Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554

Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554 In the Matter of ) ) Request for Comments on FCC Report ) GN Docket No. 11-16 On Rural Broadband Strategy ) COMMENTS OF THE NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION Lisa Schoenthaler Rick Chessen Vice President Steven F. Morris Office of Rural/Small Systems Jennifer K. McKee Association Affairs National Cable & Telecommunications Association 25 Massachusetts Avenue, N.W. Suite 100 Washington, D.C. 20001-1431 March 2, 2011 (202) 222-2445

Table of Contents INTRODUCTION AND SUMMARY...2 I. SIGNIFICANT PROGRESS HAS BEEN MADE SINCE THE RELEASE OF THE 2009 RURAL BROADBAND REPORT...3 A. Continued Deployment of Cable Broadband and Other Technologies...3 B. The Commission s Implementation of the Recommendations in the National Broadband Plan...4 1. High-Cost Universal Service Reform...5 2. Pole Attachments...6 3. Spectrum...7 4. Broadband Adoption...8 5. Interconnection...8 C. Implementation of the ARRA by NTIA and RUS...9 II. IMPROVED COORDINATION ACROSS FEDERAL AGENCIES WILL BE ESSENTIAL TO ACHIEVING CONTINUED PROGRESS...10 A. No Federal Agency Should Subsidize Overbuilding of Privately Funded Networks...10 B. The Commission Should Not Delay USF Reform To Accommodate RUS...12 C. Coordination on Updates to the National Broadband Map Will Be Critical...14 CONCLUSION...14

Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554 In the Matter of ) ) Request for Comments on FCC Report ) GN Docket No. 11-16 On Rural Broadband Strategy ) COMMENTS OF THE NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION The National Cable & Telecommunications Association (NCTA) submits these comments in response to the Commission s Notice seeking comment on updating the 2009 Rural Broadband Report. 1 As explained below, since the 2009 Rural Broadband Report was released, significant progress has been made both in deploying broadband facilities throughout rural America and in establishing the federal policy framework that will facilitate completion of the congressional goal of universal access to broadband. Nevertheless, as we discuss below, additional steps should be taken to coordinate federal policy so that government subsidies are targeted to areas where there is no business case for building broadband networks. In addition, as recommended by the National Broadband Plan, the Commission should promptly adopt changes to its pole attachment rules and move forward on universal service reform. 1 Public Notice, Comments Requested in Preparation for Update to Rural Broadband Report, GN Docket No. 11-16, DA 11-183 (rel. Jan. 31, 2011) (Notice).

INTRODUCTION AND SUMMARY In the 2008 Farm Bill, Congress directed the Chairman of the Commission, in consultation with the Secretary of Agriculture, to develop a comprehensive rural broadband strategy and to update that strategy during the third year after enactment. 2 In May 2009, Acting Chairman Copps delivered to Congress the 2009 Rural Broadband Report. 3 The report found that the level of broadband service in rural America was generally inadequate and offered a variety of recommendations for improving the situation. 4 The Notice seeks comment on updating the 2009 Rural Broadband Report. As we explain in these comments, significant progress has been made with respect to rural broadband issues in the two years since the 2009 Rural Broadband Report was released. Deployment and adoption of broadband in rural America has continued to increase during this period. In addition, major strides have been made in establishing the appropriate policy framework for extending broadband to every American, rural or otherwise. The National Broadband Plan released by the Commission, 5 the National Broadband Map released by NTIA, 6 and the distribution of over $7 billion in funding under the American Recovery and Reinvestment Act (ARRA) all should pay significant dividends over the next few years. Notwithstanding this significant progress, more must be done to ensure that the federal government s broadband policies are effective and efficient. In particular, there must be a more concerted effort to target government subsidies only to those areas where they are truly needed 2 3 4 5 6 Pub. L. No. 110-246, 122 Stat. 1651 (2008). Acting Chairman Michael J. Copps, BRINGING BROADBAND TO RURAL AMERICA: REPORT ON A RURAL BROADBAND STRATEGY (2009) (2009 Rural Broadband Report). Id. at 27. CONNECTING AMERICA: THE NATIONAL BROADBAND PLAN (rel. Mar. 16, 2010) (Plan). Press Release, Commerce s NTIA Unveils National Broadband Map and New Broadband Adoption Survey Results (Feb. 17, 2011). 2

