News

Insights into the Broadband Initiatives Program

Kevin Post, Business Editor for the Press of Atlantic City, ended 2011 with some comments about the Broadband Initiatives Program.  Some of the statistics he quotes are significant, and worth noting.

Here is an excerpt from his article:

"The Federal Communications Commission recently detailed its order to spend $4.5 billion skimmed from telecom revenues on a new Connect America Fund".

Federal stimulus spending in response to the recession already included $7.2 billion for this same purpose. An analysis by Navigant Economics of three big projects under that Broadband Initiatives Program found:

• Even "areas in which very high proportions of households were already served by multiple existing broadband providers" were eligible for subsidized broadband work.

• More than 85 percent of households in the three project areas were already passed by cable broadband, DSL and/or fixed wireless broadband.

• $232 million spent on the three projects would provide service to just 452 households without any broadband service.

This costly effort is aimed at bringing broadband to a group of people who mostly don’t want it, according to a 2010 Pew Internet survey.

• Half of Americans who don’t use the Internet told Pew that the main reason is they don’t find it relevant to their lives.

• Only one in 10 nonusers said they would be interested in starting to use the Internet sometime in the future.

• Navigant figured it cost $350,000 in subsidies to provide first-time broadband access to someone with none currently.

"So that makes the cost of new broadband access for those who actually want it about $3.5 million per household. "

"Pew asked if the spread of affordable broadband connections should be a government priority and 53 percent said no, 41 percent said yes."

Last April, the National Cable and Telecommunications Association released an analysis of the federal government broadband stimulus projects that were awarded under the Department of Agriculture's Rural Utilities Service (RUS).  It concludes that the program’s funding of duplicative broadband networks “has resulted in an extremely high cost to reach a small number of unserved households.”  The study was commissioned by the National Cable & Telecommunications Association (NCTA) and prepared by Jeffrey Eisenach and Kevin Caves of Navigant Economics of Washington, D.C.

Here is what they published:

The American Recovery and Reinvestment Act (ARRA) included $7.2 billion to subsidize broadband deployment – $4.7 billion to the National Telecommunications and Information Administration (NTIA) and $2.5 billion to RUS. The NTIA and RUS programs funded by ARRA make up the largest federal subsidies ever provided for broadband construction in the U.S.

The study shows that the RUS' history of funding duplicative service has continued under its Broadband Initiatives Program (BIP) and that the current program is not a cost-effective means of achieving universal broadband availability. It examined three large BIP subsidy awards which total $231.7 million, or about seven percent of the total BIP $3.5 billion combined loan and grant program:

• $101.2 million in western Kansas
• $66.4 million for Lake and St. Louis counties in northeastern Minnesota
• $64.1 million to cover a portion of Gallatin County in southwest Montana.

Reports by the Department of Agriculture's Inspector General (AIG) and the Government Accountability Office (GAO) have shown that RUS' prior broadband subsidy programs have not been cost effective, in part because they have provided duplicative service to areas that were already served by existing providers," the study says.

NCTA said that the study raises critical issues that were still not addressed in the RUS' "interim final" rules, which were just adopted last month. The new rules will enable RUS to continue funding duplicative broadband networks, even in communities where the vast majority of households already have access to broadband service.

Among the key findings in the study are the following:

Definitions used by the RUS to determine where grants should be awarded permitted subsidies to areas which were already served by multiple wireline and wireless providers. Of the three projects analyzed, more than 85 percent of households were already passed by existing broadband providers, and in one project area, more than 98 percent of households were already passed by at least one provider.

Based on the cost of the direct grants and subsidizing the loans, the study estimates that the cost per incremental home passed will be $30,104 if existing coverage by mobile broadband providers is ignored, and $349,234 if mobile broadband coverage is taken into account.

