Telecom Council panel session: Update on U.S. Broadband Policy

Abstract:

In a lively Telecom Council panel session sponsored by AT&T, seven industry executives discussed the ramifications for the U.S. government’s stimulus package and federal budget proposal as related to broadband policy. The sober and candid assessments offered a realistic view at what is involved in building out broadband, particularly using wireless technology, to underserved and rural areas in the U.S.

Backgrounder:

The Obama Team pitched improved broadband access and "Network Neutrality" as key priorities during the Presidential campaign. The stimulus bill the new administration initiated and the U.S. Congress passed (as the American Recovery and Reinvestment Act) on February 17, 2009, set aside $7.2 billion in funds for broadband build-outs. Of that, the Commerce Department’s National Telecommunications and Information Administration (NTIA) will administer $4.7B, while the Department of Agriculture’s Rural Utilities Service (RUS) will control $2.5B. Wireline, unlicensed wireless broadband (WISPs), and high-speed cellular data service are all eligible for grants and/or loans. Companies can tap into one, but not both of these pools of funds, if their application is approved by the respective government agency (NTIA or RUS).

The final version of the bill maintains that projects funded by NTIA must adhere to "nondiscrimination and openness principles." The funds must be dispersed before September 30, 2010, to projects that can be completed within two years. The RUS funds, to be awarded by Sept. 30 of this year, focus more on rural broadband access, requiring that at least 75 percent of an area receiving funds be in a rural area without sufficient high-speed broadband access. The RUS will give priority to projects that give consumers a choice of more than one service provider. Although rural telcos are not the only companies eligible to receive RUS money, they may be best positioned to receive it because many of them are already familiar with the process. Recipients of RUS funding traditionally have been required to use equipment approved by RUS, and that is not expected to change. The approval process relies heavily on the experiences of fund recipients, who must install and use a product for six months before it can be approved. That requirement favors companies that already have RUS approval.

It’s hoped that this new funding will create jobs and provide broadband Internet access to many communities that don’t have it now. Maybe the U.S. telecom industry will become more competitive and innovative as a result? But there are many issues involved and many industry players may stay on the sidelines. There are also many rules and regulations that have yet to be set by the government agencies before funds will be dispersed. For example, there is no part of the bill that defines the terms "broadband," "unserved area," or "underserved area." The NTIA will work with the Federal Communications Commission (FCC) to define those terms and spell out guidelines for funding.

While the focus of this panel session was on wireless broadband access, wire-line solutions (e.g. Fiber to the Node/Premises, Broadband over Power lines, etc) are also possible.

For more information, please refer to:

Stimulus bill includes $7.2 billion for broadband

http://news.cnet.com/8301-13578_3-10165726-38.html

Author’s note: The rural or underserved includes 12M households and 35M people in the U.S. According to Pew Research, 38% of rural Americans have broadband, which implies that 62% don’t.

http://pewresearch.org/pubs/888/home-broadband-adoption-2008

Prior definitions of Broadband, and “served area” in the USA have been deceptive at best. Historically, residents of a zip code were said to be in a “served area” if only a single subscriber in that zip code had broadband access. This distorts the US availability numbers and paints a deceptively positive picture.

Panel Discussion:

The panel was co-moderated by Derek Kerton of the Kerton Group and Jon Metzler of Blue Field Strategies. The five panelists were:

  • Christopher Boyer, AT&T, AVP – Internet & Technology Policy
  • Danielle Coffey*, Vice President, Government Affairs for Telecommunications Industry Association (TIA)
  • Mike Masnick, founder Techdirt; CEO, floor64
  • Robert Rini*, Partner, Rini Coran, PC (Washington DC based law firm representing WISPA)
  • David Pejcha, Marketing Director, Silver Springs Networks

* These two panelists dialed in from DC as Dulles Airport was closed and their flights cancelled.

