Yesterday, The Root published an op-ed from our Co-Chairmen Larry Irving and Jamal Simmons on the need for sensible reform of the Lifeline program. An excerpt:
These days, new social media platforms emerge regularly. Individuals have become broadcast channels with audiences rivaling some small radio stations. The barrier to new technologies reaching even wider audiences is lack of high-speed Internet access, and for many people who need it most, the barrier to access is cost. This Black History Month, reforming the federal Lifeline program to include broadband should be elevated as a key step to increasing access for Americans with the lowest incomes.
Earlier today, the Phoenix Center released a new paper titled “The Road to Nowhere: Regulatory Implications of the FCC’s Special Access Data Request.” Penned by Chief Economist George S. Ford, the paper predicts that the FCC’s data collection efforts will not serve those who want more regulations on Special Access services. In fact, Ford argues that the “FCC’s Special Access data will likely show that regulation is unnecessary in many geographic areas and already adequate, if not too strict, in others.”
Ford also reports that comments so far received at the Commission aren’t helping the process either. As he writes:
The first round of comments based on the data have been submitted to the Commission, but the comments and reports aren’t terribly helpful to the general public; the Commission, perhaps concerned the data would not support its pro-regulatory agenda, has not only restricted access to the data but those with access are required to redact from their comments and reports even the most summary of statistics indicating the extent of competition and other facts.
The commission’s new investigation into special access rates gives short shrift to these aggressive competitors and relies on an old vision of the marketplace to protect the business models of a few companies, even as it is supposed to be promoting deployment of ever-faster broadband. Those hardworking crews you see from the road, and that rumbling sound you can feel, represent investment taking place. Competition works and is working in the real world—but it apparently remains unseen and unfelt at the FCC.
You can download the Phoenix Center’s “The Road to Nowhere: Regulatory Implications of the FCC’s Special Access Data Request” at their website.
As the nation turns its eyes to political primary seasons, one of the things voters most dislike is politicians saying one thing to one group and then saying something else to others.
All politicians inevitably pander, and the smart voter needs to review the full body of a candidate’s comments to appreciate where they really stand.
The same challenge often exists with companies. For businesses also try to tell one audience, such as government regulators, one thing and Wall Street another.
Take Sprint. Sprint tells Wall Street it is incredibly well-positioned to thrive in a competitive marketplace, while begging the government to maintain regulations protecting and advantaging it against other competitors.
Start with what Sprint is telling the government: last September, Sprint told the FCC that it needs regulated access (“special access”) to business data lines: “Every one of these sites will require additional backhaul and Sprint and other competitors will depend on both TDM and Ethernet special access more than ever to be able to compete.” Sprint said essentially the same thing in 2013 in the same docket (yes, the “05” in the FCC’s proceeding refers to “2005” – this one has been going on for an absurd length of time).
But to Wall Street, Sprint sings a very different tune: it claims to save money by not relying on FCC-mandated business data circuits and writes, in its filings to the SEC, that it is purchasing alternative, more modern Ethernet circuits in the competitive marketplace. Sprint said that every year from 2011 to 2015, repeating the message that “We are also modifying our existing backhaul architecture to enable increased capacity to our network at a lower cost by utilizing Ethernet as opposed to our existing time division multiplexing (TDM) technology.”
Sprint said that it’s using Ethernet to save money; it’s apparently applying the technology for use as wireless backhaul to reduce its network costs – an effort that BITG analyst Walter Piecyk estimated “could save between $600 million to $1.2 billion a year of network expense.”
Sprint has been offering Ethernet to businesses since 2007. It’s spending money to modernize its own network, selling newer lines to customers, and talking up its technology to both Wall Street and customers. Those are all great things to do in a competitive market (and, in fact, hard evidence of a competitive market), but Sprint still wants the government to keep its hand on the scale.
So Sprint wants to sell service on those newer lines to business data customers, use others for wireless backhaul to save money, and still force its competitors to pay for regulated “special access” lines that rely on outdated technology.
