Pony up for the filters

I'm intending to give a more fulsome review of the new C2 Order, but today I'll single out one thing that seemed wrong: "the Commission has previously explained that the Children’s Internet Protection Act prohibits recipients from obtaining discounts under the universal service support mechanism for the purchase or acquisition of technology protection measures necessary for compliance with the Children’s Internet Protection Act."  Wait, what?

So I went back to the FCC's 2001 CIPA Order, and sure enough: "CIPA clearly prohibits recipients from obtaining discounts under the universal service support mechanism for the purchase or acquisition of technology protection measures necessary for CIPA compliance."

The FCC reached that conclusion based on § 1721(g) of the Act that created this mess, which says: "Notwithstanding any other provision of law, funds available under section 3134 or part A of title VI of the Elementary and Secondary Education Act of 1965, or under section 231 of the Library Services and Technology Act, may be used for the purchase or acquisition of technology protection measures that are necessary to meet the requirements of this title and the amendments made by this title. No other sources of funds for the purchase or acquisition of such measures are authorized by this title, or the amendments made by this title."

OK, I see that CIPA does not authorize the use of E-Rate funds for filtering.  But I don't think "not authorized" means the same thing as "prohibited."  It seems to me that Congress intended to ensure that applicants could use IDEA and LSTA funds for filtering, by overruling any provision that might have prohibited it ("notwithstanding") and to ensure that no one thought CIPA required other funding programs to change in order to allow funding of filters.

At one point, the FCC seemed to have some ambivalence on the subject.  The NPRM for the 2009 ESL wondered "whether [§ 1721(g)] explicitly prohibits E-rate program funding from being used for filtering software or whether the statute can be interpreted so that the Commission is not precluded from funding filtering software through the E-rate program." (paragraphs 14-15)  EdLiNC gave the most complete response, looking at legislative history and all.  Unfortunately, they came out against filtering.  Would EdLiNC reach a different conclusion now that we no longer hit the program cap?  (Back in 2008, any time a new service was included in the ESL, it meant the funding ran out earlier, and fewer applicants got Priority Two funding.)

So I disagree with the FCC.  CIPA does not "prohibit" the use of federal funds for filtering.  The law expressly allows the use of IDEA and LSTA funds (overruling any existing rules to the contrary), and makes no statement on whether other federal funds can be used.

I think filtering should be considered like any other service when it comes to E-Rate eligibility.  Which means it comes down to: are filters necessary to deliver broadband to classrooms and public areas of libraries?  My answer: "yes."  Or more precisely: "It's necessary if the applicant decides it is."  Almost all schools filter, because they know that the Internet has lots of content that is not conducive to education.  Lots of (most?) libraries, on the other hand, don't filter adult access, because they don't want to be in the position of censoring access.  (Unfiltered libraries can't get E-Rate funding for Internet access and Category 2, of course.)  I'd be interested to know what percentage of libraries allow young children to have unfiltered Internet access.

The other test I often think of is: "Do organizations which do not get E-Rate funding use the service?"  The answer is yes.  Well, at least it is here at On-Tech.  I make sure all our Internet access is filtered, just so we don't stumble on something unsavory.  It also protects us from malicious sites.

Let's add filtering to the ESL.

Talkin' EPC blues

I hear lots of discussion on C2 budgets and the merits (or demerits) of big consortia, but I haven't heard anyone discussing the change that affects me every day: the new EPC color scheme.

You noticed, right?  At first, I thought I'd messed with my screen brightness, but I confirmed that I wasn't the only one seeing it: the color on the EPC navigation bar at the top of the screen has changed.  For the old-school HTML geeks, it looks like it's gone from around #003366 to #0033CC.  Around here, it all looked purplier, but in fact, it's just bluer.

I don't like it.  It's too bright, and somehow the green made the page look more grown-up.  The new color is somehow cartoonish.  Yes, it's closer to the dark blue in the "paper flying at you" USAC logo, but I think the page looked better with more separation between those colors.

They also changed the text in the ... what shall we call it? ... navblob of links in the upper right corner below the navbar, and in other places.  The color is too bright for text.

Another minus: in the old color scheme, whatever was selected in the navbar had white text with a yellow underline.  Now the underline is white.  This doesn't make so big a difference, but I think the extra color was usefully eye-catching.

I can't really add this to the pile of reasons for scrapping EPC, but EPC is just a tiny bit worse now.

