Wednesday, September 28, 2011

An Important Announcement about Rural TeleCommentary

Every year I attend the Berkshire Hathaway Annual Meeting in Omaha, in part for the shopping and in part for the unrivaled wisdom given by Warren Buffett and Charlie Munger. One of the lessons from the 2011 meeting that really hit home with me was, The secret to success in a field is learning all you can about it.” I don’t remember if Charlie or Warren said this, but year-after-year formal education and continual personal growth through learning are always emphasized by both distinguished gentlemen of wealth and success. I have always placed the highest possible value on education, and as my graduate coursework came to an end I still wanted to find ways to develop expertise in specific areas of the telecommunications industry. In a way, my telecommunications graduate program was only the beginning of my journey to becoming an expert in telecommunications policy, economics, business and engineering. The University of Colorado ITP program helped me figure out which areas of the industry that I desired to learn more about.  

Launching Rural TeleCommentary was my secret to learning all I could about the rural telecommunications industry, with the anticipation that this website would help me achieve success. At the beginning of the year, my definition of success was definitely finding a job where I could do what I love, which is analyzing, learning and writing about the rural telecommunications industry. I’m delighted to report that my efforts paid off and I have achieved this particular goal.

Unfortunately, success often requires personal sacrifice. In order to focus all my attention on my new job, I will no longer be posting regularly on Rural TeleCommentary.   

Now for the good news—you needn’t travel far to continue reading my perspectives about the rural telecommunications industry. As a full time analyst for JSI Capital Advisors, I will be writing about regulatory issues and a wide range of other topics that are both similar to what I have covered on Rural TeleCommentary and completely new to me. I am honored to join a wonderful team of telecom experts at JSI Capital Advisors, and I believe that this is probably the best possible job opportunity that I could have ever asked for! I also except to become even more involved with the rural telecommunications providers that I love so dearly. 

My regular readers probably are aware that I have been writing part-time for JSI Capital Advisors for a few months, primarily about USF Reform. I hope that you will follow me to a different URL and continue enjoying and learning from my articles as well as those written by my colleagues, who offer a wealth of information and analysis on telecom financial activity, mergers and deals, the wireless industry, cutting-edge technology, and many other exciting topics. We are all experts in different aspects of the telecommunications industry and together I think we make a very strong team. 

JSI Capital Advisors publishes 3 blogs- The ILEC Advisor (where my articles are featured), The Deal Advisor and Phone Numbers; as well as The Daily Monitor which includes news and press releases from across the industry in addition to our original content (you can subscribe to Daily Monitor e-mails for free!).  We also have a couple of interesting forums on LinkedIn- The USF Forum and The Deal Advisor; and JSI Capital Advisors is on Twitter @JSI_Capital

I plan to leave the content on Rural TeleCommentary for the near future to serve as a resource for anyone interested in learning about the rural telecom industry. I will continue to update USF Reform Headquarters with links to interesting articles about this important proceeding. I may, from time-to-time, post an update here if something extraordinary happens in my life pertaining to the rural telecom industry, and when I finally start working on my master’s thesis (I know, I should be working on it now, but I’ve hit some roadblocks at the moment…)—I’ve had a number of readers generously offer assistance with that project and inquire about how it is progressing. To answer that question, right now I am 1) waiting for the USF reform final rules, and 2) still looking for an advisor at my school.  

I still encourage readers to contact me with questions or interesting rural telecom industry news—I will always be looking for things to write about! 

I sincerely want to thank everyone who has ever read this website and encouraged me in any way this past year and since the beginning, even before Rural TeleCommentary was launched. I never ever anticipated that I would get almost 13,000 readers in just 10 months. There are so many amazing people in the rural telecom industry and I hope everyone stays optimistic even in these difficult times. This is a group of people that I am very proud to be a part of, and I am looking forward to the wonderful opportunities that lie ahead at JSI Capital Advisors. 

Cassandra Heyne
P.S. You can still follow me on Twitter @RuralTelComment if you miss me!

Sunday, September 25, 2011

Highlights from TPRC 2011 (Research Conference on Communications, Information and Internet Policy)

The 39th Annual TPRC just wrapped up and I was honored to be able to attend this conference for the 3rd year in a row. TPRC is held every year in late September at George Mason Law School, and it has become one of the highlights of my year in terms of telecom events. TPRC is primarily for the government and academic/research telecom community, and it has benefited me as both a student and someone who is edging for a career in telecom policy. There is always an amazing selection of presenters including well-known authors, economists, legal visionaries, and engineers (national and international) who dissect nearly every possible aspect of current and potential telecommunications and information communication policy.

Friday, Sept. 23 included a few panel sessions and a keynote speech by NTIA Administrator Larry Strickling (it is always a pleasure to hear what he has to say). On Saturday and Sunday, the schedule includes 6 sessions—for each session, participants can choose from 5 different session topics, and each topic includes the presentation and open discussion of 2 or 3 research papers. I doubt any two TPRC participants have the exact same experience at the conference due to the sheer amount of material covered and the variety of sessions. I always have a really hard time deciding which sessions to attend, and I definitely have many interesting papers to read for the next few months!

I tried to pick a variety of sessions where I could hear about issues beyond what I typically focus on (rural broadband, universal service reform, FCC proceedings). I ended up learning something new and interesting about the following topics: international broadband plans, technology patents, wireless grids and social emergency response technologies, spectrum auctions and policy, FCC involvement in ISP interconnection disputes, fiber costs and competition, “phonelessness,” effectiveness of the lesser-notorious USF programs like Rural Health Care, broadband gaps, data limitations of the National Broadband Map, “Gross National Happiness” and the National Broadband Plan, international carrier selection policies, the African perspective on broadband, international telecom bribery and corruption, European Net Neutrality and the freedom of expression, and deep packet inspection. Phew! Even though there weren’t any topics specifically for, about, or presented by the RLEC industry; everything was still very much relevant to my work and my interests in rural telecom and the industry as a whole. I actually enjoy this conference mostly because it gets me away from the usual perspectives on things, and helps me think about “bigger pictures” and perspectives I may not typically consider. It also always inspires me to do my own research on topics that are both new and known to me, and in the last 2 years research from this conference has greatly aided some of my University of Colorado ITP projects.

Here are some highlights from my favorite panels and sessions:

Panel: National Strategies for Broadband Deployment, Adoption and Use: A Comparative Review and Lessons for the U.S. and Canada

This panel was really interesting to me because it discussed and compared various national broadband strategies in a variety of countries (Australia, New Zealand, Singapore, European Union, Brazil, Argentina, Colombia, Peru, Mexico). I actually did a broadband plan comparison study last year in an International Telecom Policy class at CU about broadband plans in the U.S., Japan, South Korea and Sweden where I discussed the NBP’s shortcoming of recommending 100 Mbps for 100 million people and 4 Mbps for rural Americans. During my research process, I had looked at national plans in a variety of countries before deciding on Japan, South Korea and Sweden—I had specifically looked for plans that set speed target goals at the same rate in urban and rural areas, and plans that focused heavily on the adoption side of the equation. Interestingly, I got the idea for this paper at last year’s TPRC from a session about broadband deployment in Japan. In this panel, Richard Bennet (ITIF) talked about the Singapore broadband strategy, which apparently came about partially from Singapore’s desire to compete with the US when Verizon started to deploy FiOS, and when it looked like the US was going to massively invest in FTTH. Singapore also wanted to position itself as a hub for biotech R&D, and improve competitiveness and quality of live through broadband. Bennet made the distinction that while the US NBP is mostly a study in the benefits of broadband; the Singapore plan is more like an actual procurement specification on what kind of technology to deploy and how to do it. Singapore now has 104.5% penetration of wired broadband and 144.2% penetration of wireless broadband, which is pretty impressive. On the opposite end of the spectrum are Latin American Countries (LACs). Prof. Judith Mariscal (CIDE) talked about the challenges that LACs face in implementing anything resembling a national broadband strategy—not many LACs have formal broadband plans, but many are grappling with some type of goals at least. Many LACs currently have broadband penetration at rates less than 10%, with Peru at 3.1%, and Peru apparently has a universal access fund that has net even been used. Overall, there is a lack of organization and coordination in LAC governments and regulatory bodies, and in the case of Mexico, a weak institutional policy combined with ambitious goals causing significant limitations to broadband achievements.

