Rep. Boucher Asks NARUC to Step Up on Network Neutrality

Boucher asked NARUC to back network neutrality concepts he plans to put in a proposed “BITS Bill” that would amend the 1996 Telecom Act and set federal rules for Internet service and applications. He wants to put both entirely under federal jurisdiction -- except consumer protection and service quality oversight, which would stay with the states. The FCC alone would set Internet policies on disabled and E- 911 access, universal service, law enforcement, reciprocal compensation and network neutrality.

“I urge you to adopt resolutions calling for network neutrality guarantees,” Boucher said: “It’s not enough to just endorse FCC principles against content blocking, because this involves more than blocking. It’s about access to platforms.” Plans by some phone companies to charge both consumers and content providers for higher-capacity Internet service represent “a new and very troubling development,” he said. Boucher has no problem with phone firms selling premium grade Internet access at a premium price, “but when they start charging for premium access at both ends of the pipe, the result will stifle innovation,” he said.

Today’s seamless, open Internet fosters innovation, Boucher said. If start-up companies have to face “a host of ‘last-mile’ fiefdoms demanding a toll” for priority Internet access, “they'll never get started,” he said Boucher traced the whole network neutrality question to today’s limited network capacity. The neutrality issue “will go away by itself” once capacity is unfettered, he said. But until then, lawmakers and regulators must ensure any traffic prioritization treats all similar content providers the same, and “not favor just those who can pay a premium.” He also said the BITS Bill would eliminate any barriers to Internet provider entry, such as state laws barring municipal broadband service.

Boucher also told NARUC he soon will introduce an update of his earlier universal service reform draft, in hopes of spring House Telecom Subcommittee hearings. The revised bill would make broadband eligible for universal service subsidies and set a 5 year transition to a requirement that all universal service subsidy recipients offer broadband at 1 Mbps, he said. The bill also would base subsidies on providers’ individual costs, with eligibility set by wire center instead of by geographic averaging. It would include a dollar cap on the entire high-cost support mechanism, not just the loop support, he said. Details of the cap will come when the bill is introduced.

The planned version would expand the universal service contribution base to include VoIP services and all network connection providers, including cable modems, BPL and Wi-Fi services, as well as to intrastate revenue, Boucher said. The bill would preserve states’ right to maintain their own universal service funds, he said. But adding intrastate revenue to the federal contribution base would require that Congress nullify a 5th U.S. Appeals Court, New Orleans ruling that bars states from collecting state universal service contributions from a funding source that was contributing to the federal universal service fund. “I would welcome your resolution in support of this legislation,” Boucher said.

Some panelists addressing network neutrality Mon. agreed NARUC should enter the debate to represent states’ interests. “We can disagree along the edges about how best to address network neutrality,” said Chris Murray, Vonage govt. affairs vp, “but we're here to ask whether NARUC should stay relevant with what is becoming the most important policy question facing Congress and state regulators today. NARUC absolutely has to pass a resolution and engage this topic.”

Other panelists questioned whether network neutrality has become a problem demand federal or state govt. intervention. At this point, legislative solutions to network neutrality would have to be so general “the only certain outcome would be litigation,” cable attorney Howard Symons said. The issue truly underpinning network neutrality is encouragement of innovation and competitiveness, he said. But right now there’s no need for govt. intervention in the Internet and network providers’, content producers’ and broadband consumers’ business arrangements, he said. “If anything, it was the hands-off policy government wisely followed a decade ago that’s brought us to the point where broadband customers outnumber dial-up customers on the Internet,” Symons said.

