FCC, Stop Worrying — the ‘Special Access’ Data Market Is Already Competitive
by Bruce Mehlman
The market for “special access” data services is getting more competitive all the time. And now there is additional fresh economic evidence of this.
For those who aren’t familiar with this important telecommunications issue, “special access” refers to bulk data connections used by businesses. For some time now, large traditional telecom providers have come under fire from critics who contend they make this sector uncompetitive, and the Federal Communications Commission has been investigating the issue.
But three professors (Mark Israel, Daniel Rubinfeld and Glenn Woroch) have analyzed the FCC’s own data and found that many businesses have competitive options that are geographically close to them. AT&T’s counsel summed up the professors work like this: “... these new, more precise data show even more dramatically that the vast majority of locations with special access demand are extremely close to multiple facilities-based competitors—indeed, in most cases, within a few hundred feet.”
To understand why the market is competitive, it’s important to understand how the market actually works. The professors write: “... competitive providers deploy fiber networks in areas where there is demand for special access services, use those networks to compete for customers located in buildings in the vicinity of those fiber networks, and then deploy connections to buildings where they win customers.”
Why does this matter? Because the realistic opportunity (a bid) to capture a market from an incumbent itself is a sign of competition, since it constrains the prices the incumbent can offer. With only one provider, prices would be higher. With competitive providers sniffing around and building fiber very close to potential customers, prices are constrained.
So let’s look at the facts. Based on an analysis of the FCC’s own data, it turns out that 25% of buildings that have a connection only to an incumbent local exchange carrier’s (ILEC) special access services are only 17 feet away from the nearest competitive provider’s fiber network; 50% are 88 feet away, and 75% percent are within 456 feet. The mean distance for all relevant buildings is 364 feet.
For comparison, 364 feet is about the length of a football field with the end zones. Seventeen feet? There are canoes and snakes that long. Eighty-eight feet? That’s shorter than an NBA court and less than Yadier Molina throws every night to get a runner out at second base. What about 456 feet? Well, with the Kentucky Derby coming up, that’s more than 200 feet shorter than one furlong. And it’s the same height as a roller coaster in New Jersey.
So the economic conclusion is clear. As the authors write:
“In any event, it is not true that most buildings are served by only an ILEC or only by an ILEC and a single other provider. This assertion is based on two incorrect assumptions: (1) competition occurs only among providers that have already deployed connections to a building, and (2) cable companies do not compete for special access customers.”
Rather than the distorted picture of a market dominated by ILEC incumbents that the FCC likes to present, in fact, the real picture is one of competition, with an ILEC and two competitors (one of whom may be a cable company offering fast speeds) offering facilities-based competition for most buildings in which there is special access demand. Isn’t this the way markets are supposed to work? Why won’t the FCC recognize this?
It’s said the longest journey begins with a single step. Here, to reach half of the supposed “monopoly” buildings, competitive local exchange carrier (CLEC) competitors only have to go 88 feet. Why can’t they invest? Why do they need government subsidizing their business model? Is stringing fiber 88 feet, to reach half the market, too much of a burden?
On any reasonable analysis of the FCC’s data, the special access market is competitive. It’s time to recognize that fact.
Athletes sometimes wonder what to do after their sporting careers are over. For Yadier Molina, the choice is easy: work for a CLEC. He can show them how easy it is to sling fiber 88 feet.
Originally published by The Street.
Netflix’s ‘House of Cards’ Collapses
OTT service’s network management revelations are an ‘exercise in hypocrisy’
by Rick Boucher
Netflix’s stunning admission that, for five years, it reduced the video speeds of customers of Verizon Wireless and AT&T Wireless — while not doing so for customers of Sprint and T-Mobile — is little short of breathtaking. It was an exercise in hypocrisy to claim that broadband providers were degrading the quality of its video when, in fact, Netflix — without notifying its customers — was doing precisely that.
Recall the history here to understand why Netflix’s actions were so brazen and deserving of governmental review. Traditionally, peering agreements among content networks and last-mile Internet-service providers (ISPs) were never regulated, but were always negotiated between private parties.
For Netflix, arm’s-length negotiations posed a problem, because as the share of total bandwidth taken by its content grew (up to 37% at peak hours, according to one survey in March of 2015), its position became ever more untenable. It wanted ISPs to build more bandwidth to consumers for Netflx’s use, but it didn’t want to help pay for that. It didn’t want its own business model constrained.
SHIFTING THE COST BURDEN
Instead, Netflix tried to shift the real costs of its service onto others — the local network operators. In fact, it wanted “free interconnection” with the ISPs shouldering all of the costs of the upgrades required to carry the ever-growing volume of Netflix traffic. Then, as the flood of Netflix content caused consumers to experience problems with video quality, Netflix was quick to put the blame on the ISPs.
Also remember that Netflix was a driving force in advocating for network neutrality. The company’s CEO, Reed Hastings, pushed first against Comcast and then against ISPs more generally, accusing them of “purposeful congestion” and pushed free interconnection for Netflix’s services. In a sharp departure from an unbroken history of peering agreements being negotiated by private parties through which the network responsible for delivering a greater proportion of traffic to the other network would bear the resulting cost, he demanded that “they (ISPs) must provide sufficient access to their network without charge.”
Hastings blamed video quality problems on a lack of interconnectivity, even as — without disclosure — Netflix itself was slowing down video. Then, while continuing to complain about video quality degradation, the company persistently and successfully urged the Federal Communications Commission to include regulatory oversight over interconnection for the first time as an aspect of the net-neutrality rulemaking. That unprecedented assertion of authority is now a central feature of the litigation presently pending on the net-neutrality order.
ISPs, whether cable, wired telco or mobile, weren’t throttling or slowing Netflix video. Netflix was. This fact matters for yet another reason. One of the central responsibilities imposed by the net-neutrality order on broadband providers is transparency in network management practices. It must be noted that while being one of the strongest advocates of the FCC using last-century common-carrier rules to impose net neutrality obligations on the ISPs, the company was simultaneously secretly violating one of the core net-neutrality principles, the necessity of being transparent in its network management practices. The practice of degrading video for customers without notice was anything but transparent.
A MATTER OF MATH
Network-management practices that deliver fast, reliable Internet content rely not on blog posts and banging drums for government action, but on sound engineering and sound mathematics. The French writer Stendahl wrote, “Mathematics allows for no hypocrisy and no vagueness.” Nor should legal proceedings. Now that Netflix’s actions are publicly known, there is a clear path forward.