Keynote Speech by NTIA Administrator Lawrence E. Strickling

Strickling gave the keynote speech at my first TPCR (2009), and last year it was FCC Commissioner Mignon Clyburn. It was nice to have Strickling back again; apparently he is a long-time supporter of TPRC. His keynote speech focused on the importance of implementing data-driven policies, and ensuring that telecom research and data is independent, credible and relevant. He identified research needs in the areas of broadband, spectrum and Internet policy. For broadband, we need solid research on economic and social benefits, Internet usage/behavior, availability, and discrepancies between specific groups (like urban/rural). Strickling argued that “economists have greatly advanced spectrum policy over the years;” and “the day of giving away licenses is over.” For Internet policy, we need fast and flexible decision making that does not fall prey to political stalemates and heavy handed bureaucracy.

Session: Wireless and Society
Paper: The Central Role of Wireless in the 21st Century Communications Ecology: Adapting Spectrum and Universal Service Policy to the New Reality, Mark Cooper (Fordham/Silicon Flatirons)

Cooper, who is always a lively and interesting speaker, argued that the mobile revolution is the greatest revolution in the history of humanity—unlike previous revolutions (writing, etc.); mobile communications is for everyone, not just an elite subset of the population—it also spread like wildfire. Cooper presented some interesting policy implications that are a result of the mobile revolution, which is definitely a timely issue as the government considers repurposing federal and broadcasting spectrum. Cooper warns that we must not have another “hundred year mistake” when this spectrum is released, and the government should not allocate spectrum to specific types of owners or create another batch of incumbents who will never give up the spectrum even when their use is no longer viable. He would like to see ¼ - ½ of the spectrum go to unlicensed use, and we also need better ways to determine the value of unlicensed spectrum. Cooper talked about how the value of bandwidth declines as bandwidth availability increases; and wireless operators need incentives to use spectrum efficiently and need to send signals to consumers about the costs that consumers impose as a result of their usage behavior. He made some interesting points about broadband speeds, which were typically contrary to how I think about broadband speeds (which is faster is better and the US shouldn’t settle for anything less than the best—for everyone). He said that 10 Mbps will basically do everything that people need, and engineers will figure out how to make things work within this range. He added that basically the only thing that you can do with 1 Gbps service that you can’t do with 10 Mbps is holographic videoconferencing… and really, who needs to do that? I’ve skimmed though Cooper’s paper and it is really interesting—there are some very useful charts about broadband penetration, wireless growth and speed needs for various applications.

Session: Evaluating Broadband Policy 2
Paper: “The National Broadband Map: Data Limitations and Implications,” Tony Grubesic (Drexel University; paper available upon request)

This was one of the two presentations that I was most excited about, and it did not disappoint. I fully intend to get ahold of Grubesic’s paper because his research and conclusions were very interesting and quite pertinent to a topic that I have been following this year—inaccuracies in the National Broadband Map. He argued that the map is a good start, but it is important to understand the data limitations particularly the level of participation (only 27% of Virginia providers participated) and the tendency to show “highly optimistic data.” He talked about a problem that I think a lot of people have been concerned about—that census blocks and wire centers don’t always match up, which leads to some inaccurate representations where census blocks are considered served when in fact the entire census block is definitely not served by a particular provider/technology, specifically DSL which has distance limitations. He also provided an interesting example of Dublin, Ohio where 46% of completely empty census blocks with no population or businesses are listed as served, which gives a “fuzzy view” of broadband coverage. Grubesic recommended that the map should be updated to reflect 2010 census information, and there are 35% more census blocks in 2010 than 2000 which is not reflected in the map. Overall, he thinks the map is a good effort but it is far from perfect—I definitely agree. I’ve only played around with the newly updated map for a little while, but it didn’t take me very long at all to find problems and get really frustrated with the overall navigation and ease of use. It also took forever for the map to load and then to move around within the map, which I found kind of ironic since I have a fairly decent DSL connection.

Session: ICT in Developing Countries
Paper: “Bribery and Corruption in Telecommunications,” Ewen Sutherland (University of Namur)

This was the other presentation that I was most excited about—even though this isn’t a topic relevant to my work, I thought it would be really interesting—and it was! A lot of presentations at TPRC are really heavy on econometrics and models, which are obviously important, but it is also interesting to learn about what is happening in the crazy world of telecommunications beyond graphs and charts. Anyway, Sutherland discussed a variety of colorful examples of bribery, corruption and nepotism in international telecommunications; he also discussed the Foreign Corrupt Practices Act and concluded that there is very little recognition of the corruption/bribery problem or analysis of the trends in this area. There are inconsistent enforcement mechanisms across different countries, it is hard to estimate the costs on consumers, and there are even unclear standards and practices within bodies like the OECD and UN. I thought the examples of nepotism in North African/Middle Eastern countries were especially interesting—in Morocco, the king owns 69% of a major telecom provider; in Libya, the Gadhafi family owns both mobile carriers; in Syria, the president’s cousin owns 75% of Syriatel… you get the idea! Basically, even countries that have supposedly privatized and liberalized telecommunications and established an “independent” regulatory may not have truly done so, and there isn’t really anyone who can do anything about it. I am looking forward to reading Sutherland’s paper for the entertainment and shock value alone—it is chock full of crazy examples of these problems from all over the world.

