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by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary


If USF Reform was on Facebook, its status would definitely be “It’s time to come to an end,” as FCC Wireline Competition Bureau Deputy Chief Carol Mattey said today. My status says something to the effect of “I guess I won’t be sleeping in August.”

The OPASTCO summer conference was in Minneapolis this week, and as much as I wanted to make the trip out to my former homeland, it was just not in the cards for me this year. However, I was able to listen in via conference call to one of the general sessions today (July 27)—I was especially curious about Carol Mattey’s “Update on NPRM and Broadband Deployment” (meaning the USF NPRM, of course). We are currently at the point in time that I am obscurely calling the end of the beginning of the end. An industry consensus plan by large carriers will be submitted by the end of the week, ensuring that I will have a wonderful weekend. According to Mattey, the FCC is already working on the final draft Order for USF Reform. There will be a short window of time in August for companies to file comments on a Public Notice outlining alternative plans from the industry, and then the FCC will quickly move on the final rules. Mattey said “we will move forward this fall, I’m confident.” So RLECs, get your lawyers ready! 

Much of what Mattey said has been covered to death on Rural TeleCommentary, so I’ll try to focus on new developments and interesting perspectives from the Wireline Competition Bureau’s Deputy Chief. She compared the efforts to resolve USF reform to the current situation in Congress with the debt crisis—both resolutions require shared sacrifice, a realistic attitude about the economy, recognition that we are running out of time, and knowing that “a decision is better than no decision.” She mentioned that the fact that Congress is considering raiding $1b from USF for the debt signals the critical need for fiscally responsible USF reform. On that point, I agree with her. If the entire USF fund was utilized efficiently and fiscally responsible, Congress might not even look at it as a stack of cash hidden under the mattress. However, I still don’t think that the members of Congress who made this recommendation actually understand anything about how USF works, so in my opinion the entire idea is still bogus and far-fetched. She definitely made a good point about the need for shared sacrifice and realizing that any decision is better than no decision though. I feel like I have had a pretty realistic attitude about USF reform since the beginning, despite being highly biased in favor of RLECs. I know that not every RLEC is a model of fiscal responsibility and efficiency, and I know that not every RLEC is evolving with the times and technologies. But these types of characterizations can be found in any industry, sector, city or community; and it is not ideal public policy to punish an entire subset of an industry just because a few players aren’t living up to their potential. Anyway, “shared sacrifice” does not need to be sacrifice shared only by the RLECs. VoIP providers, large carriers, content providers and even consumers need to suck it up and do their part to make sure that every American has broadband. 

Mattey talked about the inherent problems with the current system, and I breathed a sigh of relief when she did not mention that rural telecom provides are rife with waste, fraud and abuse. I guess she knew her audience! She actually focused more on the abuse and arbitrage in ICC, which I am glad someone is talking about. She said that there are new forms of arbitrage popping up all the time, and “the status quo of uncertainty [over ICC] will only get worse.” Without going into detail, I have been very troubled by some recent new arbitrage schemes and I feel like there are malicious companies out there who are basically seeing the FCC’s delay on reform as an open window for arbitrage. The refusal to terminate calls in rural areas is one issue that has drawn attention lately, and there are others as well. Mattey said, “doing nothing is not an option,” and she insisted that ICC will be reformed in one fail swoop along with USF. For me, ICC is one of the most mind-boggling aspects of telecom policy in general, and it has taken me quite a while to really even become comfortable writing about it. I completely agree with Mattey that things are going to get worse if the status quo is maintained, and I definitely agree that any decision on ICC is better than no decision—however I do not want the ICC decision to include .0007 or bill-and-keep. I guess this is where the “shared sacrifice” comes in—RLECs may have to move to a .0007 rate in the future, but we may also get the security of not having to deal with those brutal arbitrage schemes. I personally don’t know if not worrying about arbitrage is a big enough positive force to overcome the millions in lost access revenue, but this is where USF/ICC compromise gets dicey and why every single sector of the telecom industry is involved and why there are so many vastly differing opinions on what the outcome should be.

Mattey talked about the possible framework for the final USFUSF support. She referenced the Joint Board’s proposed separate Mobility Fund, but I wasn’t clear on whether or not she thought it was going to be part of the proposed final rules. She thinks the FCC will eliminate the Identical Support Rule, and she indicated that reverse auctions are still “on the table” for mobile broadband. Is this good news? Again, I was unclear on that. She specifically said reverse auctions for mobile broadband, which is an idea that I have reluctantly gotten used to ever since last year’s Mobility Fund NPRM. I really wished that the concept of reverse auctions had never been invented, but in an effort to keep with the spirit of “shared sacrifice,” I have surrendered to the fact that they are most likely going to be used in some capacity under this new USF regime. 

Moving on, Mattey said that there will be ongoing support for areas that need it, and that Rate of Return should be improved and enhanced rather than eliminated. I heard a few weeks ago at the Save Rural Broadband press conference that RoR has been saved, at least for now, and that definitely makes me happy. How will the FCC “improve” RoR? That is still unknown, but Mattey said the FCC is looking at all of the various alternative plans that were submitted by the Rural Associations, Joint Board and industry.

So, what’s the deal with the highly anticipated industry consensus plan? I’ve been on pins and needles all week waiting to hear more about it, but so far I haven’t been very optimistic about the few tidbits I have received. Connected Planet ran this helpful story yesterday: Financial Analysts: Large Carriers will Recommend Cost Model for Broadband Universal Service Program. The proposal is apparently the baby of AT&T, CenturyLink, Frontier, Windstream, FairPoint and USTelecom and it includes the dreaded .0007 access charge reduction over the next 5 years (bad), making VoIP pay access charges (good), “creating an access charge replacement mechanism for rural telcos” (good), keeping the High Cost Fund at the current level (bad), phasing out high-cost support for wireless carriers (bad for them), and “shifting much of that funding toward high-cost areas where the incumbent is one of the larger telcos (really bad). The Connected Planet article noted that “if the large carriers’ USF reform proposal materializes in the form anticipated, it will be at odds with a previous proposal filed by several rural carrier organizations.” The Rural Associations want a longer transition for phasing out access charges,  they want a “restructure mechanism” to partially replace lost revenue, and “the rural telco groups do not want broadband Universal Service funds allocated on a cost model or a reverse auction basis, but instead want it to be calculated in a manner similar to how high-cost areas are funded today.”

I’ll stop short of commenting further on the industry plan until I actually read it, but it definitely sounds like it is better than the FCC’s proposal but not as good (for RLECs anyway) as the Rural Association or Joint Board proposal. The good news is that RLECs will have the opportunity to comment on the industry plan (quickly anyway) and then hopefully we can move towards the actual end of this whole ordeal and finally get some regulatory certainty established. Take note RLECs: Mattey said that the FCC does not want to see a “general rehashing” of the arguments that have already been submitted in comments and ex parte filings, so start thinking creatively and coming up with new ideas.

There is a lot of debate about whether or not regulatory uncertainty is worse than a really bad outcome on USF reform rules. I personally think that regulatory uncertainty is worse, because at least rural telecom providers can try to adapt to changes once the rules are released. Hanging out in USF Limbo is becoming more and more expensive, challenging and dangerous with each passing day. If the final rules are indeed the “worst case scenario” for RLECs, it will be necessary for these companies to start thinking with a “survival of the fittest” mentality.

I am really excited about an event I will be attending tomorrow: the Telecom 2018 Workshop, about the proposed end date for the PSTN. I’m really looking forward to some great technical, policy and economic debates about this highly controversial recommendation! There was also a really great event yesterday in Rudd, Iowa: RUS Administrator Jonathan Adelstein visited this rural farming community in North Central Iowa to talk about the importance of rural broadband for agriculture, health care, education and the future of rural communities. He commended the progress of OmniTel Communications, an Iowa RLEC which is currently undergoing a $35m FTTH expansion project funding in part by RUS loans. I listened to Adelstein's speech and found it very empowering for rural broadband providers--he is definitely a wonderful advocate and I am really proud of the Iowa Telecom Association, The Great Disconnect (the Iowa version of Save Rural Broadband), and OmniTel Communications for bringing such a great leader to rural Iowa for this event.

Cassandra Heyne

P.S. I’m still looking for someone to submit an interesting story about the history of their rural telecom company! It is a great opportunity to inform people about the rich and diverse background of the rural telecom industry, the challenges we have faced over the last 130 years, and why small local telecom providers are important for rural communities.

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The Final USF/ICC Reform Lightning Round (Hurricane Edition): Comments by Comcast

by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary


Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. Whilst stuck indoors for the next 2 days while Hurricane Irene does its thing, I’m going to try to get through as many comments as I can. So far I’ve mostly looked at comments by parties that I generally support, so now it is time to look at the perspectives of stakeholders who are much less friendly to RLECs. Who better than Comcast, one of America’s most hated companies? As it turns out, I found most of their arguments rather hard to digest. 


Cable companies were excluded from the “industry” negotiations, so I’ve expected them to be negative about the Consensus Framework and the ABC Plan. Cable companies are not very active in the rural broadband industry, as cable is typically associated with urban and suburban broadband only—where it is very popular, making the cable industry a front-running voice on broadband and Internet policy. So, I’m not sure how influential the cable industry will be in terms of the final rules for USF reform, but their comments on ICC reform and VoIP classification are likely to hold weight at the FCC. I definitely did not take their USF comments very seriously—they have what, 3 rural customers, tops? The day that I see Comcast trying to build broadband in rural Montana is the day I will respect their opinions about the high-cost fund.

Comcast basically colors inside the FCC’s lines in terms of the “4 Principles” for USF/ICC reform, and they cite a number of National Broadband Plan recommendations throughout their comments. They also rely on the Broadband Availability Gap Model for a lot of their “evidence.” Comcast naturally feels as though the Consensus Framework is “fundamentally inconsistent with the Commission’s guiding principles,” it doesn’t promote effective change for ICC, it could result in higher interconnection rates for CLECs, its biased towards ILECS/RLECs, and “the incumbent LEC’s principle concern with respect to USF reform appears to be maintaining their current revenue streams, rather than brining long-needed fiscal responsibility and accountability to high-cost support.”

On A Low Uniform Rate for ICC: Comcast wants the same rates paid by all originating voice carriers regardless of the terminating network’s technology, and they want it now. Comcast wants everyone on the $0.0007 rate in three years, with a very rapid glide path “for all rate elements including tandem switching and transport” (pg. 13). They argue that the current ICC regime discourages upgrades to IP technology and causes all of the arbitrage problems that plague the industry. According to Comcast; “In view of the well-documented disruptions, anomalies, and economic inefficiencies caused by the current ‘patchwork’ system of Intercarrier Compensation, the most desirable policy is to supplant the existing arrangements decisively and expeditiously. Comcast thus supports a brief transition to a uniform rate for all providers—price cap and rate-of-return incumbents as well as CMRS carriers and competitive LECs—that nonetheless is designed to avoid significant disruptions” (pg. 12). They believe that a 3 year transition to uniform 0007 is not a flash cut, and it will “[hasten] the demise of regulatory arbitrage,” and reduce “perverse incentives to invest in TDM technology” (pg. 13). 

On an Access Replacement Mechanism and Total Company Earnings Review: Comcast urges the FCC to reject the ABC Plan’s proposed transitional access replacement mechanism because, “there is simply no need to allow carriers, particularly price cap carriers, to recover lost revenues previously obtained from Intercarrier Compensation on a dollar-for-dollar basis” (pg. 14). Although I found humor in the “particularly price cap carriers” jab, I don’t think anyone has proposed a dollar-for-dollar recovery mechanism. Comcast argues that the proposed recovery mechanism undermines the FCC’s market-driven and fiscal responsibility policy goals, and “any such bailout would fundamentally distort the marketplace” (pg. 14). If a recovery mechanism is adopted, Comcast thinks the FCC should include non-regulated revenues “as well as technological advances and the efficiencies that companies realize when they provide multiple services over a single network” to determine the level of recovery support (pg. 15). They think arguments against a total company earnings review are “inappropriate,” and they provided several examples of why, which I did not find particularly convincing. They also argue, “Although Congress has prohibited carriers from using revenues from regulated services to subsidize services that are competitive, there is no Congressional or FCC prohibition against the Commission’s consideration of unregulated revenues when determining the appropriate level of subsidies for regulated services. To the contrary, taking revenues from unregulated services into account when calculating the need for and amount of subsidies would advance the Commission’s stated goal of fiscal responsibility by ensuring that support is targeted to the carriers and areas that actually need a subsidy” (pg. 17). 

On Capping the High-Cost Fund: Comcast supports a hard cap on the high-cost fund at 2010 levels and provides absolutely no evidence to support this claim, other than it was recommended in the National Broadband Plan. Comcast thinks that 2010 HC support levels are somehow the definition of fiscal responsibility, and “funding decisions should focus on maximizing consumer benefits, not on ensuring incumbent LEC revenue streams.” Basically, they just don’t want LECs to receive any more USF support than they did last year. Like I said, when Comcast announces plans to deploy broadband in extremely rural areas, I will respect their opinions about the size of the high-cost fund. 

On Reverse Auctions, “The Essence of Fiscal Responsibility:” In addition to claiming that a 2010 level cap is the meaning of fiscal responsibility, Comcast also thinks that reverse auctions are the “essence of fiscal responsibility,” but they provide no evidence to support this claim. They offer a vague, and slightly hilarious, roadmap for implementing reverse auctions:

·         Step 1: Determine unserved areas where market incentives are insufficient to encourage broadband deployment;
·         Step 2: Determine the size of the area for bidding purposes, which should be census blocks, which bidders should be able to combine. Furthermore, “the bid prices for the combination of census blocks would likely be lower than the sum of the bids for the individual census blocks” (pg. 26). Yay! A sale on unserved census blocks! Buy one, get one 50% off!
·         Step 3: Design the “protocols and practices to be used in the auction” (pg. 26) Oh really, that’s it? So basically they have no solution for the actual reverse auction methodology. That’s ok, nobody else does either. 

My Thoughts: I tried to read Comcast’s ICC-related comments through the eyes of someone who supports the proposal to eliminate the PSTN by 2018 and not someone who wants to prolong the current ineffective ICC regime. I do not agree that access rates should be reduced to 0007 in three years for everyone; I think that would cause anarchy in the access revenue world. Transitioning to IP networks does not eliminate the underlying purposes of access revenue—carriers still need to compensate one another for use of each other’s networks, and those compensation rates should at least somewhat reflect actual costs, which are significantly higher for small rural companies. There is a good reason why the Consensus Framework proposes different glide paths for price cap and RoR companies.

I agree with Comcast that there must be swift action to eliminate arbitrage, but I personally do not blame the broken system entirely for arbitrage schemes—I blame the companies who engage in this behavior. If I break a law that I personally find unnecessary, I’m the one who gets in trouble if caught, not the lawmakers, and there is no legal justification for “I should get away with it because the laws aren’t proper for today’s society.” Access rate arbitrage signifies a market failure whereby regulatory intervention is now necessary. Closing the loopholes that companies exploit is one part of the equation, and adequate enforcement to discourage arbitrage in the first place is another part of the equation. I do not see how imposing a uniform low rate for ICC in 3 years will specifically address these market failures, instead it will seriously disrupt revenue streams for RLECs in particular, which will even further delay upgrades to IP networks. So, I find considerable fault in Comcast’s reasoning that a rapid transition to 0007 will both eliminate arbitrage and push all carriers to transition to IP networks—many of the small carriers will not be able to afford it. 

Regarding Comcast’s USF arguments—they just aren’t very good. Comcast clearly just wants to see their ILEC/RLEC competitors receive less support, and this agenda is not well concealed in their comments. 

---------------------------------------------------------
Still up for review this weekend: wireless carriers and state PUCs. 

Have a request? Let me know! I’m definitely not going anywhere all weekend (contact me via e-mail or on Twitter @RuralTelComment). 

If you are also stuck indoors all weekend, you can catch up on all the comment summaries I have done so far: the Rural Broadband Alliance, Alexicon Consulting, ITTA, Western State Telecom Associations, and the Rural Telecommunications Group (the last two are for The ILEC Advisor). 

Cassandra Heyne

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DES MOINES — The Iowa Environmental Council, the Des Moines Water Works and 18 central Iowa businesses have joined a coalition urging Tyson Foods to adopt new land-use rules for producers who supply livestock to Tyson slaughtering plants. “Unfortunately, the meat industry is currently driving production practices of feed grains that pollute our waterways with

Could DIDO Revolutionize Rural Wireless Broadband?

by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary

Earlier this week, I came across a fascinating technical white paper by Steve Perlman (President and CEO, Rearden Companies) and Antonio Forenza (Principle Scientist, Rearden Companies), and I decided it would be the perfect opportunity to finally write about a technical subject on Rural TeleCommentary. Normally I don’t get especially excited about technical papers, but this one really blew my mind. Distributed-Input-Distributed-Output(DIDO) Wireless Technology: A New Approach to Multiuser Wireless literally turned upside-down almost everything I thought I knew about wireless limitations. Now, I don’t have enough “field expertise” to make a determination about whether or not DIDO is possible, but I am still fascinated with topic and I think there will be some interesting developments in the near future in terms of testing and early deployment. If the predictions in Perlman’s paper do come to fruition, there may be a complete transformation of the wireless industry, where wireless broadband could actually become an equal competitor to FTTH. 

