| FCC ICC Filings |
| Thursday, 27 November 2008 00:43 |
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I believe readers should know the opinion of the editor. Here's an FCC filing I made on ICC for your curiosity.
Subjective, personal comments of Dave Burstein Second of two submissions. Objective analysis sent separately. At least I hope that's objective. For those who don't know me, I've been the editor of the DSL industry news, DSL Prime, since 1999. I wrote a book on broadband DSL: A Tech Brief (Wiley, 2002) and recently co-authored a book on a related subject, Web Video: Making It Great, Getting It Noticed (Peachpit, 2008) with Jennie Bourne. I am not a lawyer, and my strength in technology, not D.C. disputations. I know this is not standard form, although I believe it is at least as clear. I apologize for not having the time to run down original sources, but any you doubt here can be easily researched by staff or email me for a pointer. daveb@dslprime.com Apologies if I made any mistakes in my rush; I'm doing this without staff or pay and had to struggle for the deadline. Dave BursteinFolks
I'm writing because there are many good reasons to move rapidly to bill and keep, as Robert Pepper explained to many of us a while back and I didn't understand at the time. There however are some crucial flaws in the current proposals, which I'd like to address.
Most important, the best available analysis of the proposals is that between $1B and $2B per year will flow from consumers to the Bell profits. Their contention, that it would be made up by lowered LD prices, is totally unsupported and unlikely. In fact, basic LD prices have been going up the last several years, while costs of delivering LD continue to fall. That provides strong evidence we have market power, confirmed by this analysis of the Bell claims. The best way to judge the amount of competition is to look at the pricing in relation to cost. The following suggest Carpino et al's statement is false. First, a few datapoints for economists.
A few datapoints for non-economists:
Conclusion: There is some competition in the U.S., primarily between telcos and cablecos for the bundle. There is not sufficient competition to rely on that alone to align prices with costs.
“Under elementary principles of economics, companies offering those services will thus be forced to pass through much, if not all, of their intercarrier compensation savings to consumers, whether in the form of lower retail rates, accelerated investment in improved service quality, and/or wider deployment of innovative technology used to provide, for example, next-generation broadband services. Comment: Since there is both some competition and some market power, this doesn't apply. Even with “perfect competition”, elementary principles of economics would not come to that conclusion if there were significant costs of change and less than perfect information. Several Nobel prizes have been awarded for that work over the last few decades. “As a result, Free Press’s proposal to bar an ILEC from raising its SLCs because of the passed-through “savings” of its affiliates would leave the ILEC and its affiliates much worse off in the aggregate than18 See, e.g., Richard N. Clarke & Thomas J. Makarewicz, Economic Benefits from Missoula Plan Reform of Intercarrier Compensation, at 18-19 (Feb. 1, 2007), attached as Exhibit 1 to AT&T Missoula Reply Comments (explaining why access charge reductions will be passed on to customers). Comment: The Clarke paper makes the same incorrect assertions, so explains nothing of the sort.
“Years of deregulated pricing that has spawned record-low rates” Comment: The best available data show that basic phone and LD rates have gone up for the last few years, so could not be “record-low.” The wireless data is less conclusive, but certainly has not been dropping the last few years. The market today has 4 instead of 6 main wireless companies, while the three biggest LD companies (AT&T, MCI, Sprint) are no longer advertising for LD customers. Most new phone service buyers get LD from their basic company. That's a significantly different market structure, so data from before those changes is not particularly relevant.
I also note that some of the proposals pay USF to the smaller rurals for lines they are no longer serving. I don't think this is a good use of government money. I believe bill and keep – the essence of this – is long overdue. I would support it if the terms were re-arranged that consumers were made whole. I note that both the California PUC and Free Press agree with my conclusion that a bell windfall is included, as do many on Wall Street. I believe both liberals and conservatives can agree with these comments by the President-elect, Obama has been strong about cutting waste from the budget. From the NY Times “Just because a program, a special interest tax break or corporate subsidy is hidden in this year’s budget does not mean that it will survive the next,” he said. “The old ways of Washington simply can’t meet the challenges of today and tomorrow.” "We are going to go through our federal budget, as I promised during the campaign, page by page, line by line, eliminating those programs we don't need and insisting that those that we do need operate in a sensible, cost-effective way," Obama said. NY Times
I also call attention to these filings by others I believe raise important points.
