Wednesday, September 15, 2021
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USForward: FCC Must Reform USF Contributions Now
Can we measure the benefits of broadband?
Request for Notice of Inquiry into History of Systemic Racism in FCC Policy and Licensing
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Universal service Fund

The Federal Communications Commission’s (FCC) Universal Service Fund (USF or Fund) has been one of the nation’s most important tools for connecting our nation, including rural communities, low-income families, schools, libraries, and rural health care facilities. However, the funding mechanism that supports the Fund is under significant duress. The “contribution base” – the revenues used to calculate USF contributions – has declined 63% in the last two decades, from $79.9 billion in 2001 to $29.6 billion in 2021. Meanwhile, the “contribution factor” – which is the USF fee assessed on interstate and international telecommunications service and certain telecommunications revenues – has increased from 6.9% in 2001 to a historic high of 33.4% in the second quarter of 2021. Assuming a continuation of historical trends, the contribution factor could approach 40% or more in the coming years. This situation is unsustainable and jeopardizes the universal broadband connectivity mission for our nation without immediate FCC reform. To ensure the enduring value of the USF program and America’s connectivity goals, we must have a smart and substantive conversation about the program’s future. At the request of INCOMPAS, NTCA – the Rural Broadband Association, and the Schools, Health & Libraries Broadband (SHLB) Coalition, this report analyzes several options for FCC reform of the current status quo that have been pending in FCC rulemakings dating back to the early 2000’s: (1) modifying the current revenues-based contribution methodology to assess broadband internet access service revenues, (2) assessing connections, or (3) assessing telephone numbers. Reforming the current revenues-based system to include broadband internet access service revenues is the preferred approach, both as a matter of policy and ease of implementation. Doing so would reduce the contribution factor to less than 4%.
- First, it is appropriate as a matter of public policy to assess broadband internet access service revenues because all four programs in the USF promote universal broadband. The revenues from broadband internet access services that are increasingly used by Americans today should contribute to the USF programs that support the expansion of such services to all. This will better reflect the value of broadband internet access service in today’s marketplace for both consumers and businesses.
- Second, broadband internet access service revenues are expected to be stable in the future, with the potential for some modest growth. This would stabilize the funding mechanism and stop the death spiral in the current USF contribution methodology.
- Third, it is a solution that can be implemented more quickly than the alternatives. It would be far less uncertain than seeking congressional intervention and can be done by the FCC pursuant to its current statutory mandate. FCC reform of the USF contribution mechanism now is an important first step in stabilizing the current system.
- Fourth, there is a significant advantage to retaining the current revenues-based system because most of the revenues reported to the FCC for USF purposes come from publicly traded companies that are audited and subject to stringent financial reporting standards for their revenues. This external financial scrutiny would provide an additional level of assurance that the metric used to assess USF contributions is accurately reported.
- Fifth, assessing both broadband internet access service and voice services removes the incentives of providers to arbitrarily allocate revenues from bundled services to one service and not the other. This creates an inequitable situation where some end users continue to pay into USF, while others do not, yet everyone benefits from the positive network externalities of universal connectivity made possible from the four USF programs that support broadband-capable networks and service.

Since the murder of George Floyd in 2020, a racial reckoning has taken place in our country that has forced public and private institutions — including the media — to acknowledge their histories of racism. Reps. Jamaal Bowman, Yvette Clarke and Brenda Lawrence authored a letter to the Federal Communications Commission signed by 22 more of of their congressional colleagues that calls on the agency to conduct an equity audit to “address and redress the harm the agency’s policies and programs have caused Black and brown communities and identify the affirmative steps the agency commits to taking to break down barriers to just media and telecommunication practices.” We join these congressional leaders in calling on the FCC to investigate its own history of anti-Black racism in the policies it has adopted. We also call on the Commission to issue a Notice of Inquiry and identify reparative actions it will take to redress the structural racism that exists in our media system due to those FCC policies.
FCC policy decisions — and inaction — in regards to its internet policies have resulted in a digital divide where Black, Latinx and Indigenous households are far less likely to have adequate home-broadband services than white ones. 14 This means exacerbated harm for Black, Latinx and Indigenous families. As the pandemic has made plain — and as you have acknowledged on many occasions — this divide has dramatically worsened our nation’s racial inequities and has had particularly cruel impacts on our children.

