Politics and Law

The Federal Communications Commission met Wednesday to discuss obstacles to enacting a national broadband policy that will provide high-speed Internet access to every American.

President Obama has made universal broadband access a key goal. Grants and loans for helping make universal broadband access a reality have already started being doled out as part of Congress' economic stimulus package.

In an effort to ensure that new programs and policies work toward achieving the same goal, the FCC has been tasked with developing a national broadband plan to help direct policy makers in getting affordable broadband to every American. A task force, headed by Blair Levin, who had been chief of staff for former FCC chairman Reed Hundt, is developing the plan that will be presented to Congress on February 17, 2010.

Levin and his staff appeared before the FCC Wednesday to present what they see as gaps or obstacles that must be overcome to develop clear recommendations and policy for universal broadband.

Levin said that commissioners and policy makers must consider the broadband ecosystem if they hope to achieve the president's goals. This means taking into account not only consumer needs but also considering the needs of the industry, which will likely fund the bulk of the $20 billion to $350 billion that will be needed to build new infrastructure and develop new programs for spreading broadband throughout the country.

In considering these needs, Levin said it is important to identify and come up with ways to overcome some hurdles that stand in the way for achieving the ultimate goal of providing broadband to every American.

Obstacles to universal broadband access
One major issue has to do with the Universal Service Fund, a program funded through extra charges on consumers' phone bills. The USF was originally designed to provide subsidies to pay for phone service in rural communities. But the task force believes that more of the $7 billion that is allocated each year from the fund should also be used to help subsidize the cost of deploying broadband in rural areas.

Today, most of these funds are used for voice services and not broadband, the task force reported. And of the money that is used to subsidize broadband, the group noted it is often used inefficiently so that gaps in broadband deployment are still not filled.

The task force also reported that there is still a high level of disparity in income levels between people who subscribe to broadband service and those who do not. Nearly 90 percent of families with incomes of $100,000 or more subscribe to broadband services, compared to 35 percent with incomes of $20,000 or less. Rural households are less likely to subscribe to broadband service than urban households. About 65 percent of white households subscribe to broadband, while only 40 percent of Hispanic households subscribe to broadband and 46 percent of African-American households have broadband.

Another issue that was brought up by the task force during the meeting is the fact that broadband service providers tend to favor higher-income regions in more populated areas over low-income areas.

The data suggests that many low-income people in these parts of the country are offered only one broadband service option. The data also suggests that these consumers who have only one option tend to pay higher prices for service.

What this means is that lower-income people, who have less disposable income, are often the ones forced to pay higher prices, while people who have more money pay lower prices for service.

Deployments in rural areas are often affected by the high cost of building infrastructure and providing service. The task force noted that "middle mile" costs are almost three times higher than general network operations costs. This high cost is often a serious barrier to rural broadband deployments, the group said.

Blair Levin, head of the task force developing a national broadband policy for the FCC.

This "middle mile" infrastructure consists of equipment and fiber that connects local cable head-ends or telephone company central offices with bigger points of presence that connect those networks to nationwide networks. The task force said there was a lack of efficient coordination when carriers or other utility providers dig trenches for fiber infrastructure. The group also noted that these deployment gaps don't only affect rural consumers, but many residential neighborhoods and small business marketplaces as well.

As the Internet and television markets converge, the task force also noted that a lack of innovation exists in the TV set-top box market. Specifically, the majority of consumers today use set-top boxes provided through their subscription TV providers. And only a very small number of devices are even available to purchase at retail. By comparison, there are hundreds of devices available in the mobile phone market. Due to a lack of competition, innovation has been stifled. And the task force recommends the FCC adopt policies to encourage a retail market for such devices.

That said, the FCC has tried to encourage the consumer electronics industry to develop set-top boxes that could be bought separately from cable services, but so far the efforts have largely failed.