Session: Network Management
Paper: “From Competition to Freedom of Expression: Introducing Article 10 ECHR in the European Network Neutrality Debate,” Jasper Sluijs (Tilburg University)

I enjoyed all three of the presentations in this session, but especially this hard look at whether Net Neutrality is a human right, or if it actually a property right for ISPs to implement network management techniques. This is an extremely timely topic as the Net Neutrality rules here were just published in the Federal Register (I’m looking forward to analyzing them in the coming weeks… kind of). Europe has taken a lighter hand on NN regulations, where non-neutrality is OK as long as network management practices are disclosed (transparency principle) so customers can make an informed purchasing decision. However, it sounds like public interest and human rights groups have been just as vocal in Europe as they have in America, and have gone as far as arguing that NN violates the freedom of expression and the EU Human Rights Convention, (which is equivalent to our Freedom of Speech, but with some codified limitations). Sluijs looked at the question: “Is network management “expression” even if it has no public value?” He explained that application of the Human Rights principle is more complex than the public interest groups assume, and the real debate should be about “substance rather than rhetoric”—I fully believe that this applies in the U.S. as well. I am far on the anti-Net Neutrality rules side, and I have been continually amused by some of the things that public interest groups have come up with in favor of these rules. Like the AT&T/T-Mobile merger, there have been a lot of really strong opinions that actually have no relation to telecom policy. Digression… My favorite example of this was an article I came across back in December by a radical feminist group who claimed that ISPs like Verizon, etc. would literally prevent women from communicating on the Internet and prevent other things like searching for abortion providers. Really?!?! ISPs don’t have anything better to do than suppress feminist-toned emails and blogs? I didn’t realize that in 2011 there was still a problem of women being treated unfairly. I also didn’t realize that deep packet inspection could determine the sex of a packet. After reading the article a few times in utter shock that anyone could come up with something so insane, it became pretty clear that the authors were of an age where the Internet was either not widely understood or not widely used. To me it seemed like they heard about this crazy net neutrality thing from a left-wing group and ran with it, all the way to the debate over a woman’s right to choose. Anyway, this presentation (and the following one in this session on political and economic issues in Net Neutrality) reminded me of that article, and how ridiculous it is that NN has become such a political issue when it is really not at all (at least, I don’t think it is… I don’t really think it is an issue at all though). Basically, the presenters at this session all described how NN is a very complex and multifaceted issue, and there are no single straightforward solutions. It will be really interesting to see what effect, if any, the US regulations have, and I expect there will be some follow-up on this at next year’s TPRC.

I highly recommend that you check out the TPRC website and skim through some of the papers. There is an amazing wealth of research available, and there are plenty of topics that have implications for rural telecommunications providers, and plenty that are just plain interesting.


This is kind of a bittersweet post for me—this will probably be my last regular entry here on Rural TeleCommentary. I will be making an announcement about it sometime this week. As is often the case with great opportunities, sacrifices have to be made. I won’t be going away, just going somewhere else full-time (JSI Capital Advisors).

I’m looking forward to hearing about the NTCA Fall Conference in Seattle!

Cassandra Heyne

Sunday, September 18, 2011

Digging through my Archives, Thinking about the White Spaces

Over the last 4 years, I tended to save every single paper, homework assignment and notebook I amassed from 2 graduate programs, and sometimes I wondered why I saved all that stuff… But, every now and then, something pops up in the news and I remember “Oh, I wrote about that 3 years ago.” When I look back on my most notable graduate school papers, some of them still hold relevance today even with the fast paced telecommunications industry. The recent White Spaces progress is one such example. In 2008, I was really excited about the White Spaces. In my spectrum policy class at CU that year (taught in part by Dale Hatfield), I wrote a really detailed paper about rural spectrum policy, which was very well received by the distinguished professors. Here’s a quick introduction to how I was thinking about rural spectrum policy in 2008 (back when there were only 3 million iPhones in service):

Spectrum access is increasingly important for rural telecommunications providers as new advanced wireless technologies are developed and become available on the market.  Advanced wireless services can help increase connectivity to all Americans, and innovative wireless applications can improve quality of life for people in remote and rural areas. However, rural telecommunications providers must first have reliable means to access spectrum, or the communities that they serve will continue to wait for the deployment of advanced wireless services by spectrum licensees who focus network investments in more populated—and thus profitable—areas. The purpose of this report is to analyze the FCC’s spectrum policies pertaining to rural spectrum access, and to provide recommendations as to how the FCC—and rural providers themselves—may be able to increase access to spectrum in efficient and effective ways. On one hand, the FCC claims that they are trying hard to accommodate rural providers with much needed spectrum access, but on the other hand rural providers and advocacy groups argue that the FCC could do much more in rural providers’ benefit. In the current state of spectrum policy, regulatory barriers are too high for small rural providers to easily gain access to spectrum. Unless important changes are made to the current system, rural providers will continue to go without adequate spectrum access (licensed and unlicensed) which ultimately penalizes millions of Americans who live far outside metropolitan service area boundaries.  
Rural Spectrum Access and Policy Analysis, August 2008

So has rural spectrum demand and policy changed much since 2008? No, not really—small rural providers still do not have easy access to spectrum. The wireless industry certainly has changed, which has put even more pressure on rural wireless carriers to get into the wireless broadband game or risk becoming obsolete. In 2008, I said “there are still considerable gaps where FCC policy falls short and the interests of rural providers and citizens go unattended.” That is certainly as true today as it was 3 years ago, in my opinion. I also said, “Increasing access to spectrum for rural telecom providers who care about offering quality service to all people is indeed the first step to bridging the digital divide and ensuring equal, quality service for all Americans… To remain competitively viable, rural providers must embrace new spectrum-based services, because ‘wireless technology, which poses the greatest peril to independent rural wireline telcos, may also become their salvation,’” Still true today, for sure.

In this project, I proposed 3 recommendations for increasing spectrum access for small rural telecom providers:

  1.  Adopt a “keep what you use” approach (imagine how different AT&T’s footprint would look if that policy was strictly enforced)
  2. Use the White Spaces for unlicensed spectrum in rural areas
  3. Use Universal Service Fund subsidies “to pay rural wireline telcos to switch to wireless or other advanced services.” (No comment…) 

Anyway, at the time, I was really hopeful about the White Spaces: “Since the majority of White Spaces reside in rural areas, using them for unlicensed wireless service may successfully eliminate many of the regulatory barriers preventing rural providers from accessing licensed spectrum. White Space utilization also opens doors for incentives to innovate and deploy services over high-quality frequencies with optimal propagation characteristics for rural areas. Unlicensed wireless service could support interesting applications such as remote crop monitoring and irrigation control; local public safety and municipal networks; and distance education.” I don’t think I will ever forget the following data from a 2008 New America Foundation report, which illustrated how much White Space spectrum was available in certain rural-ish markets:  

When the FCC released the White Spaces Order almost exactly one year ago, I was still very hopeful about the possibilities for rural wireless developing in this spectrum… Then I completely forget about it, once the heat turned up on USF Reform. The White Spaces, unused TV frequencies between 50 and 700 MHz, promise specific propagation benefits ideal for rural areas—so much promise that they have been called “Super Wi-Fi.” The FCC’s September 23, 2010 Memorandum Opinion and Order was met with some resistance by country music festivals and sporting event coordinators who claimed White Space devices could interfere with their precious wireless microphones. Thankfully, the FCC did not find that country music festivals were more in the public interest than wireless broadband, but they did require spectrum sensing capabilities in the radios and strict power limitations. Since then, I’ve been waiting for cognitive radio technology and White Space testing to evolve. 

It was announced last week that the FCC would finally begin testing the White Spaces database operated by Spectrum Bridge, “which will allow devices to take advantage of the unused spectrum between television channels” (HilliconValley). According to a Sept. 14 FCC press release, “Unlocking this valuable spectrum will open the doors for new industries to arise, create American jobs, and spur new investment and innovation.” Interestingly, Obama also released the American Jobs Act draft legislation this past week, which also includes some hefty aspirations for wireless broadband innovation and deployment resulting from “voluntarily” released broadcaster spectrum. These two actions signal to me that the government s hedging its bets on wireless broadband, which can be seen as either good or bad, depending on what type of company you happen to own.  Anyway, the Spectrum Bridge database trial begins tomorrow (Sept. 19) and runs through November 2; after which Spectrum Bridge will provide a report to the Office of Engineering and Technology, which will be followed by a short comment cycle. If everything goes smoothly, “OET would grant final approval for Spectrum Bridge to operate its database system with certified TV band devices once it determines that the system compliant with all of the applicable rules and requirements” (FCC DA 11-1534). Then, hopefully, we will truly be ready to unleash the power of the White Spaces. 

