The big news is that the FCC is dissolving the Universal Service Fund, created by the charge on your phone bill that subsidizes phone service in rural areas, in favor of creating a fund that subsidizes broadband. "As part of this reform, some consumers may pay, on average, an additional 10 to 15 cents a month on their bills; but for every dollar in cost, reform will provide $3 in benefits for consumers." Wow, does this sound like "Hi, we're from the government, we're here to help," or what?
There's no doubt that any move away from telecom-based infrastructure and towards modern IP-based infrastructure is a good move. But will the FCC's new plan cost you? More to the point, will it preserve the "big brother" status of incumbent telecoms, or is it really a bold, new move, the equivalent of Steve Jobs' runner throwing the hammer into the screen in the famous "1984" Macintosh commercial?
According to FCC commissioner Michael J. Copps, history is being made because, in addition to converting the USF into a broadband subsidy fund, this plan has the FCC transitioning away from inter-carrier compensation. "This item puts the brakes on the arbitrage and gamesmanship that have plagued inter-carrier compensation for years and that have diverted private capital away from real investment in real networks."
Yes, we get it, the system was broken. And the principles behind the new regulation are laudable--but it's still focused on voice service and doesn't recognize that voice can come from anywhere if you have good broadband. The FCC's principles, in summary, are to preserve voice service, ensure availability of broadband and voice service for homes, business, and "anchor institutions," ensure availability of advanced mobile broadband and voice to ensure that rates for broadband and voice are comparable nationwide, and to minimize the universal service contribution on your bill.
My overall take, however, is that it's not really a Steve Jobs moment when we're encouraging carriers to build a whopping 4 Mbps downstream and 1 Mbps upstream. Can I get a Pentium Pro PC with a 100-MB hard drive to go with that? Oh, wait, carriers can apply for a waiver if it's a hardship to build out 1 Mbps. Maybe that comes with a 486SX with 4 MB of RAM.
It's hard to reconcile this with Genchowski's statement that "These networks must meet performance criteria that enable the use of common applications such as distance learning, remote health monitoring, VoIP, two-way high quality video conferencing ..." and so on.
I also think that subsidies usually have unintentional consequences, and that there are other ways to encourage broadband deployment other than paying the usual suspects to do it. But to be fair, I asked several broadband watchdogs and analysts what they thought.
James H. Cawley, a commissioner with the Pennsylvania Public Utility Commission, thinks that the FCC is vastly expanding its jurisdiction in a way that "allows it to abrogate state laws and usurp established state authority." He says that the FCC's inter-carrier compensation scheme "only works when costs and traffic are roughly in balance (which they rarely are)." As for rural America, and the much-celebrated farmer that Genachowski referred to in his remarks? Cawley says that this scheme "virtually ensures second class status for rural America." Whoa, don't hold back, tell us how you really feel.
Dave Burstein, an industry analyst, is also full of sunshine about the plan, saying that the FCC "gave the big telcos a fat subsidy for what they already have while cutting the small telcos and rural competitors. It's mostly a switch in subsidies between carriers disguised as a broadband effort." It is troubling that, according to his analysis, "Verizon and AT&T claimed they would have to abandon 5-10 million lines that already get broadband because the costs were too high," due to a phony model that claimed $80 per month in costs to serve those lines. He adds that 2 million to 5 million homes will not be reached by this effort, as they're deemed too expensive.
Craig Settles, a broadband consultant who works with municipalities and economic development professionals, agrees that 4 Mbps down and 1 Mbps upstream isn't enough. His research data regarding broadband and economic development backs his claim up. "More than 90% of economic development professionals nationwide believe this speed is insufficient for producing economic impacts such as attracting new businesses to an area, increasing start-ups and increasing individuals' ability to improve their financial situation." He is a fan of the FCC's "demand accountability" part of the plan, but worries that there isn't a defined arbitrator to ensure that these standards are met. While he's got skin in the game, he also points out that the plan doesn't seem to include community or municipal networks. This is strange because there are rural models of success that offer wireless speeds in the 20 Mbps to 30 Mbps range.
As with all plans, the proof of the pudding will be in the execution, not in the press releases or the implementation plan. Many eyes are on the FCC, and the question is, will the implementation actually work, will the money go to anyone but the big telecoms, and will the level of tech be obsolete before it's complete?