Entries in FCC (59)

Tuesday
Jan102012

NTCA: Include Text and Broadband to Cut USF Contribution Rate in Half 

With $2b Decrease to Revenue Base in 2 Years, “The USF is Being Starved”

When you glance at the National Broadband Plan action item website, you will see that it is reportedly at the 80% completion mark as the plan nears its 2 year anniversary. Then, look at the section called “Accelerate Universal Broadband Access and Adoption”—this is where all the “good stuff” on USF/ICC lives—and you will see that the FCC’s goals have largely been achieved. Except for one: the elusive USF Contributions NPRM. According to the action item agenda, “To stabilize support mechanisms for universal service programs, in Q4 2010 propose rules to reform the process for collecting contributions to the USF.” Well, here we are a year after this objective should have been achieved and still no progress on USF contributions reform…and NTCA is not letting the FCC forget about it, as evidenced by a January 9, 2012 Ex Parte meeting with FCC staff.

NTCA discussed with FCC staff “prompt and effective reform of the contributions mechanism that enables the federal universal service fund.” NTCA argued for a revenue-based contributions mechanisms that “is technology neutral and best captures the value that consumers place on competing services;” “reflects the balance that consumers strike between different service offerings and the evolution of consumer preference;” is the “most equitable means of sharing responsibility;” and “can be implemented quickly with little burden to providers or the industry.” NTCA further argues that a revenue-based mechanism would be stabilizing and not overly complex, unlike a mechanism based on numbers or connections.

NTCA believes that the FCC has ample authority to extend the contributions base. One of the most convincing arguments was that the FCC has obviously made it a key mission to reform USF for the broadband era, so it logically follows that contributions should also be broadband-centric. NTCA explains, “Given that the Commission has indicated that retooling the USF program to support broadband-capable networks is among the most significant policy priorities, it would be both self-defeating and ironically anomalous for the Commission to build a broadband-focused fund of tomorrow on a foundation comprised solely of legacy services that fewer and fewer customers are buying.”

“Fewer and fewer” is certainly no exaggeration—if the USF contribution base is kept as it is, there literally won’t be anyone to keep it afloat in the coming years. NTCA estimates that “Over the past 2 years, assessable Telecommunications Revenues declined by $2 billion.” Just looking ahead three years, JSI Capital Advisors has projected that total wired access lines will decline from 86.49 in 2012 to 56.55m in 2015; meanwhile broadband connections will increase from 102.30m in 2012 to 115.48m in 2015 (The ILEC Advisor: Communications Industry Forecast 2011-2020: ILEC and CLEC Access Lines; Communications Industry Forecast 2011-2020: Broadband Connections and Market Share). So… why hasn’t the FCC broadened the contribution base to include broadband connections yet?

Much of the fault likely lies in the challenge of deciding exactly who should contribute, and how much. NTCA recommends a revenue-based methodology, and suggests that the contributions base should be broadened to include non-interconnected VoIP revenue, fixed and mobile broadband revenues (a $49b base in 2012), and texting revenue (a $20b base in 2012). NTCA argues, “Non-interconnected VoIP and texting cannot function without supported networks, and should thus contribute.” Furthermore, “texting is increasingly a substitute for voice calls.” According to NTCA, including broadband and texting revenues in the contributions base could likely cut the steadily-increasing contributions factor in half. Fixing the supply side of USF is crucial, and NTCA stresses that “The shrinking Contributions Base must be fixed or all of Universal Service is at risk.”

So you include voice lines, broadband lines, all VoIP and texting in the contributions base—is that it? Probably not, according to NTCA, but the FCC should not hesitate to implement initial reforms before they decide who else should contribute. NTCA urges the FCC to study “how to address business models that rely heavily upon driving traffic from others to specific websites or web-based enterprises.”

Determining contributions for web-based businesses that “place substantial burdens on networks” and probably wouldn’t exist if not for the networks they utilize is definitely a murky area, but as NTCA suggests, this could be a longer-term goal. How would the FCC begin to determine which web-based businesses should pay into USF? Would it be based on traffic, revenue, bandwidth utilization, or something else? With the lines between service provider and content provider becoming increasingly blurry (Google being the prime example), how will the FCC apply a new methodology for companies that fall into different categories? One can expect content providers to cry foul that the FCC is attempting to stifle innovation by imposing fees in this realm, but if it weren’t for the networks, these businesses would not exist. They certainly wouldn’t be generating billions in revenue, or contributing massive strain on broadband networks, thus requiring service providers to continually invest in upgrading their facilities…

The debate over contributions reform is likely to heat up in the coming months, and it will be very interesting to see what the FCC—and the industry—comes up with for new methodologies and solutions to address the rapidly shrinking contributions base. What do you think should happen…and what do you think will happen?