The Federal Trade Commission has jurisdiction over unfair trade practices in the Internet ecosystem. Advertising one service, such as level of video quality, while delivering a lesser service falls within the ambit of an unfair trade practice. Did Netflix advertise a service it failed to deliver? Were its conduct and its disclosures to customers consistent with fair trade practice?
Congressional committees may also legitimately ask about the circumstances that led the FCC to take the unprecedented step of departing from voluntary peering arrangements and asserting regulatory authority over interconnection between networks. In both venues it’s timely to ask some serious questions regarding Netflix’s behavior. These proceedings could even become a new Netflix hit, a true-life House of Cards.
Originally published at Multichannel News.
Level the Privacy Playing Field to Protect Consumers
Download a PDF of IIA Honorary Chairman Rick Boucher’s op-ed for Bloomberg BNA on Internet privacy and regulation.
The competition-distorting game in the business data market
by Bruce Mehlman
In their never-ending quest for continued and even expanded “special access” price regulation, competitive local exchange carriers (CLECs) for years have suggested that no real competition exists in the business data market.
Not true. I’ve been writing for some time how the cable industry provides effective competition in the business data market by offering Ethernet connections that are significantly faster than today’s CLEC services that continue to rely on antiquated copper-based networks as a result of special access regulation. Now, it turns out there is a group that agrees with me: the cable industry itself.
In their most recent comments filed at the Federal Communications Commission (FCC), the National Cable & Telecommunications Association (NCTA) highlights how the cable industry has played “a significant and growing” role in the special access marketplace. NCTA noted how their presence has increased from “…virtually non-existent when the Commission first started this proceeding back in 2005, ” to now offering “…business customers a wide variety of high-capacity services including state-of-the-art Ethernet services over Hybrid Fiber Coax or I00 percent fiber optic networks.”
Not surprisingly, innovation and competition have vastly changed the market since 2005, two years prior to the iPhone’s introduction. Rather than simply reselling services and facilities provided by others, the cable industry has entered this market the harder way: through investment. So as NCTA notes, “the most important task for the Commission in this proceeding is to ensure that it preserves incentives for continuing and expanding facilities-based competitive entry and investment.”
One would think that preserving competition and expanding investment would always be the principal task and goal of a regulatory agency, but this hasn’t been the case with special access. Instead, we’ve seen the CLECs, for two decades, hold on to their special privileges, including price regulation, forcing ILECs to maintain two networks, one of which the CLECs use to offer a slower, technologically inferior product to that which cable now offers.
So, for the Commission, the issue ought to be simple: Is there competition? And if there is competition, why regulate prices? The first question is answered easily by cable’s extensive entry into the market; the second naturally follows from it – in a competitive market, no need or justification exists for price regulation.
The question the FCC must now resolve is whether rates are “reasonable,” and market competition is the proof of that. As NCTA notes, “Firms lacking market power simply cannot rationally price for services in ways which…would contravene Sections 201(b) and 202(a) of the Act.” Based on this longstanding precedent, where a competitor has entered the market with its own facilities, the Commission has no basis for concluding that the competitor’s price is unreasonable. Consequently, in areas with two or more facilities-based providers, the Commission has no basis in logic or law to compel an incumbent LEC to offer service at a regulated rate that is lower than the competitive price.”
Viewed this way, the Commission’s task is pretty simple. The FCC has enough data to act. It should end this proceeding quickly and allow the market and competition to work, encouraging rather than discouraging the facilities-based investment that is already bringing faster and better products to the market for business services. Unsurprisingly, the most competition in this market is already at higher speeds than 1.54 Mbps, for the same reason that Willie Sutton robbed banks – it’s where the money is.
Rate regulation would distort incentives for competition and new entry, particularly among competitors that have built out facilities to compete. Rate regulation is unnecessary. The best sign of a well-working, competitive market is when new entrants come in with a better product to compete for customers. That’s exactly what’s happening in the business services market today.
Too often in Washington, we see industries (like the CLECs) seek special protection to shield themselves from competition, rather than advertise that they want to participate in the competitive fray. Good for the cable industry for taking the path of competition, and good for them for calling out the CLECs’ regulatory, competition-distorting game.
Originally published at The Hill.
Sprint Tells Regulators, Investors Different Stories
by Bruce Mehlman
Challenged telecommunications giant Sprint (S) is talking out of both sides of its mouth—and it seems to be a smart strategy that’s paying off.
Every year American employers spend far more money than they should on a blizzard of government filings. Some are mandatory like tax returns and Securities and Exchange Commission (SEC) filings. Some are critical for public safety or record-keeping like prescription drug studies or the Census. Some are purely voluntary—like engaging in federal regulatory agency proceedings.
However, problems arise when these filings fail to add up. For instance, what if a company tells the SEC one thing to try to win favor on Wall Street but then tells another government agency something different to get special regulatory treatment? Which one should the government believe? For that matter, what should investors believe?
Sprint provides an excellent example of this type of behavior, offering investors a bullish spin for growth based on innovation while pleading with policy makers to pity its relative weakness through ongoing regulatory intervention. In the age of heightened transparency, however, policy makers should see through the smoke and recognize the competitive market that truly is. And, unfortunately for Sprint and its investors, the story it’s telling regulators is much closer to the truth.
Last September, Sprint told the FCC that it still needs government-regulated access to business data lines, so-called “special access”: “Every one of these sites will require additional backhaul and Sprint and other competitors will depend on both TDM and Ethernet special access more than ever to be able to compete.”
Sprint said much the same in 2013.
But to the SEC (and therefore to Wall Street), however, Sprint tells a different story, one of network modernization and using modern lines. For instance, in its Form 10-Q just last August (a few weeks before the filing with the FCC), Sprint stated: “As part of our recently completed modernization program, we modified our existing backhaul architecture to enable increased capacity to our network at a lower cost by utilizing Ethernet as opposed to time division multiplexing (TDM) technology.” The company also said that network modernization program was saving it money through “reduced network maintenance and operating costs, capital efficiencies, reduced energy costs, lower roaming expenses and backhaul savings.”