This is important to me because I am constantly thinking about how the broadband ecosystem is going to look in 5, 10, 15 years. When I think back 5, 10, and 15 years and contemplate how far technology has come in just half of my lifetime, it really gets me excited about the future. I have firmly argued since the day the National Broadband Plan was released that the plan’s fundamental flaw is the 4/1 Mbps broadband definition (which the Gang of 6 ILECs is now hoping to reduce to 4 Mbps/768 kbps).  I totally understand that it costs a lot of money to deploy 100 Mbps broadband to everyone, but I do not think there should be a static definition for broadband because the principle of regulatory lag dictates that the FCC will never be able to keep up with consumers’ constantly evolving expectations and definitions of broadband. I also believe that a static regulatory definition of broadband will stifle innovation. I like to envision a future in 10 years or so where nobody is restricted to the unimaginable world of broadband-enabled content and applications by capacity and speed constraints. Could DIDO help achieve this “perfect world” of super-fast, high-capacity broadband? The authors of the paper seem to think so, and they “believe that DIDO wireless will completely transform the world of communications and far more.” What I found to be particularly interesting is that DIDO apparently works at distances up to 250 miles in rural areas.

According to the paper, “Distributed-Input-Distributed-Output (DIDO) wireless technology is a breakthrough approach that allows each user to use the full data rate of shared spectrum simultaneously with all other users, by eliminating interference between users sharing the same spectrum. With conventional wireless technologies the data rate available per user drops as more users share the same spectrum to avoid interference, but with DIDO, the data rate per user remains steady at the full data rate of the spectrum as more users are added” (pg. 1).

It took me awhile to wrap my brain around this concept. It was only a year ago that I took a wireless engineering class at CU, and at that time MIMO was all the rage and there was still an assumption that we had to behave by Shannon’s laws although I remember a discussion about how we are starting to test those theoretical boundaries. I definitely do not remember my teacher ever estimating that one day there may be a wireless technology that eliminates interference between users and allows multiple users to all utilize the full data rate of the spectrum. That is basically like a wireless optical fiber for each user. As many of you know, I am a dedicated member of Team FTTH, but DIDO could actually make me consider switching my allegiance. 

Perlman provides an interesting background about the evolution of wireless and the allocation of spectrum to meet constantly increasing numbers of users and high data rate requirements, but he seems to believe that even with all the technological advances in MIMO and beamforming, wireless is still not up to par for applications like video and gaming. There are simply too many wireless users trying to do too many things with not enough spectrum. Perlman explains, “As data capacity needs continue to grow exponentially, and applications like video and videogames require high reliability, it is unclear whether there will be enough usable spectrum to meet user needs. And, once all of the usable spectrum has been allocated to consumer devices, it is effectively impossible to recover that spectrum as new technologies evolve that can use it more efficiently. We run the risk of allocating all of the usable spectrum, but still not having enough” (pg. 3). Just look at broadcasting—the fight to get some of that spectrum released has no end in sight and is years overdue. I thought the point that once the spectrum is allocated, it may be impossible to recover it if a more efficient use comes along in the future is very reflective of today’s spectrum crisis. This is one of the main reasons why I have consistently been so hesitant to get on board with wireless broadband—spectrum is a limited resource that is tightly controlled and often controlled by the absolute least efficient user, and the amount of time and effort it takes to unravel that web could deter innovation. I had a lot of hope for the White Spaces a few years ago, and I’ve all but forgotten about them now.  One thing is for sure: consumers have an insatiable appetite for wireless broadband, and there must be some combination of new technology and effective and fast-moving spectrum policy to meet the explosive demands—if not, wireless broadband will be second chair to FTTH. 

Apparently, DIDO has been tested with 10 simultaneous users in the same area, but Perlman hopes to increase that number to 100 or even 1000—therefore achieving 100X and 1000X the Shannon Limit. I found the following description of DIDO to be very illustrative:

“Distributed-Input, Distributed-Output (DIDO) wireless technology is a new approach to multiuser wireless that allows the number and density of users in the same area to be steadily increased without additional users reducing the data rate of others. In other words, the shared spectrum capacity is not subject to Shannon’s Law: as more users in a given area share the same wireless spectrum, the data rate per user does not decline. As a result, regardless of how many users are in a given area, each user is able to use the entire Shannon Limit of the channel, despite sharing the same spectrum” (pg. 4). 

I recommend that you read the paper yourself to learn more about how DIDO actually works, as there are some interesting illustrations that accompany the description. Perlman compares DIDO to a simple Wi-Fi configuration, noting that in urban Wi-Fi networks it is not unusual for users to only get about 4% of the available data rate. Well, DIDO is here to save the day, if the Wi-Fi access points are replaced with DIDO access points in this hypothetical scenario. Unlike Wi-Fi, data is processed through a “DIDO Date Center,” which “processes the data, modulates it into a radio signal waveform and sends the waveform [to the access point], which simply sends the waveform to its antenna and transmits it as a radio signal” (pg. 9). From what I gather, the DIDO Data Center does all the heavy lifting as more users are added and there is no risk of a stronger signal overpowering a weaker signal when signals are transmitted at the same time. Perlman explains, “something rather remarkable happens: the sum of the radio signals at each computer’s location results in a clean modulated waveform carrying the data intended for that particular computer…And here’s the really amazing part: what each user receives is what they would have received if they had the channel to themselves, without another user sharing the same spectrum. There is no interference from the other user. Each user is able to utilize the full Shannon Limit of the channel” (pg. 10). Wow… Is he serious?! DIDO just sounds awesome. The authors call DIDO a “cloud wireless system,” which seems appropriate, as “all of the intelligence of the DIDO system is in a DIDO Data Center, which then communicates to all of the users at once through all of the APs at once” (pg. 12). 

The paper explains that DIDO is able to crush the limitations of Shannon’s Law because, “DIDO is a general solution that creates an independent channel for each user, even in densely-populated areas. Since each user has an independent channel, Shannon’s Law does not apply, despite the fact that all users are sharing the same spectrum” (pg. 13). The authors also provide the following effective visualization for DIDO: “A DIDO channel can be roughly visualized as a 3D sphere that surrounds the antenna of a user device. We call it ‘area of coherence.’ Within that sphere, the channel for that particular user exists. Outside of that sphere, it does not. So, if there are 10 users in a DIDO network, there are 10 spheres, one around each user device. As a user device moves, the sphere moves with it” (pg. 14).

So, what is the relationship between DIDO and rural wireless broadband? More importantly, are there any business opportunities for RLECs in DIDO? I think that the answer to both of these questions remains to be seen, depending on whether or not this product becomes available to the mass market (the authors explain that it was designed for the mass market, and DIDO was tested at frequencies from 1 MHz to 1GHz).  The authors also argue that DIDO systems are highly reliable and do not have the dreaded dead zones—something that is especially prolific in rural and rugged areas. I think the most important aspect of DIDO for rural broadband providers to consider is the potential range of 250 miles (“DIDO Rural,” pg. 15) if HF frequencies in 3-7 MHz are utilized. The authors note that the HF frequencies have the limitation of being very narrow, but “DIDO would be an ideal technology to overcome this limitation” (pg. 15).  The key point in the paper for rural broadband providers to pay attention to is: “DIDO-NVIS provides a very inexpensive and efficient way to deliver broadband to rural areas, or remote areas in the wilderness” (pg. 17).

I do not recommend that RLECs abandon their FTTH projects and put all their bets on DIDO, but I do think this technology is worth keeping a close eye on while it continues to develop. I can see it being very useful in extremely rural areas, such as the areas slated for receiving satellite broadband within the new USF framework. Could DIDO eliminate the need for satellite broadband altogether? Are there any business opportunities for the RLECs who are lucky enough to hold spectrum assets to manage private DIDO networks for businesses, farmers and industries? With RUS’s Jonathan Adelstein’s visit to a rural Iowa farm last week, I started thinking about the agriculture possibilities enabled by high-speed broadband. I definitely see DIDO being really useful for “precision farming” and other high data-rate needs on the farm. It could enable innovations like remote crop video monitoring, so farmers could literally watch their corn grow from a beach in the Caribbean. 

I will definitely be keeping an eye on new developments in DIDO, and if anyone has any good resources about it, or any studies that refute these claims (I like to hear the other side of arguments too), please send them my way. This article by Dean Takahashi was also very interesting. 

I will be on vacation next week until the 16th, so I hope everyone keeps plugging away on USF Reform. The FCC released its Public Notice seeking comment on the ABC Plan, and comments are due August 24 with reply comments on August 31. This is the FCC being extremely aggressive about the expected October deadline, as expected. Good luck with your comments; I look forward to reading them!

Cassandra Heyne

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The Final USF/ICC Reform Lightning Round: Comments by the Satellite Broadband Providers

by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary

Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. The FCC has graciously extended the reply comment deadline from August 31 to September 6, citing Hurricane Irene, the large number of initial comments, and the requests for an extension, as reasons for gifting us with an additional week. Thanks, FCC! I’ve managed to at least skim through the majority of the comments now, and one that really stood out to me was by the Satellite Broadband Providers.


Until now, I was under the impression that the Satellite Broadband Providers (“SBPs”) were fairly chummy with AT&T and the large price cap ILECs—I assumed that the SBPs would be fairly supportive of the ABC Plan because of AT&T’s previously expressed desire to “partner” with satellite providers in order to “efficiently” serve extremely high-cost areas. I’ve been very critical of this proposal, because I think the large ILECs are trying to weasel out of actually having to invest any time, effort or money into delivering broadband to very rural areas. They would rather dump the responsibility on satellite providers under some kind of agreement that would naturally benefit the ILEC financially in some way. I suspected that the ILECs would hope to keep a percentage of the USF funds as some kind of “finders’ fee” or to cover “administrative costs” or whatever, while the SBP would do all the work. So, when I read the SBP’s comments, I ended up being very surprised at how hostile they were towards the ABC Plan (and the RLEC Plan and Joint Board plan, which they call the Incumbent Wireline Proposals). 

Let’s get one thing straight: I do not enthusiastically support satellite broadband providers receiving CAF funds. I don’t think anyone actually wants satellite broadband unless they have absolutely no other options. Satellite broadband service is not reasonably comparable in terms of quality, speeds, capacity or cost. Therefore, I found it rather perplexing that the majority of the SBPs’ comments in opposition to the Incumbent Wireline Proposals revolved around ensuring reasonably comparable service and facilitating consumer choice, two areas where satellite providers fall very, very short: “Instead of adopting [the ILEC] proposals, the Commission should ensure reasonably comparable rates and services by implementing a suitable market-based mechanism, consistent with the Satellite Broadband Providers’ prior filings” (pg. i). They mean reverse auctions, naturally. Despite my low opinion of SBPs, I did find that many of their arguments against the ILEC plans were thought-provoking and hit hard on some of the controversial issues of the ABC Plan in particular. I can respect that. 

On the ILECs Putting Carriers before Consumers: The SBPs do not think that the 3 proposed plans are in the best interest of consumers, because “none of these proposals attempts to make any real public interest case, or to demonstrate that incumbent wireline carriers (as opposed to their competitors) are in the best position to extend high-quality broadband service to the unserved consumers quickly and at minimal cost” (pg. i). The SBPs believe that the ILEC proposals “would prop up incumbents using inefficient technologies and networks at the expense of consumers, and also at the expense of the priorities set forth in the NPRM” (pg. 4). Furthermore, they argue that DSL is not the most efficient technology, nor is it forward-looking, which they support by citing that one comment made by the CEO of AT&T that DSL is dead. They also seem to think that preventing satellite providers from receiving CAF funds will “increase the CAF funding burden by more than $20 billion,” and excluding all non-wireline competitors would be even more costly (pg. 6). Their main problem seems to be that if the Consensus Framework is adopted, 93% of the CAF support would go to incumbents—while I may not agree that satellite broadband should receive a large chunk of support, I can’t argue that this is an excessive amount of support reserved for companies that do not actually represent 93% of the broadband market currently. 

On the ILEC Plans’ Impact on Competition: The SBPs believe that the ILEC proposals are contrary to the fundamental USF principle of competitive neutrality, and the FCC should not exclude an entire class of carriers from CAF. They think the ILEC plans are anticompetitive, and “run contrary to the principles of competitive and technological neutrality, the requirements of the Act, and sound public policy. Instead, the Incumbent Wireline Proposals would create de facto regulatory monopolies by awarding funding preferences to incumbents, regardless of merit, and/or relegating competitive providers to separate, underfunded support mechanisms” (pg. 9-10). They insist, “High-Cost support should be earned through merit…and not viewed as a perpetual form of corporate welfare to which incumbents are entitled” (pg. 12).

On Reverse Auctions: The SBPs are still carrying a torch for reverse auctions, which makes me want to have a Mean Girls moment and scream “Stop trying to make reverse auctions happen!” Anyway, the SBPs  argue that reverse auctions protect the interests of consumers. Interestingly, they suggest that “the Commission’s goal should be to facilitate the deployment of fiber (instead of copper), and that fiber should be subsidized only where it is the most cost-effective technology” (pg. 16). The SBPs want a reverse auction methodology where any provider is eligible to participate, “including fiber, cable, wireless, satellite, broadband over power line (BPL), free-space optical links, and any new delivery mechanisms that may emerge in the future;” and “the absence of a funding guarantee to any service provider, the use of competitive bidding, and the use of market forces to encourage cost efficiency and quality are all hallmarks of this proposal” (pg. 17). Furthermore, the SBPs argue that there should not be separate funds established for wireline and wireless/other carriers.

On Restricting the ILECs’ Power: In addition to limiting the power of ILECs under the CAF, the SBPs want to see more than 7% of the funding available to competitive providers, and that the size of the fund for alternative technologies should not be capped because “it is not possible to predict which or how many households will be more efficiently served by competitive technologies in the coming years” (pg. 19). I actually agree with them here. The SBPs propose a number of restrictions for the ILEC’s Right of First Refusal desire, including not allowing ROFR in areas served by a competitive provider; only allowing ROFR if the incumbent already has 4/1 Mbps service to a majority of households (35% = not a majority); tying explicit COLR obligations to ROFR; and setting “well-defined milestones.” 

My (Many) Thoughts: I really have to commend the SBPs for the fact that their comments made me think deeply about a lot of the flaws in the ABC Plan. I enjoy reading, analyzing and writing about opposing views as much as I enjoy reading the perspectives of companies that I support, and the SBP comments definitely gave my brain a workout. I’ve been thinking critically about the ABC and RLEC Plans a lot lately. To clarify my opinions, I generally support the RLEC Plan for RLECs, but I think the ABC Plan for everyone else is far from the “industry consensus” that it pretends to be. These two plans have to be analyzed separately, but I’ve noticed that they are lumped together in many comments by opposing parties, and I find myself lumping them together sometimes too. I believe that there should be a separate fund for wireless, and I think the proposed $300m is insufficient. I think it is unreasonable that the 6 price cap ILECs have made themselves the gatekeepers for USF for the entire industry, minus the RLECs, who will presumably operate under the RLEC Plan. I acknowledge that the RLEC Plan is not perfect and the RLECs who are not in favor of this plan have presented valid and thoughtful arguments and alternative proposals throughout this comment cycle. However, the reality is that the clock is ticking and I don’t think the FCC has any patience for factions and industry infighting at this time, especially from the RLECs since they represent such a small portion of the overall industry. I’m just trying to be realistic.  

Back to the SBPs’ comments… I’ve never been of the impression that the price cap ILECs are willing to, or enthusiastic about, providing broadband in extremely rural areas. The problem is that sticking the rural consumers in the unserved price cap territories with satellite service is not really helping to reduce the urban/rural or rural/rural digital divides, despite what the SBPs may think. I don't think satellite broadband service is a viable permanent solution for rural broadband, so why invest USF money in this service, when it could better go to FTTH or 4G wireless broadband? I'm not saying that there is no place for satellite broadband, because there are definitely extremely rural areas where nothing else can be deployed. Satellite broadband should just not be used as the default service for a lot of rural areas where something better could be deployed with the help of USF subsidies.

I’m still unsure why the SBPs are trying to “bite the hand that feeds them” by complaining about the ABC Plan recommendation to have satellite providers serve the extremely rural areas, which may amount to hundreds of thousands of new consumers for satellite providers. The ABC Plan has even recommended a lower broadband definition (4 Mbps/768 kbps) which in my opinion would help the satellite providers. The SBPs preach about the importance of reasonably comparable service and consumer choice, but satellite broadband is not reasonably comparable to wireline broadband and consumers do not actively choose this service. The ABC Plan recommendations might be completely insufficient for wireless broadband, which is a service that hundreds of millions of people demand and use, but I think the ABC Plan is actually a pretty good deal for satellite providers. Sorry, SBPs. 

Of all the comments I have analyzed so far, this one was my biggest challenge to write about, and I have a lot of questions. Are SBPs trying to bust out of their “niche provider” role and become a real contender in rural broadband? How will they actually get consumers to see them as a serious contender? What’s the difference, from a satellite perspective, between partnering with an ILEC for CAF support versus winning CAF support through a reverse auction, if they get the money anyway? Do they think receiving CAF support on their own will help them compete with RLECs? Why do they need CAF support anyway, when they have been providing their niche service without it perfectly well all along?  Like I said above, I respect the SBPs for submitting thought-provoking comment despite what my personal opinions may be. 

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Have a great long weekend!

Cassandra Heyne

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My Initial Statement on America's Broadband Connectivity Plan

by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary

The highly-anticipated industry consensus plan for USF Reform, the America's Broadband Connectivity Plan (ABC Plan) was filed today by a group of the nation's large- and mid-sized ILECs with the support of USTelecom. RLEC Associations NTCA, OPASTCO and WTA approve the plan (although they have not "signed on" specifically), which is a USF reform solution for price-cap carriers, but some rural carrier groups such as the Rural Broadband Alliance and the Rural Telecommunications Group are much less enthusiastic about it. The Rural Associations are hoping that the ABC Plan will work in conjunction with the RLEC Plan submitted back in April, and they were involved in the negotiations for the ABC Plan--the ideal outcome would be for the ABC Plan to apply to the large- and mid-sized carriers, while the RLEC Plan would apply to RLECs. While I expected that the industry plan would not satisfy all members of the rural telecom industry, I hope that the dissenting groups are able to work with the FCC and industry in the coming months in order to reach a more inclusive consensus. My take is that the groups who were not directly included in drafting the ABC Plan feel underrepresented despite the fact that they indeed represent very important members of the rural broadband industry.