PIA's newest employee

Check out who is now doing PIA reviews: Commissioner O'Rielly!

This week, he sent a letter to the Superintendent of one the the consortia that he has been accusing of wasting money by overbuilding.

It's basically a special cost-effectiveness review (CER).  CERs from USAC are arbitrary and mysterious enough, but now we have an FCC commissioner dreaming up more requests. We've always been dealing with secret cost-effectiveness standards, but now we have a Commissioner creating his own standards after the application's in review.

Hey, here's an idea: before we start with multi-directional CERs, the Commission should first decide if CERs are allowable.  There are a large number of appeals of CER denials that have been awaiting FCC decision since 2008. Here's my dream: that in deciding those appeals,  the Commission sets clear standards for cost-effectiveness, which are then published every year in the Eligible Services List.

I've said more than once that I don't think that the FCC should be encouraging consortia, but it seems unfair and capricious for the Commission to be encouraging consortia consistently for 20 years, and then suddenly requiring an applicant to justify creation of a consortium and justify its members.  First, the Commission should clearly disavow paragraph 476 of the Universal Service Order: "we should encourage schools and libraries to aggregate their demand with others to create a consortium with sufficient demand to attract competitors and thereby negotiate lower rates or at least secure efficiencies, particularly in lower density regions."  For 20 years, the FCC has been saying "bigger is better," and now Commissioner O'Rielly is asking an applicant to explain why bigger is better.

Mystery extension

Huh?  I was just reading the cover letter from one of the Commission's "Streamlined Resolution of Requests Related to Actions by [USAC]" and I noticed this sentence: "If the Bureau has dismissed or denied your appeal and you would like to seek reconsideration of that decision, the deadline to file a petition for reconsideration or application for review by the full Commission is 116 days from the release date."  What?! 116 days?  We were told it was 30 days. The FCC has denied a Request for Reconsideration that was filed 32 days after the decision.

Did the rules change?  What are the rules?  Well the above-mentioned cover letter provides the relevant chapter.  Here we go, 47 CFR § 1.106 (f): "The petition for reconsideration and any supplement thereto shall be filed within 30 days...."  So there, 30 days. 

Can anyone tell me where the 116 days comes from?  That's a really odd number.

Not that I'm complaining.

Let's hear from an overbuilder

In a new twist on the overbuilding debate, an Alaskan telecom provider has filed with the FCC asking for changes to E-Rate and Rural Healthcare rules, because they're finding it difficult to compete under the current rules.  The telecom costs in Alaska are thrilling, so I thought I'd see what's up.

This request is kind of the flipside of the Texas Carriers case: this time, the overbuilder is complaining that the owner of existing fiber has an unfair advantage.

Before I get into the particulars, here's an overbuilding success story from an article written the last time Quintillion tried to get the FCC to put the squeeze on GCI:

Crawford cited the Nome School District as an example. The district has five schools, and 700 students, and paid $305,000 per month to GCI for its internet service.

According to Crawford’s letter, the district was able to reduce its bill to $95,000 a month once Quintillion connected to the shore from its subsea fiber optic cable.

A little overbuilding, and the price drops by 69%.  If Commissioner O'Rielly's rules had been enacted before Quintillion laid cable in 2016, then Quintillion would have had to use GCI's infrastructure, and the Nome schools would be paying 3 times as much.  At a cost to the E-Rate of $3 million per year.


Who are Quintillion and GCI?

Quintillion, the complainant: a company that has laid oceanic fiber around the northwest corner of Alaska as part of a plan to build a link from London to Tokyo.  )Seems crazy until you see the map:

OK, it still seems crazy.  I believe the idea is to shave 24 ms off the current 170 ms latency between London and Tokyo; high-speed traders will pay a lot to give their trades that speed boost.)
Here's a map that just shows Quintillion's Alaska network:

GCI: a company that has created a fiber-microwave WAN that covers much of Alaska:

So Quintillion complains:

1. GCI gets more than 75% of USF funding awarded in Alaska.
2. The FCC cut GCI's Rural Healthcare (RHC) funding by 26% in 2017.
3. Roughly 50% of funded E-Rate Internet commitments in Alaska received only one bid.
4. GCI’s market dominance resulted, in part, from ... $44 million federal BIP [Broadband Innovations Program] grants.
5. GCI insists on using its own network, refusing to use Quintillion's.