Translated, this means that Sprint is modernizing its facilities and saving money by doing so, including from connections to other networks. Most of the network modernization efforts consist of building out Ethernet lines, the faster lines used for business data that are replacing the older, copper wires used for regulated “special access” lines. In fact, Sprint said just that in a press release in 2011, noting correctly that “Aggregated Ethernet access can provide a cost-effective alternative to traditional TDM access” (i.e., “special access” lines) for business.
Why then the need for special access and prices set by regulation rather than the competitive market?
So far, both sales pitches seem to be working, at least somewhat: the FCC has maintained anachronistic special access regulation, and Wall Street has accepted Sprint’s statements that its network modernization program is good for the company. Last July, a Fierce Wireless article noted that Sprint was going to use wireless backhaul to reduce its capital costs, even allocating a portion of its spectrum for backhaul; in a similar piece, BITG analyst Walter Piecyk estimated that Sprint could save from $600 million to $1.2 billion per year by switching to wireless backhaul.
In this, the analysts just echoed the views of Sprint CEO Dan Hesse, who stated in 2013 (a few months after Sprint once again filed at the FCC on behalf of “special access”) that he expected 90% of Sprint’s backhaul “to be driven by Ethernet over fiber and the remaining over microwave.” So Sprint is switching to newer, faster technology, and in the process saving money, but still wants its competitors to subsidize older lines. It tells the SEC that it’s embarking on newer lines to compete but tells the FCC that it needs regulation of older lines, too.
Wall Street knows that in the competitive world of telecommunications, the companies that invest in newer and faster technologies are the ones most likely to do better over time—even better if these investments lower the companies’ operating costs, as Sprint claims on its backhaul costs. Sprint obviously knows all this, too, which is why it is so eager to convince Wall Street analysts that it is a thoroughly modern company deserving of their money.
But Sprint can’t perform the straddle forever. Let’s take Sprint at its word that it is investing and competing in a highly competitive market, even at the same time reducing capital expenditures. It’s time to end the special pleading for special access, invest, and compete. That’s what great companies do.
Originally published by The Street.
As Activists Continue to Use Technology to Fight for Justice, Access Matters
The federal Lifeline program needs to be reformed to include high-speed Internet service for Americans with the lowest incomes.
by Larry Irving and Jamal Simmons
People aim cellphones at a speaker in front of the TCL Chinese Theatre on Hollywood Boulevard in Los Angeles on Dec. 6, 2014, as they march to protest the decision in New York not to indict a police officer involved in the choke hold death of Eric Garner in New York City.
Those advocating for a freer and more just America have always used the latest communications technology to further their aims. In 1841, abolitionist Frederick Douglass launched the North Star newspaper using the advanced communications technology of the 19th century, the printing press, to fight for the freedom of black people. Douglass and the suffragists of the late 19th and early 20th centuries followed in the tradition of the great pamphleteers, such as Thomas Paine, who built support among fellow colonists to separate themselves from the king of England.
President Franklin Delano Roosevelt used commercial radio to broadcast fireside chats to the American public about how he was trying to alleviate the impact of the Great Depression in the 1930s and ’40s.
In the 1950s and ’60s, Martin Luther King Jr. and other civil rights leaders knew that television cameras capturing the brutality of oppressive sheriffs would outrage Americans in their living rooms far from the front of segregation. The repulsion Americans felt when they saw women and children attacked by men wielding firehouses and dogs set in motion one of the great reform movements in American history.
Today, protest leaders across America capture moments of outrage with cellphone cameras and distribute videos over the Internet to worldwide audiences using social media.
Those who created the printing press, radio, television and mobile phone had no idea that their inventions would be used as tools in the fight for justice. Yet in each era, Americans used technology built to educate, entertain and enable business transactions in order to accomplish political goals.
These days, new social media platforms emerge regularly. Individuals have become broadcast channels with audiences rivaling some small radio stations. The barrier to new technologies reaching even wider audiences is lack of high-speed Internet access, and for many people who need it most, the barrier to access is cost. This Black History Month, reforming the federal Lifeline program to include broadband should be elevated as a key step to increasing access for Americans with the lowest incomes.
As the telephone became a tool necessary to conduct business, get access to emergency services and stay in touch with family and friends, Rep. Mickey Leland (D-Texas), then-chairman of the Congressional Black Caucus, prompted President Ronald Reagan’s Federal Communications Commission to create the Lifeline program in 1985 to lower costs and increase access to that critical service for low-income Americans. The Bush administration widened the program to include access to mobile phones. As the Internet becomes the standard required to access commercial services, apply for employment and complete homework, it’s time to include broadband service in the Lifeline program.
Along with adding broadband, policymakers should reform how the Lifeline program operates. Streamlining the application process by coordinating eligibility qualification with other federal programs and giving individual citizens the power to choose among providers on their own with a Lifeline Benefits Card should lower costs and gather more bipartisan support.
From reading pamphlets and newspapers to listening to the radio and watching television, American democracy has relied upon the communications technology of each era to engage citizens. Political candidates post digital video to communicate ideas, and activists are only becoming more creative in engaging followers online. Access to high-speed Internet service is critical for participating in the great American debates of today. Reforming Lifeline to include broadband service will help ensure that more Americans are able to bring more change.
Originally published by The Root.
Broadband growth means staying the course
by Rick Boucher & Larry Irving
Monday is the 20th anniversary of the Telecommunications Act of 1996, the last rewrite of the nation’s communications laws that set the stage for the competition, innovation and investment that we now enjoy but must not take for granted.
The act’s framers promoted light-touch regulation and a structure that led to an expanding Internet driven by new technologies, devices and applications. These forward-looking Clinton-era policies placed competition and investment as the central catalysts to drive innovation and advance consumer benefits.
Two stark paths now lie before the Federal Communications Commission (FCC): It can advance pro-investment, facilities-based broadband competition or it can discourage investment and broadband build-out.
Recent actions and announcements from the FCC indicate that the agency may be backtracking on the successful broadband policies of the past two decades. Rate regulation of broadband, for example, would negatively affect a growing sector of the economy by allowing government to place its hand on the scale rather than permitting market competition.
The FCC is required by law to determine annually the state of competition in the U.S. wireless market, but it fails to find the market competitive, even as nearly 80 percent of Americans have a choice of five or more wireless service providers. Consumers also have ample choices among plans and phone manufacturers.