I am not going to rehash the details of the ABC Plan today, but rather I just wanted to take a minute to express my first impressions and overall perspective on this plan. I encourage you to read the plan yourself and generate your own opinions as well. In an industry of over 1,000 rural telecom providers, I do not expect that everyone is going to feel the same way, and some companies may see it as a huge loss while others see it as a victory, especially compared to some of the alternative proposals (like the FCC's original NPRM). I personally fall in the latter category--I believe that the ABC Plan is a win in the sense that it could be much worse. 

By avoiding a "hard cap" on the high cost fund and by retaining Rate of Return (albeit at a slightly lower rate) and the current levels of high-cost funding for RLECs, I believe that RLECs will be able to transition smoothly into the future without some of the drastic, "end of the world" outcomes that have been described during this rulemaking process. Under the assumption of using the ABC Plan in tandem with the RLEC Plan, I would not expect widespread stranded investment, rural communities "going dark," or private lenders fleeing from the industry. I think the two plans together allow for at least some certainty going forward, while also controlling the size of the fund and encouraging rural companies to focus on broadband deployment. I am very pleased that reverse auctions are not recommended as the primary means of support distribution--I consider this a significant victory.

The biggest loss in my opinion is the eventual transition to an industry-wide, uniform $.0007 access charge rate. Allegedly, the large carriers would not budge on this recommendation, but the rural carriers may have a longer transition time frame. I do not think that this rate accurately compensates rural telecom providers for use of their networks, but this is probably just going to be one of the things that RLECs will have to adjust to in order to survive. I do not feel as though RLECs who receive over 50% of their revenues from ICC and USF are especially sustainable long-term, and I hope that if these companies know that they will eventually be losing a significant chunk of ICC revenue and they will look into other innovative sources of non-regulated revenue in emerging technologies (kind of a "wake-up call" of sorts). After attending the Telecom 2018 Workshop yesterday, I am well-convinced of the trend towards all-IP networks and I believe that RLECs need to embrace, rather than reject, the ultimate demise of the circuit-switched PSTN. However, those IP-networks still must be payed for with initial and ongoing capital, and RLECs must have investment recovery certainty in order to upgrade to all-IP infrastructure. I am not sure that the $.0007 access rate will provide much investment recovery certainty.

This is by no means a complete perspective on the ABC Plan, but these are my initial reactions. I am still contemplating the proposal for a second, smaller Advanced Mobility/Satellite Fund (AMF)--on first glance, this component of the plan seems insufficient and detrimental to small rural wireless carriers. I really don't have much to say about the large ILEC's desire to use the forward-looking cost model. It appears as though at least approximately $1.9b of the high-cost fund will be dedicated to RLECs with the remainder for price-cap carriers. Overall, I am pleased with the apparent recognition in the ABC Plan that RLECs and price-cap carriers have drastically different investment strategies, competitive objectives, funding sources and customer needs; and there needs to be separate USF mechanisms for large and small carriers.



The ABC Plan framework is available to read here, and there are several supplemental attachments about the forward-looking cost model, the .0007 access rate, and the FCC's legal authority as well.

Have a great weekend!

Cassandra Heyne
ruraltelecommentary@gmail.com

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Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan.  Today I am going to review the mid-size price cap carrier perspective, as delivered by ITTA and several concurring companies—I thought they had a lot of interesting things to say.


When I want to understand the rural mid-sized price cap company perspective, I usually need to look no further than the Independent Telephone and Telecommunications Alliance (ITTA). I always appreciate and learn a lot from their comments, which usually fall somewhere in the middle of the RLEC and large ILEC bookends of the spectrum.  ITTA filed joint comments with Cincinnati Bell, Hargray and Hickory Tech, and as expected, their position is appropriately balanced in between the large and small carriers. Basically, they approve the ABC Plan for price cap carriers, but with some modifications. The mid-sized commenters argue, “In general, the ABC Plan and the ROR [RLEC] Plan offer useful constructive starting points for how such reform can be achieved. The plans provide reasonable paths towards the longstanding goal of rational and predictable USF and ICC programs that meet the broadband needs of all Americans” (pg. 3). However, the Consensus Framework needs some modification and it appears as though these mid-sized companies are feeling a little burned about not participating in the ABC Plan development (as are most stakeholders who are not the 6 ILECs or Rural Association members). 

On the CQBAT Model: ITTA approves of the ABC Plan approach of using a forward-looking cost model to determine support in unserved areas, but “strongly urge the Commission to refrain from drawing any conclusions regarding the sufficiency, accuracy and reliability or usefulness of the CQBAT model until all interested parties have been afforded access to the model and a reasonable opportunity to review and analyze it, run reports, and present their input to the Commission” (pg. 9). Apparently, no mid-sized carriers had any involvement with the development of CQBAT, and these commenters are highly suspicious of a model that is to be applied to the entire price cap industry without their input. I can see why they would be upset about this. They argue, “It would be arbitrary and capricious for the Commission to utilize a model to calculate USF support that was developed by a sub-set of the industry behind closed doors without input from the majority of carriers who would be affected by its use” (pg. 9). ITTA and the mid-sized carriers are asking the FCC to open a proceeding on the CQBAT model. 

On Rights of First Refusal: These commenters agree with the ABC Plan’s 35% threshold for ROFR and they are against the modifications suggested in the Public Notice. ITTA supports the ROFR proposal because of the ILEC’s COLR obligations: “To meet COLR obligations, ILECs were required to build networks near to where customers reside so that prompt service could be provided to those who request it…The ROFR option would permit ILECs with COLR obligations to preserve the public benefits of their network deployment. At the same time, it would protect ILECs that have made a substantial network investment in order to comply with their COLR obligations from being left with no reasonable means to recover that investment” (pg. 13). I think they are opening themselves up for criticism in the reply comments by using the phrase “it would protect ILECs,” because there are a lot of stakeholders who are rather sour about the fact that the ABC Plan appears to be a method of entrenching ILEC monopolies—the ROFR proposal in particular. 

On State Regulators’ Role: This group does not think state regulators have a role in CAF administration beyond providing input—“the Commission should be responsible…for developing, implementing and enforcing the obligations associated with the federal CAF” (pg. 16). ITTA argues that state level compliance filings would be a costly burden with little or no benefit; and differing state requirements could cause uncertainty and confusion. 

On Total Company Earnings Review: The commenters are against a total company earnings review, with an argument that I found to be very convincing: “The new federal USF program should provide greater incentives for broadband providers to serve customers living in all areas of our country. Requiring support recipients to undergo a total company earnings review would discourage participation in the program by broadband providers who reasonably object to having the cost of deploying broadband service to consumers in rural Montana offset by the revenues generated by their provision of video services to consumers in downtown Denver. The proposal would also discourage support recipients from pushing the technological envelope by providing new and innovative services to customers throughout their service territory. Moreover, it would require the Commission to devote considerable resources to developing a methodology for such a review, as one does not exist today” (pg. 19). I agree.   

On $0.0007: ITTA does not support a default $0.0007 rate and argues that the transition plan proposed in the Consensus Framework should be modified. They argue that “a default compensation rate of $0.0007 is financially similar to a mandatory bill-and-keep regime and, as such, could have serious negative consequences for mid-sized carriers and their retail customers” (pg. 21). They feel that the FCC cannot “eliminate or dramatically decrease” access rates without proving that such funds are unnecessary, and “it is impossible for the Commission or any industry stakeholder to know at this time what the precise impacts or fallout from these changes will be” (pg. 24). As an alternative, the FCC should conduct a two-year review proceeding after the price cap carriers have reduced rates by 1/3 of the difference between their current rates and $0.0007, and when RLECs have reduced their rates to $0.005. Again, I generally agree-this transition needs to be carefully conducted. 

My Thoughts:  I thought these comments were very well conceived. The mid-size carrier perspective is not always all that different from the RLECs, like with $0.0007; but sometimes they are very different, like with COLR obligations. I definitely agree that the CQBAT model should be open for analysis from the industry—it is very bad policy for a regulatory agency to impose such a significant model on an industry without even knowing precisely how most of the industry players will be impacted. The whole “behind closed doors” component makes it seem like there is a seedy element in CQBAT where there may be unpleasant surprises for the carriers who did not have input. I’m not sure how an additional proceeding on CQBAT could be implemented before or following in the final rules—which I don’t think the FCC is willing to delay any longer. This is the problem we are facing as the FCC is intent on making a decision this fall, possibly without fully considering certain aspects. There are just so many components of these reforms, and it seems like the industry could continue on in comment cycles on various proposals for the next 20 years—meanwhile everyone suffers from a bad case of regulatory uncertainty. 

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I have a list of about 30 comments I want to get through over the weekend, and with the hurricane a’ coming that just might be possible!

Cassandra Heyne

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The 39th Annual TPRC just wrapped up and I was honored to be able to attend this conference for the 3rd year in a row. TPRC is held every year in late September at George Mason Law School, and it has become one of the highlights of my year in terms of telecom events. TPRC is primarily for the government and academic/research telecom community, and it has benefited me as both a student and someone who is edging for a career in telecom policy. There is always an amazing selection of presenters including well-known authors, economists, legal visionaries, and engineers (national and international) who dissect nearly every possible aspect of current and potential telecommunications and information communication policy.

Friday, Sept. 23 included a few panel sessions and a keynote speech by NTIA Administrator Larry Strickling (it is always a pleasure to hear what he has to say). On Saturday and Sunday, the schedule includes 6 sessions—for each session, participants can choose from 5 different session topics, and each topic includes the presentation and open discussion of 2 or 3 research papers. I doubt any two TPRC participants have the exact same experience at the conference due to the sheer amount of material covered and the variety of sessions. I always have a really hard time deciding which sessions to attend, and I definitely have many interesting papers to read for the next few months!

I tried to pick a variety of sessions where I could hear about issues beyond what I typically focus on (rural broadband, universal service reform, FCC proceedings). I ended up learning something new and interesting about the following topics: international broadband plans, technology patents, wireless grids and social emergency response technologies, spectrum auctions and policy, FCC involvement in ISP interconnection disputes, fiber costs and competition, “phonelessness,” effectiveness of the lesser-notorious USF programs like Rural Health Care, broadband gaps, data limitations of the National Broadband Map, “Gross National Happiness” and the National Broadband Plan, international carrier selection policies, the African perspective on broadband, international telecom bribery and corruption, European Net Neutrality and the freedom of expression, and deep packet inspection. Phew! Even though there weren’t any topics specifically for, about, or presented by the RLEC industry; everything was still very much relevant to my work and my interests in rural telecom and the industry as a whole. I actually enjoy this conference mostly because it gets me away from the usual perspectives on things, and helps me think about “bigger pictures” and perspectives I may not typically consider. It also always inspires me to do my own research on topics that are both new and known to me, and in the last 2 years research from this conference has greatly aided some of my University of Colorado ITP projects.

Here are some highlights from my favorite panels and sessions:

Panel: National Strategies for Broadband Deployment, Adoption and Use: A Comparative Review and Lessons for the U.S. and Canada

This panel was really interesting to me because it discussed and compared various national broadband strategies in a variety of countries (Australia, New Zealand, Singapore, European Union, Brazil, Argentina, Colombia, Peru, Mexico). I actually did a broadband plan comparison study last year in an International Telecom Policy class at CU about broadband plans in the U.S., Japan, South Korea and Sweden where I discussed the NBP’s shortcoming of recommending 100 Mbps for 100 million people and 4 Mbps for rural Americans. During my research process, I had looked at national plans in a variety of countries before deciding on Japan, South Korea and Sweden—I had specifically looked for plans that set speed target goals at the same rate in urban and rural areas, and plans that focused heavily on the adoption side of the equation. Interestingly, I got the idea for this paper at last year’s TPRC from a session about broadband deployment in Japan. In this panel, Richard Bennet (ITIF) talked about the Singapore broadband strategy, which apparently came about partially from Singapore’s desire to compete with the US when Verizon started to deploy FiOS, and when it looked like the US was going to massively invest in FTTH. Singapore also wanted to position itself as a hub for biotech R&D, and improve competitiveness and quality of live through broadband. Bennet made the distinction that while the US NBP is mostly a study in the benefits of broadband; the Singapore plan is more like an actual procurement specification on what kind of technology to deploy and how to do it. Singapore now has 104.5% penetration of wired broadband and 144.2% penetration of wireless broadband, which is pretty impressive. On the opposite end of the spectrum are Latin American Countries (LACs). Prof. Judith Mariscal (CIDE) talked about the challenges that LACs face in implementing anything resembling a national broadband strategy—not many LACs have formal broadband plans, but many are grappling with some type of goals at least. Many LACs currently have broadband penetration at rates less than 10%, with Peru at 3.1%, and Peru apparently has a universal access fund that has net even been used. Overall, there is a lack of organization and coordination in LAC governments and regulatory bodies, and in the case of Mexico, a weak institutional policy combined with ambitious goals causing significant limitations to broadband achievements.

Keynote Speech by NTIA Administrator Lawrence E. Strickling

Strickling gave the keynote speech at my first TPCR (2009), and last year it was FCC Commissioner Mignon Clyburn. It was nice to have Strickling back again; apparently he is a long-time supporter of TPRC. His keynote speech focused on the importance of implementing data-driven policies, and ensuring that telecom research and data is independent, credible and relevant. He identified research needs in the areas of broadband, spectrum and Internet policy. For broadband, we need solid research on economic and social benefits, Internet usage/behavior, availability, and discrepancies between specific groups (like urban/rural). Strickling argued that “economists have greatly advanced spectrum policy over the years;” and “the day of giving away licenses is over.” For Internet policy, we need fast and flexible decision making that does not fall prey to political stalemates and heavy handed bureaucracy.

Session: Wireless and Society
Paper: The Central Role of Wireless in the 21st Century Communications Ecology: Adapting Spectrum and Universal Service Policy to the New Reality, Mark Cooper (Fordham/Silicon Flatirons)


Cooper, who is always a lively and interesting speaker, argued that the mobile revolution is the greatest revolution in the history of humanity—unlike previous revolutions (writing, etc.); mobile communications is for everyone, not just an elite subset of the population—it also spread like wildfire. Cooper presented some interesting policy implications that are a result of the mobile revolution, which is definitely a timely issue as the government considers repurposing federal and broadcasting spectrum. Cooper warns that we must not have another “hundred year mistake” when this spectrum is released, and the government should not allocate spectrum to specific types of owners or create another batch of incumbents who will never give up the spectrum even when their use is no longer viable. He would like to see ¼ - ½ of the spectrum go to unlicensed use, and we also need better ways to determine the value of unlicensed spectrum. Cooper talked about how the value of bandwidth declines as bandwidth availability increases; and wireless operators need incentives to use spectrum efficiently and need to send signals to consumers about the costs that consumers impose as a result of their usage behavior. He made some interesting points about broadband speeds, which were typically contrary to how I think about broadband speeds (which is faster is better and the US shouldn’t settle for anything less than the best—for everyone). He said that 10 Mbps will basically do everything that people need, and engineers will figure out how to make things work within this range. He added that basically the only thing that you can do with 1 Gbps service that you can’t do with 10 Mbps is holographic videoconferencing… and really, who needs to do that? I’ve skimmed though Cooper’s paper and it is really interesting—there are some very useful charts about broadband penetration, wireless growth and speed needs for various applications.

Session: Evaluating Broadband Policy 2
Paper: “The National Broadband Map: Data Limitations and Implications,” Tony Grubesic (Drexel University; paper available upon request)


This was one of the two presentations that I was most excited about, and it did not disappoint. I fully intend to get ahold of Grubesic’s paper because his research and conclusions were very interesting and quite pertinent to a topic that I have been following this year—inaccuracies in the National Broadband Map. He argued that the map is a good start, but it is important to understand the data limitations particularly the level of participation (only 27% of Virginia providers participated) and the tendency to show “highly optimistic data.” He talked about a problem that I think a lot of people have been concerned about—that census blocks and wire centers don’t always match up, which leads to some inaccurate representations where census blocks are considered served when in fact the entire census block is definitely not served by a particular provider/technology, specifically DSL which has distance limitations. He also provided an interesting example of Dublin, Ohio where 46% of completely empty census blocks with no population or businesses are listed as served, which gives a “fuzzy view” of broadband coverage. Grubesic recommended that the map should be updated to reflect 2010 census information, and there are 35% more census blocks in 2010 than 2000 which is not reflected in the map. Overall, he thinks the map is a good effort but it is far from perfect—I definitely agree. I’ve only played around with the newly updated map for a little while, but it didn’t take me very long at all to find problems and get really frustrated with the overall navigation and ease of use. It also took forever for the map to load and then to move around within the map, which I found kind of ironic since I have a fairly decent DSL connection.

Session: ICT in Developing Countries
Paper: “Bribery and Corruption in Telecommunications,” Ewen Sutherland (University of Namur)


This was the other presentation that I was most excited about—even though this isn’t a topic relevant to my work, I thought it would be really interesting—and it was! A lot of presentations at TPRC are really heavy on econometrics and models, which are obviously important, but it is also interesting to learn about what is happening in the crazy world of telecommunications beyond graphs and charts. Anyway, Sutherland discussed a variety of colorful examples of bribery, corruption and nepotism in international telecommunications; he also discussed the Foreign Corrupt Practices Act and concluded that there is very little recognition of the corruption/bribery problem or analysis of the trends in this area. There are inconsistent enforcement mechanisms across different countries, it is hard to estimate the costs on consumers, and there are even unclear standards and practices within bodies like the OECD and UN. I thought the examples of nepotism in North African/Middle Eastern countries were especially interesting—in Morocco, the king owns 69% of a major telecom provider; in Libya, the Gadhafi family owns both mobile carriers; in Syria, the president’s cousin owns 75% of Syriatel… you get the idea! Basically, even countries that have supposedly privatized and liberalized telecommunications and established an “independent” regulatory may not have truly done so, and there isn’t really anyone who can do anything about it. I am looking forward to reading Sutherland’s paper for the entertainment and shock value alone—it is chock full of crazy examples of these problems from all over the world.

