• Broadband Stimulus Update: FCC Rural Broadband Report; Expanded Lobbying Restrictions from Obama Administration
  • June 11, 2009 | Authors: James M. Smith; Maria T. Browne; Maurita K. Coley; K.C. Halm
  • Law Firm: Davis Wright Tremaine LLP - Washington Office
    • FCC Issues Rural Broadband Strategy Report: “Building Block” for National Broadband Plan
    • Stimulus Program Lobbying Restrictions Expanded

    These two recent developments will have a substantial affect on broadband providers as they work within the guidelines of the American Recovery and Reinvestment Act (“Stimulus Act”) to maximize broadband deployment nationwide.

    FCC Issues Rural Broadband Strategy Report: “Building Block” for National Broadband Plan

    Last week, Acting Federal Communications Commission (FCC) Chairman Michael Copps submitted to Congress a “Report on a Rural Broadband Strategy: Bringing Broadband to Rural America." Chairman Copps lauded the Report (which was required under the 2008 Farm Bill) as a “building block” and “a critical step in the Commission’s efforts to develop an effective, efficient and achievable National Broadband Plan” in accordance with the Stimulus Act, which requires the FCC to submit the long-term plan to Congress by February 2010. The FCC has issued a separate Notice of Inquiry on the matter, with initial comments due next Monday, June 8.

    The Report may offer a preview of the FCC’s upcoming National Broadband Plan, as well as insight into other pending FCC rulemaking proceedings. Echoing the views of Obama administration officials, the Report calls broadband “the interstate highway of the 21st century for small towns and rural communities, the vital connection to the broader nation and, increasingly, the global economy.”

    The FCC’s Report hails the $7.2 billion in federal broadband deployment project funding to be dispensed by agencies of the Departments of Commerce and Agriculture over the next 18 months under the Stimulus Act; yet it cautions that “this funding initiative, though substantial, [is] still just a down payment on the broadband needs of the country.” The Report finds that “relying on market forces alone will not bring robust and affordable broadband services to all parts of rural America,” and suggests an array of steps to advance broadband development, including reform of the federal Universal Service Fund (USF) to include continuing financial support for rural broadband services.

    Insight into proceedings and expectations

    The Report also provides candid insight concerning several open rulemaking proceedings and how the Administration’s overarching goal to deliver broadband to rural areas should inform those proceedings. For example, the Report states that “[t]imely and reasonably priced access to poles and rights of way is critical to the build out of broadband infrastructure in rural areas,” and thus the FCC should consider this “in analyzing the record in the Pole Attachments NPRM [Notice of Proposed Rulemaking] proceeding.” Similarly, it also notes that “there are several open Commission proceedings that may affect the pace or cost of tower construction” necessary for wireless broadband development in rural areas.
     
    Other open proceedings cited by the Report include the November 2008 Further Notice concerning intercarrier compensation, the Special Access Notice of Proposed Rulemaking (which directly affects the rates that price-cap carriers may charge for access to middle-mile and other dedicated facilities), the Notice of Inquiry concerning unlicensed operation in the television broadcast bands, and the FCC’s ongoing proceedings concerning program access and program carriage requirements, which the Report concludes could impact broadband deployment.

    The Commission’s Report stresses the need for interagency coordination including the possible coordination of key terminology, such as the definition of “rural,” to ensure “federal programs work consistently and in concert with one another.” It also acknowledges the need to streamline existing federal programs in order to realize a more efficient use of government funds and resources.
     
    Assessing rural broadband needs

    In assessing the need for broadband in rural areas, the Report touches on some of the specific hurdles to providing service to remote areas (high deployment costs, rugged terrain, lower profit potential and the inherent limitations of the various technologies, including wire line, wireless and satellite) as well as the attributes and limitations of the available technologies and how they impact the ability to deliver “affordable broadband in rural areas.”

    High on this list is the issue of latency, which the FCC notes can degrade the performance of interactive Internet applications technologies, which require very quick send-response times (low latency) to function effectively. The FCC gives examples of emerging interactive Internet technologies that, while still in their infancy, have the potential to generate “tremendous economic activity” and thus should be considered of heightened value (including educational applications, teleworking applications, Voice over Internet Protocol (VoIP) and Video Relay Service, commercial virtual reality or “telepresence,” telemedicine applications, and online gaming).

    Additional technological elements considered key to rural broadband include scalability (how quickly and easily bandwidth can be expanded with network upgrades), network resiliency (ability to withstand weather, damage outages and attacks), and congestion management (keeping network performance high during times of peak usage).

    Significantly, the Report does not express a preference for any one delivery technology and instead states that rural broadband networks may need to combine a variety of wireline and wireless elements. The Report also acknowledges the lack of comprehensive and reliable data necessary to make informed decisions, including information about the extent to which broadband already is available in rural areas, the data transfer speeds available to rural subscribers, and the price of and demand for broadband.

    Stimulating and sustaining broadband adoption and demand

    Recognizing that a critical component of rural broadband deployment is ensuring that broadband networks generate enough revenue to cover their costs, the Report encourages the creation of “demand-side programs” to promote broadband adoption and use among underserved and rural populations.

    The Report cites surveys that show that approximately 35 million U.S. households that have access to broadband service (representing almost 50 percent of all broadband accessible homes) choose not to subscribe for a variety of reasons such as: lack of training, lack of knowledge of the benefits of broadband use, affordability (of costs of service or computer equipment), perceived difficulty of use and perceived lack of need. In rural areas in particular, the Report cites a claim that approximately 42 percent of rural residents without broadband fail to subscribe because they don’t feel as if they need broadband.