More spectrum needed
On the wireless side, the key barrier is a lack of spectrum, the task force said. The problem is simple, as demand for mobile broadband increases, there is a need for more spectrum to support these services. Demand for these services comes from the rapidly growing market for smartphone wireless devices and Netbooks. By 2011, smartphone sales are expected to overtake standard mobile phones.

The task force said it is critical for the FCC to identify and reallocate available spectrum as soon as possible. The group said the nation could face a spectrum shortage as soon as 2013 or 2015, if nothing is done today.

The wireless trade group CTIA and the Consumer Electronics Association support this claim. And the groups sent a letter to FCC chairman Julius Genachowski on Tuesday urging him to investigate using broadcast TV spectrum for mobile Internet use.

The measure is opposed by the broadcast TV industry. But the FCC task force noted that as the need for wireless broadband spectrum increases, the need for broadcast TV spectrum is actually decreasing. Specifically, smartphone subscriptions have increased by 690 percent since 1998, while over-the-air TV viewership decreased by 56 percent. This proposal is already generating criticism from lawmakers supporting the TV broadcast industry.

Levin and his staff acknowledged there are many other barriers that exist in providing affordable broadband access to every person in the U.S. Levin said his staff is on track to meet its February deadline, but he said the process will remain open throughout the remaining 90 days that are left to incorporate new ideas. He also emphasized the fact that the ultimate success or failure of the national broadband plan will be in the hands of Congress and policy makers who must remain committed to implementing the plan.

"In my experience and seeing what has worked in other countries, you can plan all you want, but there really needs to be a long-term commitment for such plans to succeed," he said.

Also as part of the meeting, the five-member FCC unanimously voted to impose a "shot clock" for wireless tower applications to speed up the time it takes for wireless operators to deploy new cell phone networks.

Chairman Genachowski promised last month at the CTIA tradeshow in San Diego that the Commission would do what it could to speed up this process. And the Commission's vote solidified that promise.

"Tower siting is a vital piece of our industry," CTIA president and CEO Steve Largent said in a statement. "It enables mobile services, including voice and broadband, for consumers, public safety, and businesses. Both Congress and the Supreme Court recognized the importance of taking concrete steps to ensure that the zoning process does not become a barrier to the reasonable deployment of, and competition among, diverse wireless networks."

Acting FCC Chairman Michael Copps released a report on broadband strategy for rural America on Wednesday.

The report was mandated as part of the 2008 Farm Bill. In that bill Congress asked the Federal Communications Commission to work with the U.S. Department of Agriculture to submit "a report describing a comprehensive rural broadband strategy."

The emphasis on forming a rural broadband strategy came several months before President Obama took office. Obama also sees broadband as a priority and included funding for broadband development as part of the stimulus package passed by Congress earlier this year.

In the American Recovery and Reinvestment Act of 2009, Congress appropriated $7.2 billion for broadband grants, loans, and loan guarantees to be administered by the USDA's Rural Utilities Service (RUS) and the Department of Commerce's National Telecommunications and Information Administration (NTIA). As part of this bill, the FCC is also required to file a report with Congress in February 2010 describing a national broadband policy.

Copps called this report on rural broadband strategy a starting point for developing a national broadband policy. And even with the $7.2 billion of money from the stimulus package, Copps said that more money will be needed to ensure that every American has access to broadband.

Copps identified several issues in this report that must be overcome to get broadband deployed in rural areas. These issues include technological challenges, lack of data about where broadband is available and who is accessing it, and high network costs. Despite these challenges, Copps said that the U.S. government must pour resources into solving these problems just as it did when building the U.S. Postal Service, the railroads, the nationwide electrical grid, the interstate highway system, and even the Internet backbone.

"From the country's earliest days, building the nation's infrastructure has required federal resources and leadership, and this federal role continues," he said in the report. "At their inceptions, some of these projects were controversial. Many considered them too expensive; others doubted their efficacy. Today, few would question their value, but each of these undertakings depended on a strong and coordinated national vision." ... Read more

Faced with a whopping $1.7 trillion deficit, President Obama is proposing tacking on a spectrum license fee to wireless operators to help generate revenue for the government.

