Tuesday, February 5, 2019
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The Universal Service Administrative Company (USAC) submitted the federal Universal Service Support Mechanisms fund size and administrative cost projections for the second quarter of calendar year 2019 (2Q2019), in accordance with Federal Communications Commission rules. USAC projects a consolidated operating and capital budget of $59.90 million for 2Q2019. Direct operating and capital costs for all support mechanisms total $34.66 million and are listed for each mechanism in the chart provided below. Joint and common operating and capital costs (including billing, collection, and disbursement activities) total $25.24 million and are listed in the chart below based on the allocation methodology on file with the FCC.
On June 18, 2018, the Universal Service Administrative Company (USAC) and the Federal Communications Commission deployed the National Verifier (NV) system, kicking off the initial Soft Launch phase in six states. Since then, USAC has launched in ten additional states/territories across two separate launches. States and territories in the June 2018 and October 2018 launches are in the Full Launch phase, meaning carriers are required to use the NV system. In addition, consumers have access to use the system in these states. Since the December 2018 launch is still in its Soft Launch phase, NV system use is optional for carriers in those states and consumers do not have access yet. USAC and the FCC will provide advanced notice of the full launches to all carriers and state agencies in each scheduled launch.
The US Court of Appeals for the DC Circuit overturned the Federal Communications Commission's attempt to take broadband subsidies away from tribal residents. The Ajit Pai-led FCC voted 3-2 in Nov 2017 to make it much harder for tribal residents to obtain a $25-per-month Lifeline subsidy that reduces the cost of Internet or phone service. The change didn't take effect because in Aug 2018, the court stayed the FCC decision pending appeal. The court followed that up on Feb 1 with a ruling that reversed the FCC decision and remanded the matter back to the commission for a new rule-making proceeding.
The Pai FCC's 2017 decision would have limited the $25 subsidy to "facilities-based" carriers—those that build their own networks—making it impossible for tribal residents to use the $25 subsidy to buy telecommunication service from resellers. The move would have dramatically limited tribal residents' options for purchasing subsidized service, but the FCC claimed it was necessary in order to encourage carriers to build their own networks. The same FCC decision also would have eliminated the $25 subsidy in urban areas, reserving it only for tribal lands in rural areas. The court's decision Feb 1, in response to an appeal filed by tribal organizations and small wireless carriers, overturned both of these limitations. A three-judge panel said the FCC failed to consider that facilities-based providers have been leaving the Lifeline program and provided no evidence that banning resellers would spur new broadband deployment. The FCC also failed to properly consider how eliminating the subsidy in urban areas would affect consumers, judges determined. In addition, the FCC "failed to provide an adequate opportunity for comment on the proposed limitations," judges wrote. The FCC could appeal the ruling.
The Federal Communications Commission will vote in Feb on proposed procedures for phasing out traditional Universal Service Fund (USF) support for areas served by price cap carriers in which the carrier did not accept funding through the Connect America Fund (CAF) to deploy broadband service. Those areas were subsequently made available for auction, with funding going to the network operator that offered to deploy broadband for the lowest level of support. The USF phase-out plan for CAF II auction areas also recommends how to phase out support for competitive eligible telecommunications carriers (CETCs) that have been receiving support for those areas. In determining how to allocate legacy support, also known as CAF Phase I frozen support, the FCC proposes to use the Connect America Cost Model (CAM) among those price cap carriers that declined CAF funding in the 2015 offer. Funding will be allocated based on the relative cost of serving each area served by those carriers.
