Phillip Dampier on USF Reform: It might have been great, it could have been a lot worse, but ultimately it turned out to be not very good.

Last week, the Federal Communications Commission unveiled their grand plan to reform the Universal Service Fund, a program originally designed to subsidize voice telephone service in rural areas deemed to be unprofitable or ridiculously expensive to serve.  Every American with a phone line pays into the fund through a surcharge found on phone bills. Urban Americans effectively subsidize their rural cousins, but the resulting access to telecommunications services have helped rural economies, important industries, and the jobs they bring in agriculture, cattle, resource extraction, and manufacturing.

The era of the voice landline is increasingly over, however, and the original goals of the USF have “evolved” to fund some not-so-rural projects including cell phone service for schools, wireless broadband in Hollywood, and a whole mess of projects critics call waste, fraud, and abuse.  For the last several years, USF critics have accused the program of straying far from its core mission, especially considering the costs passed on to ratepayers.  What originally began as a 5% USF surcharge is today higher than 15%, funding new projects even as Americans increasingly disconnect their landline service.

For at least a decade, proposals to reform the USF program to bridge the next urban-rural divide, namely broadband, have been available for consideration.  Most have been lobbied right off the table by independent rural phone companies who are at risk of failure without the security of the existing subsidy system.  Proposals that survived that challenge next faced larger phone company lobbyists seeking to protect their share of USF money, or by would-be competitors like the wireless industry or cable operators who have generally been barred from the USF Money Party.

This year, FCC Chairman Julius Genachowski finally achieved a unanimous vote to shift USF funding towards the construction and operation of rural broadband networks.  The need for broadband funding in rural areas is acute.  Most commercial providers will candidly admit they have already wired the areas deemed sufficiently profitable to earn a return on the initial investment required to provide the service.  The areas remaining without service are unlikely to get it anytime soon because they are especially rural, have expensive and difficult climate or terrain challenges to overcome, or endure a high rate of poverty among would-be customers, unable to afford the monthly cost for the service.  Some smaller independent phone companies are attempting to provide the service anyway, but too often the result is exceptionally slow speed service at a very high cost.

The new Connect America Fund will shift $4.5 billion annually towards rural broadband construction projects.  Nearly a billion dollars of that will be reserved in a “mobility fund” designated for mobile broadband networks.

The goal is to bring broadband to seven million additional households out the 18 million currently ignored by phone and cable operators.

The FCC believes AT&T will take a new interest in upgrading its rural landline networks, even as the company continues to lobby for the right to abandon them.

Unfortunately, the FCC has set the bar pretty low in its requirements for USF funding.  The FCC defines the minimum level of “broadband” they expect to result from the program — 4/1Mbps.  That’s DSL speed territory and that is no accident.  The phone companies have advocated a “less is more” strategy in broadband speed for years, arguing they can reach more rural customers if speed requirements are kept as low as possible.  DSL networks are distance sensitive.  The faster the minimum speed, the more investment phone companies need to make to reduce the length of copper wiring between their office and the customer.  Arguing 4Mbps is better than nothing has gotten them a long way in Washington, but it also foreshadows the next digital divide — urban/rural broadband speed disparity.  While large cities enjoy speeds of 50Mbps or more, rural towns will still be coping with speeds “up to” 4Mbps.

The FCC does not seem too worried, relying heavily on a mild incentive program to prod providers to upgrade their DSL service to speeds of 6/1.5Mbps.

The irony of asking AT&T to invest in an aging landline network they are lobbying to win the right to abandon is lost on Washington, and future speed upgrades for rural America from companies like Verizon are in serious doubt when they sell off their rural areas to companies like FairPoint and Frontier and leave town.

Critics of USF reform suggest the program is still stacked in favor of the phone companies, and considering the state of their copper wire networks, would-be competitors are scratching their heads.

The cable industry, in particular, is still peeved by reforms they feel leave them at a disadvantage.  Of course, Washington may simply be recognizing the fact cable companies are the least likely to wire rural America, but when they do, the service that results is often faster than what the phone company offers.  The nation’s biggest cable lobbyist — ironically also the former chairman of the FCC, Michael Powell — still feels a little abused after reading the final proposal.

“While we are disappointed in the Commission’s apparent decision to ignore its longstanding principle of competitive neutrality and provide incumbent telephone companies an unwarranted advantage for broadband support,” said National Cable & Telecommunications Association President Michael Powell, “we remain hopeful that the order otherwise reflects the pro-consumer principles of fiscal discipline and technological neutrality that will bring needed accountability and greater efficiency to the existing subsidy system.  We are particularly heartened by the Commission’s efforts to ensure that carriers are fairly compensated for completing VoIP calls.”