and to eliminate policies that provide government funding to incumbent telephone companies in markets where cable operators and others are willing and able to provide service without any government support. I. SIGNIFICANT PROGRESS HAS BEEN MADE SINCE THE RELEASE OF THE 2009 RURAL BROADBAND REPORT While noting a lack of definitive data, the 2009 Rural Broadband Report concluded that the information we have today demonstrates that broadband service in rural America is generally inadequate. 7 As we describe in this section, there has been significant progress over the last two years in improving the state of broadband in rural America, as well as major improvements in the data documenting the state of rural broadband. A. Continued Deployment of Cable Broadband and Other Technologies Since the 2009 Rural Broadband Report was released, cable operators have continued to invest in the deployment of broadband networks in rural areas. In some cases, these investments are directed toward improving the speed of service in existing areas. Midcontinent, for example, now offers DOCSIS 3.0 throughout its footprint in the Dakotas and Minnesota, with downstream speeds of up to 50 Mbps available. 8 In other cases, cable operators are extending their footprint, sometimes using wireless technology. For example, in December 2009, Bend Broadband deployed a wireless voice and Internet network utilizing HSPA+ technology on the fringes of its existing wireline footprint, covering areas that previously were not economically viable to serve. 9 7 8 9 2009 Rural Broadband Report at 27. See Midcontinent Communications web site, Where Has Midcontinent Launched D3Speeds?, available at http://www.midcocomm.com/resourcecenter/index.cfm/353/midconet-broadband/where-has-midcontinent- Launched-D3-Speeds ( These speeds (50 mbps down/5 mbps up) are now available for the entire Midcontinent service area. ). See BendBroadband web site, Mobile Broadband, available at http://www.bendbroadband.com/residential/hsi_mbb.asp?pageid=hsi&subid=mbb&adct=2. 3

Cable operators are not the only providers building out their broadband networks in rural areas. Over the last two years, many rural telephone companies have begun to deploy fiber networks more extensively. In a recent survey of its members, the National Telecommunications Cooperative Association found that 68 percent use fiber to the home or fiber to the curb, up from 59 percent in 2009 and 44 percent in 2008. 10 In addition, wireless carriers have been building 4G wireless networks all across the country, including in rural areas. Verizon, for example, has partnered with a number of rural providers in connection with its 4G rollout. 11 The net effect of all of this investment is that more consumers in rural America have more options than ever for accessing the Internet. The continued investment by different companies using different technologies demonstrates the fluid nature of the broadband marketplace and the fact that improvements in technology and reductions in underlying costs can, over time, change companies assessments of whether there is a business case for building or upgrading facilities in a particular area. The evolving nature of broadband investment decisions should be a consideration in any prospective policies the Commission adopts to promote broadband deployment. B. The Commission s Implementation of the Recommendations in the National Broadband Plan Perhaps the most important event since the release of the 2009 Rural Broadband Report has been the development and implementation of the National Broadband Plan. The Plan represents the most comprehensive assessment of the broadband marketplace conducted by the federal government. It should prove to be an invaluable resource for regulators and the public for years to come. 10 11 See NTCA 2010 Broadband/Internet Availability Survey Report (Jan. 2011) at 3. See, e.g., Press Release, Six Rural Companies Join With Verizon Wireless to Deliver 4G LTE Mobile Broadband to Rural Communities (Feb. 15, 2011). 4