What do the White Spaces mean for rural telecom providers? I think it is still too early to tell, but I have definitely been thinking about it for over 3 years now. White Space spectrum is most abundant in rural areas, which is definitely a good thing. It will be unlicensed, and I’m not sure how much success RLECs have had with unlicensed spectrum so far, but this is definitely the right time to start thinking about innovative business models and opportunities to take advantage of this spectrum.  One article this week explained, “technology used in these frequencies could go a long way toward helping expand broadband to all Americans, could be used to help corporate networks…to help deliver in-home applications including smart grid, and by wireless and wireline service providers that want to create or fill in existing broadband networks… the prospects of activities related to white spaces to create jobs and continue the wealth of our nation and world are significant” (Paula Bernier, The Dark Cloud Over White Spaces,
Two things from this passage stood out to me: the potential for smart grid innovations and for filling in gaps of existing broadband networks. I’m not saying that the White Space spectrum can replace FTTH, but I would bet that it is definitely better than, say, satellite broadband, which some parties in the USF Reform debate are hoping will be used to “fill in the gaps.” I am excited to see technological innovations in cognitive radios and how the White Spaces might help facilitate innovations in wireless technologies for farming, public safety, natural resource management, and industrial/commercial use. How White Space spectrum can be used for normal at-home and at-work broadband remains to be seen. I wouldn’t abandon wired network upgrade plans and put all the eggs in the White Space basket just yet, but I definitely think there will be opportunities for rural carriers in the next couple of years. 

It’s nice to see that one of my 2008 rural spectrum policy recommendations is slowly coming to fruition, and I hope that the White Spaces eventually live up to the “Super Wi-Fi” moniker and provide profitable opportunities for small rural telecom providers. Although I love wireless broadband as much as the next analyst, there are specific limitations that have always made me favor FTTH. Specifically, spectrum is a finite resource and glass is not. There is only so much that the FCC can do to increase spectrum access for rural carriers, which is why I have continued to argue that carriers should invest in FTTH even if the demand for 50 Mbps service isn’t widespread today. It will be. In the meantime, all options for expanding broadband in rural areas should be explored to the fullest extent, and that includes unlicensed wireless. 

What do you think—are there any opportunities for RLECs in the White Spaces? 

Cassandra Heyne

Sunday, September 11, 2011

The Final USF/ICC Reform Lightning Round: Reply Comments— Iowa RLECs, Iowa Municipals, Blooston Rural Carriers

Reply comments were due September 6, 201 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. This is it, people—the final chance for the industry to throw some hard punches at whomever they are so inclined to oppose, be it the FCC, the RLECs, the price cap ILECs, the Joint Board, or any number of commenters who may have said something irksome in any of the previous comments going back to April 1. Many of the reply comments are fairly short and only attack one or two issues, so I’m switching back to the multiple summaries per post format. Today I’m looking at different Iowa telecom perspectives from the Rural Iowa Independent Telecommunications Association (RIITA) and the Iowa Association of Municipal Utilities (IAMU); and the Blooston Rural Carriers (which include a few Iowa companies).

RIITA is a rural telecom organization with 130 members, nearly all of Iowa’s RLECs. Half of RIITA’s members have 1000 or fewer access lines, and all members serve high-cost rural areas—“In most areas, no other providers exist and many areas served have very few customers per square mile, driving up the marginal cost of service” (pg. 1). RIITA supports the NTCA/OPASTCO/NECA/WTA RLEC Plan, but emphasizes the following areas of reform are especially critical for Iowa RLECs:

  • Rate of Return: RIITA argues that RoR is critical, and “without [RoR], small rural carriers would have no basis for planning and investing in their communities that would be consistent and reliable enough to justify the investment” (pg.2). Furthermore, RIITA argues that RoR must be based on embedded costs, which “have formed the basis for compensating utilities for over a century” (pg. 2).
  • Carrier of Last Resort: RIITA insists that COLR requirements are critical for consumers, and “without a requirement of service, no carrier would be left to serve them” (pg. 2).
  • Recovery Mechanism: Small telecom companies need a reasonable transition period to move to a new ICC regulation system, and “capital investments in telecommunications are such that they require long-term planning and involve relatively long lived assets so it is critical that the recovery mechanism be designed to allow these companies to make this transition” (pg. 3).
  • Arbitrage: RIITA sternly warns that “any company using our networks to access rural consumers, including companies using the internet for voice service and pushing commercial services over the internet should participate in maintaining those networks” (pg. 3). RIITA explains, “What seems to a VoIP carrier of a commercial internet based provider like a free network is not, in fact, free. All users of these networks should participate in the costs of the networks” (pg. 4).

My Thoughts: Considering the sheer number of RLECs in Iowa (more than any other state), I can only hope that their collective voice is being heard at the FCC. I would have liked to see more detailed analysis in these comments with regards to some of the topics in the Public Notice, $0.0007 access rates in particular. I know the Iowa companies have a lot to say on this topic. I really liked RIITA’s closing comment: “The Commission needs to commit to [the goal of universal broadband] and work to make the funding available or abandon that goal. Under either circumstance, it should stop trying to dismantle the network that already provides broadband communications to rural America” (pg. 4). If you are interested in learning more about Iowa’s efforts to ensure reasonable USF reform such that Iowa RLECs are not “dismantled,” I recommend checking out The Great Disconnect, which is an advocacy project created by RIITA along with the Iowa Telecommunications Association (ITA) and Iowa Network Services (INS). It is a great website and I have really been impressed with this coalition’s advocacy efforts in Iowa over the last few months.


Iowa doesn’t just have a lot of RLECs; Iowa also has a large number of municipal broadband networks. IAMU has 545 Iowa communities as members, with 28 municipal broadband networks. 19 of these networks provide telephone service as CLECs, and most of them provide cable and broadband via fiber or fiber/coax. IAMU explains, “The systems were established because the residents of the communities in question believed that affordable access to advanced communications capabilities and services was vital to their economic vitality, educational opportunity, and quality of life and that the incumbent service providers were unwilling or unable to provide the necessary infrastructure and services at anything close to competitive rates” (pg. 2). IAMU comments that the FCC has recognized the progress made by Iowa municipal broadband providers, largely due to a 1997 state decision to allow municipals to deliver telecom services. This decision was challenged by the Iowa Telecom Association, but ultimately affirmed by the Iowa Supreme Court. Now, the IAMU members “would like a fair opportunity to bid for Connect America Funds to extend or upgrade their services to unserved or underserved areas” (pg. 3). IAMU does not support the RLEC Plan or the ABC Plan.

On the “Biased and Unreasonable” RLEC and ABC Plans:  IAMU argues: “These self-serving proposals by companies representing only a limited segment of the rural broadband ecosystem would not phase out USF subsidies, but would actually increase them; would require investments of billions of dollars in technologies that would produce broadband with too little capacity to support robust economic development or ever-increasing consumer bandwidth requirements; would do little, if anything, to cure the inefficiencies that have made the USF too costly; and would insulate the carriers from competition from potentially more qualified bidders of CAF funds” (pg. 4).