To which I say:

1. That is troubling.  Unless, like Commissioner O'Rielly, you believe that since federal funding helped pay for GCI's network, it should be protected from competition.  Me?  I say: "Overbuild, Quintillion, overbuild!"  The consensus up in Alaska is that a monopoly is not a good thing.
2. I'm too lazy to look into that, but I'll bet that has something to do with RHC rules about the cost of services in rural areas compared to costs in urban areas.  And, of course, it's a result of GCI having infrastructure where no one else does.
3. That is troubling.  Some might say it is a good sign, that there is no wasteful overbuilding, but me, I think it shows a disturbing lack of competition.
4. And therefore, according to Commissioner O'Rielly's reasoning, the government's $44 million investment should be protected from any competitor building service to any locations covered by their network.
5. GCI's cost to use their own existing network is close to $0.  Quintillion, did you offer to let them use your network for close to $0?  Keep lowering your price, and eventually they'll stop refusing.

And what solutions does Quintillion propose?

1. Make changes to the RHC:
1. Consider more cost-effective middle-mile and backhaul solutions.
2. Extend the bid period to 90 days.
3. If only one bid is received, limit the contract length to one year.
4. Allow more flexibility on changing service providers for single-bid awards.
5. Audit single-bid awards.
2. Make changes to the E-Rate:
1. Extend the bid period to 90 days from 28 days.
2. Require single-bid awards to submit cost and rate information that will be made public.
3. If only one bid is received, limit the contract length to one year.
4. Audit single-bid awards.  

To which I say:

1. Not my circus, not my monkeys. 
2. OK, this is my circus ("my circus" meaning "I belong to this circus," not "this circus belongs to me"):
1. No.  What will service providers be doing for 90 days?  How many more bids will come in?  I agree with letting service providers have more time in some cases, but not 90 days in all cases; let local officials determine the appropriate amount of time.
2. That info is on the Form 471, which is public.  And GCI has already made their rates public.  And we're talking about public bids here: file a FOIA request and get the whole bid if you want.  That's 3 ways you already have to get the information for all bids, not just single-bids.
3. Really?!  You're going to make schools and libraries go through the formality of re-applying and getting a single bid year after year?  In most Internet contracts I've seen, the price drops sharply if you sign up for at least 3 years.  So schools and libraries have to pay more and go through more hassle, just because one of these years, some other company might want to bother bidding?
4. How about this?  In single-bid situations, we audit all the telecom companies in the state who didn't bid?  Why go after the applicant and the service provider who participated in the competitive bidding process?  Instead, let's investigate service providers who didn't, especially any that have gotten any federal funding.

Why did Quintillion make this filing?  Quintillion is a wholesaler.  They sell middle-mile to service providers.  They brought a fiber connection to five towns in Alaska, but sell only to other telcos, who then sell to consumers (including school districts).  Why are they complaining?  Have they ever participated in a bid?

There are only 3 school districts that Quintillion fiber would serve: Nome, Northwest Arctic Borough (Kotzebue) and North Slope (Port Hope to Prudhoe Bay).  Quintillion already won Nome, but let's see:  Northwest Arctic Borough is in a $6-million-per-year contract with GCI until 2021 (with voluntary extensions through 2023); North Slope is in a $7-million-per-year contract until 2021 (with voluntary extensions through 2031).  OK, I can see why Quintillion wants to give their resellers an opportunity to figure out how they're going to connect the schools to Quintillion's POP in those towns.  But hey, if the resellers start planning now, they won't need 90 days after the Form 470 goes up.  Then in the fall of 2020, let the districts know how much money you can save them, and they'll bail on the contract extensions and you'll win the business for FY 2021-2022.


So what do you think?  Is Quintillion an evil overbuilder, hurting the value of the federal government's investment in GCI's network?  Or are they a competitor prevented from bringing costs down for schools? (And, since the E-Rate is paying 80-90% of the cost, bringing down costs for the federal government.)

Mea culpa

I owe the E-Rate community an apology.  I was reading through an August 2014 post of this blog, and found that I had suggested the following:

You know what we should do for fiber instead of getting into the weeds on which pieces of fiber are eligible and which aren't depending on whether its lit, dark or IRU?  Say this: "Any applicant seeking a dark fiber lease must also request and consider lit fiber proposals."