The RUS approach of funding duplicative coverage is directly at odds with the National Broadband Plan recommendations and would massively increase the cost of extending broadband to all unserved homes. The FCC's Omnibus Broadband Initiative estimated that the cost of extending broadband to every unserved household in the U.S. is approximately $23.5 billion, so long as duplicative service is not funded. But funding duplicative service (as RUS has done under BIP) increases the cost of a nationwide buildout by $63.7 billion, to $87.2 billion.

"While it may be too early for a comprehensive assessment of the ARRA's broadband programs, it is not too early to conclude that, at least in some cases, millions of dollars in grants and loans have been made in areas where a significant majority of households already have broadband coverage, and the costs per incremental home passed are therefore far higher than existing evidence suggests should be necessary," the study says.

House Votes Against Net Neutrality

In December, the Federal Communications Commission passed an order called "Preserving the Open Internet".  Net Neutrality had been the topic of an ongoing debate to determine what limitations telecommunications companies should impose and what pricing models work best. For example, should some content providers be blocked? Should there be different rates for broadband customers depending on the content or service type they receive? At what point is a user required to upgrade to a commercial account because they are using too much bandwidth? Essentially, the goal has been to find a balance between consumers' interest while maintaining incentive for investment and innovation on the part of service and content providers.

The December resolution created the regulatory framework for transparency and continued Internet openness, while allowing providers to effectively manage their networks and respond to market demands. In summary, the rules enforce the following:

Rule 1: Transparency
Broadband providers must publicly disclose information regarding network management practices, performance and terms of use so that consumers can make an informed choice about use of their services for content, application, and service. This information will also help content providers develop, market and maintain Internet offerings.

Rule 2: No Blocking
Broadband providers may not block lawful content, applications, services or non-harmful devices, subject to reasonable network management. (For example, a cable provider cannot block access to a content provider who offers movies, etc.)

Rule 3: No Unreasonable Discrimination
Broadband providers shall not unreasonably discriminate in transmitting lawful network traffic. (In other words, providers cannot pick and choose whether to allow faster access to some websites over others.)

Then, in mid-April, the Republican-led House of Representatives approved a measure that would prohibit the Federal Communications Commission from regulating how Internet service providers manage their broadband networks.  Many Republicans argue that the regulations will discourage these companies from investing in network upgrades.  They also express concern that the legal authority of the rules are beyond the realm of the FCC’s authority.  Most Democrats favor the rules, stating that they provide "an enforceable and effective policy for keeping the Internet free and open."

The resolution will be presented before the Senate, where 51 votes are needed to uphold the ruling.  If passed by the Democrat-led vote in the Senate, it also faces a veto threat from President Barack Obama, who promised during his campaign to enact a net neutrality provision.  If the bill does make it the President’s desk and is vetoed, it would take a two-third vote in each house of Congress to override the decision.

When was the last time you watched a DVD or VHS cassette? When did you purchase a CD? Whether it was music or video, it probably contained an FBI warning. Copyright protects the value of creative work, and any unauthorized reproduction or distribution is breaking the law.

Internet providers are required to follow-up on each occurrence. It's a time consuming process, and most often, the response from customers is the same: "I didn't know that I had done something wrong." When using the Internet, there isn't a warning that tells you that your actions are illegal – but the weight of the law still applies. Federal law allows for severe penalties, including loss of your Internet service. Fortunately, knowledge is power, and the following information can save you from committing a crime.

