Results tagged “universal service reform”

March 16, 2011 7:53 PM

The Best Role for States on Broadband and USF Reform

Today is the one year anniversary of the National Broadband Plan.  The Broadband Plan recommends, as a catalyst for broadband deployment, that the FCC undertake long-needed reform of its Universal Service Fund ("USF") and intercarrier compensation regimes.  Last month, the FCC released a Notice of Proposed Rulemaking ("NPRM"), proposing to reform both programs.  Noticeably absent in either the National Broadband Plan or the USF/ICC NPRM is any defined ongoing role for the states in either the national goal of spurring broadband deployment, or under a reformed USF/ICC regime.
There is an important role for the states in a new, broadband-centric, regulatory system.  But, to get there, the FCC has to put consumers at the forefront, considering that the purposes of its proposed reforms are to make high cost support more efficient, and further extend broadband into high cost areas.  It is possible to accomplish both objectives, while giving the states a meaningful role.
The communications visionary (and "patron saint" of Wired Magazine) Marshall McLuhan, observed, "[m]ost of our assumptions have outlived their uselessness."  The assumption that the FCC should distribute money to carriers, based on the carrier's optimal utility, in order to satisfy consumer demand is an assumption that has outlived its uselessness.

How would a better plan work?  First, get rid of the notion that state participation should be accomplished through state regulators.  They, too, are trapped by assumptions that have outlived their uselessness.  And, to be sure, the assumptions underlying the distribution of High Cost subsidies are useless--the FCC makes that case quite persuasively in its NPRM.

Consider this statement of Indiana Commissioner Larry Landis, on reforming the low income fund, "[t]oo little attention has been paid to the financial health of the RLECs (and mid-size companies) and the importance of existing High Cost support." Jt Bd Refferal Order, Sep. Stmt. of Commissioner Larry Landis.  This sentiment is antagonistic to nation's technological goals, and offers no solutions. 

While, concern for the welfare of the rural consumer is important, rural consumers' rights are a part of the law, and not up for debate.  On the other hand, no carrier has a right to be inefficient and still be in business.  So what's the answer?

I outline the long form here:Abstract_Managed Broadband Markets.doc.  The short answer, though, is to involve those parts of the state that are responsible to the NTIA for spending the states' broadband mapping/BTOP money.  Accountability and efficiency are built into their directives, plus they already have to report on their success.  But these state agencies can contribute more.

There are no real "markets" for rural consumers in high cost parts of a state, but the state BTOP point-of-contact is a natural market maker.  These agencies could function in the role of broadband development authorities.  They already know where open access local and backhaul networks exist, and they could work with rural broadband providers (including ILEC, cable, wireless, and satellite providers) to put together efficiently sized demand RFPs and match them with bidding (or reverse-bidding) supply consortia.

But, what about the "financial health" of the rural carrier?  Some, funded with the almost $40 billion or so in High Cost support since 1998 (Jt. Bd. 2010 Monitoring Rept., Chart 3-1) will, no doubt, be efficient parts of any bidding consortium.  If not, why must consumers care?

Much greater sums of competitive fiber investment--arguably more important to the health of a broadband economy--were not protected from market risk.  During the "telecom bust" of the early 2000's, an estimated $2 trillion in stock market wealth was destroyed as a result of over-investment.  Is it foolish to think that RLECs, too, may have "over-invested"?  It would be shocking if they didn't when, since the modern High Cost fund began dispersing subsidies, the "prime rate" for borrowing has been comfortably below the RLECs government-protected rate of return of 11.25%.  Why should the privately-owned, publicly-subsidized, rural LECs fare any differently from their privately-funded brethren?

States have an important role to play in the reform of the USF and stimulating broadband deployment.  However, the FCC should update its assumptions about what state agencies they find most helpful to accomplishing the Commission's goals.  The NTIA points of contact for broadband mapping/grant purposes are ideal.  By playing the intermediary between "suppliers" of high-cap backhaul, and the most efficient aggregations of local demand, the state agencies could--using "real" markets--determine the most efficient way to bring the best broadband/voice service to the most consumers.  

March 10, 2011 3:29 PM

Lifeline Reform: The FCC's "Welfare Cadillac" ?