Wireless operators are not happy either, because the arcane requirements that come with the USF bureaucracy were written with the phone companies in mind, not them.  Small, family-owned providers find it particularly difficult to do business with the USF, if only because they don’t have the staff or time to navigate through endless documents and forms.  Phone companies do.

Your phone bill is going up.

Many consumer groups are relieved because it could have been much worse.   The FCC could have simply capitulated and adopted the phone companies’ wish-list — the ABC Plan.  Thankfully, they didn’t, but the FCC has naively left the door open to substantial rate increases for consumers by not capping the maximum annual outlay of the fund.  That follows the same recipe that invited higher phone bills and questionable subsidies awarded in an effort to justify the original USF program even after it accomplished most of its goals. Consumers may face initial rate increases of $0.50 almost immediately, and up to $2.50 a month five years from now.

The FCC, unjustifiably optimistic, suspects phone companies and other telecommunications interests won’t gouge customers with higher prices.  They predict rate increases of no more than 10-15 cents a month.  I wouldn’t take that bet and neither will consumer groups.

“We’re going to press the FCC to ensure that these are temporary increases, because history has shown that these types of costs tend to stick around and go on and on and on,” said Parul Desai, policy counsel for Consumers Union.

An even bigger question left unanswered is just how far the FCC will get into the broadband arena when it refuses to take the steps necessary to ensure it has an admission ticket.  The agency has avoided classifying broadband as a telecommunications service, an important distinction that would bolster its authority to oversee the industry.  Without it, some members of Congress, and more importantly the courts, have questioned whether the FCC has any business in the broadband business.  Just one of the many high-powered players in the discussion could test that theory in the courts, and should a judge throw the FCC’s plan out, we’ll be back at square one.

[flv]http://www.phillipdampier.com/video/C-SPAN Tom Tauke from Verizon on Changes to the Universal Service Fund 10-29-11.flv[/flv]

Verizon’s chief lobbyist Tom Tauke spent a half hour last weekend on C-SPAN taking questions about USF reform and the side issues of IP Interconnection and Net Neutrality policies. Tauke supports consolidation of small phone companies into fewer, larger companies.  He also expands on his company’s lawsuit against Net Neutrality, which fortuitously (for Verizon) will he heard by the same D.C. Court of Appeals that threw out the FCC’s fines against Comcast for throttling broadband connections.  Politico’s Kim Hart participates in the questioning, which also covered wireless spectrum issues impacting Verizon Wireless, AT&T’s stumbling merger deal with T-Mobile, and Verizon’s latest lawsuit against the FCC for data roaming notification rules.  (28 minutes)

Wildfires can result when overloaded utility poles topple in California's Santa Ana winds.

The California Public Utilities Commission’s Consumer Protection and Safety Division is recommending $99 million in fines against the local power utility and several phone companies for overloading power poles with cables which toppled and started a major wildfire in Malibu Canyon in 2007.

Even worse, the PUC alleges, the power company lied to investigators and destroyed evidence to cover up the cause of the blaze, which burned more than a dozen structures to the ground and destroyed dozens of vehicles.

Named in addition to Southern California Edison are phone companies: Verizon Wireless, AT&T, Sprint, and NextC Networks of California. All are being blamed for loading up phone poles with excessive wiring for both traditional utility service and backhaul wired connections to serve area cell towers. The bulk of the proposed fine is likely to be lodged against Edison because of the evidence tampering allegations, but phone companies are also deemed liable.

At issue are the annual bouts of Santa Ana winds which can create gusts up to 80mph or higher. Most utility poles were designed to support a load of a few power cables, landline phone service, and cable television lines. But in many parts of canyon country, wireless phone companies rely heavily on utility poles to connect to their network of cell towers which are strategically located on ridges and mountains to serve populated valley regions below. While some cell phone companies now rely on fiber connections, many also still utilize a series of copper wire circuits to provide sufficient wireless capacity. In some cases, companies may hang several cables to meet bandwidth needs. The more cables, the more susceptible poles become to wind loads, which can literally snap poles in half or force them out of the ground in high wind gusts.

When electric lines topple, they can start fires that quickly grow out of control in remote areas.

Downed power lines are blamed for a number of wildfires in California, including the 2008 Sesnon fire in the San Fernando Valley. Fire investigators and local officials have pressured utility companies to mitigate the hazards from downed power lines by keeping excess cables and equipment off the poles.

Hans Laetz, a Malibu resident who has lived with what he calls “spindly-looking utility poles” for more than a decade was not surprised when life-threatening wildfires were blamed on downed lines.

“My family and my neighbors in Malibu are being placed at risk,” Laetz told the Los Angeles Times. “I drove under those poles on Malibu Canyon Road for 10 years, and I thought one of these days, one of those poles was going to fall. You could tell this was a disaster waiting to happen…. And then it happened.”

