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Johnny Kampis: New ISP Taxes Will Not Help America Build Back Better

Increasing taxes on internet service providers would be counterproductive in the quest to close the digital divide.

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The author of this Expert Opinion is Johnny Kampis, director of telecom policy for the Taxpayers Protection Alliance.

As Senate Democrats look to resurrect President Joe Biden’s Build Back Better legislation, they should quickly squash the idea of new taxes on internet service providers that would be counterproductive to closing the digital divide.

Biden said in his State of the Union address that he wants to “provide affordable high-speed internet for every American—urban, suburban, rural, and tribal communities.” Increasing costs on ISPs would only ensure that less money would be available to achieve the president’s goal.

BBB started as a $1.7 trillion spending plan that was rejected by all Senate Republicans and needed the support of all Democrats to pass the chamber. But moderate Sen. Joe Manchin, D-West Virginia, rejected the legislation last year, leading to progressives scrambling to reconfigure Biden’s signature bill.

Funding proposals being considered in a new BBB bill include the book income minimum tax, as well as a limit on interest deductions.

The limit on interest deductions would apply to a number of capital-intensive industries, including internet providers. Permitting telecoms to deduct interest payments to lower their tax burdens increases the amount of money available for broadband investment, which is capital intensive.

For example, it is estimated that nearly $80 billion was invested by the private sector for broadband deployment in 2020, according to U.S. Telecom, The Broadband Association. In fact, more than $1 trillion in private sector funding has been spent since 1995. Limiting these deductions would also lower the level of investment in broadband infrastructure. That would be another loss for the concept of broadband for every American.

Slowing broadband deployment and distorting the value of future spectrum licenses

The book income tax would place a retroactive tax on past spectrum purchases and increase taxes on future spectrum purchases. As Michael Santorelli, director of the Advanced Communications Law & Policy Institute at New York Law School, wrote in Forbes, “Spectrum is the lifeblood of wireless networks, so any increase in taxes associated with spectrum purchases would likely slow 5G deployment.”

The Tax Foundation said such a tax would likely “distort the prices companies are willing to pay for future spectrum licenses.”

Meredith Attwell Baker, president and CEO of CTIA, which represents the U.S. wireless industry, calls the spectrum tax the “5G tax trap.”

She noted in a recent op-ed that wireless providers paid the government more than $100 billion in new spectrum licenses in just the past year. The results have been that 5G networks are being created about twice as fast as 4G networks were and already cover about 90 percent of the country.

Baker said the new proposal would no longer permit wireless companies from writing off the costs associated with acquiring spectrum while still allowing other companies to write off other costs of investments made while building out broadband infrastructure.

“That puts wireless providers at a significant disadvantage at a time when mobile broadband is proving vital to getting and keeping Americans connected,” she wrote.

The U.S. leads the world in 5G development, with speeds that rival cable and fiber. But China continues to nip at the heels of the United States. Increasing taxes on providers while China subsidizes 5G infrastructure could easily flip the script.

Fortunately, the BBB legislation doesn’t seem to be moving forward, with Sen. Mark Warner, D-Virginia, telling Vox last week that he didn’t “have the foggiest idea” of how to advance the bill.

But if BBB arises again, Democrats should reconsider tax proposals that would only harm the effort to close the digital divide.

Johnny Kampis is director of telecom policy for the Taxpayers Protection Alliance. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Expert Opinion

Paul Atkinson: Why Fiber Trumps Satellite When Bridging the Digital Divide

On the surface, satellite seems like the ideal way to close the rural-urban digital divide.

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The author of this Expert Opinion is Paul Atkinson, CEO of Optical Networks of STL

The Grand Canyon in Arizona is 18 miles across at its widest point. The only thing wider is the digital divide between the state’s rural and urban areas. Roughly 99% of urban Arizonans have access to fixed terrestrial broadband services that deliver at least 25 Megabits per second (Mbps) down and 3 Mbps up, according to the FCC’s 2021 Broadband Deployment Report . Only 66% of its rural residents do.

Arizona isn’t an anomaly, either. Nearly 99% of all urban Americans have access to broadband versus 82.7% of rural residents.

This problem also is a business opportunity, which is why so many vendors and service providers are positioning their technology of choice as the best way to bridge the digital divide. The main contenders are satellite, fiber, Wi-Fi and fixed wireless access that uses 5G cellular. Each has its strengths and weaknesses.

For example, 5G FWA requires building hundreds of thousands of base stations in remote areas that might be home to only a handful of homes and businesses — a buildout that likely would take years and tens of billions of dollars. That’s a difficult investment to recoup and make profitable.

That’s simply not a viable business model, as a US Cellular white paper acknowledged: “ Our economics require approximately 500 subscribers to build a new tower, and we can’t assume that everyone will adopt the service. The cost of building and maintaining a tower in rural America can be nearly twice as expensive as building a tower in an urban area.”

Satellite and fiber have emerged as the top two contenders. On the surface, satellite seems like the ideal way to close the rural-urban digital divide because it doesn’t require hundreds of thousands of base stations. But satellite has its share of technological and business limitations, too — to the point that in August, the FCC rejected SpaceX’s application for Rural Digital Opportunity Fund (RDOF) subsidies.