I recently saw an interesting program about the life of American music icon, and champion of the underdog, Johnny Cash.  Johnny Cash met and performed for every President, from Richard Nixon on.  When he agreed to perform requests for President Nixon, Cash felt two of the songs requested (neither of which were his) were unfair to the poor, or to the young (the "hippies"), and he refused to sing them.  The song that was unfair to the poor was called "Welfare Cadillac", and portrayed those on public assistance (which Cash's childhood home was built with) as scammers, based on a few anecdotes of people who had abused the system.
For some reason, I thought about this story while reading the FCC's Lifeline/Link Up NPRM, released Monday.  It goes without saying that in any government subsidy program, there are certainly going to be some that will use the plight of the poor as an excuse to rip off the program.  But, these few scammers don't justify the unbecoming way in which the FCC portrays the growth of the fund in order to limit, or reduce, its size--without any regard to what the true size of the fund should be at this moment in time.
So, let's look at what's unfair about the NPRM.  First, consider the "panic" about the growth of the low income fund.  While it's true that the low income fund is growing quickly, that fact alone means nothing.  The Commission seems to forget that--if the purpose of the low income fund is to make voice, or broadband, services affordable to America' poor--the fund should be growing as quickly as America's poor.  That's not just a fact, but it's a fact that the FCC ignore, choosing, instead, to demean the purpose of the fund through unfair innuendo.
If you look at Paragraph 27 of the NPRM, the FCC cites some pretty "alarming" growth statistics about the fund, but here is where the NPRM begins to mislead, by exaggerating the "problem."  The paragraph describes the increase in the fund through the years, noting that the fund dispersed an inflation-adjusted $817 million in 2002 (n. 48, p.12).  The fund now stands at an estimated $1.3 billion for 2010. 

The next sentence, though, inflames the fears the FCC seeks to instill in the public, stating that "in the last several years, a number of pre-paid wireless providers have become Lifeline-only ETCs, fiercely competing for the business of low-income customers by marketing 'free' phone service."  The Commission goes on to conclude that, while this "development" has expanded choices for consumers, "it has also led to significant growth in the fund." The paragraph ends with the haunting specter that "[p]re-paid wireless ETCs now account for one third of all Lifeline reimbursements."
Now, let's just "unpack" those "facts" and get a little perspective.  The low income fund is supposed to give a monthly, need-based, allowance to low income Americans to help defray the cost of phone service.  Before leaping to its "reefer madness" conclusion, did the FCC ever consider the possibility that--regardless of how, or from whom, eligible consumers are getting their service--the number of poor Americans may have a hand in the fund's growth?
In 2002, 34.6 million Americans lived in poverty.  By 2009, more than 9 million more Americans lived in poverty.  Low income fund disbursements in 2009 were $1 billion.  The "average" household in America consists of a little over 2.5 people (based on 2000 Census data at 4).  If we do the math, then we learn that there were about 3.5 million more poor households added between 2002 and 2009.  Keep in mind, also, that the eligibility requirements for Lifeline can be as high as 150% of the Federal Poverty Guidelines (for LIHEAP participation--a Lifeline-qualifying program), so these estimates are the minimum increases in Lifeline-eligible households.
What would you expect to happen even if only a third of the new households living in poverty were served by Lifeline?  Well, the fund disbursements would have been slightly less than $1 billion in 2009 (assuming Tribal participation at today's rate)--in other words, about right.  If all of the newly-poor households had participated (and no new ones were added in 2010), the low-income fund would have been well over $1billion in 2009--about what it is expected to be in 2010.  Hmm?  A "fact-driven" explanation for the growth?  That's no way to build panic and urgency. 
But wait!  Aren't there still all those blood-sucking, pre-paid wireless, Lifeline-only ETCs?  Well, there are really only two--TracFone Wireless and Virgin Mobile (now owned by Sprint).  What about all the other names listed in n. 50 of the NPRM?  The FCC found that it was in the public interest to allow those companies to provide more service choices for low income Americans, but the FCC has not yet granted these companies the further approvals that would allow them to actually participate in the Lifeline program.
Even if the FCC had awarded ETC certification to all those companies, though, what disgrace is that?  The Commission acknowledges that more than a quarter of Americans have "cut the cord" (para 25), so why should it be surprising if a slightly larger number of low income customers have done the same?  The Commission clearly wants more low-income Americans to be able to choose broadband as a means of communication; why not wireless?
It's good for the FCC to be concerned that fraud and duplication are limiting the efficiency of the low-income fund, and, I give the Commission credit for proposing a national validation/verification database.  Such an improvement would be a welcome reform to carriers, administrators, and recipients.
Nonetheless, the tone of the NPRM, its misleading characterizations of the causes of fund growth, and many of the recommendations it makes (though the FCC concedes Lifeline has helped the poor (para 26)) conveys at best a grudging compliance with the Act's requirement that the USF serve low income Americans.  At worst, though, a reasonable person could be forgiven for considering this NPRM the regulatory successor to "Welfare Cadillac."  It's too bad there's no Johnny Cash on the Commission . . . .