Jon Meltzer noted that the $7.2B for broadband is the largest such government funded disbursement ever. It is about the size of the Universal Service Fund (USF)- which was approximately $7.6B total at last check. The USF is a fund that is mandated by the U.S. Federal government for the purpose of subsidizing rural, low income, and health/ education telecommunications customers. Jon notes that USF subsidization of broadband is still expected (perhaps to decrease its bias toward copper wire voice service).

Chris Boyer stated that AT&T was supportive of a flexible framework to deploy broadband services. However, AT&T was not seeking funds from the stimulus bill during the legislative process. However they are looking at how the legislation may advance their already substantial investment in broadband and projects currently in progress. Chris sited AT&T’s experience in California remarking that AT&T currently makes available broadband to around 90% of its service territory and getting broadband to the last 10% of the population (that does not yet have the infrastructure in place to realize broadband service) was a very expensive proposition. He later commented that AT&T’s broadband network is closer to 85% (give or take) built out elsewhere in the U.S.

The panelists agreed that the requirements for filing grant/loan applications needs to be clearly defined as do the previously mentioned terms- "broadband," "unserved area," or "underserved area." It would also be useful to define "over served area" for contrast with "underserved area." While creating jobs is the number one goal of this legislation, it’s equally important that the technology selected meets the need of the targeted user community.

If “rural” is defined as 20,000 or less, and grants/loans are contingent on addressing the “unserved” or “underserved” rural markets, the likelihood that an incumbent carrier would use the funds to roll out a broadband network for a city of 250,000 or so would be unlikely, according to Jon Meltzer.

Danielle Coffey said that TIA would ask for the time for grant/loan disbursement be accelerated, that the filing requirements not be too onerous, and that the selection criteria be technology neutral.

Robert Rini’s law firm (Rini Coran, PC) has been working with several wireless companies and Wireless ISPs (WISPs) who have asked how they can gain access to licensed spectrum to deploy wireless broadband technologies. The WISPs are interested in receiving government funding to build out wireless broadband in "small, granular service areas."

Derek Kerton observed that it’s a natural tendency of SP’s to deploy new wireless technology in densely populated areas, (e.g. Towerstream’s fixed WiMAX deployment in major U.S. cities) so they can get a better ROI. Greenfield operators often prefer to be the fourth or fifth provider in a dense city than the first provider in an underserved rural zone. So if rural deployment is the priority, then special requirements need to be attached to the funding. The population addressed by the new deployments is also important and should be taken into consideration when approving grants/ loans. Derek was concerned that job creation was more likely to come from incumbent SP’s, but they were not the likely candidates to provide broadband to rural areas (it’s the independent telcos and WISPs). Would a stimulus whose goal was to provide jobs also move the country forward in terms of the global broadband race?

Mike Masnick opined that more broadband competition in the market would create more jobs than a narrowly targeted government sponsored program, and especially so over the long-term. A narrowly defined jobs program would not really help the U.S. economy, which would face the same problems in 12 to 18 months.

Bob Rini, along with several other panelists, felt the final bill "was not stimulating enough." While Clearwire and Digital Bridge Communications may benefit from the bill, due to their synergy with educational institutions and ownership of 2.4G-to-2.5GHz spectrum, the WISPs would also benefit because they are well positioned to provide wireless broadband to rural and underserved areas. WISPs are generally very small businesses operating on a shoestring budget. They have expressed a keen interest in building out wireless broadband in their service areas, perhaps using WiMAX technology at 700MHz or 2.3G-to-2.5GHz licensed frequencies. WISPs (along with this author) believe that licensed spectrum is necessary to provide a carrier grade service- to eliminate interference, noise and signal distortion. Note that AT&T wireless broadband services operate on licensed spectrum.

Some WISPs are considering the 3.65GHz “lightly licensed” band for fixed WiMAX service, but there is no method yet defined by the FCC (or anyone else) to resolve contention amongst multiple possible users of that band. The rural telcos would have to work out spectrum re-use zones or other sharing agreements prior to turning on wireless broadband service. WISPs have not competed well at auctions for licensed spectrum, so a lightly licensed approach would be better for them if a contention or spectrum sharing arrangement can be defined. Rini said, "The FCC has one year to figure this out."

