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Senate Hears ‘Consensus Framework’ Proposal and Concerns for Universal Service Reform

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Thursday October 13th 2011 – As BroadbandBreakfast.com gears up for our panel on “Bringing Broadband Infrastructure to Rural Areas: Where is the Progress?” we have been taking some notes on the FCC’s efforts to reform the Universal Service Fund and listened in on Wednesday’s Senate Commerce Hearing on “Universal Service Reform – Bringing Broadband to All Americans.” Here is a summary of some of the talking points and some highlights from the hearing.

Senator Kerry (D-MA) made the first remarks at the hearing, and highlighted an issue that became a recurring topic of conversation in yesterday’s proceeding. Senator Kerry was concerned about the difference between what Massachusetts residents pay into USF and the amount of the subsidy that Massachusetts receives in return.

Kerry said, “Inequity might be ok if the fund is really efficient and targets only the communities that need it the most … it might be ok if Massachusetts still did not have large pockets of geography without access to broadband and spotty wireless service, but we still do.”

Senator Inouye (D-HI) followed, “the draft order is a concrete step toward sustaining investments already made and will encourage new investment in broadband infrastructure in unserved areas.” He added however that he was “concerned that the fund will not go far enough to serve native communities and remote insular areas.” Although the FCC proposal dedicates special fund for tribal communities, Inouye believed that the amount was inadequate. Hawaii and Alaska have indigenous populations that face similar hardships and should be eligible for similar universal service support. The Senator asked for specific recognition of the needs of remote insular areas.

Chairman Rockefeller (D-WV) began his comments by applauding the intentions of the FCC to move ahead on USF reform but then gave a word of caution to the audience and witnesses. “We have been talking about reform for over a decade…reform will pit sector versus sector and will affect how much different companies get paid…reform means vested stakeholders will be unhappy because they prefer the status quo…but that is the definition of reform.” Rockefeller also raised the issue that some states are underpaying and some are over paying and restated that the definition of insular is very important for Alaska and Hawaii.

In addressing the hurdles that lay ahead for the FCC Rockefeller stated “there are issues about wireless and areas where towers are very scarce…there are issues about consumer bills, consumers need more value for what they pay for… there are serious questions about how state commissions fit into the reform….accountability and deployment are critical…but we must remember that adoption is also an essential part of our mission. Waiting relegates too many communities to the wrong side of the digital divide.”

In her remarks, Senator Hutchinson (R-TX) expressed what she would like to see in the USF reform. 1) Ensure the fund is sustainable for consumers who cannot afford increasing fees, 2) The high cost fund should support carriers only where no one else is providing unsubsidized service 3) USF needs to become broadband centric 4) USF must be technology neutral and 5) the rates telephone companies charge each other need to be rational and providers need to have time to adapt to the new system.

In brief opening remarks Senator Mark Warner (D-VA) noted that the “minimum broadband standards of 4 Mbps may sound fast now, but won’t sound very fast in the near future. We need to lock in on standards that will change with technology.”

Senator Wicker (R-MS) ended the opening statements by making two points, First, USF reform needs to be adequately responsive to the needs of rural America and second the FCC needs to make sure that the best technology for each separate region gets the support. “Those that want to compete in rural areas should not be impeded by anticompetitive regulatory policy,” said the Senator.

Witnesses testifying in front of the Committee included Kathleen Abernathy, Chief Officer and VP of Frontier Communications, Mary Dillon, President and CEO of US Cellular, Michael Powell, President and CEO of National Cable and Telecommunications Association (NCTA), Shirley Bloomfield, CEO of National Telecommunication Cooperative Association (NTCA) and Philip Jones, Commissioner of Washington State Utilities and Transportation Commission.

Frontier Communications and other telecom companies were signatories and supporters of America’s Broadband Connectivity (ABC) Plan which was a proposal submitted to the FCC to reform the universal service and intercarrier compensation services.