NTCA’s Ex Parte filing is available here.

Tuesday
Jan032012

Blooston Rural Carriers to FCC: Keep Tier One Wireless out of Mobility Fund

Petition for Reconsideration of USF/ICC Order Focused on Pitfalls of Reverse Auctions  

Eighteen rural wireless stakeholders, collectively the Blooston Rural Carriers, submitted a Petition for Reconsideration of the USF/ICC Transformation Order on December 29, 2011. The law firm of Blooston, Mordkofsky, Dickens, Duffy & Prendergast, LLP wrote arguments against reverse auctions and several aspects of the Mobility Fund Phase I on behalf of these companies. The Blooston Rural Carriers argued that reverse auctions will create a “race to the bottom” and may provide opportunities for deceptively low and anti-competitive bidding. Additionally, the process favors large carriers and does not include sufficient provisions to ensure small rural providers will participate or be successful in winning Mobility Fund support. The Blooston Rural Carriers also argue that the FCC has essentially ignored several of their previous comments (and warnings) about reverse auctions in the Mobility Fund NPRM and CAF proceedings.

The FCC alleges that reverse auctions are the best possible methodology to distribute Mobility Fund Phase I support (and most likely CAF and Mobility Fund Phase II support too), but the Blooston Rural Carriers ask, are reverse auctions really the best way? The petition explains that reverse auctions are “susceptible to a number of shortcomings that ultimately undermine the Commission’s intention of expanding existing coverage to unserved areas in the most economic way possible.”

The Blooston Rural Carriers have made several attempts over the past year to convince the FCC that reverse auctions would be detrimental not only to small carriers, but the goals of USF overall. However, it appears as though many of Blooston’s pleas have gone unacknowledged by the FCC despite the fact that “Courts have long held that an agency must respond to ‘relevant’ and ‘significant’ comments.” The Blooston Rural Carriers snipe, “The opportunity to comment is meaningless unless the agency responds to significant points raised by the public.”

The Blooston Rural Carriers did indeed raise one significant point in their petition that should produce an interesting response from the FCC: Tier One wireless carriers be limited or prohibited from receiving Mobility Fund support. The Blooston Rural Carriers explain, “USF funds are limited, and the Mobility Fund rules must recognize that no Tier One carrier requires financial assistance to complete its buildout.” The USF/ICC Transformation Order makes $300m available in Phase I via reverse auction, where any carrier can participate in the auction and no areas will be prioritized (The ILEC Advisor: Introducing the Mobility Fund: “A National Priority”).  This means that Verizon and Sprint, who voluntarily surrendered USF support in exchange for merger approval, will actually be able to participate in (and possibly win) reverse auctions for support they have allegedly given up.

The Blooston Rural Carriers refer to Verizon, explaining, “Were it not for the Commission’s conditioning the Alltel merger upon a phase-down of USF receipts, it stands to reason that the merged entity would have remained the largest recipient of high-cost funding.” Verizon and AT&T saw profits in 2010 of well over $10b, which certainly begs the question of exactly why the big companies need money to deploy a few extra towers in unserved areas. According to the Blooston Rural Carriers, “Notwithstanding the fact that the recent annual profits of either AT&T or Verizon could fund the entire proposed $4.5b annual high-cost program budget with room to spare…the Commission is looking to give them substantial new CAF and Mobility Fund support…without any reference to their earnings;” which is tantamount to corporate welfare.

Even though the FCC contends that Phase I Mobility Fund support is not intended to go to particular classes of carriers, the Blooston Rural Carriers argue that “The only way to effectively encourage high-quality expansion into unserved areas is to ensure that funding is directed to carriers that have a legitimate interest in building and maintaining high-quality services in those areas;” and rural carriers have a “vested interest” in doing just so. The Blooston Rural Carriers explain that small rural carriers have only been able to achieve mild success in regular spectrum auctions because of special provisions like bidding credits—“without such measures, small carriers would have had no realistic chance.”