The Obama administration's proposal was loosely outlined in the new budget plan for 2009 and 2010 submitted Thursday. In that plan, the administration proposes adding a new fee to be paid by wireless carriers that license wireless spectrum from the government.

These annual fees would start at $50 million in 2009 and jump to $200 million in 2010, Reuters reported. The fees will gradually increase over the next 10 years to $550 million per user per year, generating an estimated total of $4.8 billion over the next decade.

The proposed fees are in addition to license fees that operators have already paid the federal government as part of its wireless auctions. The Federal Communications Commission has been auctioning off wireless spectrum to phone companies and other entities since the 1990s. These auctions grant license holders exclusive rights to the spectrum in exchange for cash.

Over the years, these auctions have generated billions of dollars for the federal government. The most recent auction, which ended in March 2008, was for the 700 MHz block of spectrum that is being vacated by television broadcasters after the mandated digital TV transition. This valuable spectrum generated a record $19.6 billion.

But wireless spectrum is a limited resource. And the government is running out of airwaves to auction. In fact, the Obama administration predicts that it will only be able to generate about $4.8 billion in revenue from wireless auctions over the next 10 years.

Even though the additional fees could help the government halve the deficit by 2013 as well as help it fund several new spending initiatives, it's likely to be met with a great deal of resistance from mobile operators.

So far, none of the big four wireless carriers in the U.S.--AT&T, Sprint Nextel, T-Mobile USA and Verizon Wireless--has been willing to comment on the proposal. And the CTIA wireless-industry association said it's still looking into the matter.

"We are currently reviewing the details of the proposal and look forward to participating in the next stages of this issue," CTIA said in a statement.

Previous spectrum fee proposals have been strongly opposed by the wireless industry, and there's little reason to suggest that the industry would support them now. The big difference this time around is that a Democrat-controlled Congress could be more willing to support President Obama's plans.

More details about the proposal are expected later this spring when the administration releases a more detailed budget package. But any changes to the fee structure would require legislation. And my guess is that the wireless industry would fight hard against it.

Comcast is appealing a ruling by the Federal Communications Commission that found the broadband provider had illegally blocked some customers' Web traffic.

The appeal, filed Thursday in the U.S. District Court of Appeals in Washington, challenges the FCC's ruling on August 1 that Comcast's throttling of BitTorrent traffic last year was unlawful--the first time any U.S. broadband provider has ever been found to violate Net neutrality rules. The FCC issued a cease-and-desist order and required the company to disclose to subscribers in the future how it plans to manage traffic.

"We filed this appeal in order to protect our legal rights and to challenge the basis on which the (FCC) found that Comcast violated federal policy in the absence of pre-existing legally enforceable standards or rules," Comcast executive vice president David L. Cohen said in a statement.

FCC Chairman Kevin Martin said he was "disappointed by Comcast's decision to appeal."

Comcast, the largest cable provider in the U.S., has been under fire for months after it was discovered the company had been slowing down peer-to-peer traffic on its network. Comcast had said that its measures to slow BitTorrent transfers, which it voluntarily ended in March, were necessary to prevent its network from being overrun. At a public hearing in February, Comcast Executive Vice President David Cohen said, "Comcast may on a limited basis temporarily delay certain P2P traffic when that traffic has or is projected to have an adverse effect on other customers' use of the service."

Consumer groups were incensed by the tactic, and the FCC investigation ensued over whether Comcast had violated any of its Net neutrality principles.

Since that ruling, Comcast announced plans to reduce Internet service to customers it deems to be using too much bandwidth. To keep service flowing to other customers, Comcast plans to impede Internet speeds to its heaviest users for up to 20 minutes, Mitch Bowling, Comcast's senior vice president and general manager of online services, told Bloomberg in an interview.