On ROFR: Rights of First refusal is turning out to be one of the biggest debates in this comment cycle, and IAMU falls on the “no way” side. IAMU urges the FCC to reject the ABC Plan’s ROFR proposal, arguing that IAMU members “became providers of communications services, not because they wanted to compete with the private sector, but because the incumbents were not offering the services that their communities required or were doing so in an inadequate or prohibitively expensive manner” (4). Furthermore, “Dissatisfaction with the incumbents’ services ran so deep in Iowa, that the communities that authorized their municipal utilities to provide communications services did so by overwhelming majorities” (pg. 4). Instead of ROFR, IAMU believes that the FCC needs to “establish an open and competitively-neutral process that gives all qualified providers an opportunity to bid and be judged on the merits of their individual proposals” (5). This is a nice way of saying “reverse auctions,” but IAMU warns that reverse auctions could be gamed by the large carriers, who could submit “lowball bids” in areas where they face competition and high bids in areas where there is no competition. IAMU recommends that the FCC “grant subsidies to those bidders that offer to make the greatest bandwidth available to the greatest number of residents and businesses in question with the funds available” (pg. 5). 

On Separate Mobile and Fixed Funds: IAMU supports establishing separate funds for fixed and mobile broadband because: “Wireline and mobile broadband are not close substitutes but differ in many important ways—including cost structure, performance, reliability, etc. As a result, treating them the same would result in significant foreseeable and unforeseeable distortions” (pg. 6).

My Thoughts: Iowans are nothing if not resourceful and dedicated when it comes to deploying telecommunications services in rural areas. Since most of Iowa is rural, state history has seen some impressive and unique solutions, which is evident in the awesome book Lines Between Two Rivers. Since the beginning of telecommunications, large incumbents (ahem, AT&T) have seen Iowa as a rural wasteland where no investments can be recovered; but both RLECs and municipals have seen the same rural wasteland as a population that needs and deserves quality and affordable telecommunications services. However, the Iowa RLECs and Iowa municipals are not exactly what I would call allies, which is pretty clear by reading the RIITA and IAMU comments—I actually picked these two comments to summarize here today in order to illustrate how much deviation still exists regarding the ideal solution for USF/ICC reform. Even an RLEC and a muni serving the same rural community may have drastically different perspectives on USF, and when you include WISPs, wireless, cable, satellite providers and the price cap ILECs, things start to get pretty convoluted. I still don’t think the industry at large is any closer to a consensus than it was 4 months ago, and in reality, I feel like the “Consensus Framework” has pushed some of the niche providers like municipals even further a consensus. I feel like some of the proposals in the ABC Plan, such as ROFR, are so far from an industry consensus that it is almost an insult to the portion of the industry who did not participate in drafting the proposals. I obviously want the final rules to be advantageous (or at least not destructive) for RLECs, but that doesn’t mean I wish to see other small rural providers be destroyed in the process, especially if this means that rural Americans will lose access to broadband.

I agree with IAMU’s argument that mobile and fixed broadband funds should be separate, specifically because of the different cost structures that exist for fixed and mobile broadband. I just do not think it would be practical or reasonable to lump them all in one fund, however I do think the size of the mobility fund should be larger with a more flexible budget. I don’t necessarily agree with IAMU that wireline and wireless “are not close substitutes;” I actually strongly believe that wireless is both a substitute and a complement to wireline broadband—it just depends on a consumer’s unique needs, and on what services are available given the consumer’s budget and needs. I believe there should be ample funding for both fixed and mobile broadband in rural areas, and consumers should not have to choose between one or the other as a result of regulatory incompetence. 


In these comments, the law firm of Blooston, Mordkofsky, Dickens, Duffy, & Prendergast, LLP represented the interests of 22 RLECs and the South Dakota Telecommunications Association. The Blooston Rural Carriers support the RLEC Plan/Consensus Framework because it “constitutes the best available alternative at this time to enable RLECs to continue to make progress toward the completion of the conversion of their networks to broadband” (pg. 3). The Consensus Framework will allow RLECs to repay loans, upgrade facilities, and “will help preserve the assurance of repayment necessary to induce lenders to continue to fund RLEC broadband investment projects” (pg. 3). The Blooston Rural Carriers oppose commenters “who argue in favor of more drastic changes in universal service and intercarrier compensation that would effectively gut the revenues of rural carriers and endanger the ability of rural customers to obtain high quality broadband services” (pg. 2).

On Ensuring Adequate USF/ICC Support for RLECs: The Blooston Rural Carriers argue against parties that have urged the FCC to eliminate corporate operations expenses (COE) and eliminate all intercarrier compensation revenue. The Blooston Rural Carriers argue that some commenters support eliminating COE “for no other reason than to drastically reduce the amount of support available to carriers,” and COE recovery is important to maintain because these costs are fundamental to providing telecommunications services and include many costs associated with FCC regulation compliance. The Blooston Rural Carriers argue that eliminating ICC and imposing bill and keep is “without merit,” and “this argument is nothing more than a red herring by entities that would like to improve their bottom lines by not paying to use the expensive last-mile networks of other carriers” (pg. 5). Furthermore, “While the elimination of all intercarrier compensation would help certain entities increase profits, it would do damage to the ability of carriers to ensure the continued availability and expansion of broadband networks and to ensure that rural consumers have access to services at reasonably comparable rates” (pg. 5).

On Satellite Service: The Blooston Rural Carriers do not wish to see satellite service providers receive USF support that could be better utilized by RLECs. They argue, “It is well documented that current satellite service is not of sufficient quality and reliability to satisfy a carrier’s requirement to provide reasonably comparable services to rural consumers;” and “a rural carrier’s support should not be reduced if the competitive carrier is a satellite service provider. To do so would endanger the ability of rural consumers to obtain reasonably comparable services, as required by the Act” (pg. 6). 

My Thoughts: I thought the Blooston Rural Carrier comments reflected a neutral and reasonable response to the ABC Plan/RLEC Plan. I have said before that I do not think the Consensus Framework is perfect, but it definitely is better than the alternatives, which seems to be the attitude of the Blooston Rural Carriers as well. I thought this specific comment was especially interesting and telling of the sacrifices that have been made on behalf of the RLECs for the purpose of reaching an agreement with the large price-cap ILECs: “The Blooston Rural Carriers would never have agreed to many of the features thereof (e.g. a decreased 10% RLEC interstate rate of return, expanded caps on RLEC corporate operations expenses, constraints on future RLEC capital expenditures, and virtual elimination of RLEC terminating switched access rates) if these features were not part of a broad industry compromise and offset by other provisions (e.g. the restructure mechanism)” (pg. 3). 

I agree with many of the opponents of the Consensus Framework that certain proposals are not especially fair for specific industry participants, like rural wireless and cable providers—however, one of the primary purposes of this entire proceeding is to reformulate the USF/ICC mechanisms for ILECs and RLECs in order make universal broadband a reality. Just as I don’t think it is fair that 6 price cap ILECs make the USF decisions for the entire wireless industry, I also don’t see it reasonable for the wireless industry (for example) to determine the fate of USF for LECs. I believe the Consensus Framework represents a reasonable solution for the parties that developed these proposals; and that just so happens to be the majority of the industry and the specific portion of the industry where the FCC has called for significant reforms to apply. Unfortunately, not everyone can be a winner, but under no circumstances should rural consumers be the losers. 