NTCA’s proposal to the FCC, the RLEC plan for rural areas served by small carriers was combined with the ABC plan to make up what the organizations have referred to as the “Consensus Framework.” Bloomfeld noted that “no one in the industry is getting exactly what they wanted and everyone is sacrificing to promote reasonable reform.”

Abernathy gave her witness testimony on behalf of Frontier Communications touting Frontier’s commitment to deploying broadband to some of the hardest to serve areas in the nation and pointing out that Frontier had deployed high speed internet to 91% of the households in their rural footprint that covers 27 states. Abernathy presented the four principles encompassed in the ABC plan 1) transitioning the voice supported mechanism to one that supports broadband, 2) fiscal responsibility which does not increase the size of the current high cost fund 3) accountability where funded recipients are required to provide defined results and 4) market driven policies that will allow funds to be distributed quickly and efficiently. With respect to ICC Abernathy mentioned that the ABC plan will phase down access charges over a five year period and will do a better job of targeting the highest cost areas of the country.

Powell representing the cable companies focused on the issues of fiscal responsibility and competitive neutrality for providing services to the unserved. Powell also suggested that the “goal of reform for the ICC regime should be regulatory certainty that ensures fair treatment of competitors and encourages migration from circuit-switched to IP technology.” “A reform that treats VoIP calls the same as “circuit-switched”” he added. The former FCC chairman called for a cap on the high cost fund at its current level of $4.5 billion and stressed the importance of cable companies being able to compete with the companies that have traditionally been subsidized by the fund.

Dillon from US Cellular spoke on behalf of the mobile providers when she stated that the goal of the fund was to invest efficiently. She expressed her concern that the commission tends to favor wireline over wireless in a marketplace that is moving towards mobile. “Investing in wireless provides more job growth and can deliver speeds faster than required in the National Broadband Plan.” She added, “The decisions that the FCC makes will affect the development of broadband in the long run, and reform must put consumers first and recognize the growth trend of wireless and mobile technologies.”

Bloomfield stressed the point that all broadband networks whether wireless or wireline ultimately rely upon a wired network. “Wired networks provide the capacity to support the type of application that the Nation critically needs.” Bloomfield was adamant that small rural carriers have invested most efficiently in connecting consumers in places where the low customer density and vast distances would discourage almost any other provider. Without USF support to these small carriers, rural customers would pay substantially more for communications services and companies would cut investments in their networks.

Commissioner Jones from Washington State wrapped up the panelist testimony. Jones’ major concerns with the new proposal  the FCC may adopt are that the consumers will give up whatever protections they currently have under the state utilities regime and that the states may loose their role as the Carrier of Last Resort (COLR).

Jones applauded the FCC chairman’s statement reiterating the States’ “crucial role in protecting consumers as we move forward in the transition of this federal subsidy regime.” Additionally, Jones was concerned that “any approach that allows the FCC to assume exclusive jurisdiction over VoIP services is short-sighted and will likely only promote additional arbitrage opportunities…Any reform must benefit the consumer and not the bottom line of carriers, assure accountability, and maintain build out and service quality requirements – a role that States are best positioned to handle.”

During the questioning session, when Senator Hutchinson asked about ICC reform, Bloomfield made the case that “lowering ICC rates is one of the only ways to come to real reform,” but she warned, “that the reduction must come in the form of a 6 to 7 year glide cut. A flash cut would be detrimental to the reform efforts.”

In response to Senator Hutchinson’s claim that NCTA does not really cover the most rural areas, Powell countered that cable’s roots were founded in rural America and that they reach 93% of American households.

Senator Warner addressed Ms. Abernathy when he asked “why being an incumbent alone should give a company the right of first refusal under the ABC plan.”
Abernathy answered by pointing out that the issue at hand is how fast one can you build out in that market. The only infrastructure in place will be the wireline provider’s, and they will inevitably build out faster than the auction process will take. Powell did add later on in the hearing that the auction process needs to be in place, and that the Commission is already an expert when it comes to auctions. “At the end of the day being hasty and efficient are two different things” claimed Powell.