There are no bidding credits or special provisions for small companies in the Mobility Fund—at least not in Phase I. The Blooston Rural Carriers warn that “participation in the Mobility Fund will significantly favor large, nationwide carriers whose capital and operating costs are significantly lower than small and rural service providers.” Furthermore, large carries may have opportunities to game the system though unreasonably low and anticompetitive bids, and determining winners based on costs alone might produce undesirable results. The Blooston Rural Carriers insist, “It is important to take into account more factors than simply which entity can claim to do the job for the least amount of money.”

As an alternative, the Blooston Rural Carriers recommend that the FCC “choose a method of distributing funds that takes into account an equitable comparison and evaluation of the differing costs and service characteristics of different technologies, rights of creditors and repayments of outstanding loans, and the treatment of carrier of last resort obligations, costs, as well as past performance and experience providing service in the kinds of areas that generally remain unserved.” In addition to bidding credits for small carriers, the Blooston Rural Carriers’ list of recommendations for improving the Mobility Fund for small rural carriers includes:

  • Ensuring affordable roaming agreements for rural carriers who receive mobility support
  • Facilitating greenfield projects and “economic ‘jump starts’” for RLEC spectrum holders interested in deploying new wireless systems in their service areas,
  • Prohibiting competitively harmful exclusive equipment and handset arrangements
  • Require 3G systems deployed with Mobility Fund support be easily upgradable to 4G

Finally, the Blooston Rural Carriers are concerned about the future direction of the Mobility Fund, since many of the finer details are still unclear and will be left to the Bureaus to determine: “The Commission’s reliance on undetermined further procedures provides little comfort for rural carriers who are routinely at a disadvantage to larger carriers.” The Blooston Rural Carriers hope that the FCC will finally notice and respond to some of the arguments mentioned in this petition—arguments that the Blooston Rural Carriers and other rural stakeholders have been delivering for over a year with little acknowledgement by an FCC determined to make reverse auctions work. However, there is a real threat that the efforts to make reverse auctions work will undermine the goals of the USF and misallocate the precious little funding that is available in the tight $4.5b budget.

The Blooston Rural Carriers recommend that the FCC, “on reconsideration, take real, concrete, active steps to ensure equal opportunity and competitive participation among all carriers.” What do you think the FCC should do to ensure small rural wireless carriers can actively participate in Phase I Mobility Fund reverse auctions?

The full Petition for Reconsideration is available here.

Thursday
Dec292011

2012 Regulatory Outlook: New Year, Same Basic Goals  

FCC Agenda Likely to Stay Laser-Focused on Broadband, Spectrum

2011 was undoubtedly a landmark year for Julius Genachowski & Friends, but will 2012 include great leaps forward as USF/ICC reform, Connect to Compete and the White Spaces? The FCC certainly has its work cut out tying up loose ends on all three of these seminal issues.  We can likely anticipate further powerful thrusts to improve wired and wireless broadband deployment and adoption in 2012, as well as initiatives to alleviate the spectrum crunch.

2012 might be the Year of the Reverse Auction. Reverse auctions could be spectacularly disastrous or sensationally effective, depending on a variety of factors including auction design and industry participation. Two other issues that RLECs should watch for in 2012 are solutions for the rural call termination problems and the PSTN transition—I would expect proceedings on both in 2012, and hopefully a swift resolution to the call termination problems. 

A December 8 speech by Commissioner Robert McDowell to the Federal Communications Bar Association titled “2012: The Year of the U.N. Regulation of the Internet?” revealed some clues about what may come in 2012 at the FCC. I was most excited about this possibility: “Until it actually happens, I will keep talking about launching and concluding a proceeding to reform our Universal Service program’s contribution methodology by mid-year.” As the USF contribution rate reaches an all-time high of nearly 18%, the FCC should have adequate pressure to make a move on contributions reform. Additionally, USF contributions reform is basically the last box left to check under the National Broadband Plan goals for modernizing USF. The question is: who will have to contribute under the new methodology? Will all broadband service providers and consumers be on the chopping block? What about major content providers like Google and Netflix? I expect that the contributions reform proceeding will be every bit as action-packed and controversial as the 2011 USF/ICC reform proceedings.

We aren’t nearly finished grappling with the November 18 USF/ICC Reform Order either—not by a long shot. Comments in response to the FNPRM are due in several rounds throughout January, February and March. Following these comment cycles, we will possibly get some resolution on 2011 rural telecom cliff-hangers like rate-of-return re-prescription, CAF methodologies for RLECs, broadband public interest obligations, IP interconnection, and the Remote Areas Fund.