California PUC
California does not support a permanent across-the-board cap on federal high-cost support because such a step would not appropriately target the subsidies to the actual high-cost areas. The first step to be taken in correcting the federal high-cost support program is to determine with more granularity the actual highcost areas existing today, and to target more narrowly support only to those areas. Capping all five legacy high-cost support mechanisms across the board at current levels would be an arbitrary cap. A more effective long-term solution would be to reform the program to deliver high-cost support to truly high cost areas. In particular, the current methodologies for High Cost Loop, Local Switching, and Interstate Common Line Support are not well targeted, and provide support to companies whose costs are simply above average, but not truly high.
Comment On target and important. The purpose of USF is not to subsidize companies but rather to provide service. There is no reason to provide subsidies except when the cost is truly excessive.
"However, as proposed in Appendix A, the plan favors the large carriers, yet could have substantial negative financial consequences for small rural carriers and their subscribers, as well as for some mid-size companies.
Comment: Appropriate and important. Before the last vote, Martin and OPASTCO revised the terms to make them more than fair to small rural carriers. However, the best available estimates are that consumers would pay between $1B and $2B more, not good public policy.
NECA In order to accomplish universal availability of broadband Internet access service, it may also be necessary to consider mechanisms to help recover the high costs of obtaining transport to the Internet backbone from rural areas. As the Joint Board previously recognized, current support mechanisms do not cover these costs, which often make it impossible for rural providers to offer economically-priced high-speed access. Comment: A strong and important point. It may well be necessary to impose price restraints on the major backhaul and backbone carriers, such as AT&T and Qwest. Otherwise, where they have market power they can raise their rates and capture much of the money intended for broadband. See http://www.fastnetnews.com/dslprimelist/112-dsl-misc/518-backhaul-cost-clobbering-rural-and-small-carriers- for some relevant data.
NTCA Middle mile transport and the Internet backbone itself are significant cost factors on providing rural broadband service and must be addressed in any comprehensive reform.75 To achieve and maintain the goal of universal affordable broadband service for all Americans, the Commission should regulate the terms, conditions and pricing of Internet backbone services, including special access transport needed to reach the Internet. ... that large, vertically-integrated Internet backbone providers do not abuse their market power by imposing unfair and discriminatory pricing on small, rural communications carriers providing retail high-speed Internet access service in rural, insular and high-cost areas of the United States. The Commission has already adopted some of these conditions as part of the Commission’s approval of the AT&T/BellSouth merger. NTCA urges the Commission to broaden these conditions in the future. Comment: Like NECA, a strong and important point. It may well be necessary to impose price restraints on the major backhaul and backbone carriers, such as AT&T and Qwest. Otherwise, where they have market power they can raise their rates and capture much of the money intended for broadband. See http://www.fastnetnews.com/dslprimelist/112-dsl-misc/518-backhaul-cost-clobbering-rural-and-small-carriers- for some relevant data.
Folks As part on my work on evidence-based policy, I reviewed the most recent 200 filings on 05-337, the Intercarrier Compensation etc. proceeding. This note is designed to highlight some assertions in some of the filings, followed by a reason to belie it unproven and/or conflicting data that suggest it's not necessarily true. I've pulled comments I consider mostly opinion into a separate filing.
For those who don't know me, I've been the editor of the DSL industry news, DSL Prime, since 1999. I wrote a book on broadband DSL: A Tech Brief (Wiley, 2002) and recently co-authored a book on a related subject, Web Video: Making It Great, Getting It Noticed (Peachpit, 2008) with Jennie Bourne.