David Pejcha company (Silver Springs Network) builds smart power grids– a communications overlay over the last mile for electricity distribution. Utilities are considering smart grids to better manage their electricity distribution, provide automated remote meter reading, electricity switching for efficient distribution to customers. In addition, they plan to offer on-demand customer notification of electricity use. Electricity demand is outpacing supply so the power delivered needs to be more efficiently managed and usage monitored automatically. Solar energy producing modules might also connect to a smart power grid. Silver Springs Networks builds wireless communications systems using unlicensed 900MHz spectrum. Their network provides a direct link between the electric utility and its customers. It is an "Open IP network" that permits many different devices to attach to it. AT&T provides backhaul transport for some smart grids.

The discussion returned to licensed spectrum being more "investable" than unlicensed spectrum. Again, licensed spectrum prevents noise and interference. It was noted that cordless phones, microwave ovens, and wireless microphones operate at 2.4GHz, which would create interference for any unlicensed service at that frequency, e.g. long range/mesh WiFi. Further, the transmit power levels might be too high in an unlicensed service arrangement. Licensed spectrum, on the other hand, provides a de facto monopoly for the network operator- he has paid for the right of exclusion to keep competitors away.

Where will the licensed spectrum come from? The FCC is freeing up vacated UHF spectrum ("white spaces") for wireless Internet access and intends to make it available to SP’s as unlicensed spectrum for two classes of wireless broadband service: fixed access and personal/ portable access. The white space rules currently specify a 30-foot antenna on the receiver, fixed or portable. That’s a vestigial holdover from the TV broadcast world, according to Jon Meltzer.

With the transition to Digital TV, analog TV broadcasters will free a great deal of spectrum up on June 12th (DTV Delay Act),. But Rini is concerned that the FCC has not comprehensively specified how that spectrum will be used and distributed to interested SPs. WISPs are lobbying the FCC to create a lightly licensed regime for the vacated analog TV spectrum. Meanwhile, the "White Spaces Database Group," plans on formulating a plan to create, govern and maintain a wireless broadband network on abandoned analog television spectrum. When the spectrum is finally vacated, the group hopes that system in place, which will allow for the creation of an open wireless broadband network, which could be accessible by any device.

Currently, there is a secondary market for licensed spectrum in the U.S. Incumbent operators are leasing spectrum at wholesale rates directly to smaller SPs. In addition, Spectrum Bridge has become "the eBay" of auctioned spectrum. The Spec Ex or spectrum exchange is offered by Spectrum Bridge (http://www.spectrumbridge.com/).

Which companies might benefit from the broadband grants/ loans?

Mike Masnick opined that the stimulus funding criteria would be based on the projected number of jobs created by the broadband build-out, rather than any consideration of the requesting company to turn a profit. Since start-up companies are too small to be on the government’s radar screen, they are unlikely to get stimulus money. And since they focus on keeping costs down, and NOT hiring excessive headcount, they are not aligned with the stimulus’ goals. Start-ups are about long-term value creation, and the stimulus is about rapid job creation, thus Silicon Valley’s innovators probably will not participate in the broadband funding program. That is somewhat of a disappointment, as it’s the start-ups that provide long-term job growth and keep the US competitive with the rest of the world.

Counterpoint: We think that independent telcos, utilities, and WISPs will apply for the funding and start-up network equipment manufacturers will likely benefit. On February 17, 2009 (date the final bill was passed by Congress) start-up Airspan Networks announced the availability of what they claim is the industry’s most complete FCC and Rural Utilities Service (RUS) certified lineup of fixed and mobile WiMAX Base Stations and Customer Premises Equipment (CPE) for the U.S. rural market. RUS approval is obtained from the U.S. Department of Agriculture, affirming Rural Development acceptance and “Buy American” status of equipment. Airspan is among a select few WiMAX equipment manufacturers with this coveted “Buy America” status.

How are Capex and Opex impacted by the broadband stimulus?