The recommendations in the National Broadband Plan are premised on the recognition that the key to achieving universal broadband access is encouraging private investment, with targeted government subsidies where private investment is not otherwise feasible. 12 From NCTA s perspective, five elements of this approach are particularly critical in bringing broadband to every corner of rural America: (1) High-Cost Universal Service Reform; (2) Pole Attachments; (3) Spectrum; (4) Broadband Adoption; and (5) Interconnection. 1. High-Cost Universal Service Reform The Plan estimated that there are approximately 14 million households that do not have broadband access and that the cost of closing this broadband availability gap is approximately $24 billion, in 2010 dollars. 13 The Plan recommended that the Commission close this gap through comprehensive reform of the Universal Service Fund, particularly the high-cost support mechanism. It recommended phasing out all existing high-cost support mechanisms and to establish a new, targeted mechanism the Connect America Fund (CAF) that would provide support for broadband networks only to the extent necessary to induce private investment in areas where there currently is no business case to provide broadband and high-quality voice service. 14 Significantly, the Plan acknowledged that continued growth in the size of the USF program could jeopardize public support and it therefore recommends that the Commission aim to keep the overall size of the fund close to its current size (in 2010 dollars). 15 12 13 14 15 Plan at 5 ( Instead of choosing a specific path for broadband in America, this plan describes actions government should take to encourage more private innovation and investment. ). Id. at 136-38. Id. at 135-36, 150. Id. at 150. 5

Last month the Commission adopted a Notice of Proposed Rulemaking proposing to implement many of the Plan s recommendations for reforming the high-cost program. 16 NCTA fully supports the proposal in the USF NPRM to keep spending at current levels by eliminating inefficiencies in the existing support mechanisms and using the savings to create a new mechanism that will provide targeted support only to those areas where there is no business case for investing in broadband facilities. We strongly encourage the Commission to complete the initial phase of these reforms before the end of this year. 2. Pole Attachments The Plan found that [t]he cost of deploying a broadband network depends significantly on the costs that service providers incur to access conduits, ducts, poles and rights-of-way on public and private lands. 17 Accordingly, the Plan recommended that the Commission establish pole attachment rental rates that are as low and close to uniform as possible, recognizing that such a step would greatly reduce the complexity and risk for those deploying broadband. 18 Recognizing that the Commission s cable rate formula has been in place for 31 years and is just and reasonable and fully compensatory for utilities, the Plan recommends that the Commission revisit its application of the telecommunications carrier rate formula to yield rates as close as possible to the cable rate in a way that is consistent with the Act. 19 In May 2010, the Commission adopted a Further Notice of Proposed Rulemaking in its existing Pole Attachment rulemaking proposing to implement these recommendations. 20 NCTA 16 Connect America Fund et al., WC Docket No. 10-90, Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking, FCC 11-13 (rel. Feb. 9, 2011) (USF NPRM). 17 18 19 20 Id. at 109. Id. at 109-111. Id. at 110. See Implementation of Section 224 of the Act: A National Broadband Plan for Our Future, WC Docket No. 07-245, GN Docket No. 09-51, Order and Further Notice of Proposed Rulemaking, FCC 10-84 (rel. May 20, 2010). 6

fully supports these proposals. As the Plan recognized, 21 and as NCTA has demonstrated in prior filings in this proceeding, 22 pole attachment rates are a particularly significant factor in deploying broadband in rural areas, where distances are greater and there are more poles per customer than in urban areas. Establishing a uniform pole attachment rate using the cable rate formula, and rejecting electric company arguments for much higher rates, will provide savings for some companies and increased certainty for others, all of which will promote rural broadband deployment. 3. Spectrum The National Broadband Plan documented the shift that is taking place from a wireline, PC-based Internet to one where content and applications are accessible at any time from any place on any device. 23 In particular, as video becomes an increasingly important component of the Internet, the Plan suggests that the ability of mobile networks to handle demand could be threatened if new spectrum is not made available. 24 As NCTA has explained in other proceedings, cable operators are entering the market for mobile broadband services in a variety of ways. 25 At the same time, cable broadband services increasingly are competing with wireless providers offering their own broadband services. As the Commission takes steps to facilitate greater use of wireless by bringing more spectrum to market, it must take care not to tip the scales against wireline providers. To the greatest extent 21 22 23 24 25 Plan at 110. See, e.g., Reply Comments of the National Cable & Telecommunications Association, WC Docket No. 07-245 (filed Apr. 22, 2008) at 16-17, Exhibit A (Declaration of Billy Jack Gregg). Plan at 77. Id. at 77-78. Comments of the National Cable & Telecommunications Association, WT Docket No. 09-66 (filed Sept. 30. 2009). 7