Further reading on USF/ICC comments and reply comments:

Cassandra Heyne

Thursday, September 8, 2011

The Final USF/ICC Reform Lightning Round: Reply Comments—FTTH Council, LARIAT, and LightSquared

Reply comments were due September 6, 201 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. This is it, people—the final chance for the industry to throw some hard punches at whomever they are so inclined to oppose, be it the FCC, the RLECs, the price cap ILECs, the Joint Board, or any number of commenters who may have said something irksome in any of the previous comments going back to April 1. Many of the reply comments are fairly short and only attack one or two issues, so I’m switching back to the multiple summaries per post format. Today I will be covering the FTTH Council (who submitted my favorite comments in the previous round), Wyoming WISP LARIAT, and satellite broadband visionary LightSquared. 

The FTTC Council’s members include small, rural and public sector providers who utilize FTTH for broadband. In the previous round of comments, they provided a most excellent discussion about broadband speeds and FTTH investment, which I wrote about here and here. I was a little disappointed that they didn’t add much to this discussion in their reply comments, but they still made some good points and supported the arguments presented by the Rural Broadband Alliance. The only topic the FTTH Council addressed from the Public Notice is the modified broadband speed target of 4Mbps/768kbps; which the Rural Broadband Alliance called a significant step backwards from the National Broadband Plan which was released nearly 2 years ago. The FTTH Council concurs.

On America’s Thirst for Broadband: The FTTH Council argues that 4 Mbps/768 kbps might be acceptable for unserved areas for a very short period of time, but they recommend that the initial speed be targeted at 12/2.5 Mbps—but really, it should be symmetrical and higher. They describe how the rural stakeholders who have commented in this proceeding, such as the Nebraska rural companies, the Rural Broadband Alliance, and NASUCA have all argued that 4/1 and 4/768 is completely inadequate for rural areas, and is “already obsolete and would deprive rural customers of reasonably comparable service” (pg. 3). The FTTH Council talks about some studies that show broadband speed demand will likely be 25/25 Mbps by 2015, including a Cisco study that concludes there will be more networked devices than people in the world by the end of this year, and “by 2015 there will be two networked devices for every person” (pg. 7). A FCC Household Speed Guide recently claimed, “if more than two users/devices were accessing ‘basic functions plus one high-demand application,’ the minimal downstream speed a household needs for adequate performance is ‘6 to 15 Mbps’” (pg. 8). The FTTH Council does not want to see rural Americans suffer with slow broadband, and “Consumers in rural America demand the same connected devices and applications, and require the same broadband speeds to support them, as those in urban areas. It should be the goal of the CAF to meet the broadband connectivity needs of rural consumers” (pg. 9).

My Thoughts: The FTTH Council is right. I’ve talked about how I think the fundamental flaw of the National Broadband Plan and one of the many fundamental flaws of the FCC’s USF/ICC NPRM is the 4/1—and now 4/768—broadband speed target. Why on earth does the FCC want rural Americans to settle for a broadband speed that was inadequate for most high-bandwidth applications 3 years ago? Many CAF recipients won’t start deploying broadband for a year or more, while the urban world continues to benefit from new and awesome broadband applications. 4/768 relegates rural Americans in unserved areas to like 4th class citizens, and it will do nothing to improve America’s broadband rankings on a global scale. It has long been my believe that rural Americans are the ones who need the highest speed broadband the most, so they can benefit from applications like distance learning and telemedicine and real-time commodities markets. People in cities can walk down the street to meet their basic needs for health, education, entertainment, socialization and income; but people in rural America do not have that luxury—and with 4/768 broadband, they will not have any luxuries anytime soon, or ever. 

Here is a chart that I made last year for my project where I compared the NBP to broadband plans in Japan, South Korea and Sweden, and argued that the 4/1 Mbps target is the Achilles Heel of the NBP:

Click to Enlarge


LARIAT is a fixed wireless Internet service provider (WISP) in rural Wyoming. WISPs have been generally very critical of USF reform proposals submitted by RLECs and ILECs, as well as proposals developed by the FCC. LARIAT argues that the FCC needs to also act on special access reform, improving access to licensed and lightly licensed spectrum, reducing barriers for antenna siting, and making access to backhaul more readily available. LARIAT is opposed to proposals in the ABC Plan, and it argues that USF reform should instead “enable the consumer to choose between the widest range of possible providers, and ensure that all comers are able to compete on a level playing field,” instead of granting ILECs a monopoly in unserved areas (pg. 5).

On Rights of First Refusal: I’ve been really interested in the ROFR debate within the broader ABC Plan opposition, and LARIAT provided some interesting comments and one good example about why ROFR should not be adopted. LARIAT argues that the ABC Plan is “cynically crafted to provide incumbent local exchange carriers, who are rarely the most cost-effective option, with a right of first refusal in virtually every area where CAF funding will be the highest” (pg. 3). LARIAT serves the city of Laramie and the surrounding Albany County in Wyoming, and “the population is extremely concentrated in the relatively small area where CenturyLink provides DSL service…the 35% market share threshold of the ABC Plan is so low that it would nonetheless give the ILEC a right of first refusal throughout the very large area served by the Laramie central office. The result: taxpayer money would be wasted as subsidies flowed to the incumbent rather than to more cost-effective providers such as WISPs” (pg. 4). LARIAT shows that the city of Laramie has a population density of around 1,000 people per square mile, but the remainder of the county is around 1 person per square mile. 

On A Separate Fund for Wireless: LARIAT does not agree that there should be separate funds for wireless/satellite and wired broadband, because separate funds would favor technologies “rather than allowing carriers to compete and the market to decide” (pg. 4). LARIAT argues that fixed wireless and mobile wireless broadband are not equal, and “consumers should have the right to opt—preferably via a voucher system in which they select carriers in an active, vibrant market—for a provider whose performance is more suitable for the real time applications that they are, increasingly, using” (pg. 4).

My Thoughts: I appreciated that LARIAT provided an example to show how ROFR will likely be harmful in Albany County, WY. I’ve been on and off the fence about ROFR and I can see how it could both be a benefit and a horrible mess, depending largely on the service area in question. One of the FCC’s goals in USF reform was to increase broadband access specifically in price cap ILEC areas, because these companies have been so slow at deployment in rural areas—in fact, most of the unserved areas lie in price cap ILEC territory. So in this regard, ROFR might be a benefit. However, I don’t really know if it is necessary that a price cap ILEC serve rural unserved areas, since they have shown such little interest in doing so all along. Further, I don’t think it is up to CAF to fund this deployment, since price cap ILECs generate billions of dollars in revenue. I think the 35% threshold should be increased to something like 75%, and I don’t think that CAF support should only go to the ILEC in an unserved rural area. However, from my understanding of the ABC Plan, ILECs would not be eligible for CAF support in rural areas where there is at least one unsupported competitor—so by that logic, CenturyLink would be ineligible for ROFR in the areas of Albany County where LARIAT provides service even if they meet the 35% threshold by way of their service in the city of Laramie. 