The Missouri House of Representatives’ Special Interim Committee on Broadband Development is working to develop a better understanding of broadband’s role across multiple aspects of everyday living, including education, entrepreneurship and economic development, government services, precision agriculture and telemedicine. The committee asked, can we measure the extent to which affordable broadband improves educational outcomes, labor market participation, or population growth? Fortunately, researchers constantly are adding to our collective knowledge. The following data measures:
- Economic boosts caused by broadband access
- An economic correlation to digital skills development
- The relationship between connectivity and rural population change
- The correlation between computers and home internet on educational outcomes
- How many students lack a computer, internet, or both
- How people are finding and signing up for low-cost broadband

California's net neutrality law could pave the way for conflicting broadband regulations in all 50 states, a lawyer for the cable industry argued to a three-judge panel of the 9th Circuit Court of Appeals. “The question before this court is whether interstate broadband service will continue to be governed by a single, national set of rules, or instead will for the first time face a patchwork of conflicting state regulation,” attorney Scott Angstreich, who represents broadband lobbying groups, told the appellate judges. “If California were correct, interstate broadband providers could have to apply up to 50 different sets of rules when carrying the same Netflix shows, or Zoom calls, or national news, to their customers in different states.” But Patti Li, who defended the California law, countered that the state law prevents broadband providers from discriminating against content providers they disagree with, or charging them fees for reaching internet users. “No one can doubt the central importance of fair and open access to the internet in this day and age, during a global pandemic that has pushed so many activities online, and in the midst of so many climate events and wildfires, when immediate access to information can be a mater of life or death.” She added that states don't need prior federal approval to pass consumer protection laws, “especially when it comes to a basic necessity like access to the internet.”

New York State has made great progress building broadband infrastructure and ranks second in the country for the share of population with access to basic broadband speeds. However, there are still over 250,000 New Yorkers for whom broadband service is unavailable in their neighborhood, and even more for whom broadband is unavailable in their home or place of business. Recent developments in federal policy — particularly the flexible funding provided under the American Rescue Plan, new federal programs geared at improving affordability for low-income households, and the potential for additional infrastructure dollars earmarked for broadband — provide an important opportunity for New York to craft an ambitious and detailed strategy to:
- Accelerate universal availability of the highest-speed connections in every part of the state, including in rural areas;
- Enhance access for low-income households; and
- Improve affordability, particularly for low-income residents.
Developing this strategy should include: setting concrete goals for each objective; identifying obstacles and barriers; identifying available federal, state, and local funding sources; and establishing interim metrics and a public reporting schedule to ensure accountability for progress.

The United States must act aggressively to meet two core broadband challenges. One is to ensure that all Americans have affordable access to the Internet at levels sufficient to enable them to participate fully in modern life. The other is to ensure that all of America’s communities obtain the advanced communications capabilities they will need to survive and thrive in the increasingly competitive global economy. Broadband partnerships can play a vital role in meeting both of these challenges, especially by taking advantage of the substantial federal and state funds that are becoming available for these purposes. Recognizing the benefits of advanced communications capabilities, hundreds of communities—perhaps thousands— are exploring their options, including working with willing incumbents or new entrants, developing their own networks, creating regional consortia, or pursuing other creative alternatives. As many are realizing, a partnership of some kind may be their best choice, and perhaps even their only feasible one. With sizable federal and state funding now available and significantly more in the pipeline, partnerships are likely to become an even more attractive option. In this article, we examine the pros and cons of broadband partnerships, the key legal and regulatory considerations involved, the steps that local governments should take—and the questions they should ask—in analyzing, planning, and negotiating partnerships.