I am not a lawyer, and my strength in technology, not D.C. disputations. I know this is not standard form, although I believe it is at least as clear. I apologize for not having the time to run down original sources, but any you doubt here can be easily researched by staff or email me for a pointer. daveb@dslprime.com Apologies if I made any mistakes in my rush; I'm doing this without staff or pay and had to struggle for the deadline. Dave BursteinCompany comments verbatim, my comments follow
AT&T Cathy Carpino Christopher Heimann Gary Phillips Paul K. Mancini Jonathan E. Nuechterlein Lynn R. Charytan Heather M. Zachary
“Wireless and long-distance competition, which is indisputably fierce, will force wireless and long-distance carriers to pass through the lion’s share of their access charge savings to consumers through rate reductions, improved service quality, and/or investment in new broadband infrastructure. .. The principal flaw in Free Press’s proposal is that it assumes that any wireless or long distance company will “keep” the cost savings attributable to access charge reductions and use them to increase its profits. That is incorrect. Long distance and wireless are among the most fiercely competitive services in this industry. Comment: Among those who have questioned whether LD and wireless are fiercely competitive are Merrill Lynch, FCC Chairman Kevin Martin, and this writer. So it is not “indisputably fierce.” The best way to judge the amount of competition is to look at the pricing in relation to cost. The following suggest Carpino et al's statement is false. First, a few datapoints for economists.
A few datapoints for non-economists:
Conclusion: There is some competition in the U.S., primarily between telcos and cablecos for the bundle. There is not sufficient competition to rely on that alone to align prices with costs.
“Under elementary principles of economics, companies offering those services will thus be forced to pass through much, if not all, of their intercarrier compensation savings to consumers, whether in the form of lower retail rates, accelerated investment in improved service quality, and/or wider deployment of innovative technology used to provide, for example, next-generation broadband services. Comment: Since there is both some competition and some market power, this doesn't apply. Even with “perfect competition”, elementary principles of economics would not come to that conclusion if there were significant costs of change and less than perfect information. Several Nobel prizes have been awarded for that work over the last few decades.
“As a result, Free Press’s proposal to bar an ILEC from raising its SLCs because of the passed-through “savings” of its affiliates would leave the ILEC and its affiliates much worse off in the aggregate than18 See, e.g., Richard N. Clarke & Thomas J. Makarewicz, Economic Benefits from Missoula Plan Reform of Intercarrier Compensation, at 18-19 (Feb. 1, 2007), attached as Exhibit 1 to AT&T Missoula Reply Comments (explaining why access charge reductions will be passed on to customers). Comment: The Clarke paper makes the same incorrect assertions, so explains nothing of the sort.
“Years of deregulated pricing that has spawned record-low rates” Comment: The best available data show that basic phone and LD rates have gone up for the last few years, so could not be “record-low.” The wireless data is less conclusive, but certainly has not been dropping the last few years. The market today has 4 instead of 6 main wireless companies, while the three biggest LD companies (AT&T, MCI, Sprint) are no longer advertising for LD customers. Most new phone service buyers get LD from their basic company. That's a significantly different market structure, so data from before those changes is not particularly relevant.
“As the Draft Order notes, elimination of current CETC support—much of which has supported the provision of wireless services—leaves open the question of what mechanism may best encourage deployment and maintenance of the facilities necessary for the provision of advanced mobile services in high-cost and rural areas.65 As explained in AT&T’s April 17, 2008 Comments on the USF NPRMs, the Commission should transition legacy CETC funding (as it is eliminated over the five-year phase-down) to a new Advanced Mobility Fund designed to support mobile wireless broadband deployment in unserved areas.66 Under this approach, providers of mobile wireless broadband Internet access would apply for funding to support the provision, maintenance, and upgrade of facilities for the provision of advanced mobile services to Commission-identified unserved areas. Initially, all legacy CETC funding transitioned to the new mechanism would be earmarked to support advanced mobile service projects in the state where support previously was provided. When consumers in all areas of that state have access to such services, support would be released to fund the provision, maintenance, and upgrade of facilities that provide advanced mobile services in the unserved areas of other states. AT&T’s proposal offers the Commission a clear and administratively simple roadmap for transitioning and targeting legacy CETC funding to areas that currently lack advanced mobile services. Comment: U.S. wireless franchises typically expire after ten years. They may be modified by commission action. One suggested action is from Commissioner Adelstein to “Use it or lose it” requiring a carrier to actual serve their territory. That has the advantage of not requiring government funding.
