Seidenberg Says FCC Rules Must Not Create ‘Dumb Pipes’

While the FCC won’t formally propose any rules until Thursday, the debate on the issue has been “extremely troubling,” Seidenberg said. The FCC shouldn’t give into net neutrality advocates who want a “binary world” of “dumb pipes” and applications, he said. Verizon and companies like Google and Amazon don’t live in different parts of the Internet ecosystem, he said. “This is a mistake, pure and simple: an analog idea in a digital universe,” he said. “It fundamentally misreads how innovation happens in a dynamic and collaborative industry.”

The government won’t create a “smart economy” by “dumbing down” critical infrastructure, Seidenberg said. Network management benefits consumers by prioritizing emergency communications and applications that need more bandwidth, and protecting networks from cyberattacks, he said. “If this burdensome regime of net regulation is imposed on all parts of the Internet industry, it will inject an extraordinary amount of bureaucratic oversight into the economy.”

“Rather than impose rigid rules on a rapidly changing industry, the FCC should focus on creating the conditions for growth,” Seidenberg said. Policymakers should seek to release more spectrum, streamline cell tower siting, and overhaul the Universal Service Fund and intercarrier compensation, he said. “And we need to protect consumers by insisting on transparency in the provision of products and services by all Internet providers, including applications developers.”

Communications technology investment should be a central part of economic recovery, Seidenberg said. The telecom industry invests more in networks every year than the federal government invests in transportation, he said. Telecom investment comprised 43 percent of all capital investment in the U.S. last year, he said. And for every 1 percent increase in broadband penetration per state, employment increases 2 to 3 percent annually, he said.

The FCC’s National Broadband Plan must address the high costs of bringing broadband to rural areas, CenturyLink Executive Vice Chairman Tom Gerke said in another keynote address later that morning. Rural areas are difficult to reach because they have low customer density, high backhaul costs and require high capital spending, he said. Wireline networks are the most effective and efficient way to serve the unserved, because speed and other network characteristics can be scaled upward at lower cost than with wireless, he said. Gerke recommended public-private partnerships to bring broadband to areas where companies can’t normally find a return on investment. To attract private capital best, government rules should be predictable and consistent, he said.

Meanwhile, policymakers must revamp the Universal Service Fund (USF) and intercarrier compensation to support broadband deployment “and not detract from it,” Gerke said. USF must explicitly support broadband deployment, targeting only the areas with highest cost, he said. Contribution reform is also needed to broaden the base of contributors and stabilize the fund, he said. Policymakers must simplify intercarrier compensation and make it more predictable, said Gerke. He called for a “balanced, transitional” move to unified interstate and intrastate rates. The revamp shouldn’t drive retail rates above affordable levels, and must move “appropriate” amounts from implicit to explicit network funding under USF, he said. USF and intercarrier compensation reform should happen together, he said. “It’s got to be done right and got to be done now.”

AT&T, Others Slam Net Neutrality

A panel on government broadband stimulus efforts got sidetracked into condemnations of net neutrality rules under discussion at the FCC. Executives from AT&T and other broadband providers said the debate has been a major distraction and could potentially discourage investment in broadband. Senior executives from Verizon and Qwest concurred on a second panel.

The FCC shouldn’t make rules that discourage private sector investment, said AT&T Senior Executive Vice President Jim Cicconi. The agency’s midterm broadband report recognized that universal broadband “is a massive investment challenge” that could require up to $350 billion, he noted. The government probably won’t get support for supplying that much money itself, so much of the cash will need to come from the private sector, he said. The pending net neutrality rulemaking could discourage “that investment on a massive scale.”

AT&T and many other big carriers didn’t apply for stimulus money because of the “regulatory strings” attached that were similar to net neutrality rules now being proposed, Cicconi said. “We considered them overly constraining and extreme in some instances,” he said. “They were absolutely a major factor in AT&T’s decision not to apply for those monies and I think other companies will tell you the same thing.”

It would be a “dangerous illusion for anybody in government to think that adding more regulations somehow will yield more investment, not less,” Cicconi said. Advocates for neutrality regulation have little if any experience building networks. “The government is playing a very dangerous game if it listens to advice of this nature.” Government’s role isn’t to “achieve some utopian end,” but rather to “identify problems and try to solve them,” he said. But so far, no one in or outside of government has made “a convincing case that there is a discernible problem here that the government must step in and address.”

