FCC's National Broadband Plan Comes Under Fire

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By Gabriel Perna | August 1, 2010 1:31 AM EST

The Federal Communications Commission wants to bring broadband to everyone in the country, and both government and industry agree it is necessary. But like many grand plans, the devil is in the details.

As usual, the big sticking point is money.

In March, the FCC introduced the comprehensive National Broadband Plan. The FCC says somewhere in the range of 14 to 24 million Americans lack access to broadband internet connections. Most live in poorer, sparsely populated rural communities.

Speaking to the Organization for the Promotion and Advancement of Small Telecommunications Companies, FCC Chairman Julius Genachowski said businesses stuck in broadband "dead zones," cannot take advantage of services available on high-speed internet connections, while farmers are not able to get real-time access to commodity prices. Healthcare operations in rural operations would also benefit from broadband coverage, as it would allow for them to use up-and-coming innovations such as telemedicine.

The FCC estimates it would cost approximately $320 billion to bring broadband internet service to all Americans. In the plan itself, the organization underlies several economic initiatives to help pay for this including a revamp of the Universal Service Fund.

Back in 1997, the Fund was originally created to help phone companies bring telephone service to rural areas using funds from government subsidies and the carriers themselves.

In the National Broadband Plan, the FCC recommends a transition of the USF from voice to broadband to the tune of $4.6 billion per year and the creation of the Connect America Fund. It also calls for a freeze on the rate of return for rural carriers.

That last point doesn't sit well with rural carriers. Shirley Bloomfield, CEO of the non-profit National Telecommunications Cooperative Association, said in rural areas, smaller customer bases mean that such a move might cripple the ability of some carriers to recover their investment.

"Telecommunications is a market based industry. Carriers generally like to recover their costs. The problem with the National Broadband Plan is it challenges existing carriers to find ways to recover those costs," she said. "They are sitting there asking should I go ahead and invest and accept a grant, because I am not sure with the cost recovery changes that I can afford to pay those grants back," she added.

Bloomfield also lamented what she says is a small government outlay for a critical piece of infrastructure. . "The government spends one hundred billion per year on the federal highway system. Isn't this the next digital commerce highway? Four billion is such a drop in the bucket."

Aside from the cost, there's the problem of standard. Four megabit per second (Mbps) connections will be the standard, but the stated goal of the plan is to get 100 Mbps connections in urban areas. "You are setting up two different service qualities. There's a problem with that right away," Bloomfield said. "The 100 Mbps is great, you can use video applications, health medicine and you have more capacity for a robust system. But by putting a 4 Mbps standard, you are setting up a completely different American broadband."

In other countries, such as South Korea, broadband is not only universally accessible, it is cheaper and faster than in the U.S. Standard speeds in Korea are 100 Mbps and the country is aiming for 1 Gbps in a few years.

Jim Baller, head of the US Broadband Coalition and president of the Baller Herbst Law Group, which represents numerous telecommunications firms, says now is the time for universal broadband implementation - and not for standards that put the U.S. behind other countries.

"I don't think Americans know what's at stake," Baller said. "There have been a couple of polls, one by the FCC and one by an industry group, suggesting most Americans think what we have here passing for broadband is ok. It's a product of simply not appreciating what we are missing. This is a transformative technology, much like electricity was over 100 years ago."

"The 4 Mbps per second is a very modest definition of broadband," he added. "I think over the next three to five years, we'll have substantial availability of broadband by that definition, but only because it's so modest."

Baller says such modest goals - and an unwillingness to pay for more - are reasons why the FCC plan is flawed.

"The plan contemplates minimal expenditures of additional funds to achieve the goals that are set forth," Baller said. "There are some additional investments to un-served areas and for public safety, but there's no real provision for investment for running fiber, which many say is the future of broadband."

Politicians, like Senator Daniel Inouye (D-Hawaii), have criticized the standards as well. In a letter to Genachowski, he asked why the FCC implemented a broadband speed standard that's "firmly rooted in the second tier of countries."

In a response, Genachowski said implementing the 4 Mbps speeds would be an aggressive strategy for short-term goals and the 100 Mbps would keep the US competitive globally.

Some in governmenthave offered alternatives to the FCC plan. Congressmen Lee Terry (R-Neb.) and Rick Boucher (D-Va.) introduced one called Universal Service Reform.

In contrast to the National Broadband Plan, this legislation did not define the speed of broadband. It suggests rather than transition USF funds from voice to broadband the FCC should broaden its contribution base. It also places no limit on carriers' rates of return. Not surprisingly, the plan was met with overwhelming support from the industry.

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