Edison denied the allegations it mislead investigators and called the proposed fine “excessive.”

Cable company-owned power backup batteries

For the last several years, telephone companies have faced millions in losses from stolen telephone cables often ripped right off of phone poles — sold to copper scrap yards, usually to fuel drug habits.  Now cable companies like Time Warner Cable are facing a theft problem of their own — stolen battery backup equipment.

In California and Texas, the problem has grown significant enough to cost the company nearly $1 million replacing lost equipment.  Time Warner is now offering up to $10,000 in some areas for information leading to the arrest of those responsible.

Thieves break into metal cabinets usually located on street corners, phone poles, or in backyards looking to harvest the power backup batteries inside.  Thieves resell the lead batteries at scrap yards, and often take the power backup controllers as well.  Most break-ins occur at night, and in many areas, the thieves dress up to resemble utility workers and drive panel vans or bucket trucks that passersby might mistake as utility-owned vehicles.

The batteries appear similar to a traditional car battery, but larger.  They weigh about 67 pounds each and typically sell for $17-20 apiece at scrap yards.  In some areas, repeated break-ins have caused the loss of dozens of batteries, and major headaches for customers who can find their phone and Internet service interrupted until technicians can replace the equipment.  In Beaumont, Tex., two men driving a bucket truck netted $3,000 worth of batteries in one evening.  They were caught by law enforcement officials who suspected them of breaking into numerous boxes attached to area telephone poles.

In January, two Huntington Beach, Calif. police officers stopped a suspicious vehicle and found 13 stolen batteries owned by the cable company removed from boxes in Huntington Beach, Fountain Valley and Costa Mesa. The vehicles’ occupants were arrested for a variety of charges including the possession of stolen property.  They have since been convicted of the crimes and sentenced to time in jail.

Grand Prairie, Tex. Det. Lyle Gensler told a Dallas TV station it’s not just the loss of service Time Warner is worried about, it’s the replacement cost of the stolen property that may trickle-down to customers.

“If Time Warner loses a battery, it’s going to cost them to replace it. If they lose money, they’re going to pass that onto the consumer,” said Gensler. “Over the last six months [Grand Prairie] has lost over $100,000 in property.”

Time Warner has been installing new theft prevention equipment on some utility cabinets in problem areas that deter unauthorized entry into the cabinets.

The cable company has already paid at least one tipster $10,000 for turning in cable equipment thieves.  Concerned citizens can report suspicious activity to their local law enforcement office or call Time Warner’s security tip line at 1-877-TWC-TIPS.

[flv width=”640″ height=”382″]http://www.phillipdampier.com/video/KXAS Dallas Time Warner Offers 10000 Reward for Battery Thefts 10-11-11.flv[/flv]

KXAS in Dallas reports on a rash of battery thefts affecting Time Warner Cable and their subscribers in the Metroplex.  (1 minute)

While most rural telephone companies are selling customers 1-3Mbps copper-delivered DSL service, Alcatel Lucent has announced the commercial availability of VDSL 2 Vectoring, a new way of delivering up to 100Mbps over the copper wire telephone network most rural North Americans still depend on for telecommunications service.

VDSL2 combines a fiber-copper hybrid network similar to Bell’s Fibe or AT&T’s U-verse, with interference-cancelling technology called “vectoring” to deliver speeds much closer to the 100Mbps theoretical limit of current DSL technology.

“Alcatel-Lucent’s plan to make VDSL2 vectoring commercially available is very timely,” said Rob Gallagher, Principal Analyst, Head of Broadband & TV Research, Informa.  “VDSL2 Vectoring promises to bring speeds of 100Mbps and beyond to advanced copper/fiber hybrid networks and make super fast broadband speeds available to many more people, much faster than many in the industry had thought possible.”

A new way to boost copper speeds even faster.

Different flavors of DSL are currently in use around North America and beyond.  The most basic form, ADSL, also happens to be the most commonplace among phone companies offering basic broadband service.  For customers up to 12,000 feet away from a phone company central office, DSL delivers speeds usually at 1Mbps or faster.  Customers enjoying the fastest speeds must live much closer to the phone company facilities.  The further away you live, the slower your broadband speed.  In rural areas, consumers can live further away than the maximum distance of the central office, which means no DSL service for those subscribers.

A combination of signal loss and interference, called “crosstalk,” from adjacent copper wire pairs are both the enemies of DSL broadband, because they can drastically reduce speeds.

Telephone companies can address this problem by building new satellite central offices located halfway between customers and their primary facilities.  These offices, usually connected by fiber, can successfully reduce the amount of copper wire between the customer and the company, boosting speeds.  Many phone companies also deploy DSL extensions called D-SLAMs, which can be attached to a phone pole or enclosed in a metal box by the roadside.  A fiber cable connects the D-SLAM back to the phone company, while existing copper phone wires go back to individual subscribers.