Moreover, the agency has been reluctant to recognize competition among different technologies, such as between wired and wireless services. The 1996 act’s goal to promote cross-platform competition appears largely to have been realized, as triple- and quadruple-play plans for video, Internet and voice service are marketed by wired and wireless phone companies and by cable companies. More and more Americans are cutting the cord to landline phones.
The FCC also seeks to continue regulating last-generation business data lines that fail to meet today’s definition of broadband. In essence, it forces incumbent providers to invest in two networks, the old one that helps the business models still using copper wires and the new one that provides fiber for the high-speed broadband consumers and businesses want and need. Rather than give incentives for new fiber investment by competitors to serve business customers, the FCC continues to promote leasing of the antiquated copper network.
The agency has further dampened investment incentives by extending pro-leasing policies to wireless networks. It recently abandoned precedent that required wireless providers with spectrum to invest and build out their spectrum resources before leasing (roaming) on a competitor’s network. Why bother building out one’s own network, enhancing competition, if it’s easier to roam on the networks of others? This slows the effort to bring faster broadband to everyone.
Europe has tried to advance leasing at the expense of promoting investment and competition, and it resulted in less investment. Under those policies, Europe fell behind the U.S. in both broadband investment and deployment. In the U.S., broadband investment was $562 per household in 2012, compared with a meager $244 per household in Europe.
At bottom, it’s pretty simple. Competition and a light regulatory touch promote investment; regulations that deter competition deter investment.
A fitting anniversary celebration of the 1996 Telecom Act would be to stay the course so wisely set forth by Congress and the Clinton administration to encourage investment and innovation. We know it works. Just look at your smartphone.
Originally published in the San Jose Mercury News.
Will the U.S. Soon Fall behind in the Global Broadband Race?
by Larry Irving
“Regulatory humility.” To many, if not most, Americans, the phrase sounds like an oxymoron. Yet, for the last two decades, this has been the almost uniquely American approach to telecommunications and technology policy.
For more than 20 years, starting with the development of the first papers on Internet policy from the Clinton-Gore Administration, America’s watchwords were “first do no harm.” Adopting a posture of regulatory humility did not mean that government had no role: it still pressed for universal service, an open and secure Internet, protection of intellectual property, and improved use and management of spectrum needed for existing and emerging wireless technologies. The Administration recognized, however, that its job was to “steer, not row,” as the late Commerce Secretary Ron Brown put it.
Consistently, the United States has acted on the belief that policies that promote innovation and long-term investment are key to maintaining and expanding technological capacity and leadership, creating jobs, and improving consumer welfare. The approach has worked. The U.S. private sector has invested more than $1.4 trillion in telecommunications infrastructure since 1996, and private investment in America’s information infrastructure outpaces investment in any other country or region of the world.
Stark contrasts, however, lie beyond our borders. Australia, for example, has taken a more hands-on approach to infrastructure investment. Australia first announced its plans for a “National Broadband Network” (NBN) in 2007. The intention was to create a government-owned business enterprise that would provide broadband Internet across the country, but the NBN became increasingly politicized, faced construction difficulties and brought cost overruns. When a new administration took over after elections in 2013, they radically altered the vision and the financing for the NBN. Now, almost a decade after Australia’s government first led efforts to bring broadband to Australia, the NBN project is still underperforming and Australians still don’t have the world-class broadband network they want and were promised.
Choice of regulatory model has also affected investment in Europe. The Boston Consulting Group, in a report commissioned by the European Telecommunications Operators’ Association, stated that investment in Europe’s telecommunications infrastructure had declined by two percent per year for five years because of outdated and intrusive regulation that distorted competition and discouraged investment.
The European Commission now understands that new emerging technologies, such as the Internet of Things, cloud computing, virtual reality and data analytics, that will determine Europe’s economic and technological competitiveness will require increased investment in broadband networks. Thus, the EU is recasting its regulatory models to encourage that investment. In fact, the Commission recently launched a Digital Single Markets strategy to lay the groundwork for Europe’s digital future. One of the pillars of that initiative is creating the right conditions for digital networks and innovation to flourish. Key to creating that environment is an overhaul of existing telecom rules and the creation of incentives for investment in high-speed broadband.
These examples make what’s happening in the U.S. so perplexing. Earlier this year, the Federal Communications Commission (FCC) put at risk two decades of unparalleled investment in networks and technological growth. The FCC voted to apply Title II regulation – designed for regulation of a monopoly-era telephone regime – to the most vibrant and innovative sector of the U.S. economy. Even more troubling is that the FCC also intends to increase its control over Internet Protocol (IP)-based networks, the networks designed to carry new and innovative applications and services for consumers and businesses.
Title II regulation could stifle investment and deter innovation and, of note, there are options to preserve an open Internet and to spur growth and competition that are less archaic and destructive. Creating regulatory uncertainty as we seek investment in more capacious broadband networks makes little sense.
We have witnessed what happened in Australia over the past decade when government and politics became too involved in the development of a nation’s infrastructure, and we are watching Europe move to reform outdated, Title II-like regulation to accelerate sluggish investment in its broadband networks. The United States, on the other hand, has led the world in Internet innovation over the last 20 years, helping to spur investment with its deliberately chosen regulatory model. Now is not the time to reverse course. With more and more users and endless possibilities for innovation thanks to high-speed IP networks, investment is needed now, more than ever.
“Regulatory humility” and “first do no harm” – sounds like the right recipe for the next 20 years of broadband growth.
Originally published in The Hill.
Regulators Should Take ‘Yes’ for an Answer to Broadband Competition
By Bruce Mehlman
Federal Communications Commission (FCC) regulators, purportedly eager to promote competition, keep stifling the investment needed to advance it meaningfully. Case in point, the Commission recently opened a tariff investigation on “special access” rates in the business data services market. For many observers, this political inquiry is unwarranted by the facts on the ground, driven instead by companies whose business models are dependent on government protection for “rent-seeking,” or ongoing access to the networks that others built.
The market is working; with every passing month, evidence of real competition in ethernet and business services grows. Telcos, fiber over-builders, wireless players and cable companies are all investing to better compete for business customers.
Cable companies have https://www.ncta.com/industry-data/item/3199#.U3JOSGox5xg upgrading networks that extend deeply into neighborhoods and commercial areas, so their expansion into this space makes sense. In a telecommunications industry characterized by cross-platform competition, successful players must upgrade their networks and use them to their full extent. Cable is working to prepare for DOCSIS 3.1, gigabit to the home, and developing higher speed offerings for all types of customers. They see synergy with their existing interests and want to take advantage of economies of scope and scale to serve business customers.