February 18, 2011 4:12 PM

USF/ICC Reform: The Customer Can't Carry the Carrier

Maybe our relationship isn't as crazy as it seems
Maybe that's what happens when a tornado meets a volcano
All i know is i love you too much to walk away though

"Love the Way You Lie" Eminem (ft. Rihanna), 2010

Last week, the FCC released a Notice of Proposed Rulemaking ("NPRM") in yet another attempt to address its crazy relationship with the tremendously (perhaps, needlessly?) complex, and intertwined, issues of Universal Service Fund ("USF") and intercarrier compensation ("ICC") reform.  The NPRM is long, but well-written.  It does a good job of explaining why these two subsidy systems are in need of drastic reform, and it proposes some thoughtful ideas for reform in both the near term and longer term. 

Sadly, though, that's the "tell"--the "near term"/"longer term" goals, with no immediate action--even on the so-called "immediate reforms."  Yep. I hate to say it, but within a few paragraphs--you know the Commission loves these old relics (both the regimes and the many small, inefficient carriers they make everyone else subsidize) way too much to walk away.  Before you even get to the Executive Summary--though the words are lovely--you can't help but think, "Love the Way You Lie."

Don't get me wrong, it's not just this Commission. These regulatory structures have been crumbling--quite publicly--for some time now, and no FCC has done anything about it (including this FCC--for its first year and a half and counting).  But, because of this tendency towards delay, there is no longer a "longer term", and the FCC cannot save, or reform, the USF without "sudden changes" or "flash cuts" that the FCC "intends to avoid." NPRM, ¶12.  Sudden changes are inevitable, and rate of return carriers can either act quickly to participate in a version of reform that guarantees them a chance, but no guarantee, of surviving, or the rate of return carriers can resist reality and the time it takes for the FCC to adopt reforms will be there only transition period.

Why do I say this?  Because "near" term was 4-5 years ago, and "long" term is just as fast as the Commission can act--probably 1 ½ -2 years at the soonest.  Let's consider the notions of "near term" and "long term" in the historical contexts of the need for USF/ICC reform.

The NPRM cites a few factors that make the reform of the USF/ICC regulations so urgent.  Prominent among these factors are observations about the market, and observations by politicians about the state of the USF.  First, the FCC points to the trend of the acceleration of the deterioration of the PSTN, once supported by its now-antiquated, and always-artificial, LEC (intrastate) and IXC (interstate) distinctions. NPRM ¶8.  The PSTN, so rapidly in decline, contains both the purpose of, and presumption for, the USF/ICC models we have today.  The NPRM also notes the observations of Congressman Lee Terry and former Congressman Rick Boucher that "the Universal Service Fund is broken." NPRM, ¶9.  But, here's the thing: neither of these precipitating factors is new. 

A Long Time Coming

As early as 2002, barely upon completion of the USF reforms of the 1996 Act, the FCC's Common Carrier Bureau ("CCB") Chief testified before the Senate that the USF structures just put in place a few years earlier would need to be evaluated and changed frequently.  Then CCB Chief Dorothy Attwood, explained that,

price competition, technological substitution, and development of new service bundles and new services--are precisely the kind of developments Congress sought to stimulate when it passed the 1996 Act. . . . Nonetheless, they strain traditional regulatory distinctions. They present challenges to our universal service framework.  They require us to consider difficult questions. Testimony at p. 4.
What about Representatives Terry and Boucher?  Well, Congressman Terry introduced his first USF reform bill, H.R. 1582 almost 8 years ago, in 2003.  Reps. Terry and Boucher were working together on universal service reform at least as early as 2005.  So the observation by Reps. Terry and Boucher that the USF is broken is hardly new information. 