Although I have often meant to write about the ongoing LightSquared drama of this summer, I’ve not really had an opportunity to study the situation closely. Anyway, LightSquared’ s reply comments primarily revolved around advocating that satellite providers can directly participate in reverse auctions and Tribal lands should be exempted from USF reductions and other proposals that could hinder broadband deploying in these areas. LightSquared discusses how they have 40 MHz of spectrum for broadband and aggressive deployment plans; they have already invested $1b and plan to invest an additional $14b to cover 100% of the US with 4G LTE by 2015. Additionally, LightSquared’ s efforts will “generate $120 Billion in consumer benefits to the U.S. by providing a broadband platform on which retailers, wireline and wireless providers, cable operators, device manufacturers and new entrants can offer new and better service” (pg. 3). LightSquared has also stepped up to help improve broadband in Tribal areas by, for example, donating 1,000 satellite phones with free service until 2020 to hospitals and health clinics in Tribal communities in the Southwest. Overall, “LightSquared’ s unique combination of resources spectrum assets, and its mission of serving areas that have been denied access to adequate broadband services directly addresses two of the Commission’s most important policy objectives: solving the spectrum scarcity issue, and providing broadband service to unserved and underserved areas of the country” (pg. 6-7). 

On Leading Bidder Rights: LightSquared is irritated with proposals that place satellite in the unfavorable position of being a partner to an ILEC in order to receive CAF funding, and not as a frontrunner in reverse auctions. LightSquared supports a ViaSat/WildBlue proposal that insists, “Satellite providers should be able to participate in auctions directly, and there should be no restrictions on the service areas on which they bid;” furthermore, they should be the leading bidders in reverse actions (pg. 8). What happened to this reform effort being about “shared sacrifice?” Anyway, LightSquared thinks that demoting satellite service to “partner status” “in which a necessary precondition to their partnership in the CAF program is an invitation by a wireline or terrestrial wireless carrier” is not technologically neutral (pg. 9). LightSquared reasons, “Given the plight of unserved and underserved areas with respect to broadband services, the last thing the Commission should do is restrict these American’s options with respect to receiving such services. Any such unnecessary restrictions will just further ensure that these citizens are left behind far longer than they need to be” (pg. 10).

On Tribal Exemptions: LightSquared provides some interesting comments on the Tribal broadband challenge, and a slightly different perspective than the Tribal carriers who have commented in this proceeding, since LightSquared is not by definition a Tribal carrier. LightSquared is also one of the only non-Tribal and non-RLEC carriers I have seen who actually seems really excited about providing broadband in Tribal communities. LightSquared argues that Tribal communities should be exempt from caps on USF support, for “The Commission has recognized that service to Tribal lands entails unique challenges that justify exemption from the USF rules that apply to other rural areas” (pg. 15). LightSquared describes a White House Native American Business Leaders Roundtable session where it was said that “Native American communities are grossly underserved in terms of banking services, capital development and broadband services, and that these deficiencies contribute to severe levels of unemployment and underemployment” (pg. 16). LightSquared is prepared to address these problems, and “has the incentive and ability to provide services that can empower a wide variety of innovative providers of services and applications, from healthcare to law enforcement, to Tribally-owned telecommunications and data service providers” (pg. 17). LightSquared can provide wholesale service and backhaul to Tribal communities that want to provide their own broadband, which I think is something important to consider. 

My Thoughts: I don’t agree with LightSquared’s position on reverse auctions, but this is nothing new. However, I thought they provided an interesting perspective on Tribal broadband. Last week I expressed that Tribal carriers might not be the most efficient providers of broadband service if they are trying to implement FTTH to low density populations with 50% unemployment, charging rates twice as much as the national average, and only seeing a 20% adoption rate. I suggested that fixed and mobile wireless would be better solutions for Tribal lands. I think LightSquared fits into this equation as a wholesale or backhaul provider, where the Tribal communities can still have their own Tribally-run communications providers. LightSquared points out that out of over 300 recognized Tribes, there are only 8 true Tribal carriers. Perhaps if Tribal communities had more opportunities to access affordable wholesale and backhaul services then we would see more true Tribal carriers and a higher broadband adoption rate—something that is not very likely if Tribal carriers have no choice but to charge over $50/month for 1.5Mbps DSL. As far as Tribal carriers being exempted from USF rules, I still think there needs to be a greater focus on broadband adoption before large investments are made with or without USF.  

I suggest that Tribal communities look at some examples of mobile banking, healthcare, education and e-commerce in African and Latin American countries. There has been a considerable amount of innovation and development in these areas internationally, in countries where it is less likely that each home has a landline broadband connection. I’ve always been interested in how developing countries have essentially leapfrogged both landline telephony and broadband, and I think Tribal areas could follow this model here in the US, especially since landline telephone penetration rates are so low in these areas as well. I might write more about this later, since I’ve been hoping to address both international rural broadband topics and Tribal topics lately. 


That’s it for today!
Cassandra Heyne

Tuesday, September 6, 2011

The Final USF/ICC Reform Lightning Round: Reply Comments by the Kansas Corporation Commission

Reply comments were due September 6, 201 for the Further Inquiry in the Universal Service-Intercarrier Compensation Transformation Proceeding (AKA USF Reform), where the industry was asked to respond to a variety of questions about several proposed alternative frameworks for USF and ICC, namely The Rural Associations’ RLEC Plan and the price cap carriers’ ABC Plan (which together forge the Consensus Framework), and the Federal-State Joint Board’s plan. This is it, people—the final chance for the industry to throw some hard punches at whomever they are so inclined to oppose, be it the FCC, the RLECs, the price cap ILECs, the Joint Board, or any number of commenters who may have said something irksome in any of the previous comments going back to April 1. To be honest, I’m not sure how much impact these final reply comments will have on the FCC—part of me suspects that the rules are already nearly completed and the FCC is just going to sit back and laugh while the stakeholders rip each other apart in comments. The Kansas Corporation Commission (KCC) definitely ripped into the ABC Plan, and given the state’s unique USF circumstances, it is easy to see why they are so heated about certain ABC Plan proposals.

One of the main reasons why I decided to start summarizing USF/ICC reform comments earlier this year was so that I could personally learn more about USF from the perspectives of different stakeholders. USF was not covered heavily in any of my telecom policy classes, yet it is the area that I am trying to become an expert in, so much of my analysis is based on what I have taught myself, specifically from this proceeding. The intricacies of State USF programs are something that I am still learning about, and the KCC reply comments proved extremely helpful for me to gain an understanding of the challenges that certain states are facing. Kansas RLECs have also been very outspoken on USF issues, so in general I really appreciate the efforts that Kansas stakeholders have made throughout this proceeding because I have learned a lot from them. Seriously- Thank you, Kansas. 

On to the comments… Wow. The KCC is seriously not happy with the ABC Plan—“If the FCC proceeds with the ABC Plan without a longer transition period for early adopter states and/or further analysis of the impacts of the plan on existing state reform, it risks irreparable harm to these complementary state reform vehicles” (pg. ii). Kansas is an “early adopter” of state USF reform, and thus faces this presumed irreparable harm, which as you will see, is definitely a menacing possibility for this state, its consumers, its businesses, and its telecommunications providers.