The Federal Communications Commission, under Chairman Ajit Pai, recently limited the number of providers that can offer Lifeline service in tribal areas (though that decision was struck down in court on Feb 1). And, in Nov 2017, the agency proposed a series of changes to the program that, together, would severely hobble the program and take Lifeline service away from millions of people. “Our statistics suggest the program has shrunk 30 percent under Chairman Pai’s watch,” said John Heitmann, a partner at Kelley Drye & Warren LLP who has represented Lifeline-participating companies. Heitmann elaborated on the 30-percent drop in the program over the past two years, attributing it to, “in large part, regulatory uncertainty created during Chairman Pai’s administration. [Pai] started by eliminating Lifeline Broadband Provider (LBP) designations within weeks of walking in the door,” Heitmann added, referring to Chairman Pai’s decision, at the very beginning of his administration in 2017, to revoke nine broadband companies’ official designations, which had allowed them to participate in the program. “That sent a signal to the marketplace that we have problems…The companies have been having difficulty attracting investment to grow in the Lifeline space.” What were the FCC’s specific 2017 proposals? They included a ban on standalone broadband from the program, strict limitations on subscribers’ lifetime use and the program’s budget, and a ban on wireless resellers, which make up around 70 percent of Lifeline-supported connections. The FCC’s proposal, on the whole, represents a wholesale attack on the Lifeline program.
House Commerce Committee Chairman Frank Pallone (D-NJ) said this week's hearing on net neutrality won’t be the last — and a bill is forthcoming: “It’s going to be quickly followed after a couple hearings with legislation that would repeal the repeal, if you will, of net neutrality, bring back net neutrality,” Chairman Pallone pledged during a video update.
Former Federal Communications Commission Chairmen Tom Wheeler and Michael Powell will be among the high-profile witnesses at the Feb 7 House Communications Subcommittee hearing on network neutrality. Others testifying include:
- Jessica González, deputy director and senior counsel, Free Press & Free Press Action Fund
- Denelle Dixon, COO, Mozilla
- Ruth Livier, actress, writer, and UCLA doctoral student.
Benton Senior Fellow Gigi Sohn, previously counselor to former Federal Communications Commission Chairman Tom Wheeler, said that current FCC Chairman Ajit Pai's attempt to repeal network neutrality rules could result in the reinstatement of the former rules. "If this prevails in the court, yes, the 2015 rules should come back," said Sohn, referring to the Mozilla suit, the case that is challenging the decision to end the Obama-era rules. "The court can do many different things to resolve this. They could send it back to the FCC, and say look, you didn't give it an adequate enough rationale for what you did, go back and try again," she continued. "Or it could say, look, you completely screwed up, we're just going to vacate what you did, eliminate what you did, and then the 2015 rules would come back," she said.
On Feb 1, Petitioners (including Public Knowledge) finally got to make their case in court that the Federal Communications Commission’s reckless abdication of responsibility over broadband was illegal. To highlight some of them:
- The Petitioners argued that the FCC violated the Administrative Procedure Act (APA) by failing to explain how and whether antitrust law and Federal Trade Commission enforcement could actually take the place of FCC rules.
- The FCC adopted a transparency rule, and much of its policy justification hinges on transparency being sufficient to allow the market, and antitrust and general consumer protection law, to work. But it failed to properly ground this rule in statutory authority during the rulemaking process, and the statute it did rely on was subsequently repealed. The FCC was also unable to answer some fairly basic questions about how its rule worked and its likely efficacy. Given that the transparency rule is invalid, the entire order must be vacated.
- The FCC also argued that DNS and caching -- which it has conceded are the only relevant "information processing" components of broadband -- do not fall within the “telecommunications management exception.” But this relies on inaccurate characterizations of the FCC's own precedent, and misleading citations of decisions from the Modification of the Final Judgment (MFJ) court of Judge Harold Greene.
- Local government intervenors noted that the FCC failed to even consider strong public safety arguments put forward by some local governments. Not only was it required to respond to substantive comments in the record, it has a statutory responsibility to promote and protect public safety as well. This argument got quite a bit of traction on the bench and is particularly relevant given that Verizon throttled data services used by firefighters combating 2018’s California wildfires.
- State government intervenors argued that if the FCC claims to have no authority to regulate broadband, it likewise lacks the authority to preempt states from doing so.