Did I create the heinous mess of Form 470 drop-downs and evaluation requirements for dark fiber?

Maybe I should watch my mouth.  Yeah, maybe I'll release an NPRM and consider a new rule for not spouting suggestions before considering the evil rules that they could spawn.

Schools should subsidize rural broadband?

As promised, I'm going to take a look at Commissioner O'Rielly's comments about overbuilding from his speech to the Hudson Institute.

First, kudos on "pernicious consequences."  That is just a delightful phrase.

While we're side-tracked onto my preoccupation with language, in the official transcript of the speech, the Commissioner capitalizes the "R" in "E-Rate."  Bravo!

Back to the pernicious overbuilding.  I've already given my views on overbuilding, but let me take a look at the Commissioner's statements in this speech.

OK, first off, in my-speak (as opposed to "Orwellian-speak"), allowing service from someone other than the incumbent provider doesn't just "promote 'greater competition'"; it "allows competition."  Allowing bids from service providers who do not have existing fiber does not "enable artificial competition"; it creates a level playing field where existing providers must compete for business, instead of being given a monopoly.

Here are the Commissioners objections to allowing competition:

1. it does not help consumers
2. it does not promote long-term competition
3. it undermines private incentives to invest in and upgrade broadband networks
4. it distorts competitive outcomes
5. it makes it more expensive to connect Americans living in the most remote areas

 To which I say:

1. It helps the schools and libraries who are able to get service at a lower cost.
2. So having two providers with fiber in an area does not promote long-term competition?  Restricting fiber to a single provider is somehow better for competition?  I don't think so.
3. What incentive does a monopoly have to invest in and upgrade networks?  Meanwhile, a new service provider will have to invest more than an existing provider, so in the big picture, we get more investment when we don't protect the existing provider.
4. It doesn't "distort" competitive outcomes, it "allows" competitive outcomes.  You can't have a competitive outcome if you restrict the ability of competitors to enter the market.
5. Connecting private individuals is not the goal or the responsibility of the E-Rate.  The High Cost program needs to take care of that.

"Due to a loophole in the E-Rate rules, school district consortia had manipulated the competitive bidding process to ensure that funding went to build new wide area networks covering entire school regions...."  I have long been saying that consortia do not necessarily lower costs, but calling consortia a "loophole" is ridiculous.  The original FCC Order implementing the Universal Service provisions of the Telecommunication Act of 1996 says, "we should encourage schools and libraries to aggregate their demand with others to create a consortium with sufficient demand to attract competitors and thereby negotiate lower rates or at least secure efficiencies, particularly in lower density regions." (paragraph 476). More recently, the FCC took steps to favor consortia in the Seventh Report and Order (paragraphs 168-182)

"Given the large geographic scope of the projects and the short window to respond with a bid,small rate-of-return carriers didn’t stand a chance."  Actually, we'll never know if they stood a chance, because they chose not to bid.  They could have banded together and produced a bid.  Or they could have bid on part of the network (which was allowed under the RFP).

"any dollar that a rate-of-return provider loses to an overbuilder will inevitably be recouped from the High Cost program."  Is that how the High Cost program works?  It guarantees revenue?  Is that program under cap?

I've spent a little time trying to understand the rules for rate-of-return carriers, but the resources go from overly simple ("The Rate-of-Return Reform Order released by the FCC at the end of March 2016 aims to bring broadband to the parts of rural America that still lack access.") to opaquely jargon-filled ("Q: If a rate-of-return carrier currently has no broadband-only lines and elects ACAM model-based support, must it refile its Special Access tariff to move the relevant costs into the new service category?  A: Yes, carriers are required to move these costs from the Special Access service category to the new Consumer Broadband-Only Loop category. Rate-of-return carriers then have the option of tariffing a consumer broadband-only loop charge for this service.")

In any case, which fund should support incumbent carriers that cannot compete with competitive carriers?  Seems to me that's the job of the High Cost fund, not the E-Rate. 

So it's possible that an applicant selecting a lower-cost offering from a competitive carrier might force  the High Cost program to pay the (more expensive) incumbent carrier more.  Will the savings to the E-Rate be greater than the cost to the High Cost program?  I'm confident no one can calculate that. 

But in any case, it seems absurd to force schools and libraries to subsidize carriers.  That would be the result if the FCC created rules to protect incumbent carriers' monopolies by forcing E-Rate applicants to use existing networks.