The FCC's Latest Plan to Close the Rural Digital Divide

Benton Institute for Broadband & Society

Friday, January 10, 2020

Weekly Digest

The FCC's Latest Plan to Close the Rural Digital Divide

The Connect America Fund is Dead—Long Live the Rural Digital Opportunity Fund

 You’re reading the Benton Institute for Broadband & Society’s Weekly Digest, a recap of the biggest (or most overlooked) broadband stories of the week.

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Round-Up for the Week of January 6-10

Kevin Taglang

This week we learned that the Federal Communications Commission will vote on its latest plan to subsidize broadband deployment in rural areas at its January meeting. The Rural Digital Opportunity Fund, first proposed by FCC Chairman Ajit Pai back in August, will provide up to $20.4 billion over the next decade to support the deployment of broadband networks in those parts of rural America that currently lack fixed broadband service that meets the FCC's baseline speed standards (25 Mbps download and 3 Mbps upload). The support is greatly needed to extend broadband's reach. But as my colleague, Robbie McBeath, asked this summer, can slapping "new and improved" on an existing program really close the Digital Divide?  

Although we live at a pace in which three weeks can seem like a lifetime ago, let's take a longer walk down memory lane.

In 2011, the FCC reformed the Universal Service Fund (USF) and created the Connect America Fund (CAF) to extend broadband infrastructure to rural areas. At the time, the FCC estimated that more than 83 percent of the approximately 18 million Americans that lacked access to residential fixed broadband lived in areas served by "price cap carriers"—Bell Operating Companies and other large and mid-sized carriers. The FCC froze the support those carriers previously got to make legacy telephone networks more affordable and added $300 million to CAF with the goal of universal availability of voice and broadband.

Carriers were obligated to build and operate broadband-capable networks in areas unserved by an unsubsidized competitor. Carriers electing for CAF support would receive $775 in incremental support for serving a previously unserved location. In CAF Phase II, the FCC adopted a forward-looking broadband cost model and competitive bidding to efficiently support deployment of networks providing both voice and broadband service for five years. The FCC also created a $100 million Remote Areas Fund to employ alternative technology platforms, including satellite and unlicensed wireless services, to serve areas where the cost of deploying traditional wireline networks was too high. 

As noted above, CAF was mainly funded by redirecting funds from what had been called the USF's High Cost Program. The FCC also promised that any additional funding would be raised through fees on consumers bills of no more than 10-15 cents per month (excluding areas where people already paid $30 or more per month for phone service and for people participating in the FCC's Lifeline program). The FCC also set a firm annual budget at the then-current level of high-cost spending of $4.5 billion.

In 2015, price cap carriers accepted $9 billion over six years from Phase II of the Connect America Fund. In March 2016, the FCC reformed its broadband support for the nation’s smallest carriers, providing $20 billion over the following ten years.

In May 2016, the FCC started to employ what's popularly known (well, in wonkland) as "reverse auctions." In 20 states where the price cap carriers declined CAF support and in other locations with extremely high deployment costs, a broad range of broadband providers could bid for subsidies with the lowest bid winning the support. The FCC required:

  • A minimum performance tier that requires bidders to commit to provide broadband speeds of at least 10 Mbps downstream and 1 Mbps upstream (10/1 Mbps) and offer at least 150 gigabytes (GB) of monthly usage.
  • A baseline performance tier that requires bidders to commit to provide at least 25 Mbps downstream and 3 Mbps upstream (25/3 Mbps) and offer a minimum usage allowance of 150 GB per month.
  • An above-baseline performance tier that requires bidders commit to provide at least 100 Mbps downstream and 20 Mbps upstream (100/20 Mbps) and offer an unlimited monthly usage allowance.
  • A Gigabit performance tier that requires bidders commit to provide at least 1 Gigabit per second (Gbps) downstream and 500 Mbps upstream and offer an unlimited monthly usage allowance.
  • Network build-out requirements: 40% three years after authorization, 60% after four years, 80% after five years, and 100% by six years.

CAF II currently provides around $2 billion in subsidies each year but is scheduled to end in 2020. 

Source: FCCIf adopted later this month, the Rural Digital Opportunity Fund will replace CAF, targeting areas that lack access to 25/3 Mbps broadband service [areas that lack 10/1 service will be prioritized) in two phases. For Phase I, the FCC will target $16 billion to census blocks that are wholly unserved by 25/3 broadband networks. The FCC estimates that almost 6 million homes and businesses in rural America would be eligible for Phase I (although the FCC concedes that its broadband coverage data is inaccurate). 

For Phase II, the FCC will use a new granular broadband mapping approach, called the Digital Opportunity Data Collection, to target unserved households in areas that are partially served by 25/3 broadband. Phase II will also include areas that do not receive winning bids in Phase I.

For the Rural Digital Opportunity Fund, the FCC will employ the same reverse-auction approach it adopted in 2018 for CAF Phase II, which funded the deployment of high-speed broadband to 713,000 unserved rural homes and businesses for just 30% of the FCC's projected cost.

