Rural America Needs Advanced Services & Competition – Part 2

[Editor’s note: Mr. South’s first article provided a brief history of AT&T as as a regulated monopoly and the forces that drove to the 1984 break-up of “Ma Bell”. Part 2 examines the aftermath of the break-up, particularly its impact on telecommunication services to rural areas.]

Click here to read Rural America Needs Advanced Services & Competition – Part 1

AT&T was immediately thrown into a competitive world, having to formally “interconnect” with its previous corporate subsidiaries and others.  The Bell Operating companies would continue their local regulated monopoly services with all the requirements (Carrier of Last Resort, etc.) associated with that position.  But the handwriting was on the wall…..the word of the day was competition and even the individual Regional Bell Companies soon looked at the other regions (and everyone else in the marketplace) as competitors.

Bottom line; the telecommunications world was turned upside down.  Local Access and Tandem Areas (LATAs) were designed….“Access Charges” was added to the industry glossary of terms… Organizations were created, such as NECA, ECSA, etc., to assist in the management of interconnecting carriers.  The complexity of this event was compounded due to the number of other participating carriers & companies, such as the 1,000+ non-Bell independent and cooperative exchange companies, the new long-distance carriers, wireless providers and the equipment manufacturers.

This far-reaching action was another step in what was an obvious movement to a competitive operating environment for the entire telecommunications landscape.  Now that the Bell companies could control their own destiny, they began to venture into other areas and test their freedoms; i.e., they could not offer competitive services in their territory; but they could offer competitive services outside their individual region territory.  Wireless or cellular service was of particular interest and the Baby Bell companies were successful in grasping a major foothold in that arena.

What was a closed marketplace with a limited number of participants was changed into a semi-open market with many providers (telcos, long distance companies, CATV, wireless, internet providers, satellite, etc.) and you could not tell a player without a scorecard…and even then it was tricky.  The convergence of services over the facilities provided by some companies compounded the complexity; Digital Subscriber Line (DSL) internet access service over the voice grade copper facilities of telcos; Voice Over Internet Protocol (VOIP) provided by internet service providers, etc.

It was becoming abundantly clear that there would be some winners and some losers.  What happened next were a significant number of mergers and acquisitions…each was an attempt to gain a stronger position in the market by increasing its footprint and enhancing its product line offering…. Even the very large Regional Bell companies were not excluded from consolidations.

The marketplace was partly competitive and partly regulated….The lines of demarcation were very fuzzy.  To say it was chaotic would be an understatement.  Regulators were constantly changing rules; putting out fires with little long-term direction for planning purposes.  It was evident that something had to be done to protect the American consumers and ensure that all consumers would realize the numerous benefits from this technological explosion.

Congress was compelled to step in to attempt to crystallize the telecommunications landscape for everyone; regulators, companies, consumers.  The effort would prove to be herculean and consumed lengthy discussions, hearings, comments, arguments and positions from all interested parties. After various draft bills, congress produced The Telecommunications Act of 1996 which was signed into law by the President.  The stated objective of the law was

To promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies”.

The message was crystal clear; advanced services were critical to the economic growth of America and that competition was the vehicle to deliver those benefits.  When before the signals were cloudy and piecemeal, America was now focused on a direction that offers the greatest benefit to all consumers.  This very significant congressional action sent the message that all future decisions would be measured against what is best for all American consumers.

This national debate went far beyond just Plain Old Telephone Service (POTS).  Historical discussions had dealt with, “Who was going to provide POTS to a certain community.” Now it is, “What provider can offer me with all my telecommunications, Internet & broadband services….today”.  This new debate further continued on with, “What provider can provide the required services to assist my community with education, health care, security, etc.”

It will not only be based on who is the provider (telcos, ISPs, CATV operators, satellite providers, private companies, etc.), how it is financed (private or public funded); or who manages the operation., but it will be decided on the ability to offer the most advanced services at the best prices in the timeliest manner to serve the consumer and the community.

If one company is not in a position to offer satisfactory responses to these issues for the community and its consumers; then these services will be provided by an organization(s) that step forward and is ready, willing and capable of the task(s).

Economic development and Consumer interests are the prime movers in these current debates……

The entire industry became under a magnifying glass; externally by media interests, Congress, regulators, consumer groups and policy makers.  Internally, industry players studied the market for more self-serving reasons.

Reports indicate that approximately 100 million Americans do not have broadband in their home.  Internationally, America has fallen behind other countries in the deployment of broadband services.  Domestically, consumers continue to demand advanced services/faster speeds; educators want better service (especially in rural areas); health care providers indicate that enhanced services could improve health care (especially in rural areas). These type of reports are getting significant media attention and many policy makers continue to express  concern.

A June 2013 snapshot of broadband wireline service availability of at least 3 Mb/s.
3 Mb/s or more BB Availability – US Broadband Map

Because Congress, the FCC, the NTIA and state agencies began to place a focus on telecommunications and advanced services, various activities were initiated to investigate and analyze the current state of affairs.  Various studies were undertaken….from a National Broadband Mapping project… to a study of where we are today and what is needed for the future.

In 2009, Congress charged the FCC with developing a National Broadband Plan to ensure every American has access to broadband capability.  The FCC conducted a hearing in November, 2009 to discuss specifically identified “barriers” that exist in formulating a new national broadband policy plan.  One major barrier was the Universal Service Fund.  The FCC Task Force believed that …

the fund should also be used to help subsidize the cost of deploying broadband in rural areas.”

A second barrier that was identified by the FCC Task Force was….