possible, the Commission should strive for policies that are competitively and technologically neutral and that promote fair competition among all broadband providers. 4. Broadband Adoption One of the biggest contributions made by the Plan is the recognition of the importance of promoting broadband adoption. While roughly 5 percent of households are not able to purchase broadband because it has not been deployed where they live, roughly 30 percent could purchase it but choose not to. 26 While deployment and operation of facilities traditionally has been the focus of Commission policies with respect to rural areas, the Plan makes clear that rural consumers may need support on the adoption side as well. There are a variety of ways the federal government can help to promote broadband adoption. RUS, for example, distributed $100 million to satellite broadband providers so that they can offer discounted service and equipment to customers in rural areas. 27 The Commission s upcoming Notice of Proposed Rulemaking regarding modernization of the Lifeline and LinkUp programs provides an excellent opportunity for the Commission to make progress in giving all Americans the opportunity to benefit from broadband services. An effective and efficient low-income program could be very beneficial in promoting adoption in the many rural areas where broadband already is available. 5. Interconnection The Plan recognized the importance of promoting competition in rural areas whenever possible and that regulating interconnection arrangements between telecommunications carriers, which may also provide broadband services or partner with broadband providers, was essential to 26 27 Plan at 167. See United States Department of Agriculture, Broadband Initiatives Program, Advancing Broadband: A Foundation for Strong Rural Communities (Jan. 2011) at 6. 8

that policy. In particular, it found that regulated interconnection has been a central tenet of telecommunications regulatory policy for over a century and that the principle of interconnection... needs to be maintained for competition to thrive and for broadband entry to be economically viable in rural areas. 28 The Plan specifically addressed decisions that denied competitors the right to interconnect with rural telephone companies and found that they are based on a misinterpretation of the Act s rural exemption and interconnection requirements. 29 Accordingly, the Plan recommended that the Commission clarify rights and obligations regarding interconnection to remove any regulatory uncertainty. 30 As the Plan recommended, the Commission should take steps to ensure that its interconnection rules promote, rather than hinder, competition in rural America. The Commission can quickly address this issue by granting Time Warner Cable s petition seeking preemption of an interconnection decision by the Maine PUC. The Commission should grant the petition and clearly state that the Maine PUC decision incorrectly shields rural telephone companies from their statutory interconnection obligations and wrongfully prohibits Time Warner Cable from providing service to consumers in rural areas of Maine. 31 C. Implementation of the ARRA by NTIA and RUS The Commission has not been the sole federal agency focused on promoting broadband in rural America. Over the last two years, both NTIA and RUS have played a significant role as well. Both agencies have been responsible for distributing funding under the ARRA, and NTIA 28 29 30 31 Plan at 49. Id. Id. See Comments of the National Cable & Telecommunications Association, WC Docket No. 10-143 (filed Aug. 30, 2010). The problems experienced by Time Warner Cable in Maine are not an isolated situation. See Letter from Mary McManus, Comcast, to Marlene H. Dortch, Secretary, Federal Communications Commission, WC Docket No. 10-143 (filed Feb. 17, 2011) (discussing attempts by a telephone company in Vermont to avoid interconnecting with Comcast). 9