The panelists and moderator pointed out that capex and opex are different accounting items. Jon Meltzer believes that the broadband stimulus may help with capex, but it won’t help lower opex. Still, offsetting capex is a non-trivial benefit. Grants could be used to offset the civil and construction costs of putting up a cell tower for rural broadband.

What is the FCC’s role in determining U.S. Broadband Policy?

Bob Rini provided this information: The FCC has one year to deliver Congress a report containing a national broadband plan “to ensure that all people of the United States have access to broadband capabilities” and establish benchmarks for reaching that goal. The plan will include:

  • Analysis of the most efficient and effective mechanisms for ubiquitous service
  • Strategy for achieving affordable service
  • Evaluation of broadband deployment, including progress of funded projects
  • lan for use of broadband to support national purposes

The FCC is expected to invite public comment to help develop national broadband plan

Finally, a questioner asked about "spectrum fees" in Obama’s new budget. No definitive answer was provided regarding renewal fees for operators that already owned licensed spectrum. But it’s something to watch down the line.

Reference:

What the broadband stimulus package means to rural telcos

http://telephonyonline.com/independent/news/broadband-stimulus-rural-telcos-0223/?smte=wr

Acknowledgement: The author would like to thank Bob Rini, Jonathan Meltzer and Derek Kerton for their diligent review of this manuscript and very helpful comments and clarifications.

0 thoughts on “Telecom Council panel session: Update on U.S. Broadband Policy

  1. AlphaStar, CTC propose WiMAX-satellite hybrid to get Stimulus funding for remote area wireless broadband

    AlphaStar International and Computers & Tele-Comm (CTC)
    have created a joint venture to offer WiMAX service in remote areas using a satellite network for backhaul. The two are touting it as a viable solution for broadband stimulus money.

    The hybrid model takes advantage of the AlphaStar Teleport, a facility originally built by the U.S. government as part of President Reagan’s Star Wars initiative. AlphaStar has the ability to track any area of the U.S., including Hawaii, to deliver WiMAX, the companies said.

    CTC said the costs of the network are contained by using satellite primarily for backhaul. The bandwidth is then relayed by ground-based WiMAX transmitters. The system can also serve to supply metro-WiFi services or be used for mobile and maritime applications as well as disaster recovery and homeland security purposes. Low cost radios can be used rather than a two-way satellite receiver at customer locations. The Teleport can also deliver video and audio streaming. By caching the AV streams and large portions of the Internet locally at the WiMAX transmitter performance is dramatically improved at affordable cost, CTC said.

    The companies said the partnership will assist local government, companies and organizations in applying for stimulus grants.

    “The hybrid model can be deployed within weeks to months (depending on scope), serves underserved and unserved areas, and offers immediate employment as intended by the legislation,” said John Wahba of AlphaStar in a press release.

  2. Firms Face Off on Broadband Spending

    Cable and big phone companies have a message for federal officials overseeing $7.2 billion in stimulus money set aside for new high-speed Internet lines: Don’t use the money to subsidize upstarts planning to compete with existing broadband services.

    Stimulus money should be used for “extending broadband [service] to unserved areas,” the cable industry’s lobbying group emphasized in a letter to members of Congress last week. The group repeated those remarks in a paper released Monday. Lobbyists for AT&T Inc. and Verizon Communications Corp. are spreading the same message, urging regulators to spend the money only on wiring homes in rural areas that still rely on dial-up Internet service.

    The definition of unserved, and how that is different from underserved, could be critical in deciding who gets stimulus money to extend broadband services, and where the money goes.

    That isn’t the only issue overshadowing the Obama administration’s efforts to extend fast Internet services to more Americans. Advocates of an open Internet, or net neutrality, are wrangling with big telecommunications companies over what conditions, if any, are attached to grants. Meanwhile, industry groups want the money to be given to companies directly, instead of requirements that they work with local governments on grants. Local officials frown on that idea.

    The biggest issue, however, is the debate over unserved areas versus underserved areas. Established broadband providers are concerned that the government not give federal grants to competitors looking to build new — and potentially faster — Internet services in markets that already have some form of broadband.