There’s no reason the FCC should fall for such double speak. Sprint does not need special access regulation; it’s merely using this as a tool to increase its competitors’ costs while reducing its own.
Wall Street accepts (and has for several years) that Sprint has made the investments (a 53% increase in 2012, for instance) to make it a competitor in a competitive Ethernet market. It doesn’t need “special access” regulations or special protection from the refs (in this case, the FCC).
Like sophisticated voters, government regulators should consider all of the candidates’ statements, not merely those pandering to a single audience.
Special Access is receiving a lot of attention these days, mainly due to the FCC’s controversial stance on the topic. And now US Telecom has released three white papers on Special Access and the competitiveness of business broadband. Describing the papers, US Telecom’s Walter McCormick said, “These papers document the huge successes in this marketplace, which are exactly the competitive outcome Congress envisioned, and that the FCC has said it wants to see. We hope the FCC will innovate with us by modernizing policy and regulation so industry can leverage the competition we have today to a greater future for tomorrow.”
Late last week, the San Jose Mercury News published an op-ed from our own Rick Boucher and Larry Irving marking the 20th anniversary of the Telecommunications Act of 1996. In the piece, Boucher and Irving discuss how the relatively “light-touch” regulation helped spur broadband growth in America, and how the FCC would be wise to stay the course. An excerpt:
The act’s framers promoted light-touch regulation and a structure that led to an expanding Internet driven by new technologies, devices and applications. These forward-looking Clinton-era policies placed competition and investment as the central catalysts to drive innovation and advance consumer benefits.
Two stark paths now lie before the Federal Communications Commission (FCC): It can advance pro-investment, facilities-based broadband competition or it can discourage investment and broadband build-out.
In 1973, the Edgar Winter Group scored a Top 20 hit with “Free Ride.” In 2016, Competitive Local Exchange Carriers (CLECs) are trying to score a free ride from the FCC via heavy regulation of special access rates.
While the CLECs like to claim there is a monopoly in the business broadband market, investment numbers say otherwise. Hundreds of billions are being invested in broadband networks, and all that money is not coming from CLECs. No wonder they want the FCC to impose heavy regulations on special access. The CLEC business model is to rely on the regulatory hammer to give them access to networks others have built, and as networks across the nation are upgraded to run on all-IP — and businesses require ever-faster broadband — the CLECs are quickly finding their business model is on thin ice — with spring around the corner.
Still, they continue to bend the FCC’s ear, which is why I continue to write about special access. It’s also why the organization US Telecom has launched a new initiative called “Innovate With Us” to remind policymakers that the broadband market in America is thriving across the board, and in order to keep the good times — and investment dollars — rolling, sensible regulations need to be in place. Or, as US Telecom succinctly put it in the intro to the initiative:
[T]he FCC should champion pro-investment policies that work for business customers, not specific companies, and look beyond yesterday’s technologies toward the networks of the future.
“Competition” is one of those words that make policymakers tingle. And yet, time and time again, private industry finds itself wrestling with regulations that not only harm competition but — in the most extreme cases — actively benefit one party over another.
Case in point: wireline broadband competition. Providers have invested billions to expand the reach and speed of their networks, and yet recent actions taken by the FCC are threatening to stifle ongoing investment. But don’t just take my word for it. Check out this latest study from the American Consumer Institute titled “Concentration by Regulation: How the FCC’s Imposition of Asymmetric Regulations Are Hindering Wireline Broadband Competition in America.”
Yes, that title is quite the mouthful (as most study titles are), and to be honest, unless you’re someone who enjoys diving into studies (with charts) on regulations, investment, and the economy, you might find the report’s 18 pages a bit of a slog. But those of us who do read through ACI’s study will find a convincing — and rather damning — case that the FCC is mistepping rather badly as it continues to amass more and more power over broadband. For example, here’s what the report has to say about one of the biggest regulatory marks the Commission made in 2015:
Title II regulations are preserving and maintaining duplicative and costly copper networks. That cost is an impediment to fiber deployment that keeps ILECs more reliant on older copper-based DSL technologies. Instead of the FCC relieving non-dominant ILECs of Title II regulations in more competitive markets, the FCC has recently chosen to make broadband service providers subject to Title II regulations.