A Policy “Roulette Wheel”

The dreaded HCLS regression analysis will cause no end of headaches for RLECs in 2012 as these companies will need to play a rather sadistic guessing game with their costs in order to avoid placement at or above the ninetieth percentile. The precise regression analysis methodology will be finalized through the FNPRM—it is very concerning that the proposed methodology inserts such a great deal of unpredictability in HCLS because RLECs will not know in advance if they will fall above the ninetieth percentile—this level of unpredictability is far greater than the rather constant artificial increases in the NACPL used to cap current HCLS.

The FCC appears to protect itself from legal challenges by adopting a regression analysis methodology that will be used, predictably, but the methodology itself is where things get murky. In other words, it is predictable that the FCC will use the regression analysis, but it is unpredictable as to how individual companies are impacted by the model. The unfortunate carriers who fall in or above the ninetieth percentile of similarly situated carriers may face a double-whammy punishment: clipped support and ineligibility to receive redistributed support.    

John Staurulakis Inc. economic and policy director Douglas Meredith provided the following statement about the regression analysis: “The FCC regression methodology proposed to limit capital and operational expenditures is fraught with policy and technical challenges.  This method is an order of magnitude less predictable for individual carriers than the current HCLS mechanism—even with the current capping procedure.  This method has been summarized as a ‘race to the middle.’  If adopted, we should consider whether a capital expenditure race to the middle will promote and advance universal service in high-cost and remotely populated areas of the nation.” 

Meredith continues, “I submit that the proposed method fails to achieve the Congressional goals for universal service.  In addition to serious policy concerns, the technical aspects of the proposed method are also suspect: study areas that are missing from the FCC’s analysis, descriptive independent variables missing from the model, relatively low goodness of fit measures and a high reliance on covariance relationships among carriers makes the application of this regression method look more like a roulette wheel in Las Vegas than well-established public policy.”

There’s a First Time for Everything

As mentioned above, I expect 2012 to be the Year of Reverse Auctions. The FCC is responsible for designing—for the first time ever—reverse auctions for second phases of the Mobility Fund and the wireline broadband Connect America Fund. Furthermore, if Congress releases under-utilized government spectrum in 2012, the FCC may also be tasked with designing auctions for this spectrum too. According to McDowell’s December 8 speech, “If that were to occur in 2012, suddenly the Commission could be working furiously on auction and service rules, band plans and such throughout the year.”

Voluntary incentive auction legislation has passed in the House, which Genachowski praised as a “major achievement.” Genachowski’s December 13 statement explains that the legislation “would authorize the Federal Communications Commission to conduct voluntary incentive auctions as recommended in the FCC’s National Broadband Plan. This would free up new spectrum for mobile broadband, driving investment, innovation, and job creation; generating many billions of dollars in revenue; and helping foster U.S. leadership in mobile broadband.” Genachowski insists that FCC incentive auction authority “needs to become law;” but warns that the House bill “could be counterproductive” by downplaying FCC policies to promote unlicensed spectrum and limiting the FCC’s ability to develop band plans and auction structures “in ways that maximize the value of licensed spectrum.”

How will the FCC avoid pitfalls associated with reverse auctions, which have been implemented internationally with less-than-stellar results? How will the FCC ensure that small rural carriers have a fair shot in future auctions? The Mobility Fund Phase II proceeding may provide an excellent opportunity for small carriers to state their demands and recommend a methodology that is fair for companies of all shapes and sizes. But... will the FCC listen, or pull a Consensus Framework 2.0, demanding industry input then essentially ignoring it?

Broadband for President in 2012

The FCC built up considerable momentum in 2011 with broadband adoption and deployment initiatives; but the U.S. has a whole lot of work to do before reclaiming #1 in the world for broadband adoption, deployment and speed—a spot in the top ten would be a nice goal for now. You can debate how important international broadband rankings are in the grand scheme of things, but with a presidential election on the horizon it probably wouldn’t be out of line to speculate that America’s sub-par international broadband ranking could become a hot-button issue in 2012.

A December 14 FCC blog post by Josh Gottheimer and Jordan Usdan includes a line that could easily be inserted into any run-of-the-mill campaign sound-byte: “Closing the digital divide isn’t just an economic issue, it’s one of the great civil rights challenges of our time. Broadband can be the great equalizer – giving every American with an Internet connection access to a world of new opportunities that might otherwise be beyond their reach.” The common assumption among politicos is that more broadband means more jobs, so increasing broadband will surely make it into multiple presidential-hopefuls’ campaigns. As a result, the FCC could be pressured to take further drastic steps to influence broadband adoption and deployment, even if 2011 initiatives (like Connect to Compete, for example) prove unsuccessful at actually adding percentage points to deployment and adoption rates.