But the U.S. lacks enough broadband competition to guard consumers, said Google “chief Internet evangelist” Vinton Cerf: “I'm a big fan of some form of network neutrality guarantee to preserve innovation.” Network neutrality isn’t some obscure business dispute, Cerf said: “It’s innovation that’s at stake here -- which happens only if every consumer has access to any product or service on the Internet without restrictions.” If providers offer classes of service, they should be equally accessible to all users, he added. Mark Cooper, research dir. for Consumer Federation of America, said keeping the Internet pipe wide open is essential “so that the real innovators can deliver services that consumers can and will pay for.” Cooper has no problem with offering levels of service if customers have choice and service levels aren’t misused to steer customers toward the content offered by access providers’ affiliates, he said.

BellSouth wants to create Internet applications that will increase demand for broadband access, said Jonathan Banks, the firm’s regulatory vp-federal affairs. Network neutrality rules could impede useful applications that might also require customers to choose which traffic they want to prioritize, he said. BellSouth is looking at personal healthcare uses like remote monitoring that require uninterrupted connection and higher-than-normal security, Banks said. As good as the Internet is today, he said, “tomorrow will need a bigger, faster, better Internet that’s more valuable to consumers. We think the choice should be left to the consumer and we don’t see a need for preemptive laws preventing customers from selecting new, innovative services.”

Earlier, Sen. Wyden told NARUC’s Telecom Committee the growing debate over broadband network neutrality “looks like a fight between behemoths. But it’s not about the behemoths. It’s really about the guy in a garage with ambitious plans to become the next Google. How can he see his dream play out in the marketplace if the behemoths who own the pipes won’t give him a fair deal?” Wyden plans to introduce network neutrality legislation, he said. His bill will move to prohibit broadband access providers from creating fast and slow lanes, requiring them to “treat all bits exactly the same,” barring them from favoring their own content over others, and keeping them from blocking any applications or devices, he said.

“The Internet has been a trampoline for everybody to use to reach the fruits of the communications revolution,” but powerful interests want to break it into an expensive fast lane and an inexpensive but slow lane, Wyden said. “Changing the Internet architecture in this fashion will distort the market and smother future Googles,” he said: “Consumers will end up in the worst of both worlds, with higher prices and fewer choices.” -- Herb Kirchhoff

NARUC Notebook

Sen. Jim DeMint (R-S.C.) told NARUC’s winter meeting Telecom Act reform should shift regulatory policy away from the FCC model of “regulating how business does business” to the FTC model of protecting consumers from unfair competition and situational monopolies, but otherwise let firms make their own marketplace decisions. Utility regulation is based on the assumption of little or no competition, but telecom no longer is a monopoly utility kind of business, he said: “The old telecom regulatory structures are no longer relevant in today’s age of competitive voice, data and video anywhere. VoIP is a global phenomenon. Our regulatory structures are holding back progress.” His Telecom Act reform bill (S-2113) “will deputize states to report offenses and enforce consumer protection,” he said. His bill also would reform universal service by basing contributions on phone numbers and putting a cap on fund size, DeMint said. Over time, competitive market forces freed of burdensome oversight should cut the need for subsidies, he said: “We need to let go of unneeded regulation by a patchwork of regulatory regimes. We can’t compete globally this way.”

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Continued public wireline telecom network spending hinges on intercarrier compensation and universal service reform and removing barriers to video service entry, Tom Tauke, Verizon exec. vp-public affairs, policy & communications, said at the NARUC winter meeting. “It’s time to bring legacy policies into line with the competitive new world we live in and keep wireline communications attractive for long-term investment and innovation,” he said. Lack of reform will mean “wireline dis-investment in the future,” he said. According to Tauke, intercarrier compensation reform requires: (1) Eliminating subsidies and supports from intercarrier compensation rates, including subsidies that “support unreasonably low rates for basic services.” (2) Setting a national framework covering all traffic instead of today’s patchwork of federal and state regulation. (3) Directing universal service subsidies to high-cost areas without regard to the serving local carrier’s size. (4) Limiting subsidies to a single carrier of last resort. If subsidies are necessary to support infrastructure in a high- cost area, “it makes no sense to subsidize multiple duplicative infrastructures,” he said. Answering a question, Tauke said market circumstances might justify one subsidized wireless provider and one subsidized landline provider, but there never should be more than 2 subsidized providers in any high-cost market. Tauke called for a cap on the universal service fund’s total size. Removing franchise barriers to video entry is key to encouraging wireline investment, he said. Consumers want video in service packages, making it an important justification for upgrading the wireline network. Tauke urged federal and state franchising reforms to speed and simplify franchising and remove bars to new video entrants: “The old structures served us well in the past, but they won’t work in the future.” -- HK