Re: Funding for mid-sized LECs Iowa Telecommunications Services, Inc.
“Although this investment has produced excellent results for Iowans, the company has not been able to invest at levels which would accelerate broadband use in many of its rural exchanges. Although broadband service is available in every Iowa Telecom exchange, roughly one quarter of Iowa Telecom’s access lines are not DSL-qualified due to their copper loop lengths. Further, many of the customers who are DSL qualified are limited to maximum download speeds of below 1.0 mbps.4 These conditions are likely to remain for some time in the future absent federal universal service support.
Comment
"The company has not been able to invest" is unproven and disingenuous. Iowa Telecom had $82M in EBIDTA in 2007. Their $29M in earnings came after paying $30M in interest, some portion of which is related to the purchase of goodwill. Their capital expenditures in 2007 were only $26M. While depreciation was $49M. They paid $51M in dividends, much more than their earnings. In the last three years, they have paid $40M more in dividends than in earnings. Whether that is the proper use of money is a question to be decided elsewhere. Conclusion: The company has been able to invest. The statement in their filing is untrue. --------------------------- “The Global Reform FNPRM proposes to require all ILECs to commit to serve one hundred percent of its subscribers with broadband communications within five years. Iowa Telecom recognizes the importance of broadband services to rural Americans and appreciates the policy behind such a mandate. However, the Commission has failed to provide an adequate support mechanism to attain that goal.
Reply: They have not provided any estimate, much less documented cost of reaching that goal. There filing provides no means to judge whether the support is adequate or not. As a DSL expert, I would guess their net cost of serving 98% is significantly less than the $40M they paid in dividends beyond their earnings. But they haven't released the data that would allow me more to guess. Conclusion: Unproven, with some data to suggest the existing support is “adequate.” ------------------------- infrastructure. For instance, a rural telephone company may only receive universal service support if its net investment exceeds the “national average,” a figure that is indexed to a much higher level to fund support only below a certain cap. If investment in network infrastructure has been inadequate for years, such as has been the case with exchanges sold by large, urbanized companies, the purchased operations would not be eligible to receive high-cost loop support because their loop costs are far below the national average. Even millions of dollars of investment often is insufficient to bring the carrier’s average costs above the national average and the safety valve rules reimburse companies for new investment at a small fraction of needed investment.
Comment If the network needed such high investment, because GTE starved it with intent to sell, Iowa Tel should have discovered that in due diligence and included that in the price paid back in 2000. Especially because most of Iowa Tel was controlled by local telecom professionals. In addition to which, if they had overpaid that much as to have a need today for a government subsidy, it would almost certainly been right to take a writeoff of the $hundreds of millions for goodwill. The fact they didn't take such a write-off suggests the company is properly valued, and the numbers certainly don't scream bailout.
Conclusion: Since the company could easily have made these investments and still paid 70% of earning as dividends, I don't see how their claims make sense.
Although mid-size companies should make reasonable investments in these companies’ infrastructure, they cannot rationally do so at the levels necessary to bring modern infrastructure and services to their customers. The nature of rural properties, given their small subscriber base and low density, makes it impossible for subscribers to fund all of these investment costs on a self-sufficient basis, even if they charge local exchange service rates at or slightly above the national average level. reply Impossible? In that case, they are violating their fiduciary responsibility paying such a high dividend.
The need to fund such high-cost wire centers, however, is critical now. In these treacherous economic times, funding sources have dried up, but consumer interest in receiving modern advance services has not. Therefore, if the Commission cannot adopt the plan promptly, it should grant the current waiver Iowa Telecom has on file which requests treatment as a non rural carrier for purposes of receiving high-cost loop support.
reply Yet another request to cover Iowa's overpayment and dividend above earnings. I haven't seen the write off on their balance sheet, however.
Subjective conclusion: They have more than enough internally generated funds to cover the needed investment and a generous dividend. Confirmation: Last three years of Iowa's income statement http://finance.yahoo.com/q/is?s=IWA&annual and cash flow statement http://finance.yahoo.com/q/cf?s=IWA&annual
Second confirmation: Iowa just announced a deal to buy another telco for $80M at a p/e ratio that appears to be higher than Verizon.
