Get fiber while the getting's good

Looks like Commissioner O'Rielly is coming after self-provisioned fiber.  This is nothing new.  The Commissioner's first blog post included the statement "E-Rate funding must leverage the private sector networks and services, not overbuild them."  The most troubling part of the letter: "Regardless, I see absolutely no justification for using E-[R]ate funds for such a purpose.  Instead, any universal service funding for broadband deployment should be targeted, through the high-cost program, to unserved communities most in need of support."  It's that "regardless" that sends a chill up my spine.

But before we get to the meat of the letter, let's look at the most important question: Did the Commissioner use a small "r" in "E-Rate"?  He did.  That's disappointing, especially because back when he first arrived at the FCC, he used a capital "R."  Did the mole get to him?

I disagree with the Commissioner's position for a few reasons:

1. The current rules require that a district prove that self-provisioned fiber is cheaper than existing networks.  The E-Rate only pays for self-provisioned fiber when it is cheaper than the existing service.  So in every case, self-provisioned fiber is reducing the amount of E-Rate funding needed.  It's the opposite of wasteful.  I have a client that built a self-provisioned network before it was eligible for E-Rate, because it saved them money, even with the E-Rate putting a thumb on the scale by discounting service from the existing network and not from the self-provisioned network.  Even with a 40% discount, the existing service providers' networks were more expensive than undiscounted private fiber.  Maybe self-provisioned isn't always cheaper, but the E-Rate will only fund it when it is cheaper.
2. The Commissioner seems to be saying that self-provisioned fiber shouldn't be allowed if "there is already at least one private broadband company operating in the county...."  That is a troubling line of thinking.  Forbid competition, even when it reduces reliance on E-Rate funding?
3. This seems like an extension on the FCC's fear of "duplicative" services.  I'd invite the Commissioners to talk to their CIO about the Commission's infrastructure.  I'll bet the CIO won't say "duplicative," but will mention "redundancy" and "backup" as virtues.  I'm all for eliminating waste, but duplication is not necessarily waste when it comes to technology.  In IT, "redundant" is good, and "single point of failure" is bad.
4. I don't like "overbuild."  Instead, let's say "encourage competition" or "break monopolies."  Commissioner O'Rielly doesn't want to "support artificial competition."  I say we should support any kind of competition we can.  I'd prefer organic competition, but artificial is better than none.
5. The Commissioner says, "Overbuilding is especially problematic when those existing networks are subsidized by other federal funding...."  Wait, so we give one service provider a leg up on installing fiber, and then deny other providers who can install new fiber and beat the price of the subsidized network?  Is that fair?
6. The Commissioner says he hears concern about overbuilding "[i]n meetings with outside parties...."  Those outside parties wouldn't be the incumbents who currently have a monopoly on installed fiber, would they?  What did the E-Rate applicants say about overbuilding when you talked to them about it?  You are having as many meetings with applicants as you are with service providers, right?

I have to say, he does have a good example attached to his letter.  The applicant says that the self-provisioned fiber will be a "backup system" to a county-wide fiber network now being installed "until we know that [the county WAN] is complete and fully functional."  OK, that seems like a bad reason to build your own fiber network; private fiber is a long-term investment, and the new fiber won't be up before the county WAN.  And if the county WAN includes redundant connections to each school and a redundant connection to the Internet, then it does seem unnecessary to build another network.  But the district would have to kick in half the cost of the WAN (they have a 50% discount), so they seem to believe that the service is worth paying for.  (Or at least potentially worth paying for; the bids aren't in.)  Because self-provisioning will be cheaper.  For the applicant and for the E-Rate program.

What's an applicant to do?  Get your self-provisioned fiber application in now.  I smell changes in the eligibility of dark fiber for FY 2018-2019.  Also, make sure to use the option to get the entire E-Rate payment in the first year.  When weighing whether to self-provision, don't factor in E-Rate funding past 2017-2018.  Because as the Commission's recent order reiterates, "A multi-year contract does not insulate applicants and service providers from changes in program rules, including changes to the eligible services list...."

But even FY 2017-2018 is not going to be smooth sailing.  Commissioner O'Rielly has requested a bunch of info from USAC on self-provisioned networks.  Ugh.  Approvals of self-provisioned fiber for FY 2016-2017 were delayed over 6 months while USAC figured out what info they needed and how to approve those requests.  I had been thinking that maybe next year would go more smoothly, but I'll bet this is going to throw USAC into uncertainty and self-doubt.  I know it's thrown me into uncertainty.

And here I thought the E-Rate would be left alone for a year while the Commission went after bigger (and less popular) fish.