Connect America Fund Phase II program, which ran from 2015 through 2020, maintained the 10/1 threshold. And under FCC’s Rural Digital Opportunity Fund Phase 1 auction, 25/3 Mbps was the benchmark for areas to be considered unserved and thus eligible for funding.

The report's findings indicate agencies are still figuring out what the standard for broadband service should be. The FCC’s long-anticipated, revamped broadband maps are set to be released sometime this fall, and they may help more precisely allocate broadband funds where they’re needed.

Advanced telecommunications fraught with heightened political peril with enactment of infrastructure bill

Due to excessive reliance on privatized advanced telecommunications infrastructure and weak regulatory and market incentives, the United States is many years behind where it should be when it comes to replacing ubiquitous copper telephone lines built for an era of voice telephone service with fiber for today’s Internet-protocol enabled services. That became painfully apparent with public health social distancing measures during the COVID-19 pandemic that made households very reliant on advanced telecommunications for work, education, purchasing goods and services, virtual medical care and entertainment. Impatience with lack of reliable, affordable access -- present pre-pandemic -- reached a boiling point.

The enactment of advanced telecommunications infrastructure subsidies in the Infrastructure Investment and Jobs Act last November has raised expectations of rapid relief after years of dashed political promises by elected officials to address the issue. The billions in subsidies set aside for advanced telecommunications infrastructure has been characterized as a once in a lifetime investment to finally put it to rest.

But the legislative provisions of the subsidies to be granted states as well as recently issued rules governing the grants will likely introduce additional delay even before any infrastructure is built. Expect months if not years of delays as incumbent investor-owned telephone and cable companies battle states, smaller upstarts and publicly owned projects over eligibility rules governing the subsidies and how they can be used.

Unlike transportation infrastructure such as roads, highways and airports that are expected to take many years to plan and build, voters may well have far less patient expectations. They’ll want to see fast, tangible progress when it comes to advanced telecommunications infrastructure. Especially with neighbors just down the road or around the bend who have fiber connections, envious while they try to get by on DSL over aged copper and wireless workarounds. Or fiber on a nearby utility pole but no affordable residential service in the case of Vermonter Claudia Harris. They’ll naturally think since they’ve been waiting for years for fiber, all those billions in federal subsidies should easily bridge the gap to their homes in short order. When it doesn’t quickly materialize, elected officials at all levels of government could face angry blowback from voters. They are well aware of the high level of concern among their constituents, noting complaints about Internet access and affordability are among the top issues raised by them.

NTIA chief's comments on subsidizing non-fiber telecom infrastructure as "escape hatch" raises questions

Do the BEAD rules mean satellite and other non-fiber services won’t be eligible for funding?

Again, no. It’s true the NTIA in its BEAD rules said it will count areas covered only by satellite broadband or service based on unlicensed spectrum as unserved and also expressed a preference for fiber. However, Davidson said he expects satellite and other non-fiber technologies will receive plenty of funding.

“This is an infrastructure project that’s designed to last for years. And we do put our thumb on the scale on the most resilient, future-proof technologies that we can,” he said. But NTIA knows “there has to be an escape valve for states. And for the really high-cost areas we fully expect that there will be states who have significant portions of other technologies.”

Source: NTIA chief answers 5 burning broadband funding questions

Alan Davidson, the NTIA administrator, didn't elaborate in this piece as to what those other non-fiber to the premise (FTTP) technologies will be. States can authorize Broadband Equity, Access, and Deployment (BEAD) Program grant funding for up to 75 percent of project costs in high cost areas, with the 25 percent match waivable. These are defined in the rules as areas with higher than average construction costs for projects where at least 80 percent of homes and businesses cannot order service with minimum throughput of 25Mbps down and 3Mbps up.

Davidson is quoted as specifying satellite as one of the fiber alternatives. But satellite has been around for years in these areas, calling into question why it would need subsidization to expand it. Moreover, it's a substandard, costly option that no one really wants to rely upon for connectivity. Satellite is also omitted from the BEAD rules as a form of reliable service where it is the only service option.

The other possible technology is fixed terrestrial wireless. The BEAD rules implicitly allow funding of fixed wireless using licensed spectrum or a mix of licensed and unlicensed spectrum as they recognize it as "reliable" service. As with satellite, fixed wireless has been around for many years in areas of the nation as a stopgap until FTTP can be deployed, calling into question the need to subsidize its expansion. It's best suited to areas of the nation with relatively flat terrain and modest tree growth since it utilizes frequencies that require a clear line of sight to end users -- areas because of these attributes are also likely to be less costly to build FTTP.