Indeed, Comcast now boasts that its business services revenue “grew 21.4% to over $1.1 billion” targeting “businesses of any size;” Time Warner claims “just north of 30% growth in its wholesale transport business” while increasing capital expenditures focused on commercial buildings; Cox (which plans to offer gigabit service in all its markets by the end of next year) reports “double-digit growth again in the wireline last mile;” and Charter recently announced its plan to continue to expand “the footprint of [its] serviceable enterprise area” to serve more businesses. A FCC filing even noted that “[t]he enterprise-focused units of the nation’s largest cable operators-Time Warner Cable, Comcast, and Cox-are now the fifth, sixth, and eighth largest providers of ethernet services in the United States, respectively.”
Another reason cable is moving into business data services now, and another sign of healthy competition, is presented by Google. Bernstein Research believes that Google Fiber could take up to 40%-to-50% of the market in cities where it will be deployed and could pass 15-to-20 million homes within six-to-eight years—not bad for something Google described as an “experiment.” This expansion will force both the incumbents and cable to respond.
The commission’s new investigation into special access rates gives short shrift to these aggressive competitors and relies on an old vision of the marketplace to protect the business models of a few companies, even as it is supposed to be promoting deployment of ever-faster broadband. Those hardworking crews you see from the road, and that rumbling sound you can feel, represent investment taking place. Competition works and is working in the real world—but it apparently remains unseen and unfelt at the FCC.
According to FCC filings from INCOMPAS—the voice of Competitive Local Exchange Carriers (CLECs) who are dependent on government regulation giving them access to networks that others built—the country needs permanently heavy regulation to preserve competition. Just recently, INCOMPAS CEO Chip Pickering appeared on C-SPAN’s “The Communicators” to note that his trade association arose from the question, “Should we have a big monopoly or open it up to competition?” In reality, there is no such monopoly. INCOMPAS is simply trying to force real competitors making actual investment in infrastructure to subsidize those who are not; it’s choosing to ignore the investments and deployments by new entrants and the competition they offer for business services.
There is no reason for the FCC to put its hand on the scale and select winners and losers by re-regulating the business data services market. The Commission’s investigation is unnecessary and should be shut down now. The “village” is safe and thriving.
Originally published by The Street.
Net Neutrality: Washington’s Chance at a Bi-Partisan Win-Win Solution
by Rick Boucher
Net neutrality. It’s the longest standing communications policy debate of the 21st Century, and a decade after it started, it’s still raging and far from resolved.
I share these observations as a Democrat and long-standing supporter of strong network neutrality protections and as a deeply involved participant in the writing of the Communications Act of 1996.
I’m motivated by a desire to put this controversy to rest on terms that would allow both Democrats and Republicans to declare victory and realize their main policy objectives and, coincidentally, strongly benefit the public interest.
Title II Vulnerability
First, why do I say that the controversy is far from resolved? After all, in the name of network neutrality protection, the FCC just reclassified broadband as a Title II common carrier service. Doesn’t reclassification of broadband resolve the controversy and assure network neutrality protection?
Actually, no. It has only escalated the controversy and jeopardized the future for net neutrality guarantees. In fact, reclassification of broadband is perhaps the most tenuous federal agency decision in recent memory given that it suffers from severe potential legal infirmities and enormous political risk.
I’ll be specific.
First, the FCC’s reclassification order is legally vulnerable. For starters, it flies in the face of the Communications Act of ‘96. In that law, we specifically created the category of “information services” to ensure that Internet service providers who use telecommunications to make information available to the public will not be subject to monopoly-style regulation designed for the era of wired telephones. Until this year’s reclassification decision, the FCC had consistently treated Internet access as an information service. Suddenly, the FCC has now reversed ground, ignored years of precedent and reclassified broadband as a telecommunications service so that it can protect network neutrality through telephone regulations descended from the 1930s.
The courts do not look kindly on abrupt agency reversals where long-held interpretations are suddenly thrown out the window without a clear indication of changed circumstances warranting the regulatory about-face. In this case, the underlying facts have not changed, and consistent with judicial precedent, the courts will hold the FCC’s feet to the fire on its decision to ignore and reverse a long-standing interpretation that defines broadband as an “information service.”
The courts will also examine the FCC’s deficient notice prior to the rule change, in which the agency failed to put a possible reclassification at the center of its rule making proceeding. That shortcoming may well have deprived interested parties of the opportunity to provide informed comments and presents a very real legal risk that the FCC’s decision will be overturned.
Avoidance of Political Risk
Yet, the ultimate risk to the FCC’s net neutrality decision may be political. Current polling indicates roughly a 50 percent chance that a Republican will win the presidency next year. If that happens, the FCC would revert to a three-to-two Republican majority, and it’s virtually certain that a new Republican FCC would return to the classification of broadband as an information service. Network neutrality protections would be lost, and philosophically the Republicans would have little interest in finding an alternate means to continue them.
The FCC’s reclassification order rests on a bed of sand, but one thing it has done is open the door to a legislative opportunity for Democrats to achieve their long-held goal of statutory permanence for network neutrality protections.
During the telecom debates of the past decade, Republicans have consistently opposed net neutrality legislation. Now, in the interest of obtaining lighter regulatory treatment for broadband as an information service, Republicans have signaled their willingness to enshrine meaningful network neutrality protections in a statute in return for not applying common carrier regulation to the Internet.
By accepting the Republican offer, Congressional Democrats would achieve their long-held goal of statutory permanence for network neutrality in exchange for a return of broadband to the information services status it has enjoyed since its inception for all but a few months of this year. Net neutrality guarantees would be virtually immune from legal challenge and far removed from political risk.
Why wouldn’t Democrats want to take advantage of this unique opportunity? It’s a true compromise: net neutrality regulations in statute, enforceable by the FCC, in exchange for a return to information services regulatory treatment of broadband, also in statute, as Republicans want. There’s no reason not to take the deal for either party and also thereby remind the FCC that no matter which party controls it, Congress is the ultimate arbiter of telecom policy.
The issues are crystallized. For the moment, both Democrats and Republicans enjoy roughly equal leverage, and each can give to the other the thing it wants the most. In that circumstance, even in a Congress not prone to legislating, the passage of a law is clearly possible.