The NPRM also notes the importance of clarifying the regulatory treatment of VoIP for intercarrier compensation purposes.  Is this a new problem?  Nope, been there, done that (as far as asking the questions go). The FCC just celebrated its 7th anniversary of adopting its first VoIP classification NPRM.

Transition? Maybe When We Had Time

Finally, let's go back to the fundamentals.  Paragraph 8 of the NPRM says it all with just a few statistics,

traditional wireline telephone (switched access) minutes plummeted from 567 billion in 2000 to 316 billion in 2008.  From 2008 to 2009, interconnected Voice over Internet Protocol (VoIP) subscriptions increased by 22 percent, while switched access lines decreased by 10 percent.
By 2008, the number of switched access minutes were almost half of what they were in 2000.  By 2010, the number is almost certainly half (or less) of the number of switched minutes in 2000.  The Commission's recent Local Competition Report ("LCR") provides additional evidence of the trend away from the PSTN.  Between 1999 and 2009, ILEC switched access lines (including CLECs using ILEC lines) had declined from around 189 million in 1999 (LCR, Table 1) to about 116 million in 2009 (LCR, Fig. 4 + Fig. 8).  Interestingly, the total Universal Service Fund size in 2000 ($4.4 billion) was about the same as the size of the high cost fund alone today ($4.3 billion).

Add to this the information in the figure 6, ¶165 of the NPRM, which notes that at the end of 2010, rate of return carriers collected $2.0 billion to serve 5.8 million access lines.   If current trends hold (10% line loss/year), these same carriers will be serving 2 million less lines by the end of 2014.  If the President's $5 billion plan to bring wireless broadband to unserved areas  is successful, then line losses will be much more drastic around the time the FCC adopts comprehensive reform.

Unless reforms are equally drastic, the "have nots"--and thanks to the National Broadband Map, you now know who you are--will (one hopes) grow weary of paying a higher and higher USF "tax" on their phone bill (currently 15.5%) to subsidize the increasingly irrelevant "haves."  Contribution reform (another long-ignored concern) is not yet in discussion.  So, by the time comprehensive USF reforms are adopted, it's a safe bet that unless something changes the inefficient rate of return LECs won't have enough customers/lines to make a transition plan even worth the candle.  If these carriers choose to cling to antiquated entitlements, they will be choosing to accept the fate of the entitlements they love.

However, there is a message of hope for rate of return LECs.  They have a (very) little time left which they can use to work with the Commission to modernize USF in a way that allows them an opportunity (but no guarantee) of remaining relevant.  They also have the outside chance of getting efficient on their own.  Either way, a transition will be unnecessary. 

March 9, 2010 5:21 PM

Rust Never Sleeps . . .

"Another flaw in the human character is that everybody wants to build and nobody wants to do maintenance."  Kurt Vonnegut, Hocus Pocus, 1990.

With respect to the Hocus Pocus quote above, the late Kurt Vonnegut could just have easily said the same thing about what humans want to read and write about.  No one wants to read about maintenance, but everyone wants to read about big events and big plans [like Mike Shanahan coming to town, or the National Broadband Plan].  Maintenance is only interesting when it doesn't get done, and the failure to do maintenance causes something bad to happen. 

As a result of this quirk of human nature, when it comes to speculation/predictions/pontification on the National Broadband Plan, the Plan is the thing.  The maintenance on the rusting-for-too-long Universal Service Fund and the related intercarrier compensation system are afterthoughts, and haven't received a ton of attention among FCC watchers, and reporters.  The shame is that the FCC's publicly-stated intent to do this maintenance is a REALLY BIG DEAL. 