On the Kansas Universal Service Fund (KUSF): Some of my readers may know these facts, but I thought the background information on the KUSF was helpful. KUSF was started in 1996 to provide support for Lifeline, dual part relay, telecom equipment for persons with special needs, and universal service/intercarrier compensation funding. When KUSF started, the assessment rate was 9%, one of the highest in the nation, but it has decreased over time to 6.18% currently. The total current funding obligation for the KUSF is $65.7m, and over its 14 years the KUSF has contributed $870m. The KUSF is now “at risk for becoming unsustainable under the ABC Plan,” because the size of the state fund may have to double as a result of specific Kansas state laws that require complete “make whole” access recovery for RLECs (and an opportunity for price cap carriers to seek full recovery as well). The KCC anticipates that the ABC Plan could result in total user contribution rates of 20-25% “not outside the realm of possibility” (pg. 10). Basically, with any significant loss in federal universal service funding and access revenue recovery, Kansas will burden an equal-sized increase in state contributions as per state laws. Kansas has 37 RLECs which are required to be made-whole through KUSF support (K.S.A. 66-2005(c)), and 2 price cap ILECs who legally could, and probably will, request to be made-whole especially if access revenues are significantly reduced (K.S.A. 66-2008(d)). KCC describes that the only recourse is to chance the state laws, and “such a dramatic change in state law requires legislation, and this is uncertain, will take time to accomplish, and cannot realistically be done until the contours of federal reform are known” (pg. 11).

On the “Train Wreck” ABC Plan: Yeah, they went there—KCC called the ABC Plan a “train wreck” for states like Kansas who have already adopted USF reforms. According to KCC, the ABC Plan would be a train wreck if hastily implemented, if VoIP is declared 100% interstate, if states are preempted, and if the highest-cost consumers are relegated to satellite service only. KCC argues that Kansas and other “early adopter” states should be treated differently than states who have not already implemented reforms (which are most states). KCC is very worried  that, “even if the FCC provides some FUSF support to recover some parts of the lost access charge revenue, the KUSF will likely be the easiest and most attractive ‘target’ for LECs seeking to make up losses in access revenue that result from reform”(pg. 8). Basically, the state fund will be overwhelmed, and KCC does not think the ABC Plan’s proposed ARM will be sufficient to cover the losses for price cap carriers, nor will the strict RLEC funding budget which “must cover not only access restricting losses, but also broadband build out and a reasonable opportunity to recover costs associated with existing investments in broadband capable plant” (pg. 8). To make matters worse, KCC acknowledges that all these negative consequences will have a direct economic impact on the state, for example, “a high-tech communications-centric company would find Kansas to be uncompetitive with other states that did not levy such a perceived ‘tax’ on their communications services,” if the total USF assessment rate does actually become 20-25%. Train wreck, indeed. 

On Not Declaring VoIP 100% Interstate: If you like reading comments that use the terms “interstate” and “intrastate” so much that you constantly keep typing the wrong term in your notes and articles, then you should read this section. Legalese aside, this section was really interesting and not a topic that has been covered considerably so far in what I have read. Basically, KCC is against the FCC declaring VoIP 100% interstate traffic, as it would reverse previous decisions and cause considerable havoc for states. KCC explains declaring VoIP 100% interstate “would be construed by providers as preempting State USF assessments of VoIP traffic, because State USFs very likely may only assess intrastate traffic under current law. As VoIP replaces circuit-switched technology, that reversal would reduce the State USF assessment base, thereby reducing the assistance that State USFs now provide to the FUSF in maintaining universal service. Thus, declaring VoIP traffic to be 100% interstate contravenes the Act’s admonition that ‘there should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service’” (pg. 15). 

Furthermore:  “For the FCC to ‘wave a magic wand’ and declare 100% of VoIP revenues to be from interstate calls, when consumers in fact clearly make considerable numbers of intrastate calls using VoIP telephones, and providers earn intrastate revenues from those calls, would be arbitrary and capricious. It would be inexplicable in light of the FCC’s treatment of wireless revenue, which the FCC for more than a decade has divided into an interstate portion assessable by the FUSF and an intrastate portion assessable by State USFs, using a ‘safe harbor’ approach very similar to that now used by the FCC for VoIP calls” (pg. 17). KCC anticipates that the KUSF could assess $500m in VoIP revenues in the next 5 years, which would clearly be an important contribution especially if the threats discussed above to the state fund come to fruition. KCC argues, “if that revenue is eliminated, the surcharge on remaining circuit-switched revenue will be increased, putting ever more pressure on the KUSF, and unfairly disadvantaging circuit-switched customers and providers as compared to VoIP customers and providers” (pg. 18). 

The final argument that I found really interesting regarding VoIP classification, (and I apologizing for taking such long blocks of text straight from the comments, but I really like KCC’s voice in some of their examples and arguments) described how the combination of changing technology standards and regulatory loopholes could spell disaster for the KUSF via new methods of arbitrage: “A trend in rural areas is to provide communications services via fixed wireless or WISP networks in lieu of landline networks. Placing an antenna on a grain silo or mountain top and providing wireless broadband service via technologies such as Motorola Canopy is done today in rural areas. In such a configuration, voice communications is provided via VoIP in lieu of a traditional landline. If VoIP providers are exempted from State USF contributions, then an enterprising ILEC with an aging landline network could deploy an inexpensive wireless network and avoid making USF payments because it was a VoIP provider. Yet, it could collect State USF support from make-whole state funds, such as KUSF, for its embedded costs of its unused landline network” (pg. 18). It should be noted that KCC is not against WISPs per se, just ILECs who pretend to still be landline providers but whose traffic is really traveling on a fixed wireless VoIP network while the landline infrastructure collects dust. KCC even suggests that fixed wireless service would be far superior to satellite in high-cost areas because fixed wireless service can facilitate a high quality of voice communication through VoIP, which satellite cannot. Just do not be a WISP by technical definition but a landline ILEC by regulatory definition—KCC is clearly anticipating such schemes already (perhaps something like this has already happened?). 

My Thoughts: KCC really hit on some tough issues, and unfortunately the ABC Plan authors will probably not have an opportunity to respond directly to some of these Kansas-specific arguments (maybe they did, I guess I will find out soon enough), which means it is now solely up to the FCC to figure out the appropriate balance between state and federal authority and responsibilities. Hopefully the FCC will take heed to some of KCC’s warnings about the dire consequences that will be inflicted upon the state if certain ABC Plan proposals are implemented. Clearly, Kansas is an exception and not the norm, so I wonder just how much attention the FCC will pay to the minority of states who have taken tremendous efforts in USF Reform (Nebraska is also in this category). KCC is really worried that the ABC Plan proposals could literally wash out all the progress the state has made in USF/ICC reform, and they are confused about how state-level responsibilities like audits, eligibility, etc. will be handled by the FCC if states are preempted. 

I really appreciated the depth of research that KCC invested in these comments, and the clear voice that they expressed. I hope all their work wasn’t in vain. I would have liked more direct commentary on the RLEC Plan, since; after all, Kansas has such a large number of RLECs and rural areas in comparison to other states. I didn’t really get much impression on their feelings about the RLEC Plan, other than they seem to think that the access revenue recovery is insufficient. 


KCC was an early filer with their reply comments, but the others should be rolling in soon. I have yet to decide which comments I will feature here (although I think I did promise to cover the WISP perspective), but on the ILEC Advisor I am planning to look specifically at how the ABC Plan parties and the Rural Associations address some of the common critiques of their plans, so be sure and check there for new articles! 

Don’t hesitate to contact me with requests!
Cassandra Heyne