FCC: Wireless Costs to Rise

By Gerry Blackwell

April 30, 2002

Under a Federal Communications Commission (FCC) proposal, the cost of wireless networking would go up thanks to the extension of the Universal Service Fund for wireless users.

Wireless ISPs are responding to a call to action and peppering the Federal Communications Commission (FCC) with often-angry comments on a proposed new rulemaking that would force WISPs to collect contributions for the Universal Service Fund (USF) -- which in turn would increase costs for their customers.

Competitive telephone service providers currently collect USF contributions from customers and submit the funds, indirectly, to the incumbent phone companies. The USF was originally set up to subsidize ILECs for providing basic phone service in high-cost-of-service areas, mostly in remote and rural regions of the country. (An ILEC is an incumbent local exchange carrier -- a telephone company that was providing local service when the Telecommunications Act of 1996 was enacted.)

But in a February 14 Notice of Proposed Rulemaking 02-33, misleadingly titled "Appropriate Framework for Broadband Access to the Internet over Wireline Facilities," the FCC is bidding to extend Universal Service obligations to all broadband Internet service providers, including wireless ISPs.

In a press release announcing NPRM 02-33, the federal regulator claimed it wants to "encourage the ubiquitous availability of broadband access to the Internet to all Americans," "promote competition across different platforms for broadband services" and "ensure that broadband services exist in a minimal regulatory environment that promotes investment and innovation."

But buried in the often confusing verbiage of the document itself is the proposal to make broadband services providers collect USF contributions, a change critics say works against all of the FCC's high-sounding principles, and also against the original intent of the Universal Service Fund.

WISP activists have no doubt that ILEC lobbyists are behind the proposal.

The change would be particularly galling for WISPs given the origins of the USF and the fact that in the Internet access space it is often the WISPs that provide broadband service in rural and remote regions, while ILECs offer no service at all to residential customers and only prohibitively expensive business services.

So it's essential that wireless ISPs register their strong objections to the rulemaking, says Tim McAllister, executive vice president and chief technology officer at BroadLink Communications, a Santa Rosa CA-based WISP.

As part of the rulemaking process, the FCC will accept comments until May 14, 2002. Wireless ISPs and others can file comments online using the FCC's Electronic Comment File Submission system.

"If they don't receive comments or the only comments they do get are from ILECs, they'll issue a report in order [accepting the proposed rulemaking]," McAllister explains. And once that is done, he warns, it becomes a very expensive proposition to reverse the decision.

McAllister argues that the proposed changes go against the original intent of the USF. It was set up because ILECs were required by regulation to provide universal service, while the Telecommunications Act of 1996 forced them to make their facilities available to competitors -- who were not obliged to provide universal service and clearly never would.

But unlike CLECs, WISPs typically do not rely on ILEC facilities to provide their services, McAllister points out. Most WISPs use their own and competitive access providers' facilities.

"We typically don't use ILEC switches or local copper," he notes. "We're having to foot all the costs [for local loop infrastructure] ourselves. We're putting up our own tower sites in many cases, backhauling [by radio] back to a fiber provider -- and we usually don't use ILEC fiber either. Plus, we're typically buying Internet termination services from a competitor, a Sprint or an AT&T."

"It just isn't applicable," McAllister says of the USF.

He also notes that competitive providers of other high-bandwidth services like T-1, fiber and ISDN are not required to collect USF contributions. Nor are cable companies. So why should non-cable wired and wireline broadband Internet service providers be singled out?

An associated proposed rulemaking would also change the way USF contributions are calculated, basing them on bandwidth rather than on number of lines. In the case of wireline providers, McAllister says, it may be possible to assign some rational value per megabit based on capital costs to establish fiber and switches. But with wireless it would just be "making stuff up" to assign a value, he argues.

One of the first to raise the WISP alarm in the public media was wireless pioneer Dave Hughes, owner of Old Colorado City Communications, a community wireless ISP near Colorado Springs CO.

Hughes argues that forcing WISPs, many of which are very small -- even one-person -- operations, to collect USF contributions places an administrative burden on them that could force many under. He cites one comment already received by the FCC from a small community WISP. The commenter calculates he would have to spend $10,000 a year for part-time help to administer collection of the USF.

In his own sometimes strident submission, Hughes argues that the proposed changes will "virtually insure" that the aims of Congress, to make broadband access available to all Americans, will not be met in the near future or in a timely fashion --notwithstanding the stated aims of the FCC.

And rather than removing barriers to infrastructure investment, Hughes says, the proposed actions will serve to erect them.

Hughes also takes the FCC to task for past blunders. It failed utterly in its supposed attempts to foster competition in the CLEC space, he points out. Now the regulator seems intent on hobbling small wireless ISPs, making it difficult for them to compete in the broadband Internet market.

And those WISPs, he points out in his submission, are "carrying out the mandate of Congress far better and in far more remote places than the LECs ever have or ever will."

Hughes is a long-time adversary of the ILECs and the FCC. He is still passionately arguing the folly of another USF-related rule that he claims hurt WISPs -- and also takes millions out of the pockets of ratepayers unnecessarily.

Under FCC regulations, E-rate money from the USF -- paid to school districts and libraries in "digital divide" areas to establish broadband Internet connections -- cannot be used by the applicants to buy and set up their own wireless access networks. Instead, the school districts and libraries must solicit bids from LECs to build facilities (if necessary) and then provide a monthly service.

The fund has become so popular that it is now badly oversubscribed, Hughes says. The total amount in the fund is $2.25 billion, but this year there were applications amounting to over $5 billion.

And in many cases it's unnecessary, Hughes says. School districts could build their own wireless networks using license-free spectrum and spend far less. Some have.

He cites one pre-E-rate example from 1995. A predominantly rural school district in Colorado wanted to link its schools and provide broadband access to the Internet. US West (now Qwest Communications) bid $1.5 million in upfront costs to install T-1s and $12,000 a month for services. Calculated over 10 years, this amounts to $10.5 million in total.

A tiny wireless systems integrator bid a one-time $601,000 to build an entire 2-Mbps (pre-802.11b) network which is still in use today and costs the schooled district nothing each month except normal maintenance.

Building and maintaining school district and library wireless networks is work regional WISPs could easily do, Hughes says. Except now there is no call for these services because community groups can get free money from Washington -- which they then pay to the ILECs.

"Many applicants go back year after year," Hughes points out. And all that money goes into the pockets of the telephone companies -- till hell freezes over."

Are WISPs getting a raw deal from the FCC? We couldn't get an FCC spokesperson to comment. A press-relations officer says the proposed rulemaking is just that -- a proposal, to which the regulator is seeking comment. It won't comment on the issues in the media before the process is complete.

Want to discuss this issue with your fellow 802.11 networkers? Then visit the 80211planet discussion forurms.

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