Entries in American Jobs Act (2)

Thursday
Dec222011

August – October 2011: FCC Yields to no Earthquake, Hurricane or Industry Consensus 

Exactly How Many New Jobs will Broadband Create?

Part 3 of “2011: The Regulatory Year in Review.” Autumn was intense—no doubt about that. From the early August release of the Public Notice on the ABC Plan to the October 27 FCC vote on the USF Order, these 3 months were chock-full of excitement. One trend I noticed during this time was the overwhelming number of job creation claims associated with government and private sector broadband initiatives. Sure, broadband helps create jobs and certainly provides new possibilities for individuals to further their educations, start businesses at home, and conduct commerce on an international scale. But will a few government decisions and one colossal merger create literally millions of new jobs? Or is “broadband = tons of jobs” just the catch phase of the year?

August 2011: August began with the Public Notice on the ABC Plan and ended with a rapid-fire comment cycle. In between these events, we saw several natural disasters and an unprecedented FCC blog post on USF/ICC reform signed by all 4 Commissioners proclaiming that the Public Notice “marks the final stage of our reform process.”

On August 4 in Jefferson, Indiana, FCC Chairman Julius Genachowski announced “jobs4america,” “a new coalition of forward-looking businesses committed to bringing thousands of new jobs in America.”  If you are keeping a tally of broadband-related job creation claims, add 100,000 to the list—primarily broadband-enabled call center jobs, including home-based call centers. Genachowski applauded a new call center in Indiana, adding “So broadband really is enabling new economic opportunities, creating jobs and revitalizing communities—including some communities that thought their best days might be behind them.” Of course, he made sure to mention his recent trip to rural Diller, Nebraska. A fact sheet about jobs4america lists 575 broadband-enabled call center jobs that have actually recently been created, and another 17,500 or so “job creation goals over the next two years.” So… 100,000? Seems like a stretch.

The job claims didn’t stop with the FCC—President Obama also pledged to bring new jobs to rural America at an August 16 Town Hall meeting in Peosta, Iowa. Obama’s visit complemented a White House Rural Economic Forum and the release of a White House Rural Council report, “Jobs and Economic Security for Rural America.” One of the primary goals of the Council is to deploy broadband to 7 million rural Americans currently unserved, which will help enable distance learning, health care, and of course—new jobs! (The ILEC Advisor: Obama Pledges Rural Jobs and Economic Growth).

Finally, who will ever forget AT&T’s preposterous claim that the merger with T-Mobile will create 96,000 jobs? Certainly not anyone who lived in DC these past few months, as AT&T blanketed the media with commercials and print ads touting this alleged benefit of the merger.  On the same day that AT&T ceo Randall Stephenson told CNBC that the company would bring 5,000 international call center jobs back to the U.S, the Department of Justice slapped AT&T with the allegedly-shocking news (to AT&T anyway) that it had filed a suit to block the deal. (The Deal Advisor: Surprise, Surprise…DOJ Says “No Way” to AT&T – T-Mobile Merger).

September 2011: DC was still shaking and drying out from the August hurri-quake in early September, and the FCC responded by holding a public safety workshop on network reliability and outage reporting. Genachowski stated, “The hurricane and earthquake also shed light on ways we can continue to enhance our work to ensure the reliability of communications during and following disasters… Our experience with these events will inform our pending rulemaking on outage reporting… [and] our separate but related inquiry on network reliability.” Meanwhile, another threat to public safety has emerged over the last couple years in the form of rural call termination problems, but the FCC has moved much slower to address this issue than they did to address two East Coast natural disasters that caused very little disruption to communications networks. A large portion of the FCC’s September agenda was dominated by public safety, disaster preparation and network reliability topics.

A significant step in developing the White Space spectrum occurred on September 14 with Genachowski’s announcement of a 45-day public trial of the Spectrum Bridge Inc. White Space database. Genachowski explained, “Unleashing white space spectrum will enable a new wave of wireless innovation. It has the potential to exceed the billions of dollars in economic benefit from Wi-Fi, the last significant release of unlicensed spectrum, and drive private investment and job creation.” No word on how many hundreds of thousands of jobs the White Spaces may create, but definitely look for more progress on White Space spectrum development in 2012.

