Wheeler Warns RLECs on USF, Eyes Internet Video, Privacy Items in Fall

Extolling the potential of broadband networks to transform the economy and society, Wheeler said the FCC should push broadband growth to "ignite new possibilities" and software-driven Internet applications that are already vastly increasing network capabilities and cost efficiencies. "It's pedal to the metal on broadband policy -- for both consumers and competitors," he said. "Simply put, broadband should be available to everyone everywhere."

Wheeler said the FCC would continue to seek to spur broadband, including through $10 billion in planned broadband USF support over six years to price-cap telco rural areas. He said he wanted to "similarly reform" USF support to promote broadband deployment by small rate-of-return carriers, but expressed impatience with telco group proposals to revamp rate-of-return USF (see 1506040028). "We had been in search of a consensus proposal from the rate-of-return carriers that would help us meet the policy objectives the commission unanimously adopted in April 2014," he said. "Unfortunately, while I appreciate the carriers’ willingness to engage, if we are to keep on schedule, time is not our friend. Absent a consensus from the parties involved we will put forth our own proposal."

NTCA CEO Shirley Bloomfield responded that rural groups presented a proposal that combines "straightforward" changes to existing USF mechanisms with optional model-based support for carriers that opt in. "This package of changes -- which represents a clear and overwhelming consensus -- provides a common-sense roadmap for reform and a detailed point of reference for reform efforts," she said in a statement. "NTCA greatly appreciates the commitment of the chairman and the other commissioners to complete work on reforms by the end of the year, and we continue to engage almost daily with the FCC.” ITTA President Genny Morelli told us by email: "Like Chairman Wheeler, Commissioner [Mike] O'Rielly and the other commissioners, ITTA is committed to the process and remains hopeful that meaningful reforms can be adopted by the end of this year."

Wheeler said the FCC would continue to protect broadband competition, noting the agency helped discourage Sprint/T-Mobile merger interest and scuttle Comcast's planned buy of Time Warner Cable. He warned some broadband providers that see migration to digital networks as "their ticket to escape ... a network compact" of responsibilities to provide Americans with "access, interconnection, public safety, consumer protection and national security." Calling broadband the most powerful network on the planet, Wheeler said: "Suggestions that that kind of platform, with that kind of pervasiveness ... can be without effective oversight are unthinkable." The FCC is working on a draft IP tech transition order that appears aimed at spelling out ILEC regulatory duties, including to provide wholesale access to competitors (see 1506250054).

ITTA Vice President Micah Caldwell told us by email that Wheeler "recognized the importance of enabling 'LECs to become more fulsome competitors to cable operators’ dominant position in high-speed broadband.' Yet, incumbent LECs continue to be subject to a regulatory framework that reflects a bygone era when they were monopoly providers. To promote broadband competition, regulatory parity is essential, and the commission should eliminate outdated legacy regulations (and refrain from adopting new regulations) that continue to place incumbent LECs at a competitive disadvantage in comparison to their cable and other broadband competitors."

Wheeler said the FCC also was seeking to promote broadband competition. He said one of the best ways to do that was to lower input costs, including the FCC's current effort "to better align the costs of using poles and conduits." Cable and telco broadband providers are seeking pole-attachment formula changes to put downward pressure on the rates they pay power companies to attach lines and other equipment to their poles (see 1506050037).

Wheeler said that even more can be to done promote wireless broadband by making available more licensed and unlicensed spectrum. Wheeler said he and House Communications Subcommittee Chairman Greg Walden, R-Ore., were of one mind: "There will be an incentive auction in the first quarter of 2016." Wheeler said he was "encouraged by what we have been hearing from broadcasters," which will have to sell spectrum for the auction to work. He also spoke glowingly of the increased possibilities that broadcasters and others can share frequencies to increase spectrum efficiency.

Competitive Carriers Association CEO Stephen Berry welcomed Wheeler's auction vow and general broadband comments but said more was needed to promote competition, including through additional mobile carrier USF support in "high-cost, low-density, often uneconomical areas." In a note to investors, Guggenheim analyst Paul Gallant said a 2016 incentive auction "would be good for T-Mobile and Dish (by ensuring access to set-aside spectrum)."

Another way to stimulate broadband, Wheeler said, is to increase competitive opportunities in "upstream markets." That's why the FCC proposed to allow over-the-top (OTT) video providers to compete with cable and satellite-TV providers "with the same program access rights," he said, saying he expected to move to an order on that topic this fall. Gallant said OTT video "could play a role in efforts by Dish/Sling, Apple and Sony in competing against established pay-TV operators." Wheeler also said he planned to move an NPRM this autumn on broadband/Internet privacy. "If consumers worry they don't have sufficient privacy, why are they going to use online services?" he asked.

Defending the net neutrality order, Wheeler rejected telco/cable arguments that the decision to reclassify broadband as a Title II service under the Communications Act would stymie investment. "We're not going to let imaginary concerns about investment incentives and the omnipresent bogeyman of so-called 'utility regulation' cause us to let up on policies to encourage fast, fair and open broadband," he said. "While a few Big Dogs are threatening to starve investment, others are stepping up. The CEOs of Sprint, T-Mobile, Cablevision, Charter and Frontier Communications have all publicly said Title II regulation does not discourage investment. Recent transactions, both announced and rumored, point to the same conclusion. And, of course, the post-open Internet announcements by AT&T, Bright House, CenturyLink, Cincinnati Bell, Comcast, Cox Cable, TDS Telecom and Time Warner Cable about their plans to expand their broadband service certainly speak for themselves."

Wheeler said the FCC would act as a neutral and judicious "referee" in enforcing its rules. "Make no mistake, if they violate the rules, we will blow the whistle," he said. "We are arbiters of last resort, not first resort. We will not micromanage networks as was done in the pre-broadband days. This means no retail rate regulation, no network unbundling, and no tariffs. In short, none of this bogeyman of 'utility regulation.'”

Wheeler also touted FCC efforts to modernize and improve its Lifeline USF program for low-income consumers and to provide broadband access to Americans with disabilities. He noted the FCC was pressing other federal agencies to develop greater American Sign Language capabilities, with the commission building a Web-based broadband platform to allow any agency or company to "plug in" and help hearing-impaired people communicate. "This is a great opportunity for federal agencies to take the simple but significant step of harnessing online video for those who speak with their hands and hear with their eyes," he said.