    “We believe that the rules that will result here should not overly fund competitors in a market where there are already multiple broadband providers,” said Matthew Polka, president of the American Cable Association, which represents smaller cable operators.

    “It makes sense to start with the unserved areas,” said David Fish, a Verizon spokesman. “They’re the ones in the most need.”

    Midsize phone companies and consumer advocates argue that some stimulus money should be spent on new Internet lines in areas that already have service. New “middle mile” Internet lines could be used by multiple phone and wireless companies to offer faster service over longer distances, they say, and potentially increase competition.

    “We believe that areas where there’s only slow broadband service deserve just as much attention as where they have no broadband,” said Derek Turner, research director for Free Press, a nonprofit advocacy group. “In many of these isolated communities with broadband, the reason it’s slow is that there’s not many options to get that [Internet] traffic back to the backbone.”

    Last year, a study by the Pew Internet & American Life Project found that only about 10% of Americans still use dial-up service. Upwards of 10 million households don’t have any access to broadband service, according to a July 2008 Brookings Institution study, which found most unserved areas were in rural communities that are expensive to wire.

    Cable and large phone companies would also like some of the $7.2 billion in stimulus funds to go toward spurring demand by consumers who have access to broadband now but don’t subscribe. Incentives for such consumers might include things like subsidized purchases of PCs or discounted broadband access for low-income households, for instance, through an existing federal telephone-subsidy program.

    “Not everyone can afford” broadband, said Kyle McSlarrow, president of the National Cable & Telecommunications Association, a cable industry lobbying group. “Let’s go after the demand side.”

    Decisions on rules for the broadband stimulus grants are expected to be made in a few weeks, much faster than the usual government rule-making process. Commerce and Agriculture department officials are holding six public workshops over the next week to hear suggestions on how to hand out the money. Federal officials originally planned to hold private meetings with grant applicants but dumped that idea after more than 2,000 meeting requests poured in.

    On Monday, hundreds of lobbyists packed in to the Commerce Department for the first workshop, which focused on eligibility requirements for private companies. Later this week, scheduled meetings will focus on issues including how to define unserved areas and how much of a role state officials should play in the grant-making process.

    Write to Amy Schatz at Amy.Schatz@wsj.com

  3. Billions in broadband stimulus funds are dependent on definitions: What is broadband? Underserved area? Unserved area?

    The FCC has not yet defined several key terms that are needed to be understood by the government officials doling out broadband stimulus money. At the request of lawmakers and lobbying groups, the FCC is (at long last) in the process of defining “broadband,” “underserved,” “unserved area” and other terms. The FCC is advising the National Telecommunications and Information Administration (NTIA), which will make the final call on how stimulus money gets doled out to urban and suburban areas. The RUS agency is responsible for grants and loans to rural areas.

    The U.S. government has allotted $7.2 billion for broadband deployment. It is a building block for improvements in education, health care and energy, says Jeff Campbell, senior director of technology and trade policy at Cisco, which has helped expand high-speed Internet access in the U.S., Europe and elsewhere.

    Major deployment of broadband could create 300,000 jobs for the telecom and tech industries, according to a study by the non-profit Information Technology & Innovation Foundation.

    Some 6% to 10% of all U.S. households — especially those in rural areas — do not have broadband Internet access. Some 75 million to 85 million American adults do, according to the Pew Internet & American Life Project.

    “We don’t want to live in a nation of (technology) haves and have-nots,” says Carl Guardino, CEO of Silicon Valley Leadership Group, a trade association that represents about 300 Silicon Valley companies that employ 500,000 in California.

    Of course, it’s not clear how much of this money goes toward WiMAX deployments, but we here that WISPs and small network operators (e.g. Nth Air) are planning to apply to NTIA and RUS for subsidized or government funded WiMAX buildouts.

    For more info, please see the following:

    http://www.usatoday.com/tech/news/2009-04-05-stimulus-infrastructure-technology_N.htm

    http://www.usatoday.com/tech/news/2009-04-05-broadband-fcc_N.htm

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