The Legislative and Legal Fronts

2012 is also looking to be a significant year for telecom and Internet-related legislation and legal decisions. The Internet ecosystem is in an uproar over House and Senate legislation to combat online piracy and “rogue” foreign websites, to the extent that the uproar over net neutrality almost pales in comparison. Given the public outcry, it seems unlikely that SOPA or PIPA will pass as they stand, but we can probably expect similar legislation to go through in 2012—hopefully it won’t kill the Internet as we know it.

A House bill to actually reform the FCC is still a live wire on the Hill, so we might continue to see a power struggle between Congress and the independent agency charged with regulating telecom that we all love so much. According to a December 20 Politico article, Senator Jim DeMint (R-SC) “called the FCC ‘way out of control,’” and stated, “’We need to reign them in and remind them that their job is not to manage the industry but to provide just a light hand of regulation to make sure there is fairness.’”

Additionally, courts in DC and Denver will hear appeals cases on net neutrality and USF/ICC reform, respectively. Although it is too early to tell how these cases will conclude, we can’t rule out the possibility that the decisions could throw a wrench into the regulations and reforms that the FCC spent the better part of the last 3 years bringing to fruition.

If the regulatory theme of 2010 was the National Broadband Plan (with net neutrality a close second) and USF/ICC reform dominated 2011; what will be the one thing that we will remember the 2012 FCC for accomplishing? You know my guess is designing and implementing reverse auctions for the Mobility Fund, CAF and re-released spectrum, but what do you think?

Tuesday
Dec272011

November – December 2011: The Dawn of the Winter of our Discontent

2011 Ends with RLECs, Small Cablecos and AT&T Searching for a Bright Light

Part 4 of “2011: The Regulatory Year in Review.” When you look at everything that has happened in telecom in the last two months alone, the entire rest of the year seems almost inconsequential in comparison. The whirlwind of activity in the past six weeks was one part culmination of several longstanding regulatory-industry entanglements and one part FCC commissioners wanting to get things done before two new commissioners take their seats at the table in 2012. No matter how you mix it up, the FCC served up a smorgasbord of prime cuts and rotten left-overs for both Thanksgiving and Christmas.

November 2011: We endured most of the year with only four FCC commissioners, and the knowledge that Commissioner Michael Copps would be departing at the end of the year. I had some personal objections to a four-member commission approving something as monumental as the USF/ICC Order, but it is unlikely the outcome would have been different even with the full five. Still, one can wonder…

On November 1 President Obama nominated Jessica Rosenworcel and Ajit Pai to fill the empty seats starting in 2012. Rosenworcel will replace Copps; she hails from the Senate Commerce Committee and has served the FCC as senior legal advisor to Copps and Wireline Competition Bureau chief. Pai will fill Baker’s seat and was formerly a partner at Jenner & Block. Pai’s resume also includes the Senate Judiciary Committee’s Subcommittee on Civil rights, the Office of Legal Policy at the Justice Department and the FCC.

Pai might be a much-needed advocate for rural telecommunications as he was raised in Kansas. According to Senator Jerry Moran (R-KS), “Ajit is a humble and hard worker – just what you would expect from a Kansan. He is the type of person you would like to have as your neighbor.“ Moran’s statement continues, “The FCC also needs commissioners who are committed to the needs of all Americans, including those who live in rural America, so its innovators can compete in the marketplace along those in urban areas. A native of Parsons, Kansas, Ajit will bring an understanding of the challenges facing our part of the country at this vital time for the future of telecommunications.” One major criticism of the FCC this year has been that they simply do not understand rural America (even though Genachowski visited Diller, NE), so Pai may bring a welcome and necessary perspective to the urban-centric Commission.

On November 9, Genachowski announced “Connect to Compete,” a broadband adoption initiative focused on low-income families. Connect to Compete and its cousin Comcast Internet Essentials promise to provide broadband to qualifying low-income families for $9.95 per month as well as access to digital literacy training and low cost computers. Dozens of big-name tech companies have signed on to participate in Connect 2 Compete. As these low-income programs pick up steam in 2012, there may be some market pressure for RLECs to respond in kind. However, reports are already coming in that very few low-income families are even qualifying for Comcast’s Internet Essentials program—one requirement is that participants cannot have outstanding bills with the company. (The ILEC Advisor: The FCC’s Egalitarian Cable Broadband Initiative: What does it Mean for RLECs?).