has had the additional responsibility of overseeing the production of the first-ever national broadband map. It is too soon to tell the precise impact of the $7 billion in ARRA funding on the state of rural broadband, but in many rural areas the results should be positive. While these programs raise a number of significant concerns, which we discuss below, it appears that at least some of the last-mile projects funded by RUS will bring broadband to unserved areas, while many of the middle-mile projects funded by NTIA should be helpful in reducing the cost of providing broadband and enabling anchor institutions to connect at higher speeds than before. Over time, the creation of the National Broadband Map may also prove to be a key milestone in achieving universal broadband access. Although there appear to be some significant glitches in the initial version of the map and the underlying database, when it is fully and accurately populated it will be a powerful tool for regulators and for the public. In particular, as we discuss in more detail below, an accurate map would enable federal and state agencies to target subsidies far more effectively than they do today. II. IMPROVED COORDINATION ACROSS FEDERAL AGENCIES WILL BE ESSENTIAL TO ACHIEVING CONTINUED PROGRESS As described in the previous section, there has been significant progress in extending broadband networks to rural areas and in establishing the policy framework to ensure future progress toward the goal of universal broadband access. Notwithstanding all of these positive developments, there still remain a number of areas where government policy has been ineffective and inefficient. A. No Federal Agency Should Subsidize Overbuilding of Privately Funded Networks Of particular concern to NCTA and its members is the continued reliance on policies that subsidize incumbent local exchange carriers in areas where cable operators and others are 10

providing broadband and other services without the need for any subsidy. Shortly after the 2009 Rural Broadband Report was released, NCTA filed a petition with the Commission asking it to establish a process for reducing or eliminating support in areas where cable operators or other wireline providers are offering service without support. 32 The petition included an expert report documenting the extensive availability of cable voice services in rural America. 33 We applaud the Commission for generally recognizing in the USF NPRM the importance of redirecting support to areas where there are no unsubsidized providers and for specifically including the NCTA Petition among the proposals on which it is seeking comment. 34 While the Commission seems to be moving in the right direction with respect to targeting support where it is needed, it is a different story at RUS. A number of the ARRA awards made by RUS cover areas already served by cable operators and others. The negative effects of such a policy are profound. For example, as Gary Shorman, President and CEO of Eagle Communications, explained in recent testimony before the House Energy and Commerce Committee: Facing a government-subsidized competitor creates tremendous difficulties for small companies like Eagle and puts our continued viability seriously at risk. We have invested over $20 million in private capital in the last 5 years alone to bring cutting-edge broadband to our communities. Using scarce federal resources to undermine that investment by skewing the playing field is wrong. It threatens the jobs of our 277 employees who live in the very communities the award was 32 33 34 Petition for Rulemaking of the National Cable & Telecommunications Association (NCTA Petition), attached to Letter from Neal M. Goldberg, Vice President and General Counsel, National Cable & Telecommunications Association, to Marlene H. Dortch, Secretary, Federal Communications Commission, GN Docket No. 09-51, et al (filed Nov. 5, 2009) (NCTA Petition). See NCTA Petition, Attachment B, Report of Dr. Jeffrey A. Eisenach. USF NPRM at 384-85, 391. 11