More modern forms of DSL: ADSL2, ADSL2+, and VDSL, share some of those concepts.  The key is cutting as much copper wire out of the network as possible, replacing it with fiber optic cable which does not suffer signal loss or interference in the same way.

Many European and Pacific broadband networks rely on ADSL2/2+, which can usually deliver reliable speeds in the 20Mbps range.  VDSL networks offer even more bandwidth, and are the basis of U-verse and Fibe, which split up broadband, phone service, and television on the same cable.  When customers demand even faster speeds, phone companies can “bond” several individual DSL connections together to deliver faster speeds.  Some traditional ADSL providers do that today for their customers, especially in areas where low speeds prevail.

An argument the phone company will love.

Alcatel Lucent says VDSL2 with Vectoring is the next best thing to fiber to the home, because it is cheaper to deploy with fewer headaches from local authorities when streets and yards are dug up for fiber cable replacements.  It also meets the growing speed needs of average consumers.  Alcatel Lucent predicts the minimum speed North Americans will need to support the next generation of online video is 50Mbps, more than 10 times the speed phone companies like Verizon, AT&T, Frontier, and CenturyLink provide over their traditional DSL networks, especially in rural and suburban areas.

Vectoring can deliver results for phone companies with aging copper wire infrastructure, more prone to crosstalk and other signal anomalies.  Alcatel Lucent compares vectoring with noise-cancellation headphones.  By sampling the current noise conditions on copper cable networks, vectoring can suppress the impact of the interference, boosting speeds and delivering more reliable results.

With technologies like VDSL2 with Vectoring promising speeds far faster than what rural North Americans currently enjoy, the Federal Communications Commission may want to re-evaluate its national minimum speed standard for broadband — 3-4Mbps — found in its National Broadband Plan.  Alcatel Lucent promises they can do much better.

[flv width=”640″ height=”324″]http://www.phillipdampier.com/video/Alcatel Lucent VDSL2.flv[/flv]

Alcatel Lucent produced this video to promote its new VDSL2 with Vectoring technology.  The video targets cost-conscious phone companies who are being pressured to deliver faster service, but don’t want to spend the money on a fiber to the home network.  (6 minutes)

A similar group in Baltimore placed bus advertising complaining about the lack of FiOS in that city in 2010.

A Buffalo group backed by the Communications Workers of America is demanding a federal and state investigation into whether Verizon is intentionally bypassing urban, ethnic, and economically-challenged neighborhoods for its fiber-to-the-home service, FiOS.

The Don’t Bypass Buffalo Coalition has stepped up the pressure on Verizon with a new billboard campaign that accuses the company of exacerbating the digital divide in western New York.

“The Verizon FiOS deployment in Buffalo is a corporate redlining scheme undermining the City of Buffalo with intentional discriminate design,” said Coalition member Jim Anderson.

Verizon suspended FiOS deployment during the height of the economic downturn, leaving some cities with a patchwork of FiOS service in some locations, traditional copper phone wiring in others.  In Buffalo, suburban areas that quickly approved the FiOS network with few franchise pre-conditions were among the first to get the fiber network.  Other suburbs, and the city of Buffalo itself, were effectively bypassed when franchise agreements and negotiations were left uncompleted at the time Verizon suspended further expansion.

The Coalition released a letter signed by two dozen local officials and community leaders that suggests Verizon may be up to something more sinister, suggesting possible racial and economic discrimination by the company over its choice of areas to deploy the service.

Coalition members note that in the 10 suburbs where Verizon offers FiOS, the proportion of African American residents in those areas is more than 13 times lower than it is in the city of Buffalo, and the Hispanic population is nearly four times lower. Even more telling, the Coalition writes, is that the network infrastructure is already in place to deploy FiOS within Buffalo city limits.

The Coalition is among the most vocal among local pressure groups Verizon has faced since its decision to suspend further FiOS expansion.  Other cities, especially Baltimore, have their own coalitions to complain about Verizon’s apparent lack of interest in restarting fiber projects.

Verizon rejects most of the charges the Buffalo-based Coalition has made.

“As Verizon has told the Coalition and local officials countless times, our focus these days is meeting the buildout commitments in the 182 municipalities across the state where we currently have TV franchises,” a Verizon spokesman said in a statement. “The allegation of discrimination with respect to FiOS deployment is just plain wrong…period. The coalition simply needs to look at other FiOS deployment areas in New York and other states to see those allegations are off base.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Is Verizon Redlining Baltimore City 3-16-10.flv[/flv]

In March, 2010 Progressive Maryland held a public rally protesting the lack of Verizon FiOS in Baltimore.  (8 minutes)