On balance, I come away from the argument fairly confident of a victory for Petitioners, though as to how sweeping of a victory, and on what precise grounds, it is as difficult as ever to say.
In Georgia, at least 626,070 people live without access to broadband service, according to the Federal Communications Commission. But it’s probably closer to 1.6 million Georgians who lack access to adequate broadband, according to the state Department of Community Affairs, which is in the midst of a statewide mapping project. The agency’s initial work shows a patchwork of coverage that is particularly thin in parts of middle and South Georgia. Only about 4 percent of homes and businesses in Baldwin County lack access while a stunning 86 percent go without a decent connection just one county over in Hancock County.
Many rural Georgians who are living with little to no internet service are also customers of not-for-profit electric cooperatives, which have been piping electricity to rural communities nationally since the 1930s. A proposal to empower these electric co-ops, along with a handful of telephone co-ops, to provide broadband service has once again emerged in the GA General Assembly as a way to help boost rural broadband. It’s the third such attempt. A lead proponent of the measure, GA State Rep Penny Houston (R-Nashville), is pushing the idea in 2019 with a sense of urgency, citing a looming application deadline for $600 million in federal loans and grants for rural broadband. Enabling the state’s 41 electric co-ops, or electric membership corporations, to enter the broadband game would bolster the state’s case for claiming a share of that money.
Verizon and AT&T have waffled on their timelines and business strategies for fixed 5G vs. mobile 5G. In 2018, Verizon pushed hard to be the “first” operator to launch 5G and it was going to do so by offering a fixed wireless service. The company fulfilled that goal with its prestandardized fixed 5G service, called 5G Home, that it launched in four markets in Oct 2018. However, it appears Verizon will be moving more quickly to a mobile 5G offering, while the expansion of its fixed 5G Home service may be delayed to later in 2019.
Back in mid-2018 AT&T CFO John Stephens said that AT&T didn’t think it was cost efficient to deploy fixed 5G wireless service to residences because it would take too much fiber and too many small cells to backhaul the traffic. Now, AT&T appears to be bullish on fixed wireless as a broadband replacement service. In late Jan, CEO Randall Stephenson predicted that fixed 5G wireless will have enough broadband capacity for consumers to access streaming video services similar to what cable broadband offers today. However, he did reiterate that the company will pursue standards-based mobile 5G first.
Fixed wireless has garnered a lot of attention lately because both Verizon and AT&T are deploying the technology as a first step in their 5G networks. Not only does fixed wireless provide a first step in the evolution to 5G, but the technology can also be used for urban densification. And carriers can use it to “overbuild” in their competitor’s territory as well. For instance, Verizon has a lot of fiber in New York City, but with fixed 5G and its higher speeds, AT&T could poach some of Verizon’s broadband customers. And the telecom operators could also use fixed 5G wireless to lure residential broadband customers away from cable competitors such as Comcast. But there’s more. Fixed wireless could also bring broadband to rural areas that have never had any internet service. And last week C Spire, the nation’s sixth-largest wireless operator, announced it was partnering with Airspan Networks, Microsoft, Nokia and Siklu to come up with innovative ways to bring broadband to more rural areas.
In the world of competition law, Louis Brandeis applauded “the introduction of two governmental devices designed to protect the rights and opportunities of the individual.” One was, of course, antitrust. The second was the creation of “[c]ommissions to regulate public utilities.” Brandeis always preferred competition to regulated monopoly, but he recognized that there were times when sectoral regulation was needed, as, for example with local gas, water, and telephone monopolies. He viewed such instances as “exceptional” but obviously important. For example, Brandeis understood price-setting as a tool to be used only in the context of specific industries where such government involvement was necessary. Brandeis believed there to be a “radical difference between attempts to fix rates for transportation and similar public services and fixing prices for industrial services.” Brandeis also recognized the importance of sectoral regulation where regulated entities were not monopolies. He supported “effective regulation of railroads as well as of other public-service corporations, whether they be monopolies or competitive concerns,” but he vehemently argued that such sectoral regulation should work to preserve and create competition, not, as in the Theodore Roosevelt view that he opposed in 1912, simply to acquiesce in the existence of non-competitive markets.