The company also announced it would set a data cap of 250GBs per month for its residential customers beginning on October 1.

Federal regulators voted 3-2 on Friday to declare that Comcast's throttling of BitTorrent traffic last year was unlawful, marking the first time that any U.S. broadband provider has ever been found to violate Net neutrality rules.

The Federal Communications Commission handed Comcast a cease-and-desist order and required the company to disclose to subscribers in the future how it plans to manage traffic. Comcast had said that its measures to slow BitTorrent transfers, which it voluntarily ended in March, were necessary to prevent its network from being overrun.

"We need to protect consumers' access, said FCC Chairman Kevin Martin, a Republican. "While Comcast has said it would stop the arbitrary blocking, consumers deserve to know that the commitment is backed up by legal enforcement."

The vote was not unexpected. Martin said recently that he planned to side with the commission's two Democrats on the request submitted in November by Free Press and its political allies, including some Yale, Harvard, and Stanford University law school faculty. That led to a backlash against Martin this week from economic conservatives, including the Bush administration and House Republican Leader John Boehner.

It also is likely to be challenged in court. In 2006, Congress rejected five different bills that would have handed the FCC the power to police Net neutrality violations; the FCC has acknowledged that its own Net neutrality principles "are not enforceable"; the Supreme Court has previously ruled that the FCC has no power to regulate "unless and until Congress confers power upon it."

Comcast said in a statement on Friday that it believes "the commission's order raises significant due process concerns and a variety of substantive legal questions. We are considering all our legal options and are disappointed that the commission rejected our attempts to settle this issue without further delays."

Details of the FCC's ruling, which may not be available for a few weeks, remain unclear. While Comcast will face no fine, Martin said the FCC has adopted a new legal "framework" that will let federal bureaucrats deem whether future network management practices are permissible. The dissenting Republicans said they did not receive the final text of the order until late last night--it apparently includes a variant of a "strict scrutiny" test usually reserved to judge whether government policies are legal or not--and it is not yet public.

Commissioner calls ruling unlawful
In an unusually pointed dissent, Commissioner Robert McDowell, a Republican, said the FCC's ruling was unlawful and the lack of legal authority "is sure to doom this order on appeal." McDowell said the order would invite far more extensive FCC regulation of the Internet, with the rules varying by which political party controls the White House: "The ground rules will change based on election results."

The is the FCC's "journey into the realm of the unknowable," McDowell said, saying that the outcome "may result in slower online speeds" for most Americans. Deborah Taylor Tate joined him in a dissent; Democrats Michael Copps and Jonathan Adelstein joined Martin.

A summary of the order released by the FCC on Friday says:

The Commission announced its intention to exercise its authority to oversee federal Internet policy in adjudicating this and other disputes regarding discriminatory network management practices with dispatch, and its commitment in retaining jurisdiction over this matter to ensure compliance with a proscribed plan to bring Comcast's discriminatory conduct to an end.

Under the plan, within 30 days of release of the Order Comcast must:
* Disclose the details of its discriminatory network management practices to the Commission
* Submit a compliance plan describing how it intends to stop these discriminatory management practices by the end of the year
* Disclose to customers and the Commission the network management practices that will replace current practices

To the extent that Comcast fails to comply with the steps set forth in the Order, interim injunctive relief automatically will take effect requiring Comcast to suspend its discriminatory network management practices and the matter will be set for hearing.

Free Press hailed the vote as a "landmark" decision. "Comcast's history of deception and continued blocking show contempt for the online consumer protections established by the FCC," said Josh Silver, executive director of Free Press, in a statement. "We commend Chairman Martin and Commissioners Copps and Adelstein for standing up for Internet users and working across party lines to protect free speech and the free market."