    To address these and other “consumer affordability and education” barriers, the Report refers to provisions of the Broadband Technology Opportunities Program (BTOP) grant program that: (1) provides grants for broadband education, awareness, training, access and equipment, as well as grants for outreach to facilitate greater use of broadband service by “low-income, unemployed, aged, and otherwise vulnerable populations” and (2) allocates “at least $250 million in grant funding for innovative programs to encourage sustainable adoption of broadband service.”

    Finally, the Report notes the importance of involving industry stakeholders and public entities in designing programs to stimulate broadband adoption and sustainability, such as programs that aggregate or consolidate demand among consumers, businesses, educational institutions, healthcare facilities and government agencies, where necessary, to spur broadband infrastructure investment and to ensure its sustainability.

    Only limited details on resolving existing policy “challenges” to rural broadband deployment

    The Report also explains that resolution of a number of current unresolved policy issues is critical to the development of broadband services and facilities in rural areas. These issues—which the Report labels as “challenges”—include reform of the USF program, re-affirmation of network “openness” principles, further modification of spectrum access policies and resolution of issues surrounding critical network deployment questions such as access to poles and rights of way, intercarrier compensation and middle mile/special access rules.

    Although generally lacking in specific policy proposals, the Report provides some insight into the Chairman’s views regarding network management issues. Citing the value of the four Internet “principles” adopted in 2005, the Report asserts that a fifth principle, nondiscrimination, should be added to the list.

    Specifically, the Report argues for the adoption of a nondiscrimination principle that would “allow for reasonable network management” while at the same time making “crystal clear that the transformative power of the Internet is not to be limited by such techniques.” This type of restraint is necessary, it suggests, to ensure that consumers are not constrained by what the Report characterizes as “careful bundling, packaging and discriminatory practices.” The Report also suggests that the FCC adopt a systematic and expeditious case-by-case process for adjudicating potential claims of discrimination.

    These network management proposals are aligned with President Obama’s support for some form of net neutrality regulation, and may provide some insight into any new regulatory regime. Notably, the proposal to adopt a fifth Internet “principle,” along with a specific adjudicatory process, falls well short of the adoption of a new set of regulations governing network management techniques.

    However, whether this type of enforcement regime will be embraced by the new incoming Chairman, Julius Genachowski, is not clear. These proposals are therefore instructive, but not necessarily determinative, of any potential new regime to regulate network management issues.

    Reform of USF programs also cited as enhancing rural broadband deployment

    Despite the many problems surrounding existing USF programs, the Report highlights some successes with respect to the limited broadband services supported under current USF rules. For example, it credits the USF E-rate program for bringing broadband to nearly all public schools in the United States. Broadband is currently supported to a limited extent under the E-rate and rural health care programs, but the bulk of USF funding is distributed through the “high cost” program, which does not directly support broadband services.

    Given the relative size of the current USF compared to the broadband stimulus funding—$7.1 billion disbursed in 2008 alone for all supported services vs. $7.2 billion total broadband stimulus funding—current USF reform efforts are likely to influence the broadband stimulus funding process.

    As reported in our November 2008 advisory bulletin, the FCC has been considering funding broadband under the USF program for some time. The Report may signal significant support of, and differences from, past USF reform proposals, particularly with respect to possible contribution requirements on broadband revenues and intrastate revenues.

    In November 2008, then-Chairman Kevin Martin rejected a proposal to use USF funds to more broadly subsidize broadband services. Instead, the FCC issued a set of three competing reform proposals that focused on reining in the size of the fund. In contrast, the Report supports comprehensive funding of broadband services. Further, to support the additional cost of funding broadband services the Report also recommends that service providers contribute to the USF on their broadband service revenues. According to Chairman Copps, such funding contributions would “accomplish a great deal in addressing the sustainability and integrity of the fund … ”

    The Report also recommends that Congress modify the Communications Act to extend contribution requirements to intrastate revenues, a significant departure from past USF policies, as well as elimination of the so-called “identical support rule,” which provides competitive providers the same per line support as incumbent providers.

    Video programming access also cited as critical issue

    In addition to the USF and nondiscrimination proposals, the Report also argues that a lack of access to video programming could undermine rural broadband deployment. Noting that access to video programming is often an important element in subscriber decisions to acquire broadband service, the Report identifies several open proceedings affecting the video programming marketplace, and urges the FCC to consider rural broadband adoption issues when resolving those proceedings.

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    Stimulus Program Lobbying Restrictions Expanded

    The Obama administration has extended its restriction on Stimulus Act program lobbying of federal Executive Branch departments and agencies regarding Stimulus Act programs, previously applied only to "registered lobbyists," to virtually all persons.

    The expanded prohibition includes contacts with White House offices, as well as the Commerce Department’s National Telecommunications and Information Administration (NTIA) and the Department of Agriculture’s Rural Utilities Service (RUS). It does not apply to contacts with congressional offices or state and local governments or to the FCC (although it is possible that the FCC may adopt a similar policy).

    Importantly, however, these restrictions evidently do not apply to persons other than registered lobbyists until a Stimulus Act program application has been filed. Thus, it behooves prospective applicants who wish to advocate their views before Executive agency decision makers to do so before they file their applications.
     
    The new, expanded lobbying prohibition is available on the White House Web site.