The Connect America Fund II auction was largely a success. For less than half the money per location previously spent on 4/1 Mbps and 10/1 Mbps services, rural electric cooperatives have secured $250 million in funding to build fiber networks and offer Gigabit services.
And then there was the participation by a single satellite bidder who, if left unexamined by regulators and the public, will damage the long-term interests of rural communities.
Satellite VoIP Service
Viasat, the only satellite bidder in the auction, won a total of $122,499,877 to serve 190,595 locations. Viasat bid as low as 1% of the reserve price during the auction. In some areas, it was willing to receive less than $10 in subsidies over a 10-year period to offer broadband. Such bidding in and of itself was an attempt by ViaSat to block competitors from receiving funds to build terrestrial networks. On average, Viasat will receive $64.27 per location per year whether or not they have subscribers. That is less than 7% of the money that was made available to bidders to build terrestrial networks. In other words, the FCC was prepared to invest over $1.8 billion in those areas, and now will spend just $110 million over the next decade and no other funds will be spent.
In Mississippi, Viasat’s bidding means that the state will forego more than $50 million in federal funds. In Oregon, over $100 million will be lost. And, in rural Pennsylvania, say good-bye to over $200 million.
In addition, according the rules of the new ReConnect program, the Rural Utilities Service will not permit applications for funding in CAF areas won by Viasat. Remarkably, RUS states that it finds satellite insufficient for rural broadband, but will defer to the FCC and leave those areas unfunded with insufficient broadband.
From the perspective of some at the FCC, that is a great deal. To those FCC officials, satellite service is fine, and the federal government need not spend any more public money to fulfill its mandate from Congress to ensure reasonably comparable service in rural America.
To the more than half a million Americans who will left without adequate broadband service, it isn’t such a good deal. The FCC has passed a digital death sentence. Good luck attracting new businesses, enjoying the latest in video entertainment, participating in the cultural life of the nation, benefiting from advances in telemedicine, or providing opportunity for the youth of your community. For that matter, good luck in getting your kids and grandkids to visit, and good luck selling your home.
There are those who think that something is better than nothing. In this instance, this particular something restricts the opportunity for something better in the future. If you live in one of these communities, no further funds will be spent in your community even though your internet service will be worse than the service in 99% of the country.
What can be done? Ask your state public service commission to do its job.
For most of the last century, state public service commissions ensured that rural areas of the country had adequate telecommunications service, service that was reasonably comparable to that available in urban areas. The authority of public service commissions has been steadily cut back over the past twenty years, but in this particular area public service commissions have the authority and responsibility to assure that those who receive public funds are providing quality telecommunications services. In order for a company to receive public money from the universal service funds, of which CAF is one component, a company must be certified by the state commission as an Eligible Telecommunications Carrier (ETC).
If I were a resident of one of the twenty states, I would ask my state commission to ensure that all ETC applicants can deliver quality voice service, which according to the FCC should be a quality as measured by actual users engaged in conversation to score an average of 4.0 out of 5.0 in testing, a test known as the voice Mean Opinion Score (MOS). Recently, ViaSat petitioned the FCC to dumb down the testing methodology that the FCC adopted. Specifically, ViaSat is asking that the voice tests be done in the lab, rather than actual real-world calls. That the test of voice quality be a one-way script, rather than conversation. And, that ViaSat be the one the conduct the test, rather than a neutral third-party.
Perhaps ViaSat knew when it bid that it couldn’t meet the current standard under the current testing protocol. Hughes, a competitor to Viasat, has told the FCC that it did not participate in the CAF auction because it is not possible to meet the FCC’s proscribed test for voice services using satellite VoIP. My own skepticism is based on ViaSat’s representations to officials at the FCC that it could not meet the voice standard. In one meeting with me and the Chairman of the FCC, ViaSat told the FCC that their internal testing resulted in scores less than 4.0. I trust that something has changed in the past few years, even if that something isn’t latency or the speed of light.
Whether or not the FCC changes its testing methodology, any state commission can adopt the FCC methodology or its own methodology in the ETC process. I would recommend five elements: (1) the test participants measuring the quality be engaged in conversation, (2) both parties to the conversation use the satellite VoIP service so that double-hop call quality is measured, (3) the test be conducted by an objective firm unrelated to ViaSat, (4) the testing should involve individuals from the communities that will be affected by this service, and (5) the testing methodology and scores be made available to the public.
If the tests demonstrate quality voice service, then the state commission will have more confidence in granting the ETC petition. If not, the ETC application should be denied, the potential funding returned to the Connect America Fund for re-auction next year.
I want to make one point clear. I believe individuals and companies should invest their own resources in technologies and networks that they believe will gain them customers and make them successful. I think public spending on rural broadband should be directed by consumer decisions, not by those sitting in offices in southwest Washington, DC. I also think the public’s money should not be spent on speculation. And, I think the government should stop wasting public resource on incremental improvements in broadband when real improvement is within reach.
When I was at the FCC, I was asked by each of three Chairpersons to look at FCC technology programs that had been beset by fraud, where the public’s money was ill-spent. There has been fraud in every single FCC spending program. The common theme of much of the fraud was not that there are unscrupulous raiders of the public fisc. There was some of that, but most of the fraud was due to hopeful service providers and hopeful public officials, those who wanted to believe that the problems of access, whether the unserved populations were rural, high-cost, poor, or persons with disabilities, could be solved with some sort of magic new technology.
As the FCC prepares to invest over $50 billion of the public’s money over the next decade in rural broadband, shouldn’t the public know what we’re buying?