Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C

Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 ) ) In the Matter of ) ) Connect America Fund ) WC Docket No. 10-90 ) ) COMMENTS OF THE FIBER TO THE HOME COUNCIL AMERICAS ON THE FURTHER NOTICE OF PROPOSED RULEMAKING ON NEXT GENERATION NETWORK EXPERIMENTS IN RURAL AMERICA INTRODUCTION AND SUMMARY The Fiber to the Home Council Americas ( FTTH Council or the Council ) respectfully submits these comments in response to the Federal Communications Commission s ( FCC s or Commission s ) Further Notice of Proposed Rulemaking ( FNPRM ) on Next Generation Network Experiments in Rural America ( Rural Broadband Experiments or Experiments ). 1 The FTTH Council is a not-for-profit entity whose mission is to accelerate deployment of all-fiber access networks by demonstrating how fiber-enabled applications and solutions create value for service providers and their customers, promote economic development 1 See In the Matter of Technology Transitions; AT&T Petition to Launch a Proceeding Concerning the TDM-to-IP Transition; Connect America Fund; Structure and Practices of the Video Relay Service Program; Telecommunications Relay Services And Speech-to-Speech Services for Individuals with Hearing and Speech Disabilities; Numbering Policies for Modern Communications, GN Docket No. 13-5, GN Docket No. 12-353, WC Docket No. 10-90, CG Docket No. 10-51, CG Docket No. 03-123, WC Docket No. 13-97, Order, Report and Order and Further Notice of Proposed Rulemaking, Report and Order, Order and Further Notice of Proposed Rulemaking, Proposal for Ongoing Data Initiative, FCC 14-5 (rel. Jan. 31, 2014) ( Technology Transitions Order or FNPRM ). 1

and enhance quality of life. The FTTH Council s over 300 members 2 represent all areas of the broadband access industry, including telecommunications, computing, networking, system integration, engineering, and content-provider companies, as well as traditional service providers, utilities, and municipalities. As such, the FTTH Council and its members have a substantial interest in the outcome of this proceeding. Last July, the Council filed its Petition for Rulemaking to Establish a Gigabit Communities Race-to-the-Top Program (the Petition ) with the aim of creating a critical mass of all-fiber networks that will jumpstart the deployment of these networks in Tier II and III communities throughout the country. 3 In the Petition, the Council proposed a competitive program that would provide five years of funding to deserving communities to deploy ultra-highspeed networks, which would be used to develop the transformative applications that only those networks can support. For that reason, we were heartened when the Commission adopted its Experiments program in January. We view the Commission s Experiments, which seek to establish test-beds to examine different deployments of robust, scalable i.e., fiber broadband networks, as a precursor to the Council s Race-to-the-Top program. While the Experiments are not seeking to directly drive deployments, they should determine ways to most efficiently build robust, scalable networks in rural areas. That is most valuable. To best achieve its objectives, we encourage the Commission to undertake a diversity of Experiments, which should be completed relatively expeditiously so 2 A complete list of FTTH Council members can be found on the organization s website: http://www.ftthcouncil.org. 3 See In the Matter of Universal Service Gigabit Communities Race-to-the-Top Program, Connect America Fund, RM-11703, WC Docket No. 10-90, Fiber to the Home Council Americas Petition for Rulemaking to Establish a Gigabit Communities Race-to-the-Top Program (July 23, 2013) (the Petition ). 2

that the Commission can use the results to more immediately reorient its Connect America Fund ( CAF ) policies toward scalable, robust all-fiber networks. As described more fully herein, the Council recommends that the Commission take the following steps with respect to the rural broadband experiments: Set a budget for the Experiments at $50 $100 million, which will support between 20 and 30 Experiments representing a variety of business models in areas with a real diversity of geographic and demographic characteristics; Rely on three primary selective criteria when selecting Experiments: (1) costeffectiveness; (2) deployment of robust, scalable networks; and (3) the overall reasonableness of the business case of the project (including the competency and financial wherewithal of the applicant). These three criteria should account for at least 80% of the score upon which the Commission will judge applications. The Commission should weigh the remaining percentage based on other important factors (e.g., favoring projects that leverage service to community anchor and other key institutions in an area), so long as those factors do not undermine the more objective criteria described above; Evaluate proposals as if they were business plans, requiring applicants to detail: (1) the nature and cost of the deployment; (2) creative aspects of the project that differentiate it from other applicants proposals; (3) cooperation from local and other government entities and other parties to facilitate the network construction and the rollout of services; and (4) ways in which the applicant intends to achieve scale; Maintain the Commission s proposed flexible approach to ETC status, which will encourage a diversity of service providers to participate in the Experiments. I. THE COUNCIL SUPPORTS A BUDGET FOR THE RURAL BROADBAND EXPERIMENTS OF $50 $100 MILLION In the FNPRM, the Commission sought comment on the budget for the Experiments. 4 The Commission proposes to use a limited amount of unallocated funds from the CAF reserve account, which is projected to have a balance of $1.68 billion as of the first quarter of 2014, with $1.45 billion of those funds already allocated to existing CAF programs. 5 Of the remaining $230 4 5 See FNPRM, 203-204. See id., 204. 3

