FCC, Please Speed the Deployment of Broadband

Published September 27, 2018

Yesterday the FCC held an open commission meeting. There are a number of items on the agenda, two items in particular focused on advancing broadband deployment across the country. One item to be considered is to clarify the scope and meaning of the 1996 Communications Act in reference to barriers to entry and the use of rights of way, as well as local zoning authority. But, also to establish “shot clocks” a time in which they must make a decision, for state and local approvals for the development of small wireless infrastructure. The FCC will also provide guidance on streamlining state and local requirements on wireless infrastructure deployment.

The second item addresses regulatory practices in the cable franchising process that have the effect of impeding or blocking broadband deployment by cable operators in towns and cities across the country. Adoption of the infrastructure and franchising items are critical to advancing broadband deployment.

Broadband has been a reliable economic multiplier for the U.S. economy and a steady contributor to the financial health of states, counties and towns. Remarkably, since 1996, cable and telecom companies have invested over $1.6 trillion in private capital in infrastructure and services to bring broadband to communities across the country.  Astonishingly, that is 25 percent of the total global investment in broadband. With the second lowest broadband pricing of any OECD countries, and more than 1.25 million low income households have been connected by the cable industry alone. Of the households with broadband, 89 percent used wi-fi to connect in just the first quarter of 2017. All told, such access has made remote work a reality for many, increased their opportunities for entertainment, enhanced access to health care as well as education, just to name a few benefits. But there is so much more yet to come. To get there the regulatory environment must remove impediments broadband thereby spurring build out in those remaining areas of the U.S. where broadband is lacking.

One of the hot topics in the broadband space is the coming of 5G, a system of systems that will work with previous technologies, and also require new infrastructure, including small antennas also known as “small cells.” New investments in many miles of new fiber, cell towers and base stations will also be required. This mash up of existing and new technologies, including Wi-Fi, and improvements in both wireless and wired connections completes the communications loop. For example, 5G providers will continue to use wireline infrastructure to backhaul data between the backbone and the local networks. But, overall there will be more antennas in more places, allowing more wireless connectivity where it makes sense, particularly in cities. This ubiquity of high speeds, a hundred times faster than 4G, will enable more of everything valued in broadband such as hyper fast download speeds but will also open the world to promised technological advancements such as remote surgery, and tactile real-time feedback for robotics, the long-promised internet of things and self-driving vehicles. That is, of the cities and localities will allow.

Earlier this year the FCC pursued some reform, moving to spur investment on the infrastructure of today and tomorrow by updating a federal regulatory scheme designed for completely different technology. But another step is needed because while many states and cities have been cooperative in moving forward in getting broadband to their citizens, there has also been some outlier behavior that needs to end. The great news is that twenty states have passed “small cell” legislation to require reasonable fees for the application to place small cells, reasonable ongoing fees to rent the right of way from the communities, and a guarantee of timely decision making on whether the applications are approved so that infrastructure building can proceed. But in those states and localities where they are slowing the expansion of broadband for their own gains, the FCC must move forward this week and remove those artificial barriers to infrastructure investment and the national broadband network.

Being sensitive to the authority of the states, the structure of the FCC provision preserves the state’s legislation in states where they are actually moving forward on deployment. The FCC has learned from those states – those states have been the laboratory of democracy, the laboratories of policy innovation – and has crafted its proposal accordingly. Ultimately, the intent is to give a fair shot to smaller and medium communities to gain broadband advantages even while large communities continue to benefit as the country moves along a clear path for the national adoption of 5G. Such a move is of great value to the nation. One study by Recon Analytics of the economic effects of 4G showed that America’s 4G leadership led to roughly $125 billion in revenue for U.S. companies and increased wireless-related jobs in the country by 84%, to 4.6 million in 2014 from 2.5 million in 2011. Such bounty, and more, could come again to the U.S. if we lead in 5G.