As a Democrat and network neutrality proponent, this is a deal I hope the Democrats will accept.
Republished with permission from Bloomberg BNA.
Bringing The Benefits of Broadband to Those Who Need It Most
Almost 90 percent of American households have broadband Internet. But tens of millions of Americans still are not connected to broadband.
Those Americans tend to be older, poorer, sicker or live in rural communities. In other words, the Americans who most need the benefits of broadband Internet too often are the people who aren’t connected. We can change that. With a revamp of an existing government program, we will ensure every American that wants broadband Internet service can have it.
The Lifeline Program democratized telephone service in America. It is difficult to imagine today given the ubiquity of mobile phones, but just 30 years ago almost 10 percent of Americans and 20 percent of black and Hispanic Americans lacked access to basic home telephone service. For low-income Americans, the situation was even worse: 25 percent of low-income black families and almost a third of low-income Hispanic families were without home telephone access.
The Lifeline Program was first a legislative proposal by the late Congressman Mickey Leland, then Chairman of the Congressional Black Caucus. At his prodding and with strong encouragement from consumer and civil rights groups, the Federal Communications Commission adopted a program providing low-income families with discounted telephone service. The Lifeline Program has been an unqualified success. Over the past 30 years, we have seen the national percentage of homes with phones increase from 91 percent in 1985 to 95 percent today. And the percentage of low-income households with telephone service has grown from 80 percent in 1985 to 92 percent today.
The Lifeline Program, which was extended to wireless phones in 2005, now provides phone service to 14 million people. But times have changed, and the telephone no longer is the principle tool of communication for many Americans. Broadband Internet is now a critical part of our communications infrastructure. In 2015, broadband Internet is as essential as basic telephone service was in 1985. It is time that our Lifeline policies reflect that reality.
Fortunately, members of the FCC recognize the need for updating Lifeline policies. Commissioners Mignon Clyburn and Jessica Rosenworcel, in particular, have outlined thoughtful approaches that can help bring the Lifeline Program into the 21st Century. There is an emerging consensus on what needs to be done:
• Extend Lifeline benefits to broadband Internet use;
• Empower consumers by providing the subsidy directly to eligible people (they could use a “Lifeline Benefit Card” with different providers);
• Level the playing field between different providers to broaden consumer choice and stimulate competition for their purchasing power; and
• Safeguard and simplify the program by taking administration away from companies and instead vest that responsibility with an appropriate government agency or agencies.
The existing Lifeline program has benefited not just low-income Americans but every American by strengthening our economy and our sense of community. Updating Lifeline so that we connect millions of Americans to broadband Internet similarly benefits us all.
The mix of homes without broadband Internet access today looks very much like the mix of homes without telephone service three decades ago. Lifeline Program reform will bring broadband to Americans who are elderly, disabled, single parents, unemployed or living in poverty. These are precisely the people who need the services, information and assistance that broadband Internet provides.
Revising the Lifeline Program for the 21st Century will allow us to connect more people to high-speed Internet, provide them with more communications choices and increase competition among broadband providers. Smart reforms will simultaneously reduce costs, waste and inefficiency in the program.
Over the past three decades, we improved millions of lives by connecting American families to a telephone. Now, we can improve lives even more by helping to connect those in need to high-speed broadband Internet. What are we waiting for?
Source URL: https://medium.com/@larry_irving/bringing-the-benefits-of-broadband-to-those-who-need-it-most-a1e2b0cd0e61
FCC Needs Market Data Before Changing Rules of the Road
by Bruce Mehlman
Like a cat that won’t give up trying to get on a table, the Competitive Local Exchange Carriers are back, pushing for more special treatment for special access lines. In their latest salvo, three CLECs claim that the Federal Communications Commission should re-regulate special access business services and Ethernet lines on the theory that price deregulation has somehow not worked (read: not been helpful for their business models), even though price deregulation/non-regulation expanded investment and competition in every other telecom market, from cable to wireless to broadband.
Unfortunately for these CLECs, however, the FCC has no legal authority to do what they want. US Telecom recently noted the Commission’s proposal “cannot upend forbearance and other deregulatory decisions with little or no data analysis” and that the FCC’s discretion is constrained by relevant statutes and the agency’s own precedent.
For a decade, the FCC has had an effective policy of “new wires, new rules.” Relying on that policy, the Incumbent Local Exchange Carriers – even though forced by the special access rules to subsidize a second network of non-competitive older technology – eagerly invested billions to roll out the faster broadband network people want to compete with cable, wireless and fiber networks. Now, some CLECs want to toss deregulation out the window, changing the rules in midstream without a formal data analysis and imperiling that needed investment.
That’s just wrong. Why would the FCC want to re-impose regulation on a competitive environment without understanding the marketplace? And what about the ILECs’ reliance on the FCC’s regulatory promise of “new rules” for new wires – does that just get washed away?
As US Telecom correctly contends, “[t]he FCC cannot step in and set prices without a fact-specific, full and fair analysis of the competitive landscape” and instead rely on “procedural shortcuts.”
The FCC has in the past realized all of this, and I’m hopeful it will again. In 2010, for instance, the agency denied a Qwest petition for forbearance and in doing so, significantly increased the burdens on parties seeking forbearance by raising the evidentiary standard for relief.  Perhaps of greater relevance, in his first major address, Chairman Wheeler said that he is “a rabid believer in the power of the marketplace” and that his focus will be to see “what, if any action (including governmental action) is needed to preserve the future of network competition” (Wheeler’s emphasis). He also stated that his policy is to use the tools of government regulation “in a fact-based, data-driven manner” and that if “a market is competitive, the need for FCC intervention decreases.”
That’s exactly right. So what’s happening in the marketplace? Honest examination of real-world data will show the “new wires, new rules” paradigm has worked well to generate investment, competition and innovation, and perhaps exposure of those stubborn facts are what some CLECs fear.
But even if the FCC were tempted to move away from Wheeler’s wise guidance, the courts wouldn’t give deference to such a decision. Judicial tolerance for unreasoned switches in policy is already low and getting tighter. The Tenth Circuit affirmed the FCC’s policy shift in the Qwest case yet warned that “goalpost-moving does not reflect an optimal form of administrative decision making.” No kidding! Why would any company invest billions of dollars in networks if their expected ROI can simply be erased with the stroke of a political pen?