million, the Commission envisions using an amount that is sufficient to enable us to award funding to a limited number of [Experiments]. 6 When determining the budget for the Experiments, the Commission should seek to support a diversity of projects at sufficient scale to gain useful data reflecting the heterogeneity of rural America. The Commission has received nearly 1,000 expressions of interest from service providers and communities representing a wide range of rural areas throughout the country, each with unique demographic and geographic characteristics. 7 It is clear from these that the Commission will have a choice of many worthy test-beds to examine ways to deploy ultra-high speed networks to these communities. The Commission should select a sufficient number of experiments, which can be completed in a relatively expeditious manner and which can provide valid results to enable the Commission to re-orient its CAF policies toward supporting to the greatest extent further deployments of all-fiber networks throughout the country. The Council believes an aggregate budget of $50 to $100 million for the Experiments is sufficient to meet this aim. Based on the experience of Council members, an all-fiber deployment to a rural community of 2000 to 4000 homes (which represents sufficient scale) may cost in the range of $5 to $10 million. A budget of $50 to $100 million will allow the Commission to reasonably test between 20 and 30 Experiments of varying cost, assuming a sufficient match from other public or private funds. In addition, the Council believes that 20 to 30 Experiments is reasonable to administer and will provide a sufficient sample size to test a 6 See id., 204. 7 See FCC, List of Expressions of Interest (last visited Mar. 31, 2014), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/doc-326130a1.xlsx. 4

wide array of business models in areas reflecting a real diversity of geographic and demographic characteristics. 8 II. THE SELECTIVE CRITERIA FOR THE EXPERIMENTS SHOULD EMPHASIZE COST EFFECTIVENESS, THE DEPLOYMENT OF ROBUST, SCALABLE NETWORKS, AND THE REASONABLENESS OF THE BUSINESS CASE The Commission sought comment on the selective criteria for the Experiments. 9 In the FNPRM, the Commission stated that a key objective in conducting these experiments is to determine whether there is interest in deploying robust, scalable broadband at an amount that is equal to or less than model-based support. 10 The Council proposes that the Commission rely on three primary criteria when selecting Experiments: (1) cost-effectiveness; (2) deployment of robust, scalable networks; and (3) the overall reasonableness of the business case of the project (including the competency and financial wherewithal of the applicant). These three criteria should account for at least 80% of the score upon which the Commission will judge applications. First, the Council agrees with the Commission that cost-effectiveness should be the primary driver when selecting Experiments to support. Cost-effectiveness is vital because it will ensure the maximum value for each federal dollar spent on an Experiment, while simultaneously allowing the Commission to support the greatest number of Experiments within its limited 8 Indeed, the Commission has conducted and is conducting similar experiments within the Universal Service Fund. For example, the Commission is currently undertaking a Lifeline Broadband Pilot Program, which supports fourteen diverse projects with different amounts and durationofsubsidies,differenttypesofgeographicareas...anddifferenttypesofbroadband technologies in order to gather data sufficient to identify opportunities for the Commission to increase broadband adoption and retention by low-income consumers. See Lifeline and Link Up Reform and Modernization; Lifeline and Link Up; Federal-State Joint Board on Universal Service; Advancing Broadband Availability Through Digital Literacy Training, WC Docket Nos. 11-42, 03-109; CC Docket No. 96-45; WC Docket No. 12-23, Report and Order and Further Notice of Proposed Rulemaking, 27 FCC Rcd 6656, 6794-6806, 321-54 (Feb. 6, 2012); Lifeline and Link Up Reform and Modernization, WC Docket No. 11-42, Order, 27 FCC Rcd 15842 (Dec. 19, 2012). 9 See FNPRM, 211-217. 10 See id., 211. 5