The US National Science Foundation (NSF) is announcing a $25 million investment over five years to launch SpectrumX, an NSF Spectrum Innovation Center that will address the growing demand for usage of the radio spectrum. This represents the first federal investment in a national center focused on the transformation of wireless spectrum management. SpectrumX is a coalition of 27 institutions led by the University of Notre Dame. SpectrumX will develop new ways to share and manage the radio spectrum; act as a hub for collaboration among researchers, industry, government agencies and others; and develop the diverse workforce needed for future growth. The overall goal of SpectrumX is to maximize the benefits of the radio spectrum for society. The investment in SpectrumX is part of the Spectrum Innovation Initiative, a collaboration between NSF, the National Telecommunications and Information Administration and the Federal Communications Commission to promote dynamic and agile spectrum utilization while ensuring innovation and security for all users. With NTIA and FCC’s partnership, this initiative is designed to promote dynamic and agile spectrum and help align NSF’s investments with US spectrum regulatory and policy objectives, principles and strategies.

Billions in federal funding have been made available to expand broadband access since the COVID-19 pandemic began, but Wireless Internet Service Providers Association (WISPA) CEO Claude Aiken argued some of that money is being wasted on wireline rollouts in areas already covered by fixed wireless access service. As noted by Pew Charitable Trusts, the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020 handed states $150 billion in funding which could, among other things, be used to extend broadband connectivity. The American Rescue Plan Act (ARPA) followed a year later, making another $350 billion available, and the congressional infrastructure bill is expected to provide an additional $65 billion. According to Aiken, guidance issued by the Treasury Department about how states should use those funds to expand broadband access essentially ignores the presence of fixed wireless access networks. That, he said, has led to fears of overbuilding and wasteful spending. In July 2021, UTOPIA fiber argued the term overbuilding is bandied about by incumbent providers to make new competition sound like a bad thing. Aiken said that’s not quite the case here; as an example, he noted one WISPA member who serves rural Nebraska with a fixed wireless service offering speeds of 200 Mbps downstream and 100 Mbps upstream. But since fixed wireless isn’t counted when determining whether or not an area is served, the state decided to fund fiber within that WISPA member’s service area.

Amazon isn’t the only company opposed to SpaceX's second-gen Starlink proposal. Viasat, a rival satellite internet broadband provider, also filed a protest letter urging the Federal Communications Commission to dismiss SpaceX’s request. Like Amazon, Viasat claims SpaceX’s proposal for the second-generation Starlink network “runs afoul” of FCC rules for requesting clearance for two satellite configurations instead of one. SpaceX is already beaming high-speed internet to 100,000 customers through the first-generation Starlink network but has ambitions to eventually serve millions of users through a second-gen network that’ll involve nearly 30,000 orbital satellites. To build this, SpaceX has requested FCC clearance to secure two orbital configurations for the satellites, one to be used and one as a backup. However, Viasat claims past FCC actions show the Commission prohibits companies from requesting multiple satellite configurations in one application. In addition, Viasat cites an FCC rule that says applicants for one non-geostationary satellite orbit system are not permitted to file for another satellite license in the same frequency band.

The Federal Trade Commission voted to approve and make public a series of resolutions that will enable agency staff to efficiently and expeditiously investigate conduct in core FTC priority areas over the next ten years. Streamlining and improving efficiency at the agency is vitally important given the increased volume of investigatory work created by the surge in merger filings. Having already doubled between 2010 and 2020, the number of mergers filed with the antitrust authorities this year hit a record-setting pace of 2,067 acquisitions for the first seven months alone. With these resolutions in place, the FTC can better utilize its limited resources and move forward in earnest to quickly investigate potential misconduct. The Bureaus recommended that the Commission authorize eight new compulsory process resolutions in these essential areas:
- Acts or Practices Affecting United States Armed Forces Service Members and Veterans;
- Acts or Practices Affecting Children;
- Bias in Algorithms and Biometrics;
- Deceptive and Manipulative Conduct on the Internet;
- Repair Restrictions;
- Abuse of Intellectual Property;
- Common Directors and Officers and Common Ownership; and
- Monopolization Offenses.