To my mind, the Commission deserves more credit for tackling the maintenance (if this is, in fact part of the Plan) than any--forgive the characterization--"pie in the sky" plans. Why, you may ask?  Because--to me--these are the boring-but-thankless (not to mention impossibly complex and politically contentious) chores that the Commission must succeed in addressing as a predicate to creating a regulatory climate that will stimulate investment by carriers (regardless of technology), customers, content, and applications service providers. 

Moreover, this Commission can really clear away a lot of rust in the next two years, and the rest will take care of itself.  Any part of the plan that can be accomplished, in a self-executing way, by mid-2013 is realistic, parts that become effective by 2017 extend into the "optimistic", but still possible.  Anything that's supposed to happen past 2017 should probably be taken out of the Broadband Plan, and put into a special "Broadband Prophecy" section, and phrased in Nostradamus-style quatrains.

Back to the point, though, let's look at one really overlooked area of "rust removal"--Universal Service Contribution Reform--and see why it's so important to a plan designed to increase broadband deployment.

The "Broadband Gap" Will Only Widen Without USF Contribution Reform.  I've heard some pretty reliable sources speculate that the "Contribution Factor" (the percent of the interstate telecom services revenue that consumers must pay to the Fund) for the second quarter will exceed 15%.  This number should be announced this week or next week (I would guess the night of Friday, the 12th).  If true, this would represent an almost 40% increase over last year's second quarter figure of 11.3%.  Moreover, at the current rate of increase, it would not be surprising to see the factor approach 20% by the end of the year. What does this mean? 

Well, let's say you want a "bundled" local/long-distance plan with unlimited long-distance calling.  You live in a big-city suburb, and you want to use a facilities-based competitor to the incumbent LEC.  Here is a typical price schedule for "phone only" for the VA suburbs of DC.  Thus, a 15% contribution factor means that the customer is paying an additional $54 to $72 per year (depending on whether the customer commits to a 1 year contract) over and above the charges it pays to the carrier.  Either way, the telephone service customer is paying well over $400/ year simply for phone service.

On the other hand, if the customer had access to broadband, the customer could purchase the lowest speed broadband service for only a little more, and then pay about $20 per year for VoIP service using magicJack.  If the broadband customer has no privacy concerns, they could get service for next to nothing with Google Voice. 

Nonetheless, according to the Commission, those customers that are least likely to purchase broadband will continue to be subject to increasing monthly costs for basic telephone service.  These customers are those least likely to buy broadband--the poor, the elderly, and the uneducated. (See, p. 82).

It's difficult to conceptualize that the lack of doing USF "maintenance" on the contribution side--to take account of the many, relatively affluent, customers that have already adopted broadband service--can act as a regressive "tax" on those least capable of shouldering this burden.  Yet, increasingly, without contribution reform (without "maintenance") this is what those buying POTS ("plain old telephone service") every month are facing. 

Contribution reform can be completely accomplished within Chairman Genachowski's tenure, and, if he plans it and follows through, it will be one of the most successful, and (probably) most under-appreciated, things he can do as a Chairman.  If contribution reform is announced as part of the plan--and part of the plan that gets implemented most quickly--the Chairman and the Commission staff deserve a lot more gratitude than they will get in the popular press.  But, if it helps, I'll grant permission to "crack open a cold Bud Light" to the righteous razors of rust . . . . 

January 6, 2010 11:27 PM

A Good Question, A Direct Answer, and . . . Mayhem Ensues

Confusing, huh?  Sounds like a movie idea . . . for a really bad movie; but that's what happened recently with an AT&T filing in response to the 25th Public Notice in the National Broadband Plan proceeding.  The Commission asked for public comments on a very important, and very forward-thinking topic: how should the Commission plan for the inexorable obsolescence of the Public Switched Telephone Network ("PSTN").  

The simple fact of the matter is that, due to broadband availability and adoption patterns, increasing availability of mobile VoIP apps, and (morbidly) the dying off of PSTN customers--and the fact that younger customers, with broadband access, are opting for VoIP solutions.  Fortunately, the Commission acted on its own data, and recognized that the costs of the PSTN are being born by a smaller, and smaller group of consumers all the time, and the consumers that lack VoIP as an alternative (because they have not adopted broadband) are those least able to afford these increasing costs--the less-educated, the poor, the elderly, and minorities.  (See, p. 82). The Commission is to be applauded for recognizing a trend, and trying to plan in advance in order to avoid a potentially disastrous crisis in advance.