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Electric utility representatives speaking Mon. at a NARUC BPL panel split on whether regulators impede utilities wanting to provide broadband services via BPL technology. “Regulation isn’t a strong factor in BPL entry decisions,” Wade Malcolm, EPRI power delivery vp, said. The biggest consideration in utility decisions on BPL is their historic tolerance for business risk, he said. Utilities moving into BPL generally have “a successful history of offering services other than commodity electric power,” Malcolm said. Other factors affecting entry decisions are competing broadband services, the presence of embedded fiber and growth potential, he said. Not so, said Steve Houle, TXU Energy corporate development vp: “Regulation is the most important aspect. Will your regulators say your BPL service is in the public interest?” He said key questions include whether regulators allow BPL expenses in rate cases and set just and reasonable pole attachment rates. He cited a 2005 Tex. law finding BPL in the public interest, allowing cost recovery in rate cases and setting BPL pole attachments at the same rate as cable attachments. The Tex. law bars municipal regulation of BPL services and keeps municipalities from imposing additional franchise or right of way fees on utilities that deploy BPL, he said. TXU’s BPL plans center on uses like advanced metering, outage monitoring and substation automation that up electric distribution system efficiency, he said. Walt Brown, BPL project mgr. for Progress Energy, said his company “doesn’t see how BPL will fit into our existing infrastructure.” When Progress studied BPL, it joined with EarthLink in a 500-home trial gauging BPL for utility network and commercial use, he said: “It was a disappointment. Our experience didn’t match others’.” The only possibly practicable BPL approach Progress found was to be a “landlord” leasing space on its poles and rights of way to a “partner” broadband provider -- a model Progress is using with 3 partners in 6 Fla. cities, he said. BPL technology shows promise for use within premises, but more research is needed, he said. Gerald Wyse, Consumers Energy BPL project engineer, endorsed the BPL “landlord” model. Consumers has teamed up with Shingler Group to offer Shingler’s Lighthouse broadband service to around 5,000 homes in Grand Ledge, Mich., a trial it plans to widen to 5,000 homes in St. Johns in 2006, he said. Being a BPL partner’s landlord eliminates affiliate transaction problems, capitalizes on Consumer’s infrastructure and can be carried out within existing regulatory structures, he said.

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Rural communities need broadband service for economic development, but also aid from state and federal regulators in picking and obtaining infrastructure, said Guy Land, special counsel for the Appalachian Regional Commission. Land told a NARUC roundtable on regulation rural communities in its 12-state Eastern region face “all kinds of companies that continually press their wares on them,” such that communities resist technology “because they are afraid of it.” Rural communities have approached broadband ad hoc and individually, he said. Regulators should provide “a neutral forum to help communities sort through their needs, and to deal with the private sector,” Land said. ARC is working to create information technology jobs and educate rural residents on what they can do with broadband, he said. Broadband’s promise for rural America depends on access, education and economic development, Land said. Comr. Larry Landis of Ind. said “we need someone to step up to the plate to bring broadband to rural areas,” noting Ind. has 4 rural wire centers lacking broadband capability: “Larger companies can’t make a business case for extending broadband to these rural areas.” USDA has $1.5 billion for low-interest loans to competitive broadband providers including for electric utility BPL service, and to nonrural telcos for rural broadband service, Ed Cameron of USDA World Development said. However, those loans are for infrastructure only and can’t be used to develop broadband applications, he said.