Senator Pryor (D-AR) continued the questioning about the right of first refusal by asking, what was the timeframe that was proposed?

“The right of first refusal model would identify high cost areas, calculate the service area and see if a provider wanted to provide support,” Abernathy explained. The provider would either have to take the money and build out or there would be an auction. Abernathy mentioned that the basic timeframe would include a requirement of accepting the money in the first year and a demonstration of the companies’ ability to build out.

Senator Pryor then added, “Does accountability include quality of service and commitments to improve technology?”

“Under Frontier accounting is done every month,” said Abernathy. She added that companies should always asses the quality of their services and assessments of progress should be made at least once a year.

Senator Ayotte (R-NH) raised a similar issue to the ones initially raised by Senators Kerry and Rockefeller when she asked about what is the equitable balance of the fund if New Hampshire is contributing much more to the fund than they are receiving.

Jones from Washington blamed this inequity on the way the system works, “some states are net donors and some are net recipients,” he said “the same thing happens with electricity and rural telephone.”

As Deputy Editor, Chris Naoum is curating expert opinions, and writing and editing articles on Broadband Breakfast issue areas. Chris served as Policy Counsel for Future of Music Coalition, Legal Research Fellow for the Benton Foundation and law clerk for a media company, and previously worked as a legal clerk in the office of Federal Communications Commissioner Jonathan Adelstein. He received his B.A. from Emory University and his J.D. and M.A. in Television Radio and Film Policy from Syracuse University.

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U.S. Broadband Deployment and Speeds are Beating Europe’s, Says Scholar Touting ‘Facilities-based Competition’

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WASHINGTON, June 10, 2014 – In spite of press reports to the contrary, U.S. broadband coverage is not falling behind European levels of service, academic Christopher Yoo said on Wednesday at the National Press Club.

“It seems like every other week there’s a new infographic or news story that talks about how the U.S. is falling behind in broadband speeds, we don’t have fiber to the home, and telecom companies are rolling in the profits while consumer prices soar,” said Doug Brake, telecommunications policy analyst with The Information Technology and Innovation Foundation, setting up the topic tackled in by Yoo in his presentation.

On the contrary, said Yoo, the founding director of the Center for Technology, Innovation and Competition, the U.S. led in many broadband metrics in 2011 and 2012. And, he said, it is precisely the absence of a “one size fits all” regulatory structure that has been been driving technological innovation forward in the marketplace.

In other words, according to Yoo, the American approach to facilities-based competition – where cable companies and telephone companies compete through rival communications networks –has succeeded.

While the findings may be “surprising” to some, Yoo said they proved the importance of examining the best approach to broadband regulation based on “real world data.”

The notion that “fiber is the only answer” to affordable high-speed broadband is a misconception, he said. Countries emphasizing fiber over rival technologies – including Sweden and France – were among the worst broadband performers.

In the U.S., 82 percent of households received broadband at speeds of at least 25 Megabits per second (Mbps), versus 54 percent in Europe. In rural areas, the difference was even greater: 48 percent in the U.S., versus 12 percent in Europe. The five countries that did beat U.S. coverage of greater than 25 Mbps (including Denmark and the Netherlands) are compact, urbanized regions with greater population densities.

Additionally, even looking at fiber-based technologies, the U.S. is outperforming Europe, he said. Fiber coverage in the U.S. went from 17 percent in 2011 to 23 percent in 2012. In Europe, fiber coverage went from 10 percent in 2011 to 12 percent in 2012.

And, based on the measurement of telecommunications investment per household, the U.S. number is more than double that of Europe: $562 versus $244 in the old world.

And, he said, American users consumed 50 percent more bandwidth than Europeans in 2011 and 2012.

“The best measure of how much a network is really worth is how much you use it,” Yoo said. “It’s great to have a very fast car, but unless you use it, it’s not really doing very much for you.”