intended to benefit, offsetting new jobs created by the project, and undermines one broadband provider in the area to benefit another. 35 The lack of transparency and monitoring associated with these subsidy programs contributes to the overbuilding problem. For example, while NTIA published its map with deployment data shown at the census block level, none of the three federal agencies yet publishes data regarding government subsidies at the same level of granularity. As a result, it is much harder than it should be for the government or the public to monitor the effectiveness of those subsidies in achieving their intended purposes. To its credit, the Commission proposes to award broadband support on a census block basis (and presumably to make such information public, as it does with respect to the existing high-cost mechanism.) 36 NTIA and RUS should commit to do the same in connection with the ARRA funding that those agencies already have distributed, as well as any future broadband funding mechanisms. B. The Commission Should Not Delay USF Reform To Accommodate RUS A distinct, but related, concern is the effect that outstanding RUS loans may have on the Commission s ability to move forward with its USF reform proposals. As explained in a recent letter from RUS Administrator Jonathan Adelstein, RUS has made billions of dollars of loans to telephone companies that receive high-cost support and it is relying on continuation of that support (as well as revenue from intercarrier compensation) for repayment of those loans. 37 35 36 37 Testimony of Gary Shorman, President and CEO, Eagle Communications before the U.S. House of Representatives, Committee on Energy and Commerce, Subcommittee on Communications and Technology (Feb. 10, 2011) at 5-6. USF NPRM at 289-94. Letter from Jonathan Adelstein, Administrator, Rural Utilities Service, to Julius Genachowski, Chairman, Federal Communications Commission (Nov. 9, 2010) at 2 ( RUS financing is dependent on sufficient, specific, and predictable revenues. USF support and ICC revenues are among the factors evaluated in virtually every RUS loan. ). 12

Implicit in the letter s discussion of the role that high-cost support plays in evaluating RUS loans is the suggestion that USF reform might somehow jeopardize repayment of these loans. These RUS loans are troubling in a number of ways. First, as noted above, many of the loans are being used to overbuild existing broadband networks, not to extend broadband to areas that do not have it today. This results in the unseemly situation where the government has a stake in the success of one competitor over others. Furthermore, providing loans for new facilities based on the future receipt of universal service support erroneously assumes that such support is a guaranteed, ongoing entitlement, untethered from the recipient s actual costs. That approach reflects a fundamental misunderstanding of the Commission s rules. High-cost support (as well as implicit support provided through intercarrier compensation) is intended to enable recipients to recover the cost of building and operating the network the company has actually built there is not supposed to be extra money left over to pay for construction of new facilities. The only way RUS s policy of leveraging government subsidies can work is if the telephone company receives more high-cost support than is needed to cover the costs of building and operating its existing facilities and uses this extra universal service money to repay its RUS loans. Put differently, under the approach taken by RUS, the best candidates for loans are those companies that are receiving the most excessive high-cost support payments. It should be obvious to both the Commission and RUS that this is a fundamentally flawed way to finance broadband investment that rewards wasteful spending and needlessly places billions of taxpayer dollars at risk. We strongly encourage the Commission to proceed with these necessary reforms and for RUS to cease making loans that depend on high-cost support for repayment. 13

C. Coordination on Updates to the National Broadband Map Will Be Critical As noted above, the National Broadband Map has not yet realized its potential to be a powerful new tool for regulators to use in targeting support. Notwithstanding the significant efforts of federal and state regulators, the initial process of gathering data from hundreds of providers in 56 jurisdictions and compiling that data in a single national database was not without problems. Over the next few months, it will be extremely important for NTIA, the Commission, and state mapping entities to work closely with each other and with broadband providers to identify and fix any glitches in the data gathering and compilation process and to reach out to the scores of companies that did not participate in the initial mapping exercise. CONCLUSION For the reasons explained above, the Commission should continue with its implementation of the recommendations in the National Broadband Plan. In particular, it should quickly adopt the recommended changes to its pole attachment rules and strive to move forward with respect to universal service reform by the end of this year. The Commission also should work closely with RUS and NTIA to ensure that there is a coordinated federal policy of targeting broadband subsidies only to those areas of the country where there is no business case for building broadband networks. Respectfully submitted, /s/ Rick Chessen Lisa Schoenthaler Rick Chessen Vice President Steven F. Morris Office of Rural/Small Systems Jennifer K. McKee Association Affairs National Cable & Telecommunications Association 25 Massachusetts Avenue, N.W. Suite 100 Washington, D.C. 20001-1431 March 2, 2011 (202) 222-2445 14