Session: Network Management
Paper: “From Competition to Freedom of Expression: Introducing Article 10 ECHR in the European Network Neutrality Debate,” Jasper Sluijs (Tilburg University)


I enjoyed all three of the presentations in this session, but especially this hard look at whether Net Neutrality is a human right, or if it actually a property right for ISPs to implement network management techniques. This is an extremely timely topic as the Net Neutrality rules here were just published in the Federal Register (I’m looking forward to analyzing them in the coming weeks… kind of). Europe has taken a lighter hand on NN regulations, where non-neutrality is OK as long as network management practices are disclosed (transparency principle) so customers can make an informed purchasing decision. However, it sounds like public interest and human rights groups have been just as vocal in Europe as they have in America, and have gone as far as arguing that NN violates the freedom of expression and the EU Human Rights Convention, (which is equivalent to our Freedom of Speech, but with some codified limitations). Sluijs looked at the question: “Is network management “expression” even if it has no public value?” He explained that application of the Human Rights principle is more complex than the public interest groups assume, and the real debate should be about “substance rather than rhetoric”—I fully believe that this applies in the U.S. as well. I am far on the anti-Net Neutrality rules side, and I have been continually amused by some of the things that public interest groups have come up with in favor of these rules. Like the AT&T/T-Mobile merger, there have been a lot of really strong opinions that actually have no relation to telecom policy. Digression… My favorite example of this was an article I came across back in December by a radical feminist group who claimed that ISPs like Verizon, etc. would literally prevent women from communicating on the Internet and prevent other things like searching for abortion providers. Really?!?! ISPs don’t have anything better to do than suppress feminist-toned emails and blogs? I didn’t realize that in 2011 there was still a problem of women being treated unfairly. I also didn’t realize that deep packet inspection could determine the sex of a packet. After reading the article a few times in utter shock that anyone could come up with something so insane, it became pretty clear that the authors were of an age where the Internet was either not widely understood or not widely used. To me it seemed like they heard about this crazy net neutrality thing from a left-wing group and ran with it, all the way to the debate over a woman’s right to choose. Anyway, this presentation (and the following one in this session on political and economic issues in Net Neutrality) reminded me of that article, and how ridiculous it is that NN has become such a political issue when it is really not at all (at least, I don’t think it is… I don’t really think it is an issue at all though). Basically, the presenters at this session all described how NN is a very complex and multifaceted issue, and there are no single straightforward solutions. It will be really interesting to see what effect, if any, the US regulations have, and I expect there will be some follow-up on this at next year’s TPRC.

I highly recommend that you check out the TPRC website and skim through some of the papers. There is an amazing wealth of research available, and there are plenty of topics that have implications for rural telecommunications providers, and plenty that are just plain interesting.

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This is kind of a bittersweet post for me—this will probably be my last regular entry here on Rural TeleCommentary. I will be making an announcement about it sometime this week. As is often the case with great opportunities, sacrifices have to be made. I won’t be going away, just going somewhere else full-time (JSI Capital Advisors).

I’m looking forward to hearing about the NTCA Fall Conference in Seattle!

Cassandra Heyne
ruraltelecommentary@gmail.com

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Rural Telecom History: What's Your Story?

by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary

A few weeks ago I came across a hidden gem that is probably not well known outside of the Iowa RLEC circle- Lines Between Two Rivers: A History of Telephony in Iowa. This 600-page book was compiled in 1991 by the Iowa Telecom Association (ITA), and dedicated “to those Telephone Company Pioneers who gave their blood, sweat and tears in order to provide an outstanding telephone system to the citizens of the great State of Iowa.” I actually learned about it from a footnote in ITA comments, and I immediately looked for it online where I found a used copy via Amazon.com. It looks like the copy I ended up with came from the Keosauqua Public Library and was marked “Discard” which makes me feel lucky to have ended up with it. In the back, it says that it was a gift for Van Buren Telephone (also in Keosauqua) in August, 1992. There are a few copies available on Amazon still, so I encourage you to grab one if this book sounds interesting (price ranges from $34-$95). If you love history and particularly telecom history (like me), definitely get it. 

Lines Between Two Rivers include short histories of every rural telephone company in Iowa—almost 150 companies in 1991. The stories were submitted by the companies, and include extremely interesting and amazing tales of the early days of telephony going back to the late 1800s. I’ve been trying to read a couple stories every night, so it will probably take me awhile to get through the entire book. Meanwhile, I thought maybe I would put my B.A. in History to good use by investigating and publishing historical accounts from other rural telephone companies outside of Iowa. RLEC readers: I would like to hear stories about how your company was started, the early challenges that it faced, how it grew, technology milestones, and how you managed to stay in the business for 100+ years. I know there have to be some great stories about battles with AT&T in the old days—my own company’s history has proved that, as well as some stories in my favorite book The Master Switch. I’m really interested in family-owned RLECs and the “extremely rural” companies that laid it all on the line (literally) to provide telephone service in the most daunting geographic areas of the country. I’d love to see pictures, maps, old bills, anything! Please e-mail me at ruraltelecommentary@gmail.com if you would like me to share your RLEC’s history on Rural TeleCommentary. In addition to your history, I would like to know your future—how is your company going to evolve in order to stay in business as our industry faces increasing and intimidating regulatory, financial and competitive challenges?

I think that posting histories of rural telecom companies will tie into my advocacy efforts here on Rural TeleCommentary by helping to personalize the companies—I know I have readers “inside the Beltway” who have possibly never visited a truly rural area and who would (maybe) love to learn more about the background of the RLEC industry. I hear criticism of DC-based telecom regulators and lobbyists all the time; that they don’t really know what a rural area means because they never go any further than the Greater DC Area. Why not help them understand rural telecom better by depicting the challenges RLECs have gone through to bring telephone and broadband service to the most rural and remote people in America? I also have a more sinister goal here, which is hopefully not too grim of an analogy, but I see this as a way to “humanize the victim.” People are told that if they are ever in the unfortunate situation of being kidnapped or attacked, they should blurt out information about themselves (I’ve seen it on TV anyway, and Silence of the Lambs), in order for the attacker to see them as real people. RLECs are under attack from the FCC and now Congress, as well as competitors, so maybe if we let them know that we are more than just wasteful, inefficient pieces of technology scattered around rural backwaters, they will be more understanding. It’s a long shot, but it might be fun to try at least. 

Meanwhile, here are some excerpts from Lines Between Two Rivers that I have been particularly impressed with. 

  • Ace Telephone Association (now Ace Communications, Houston, MN) came together as a collection of smaller farmers’ telephone companies in 1949 to improve telephone service in the area: “The biggest single reason for the local enthusiasm at this meeting was the recent amendment of the REA Act of 1936.” Apparently, not much has changed since 1950 regarding business incentives to build communications networks in rural areas: “The tremendous cost of bringing telephone service to the hilly, rural, area in southeastern Minnesota and northeastern Iowa had taken all the initiative out of the private telephone companies as well as the Bell system.” My favorite part of Ace’s story was that the switchboards were actually located in the home of the operator, and “manned 24 hours a day and seven days a week.” Area residents would actually come to the operator’s home to make calls—can you imagine? That is definitely true customer service. 

  • Amana Society Service Company indeed has a rich history, which I assumed it might. The Amana Colonies were settled in the 1855 by German Pietists, and telephone service came fairly shortly thereafter: “When news of Bell’s 1876 invention reached the community, they could see the practicality of telephones in the villages. The Amana people decided to build their own telephone system. They often copied or modified national brands for their own use, rather than purchasing them. So, in 1880, after studying the subject of telephony, Friedrich Hahn Sr. (1843-1917) of Middle Amana, a cabinet and clock maker, build a magneto telephone. He built the walnut cabinet, as well as the generator, switch hook, ringer movements and induction coils inside the cabinet.” He built all of this himself! Next time I am in Iowa (October probably) I am definitely going to make a point of visiting the Amana Colonies Heritage Society Museum to check out this phone, and eat some delicious German food.

    •  Arcadia Telephone Cooperative (Arcadia, IA) started in 1884, and in the early 1900’s their telephone switch was located in the front room of a funeral parlor.  

      • Ayrshire Farmers Mutual Telephone (Ayrshire Communications, Ayrshire, IA) struggled during the Great Depression: “Wages of employees were reduced and much emphasis was put on past bills. Also a new rule was made, ‘When toll bill reaches the amount of $2.00 service will be discontinued until too bill is paid.’” Things turned around eventually, and the company “entered the 80’s with a very comfortable feeling—digital office, all buried, one party service, owned toll facilities to and beyond our boundary lines, recently converted to a cost company so the revenues were good. Yes, a real tranquil time!” Ayrshire noted that after the AT&T breakup, they were “bombarded with consultant classes, seminars, etc., all hoping to re-educate the company staff members to a new and different telephone world.” 

        • Barnes City Cooperative Telephone Co. (which appears to be no longer in existence) described the multi-faceted role of the telephone operator: “It was not unusual for the telephone operator in the days of the magneto or common batter switchboard to be the central point of information about how to cook certain things or have recipes to share about baking, etc.” During WWII, the operator also had to deliver the news to families when a soldier died in the war.  

          • Butler-Bremer Mutual Telephone Company (Butler-Bremer Communications, Plainfield, IA) shared an interesting story about small vs. Bell in the 1930s. The company’s secretary for 30 years, Senator J. Kendall “Buster” Lynes, “formulated the strategy which enabled the company to virtually force the Northwestern Bell Telephone Company to sell its telephone equipment in Tripoli to the Butler-Bremer Mutual Telephone Company. This is probably one of the only cases on record of such an occurrence—the giant of the telephone industry being defeated by a tiny David!” 

            •  The location of early switchboards was really interesting. So far I have read of switchboards being located in candy stores, ice cream parlors, grocery stores, funeral homes, banks, feed mills, meat markets, the operator’s home, post offices, and basically anywhere you can think of in a small rural town.

            I will definitely continue to share exceptional stories from Lines Between Two Rivers here as I read through the book. I hope that some of my readers take the time to submit their own stories because I think it would make a really great addition to Rural TeleCommentary.
            Hopefully everyone has survived the heat wave this week!

            Cassandra Heyne

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            MASON CITY — Mason City police say they’ve found counterfeit money and drugs after the execution of a search warrant. On Monday evening, officers were dispatched to Godfather’s Pizza at 1703 4th Southeast on the report of a man that had attempted to pay with a counterfeit $20 bill. The investigation led to a search

            An Important Announcement about Rural TeleCommentary

            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary


            Every year I attend the Berkshire Hathaway Annual Meeting in Omaha, in part for the shopping and in part for the unrivaled wisdom given by Warren Buffett and Charlie Munger. One of the lessons from the 2011 meeting that really hit home with me was, The secret to success in a field is learning all you can about it.” I don’t remember if Charlie or Warren said this, but year-after-year formal education and continual personal growth through learning are always emphasized by both distinguished gentlemen of wealth and success. I have always placed the highest possible value on education, and as my graduate coursework came to an end I still wanted to find ways to develop expertise in specific areas of the telecommunications industry. In a way, my telecommunications graduate program was only the beginning of my journey to becoming an expert in telecommunications policy, economics, business and engineering. The University of Colorado ITP program helped me figure out which areas of the industry that I desired to learn more about.  

            Launching Rural TeleCommentary was my secret to learning all I could about the rural telecommunications industry, with the anticipation that this website would help me achieve success. At the beginning of the year, my definition of success was definitely finding a job where I could do what I love, which is analyzing, learning and writing about the rural telecommunications industry. I’m delighted to report that my efforts paid off and I have achieved this particular goal.

            Unfortunately, success often requires personal sacrifice. In order to focus all my attention on my new job, I will no longer be posting regularly on Rural TeleCommentary.   

            Now for the good news—you needn’t travel far to continue reading my perspectives about the rural telecommunications industry. As a full time analyst for JSI Capital Advisors, I will be writing about regulatory issues and a wide range of other topics that are both similar to what I have covered on Rural TeleCommentary and completely new to me. I am honored to join a wonderful team of telecom experts at JSI Capital Advisors, and I believe that this is probably the best possible job opportunity that I could have ever asked for! I also except to become even more involved with the rural telecommunications providers that I love so dearly. 

            My regular readers probably are aware that I have been writing part-time for JSI Capital Advisors for a few months, primarily about USF Reform. I hope that you will follow me to a different URL and continue enjoying and learning from my articles as well as those written by my colleagues, who offer a wealth of information and analysis on telecom financial activity, mergers and deals, the wireless industry, cutting-edge technology, and many other exciting topics. We are all experts in different aspects of the telecommunications industry and together I think we make a very strong team. 

            JSI Capital Advisors publishes 3 blogs- The ILEC Advisor (where my articles are featured), The Deal Advisor and Phone Numbers; as well as The Daily Monitor which includes news and press releases from across the industry in addition to our original content (you can subscribe to Daily Monitor e-mails for free!).  We also have a couple of interesting forums on LinkedIn- The USF Forum and The Deal Advisor; and JSI Capital Advisors is on Twitter @JSI_Capital

            I plan to leave the content on Rural TeleCommentary for the near future to serve as a resource for anyone interested in learning about the rural telecom industry. I will continue to update USF Reform Headquarters with links to interesting articles about this important proceeding. I may, from time-to-time, post an update here if something extraordinary happens in my life pertaining to the rural telecom industry, and when I finally start working on my master’s thesis (I know, I should be working on it now, but I’ve hit some roadblocks at the moment…)—I’ve had a number of readers generously offer assistance with that project and inquire about how it is progressing. To answer that question, right now I am 1) waiting for the USF reform final rules, and 2) still looking for an advisor at my school.  

            I still encourage readers to contact me with questions or interesting rural telecom industry news—I will always be looking for things to write about! 

            I sincerely want to thank everyone who has ever read this website and encouraged me in any way this past year and since the beginning, even before Rural TeleCommentary was launched. I never ever anticipated that I would get almost 13,000 readers in just 10 months. There are so many amazing people in the rural telecom industry and I hope everyone stays optimistic even in these difficult times. This is a group of people that I am very proud to be a part of, and I am looking forward to the wonderful opportunities that lie ahead at JSI Capital Advisors. 

            Cassandra Heyne
            P.S. You can still follow me on Twitter @RuralTelComment if you miss me!

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            Today, U.S. v. AT&T Gets a New Meaning

            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary

            August 31, 2011 is indeed a fine day for competition in the wireless telecommunications industry, and it is very reaffirming to see that AT&T’s lobbying power in DC has for once not worked to their advantage—no amount of lobbying dollars can conceal the fact that this merger would be a disaster for competition and consumers. The AT&T-Mobile Saga is not over yet, not by a long shot… However, AT&T’s stronghold over the outcome has been softening gradually over the last month and with the DOJ’s decision today, AT&T’s claims to T-Mobile, and therefore to a duopoly in the wireless industry, are becoming more of a pathetic whimper than a battle cry.

            I have been trying to consistently cover the merger from a rural telecom perspective since it was announced, but I’ve been fairly selective about what I have written about since there is no shortage of good information available. Well, if this announcement doesn’t warrant me taking a short break from USF comments, then I don’t know what does!

            I have honestly not been paying very much attention to the DOJ’s review of the merger-the DOJ is “out of my element,” so to speak, so I typical focus my attention on the FCC’s review. I actually haven’t been paying all that much attention to the merger in general for the last few weeks, as I have obviously been focused on USF. However, I have been pleased with the FCC’s merger review so far, including its ongoing search for more information from AT&T. To me, this has indicated that the FCC is not about to blindly accept the merger (which Commissioner Copps assured the world several months ago). Public opinion about the merger has continued to decline, despite what AT&T may be saying. AT&T continues to spin news reports and “facts” about alleged merger benefits in a way that attempts to draw attention away from the real issues. They say the merger will create 5,000 jobs, but negative 15,000 jobs do not a public benefit make (this is just one of the recent examples of AT&T’s delusional attempts to justify the merger). 