NECA
Study area-specific freezes on Universal Service support will, in effect, eliminate rate of return regulation and likely make it impossible for most RoR companies to commit to universal deployment goals or to acquire the necessary financing to meet broadband deployment commitments if made. Comment: That might be true if the carriers required outside financing, but many can finance this from existing cash flow. Iowa Telecom is a good example.
ITTA
As written, the FNPRM would order carriers to provide more broadband with less revenue. Such a proposal, however, would effectively shut the doors on meaningful broadband deployment in more than half of rural America. By contrast, the ITTA proposals consider an integrated view of ICC and USF and offer a framework that assures the continued successful deployment of broadband across the Nation. Comment: This would not be true if the available cash flow was sufficient, as suggested by the financial data from Iowa. This requires an estimate of the actual cost that is not included, and an analysis of the cash flow of the companies. Neither is included. Conclusion: Unproven
Absent an adequate recovery mechanism, carriers will be left in the unenviable position of determining how to drastically cut capital and operational costs and raise prices where possible to compensate for the substantial recurring revenue losses. Such action will retard broadband deployment, rather than promote it, and impose upon end-users higher rates, rather than cognizable benefits. Despite these consequences, the Commission proposes to place millions of end-users at risk when it states that carriers that pay shareholder dividends should not receive universal service support (or, presumably, access cost recovery mechanism support, however provided.) Comment: I don't see that in the original. I thing this is a misreading, and the specific comments should have been quoted.
Frontier
First, the proposed reductions to access revenues, in the absence of balanced compensating revenue streams from other mechanisms, would impair carriers' ability to effect network deployment, maintenance, and other functions necessary to ensure their viability. Comment: If Frontier's viability were in doubt, I'd think that is material and would need to be reported to shareholders under securities law. I've seen no such filing.
Frontier has currently deployed broadband, at speeds above the 768k contemplated in the FNPRM, to over 90% of its customers. Under the FNPRM, the viability of future investment to the final 10% and continued investment to the existing 90% would be put at serious risk. Putting Frontier’s high-cost support at risk by means of an unfunded mandate to deploy broadband service where it is not economical to do so could have a devastating impact not only on Frontier’s customers’ ability to access advanced services but on the economies of many of the very rural communities that rely on Frontier to provide them with services that are reasonably comparable in nature and price to the services available to consumers in the nation’s most urban markets. Comment: Frontier provides no relevant cost or cash flow estimates, so this has no backup.
By tying support to a broadband commitment that will likely be significantly more expensive than the declining amounts of support received by companies like Frontier, it is likely that this policy will lead to less broadband deployment not more. Comment: No data provided. Frontier already provides broadband to 90% of its customers, but it is the final 10% that will be the most costly. Current high-cost support is less than 3% of Frontier’s total revenues and that number has continued to decline. While Frontier is continually reviewing ways to deploy broadband more cost effectively, the Alternatives in the FNPRM would force Frontier to make a decision whether it makes sense to give up its high-cost support since it would only make up a small percentage of what the capital expenditure requirement to reach the 100% market. Comment: This would be true if high-cost support were the only source of revenue to cover the costs of broadband. I believe Frontier also collects over $400/year from the average broadband customer. That is more than enough to cover the costs and a moderate return for many similar companies.