FCC Chairwoman Rosenworcel questioned whether it was affordable to ‘subsidize ventures that are not delivering the promised speeds or are not likely to meet program requirements, especially when consumer would have to purchase a $600 dish.

Rural America’s high-fiber diet

The FCC’s rejection of SpaceX/Starlink is not a setback in bridging the rural-urban digital divide. It’s actually a milestone toward parity because it ensures that an unproven technology doesn’t divert scarce public subsidies from a proven one.

As Gary Bolton, Fiber Broadband Association president and CEO rightly stated, this is a huge victory for 640,000 families who were relegated to Low Earth Orbit Satellite service. They could have been redlined from being eligible for fiber broadband. There is now clarity and a path forward for fiber to bridge the digital divide.

Fiber has already proven its worth in rural America, where it has 23% of the broadband market and the highest customer satisfaction of all internet-access technologies, according to a 2021 Pivot Group study . By comparison, fixed wireless and satellite have only 10% and 6% penetration, respectively. Cable has the largest share of the rural market, but many customers find it lacking: One third say they want faster speeds.

In fact, broadband speed is a decisive factor when people are deciding where to relocate. According to the 2022 RVA Market Research & Consulting study “A Detailed Review: The Status of U.S. Broadband and The Impact of Fiber Broadband,” 47% of the people who moved to a rural area in the past year chose one where fiber-to-the-home service is available. That preference highlights how rural communities can use fiber to attract retirees, young professionals, families, entrepreneurs and other demographics looking to escape to the beautiful countryside.

Fiber’s 23% share of the rural broadband market also busts the myth that as a wired technology, it takes too much time and money to deploy in sparsely populated areas, including those with challenging terrain such as mountains. Another wired technology — electricity — overcame those challenges 86 years ago with passage of the Rural Electrification Act , which funded utility cooperatives that built out transmission and distribution networks to serve farms, ranches, small towns and other rural places.

Today, more than 250 of those co-ops have built or are planning broadband networks, according to the National Rural Electric Cooperative Association . Many have been in service for the better part of a decade — or longer. For example, in 2006, Blue Ridge Mountain EMC launched FTTH in Georgia. In 2019, it deployed a 7,000-foot line up a mountain, using drones to overcome challenges such as deep gorge and 100-foot-tall pine trees. In 2016, Elevate Fiber, a division of Delta-Montrose Electric Association, launched gigabit FTTH in two Colorado counties by overlaying fiber on its 4,000 miles of distribution lines.

Co-ops are just one example of how fiber isn’t just poised to bridge the rural-urban digital divide. It already is. That’s great news for rural Americans, who don’t have to wait on unproven, pie-in-the-sky technologies such as satellite.

Paul Atkinson is Chief Executive Officer of Optical Networks for STL. This Expert Opinion is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Johnny Kampis: Wireless Survey Shows 5G’s Role in Closing Digital Divide

5G has experienced a quantum leap in growth since it first began rolling out in 2018.

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The author of this Expert Opinion in Johnny Kampis of the Taxpayers Protection Alliance

There was universal consensus that 5G wireless technology would be a game changer for closing the digital divide. The question was whether or not private investment would be enough to deploy the needed infrastructure. A new report shows that capital expenditures from wireless providers reached a record high in 2021, as 5G saw tremendous growth and will continue to help connect households now unserved by broadband.

CTIA’s 2022 Annual Wireless Industry Survey shows that wireless providers invested $35 billion into growing and improving their networks, the fourth consecutive year of industry growth.

CTIA said this is “a powerful trend that emphasizes the societal importance of wireless connectivity and underlines the industry’s commitment to building a robust platform for innovation that connects all communities.”

5G has experienced a quantum leap in growth since it first began rolling out in 2018, as infrastructure reforms that eased deployment barriers have resulted in 5G growing twice as fast as 4G. Since the Federal Communications Commission and state legislatures worked to modernize key siting regulations that could have stymied the technology’s growth, wireless providers have added 70,000 active cell sites. There are now nearly 420,000 operational cell sites across the U.S.

As CTIA notes, “More cell sites enhance coverage, encouraging adoptions and helping to close the digital divide.”

Clearly consumers want faster mobile internet speeds as the number of connective 5G devices grew more than a whopping 500 percent this past year from 14 million to Accenture 85 million. About one-third of American now possess an active 5G device.

CTIA points out that the number of connections that require wireless technology is helping fuel the growth – everything from smart watches to medical sensors. Such data-only devices represent about 42 percent of all wireless connections.

Wireless providers have invested nearly $121 billion into their networks since the launch of 5G.

CTIA notes that in an age of incredible inflation, the wireless industry’s investment, combined with increased market competition, has led to lower prices, “providing a welcome contrast to an economy where consumers have faced priced increases for 94 percent of tracked goods and services nationwide.”

Since 2010, the cost of unlimited data plans has declined 43 percent while wireless speeds have increased 85-fold over the same period.