budget. However, the Council believes that an applicant s proposal to serve an area for less than model-based support must be considered alongside the availability of private capital to fund the remainder of the project. Private capital support is critical for any Experiment because access to government or other non-private support cannot be guaranteed. As a practical matter, then, the Commission should favor those Experiments that can be completed with the lowest amount of federal support relative to total cost for each location. Second, the Commission should give significant weight to projects that seek to deploy robust, scalable broadband networks that exceed the broadband performance benchmarks that the Commission adopted for price cap local exchange carriers accepting model-based support. In the USF/ICC Transformation Order, the Commission set an initial minimum broadband speed benchmark of 4 Mbps downstream and 1 Mbps upstream. 11 However, all-fiber networks in operation today can deliver symmetrical speeds of 1 Gbps and higher. Moreover, with improvements in modulating equipment, these all-fiber networks can readily scale to even greater throughput. As such, in selecting which Experiments to fund, the Commission should favor all-fiber networks. These networks provide the greatest throughput and the greatest opportunity for future scaling to keep up with the rising expectations of consumers and the growing bandwidth demands of next-generation application and services. Third, the Commission should analyze the overall reasonableness of the business case for the project and the competency and financial wherewithal of the applicant when selecting 11 See Connect America Fund; A National Broadband Plan for Our Future; Establishing Just and Reasonable Rates for Local Exchange Carriers; High-Cost Universal Service Support; Developing an Unified Intercarrier Compensation Regime; Federal-State Joint Board on Universal Service; Lifeline and Link-Up; Universal Service Reform Mobility Fund, WC Docket Nos. 10-90, 07-135, 05-337, 03-109, GN Docket No. 09-51, CC Docket Nos. 01-92, 96-45, WT Docket No. 10-208, Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17695, 94 (rel. Nov. 18, 2011) ( USF/ICC Transformation Order ). 6

Experiments. This criterion comports with the Commission s assumption that applicants that submit formal proposals would seek to demonstrate their financial and technical capabilities throughout their application and will submit well-developed proposals that could be implemented quickly if selected. 12 The qualifications of applicants will help ensure, as practicably as possible, that the money will go to Experiments that not only appear meritorious on paper, but will be deployed by a facilities or service provider that has delivered in the past, albeit perhaps on less ambitious projects. The applicant s technical qualifications and operational experience will help ensure that the Experiments will be completed relatively expeditiously after receiving funds. The applicant s experience as a provider and its financial soundness will give added weight to the demonstrations of the business case. While consideration of such qualifications should not be decisional among multiple qualified applicants, the Commission may use such qualifications to disqualify applicants that may lack the basic prerequisites for success. Together, these factors will ensure that the Commission selects the most meritorious projects i.e., those that provide the greatest bang for the buck and are best positioned to deliver meaningful information to meet the key objectives of the Experiments. Finally, in addition to these three criteria, the Council recognizes that the Experiments are tests, and therefore the Commission should take other important factors into consideration in selecting them. For example, the Council proposes that the Commission support projects that leverage service to community anchor and other key institutions in an area, since those institutions are more ubiquitous in rural communities, tend to serve more patrons than a single home, and consequently have greater need for ultra-high-speed broadband. The Council 12 See Technology Transitions Order, 119. 7

supports using these additional criteria, so long as they do not undermine the more objective criteria discussed above. III. THE COMMISSION SHOULD VIEW THE PROPOSALS AS IF THEY WERE BUSINESS PLANS AND REQUIRE INFORMATION SUFFICIENT TO SUPPORT THE BUSINESS CASE FOR EACH EXPERIMENT In the FNPRM, the Commission sought comment on what information may be useful to include in the proposals for Experiments. 13 The Council suggests that the proposals should be the equivalent of a business plan that seeks to demonstrate how all-fiber networks can be deployed in rural, high cost areas. In effect, the applicant is asking the Commission to be an investor in its project. Consequently, the applicant should provide sufficient information to ensure that the Commission is funding those Experiments most likely to be cost-effective, sustainable, and easily replicable in other, similar rural areas. First, the proposals should detail the nature and cost of the deployment. With respect to the nature of the deployment, the applicant should explain the technology or technologies that will be used to provide robust, scalable broadband services (e.g., fiber). As for the cost of the deployment, the applicant should provide details on the cost of the network itself and the services it will provide, as well as any matching funds available to the applicant for the proposed project. In addition, the proposal should outline the pricing that the applicant will charge to businesses, residents, and community anchor institutions for voice and broadband service. The proposal should demonstrate that any funds, in conjunction with matching support, will be sufficient to deploy the Experiment and to ensure that it is sustainable at reasonable end-user pricing. Moreover, the proposal should explain how the provider plans to acquire and service customers, 13 See FNPRM, 218. 8