While 5G will be great for hyper local applications and will be abundant in smart cities, a smart America will take a broader and familiar approach, using a combination of new fiber and wireless. Other technologies will also play a role, and communities can do more to help there too. But aside from the broadband infrastructure item, the FCC will also consider an item that addresses the cable franchising process. Cable operators are major providers of wireline broadband across the country. Many state and local authorities are excited to see broadband expand and have worked collaboratively with cable operators to make that happen. Unfortunately, there are some others that attempt to use the franchising process to impose costs and other requirements on cable broadband deployment. The FCC item launches a rulemaking to curb such abuses.

The franchising process evolved at the state and local level to facilitate the deployment of cable service in communities across the country. The prospective operator would negotiate a franchise agreement with the local or state franchising authority in order to lay cable in the public rights-of-way, and also pay so-called “franchise fees”. However, over time, franchising authorities became experts at extortion when negotiating or renegotiating these franchise agreements, demanding more and more money or other “gifts to the community.” City and county buildings all over the nation were full of dark fiber and unused circuitry that cable companies were forced to install in those same buildings to obtain or renew a local franchise.[1]

Congress took steps in 1984 and again in 1992 and 1996 to impose certain federal standards on the franchising process as part of the federal Cable Act. For example, Congress set a franchise fee rate cap at 5 percent of cable service revenues and also placed limitations on regulation of non-cable services delivered over cable systems. The FCC, for its part, has periodically adopted rules to implement Congress’s statutory directives, most recently in a series of orders starting in 2007 that sought to curb some local franchising practices that were inconsistent with the Cable Act. Those orders were appealed in federal court, and the court ruled in 2017 that some of the FCC’s decisions were not properly justified and sent those issues back to the FCC for further consideration. The item considered this week tackled these and related issues.

The item addresses two main issues. First, it proposes to bar franchising authorities from imposing fees and other requirements on broadband and other non-cable services delivered over cable systems. As the FCC explains in the rulemaking notice, Congress intended to limit the cable franchising process to the regulation of cable services, not other services provided over cable systems. Unfortunately, in recent years, a number of states and localities have sought to use the franchising process as a vehicle for imposing additional fees and regulations on cable broadband, contrary to the express directives of Congress, the broadband goals of the FCC, and the interests of consumers. The FCC is proposing to end those abusive practices, and thereby facilitate greater broadband deployment across U.S. communities.

Second, the item proposes to bar franchising authorities from using the franchising process as a way to extort various fees and services that often have nothing to do with cable service and are not contemplated in the franchise fee framework established in the Cable Act. Under the FCC’s proposal, if a municipality wants to force a video provider to, say, provide decorative baskets of flowers down Main Street (yes this has really happened), the cost of doing so would be considered an in-kind contribution offset against that 5 percent franchise fee cap. Additionally, the Commission would clarify that capital costs for public, educational, and government channels required by a franchise agreement are the only cable-related contributions that are not subject to the statutory 5 percent franchise fee cap.

Such fees, which effectively act as a tax regardless of what they are called, should be much lower, if they must exist at all, but certainly they should not be allowed to expand beyond video, and in that should apply to all video. As cable video revenue is in decline even while broadband expands, municipalities would like to expand their income by expanding the reach of franchise fees, essentially hiding behind video providers to collect a tax from its citizens. Such tax creep is unacceptable, creating an ever-larger barrier to entry for new broadband and should be curtailed. A further, related, threat is the invention of new fees or taxes, such as a licensing fee on cable modems. The FCC should be applauded for combating these practices and thereby facilitating broadband deployment and benefiting U.S. consumers.

In all cases, barriers to broadband expansion end up harming those who are without or now struggle to pay for, broadband. Administrative barriers, fees and taxes all result in higher costs for and slower expansion of broadband. Congress, the FCC, and local leaders of all sorts, from legislators to administrators, should consider how they can reduce the barriers for broadband expansion. The path to success is clear – make broadband deployment easy.

[1] IPI President Tom Giovanetti at https://www.ipi.org/ipi_issues/detail/testimony-before-indiana-senate-regarding-telecom-deregulation and https://www.ipi.org/ipi_issues/detail/testimony-before-the-indiana-senate-regarding-telecom-deregulation