In short, the FCC does not have either the legal authority or marketplace basis to change its rules for the convenience of the business models of certain companies selling outdated technology. Perhaps yet more litigation is needed to figure this out again, but that would be a shame.
Of course the CLECs will keep pushing, even lacking facts to substantiate their case. I’m not sure who first coined the phrase “the plural of anecdote is data,” but I’m starting to wonder if that person works at a CLEC.
 See Petition of Qwest Corp. for Forbearance Pursuant to 47 U.S.C. S 160 (c) in the Phoenix, Arizona Metro. Statistical Area, Memorandum Opinion and Order, FCC 10-113 at paras. 21, 46, 58-61 25 FCC Rcd. 8622 (2010).
 Qwest Corp. v. F.C.C., 689 F.3d 1214, 1228-29 (10th Cir. 2012).
 See Id. at 1227-28.
A Lifeline Argument Not Rooted in Reality
by Rick Boucher
The Federal Communications Commission is now modernizing its Lifeline program, originally designed to connect low-income Americans to the telephone network.
Lifeline was created in the mid-1980s and reflects the pre-broadband era, when Americans communicated primarily by wired or wireless telephone. The reform now underway would broaden the program to cover high-speed Internet service.
That change is urgently needed. Only 36% of individuals with incomes below $10,000 have access to broadband, even though broadband is the bridge to success in today’s economy.
Lifeline is unique in that service providers, and not the government, today determine whether consumers qualify for and remain in the program. That means service providers maintain an incentive to qualify as many subscribers as possible, which can lead to waste and misallocation of program resources.
That’s why my organization, the Internet Innovation Alliance (IIA), has joined FCC commissioner Mignon Clyburn and many others in calling for fundamental reform of the Lifeline program. We seek to enhance consumer choice, expand the number of carriers willing to offer Lifeline-supported services and promote greater financial accountability to ward off waste, fraud and abuse. To enhance accountability, IIA supports having states, not self-interested companies, determine who is eligible to receive Lifeline service. A state agency determination that an individual is eligible for other federal benefit programs, such as food stamps, would automatically qualify that person in the Lifeline program.
TIME FOR AN EBT
To spur competition by encouraging a larger number of carriers to participate in the program and to give consumers the most flexible way to choose from among competing carriers, we support moving the Lifeline subsidy to an electronic benefit transfer (EBT) card.
Putting the Lifeline benefit on an EBT card and asking the states to confirm eligibility would empower consumers in the marketplace and help prevent fraud. Yet even as many states have adopted the convenience and accountability of moving government-provided benefits to an EBT card, some still resist this change for Lifeline.
They contend that EBT cards would burden certain beneficiaries, such as the elderly, disabled and rural poor, based on an incorrect assumption that the cards would have to be swiped at a retail location on a regular basis.
Let’s review how eligibility determinations and EBT cards would work in practice under a new Lifeline program.
First, Lifeline eligibility would be determined through “coordinated enrollment,” with states performing Lifeline enrollments as they judge eligibility for a number of other federal programs (such as the Supplemental Nutrition Assistance Program, or SNAP). Lifeline could be added to this process to ensure that only those eligible for benefits actually receive them. Upon a determination of eligibility, the low-income consumer would receive a “Lifeline EBT Card,” similar to food stamp cards, allowing them to apply the subsidy to the telephone or broadband service of their choice.
State agencies that approve eligibility for Lifeline would also provide to the beneficiary a list of registered Lifeline service providers in that area. Individuals could then sign up for Lifeline by visiting a retail location or by using their electronic benefit to order service by phone or over the Internet.
Consumers with EBT cards could apply their $9.25 Lifeline monthly discount toward basic telephone or basic wireless service, or they could decide to apply the discount toward Internet service.
When consumers are satisfied with their service option and want it to continue, they should be able to set up automatic monthly payments of the Lifeline subsidy through an agreement with the carrier, revocable by the customer at any time.
There’s no need to go to a storefront every month unless the consumer wants to switch Lifeline providers (which could also be done online or over the telephone).
WORKS IN THE STATES
Thirty-seven states have put federal benefits on some form of debit card. It’s efficient, and it’s working well. There’s no reason why it should not be extended to the Lifeline program.
Those who argue against EBT cards and want to maintain the status quo are obliged to frame their arguments in the realities of how the program would actually function in practice. In particular, claims that placing the Lifeline benefit on an EBT card would impose logistical burdens on subscribers by requiring that they visit physical store locations on a regular basis are simply inaccurate and do nothing to advance the reform dialogue. Moreover, those who oppose moving Lifeline eligibility determination authority to the states and removing self-interested carriers from the process should spell out how the government can stop Lifeline enrollment abuse that weakens popular support for the current program.
An EBT card as part of coordinated enrollment with other federal programs is the best way forward. Giving consumers more choices, including both the choice of broadband and greater choice among providers, will empower consumers to take maximum advantage of their Lifeline benefit and to encourage the nation’s transition to broadband. That is the key not only to Lifeline reform, but to its success in the 21st century.
Source URL: http://www.multichannel.com/lifeline-argument-not-rooted-reality/394090
Four ways to close the ‘homework gap’
by Jamal Simmons
Donald Trump makes the case as plainly as any candidate for president can. He wants to “Make America Great Again.” From Trump to Bernie Sanders, Americans are looking for leaders to stop playing politics, shake things up and help them reclaim the American Dream.
The problems are easy to see. Increasing college costs and student-loan debt are a weight around young Americans’ ankles as they try to get started in the workforce, find life partners and buy homes. Unemployment has decreased and productivity has increased, but incomes have stayed flat. Candidates point fingers of blame at each other, but policy makers still have a chance to fix a few problems before politics takes over every decision made in DC.
The country is becoming more diverse, while our most dynamic industries are not. Silicon Valley is under a microscope as public policy makers, activists and customers have focused on the lack of diversity among their employees. Companies have been wrestling with hiring and retention strategies to jump-start a solution but over the longer term, we need more Americans in the pipeline with the skills to fill jobs in our high-tech sector. Getting them on the path to success at a young age is critical.
One way to make sure students from all backgrounds have the strongest start is by closing what Federal Communications Commissioner Jessica Rosenworcel calls the “homework gap,” which impacts students in five million American households. These students from low-income families have less regular access to broadband Internet at home than their peers from wealthier households, making completing homework assignments tougher.