One area where the U.S. could see improvement is in the area of broadband adoption, Brake said. That demonstrates continued need to demonstrate value in broadband for consumers.

Yoo agreed: “Availability is only a part of the question. There are plenty of people who have broadband available to them who are choosing not to adopt.”

Moderator Gerry Faulhaber added: “As regulators, we can mandate coverage, we can mandate buildout. What we can’t do is mandate people to use it.”

Keeping a series of tiered rates for broadband service is exactly what America’s broadband rollout needs, said Brake. That not only encourages consumers to purchase internet at lower introductory rates, it also efficiently places the burden on those who wish to pay more for higher-speed service. This helps to recuperate costs for networks.

“Is it better to provide 75 to 100 Mbps to 80 to 90 percent of the population, or one Gigabit per second to 10 to 20 percent of the population?”

Blair Levin, former director of the FCC’s National Broadband Plan, and now communications a science fellow at the Aspen Institute, said that comparisons with Europe doesn’t change America’s objective to build deeper fiber, use broadband to improve the delivery of goods and services, and connect more users.

“Which activity is more productive – looking at oneself in the mirror and asking, ‘do these jeans make me look fat?’ or going to the gym? Focusing on actions that improve one’s condition is better than wondering about how one should appear relative to others,” said Levin.

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Discussion of Broadband Breakfast Club Virtual Event on High-Capacity Applications and Gigabit Connectivity

WASHINGTON, September 24, 2013 – The Broadband Breakfast Club released the first video of its Broadband Breakfast Club Virtual Event, on “How High-Capacity Applications Are Driving Gigabit Connectivity.”

The dialogue featured Dr. Glenn Ricart, Chief Technology Officer, US IGNITESheldon Grizzle of GigTank in Chattanooga, Tennessee; Todd MarriottExecutive Director of UTOPIA, the Utah Telecommunications Open Infrastructure Agency, and Drew ClarkChairman and Publisher, BroadbandBreakfast.com.

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WASHINGTON, September 24, 2013 – The Broadband Breakfast Club released the first video of its Broadband Breakfast Club Virtual Event, on “How High-Capacity Applications Are Driving Gigabit Connectivity.”

The dialogue featured Dr. Glenn Ricart, Chief Technology Officer, US IGNITESheldon Grizzle of GigTank in Chattanooga, Tennessee; Todd MarriottExecutive Director of UTOPIA, the Utah Telecommunications Open Infrastructure Agency, and Drew ClarkChairman and Publisher, BroadbandBreakfast.com.

To register for the next Broadband Breakfast Club Virtual Event, “How Will FirstNet Improve Public Safety Communications?,” on Tuesday, October 15, 2013, at 11 a.m. ET/10 a.m. CT, please visit http://gowoa.me/i/XV8

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Breakfast Club Video: ‘Gigabit and Ultra-High-Speed Networks: Where They Stand Now and How They Are Building the Future’

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WASHINGTON, May 24, 2013 – Emphasizing the developing nature of broadband networks in the United States, speakers at the May 21 Broadband Breakfast Club event said that the recent achievement of ultra-high speed broadband networks has been a critical factor seeding transformative developments for organizations, individuals and communities. These developments, panelists said, were simply not possible before with slower speed networks.

Yet panelists at the event, “Becoming a Gigabit Nation: What Have We Learned About Ultra-High Speed Broadband?” also agreed that speed is not actually the most important factor in the maturing of these networks.

Event Highlights

Complete Program

Successful deployment of such networks requires concerted efforts and continual upgrades involving community leadership, assessment of consumer needs and desires, infrastructure development, application development and successful assessment of usage patterns. All of these factors affect the success of such gigabit and high-speed networks, panelists said.

In other words, high-speed networks need to be developed in concert with proposed applications, which are in turn developed in the context of their communities or customer base.