Among those filing comments in this proceeding, AT&T recognized the problem was as grave as the Commission suspected, and they responded to the Commission's request for comments with all the gravity with which the Commission solicited the comments.  Critics may call AT&T's comments melodramatic, but, judging from the attention they received (even if it was misplaced), I'd say AT&T did a good job of calling public attention to the Commission's very timely concern.  AT&T's policy blog explains their position a lot more succinctly than I could, and the posts contain good links to AT&T's actual comments.  If readers are interested, I would strongly encourage them to read these two posts--the first, and the second.

Bottom line: AT&T isn't seeking to turn off the PSTN, so there's no need for panic.  Hysteria isn't good, but (this time) it can have a good outcome if it brings more awareness to an urgent problem--the need for the Commission to reform USF contributions and distributions, and Intercarrier Compensation Reform, before the network becomes a network for broadband "haves, and have-nots."

November 14, 2009 12:35 PM

Broadband Team Finally Gets It Right! New NPRM on USF and Intercarrier Comp

Yeah, like I'm one to talk about someone finally "getting it right?"  I've posted exactly 0 blog entries in one month (but it was a long month and we did go off daylight savings time), and I get to be a critic?  Seriously, though, if they had such a thing as a "license to blog", mine would have already expired for lack of use.   But, in my defense, I haven't posted anything in a while, because the big telecom policy talk of the day has been the FCC's proposed "Net Neutrality" Rulemaking, which was released on October 22nd.  And, the fact is, I'm really uncomfortable with the subject of "net neutrality"--for several reasons, not the least of which is that I've always been kind of confused and intimidated by the subject, because it always meant something different to different people.  However, now that the FCC has given it a concrete meaning, I have no excuses, so I'll hold my nose and start writing on it very soon. 

The point of this post, though--because I'm not one of those "hater" bloggers (not all the time anyway)--is to give credit to the Broadband Team over at the FCC for their appropriately named 19th [Nervous Breakdown] NPRM where they ask about how the role of the current state of USF funding and distribution, and intercarrier compensation, can effect broadband deployment.  As I am wont to do, I will take credit for prompting this NPRM--even though the subject was inescapable for the Broadband Team if they were going to do a comprehensive report (which they seem to be striving for)--because I wrote a post on this same subject two months ago (back when I was blogging). 

The NPRM seeks, in my opinion the most important information of the inquiry, because, unlike a lot of panels and inquiries, this information could really end up setting the FCC's substantive agenda for the next year or more--after the report is issued.   The reasons these issues are so big is that they are so pervasive, and so relevant to broadband deployment to rural and low income areas, and have been neglected for far too long.  Moreover, in a broadband/Net-centric world, these two key policies remain firmly stuck in the pre-Telecom Act days.  Additionally, it must be noted that it is impossible  for the Commission to tackle my new favorite subject of Net Neutrality without first figuring out the effects of imposing "neutrality" on the two of the pillars of regulation that are currently built on discrimination.  The FCC really can't think about imposing system-wide "neutrality" on a system that was never built to accommodate that principle (beyond common carriage--which the FCC's proposed Net Neutrality rules go well beyond), until the Commission understands how the current system promotes, or discourages, broadband Internet usage. 

Think about it.  Universal service was to be achieved on the theory that long distance (voice) subsidizes local, urban subsidizes rural, and business subsidizes residential.  Similarly, interconnection prices (for originating and terminating specific calls) range from "free" (wireless termination) to 6-7 cents a minute or more (rural or intrastate toll landline terminations).  Where discrimination is the law, economic incentives run counter to the law--and unproductive regulatory arbitrage is rewarded.  This is the system that we have and that is crumbling.  It certainly merits a look by the Commission as to how this system--and potential reforms--might promote broadband deployment in places where deployment is stuck, but subsidies persist to flow. 

Finally, I think this NPRM will lead to the most long lasting effects on the Commission's agenda in the near future because these matters are the biggest matters affecting broadband deployment that the FCC has the most control over.  I said it before, but these are the biggest issues from the past, that will be the biggest issues for the near future--if the FCC gets it right.  Yesterday's announced NPRM assures that these issues will be accounted for in the report to Congress, and will probably produce more pressure from Congress to work on these matters for the sake of establishing a platform for economic growth. 