Job fever continued with the September 12 release of the Obama Administration’s American Jobs Act legislative proposal which included a “National Wireless Initiative” to repurpose underutilized spectrum through incentive auctions, reduce the federal deficit, and of course, create jobs (The ILEC Advisor: American Jobs Act Includes Wireless Initiative, Public Safety Network). Despite all of the heavy-duty job creation claims by the FCC, White House and telecom providers; some rural stakeholders warned that the FCC’s proposal for USF/ICC reform will actually eliminate jobs. Impact studies conducted by universities in New Mexico, Kansas, Colorado and Missouri made dire predictions about RLEC jobs, state and local taxes, RLEC wages, and total economic impact in their respective states. Although I was skeptical about some of the calculations, these impact studies definitely carried an important message about the value of RLECs to local and regional economies (The ILEC Advisor: New Mexico Study Depicts Life without USF, State USF Reform Impact Studies Predict RLEC “Death Spiral”).

October 2011: As the death of Steve Jobs rocked the galaxy, Genachowski’s October 6 announcement that the USF/ICC rules would indeed be on the October open meeting agenda launched the telecom industry into one final frenzy.  Unfortunately, Genachowski’s big reveal did little to ease our anticipation as it gave very few solid clues as to what “devils” were lurking in the details of the Order. Genachowski predictably mentioned his visit to Diller, Nebraska and claimed the reforms will “spur billions of dollars in private investment and very significant job creation”— 500,000 jobs to be exact.

We expected the Order would be about 400-500 pages long, and would be released shortly after the October 27 Open Meeting, where it was approved unanimously. We were wrong… Although we had to wait a few more weeks for the rules, the Commissioners revealed enough at the Open Meeting for it to become clear that the ABC Plan/Consensus Framework/RLEC Plan were not adopted in entirety, or really at all. Thus began 3 weeks of general panic. (The ILEC Advisor: Finally – Genachowski’s Big Announcement on USF/ICC Reform).

The FCC threw the RLECs a bone on October 18 with a workshop to address rural call termination problems. The workshop was a good first step to publically bring attention to the pervasive issue, but it almost seemed “too little too late.” After all, these problems have been increasingly occurring for more than a year. Thousands upon thousands of calls have not reached their rural destinations, harming small businesses, threatening public safety and straining family relationships with great aunt Gertrude. Rural panelists urged the FCC to issue forfeitures and fines to companies found intentionally blocking or degrading calls to high-cost rural areas, but so far no actions have been taken. Expect this issue to rear its ugly head in 2012. (The ILEC Advisor: FCC Finally Gets the Message about Rural Call Termination Problems, Rural Panelists Discuss Call Termination Problems – Causes, Effects, Solutions).  

Also notable in October, the Net Neutrality rules finally stopped collecting dust in the Office of the Federal Register storage room. Political polarization over the rules became almost too much to handle. Lawsuits from the left and right popped up faster than you can say “anti-discrimination,” and we can all look forward to a 2012 court showdown between Verizon, Free Press, the FCC and others at the U.S. Appeals Court in Washington. (The ILEC Advisor: Net Neutrality Fight Intensifies – In Washington Anyway).

While not without hurricane-force excitement, the early fall months were certainly the calm before the real storm—look for the final installment of “2011: The Regulatory Year in Review” covering November and December next week!

Sunday
Sep182011

American Jobs Act Includes Wireless Initiative, Public Safety Network

Coming Soon to the FCC: Plenty of Incentive Auction Proceedings

On September 12, the Obama Administration released the American Jobs Act of 2011 legislative proposal, which the President hopes will help rebuild the American economy in the wake of the economic crisis. Earlier this year, Obama revealed a wireless broadband plan which included utilizing incentive auctions to 1) remove spectrum from the hands of inefficient users; 2) put said spectrum to better use by covering 98% of Americans with wireless broadband; and 3) help pay down the Federal deficit with surplus funds from the auctions. These ideas have come to fruition in the American Jobs Act, as well as proposals to carve out the 700 MHz D Block exclusively for a nationwide public safety wireless broadband network.

According to the President's statement, “The purpose of the American Jobs Act of 2011 is simple: put more people back to work and put more money in the pockets of working Americans. And it will do so without adding a dime to the deficit.” The Act outlines proposals ranging from small business tax cuts to refurbishing foreclosed homes to banning employers from discriminating against unemployed potential hires. The section entitled “National Wireless Initiative” appears to serve a combination of goals, including reducing the deficit, adding jobs as a result of wireless broadband innovation, and improving public safety communications.