As gigabit cities consultant David Sandel said, gigabit and smart city transformation being undertaken is 90 percent sociology and 10 percent infrastructure. Sandel, president of Sandel and Associates, works with St. Louis, Kansas City and other communities worldwide and runs the Gigabit City Summit, a global forum of community leaders who are engaged in discussion on new forms of leadership for managing such networks.

Sandel said that new gigabit leadership must break out of traditional silos and engage in greater information exchange and collaboration. Less hierarchy, more inclusion and more communication, facilitate the success of gigabit services and applications, he said.

What’s Happening Now

Sandel and other panelists gave examples of how 100-plus megabit per second and gigabit-level connectivity is already providing considerable benefits to cities that have it – even where the majority of a city’s consumers do not yet have needs for those levels of service.

For example, Sandel described the success of a two-mile gigabit main street in St. Louis, Missouri. This project has attracted a number of innovative businesses to the area. He said that such projects carry several benefits to an entire city, such as enabling the use of cloud services, driving up real estate values, and creating high-value jobs. In addition, the current relatively higher costs of gigabit service in communities can be partially offset by institutional and industrial uses.

Similarly, Sheldon Grizzle, founder and co-director of the Chattanooga-based GIGTANK, a technology start-up accelerator, said that the implementation of gigabit broadband by the local utility EPB has been a boon to its electrical grid. Power outages in the area have decreased by 60 percent, he said.

Grizzle says that Chattanooga, as a small city of 170,000, sees itself as a good test case for gigabit networks. Its network now provides speeds of 50 Mbps for 50,000 subscribers. It also offers or Gbps symmetrical service (i.e. 1 Gbps upload and 1 Gbps download) for $300 a month, although the number of subscribers has been fewer. He attributed the relatively low demand for the gigabit offered to the high price point.

Grizzle said that GIGTANK has been recruiting application developers from around the world to build appropriate apps for the community, as Chattanooga’s gigabit network grows beyond its infancy.

Speed Issues

Notwithstanding high-profile gigabit build-outs in recent years, nationally broadband speeds have been steadily increasing by other methods over the last several years, said Kevin McElearney, senior vice president of network engineering and technical operations for Comcast Cable.

McElearney said that, for example, Comcast has innovated on nextgen technologies every year, increasing network speeds 11 times over the last 11 years, and is now running terabit links over the backbone to allow capacity for new applications. He said that Comcast now provides up to 100 Mbps download capacity, with 70 percent of consumers electing for 25 Mbps and 30 percent for tiers higher speeds.

McElearney said that Comcast sees the increasing use of multiple devices in households as the principal driver behind the demand for higher broadband speeds for consumers.

Application Development

William Wallace, Executive Director of U.S. Ignite, a developer of gigabit-ready digital experiences and applications, spoke of an “internet of immersive experience,” suggesting an internet experience completely different from prior experiences. Users will also be creating their own experiences, he said.

Wallace further noted that customization of network features around applications will help to build in the greatest efficiencies. For example, different applications will be characterized by different speeds, security features, cloud storage locations, latencies etc.

Scott Wallsten, vice president for research and senior fellow at the Technology Policy Institute, said that focus on ultra-high broadband speeds is misplaced. According to Wallsten, because internet speeds are already increasing consistently, policies focusing on speed are unnecessary. Instead, Wallsten said, greater attention should be paid to other metrics of broadband quality, such as latency and reliability.

Additionally, Wallsten stated that the government’s adoption programs should be focused on low-income inner-city non-adopters rather than rural high-speed development. He said that the Federal Communications Commission’s high cost fund portion of the Universal Service Fund has not been sufficient to pay for rural development. Instead, the best hope to help the most individuals get broadband is to focus on urban areas. Increased efficiencies in cities will offer a better chance for providers to lower costs and then expand network development in rural areas.

Sandel concluded with how education is critical for successful gigabit network development and that there should be a three-pronged approach: education for leaders as to the impacts and benefits of gigabit networks and applications across all sectors, development of clear economic development models that draw lines to revenue flows, and policies for inclusion of all populations so that everyone can participate.

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