“What problem are we trying to solve?” asked Bob Udell, senior vice president for Consolidated Communications. There are more important issues to focus on than a “hypothetical problem” like net management abuses, he said. If problems are raised, they can be addressed in turn through enforcement proceedings, he said.

Determining what type of network management is “reasonable” depends on the facts, and no one can say all management is good or bad, said Cisco Vice President Jeff Campbell. Cisco makes some of the net management tools used by carriers. People don’t manage networks just because “they feel like it,” he said. In some cases it’s dealing with congestion, and even Japan does that, he said. Management also enables services like public safety, or video services for which consumers pay extra, he said.

Broadband providers are “constantly” managing their networks in a fashion that’s “seamless” to the customer, said CenturyLink Senior Vice President David Zesiger. Rules could distract from deployment and create uncertainty, he said. The net neutrality debate has already proven to be an “extra- curricular” distraction from broadband efforts, said Bruce Mehlman, co-chairman of the Internet Innovation Alliance. He noted that the Supercomm panel was supposed to focus on stimulus, but net neutrality ensnared half the discussion.

On a second panel, executives from Verizon and Qwest echoed concerns that neutrality rules could discourage investment. “Any change … even a relatively small change, can have a huge impact” on investment decisions, said Verizon Executive Vice President Tom Tauke. Network management regulations should focus on anti-competitive acts, said Qwest Senior Vice President Steve Davis. He said he’s skeptical of proposals that say regulation will preserve Internet qualities that came about in an unregulated Internet.

Net neutrality is an “important and disconcerting issue,” Tauke said. “If a company is relegated to a transport-only company,” it will be almost impossible to make a return on investment, he said. Language in the draft rulemaking circulated at the FCC last week was concerning, he said. Reasonable management would have been subject to a “strict scrutiny” standard, he said. “It’s just nuts” to have lawyers overseeing everything engineers do to keep networks running smoothly, he said. Davis agreed.

Spurring Broadband

While many panelists lambasted the FCC’s neutrality effort, they complimented work on the National Broadband Plan. The broadband plan effort “is one of the better policy processes I've seen,” said Cicconi. “As promised,” the process has been data driven and fact based, with no prejudgments, he said. The process is only halfway through, but it’s been a “real template for the right way to approach serious government policy.”

The FCC broadband team’s consumer research director John Horrigan said his team is actively seeking to crack the broadband “non-adoption problem.” The FCC has a survey out now to determine why some people don’t want broadband. It’s also studying existing adoption efforts to find best practices for closing the adoption gap, he said. There’s only a “small sliver” of the population that doesn’t have access to broadband. A larger group has dial-up and doesn’t want broadband, and another group that doesn’t want the Internet at all, he said.

Horrigan’s team aims to determine adoption barriers and then make tailored recommendations, he said. In the end, the team wants to set the stage for users to enter the broadband ecosystem and do innovative things. “Users do the damndest things” when they have access to broadband, he said.

On the deployment side, the good news is that the U.S. has the best backbone network in the world, and it’s totally maintained by private investment, said Campbell. In addition, most Americans are covered by fast broadband networks from AT&T, Verizon and cable companies, he said. For many unserved rural areas, the government can stimulate much deployment through universal service or tax credits, he said. Other “super high-cost” areas may require long-term government spending, he said.

Mehlman urged policymakers to free up spectrum and allow effective spectrum management. Government should also redirect the $7 billion universal service fund to broadband, he said. Government should treat broadband as a critical service, rather than taking the current attitude of treating telecom “like a luxury and tax[ing] it like a sin,” he said. -- Adam Bender

Supercomm Notes …

The National Broadband Plan provides a good chance to renew efforts to revamp USF and intercarrier compensation, said Verizon Executive Vice President Tom Tauke in a Supercomm panel Wednesday. Tauke expects to see “some guidelines” in the plan on how to resolve those long-brewing overhaul efforts, he said. If so, action could happen within a year, he said. FCC Commissioner Michael Copps was involved in the effort to get an overhaul through last year and wants to see the issue resolved, Tauke noted. Qwest Senior Vice President Steve Davis agreed that the broadband plan presents a window of opportunity. If the window is missed, it could be a long time before an overhaul happens, he said. Industry should work together to come up with a plan to present to rulemakers, said Davis, saying the process may involve compromises. Uncertainty over the long-pending overhauls has discouraged investment, said USTelecom Chairman Steve Oldham. If government wants to achieve National Broadband Plan objectives, it must “move swiftly” on those and Internet “rules of the road,” he said.