• Copyright law protects literary works, paintings, photographs, drawings, films, music, choreography, sculptures and many other things.
• If you copy or distribute copyrighted work, you can be prosecuted in criminal court and/or sued for damages in civil court.
• It is illegal to download unauthorized copies of any copyrighted material – even if you don't intend on sharing it or passing it along to others.
• Peer-to-Peer networks allow Internet users to link their computers with other computers around the world. If you allow a file-sharing network to use part of your computer's hard drive to store copyrighted material that anyone can access and download, it's illegal.
• File Sharing is the distribution of data (documents, music, videos, images, e-books or any other digitally stored information) through the use of a peer-to-peer network, e-mail, etc.
• Peer-to- Peer, commonly known as P2P, is a giant network of computers in which each user installs and runs software to connect to this network.
• Torrent or bit torrent is very similar to other P2P programs (like LimeWire, Kazza etc.). Torrents integrate themselves into your web browser (example: Internet Explorer, Firefox, Safari etc.) and create a new file type ".tor" (abbreviated for torrent) within the Windows operating system, similar for the Macintosh operating system. When finding a file that you wish to download, the download will initially start as a small file but then builds itself from other users around the globe until your download is complete. While you are downloading, other users begin to connect to you and get file chunks from you.​

The name sounds like something great. It may even remind you of a super hero. Super Wi-Fi is a very powerful network and has extraordinary potential. It's a new platform of innovation with many possibilities.

In September 2010, the Federal Communications Commission voted to open the "white space" between TV channels. When cable TV stations switched from analog to digital signals in June 2009, they left behind an unused spectrum – the unused "white spaces" between the TV channels, spectrum that companies like Microsoft and Google wanted to use for mobile broadband. Instead, the National Association of Broadcasters (NAB) argued that it could disrupt RV signals and wireless microphone transmission. The new rules walk the line between expanding current Wi-Fi service and preventing disruption of existing TV signals. This possibility of "Wi-Fi on steroids" could spark a technological revolution in the United States. Using low frequencies, the spectrum will allow signals to travel further, through walls, barriers, buildings, trees and other terrain to transfer more information.

This forward-looking change will optimize spectrum allocation by capitalizing on evolving technologies. Companies will develop new applications to develop the white space networks, which is also an opportunity for American companies to participate in innovation and perhaps even provide Internet service where it is currently unavailable.

As a direct result of the American Recovery and Reinvestment Act of 2009, \$7.2 billion was designated for the Department of Agriculture's Rural Utilities Service (RUS) and the Department of Commerce's National Telecommunications Information Administration (NTIA) to expand broadband access and adoption in underserved communities across the United States.

Many Internet providers in Pennsylvania already offer 1 GB connections to serve schools, hospitals and numerous other businesses. Despite this, the state was awarded a large portion of federal monies to build a network that many feel is already being served from private investment. According to www.recovery.org, projects in Pennsylvania are focused on constructing an almost 1,700-mile fiber-optic network connecting 60 community institutions, public and private universities, K–12 schools, public libraries, public broadcasting facilities, and medical facilities in 39 counties across the southern and central regions of the state. More than 2 million households and 200,000 businesses were also expected to benefit.

For most Internet customers in Pennsylvania, this concept is not new. The Broadband Cable Association of Pennsylvania (BCAP) is the trade association for the Commonwealth's broadband cable industry that represents 75 cable operators, networks and suppliers in Pennsylvania who provide advanced video, high-speed data and voice products to more than 3.6 million households. According to their June 17, 2010 testimony to the Senate Communications & Technology Committee, "BCAP members have invested nearly \$8 billion in private capital since 1996 to bring broadband services to rural, suburban and urban areas of the Commonwealth. Those same cable company members employ 17,000 in Pennsylvania with a total payroll of \$700 million. Broadband cable operators are the largest providers of residential data services in the Commonwealth. Our advanced fiber optic networks provide broadband connectivity to K-12 schools, colleges and universities, hospitals, health care facilities, and small and large businesses." In fact, prior to the stimulus funding, Pennsylvania made one of the most aggressive broadband deployment commitments. Pennsylvania's Act 183 is a telecommunication modernization law which expanded earlier legislation and included a plan to ensure "By 2015, and as early as 2008, every city, town and village will have access to broadband service – even in the most rural areas." In almost every case, with only a few exceptions, that deadline has already been met.

Not only are existing providers privately funded, but BCAP members, telephone operators and other private sector broadband providers have the experience to run and maintain large telecommunications networks.