[Jonathan Sallet is a Benton Senior Fellow]
Snopes, one of Facebook's high-profile fact-checking partners, and the Associated Press are not renewing its contract with the social network -- dealing a blow to a program Facebook executives have said is a key line of defense in their fight against disinformation. It was no longer practical for Snopes to participate in the partnership, said Snopes Vice President of Operations Vinny Green, because having such a high-profile deal with one company prevented Snopes from doing fact-checking work around the rest of the Internet. He said Facebook needed to create better digital tools for fact-checking posts -- and that the largely manual process was too labor-intensive. There were also unanticipated public relations costs associated with the partnership, he said. Facebook has tried to have its cake and eat it too by touting the fact it's investing in efforts to crackdown on disinformation while leaving the tough calls up to third-parties. But that strategy won't work if it can't keep its partners happy
The Federal Communications Commission has voted to create a Fraud Division within its Enforcement Bureau. This action codifies and reiterates the importance of ongoing work by FCC enforcement staff to combat misuse of taxpayer funds. The new Fraud Division will be dedicated to investigating and prosecuting fraud in the Universal Service Fund (USF). This team will work closely with the FCC’s Office of Inspector General, the US Department of Justice, and other law enforcement agencies to prosecute unlawful conduct. The Fraud Division will be established following review and approval by the Office of Management and Budget and the House and Senate Appropriations Committees, as well as publication of the Order in the Federal Register.
House Commerce Committee Chairman Frank Pallone, Jr. (D-NJ) and Communications and Technology Subcommittee Chairman Mike Doyle (D-PA) sent a letter to Federal Communications Commission Chairman Ajit Pai requesting information and documents related to the FCC’s current workload, the work of its bureaus and offices, and the FCC’s interactions with the public through its handling of consumer complaints and Freedom of Information Act requests. As part of their request, Chairmen Pallone and Doyle wrote that the Committee was reassuming its traditional role of oversight to ensure the agency is acting in the best interest of the public and consistent with its legislative authority. Since Pai assumed the Chairmanship at the FCC two years ago, the agency has been unresponsive to Committee Democrats’ numerous and reasonable oversight requests. In their letter, the Committee Chairmen requested that Chairman Pai provide information updating the Committee on FCC activities, including consumer complaints the FCC has received on various topics, including: robocalls/spoofing, privacy, open internet/internet service speed, wireless service coverage/availability, access for individuals with disabilities, billing, rural call completion, telemarketing, and unwanted calls. Similar requests were made to Pai’s predecessor.
The US is now in a winner-take-all race with China for dominance in 5G, artificial intelligence and quantum computing. Dr. Graham Allison, a specialist in national security at Harvard said, "The story beneath the story is the Great Rivalry between a meteorically rising China and a ruling US. The very idea that a Chinese company could displace the US as No. 1 in any significant arena [China's Huawei in 5G], and most of all in a next-generation technology, is for most Americans an assault on who we are." And, recently, the New York Times wrote, "[T]he potential of 5G has created a zero-sum calculus in the Trump White House — a conviction that there must be a single winner in this arms race, and the loser must be banished."
Benton (www.benton.org) provides the only free, reliable, and non-partisan daily digest that curates and distributes news related to universal broadband, while connecting communications, democracy, and public interest issues. Posted Monday through Friday, this service provides updates on important industry developments, policy issues, and other related news events. While the summaries are factually accurate, their sometimes informal tone may not always represent the tone of the original articles. Headlines are compiled by Kevin Taglang (headlines AT benton DOT org) and Robbie McBeath (rmcbeath AT benton DOT org) — we welcome your comments.
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