            Anyway, I couldn’t believe my eyes when I saw earlier today, on Twitter of course, that the DOJ filed a suit to block the mergerapparently, AT&T did not even expect this monumental action by the DOJ. I thought the Telecom Gods had gifted us aplenty this week with the FCC’s decision to extend the reply comments on USF by an additional week, but I guess I was wrong! Basically, the DOJ thinks the merger will have detrimental effects on competition, which means that the DOJ is actually doing its job. Here is a rundown of some of the comments in the United States of America v. AT&T Inc., T-Mobile USA, Inc., and Deutsche Telekom  that I found interesting, with an emphasis on comments regarding smaller carriers:

            •  “Vigorous competition is essential to ensuring continued innovation and maintaining low prices.” (pg.2). Nice shout-out to the Brick Phone of Yesteryear!
            •  “None of the smaller carriers’ voice networks cover even one-third of the U.S. population, and the largest of these smaller carriers has less than one-third the number of wireless connections as T-Mobile. Similarly, regional competitors often lack a nationwide data network, nationally recognized brands, significant nationwide spectrum holdings, and timely access to the most popular handsets” (pg. 2-3).
            • T-Mobile has, and continues to be a “challenger brand,” which is an important role in the market, and “places important competitive pressure on its three larger rivals, particularly in terms of pricing” (pg. 3)—a role which should not be eliminated from the marketplace.
            • “There are no cost-effective alternatives to mobile wireless telecommunications services” (pg. 6)—not for regular consumers or business/enterprise/government consumers.
            • “In the face of a small but significant price increase imposed by a hypothetical monopolist it is unlikely that a sufficient number of customers would switch some or all of their usage from mobile wireless telecommunications services to fixed wireline services such that the price increase or reduction in innovation would be unprofitable” (pg. 7).
            • “Nationally, the proposed merger would result in an HHI of more than 3,100 for mobile wireless telecommunications services, an increase of nearly 700 points. These numbers substantially exceed the thresholds at which mergers are presumed to be likely to enhance market power“(pg. 12).
            • T-Mobile is not only a value challenger, but a known innovator, “responsible for numerous ‘firsts’ in the U.S. mobile wireless industry:” first Android handset, BlackBerry, wireless e-mail, Sidekick, Wi-Fi hotspots, advanced HSPA+ technology, and unlimited plans (pg. 12). [But AT&T had the first iPhone, which is all that really matters now, right?]
            • “Competition taking place across a variety of dimensions, including price, plan structure, network coverage, quality, speeds, devices, and operating systems would be negatively impacted if this merger were to proceed” (pg. 14).
            • Smaller carriers would especially be impacted re: roaming agreements, ability to “constrain” the Big 4, obtaining good handsets and smartphones, and ability to increase their market shares.
            • “Enhanced risk of anticompetitive coordination” = significant harm, for consumers “all across the nation, including those in rural areas with limited T-Mobile presence” (pg. 16)
            • “By eliminating T-Mobile as an independent competitor, the proposed transaction will likely reduce the competitive incentive to invest in wireless networks to attract and retain customers” (pg. 17).
            • The merger would increase entry barriers, and entry “would not be likely, timely and sufficient to thwart the competitive harm” that the merger would cause (pg. 19)

            Naturally, the response from the industry has been colossal. Most merger opponents wasted no time in releasing statements declaring the DOJ’s decision a victory and “a triumph of facts over politics,” but AT&T has spit back that they will oppose this decision—I don’t know about you, but I can’t wait to see what “evidence” they provide in an effort to persuade the DOJ to reverse its findings. PCMag.com cautions that “the fight isn’t over until a federal court hands down an order to block the merger, or AT&T decides it will just be too much trouble.” However, other analysts are saying that the merger is basically dead in the water, which could end up being a bad thing for companies like Sprint who may wish for a shot at eating AT&T’s leftovers once the deal falls through.

            The Wall Street Journal’s article asks, “who could oppose a deal supported by interest groups as varied as the Louisiana Ballooning Festival and the Association of New Jersey Orchestras?” Since I’ve found the insanely strange responses by rice farmers, balloon hobbyists, cattle ranchers and whatnot one of the most entertaining aspects of this merger, I can’t help but say this: “It’s a dark day for AT&T’s minions.” Next time, perhaps try gaining favor from constituents who are actually involved in the telecommunications industry. Most rational analysts saw though all the fluff submitted by these parties as nothing more than an attempt by AT&T to buy support and make the awful deal seam palatable. Anyway, who can argue with the Association of Retired and Disabled Minority Rare Orchid Farmers with Lupus when it comes to telecommunications mergers?  You don’t want to look like an insensitive jerk by saying “these people know nothing about the wireless market,” so you just let them have their duopoly—right? I think that was AT&T’s intention all along, because there definitely haven’t been any cold, hard facts proving that the merger will be a benefit to competition and consumers. 

            Looking at the reactions… A statement by the Rural Telecommunications Group (a vocal opponent of the merger) explains that the DOJ’s decision “shows that there is no question that this merger would have been bad for rural America, rural consumers, and rural carriers.” Another vocal opponent, Public Knowledge, stated: “Fighting this job-killing merger is the best Labor Day present anyone can give the American People. AT&T’s effort to recreate ‘Ma Cell’ by holding rural broadband hostage and threatening American jobs deserves nothing by scorn. The FCC should move as quickly as possible to follow the lead of the Department of Justice and reject the merger.” JSI Capital Advisors analyst Richelle Elberg expressed little surprise about this decision and provided a great chart describing her reaction’s to AT&T’s alleged benefits of the merger. GigaOM mused on what might happen to T-Mobile if the deal fails, and considered options ranging from Sprint moving to merge with T-Mobile (again, but I honestly don’t expect this outcome to happen) to T-Mobile getting snatched up by a cable company or private equity firm. Members of Congress have weighed in too—Senator Al Franken (D-MN), yet another vocal opponent, stated “I have long believed that this merger would be a terrible deal for consumers, and I’m pleased the Department of Justice has taken the wise step of officially opposing it.” 

            You get the idea—basically everyone is ecstatic about this decision, at least everyone who isn’t AT&T or T-Mobile or perhaps the International Rice Festival. Well, I am ecstatic too but I heed the warnings that the war is not won yet. I think the FCC will be more likely to block the merger now that the DOJ has filed this suit, but I definitely do not see AT&T letting up on the pressure. 

            I think the DOJ has effectively paved the road for merger opponents, especially small wireless carriers, to feel confident that the government is not always against “the little guy.” The DOJ filing clearly describes the challenges that small carriers will face if the merger is approved, and these companies should continue to provide evidence illustrating this fact. Small rural carriers who are opposed to the merger need to keep in mind, "the battle may be won but the war is not over."

            So far this merger has enough twists, turns, shocks and stabs to befit, well, an AT&T-sized merger. I can’t wait to see what happens next!

            Tomorrow… Back to USF comments.

            Cassandra Heyne

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            The Final USF/ICC Reform Lightning Round (Hurricane Edition): Comments by Cellular South

            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary


            Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. Whilst stuck indoors for the next 2 days while Hurricane Irene does its thing, I’m going to try to get through as many comments as I can. I highly doubt I’ll get through all 130 by Wednesday, but Hurricane Irene definitely provided me with a nice excuse to do as much work as possible this weekend!


            Since the ABC Plan was released, I have been very curious about the response by rural wireless carriers to the proposal that the Mobility Fund should be a mere $300m, in comparison to the $4.5b for wireline carriers. When wireless broadband appears to be “the wave of the future,” according to Cellular South and the broadband marketplace, it is hard to imagine that these companies would be satisfied with such a small piece of the pie. Well, they are not satisfied. You can read more about the rural wireless perspective from the Rural Telecommunications Group here, but I also thought Cellular South’s comments deserved some attention. I thought they had some great arguments, and then… They call for rate-of-return to be eliminated! With all due respect to Cellular South, I do not think one rural wireless provider is exactly in a position to decide the best course of policy for all the RLECs. 

            Overall, Cellular South agrees with the Consensus Framework and Joint Board proposals to establish separate funds for fixed and mobile broadband, but the agreement stops there. Cellular South feels as though these alternative frameworks are the “wrong answer” because “allocating a substantial share of CAF support to wireline carriers would inevitably and significantly impair the extent and pace of mobile broadband deployment in rural America, and would also ignore the fact that carriers serving subscribers of wireless services are by far the largest category of contributors to the universal service fund” (pg. iii). Cellular South is understandably outraged by the fact that mobile broadband is placed at such low priority in the alternative proposals, when mobile broadband in such high demand—“in the face of these facts on the ground, it is stunning that the wireline broadband proponents have chosen to put forward plans for CAF funding mechanisms that are marked by a transparent imbalance in proposed funding levels” (pg. 4). 

            On a Separate Fund for Wireless: Cellular South provides 3 sound arguments in favor of establishing separate funds for wireless broadband:

            1.       Separate funds “would enable the Commission to give a focus and priority to mobile broadband commensurate with the role that mobile broadband has come to play in the communications marketplace” (pg. 8);
            2.       Separate funds “would facilitate the use of a forward-looking economic cost model tailored to the costs associated with deploying and maintaining mobile broadband networks in rural and high-cost areas” (pg. 9); and
            3.       Separate funds would help meet the aggressive mobile broadband goals set forth by the Obama Administration and the FCC.

            On the $300m Mobility Fund Budget: Cellular South points out that $300m is only 6.7% of the overall ABC Plan budget and only 12% of the Joint Board plan’s budget (and just for build-out costs, not operational costs, which can make up a substantial portion of a wireless network’s expenses). With this in mind, “Cellular South encourages the Commission to compare these proposals to the widespread and accelerating demand for mobile broadband devices and services, to the fading demand for wireline services, to the costs associated with brining mobile broadband networks and services to rural areas, and to the level of contributions into the existing USF program received from carriers providing wireless services” (pg. 13). Rather than such an incredibly one-sided budget, Cellular South supports a balanced distribution of funding with support portability reflective of the actual broadband marketplace. Of many of the comments I’ve read, I found this to be reasonably consumer-oriented. I think some of the commenters have forgotten that consumers are the actual beneficiaries of USF support. Cellular South seems to keep this in mind, at least until their next recommendation…

            On Kicking RoR to the Curb: I don’t know why, but Cellular South is very bitter about RoR. They find it anti-competitive and they do not think it is even worth the FCC’s time and effort to improve it, because “the embedded cost mechanism used to disburse support to rural incumbents is bankrupt and should have been discarded long ago” (pg. 16). They caution that if RoR is maintained (which it should not be), the rate should be reduced significantly: “If the Commission decides to retain a rate-of-return mechanism—based on what Cellular South considers to be the misguided view that this mechanism can somehow be overhauled to improve the incentives of rural incumbents to make rational investments and to avoid the temptation of pumping up costs as a means of inflating the amount of support they receive—then a prerequisite for the continued use of the rate-of-return mechanism should be a represcription of the stratospheric 11.25 percent rate of return that has remained in place since 1990” (pg. 17-18).

            On NOT Capping CAF: Taking the polar opposite position as Comcast, Cellular South is opposed to capping CAF. Interestingly, Comcast argued that caps are the definition of fiscal responsibility; but Cellular South argued that there is nothing about the definition of fiscal responsibility that necessitates a cap on high-cost funding (I agree with Cellular South). They insist, “The Commission has at its disposal many tools for improving the efficient use of funds (e.g. through reliance on forward-looking cost mechanisms and portability of support) and for curbing waste, fraud and abuse perpetuated by CAF funding recipients (e.g. through meaningful penalties and audit requirements)” (pg. 18). I think they hit on a good point—that curbing waste, fraud and abuse should be through enforcement. Cellular South further argues that a cap on USF is “a repudiation of the Commission’s statutory duty to base its universal service policies on a principle that its support mechanisms should be sufficient to preserve and advance universal service” (pg. 18). 

            My Thoughts: I don’t know where Cellular South’s hostility towards RoR came from, but I would like to know. One of my biggest sources of aggravation throughout the multiple comment cycles in this proceeding, starting with last summer’s CAF inquiry (when it still seemed like a threat that RoR would actually be eliminated), are the complaints that RoR companies are wasteful and inefficient without providing examples. Verizon and AT&T were the worst perpetrators, and it surprised me that another rural telecom provider like Cellular South would also blindly follow this train. I want someone to cite specific examples of RoR companies who meet a numerical definition of wasteful and inefficient utilization of USF because of RoR regulation specifically. Tell me the name of the company, and show me exactly how a forward-looking cost model would correct the so-called abuses and inefficiencies allegedly caused by RoR. RLECs have been more than willing to show quantitative examples of 1) how most of them never see 11.25% in the first place; and 2) how eliminating RoR would be financially catastrophic. So, RoR critics, step up your game and stop saying that RoR is the source of waste, abuse and inefficiency without backing up your claims. This just leads to the FCC and others in the government (like state regulators and Congress) perpetuating the “systemic prejudice” against RoR and RLECs that the Rural Broadband Alliance is so gallantly trying to fight.
             
            Aside from this one issue, I basically agreed with everything else Cellular South said, and I thought their reasons for establishing separate wireless and fixed funds were well conceived. I’m not sure if I think CAF should be split evenly 3 ways between ILECs, RLECs and wireless, but I actually think an even distribution is more rational than wireless only getting 6.5% of the funding. I also thought they made an interesting recommendation that funding should be portable between the separate funds, but they didn’t go into much detail about this—hopefully they will in the reply comments.

            ---------------------------------------------------- 

            I’m going to enjoy the hurricane now, but tomorrow I’m going to take a hard look at the comments submitted by a variety of state regulators. Like the wireless carriers, I suspect many of them feel burned by the ABC Plan’s proposal to drastically reduce their role in the future of USF.

            Have a request? Let me know! I’m definitely not going anywhere all weekend (contact me via e-mail or on Twitter @RuralTelComment). 

            If you are also stuck indoors all weekend, you can catch up on all the comment summaries I have done so far: the Rural Broadband Alliance, Alexicon Consulting, ITTA, Comcast, Western State Telecom Associations, and the Rural Telecommunications Group (the last two are for The ILEC Advisor). 

            Cassandra Heyne

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            The Final USF/ICC Reform Lightning Round (Hurricane Edition): Comments by the Rural Broadband Alliance

            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary


            Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. Whilst stuck indoors for the next 2 days while Hurricane Irene does its thing, I’m going to try to get through as many comments as I can. I wonder if the FCC will delay the reply comments if their office loses power for several days? Probably not—they wouldn’t yield to NASUCA’s continual requests for an extension, so I don’t know why they would yield to a hurricane. 


            I don’t know much about the Rural Broadband Alliance, but I’ve been following them throughout this proceeding because they have a very specific viewpoint about rate-of-return companies. On the spectrum of perspectives ranging from most resistant to the proposed changes to most excited about the proposed changes, the RBA seems to sit pretty far on the most resistant side. They submitted a proposal (the Transitional Stability Plan) in the earlier round which focused primarily on maintaining adequate investment recovery for both existing investments and future investments, which I thought was pretty good. You can read about it here. I appreciate that this group is sticking to its convictions about USF Reform and doing their own thing and representing RLECs who might not be on board with the Rural Associations’ proposal, but I’m not sure how effective their efforts will be in the end. Their plan was not included in the Public Notice, which to me indicates that the FCC is not considering it for adoption.

            RBA is skeptical about the ABC Plan/RLEC Plan/Consensus Framework because they do not think it ensures sufficient and predictable recovery for small companies. RBA argues, “Any sustainable order must include rural rate-of-return carrier recovery of costs of existing expenses incurred to provide universal service, and clear, quantifiable, predictable, specific support mechanisms to ensure rural carriers of support sufficient to enable them to advance and preserve the provision of universal service available to rural consumers at ‘reasonably comparable’ rates” (pg. ii). RBA thoroughly answered all the questions from the Public Notice, but I thought their best comments were their free-flowing criticisms of how the FCC perceives RoR companies.

            On 4/1 Mbps 4 Mbps/768 kbps: RBA pointed out something that perhaps many of us (myself included) have been thinking: 4/768, which was proposed in the ABC Plan, is a step backwards from the National Broadband Plan, which was released 18 months ago. What’s that old saying—computing power doubles every 18 months-2 years? I realize that Moore’s Law doesn’t apply directly to broadband speeds, but it is definitely one of the most fundamental guiding principles in innovation for the broader technology industry, which includes broadband. Anyway, RBA states that “speed matters, and it matters every bit as much in rural America as in our urban centers” (pg. 4). They argue that there was no fact-finding to reach the 4/768 conclusion, and that most rural telecom providers assumed that the 4/1 Mbps speed would be revised fairly soon after the rulemaking—not pushed backwards before the rulemaking even happened. And, it’s not like the ABC Plan authors are also recommending that the speed target for urban America gets pushed back to like 75 Mbps—that would be the real travesty, and then rural America would only have broadband speeds 18 x’s slower—which is definitely reasonably comparable!! The RBA argues, “the level of universal service available in a rural community will not only drive potential economic development in the area, but will also determine the availability of educational and health care services enabled by high speed broadband” (pg. 4). Basically, they really want the FCC to wake up and realize that the ABC Plan proposal for supported broadband speeds in rural areas is an insult to rural Americans, which it most certainly is. 

            On Sufficient and Predictable Recovery: The heart and soul of RBA’s arguments throughout this proceeding have been about ensuring sufficient and predictable recovery for RoR companies for both existing and future investments. While they are not specifically against the Consensus Framework entirely, they are worried that “the math may not work” (pg. 12). Regarding the Rural Association’s decision that $2b with moderate growth and a 10% RoR is sufficient, the RBA “[hopes] they are correct. Rural carriers, however, cannot operate companies and provide universal service on the basis of hope” (pg. 12). RBA is also skeptical about the overall $4.5b size of the fund, arguing that it should be based on fact and law, and it is not. They really don’t like that 730,000 rural consumers are going to be stuck with satellite service, because “this result is the very opposite of the intent of the Universal Service provisions of the Act which seeks to ensure reasonably comparable services and rates to consumers” (pg. 15-16).

            On Systemic Prejudice against RoR and RoR Companies: The RBA is really sore about how the FCC has been treating small rural companies in this proceeding, and I fully support them speaking out about this and making it known in a public document. What they say is true from my experience as well: “Both the official record and meetings with the Commission evidence the creation of a superficial caricature of rural companies and rate-of-return regulation at the Commission. This caricature is forged on a baseless assumption that rural rate-of-return carriers make unwanted investments in networks and incur operational expenses without limitations because rate-of-return provides them with an automatic recovery without regard to the prudency of their investment and expenses” (pg. 20). They go on like this for several pages…”The Commission, as indicated in the NPRM, perpetuates a baseless and prejudicial caricature which, in turn, drives the Commission away from the consideration of utilizing actual cost-based methodologies to determine what constitutes ‘sufficient’ funding” (pg. 24). 