The Rural Digital Opportunity Fund will also prioritize the deployment of broadband networks that offer higher speeds and lower latency. Once the reverse auction in Phase I hits the clearing amount of $16 billion, a bid to provide faster service to an area will automatically be chosen over a competing bid to provide slower service to that same area. Jon Brodkin reported that AT&T, Frontier, Windstream, and USTelecom are fighting against the higher speeds, claiming that higher upload speeds won't benefit rural customers much:

[W]hen considering network build-out using fixed wireless technologies, an upload target of 20Mbps likely drives significant additional deployment costs—up to two to three times as high—compared to a 10Mbps upload target. At the same time, a 20Mbps upload target provides little to no additional benefits to the end user customer as all key upload use cases, including HD streaming, video conferencing, and gaming can similarly be accomplished with 10Mbps. By adjusting the upload deployment target from 20Mbps to 10Mbps, the Commission can promote competition at the 100Mbps tier, incentivize additional broadband deployment, and make limited Rural Digital Opportunity Fund dollars reach further.

Brodkin notes that CAF is already mostly funding 100Mbps/20Mbps projects. In 2018 CAF awarded $1.488 billion to broadband providers that will serve 700,000 households and small businesses in 45 states, "with 99.75 percent of locations receiving at least 25/3Mbps service and more than half receiving at least 100/20Mbps service." So what AT&T, USTelecom and others propose would be a step back. Two groups that represent smaller broadband providers urged the FCC to reject calls for slower speeds. 

The Fiber Broadband Association told the FCC that "[M]arket research data from RVA LLC show that average upload speeds in the US surpassed 10Mbps over two years ago, grew by 75 percent over the next year, and continues to increase significantly. Speed test data from Ookla show that average upload speeds are even higher—38.71Mbps as of December 2018 and increasing to 48.41Mbps as of November 2019."

Writing for Benton last month, University of Virginia Associate Professor Christopher Ali raised concerns with the proposed Rural Digital Opportunity Fund:

  1. This is not new money; it is old money with a new name. FCC press releases intimate that the $20 billion is new money, that is to say, funds additional to what is currently being spent. Instead, Rural Digital Opportunity Fund is simply a repackaging of CAF II with improvements. The FCC never misses an opportunity to pat itself on the back, but we need to take such proclamations with a grain of salt.
  2. We still have mapping issues. Rural Digital Opportunity Fund will continue to use data from the infamous FCC Form 477 to determine unserved and underserved locations. As numerous studies and articles attest, the FCC’s broadband data is woefully inaccurate, leading to an exaggerated estimate of who is connected in America. Dozens of communities are reported as being served, when they are anything but. These communities will find themselves ineligible for the bulk of Rural Digital Opportunity Fund, since $16 billion is proposed to be reserved for unserved areas and only $4.4 for underserved. Commissioner Jessica Rosenworcel shares this concern, writing in her partial dissent to Rural Digital Opportunity Fund: “I therefore find it surprising that the Commission proposes spending $16 billion dollars - nearly 3/4 of the USF support the FCC intends to use over the upcoming decade - without any improvement to the data it will use and without any reliance on updated and improved maps to tell us where the money needs to go.”
  3. Big telco continues to dominate. Big telecommunication companies dominated CAF II and are eligible for RDOF. They largely failed at connecting rural America when given the chance in 2011 with the first and second phases of CAF, and Rural Digital Opportunity Fund proposes few safeguards to make sure it does not happen again.
  4. The baseline is set at 25/3. 25/3 was already inadequate when it was made the broadband standard by the FCC in 2015 and now, in 2019, the FCC proposes to make it the baseline for Rural Digital Opportunity Fund. Making matters worse, the threshold is asymmetrical, prioritizing download (consumption) over upload (production). We need a forward-looking, symmetrical threshold, not 2015 standards.
  5. The myth of “technological neutrality” remains sacrosanct. One overarching principle of FCC universal service regulation is the concept of “competitive neutrality” which includes a commitment to not unfairly favor nor disfavor one technology over another. Unfortunately, technological neutrality often results in technological blindness. Regulators set such low speed baselines that public dollars end up supporting companies using antiquated (e.g. DSL) or inconsistent (e.g. satellite) communication technologies.

The FCC's open meeting is scheduled for January 30. With the release of the draft order this week, we're likely to see many rural broadband advocates weigh in on the proposed fund and how best to make sure broadband reaches all of America. (You can follow the conversation in Headlines.) But the Rural Digital Opportunity Fund is likely to be adopted January 30 with few if any changes to the draft order.  

Quick Bits

Weekend Reads (resist tl;dr)

ICYMI from Benton

Upcoming Events

Jan 14 2.5 GHz Rural Tribal Window Workshop (FCC)

Jan 15 Lifting Voices: Legislation to Promote Media Marketplace Diversity (House Commerce Committee)

Jan 15 The Benefits of Smart Building Technology (NTIA)

Jan 23 Opportunities for Bipartisan Tech Policy 2020 (Next Century Cities)

Jan 27 New Lifeline Program Rule Effective (FCC)

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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Kevin Taglang

Kevin Taglang
Executive Editor, Communications-related Headlines
Benton Institute
for Broadband & Society
727 Chicago Avenue
Evanston, IL 60202
headlines AT benton DOT org

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