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 . . . . 

we seek to . . . identify the best means to achieve our goal of preserving and promoting the open Internet. We seek to do so in a manner that will protect the legitimate needs of consumers, broadband service providers, entrepreneurs, investors, and businesses of all sizes that make use of the Internet.

If the quote hasn't tipped you off yet, this is where I stop "hating on" the FCC's NPRM and proposed rules, for all their silliness, and start getting constructive.  This is why I wanted to "change gears" with a quote that has been repeated enough to become a full-fledged, diabetes-cavity-inducing cliché of sweetness.  Yet if the expression wasn't eloquent, or relevant, it would have never gained the popularity it has; which is why it made its way into the Net Neutrality NPRM (well sort of).  So kick back a little, click on to this saccherine-sweet little ditty, and open up your NPRM.  In Paragraph 81, the Commission asks one of the most--perhaps THE MOST--prescient questions in the entire NPRM.

In essence, the Paragraph asks for comment on how the adoption of Net Neutrality rules (by the Commission) would be enforced by the Commission.  This is a good question, because the Commission is not really built to investigate and enforce complex fact patterns.  For example, the Paperwork Reduction Act requires the Commission to seek public comment (allowing at least 30 days for public comment and replies), and obtain Office of Management and Budget approval (allowing the OMB at least 60 days to make a decision on the agency's request) before seeking information from more than 10 parties. 

For a "data driven" Commission, this is more than just a hassle; it presents a real enforcement hurdle--especially for the most egregious and difficult cases.  Moreover, these investigatory handicaps are further limited by the fact that the Commission can only enforce violations of its rules occurring within the last year; that's right, a one year statute of limitations.  Add to that the fact that the Commission has further legal and personnel resource handicaps and it would seem to make the FCC an unlikely sole enforcer of the most anticompetitive, anti-consumer, concerns proscribed by the proposed rules.

So, this is a very real conundrum--and probably deserves a lot more explanation and consideration than given in the NPRM.  The question is this: what if the Commission passes rules and the FCC is the ONLY agency (aside from private parties) that can enforce the rules?   Furthermore, what if the only vehicle for private party redress were under the Communications Act?  This has distinct disadvantages to the public, in that the antitrust laws allow for enforcement by the Department of Justice, the Federal Trade Commission, the state attorneys general, and private parties.  Moreover, the antitrust laws allow prevailing plaintiffs--including states on behalf of their citizenry--to collect three times actual damages suffered, plus attorneys fees; additionally, the antitrust laws have a 4 year statute of limitations and broad discovery rights for plaintiffs.

`The question is,' said Alice, `whether you can make words mean so many different things.'

`The question is,' said Humpty Dumpty, `which is to be master -- that's all.'  Through the Looking Glass, Chapter 6.

`Can you do Addition?' the White Queen asked. `What's one and one and one and one and one and one and one and one and one and one?'

`I don't know,' said Alice. `I lost count.'  Through the Looking Glass, Chapter 9.

The question to be considered in the context of the Net Neutrality NPRM is not that the Commission is using a word--this time "neutrality"--to mean just what it chooses it to mean, but rather, how does it all add up, when layered on top of another equally "neutral" (but fundamentally discriminatory) regulatory regime such as intercarrier compensation where the same word "termination" has so many different meanings (prices)?  How do the sums add up?  Like Alice, I've lost count, but let me give you an example to see if you can keep better count. 

On November 19th, eBay closed on its sale of Skype, eBay's large, over-the-top, VoIP subsidiary, in a transaction that valued Skype at $2.75 billion (though eBay held on to 30% of the company).  This somewhat concludes eBay's rollercoaster ride into the world of telecommunications. Though the company itself valued Skype at $1.7 billion on its own books, eBay was unable to find anyone willing to pay even $1.4 billion--eBay's asking price--this spring, and even some Skype cheerleaders were speculating that, earlier this year when eBay made the decision to sell Skype, that eBay would likely get closer to $1 billion.  

In 2005, eBay bought Skype (or some part of it that, curiously, did not include the central intellectual property that made the service work) for a reported $2.6 billion, but the founders stayed on to manage the Skype subsidiary, and if all had worked out, could have earned an additional $1.5 billion over the next couple of years if certain targets were met.  Less than a year later, eBay ousted the founders and gave them an additional $500 million to leave early, for a real cost of acquisition of $3.1 billion.  At the time of the purchase, eBay was alternately lauded for its foresight, or criticized for paying way too much for a service that is largely "free." 

Subsequent to the original purchase date, most reports about the transaction were negative--suggesting that eBay's purchase was looking like a worse and worse decision with each passing year.  Business Week continued to follow the operation of Skype within eBay to see how the transaction would turn out.  The articles suggested the acquisition, in hindsight, was a bad idea--and getting worse all the time. 

But, what happened since April, when no buyers were willing to even purchase all of Skype for $1.4 billion?  Who knows?  But Skype is now valued at a higher revenue/EBITDA ratio than Google (15X vs. 11X).  And, if it's relevant, Skype's 15+ revenue/EBITDA was multiples higher than the 4.4 recorded by Apple over the fiscal year ending in September 2009.