So here's to you, oh conjurers of the Congressional Report, crack open a cold Bud Light, and . . . get back to work. . . you don't have a lot of time left!

October 13, 2009 3:41 PM

FCC Last Friday: "Someone's $0.00 Has Got to Go(?)!"

Well . . . not really, at least not quite yet, but this is where the Commission is heading--whether they know it, or like it, or not.  If the FCC does know where they're heading (and I don't think they do), they can't be too thrilled, because they also don't know how to make it stop.  Wait, what am I talking about?

Last Friday, October 9th, on the Friday afternoon before the Columbus Day weekend, the Commission's Wireline Competition Bureau sent a letter to Google, asking some questions about the Google Voice service.  The questions aren't that tough for Google to "slip", in the sense that the questions won't get the "real" story out--the most we could probably learn is that Google itself just might receive ultra-low priced, even "free", inputs from its carrier partner(s), and Google might have some deniability about knowing how their "free" service is paid for.  But the answers should give the Commission some clues to pursue the whole story--which they won't get until they send out questions to Google's carrier partner(s), and the FCC does ask Google to identify its carrier partner(s) in the last question.

Notably, the Google letter is found on the Wireline Competition Bureau's home page, and not the FCC's main home page.  However, with no apparent sense of awareness, or irony, the entire FCC voted an Order and Notice of Proposed Rulemaking on the very same date (that was on the main home page) designed to agree with a coalition of smaller LECs seeking to "amend [the Commission's] rules to permit an incumbent LEC ETC with declining numbers of access lines to use a higher DEM weighting factor in performing jurisdictional separations and calculating LSS.  We believe that public policy supports doing so."  (See paragraph 13, citations omitted).  Effectively, the FCC has recognized that the number of companies actually paying access is declining, and decided that the best solution is to raise rates for the few companies that actually own up to providing a telecommunications service.  Why does this matter?

In August when the FCC sent its original letters to Apple, AT&T, and Google, I really didn't think the letters could possibly turn out well for Google.  I also noted that I preferred to think the purpose of the letters were for the FCC to "declare Google Voice to be a wireless information service, and then apply this definition to the wired broadband network in solving the classification of VoIP to eliminate this nasty obstacle to the creation of the national broadband plan."  I've since become skeptical that this Commission has any appetite--or understanding of the necessity--for reforming intercarrier compensation (and universal service) before undertaking any discretionary projects.  I don't think the FCC wants to classify VoIP service at all, but at this point, it just seems that circumstances won't allow this luxury.

I recently noted, that Traffic Pumping and "Magic-Jacking" cannot continue to exist, while the number of "access paying" telecommunications carriers dwindles.  Yeah, that's right, I'm copyrighting the term "magic-jacking" to refer to the practice of an "over-the-top" VoIP provider (i.e., no LEC facilities) "stimulating" terminating and originating 8YY "access" revenues (for which the switchless VoIP provider appears to have no right to charge) by offering a "free" two-legged calling service in which the first "leg" goes to a mechanical relay point--usually in a higher-than-RBOC interstate location.  Meanwhile, the "magic-jacker" blocks termination to locations where termination costs are greater than the "terminating" access being charged to the IXC for "completing" the call to the relay point.  Google Voice, Magic Jack, and Skype are all prominent examples of alleged "magic-jackers."  SpeakEasy has recently declared that it is joining their ranks.

Continue reading FCC Last Friday: "Someone's $0.00 Has Got to Go(?)!"
September 25, 2009 4:13 PM

Policy Personals: FCC Broadband Planner ISO "the Man in the Mirror"

I have to confess, I haven't been following the Commission's major initiative: the development of the National Broadband Plan.  Why?  I guess I'm just skeptical about the ability of the regulator (or any other central planner) to anticipate innovation, much less promote it.  From what I've seen, the best the government can do is to try to enforce the rules that exist, on the one hand, and, on the other, to eliminate rules that hinder healthy growth in commerce.  The idea of the government "creating" a "broadband plan" and then seriously expecting private firms to cooperate is just something I don't think I've ever witnessed--outside of an economy with much deeper government participation in the marketplace than we have here in the U.S. 