The impacts of the current Alternatives in the FNPRM, if unchanged, would be far reaching and extremely negative to mid-sized price cap ILECs. This reach would go beyond revenue reductions. These companies would have to completely overhaul their capital and operating expense structures to remain profitable. Comment: No data provided Comments on costing and providing more subsidies to the Bells. Massachusetts Department of Telecommunications and Cable
LEGAL CONCERNS 1. The FCC would act prematurely on ICC reform prior to a final determination by the United States Court of Appeals for the D.C. Circuit (“D.C. Circuit”) Because the legal authority cited in the Alternate Reform Proposal is essentially the same as that authority cited in ISP-Remand Order II (to which the Alternate Reform Proposal is attached),26 and because the D.C. Circuit has not yet deemed proper that legal authority, the FCC would act prior to a final determination by the D.C. Circuit.27
Comment: This is disingenuous. The D.C. Circuit is noted for a particular point of view on telecom issues. Designating the D.C. Circuit review rather than the Supreme Court decision is venue-shopping, with predictable results. -------------------- "Furthermore, the FCC should remap ILEC ETC service areas into smaller segments, where the funding mechanism “takes into account customers‟ ability to pay, and relative costs and rates between rural and urban areas within the state.”80 This would help to redistribute high-cost funding and permit net-contributor states such as Massachusetts to receive more high-cost funding in its rural areas.81
Comment If I'm reading this correctly - IANAL - this would be a way to give more money to the bells by isolating small areas with low population density and providing the bells a subsidy. I think there is very little evidence the bells cannot afford universal service in the current system.
There is also a crucial fact not demonstrated in the filing. Ms. Gillette knows well that giving money to a company headquartered outside Massachusetts does not guarantee that the money will be provided or spent in Massachusetts. That needs proof, not assumption.
Washington PUC
seems not to be able to send a document from which I can cut and paste. Essentially, they sensibly suggest that if Century and Embarq choose not to cover all with broadband, they might lose USF/ICC and hence have less money to build. However, they would probably have bigger problems, such as insolvency, in that case.
The PUC also wants money for Qwest, with the lowest capex and depreciation ration among the Bells. CFO Oren Schaeffer pointed out they barely avoided insolvency not long ago, so they have even more reason to use the money for general corporate purposes.
California --------- California recommends that the FCC establish a process and a timetable to review and modernize the existing high-cost mechanisms for rural and non-rural carriers, with the objective of developing a coherent system that can be applied to all incumbent carriers, as recommended by the Federal-State Universal Service Joint Board in its November 2007
Comment The large profits of the "non-rural" carriers - the bells - should be considered presumptive evidence that the overall system provides them adequate support to offer services statewide. See comments on Wisconsin. ------------
While the goal [universal broadband] is laudable and well supported by federal and California laws and policies, the penalty strikes us as draconian, given that there will be a transition period that may cause rural providers some financial hardships. The FCC’s comment schedule has not afforded California sufficient time to fully analyze the impact of the proposal in this FNPRM to condition ETC high cost support on the requirement that the ETC commit to deploy broadband throughout its service area within five years.
Comment: After years of debate, no reliable study based on the technologies and distances involved has shown draconian costs to reach 98% coverage. Therefore, CPUC should not be commenting unless it believes it has strong affirmative evidence that the costs are in fact draconian. (Which they aren't.) Claiming they didn't have enough time is disingenuous; plenty of convincing evidence could be uncovered in a few hours of online research and phone calls to experts. The state in fact has a broadband task force that could have quickly pointed out their error.
There is enormous evidence in the literature that the cost of extending broadband at 768K to 98% of the territory in modest, and dozens of U.S. carriers have done so. British Telecom is at 99.6% in 2006, much less 2013. Allowing satellite to 2%, and a waiver in truly extreme conditions, eliminates any lines that might be draconian. The evidence includes a statement by AT&T CEO Ed Whitacre that he could and would provide broadband "to all his customers," generally using $200 repeaters.
Public Service Commission of Wisconsin The PSC writes: Universal Service Support for Broadband... The PSCW is concerned, however, that the timelines of both the expected deployment of broadband and the two-year time frame for large reductions in intrastate access revenues, the potential loss of existing support for various reasons, and the very tight credit market at present will make it difficult for some providers in Wisconsin to afford to make such investments.
Comment: Wisconsin does not provide any basis for evaluating this, because they do not provide any data of the actual cost. That can generally be calculated from the loop length, not provided here. There are industry standard techniques for reaching customers at longer distances, generally at modest cost. Dozens of NECA members are already at 100%; I worked with Vermont Tel five years ago as they reached 98.5% of their 20,000 customers without a broadband subsidy. There is no reason to assume these costs are high, either in the technical literature or this filing.