Not helping Comcast's credibility was its denial in August 2007 of early allegations that it was filtering BitTorrent traffic. A few months later, though, it turned out that Comcast really was throttling BitTorrent after all, and the company was forced to concede to the FCC that it blocks only "excessive" traffic. That also handed competitors like AT&T a perfect opening to say that they don't throttle peer-to-peer traffic at all.

Kevin Martin, the Republican chairman of the Federal Communications Commission, is drawing fire from economic conservatives over his plan to declare that Comcast violated the law when throttling BitTorrent last year.

The vote is expected at a FCC meeting (PDF) on Friday morning. It promises to be a landmark one: this would be the first time the commission has ruled on a Net neutrality violation. (An earlier one was settled without a formal ruling.)

Martin's intra-party backlash started on Wednesday with an editorial in the Wall Street Journal that started with this uncomplimentary paragraph: "Bad personnel decisions have haunted the Bush Administration, and one of the bigger disappointments is Federal Communications Commission Chairman Kevin Martin. In his last months as Master of the Media Universe, he seems poised to expand government regulation of the Internet."

The Journal also reported in a news article on Friday that the Bush administration itself is irritated. "We're concerned about the decision," Meredith Attwell Baker, acting head of the Commerce Department's National Telecommunications & Information Administration, told the paper. "It appears to reverse a decade-old bipartisan policy against regulation of the Internet."

There's also House Republican Leader John Boehner, an Ohio Republican, who sent a letter (PDF) to Martin on Thursday warning him of going through with his plan to rule against Comcast, with the help of the five-member FCC's two Democrats. The text of the letter:

Dear Chairman Martin,

I am dismayed by recent press reports that you intend to interfere with the network management decisions of broadband providers, essentially regulating the Internet. As one of your Republican colleagues at the FCC, Commissioner McDowell, so aptly explained in his July 28 Washington Post editorial, "[t]he Internet has flourished because it has operated under the principle that engineers, not politicians or bureaucrats, should solve engineering problems." Congress has intentionally refrained from imposing the heavy hand of government, which is precisely why we have seen such rapid growth in the Internet. As the Wall Street Journal editorial board pointed out July 30, "the FCC's job is not to determine business models in the private sector. The community of Internet service and content providers has proven itself more than able to work out problems on its own as Web use has exploded."

As press reports indicate, the current case is no different. Difficulties in quickly transferring large files led to the development of cutting edge peer-to-peer technology. When a small minority of subscribers--often using these applications to share pirated music and movies--began clogging the networks to the harm of the large majority of users, broadband providers began taking steps to alleviate the congestion. This, in turn, has prompted peer-to-peer developers to collaborate with broadband providers to find better ways to manage traffic. It is this market-based, self-governing nature of the Internet that is the key to its success. Your heavy handed attempts to inject the FCC into the middle of that process threaten to hijack the evolution of the Internet to everyone's detriment. It will also deter the very broadband investment we need for the Internet to continue growing to meet the increasing demands being placed upon it.

Adding insult to injury, it appears you are wading into this debate on very shaky procedural and legal grounds. While the FCC has endorsed certain Internet policy principles, it has never adopted regulations through a proper notice and comment rulemaking. Nor should it, for the reasons I outline above. Nonetheless, your continued pursuit of this matter suggests that you are making not only a poor policy judgment, but a poor legal one, as well. I urge you return to a sound market-oriented approach, rather than continue down the path you have chosen. It will surely stifle one of the greatest technological and economic success stories our Nation has seen.

Adam Thierer, a policy analyst at the free market Progress and Freedom Foundation (which began its days as Newt Gingrich's favorite think tank), wrote this week that liberal activists "will incessantly petition the FCC to review each and every business model decision and encourage the unelected bureaucrats at the agency to manage the Internet to their heart's content."

It's possible that this last-minute criticism will change Martin's mind, or he may be spooked at the prospect of damaging his future political viability (at least inside the Republican Party). We'll know for sure in a few hours.