So, I haven't been following along mostly because I can't figure out why this regulator-driven plan would be any more successful than any other "plan" from any other central planner.  In fact, one thing about the "fact gathering" for the Plan makes me wonder whether this is even what Congress had in mind when they asked the FCC to come up with a "Plan."  Specifically, the methodology for "creating" the "plan" seems--from the panels the Commission is holding--exclusively, and excessively, focused on factors beyond the Commission's ability to influence. 

But, given the Agenda for the next FCC meeting on September 29th (progress on "the Plan"), I decided to take a gander at what the FCC has been looking at to develop the National Broadband Plan.  A cursory glance at the web site displays a profound lack of introspection into how the Commission's current policies are influencing--for better or worse--broadband deployment.  In the previous post, I noted the IUB decision earlier this week, finding "traffic pumping" to be a violation of the traffic pumpers' tariffs. 

Given that access charge revenue is only available for originating or terminating circuit-switched calls, any regulatory scheme that allows access charges to artificially expand is tantamount to paying carriers not to deploy broadband and not to switch to an all-IP format. Yet the Commission sees no sense of urgency to reform intercarrier compensation, and is even entertaining a Petition to Preempt the IUB decision.

Similarly, higher USF "taxes" limit the amount of funds available to carriers who have yet to deploy broadband, and the "squeeze" gets tighter every quarter, as the contribution factor inexorably increases.  Expanding the contribution factor, or more closely scrutinizing subsidized services are issues that have simply faded from the Commission's screen--and I mean this literally.  Under "strategic goals" at the FCC web site (on the left hand side of the screen), Universal Service and Intercarrier Compensation are two issues that are nowhere to be found.

Is it me, or would a good look in the mirror, help the Commission better assess the influences of its current policies, so that--if necessary--the FCC could change the things that are easiest to change?  It's kind of like looking at a "muscle magazine" and designing an exercise/diet/fitness program, dreaming about how big and buff you're going to get . . . all the while, conveniently ignoring that you're smoking two packs a day and drinking a six-pack every night.  Wouldn't you want to know if you could reach your goals faster, just by getting out of your own way?

July 2, 2009 11:24 PM

The FCC's Broadband Plan: Is the Grass Greener in a "Green Field" or a "Brown Field"?

At today's open meeting, the FCC gave an update on its process for developing a National Broadband Plan.  The Commission's explanation of the development of a National Broadband Plan, and the benefits that such a plan promises, upon implementation, was truly inspirational. . . and a very befitting way to kick off the Fourth of July weekend.  The only thing that could have made the presentation more inspiring would have been the addition of Lee Greenwood's, "Proud To Be An American" as a background track. 

All kidding aside, though, the prospect of a National Broadband Plan is an exciting proposition, and has, naturally enough, led to a lot of excited and ambitious "castles in the air" type conjecture (though not in the pejorative sense of the expression).   Seriously, I'm impressed by the way Chairman Genachowski is going about developing a broadband plan.  He couldn't do better with his choice of a person to shepherd the plan along--Blair Levin.  I wasn't able to find Blair's bio on the Commission web site, but, if you're reading this, I shouldn't have to.  Blair is one of those few people that, if you've been around the telecom policy world for any time at all, even if you don't know him, you know he knows what's going on--and probably understands the implications a lot better than you!  At least this is the case when the "you" is me, anyway. 

The other thing Chairman Genachowski--with less than a week on the job--got right was the "" web site to allow a lot of transparency into the development of the broadband plan, and to allow for maximum inclusion of ideas by all concerned parties.  Finally, on the web site, I'd like to draw the reader's attention to the excellent presentation by Blair Levin on the process that has already been developed to begin the iterative process of creating a National Broadband Plan. So, I am kind've encouraged that the Commission is not looking at the broadband plan as a totally "green field" project that can be undertaken without regard to first fixing existing problems.  Still, this being Washington, nobody gets a free ride--except for, like, on their birthday, or political appointment day, or some other special occasion.

Continue reading The FCC's Broadband Plan: Is the Grass Greener in a "Green Field" or a "Brown Field"?