Frontier CFO Scott Beasely said there’s no denying the company’s copper business is “in a state of long-term decline” but it believes rapid growth in its fiber business will more than make up for that slide soon enough. The operator recently announced it is aiming to hit a total of 4 million locations served by end-2021 and build to an additional 1 million locations in 2022. Beasely noted “we’ve said after 12 months we expect 15 to 20% penetration, in 24 months we expect 25 to 30% penetration and then beyond there working up toward the mid-40s penetration in the terminal state.” “So if we build fiber at an increasing pace, sell at those kind of penetration rates we should be in a position in late 2022 where the fiber growth offsets the copper decline,” he continued, adding “the longer our build goes on the more cumulative net adds we should be able to earn.” While it can’t outright stop the copper decline, Beasely asserted there are levers the company can pull to slow it down. For instance, he said investments Frontier is making to improve its customer service operations will benefit copper as well as fiber customers. He added the idea is to reduce churn so that “as we reach those locations, we still own that customer relationship because we really like the advantage of converting a copper customer to fiber.”

Comcast Chief Financial Officer Mike Cavanagh reported that subscriber additions for Comcast’s cable business—which consists of the Xfinity-branded broadband, pay-TV, landline and mobile phone units—slowed at the end of August 2021, and lags behind the same period in 2019 before the pandemic. Cable peers, such as Charter Communications, Altice USA and Cable One, also experienced stock share-price selloffs. During the height of stay-at-home pandemic orders at the beginning of 2020, companies such as Comcast and Charter added record numbers of broadband customers as people relied on home broadband for work and learning. That growth has continued through recent quarters; during the second quarter, Comcast added 354,000 customers compared with 323,000 in the previous year. The company told investors in July 2021 it expected total broadband net additions for the year to have a percentage growth in the midteens from the 1.4 million net additions in 2019. On September 14, Cavanagh said that expectation hasn’t changed for the full year.

Fiber Minnesota merged with two other fiber transport carriers – Broadband Visions (BBV) and SM Broadband (SMB) – to create what it says is one of the state’s largest transport networks. The new entity will operate under the Fiber Minnesota brand. It will have a backbone of 3,900 route miles, which is 60 percent more than the network had before the move. The newly constituted company will reach “nearly all corners of the state,” including rural areas that often are left behind, with redundant connectivity. The company also noted that the combination makes sense since principals share multiple shareholders and have significant overlap. The members of BBV and SMB now are shareholders in Fiber Minnesota. Most of the members are operating companies/ ISPs serving rural areas of the state. Member companies also come from South and North Dakota. BBV will continue to operate its video headend and Internet Services division. SMB has completely merged into Fiber Minnesota. Fiber Minnesota initially emerged from a 2020 deal in which fiber network operator Cooperative Network Services acquired the West Central Transport Group fiber network and integrated the two networks.

President Joe Biden's failure to nominate a fifth Federal Communications Commission member has forced Democrats to work with a 2-2 deadlock instead of the 3-2 majority the president's party typically enjoys at the FCC. Additionally, things could get worse for Democrats starting in January; if Biden doesn't make his choice quickly enough to get Senate confirmation by the end of 2021, Republicans could get a 2-1 FCC majority despite Democrats controlling both the White House and Senate. This is because acting FCC Chairwoman Jessica Rosenworcel's term expired in mid-2020. However, US law allows commissioners on lapsed terms to stay until "the expiration of the session of Congress that begins after the expiration of the fixed term," which means Rosenworcel can stay until the beginning of January 2022. To ensure a 3-2 Democratic majority in January, Biden has to nominate a third Democrat, renominate Rosenworcel or nominate a replacement for Rosenworcel, and hope that the Senate confirms both nominations in time.
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 Grace Tepper (grace AT benton DOT org) — we welcome your comments.
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