particularly those rural elderly subscribers who tend to have lower broadband adoption rates than their urban counterparts. 14 Second, each proposal should highlight the creative aspects of the project that differentiate it from other applicants proposals. For example, the proposals should detail key anchor partners or customers that will benefit from the network, explaining how the community to be served is ready to receive and take advantage of robust, scalable broadband. Furthermore, proposals should explain in concrete terms the steps that the community has taken or will take to foster a sustainable local entrepreneurial ecosystem capable of developing innovative applications that will be enabled by the Experiment. Third, the proposal should evince a high level of cooperation from local and other government entities and other parties to facilitate the network construction and the rollout of services. The Commission might even want to favor proposals where local and other government entities have adopted practices to streamline construction of the network. Proposals should provide evidence of permits received or at least advanced discussions with the communities and anchor institutions the networks will support regarding the deployment of facilities in public and private rights-of-way. To the extent the build-out will rely on the poles, ducts, conduits, or other rights-of-way of electric, gas, or other utilities or other communications providers, the proposals should provide evidence of license or pole attachment agreements or advanced discussions regarding the same with the utilities or third-party providers. The proposals should also demonstrate that the applicant already has the local franchises and, where those franchises are not yet in place, what the status is of its efforts to obtain the requisite franchises. To the extent that the infrastructure, land, or buildings of non-providers will be used 14 See Technology Transitions Order, 88 9

to construct the network, the applicant should explain the status of efforts to secure the necessary private agreements. Finally, the proposal should detail whether the applicant already has some or all of the regulatory and other approvals that it will need to provide the services in the target community including any necessary state certificates of authority or interconnection agreements. Fourth and finally, the proposals should demonstrate the ways in which the applicant intends to achieve scale. Thus, for example, where community anchor institutions are in close proximity to each other and the surrounding neighborhoods, it may be possible to more efficiently deploy the networks to create ultra-high-speed connections between and among these organizations in ways that make it more cost effective to extend the network to surrounding neighborhoods. Another basic characteristic of any successful formal proposal will be the number and nature of homes and other key institutions that would be passed by the planned deployment and what the anticipated numbers of connections are relative to the dollars projected to be spent. In other words, a successful application will show how the provider will leverage institutional and residential assets to build a viable next-generation network with the most bang for the federal buck. IV. THE COUNCIL SUPPORTS THE COMMISSION S FLEXIBLE APPROACH WITH RESPECT TO ETC STATUS In the FNPRM, the Commission determined that entities selected to receive funding in an experiment need to obtain ETC designation from either a State commission or the Commission before receiving funds for an experiment, but that entities need not be ETCs at the time they 10

initially apply for funding at the Commission. 15 In addition, in the FNPRM, the Commission sought comments to refresh the record on issues relating to the ETC designation process. 16 Although the Council believes that ETC designation is not necessary in this context as a matteroflaw, 17 it applauds the Commission for adopting a more flexible approach, which will encourage greater participation in the experiment by a wider range of entities 18 than if applicants were required to receive ETC designation before submitting an application. As it stated in its Petition, the Council believes that allowing applications from a diversity of service and facilities providers will ensure the most efficient use of federal funds and will promote a more competitive bidding process. 19 In addition, broader participation by non-etcs at the application stage will promote delivery of next-generation applications and services to rural communities that would not otherwise be able to make the business case for the networks. As a result, we believe that requiring applicants to obtain ETC designation before the Commission disburses Experiment funds, but not at the application stage, is an appropriate means of ensuring that a broad diversity of worthy providers submit proposals. Moreover, we agree that requiring applicants to demonstrate their financial and technical capabilities throughout their application will serve as an important screen against unserious proposals. Finally, we agree that in the context or partnerships or consortia, only one applicant should be required to obtain ETC designation before receiving funds. CONCLUSION The Commission s decision to reorient its High-Cost Universal Service Fund from voice to broadband was an important step toward providing rural Americans with the connectivity 15 16 17 18 19 See id., 118. See FNPRM, 222. See Petition at 30-32. See Technology Transitions Order, 118. Petition at 31-32. 11

necessary to participate meaningfully in the digital age. However, in the more than two years that have passed since the Commission first released its USF/ICC Transformation Order, consumer expectations and demands for ultra-high-speed networks have only increased. The Experiments provide an opportunity to understand how best to support the deployment of robust, scalable broadband networks in high-cost rural areas and to determine how best to reorient the Connect America Fund to further support all-fiber networks throughout the country. For these reasons, the Commission should adopt rules consistent with the suggestions detailed herein. Respectfully Submitted, FIBER TO THE HOME COUNCIL AMERICAS March 31, 2014 Heather Burnett Gold President Fiber to the Home Council Americas 6841 Elm Street #843 McLean, VA 22101 Telephone: (202) 365-5530 12