            My Thoughts: RBA hits on two issues that I have been vocal about in this proceeding as well—ensuring reasonably comparable service in rural areas and changing the FCC’s negative perception of RoR companies. I think that there is more than enough evidence in the mountain of comments that RoR companies are not wasteful and inefficient, and there are a lot of RoR companies who do not even see the 11.25%--not even close! Yes, there are undoubtedly a few companies that have abused the system for financial gain rather than consumer benefits. Yes, the current system needs to be updated for a broadband world. But NO, not all RoR companies are woefully inefficient or make business decisions only with the intention of reaping USF support and an inflated rate of return. That is not a sustainable investment strategy, and companies that have been around for 100 years will surely agree. RoR companies are subject to regular audits and they aren’t just handed a check no-questions-asked whenever they decide to undertake a large infrastructure upgrade. I’ve heard from a number of RLEC representatives who have met with the FCC that they encountered criticism and even insults from FCC staff. It’s not cool, OK, FCC? After seeing all the financial impact statements presented by RLECs, I would hope that they “get it” by now—RLECs walk a fine line between profit and loss, and reasonable and sufficient investment recovery is that fine line. 

            Anyway, I also agree with RBA’s arguments about reasonable comparable service and that 4/768 is an unfounded step backwards. 18 months after the NBP was released—when 4/1 was widely criticized as insufficient and absolutely NOT reasonably comparable (I wrote a term paper all about this a year ago, detailing how 4/1 is the fatal flaw of the NBP because it will push the US far behind OECD countries who are ensuring equal broadband speeds for all citizens), the FCC should not even entertain the idea of stepping backwards on speed definitions. Have consumers suddenly stopped wanting to download movies? Are less people working from home and enrolling in distance learning programs? Are gamers suddenly deciding that they no longer want HD 3D capabilities for World of Warcraft or whatever the cool game is right now? Obviously no, on all these questions—so why adopt a USF framework that even further constrains innovation and consumer utility? Answer: so satellite broadband can serve those poor, unfortunate 730,000 rural Americans and the large ILECs won’t have to lift a finger to deploy service in deeply rural areas. It is not a good deal for anyone, especially not consumers. 

            ----------------------------------------------------------

            Next up: cable. 

            Have a request? Let me know! I’m definitely not going anywhere all weekend (contact me via e-mail or on Twitter @RuralTelComment). 

            If you are also stuck indoors all weekend, you can catch up on all the comment summaries I have done so far: Alexicon Consulting, ITTA, Western State Telecom Associations, and the Rural Telecommunications Group (the last two are for The ILEC Advisor). 

            Cassandra Heyne
            ruraltelecommentary@gmail.com

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            Comments on Network Reliability & Resiliency: No Need for Regulatory Intervention

            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary


            Back in April I flagged the FCC NOI on Network Reliability and Resiliency in part because it seemed interesting, and in part because it made for a good debate over how far the FCC should push regulation in arenas that are, in my opinion, best served by market forces and innovation. This issue is also especially timely following the devastating tornadoes and flooding in the Midwest this summer. Anyway, in my post about the NOI back in April, I commented that although network reliability and resiliency are of the utmost importance, the FCC should not be imposing intrusive regulations in this area—the market should determine the best technologies and solutions, and companies should have the flexibility to adopt technologies and solutions that fit their specific needs and budgets. Furthermore, I don't trust regulatory lag to keep pace with new challenges that arise by way of natural and man-made disasters that threaten networks. I also don't see a specific problem that requires regulatory intervention—telecom service providers know that network reliability and resiliency is important, and there is definitely no lack of technology or innovation that would indicate a need for regulatory intervention. Those are my thoughts, but let's see what the industry has to say about it.

            The following comments are in response to the FCC's April 7 Notice of Inquiry on Network Reliability and Resiliency: PS DN 11-60, PS DN 10-92 and EB DN 06-119.

            Comments of the Telecommunications Industry Association (TIA)

            TIA's comments were very in sync with my own opinions on this issue—TIA supports the goal of ensuring that networks are reliable and resilient ("R&R"), but they do not agree that regulation is necessary to achieve this goal. TIA recognizes that there are an unlimited number of potential threats to network R&R, and "no network, no matter the planning or regulation, can be designed and implemented to withstand every possible source of failure" (pg. 4). As new challenges arise, networks and technology evolves to meet these challenges, and unfortunately innovation is sometimes reactionary when something bad happens—however, this prevents network operators from getting complacent with certain technologies and solutions, so they continually strive to improve based on new challenges. TIA notes that the ongoing transition to an all-IP communications networks will help address some R&R challenges because single points of failure "will increasingly become a problem of the past" (pg. 5). TIA also understands that R&R challenges are different for every single network operator, and "these operators routinely make hyper-local decisions on how to address resiliency challenges based on direct knowledge of unique threats and priorities guided by already existing industry standards and best practices" (pg. 5-6).

            TIA does not believe that the FCC should take regulatory action on network R&R, rather the FCC should just encourage voluntary, consensus-based solutions and best practices, in a very technology-neutral way, and the FCC should publicly praise network operators who go above and beyond on network R&R. TIA argues that market incentives have worked thus far, and "each operator has been able to make the most responsible decision to address [R&R concerns] in the most efficient manner" (pg. 7). TIA warns that regulatory intervention could derail infrastructure improvements that are currently underway, including improvements funded by BTOP, BIP and TLIP; furthermore, there could be a negative impact on smart grid deployment, and in general it is not right to force capital investments where they may not be necessary or appropriate. TIA also argues that it is too difficult to impose minimum standards for everyone, "as requirements vary from node to node" (pg. 10). I basically agree with all of TIA's recommendations, I think they hit it right-on: the FCC should not intervene in a market that has no failure, and the FCC should not impose sweeping requirements where there is so much differentiation from network to network.

            Comments of the Edison Electric Institute (EEI)

            EEI took a very different approach to the R&R NOI than TIA, and I felt that EEI's comments were very interesting even if they didn't echo my exact opinions. Basically, EEI thinks that commercial communications networks are not good enough for utilities, and therefore the FCC should take steps to adopt R&R standards so that commercial networks are more capable of supporting utility communications—but, the FCC should not take any actions that would make it a challenge for utilities to rely on private networks. I learned a great deal about utility communications architecture in my Smart Grid class last semester, and yes, these networks are quite different than the commercial telecom architectures. Utilities love redundancy and their networks are not always what we in the telecom industry consider "modern." Utilities like networks that have no extra bells and whistles, and networks that have extremely high reliability, obviously. I believe that part of the reason why the utility-telecom smart grid synergies (which I have written about here, here, and here) are slow-moving is because utilities do not trust commercial telecom networks. So, it is not really surprising that EEI is calling for the FCC to step in and push commercial networks to a higher level of R&R—if this were to happen, it is possible that more utility providers would utilize commercial networks for smart grid operations. Although I am all for utility-telecom collaboration, I'm still not convinced that regulatory intervention is necessary.

            EEI points out the problems with commercial networks: "In particular, carriers do not provide sufficient network capacity during emergencies, and lack network priority routing necessary to support critical applications. Further, carriers do not provide levels of service restoration or variable latency needed by electric utilities, and current networks lack adequate back-up power and redundancy. These problems are of great consequence to electric utilities from the end-use perspective" (pg. 2). EEI also adds that utilities have unique public safety needs, "which often requires electric utilities to design their communications networks to different standards and practices than commercial networks" (pg. 2). Electric utilities need specific levels of R&R for "maintenance, remote control and monitoring, dispatch of field crews in service territories, and communications with customer meters;" as well as a multitude of internal communications categories (pg. 4). The network must have sufficient capacity and coverage under any dire situation, and comply with NERC and FERC standards. Basically, EEI just doesn't think commercial networks are good enough—they are too susceptible to backup power failure, have insufficient backhaul redundancy, have frequent failures during emergencies, and are often very slow in service restoration. EEI argues that "commercial networks are not designed to provide levels of reliability, survivability and coverage necessary to meet all utility communications needs, particularly in times of emergency" (pg. 5). I don't really disagree with any of EEI's claims based on my knowledge of utility networks and commercial networks, but I think that any commercial telecom network who wants to collaborate with a utility provider will make the investments necessary to bring the network up to utility standards without the need for regulatory intervention. Not all commercial network operators want to be utility network operators, and those who do are free to modify their networks utilizing existing and future technologies and solutions. EEI's comments are definitely worth reading if you are interested in utility network requirements, especially if you are a rural telecom provider who is looking at collaborating with a utility on smart grid deployment—you will want to know what the utility provider needs and expects in terms of network R&R, and then determine whether or not your company can meet these requirements.

            Comments of the United States Telecom Association (USTelecom)

            USTelecom also disapproves of regulatory intervention for network R&R. They argue, "USTelecom member companies have voluntarily spent hundreds of millions of dollars and countless hours preparing for disaster recovery in order to support continued quality service to their customers, even during emergencies" (pg. 1). USTelecom believes that the efforts of their members illustrate that regulatory intervention is not necessary, and they argue that their members have made significant progress in recent years to increase network R&R. USTelecom cites examples of very few network overloads, better traffic management, and the emergence and adoption of remote access capabilities as evidence that telecom providers are taking network R&R seriously, despite the high costs involved. Rather than regulatory intervention, USTelecom argues in favor of Public-Private Partnerships (PPPs), where the FCC would have an important role in facilitating industry-government collaboration. USTelecom argues that PPPs have a good track record of success and are better suited to this particular challenge than all-out regulation. They argue, "A regulatory approach to network survivability would likely inhibit the ability of companies to respond quickly to new types of threats, and reduce the effectiveness of public-private partnerships already under way" (pg. 6). USTelecom noted that its members widely adopt industry best practices, and "member companies implemented remarkably successful procedures, technologies and precautions to support survivability—without regulatory requirements that they do so" (pg. 8).

            Basically, I agree with pretty much everything USTelecom said—I definitely agree that there is no one-size-fits-all solution for network R&R standards, and if voluntary adoption is successful, why fix what's not broken?... But, this IS the FCC we are talking about, and they definitely have a tendency to try to fix things that aren't broken—this should be their motto: "FCC: Fixing What Isn't Broken Since 1934."

            ----------------------------------------------------------------------------------

            I thought these three stakeholders provided a nice range of viewpoints covering network technology vendors/manufacturers, the utility industry, and telecom providers. I would like to say that I don't think regulatory intervention is likely on this issue, but I don't think the idea will be "off the table" either. I don't expect much to happen with this NOI any time soon, however. There weren't a whole lot of comments filed and there is definitely no clearly demonstrated, impending and severe industry or market failure at hand. I agree that the utility industry needs better R&R from commercial networks if the two industries are to collaborate on the smart grid, but I definitely don't think regulatory intervention is the right way to achieve these goals.

            Cassandra Heyne

            ruraltelecommentary@gmail.com

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            An Open Letter to the FCC: USF Reform Poses a Critical Threat to Rural America

            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary


            Dear FCC Commissioners and Staff:

            With a decision on Universal Service Fund reform drawing near, I want to take a moment to share my feelings on this highly important issue in a public forum, with hopes that my message will be heard by a diverse audience in addition to its intended recipients: telecom regulators at the FCC. I have been involved in the rural telecommunications industry my entire life, as I come from a family-owned rural telecom business (Walnut Communications) that has been operating in rural Iowa for nearly 100 years. I have been a student of telecommunications for five years, and I have spent the last six months almost exclusively focused on USF reform—I have read nearly every filing in this proceeding, attended conferences, lobbied Congressional offices, written dozens of articles analyzing different aspects of the reforms, talked to various stakeholders about the potential impacts, and I intend to do my Master's thesis on the outcomes of the reforms on the RLEC industry once the rules are finalized. I am extremely pleased with how vocal the RLEC industry has been about the critical threats that the Commission's USF proposals, as described in the February 9, 2011 NPRM, pose to these small, independent, cooperative and family-owned businesses—businesses which are each unique and important to their rural communities as employers, carriers of last resort and contributors to local economies. Although I am proud of my colleagues in the RLEC industry for their extremely hard work in this proceeding, I am scared for them as well.

            Against all odds in the early 1900s, my great-great uncle, my great-grandfather, and a group of farmers built the foundation for Walnut Telephone Company. It was truly a community effort, for famers and volunteers offered assistance, equipment and even their own wagons to help build the phone lines miles outside of town. Over the years, the company faced great adversity, survived the Great Depression, and even earned the respect of AT&T during a time when AT&T stopped at nothing to squash competition, including destroying farmers' telephone equipment and ripping out lines. Now, Walnut Telecommunications faces its greatest challenge yet—surviving the directives of the National Broadband Plan. I care very much for my family's business and the rural area that I came from, and I cannot ignore four generations of ancestors who have poured their lives into providing telecommunications in a very small community in Iowa—a community that has little growth, an aging demographic, few high-income residents or large businesses. Despite these demographic and geographic challenges, Walnut Communications has historically been a leader in advanced telecom technologies, installing the first digital switch in Iowa, offering the first cellular service in Iowa, upgrading all customers to DSL in the 1990s, and most recently, deploying high-speed Fiber-to-the-Home to rural homes and businesses.

            Walnut Communications and hundreds of other RLECs have been able to make these groundbreaking investments and provide advanced telecommunications services at rates reasonably comparable to urban Americans because of the financial stability that the current rate-of-return and USF facilitate. USF enables these companies to take risks on technologies and secure private capital for critical investments in broadband infrastructure, despite being located in economically challenged and sparsely populated high-cost regions. Yet, the FCC contends that RLECs are wasteful, inefficient, and apparently not worthy of ongoing USF subsidies to continue providing telephone and broadband service in rural areas. In my analysis of the USF reform proceeding, I have personally found very little evidence to suggest that RLECs are in any way wasteful and inefficient—sure, there are likely a few "bad actors" in the industry, but the bad actions of the few should not be used to penalize the RLEC industry as a whole. Large companies like AT&T, Verizon and Windstream echo the FCC's accusations against RLECs, but provide no evidence to suggest that they are actually willing to provide service in extremely rural high-cost, low-return areas. If these companies wanted to serve rural areas, they could have done it already with their billions of dollars in revenue—but they haven't, because of the fundamental economic principles of investor-owned public companies, where low-return investments are scrapped in favor of higher return ventures. The RLEC industry is not a high profit game; RLECs provide outstanding service to their rural communities because they care about the communities. 100 years ago, AT&T did not want to provide service in extremely rural areas, and today, they still don't. RLECs were established to help prevent an urban-rural divide in telephone service, and yet here we are 100 years later facing the same problem with broadband service.

            I do believe that USF should be modernized for a broadband era—there are certainly aspects of USF, and Intercarrier Compensation in particular, which are in dire need of modernization and simplification. However, there is no need for the FCC to achieve USF reform by causing irreparable harm to thousands of companies, and there is absolutely no excuse for the FCC to create broadband black holes in rural areas by excluding RLECs from future USF support for broadband. I strongly urge the FCC to look at alternative plans submitted by Hargray Telephone Company, the Rural Associations (NTCA, NECA, OPASTCO and WTA), and the Federal State Joint Board on Universal Service. Each of these alternative plans include compromises, meet the FCC's four objectives for USF reform, will keep the RLEC industry viable in the long term, and will help increase broadband deployment in rural areas. Of the proposed USF reforms in the NPRM and the National Broadband Plan, I am most concerned with proposals to cap the High Cost Fund (there is no need if contributions are expanded), reverse auctions (which are unproven, untested and would favor large carriers), and eventually eliminating rate-of-return (why fix what's not broken?). I deeply fear that these three actions together would sign the death certificate for the RLEC industry.

            I am also particularly concerned with FCC sentiments that RLECs should consolidate—there is no evidence to support the argument that consolidation would yield positive impacts on rural broadband deployment and adoption. Rather, it is an ignorant conclusion based on "bigger is better" attitudes. Bigger is not always better, especially in rural areas, where small, locally-owned businesses are actually important. Just because every sector of the information and telecommunications industry is moving towards consolidation—and borderline monopolization—does not mean that it is the best outcome for everyone. Rural cultures value small local businesses, and forcing consolidation in the industry will result in a devastating loss to many vibrant rural communities. Furthermore, actions that force RLECs to consolidate (or worse, go out of business) will result in thousands of lost jobs and opportunities for rural Americans.

            I felt that comments by Warinner, Gesinger and Associates best described this situation, and specifically reflect my own personal feelings about possibly moving back to a rural community after leaving rural America at a young age to receive a world class education in a major city. They explain, "The FCC would limit a small rural company's ability to attract personnel with advanced degrees, by limiting their corporate expenses or capping the amounts they can recover. Limiting or eliminating these expenses would put an immense strain on a company's ability to attract and keep qualified employees for a specialized industry. In fact, it could be counter-productive because many of the students in rural areas that go to urban colleges and universities would lose the opportunity that the telephone company would provide in offering a job that allows the individual to work in the rural area from which they came or a rural area that provides the benefits of living in a small close-knit community" (at pg. 21-22). As America slowly begins to emerge from the worst economic crisis in decades, the government should not be preventing any small business from attracting, hiring, and paying skilled workers—workers who could help revitalize rural economies and cultures, contribute to local tax revenue, and start families of their own in rural communities; which in turn will help revitalize rural schools and businesses, and possibly even help change the urban world's perspective of rural America. I highly recommend a recent study by Wichita State University Center for Economic Development and Business Research, which describes how the FCC's USF proposals would impact Kansas RLECs. The outcome is not good—between 2012 and 2016 Kansas RLECs could lose a total of $143m in USF funding, 367 direct and indirect jobs would be lost, and the state would lose around $5m in combined income, property and sales tax revenue. This study is a perfect example of why the FCC needs to look at the "bigger picture" before hastily implementing USF reforms based on a shaky foundation and unsubstantiated conclusions. It isn't just the rural telecom industry that will suffer, it is ancillary businesses, equipment vendors, state and local governments; and most of all—rural communities. In addition to the Kansas RLEC study, there are dozens of comments and ex parte filings that demonstrate the financial impact of the FCC's reforms on RLECs, and some filings even include letters from community schools, hospitals, businesses and public safety entities who all provide testimony about the benefit of RLECs and broadband to their local communities—benefits that will undoubtedly disappear if RLECs disappear as a result of USF reforms.