Unless there is action soon, the shift in concentration is likely to be permanent. A decade ago, the rollback of asymmetric regulations permitted modest rebound in broadband services for ILECs, because there was brisk growth in subscribers. Today, because the broadband market is so widespread, growing slower and more mature, asymmetric broadband regulation will likely have longer term consequences that could permanently displace and weaken wireline competition. Even if a rebound is possible, ILECs will face a major cost to win back customers. Regulations are costly and delays in lifting these regulations will be even more costly.
Translation: Old regulations that effect some providers and not others are forcing companies like Verizon and AT&T to invest billions in the copper networks of old. Meanwhile, other providers don’t face such regulatory roadblocks, even as they aim to invest in the very same thing legacy providers are investing in — fiber-backed, high-speed broadband networks. Not exactly the spirit of competition, is it?
The ACI study isn’t all doom and gloom for America’s communications infrastructure, though, for the group has thoughtfully included a three bullet points that can help level the playing field:
• Policymakers need to end Title II regulations for all providers.
• There needs to be less emphasis on regulation of wholesale services. Less regulation will encourage more facility-based investments, which will lead to the natural development of a healthy, wholesale market; and
• If regulators truly believe that some regulation of wholesale services is necessary – and that may be the case in some rural markets – then regulators need to apply these regulations on a symmetrical and competitively neutral basis.
In short, get rid of the bad regulations, be careful when imposing new ones, and make sure everyone is playing under the same rules. Wise words, but the question is: Will the FCC listen?
In advocating for new regulations, Net Neutrality proponents have consistently made clear that any new rules should not include rate regulation over Internet access services. For example, when President Obama announced his support for regulating the Internet as a Title II service under the Communications Act, he explicitly stated that such effort should include “forbearing from rate regulation.” Likewise, in applying Title II to broadband last May, FCC Chairman Wheeler stated that the Commission’s net neutrality effort would “forgo sections of Title II that pose a meaningful threat to network investment” and specifically declared that the “goal is not to have rate regulation.” Tomorrow, the House Energy & Commerce Subcommittee on Communications & Technology will consider the bill H.R. 2666, “No Rate Regulation of Broadband Internet Access Act,” aimed at codifying these clearly stated intentions into law.
President Obama and Chairman Wheeler were right to reject rate regulation. Any attempt to introduce pricing rules over the dynamic broadband sector would harm consumers by retarding future network investments. Such actions would also strike a blow to the American economy with lost jobs and decreased productivity. H.R. 2666, authored by Rep. Kinzinger, offers a smart, protective measure to help continue the virtuous cycle of innovation that has fueled the Internet’s success. If enacted, his bill would turn the stated intentions of President Obama and Chairman Wheeler into law.
And adopting that law would remove a substantial part of the uncertainty stemming from Title II reclassification of broadband and have the highly positive effect of giving broadband providers greater confidence to increase network investments.
Technological advancement is synonymous with American ingenuity. Successful bi-partisan, light-touch regulatory policies over the past two decades have made the American technology sector the envy of the world, increasing competition, spurring innovation and inviting greater private investment. These polices opened the door to Gigabit level network deployments by AT&T, Comcast, CenturyLink and Google Fiber, and these advances have increased broadband throughput tenfold and made high-bandwidth streaming easier for consumer connected devices.
The subcommittee should approve H.R. 2666, which would bar the FCC from regulating the prices charged for broadband. Without legislation, no guarantee exists to prevent future Commissions from rate regulating the Internet. Congressional action in this area is welcome given that promises are mere words until they are set in stone by statute.
In the latest installments of our “Let’s Get Nerdy” video series, our Co-Chairman Jamal Simmons talks about our recent Cost Campaign study and why it’s more important than ever to close the digital divide.
Simmons also discusses the progress being made through ConnectED and the Lifeline program, and how policymakers can still do more to close the digital divide.
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