The standard in the NPRM is 786K in one direction. That can be provided to 25,000-30,000 feet with a $200 repeater, a standard procedure at hundreds of companies. Since the service typically bills over $400/year with a 70% margin, for these customers the cost of providing service (all included) will typically be recovered in 2-4 years.
Rural companies like those in Wisconsin typically have already covered 90% of their customers. Many, generally most, of those remaining, can be served with an inexpensive repeater. A second repeater extends the reach another 10-15,000, again at modest cost. The proposal allows for 2% service by satellite. I have no reason to doubt that 98% or close to it can be achieved with modest capex and a reasonable payback time. There's a provision for waivers and more use of satellite for the (handful) of likely exceptions.
A NECA survey http://www.fastnetnews.com/dslprime/341-89-100-dsl-at-352-rural-telcos reports 352 rural carriers at 89-100% DSL coverage. The DSL Forum years ago published a paper, DSL Anywhere, http://fastnetnews.com/p/dsl_anywhere.pdf that outlined how a telco could reach all customers.
Conclusion: Unproven that the investment is unaffordable, with contrary evidence presented.
High Cost Support Funding for Rural Areas Served by Non-Rural Providers The PSCW previously raised the concern that no funding is currently available for the rural areas of non-rural providers in Wisconsin. The PSCW has shown that Wisconsin consumers served by non-rural providers are less likely to have ubiquitous broadband service than customers of rural carriers.
Comment: The PSCW uses this datapoint to suggest the failure of the bells to provide broadband suggests they should receive a subsidy. It should suggest the opposite: that the bells are not investing. They are among the most profitable companies in the world, with AT&T on track to earn over $10B this year. So there is no doubt they have the funds to invest, but have chosen to use them for other things. (AT&T has bought back $B's of stock and consistently raised dividends. That suggest any subsidy would more likely accrue to the shareholders of the company than necessary broadband investment. In fact, the key Bell in the state, AT&T, has consistently spent less on capex than depreciation, indicating the lack of broadband is a failure to invest, not an inadequacy of available funds. AT&T has dramatically increased their "return to shareholders" in the form of dividends and stock buybacks. They also have not deployed broadband even to the extent of the national average of smaller telcos.
There is nothing in this proposal that given more money to the bells should increase broadband beyond what AT&T does because of competition.
Conclusion: Unproven that the reason AT&T hasn't deployed is they don't have the money and need a subsidy. Contrary evidence presented.
"The PSCW also sees little factual basis for the conclusion that a fiber and soft switch-based network must be the lowest cost option for all providers and in all areas. Even the Commission proposed rules--which offer exceptions for satellite-based services and which contemplate that no providers will bid on some areas--indicate that technologies other than fiber and soft switch networks will persist as the least-cost technologies in some areas. In selecting a methodology, the Commission should not be dictating that particular factual conclusions should be made. Development of a complete record is needed to serve as a factual basis for conclusions regarding least cost technologies.
Comment: While a softswitch is not always the low cost method, that is true for the overwhelming majority of carriers. There is no doubt based on voluminous industry data that softswitches are much less expensive and may be used in almost all circumstances. There certainly is no need to "develop a record." The PSCW could research this in a few hours, as could the FCC, because there is little dispute. My personal sources include the CTO of Verizon (conversation with author.) The FCC could ask one of all of the members of the Technical Advisory Committee and get a rapid answer.
The commission needs a method to determine a reasonable level of reimbursement, and using the costs of the predominant technology would seem to this write a reasonable on.
Telecom Investors Attorney/Author Name: Andrew D. Lipman Lipman explains his position on costs by reference to the as a function of the costs of a class 4/5 switch. These have been rapidly replaced by softswitches at less than a tenth of the cost, which means switch costs are a much smaller percent of the total cost. I do not see any other useful data that would allow a measurement of the costs referred to. Lipman also about a favorable climate of investment under the current rules, and thereby argues for retaining them (I believe.) There is overwhelming evidence that over the last few years the investment in U.S. wireline telephony has been negative. Capital spending is significantly less than depreciation, one measure. An alternate measure, flow of investment funds into the sector, has also been negative, with stock buybacks being larger than the total net money raised in the financial markets.
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