Photo of Douglas Jarrett

As 2015 begins, the FCC has reportedly chosen Title II with forbearance as the basis for targeted Net Neutrality rules.  Other headline issues are the incentive auction, re-assessing whether the Communications Act empowers the FCC to pre-empt state laws limiting municipal broadband networks, and redefining broadband as 25 MBPS downstream/3 MBPS downstream.    

However far reaching, the FCC’s focus has blind spots.  Multiple industry sectors and user communities face significant challenges in terms of basic connectivity and market entry opportunities.  This post highlights three areas that deserve far more attention and creative energy from the FCC. 

  1. Lack of Wireless Service Diversity
  2. Nationwide In-Building Wireless Coverage Gaps
  3. USF Contribution Reform

1.         Lack of Wireless Service Diversity.  The statutory and policy biases in favor of spectrum auctions trigger a series of unfortunate dynamics.  Auctions have become a politically unassailable source of government funding.  As the major wireless carriers expend billions for spectrum (almost $45B in the AWS-3 auction), barriers to entry rise; the dominant carriers are in an even stronger position to dictate technology and service offerings.  As a result, the wireless requirements of critical infrastructure industries are ignored at two fundamental levels. 

First, each of the wireless carriers’ data service offerings are limited to wireless high speed Internet access, a “best efforts” service.  Baseline service level agreements for latency, availability, or reliability, even on a regional or local basis, are not offered.  The carriers do not offer wireless equivalents of private line service or virtual IP services, such as MPLS.  The same is true for fixed M2M (“Internet of Things”) offerings:  no SLAs.   

The carriers’ best efforts, “one-size-fits-all” data service conveniently ignores the reality that wireless high speed Internet access service poses significant cyber risks.   That their data must traverse the Internet is a difficult pill to swallow for critical infrastructure CTOs and CIOs constantly challenged to secure their networks from cyber threats.

Second, requests for additional spectrum for wireless voice and data requirements of critical infrastructure industries are given short shrift by the agency.  To meet these requirements, CII firms look to the FCC’s secondary market rules to secure area-wide licenses, principally spectrum that the major wireless carriers have abandoned.  These spectrum resources provide a limited, short term “relief valve” for CCI firms.

2.         Nationwide In-Building Wireless Coverage Gaps.  Almost two years ago, the FCC adopted rules for consumer signal boosters.  Fixed consumer boosters are designed for single-family residences and small business environments.  While the FCC recently proposed helpful rule amendments, fixed consumer signal boosters have limited coverage, require exterior antennas, and are not designed to provide building-wide coverage.    

In its 2013 decision, the FCC deferred to the wireless carriers’ interest in network management, failing to acknowledge the persistence of substantial in-building signal coverage gaps.  This blind spot extends into the FCC’s efforts to improve in-building wireless 9 1 1 capabilities.  Advanced location-based technology is useless if the 9 1 1 call from the dorm room or apartment cannot reach the wireless carrier’s network.

From the author’s vantage point, the demand for in-building coverage far exceeds the ability or willingness of the wireless carriers to serve.   Major venues, airports and rail terminals, and large commercial structures appear to have the carriers’ attention.  But this is not the case for many multi-dwelling residential properties (apartment buildings, condos, college dormitories and retirement communities), commercial buildings, and industrial structures.  This is a particular challenge when upwards of 44% of America’s households rely exclusively on wireless service for voice communications. 

Property owners are beginning to accept that they must bear the cost to install distributed antenna system (“DAS”) technology and some related equipment with the wireless carrier installing, maintaining and operating the RF signal source at the property.  In many ways, DAS is becoming the “inside wiring” for wireless service. 

But when the property owner makes or is willing to make the investment in a DAS, the carriers are often indifferent to reasonable requests for service.  At a given property, participation by the wireless carriers varies:  some or one of the carriers may agree to participate.  It is not unusual for all of the wireless carriers to decline to participate.  And, even when a carrier commits to participate in an in-building solution, the carrier may reserve the right to terminate the relationship without cause on 30 days’ notice.

3.         USF Contribution Reform.  The principal issue with the USF rules is that the contribution rules have not changed since the late 1990s and, despite substantial growth in telecommunications (both information services and telecommunications services) revenues, aggregate assessable revenues have not kept pace.  The contribution factor is well above 16% and will remain elevated due to major USF program reforms such as E-Rate Modernization.  In addition, requests for important rule clarifications remain pending for years.   

The FCC does not grasp the competitive challenges posed by a surcharge of 15-18%, particularly when the applicable rules are unclear and subject to multiple interpretations.  Unlike the wireless carriers, cable companies and the major wireline carriers, all of which systematically pass their USF assessments onto their customers, new telecommunications carriers and ISPs (that don’t have historic rights-of-way grants or franchises) must compete aggressively on price and service quality.  USF contribution levels set at typical state sales tax rates of 4-6% based on clearer, more rational rules would mitigate this competitive hurdle.

The expansion of USF funding to broadband strongly suggests that revenues attributable to the telecommunications (service?) component of high speed Internet access service (probably on a capacity basis) should be assessable.  Assuming the FCC bases Net Neutrality rules on its Title II authority, the pool of assessable USF revenues should expand significantly.  Alternatively, a more sustainable and less convoluted approach (as compared to today’s rules) based on assigned telephone numbers could also work. 

While the FCC punted contribution reform to the Federal State Joint Board last year, the Commission should advance the ball when it receives the Joint Board’s recommendations.