“the fact that broadband service providers tend to favor higher-income regions in more populated areas over low-income areas.  The data suggests that many low-income people in these parts of the country are offered only one broadband service option. The data also suggests that these consumers who have only one option tend to pay higher prices for service.

What this means is that lower-income people, who have less disposable income, are often the ones forced to pay higher prices, while people who have more money pay lower prices for service.

Deployments in rural areas are often affected by the high cost of building infrastructure and providing service. The task force noted that “middle mile” costs are almost three times higher than general network operations costs. This high cost is often a serious barrier to rural broadband deployments, the group said.”

The FCC Task Force conducted an extensive analysis and investigation into what would be required to implement a national broadband policy that would provide high-speed internet access to every American.

The results of the FCC efforts were documented in a comprehensive report unveiled on March 16, 2010 entitled:

“Connecting America: The National Broadband Plan”

The Plan stipulated that the:

Government can influence the broadband ecosystem in four ways:

  1. Design policies to ensure robust competition and, as a result maximize consumer welfare, innovation and investment.
  2. Ensure efficient allocation and management of assets government controls or influences, such as spectrum, poles, and rights-of-way, to encourage network upgrades and competitive entry.
  3. Reform current universal service mechanisms to support deployment of broadband and voice in high-cost areas; and ensure that low-income Americans can afford broadband; and in addition, support efforts to boost adoption and utilization.
  4. Reform laws, policies, standards and incentives to maximize the benefits of broadband in sectors government influences significantly, such as public education, health care and government operations.

The plan also recommended that the country adopt the following six Goals:

  1. At least 100 million U.S. homes should have affordable access to actual download speeds of at least 100 megabits per second and actual upload speeds of at least 50 megabits per second by the year 2020.
  2. The United States should lead the world in mobile innovation, with the fastest and most extensive wireless networks of any nation.
  3. Every American should have affordable access to robust broadband service, and the means and skills to subscribe if they so choose.
  4. Every American community should have affordable access to at least one gigabit per second broadband service to anchor institutions such as schools, hospitals, and government buildings.
  5. To ensure the safety of the American people, every first responder should have access to a nationwide, wireless, interoperable broadband public safety network.
  6. To ensure that America leads in the clean energy economy, every American should be able to use broadband to track and manage their real-time energy consumption.

The release of the National Broadband Plan (NBP) received significant media attention and great anticipation from the entire telecommunications, Internet & broadband segments of the marketplace.  Market participants reviewed all their plans and strategies to measure any impacts on their operations.  Existing broadband providers studied their markets to make investment decisions on the most attractive locations to allocate resources; i.e., where they need to move quickly and where they could delay deployment.  These decisions could be based on a variety of factors such as density, cost to install facilities, current competitors in the area and where it was believed they had a sense of control over that market area.

New entrants in the market conducted similar analysis; but they were starting from a position of limited information; they did have the Broadband Mapping information, but lacked consumer demand and cost data.  But they did believe that time was critical….”first in the market, and so on…”.

Some encouraging good news was that some necessary financing capital was available.  The President had made universal broadband access a key goal for America.  Economic Stimulus money was available in the form of grants and loans to approved providers.  Numerous applications were prepared and submitted for approval from existing providers and new entrants.

The other good news for the American consumer was that individual communities, in the form of local municipal or county organizations, became well aware of the importance of advanced services to their constituency and its economic growth.  In the past, when consumers complained about the lack of available services in the area, local government officials believed that their hands were tied.  Now, they saw what was taking place in other parts of the country and around the world and said…Why not us and why not here.

This community awakening was contagious and many community activists and organizers (including the general public, businesses, schools, and medical institutions) joined this very active movement.  The battle cry was…”What can we do to secure advanced services for our community”.  They did not want their taxpaying public consumers to become “second class citizens” and in certain situations the communities had run out of patience in being last in line for advanced services from competitors providing service in the area.  Municipal and county officials believed that they were doing their job and this is one of the reasons why their constituency trusted them with the responsibility to protect their interests.

The municipalities and / or counties established organizations, reviewed their existing situations, analyzed alternatives, met with constituencies, sought voter approval (if warranted), developed a strategy, prepared documentation, filed paperwork, sought financial assistance (grants or loans from federal government), established contracts with consultants and construction companies….and scheduled installation.

Of course, this activity met with some opposition from competitors in the area; who believed that they had the right to that area.  The answer to that issue is simple….If the perceived competitors had been providing acceptable level of advanced services in the area; it would not have been necessary for the municipality or county to take that action.  The fact is that a lot of existing companies have assumed “ownership” of the area and they believed that these consumers were obligated to wait until the competitor was ready to upgrade facilities in the area to provided advanced or broadband service.

Well, contrary to their opinion, today’s consumers just do not want to wait indefinitely….and educators, health care administrators, business operators, police forces and economic development councils do not want to wait at all….especially in Rural America !

This picture is a very nice one of independent broadband industry icon, Gene South.
Gene South

Gene R. South Sr. is a telecommunications and broadband professional with 45 years of experience including positions as EVP for Panhandle Telephone Cooperative in Guymon, OK; CEO / GM of Lakedale Communications in Annandale, MN and currently the V.P. & Director of Governmental Affairs for Lake Communications in Two Harbors, MN.*  Mr. South served as Chairman of the Board of USTA, RTFC and MART; he also has held Board memberships for OPASTCO and MTA.  In addition, he has testified before congress and state legislatures.

*Lake Communications, a private company, is building and operating Lake Connections for Lake County. Lake Connections is a local fiber-optic broadband provider owned by Lake County and formed to bring High-Speed Internet, Digital TV, and Voice services to Lake County and Eastern St. Louis County in northeastern Minnesota starting in 2014. 

 

 

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