Investment and competition have also led to new innovations such as 5G for home broadband and 5G fixed wireless. The latter is particularly useful in connecting rural areas where it’s hard to make a business case for fiber due to the cost of the last-mile connections. CTIA notes that 5G home broadband is available in more than 40 million households, providing home connections via spectrum with high capacity and low latency rather than a wired connection.

The report also points out that 5G is helping mitigate the impacts of climate change by creating green jobs in key industries. Accenture has found that 5G-enabled use cases should delivers 20 percent of the U.S.’s emission reduction targets by 2025.

5G is clearly helping usher in a new age of connectivity in this country. CTIA’s statistics are encouraging signs that the latest wireless technology is helping make broadband access available to more Americans than ever before. The best part of this growth is that taxpayer dollars are not being spent.

Johnny Kampis is director of telecom policy for the Taxpayers Protection Alliance. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Expert Opinion

Kate Forscey: Mobile Broadband Gap Needs to Be Remedied, Too

A recent study by CostQuest suggests that 37,000 more towers are needed to bring mobile coverage up to speed nationwide.

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The author of this Expert Opinion is Kate Forscey, contributing fellow for the Digital Progress Institute

It’s no longer a question: Whether it’s launching a new business, keeping up with friends, or finding the cheapest gas station nearby, the Internet is quintessential to the extent we don’t even think twice—until we don’t have it.

While Internet in America’s cities and suburbs weathered COVID’s storm, rural and low-income Americans have struggled to get any Internet access for decades.  The well-known stories of parents taking their kids to McDonald’s parking lots to do their homework haven’t ended—far too many Americans still lack access to the broadband they need.

The federal government, however, is taking steps to change the story.  The FCC’s Universal Service Fund has awarded billion dollars to deploy fiber and fixed wireless service to unserved areas through an alphabet soup of programs like the ACAM, the CAF, the HCLS, and the CAF BLS.  The most prominent of these is the Rural Digital Opportunity Fund that auctioned off $9.2 billion in federal support to connect 5.2 million unserved homes with high-speed broadband.

Congress has stepped up, too, with the bipartisan Infrastructure, Investment, and Jobs Act.  That legislation sent $42.45 billion for states to build out fixed, high-speed broadband.  In addition, Congress created the Affordable Connectivity Program, allocating $14.2 billion to reduce the cost of broadband for low-income households.

Policymakers recognize the problem and their responsibility to do something, and they are taking action on a bipartisan basis.  This is good.  But it’s not enough.  All of this funding is directed at one broadband gap—fixed connections to the home.

Mobile connectivity gap remains unresolved

There is another broadband gap—mobile connectivity—that’s unresolved.  A recent study by CostQuest suggests that 37,000 more towers are needed to bring mobile coverage up to speed nationwide.

Mobile broadband is central to the daily goings-on of families and businesses as we leave our houses with the fading of the pandemic.  That’s especially true for rural communities where commutes are longer, educational opportunities are sparse, and precision agriculture is necessary to stay in business.

To be fair, work is underway.  The FCC allocated $9 billion in 2020 for its 5G Fund, a support program to bring high-speed mobile connectivity to unserved Americans.  But that’s only a fraction of the funding needed to close the mobile gap.  And the FCC cannot move forward with the 5G Fund until it finishes updating its broadband coverage maps, which it’s been working on since 2019 and should be ready this fall.

So what to do?  Well, the FCC can move forward with its 5G Fund.  The auction model for that fund, as the Commission has proposed, would work—the RDOF used a similar model, costing the federal government $6.8 billion less than the FCC originally estimated.  And that $6.8 billion in savings could be redirected to the 5G Fund now that Congress is working to close the fixed-broadband gap.  The only downside is that the 5G Fund is a long-term solution—it will likely take several years before the funding is awarded.

Private companies are bringing new solutions to bear

In the interim, private companies are bringing innovative solutions to bear.  For example, AST SpaceMobile is building the first space-based cellular broadband network, allowing existing mobile phones to jump seamlessly from their terrestrial service to the company’s satellites and back again.  If the FCC were to fully authorize the service, it could expand the reach of existing towers and lower the cost of building out 5G to the far reaches of America.

Following in AST’s footsteps, SpaceX’s Starlink just announced a technology partnership with T-Mobile to enable connectivity to mobile phones in areas that don’t currently have access. Amazon’s Project Kuiper has similarly partnered with Verizon to extend the reach of mobile networks.

The advantage of these immediate solutions is they don’t require granular mapping or government funding to get started—they just need the FCC’s okay.  And while they don’t solve the problem entirely (satellite service works much better in Kansas cornfields than in the forested hills and hollers of West Virginia), they can quickly close the mobile gap where they do work well.

I remain hopeful that we can and will close the mobile gap.  Just as Congress and the FCC have relied on a variety of solutions to connect every household, we’ll need a multi-pronged approach to bring mobile connectivity to every American.  That means moving forward on government solutions like the 5G Fund as well as private solutions that give companies the flexibility to serve new customers.

Connectivity is having a bipartisan moment—let’s make it last.

Kate Forscey is a contributing fellow for the Digital Progress Institute and principal and founder of KRF Strategies LLC. She has served as senior technology policy advisor for Congresswoman Anna G. Eshoo and policy counsel at Public Knowledge. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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