When I was a student at UCLA, my car (that was uninsured for theft) was stolen. I suddenly found myself without basic transportation in Los Angeles. The logistics of getting to school and work became quite challenging, forget about attempting a doctor’s appointment or a social event. I became a slave to bus schedules and favors from friends. And, contrary to the admonition in the Missing Persons’ song that was popular at the time, I walked in LA.
After six months, I scraped together enough money to buy a friend’s 10-year-old dented Subaru mini-wagon. I loved that car as if it was a Cadillac. To this day, I remember my first day in the car driving down Santa Monica Boulevard feeling an enormous sense of freedom and opportunity. I learned that transportation in LA was not a luxury – it was a necessity.
This week, the FCC will consider two items central to delivering broadband – the 21st century necessity – to rural communities that have been left behind. That these items are moving forward quickly is no surprise given Chairman Pai’s enduring commitment to closing the digital divide, particularly in rural America. The FCC’s Connect America Fund (CAF) and Mobility Fund Phase II (MF II) programs represent the best and perhaps only path to broadband deployment in these rural communities. And the MF II item now on circulation appears to take huge steps toward the adoption of a clear and fair framework that will increase both the efficiency and effectiveness of the program.
But the hard fact is that there are clear limits to the amount of subsidy money available in both programs, and tough policy cuts will need to be made on the breadth and scope of the services that will ultimately be delivered to these communities.
Let’s consider first the MF II program, which will subsidize the delivery of LTE service to areas where it does not currently exist. As we understand it, the FCC has smartly pivoted toward assessing required LTE coverage based on geography, ensuring that winning bidders cover not only population centers, but also the various locations where community members work, farm, visit family and friends, and the points in between.
AT&T’s preliminary budget estimate is that the available fund dollars will support an LTE build to only 70-80% of the aggregate geography of the program’s eligible areas. Yet the current proposed framework would require winning providers to cover an average of 90% of the geography that the provider wins in a state, with no individual census tract falling below 75% coverage.
While such a coverage requirement is certainly laudable, it will come with a significant price tag and will likely push bidders away from census tracks with extremely sparse populations or tough topography, particularly because our preliminary analysis suggests that 40% of the potentially eligible areas currently lack wireless service of any kind.
Consider, for example, a census block where 50% of the area is covered by unpopulated mountainous terrain. Such a block could be deemed unbiddable, as efforts to reach 75% geographic coverage would be enormously expensive and, to meet the 90% aggregate requirement, other blocks in the state would have to be built to 100%. Moreover, stretching coverage requirements too far could exhaust available support dollars short of coverage for all eligible areas. If census blocks remain unbid because of coverage concerns or budget constraints, communities in those census blocks may be permanently left behind.
But it is not just coverage decisions that are critical. In the CAF II item, the FCC also will need to decide how to weigh bids for varying service levels, from a basic service of 10 Mbps/down to Cadillac services with gigabit download speeds. The current proposal skews toward favoring fiber-fed services that will deliver gigabit speeds. Again, we do not fault the FCC for wanting to deliver gigabit speeds to rural communities. But setting weights that favor 1 Gig deployments will leave more than half of eligible consumers untouched by CAF II support and with little hope of being served in the future. A weight range such as USTelecom’s 0/5/15/20 acknowledges that speed has value without losing sight of the importance of coverage and cost effectiveness.
Finally, for these auctions to be successful, participants must know what their service obligations are before they bid and certainly before they build. While the FCC has recognized the importance of clear and defined requirements, its current CAF rules still fall short. Specifically, the FCC subjects certain providers, which will include certain CAF II auction bidders, to an “evolving” usage standard. Evolving standards are moving targets for network builds and the FCC should end the use of evolving standards for all its CAF programs in its CAF II auction order.
There is a reason why, year after year, the Toyota Corolla is one of the best selling cars in America. It’s no Cadillac, but it fulfills essential transportation needs at an affordable price. The communities targeted by these two programs deserve our best efforts to deliver them essential broadband services that will allow them to connect to the world around them, even if at 10-25 Mbps speeds. Where the economics require tough cuts, we encourage the FCC to make those cuts in a way that is designed to achieve the goal of funding broadband service to as many of the eligible areas as possible.