FCC Commissioner Mignon Clyburn has proposed revamping the Lifeline program as one way to help close this gap. Started during the Reagan administration, Lifeline was created to help low-income Americans get access to telephone service. As mobile phones became more ubiquitous, the George W. Bush administration expanded the program to allow Americans to choose wireless phone service under Lifeline. Today, broadband is the critical service that connects Americans to jobs, health care, entertainment and family, and the current FCC should allow the Lifeline program to evolve again.
In addition to expanding Lifeline to cover broadband, Internet Innovation Alliance, the organization I co-chair, has proposed four reforms that will make this program more effective for more American families:
1) Let the government make the eligibility determination and take it out of the hands of private company providers who may have improper incentives to increase enrollment.
2) Link eligibility to those who qualify for the Supplemental Nutrition Assistance Program (SNAP) — 46 million Americans— which is administered by states. This would simplify the process for providers and consumers and make it more efficient.
3) Issue consumers a “Lifeline Benefit Card” to buy stand-alone or bundled wireline, wireless, or broadband services from the authorized companies that make sense for them.
4) Remove regulatory roadblocks to make it easier for service providers to participate in Lifeline and incentivize them to compete for the purchasing power of Lifeline customers.
Black and Latino students would benefit from closing the “Homework Gap” and increasing access to Lifeline, but so would thousands of children in military families who are struggling to make ends meet. Pinpointing the exact number of military families receiving food assistance is difficult, but according to the U.S. Department of Agriculture, more than $84 million in food-stamp benefits was spent at military commissaries in 2014. That number doesn’t include the amount these families spend in grocery stores and markets off base. Using USDA estimates, and pegging Lifeline access to SNAP, we would ensure that as many as 22,000 active duty members of the military and their families are eligible for this benefit.
Working together, Democrats and Republicans can improve efficiency for Lifeline, ensure communications access to those in need and keep costs under control. Fixing Lifeline is not as exciting as a reality TV star lambasting his opponents or news stories about email controversies, but fixing this problem can help real Americans fix real problems. Everybody wins and America can help get more students on the path to success.
Source URL: http://www.cnbc.com/2015/09/23/increase-broadband-access-for-low-income-students-and-families-commentary.html
At the tipping point: Comprehensive reform of FCC’s Lifeline program
By Rick Boucher
Today, few argue with the fact that broadband Internet access is a 21st-century necessity. It’s the modern passkey to healthcare, education, government services and economic opportunities. Unfortunately, some Americans still lack this essential bridge to success.
The overwhelming majority of wealthy Americans have high-speed Internet access, but close to two-thirds of those with the lowest incomes are have-nots. The statistics are stark: Using 2013 data, 93 percent of individuals with annual incomes over $150,000 had broadband compared to only 36 percent of individuals with incomes below $10,000. Lack of broadband availability among the lowest income families makes it ever harder for them to get ahead.
Fortunately, the Federal Communications Commission (FCC) is at this moment working to transform its existing and successful Lifeline program, which was initially created to make essential telephone service affordable, by expanding the program to bring broadband within reach for our nation’s low-income residents.
A forward-looking concept when introduced during the Reagan administration, Lifeline helped raise basic telephone subscribership for low-income households in the U.S. from 80 percent in 1984 to nearly 93 percent by 2013. Yet, the program only provides funding for stripped-down phone service at a time when consumers are rapidly shifting to broadband, whether fixed or wireless, as their preferred means to communicate.
With bipartisan support in Congress, the FCC now has a unique opportunity to completely overhaul and reshape the program for the 21st century. The central challenge is to add broadband as a Lifeline benefit without a significant increase in program costs. Tinkering with the existing program or making minor modifications to program administration at the edges will likely fail to deliver the promise of ubiquitous and modern high-speed broadband access for low-income consumers.
A thoroughgoing reform is needed, one that delivers a fundamentally new program based on core principles similar to those recently announced by FCC Commissioner Mignon Clyburn. For example, why not start by putting the consumer in charge? Today’s program is centered around the carriers who receive the $9.25 per month Lifeline subsidy and also determine the eligibility of individuals for the program. A reformed Lifeline program should be consumer-centric, recognizing the power that consumers exercise in today’s competitive communications marketplace and building off of that recognition.
Instead of giving the subsidy to the carriers, it should be given directly to consumers who could then decide where it should be spent. To promote consumer choice, eligible individuals could be issued a “Lifeline Benefit Card,” similar to food stamp cards, which would allow them to easily apply the subsidy to broadband or basic telephone service or some combination of both. Consumers could also shop among the various service providers and submit their Lifeline Benefit Card to the one they choose. In theory, this change could be made with little increase in program costs.
Eliminating incentives that can lead to misallocation of program resources should result in cost savings for the program. The present approach of carriers determining eligibility for Lifeline participation carries incentives to qualify ineligible applicants, leading to inefficiency and waste of program resources. A better way to administer the program would be to share the responsibility for determining consumer qualification with state governments under a process known as “coordinated enrollment.”
At present, states handle verification of consumer eligibility for a number of federal programs, such as food stamps, school lunches and Medicaid. Adding Lifeline to that list would promote efficiency and would also cut down on the opportunities for waste in the program. Simply stated, when an individual is qualified by a state public assistance office for programs like food stamps or Medicaid, the individual could simultaneously be deemed qualified for the Lifeline program and could receive a Lifeline Benefit Card. Thirty-seven states currently provide federal subsidies, including food stamps, through a debit-card system. It works well; why not simply add Lifeline?
Lifeline remains as important to achieving “full participation in our society and economy” as it was in 1985 when the program was started. If anything, Lifeline is even more critical today as broadband becomes increasingly central to American life. Those without it simply lack access to the tools necessary for success.
Winston Churchill once said that “a pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” I believe that the optimists at the FCC recognize that only top to bottom reform of the Lifeline program can place it on a sustainable path for the nation’s broadband future. I’m also optimistic that they will prevail in initiating the wholesale changes necessary to make broadband an eligible service, strengthen program administration and protect against misallocation and waste of program resources.
Fundamental — not half-hearted reform — is how to ensure that Lifeline remains relevant and opens the door to meaningful opportunities for low-income families in need of communications services.
Source URL: http://thehill.com/opinion/op-ed/253161-at-the-tipping-point-comprehensive-reform-of-fccs-lifeline-program