As Thanksgiving drew closer, the entire telecom industry was watching FCC.gov like a hawk waiting for the USF/ICC Order. Rumors swirled regarding the release date, length of the document, and changes that may have been made after the October 27 Open Meeting vote. On November 19 around 6:30 PM EST, I was planning my weekend and looking forward to a relaxing evening when I received the news that the order was released, and it was a doozy at 759 pages long. The Order more closely resembled the February NPRM than the industry’s Consensus Framework, which has caused more than a few to wonder if the FCC’s insistence that the industry draft an alternative was just a smoke-and-mirrors diversion. The Order has received criticism from the Hill for being released late, extremely long, and likely modified after the vote contrary to the open and transparent principles that the Commission is supposed to abide. Criticism aside, the USF/ICC Reform Order is certainly one of the most significant events for RLECs since the 1996 Act. (The ILEC Advisor: Introducing the Connect America Fund – USF Reform Overview).

Many of us were pleased that the USF/ICC Order was released a week before Thanksgiving, thus saving the holiday (although I spent most of the holiday reading it). However, AT&T/T-Mobile merger groupies got their fill of Thanksgiving goodness when the FCC announced on November 23 that it was opposed to the merger and an administrative hearing would be held to further consider the facts—the kiss of death, according to some experts. Following this decision, things got really ugly between AT&T and the FCC for a few weeks. (The Deal Advisor: FCC Calls for Hearing on AT&T/T-Mobile Combo).

December 2011: December has seen RLECs struggling to comprehend the USF/ICC rules, AT&T battling with the FCC and DOJ, small cablecos fighting with local broadcasters over outrageous retransmission fees, and the FCC grappling with when and how to abandon the PSTN.

The best drama unfolded before my very eyes on December 1, 2011. Not 15 hours earlier, the FCC had released its staff report detailing why it was opposed to the AT&T//T-Mobile deal—including AT&T’s egregious jobs claims and questionable economic analysis and engineering models. Needless to say, the staff report was the talk of the town in DC the following morning, when AT&T’s senior executive vice president for external and legislative affairs Jim Cicconi released a sharply-worded blog post damning the staff report as “obviously one-sided” and “an advocacy piece.”

Immediately after Cicconi’s blog post was released, he was a panelist at the Phoenix Center’s 2011 Annual U.S. Telecoms Symposium, which I attended—I was surprised that he even showed up. At the Symposium, Cicconi made some strange remarks comparing consumer behavior with cell carriers to religion; and at one point he commented that he was glad there weren’t any hard questions about the merger or the FCC staff report. He also made a comment about how telecom regulation is designed to protect companies, not consumers, which sent shock-waves through the city. This initiated a day of he-said-FCC-said PR battles on Twitter and the AT&T Public Policy blog. But at the end of the day, the AT&T/T-Mobile merger was still essentially doomed…and just over two weeks later AT&T announced that the deal was, in fact, dead. (The Deal Advisor: The Deal is Dead! Now What?)

Court challenges to the USF/ICC Order predictably rolled in throughout the month, with 13 lawsuits to date from small telephone companies, NTCA, state public utility commissions, a couple wireless companies, and AT&T. A judicial panel selected the Tenth Circuit Court of Appeals in Denver, CO as the venue—apparently a good court for this particular subject matter. The issues in the lawsuits range from states’ loss of power to bill and keep. I got the impression that the FCC protected itself from legal challenges quite thoroughly in the Order, so it will definitely be interesting to see how this case unfolds next year. (The ILEC Advisor: Let the Challenges Begin! USF/ICC Order under Attack as Parties Turn to Courts).

Finally in December the FCC held two informative public workshops on transitioning the PSTN to all-IP; but the workshops left plenty of uncertainty regarding the path forward. Despite gathering over 50 experts from all corners of the industry, there was still not a clear definition on what the PSTN actually is or why it should be forcibly transitioned since it is already clearly in transition. Questions aside, the PSTN workshops were extremely informative and likely signaled the beginning of what is surely to be a high-priority initiative at the FCC in the next year. (The ILEC Advisor: The PSTN is Already in Transition… What is the PSTN, Anyway?, The PSTN: Sunset, Transition, Rebirth, or Just Leave it Alone?).  

Well, that about does it for 2011… It has been an exciting year! Coming up next, JSI Capital Advisors will speculate on several big regulatory topics for 2012.

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!