Broadcasters and some Federal spectrum users have certainly had ample warning that the government intends to repurpose underutilized bands.  Wireless carriers are no doubt planning their auction strategies at this very moment, and hoping that soon-to-be-reallocated spectrum will help ease the growing “spectrum crisis” resulting from explosive mobile broadband demands. If this Act is passed, the FCC will initiate proceedings to help determine auction methodologies, payments for license holders who voluntarily relinquish spectrum assets, and spectrum bands that should (or should not) be auctioned. The American Jobs Act describes the FCC’s incentive auction authority:

“Notwithstanding any other provision of law, if the Commission determines that it is consistent with the public interest in utilization of the spectrum for a licensee to voluntarily relinquish some or all of its licensed spectrum usage rights in order to permit the assignment of new initial licenses through a competitive bidding process subject to new service rules, or the designation of spectrum for unlicensed use, the Commission may pay to such licensee a portion of any auction proceeds that the Commission determines, in its discretion, are attributable to the spectrum usage rights voluntarily relinquished by such licensee. If the Commission also determines that it is in the public interest to modify the spectrum usage rights of any incumbent licensee in order to facilitate the assignment of such new initial licenses subject to new service rules, or the designation of spectrum for unlicensed use, the Commission may pay to such licensee a portion of the auction proceeds for the purpose of relocating to any alternative frequency or location that the Commission may designate.”

After the former licensee is compensated from the auction proceeds and around $6.5b and $300m are put aside for the public safety network and public safety network research and development, respectively, then the remaining funds can be used to pay the Federal deficit. Commenters disagree on exactly how much money will be available for the deficit—clearly, since it cannot be determined with accuracy how profitable the auctions will actually be (one Radio Business Reports article notes that the Congressional Budget Office estimates the deficit reduction from incentive auction proceeds to be around $6b). On its website, the FCC describes the benefits of incentive auctions and explains that auctions may bring in close to $30b total, but the consumer benefits “would be 10 times higher than the value that spectrum generates at auction.” Additionally, the FCC writes, “According to the High Tech Spectrum Coalition, over the next five years, investments in 4G wireless technology will create 205,000 U.S. jobs,” which may be one big reason why this proposal is included in the American Jobs Act.

Both the Consumer Electronics Association (CEA) and CTIA have commented favorably on the American Jobs Act’s wireless initiatives. A CEA press release states: “By incentivizing broadcasters to return underutilized spectrum our nation can solve our wireless spectrum shortage, create jobs and raise billions of dollars to help address the ballooning deficit.” CTIA likewise supports incentive auctions, arguing that “Bringing additional spectrum to auction expeditiously is critical to efforts to address wireless consumers’ demand for mobile broadband services, just as it is key to spurring additional investment, innovation and job creation across the wireless ecosystem.”

Broadcasters may be fine with going along for the ride so long as they are compensated appropriately and the auctions are fully voluntary, but that begs the question “will the broadcasters really give up their precious spectrum assets?” A September 12 CNET article about the Act explains, “Broadcasters say they have already given enough wireless spectrum for auction… Recently broadcasters have also complained that wireless and broadband providers that already hold wireless licenses are hoarding spectrum. Broadcasters say even though the auctions are meant to be voluntary, they fear that some broadcasters will be forced to give up spectrum that they could use to develop other services, such as mobile TV.”

While looking at the American Jobs Act and the reactions from the industry, I couldn’t help but draw comparisons between the broadcasters’ situation and the wireline telecom industry in the USF proceeding. In both cases, the government is being challenged to ensure that broadband is deployed to all Americans, with a limited amount of funding and where sacrifices must be made by virtually all sectors of the industry. Policies also have to balance the interests of “old telecom”—the entrenched broadcasting and wireline networks, with “new telecom”—fiber and 4G; without intentionally being anticompetitive or not technologically neutral.  Both the American Jobs Act and USF reform must be able to facilitate deployment of broadband in rural areas, without undermining existing investments or creating barriers for future investments. If done properly, both proposals definitely have the potential to help revitalize rural economies and bring new jobs to rural areas.

Can RLECs benefit from the proposals in the American Jobs Act? That will probably depend on how the FCC structures the incentive auctions, if there is unused broadcaster spectrum available in RLEC territories, and how much companies like Verizon and AT&T are willing to pay to prevent smaller competitors from getting some of this spectrum. Basically, new spectrum auctions could be a competitive threat or a great business opportunity for small telecom providers—it just depends on individual market circumstances in areas where auctions are likely.

There may also be opportunities for RLECs to get involved with the 700 MHz public safety network. The Act proposes that the FCC grant the D Block license to the Public Safety Broadband Corporation, who can “take all actions necessary to ensure the building, deployment, and operation of a secure and resilient nationwide public safety interoperable broadband network…by… issuing open, transparent and competitive requests for proposals to private sector entities for the purposes of building, operating and maintaining the network.” 

It would certainly be great if small rural companies could get access to spectrum via these proposed incentive auctions, but that will all depend on if this Act is passed and the subsequent rulemaking proceedings at the FCC.

The full text of the American Jobs Act is available here; Subtitle H – National Wireless Initiative begins on page 62.