            FCC, please take seriously the overwhelming amount of evidence that your USF proposals will harm RLECs and rural communities as you move forward with the final rules. There is no reason to change the game so dramatically that companies will actually go out of business as a result of overly aggressive and intrusive government actions, especially when there are very reasonable alternative proposals available. I fully recognize that every USF stakeholder will have to make some compromise and sacrifices going forward in order to transition USF into the broadband era. However, sacrificing entire companies will not achieve the end goal of deploying broadband to 100% of the country—it will have the exact opposite effect. RLECs have been leaders in providing broadband to rural Americans since before broadband was even considered an important service, and there is no reason to take funding away from these companies in order to give it to companies that will not serve extremely rural areas simply because their investors won't profit from it. Ensuring that all Americans have access to, and utilize, high-speed broadband is an extremely admirable vision, but the path to achieve this lofty goal should not be hastily planned or build upon an unstable foundation. There is simply too much at stake—from the viability of small businesses to the opportunities for extremely rural Americans to participate in the global Internet ecosystem—to implement rules without considering the full spectrum of short and long term outcomes for each stakeholder. RLECs have depicted a bleak future as a result of the proposed reforms, and I sincerely hope that the FCC can conceptualize and implement an alternative suite of USF reforms where RLECs have a bright and profitable future, and where all rural Americans have access to broadband.

            Respectfully submitted,

            Cassandra Heyne, Rural TeleCommentary

            ruraltelecommentary@gmail.com

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            The Final USF/ICC Reform Lightning Round: Reply Comments by the Kansas Corporation Commission

            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary

            Reply comments were due September 6, 201 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. This is it, people—the final chance for the industry to throw some hard punches at whomever they are so inclined to oppose, be it the FCC, the RLECs, the price cap ILECs, the Joint Board, or any number of commenters who may have said something irksome in any of the previous comments going back to April 1. To be honest, I’m not sure how much impact these final reply comments will have on the FCC—part of me suspects that the rules are already nearly completed and the FCC is just going to sit back and laugh while the stakeholders rip each other apart in comments. The Kansas Corporation Commission (KCC) definitely ripped into the ABC Plan, and given the state’s unique USF circumstances, it is easy to see why they are so heated about certain ABC Plan proposals.


            One of the main reasons why I decided to start summarizing USF/ICC reform comments earlier this year was so that I could personally learn more about USF from the perspectives of different stakeholders. USF was not covered heavily in any of my telecom policy classes, yet it is the area that I am trying to become an expert in, so much of my analysis is based on what I have taught myself, specifically from this proceeding. The intricacies of State USF programs are something that I am still learning about, and the KCC reply comments proved extremely helpful for me to gain an understanding of the challenges that certain states are facing. Kansas RLECs have also been very outspoken on USF issues, so in general I really appreciate the efforts that Kansas stakeholders have made throughout this proceeding because I have learned a lot from them. Seriously- Thank you, Kansas. 

            On to the comments… Wow. The KCC is seriously not happy with the ABC Plan—“If the FCC proceeds with the ABC Plan without a longer transition period for early adopter states and/or further analysis of the impacts of the plan on existing state reform, it risks irreparable harm to these complementary state reform vehicles” (pg. ii). Kansas is an “early adopter” of state USF reform, and thus faces this presumed irreparable harm, which as you will see, is definitely a menacing possibility for this state, its consumers, its businesses, and its telecommunications providers.

            On the Kansas Universal Service Fund (KUSF): Some of my readers may know these facts, but I thought the background information on the KUSF was helpful. KUSF was started in 1996 to provide support for Lifeline, dual part relay, telecom equipment for persons with special needs, and universal service/intercarrier compensation funding. When KUSF started, the assessment rate was 9%, one of the highest in the nation, but it has decreased over time to 6.18% currently. The total current funding obligation for the KUSF is $65.7m, and over its 14 years the KUSF has contributed $870m. The KUSF is now “at risk for becoming unsustainable under the ABC Plan,” because the size of the state fund may have to double as a result of specific Kansas state laws that require complete “make whole” access recovery for RLECs (and an opportunity for price cap carriers to seek full recovery as well). The KCC anticipates that the ABC Plan could result in total user contribution rates of 20-25% “not outside the realm of possibility” (pg. 10). Basically, with any significant loss in federal universal service funding and access revenue recovery, Kansas will burden an equal-sized increase in state contributions as per state laws. Kansas has 37 RLECs which are required to be made-whole through KUSF support (K.S.A. 66-2005(c)), and 2 price cap ILECs who legally could, and probably will, request to be made-whole especially if access revenues are significantly reduced (K.S.A. 66-2008(d)). KCC describes that the only recourse is to chance the state laws, and “such a dramatic change in state law requires legislation, and this is uncertain, will take time to accomplish, and cannot realistically be done until the contours of federal reform are known” (pg. 11).

            On the “Train Wreck” ABC Plan: Yeah, they went there—KCC called the ABC Plan a “train wreck” for states like Kansas who have already adopted USF reforms. According to KCC, the ABC Plan would be a train wreck if hastily implemented, if VoIP is declared 100% interstate, if states are preempted, and if the highest-cost consumers are relegated to satellite service only. KCC argues that Kansas and other “early adopter” states should be treated differently than states who have not already implemented reforms (which are most states). KCC is very worried  that, “even if the FCC provides some FUSF support to recover some parts of the lost access charge revenue, the KUSF will likely be the easiest and most attractive ‘target’ for LECs seeking to make up losses in access revenue that result from reform”(pg. 8). Basically, the state fund will be overwhelmed, and KCC does not think the ABC Plan’s proposed ARM will be sufficient to cover the losses for price cap carriers, nor will the strict RLEC funding budget which “must cover not only access restricting losses, but also broadband build out and a reasonable opportunity to recover costs associated with existing investments in broadband capable plant” (pg. 8). To make matters worse, KCC acknowledges that all these negative consequences will have a direct economic impact on the state, for example, “a high-tech communications-centric company would find Kansas to be uncompetitive with other states that did not levy such a perceived ‘tax’ on their communications services,” if the total USF assessment rate does actually become 20-25%. Train wreck, indeed. 

            On Not Declaring VoIP 100% Interstate: If you like reading comments that use the terms “interstate” and “intrastate” so much that you constantly keep typing the wrong term in your notes and articles, then you should read this section. Legalese aside, this section was really interesting and not a topic that has been covered considerably so far in what I have read. Basically, KCC is against the FCC declaring VoIP 100% interstate traffic, as it would reverse previous decisions and cause considerable havoc for states. KCC explains declaring VoIP 100% interstate “would be construed by providers as preempting State USF assessments of VoIP traffic, because State USFs very likely may only assess intrastate traffic under current law. As VoIP replaces circuit-switched technology, that reversal would reduce the State USF assessment base, thereby reducing the assistance that State USFs now provide to the FUSF in maintaining universal service. Thus, declaring VoIP traffic to be 100% interstate contravenes the Act’s admonition that ‘there should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service’” (pg. 15). 

            Furthermore:  “For the FCC to ‘wave a magic wand’ and declare 100% of VoIP revenues to be from interstate calls, when consumers in fact clearly make considerable numbers of intrastate calls using VoIP telephones, and providers earn intrastate revenues from those calls, would be arbitrary and capricious. It would be inexplicable in light of the FCC’s treatment of wireless revenue, which the FCC for more than a decade has divided into an interstate portion assessable by the FUSF and an intrastate portion assessable by State USFs, using a ‘safe harbor’ approach very similar to that now used by the FCC for VoIP calls” (pg. 17). KCC anticipates that the KUSF could assess $500m in VoIP revenues in the next 5 years, which would clearly be an important contribution especially if the threats discussed above to the state fund come to fruition. KCC argues, “if that revenue is eliminated, the surcharge on remaining circuit-switched revenue will be increased, putting ever more pressure on the KUSF, and unfairly disadvantaging circuit-switched customers and providers as compared to VoIP customers and providers” (pg. 18). 

            The final argument that I found really interesting regarding VoIP classification, (and I apologizing for taking such long blocks of text straight from the comments, but I really like KCC’s voice in some of their examples and arguments) described how the combination of changing technology standards and regulatory loopholes could spell disaster for the KUSF via new methods of arbitrage: “A trend in rural areas is to provide communications services via fixed wireless or WISP networks in lieu of landline networks. Placing an antenna on a grain silo or mountain top and providing wireless broadband service via technologies such as Motorola Canopy is done today in rural areas. In such a configuration, voice communications is provided via VoIP in lieu of a traditional landline. If VoIP providers are exempted from State USF contributions, then an enterprising ILEC with an aging landline network could deploy an inexpensive wireless network and avoid making USF payments because it was a VoIP provider. Yet, it could collect State USF support from make-whole state funds, such as KUSF, for its embedded costs of its unused landline network” (pg. 18). It should be noted that KCC is not against WISPs per se, just ILECs who pretend to still be landline providers but whose traffic is really traveling on a fixed wireless VoIP network while the landline infrastructure collects dust. KCC even suggests that fixed wireless service would be far superior to satellite in high-cost areas because fixed wireless service can facilitate a high quality of voice communication through VoIP, which satellite cannot. Just do not be a WISP by technical definition but a landline ILEC by regulatory definition—KCC is clearly anticipating such schemes already (perhaps something like this has already happened?). 

            My Thoughts: KCC really hit on some tough issues, and unfortunately the ABC Plan authors will probably not have an opportunity to respond directly to some of these Kansas-specific arguments (maybe they did, I guess I will find out soon enough), which means it is now solely up to the FCC to figure out the appropriate balance between state and federal authority and responsibilities. Hopefully the FCC will take heed to some of KCC’s warnings about the dire consequences that will be inflicted upon the state if certain ABC Plan proposals are implemented. Clearly, Kansas is an exception and not the norm, so I wonder just how much attention the FCC will pay to the minority of states who have taken tremendous efforts in USF Reform (Nebraska is also in this category). KCC is really worried that the ABC Plan proposals could literally wash out all the progress the state has made in USF/ICC reform, and they are confused about how state-level responsibilities like audits, eligibility, etc. will be handled by the FCC if states are preempted. 

            I really appreciated the depth of research that KCC invested in these comments, and the clear voice that they expressed. I hope all their work wasn’t in vain. I would have liked more direct commentary on the RLEC Plan, since; after all, Kansas has such a large number of RLECs and rural areas in comparison to other states. I didn’t really get much impression on their feelings about the RLEC Plan, other than they seem to think that the access revenue recovery is insufficient. 

            -------------------------------------------------------------------------------

            KCC was an early filer with their reply comments, but the others should be rolling in soon. I have yet to decide which comments I will feature here (although I think I did promise to cover the WISP perspective), but on the ILEC Advisor I am planning to look specifically at how the ABC Plan parties and the Rural Associations address some of the common critiques of their plans, so be sure and check there for new articles! 


            Don’t hesitate to contact me with requests!
            Cassandra Heyne

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            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary

            Reply comments were due September 6, 201 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. This is it, people—the final chance for the industry to throw some hard punches at whomever they are so inclined to oppose, be it the FCC, the RLECs, the price cap ILECs, the Joint Board, or any number of commenters who may have said something irksome in any of the previous comments going back to April 1. Many of the reply comments are fairly short and only attack one or two issues, so I’m switching back to the multiple summaries per post format. Today I’m looking at different Iowa telecom perspectives from the Rural Iowa Independent Telecommunications Association (RIITA) and the Iowa Association of Municipal Utilities (IAMU); and the Blooston Rural Carriers (which include a few Iowa companies).


            RIITA is a rural telecom organization with 130 members, nearly all of Iowa’s RLECs. Half of RIITA’s members have 1000 or fewer access lines, and all members serve high-cost rural areas—“In most areas, no other providers exist and many areas served have very few customers per square mile, driving up the marginal cost of service” (pg. 1). RIITA supports the NTCA/OPASTCO/NECA/WTA RLEC Plan, but emphasizes the following areas of reform are especially critical for Iowa RLECs:

            • Rate of Return: RIITA argues that RoR is critical, and “without [RoR], small rural carriers would have no basis for planning and investing in their communities that would be consistent and reliable enough to justify the investment” (pg.2). Furthermore, RIITA argues that RoR must be based on embedded costs, which “have formed the basis for compensating utilities for over a century” (pg. 2).
            • Carrier of Last Resort: RIITA insists that COLR requirements are critical for consumers, and “without a requirement of service, no carrier would be left to serve them” (pg. 2).
            • Recovery Mechanism: Small telecom companies need a reasonable transition period to move to a new ICC regulation system, and “capital investments in telecommunications are such that they require long-term planning and involve relatively long lived assets so it is critical that the recovery mechanism be designed to allow these companies to make this transition” (pg. 3).
            • Arbitrage: RIITA sternly warns that “any company using our networks to access rural consumers, including companies using the internet for voice service and pushing commercial services over the internet should participate in maintaining those networks” (pg. 3). RIITA explains, “What seems to a VoIP carrier of a commercial internet based provider like a free network is not, in fact, free. All users of these networks should participate in the costs of the networks” (pg. 4).

            My Thoughts: Considering the sheer number of RLECs in Iowa (more than any other state), I can only hope that their collective voice is being heard at the FCC. I would have liked to see more detailed analysis in these comments with regards to some of the topics in the Public Notice, $0.0007 access rates in particular. I know the Iowa companies have a lot to say on this topic. I really liked RIITA’s closing comment: “The Commission needs to commit to [the goal of universal broadband] and work to make the funding available or abandon that goal. Under either circumstance, it should stop trying to dismantle the network that already provides broadband communications to rural America” (pg. 4). If you are interested in learning more about Iowa’s efforts to ensure reasonable USF reform such that Iowa RLECs are not “dismantled,” I recommend checking out The Great Disconnect, which is an advocacy project created by RIITA along with the Iowa Telecommunications Association (ITA) and Iowa Network Services (INS). It is a great website and I have really been impressed with this coalition’s advocacy efforts in Iowa over the last few months.

            -------------------------------------------------------------------------------------------------


            Iowa doesn’t just have a lot of RLECs; Iowa also has a large number of municipal broadband networks. IAMU has 545 Iowa communities as members, with 28 municipal broadband networks. 19 of these networks provide telephone service as CLECs, and most of them provide cable and broadband via fiber or fiber/coax. IAMU explains, “The systems were established because the residents of the communities in question believed that affordable access to advanced communications capabilities and services was vital to their economic vitality, educational opportunity, and quality of life and that the incumbent service providers were unwilling or unable to provide the necessary infrastructure and services at anything close to competitive rates” (pg. 2). IAMU comments that the FCC has recognized the progress made by Iowa municipal broadband providers, largely due to a 1997 state decision to allow municipals to deliver telecom services. This decision was challenged by the Iowa Telecom Association, but ultimately affirmed by the Iowa Supreme Court. Now, the IAMU members “would like a fair opportunity to bid for Connect America Funds to extend or upgrade their services to unserved or underserved areas” (pg. 3). IAMU does not support the RLEC Plan or the ABC Plan.

            On the “Biased and Unreasonable” RLEC and ABC Plans:  IAMU argues: “These self-serving proposals by companies representing only a limited segment of the rural broadband ecosystem would not phase out USF subsidies, but would actually increase them; would require investments of billions of dollars in technologies that would produce broadband with too little capacity to support robust economic development or ever-increasing consumer bandwidth requirements; would do little, if anything, to cure the inefficiencies that have made the USF too costly; and would insulate the carriers from competition from potentially more qualified bidders of CAF funds” (pg. 4).

            On ROFR: Rights of First refusal is turning out to be one of the biggest debates in this comment cycle, and IAMU falls on the “no way” side. IAMU urges the FCC to reject the ABC Plan’s ROFR proposal, arguing that IAMU members “became providers of communications services, not because they wanted to compete with the private sector, but because the incumbents were not offering the services that their communities required or were doing so in an inadequate or prohibitively expensive manner” (4). Furthermore, “Dissatisfaction with the incumbents’ services ran so deep in Iowa, that the communities that authorized their municipal utilities to provide communications services did so by overwhelming majorities” (pg. 4). Instead of ROFR, IAMU believes that the FCC needs to “establish an open and competitively-neutral process that gives all qualified providers an opportunity to bid and be judged on the merits of their individual proposals” (5). This is a nice way of saying “reverse auctions,” but IAMU warns that reverse auctions could be gamed by the large carriers, who could submit “lowball bids” in areas where they face competition and high bids in areas where there is no competition. IAMU recommends that the FCC “grant subsidies to those bidders that offer to make the greatest bandwidth available to the greatest number of residents and businesses in question with the funds available” (pg. 5). 

            On Separate Mobile and Fixed Funds: IAMU supports establishing separate funds for fixed and mobile broadband because: “Wireline and mobile broadband are not close substitutes but differ in many important ways—including cost structure, performance, reliability, etc. As a result, treating them the same would result in significant foreseeable and unforeseeable distortions” (pg. 6).

            My Thoughts: Iowans are nothing if not resourceful and dedicated when it comes to deploying telecommunications services in rural areas. Since most of Iowa is rural, state history has seen some impressive and unique solutions, which is evident in the awesome book Lines Between Two Rivers. Since the beginning of telecommunications, large incumbents (ahem, AT&T) have seen Iowa as a rural wasteland where no investments can be recovered; but both RLECs and municipals have seen the same rural wasteland as a population that needs and deserves quality and affordable telecommunications services. However, the Iowa RLECs and Iowa municipals are not exactly what I would call allies, which is pretty clear by reading the RIITA and IAMU comments—I actually picked these two comments to summarize here today in order to illustrate how much deviation still exists regarding the ideal solution for USF/ICC reform. Even an RLEC and a muni serving the same rural community may have drastically different perspectives on USF, and when you include WISPs, wireless, cable, satellite providers and the price cap ILECs, things start to get pretty convoluted. I still don’t think the industry at large is any closer to a consensus than it was 4 months ago, and in reality, I feel like the “Consensus Framework” has pushed some of the niche providers like municipals even further a consensus. I feel like some of the proposals in the ABC Plan, such as ROFR, are so far from an industry consensus that it is almost an insult to the portion of the industry who did not participate in drafting the proposals. I obviously want the final rules to be advantageous (or at least not destructive) for RLECs, but that doesn’t mean I wish to see other small rural providers be destroyed in the process, especially if this means that rural Americans will lose access to broadband.

            I agree with IAMU’s argument that mobile and fixed broadband funds should be separate, specifically because of the different cost structures that exist for fixed and mobile broadband. I just do not think it would be practical or reasonable to lump them all in one fund, however I do think the size of the mobility fund should be larger with a more flexible budget. I don’t necessarily agree with IAMU that wireline and wireless “are not close substitutes;” I actually strongly believe that wireless is both a substitute and a complement to wireline broadband—it just depends on a consumer’s unique needs, and on what services are available given the consumer’s budget and needs. I believe there should be ample funding for both fixed and mobile broadband in rural areas, and consumers should not have to choose between one or the other as a result of regulatory incompetence. 

            --------------------------------------------------------------------------------------------------


            In these comments, the law firm of Blooston, Mordkofsky, Dickens, Duffy, & Prendergast, LLP represented the interests of 22 RLECs and the South Dakota Telecommunications Association. The Blooston Rural Carriers support the RLEC Plan/Consensus Framework because it “constitutes the best available alternative at this time to enable RLECs to continue to make progress toward the completion of the conversion of their networks to broadband” (pg. 3). The Consensus Framework will allow RLECs to repay loans, upgrade facilities, and “will help preserve the assurance of repayment necessary to induce lenders to continue to fund RLEC broadband investment projects” (pg. 3). The Blooston Rural Carriers oppose commenters “who argue in favor of more drastic changes in universal service and intercarrier compensation that would effectively gut the revenues of rural carriers and endanger the ability of rural customers to obtain high quality broadband services” (pg. 2).

            On Ensuring Adequate USF/ICC Support for RLECs: The Blooston Rural Carriers argue against parties that have urged the FCC to eliminate corporate operations expenses (COE) and eliminate all intercarrier compensation revenue. The Blooston Rural Carriers argue that some commenters support eliminating COE “for no other reason than to drastically reduce the amount of support available to carriers,” and COE recovery is important to maintain because these costs are fundamental to providing telecommunications services and include many costs associated with FCC regulation compliance. The Blooston Rural Carriers argue that eliminating ICC and imposing bill and keep is “without merit,” and “this argument is nothing more than a red herring by entities that would like to improve their bottom lines by not paying to use the expensive last-mile networks of other carriers” (pg. 5). Furthermore, “While the elimination of all intercarrier compensation would help certain entities increase profits, it would do damage to the ability of carriers to ensure the continued availability and expansion of broadband networks and to ensure that rural consumers have access to services at reasonably comparable rates” (pg. 5).

            On Satellite Service: The Blooston Rural Carriers do not wish to see satellite service providers receive USF support that could be better utilized by RLECs. They argue, “It is well documented that current satellite service is not of sufficient quality and reliability to satisfy a carrier’s requirement to provide reasonably comparable services to rural consumers;” and “a rural carrier’s support should not be reduced if the competitive carrier is a satellite service provider. To do so would endanger the ability of rural consumers to obtain reasonably comparable services, as required by the Act” (pg. 6). 

            My Thoughts: I thought the Blooston Rural Carrier comments reflected a neutral and reasonable response to the ABC Plan/RLEC Plan. I have said before that I do not think the Consensus Framework is perfect, but it definitely is better than the alternatives, which seems to be the attitude of the Blooston Rural Carriers as well. I thought this specific comment was especially interesting and telling of the sacrifices that have been made on behalf of the RLECs for the purpose of reaching an agreement with the large price-cap ILECs: “The Blooston Rural Carriers would never have agreed to many of the features thereof (e.g. a decreased 10% RLEC interstate rate of return, expanded caps on RLEC corporate operations expenses, constraints on future RLEC capital expenditures, and virtual elimination of RLEC terminating switched access rates) if these features were not part of a broad industry compromise and offset by other provisions (e.g. the restructure mechanism)” (pg. 3). 

            I agree with many of the opponents of the Consensus Framework that certain proposals are not especially fair for specific industry participants, like rural wireless and cable providers—however, one of the primary purposes of this entire proceeding is to reformulate the USF/ICC mechanisms for ILECs and RLECs in order make universal broadband a reality. Just as I don’t think it is fair that 6 price cap ILECs make the USF decisions for the entire wireless industry, I also don’t see it reasonable for the wireless industry (for example) to determine the fate of USF for LECs. I believe the Consensus Framework represents a reasonable solution for the parties that developed these proposals; and that just so happens to be the majority of the industry and the specific portion of the industry where the FCC has called for significant reforms to apply. Unfortunately, not everyone can be a winner, but under no circumstances should rural consumers be the losers. 

            -------------------------------------------------------------------------------------------------

            Further reading on USF/ICC comments and reply comments:



            Cassandra Heyne

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            The Final USF/ICC Reform Lightning Round: Comments by Alexicon Consulting

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            Starting with last summer’s Connect America Fund proceeding, I have been reading USF Reform comments in 10-90 for over a year now. Is there anything left under the sun for the industry to say that hasn’t been said yet? Well, this is the next-to-last chance for stakeholders to make their final plea before the FCC changes things forever. 

            Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC: namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. Reply comments are due next week which means two things for me: I’ll be working all weekend, and I won’t have time to cover as many comments in detail as I have in the past. In this blazing-fast comment cycle, I’m expecting a great deal of tension between wired telecommunications providers and their wireless and cable competitors because the Consensus Framework is really only a consensus between the RLECs and 6 price cap ILECs—and not even all of the RLECs are on board. While I felt it was a valiant effort and I personally support the Consensus Framework because it is much better than the FCC’s plan, it is, as they say, “a few crayons short of a box,” with fixed and mobile wireless and cable being largely left behind. 

            Let’s see what the industry says. First up: RLEC consultant Alexicon Consulting. RLEC consultants have been working tirelessly this year to produce financial impact studies to illustrate the harms that would befall RLECs under the FCC’s NPRM framework, and I have enjoyed their comments in the previous rounds of this proceeding.  Note that this NOI asked a lot of questions- I’m not going to go over every single response to each question. I’m primarily going to highlight new information that hasn’t been discussed previously or comments that I found particularly compelling or revolting. For a more detailed analysis of specific comments, be sure and check The ILEC Advisor regularly over the next few weeks. 



            Alexicon is a management, financial and regulatory consulting firm that represents small RoR telecom providers including Tribal carriers. They submitted their own model, the Alexicon Plan, which they continue to support while voicing concern over a variety of proposals in the Consensus Framework/ABC Plan. I have not reviewed the Alexicon Plan in great detail, and in the spirit of this lightening round comment cycle, I probably will not have time to really analyze it thoroughly. However, I thought they made some good arguments in their comments. The main deviations from the Consensus Framework included providing $500m for wireless through the Mobility Fund rather than $300m, and $750m for price cap carriers through CAF rather than $2.2b. 

            On Rate-of-Return Reforms: Alexicon argues that their plan is the most comprehensive alternative to modernize USF and ICC to include incentives for small carriers to invest in broadband and ensure sufficient and predictable support. They do not agree with completely eliminating support in areas where there is an unsubsidized competitor, and they appear rather staunchly in favor of maintaining COLR and ETC obligations. I found this argument the most convincing: “While competitors in rural areas may operate without USF support, they may also operate without obligations or regulatory oversight, making it impossible to ensure that the competitor will continue to operate in the same fashion in the absence of a regulated carrier” (pg. 8). Alexicon does not support the total company earnings proposal because, “using a total company earnings review to limit the earnings potential of a given carrier could provide perverse incentives for that carrier to discontinue business segments that are not profitable in the spirit of obtaining additional CAF funding thus lending to a ‘gaming of the system’ mentality, which is contrary to what the Commission is hoping to accomplish” (9). 

            On Increasing the SLC (ABC Plan Component): The reason why Alexicon favors only $750m per year for price cap carriers under CAF comes down to the price cap carriers’ proposal to increase the SLC in order to ensure revenue recovery during the transition. Many have argued that the ABC Plan essentially represents a windfall for price cap carriers, but I think Alexicon’s proposal to dedicate just $750m for these companies instead of over $2 definitely could be one way to keep this windfall in check. Alexicon provided some “quick and dirty” calculations: the 6 ILECs in the ABC Plan currently have 93m access lines, expected to decrease to 61m in 5 years. With an SLC increase of 50 cents per line per month, these companies would see an additional $6.3b in the next 5 years, or an additional $9.5b with an SLC increase of 75 cents per line per month. On the other hand, RLECs have around 21m access lines and would only receive an additional $1.4b-2.2b over the next five years, but “the smallest rural carriers clearly do not have the economies of scale to reap SLC revenue increases that will sustain their ability to build and maintain broadband networks” (pg. 14). Alexicon believes that “SLC revenues by themselves will provide sufficient funding to cover [the price cap carriers’] needs” (pg. 14). 

            My Thoughts: I liked Alexicon’s SLC arguments, and after thinking about these numbers I can see why so many people accused the ABC Plan of being a windfall for ILECs. 50 cents per month per line might not seem like very much for a company with 1500 access lines, but it is definitely a nice chunk of change for a company with 500,000 access lines. I think this just plays into the argument that there must be separate recovery mechanisms and support distribution frameworks for RLECs and price cap carriers. I also agree with Alexicon that the Mobility Fund should be greater than $300m, and the FCC must consider specific, unique wireless financing issues and business models which “include consideration for mobility itself, roaming, spectrum allocation and reuse, among others” (pg. 5). 

            Finally, I agree with Alexicon’s position regarding ETC and COLR. If you want USF, you need to meet certain service obligations, and there really shouldn’t be any debate about this. I don’t necessarily think there should be subsidized competition everywhere to the extent that there are wasteful and duplicative infrastructures where one carrier is subsidized and one is not, but most extremely rural areas do not have that problem—it’s hard enough getting one dedicated and modern infrastructure in place. I feel like the FCC is fairly intent on doing away with support in areas with unsubsidized competition though, I just hope it doesn’t result in stranded investments in rural areas.

            Alexicon represents the subset of RLEC stakeholders who are not completely on board with the Consensus Framework, and I suspect there will be more. However, I’m not sure if the FCC is really considering alternative plans anymore. It seems like if they were, they would have included questions in the NOI about other plans, like Alexicon’s or Hargray’s or any of the others—but, this comment cycle could still sway the FCC to at least include components of other plans in the Consensus Framework or the final rules, if the rules are ultimately a significant departure from what is now expected. The one drawback here is that other commenters in favor of the Conesus Framework have warned that the RLEC Plan cannot be broken apart and the FCC cannot pick and choose certain components and modify others, or there will be dire consequences (which remains to be seen). 

            ------------------------------------------------------------------

            For my next installment, I will look at some state telecom associations. With only one week until reply comments are due, I am unsure how many reviews will be posted but definitely check back frequently over the next couple of weeks, both here and The ILEC Advisor! 

            Cassandra Heyne

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            The Final USF/ICC Reform Lightning Round: Comments by Gila River Telecommunications, Inc.

            by noreply@blogger.com (Cassandra Heyne) @ Rural TeleCommentary

            Comments were due August 24, 2011 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. In an effort to cover a broad range of stakeholders in a really short period of time, today I want to bring your attention to a rather depressing selection of comments by Gila River Telecommunications Inc. (GRTI). Tribal carriers face some absolutely daunting challenges in deploying broadband on tribal lands, and the proposed USF/ICC reforms have the potential to further devastate broadband progress in these economically, geographically and demographically challenged areas. 


            GRTI does not support the Joint Board plan, ABC Plan or RLEC Plan (referred to as “The Three Reform Plans”), but they do not offer much by way of evidence or arguments against these plans aside from claiming that tribal carriers would likely lose millions of dollars if any of these plans are adopted. According to GRTI, “The loss of revenues would cripple GRTI financially and would likely have a detrimental effect on telecommunications services and on broadband service in the Gila River Indian Community” (pg. iii). Furthermore, “any decrease in revenue would likely halt any progress” in increasing Tribal community broadband adoption rates or decreasing end-user prices. 

            On the Unique Tribal Challenges: GRTI explains that only about 70% of households on tribal lands have basic telephone service, and the broadband adoption rate is absolutely dismal (like 10% dismal). GRTI actually has a fairly high adoption rate of around 20%. In addition to the adoption challenge, GRTI faces very high costs to deploy infrastructure, and the GRTI community has a high rate of unemployment and poverty. According to GRTI, “Costs of deploying fiber-to-the-home have been as high as $12,000 for a single residence. These costs leave little, if any, margin for profit. As a result, GRTI has been forced to deploy fiber-to-the-home in small increments” (pg. 5) Furthermore, GRTI cannot charge less than $52.90 per month for 1.5 Mbps DSL, over $20 more than the national average, and “few residents are able to afford this service” (pg. 5).

            On Recognizing and Promoting Tribal Sovereignty: GRTI encourages the FCC to adopt USF/ICC reforms that uphold tribal sovereignty. GRTI’s recommendations include rules that reflect the following: “(1) any carrier seeking to provide communications services on tribal lands must receive approval from the appropriate tribal entity; (2) tribal governments should have the option to establish, monitor and enforce public interest obligations and deployment requirements; and (3) actions by states to reform state universal service systems and Intercarrier compensation mechanisms should have no bearing on the disbursement of federal funds to provide service on tribal lands” (pg. 11). Upholding such principles of tribal sovereignty in USF reform will allow Tribes to choose which carrier best serves their communities and allow them to have more control over service quality, costs and deployment schedules. 

            On Adopting a Tribal Carve-Out: GRTI encourages the FCC to adopt a “Tribal Carve-Out” similar to General Communications Inc.’s proposal. The Tribal Carve-Out “should include the following characteristics: (1) a floor on the minimum amount of USF support; (2) cost recovery for middle mile costs; and (3) an exclusion for tribal lands from any cap on high-cost support” (pg. 14). GRTI thinks that a carve-out will “ensure that ILECs serving tribal lands would have a reliable flow of revenue to further broadband deployment and sustain local service…prevent net losses in revenue due to decreased ICC revenues…[and] ensure that GRTI realizes fair and expected returns on its investments” (pg. 15-16). In addition to the carve-out, GRTI thinks tribal carriers should be excluded from any caps on CAF support, “for the same reason a cap would not be appropriate in the context of high-cost USF support to tribal lands” (pg. 18).

            My Thoughts: While I am deeply sympathetic to the trials and tribulations of Tribal carriers, I feel a need to be harshly critical on some of their proposals. First, I think there needs to be a demonstrated increase in adoption rates before the FCC “carves out” special treatment for these carriers. I don’t think a 20% adoption rate necessitates investments of $12,000 per household. I would rather see special funding programs going towards increasing adoption rates and digital literacy than going towards infrastructure investments that will never be recovered. I calculated that it would cost $1.2m to deploy FTTH to 100 households, based on GRTI’s $12k figure. If only 20 of these household subscribe, GRTI is only recovering about $12,500 per year at the $53 monthly rate, barely enough to cover the cost of deployment to one household. When you include regular operating expenses, there is literally no business case for deploying FTTH to these households—and I do not say that very often, as I am an avid FTTH supporter. Last week I wrote about the fundamental rural broadband conundrum: do you provide the service first and then reap the rewards from increased economic activity in the community, or do you wait for new businesses and education opportunities and improved health care to come to the community and then increase broadband capability? In the case of these tribal communities, I’m not sure if deploying FTTH first is the right answer, when 50% of the population is unemployed and 50% are below the poverty line.

            However… broadband has the opportunity to facilitate jobs, education and health care for tribal communities, so it probably isn’t a good idea to hold off on deployment either. So, I would propose that Tribal communities take a hard look at wireless broadband, either fixed or mobile, preferably utilizing unlicensed spectrum. It would cost considerably less, and the benefits would be just as powerful as if the community had FTTH. It probably would not take 20 customers an entire year to cover the costs of deploying wireless to one customer. Wireless broadband would be a much more affordable solution for the members of the community, especially compared to the astronomical $53/month for 1.5 Mbps DSL. If the cost of broadband decreased to $20-30, more people could subscribe, and more people might be willing to try it out for a couple of months and boost their digital literacy skills in the process. Once the tribal carrier increased adoption and helped the community realize the benefits of broadband, it might be able to make a better business case for investing in FTTH. 

            I hate that there are areas in this country where broadband only reaches 10-20% of the homes, but in these areas, I’m not sure if it is specifically the responsibility of the Universal Service Fund to fix what appears to largely be a demographic problem. I do however think that tribal carriers could benefit from a short-term separate fund, but a significant portion of the funding should go towards programs that increase adoption and digital literacy. Aside from this, I don’t especially think that tribal carriers should follow different USF rules than regular RLECs—there are also RLECs who provide service in tribal communities but are not specifically “tribal carriers,” so their interests need to be recognized as well, and there should be incentives for more companies—RLECs, ILECs, wireless, etc. to invest in tribal areas, which could be prevented by restricting special treatment only to tribal carriers. 

            What other funding opportunities are available to tribal carriers through small business loans, special tribal business financing programs, and schools, libraries and health care broadband funding opportunities? I hope that there are ample funding opportunities outside of USF for these carriers, because there is clearly a need for extra, extra support in these communities. I definitely don’t think the tribal carriers should receive less USF support than they do currently, but I’m not sure if USF is the solution to the vast challenges these carriers face. 

            -----------------------------------------------------------------------

            If anyone has any good information on Tribal broadband adoption, deployment and investment challenges, please feel free to share it with me, as I would like to learn more about this issue. 

            Only 2 more days until reply comments are due! Where did the time go? 

            Cassandra Heyne

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